-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KBU4l8xPEY4sBCRxv4oRLZ8DRKyk+SJeCfVtI+J3rrhNAdT50vKxX6/8c8I5Cnpb W0w5oWNuprr/NUkj3c8frg== /in/edgar/work/20000714/0000912057-00-031943/0000912057-00-031943.txt : 20000920 0000912057-00-031943.hdr.sgml : 20000920 ACCESSION NUMBER: 0000912057-00-031943 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000531 FILED AS OF DATE: 20000714 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARVEYS CASINO RESORTS CENTRAL INDEX KEY: 0000914022 STANDARD INDUSTRIAL CLASSIFICATION: [7990 ] IRS NUMBER: 880066882 STATE OF INCORPORATION: NV FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12802 FILM NUMBER: 672854 BUSINESS ADDRESS: STREET 1: HWY 50 & STATELINE AVE STREET 2: P O BOX 128 CITY: LAKE TAHOE STATE: NV ZIP: 89449 BUSINESS PHONE: 7755882411 10-Q 1 a10-q.txt 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MAY 31, 2000 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 number 1-12802 HARVEYS CASINO RESORTS ---------------------- (Exact Name of Registrant as Specified in its Charter) Nevada 88-0066882 ------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Highway 50 & Stateline Avenue P.O. Box 128 Lake Tahoe, Nevada 89449 -------------------------------------- -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (775) 588-2411 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ The number of shares outstanding of the registrant's Class A Common Stock, $0.01 par value was 40,091 and the number of shares outstanding of the registrant's Class B Common Stock, $0.01 par value was 4,008,692, each as of July 10, 2000. HARVEYS CASINO RESORTS INDEX
PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Balance Sheets, May 31, 2000 and November 30, 1999 3 Condensed Consolidated Statements of Operations for the Three Months Ended May 31, 2000 and 1999, the Six Months Ended May 31, 2000, the Period of December 1, 1998 through February 1, 1999 and the Period of February 2, 1999 (the date of acquisition) through May 31, 1999 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended May 31 2000, the Period of December 1, 1998 through February 1, 1999 and the Period of February 2, 1999 (the date of acquisition) through May 31, 1999 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 PART II. OTHER INFORMATION Item 1. Legal Proceedings 22 Item 2. Changes in Securities 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Submission of Matters to a Vote of Security Holders 22 Item 5. Other Information 22 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURES 23
2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements HARVEYS CASINO RESORTS CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts)
May 31, November 30, 2000 1999 ---------- ------------ ASSETS Current assets Cash and cash equivalents $ 35,728 $ 32,496 Accounts and notes receivable, net 7,019 5,810 Prepaid expenses 4,232 2,228 Other current assets 6,468 6,846 ----------- ----------- Total current assets 53,447 47,380 Property and equipment (net of accumulated depreciation of $31,916 and $18,872) 436,930 440,759 Cost in excess of net assets acquired 152,103 155,904 Other assets 22,156 29,876 ---------- ---------- Total assets $664,636 $673,919 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts and contracts payable $ 6,402 $ 9,752 Accrued expenses 34,065 34,468 ---------- ---------- Total current liabilities 40,467 44,220 Long-term debt, net of current portion 389,162 400,577 Deferred income taxes 58,091 58,091 Other liabilities 28,199 28,234 ---------- ---------- Total liabilities 515,919 531,122 --------- --------- Preferred stock, $.01 par value, 1,000,000 shares authorized; 10 Series A and 99,990 Series B 13 1/2% senior redeemable convertible cumulative shares outstanding (liquidation value $55,000) 65,660 61,442 ---------- ---------- Stockholders' equity Common stock, $.01 par value, 20,000,000 shares authorized; 4,085,450 shares issued at May 31, 2000, and 4,018,790 shares issued at November 30, 1999 41 40 Additional paid-in capital 74,959 74,960 Retained earnings 8,057 6,355 ----------- ----------- Total stockholders' equity 83,057 81,355 ---------- ---------- Total liabilities, preferred stock and stockholders' equity $664,636 $673,919 ======== ========
The accompanying notes are an integral part of these statements. 3 HARVEYS CASINO RESORTS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands)
Predecessor Company ------------ February 2, December 1, 1999 Three Months 1998 (date of Ended May 31, Six Months to acquisition) ------------------------- Ended February 1, to May 31, 2000 1999 May 31, 2000 1999 1999 --------- ---------- ------------ ------------ ----------- Revenues Casino $ 96,468 $ 61,725 $ 186,627 $ 41,454 $ 80,405 Racing 1,796 -- 3,132 -- -- Lodging 8,920 8,611 17,616 5,958 11,467 Food and beverage 14,572 11,823 28,896 8,108 15,571 Other 2,353 2,010 4,719 1,271 2,765 Less: Casino promotional allowances (6,899) (6,453) (14,427) (5,003) (8,532) --------- --------- --------- --------- --------- Total net revenues 117,210 77,716 226,563 51,788 101,676 --------- --------- --------- --------- --------- Costs and expenses Casino 45,730 30,857 89,556 21,146 41,102 Racing 3,091 -- 5,847 -- -- Lodging 3,340 3,328 6,371 1,997 4,305 Food and beverage 10,485 7,629 20,413 4,727 9,867 Other operating 887 797 1,814 592 1,087 Selling, general and administrative 24,589 17,516 47,948 13,428 22,760 Depreciation and amortization 9,244 6,015 18,387 3,553 7,957 Development project write-downs 1,314 2,013 1,314 130 2,019 Consent fee and merger costs -- -- -- 19,879 -- --------- --------- --------- --------- --------- Total costs and expenses 98,680 68,155 191,650 65,452 89,097 --------- --------- --------- --------- --------- Operating income (loss) 18,530 9,561 34,913 (13,664) 12,579 --------- --------- --------- --------- --------- Other income (expense) Interest income 60 35 97 338 42 Interest expense (9,290) (6,940) (19,088) (3,016) (9,187) Other, net (58) (265) (163) 77 (248) --------- --------- --------- --------- --------- Total other income (expense) (9,288) (7,170) (19,154) (2,601) (9,393) --------- --------- --------- --------- --------- Income (loss) before income taxes, extraordinary item and the cumulative effect of an accounting change 9,242 2,391 15,759 (16,265) 3,186 Income tax benefit (provision) (3,928) (936) (6,698) 3,904 (1,247) --------- --------- --------- --------- --------- Income (loss) before extraordinary item and the cumulative effect of an accounting change 5,314 1,455 9,061 (12,361) 1,939 Loss on early retirement of debt, net of taxes -- -- -- (869) -- Cumulative effect of an accounting change, net of taxes -- -- (3,142) -- -- --------- --------- --------- --------- --------- Net income (loss) $ 5,314 $ 1,455 $ 5,919 $ (13,230) $ 1,939 ========= ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 4 HARVEYS CASINO RESORTS CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Six Months Predecessor Company February 2, 1999 Ended December 1,1998 to (date of acquisition) May 31, 2000 February 1, 1999 to May 31, 1999 ------------ ---------------- --------------- Cash flows from operating activities Net income (loss) $ 5,919 $(13,230) $ 1,939 Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization 18,387 3,553 7,957 Development project write-down 1,314 130 2,019 Amortization of deferred compensation 1,163 88 239 Write-off of debt issuance costs, net of tax -- 869 -- Change in income taxes payable 3,893 (3,904) 690 Accrual of consent fee and merger costs -- 19,823 -- Other, net (4,649) (2,478) (2,766) -------- -------- -------- Net cash provided by operating activities 26,027 4,851 10,078 -------- -------- -------- Cash flows from investing activities Capital expenditures (9,483) (3,830) (9,329) Change in construction payables (2,201) -- -- Proceeds from sale of marketable securities -- 10,000 657 Proceeds from notes receivable -- -- 1,879 Other, net 60 (296) 422 -------- -------- -------- Net cash provided by (used in) investing activities (11,624) 5,874 (6,371) -------- -------- -------- Cash flows from financing activities Net payments under revolving credit facility (10,903) -- (30,500) Debt issuance and deferred financing costs (268) -- (2,934) Payment of consent fee and merger costs -- (56) (19,823) Other, net -- (251) 25 -------- -------- -------- Net cash used in financing activities (11,171) (307) (53,232) -------- -------- -------- Increase (decrease) in cash and cash equivalents 3,232 10,418 (49,525) Cash and cash equivalents at beginning of period 32,496 67,299 77,717 -------- -------- -------- Cash and cash equivalents at end of period $ 35,728 $ 77,717 $ 28,192 ======== ======== ========
The accompanying notes are an integral part of these statements. 5 HARVEYS CASINO RESORTS NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In the following footnotes, the words, "Company" and "Harveys" refer to Harveys Casino Resorts, a Nevada corporation, and its wholly-owned subsidiaries unless the context requires otherwise. 1. BASIS OF PRESENTATION AND CONSOLIDATION Founded in 1944, Harveys has been engaged in the casino entertainment industry for over 55 years. On February 2, 1999, Harveys Acquisition Corporation merged with and into Harveys. Harveys was the surviving corporation in the merger and is continuing business operations as conducted prior to the merger. Harveys Tahoe Management Company, Inc., a wholly-owned subsidiary, owns and operates Harveys Resort & Casino on the south shore of Lake Tahoe, Nevada. Harveys Iowa Management Company, Inc., a wholly-owned subsidiary, is the owner and operator of Harveys Casino Hotel, a riverboat casino, hotel and convention center complex in Council Bluffs, Iowa. Harveys C. C. Management Company, Inc., a wholly-owned subsidiary, owns and operates Harveys Wagon Wheel Hotel/Casino in Central City, Colorado. On October 6, 1999, HBR Realty Company, Inc., a wholly-owned subsidiary, purchased the net assets (excluding the gaming equipment) of Bluffs Run Casino, the greyhound racetrack and casino in Council Bluffs, Iowa. The facilities were purchased pursuant to a Purchase and Sale Agreement and Joint Escrow Instructions dated as of August 31, 1999 by and between HBR Realty Company and Iowa West Racing Association. Immediately after closing of the transaction, the Bluffs Run Casino facilities were leased back to Iowa West Racing Association for an initial term of 25 years. At the same time, Iowa West Racing Association retained Harveys BR Management Company, Inc., a wholly-owned subsidiary, to manage the operations of Bluffs Run Casino for a minimum of 25 years. Iowa West Racing Association continues to hold the pari-mutuel and gaming licenses under Iowa law. Harveys, through its wholly-owned subsidiaries, receives management fees and lease income generally equal to the ongoing cash flow from the operations of Bluffs Run Casino. The February 2, 1999 merger was accounted for as a purchase. This required an allocation of the purchase price to the individual assets acquired and liabilities assumed based on their fair value at the time of the merger. As a result, the consolidated financial statements for the periods after the merger are presented on a different basis of accounting from those for the periods before the merger and, therefore, are not directly comparable. The accompanying condensed consolidated statements of operations and condensed consolidated statements of cash flows for periods prior to the merger are captioned as the predecessor company and are shown for informational purposes. 6 The October 6, 1999 acquisition of the net assets of Bluffs Run Casino was accounted for as a purchase. Consequently, the net assets acquired are included in the condensed consolidated balance sheet based on their fair value as of the date of acquisition. The condensed consolidated statements of operations include the revenues and expenses of Bluffs Run Casino for the periods ended May 31, 2000. The condensed consolidated financial statements include the accounts of Harveys and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The condensed consolidated balance sheet as of November 30, 1999 has been prepared from the audited financial statements at that date. The accompanying condensed consolidated financial statements at May 31, 2000 and 1999, have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Certain reclassifications have been made to prior periods to conform to the current quarter presentation. These reclassifications had no effect on net income (loss). All adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of financial condition, results of operations and cash flows have been included. Results of operations for interim periods should not be considered to be indicative of results for the full fiscal year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended November 30, 1999. 2. PROPOSED MERGER On April 17, 2000, PH Casino Resorts, a newly formed subsidiary of Harveys Casino Resorts, entered into a definitive agreement with Pinnacle Entertainment, Inc. (formerly Hollywood Park, Inc.) pursuant to which PH Casino Resorts would acquire by merger all of the outstanding capital stock of Pinnacle Entertainment, Inc. Pinnacle Entertainment, Inc. is a gaming company that owns and operates eight casinos in Nevada, Mississippi, Louisiana and Argentina, two of which are the subject of a pending third-party sales transaction. Pinnacle Entertainment, Inc. also receives lease income from two card club casinos in the Los Angeles area. Pinnacle Entertainment, Inc. is in the process of constructing a casino resort in southern Indiana. 7 Upon closing of the merger, PH Casino Resorts will acquire all of the then outstanding stock of Pinnacle Entertainment, Inc. for $24 in cash per fully diluted share (or aggregate cash consideration of approximately $661.2 million). Additional consideration of up to $1 in cash per fully diluted share may be payable contingent upon the timing and net after tax proceeds of Pinnacle Entertainment, Inc.'s sale of 97 acres of surplus land in Inglewood, California. As a condition to the proposed transaction, senior management of Pinnacle Entertainment, Inc. will contribute $50 million of Pinnacle Entertainment, Inc. shares and share equivalents to PH Casino Resorts and will assume an ongoing role with PH Casino Resorts. Consummation of the merger is subject to, among other things, regulatory approvals in the various jurisdictions in which Pinnacle Entertainment, Inc. and Harveys Casino Resorts conduct gaming operations, approval by a majority of Pinnacle Entertainment, Inc.'s stockholders, completion of PH Casino Resorts' financing for the transaction and satisfaction of other conditions precedent, including certain dispositions by Pinnacle Entertainment, Inc. and the opening of their Indiana casino resort (currently under construction), substantially in accordance with its current budget, not later than September 15, 2000. The Company expects the transaction to close in the fourth quarter of 2000. 3. LONG-TERM DEBT Long-term debt consisted of the following (in thousands) as of:
May 31 2000 November 30, 1999 ----------- ----------------- 10 5/8% Senior Subordinated Notes, due 2006 $150,000 $150,000 Unamortized premium on Senior Subordinated Notes 6,141 6,654 ------------ ------------ 156,141 156,654 Note payable to banks 233,021 243,923 ------------ ------------ $389,162 $400,577 ============ ============
Senior Subordinated Notes - The indenture governing the senior subordinated notes contains certain covenants that impose limitations on, among other things: (i) the incurrence of additional indebtedness by the Company, (ii) the payment of dividends, (iii) the repurchase of capital stock and the making of certain other restricted payments and restricted investments (each defined in the indenture), (iv) mergers, consolidations and sales of assets, (v) the creation or incurrence of liens on the assets of the Company, and (vi) transactions by the Company or any of its subsidiaries with affiliates (as defined in the indenture). These limitations are subject to a number of qualifications and exceptions as described in the indenture. The Company was in compliance with these covenants at May 31, 2000. The premium on the senior subordinated notes is being amortized as a reduction of interest expense over the remaining term of the notes. 8 Note Payable to Banks - A second amended and restated credit facility, dated as of October 5, 1999, provides a revolving loan facility, a swingline facility that allows borrowing on same- day notice and a letter of credit facility. The Company can borrow up to $10 million under the swingline facility. The maximum available under the credit facility, including amounts outstanding under the swingline facility and letters of credit exposure, is $335 million. The maximum permitted principal balance is reduced quarterly, beginning August 31, 2000. At May 31, 2000, the Company had approximately $233.0 million in outstanding borrowings and approximately $48.5 million in letters of credit exposure. Interest on outstanding borrowings accrues at a base rate plus an applicable margin. The base rate is equal to the higher of the prime rate or the federal funds rate plus one-half of one percent. The Company may, at its option and under certain circumstances, elect to pay interest based on the London Interbank Offered Rate ("LIBOR") plus an applicable margin. The applicable margins are based on the ratio of total funded debt to earnings before deductions for interest, taxes, depreciation and amortization ("EBITDA"). The applicable margins are determined quarterly and are subject to change. At May 31, 2000 the applicable margin relative to the base rate was 1.00% and the applicable margin relative to the LIBOR was 2.00%. The Company entered into an interest rate cap agreement, effective March 1, 2000, to reduce the potential impact of increases in interest rates on variable-rate debt. The notional amount of the interest rate cap agreement was $48 million on March 1, 2000 and reduces quarterly over the 35 month term of the agreement. The notional amount on May 31, 2000 was $43.5 million. The agreement entitles the Company to receive from counterparties, on a monthly basis, the amount, if any, by which the Company's interest payments on its floating LIBOR-based debt exceeds the amount that would have been paid if the one-month LIBO rate was capped at 7.5%. The combination of the interest rate cap agreement and the terms of the credit facility result in the Company paying interest, on an amount of variable-rate debt equal to the notional amount of the interest rate cap agreement, at a variable rate (LIBOR plus 2.00%), not to exceed 9.5%. The cost (approximately $0.3 million) of acquiring the interest rate cap agreement is being amortized to interest expense over the term of the agreement. The unamortized cost is included in other assets in the condensed consolidated balance sheet. Amounts receivable under the interest rate cap agreement are recorded as a reduction of interest expense. The amounts the banks lend under the credit facility are secured by substantially all of the Company's assets including a pledge of the capital stock of its subsidiaries. 9 The credit facility contains a number of covenants that restrict the Company's ability to: (i) dispose of assets, (ii) incur additional indebtedness, (iii) prepay any of the 10 5/8% senior subordinated notes, (iv) pay dividends, (v) create liens on assets, (vi) make investments, loans or advances, (vii) engage in mergers or consolidations, change the Company's business, engage in certain transactions with affiliates, and (viii) engage in certain corporate activities. The Company is required to maintain specified financial ratios and net worth requirements, satisfy specified financial tests, including interest coverage tests, and maintain certain levels of annual capital expenditures. At May 31, 2000, the Company was in compliance with these covenants. 4. REDEEMABLE PREFERRED STOCK At May 31, 2000, the Company had outstanding 10 shares of 13 1/2% Series A Senior Redeemable Convertible Cumulative Preferred Stock and 99,990 shares of 13 1/2% Series B Senior Redeemable Convertible Cumulative Preferred Stock. The Series A Preferred Stock and Series B Preferred Stock each have a liquidation value of $550 per share. Both series of preferred stock are entitled to quarterly dividends at an annual rate of 13 1/2% of the liquidation value. If dividends are not paid in cash when due, they cumulate and compound at an annual rate of 13 1/2%. The Company must redeem all the outstanding preferred stock on February 1, 2011, for cash, at the liquidation value plus any accrued and unpaid dividends, and has the right to redeem the preferred stock, at any time, at the liquidation value plus any accrued and unpaid dividends. The Series A and Series B Preferred Stock are convertible, at any time on or prior to February 1, 2002, into corresponding shares of Class A and Class B Common Stock. The right of conversion, as it relates to the Series A and Series B Preferred Stock, only vests in, and is only exercisable by, the current holders of preferred stock and their affiliates (as that term is defined in the certificate of designation that governs the preferred stock). The conversion rate is 28.7309164 shares of common stock per share of preferred stock and is subject to customary antidilution adjustments. The conversion of the preferred stock to common stock would require the approval of all applicable gaming authorities. At the time of conversion, the Company would have the option of satisfying any accrued and unpaid dividends due on the preferred stock being converted by paying cash or issuing additional shares of the corresponding Class A Common Stock or Class B Common Stock having a market value equal to the amount of accrued dividends. The certificate of designation contains covenants which: (i) limit the Company's ability to make restricted payments or investments, (ii) limit consolidation, merger and the sale of assets, (iii) require the Company to provide certain financial reports, and (iv) limit business activities. At May 31, 2000, the Company was in compliance with these covenants. The combined liquidation value of the Series A Preferred Stock and Series B Preferred Stock at May 31, 2000 was $55 million. Additionally, on that date, there were approximately $10.7 million of accrued and unpaid dividends on the preferred stock. 10 5. DEVELOPMENT PROJECT WRITE-DOWNS In the second quarter of fiscal 2000, Harveys reviewed its business development plans as they related to a proposed resort in Salisbury Beach, Massachusetts. As a result of that review, the Company abandoned the project and wrote off approximately $1.3 million of real estate options and architectural designs. In the second quarter of fiscal 1999, the Company wrote off approximately $2.0 million related to a proposed casino project in Las Vegas which the Company chose not to pursue. 6. CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE Effective December 1, 1999, the Company adopted Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities. SOP 98-5 was issued by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants and its provisions are effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires costs of start-up activities (commonly referred to as preopening costs in the gaming industry) to be expensed as incurred. The initial effect of adopting SOP 98-5 is reported as the cumulative effect of a change in accounting principle. As required, all capitalized preopening costs as of December 1, 1999 were written off. These costs included previously deferred organization and licensing costs. The write-offs resulted in a charge of approximately $3.1 million, net of an income tax benefit of approximately $1.4 million. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations In the following discussion, the words "Harveys," "Company," "we," "our," and "us" refer to Harveys Casino Resorts, a Nevada corporation, and its wholly-owned subsidiaries, unless the context requires otherwise. On February 2, 1999, we were acquired by Harveys Acquisition Corporation, which merged with and into Harveys. The Company was the surviving corporation in the merger and we are continuing our business operations as conducted prior to the merger. We currently own and operate Harveys Resort & Casino at Lake Tahoe, Nevada, Harveys Casino Hotel in Council Bluffs, Iowa and Harveys Wagon Wheel in Central City, Colorado. We also own the assets of, and manage, Bluffs Run Casino in Council Bluffs, Iowa, a facility under license from Iowa West Racing Association. The following table presents certain operating results for the Company's properties. For comparative purposes, results for the first six months of fiscal 1999 have been presented on a combined six-month basis by aggregating the results for the period December 1, 1998 through February 1, 1999 with the results for the period February 2, 1999 (the date of acquisition) through May 31, 1999. Results of Operations
Three Months Ended Six Months Ended ------------------ ---------------- May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999 ------------ ------------ ------------ ------------ (Dollars in thousands) Net Revenues Harveys Resort & Casino $ 36,473 $ 32,374 $ 69,126 $ 63,523 Harveys Casino Hotel 32,959 31,554 65,792 61,855 Bluffs Run Casino 34,219 - 64,507 - Harveys Wagon Wheel 13,559 13,788 27,138 28,086 ----------- ----------- ----------- ---------- $117,210 $ 77,716 $226,563 $153,464 ========= ========= ========= ======== Operating Income (Loss) Harveys Resort & Casino $ 7,544 $ 5,108 $ 12,230 $ 8,521 Harveys Casino Hotel 7,224 7,010 14,321 13,486 Bluffs Run Casino 7,562 - 13,229 - Harveys Wagon Wheel 1,439 2,520 3,225 4,894 Corporate and Development (5,239) (5,077) (8,092) (8,107) Consent fee and merger costs - - - (19,879) --------------- --------------- --------------- ---------- $ 18,530 $ 9,561 $ 34,913 ($1,085) ========= ======= ======== ======== EBITDA (1) Harveys Resort & Casino $ 10,363 $ 7,510 $ 17,763 $ 13,213 Harveys Casino Hotel 9,398 8,991 18,647 17,409 Bluffs Run Casino 10,210 - 18,528 - Harveys Wagon Wheel 2,463 3,506 5,286 6,829 Corporate and Development (2,353) (2,210) (4,448) (4,672) ---------- ---------- ---------- ---------- $ 30,081 $ 17,797 $ 55,776 $ 32,779 ======== ======== ======== ========
12 Note to the operating results (1) EBITDA (operating income plus depreciation and amortization and excluding non-recurring items) should not be construed as an indicator of the Company's operating performance, or as an alternative to cash flows from operating activities as a measure of liquidity. We have presented EBITDA solely as supplemental disclosure because we believe that it allows for a more complete analysis of results of operations. Because companies do not calculate EBITDA identically, the presentation of EBITDA herein is not necessarily comparable to similarly entitled measures of other companies. EBITDA is not intended to represent and should not be considered more meaningful than, or an alternative to, measures of operating performance as determined in accordance with generally accepted accounting principles. SUMMARY - Our fiscal year 2000 results are significantly affected by our October 6, 1999 acquisition of the net assets of Bluffs Run Casino and our management of that facility. Our consolidated net revenues for the second quarter of fiscal 2000 amounted to $117.2 million, an increase of $39.5 million, or 50.8%, over our net revenues for the second quarter of fiscal 1999. Bluffs Run Casino provided $34.2 million of the net revenue growth. Excluding the net revenue contribution from Bluffs Run Casino, our same-store net revenues improved by $5.3 million, or 6.8%. Improvements in net revenues from Harveys Casino Hotel at Council Bluffs and Harveys Resort & Casino at Lake Tahoe mitigated our declining net revenues from Harveys Wagon Wheel in the increasingly competitive Central City/Black Hawk, Colorado market. Operating income amounted to $18.5 million for the second quarter of fiscal 2000. This was a $9.0 million, or 93.8%, improvement from the prior year period. Bluffs Run Casino provided $7.6 million of the increased operating income. On a same-store basis, our operating income improved $1.4 million, or 14.7%. For the first six months of fiscal 2000, net revenues amounted to $226.6 million, an increase of $73.1 million, or 47.6%, over net revenues for the first half of fiscal 1999. Bluffs Run Casino provided $64.5 million of the net revenue growth. Excluding the contribution from Bluffs Run Casino, our same-store net revenues improved by $8.6 million, or 5.6%. The growth in same-store net revenue was driven by improvements at our Lake Tahoe property and at Harveys Casino Hotel in Council Bluffs. Harveys Wagon Wheel experienced a decline in net revenues for the comparable six month periods due to increased competition. Operating income of $34.9 million for the six-months ended May 31, 2000 exceeded operating income for the same period of the prior year by $16.1 million, or 85.8%, (excluding $19.9 million of consent fee and merger related expenses from the 1999 period). The addition of Bluffs Run Casino was responsible for $13.2 million of that growth. On a same-store basis, our operating income improved by $2.9 million, with growth recognized at Harveys Resort & Casino and Harveys Casino Hotel while Harveys Wagon Wheel recorded a decline in operating income. HARVEYS RESORT & CASINO - Our Lake Tahoe property produced net revenues for the quarter of $36.5 million, an increase of $4.1 million, or 12.7%, over our net revenues for the second quarter of fiscal 1999. Revenues improved primarily as a result of increased wagering volume and an increase in the number of meals served. Our operating profit of $7.5 million increased by $2.4 million, or 47.7%, primarily as a result of improvements in casino profit margins. 13 Our net revenues from Lake Tahoe for the six months ended May 31, 2000 amounted to $69.1 million, an increase of $5.6 million, or 8.8%, over our net revenues recorded for the same period of fiscal 1999. All operating areas experienced revenue improvements as a result of overall growth in the South Lake Tahoe market and a combination of our marketing efforts and some business disruption at one of our competitors due to its remodeling construction which was just recently completed. Our Lake Tahoe operating profit of $12.2 million for the first half of fiscal 2000 improved by $3.7 million, or 43.5 %, driven by improvements in casino profit margins. We have not yet experienced any impact from additional competition that could result from an increase in the number of casinos on Native American lands in California as a consequence of the approval of the California Indian Self-reliance Initiative in November 1998. While we do not anticipate any such additional competition to affect us in fiscal 2000, any future Native American casinos on lands between Harveys Resort & Casino and major population centers, such as the San Francisco Bay area, could have an adverse impact on our Lake Tahoe operations. HARVEYS CASINO HOTEL - This Council Bluffs property provided net revenues for the quarter of $33.0 million, an increase of $1.4 million, or 4.5% over our net revenues recorded in the second quarter of fiscal 1999. Revenues improved as a result of increases in wagering volume and the number of meals served. Operating profit of $7.2 million increased by $0.2 million, or 3.1%, as a result of the improvements. Our net revenues from Harveys Casino Hotel for the six months ended May 31, 2000 amounted to $65.8 million, an increase of $3.9 million, or 6.4%, over our net revenues recorded in the same period of fiscal 1999. All operating areas experienced revenue improvements as a result of increases in wagering volume, hotel occupancy and the number of meals served. Operating profits of $14.3 million improved by $0.8 million, or 6.2 %, driven primarily by casino revenues and profits. BLUFFS RUN CASINO - The second quarter of fiscal 2000 was the second full quarter of our management of Bluffs Run Casino. This Council Bluffs property provided net revenues for the quarter of $34.2 million and operating profit of $7.6 million. Our net revenues from this property for the six months ended May 31, 2000 amounted to $64.5 million and operating profit amounted to $13.2 million. Casinos at pari-mutuel tracks in Iowa, including Bluffs Run Casino, are subject to an escalating wagering tax which is currently 28%. The tax, which applies to gross receipts from slot machines, increases two percent per year until it reaches a maximum of 36% on January 1, 2004. We were subject to our first increase in the tax (since our October 6, 1999 acquisition) on January 1, 2000 and will be subject to the next increase on January 1, 2001. 14 HARVEYS WAGON WHEEL - Net revenues from our Central City property amounted to $13.6 million for the quarter, a decrease of $0.2 million, or 1.7%, from our net revenues recorded in the second quarter of fiscal 1999. The decrease was primarily in casino revenues, resulting from additional competition in nearby Black Hawk, Colorado. Our operating profit of $1.4 million declined by $1.1 million, or 42.9%, primarily as a result of the decline in our casino revenues and profits and an increase in our marketing and advertising expenditures in response to the new competition. Our net revenues from Central City for the six months ended May 31, 2000 amounted to $27.1 million, a decrease of $0.9 million, or 3.4%, from our net revenues recorded in the same period of fiscal 1999. The revenue decline was in our casino revenues and is principally the result of the opening of new competition in Black Hawk, Colorado. Our Central City operating profit of $3.2 million declined $1.7 million, or 34.1%, as a result of the decline in our casino revenues and profits and marketing and advertising expenditures in response to the new competition. During the second quarter of our current fiscal year, another competitor opened a new casino facility in Black Hawk, bringing to four the number of new gaming facilities opened there in the past two years. OTHER FACTORS AFFECTING RESULTS OF OPERATIONS - Our results for the quarter and six months ended May 31, 2000 were affected by several other factors, including: increases in depreciation and amortization, increases in selling, general and administrative expenses, a development project write-off, increases in interest expense and the cumulative effect of a change in accounting principle. Depreciation and amortization expense amounted to approximately $9.2 million in the second quarter of fiscal 2000 compared to approximately $6.0 million of depreciation and amortization in the second quarter of the prior year. This increase included approximately $2.1 million of amortization of the costs in excess of net assets acquired in the merger with Harveys Acquisition Corporation and in the acquisition of the net assets of Bluffs Run Casino. The balance of the increase for the second quarter of fiscal 2000 was primarily the result of the change in the accounting basis for property and equipment brought on by the merger and additional depreciation from Bluffs Run Casino. The increase in depreciation and amortization for the comparable six-month periods amounted to approximately $6.9 million and was attributable to the same factors. Our selling, general and administrative expenses increased by $7.1 million over the selling, general and administrative expenses of the prior year second quarter. Assuming management of the Bluffs Run Casino accounted for approximately $4.9 million of the increase. Other increases included higher marketing costs for Harveys Wagon Wheel and recognition of increased deferred compensation expenses related to executive stock-based compensation plans. The increase in selling, general and administrative expenses for the six months ended May 31, 2000, compared to the prior year period, was approximately $11.8 million. The management of Bluffs Run Casino accounted for approximately $9.5 million of the increase. 15 In the second quarter of fiscal 2000, we reviewed our business development plans as they related to a proposed resort in Salisbury Beach, Massachusetts. As a result of that review, we abandoned the project and wrote off approximately $1.3 million of real estate options and architectural designs. In the second quarter of fiscal 1999, we wrote off approximately $2.0 million related to a proposed casino project in Las Vegas which we chose not to pursue. As a result of the merger financing and the 100% financing of the acquisition of the net assets of Bluffs Run Casino, our average long-term debt during the second quarter and first half of fiscal 2000 was substantially higher than during the comparable periods of fiscal 1999. Consequently, our interest expense, net of interest income, increased by $2.3 million to $9.2 million for the most recent quarter, and increased by $7.2 million to $19.0 million for the first six months of fiscal 2000. Effective December 1, 1999, we adopted Statement of Position 98-5, Reporting on the Costs of Start-Up Activities. The provisions of this accounting pronouncement require costs of start-up activities (commonly referred to as preopening costs in the gaming industry) to be expensed as incurred. The initial effect upon adoption is reported as the cumulative effect of a change in accounting principle. As required, we wrote off all capitalized preopening costs as of December 1, 1999. These costs included previously deferred organization and licensing costs. The write-off resulted in a charge of approximately $3.1 million, net of an income tax benefit of approximately $1.4 million. Liquidity and Capital Resources Our primary source of cash during the first half of fiscal 2000 was approximately $26.0 million of cash flow from operations, compared to approximately $14.9 million of aggregate cash flow from operations in the first six months of the prior year. We expended approximately $9.5 million on capital improvements and replacements and paid approximately $2.2 million of construction payables on our parking structure at Harveys Casino Hotel in Council Bluffs. We were also able to reduce our outstanding indebtedness under our credit facility by approximately $10.9 million. Primarily as a result of the above, our cash and cash equivalents increased by $3.2 million, from $32.5 million at November 30, 1999 to $35.7 million at May 31, 2000. Additionally, our outstanding debt decreased from $393.9 million at the end of fiscal 1999 to approximately $383.0 million at May 31, 2000, excluding the unamortized premium on our senior subordinated notes. Our debt at May 31, 2000 consisted of $150 million of senior subordinated notes and $233.0 million outstanding under our credit facility. In addition to our debt, we were obligated at May 31, 2000 for an aggregate of approximately $65.7 million on our outstanding Series A Preferred Stock and Series B Preferred Stock and the unpaid dividends accrued thereon. 16 At May 31, 2000, we also had approximately $48.5 million of standby letters of credit outstanding, including a $45.0 million irrevocable letter of credit to support contingent consideration of up to $50.0 million which may be due as part of the consideration paid for the assets of Bluffs Run Casino. The contingent payment depends on the results of a referendum to be decided by the voters of Pottawattamie County, Iowa in November of 2002. Our credit facility matures and is fully due and payable on September 30, 2004. The permitted principal balance of the credit facility reduces on a quarterly basis, beginning August 31, 2000. Given our outstanding balance at May 31, 2000 and our anticipated sources and uses of cash, we do not expect to be subject to any mandatory principal payment requirements during the next twelve months. Interest on borrowings outstanding under the credit facility are payable, at our option, at either LIBOR or an alternative base rate, in each case plus an applicable margin. In the future, the applicable margins may be changed, based on the ratio of our total funded debt to EBITDA. The credit facility contains a number of covenants that, among other things, subject to applicable gaming approvals, restrict our ability to dispose of assets, incur additional indebtedness, prepay any principal amount of our $150 million senior subordinated notes, pay dividends, create liens on assets, make investments, loans or advances, engage in mergers or consolidations, change the nature of our business or engage in certain transactions with affiliates and otherwise restrict certain corporate activities. In addition, under the credit facility, we are required to maintain specified financial ratios and net worth requirements, satisfy specified financial tests, including interest coverage tests, and maintain certain levels of annual capital expenditures. The credit facility contains events of default customary for facilities of this nature. Our senior subordinated notes are governed by an indenture and are general unsecured obligations of the Company, subordinated in right of payment to all existing and future senior debt of the Company. Interest on the senior subordinated notes is payable semi-annually on June 1 and December 1 of each year. The senior subordinated notes mature on June 1, 2006. The senior subordinated notes are redeemable at our option, in whole or in part, at any time on or after June 1, 2001 at prices ranging from 105.313% of the principal amount plus accrued and unpaid interest, to 100% of the principal amount plus accrued and unpaid interest beginning June 1, 2004 and thereafter. The indenture contains certain covenants that impose limitations on, among other things, the incurrence of additional indebtedness, the payment of dividends, the repurchase of capital stock and the making of certain other restricted payments and restricted investments (as defined in the indenture), mergers, consolidations and sales of assets by the Company, the creation or incurrence of liens on the assets of the Company, and transactions by the Company or any of its subsidiaries with affiliates (as defined in the indenture). These limitations are subject to a number of qualifications and exceptions as described in the indenture. Our Series A Preferred Stock and Series B Preferred Stock are entitled to quarterly dividends at an annual rate of 13 1/2% of the $550 per share liquidation value. To the extent we do not pay the dividends in cash, dividends will cumulate and compound quarterly at an annual rate of 13 1/2%. The Series A Preferred Stock and Series B Preferred Stock are subject to mandatory redemption on February 1, 2011 for cash at the liquidation value plus any accrued and unpaid dividends. We have the right to redeem the Series A Preferred Stock and the Series B Preferred Stock at any 17 time for cash at the liquidation value plus any accrued and unpaid dividends. The certificate of designation for the preferred stock contains covenants which limit restricted payments or investments; limit consolidation, merger and the sale of assets; mandate the provision of financial reports; and limit business activities. Upon the receipt of all applicable gaming approvals the Series A Preferred Stock and Series B Preferred Stock are convertible at any time on or before February 1, 2002, at the per share rate of 28.7309164 shares of the Class A Common and Class B Common, respectively, subject to customary anti-dilution adjustments. The right of conversion, as it relates to our Series A and Series B Preferred Stock, only vests in, and is only exercisable by, the current holders of our preferred stock and their affiliates (as that term is defined in the certificate of designation). Any accrued and unpaid dividends at the time of a conversion will be required to be paid in cash or, at our election, may be satisfied with additional shares of the corresponding common stock having a fair market value equal to the amount of accrued dividends. As of May 31, 2000, we were in compliance with the covenants under the credit facility, the indenture and the certificate of designation. At the end of the first half of fiscal 2000, we had approximately $53.5 million available to us under the bank credit facility, net of outstanding letters of credit and subject to compliance with certain financial covenants. We also had cash and cash equivalents of approximately $35.7 million. We anticipate expending an additional $11.4 million for maintenance capital expenditures and property improvements in fiscal 2000. We believe that our existing cash and cash equivalents, cash flows from operations and our borrowing capacity under the credit facility will be sufficient to meet the cash requirements of our existing operations for at least the next twelve months, including capital improvements and replacements at the operating properties and debt service requirements. We currently believe that cash requirements of our existing operations beyond the next twelve months will consist of debt service requirements and capital improvements and replacements in the ordinary course, which we expect to be met by then-existing cash, cash flows from operations and borrowing capacity under the credit facility. Other than the proposed merger discussed below, we do not currently anticipate incurring material capital expenditures, balloon or other extraordinary payments on long-term obligations or any other extraordinary demands or commitments beyond the next twelve months. We do not expect to pay cash dividends on the preferred stock prior to 2004 because of, among other reasons, restrictions in the credit facility and the indenture on the payment of cash dividends. On April 17, 2000, our newly formed subsidiary, PH Casino Resorts, entered into a definitive agreement with Pinnacle Entertainment, Inc. (formerly Hollywood Park, Inc.) pursuant to which PH Casino Resorts would acquire by merger all of the outstanding capital stock of Pinnacle Entertainment, Inc. for $24 in cash per fully diluted share (or aggregate cash consideration of approximately $661.2 million). Additional consideration of up to $1 in cash per fully diluted 18 share may be payable depending upon the timing and net after tax proceeds of Pinnacle Entertainment, Inc.'s sale of 97 acres of surplus land in Inglewood, California. Consummation of the merger is subject to, among other things, completion of PH Casino Resorts' financing for the transaction. We believe that the financing will be provided by some combination of: (i) assumption of existing debt of Pinnacle Entertainment, Inc., (ii) issuance of unsecured subordinated debt, (iii) incurrence of secured bank financing, (iv) conversion of Harveys' preferred stock into common equity, and (v) equity contributions by key shareholders of Pinnacle Entertainment, Inc. However, we cannot make any assurances that financing will be available at terms acceptable to us, if at all. 19 Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk from changes in interest rates. Borrowings outstanding under our credit facility are subject to variable interest rates. The amount outstanding under our credit facility at May 31, 2000 was approximately $233 million, subject to a weighted-average interest rate of 8.48%. Assuming an identical outstanding balance, a hypothetical immediate 100 basis point increase in interest rates would increase interest expense for the next twelve months by approximately $2.3 million. We entered into an interest rate cap agreement, effective March 1, 2000, to reduce the potential impact of increases in interest rates on variable-rate debt. The notional amount of the interest rate cap agreement was $48 million on March 1, 2000 and reduces quarterly over the 35 month term of the agreement. The notional amount on May 31, 2000 was $43.5 million. The agreement entitles us to receive from counterparties, on a monthly basis, the amount, if any, by which our interest payments on our floating LIBOR-based debt exceeds the amount that we would have paid if the one-month LIBO rate was capped at 7.5%. The combination of the interest rate cap agreement and the terms of the credit facility result in the Company paying interest, on an amount of variable-rate debt equal to the notional amount of the interest rate cap agreement, at a variable rate (LIBOR plus 2.00%), not to exceed 9.50%. We may use additional derivative financial instruments in the future as a risk management tool. We do not use derivative financial instruments for speculative or trading purposes. Additionally, the fair value of our fixed rate long-term debt, consisting of our $150 million of senior subordinated notes and approximately $6.1 million of unamortized premium on our senior subordinated notes at May 31, 2000, and the fair value of our fixed rate preferred stock, are sensitive to differences between market interest rates and rates at the time of issuance. A hypothetical immediate 100 basis point increase in interest rates at May 31, 2000 would have decreased the fair value of our fixed rate long-term debt by approximately $13.9 million. Conversely, a 100 basis point decrease in interest rates would have increased the fair value of our outstanding long-term debt at May 31, 2000 by approximately $17.0 million. A hypothetical immediate 100 basis point increase in interest rates would have decreased the fair value of our fixed rate preferred stock by approximately $4.3 million at May 31, 2000. Conversely, a 100 basis point decrease in interest rates would have increased the fair value of our preferred stock by approximately $5.0 million. 20 CAUTIONARY STATEMENT FOR PURPOSES OF THE 'SAFE HARBOR' PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This document includes various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. Statements containing expressions such as "believes", "anticipates", or "expects" used in the Company's press releases and periodic reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission are intended to identify forward-looking statements. All forward-looking statements involve risks and uncertainties. Although the Company believes its expectations are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurances that actual results will not materially differ from expected results. The Company cautions that these and similar statements included in this report and in previously filed periodic reports, including reports filed on Forms 10-K and 10-Q, are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, without limitation, the following: ability to complete the proposed merger with Pinnacle Entertainment, Inc.; increased competition in existing markets or the opening of new gaming jurisdictions; a decline in the public acceptance of gaming; the limitation, conditioning or suspension of any of the Company's gaming licenses; increases in or new taxes imposed on gaming revenues or gaming devices; a finding of unsuitability by regulatory authorities with respect to the Company's officers, directors or key employees; loss or retirement of key executives; significant increases in fuel or transportation prices; adverse economic conditions in the company's key markets; severe and unusual weather in the Company's key markets; adverse results of significant litigation matters. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligation to publicly release any revision to such forward-looking statements to reflect events or circumstances after the date thereof. 21 PART II - OTHER INFORMATION Item 1. Legal Proceedings. Not Applicable Item 2. Changes in Securities. Not Applicable Item 3. Defaults Upon Senior Securities. Not Applicable Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. Not Applicable Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits See attached Exhibit Index (b) Reports on Form 8-K On April 27, 2000, the Company filed a Current Report on Form 8-K to report, that PH Casino Resorts, a newly formed subsidiary of Harveys Casino Resorts had entered into a definitive agreement with Pinnacle Entertainment, Inc. (formerly Hollywood Park, Inc.) pursuant to which PH Casino Resorts would acquire by merger all of the outstanding capital stock of Pinnacle Entertainment, Inc. 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARVEYS CASINO RESORTS ----------------------------------------- Registrant Date: July 13, 2000 /S/ John McLaughlin ----------------------------------------- John McLaughlin Senior Vice President, Treasurer and Chief Financial Officer 23 EXHIBIT INDEX
Exhibit Number Description - -------- --------------------------------------------------------------------- 3.1 Amendments to Articles of Incorporation of Harveys Casino Resorts as Surviving Constituent Entity (filed as Exhibit A to Articles of Merger of Harveys Acquisition Corporation into Harveys Casino Resorts). (4) (Articles of Incorporation are incorporated herein by reference to Harveys Acquisition Corporations's Registration Statement on Form 10 (File No. 0-25093), filed November 20,1998). 3.2 Eighth Amended and Restated Bylaws of the Registrant (5) 4.1 Form of Stock Certificate of the Registrant (5) 4.2 Indenture, dated as of May 15, 1996 ( the "Original Indenture"), by and among the Registrant, Harveys Wagon Wheel Casino Limited Liability Company, Harveys C. C. Management Company, Inc., Harveys Iowa Management Company, Inc. and Harveys L. V. Management Company, Inc. ( the 'Guarantors') and IBJ Schroder Bank & Trust Company as Trustee ( including form of Note) (1) 4.3 First Supplemental Indenture, dated as of June 5, 1996, supplementing the Original Indenture (2) 4.4 Second Supplemental Indenture, dated as of May 22, 1997, supplementing the Original Indenture (3) 4.5 Third Supplemental Indenture, dated as of December 24, 1998, among the Registrant, Harveys Tahoe Management Company, Inc., Harveys C. C. Management Company, Inc., Harveys Iowa Management Company, Inc., Harveys L. V. Management Company, Inc. and IBJ Schroder Bank and Trust Company, supplementing the Original Indenture (5) 4.6 Fourth Supplemental Indenture, dated as of December 24, 1998, among the Registrant, Harveys Tahoe Management Company, Inc., Harveys C. C. Management Company, Inc., Harveys Iowa Management Company, Inc., Harveys L. V. Management Company, Inc. and IBJ Schroder Bank and Trust Company, supplementing the Original Indenture (5) 4.7 Certificate of Designation of the 13 1/2% Series A Senior Redeemable Convertible Cumulative Preferred Stock ($0.01 par value per share) and the 13 1/2% Series B Redeemable Convertible Cumulative Preferred Stock ($0.01 par value per share) of Harveys Casino Resorts (4) 4.8 Certificate of Amendment, dated as of February 7, 2000, to the Certificate of Designation of the 13 1/2% Series A Senior Redeemable Convertible Cumulative Preferred Stock ($0.01 par value per share) and the 13 1/2% Series B Senior Redeemable Convertible Cumulative Preferred Stock ($0.01 par value per share) of Harveys Casino Resorts (6) 10.1 Second Amended and Restated Credit Agreement, dated as of October 5, 1999, among Harveys Casino Resorts, a Nevada corporation, Harveys C. C. Management Company, Inc., a Nevada corporation, Harveys Iowa Management Company, Inc., a Nevada corporation, Harveys Tahoe Management Company, Inc., a Nevada corporation, HBR Realty Company,
24 Inc., a Nevada corporation, Harveys BR Management Company, Inc., a Nevada corporation, HCR Services Company, Inc., a Nevada corporation, as Borrowers, the Lenders herein named, Wells Fargo Bank, National Association, as Swingline Lender, L/C Issuer and Agent Bank, Credit Lyonnais Los Angeles Branch, as Syndication Co-Agent, Deutsche Banc Securities, as Documentation Agent, Societe Generale and Bank One, N. A. as Co-Managing Agents. (6) 10.2 First Amendment to Second Amended and Restated Credit Agreement, dated as of April 14, 2000 by and among Harveys Casino Resorts, a Nevada corporation, Harveys C. C. Management Company, Inc., a Nevada corporation, Harveys Tahoe Management Company, Inc., a Nevada corporation, HBR Realty Company, Inc., a Nevada corporation, Harveys BR Management Company, Inc., a Nevada corporation and HCR Services Company, Inc., a Nevada corporation, as Borrowers, the Lenders herein named, Wells Fargo Bank, National Association as Swingline Lender, L/C Issuer and Agent Bank. (7) 10.3 Employment Agreement and Agreement and Covenant Not to Compete or Use or Disclose Trade Secrets, each dated as of December 6, 1999, by and between John R. Bellotti and Harveys Casino Resorts. (7) 10.4 Amended and Restated Employment Agreement dated as of April 28, 2000, by and between Harveys Casino Resorts and Charles W. Scharer. (7) 10.5 Amended and Restated Employment Agreement dated as of April 28, 2000, by and between Harveys Casino Resorts and John J. McLaughlin. (7) 10.6 2000 Deferred Compensation Plan Participants. (7) 27 Financial Data Schedule (7)
------------------------ (1) Incorporated herein by reference to Registration Statement No. 333-3576 (2) Incorporated herein by reference to Registrant's Current Report on Form 8-K filed June 14, 1996 (3) Incorporated herein by reference to Registrant's Quarterly Report on Form 10-Q for the period ended August 31, 1997 (4) Incorporated herein by reference to Registrant's Current Report on Form 8-K filed February 16, 1999 (5) Incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the period ended November 30, 1998 (6) Incorporated herein by reference to Registrant's Quarterly Report on Form 10-Q for the period ended February 29, 2000. (7) Filed herewith 25 EX-10.2 2 ex-10_2.txt EXHIBIT 10.2 EXHIBIT 10.2 FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT ("First Amendment") is made and entered into as of the 14th day of April, 2000, by and among HARVEYS CASINO RESORTS, a Nevada corporation, HARVEYS C.C. MANAGEMENT COMPANY, INC., a Nevada corporation, HARVEYS IOWA MANAGEMENT COMPANY, INC., a Nevada corporation, HARVEYS TAHOE MANAGEMENT COMPANY, INC., a Nevada corporation, HBR REALTY COMPANY, INC., a Nevada corporation, HARVEYS BR MANAGEMENT COMPANY, INC., a Nevada corporation and HCR SERVICES COMPANY, INC., a Nevada corporation (collectively the "Borrowers"), WELLS FARGO BANK, National Association, CREDIT LYONNAIS LOS ANGELES BRANCH, BANK ONE, NA, BANKERS TRUST COMPANY, SOCIETE GENERALE, FIRST SECURITY BANK, N.A., U.S. BANK NATIONAL ASSOCIATION, FIRST HAWAIIAN BANK, GREATER BAY CORPORATE FINANCE, IMPERIAL BANK, WEST COAST BANK, NATIONAL CITY BANK OF INDIANA and HIBERNIA NATIONAL BANK, as Lenders, WELLS FARGO BANK, National Association, as the Swingline Lender (herein in such capacity, together with its successors and assigns, the "Swingline Lender"), WELLS FARGO BANK, National Association, as the issuer of letters of credit thereunder (herein in such capacity, together with its successors and assigns, the "L/C Issuer"), and WELLS FARGO BANK, National Association, as arranger, administrative and collateral agent for the Lenders, Swingline Lender and L/C Issuer (herein, in such capacity, called the "Agent Bank" and, together with the Lenders, Swingline Lender and L/C Issuer, collectively referred to as the "Banks"). R_E_C_I_T_A_L_S: WHEREAS: A. Borrowers and Banks entered into a Second Amended and Restated Credit Agreement dated as of October 5, 1999 (the "Existing Credit Agreement"). B. For the purpose of this First Amendment, all capitalized words and terms not otherwise defined herein shall have the respective meanings and be construed herein as provided in Section 1.01 of the Existing Credit Agreement and any reference to a provision of the Existing Credit Agreement shall be deemed to incorporate that provision as a part hereof, in the same manner and with the same effect as if the same were fully set forth herein. C. Borrowers and Banks desire to amend the Existing Credit Agreement for the purpose of fully amending and restating Section 5.24 of the Existing Credit Agreement entitled "Interest Rate Protection" and adding a quarterly certification as to compliance with Section 5.24 to the Compliance Certificate. D. Borrowers and Banks have agreed to the following modifications and amendments to the Existing Credit Agreement on the terms and subject to the conditions and provisions set forth in this First Amendment. NOW, THEREFORE, in consideration of the foregoing and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do agree to the waiver, amendments and modifications to the Existing Credit Agreement as specifically hereinafter provided as follows: 1. DEFINITIONS. As of the First Amendment Effective Date, Section 1.01 of the Existing Credit Agreement entitled "Definitions" shall be and is hereby amended to include the following definitions. Those terms which are currently defined by Section 1.01 of the Existing Credit Agreement and which are also defined below shall be superseded and restated by the applicable definition set forth below: "Compliance Certificate" shall mean a compliance certificate as described in Section 5.08(a)(v) substantially in the form of "Exhibit F", affixed to the First Amendment and by this reference incorporated herein and made a part hereof, which shall fully restate and supersede the "Compliance Certificate" affixed as Exhibit F to the Existing Credit Agreement. "Credit Agreement" shall mean the Existing Credit Agreement as amended by the First Amendment, as it may be further amended, modified, extended, renewed or restated from time to time. "Existing Credit Agreement" shall have the meaning set forth in Recital Paragraph A of the First Amendment. "First Amendment" shall have the meaning set forth in the Preamble of the First Amendment to Second Amended and Restated Credit Agreement dated as of April 14, 2000, executed by and among Borrowers and Banks. "First Amendment Effective Date" shall mean April 5, 2000. 2. RESTATEMENT OF INTEREST RATE PROTECTION COVENANT. As of the first Amendment Effective Date, Section 5.24 entitled "Interest Rate Protection", shall be and is hereby fully amended and restated in its entirety as follows: 2 "Section 5.24. INTEREST RATE PROTECTION. a. Commencing no later than one hundred eighty (180) days following the Amendment Effective Date and continuing for a period of no less than three (3) years following the date of such commencement, Borrowers shall maintain Interest Rate Hedges in an aggregate principal notional amount of no less than fifty percent (50.0%) of the Total Funded Debt (exclusive of Contingent Liabilities) outstanding from time to time. b. Commencing no later than one hundred eighty (180) days following the Commitment Increase Effective Date and continuing for a period of no less than three (3) years following the date of such commencement, Borrowers shall maintain Interest Rate Hedges in an aggregate principal notional amount of no less than fifty percent (50.0%) of the amount of the Commitment Increase outstanding from time to time." 3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF FIRST AMENDMENT. The First Amendment shall become effective as of the date hereof upon receipt by Agent Bank of the following documents and payments, in each case in a form and substance reasonably satisfactory to Agent Bank, and the occurrence of each other condition precedent set forth below: a. Due execution by Borrowers and Banks of fourteen (14) duplicate originals of this First Amendment; b. Corporate resolutions or other evidence of requisite authority of Borrowers to execute the First Amendment; c. Reimbursement to Agent Bank by Borrowers for all reasonable fees and out-of-pocket expenses incurred by Agent Bank in connection with the First Amendment, including, but not limited to, reasonable attorneys' fees of Henderson & Morgan, LLC; and d. Such other documents, instruments or conditions as may be reasonably required by Lenders. 4. REPRESENTATIONS OF BORROWERS. Borrowers hereby represent to the Banks that as of the date hereof: a. The representations and warranties contained in Article IV of the Existing Credit Agreement and contained in each of the other Loan Documents (other than representations and warranties which expressly speak only as of a different date, 3 which shall be true and correct in all material respects as of such date) are true and correct on and as of the date hereof in all material respects as though such representations and warranties had been made on and as of the date hereof, except to the extent that such representations and warranties are not true and correct as a result of a change which is permitted by the Credit Agreement or by any other Loan Document or which has been otherwise consented to by Agent Bank; b. Since the date of the most recent financial statements referred to in Section 5.08 of the Existing Credit Agreement, no Material Adverse Change has occurred and no event or circumstance which could reasonably be expected to result in a Material Adverse Change or Material Adverse Effect has occurred; c. No event has occurred and is continuing which constitutes a Default or Event of Default under the terms of the Credit Agreement; and d. The execution, delivery and performance of this First Amendment has been duly authorized by all necessary action of Borrowers and this First Amendment constitutes a valid, binding and enforceable obligation of Borrowers. 5. INCORPORATION BY REFERENCE. This First Amendment shall be and is hereby incorporated in and forms a part of the Existing Credit Agreement. 6. GOVERNING LAW. This First Amendment shall be governed by the internal laws of the State of Nevada without reference to conflicts of laws principles. 7. COUNTERPARTS. This First Amendment may be executed in any number of separate counterparts with the same effect as if the signatures hereto and hereby were upon the same instrument. All such counterparts shall together constitute one and the same document. 8. CONTINUANCE OF TERMS AND PROVISIONS. All of the terms and provisions of the Existing Credit Agreement shall remain unchanged except as specifically modified herein. 4 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the day and year first above written. BORROWERS: HARVEYS CASINO RESORTS, a Nevada corporation By /s/ CHARLES W. SCHARER ------------------------------- Charles W. Scharer, President and CEO By /s/ JOHN MCLAUGHLIN ------------------------------- John McLaughlin, Senior Vice President, Treasurer and CFO HARVEYS C.C. MANAGEMENT COMPANY, INC., a Nevada corporation By /s/ CHARLES W. SCHARER ------------------------------- Charles W. Scharer, President By /s/ JOHN MCLAUGHLIN ------------------------------- John McLaughlin, Secretary/Treasurer 5 HARVEYS IOWA MANAGEMENT COMPANY, INC., a Nevada corporation By /s/ CHARLES W. SCHARER ------------------------------- Charles W. Scharer, President By /s/ JOHN MCLAUGHLIN ------------------------------- John McLaughlin, Secretary/Treasurer HARVEYS TAHOE MANAGEMENT COMPANY, INC., a Nevada corporation By /s/ CHARLES W. SCHARER ------------------------------- Charles W. Scharer, President By /s/ JOHN MCLAUGHLIN ------------------------------- John McLaughlin, Secretary/Treasurer HCR SERVICES COMPANY, INC., a Nevada corporation By /s/ CHARLES W. SCHARER ------------------------------- Charles W. Scharer, President By /s/ JOHN MCLAUGHLIN ------------------------------- John McLaughlin, Secretary/Treasurer 6 HBR REALTY COMPANY, INC., a Nevada corporation By /s/ CHARLES W. SCHARER ------------------------------- Charles W. Scharer, President By /s/ JOHN MCLAUGHLIN ------------------------------- John McLaughlin, Secretary/Treasurer HARVEYS BR MANAGEMENT COMPANY, INC., a Nevada corporation By /s/ CHARLES W. SCHARER ------------------------------- Charles W. Scharer, President By /s/ JOHN MCLAUGHLIN ------------------------------- John McLaughlin, Secretary/Treasurer 7 BANKS: ----- WELLS FARGO BANK, National Association, Agent Bank, Lender, Swingline Lender and L/C Issuer By /s/ SUE FULLER -------------- Name SUE FULLER ---------- Title VICE PRESIDENT -------------- CREDIT LYONNAIS LOS ANGELES BRANCH, Lender By /s/ DIANNE M. SCOTT ------------------- Name DIANNE M. SCOTT --------------- Title FIRST VICE PRESIDENT & MANAGER ------------------------------ BANK ONE, N.A., Lender By /s/ BETTY FRANCIS-SAMILTON -------------------------- Name BETTY FRANCIS-SAMILTON ---------------------- Title CUSTOMER SERVICE OFFICER ------------------------ 8 BANKERS TRUST COMPANY, Lender By /s/ LAURA S. BURWICK -------------------- Name LAURA S. BURWICK ---------------- Title PRINCIPAL --------- SOCIETE GENERALE, Lender By /s/ ALEX Y. KIM --------------- Name ALEX Y. KIM ----------- Title VICE PRESIDENT -------------- FIRST SECURITY BANK, N.A., Lender By /s/ DAVID P. WILLIAMS --------------------- Name DAVID P. WILLIAMS ----------------- Title VICE PRESIDENT -------------- 9 U.S. BANK NATIONAL ASSOCIATION, Lender By /s/ J. ANDREW BACKSTROM ----------------------- Name J. ANDREW BACKSTROM ------------------- Title VICE PRESIDENT -------------- FIRST HAWAIIAN BANK, Lender By /s/ DONALD C. YOUNG ------------------- Name DONALD C. YOUNG --------------- Title SENIOR VICE PRESIDENT --------------------- GREATER BAY CORPORATE FINANCE, a division of Cupertino National Bank & Trust, Lender By /s/ DAN MCCARTNEY ----------------- Name DAN MCCARTNEY ------------- Title VICE PRESIDENT -------------- 10 IMPERIAL BANK, Lender By /s/ R. VADALMA -------------- Name RAY VADALMA ----------- Title SENIOR MANAGING DIRECTOR ------------------------ WEST COAST BANK, Lender By /s/ TIMOTHY B. JOHNSON ---------------------- Name TIMOTHY B. JOHNSON ------------------ Title VICE PRESIDENT -------------- NATIONAL CITY BANK OF INDIANA, Lender By /s/ MARK A. MINNICK ------------------- Name MARK A. MINNICK --------------- Title SENIOR VICE PRESIDENT --------------------- 11 HIBERNIA NATIONAL BANK, Lender By /s/ ROSS S. WALES ----------------- Name ROSS S. WALES ------------- Title VICE PRESIDENT -------------- 12 EX-10.3 3 ex-10_3.txt EXHIBIT 10.3 EXHIBIT 10.3 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement") is made and entered into this 6TH day of DECEMBER, 1999, by and between HARVEYS CASINO RESORTS, a Nevada corporation, hereinafter referred to as "HARVEYS" and/or "EMPLOYER," and JOHN R. BELLOTTI, hereinafter referred to as "EMPLOYEE": W I T N E S S E T H: WHEREAS, HARVEYS desires to continue to secure the benefits of EMPLOYEE's background, knowledge, experience, ability, expertise and industry to promote and maintain HARVEYS stability, growth, viability and profitability; and WHEREAS, HARVEYS desires to continue to engage the services of EMPLOYEE who is desirous of being employed by HARVEYS under the terms and conditions as herein set out; and NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements herein contained, together with other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: I DEFINITIONS 1.01 EMPLOYEE shall at all times mean JOHN R. BELLOTTI. 1.02 EMPLOYER shall at all times mean HARVEYS CASINO RESORTS, a Nevada corporation, and its Successors in Interest together with its subsidiaries. 1.03 HARVEYS shall at all times mean HARVEYS CASINO RESORTS, a Nevada 1 corporation, and its Successors-in-Interest together with its subsidiaries. 1.04 Successor in Interest shall mean any entity which is the successor or assign of HARVEYS, at law or at equity, and shall include without limitation, any entity into which HARVEYS is merged or consolidated, and any entity to which all or substantially all of the assets or businesses of HARVEYS are transferred. II NATURE OF EMPLOYMENT AND DUTIES OF EMPLOYEE 2.01 Effective upon the commencement date of the term of this Agreement, EMPLOYEE shall become Senior Vice-President of Human Resources of HARVEYS CASINO RESORTS, Corporate Offices located in Douglas County, Nevada, or assume such other position as determined by the President/Chief Executive Officer of HARVEYS. EMPLOYEE shall do and perform all services, acts, or things necessary or advisable to assist in the management and conduct of the business of EMPLOYER, subject always to the policies as set forth by the Board of Directors. 2.02 EMPLOYEE shall be responsible for the creation, installation, and ongoing direction and monitoring of human resources programs for properties owned and operated by Harveys Casino Resorts; oversee the development and implementation of compensation and benefits administration, health care claims processing, 401(k) administration, employment and personnel policy initiation, succession planning, executive development, risk management, employee relations, Board of Review system, and other corporate employee programs, and such other responsibilities or duties that HARVEYS may assign from time to time. 2.03 EMPLOYEE has reviewed and concurs with his responsibilities and duties as set 2 forth in Section 2.02 above. 2.04 EMPLOYEE shall devote his entire productive time, ability and attention to the business of EMPLOYER during the term of this Agreement. EMPLOYEE shall not directly or indirectly render any service of a business, commercial or professional nature, to any other person or organization, whether for compensation or otherwise, without the prior written consent of the President/Chief Executive Officer of HARVEYS except that EMPLOYEE shall not be precluded from involvement in charitable or civic activities or his personal financial investments provided the same do not interfere with EMPLOYEE's time or attention to the business of EMPLOYER. 2.05 EMPLOYEE agrees, to the best of his ability and experience, to at all times conscientiously perform all of the duties and obligations expressly required of EMPLOYEE. III TERM OF EMPLOYMENT 3.01 EMPLOYER hereby employs EMPLOYEE, and EMPLOYEE hereby agrees to be employed by EMPLOYER for a period of at least two (2) years commencing on the 10th day of December 1999, and terminating on the 9th day of December, 2001. This Agreement may be terminated earlier as hereinafter provided or may be extended or modified only by written document signed by both parties hereto specifically referencing this instrument. IV TERMINATION OF EMPLOYMENT WITHOUT CAUSE 4.01 EMPLOYEE may be terminated at any time, without cause, or as referenced in paragraph 5 herein, by EMPLOYER on thirty (30) days' prior written notice to EMPLOYEE. In the 3 event of such termination without cause, EMPLOYEE shall continue to be paid EMPLOYEE's annual salary as set forth in Paragraph 6.01, as such salary may be modified from time to time, and continue to receive medical, vision and dental benefits as set forth in Paragraph 7.06 for the balance of the contract term, or twelve (12) months, whichever is lesser. 4.02 EMPLOYEE may, at EMPLOYEE's option and right, terminate this Agreement at any time by giving HARVEYS thirty (30) days prior written notice. Upon any such termination of this Agreement by EMPLOYEE, EMPLOYER shall be under no obligation to EMPLOYEE except to pay EMPLOYEE's then annual salary and perquisites for services performed up to the effective date of termination. 4.03 If during the term hereof EMPLOYEE shall die or become disabled, EMPLOYEE shall be entitled to such death and/or disability benefits that may be due EMPLOYEE under any benefit plans of EMPLOYER in effect from time to time in which EMPLOYEE is eligible to participate. V TERMINATION OF EMPLOYMENT FOR CAUSE 5.01 EMPLOYER may at any time, at its election, by providing written notice to EMPLOYEE stating with specificity the reason for the termination, immediately terminate this Agreement and the employment term should EMPLOYEE: (a) be negligent or willfully malfeasant in the performance of EMPLOYEE's duties to EMPLOYER set forth in Article II hereof; (b) be convicted of any felony or a crime involving moral turpitude; 4 (c) be dishonest with respect to EMPLOYER (including without limitation, fraud); (d) use or impart any confidential or proprietary information of EMPLOYER or any of its subsidiaries or affiliates in violation of EMPLOYER's policy regarding confidentiality or any confidentiality or proprietary agreement to which EMPLOYER is a party, which act or actions have a material adverse affect on EMPLOYER; or (e) fail to obtain or retain any permits, licenses, or approvals which may be required by any state or local authorities in order to permit EMPLOYEE to continue employment as contemplated by this Agreement. Upon the occurrence of any of the above, at EMPLOYER's sole option, EMPLOYEE's employment shall immediately terminate and EMPLOYER shall be under no further obligation to EMPLOYEE except to pay EMPLOYEE his annual salary for such services as may have been performed up to the date of such termination. VI COMPENSATION OF EMPLOYEE 6.01 ANNUAL SALARY - EMPLOYEE shall receive an annual salary of One Hundred Eighty Five and 00/100 Dollars ($185,000.00), payable in at least monthly installments, less all applicable Federal, State and Local Taxes, Social Security and any other government mandated deductions. EMPLOYEE's annual salary shall be subject to an annual review, as determined by EMPLOYEE's direct supervisor, and the President/Chief Executive Officer of HARVEYS within the parameters 5 set forth by HARVEYS' Board of Directors. VII OTHER PERQUISITES 7.01 HARVEYS 401(K) PLAN - During the employment term, EMPLOYEE shall be allowed to participate in HARVEYS 401(k) Plan as such plan may be in effect and amended from time to time. 7.02 VACATION - EMPLOYEE shall be entitled to vacation and holiday pay in accordance with EMPLOYER's policy for EMPLOYEE's position as may be in place from time to time, with credit being given as of EMPLOYEE's original hire date. 7.03 COMPLIMENTARY PRIVILEGES - EMPLOYEE shall be entitled to Level I complimentary privileges as are afforded all other corporate employees of equal job code. 7.05 MANAGEMENT INCENTIVE PLAN (MIP) - EMPLOYEE shall be eligible to participate in EMPLOYER's Management Incentive Plan as such plan may be in effect or amended from time to time. 7.06 MEDICAL, VISION AND DENTAL INSURANCE - EMPLOYER shall provide medical, vision and dental benefits to EMPLOYEE and EMPLOYEE's spouse and dependents in accordance with EMPLOYER's Class I coverage under EMPLOYER's Executive Medical Plan, as such plan may be in effect or amended from time to time. 7.07 DEFERRED COMPENSATION PROGRAM - EMPLOYEE shall be allowed to participate in EMPLOYER's Deferred Compensation Program as said program may be in effect or amended from time to time. 6 7.08 GROUP LIFE INSURANCE - During the term of this Agreement, EMPLOYER shall furnish EMPLOYEE with Group Term Life Insurance and Accidental Death/Dismemberment Insurance with the maximum benefit being equal to two (2) times EMPLOYEE's annual salary, up to a maximum of $500,000.00. 7.09 GROUP LONG TERM DISABILITY - During the term of this Agreement, EMPLOYER shall furnish EMPLOYEE with Group Term Disability insurance in accordance with EMPLOYER's then existing policy. The maximum insurance benefit to be paid EMPLOYEE shall be sixty percent (60%) of EMPLOYEE's annual salary to be paid for the duration of EMPLOYEE's permanent disability. 7.10 STOCK OPTIONS AND STOCK GRANTS - EMPLOYEE's rights to stock options and/or stock grants, are those set forth in the Management Stock Option and Restricted Stock Agreement, dated as of February 2, 1999, as may be amended from time to time and as supplemented by action of the Board of Directors in Resolution 1999-5. 7.03 SERP - EMPLOYEE shall continue to participate in the Company's SERP Plan, as such Plan may be amended from time to time by the EMLOYER. VIII ARBITRATION 8.01 Except as necessary for EMPLOYER and its subsidiaries, affiliates, successors or assigns or EMPLOYEE to specifically enforce or enjoin a breach of this Agreement (to the extent such remedies are otherwise available), the parties agree that any and all disputes that may arise in connection with, arising out of or relating to this Agreement, or any dispute that relates in any way, 7 in whole or in part, to EMPLOYEE's employment with EMPLOYER or any subsidiary, the termination of that employment or any other dispute by and between the parties or their subsidiaries, affiliates, successors or assigns, shall be submitted to binding arbitration in Douglas County, Nevada according to the National Employment Dispute Resolution Rules and procedures of the American Arbitration Association. The parties agree that the prevailing party in any such dispute shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which he or it may be entitled. This arbitration obligation extends to any and all claims that may arise by and between the parties or their subsidiaries, affiliates, successors or assigns and expressly extends to, without limitation, claims or causes of action for wrongful termination, impairment of ability to compete in the open labor market, breach of an express or implied contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud, misrepresentation, defamation, slander, infliction of emotional distress, disability, loss of future earnings and claims under the Nevada Constitution, the United States Constitution, and applicable state and federal fair employment laws, federal and state equal employment opportunity laws, and federal and state labor statutes and regulations, including, but not limited to, the Civil Rights Act of 1964, as amended, the Fair Labor Standards Act, as amended, the Americans With Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Age Discrimination in Employment Act of 1967, as amended, and other state or federal law. 8 IX MISCELLANEOUS 9.01 This Agreement shall be construed and governed by the laws of the State of Nevada. 9.02 This Agreement, shall bind and inure to the benefit of the EMPLOYER, its successors and assigns and EMPLOYEE, his heirs, executors and administrators. No transfer or assignment of this Agreement shall release EMPLOYER from any obligation to EMPLOYEE hereunder. 9.03 Notices to or for the respective parties shall be given in writing and delivered in person or mailed by certified or registered mail, addressed to the respective party at the address as set out below, or at such other address as either party may elect to provide in advance in writing, to the other party: EMPLOYEE: John R. Bellotti Post Office Box 11241 Zephyr Cove, NV 89448 EMPLOYER: HARVEYS CASINO RESORTS Attn: CHARLES W. SCHARER President/Chief Executive Officer Highway 50 and Stateline Avenue Post Office Box 128 Stateline, NV 89449 WITH A COPY TO: Ronald D. Alling, Esq. SCARPELLO & ALLING, LTD. 276 Kingsbury Grade, Suite 2000 9 Post Office Box 3390 Stateline, NV 89449 9.04 Should any provision of this Agreement be held to be invalid, illegal, or unenforceable by reason of any rule of law or public policy, all other provisions of this Agreement shall remain in effect. No provision of this Agreement shall be deemed dependent on any other provision unless so expressed herein. 9.05 Nothing contained in this Agreement shall be construed to require the commencement of any act contrary to law. Should any conflict between any provision of this Agreement and any statute, law, ordinance, or regulation, contrary to which the parties have no legal right to contract arise or exist, then the latter shall prevail; but in such event, the provisions of this Agreement so affected shall be curtailed and limited only to the extent necessary to bring it within the legal requirements. 9.06 The several rights and remedies provided for in this Agreement shall be construed as being cumulative, and no one of them shall be deemed to be exclusive of the others or of any right or remedy allowed by law. No waiver by EMPLOYER or EMPLOYEE of any failure by EMPLOYEE or EMPLOYER, respectively, to keep or perform any provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or other provision. 9.07 This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of EMPLOYEE by EMPLOYER along with the other instruments executed concurrently herewith, contain all of the covenants, conditions and agreements between the parties with respect to such employment. Each party to this Agreement 10 acknowledges that no representations, inducements, promises or other agreements excepting those specifically set forth herein, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding. Any addendum to or modification of this Agreement shall be effective only if it is in writing and signed by the parties to be charged. EMPLOYEE: /s/ JOHN R. BELLOTTI -------------------- JOHN R. BELLOTTI EMPLOYER: HARVEYS CASINO RESORTS, A NEVADA CORPORATION By: /s/ CHARLES W. SCHARER ---------------------- CHARLES W. SCHARER President/Chief Executive Officer 11 EX-10.4 4 ex-10_4.txt EXHIBIT 10.4 EXHIBIT 10.4 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, made and entered into this 28th day of April, 2000 (the "Agreement"), by and between HARVEYS CASINO RESORTS, a Nevada corporation, hereinafter referred to as "Harveys" and/or "Employer," and CHARLES W. SCHARER, hereinafter referred to as "Employee," as follows: W I T N E S S E T H: WHEREAS, Employee and Employer have previously entered into an Employment Agreement, dated as of February 2, 1999 (the "Original Agreement"), setting forth the terms and conditions of Employee's employment with Employer from and after February 2, 1999, the effective time (the "Effective Date") of the merger (the "Merger") of Harveys Acquisition Corporation, a Nevada corporation ("Acq Corp"), with and into Harveys pursuant to the terms of the Agreement and Plan of Merger, dated as of February 1, 1998, between Harveys and Acq Corp; and WHEREAS, in connection with the Merger, Harveys and Employee, together with other members of Harveys management, entered into a Memorandum of Understanding, dated February 1, 1998 (the "MOU"), which set forth, among other things, certain terms regarding Employee's employment with Harveys following consummation of the Merger, including the execution of the Original Agreement; and WHEREAS, PH Casino Resorts, Inc., a wholly owned subsidiary of Harveys ("PH Casino"), has entered into an Agreement and Plan of Merger, dated as of April 17, 2000, among Pinnacle Entertainment, Inc. ("Target"), PH Casino and Pinnacle Acquisition Corporation ("Acquisition") (as the same may be amended, supplemented, or superceded the "Acquisition Agreement") pursuant to which Acquisition will merge with and into Target (together with any 1 similar transaction as a result of which Target, or an entity that has acquired substantially all of the assets and business of Target, controls, is controlled by or is under common control with Harveys, but not including any transaction as a result of which Target and Harveys are under common control solely be reason of having as their respective ultimate common parent a pooled investment entity sponsored by Colony Capital, Inc., the "Transaction"); and WHEREAS, Harveys and Employee desire to enter into certain special retention and employment protection arrangements that will apply to the terms of Employee's employment prior to the date of consummation of the Transaction (the "Acquisition Effective Date") and to certain terminations of Employee's employment with Employer prior to or within one year following the Acquisition Effective Date; and WHEREAS, Harveys and Employee desire to amend and restate the Original Agreement, in its entirety, to incorporate such retention and employment protection arrangements and intend that the Original Agreement, as amended and restated herein, shall be superceded in its entirety by this Agreement; and WHEREAS, in connection with the Merger, Harveys and Employee also entered into a Stock Option and Restricted Stock Agreement (the "Award Agreement" and, as so amended, the "Amended Award Agreement") and a Deferred Compensation Agreement (the "Deferred Compensation Agreement" and, as so amended, the "Amended Deferred Compensation Agreement"), each dated as of the Effective Date, each of which agreements is also being amended and restated, as of the date hereof, to incorporate the agreements between Harveys and Employee concerning the retention and employment protection arrangements. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements herein contained, together with other good and valuable consideration the receipt of 2 which is hereby acknowledged, the parties hereto do hereby agree that the Original Agreement is hereby amended and restated in its entirety as follows: I. DEFINITIONS 1.01. Employee shall at all times mean Charles W. Scharer. 1.02. Employer shall at all times mean Harveys Casino Resorts, a Nevada corporation, and its Successors in Interest together with its subsidiaries. 1.03. Harveys shall at all times mean Harveys Casino Resorts, a Nevada corporation, and its Successor in Interest together with its subsidiaries. 1.04. Successor in Interest shall mean any entity which is the successor or assign of Harveys, at law or at equity, and shall include without limitation, any entity into which Harveys is merged or consolidated, any entity to which all or substantially all of the assets or businesses of Harveys is transferred, or following the Transactions, the ultimate parent company of Harveys and Target. II. NATURE OF EMPLOYMENT AND DUTIES OF EMPLOYEE 2.01. In accordance with the terms of the Original Agreement, on the Effective Date, Employee continued to serve Harveys as President and Chief Executive Officer of Harveys and, in accordance with the terms of this Agreement, Employee shall continue to so serve Harveys in such positions. Employee shall at all times be subject to, observe and carry out such rules, regulations, policies, directions, and restrictions as Harveys Board of Directors (the "Board") may from time to time establish for senior executive officers of the Employer. 2.02. Subject to the supervision and control of the Board, Employee shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities 3 of his position and shall render such services on the terms set forth herein. Without limiting the generality of the foregoing, Employee shall be responsible for developing, directing and implementing the operation of the business and the Company's policies and plans and assisting the Company in consummating the Transaction, in each case, as determined by the Board. In addition, Employee shall have such other executive and managerial powers and duties with respect to Harveys and its subsidiaries that are consistent with the offices of President and Chief Executive Officer and as may reasonably be assigned to him by the Board, including without limitation serving on the Board of Directors of any subsidiary of Harveys. 2.03. Employee has reviewed and concurs with his responsibilities and duties as set forth in Section 2.02 above. 2.04. During the Term (as defined below), Employee shall devote substantially all of his productive time, ability and attention to the business of Employer. In addition, Employee shall not directly or indirectly render any service of a business, commercial or professional nature, to any other person or organization, whether for compensation or otherwise, without the prior written consent of the Board, PROVIDED, that, subject to the provisions of Article X hereof, Employee shall not be precluded from involvement in charitable or civic activities or his personal financial investments provided the same do not materially interfere with his time or attention to the business of Employer, and PROVIDED, further, that Employee shall not serve as a director of any other for-profit business that is not an affiliate of Employer. 2.05. Employee agrees that he shall at all times (i) to the best of his ability and experience conscientiously perform all of the duties and obligations of his position with the Employer, (ii) use his best efforts to do and perform all services, acts, or things necessary or advisable to assist in the management and conduct of the business and otherwise advance the 4 interests of Employer and (iii) diligently and in the highest good faith carry out the lawful directives of the Board, PROVIDED, that Employee shall not be obligated to perform his duties hereunder outside the Stateline, Nevada area, except for business trips and directors meetings outside said area which arise and result from the normal conduct of the business of Harveys. 2.06. Employee shall continue to serve as a member of the Board (though not as Chairman) following the Effective Date. In addition, during the Term, Employee shall be nominated for election to the Board at each meeting of stockholders at which directors are to be elected, and Employer shall use its best efforts to provide for Employee's election to the Board at each such meeting. Notwithstanding the foregoing provisions of this Section 2.06, Employee agrees to promptly resign his position on the Board and become a non-voting observer on the Board (with rights equivalent to those of an employee director other than voting rights) if, and for so long as (absent such resignation) members of the Board who are also employees of Colony Capital, Inc. or its affiliates (other than Employer or any of its subsidiaries) would not otherwise constitute at least a majority of the members of the Board. During such period as Employee shall by reason of such circumstances be a non-voting observer on the Board, Employer shall diligently use commercially reasonable, good faith efforts (subject to applicable gaming approvals, licensing requirements and other regulatory determinations) to attempt to cause one or more additional employees of Colony Capital, Inc. or its affiliates (other than Employer or any of its subsidiaries) to be appointed to the Board, such that Employee may resume his position as a voting member of the Board consistent with the provisions of the immediately preceding sentence. Employee also agrees that effective upon notice being provided of his termination of employment with Employer, he shall immediately resign from his position as a non-voting observer or member of the Board, as applicable. 5 III. TERM AND GENERAL CONDITIONS OF EMPLOYMENT 3.01. Employer hereby continues the employment of Employee, and Employee hereby agrees to such continued employment by Harveys for the period of five (5) years commencing on the Effective Date and terminating on the fifth anniversary of the Effective Date (as the same may be extended as set forth below, the "Term"), unless extended by mutual written agreement of the parties; PROVIDED, that the period of employment shall automatically be extended for successive one (1) year periods if neither party has provided six (6) months prior written notice to the other of its intention to have this Agreement lapse at the expiration of the Term; and PROVIDED FURTHER, that the Term shall be subject to earlier termination in accordance with Articles IV, V and VI below. 3.02. Notwithstanding anything to the contrary herein, in the event of any termination of Employee's employment for any or no reason, Employee and Employer shall nevertheless continue to be bound by the terms and conditions set forth in Articles IX through XII, in Section 13.08 and, to the extent provided therein, Section 13.09 below. 3.03. Upon consummation of the Merger, the Prior Agreement was cancelled and terminated without further obligation of Employer. Upon the execution of this Agreement by the parties hereto, the Original Agreement shall be cancelled and terminated without further obligation of Employer or Employee and shall be superceded in its entirety by this Agreement. 3.04. Employee hereby acknowledges and agrees that his rights as set forth herein to receive severance and other compensation and benefits hereunder shall supersede and replace in its entirety any severance or other benefits that might otherwise be payable pursuant to Harveys' Change of Control Plan as in effect on the Effective Date or as the same may be amended from time to time or under any other severance plan, policy, agreement or arrangement in effect immediately prior to the Effective Date or at any time during the Term. Employee further acknowledges that as of the Effective Date, Employee shall no longer be a participant in or have any rights under the Change of Control Plan (or under any such other severance plan, policy, agreement or arrangement 6 in effect immediately prior to the Effective Date or at any time during the Term), regardless of the reasons or circumstances of his termination of employment. Employee further acknowledges that as of the Effective Date Employee shall no longer be a participant in or have any rights under the Company's Long Term Incentive Plan or Supplemental Executive Retirement Plan. IV. TERMINATION OF EMPLOYMENT WITHOUT CAUSE 4.01. Employee's employment may be terminated by Harveys, with or without "Cause" (as defined in Section 6.01 below), at any time and for any or no reason. Any such termination without Cause shall be effective only upon thirty (30) days' prior written notice to Employee (such effective date, for purposes of this Article IV, the "Termination Date"). 4.02. If Employee's termination by Employer shall be without Cause and such termination is effective after the earlier of (i) the first anniversary of the Acquisition Effective Date and (ii) the date, if any, that an Abandonment Event (as defined below) occurs, Employee shall be entitled to the following benefits: (a) Except as provided below, Employee shall be entitled to receive, as soon as reasonably practicable, but no more than 10 business days, after the Termination Date, a lump sum payment in an amount equal to the product of (x) the Applicable Multiplier (as defined below) and (y) the sum of his then Base Salary and then Annual Target Bonus (each as defined below). 7 (i) "Applicable Multiplier" shall mean the lesser of (A) 2.0 and (B) a fraction, the denominator of which is 12, and the numerator of which shall be the number of full plus partial (calculated by the day) months remaining in the Term following the Termination Date, which numerator shall be increased by the number of full plus partial (calculated by the day) months during any Post-Term Restriction Period (as defined below and further described in Annex E) if an election to have such Post-Term Restriction Period apply to Employee is made by Employer pursuant to Section 10.01. (ii) For purposes of this Section 4.02(a) and Section 4.04(a), the term "Annual Target Bonus" shall mean Employee's annual target bonus under the Annual Bonus Plan (as defined in Section 7.02 below) for each fiscal year during the Term, which shall be deemed to be 70 percent of Employee's Base Salary as in effect as of the date the relevant business plan targets for such fiscal year are established by the Board. (iii) For purposes of this Agreement, the "Post-Term Restriction Period" shall mean that period, if any, following expiration of the Term during which Employee would be subject to the restrictions of Section 10.01 as determined under the first paragraph of Section 10.01, without regard to any limitation of such period by reason of Section 10.01(a). The Post-Term Restriction Period is further described in Annex E hereto. (iv) Notwithstanding the foregoing, in the event that Employee's Termination Date shall be less than one year prior to the expiration of the Term and the Applicable Multiplier (determined as above by including any applicable Post-Term Restriction Period) shall be less than 1.0, Employee shall not be entitled to receive the lump sum payment determined under the first sentence of this Section 4.02(a), but shall instead be entitled to receive (A) as soon as reasonably practicable, but no more than 10 business 8 days, after the Termination Date, a lump sum payment in an amount equal to the product of (x) the Applicable Multiplier and (y) his then Base Salary and (B) as applicable, a bonus as determined under Annex E hereto. (b) Employee shall be entitled to continuation of his Benefits (as defined below) for that number of months immediately following the Termination Date equal to the product of (A) the Applicable Multiplier and (B) 12 (such number of months, the "Section 4.02 Severance Period"), PROVIDED, that in the event that during such period, pursuant to applicable law or the terms of the applicable plan, any Benefits may not be provided pursuant to the terms of the specific plan referenced herein, Employer shall provide substantially equivalent benefits by alternate means. (c) Subject to the provisions of the Award Agreement, Employee shall vest as of the Termination Date in that portion of the Stock Award and Stock Option grants (each as defined below) that would otherwise have vested had Employee remained in Harveys employ for the duration of the Section 4.02 Severance Period. (d) Employee shall be entitled to payment of all amounts of Base Salary and Benefits accrued but unpaid through the Termination Date. Except as set forth in this Section 4.02 and Section 13.08, all other rights of Employee (and, except as provided in Sections 4.02 and 3.02 above and Section 13.08, all obligations of the Employer) hereunder shall terminate as of the Termination Date. 4.03. If Employee's employment shall terminate by reason of his death or Disability and such termination is effective after the earlier of (i) the first anniversary of the Acquisition Effective Date and (ii) the date, if any, that an Abandonment Event occurs, he or his estate, as applicable, shall be entitled to (i) all amounts of Base Salary and Benefits accrued but 9 unpaid through the date of such termination (which shall be the date of death or the 45th day after the date Employer provides Employee notice of termination for Disability) and (ii) any death and/or disability benefits that may be due Employee under any benefit plans in effect from time to time. "Disability" shall mean any physical or mental disability that prevents Employee from performing one or more of the essential functions of his position for a period of not less than six (6) months in any continuous 12-month period. Except as set forth in this Section 4.03 and Section 13.08, all other rights of Employee (and, except as provided in this Section 4.03 and Section 3.02 above and Section 13.08, all obligations of the Employer) hereunder shall terminate as of the date of such termination of employment. 4.04. If the termination of Employee's employment with Employer is a Special Termination, provided Employee executes and delivers to Employer a general release of claims in substantially the form attached hereto as Annex G (the "Release"), Employee shall be entitled to the benefits described in subparagraphs (a) through (g) of this Section 4.04 and to the extent applicable, in Sections 7.04 and 7.05. For purposes of this Agreement, the Amended Award Agreement and the Amended Deferred Compensation Agreement, the term "Special Termination" shall mean the termination of Employee's employment by Employer without Cause or any such termination due to Employee's death or Disability (i) as of a Termination Date that is after the date of this Agreement and on or prior to the Acquisition Effective Date, but only if the Transaction is actually consummated pursuant to the terms of the Acquisition Agreement (any such Special Termination under this clause (i), a "Pre-Acquisition Special Termination") or (ii) as of a Termination Date that is after the Acquisition Effective Date and on or prior to the first anniversary of the Acquisition Effective Date (any such Special Termination under this clause (ii), a "Post-Acquisition Special Termination"). In the event that, following the 10 Termination Date, the Acquisition Agreement is terminated or expires, in either case, without consummation of the Transaction or the Board otherwise resolves to abandon the Transaction (any such event, an "Abandonment Event"), Employee shall be entitled only to the benefits to which he would have been entitled under Section 4.02 or 4.03, as the case may be, if the Termination Date had been after the Abandonment Event and, to the extent provided therein, to the benefits payable under Section 7.04, and Employee shall not be entitled to any benefits under this Section 4.04. In the event that the Termination Date precedes an Abandonment Event, the benefits to which Employee shall be entitled pursuant to the preceding sentence and Section 4.02 shall be reduced, on a dollar for dollar or benefit by benefit basis, as applicable, by all payments or benefits received by Employee pursuant to this Section 4.04 prior to the occurrence of the Abandonment Event. (a) In the event of a Special Termination, Employee shall be entitled to receive a lump sum payment, as soon as reasonably practicable, but in no event more than 10 business days, following the Termination Date, in an amount equal to the product of (x) 2.0 and (y) the sum of his then Base Salary and then Annual Target Bonus. (b) In the event of a Special Termination, Employee shall be entitled to continuation of his Benefits for 24 months immediately following the Termination Date (the "Section 4.04 Severance Period"), PROVIDED, that in the event that during such period, pursuant to applicable law or the terms of the applicable plan, any Benefits may not be provided pursuant to the terms of the specific plan referenced herein, Employer shall provide substantially equivalent benefits by alternate means. (c) In the event of (x) a Pre-Acquisition Special Termination or (y) a termination without Cause (within the meaning of Section 4.02) or due to Employee's death or 11 Disability, in any such case, followed by an Abandonment Event, (i) as of the Termination Date, Employee shall vest in that portion of the Stock Award and Stock Option grants made to Employee pursuant to the Amended Award Agreement that would otherwise have vested had Employee remained in Harveys employ for the duration of the Section 4.04 Severance Period and (ii) subject to Employer's call right under Section 8 of the Amended Award Agreement, such Stock Options shall be exercisable for the 90 day period following the Termination Date and, to the extent not so exercised, shall thereafter terminate automatically. In addition, in the event of a Pre-Acquisition Special Termination, on the Acquisition Effective Date, each then outstanding Stock Award and Stock Option granted pursuant to the Amended Award Agreement shall be cancelled in exchange for an aggregate cash payment equal to the sum of the following amounts, to be paid as set forth below: (1) an amount equal to the product of (A) the Transaction Share Price (as defined below) multiplied by (B) the sum of (I) the number of shares of Class A Common Stock and Class B Common Stock subject to each such cancelled Stock Award and (II) the number of shares of Class A Common Stock and Class B Common Stock that were subject to those Stock Awards that were forfeited as of the Termination Date in connection with Employee's termination of employment; (2) an amount equal to the product of (A) (I) the excess of the Transaction Share Price over (II) the exercise price per share of Common Stock applicable under each such cancelled Stock Option multiplied by (B) the number of shares of 12 Common Stock subject to such cancelled Stock Options immediately prior to the cancellation thereof; (3) an amount equal to the product of (A) (I) the excess of the Transaction Share Price over (II) the exercise price per share of Common Stock applicable under each Stock Option that was forfeited as of the Termination Date in connection with Employee's termination of employment multiplied by (B) the number of shares of Common Stock subject to each such Stock Option immediately prior to the forfeiture thereof; and (4) an amount equal to the product of (A) (I) the excess of the Transaction Share Price over (II) the exercise price per share of Common Stock applicable under any Stock Option that was outstanding immediately following the Termination Date but terminated by its terms prior to the Acquisition Effective Date without having been exercised multiplied by (B) the number of shares of Common Stock subject to each such Stock Option immediately prior to its termination. For purposes of this Section 4.04, the term "Transaction Share Price" shall mean (i) for purposes of calculating a payment in respect of shares of Class A or Class B Common Stock subject to Stock Awards or Stock Options that are forfeited or terminated prior to the Acquisition Effective Date, $54.12 and (ii) for purposes of calculating a payment in respect of shares of Class A or Class B Common Stock subject to Stock Awards, Stock Options or Incentive Stock Grants that, in any such case, are cancelled pursuant to this Section 4.04 on or after the Acquisition Effective Date, $43.42 (i.e., the 13 per share value of the Class A and Class B Common Stock after the increase in the capitalization of Employer in connection with the Transaction). Subject to Section 13.10, such payment shall be made to Employee in five installments, with the first such installment payable as soon as reasonably practicable, but no more than 10 business days, after the Acquisition Effective Date and equal to the greater of (i) 20% of the full amount of such payment and (ii) the aggregate income taxes payable by Employee with respect to the accelerated vesting of the Stock Award pursuant to this Section 4.04(c). Subject to Section 13.10, the balance of the amount payable to Employee pursuant to this Section 4.04(c) shall be paid in four equal installments, with interest at an annual rate of 12%, on each of the first four anniversaries of the Acquisition Effective Date. Annex H hereto sets forth an example of the calculations under this Section 4.04(c). (d) In the event of a Post-Acquisition Special Termination, as of the Termination Date (i) Employee shall vest in 100% of all then outstanding Stock Awards and Stock Options grants made to Employee pursuant to the Award Agreement and (ii) each such Stock Award and Stock Option shall be cancelled in exchange for an aggregate payment equal to the sum of the following amounts, to be paid as set forth below: (1) an amount equal to the product of (A) the Transaction Share Price multiplied by (B) the number of shares of Class A Common Stock and Class B Common Stock subject to each such cancelled Stock Award; and (2) an amount equal to the product of (A) (I) the excess of the Transaction Share Price over (II) the exercise price per share of Common Stock applicable under each such cancelled Stock Option multiplied by (B) the number of shares of 14 Common Stock subject to each such cancelled Stock Option immediately prior to the cancellation thereof; Subject to Section 13.10, such payment shall be made to Employee in five installments, with the first such installment payable as soon as reasonably practicable, but no more than 10 business days, after the Termination Date and equal to the greater of (i) 20% of the full amount of such payment and (ii) the aggregate income taxes payable by Employee with respect to the accelerated vesting of the Stock Award pursuant to this Section 4.04(d). Subject to Section 13.10, the balance of the amount payable to Employee pursuant to this Section 4.04(d) shall be paid in four equal installments, with interest at an annual rate of 12%, on each of the first four anniversaries of the Termination Date. (e) In the event of a Special Termination, each Incentive Stock Grant Share that has been awarded to Employee with respect to any New Project (the Bluffs Run transaction) shall remain outstanding following the Termination Date until the expiration of the performance period governing the release from the risk of forfeiture of such Incentive Stock Grant Share. If all objectives of such Incentive Stock Grant Share are achieved so that there is no longer a risk of forfeiture on or prior to the end of such performance period, Employer shall cancel such Incentive Stock Grant Share in exchange for a cash payment equal to the product of the number of Incentive Stock Grant Shares so cancelled and the Transaction Share Price. Subject to Section 13.10, such payment shall be made to Employee in installments, with the first such installment payable as soon as reasonably practicable, but no more than 10 business days, after delivery to the Board of the financial statements necessary to determine if the performance objectives have been 15 achieved and equal to the greater of (i) the Applicable Percentage (as defined below) of the full amount of such payment and (ii) the aggregate income taxes payable by Employee with respect to the release from the risk of forfeiture of such Incentive Stock Grant Shares. Subject to Section 13.10, the balance of the amount payable to Employee in respect of the cancellation of such Incentive Stock Grant Shares pursuant to this Section 4.04(e) shall be paid in equal installments, with interest at an annual rate of 12%, on each anniversary of the Termination Date thereafter such that the total amount so payable shall be paid in full as of the fourth anniversary of the Termination Date. If (i) any of the objectives for accelerated vesting of such Incentive Stock Grant Share are not achieved as of the end of such performance period or (ii) Employee's employment shall have been terminated prior to the Acquisition Effective Date by the Company without Cause, by Employee with Good Reason or due to Employee's death or Disability and thereafter an Abandonment Event occurs, all of Employee's rights with respect to such Incentive Stock Grant Shares shall be forfeited and cancelled immediately without any payment or other consideration to Employee. The term "Applicable Percentage" shall mean the quotient, expressed as a percentage, of (i) the number of days from the Termination Date to the last day of the applicable performance period divided by (ii) 1460. (f) In the event of a Special Termination, Employee shall be entitled to receive a lump sum cash payment equal to the product of the number of Deemed SERP Shares (within the meaning of the Amended Deferred Compensation Agreement) multiplied by the Transaction Share Price. Subject to Section 13.10, such payment shall be made to 16 Employee as soon as reasonably practicable, but in no event more than 10 business days, following the Termination Date. (g) In the event of a Special Termination, Employee shall be entitled to payment of all amounts of Base Salary and Benefits accrued but unpaid through the Termination Date. In addition, notwithstanding any provision of the MIP, Employee shall be entitled (i) to receive, as soon as reasonably practicable, but in no event more than 10 business days following the Termination Date any Annual Bonus accrued under the MIP but unpaid for any fiscal year of Employer ending on or prior to the Termination Date and (ii) if Employee's Employment with Employer is terminated during Employer's 2000 fiscal year, and all regulatory approvals necessary for the closing of the Transaction are obtained on or prior to November 30, 2000, a pro-rata bonus payment (based on the portion of the fiscal year prior to termination) for the year in which such termination occurs, calculated in accordance with the terms of the MIP for such year and payable when bonuses are generally payable to executives for such year. Except as set forth in this Section 4.04, Section 13.08 and Section 13.10, all other rights of Employee (and, except as provided in Sections 4.04 and 3.02 , Section 13.08 and Section 13.10, all obligations of the Employer) hereunder shall terminate as of the Termination Date. V. TERMINATION OF EMPLOYMENT AT EMPLOYEE'S REQUEST 5.01. Employee may, at Employee's sole option and right, terminate his employment with Employer at any time, with or without Good Reason (as defined below). Any such termination shall be effective only upon thirty (30) days' prior written notice to Harveys. 17 (a) In the event of such termination of employment without Good Reason, Employee shall be entitled to receive all amounts of Base Salary and Benefits accrued but unpaid through the date of such termination. (b) In the event of any such termination of employment with Good Reason that is effective on or after the earlier of (i) the first anniversary of the Acquisition Effective Date or (ii) if applicable, an Abandonment Event, Employee shall be entitled to receive the benefits set forth in Sections 4.02(a)-(d) as if Employee's employment had been terminated by Employer without Cause, with the "Termination Date" as used in such sections being the effective date of termination pursuant to this Section 5.01. (c) In the event of any such termination of employment with Good Reason that is effective on or after the date of this Agreement and prior to the earlier of (i) the first anniversary of the Acquisition Effective Date and (ii) if applicable, an Abandonment Event, provided Employee executes and delivers to Employer the Release, Employee shall be entitled to receive the benefits set forth in the applicable provisions of Sections 4.04(a)-(g), depending upon the effective date of such termination, as if Employee's employment had been terminated in a Special Termination, with the "Termination Date" as used in such sections being the effective date of termination pursuant to this Section 5.01. To the extent applicable, Employee shall also be entitled to receive the benefits described in Sections 7.04 and/or 7.05. (d) For purposes of this Section 5.01, in the case of any termination by Employee on or after the earlier of (i) Acquisition Effective Date or (ii) if applicable, an Abandonment Event, Employee shall have "Good Reason" to terminate his employment hereunder if (A) Employer shall, without Employee's written consent, willfully and 18 materially breach its obligations under this Agreement, (B) Employee provides Employer written notice pursuant hereto stating with specificity the respects in which Employee believes Employer to have willfully and materially breached its obligations under this Agreement and (C) within thirty (30) days following the date of such notice Employer shall not have cured such breach. (e) For purposes of this Section 5.01, in the case of any termination by Employee on or after the date of this Agreement and prior to the earlier of (i) the Acquisition Effective Date and (ii) if applicable, an Abandonment Event, Employee shall have "Good Reason" to terminate his employment hereunder if (A) Employer changes Employee's reporting responsibilities such that Employee no longer reports directly to the Board, or (B) the Board resolves to reduce Employee's duties and responsibilities for Employer or written notice of any such reduction is delivered to Employee by the Board or any member thereof (other than Employee), or (C) Employer reduces Employee's title to a title other than President and Chief Executive Officer of Harveys, or (D) Employer reduces the rate of Employee's Base Salary, or (E) Employer materially reduces the aggregate level of employee benefits and perquisites provided to Employee pursuant to Section 8 hereof, or (F) Employer fails to pay to Employee when due any Base Salary, other bonus or other material amount payable to Employee pursuant to Section 7 hereof, or (G) Employer requires Employee to relocate his principal place of business to a location beyond a radius of 30 miles from Stateline, Nevada, and (H) Employee provides Employer written notice pursuant hereto stating with specificity the circumstances claimed to constitute the basis for such termination with Good Reason and (I) within 19 thirty (30) days following the date of such notice Employer shall not have cured such circumstances. (f) Except as set forth in this Section 5.01 (and, as incorporated hereinabove by reference, Section 4.02 or 4.04, as applicable) and Sections 13.08 and 13.10, all other rights of Employee (and, except as provided in Section 3.02 above and Section 13.08 and 13.10, all obligations of the Employer) hereunder shall terminate as of the date of such termination of employment. VI. TERMINATION OF EMPLOYMENT FOR CAUSE 6.01. Employer may at any time, at its election, by written notice to Employee stating with specificity the reason for the termination, terminate Employee's employment for "Cause," which shall be defined as Employee's: (a) Gross negligence or willful malfeasance in the performance of his duties under this Agreement; (b) Failure to obtain or retain any permits, licenses, or approvals which may be required by any state or local authorities in order to permit the Employee to continue his employment as contemplated by this Agreement; (c) Conviction of any felony or conviction of a crime involving moral turpitude; (d) Dishonesty with respect to Employer (including, without limitation, fraud) resulting in a breach of duty to Employer involving Employee's personal gain or profit; (e) Engaging in any activity that is in violation of the provisions of Article X of this Agreement, which shall not be cured following ten days' written notice and a demand to cure such violation; or 20 (f) Use or imparting of any confidential or proprietary information of Employer or any subsidiary or affiliate in violation of any confidentiality or proprietary agreement to which Employee is a party, including without limitation the provisions of Article IX of this Agreement; PROVIDED, that in the event such notice is provided pursuant to Section 6.01(b), Employee shall have a period of thirty (30) days following the date of such notice in which to cure such failure, and if Employee shall cure such failure within such period, Employee's employment hereunder shall be reinstated without prejudice. 6.02. Upon the provision of such notice (or, in the case of such notice pursuant to Section 6.01(b), upon expiration of the applicable cure period without cure), Employee's employment shall immediately cease and terminate for Cause. In the event of such termination of employment, Employee shall be entitled to receive all amounts of Base Salary and benefits accrued but unpaid through the date of such termination. Except as set forth in this Section 6.02 and Section 13.08, all other rights of Employee (and, except as provided in Section 3.02 above and Section 13.08, all obligations of the Employer) hereunder shall terminate as of the date of such termination of employment. VII. COMPENSATION OF EMPLOYEE 7.01. Base Salary - Employee shall receive an annual base salary ("Base Salary") of Five Hundred Seventy Thousand Dollars ($570,000), payable in at least monthly installments, less all applicable Federal, state and local taxes, Social Security and any other government mandated deductions. Employee's Base Salary shall be reviewed by the Board no less frequently than annually relative to specified performance-based criteria to be determined by the Board. 21 7.02. Annual Bonus - Following the Effective Time, Employee shall be eligible to participate in Employer's Management Incentive Plan ("MIP") or, at the election of Employer, in a new or equivalent annual bonus plan established by Employer having a similar structure to the MIP providing for payment of an annual bonus (the "Annual Bonus Plan"), but in either case with thresholds and triggering events for payment based on the achievement of Harveys annual budget and other business plan targets to be determined by the Board following the Effective Date. Employee's maximum annual bonus under the Annual Bonus Plan shall not be less than $360,000. Notwithstanding the foregoing, the following provisions shall apply with respect to Employee's participation in the Annual Bonus Plan with respect to fiscal 1999: (a) On the Effective Date, Employer paid to Employee a lump sum amount in cash equal to 25% of Employee's maximum bonus under the Annual Bonus Plan for fiscal 1999, which lump sum amount Employer and Employee acknowledge and agree to be $130,000 (the "Advance"). Employee hereby acknowledges receipt of the Advance. (b) Following the end of fiscal 1999, the Board shall determine Employee's bonus under the Annual Bonus Plan in the ordinary course using the financial targets established by the Board prior to the date hereof, without regard to the Advance (the "Overall 1999 Bonus Entitlement"). On the date bonuses under the Annual Bonus Plan are paid generally to employees with respect to fiscal 1999, Employee shall be entitled to receive an annual bonus payment equal to the excess, if any, of (i) Employee's Overall 1999 Bonus Entitlement over (ii) the amount of the Advance. In the event the Advance shall be greater than the Overall 1999 Bonus Entitlement, Employee shall have no obligation to repay any portion of the Advance to Employer, and no portion of the Advance shall be offset against amounts otherwise payable to Employee under the 22 Annual Bonus Plan with respect to subsequent fiscal years. However, in the event Employee's employment is terminated by Employer without Cause or by Employee with Good Reason prior to December 31, 1999, the amount of the Advance shall be offset dollar-for-dollar against amounts otherwise payable to Employee under Section 4.02(a). 7.03. Stock Grants and Stock Option - On the Effective Date, Employee received (i) a restricted stock award (the "Stock Award") consisting of 270 shares of the Class A common stock, par value $.01 per share, of Harveys ("Class A Common Stock") and 27,000 shares of the Class B common stock, par value $.01 per share, of Harveys ("Class B Common Stock") and (ii) a stock option (the "Stock Option") to purchase 360 additional shares of Class A Common Stock and 36,000 additional shares of Class B Common Stock, each at a price of $20.06 per share. The Stock Awards and Stock Options shall each be subject in all respects to the terms of Harveys 1999 Omnibus Incentive Plan, a copy of which is attached hereto as Annex A, as the same may be amended from time to time (the "Omnibus Plan"), the Amended Award Agreement, as the same may be further amended from time to time, and that certain Stockholders Agreement, as the same may be amended from time to time, among Harveys, Colony HCR Voteco, LLC, a Nevada limited liability company, Colony Investors III, L.P., a Delaware limited partnership, and the security holders of the Company (including Employee) as identified from time to time on Schedule A thereto, a copy of which is attached hereto as Annex C. 7.04. Retention Bonus - In addition to any payments to which Employee may be entitled under Sections 4.02, 4.03, 4.04, or 5.01, as applicable, and any bonuses to which Employee is entitled under the MIP or otherwise, Employee shall be entitled to receive a lump sum cash retention bonus of $1 million if (i) (A)Employee remains in the continuous employment of Employer from the date hereof to the Acquisition Effective Date or (B) 23 Employee's employment with Employer is terminated prior to the Acquisition Effective Date by Employer without Cause, by Employee with Good Reason (as defined in Section 5.01(d)) or due to Employee's death or Disability and (ii) the Transaction is consummated in accordance with the Acquisition Agreement. In the event that an Abandonment Event occurs, if (i) Employee remains in the continuous employment of Employer from the date hereof to the date of such Abandonment Event or (ii) Employee's employment with Employer is terminated prior to the Abandonment Event by Employer without Cause, by Employee with Good Reason (as defined in Section 5.01(d)) or due to Employee's death or Disability, Employee shall be entitled to receive a lump sum cash payment of $500,000. Any payment to which Employee is entitled pursuant to this Section 7.04 shall be made to Employee as soon as reasonably practicable, but in no event more than 10 business days, following the Acquisition Effective Date or the date an Abandonment occurs, as the case may be; provided that in the case of any termination of Employee's employment prior to the Acquisition Effective Date by Employer without Cause, by Employee with Good Reason (as defined in Section 5.01(d)) or due to Employee's death or Disability, Employer shall pay Employee $500,000 as soon as reasonably practicable, but in no event more than 10 business days, following the Termination Date and, in the event the Transaction is thereafter consummated, Employer shall pay Employee an additional $500,000 as soon as reasonably practicable, but in no event more than 10 business days, following the Acquisition Effective Date. 7.05. Special Performance Bonus - (a) In addition to any payments to which Employee may be entitled under Sections 4.02, 4.03, 4.04, or 5.01, as applicable, and provided the Transaction is consummated in accordance with the Acquisition Agreement and Employee remains in 24 the continuous employment of Employer from the date hereof to the Acquisition Effective Date, Employee shall be entitled to a special performance bonus in addition to any bonuses to which Employee is entitled under the MIP or otherwise. The target amount of the special performance bonus shall be $350,000 and shall be payable to Employee as soon as reasonably practicable after Acquisition Effective Date but in no event more than 10 business days following the Acquisition Effective Date if (i) Employer attains 100% of the performance objectives ("Bonus Targets") established by the Board for the 2000 fiscal year of the Company, as set forth on Schedule A attached, and (ii) substantially all of the current members of Employer's executive committee, Employer's general managers and certain other key employees of Employer identified in writing to Employee prior to the date hereof (other than any such Management Employee whose employment is terminated by Harveys or terminates due to such Management Employee's retirement, death or disability) (collectively, the "Management Employees") remain employed in accordance with the terms of their respective current employment agreements from the date hereof to the Acquisition Effective Date; provided that, if substantially all of the Management Employees do not remain employed by Employer, the Compensation Committee of the Board shall review, in good faith, the circumstances surrounding each Management Employee's departure, including the activities of Employee with respect thereto and the reasons for such Management Employee's departure, and based on such review, shall determine the portion, if any, of the special performance bonus that will be paid to Employee. Satisfaction of the Bonus Targets shall be determined on the basis of Employer's EBITDA as adjusted to take account of certain non-recurring events, substantially in accordance with past practices. Following the end 25 of fiscal year 2000, if the Transaction has not been consummated and an Abandonment Event has not occurred, Employer may implement a special bonus program for Employee for fiscal year 2001, based on such bonus targets and target amounts as Employer shall determine and providing for the payment of a pro rated special performance bonus based upon the Acquisition Effective Date. (b) In addition to any payments to which Employee may be entitled under Sections 4.02, 4.03, 4.04, or 5.01, as applicable, and provided the Transaction is consummated in accordance with the Acquisition Agreement, if Employee's employment with Employer is terminated prior to the Acquisition Effective Date by Employer without Cause, by Employee with Good Reason (as defined in Section 5.01(d)) or due to Employee's death or Disability, Employee shall be entitled to a special performance bonus of $245,000 payable to Employee as soon as practicable, but in no event more than 10 business days following the Acquisition Effective Date. VIII. BENEFITS AND PERQUISITES During the Term, Employee shall be entitled to the benefits and perquisites as set forth in this Article VIII (collectively, "Benefits"). 8.01. Harveys 401(k) Plan - During the Term the Employee shall be allowed to participate in Harveys 401(k) Plan, or shall be provided with benefits that are substantially identical to the benefits provided under such plan as of the date hereof. 8.02. Vacation - Employee shall be entitled to five weeks of paid vacation per year. Employee shall be afforded the usual holidays as Employer may from time to time recognize. 26 8.03. Complimentary Privileges - Employee shall be entitled to such Level I complimentary privileges as are afforded generally to senior executives of Employer from time to time pursuant to policies adopted by the Board. 8.04. Employer shall provide Employee with an automobile in accordance with the Class I category of Employer's Standard Automobile Policy and Procedures, as from time to time amended. 8.05. Disability - Employee shall also be entitled to short term disability coverage and long term disability coverage under plans as in effect from time to time as implemented by Employer. 8.06. Medical, Vision and Dental Insurance - Employer shall provide medical, vision and dental benefits to Employee, his spouse and dependents in accordance with Employer's Class One coverage under the Executive Medical Plan, as amended from time to time. 8.07. Deferred Compensation Program - Employee shall be allowed to participate in the Deferred Compensation Program as is in effect from time to time. 8.08. Life Insurance - (a) During the Term, Employer shall furnish Employee with Group Term Life Insurance and Accidental Death/Dismemberment Insurance, in each case subject to the terms of such plans as in effect from time to time. (b) Convertible Term Life Insurance - During the Term, Employer shall furnish Employee with a Convertible Term Life Insurance Policy in the face amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000), PROVIDED, that Employee continues to be an insurable risk. Upon termination of Employee's employment under any circumstances, Employee shall have the right to have such policy assigned to him, 27 PROVIDED, that Employee agrees to bear all costs and expenses of such assignment and of maintaining such policy following the date of such termination of employment (and that he shall not have the benefit of Employer's group life insurance rates with respect thereto), and to hold harmless and indemnify the Company with respect thereto. If such policy is not so assigned to Employee, Employee's rights thereunder shall expire as of the effective date of his termination of employment with Employer. 8.09. Additional Employee Benefit Plans - Employee shall be entitled to participate in all additional employee benefits plans which may, in the future, be made generally available to Employer's most senior management employees, PROVIDED, that separate employee benefits plans may be adopted for lower-ranking management employees as to which Employer may determine Employee ineligible for participation, and PROVIDED, FURTHER, that Employee shall not be entitled to participate in (i) Employer's Supplemental Executive Retirement Plan or any other supplemental retirement plan or arrangement, (ii) Employer's Long Term Incentive Plan or (iii) any severance plan, policy or arrangement of Employer. This Section 8.09 shall not be construed to affect Employee's entitlement to severance or bonus amounts as provided in this Agreement or hereafter. 8.10. Reimbursement of Expenses - Employer shall reimburse Employee for any expenses reasonably and necessarily incurred by him in furtherance of his duties hereunder, including, travel, meals, and accommodations, upon submission by him of vouchers or receipts and in compliance with such rules and policies relating thereto as Employer may from time to time adopt. 28 IX. PROTECTION OF CONFIDENTIAL INFORMATION Employee acknowledges that during the course of his employment with the Employer, its subsidiaries and affiliates, he has been and will be exposed to documents and other information regarding the confidential affairs of the Employer, its subsidiaries and affiliates, including, without limitation, Colony Capital, Inc, its employees, owners and affiliates, including without limitation such information about their past, present and future financial condition, the markets for their products, key personnel, past, present or future actual or threatened litigation, trade secrets, current and prospective customer lists, operational methods, acquisition plans (including without limitation potential acquisition targets), financing sources, prospects, plans for future development and other business affairs and information about the Employer and its subsidiaries and affiliates, including, without limitation, Colony Capital, Inc., its employees, owners and affiliates, not readily available to the public (the "Confidential Information"). Employee further acknowledges that the services to be performed under this Agreement are of a special, unique, unusual, extraordinary and intellectual character. In recognition of the foregoing, the Employee covenants and agrees as follows: 9.01. At no time shall Employee ever divulge, disclose, or otherwise use any Confidential Information, unless and until such information is readily available in the public domain by reason other than Employee's unauthorized disclosure or use thereof, unless such disclosure or use is made in good faith and solely in furtherance of Employee's duties hereunder or expressly authorized by the Board in writing in advance of such disclosure or use. 9.02. Upon the termination of Employee's employment at any time and for any or no reason, or at any other time the Board may so direct, Employee shall promptly deliver to the Employer's offices in Stateline, Nevada all of the property and equipment of the Employer 29 and its subsidiaries (including any automobiles, cell phones, pagers, credit cards, personal computers, etc.) and any and all documents, records, and files, including any notes, memoranda, customer lists, reports or any and all other documents, including any copies thereof, whether in hard copy form or on a computer disk or hard drive, which relate to the Employer, its subsidiaries, affiliates, successors or assigns, and/or their respective past and present officers, directors, employees or consultants (collectively, the "Employer Property, Records and Files"); it being expressly understood that, upon termination of Employee's employment, Employee shall not be authorized to retain any of the Employer Property, Records and Files, except to the extent expressly so authorized in writing by the Board. X. NONCOMPETITION AND OTHER MATTERS 10.01. During the Term and for the one year period following the date of termination of Employee's employment at any time and for any or no reason (PROVIDED, that such period shall be six months in the event Employee's employment terminates upon expiration of the Term), Employee shall not at any time in any city, town, county, parish, other municipality in any state of the United States or Native American territory (the names of each such city, town, county, parish, other municipality or Native American territory, including, without limitation, the name of each county in the State of Nevada being expressly incorporated by reference herein), or any other place in the world, where the Employer, or its subsidiaries, affiliates, successors, or assigns, engages in owning, operating, managing and/or developing land-based or riverboat casinos or hotels associated or materially competitive with casinos, or any other business engaged in from time to time by the Employer or its subsidiaries, affiliates, successors or assigns in which Employee has had significant authority and responsibility (the "Business"), directly or indirectly, (i) engage in a competing business for Employee's own account; (ii) enter the employ 30 of, or render any consulting services to, any entity that competes with the Employer, or its subsidiaries, affiliates, successors, or assigns, in the Business; or (iii) become interested in any such entity in any capacity, including, without limitation, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; PROVIDED, HOWEVER, (x) Employee may (A) own, directly or indirectly, solely as a passive investment, securities of any entity traded on any national securities exchange or market if Employee is not a controlling person of, or a member of a group which controls, such entity and does not, directly or indirectly, own 5% or more of any class of securities of such entity and (B) subject to the first sentence of Section 2.04 above, make passive investments in hospitality enterprises not materially competitive with gaming and/or enterprises which are principally bar/restaurant enterprises containing no more than 50 gaming positions, PROVIDED, that such investments shall not materially interfere with the performance of Employee's duties hereunder and (y) in the event of a Special Termination or a Termination by Employee with Good Reason that is effective on or after the date hereof and prior to the earlier of (I) the first anniversary of the Acquisition Effective Date and (II) if applicable, an Abandonment Event, the covenants of Employee in this Section 10.01 shall apply only to activities by Employee in the Lake Tahoe and Iowa geographic areas or for or in respect of any entity which, directly or indirectly, including through affiliates, has operations in the Lake Tahoe or Iowa geographic areas. (a) Notwithstanding the foregoing, if (i) Employee's employment is terminated by Employer other than for Cause or by Employee with Good Reason and (ii) the effective date of such termination as determined hereunder occurs within the one year period prior to the expiration date of the Term, the restrictions set forth in this Section 10.01 shall expire upon expiration of the Term unless Employer provides written notice 31 to Employee not later than two days after such effective date that it wishes the restrictions of this Section 10.01 to apply during the Post-Term Restriction Period (as defined in Section 4.02 above) and pays Employee the severance compensation provided for under Section 4.02(a) and provides the benefits provided for under Section 4.02(b). (b) If Employee's employment is terminated for any other reason or under any other circumstances, the provisions of this Section 10.01 shall be effective without regard to Section 10.01(a). 10.02. During the Term and for the two year period immediately following the date of termination of Employee's employment at any time and for any or no reason, Employee shall not at any time, directly or indirectly, solicit or induce any officer, director, employee, agent or consultant of the Employer or any of its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, to terminate his, her or its employment or other relationship with the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, for the purpose of associating with any competitor of the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, or otherwise encourage any such person or entity to leave or sever his, her or its employment or other relationship with the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, for any other reason. 10.03. During the Term and for the two year period immediately following the date of termination of Employee's employment at any time and for any or no reason, Employee shall not at any time, directly or indirectly, solicit or induce (i) any customers or clients of Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, or (ii) any vendors, suppliers or consultants then under contract to the Employer or its 32 successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, to terminate his, her or its relationship with the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, for the purpose of associating with any competitor of the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, or otherwise encourage such customers or clients, or vendors, suppliers or consultants then under contract, to terminate his, her or its relationship with the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, for any other reason. 10.04. During the Term and thereafter following any termination or other expiration of the Term or other termination of Employee's employment, Employee shall not, publicly or privately, disparage or otherwise make any derogatory statement (whether written or oral) in respect of Employer or any of its subsidiaries or affiliates, including, without limitation, Colony Capital, Inc., its employees, owners and affiliates, or the conduct of any of their respective business or professional activities, except to the extent required (i) by an order of a court having jurisdiction or under subpoena from an appropriate government agency, in which event, Executive shall use his best efforts to consult with the Board prior to responding to any such order or subpoena and (ii) to litigate any claim against Employer for failure to pay any amount due to Employee under the terms of this Agreement, the Amended Award Agreement or the Amended Deferred Compensation Agreement. In the event that, following any termination of his employment, Employee shall have breached or breaches his obligations under this Section 10.04, Employee shall thereupon forfeit any and all rights he otherwise may have to any subsequent payment or benefit pursuant to Article IV or V hereof. 33 XI. RIGHTS AND REMEDIES UPON BREACH If Employee breaches any of the provisions of Articles IX or X above (the "Restrictive Covenants"), the Employer and its subsidiaries, affiliates, successors or assigns shall have the rights and remedies set forth below in this Article XI, each of which shall be independent of the others and severally enforceable, and each of which shall be in addition to, and not in lieu of, any other rights or remedies available to the Employer or its subsidiaries, affiliates, successors or assigns at law or in equity. 11.01. The right and remedy to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction by injunctive decree or otherwise, it being agreed that any breach of the Restrictive Covenants would cause irreparable injury to the Employer or its subsidiaries, affiliates, successors or assigns and that money damages would not provide an adequate remedy to the Employer or its subsidiaries, affiliates, successors or assigns. 11.02. Employee acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographic and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full force and effect without regard to the invalid portions. 11.03. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or scope of such provision. such court shall have the power to reduce the duration or scope of such provision, as the case may be (it being the intent of the parties that any such reduction be limited to the minimum extent necessary, to render such provision enforceable), and, in its reduced form, such provision shall then be enforceable. 34 11.04. Employee intends to and hereby confers jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographic scope of such covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants unenforceable by reason of the breadth of such scope or otherwise, it is the intention of Employee that such determination not bar or in any way affect the right of the Employer or its subsidiaries, affiliates, successors or assigns to the relief provided herein in the courts of any other jurisdiction within the geographic scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. XII. ARBITRATION Except as necessary for the Employer and its subsidiaries, affiliates, successors or assigns or Employee to specifically enforce or enjoin a breach of this Agreement (to the extent such remedies are otherwise available), the parties agree that any and all disputes that may arise in connection with, arising out of or relating to this Agreement, or any dispute that relates in any way, in whole or in part, to Employee's employment with the Employer or any subsidiary, the termination of that employment or any other dispute by and between the parties or their subsidiaries, affiliates, successors or assigns, shall be submitted to binding arbitration in Las Vegas, Nevada according to the National Employment Dispute Resolution Rules and procedures of the American Arbitration Association. The parties agree that the prevailing party in any such dispute shall be entitled to reasonable attorneys' fees, costs. and necessary disbursements in addition to any other relief to which be or it may be entitled. This arbitration obligation extends to any and all claims that may arise by and between the parties or their subsidiaries, affiliates, successors or assigns, and expressly extends to, without limitation, claims or causes of action for 35 wrongful termination, impairment of ability to compete in the open labor market. breach of an express or implied contract, breach of the covenant of good faith and fair dealing. breach of fiduciary duty, fraud, misrepresentation, defamation, slander, infliction of emotional distress, disability, loss of future earnings, and claims under the Nevada constitution, the United States Constitution, and applicable state and federal fair employment laws, federal and state equal employment opportunity laws, and federal and state labor statutes and regulations, including, but not limited to, the Civil Rights Act of 1964, as amended, the Fair Labor Standards Act, as amended, the Americans With Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Age Discrimination in Employment Act of 1967, as amended, and any other state or federal law. XIII. MISCELLANEOUS 13.01. If any action to specifically enforce or enjoin a breach of this Agreement is necessary, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and necessary disbursements in addition to any other relief to which he or it may be entitled. 13.02. This Agreement shall be construed and governed by the laws of the State of Nevada, without giving effect to conflicts of laws principles thereof which might refer such interpretations to the laws of a different state of jurisdiction. 13.03. This Agreement, and all of the terms and conditions hereof, shall bind the Employer and its successors and assigns and shall bind the Employee and his heirs, executors and administrators. No transfer or assignment of this Agreement shall release Employer from any obligation to Employee hereunder. Neither this Agreement, nor any of Employer's rights or obligations hereunder, may be assigned or otherwise subject to hypothecation by Employee. Employer may assign the rights and obligations of Employer hereunder, in whole or in part, to 36 any of Employer's subsidiaries, affiliates or parent corporations, or to any other successor or assign in connection with the sale of all or substantially all of Harveys' assets or stock or in connection with any merger, acquisition and/or reorganization. In the event of the death of Employee, any amounts accrued and payable hereunder that, as of the date of death, have not been paid to Employee shall be paid on behalf of Employee to Employee's estate at the times specified and otherwise in accordance with the provisions of this Agreement. 13.04. Notices - All notices and other communications under this Agreement shall be in writing and shall be given by first class mail, certified or registered with return receipt requested, or by a nationally recognized overnight delivery service to the respective parties named below: Employee: Charles W. Scharer P.O. Box 4735 148 Granite Springs Drive Stateline, Nevada 89449 Facsimile: 775-586-6756 WITH A COPY TO: Michael Forman Klehr, Harrison, Harvey, Branzburg & Ellers LLP 1401 Walnut Street Philadelphia, PA 19102 Facsimile: 215-568-6603 Employer: HARVEYS CASINO RESORTS Attn: Corporate Secretary Highway 50 and Stateline Avenue Post Office Box 128 Stateline, NV 89449 Facsimile: 775-586-6852 37 WITH A COPY TO: Mark Hedstrom Colony Capital, Inc. Suite 1200 1999 Avenue of the Stars Los Angeles, CA 90067 Facsimile: 310-282-8808 AND TO: Deborah E. Kurtzberg Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Facsimile: 212-225-3999 13.05. Nothing contained in this Agreement shall be construed to require the commencement of any act contrary to law, and when there is any conflict between any provision of this Agreement and any statute, law, ordinance, or regulation, contrary to which the parties have no legal right to contract, then the latter shall prevail; but in such an event, the provisions of this Agreement so affected shall be curtailed and limited only to the extent necessary to bring it within the legal requirements. 13.06. The several rights and remedies provided for in this Agreement shall be construed as being cumulative, and no one of them shall be deemed to be exclusive of the others or of any right or remedy allowed by law. No waiver by Employer or Employee of any failure by Employee or Employer, respectively, to keep or perform any provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or other provision. 13.07. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties heretowith respect to the employment of the Employee by the Employer (including, without limitation, the Original Agreement, the Prior Agreement, Harveys 38 Change in Control Plan and, insofar as it relates to the subject matter hereof, but except as provided in Section 13.08, the MOU) and, together with all other plans, agreements and other documents specifically referenced herein, contains all of the covenants, conditions and agreements between the parties with respect to such employment. Annex F hereto sets forth a list of payments to Employee pursuant to the MOU, and Employee hereby acknowledges receipt of all such payments. Each party to this Agreement acknowledges that no representations, inducements, promises or other agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding. Any addendum to or modification of this Agreement shall be effective only if it is in writing and signed by the parties to be charged. 13.08. To the extent applicable, Employee shall be entitled to receive a gross-up payment with respect to payments made hereunder (including under agreements referenced herein) and under the MOU to account for the payment of Internal Revenue Code Section 4999 excise taxes as well as taxes imposed on such gross up payments, as determined pursuant to the procedures set forth in Annex D, PROVIDED, that Employee shall reasonably cooperate with Employer in structuring such payments and taking such other actions to limit the extent to which such payments may be subject to such excise tax, provided that such restructuring does not cause Employee to suffer additional costs or other adverse consequences. Notwithstanding anything contained to the contrary contained herein, the provisions of this Section 13.08 and Annex D hereto shall survive the expiration or termination of this Agreement for any or no reason. 13.09. If Employee's employment with the Company is terminated by the Company without Cause either (i) as a result of a Change in Control (as defined in the Award 39 Agreement) or (ii) within the 12 month period immediately preceding a Change in Control (or such longer period, not to exceed 18 months prior to such Change in Control, during which significant discussions or other material action regarding such Change in Control occurred) at the request, directly or indirectly, of a third party who has taken steps reasonably calculated to effect a Change in Control or otherwise in connection with, or in anticipation of a Change in Control, Employee shall be entitled to receive, at the effective date of such termination (or, if payable in respect of clause (ii), within ten business days following such Change in Control), a lump sum payout at maximum of the bonus otherwise payable to Employee with respect to the then current fiscal year under the Annual Bonus Plan, such amount pro rated through the effective date of such termination of employment. The amount provided for in the immediately preceding sentence shall also be paid if Employee's employment with the Company is terminated with Good Reason if the grounds constituting Good Reason occur as the result of a Change in Control or within the stated time frame at the request, directly or indirectly, of such a third party or otherwise in connection with, or in anticipation of a Change in Control. If (x) no payment is made pursuant to either of the two immediately preceding sentences, (y) following a Change in Control and prior to the effective date of termination of Employee's employment the Annual Bonus Plan is terminated or amendments are made that materially adversely affect Employee and (z) Employee's employment is not terminated prior to the end of the fiscal year in which such termination or amendments occur, then, in lieu of any other amounts payable to Employee under the Annual Bonus Plan with respect to such fiscal year, Employee shall receive a lump sum payout at maximum within sixty (60) days following the termination of the Annual Bonus Plan or the fiscal year during which any such material amendments were made. The provisions of this Section 13.09 shall survive the expiration of the Term, but only to the extent necessary to 40 determine whether a Change in Control occurs within the 12 to 18 month period described in clause (ii) of the first sentence of this Section 13.09. 13.10. Notwithstanding any other provision of this Agreement, Employer shall not be obligated or permitted to pay any amount in respect of the Stock Awards or Stock Options pursuant to Section 4.04(d) or 4.04(e) if (i) the payment of such amount would result in a violation of the terms or provisions of, or result in a default or an event of default under, any guarantee, financing or security agreement or document entered into by Employer or any of its subsidiaries, affiliates or successors (such agreements and documents, as each may be amended, modified or supplemented from time to time, are referred to herein as the "FINANCING AGREEMENTS"), in each case as the same may be amended, modified or supplemented from time to time, or (ii) the payment of such purchase price would violate any of the terms or provisions of the Certificate of Incorporation of Employer. In the event that the payment of any such amount is prevented solely by the terms of this Section 13.10, the payment of such amount will be postponed and will be made, with interest at an annual rate of 12% for the period of delay, at the first opportunity thereafter when Employer has funds legally available therefor and when the payment of such amount will not result in any default or event of default or violation by Employer or any of its subsidiaries, affiliates or successors under any of the Financing Agreements or in a violation of any term or provision of the Certificate of Incorporation of the Employer. Employer shall endeavor in good faith to negotiate in the Financing Agreements for the Transaction appropriate baskets (including baskets with respect to payments in respect of management equity) to the extent negotiation of the overall covenants under such arrangements permits, provided Employee hereby acknowledges and agrees that Employer's ability to utilize 41 such baskets is typically subject to company performance criteria and credit ratio standards set forth under such Financing Arrangements. 13.11. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 13.12. Unless expressly provided herein or therein, the expiration of the Term shall not alter or affect any rights or obligations of Employer or Employee under any other agreement or plan including, without limitation, the Award Agreement, the Omnibus Plan, the Deferred Compensation Agreement, of even date herewith, between Employer and Employee, and, to the extent provided under Section 7.02 above, the Annual Bonus Plan. 42 13.13. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. DATED this 28th day of April, 2000. EMPLOYEE: /s/ CHARLES W. SCHARER ---------------------- CHARLES W. SCHARER EMPLOYER: HARVEYS CASINO RESORTS By: /s/ THOMAS J.BARRACK. JR. -------------------------- Name: Thomas J. Barrack Jr. Its: 43 EX-10.5 5 ex-10_5.txt EXHIBIT 10.5 EXHIBIT 10.5 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, made and entered into this 28th day of April, 2000 (the "Agreement"), by and between HARVEYS CASINO RESORTS, a Nevada corporation, hereinafter referred to as "Harveys" and/or "Employer," and JOHN J. MCLAUGHLIN, hereinafter referred to as "Employee," as follows: W I T N E S S E T H: WHEREAS, Employee and Employer have previously entered into an Employment Agreement, dated as of February 2, 1999 (the "Original Agreement"), setting forth the terms and conditions of Employee's employment with Employer from and after February 2, 1999, the effective time (the "Effective Date") of the merger (the "Merger") of Harveys Acquisition Corporation, a Nevada corporation ("Acq Corp"), with and into Harveys pursuant to the terms of the Agreement and Plan of Merger, dated as of February 1, 1998, between Harveys and Acq Corp; and WHEREAS, in connection with the Merger, Harveys and Employee, together with other members of Harveys management, entered into a Memorandum of Understanding, dated February 1, 1998 (the "MOU"), which set forth, among other things, certain terms regarding Employee's employment with Harveys following consummation of the Merger, including the execution of the Original Agreement; and WHEREAS, PH Casino Resorts, Inc., a wholly owned subsidiary of Harveys ("PH Casino"), has entered into an Agreement and Plan of Merger, dated as of April 17, 2000, among Pinnacle Entertainment, Inc. ("Target"), PH Casino and Pinnacle Acquisition Corporation ("Acquisition") (as the same may be amended, supplemented, or superceded the "Acquisition Agreement") pursuant to which Acquisition will merge with and into Target (together with any 1 similar transaction as a result of which Target, or an entity that has acquired substantially all of the assets and business of Target, controls, is controlled by or is under common control with Harveys, but not including any transaction as a result of which Target and Harveys are under common control solely be reason of having as their respective ultimate common parent a pooled investment entity sponsored by Colony Capital, Inc., the "Transaction"); and WHEREAS, Harveys and Employee desire to enter into certain special retention and employment protection arrangements that will apply to the terms of Employee's employment prior to the date of consummation of the Transaction (the "Acquisition Effective Date") and to certain terminations of Employee's employment with Employer prior to or within one year following the Acquisition Effective Date; and WHEREAS, Harveys and Employee desire to amend and restate the Original Agreement, in its entirety, to incorporate such retention and employment protection arrangements and intend that the Original Agreement, as amended and restated herein, shall be superceded in its entirety by this Agreement; and WHEREAS, in connection with the Merger, Harveys and Employee also entered into a Stock Option and Restricted Stock Agreement (the "Award Agreement" and, as so amended, the "Amended Award Agreement") and a Deferred Compensation Agreement (the "Deferred Compensation Agreement" and, as so amended, the "Amended Deferred Compensation Agreement"), each dated as of the Effective Date, each of which agreements is also being amended and restated, as of the date hereof, to incorporate the agreements between Harveys and Employee concerning the retention and employment protection arrangements. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements herein contained, together with other good and valuable consideration the receipt of 2 which is hereby acknowledged, the parties hereto do hereby agree that the Original Agreement is hereby amended and restated in its entirety as follows: I. DEFINITIONS 1.01. Employee shall at all times mean John J. McLaughlin. 1.02. Employer shall at all times mean Harveys Casino Resorts, a Nevada corporation, and its Successors in Interest together with its subsidiaries. 1.03. Harveys shall at all times mean Harveys Casino Resorts, a Nevada corporation, and its Successor in Interest together with its subsidiaries. 1.04. Successor in Interest shall mean any entity which is the successor or assign of Harveys, at law or at equity, and shall include without limitation, any entity into which Harveys is merged or consolidated, any entity to which all or substantially all of the assets or businesses of Harveys is transferred, or following the Transactions, the ultimate parent company of Harveys and Target. II. NATURE OF EMPLOYMENT AND DUTIES OF EMPLOYEE 2.01. In accordance with the terms of the Original Agreement, on the Effective Date, Employee continued to serve Harveys as Senior Vice President, Chief Financial Officer and Treasurer of Harveys and, in accordance with the terms of this Agreement, Employee shall continue to so serve Harveys in such positions. Employee shall at all times be subject to, observe and carry out such rules, regulations, policies, directions, and restrictions as Harveys Board of Directors (the "Board") may from time to time establish for senior executive officers of the Employer. 3 2.02. Subject to the supervision and control of the Board and Employer's Chief Executive Officer, Employee shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of his position and shall render such services on the terms set forth herein. Without limiting the generality of the foregoing, Employee shall be responsible for the Employer's financial plans, policies and relationships with financial institutions as well as managing the Employer's controller, directing the Employer's treasury, national purchasing, budgeting, tax and accounting functions and overseeing the Employer's data processing functions. In addition, Employee shall have such other executive and managerial powers and duties with respect to Harveys and its subsidiaries that are consistent with the offices of Senior Vice President, Chief Financial Officer and Treasurer and as may reasonably be assigned to him by the Board, including without limitation serving on the Board of Directors of any subsidiary of Harveys. 2.03. Employee has reviewed and concurs with his responsibilities and duties as set forth in Section 2.02 above. 2.04. During the Term (as defined below), Employee shall devote substantially all of his productive time, ability and attention to the business of Employer. In addition, Employee shall not directly or indirectly render any service of a business, commercial or professional nature, to any other person or organization, whether for compensation or otherwise, without the prior written consent of the Board, PROVIDED, that, subject to the provisions of Article X hereof, Employee shall not be precluded from involvement in charitable or civic activities or his personal financial investments provided the same do not materially interfere with his time or attention to the business of Employer, and PROVIDED, further, that Employee shall not serve as a director of any other for-profit business that is not an affiliate of Employer. 4 2.05. Employee agrees that he shall at all times (i) to the best of his ability and experience conscientiously perform all of the duties and obligations of his position with the Employer, (ii) use his best efforts to do and perform all services, acts, or things necessary or advisable to assist in the management and conduct of the business and otherwise advance the interests of Employer and (iii) diligently and in the highest good faith carry out the lawful directives of the Board, PROVIDED, that Employee shall not be obligated to perform his duties hereunder outside the Stateline, Nevada area, except for business trips and directors meetings outside said area which arise and result from the normal conduct of the business of Harveys. III. TERM AND GENERAL CONDITIONS OF EMPLOYMENT 3.01. Employer hereby continues the employment of Employee, and Employee hereby agrees to such continued employment by Harveys for the period of five (5) years commencing on the Effective Date and terminating on the fifth anniversary of the Effective Date (as the same may be extended as set forth below, the "Term"), unless extended by mutual written agreement of the parties; PROVIDED, that the period of employment shall automatically be extended for successive one (1) year periods if neither party has provided six (6) months prior written notice to the other of its intention to have this Agreement lapse at the expiration of the Term; and PROVIDED FURTHER, that the Term shall be subject to earlier termination in accordance with Articles IV, V and VI below. 3.02. Notwithstanding anything to the contrary herein, in the event of any termination of Employee's employment for any or no reason, Employee and Employer shall nevertheless continue to be bound by the terms and conditions set forth in Articles IX through XII, in Section 13.08 and, to the extent provided therein, Section 13.09 below. 5 3.03. Upon consummation of the Merger, the Prior Agreement was cancelled and terminated without further obligation of Employer. Upon the execution of this Agreement by the parties hereto, the Original Agreement shall be cancelled and terminated without further obligation of Employer or Employee and shall be superceded in its entirety by this Agreement. 3.04. Employee hereby acknowledges and agrees that his rights as set forth herein to receive severance and other compensation and benefits hereunder shall supersede and replace in its entirety any severance or other benefits that might otherwise be payable pursuant to Harveys' Change of Control Plan as in effect on the Effective Date or as the same may be amended from time to time or under any other severance plan, policy, agreement or arrangement in effect immediately prior to the Effective Date or at any time during the Term. Employee further acknowledges that as of the Effective Date, Employee shall no longer be a participant in or have any rights under the Change of Control Plan (or under any such other severance plan, policy, agreement or arrangement in effect immediately prior to the Effective Date or at any time during the Term), regardless of the reasons or circumstances of his termination of employment. Employee further acknowledges that as of the Effective Date Employee shall no longer be a participant in or have any rights under the Company's Long Term Incentive Plan or Supplemental Executive Retirement Plan. IV. TERMINATION OF EMPLOYMENT WITHOUT CAUSE 4.01. Employee's employment may be terminated by Harveys, with or without "Cause" (as defined in Section 6.01 below), at any time and for any or no reason. Any such termination without Cause shall be effective only upon thirty (30) days' prior written notice to Employee (such effective date, for purposes of this Article IV, the "Termination Date"). 6 4.02. If Employee's termination by Employer shall be without Cause and such termination is effective after the earlier of (i) the first anniversary of the Acquisition Effective Date and (ii) the date, if any, that an Abandonment Event (as defined below) occurs, Employee shall be entitled to the following benefits: (a) Except as provided below, Employee shall be entitled to receive, as soon as reasonably practicable, but no more than 10 business days, after the Termination Date, a lump sum payment in an amount equal to the product of (x) the Applicable Multiplier (as defined below) and (y) the sum of his then Base Salary and then Annual Target Bonus (each as defined below). (i) "Applicable Multiplier" shall mean the lesser of (A) 1.5 and (B) a fraction, the denominator of which is 12, and the numerator of which shall be the number of full plus partial (calculated by the day) months remaining in the Term following the Termination Date, which numerator shall be increased by the number of full plus partial (calculated by the day) months during any PostTerm Restriction Period (as defined below and further described in Annex E) if an election to have such PostTerm Restriction Period apply to Employee is made by Employer pursuant to Section 10.01. (ii) For purposes of this Section 4.02(a) and Section 4.04(a), the term "Annual Target Bonus" shall mean Employee's annual target bonus under the Annual Bonus Plan (as defined in Section 7.02 below) for each fiscal year during the Term, which shall be deemed to be 50 percent of Employee's Base Salary as in effect as of the date the relevant business plan targets for such fiscal year are established by the Board. (iii) For purposes of this Agreement, the "Post-Term Restriction Period" shall mean that period, if any, following expiration of the Term during which Employee would 7 be subject to the restrictions of Section 10.01 as determined under the first paragraph of Section 10.01, without regard to any limitation of such period by reason of Section 10.01(a). The Post-Term Restriction Period is further described in Annex E hereto. (iv) Notwithstanding the foregoing, in the event that Employee's Termination Date shall be less than one year prior to the expiration of the Term and the Applicable Multiplier (determined as above by including any applicable PostTerm Restriction Period) shall be less than 1.0, Employee shall not be entitled to receive the lump sum payment determined under the first sentence of this Section 4.02(a), but shall instead be entitled to receive (A) as soon as reasonably practicable, but no more than 10 business days, after the Termination Date, a lump sum payment in an amount equal to the product of (x) the Applicable Multiplier and (y) his then Base Salary and (B) as applicable, a bonus as determined under Annex E hereto. (b) Employee shall be entitled to continuation of his Benefits (as defined below) for that number of months immediately following the Termination Date equal to the product of (A) the Applicable Multiplier and (B) 12 (such number of months, the "Section 4.02 Severance Period"), PROVIDED, that in the event that during such period, pursuant to applicable law or the terms of the applicable plan, any Benefits may not be provided pursuant to the terms of the specific plan referenced herein, Employer shall provide substantially equivalent benefits by alternate means. (c) Subject to the provisions of the Award Agreement, Employee shall vest as of the Termination Date in that portion of the Stock Award and Stock Option grants (each as defined below) that would otherwise have vested had Employee remained in Harveys employ for the duration of the Section 4.02 Severance Period. 8 (d) Employee shall be entitled to payment of all amounts of Base Salary and Benefits accrued but unpaid through the Termination Date. Except as set forth in this Section 4.02 and Section 13.08, all other rights of Employee (and, except as provided in Sections 4.02 and 3.02 above and Section 13.08, all obligations of the Employer) hereunder shall terminate as of the Termination Date. 4.03. If Employee's employment shall terminate by reason of his death or Disability and such termination is effective after the earlier of (i) the first anniversary of the Acquisition Effective Date and (ii) the date, if any, that an Abandonment Event occurs, he or his estate, as applicable, shall be entitled to (i) all amounts of Base Salary and Benefits accrued but unpaid through the date of such termination (which shall be the date of death or the 45th day after the date Employer provides Employee notice of termination for Disability) and (ii) any death and/or disability benefits that may be due Employee under any benefit plans in effect from time to time. "Disability" shall mean any physical or mental disability that prevents Employee from performing one or more of the essential functions of his position for a period of not less than six (6) months in any continuous 12 month period. Except as set forth in this Section 4.03 and Section 13.08, all other rights of Employee (and, except as provided in this Section 4.03 and Section 3.02 above and Section 13.08, all obligations of the Employer) hereunder shall terminate as of the date of such termination of employment. 4.04. If the termination of Employee's employment with Employer is a Special Termination, provided Employee executes and delivers to Employer a general release of claims in substantially the form attached hereto as Annex G (the "Release"), Employee shall be entitled to the benefits described in subparagraphs (a) through (g) of this Section 4.04 and to the extent applicable, in Sections 7.04 and 7.05. For purposes of this Agreement, the Amended Award 9 Agreement and the Amended Deferred Compensation Agreement, the term "Special Termination" shall mean the termination of Employee's employment by Employer without Cause or any such termination due to Employee's death or Disability (i) as of a Termination Date that is after the date of this Agreement and on or prior to the Acquisition Effective Date, but only if the Transaction is actually consummated pursuant to the terms of the Acquisition Agreement (any such Special Termination under this clause (i), a "Pre-Acquisition Special Termination") or (ii) as of a Termination Date that is after the Acquisition Effective Date and on or prior to the first anniversary of the Acquisition Effective Date (any such Special Termination under this clause (ii), a "Post-Acquisition Special Termination"). In the event that, following the Termination Date, the Acquisition Agreement is terminated or expires, in either case, without consummation of the Transaction or the Board otherwise resolves to abandon the Transaction (any such event, an "Abandonment Event"), Employee shall be entitled only to the benefits to which he would have been entitled under Section 4.02 or 4.03, as the case may be, if the Termination Date had been after the Abandonment Event and, to the extent provided therein, to the benefits payable under Section 7.04, and Employee shall not be entitled to any benefits under this Section 4.04. In the event that the Termination Date precedes an Abandonment Event, the benefits to which Employee shall be entitled pursuant to the preceding sentence and Section 4.02 shall be reduced, on a dollar for dollar or benefit by benefit basis, as applicable, by all payments or benefits received by Employee pursuant to this Section 4.04 prior to the occurrence of the Abandonment Event. (a) In the event of a Special Termination, Employee shall be entitled to receive a lump sum payment, as soon as reasonably practicable, but in no event more than 10 10 business days, following the Termination Date, in an amount equal to the product of (x) 1.5 and (y) the sum of his then Base Salary and then Annual Target Bonus. (b) In the event of a Special Termination, Employee shall be entitled to continuation of his Benefits for 18 months immediately following the Termination Date (the "Section 4.04 Severance Period"), PROVIDED, that in the event that during such period, pursuant to applicable law or the terms of the applicable plan, any Benefits may not be provided pursuant to the terms of the specific plan referenced herein, Employer shall provide substantially equivalent benefits by alternate means. (c) In the event of (x) a Pre-Acquisition Special Termination or (y) a termination without Cause (within the meaning of Section 4.02) or due to Employee's death or Disability, in any such case, followed by an Abandonment Event, (i) as of the Termination Date, Employee shall vest in that portion of the Stock Award and Stock Option grants made to Employee pursuant to the Amended Award Agreement that would otherwise have vested had Employee remained in Harveys employ for the duration of the Section 4.04 Severance Period and (ii) subject to Employer's call right under Section 8 of the Amended Award Agreement, such Stock Options shall be exercisable for the 90 day period following the Termination Date and, to the extent not so exercised, shall thereafter terminate automatically. In addition, in the event of a Pre-Acquisition Special Termination, on the Acquisition Effective Date, each then outstanding Stock Award and Stock Option granted pursuant to the Amended Award Agreement shall be cancelled in exchange for an aggregate cash payment equal to the sum of the following amounts, to be paid as set forth below: 11 (1) an amount equal to the product of (A) the Transaction Share Price (as defined below) multiplied by (B) the sum of (I) the number of shares of Class A Common Stock and Class B Common Stock subject to each such cancelled Stock Award and (II) the number of shares of Class A Common Stock and Class B Common Stock that were subject to those Stock Awards that were forfeited as of the Termination Date in connection with Employee's termination of employment; (2) an amount equal to the product of (A) (I) the excess of the Transaction Share Price over (II) the exercise price per share of Common Stock applicable under each such cancelled Stock Option multiplied by (B) the number of shares of Common Stock subject to such cancelled Stock Options immediately prior to the cancellation thereof; (3) an amount equal to the product of (A) (I) the excess of the Transaction Share Price over (II) the exercise price per share of Common Stock applicable under each Stock Option that was forfeited as of the Termination Date in connection with Employee's termination of employment multiplied by (B) the number of shares of Common Stock subject to each such Stock Option immediately prior to the forfeiture thereof; and (4) an amount equal to the product of (A) (I) the excess of the Transaction Share Price over (II) the exercise price per share of Common Stock applicable under any Stock Option that was outstanding immediately following the Termination Date but terminated by its terms prior to the Acquisition Effective Date without having been exercised multiplied by (B) the number of 12 shares of Common Stock subject to each such Stock Option immediately prior to its termination. For purposes of this Section 4.04, the term "Transaction Share Price" shall mean (i) for purposes of calculating a payment in respect of shares of Class A or Class B Common Stock subject to Stock Awards or Stock Options that are forfeited or terminated prior to the Acquisition Effective Date, $54.12 and (ii) for purposes of calculating a payment in respect of shares of Class A or Class B Common Stock subject to Stock Awards, Stock Options or Incentive Stock Grants that, in any such case, are cancelled pursuant to this Section 4.04 on or after the Acquisition Effective Date, $43.42 (i.e., the per share value of the Class A and Class B Common Stock after the increase in the capitalization of Employer in connection with the Transaction). Subject to Section 13.10, such payment shall be made to Employee in five installments, with the first such installment payable as soon as reasonably practicable, but no more than 10 business days, after the Acquisition Effective Date and equal to the greater of (i) 20% of the full amount of such payment and (ii) the aggregate income taxes payable by Employee with respect to the accelerated vesting of the Stock Award pursuant to this Section 4.04(c). Subject to Section 13.10, the balance of the amount payable to Employee pursuant to this Section 4.04(c) shall be paid in four equal installments, with interest at an annual rate of 12%, on each of the first four anniversaries of the Acquisition Effective Date. Annex H hereto sets forth an example of the calculations under this Section 4.04(c). (d) In the event of a Post-Acquisition Special Termination, as of the Termination Date (i) Employee shall vest in 100% of all then outstanding Stock Awards and Stock 13 Options grants made to Employee pursuant to the Award Agreement and (ii) each such Stock Award and Stock Option shall be cancelled in exchange for an aggregate payment equal to the sum of the following amounts, to be paid as set forth below: (1) an amount equal to the product of (A) the Transaction Share Price multiplied by (B) the number of shares of Class A Common Stock and Class B Common Stock subject to each such cancelled Stock Award; and (2) an amount equal to the product of (A) (I) the excess of the Transaction Share Price over (II) the exercise price per share of Common Stock applicable under each such cancelled Stock Option multiplied by (B) the number of shares of Common Stock subject to each such cancelled Stock Option immediately prior to the cancellation thereof; Subject to Section 13.10, such payment shall be made to Employee in five installments, with the first such installment payable as soon as reasonably practicable, but no more than 10 business days, after the Termination Date and equal to the greater of (i) 20% of the full amount of such payment and (ii) the aggregate income taxes payable by Employee with respect to the accelerated vesting of the Stock Award pursuant to this Section 4.04(d). Subject to Section 13.10, the balance of the amount payable to Employee pursuant to this Section 4.04(d) shall be paid in four equal installments, with interest at an annual rate of 12%, on each of the first four anniversaries of the Termination Date. (e) In the event of a Special Termination, each Incentive Stock Grant Share that has been awarded to Employee with respect to any New Project (the Bluffs Run transaction) shall remain outstanding following the Termination Date until the expiration 14 of the performance period governing the release from the risk of forfeiture of such Incentive Stock Grant Share. If all objectives of such Incentive Stock Grant Share are achieved so that there is no longer a risk of forfeiture on or prior to the end of such performance period, Employer shall cancel such Incentive Stock Grant Share in exchange for a cash payment equal to the product of the number of Incentive Stock Grant Shares so cancelled and the Transaction Share Price. Subject to Section 13.10, such payment shall be made to Employee in installments, with the first such installment payable as soon as reasonably practicable, but no more than 10 business days, after delivery to the Board of the financial statements necessary to determine if the performance objectives have been achieved and equal to the greater of (i) the Applicable Percentage (as defined below) of the full amount of such payment and (ii) the aggregate income taxes payable by Employee with respect to the release from the risk of forfeiture of such Incentive Stock Grant Shares. Subject to Section 13.10, the balance of the amount payable to Employee in respect of the cancellation of such Incentive Stock Grant Shares pursuant to this Section 4.04(e) shall be paid in equal installments, with interest at an annual rate of 12%, on each anniversary of the Termination Date thereafter such that the total amount so payable shall be paid in full as of the fourth anniversary of the Termination Date. If (i) any of the objectives for accelerated vesting of such Incentive Stock Grant Share are not achieved as of the end of such performance period or (ii) Employee's employment shall have been terminated prior to the Acquisition Effective Date by the Company without Cause, by Employee with Good Reason or due to Employee's death or Disability and thereafter an Abandonment Event occurs, all of Employee's rights with respect to such Incentive Stock Grant Shares shall be forfeited and cancelled immediately without any 15 payment or other consideration to Employee. The term "Applicable Percentage" shall mean the quotient, expressed as a percentage, of (i) the number of days from the Termination Date to the last day of the applicable performance period divided by (ii) 1460. (f) In the event of a Special Termination, Employee shall be entitled to receive a lump sum cash payment equal to the product of the number of Deemed SERP Shares (within the meaning of the Amended Deferred Compensation Agreement) multiplied by the Transaction Share Price. Subject to Section 13.10, such payment shall be made to Employee as soon as reasonably practicable, but in no event more than 10 business days, following the Termination Date. (g) In the event of a Special Termination, Employee shall be entitled to payment of all amounts of Base Salary and Benefits accrued but unpaid through the Termination Date. In addition, notwithstanding any provision of the MIP, Employee shall be entitled (i) to receive, as soon as reasonably practicable, but in no event more than 10 business days following the Termination Date any Annual Bonus accrued under the MIP but unpaid for any fiscal year of Employer ending on or prior to the Termination Date and (ii) if Employee's Employment with Employer is terminated during Employer's 2000 fiscal year, and all regulatory approvals necessary for the closing of the Transaction are obtained on or prior to November 30, 2000, a pro-rata bonus payment (based on the portion of the fiscal year prior to termination) for the year in which such termination occurs, calculated in accordance with the terms of the MIP for such year and payable when bonuses are generally payable to executives for such year. 16 Except as set forth in this Section 4.04, Section 13.08 and Section 13.10, all other rights of Employee (and, except as provided in Sections 4.04 and 3.02 , Section 13.08 and Section 13.10, all obligations of the Employer) hereunder shall terminate as of the Termination Date. V. TERMINATION OF EMPLOYMENT AT EMPLOYEE'S REQUEST 5.01. Employee may, at Employee's sole option and right, terminate his employment with Employer at any time, with or without Good Reason (as defined below). Any such termination shall be effective only upon thirty (30) days' prior written notice to Harveys. (a) In the event of such termination of employment without Good Reason, Employee shall be entitled to receive all amounts of Base Salary and Benefits accrued but unpaid through the date of such termination. (b) In the event of any such termination of employment with Good Reason that is effective on or after the earlier of (i) the first anniversary of the Acquisition Effective Date or (ii) if applicable, an Abandonment Event, Employee shall be entitled to receive the benefits set forth in Sections 4.02(a)(d) as if Employee's employment had been terminated by Employer without Cause, with the "Termination Date" as used in such sections being the effective date of termination pursuant to this Section 5.01. (c) In the event of any such termination of employment with Good Reason that is effective on or after the date of this Agreement and prior to the earlier of (i) the first anniversary of the Acquisition Effective Date and (ii) if applicable, an Abandonment Event, provided Employee executes and delivers to Employer the Release, Employee shall be entitled to receive the benefits set forth in the applicable provisions of Sections 4.04(a)(g), depending upon the effective date of such termination, as if Employee's 17 employment had been terminated in a Special Termination, with the "Termination Date" as used in such sections being the effective date of termination pursuant to this Section 5.01. To the extent applicable, Employee shall also be entitled to receive the benefits described in Sections 7.04 and/or 7.05. (d) For purposes of this Section 5.01, in the case of any termination by Employee on or after the earlier of (i) Acquisition Effective Date or (ii) if applicable, an Abandonment Event, Employee shall have "Good Reason" to terminate his employment hereunder if (A) Employer shall, without Employee's written consent, willfully and materially breach its obligations under this Agreement, (B) Employee provides Employer written notice pursuant hereto stating with specificity the respects in which Employee believes Employer to have willfully and materially breached its obligations under this Agreement and (C) within thirty (30) days following the date of such notice Employer shall not have cured such breach. (e) For purposes of this Section 5.01, in the case of any termination by Employee on or after the date of this Agreement and prior to the earlier of (i) the Acquisition Effective Date and (ii) if applicable, an Abandonment Event, Employee shall have "Good Reason" to terminate his employment hereunder if (A) Employer changes Employee's reporting responsibilities such that Employee no longer reports directly to the Chief Executive Officer, or (B) the Board resolves to reduce Employee's duties and responsibilities for Employer or written notice of any such reduction is delivered to Employee by the Board or any member thereof (other than Employee), or (C) Employer reduces Employee's title to a title other than Senior Vice President, Chief Financial Officer and Treasurer of Harveys, or (D) Employer reduces the rate of Employee's Base 18 Salary, or (E) Employer materially reduces the aggregate level of employee benefits and perquisites provided to Employee pursuant to Section 8 hereof, or (F) Employer fails to pay to Employee when due any Base Salary, other bonus or other material amount payable to Employee pursuant to Section 7 hereof, or (G) Employer requires Employee to relocate his principal place of business to a location beyond a radius of 30 miles from Stateline, Nevada, and (H) Employee provides Employer written notice pursuant hereto stating with specificity the circumstances claimed to constitute the basis for such termination with Good Reason and (I) within thirty (30) days following the date of such notice Employer shall not have cured such circumstances. (f) Except as set forth in this Section 5.01 (and, as incorporated hereinabove by reference, Section 4.02 or 4.04, as applicable) and Sections 13.08 and 13.10, all other rights of Employee (and, except as provided in Section 3.02 above and Section 13.08 and 13.10, all obligations of the Employer) hereunder shall terminate as of the date of such termination of employment. VI. TERMINATION OF EMPLOYMENT FOR CAUSE 6.01. Employer may at any time, at its election, by written notice to Employee stating with specificity the reason for the termination, terminate Employee's employment for "Cause," which shall be defined as Employee's: (a) Gross negligence or willful malfeasance in the performance of his duties under this Agreement; (b) Failure to obtain or retain any permits, licenses, or approvals which may be required by any state or local authorities in order to permit the Employee to continue his employment as contemplated by this Agreement; 19 (c) Conviction of any felony or conviction of a crime involving moral turpitude; (d) Dishonesty with respect to Employer (including, without limitation, fraud) resulting in a breach of duty to Employer involving Employee's personal gain or profit; (e) Engaging in any activity that is in violation of the provisions of Article X of this Agreement, which shall not be cured following ten days' written notice and a demand to cure such violation; or (f) Use or imparting of any confidential or proprietary information of Employer or any subsidiary or affiliate in violation of any confidentiality or proprietary agreement to which Employee is a party, including without limitation the provisions of Article IX of this Agreement; PROVIDED, that in the event such notice is provided pursuant to Section 6.01(b), Employee shall have a period of thirty (30) days following the date of such notice in which to cure such failure, and if Employee shall cure such failure within such period, Employee's employment hereunder shall be reinstated without prejudice. 6.02. Upon the provision of such notice (or, in the case of such notice pursuant to Section 6.01(b), upon expiration of the applicable cure period without cure), Employee's employment shall immediately cease and terminate for Cause. In the event of such termination of employment, Employee shall be entitled to receive all amounts of Base Salary and benefits accrued but unpaid through the date of such termination. Except as set forth in this Section 6.02 and Section 13.08, all other rights of Employee (and, except as provided in Section 3.02 above and Section 13.08, all obligations of the Employer) hereunder shall terminate as of the date of such termination of employment. 20 VII. COMPENSATION OF EMPLOYEE 7.01. Base Salary - Employee shall receive an annual base salary ("Base Salary") of Three Hundred Thirty Five Thousand Dollars ($335,000), payable in at least monthly installments, less all applicable Federal, state and local taxes, Social Security and any other government mandated deductions. Employee's Base Salary shall be reviewed by the Board no less frequently than annually relative to specified performancebased criteria to be determined by the Board. 7.02. Annual Bonus - Following the Effective Time, Employee shall be eligible to participate in Employer's Management Incentive Plan ("MIP") or, at the election of Employer, in a new or equivalent annual bonus plan established by Employer having a similar structure to the MIP providing for payment of an annual bonus (the "Annual Bonus Plan"), but in either case with thresholds and triggering events for payment based on the achievement of Harveys annual budget and other business plan targets to be determined by the Board following the Effective Date. Employee's maximum annual bonus under the Annual Bonus Plan shall not be less than $165,000. Notwithstanding the foregoing, the following provisions shall apply with respect to Employee's participation in the Annual Bonus Plan with respect to fiscal 1999: (a) On the Effective Date, Employer paid to Employee a lump sum amount in cash equal to 25% of Employee's maximum bonus under the Annual Bonus Plan for fiscal 1999, which lump sum amount Employer and Employee acknowledge and agree to be $55,625 (the "Advance"). Employee hereby acknowledges receipt of the Advance. (b) Following the end of fiscal 1999, the Board shall determine Employee's bonus under the Annual Bonus Plan in the ordinary course using the financial targets established by the Board prior to the date hereof, without regard to the Advance (the 21 "Overall 1999 Bonus Entitlement"). On the date bonuses under the Annual Bonus Plan are paid generally to employees with respect to fiscal 1999, Employee shall be entitled to receive an annual bonus payment equal to the excess, if any, of (i) Employee's Overall 1999 Bonus Entitlement over (ii) the amount of the Advance. In the event the Advance shall be greater than the Overall 1999 Bonus Entitlement, Employee shall have no obligation to repay any portion of the Advance to Employer, and no portion of the Advance shall be offset against amounts otherwise payable to Employee under the Annual Bonus Plan with respect to subsequent fiscal years. However, in the event Employee's employment is terminated by Employer without Cause or by Employee with Good Reason prior to December 31, 1999, the amount of the Advance shall be offset dollarfordollar against amounts otherwise payable to Employee under Section 4.02(a). 7.03. Stock Grants and Stock Option - On the Effective Date, Employee received (i) a restricted stock award (the "Stock Award") consisting of 180 shares of the Class A common stock, par value $.01 per share, of Harveys ("Class A Common Stock") and 18,000 shares of the Class B common stock, par value $.01 per share, of Harveys ("Class B Common Stock") and (ii) a stock option (the "Stock Option") to purchase 240 additional shares of Class A Common Stock and 24,000 additional shares of Class B Common Stock, each at a price of $20.06 per share. The Stock Awards and Stock Options shall each be subject in all respects to the terms of Harveys 1999 Omnibus Incentive Plan, a copy of which is attached hereto as Annex A, as the same may be amended from time to time (the "Omnibus Plan"), the Amended Award Agreement, as the same may be further amended from time to time, and that certain Stockholders Agreement, as the same may be amended from time to time, among Harveys, Colony HCR Voteco, LLC, a Nevada limited liability company, Colony Investors III, L.P., a Delaware limited 22 partnership, and the security holders of the Company (including Employee) as identified from time to time on Schedule A thereto, a copy of which is attached hereto as Annex C. 7.04. Retention Bonus - In addition to any payments to which Employee may be entitled under Sections 4.02, 4.03, 4.04, or 5.01, as applicable, and any bonuses to which Employee is entitled under the MIP or otherwise, Employee shall be entitled to receive a lump sum cash retention bonus of $500,000 if (i) (A)Employee remains in the continuous employment of Employer from the date hereof to the Acquisition Effective Date or (B) Employee's employment with Employer is terminated prior to the Acquisition Effective Date by Employer without Cause, by Employee with Good Reason (as defined in Section 5.01(d)) or due to Employee's death or Disability and (ii) the Transaction is consummated in accordance with the Acquisition Agreement. In the event that an Abandonment Event occurs, if (i) Employee remains in the continuous employment of Employer from the date hereof to the date of such Abandonment Event or (ii) Employee's employment with Employer is terminated prior to the Abandonment Event by Employer without Cause, by Employee with Good Reason (as defined in Section 5.01(d)) or due to Employee's death or Disability, Employee shall be entitled to receive a lump sum cash payment of $250,000. Any payment to which Employee is entitled pursuant to this Section 7.04 shall be made to Employee as soon as reasonably practicable, but in no event more than 10 business days, following the Acquisition Effective Date or the date an Abandonment occurs, as the case may be; provided that in the case of any termination of Employee's employment prior to the Acquisition Effective Date by Employer without Cause, by Employee with Good Reason (as defined in Section 5.01(d)) or due to Employee's death or Disability, Employer shall pay Employee $250,000 as soon as reasonably practicable, but in no event more than 10 business days, following the Termination Date and, in the event the 23 Transaction is thereafter consummated, Employer shall pay Employee an additional $250,000 as soon as reasonably practicable, but in no event more than 10 business days, following the Acquisition Effective Date. 7.05. Special Performance Bonus - (a) In addition to any payments to which Employee may be entitled under Sections 4.02, 4.03, 4.04, or 5.01, as applicable, and provided the Transaction is consummated in accordance with the Acquisition Agreement and Employee remains in the continuous employment of Employer from the date hereof to the Acquisition Effective Date, Employee shall be entitled to a special performance bonus in addition to any bonuses to which Employee is entitled under the MIP or otherwise. The target amount of the special performance bonus shall be $250,000 and shall be payable to Employee as soon as reasonably practicable after Acquisition Effective Date but in no event more than 10 business days following the Acquisition Effective Date if (i) Employer attains 100% of the performance objectives ("Bonus Targets") established by the Board for the 2000 fiscal year of the Company, as set forth on Schedule A attached, and (ii) substantially all of the current members of Employer's executive committee, Employer's general managers and certain other key employees of Employer identified in writing to Employee prior to the date hereof (other than any such Management Employee whose employment is terminated by Harveys or terminates due to such Management Employee's retirement, death or disability) (collectively, the "Management Employees") remain employed in accordance with the terms of their respective current employment agreements from the date hereof to the Acquisition Effective Date; provided that, if substantially all of the Management Employees do not remain employed by Employer, 24 the Compensation Committee of the Board shall review, in good faith, the circumstances surrounding each Management Employee's departure, including the activities of Employee with respect thereto and the reasons for such Management Employee's departure, and based on such review, shall determine the portion, if any, of the special performance bonus that will be paid to Employee. Satisfaction of the Bonus Targets shall be determined on the basis of Employer's EBITDA as adjusted to take account of certain non-recurring events, substantially in accordance with past practices. Following the end of fiscal year 2000, if the Transaction has not been consummated and an Abandonment Event has not occurred, Employer may implement a special bonus program for Employee for fiscal year 2001, based on such bonus targets and target amounts as Employer shall determine and providing for the payment of a pro rated special performance bonus based upon the Acquisition Effective Date. (b) In addition to any payments to which Employee may be entitled under Sections 4.02, 4.03, 4.04, or 5.01, as applicable, and provided the Transaction is consummated in accordance with the Acquisition Agreement, if Employee's employment with Employer is terminated prior to the Acquisition Effective Date by Employer without Cause, by Employee with Good Reason (as defined in Section 5.01(d)) or due to Employee's death or Disability, Employee shall be entitled to a special performance bonus of $175,000 payable to Employee as soon as practicable, but in no event more than 10 business days following the Acquisition Effective Date. VIII. BENEFITS AND PERQUISITES During the Term, Employee shall be entitled to the benefits and perquisites as set forth in this Article VIII (collectively, "Benefits"). 25 8.01. Harveys 401(k) Plan - During the Term the Employee shall be allowed to participate in Harveys 401(k) Plan, or shall be provided with benefits that are substantially identical to the benefits provided under such plan as of the date hereof. 8.02. Vacation - Employee shall be entitled to five weeks of paid vacation per year. Employee shall be afforded the usual holidays as Employer may from time to time recognize. 8.03. Complimentary Privileges - Employee shall be entitled to such Level I complimentary privileges as are afforded generally to senior executives of Employer from time to time pursuant to policies adopted by the Board. 8.04. Employer shall provide Employee with an automobile in accordance with the Class I category of Employer's Standard Automobile Policy and Procedures, as from time to time amended. 8.05. Disability - Employee shall also be entitled to short term disability coverage and long term disability coverage under plans as in effect from time to time as implemented by Employer. 8.06. Medical, Vision and Dental Insurance - Employer shall provide medical, vision and dental benefits to Employee, his spouse and dependents in accordance with Employer's Class One coverage under the Executive Medical Plan, as amended from time to time. 8.07. Deferred Compensation Program - Employee shall be allowed to participate in the Deferred Compensation Program as is in effect from time to time. 26 8.08. Life Insurance - During the Term, Employer shall furnish Employee with Group Term Life Insurance and Accidental Death/Dismemberment Insurance, in each case subject to the terms of such plans as in effect from time to time. 8.09. Additional Employee Benefit Plans - Employee shall be entitled to participate in all additional employee benefits plans which may, in the future, be made generally available to Employer's most senior management employees, PROVIDED, that separate employee benefits plans may be adopted for lowerranking management employees as to which Employer may determine Employee ineligible for participation, and PROVIDED, FURTHER, that Employee shall not be entitled to participate in (i) Employer's Supplemental Executive Retirement Plan or any other supplemental retirement plan or arrangement, (ii) Employer's Long Term Incentive Plan or (iii) any severance plan, policy or arrangement of Employer. This Section 8.09 shall not be construed to affect Employee's entitlement to severance or bonus amounts as provided in this Agreement or hereafter. 8.10. Reimbursement of Expenses - Employer shall reimburse Employee for any expenses reasonably and necessarily incurred by him in furtherance of his duties hereunder, including, travel, meals, and accommodations, upon submission by him of vouchers or receipts and in compliance with such rules and policies relating thereto as Employer may from time to time adopt. IX. PROTECTION OF CONFIDENTIAL INFORMATION Employee acknowledges that during the course of his employment with the Employer, its subsidiaries and affiliates, he has been and will be exposed to documents and other information regarding the confidential affairs of the Employer, its subsidiaries and affiliates, including, without limitation, Colony Capital, Inc, its employees, owners and affiliates, including 27 without limitation such information about their past, present and future financial condition, the markets for their products, key personnel, past, present or future actual or threatened litigation, trade secrets, current and prospective customer lists, operational methods, acquisition plans (including without limitation potential acquisition targets), financing sources, prospects, plans for future development and other business affairs and information about the Employer and its subsidiaries and affiliates, including, without limitation, Colony Capital, Inc., its employees, owners and affiliates, not readily available to the public (the "Confidential Information"). Employee further acknowledges that the services to be performed under this Agreement are of a special, unique, unusual, extraordinary and intellectual character. In recognition of the foregoing, the Employee covenants and agrees as follows: 9.01. At no time shall Employee ever divulge, disclose, or otherwise use any Confidential Information, unless and until such information is readily available in the public domain by reason other than Employee's unauthorized disclosure or use thereof, unless such disclosure or use is made in good faith and solely in furtherance of Employee's duties hereunder or expressly authorized by the Board in writing in advance of such disclosure or use. 9.02. Upon the termination of Employee's employment at any time and for any or no reason, or at any other time the Board may so direct, Employee shall promptly deliver to the Employer's offices in Stateline, Nevada all of the property and equipment of the Employer and its subsidiaries (including any automobiles, cell phones, pagers, credit cards, personal computers, etc.) and any and all documents, records, and files, including any notes, memoranda, customer lists, reports or any and all other documents, including any copies thereof, whether in hard copy form or on a computer disk or hard drive, which relate to the Employer, its subsidiaries, affiliates, successors or assigns, and/or their respective past and present officers, 28 directors, employees or consultants (collectively, the "Employer Property, Records and Files"); it being expressly understood that, upon termination of Employee's employment, Employee shall not be authorized to retain any of the Employer Property, Records and Files, except to the extent expressly so authorized in writing by the Board. X. NONCOMPETITION AND OTHER MATTERS 10.01. During the Term and for the one year period following the date of termination of Employee's employment at any time and for any or no reason (PROVIDED, that such period shall be six months in the event Employee's employment terminates upon expiration of the Term), Employee shall not at any time in any city, town, county, parish, other municipality in any state of the United States or Native American territory (the names of each such city, town, county, parish, other municipality or Native American territory, including, without limitation, the name of each county in the State of Nevada being expressly incorporated by reference herein), or any other place in the world, where the Employer, or its subsidiaries, affiliates, successors, or assigns, engages in owning, operating, managing and/or developing landbased or riverboat casinos or hotels associated or materially competitive with casinos, or any other business engaged in from time to time by the Employer or its subsidiaries, affiliates, successors or assigns in which Employee has had significant authority and responsibility (the "Business"), directly or indirectly, (i) engage in a competing business for Employee's own account; (ii) enter the employ of, or render any consulting services to, any entity that competes with the Employer, or its subsidiaries, affiliates, successors, or assigns, in the Business; or (iii) become interested in any such entity in any capacity, including, without limitation, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; PROVIDED, HOWEVER, (x) Employee may (A) own, directly or indirectly, solely as a passive investment, securities of any entity traded on 29 any national securities exchange or market if Employee is not a controlling person of, or a member of a group which controls, such entity and does not, directly or indirectly, own 5% or more of any class of securities of such entity and (B) subject to the first sentence of Section 2.04 above, make passive investments in hospitality enterprises not materially competitive with gaming and/or enterprises which are principally bar/restaurant enterprises containing no more than 50 gaming positions, PROVIDED, that such investments shall not materially interfere with the performance of Employee's duties hereunder and (y) in the event of a Special Termination or a Termination by Employee with Good Reason that is effective on or after the date hereof and prior to the earlier of (I) the first anniversary of the Acquisition Effective Date and (II) if applicable, an Abandonment Event, the covenants of Employee in this Section 10.01 shall apply only to activities by Employee in the Lake Tahoe and Iowa geographic areas or for or in respect of any entity which, directly or indirectly, including through affiliates, has operations in the Lake Tahoe or Iowa geographic areas. (a) Notwithstanding the foregoing, if (i) Employee's employment is terminated by Employer other than for Cause or by Employee with Good Reason and (ii) the effective date of such termination as determined hereunder occurs within the one year period prior to the expiration date of the Term, the restrictions set forth in this Section 10.01 shall expire upon expiration of the Term unless Employer provides written notice to Employee not later than two days after such effective date that it wishes the restrictions of this Section 10.01 to apply during the PostTerm Restriction Period (as defined in Section 4.02 above) and pays Employee the severance compensation provided for under Section 4.02(a) and provides the benefits provided for under Section 4.02(b). 30 (b) If Employee's employment is terminated for any other reason or under any other circumstances, the provisions of this Section 10.01 shall be effective without regard to Section 10.01(a). 10.02. During the Term and for the two year period immediately following the date of termination of Employee's employment at any time and for any or no reason, Employee shall not at any time, directly or indirectly, solicit or induce any officer, director, employee, agent or consultant of the Employer or any of its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, to terminate his, her or its employment or other relationship with the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, for the purpose of associating with any competitor of the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, or otherwise encourage any such person or entity to leave or sever his, her or its employment or other relationship with the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, for any other reason. 10.03. During the Term and for the two year period immediately following the date of termination of Employee's employment at any time and for any or no reason, Employee shall not at any time, directly or indirectly, solicit or induce (i) any customers or clients of Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, or (ii) any vendors, suppliers or consultants then under contract to the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, to terminate his, her or its relationship with the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, for the purpose of associating with any competitor of the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, 31 affiliates, or otherwise encourage such customers or clients, or vendors, suppliers or consultants then under contract, to terminate his, her or its relationship with the Employer or its successors, assigns, subsidiaries or, to the best of Employee's knowledge, affiliates, for any other reason. 10.04. During the Term and thereafter following any termination or other expiration of the Term or other termination of Employee's employment, Employee shall not, publicly or privately, disparage or otherwise make any derogatory statement (whether written or oral) in respect of Employer or any of its subsidiaries or affiliates, including, without limitation, Colony Capital, Inc., its employees, owners and affiliates, or the conduct of any of their respective business or professional activities, except to the extent required (i) by an order of a court having jurisdiction or under subpoena from an appropriate government agency, in which event, Executive shall use his best efforts to consult with the Board prior to responding to any such order or subpoena and (ii) to litigate any claim against Employer for failure to pay any amount due to Employee under the terms of this Agreement, the Amended Award Agreement or the Amended Deferred Compensation Agreement. In the event that, following any termination of his employment, Employee shall have breached or breaches his obligations under this Section 10.04, Employee shall thereupon forfeit any and all rights he otherwise may have to any subsequent payment or benefit pursuant to Article IV or V hereof. XI. RIGHTS AND REMEDIES UPON BREACH If Employee breaches any of the provisions of Articles IX or X above (the "Restrictive Covenants"), the Employer and its subsidiaries, affiliates, successors or assigns shall have the rights and remedies set forth below in this Article XI, each of which shall be independent of the others and severally enforceable, and each of which shall be in addition to, 32 and not in lieu of, any other rights or remedies available to the Employer or its subsidiaries, affiliates, successors or assigns at law or in equity. 11.01. The right and remedy to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction by injunctive decree or otherwise, it being agreed that any breach of the Restrictive Covenants would cause irreparable injury to the Employer or its subsidiaries, affiliates, successors or assigns and that money damages would not provide an adequate remedy to the Employer or its subsidiaries, affiliates, successors or assigns. 11.02. Employee acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographic and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full force and effect without regard to the invalid portions. 11.03. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or scope of such provision. such court shall have the power to reduce the duration or scope of such provision, as the case may be (it being the intent of the parties that any such reduction be limited to the minimum extent necessary, to render such provision enforceable), and, in its reduced form, such provision shall then be enforceable. 11.04. Employee intends to and hereby confers jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographic scope of such covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants unenforceable by reason of the breadth of such scope or otherwise, it is the intention of Employee that such determination not bar or in any way affect the right of the Employer or its 33 subsidiaries, affiliates, successors or assigns to the relief provided herein in the courts of any other jurisdiction within the geographic scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. XII. ARBITRATION Except as necessary for the Employer and its subsidiaries, affiliates, successors or assigns or Employee to specifically enforce or enjoin a breach of this Agreement (to the extent such remedies are otherwise available), the parties agree that any and all disputes that may arise in connection with, arising out of or relating to this Agreement, or any dispute that relates in any way, in whole or in part, to Employee's employment with the Employer or any subsidiary, the termination of that employment or any other dispute by and between the parties or their subsidiaries, affiliates, successors or assigns, shall be submitted to binding arbitration in Las Vegas, Nevada according to the National Employment Dispute Resolution Rules and procedures of the American Arbitration Association. The parties agree that the prevailing party in any such dispute shall be entitled to reasonable attorneys' fees, costs. and necessary disbursements in addition to any other relief to which be or it may be entitled. This arbitration obligation extends to any and all claims that may arise by and between the parties or their subsidiaries, affiliates, successors or assigns, and expressly extends to, without limitation, claims or causes of action for wrongful termination, impairment of ability to compete in the open labor market. breach of an express or implied contract, breach of the covenant of good faith and fair dealing. breach of fiduciary duty, fraud, misrepresentation, defamation, slander, infliction of emotional distress, disability, loss of future earnings, and claims under the Nevada constitution, the United States Constitution, and applicable state and federal fair employment laws, federal and state equal 34 employment opportunity laws, and federal and state labor statutes and regulations, including, but not limited to, the Civil Rights Act of 1964, as amended, the Fair Labor Standards Act, as amended, the Americans With Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Age Discrimination in Employment Act of 1967, as amended, and any other state or federal law. XIII. MISCELLANEOUS 13.01. If any action to specifically enforce or enjoin a breach of this Agreement is necessary, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and necessary disbursements in addition to any other relief to which he or it may be entitled. 31.02. This Agreement shall be construed and governed by the laws of the State of Nevada, without giving effect to conflicts of laws principles thereof which might refer such interpretations to the laws of a different state of jurisdiction. 13.03. This Agreement, and all of the terms and conditions hereof, shall bind the Employer and its successors and assigns and shall bind the Employee and his heirs, executors and administrators. No transfer or assignment of this Agreement shall release Employer from any obligation to Employee hereunder. Neither this Agreement, nor any of Employer's rights or obligations hereunder, may be assigned or otherwise subject to hypothecation by Employee. Employer may assign the rights and obligations of Employer hereunder, in whole or in part, to any of Employer's subsidiaries, affiliates or parent corporations, or to any other successor or assign in connection with the sale of all or substantially all of Harveys' assets or stock or in connection with any merger, acquisition and/or reorganization. In the event of the death of Employee, any amounts accrued and payable hereunder that, as of the date of death, have not 35 been paid to Employee shall be paid on behalf of Employee to Employee's estate at the times specified and otherwise in accordance with the provisions of this Agreement. 13.04. Notices All notices and other communications under this Agreement shall be in writing and shall be given by first class mail, certified or registered with return receipt requested, or by a nationally recognized overnight delivery service to the respective parties named below: Employee: John J. McLaughlin 106 Willow Drive Zephyr Cove, Nevada Stateline, Nevada 89448 Facsimile: 775-588-6348 WITH A COPY TO: Michael Forman Klehr, Harrison, Harvey, Branzburg & Ellers LLP 260 S. Broad St. Philadelphia, PA 19102 Facsimile: 215-568-6603 Employer: HARVEYS CASINO RESORTS Attn: Corporate Secretary Highway 50 and Stateline Avenue Post Office Box 128 Stateline, NV 89449 Facsimile: 775-586-6852 WITH A COPY TO: Mark Hedstrom Colony Capital, Inc. Suite 1200 1999 Avenue of the Stars Los Angeles, CA 90067 Facsimile: 310-282-8808 36 AND TO: Deborah E. Kurtzberg Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Facsimile: 212-225-3999 13.05. Nothing contained in this Agreement shall be construed to require the commencement of any act contrary to law, and when there is any conflict between any provision of this Agreement and any statute, law, ordinance, or regulation, contrary to which the parties have no legal right to contract, then the latter shall prevail; but in such an event, the provisions of this Agreement so affected shall be curtailed and limited only to the extent necessary to bring it within the legal requirements. 13.06. The several rights and remedies provided for in this Agreement shall be construed as being cumulative, and no one of them shall be deemed to be exclusive of the others or of any right or remedy allowed by law. No waiver by Employer or Employee of any failure by Employee or Employer, respectively, to keep or perform any provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or other provision. 13.07. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties heretowith respect to the employment of the Employee by the Employer (including, without limitation, the Original Agreement, the Prior Agreement, Harveys Change in Control Plan and, insofar as it relates to the subject matter hereof, but except as provided in Section 13.08, the MOU) and, together with all other plans, agreements and other documents specifically referenced herein, contains all of the covenants, conditions and agreements between the parties with respect to such employment. Annex F hereto sets forth a list of payments to Employee pursuant to the MOU, and Employee hereby acknowledges receipt 37 of all such payments. Each party to this Agreement acknowledges that no representations, inducements, promises or other agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding. Any addendum to or modification of this Agreement shall be effective only if it is in writing and signed by the parties to be charged. 13.08. To the extent applicable, Employee shall be entitled to receive a grossup payment with respect to payments made hereunder (including under agreements referenced herein) and under the MOU to account for the payment of Internal Revenue Code Section 4999 excise taxes as well as taxes imposed on such gross up payments, as determined pursuant to the procedures set forth in Annex D, PROVIDED, that Employee shall reasonably cooperate with Employer in structuring such payments and taking such other actions to limit the extent to which such payments may be subject to such excise tax, provided that such restructuring does not cause Employee to suffer additional costs or other adverse consequences. Notwithstanding anything contained to the contrary contained herein, the provisions of this Section 13.08 and Annex D hereto shall survive the expiration or termination of this Agreement for any or no reason. 13.09. If Employee's employment with the Company is terminated by the Company without Cause either (i) as a result of a Change in Control (as defined in the Award Agreement) or (ii) within the 12 month period immediately preceding a Change in Control (or such longer period, not to exceed 18 months prior to such Change in Control, during which significant discussions or other material action regarding such Change in Control occurred) at the request, directly or indirectly, of a third party who has taken steps reasonably calculated to effect a Change in Control or otherwise in connection with, or in anticipation of a Change in Control, 38 Employee shall be entitled to receive, at the effective date of such termination (or, if payable in respect of clause (ii), within ten business days following such Change in Control), a lump sum payout at maximum of the bonus otherwise payable to Employee with respect to the then current fiscal year under the Annual Bonus Plan, such amount pro rated through the effective date of such termination of employment. The amount provided for in the immediately preceding sentence shall also be paid if Employee's employment with the Company is terminated with Good Reason if the grounds constituting Good Reason occur as the result of a Change in Control or within the stated time frame at the request, directly or indirectly, of such a third party or otherwise in connection with, or in anticipation of a Change in Control. If (x) no payment is made pursuant to either of the two immediately preceding sentences, (y) following a Change in Control and prior to the effective date of termination of Employee's employment the Annual Bonus Plan is terminated or amendments are made that materially adversely affect Employee and (z) Employee's employment is not terminated prior to the end of the fiscal year in which such termination or amendments occur, then, in lieu of any other amounts payable to Employee under the Annual Bonus Plan with respect to such fiscal year, Employee shall receive a lump sum payout at maximum within sixty (60) days following the termination of the Annual Bonus Plan or the fiscal year during which any such material amendments were made. The provisions of this Section 13.09 shall survive the expiration of the Term, but only to the extent necessary to determine whether a Change in Control occurs within the 12 to 18 month period described in clause (ii) of the first sentence of this Section 13.09. 13.10. Notwithstanding any other provision of this Agreement, Employer shall not be obligated or permitted to pay any amount in respect of the Stock Awards or Stock Options pursuant to Section 4.04(d) or 4.04(e) if (i) the payment of such amount would result in a 39 violation of the terms or provisions of, or result in a default or an event of default under, any guarantee, financing or security agreement or document entered into by Employer or any of its subsidiaries, affiliates or successors (such agreements and documents, as each may be amended, modified or supplemented from time to time, are referred to herein as the "FINANCING AGREEMENTS"), in each case as the same may be amended, modified or supplemented from time to time, or (ii) the payment of such purchase price would violate any of the terms or provisions of the Certificate of Incorporation of Employer. In the event that the payment of any such amount is prevented solely by the terms of this Section 13.10, the payment of such amount will be postponed and will be made, with interest at an annual rate of 12% for the period of delay, at the first opportunity thereafter when Employer has funds legally available therefor and when the payment of such amount will not result in any default or event of default or violation by Employer or any of its subsidiaries, affiliates or successors under any of the Financing Agreements or in a violation of any term or provision of the Certificate of Incorporation of the Employer. Employer shall endeavor in good faith to negotiate in the Financing Agreements for the Transaction appropriate baskets (including baskets with respect to payments in respect of management equity) to the extent negotiation of the overall covenants under such arrangements permits, provided Employee hereby acknowledges and agrees that Employer's ability to utilize such baskets is typically subject to company performance criteria and credit ratio standards set forth under such Financing Arrangements. 13.11. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 13.12. Unless expressly provided herein or therein, the expiration of the Term shall not alter or affect any rights or obligations of Employer or Employee under any other 40 agreement or plan including, without limitation, the Award Agreement, the Omnibus Plan, the Deferred Compensation Agreement, of even date herewith, between Employer and Employee, and, to the extent provided under Section 7.02 above, the Annual Bonus Plan. 41 13.13. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. DATED this 28th day of April, 2000. EMPLOYEE: /s/ John J. Mclaughlin ------------------------ JOHN J. MCLAUGHLIN EMPLOYER: HARVEYS CASINO RESORTS By: /s/ Thomas J. Barrack, Jr. -------------------------- Name: Thomas J. Barrack, Jr. Its: 42 EX-10.6 6 ex-10_6.txt EXHIBIT 10.6 EXHIBIT 10.6 HARVEYS CASINO RESORTS PARTICIPANTS IN THE DEFERRED COMPENSATION PLAN FOR 2000 CORPORATE LAKE TAHOE - --------- ---------- Charles Scharer 10% Phil Herback 23% Jim Rafferty 8% Joe Wells 7% John Hewitt 5% Sue Ewald 20% Jack Bellotti 4% Bill Fletcher 16% Art Goldberg 20% Dave Hurst 15% Willie Stephens 10% COLORADO IOWA - -------- ---- Debra Fletcher 5% Verne Welch, Jr. 10% Geri Clerkin 5% Bonnie Picker 5% Ed Barraco 15% William French 9% EX-27 7 ex-27.txt EXHIBIT 27
5 1,000 6-MOS NOV-30-2000 DEC-01-1999 MAY-31-2000 35,728 0 7,445 426 3,326 53,447 468,846 31,916 664,636 40,467 389,162 65,660 0 41 83,016 664,636 33,615 226,563 13,375 191,650 0 542 19,088 15,759 6,698 9,061 0 0 3,142 5,919 0 0
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