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Note 17 - Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2015
Notes to Financial Statements |
Commitments and Contingencies Disclosure [Text Block] | 17. Commitments and Contingencies Rocky Gap Lease In connection with the closing of the acquisition of Rocky Gap, the Company entered into an operating ground lease with the Maryland Department of Natural Resources for approximately 270 acres in the Rocky Gap State Park in which Rocky Gap is situated. The lease expires in 2052, with an option to renew for an additional 20 years. Under the lease, rent payments are due and payable annually in the amount of $275,000 plus 0.9% of any gross operator share of gaming revenue (as defined in the lease) in excess of $275,000, and $150,000 plus any surcharge revenue in excess of $150,000. Surcharge revenue consists of amounts billed to and collected from guests and are $3.00 per room per night and $1.00 per round of golf. Rent expense associated with the lease was $0.3 million (net of surcharge revenue of $0.1 million), $0.3 million (net of surcharge revenue of $0.1 million) and $0.4 million (net of surcharge revenue of less than $0.1 million) during fiscal years 2015, 2014 and 2013, respectively. Gold Town Casino Leases The Company’s Gold Town Casino is located on four leased parcels of land, comprising approximately nine acres in the aggregate, in Pahrump, Nevada . The leases are with unrelated third parties and have various expiration dates beginning in 2026 (for the parcel on which the Company’s main casino building is located, which we lease from a competitor), and the Company subleases approximately two of the acres to an unrelated third party. Rental income during the year ended December 31, 2015 was less than $0.1 million related to the sublease of the two acres in Pahrump, Nevada. Other Operating Leases The Company leases its branded tavern locations, office headquarters building, equipment and vehicles under noncancelable operating leases that are not subject to contingent rents. The original terms of the current branded tavern location leases range from one to 14 years with various renewal options from one to 15 years. The Company has operating leases with related parties for certain of its tavern locations and its office headquarters building. The lease for the Company’s office headquarters building expires in July 2025. A portion of the office headquarters building is sublet to a related party. Rental income during the year ended December 31, 2015 was less than $0.1 million for the sublet portion of the office headquarters building. See Note 18, Related Party Transactions , for more detail. Operating lease rental expense, which is calculated on a straight-line basis, net of surcharge revenue, associated with all operating leases during 2015, 2014 and 2013 was as follows:
|  | 2015 |  |  | 2014 |  |  | 2013 |
|  | (In thousands) |
Rent expense |  |  |  |  |  |  |  |  |  |  |  |
Space lease agreements |  | $ | 16,032 |  |  | $ | — |  |  | $ | — |
Related party leases |  |  | 1,108 |  |  |  | — |  |  |  | — |
Other operating leases |  |  | 4,619 |  |  |  | 339 |  |  |  | 390 |
|  | $ | 21,759 |  |  | $ | 339 |  |  | $ | 390 |
As of December 31, 2015, future minimum lease payments, not subject to contingent rents, were as follows:
|  | 2016 |  |  | 2017 |  |  | 2018 |  |  | 2019 |  |  | 2020 |  |  | Thereafter |
|  | (In thousands) |
Minimum lease payments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Space lease agreements |  | $ | 35,033 |  |  | $ | 25,392 |  |  | $ | 18,860 |  |  | $ | 18,240 |  |  | $ | 3,372 |  |  | $ | 157 |
Related party leases |  |  | 2,902 |  |  |  | 2,691 |  |  |  | 2,140 |  |  |  | 2,157 |  |  |  | 2,192 |  |  |  | 11,111 |
Other operating leases |  |  | 9,667 |  |  |  | 8,151 |  |  |  | 7,149 |  |  |  | 6,412 |  |  |  | 6,259 |  |  |  | 53,161 |
|  | $ | 47,602 |  |  | $ | 36,234 |  |  | $ | 28,149 |  |  | $ | 26,809 |  |  | $ | 11,823 |  |  | $ | 64,429 |
Participation and Revenue Share Agreements During the year ended December 31, 2015, the total contingent payments made by the Company (recorded in gaming expenses) under revenue share and participation agreements was $41.7 million, including $0.7 million paid to related parties, as described in Note 18, Related Party Transactions . No such amounts were recorded during the years ended December 28, 2014 or December 29, 2013. Employment Agreements On October 1, 2015, the Company entered into at-will employment agreements with each of the Company’s executive officers. Under each employment agreement, in addition to the executive’s annual base salary, the executive is entitled to participate in the Company’s incentive compensation programs applicable to executive officers of the Company. The executives are also eligible to participate in all health benefits, insurance programs, pension and retirement plans and other employee benefit and compensation arrangements. Each executive is also provided with other benefits as set forth in his employment agreement. In the event of a termination without “cause” or a “constructive termination” of the Company’s executive officers (as defined in their respective employment agreements), the Company could be liable for estimated severance payments of up to $6.2 million for Mr. Sartini, $1.8 million for Stephen A. Arcana, and $1.6 million for Matthew W. Flandermeyer (assuming each officer’s respective annual salary and health benefit costs as of December 31, 2015 are the amounts in effect at the time of termination and excluding potential expense related to acceleration of stock options). The Company previously entered into employment agreements with certain former executives. The agreements provided for certain benefits to the executives, as well as severance if the executives were terminated without cause or due to a “constructive termination” as defined in the agreements. The severance amounts depended upon the term of the agreement and were up to two years of base salary and two years of bonus calculated as the average bonus earned in the previous two years. If such termination occurred within three years of a change of control as defined in the agreements by the Company without cause or due to a constructive termination, the executive was entitled to receive a lump sum payment equal to two times the annual base salary and bonus/incentive compensation along with insurance costs, 401(k) matching contributions and certain other benefits. In the event the executive’s employment terminated for any reason, including death, disability, expiration of an initial term, non-renewal by the Company with or without cause, by the executive with notice, or due to constructive termination, all unvested stock options would vest at the date of termination and remain exercisable for three years. As a result of the Merger, a total of approximately $2.2 million was paid to Lyle A. Berman, the former Chairman of the Board and Chief Executive Officer of the Company, and Timothy J. Cope, the former President and Chief Financial Officer of the Company, during the third quarter of 2015 under these employment agreements. Retention Bonus and Severance Agreements On March 30, 2015, the Company provided Retention Bonus and Severance Agreements (“Severance Agreements”) to 14 of its employees. These Severance Agreements were contingent upon the closing of the Merger. Pursuant to these Severance Agreements and upon the closing of the Merger, the Company recognized a charge of $2.8 million, representing cash payments and non-cash expenses related to accelerated stock option vesting, during the third quarter of 2015. Shareholder Class Action Lawsuits On February 6, 2015, the Company, certain current and former members of the Company’s Board of Directors, LG Acquisition Corporation, Sartini Gaming and the Sartini Trust were named as defendants in three complaints filed in the District Court of the State of Minnesota, Fourth Judicial District in Hennepin County. These are purported shareholder class action lawsuits brought by certain of the Company’s shareholders on behalf of themselves and others similarly situated, alleging that in entering into the Merger, the defendants had breached their fiduciary duties of good faith, loyalty and due care, and/or have aided and abetted such breaches. The plaintiffs seek, among other things, attorney’s fees. On April 20, 2015, the plaintiffs filed an Amended Consolidated Class Action Complaint consolidating all pending claims arising out of the Merger. In response to the lawsuits, the Board of Directors appointed a special litigation committee (the “SLC”) pursuant to Minnesota law to investigate the plaintiffs’ allegations. On June 8, 2015, the judge in the matter denied the plaintiffs’ request for expedited proceedings and stayed the lawsuit until the conclusion of the SLC investigation and the issuance of its determinations. The SLC issued its report on October 13, 2015, in which it determined, among other matters, that the members of the Company’s Board of Directors properly discharged their fiduciary duties under Minnesota law and that the shareholder claims were without merit. The SLC report was submitted to the District Court with a motion requesting that the Court dismiss the litigation. On October 30, 2015, an order granting defendant’s motion to dismiss the amended consolidated class action complaint was granted by the judge. The complaint was dismissed with prejudice and on the merits, based on the SLC’s report. Argovitz Demand for Arbitration On March 13, 2015, Jerry Argovitz filed a Demand for Arbitration with the American Arbitration Association, alleging that the Company and/or its subsidiary Lakes Jamul, Inc. breached the terms of an agreement under which Mr. Argovitz retained certain rights to share in potential revenue from a gaming facility development project the Company (through its subsidiaries) pursued with the Jamul Tribe. Mr. Argovitz alleges that the Company breached such agreement by failing to protect his alleged contractual rights when the Company restructured its contractual relationship with the Jamul Tribe over the course of its involvement in the project and/or by ultimately exercising its contractual right in March 2012 to terminate its involvement in the Jamul casino project, which had not resulted in the successful opening of a gaming facility. Mr. Argovitz is seeking a declaration that, if the Jamul casino opens, then the Company has an obligation to pay him $1.0 million per year for up to seven years of operation of the Jamul casino. The Company denies Mr. Argovitz’s allegations and is vigorously defending the case. On September 2, 2015, the three-member arbitration panel denied the parties’ cross-motions for summary judgment. On January 5, 2016, the arbitration panel held an evidentiary hearing on the merits. Following the hearing, the parties submitted post-trial briefs. The Company expects a ruling from the panel in March 2016. Miscellaneous Legal Matters From time to time, the Company is involved in a variety of lawsuits, claims, investigations and other legal proceedings arising in the ordinary course of business, including proceedings concerning labor and employment matters, personal injury claims, breach of contract claims, commercial disputes, business practices, intellectual property, tax and other matters. Although lawsuits, claims, investigations and other legal proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of its other currently pending matters will not have a material adverse effect on its business, financial condition, results of operations or liquidity. Regardless of the outcome, legal proceedings can have an adverse impact on the Company because of defense costs, diversion of management resources and other factors. In addition, it is possible that an unfavorable resolution of one or more such proceedings could in the future materially and adversely affect the Company’s business, financial condition, results of operations or liquidity in a particular period.

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