EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of the 2nd day of December, 1996 (date
hereof) by and between Video Lottery Technologies, Inc., (the "Company"), and
Xxxxxxx X. Xxxxxxxx, an individual (the "Executive") (hereinafter collectively
referred to as "the parties").
WHEREAS, the Company and the Executive desire to establish an employment
relationship on the terms set forth herein, which shall (except to the extent
expressly provided herein) supersede and replace those set forth in that certain
Employment Agreement dated as of November 1, 1994 by and between the Company and
the Executive (the "Prior Employment Agreement"),
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Employment Term. Subject to the terms and provisions of this Agreement,
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the Company hereby agrees to employ the Executive and Executive hereby agrees to
be employed by the Company for the period commencing on the date hereof and
ending on January 1, 1999, unless terminated sooner as hereinafter provided (the
"Employment Term").
2. Duties. During the Employment Term the Executive shall serve as ------
President of the Company. The Executive shall perform such services and duties
as are incident to such position and such other duties as determined from time
to time by the Board of Directors of the Company (the "Board") which are
consistent with such position. All officers of the Company and its subsidiaries
shall report to the Executive, and the Executive shall have the authority,
consistent with guidelines adopted by the Board, to hire, terminate and
determine the compensation of such officers and other employees of the Company
and such subsidiaries. The Executive's duties shall include, without additional
compensation, the performance of similar services for any Affiliates (as defined
below) of the Company as may be reasonably requested by the Board from time to
time. The Executive shall devote his full business time, attention and skills to
the performance of such duties, services and responsibilities, and will use his
best efforts to promote the interests of the Company. The Executive will not,
without the prior written approval of the Board, engage in any other business
activity which would interfere with the performance of his duties, services and
responsibilities hereunder or which is in violation of policies established from
time to time by the Company and provided to the Executive; provided, however,
that Executive may manage his personal finances and investments. The Executive
may participate in civic and charitable activities and serve on Boards of
Directors to the extent they do not affect the Executive's ability to perform
his duties as an officer of the Company provided they are approved by the
Chairman of the Board in advance, which approval will not be unreasonably
withheld. An "Affiliate" of the Company shall mean any entity, whether a
corporation, firm, partnership or other legal entity or business unit or
division that directly or indirectly is controlled by the Company, including,
but not limited to, Automated Wagering International, Inc., Video Lottery
Consultants Inc. and United Wagering Systems International, Inc., or their
successors. The Executive's principal place of employment shall be located, at
the discretion of the Executive, in either the greater Bozeman, Montana or the
greater
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Las Vegas, Nevada metropolitan area and the Company shall not require the
Executive to relocate from such area without the Executive's prior written
consent.
3. Compensation. In order to induce the Executive to become President of
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the Company and in consideration of the performance by the Executive of the
Executive's obligations during the Employment Term (including any services as an
officer, director, employee, member of any committee of the Company, or
otherwise), the Company will:
(a) during the Employment Term pay the Executive a salary (the "Base
Salary") at an annual rate of not less than $240,000 for each of
the twelve- month periods ending December 31, 1997 and December
31, 1998, and $74,959 for the period commencing September 9, 1996
and ending December 31, 1996, payable in accordance with the
normal payroll practices of the Company then in effect for other
officers of the Company. The Board shall have the authority, in
its sole discretion, to increase, but not decrease, such Base
Salary and will review it in conjunction with a significant
change in the scale and scope of the Executive's duties;
(b) pay the Executive an earned bonus of $150,000 for 1996 payable on
January 2, 1997;
(c) during the Employment Term and for the twelve-month periods
ending December 31, 1997 and 1998, pay the Executive annual
bonuses of amounts up to $450,000 and $504,000 for each
respective twelve-month period if financial or other performance
criteria related to the Company and its businesses are attained,
which criteria shall be subject to reasonable agreement by the
Executive that they are appropriate in connection with
performance-based criteria for the President and other senior
management of the Company and shall be proposed by the Executive
no later than December 31 of each such year and approved or
modified by the Board no later than the following February 15;
(d) award the Executive as of the date hereof restricted stock of
30,000 shares of the Company's common stock, of which one-third
of such shares shall fully vest on September 9, 1997, one-third
of such shares shall fully vest on September 9, 1998, and
one-third of such shares shall fully vest on September 9, 1999
(unless the Executive's employment hereunder shall have been
terminated for any reason prior to such vesting, in which case
all unvested shares of such restricted stock shall be forfeited;
provided, however, that upon the occurrence of a "change in
control" as defined in the Company's 1994 Stock Incentive Plan
(the "Plan") (which Plan shall not be amended inconsistent with
this Agreement), all restrictions on such restricted stock shall
lapse immediately and no such stock shall be forfeited regardless
of whether the Executive remains an employee of the
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Company); provided, however, that the Company and the Executive
acknowledge and agree that, pursuant to the Prior Employment
Agreement, the Company awarded to the Executive restricted stock
of 70,000 shares of the Company's common stock, of which 17,500
shares fully vested on November 1, 1995, 17,500 shares fully
vested on November 1, 1996 and an additional 17,500 shares shall
fully vest on each of November 1, 1997 and November 1, 1998
(unless the Executive's employment hereunder shall have been
terminated for any reason prior to such vesting, in which case
all unvested shares of such restricted stock shall be forfeited;
provided, further, that upon the occurrence of a "change in
control" as defined in the Plan, all restrictions on such
restricted stock shall lapse immediately and no such stock shall
be forfeited regardless of whether the Executive remains an
employee of the Company); and
(e) as of the date hereof, grant the Executive options to purchase an
aggregate of 140,000 shares of the Company's common stock (70,000
of which shall be fully vested as of the date hereof, 35,000 of
which shall vest on November 1, 1997 and 35,000 of which shall
vest on November 1, 1998, unless the Executive's employment
hereunder shall have been terminated prior to such vesting, in
which case, (i) if the Executive's employment shall have been
terminated by the Company for Cause or by the Executive other
than for Good Reason, then all unvested options shall be
forfeited, and (ii) in all other cases all unvested options shall
be subject to Section 8 of this Agreement; provided, however,
that upon the occurrence of a "change in control" as defined in
the Plan, all stock options shall become immediately and fully
exercisable and any termination of the Executive's employment
shall not affect his right to exercise such options for a period
of at least 90 days after such termination, it being understood
that, in the event of the liquidation or dissolution of the
Company or a merger or consolidation of the Company (a
"Transaction"), the options shall continue in effect in
accordance with their terms and the Executive shall be entitled
to receive in respect of each share subject to any outstanding
stock option granted to him pursuant to this Agreement, upon
exercise of any such option, the same number and kind of stock,
securities, cash, property, or other consideration that each
holder of a share of the Company's common stock was entitled to
receive in the Transaction in respect of a share), with an
exercise price equal to the average of the opening and closing
prices of such common stock on the date hereof. (Each option
shall have a term of ten years from the date of grant and shall
be granted under and subject to the terms of the Plan and shall
be incentive stock options within the meaning of Section 422 of
the Internal Revenue Code.) Notwithstanding the foregoing
provisions of this Section 3(e) and the provisions of Section 22
hereof, the Company and the Executive acknowledge and agree that
the
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Company granted to the Executive pursuant to the Prior Employment
Agreement options (the "Old Options") to purchase an aggregate of
140,000 shares of the Company's common stock, which Old Options
shall continue to be governed by the terms and conditions of the
Prior Employment Agreement; provided, however, that in no event
shall the exercise prices of the Old Options be reduced or
modified.
4. Benefits. During the Employment Term, the Executive shall be entitled to
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participate in any employee benefit plans (including, but not limited to, any
life insurance, disability, medical, dental, hospitalization, savings,
retirement and other benefit plans of the Company) then in effect for executive
officers and receive any other fringe benefits that the Company then provides to
executive officers of the Company to the extent the Executive meets the
eligibility requirements for any such plan or benefit. The Company will pay the
November, 1996 premium (approximately $27,000) for the Executive's split dollars
life insurance policy now in effect and subject to assignment to the Company of
benefits from the policy equal to the premium paid by the Company of such
policy. (Notwithstanding the foregoing, the Company shall have no obligation
other than that set forth in Section 3 to provide the Executive stock-based
compensation or to pay the Executive any bonuses or other incentive or
performance-based compensation). In addition, during the Employment Term, the
Company shall provide the Executive with such other perquisites reasonably
requested by the Executive and customarily provided to senior officers of
companies comparable in size to the Company.
5. Reimbursements for Business Expenses. Subject to compliance by the
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Executive with such policies regarding expenses and expense reimbursement as may
be adopted from time to time by the Company, during the Employment Term, the
Executive is authorized to incur reasonable expenses in the performance of his
duties hereunder in the furtherance of the business of the Company and the
Company shall reimburse the Executive for all such reasonable expenses. In
addition, the Company shall promptly reimburse the Executive for all actual out
of pocket expenses incurred by the Executive in connection with his
consideration of employment with the Company, including, but not limited to, up
to $4,000 in respect of reasonable legal, accounting and financial advisory fees
and expenses incurred by the Executive in connection therewith and with the
negotiation of this Agreement. In addition, the Executive may request
reimbursement of actual expenses in excess of the foregoing and the Company
shall not unreasonably refuse any such request.
6. Vacations. During the Employment Term the Executive shall be entitled to
---------
paid vacations in accordance with the policies of the Company in effect from
time to time; provided that the Executive shall be entitled to at least four
weeks paid vacation during each year of the Employment Term.
7. Termination. The Executive's employment hereunder may be terminated
-----------
under the following circumstances:
(a) Death. The Executive's employment hereunder shall be terminated
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automatically upon the Executive's death.
(b) Disability. The Company may terminate the Executive's employment
after having established the Executive's Disability. For purposes of this
Agreement, "Disability" means a physical or mental infirmity which impairs the
Executive's ability to substantially perform his duties under this Agreement for
one hundred and eighty (180) consecutive days or for two hundred and ten (210)
days during any twelve (12) month period or for two hundred and seventy (270)
days during any twenty-four (24) month period.
(c) Cause. The Company may terminate the Executive's employment for
"Cause." A termination for Cause is a termination evidenced by a finding adopted
in good faith by the Board that the Executive (i) willfully and continually
failed to substantially perform his duties with the Company (other than a
failure resulting from the Executive's incapacity due to physical or mental
illness) and such failure continues after written notice to the Executive
providing a reasonable description of the basis for the determination that the
Executive has failed to perform his duties, (ii) indicted for a criminal offense
other than misdemeanors not disclosable under the federal securities laws, (iii)
has breached this Agreement in any material respect and such breach is not
susceptible to remedy or cure or has not already materially damaged the Company,
or is susceptible to remedy or cure and no such damage has occurred, is not
cured or remedied reasonably promptly after written notice to the Executive
providing a reasonable description of the breach, (iv) engaged in conduct to the
material detriment of the Company that is dishonest, fraudulent, unlawful or
grossly negligent or which is not in compliance with the Company's Code of
Conduct or similar applicable set of standards or conduct and business practices
set forth in writing and provided to the Executive prior to such conduct, or (v)
any regulatory authority, gaming commission, lottery agency or similar authority
in any jurisdiction in which the Company is conducting business or intends to
submit a proposal or conduct business finds the Executive unsuitable or unfit to
continue to act as a representative, officer, director or employee of the
Company, the Company has received notice from such authority of such a finding
or the Executive fails to file appropriate applications with, provide requested
information to, or otherwise fails to cooperate with, any such authority. No
act, nor failure to act, on the Executive's part, shall be considered "willful"
for purposes of (i) above unless he has acted or failed to act with an absence
of good faith and without a reasonable belief that his action or failure to act
was in the best interest of the Company. Notwithstanding anything contained in
this Agreement to the contrary, no failure to perform by the Executive after
Notice of Termination is given by the Executive shall constitute Cause for
purposes of this Agreement. Termination for Cause shall be by action of the
Chairman of the Board after giving the Executive and his legal advisors an
opportunity to meet with the Chairman of the Board, contest the basis for
termination, and to demonstrate that the Executive's continued employment is in
the best interests of the Company. In addition, the Company may require that the
Executive take a paid leave of absence if the Chairman of the Board determines
that there is a reasonable basis to believe that a regulatory authority, gaming
commission, lottery agency or similar authority may likely find the Executive
unsuitable or unfit or there are serious concerns regarding the honesty,
integrity or possible misconduct of the Executive. During the leave of absence
the Executive will be entitled to demonstrate to the Chairman of the Board that
such
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concerns are unfounded. However, if at any time following three months after the
start of the leave of absence, the Chairman of the Board reasonably determines
that a continuation of the Executive's employment will jeopardize the good
standing of the Company with any such authority, commission or agency, the
Company may terminate the Executive for Cause.
(d) (1) Good Reason. The Executive may terminate his employment for
"Good Reason." As used in this Section 7(d), the term "Company" shall also refer
to its successor entity or any entity which has acquired control of the Company.
For purposes of this Agreement, Good Reason shall mean the occurrence of any of
the events or conditions described in Subsections (i) through (viii) hereof:
(i) the Executive determines prior to December 2, 1997 to terminate
his employment;
(ii) the Executive is no longer serving as President of the Company,
the Executive is directed to report to other than the Chairman of the
Board, or the assignment to the Executive of any duties or
responsibilities which are inconsistent with the status, title,
position or responsibilities of such position (which assignment is not
rescinded after the Company receives written notice from the Executive
providing a reasonable description of such inconsistency);
(iii) after a Change in Control (as hereinafter defined in Section
7(e), the Company's requiring the Executive to be based at any place
outside a 30-mile radius from the principal location from which the
Executive served as an employee of the Company immediately prior to
the Change in Control and except for reasonably required travel on the
Company's business which is not materially greater than such travel
requirements prior to the Change in Control;
(iv) after a Change in Control, the failure by the Company to provide
the Executive with compensation and benefits substantially comparable,
in the aggregate, to those provided for under the employee benefit
plans, programs and practices in effect immediately prior to the
Change in Control (other than stock option and other equity based
compensation plans);
(v) after a Change in Control, the insolvency or the filing (by any
party including the Company) of a petition for bankruptcy of the
Company;
(vi) any material breach by the Company of any provision of this
Agreement (which breach, if susceptible to cure, has not been cured
within thirty (30) days by the Company after reasonable notice in
writing from the Executive providing a reasonable description of the
breach);
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(vii) after a Change in Control, the failure of the Company to obtain
an agreement, satisfactory to the Executive, from any successor or
assign of the Company to assume and agree to perform this Agreement,
as contemplated in Section 16 hereof; and
(viii) the Executive determines within twelve (12) months of a Change
in Control to terminate his employment with the Company.
(2) Any event or condition described in Section 7(d)(1)(ii), (iii),
(iv) or (vi) above which occurs prior to a Change in Control but which was at
the request of a third party who has taken steps reasonably calculated to effect
a Change in Control, shall constitute Good Reason for purposes of this Agreement
notwithstanding that it occurred prior to a Change in Control.
(3) The Executive's right to terminate his employment pursuant to this
Section 7(d) shall not be affected by his incapacity due to physical or mental
illness.
(e) For purposes of this Agreement, a "Change in Control" shall mean
any of the following events:
(1) The "acquisition" by any "Person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") of "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of any securities of the Company which generally entitles the holder
thereof the vote for the election of directors of the Company (the
"Voting Securities") which, when added to the Voting Securities then
Beneficially Owned by such Person, would result in such Person
Beneficially Owning forty percent (40%) or more of the combined voting
power of the Company's then outstanding Voting Securities; provided,
however, that for purposes of this paragraph (1), a Person shall not
be deemed to have made an acquisition of Voting Securities if such
Person: (i) acquires Voting Securities as a result of a stock split,
stock dividend or other corporate restructuring in which all
stockholders of the class of such Voting Securities are treated on a
pro rata basis; (ii) becomes the Beneficial Owner of more than the
permitted percentage of Voting Securities solely as a result of the
acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by such Person; (iii) is the
Company or any corporation or other Person of which a majority of its
voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Controlled Entity") or (iv)
acquires Voting Securities in connection with a "Non-Control
Transaction" (as defined in paragraph (3) below);
(2) The individuals who, as of the date of this Agreement
were members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least a
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majority of the Board; provided, however, that if either the election
of any new director or the nomination for election of any new director
by the Company's stockholders was approved by a vote of at least a
majority of the Incumbent Board, such new director shall be considered
as a member of the Incumbent Board; provided further, however, that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened election Contest" (as described in Rule 14a-11 promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board
(a "Proxy Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest;
(3) The consummation or effectiveness of:
(i) A merger, consolidation or reorganization involving the
Company (a "Business Combination"), unless
(A) the stockholders of the Company, immediately before the
Business Combination, own, directly or indirectly immediately
following the Business Combination, at least fifty-one percent (51 %)
of the combined voting power of the outstanding voting securities of
the corporation resulting from the Business Combination (the
"Surviving Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before the Business
Combination,
(B) all or a portion of the individuals who were members of
the Incumbent Board immediately prior to the execution of the
agreement providing for the Business Combination constitute at least a
majority of the members of the Board of Directors of the Surviving
Corporation, and
(C) no Person (other than the Company or any Controlled
Entity), a trustee or other fiduciary holding securities under one or
more employee benefit plans or arrangements (or any trust forming a
part thereof) maintained by the Company, the Surviving Corporation or
any Controlled Entity, or any Person who, immediately prior to the
Business Combination, had Beneficial Ownership of forty percent (40%)
or more of the then outstanding Voting Securities) has Beneficial
Ownership of forty percent (400%) or more of the combined voting power
of the Surviving Corporation's then outstanding voting securities (a
transaction described in this subparagraph (i) shall be referred to as
a "Non-Control Transaction");
(ii) A complete liquidation or dissolution of the Company;
or
(iii) The sale or other disposition of all or substantially
all of the assets of the Company to any Person (other than a transfer
to a Controlled Entity); or
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(4) A Person acquires 10% or more of the combined voting
power of the Company's then outstanding Voting Securities from any of
the Company's stockholders who, as of the date of this Agreement, owns
in excess of 10% of such voting power and who has representation on
the Board unless such Person becomes party to a stockholders agreement
imposing restrictions on its ability to exercise control substantially
similar to that agreed to by such current 10% stockholders.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because forty percent (40%) or more of the then
outstanding Voting Securities is Beneficially Owned by (A) a trustee
or other fiduciary holding securities under one or more employee
benefit plans or arrangements (or any trust forming a part thereof)
maintained by the Company or any Controlled Entity or (B) any
corporation which, immediately prior to its acquisition of such
interest, is owned directly or indirectly by the stockholders of the
Company in the same proportion as their ownership of stock in the
Company immediately prior to such acquisition.
(f) Notice of Termination. Any purported termination of the
Executive's employment hereunder by the Company or by the Executive for Good
Reason shall be communicated by written Notice of Termination to the other. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
indicates the specific termination provision in this Agreement relied upon as a
basis for termination. For purposes of this Agreement, no such purported
termination of employment shall be effective without such Notice of Termination.
(g) Termination Date. "Termination Date" shall mean in the case of the
Executive's death, his date of death, or in all other cases, the date specified
in the Notice of Termination; provided, however, that if the Executive
terminates his employment for Good Reason, the date specified in the Notice of
Termination shall not be more than 30 days from the date the Notice of
Termination is given to the Company and if the Company terminates the
Executive's employment other than for Cause, the date specified in the Notice of
Termination shall be no less than 30 days from the date the Notice of
Termination is given to the Executive.
8. Compensation Upon Termination. Upon termination of the Executive's
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employment during the Employment Term, the Executive shall be entitled to the
following benefits:
(a) If the Executive's employment is terminated by the Company for
Cause or Disability or by the Executive (other than for Good Reason), or by
reason of the Executive's death, the Company shall pay to the Executive (or to
the Executive's legal representatives) all amounts earned or accrued hereunder
through the Termination Date but not paid as of the Termination Date, including
(i) Base Salary, (ii) reimbursement (in accordance with Company policy) for any
and all monies advanced or expenses incurred in connection with the Executive's
employment for reasonable and necessary expenses incurred by the Executive on
behalf of the Company for the period ending on the Termination Date, (iii)
accrued but unpaid vacation pay,
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(iv) any previously awarded and vested, but unpaid, bonus or incentive
compensation and (v) any previous compensation which the Executive has
previously deferred (including any interest earned or credited
thereon)(collectively, "Accrued Compensation. Executive's entitlement to any
other benefits shall be determined in accordance with the Company's employee
benefit plans and other applicable programs and practices then in effect and all
unvested stock options and unvested shares of restricted stock shall be
forfeited.
(b) Subject to the last sentence of Section 8(c), if the Executive's
employment is terminated (i) by the Company prior to a Change in Control for any
reason other than for Cause, death or Disability, (ii) by the Executive prior to
December 2, 1997 for Good Reason pursuant to Section 7(d)(1)(i), or (iii) by the
Executive for Good Reason pursuant to Section 7(d)(1)(ii) or (vi), the Company
shall pay to the Executive all Accrued Compensation plus any bonus or portion
thereof which would be payable if the Executive's employment had continued
because the performance targets relating thereto had been achieved as of the
Termination Date ("Earned Bonus") and, to the extent not covered by the
foregoing, Accrued Bonus (as hereinafter defined). The term "Accrued Bonus"
shall mean the amount of the bonus which would have been payable to the
Executive pursuant to Section 3(b) or (c) hereof in respect of the year of the
Employment Term in which the Termination Date occurs and calculated as if the
Executive were employed by the Company as of the end of such year (but, to the
extent the bonus is contingent on the achievement of performance targets, based
on whether such targets were actually achieved) multiplied by a fraction, the
numerator of which shall be the number of days in such year which have elapsed
prior to the Termination Date and the denominator of which shall be the number
of days in such year. In addition, subject to Executive's compliance with the
provisions of Sections 9, 10, and 11, the Executive shall receive (i) within ten
days a lump sum equal to the greater of the aggregate amount of the Base Salary
for the duration of the Employment Term which would have been payable absent
such termination of employment (discounted using the prime rate then in effect)
and an aggregate of $420,000 and (ii) until the end of the Employment Term, the
life insurance, medical, dental and hospitalization benefits which the Executive
would have been entitled to receive ff he had continued his employment with the
Company until the last day of the Employment Term, on the terms and conditions
applicable to other executive officers of the Company as in effect from time to
time during such period; provided, however, that in the event of a termination
of the Executive's employment pursuant to Section 8(b)(ii) hereof, the amounts
payable to the Executive shall be calculated pursuant to the Prior Employment
Agreement. Executive's entitlement to any other benefits shall be determined in
accordance with the Company's employee benefit plans and other programs and
practices then in effect and all unvested shares of restricted stock shall be
forfeited upon such termination of employment and unvested stock options shall
vest or be forfeited as set forth in the following sentence. If a termination of
the Executive's employment hereunder which is governed by this Section 8(b)
occurs on or prior to the second anniversary of the date hereof, then, to the
extent not previously vested, all stock options which would have vested by such
second anniversary shall vest and become exercisable and the termination of the
Executive's employment shall not affect his right to exercise such options for a
period of at least 90 days after such termination and, if such a termination of
the Executive's employment occurs after the second anniversary of the date
hereof, the number of unvested stock options equal to the number
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of options which would have vested on the anniversary of the date hereof
following the Termination date multiplied by a fraction, the numerator of which
shall be the number of days in the year beginning on the anniversary of the date
hereof immediately preceding the Termination Date which have elapsed prior to
the Termination Date and the denominator shall be the number of days in such
year which ends on the anniversary of the date hereof, shall vest and become
exercisable (and the termination of the Executive's employment shall not affect
his right to exercise such options for a period of at least 90 days after such
termination) and all other unvested stock options granted pursuant to the
Agreement shall be forfeited upon such termination of employment.
(c) If the Executive's employment by the Company is terminated by the
Company following a Change in Control other than for Cause, death or Disability,
or by the Executive for Good Reason (other than as defined in Section
7(d)(1)(ii) or (vi)), then the Executive shall be entitled to the benefits
provided below.
(i) the Company shall pay the Executive all Accrued
Compensation;
(ii) the Company shall pay the Executive as severance pay
and in lieu of any further salary for periods subsequent to the
Termination Date a single lump-sum cash amount equal to two (x 2)
times the sum of (A) the Executive's Base Salary at the greater of (x)
the highest rate in effect at any time within the ninety (90) day
period ending on the date the Notice of Termination is given and (y)
the rate in effect immediately prior to the Change in Control and (B)
the greater of the annual bonus paid to the Executive in the year
preceding the termination of Employment or the sum of Earned Bonus and
Accrued Bonus or $180,000; and
(iii) for twenty-four (24) months, the Company shall at its
expense continue on behalf of the Executive and his dependents and
beneficiaries the life insurance, medical, dental and hospitalization
benefits which were being provided to the Executive at the time the
Notice of Termination is given (or the benefits provided to the
Executive at the time of the Change in Control, if greater). The
benefits provided in this Section 8(c)(iii) shall be no less favorable
to the Executive, in terms of amounts and deductibles and costs to
him, than the coverage provided the Executive under the plans
providing such benefits at the time the Notice of Termination is given
(or at the time of the Change in Control ff more favorable to the
Executive). The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that the Executive
obtains any such benefits pursuant to a subsequent employer's benefit
plans, in which case the Company may reduce the coverage of any
benefits it is required to provide the Executive hereunder as long as
the aggregate coverage of the combined benefit plans is no less
favorable to the Executive, in terms of amount and deductibles and
costs to him, than the coverage required to be provided
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hereunder.
If the Executive's employment by the Company is terminated by the Company other
than for Cause, death or Disability or by the Executive for Good Reason at any
time after a transaction or other actions have been proposed to or by the
Company or to its stockholders, which if consummated or completed would
constitute a Change in Control, and such transaction or other action ultimately
is consummated or completed, then (whether or not the Executive was employed
following a Change in Control), the Executive's employment shall be deemed to
have been terminated following a Change in Control and the Executive shall be
entitled to the benefits set forth in this Section 8(c) and the shares of
restricted stock and stock options granted pursuant to the Prior Employment
Agreement or this Agreement and outstanding prior to such termination of the
Executive's employment shall be deemed to have been held by the Executive and
outstanding immediately following the Change in Control, notwithstanding any
other provision of this Agreement to the contrary.
(d) The amounts (other than any life insurance and medical, dental and
hospitalization coverage) provided for in this Section 8 shall be paid within
five (5) business days after the Executive's Termination Date. The continuation
of any life insurance, medical, dental or hospitalization benefits pursuant to
Section 8(b) or 8(c) shall be in satisfaction of the Company's obligations under
Section 4980B of the Internal Revenue Code of 1986, or any similar state law
requiring continuation of such insurance or benefits, with respect to the period
of time during which such insurance or benefits are continued hereunder.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment.
(f) The amounts payable by the Company pursuant to this Section 8
shall be in full satisfaction of any claims the Executive might assert in
connection with severance and claims of wrongful termination and fraudulent
inducement or similar claims based on this Agreement or relating to an
employer/employee relationship.
(g) The Company shall use its best efforts to ensure that shares of
the Company's common stock obtained by the Executive from the Company by reason
of the exercise of stock options or the award of shares of restricted stock in
accordance with this agreement shall be covered by an effective registration
statement on Form S-8 (or similar or successor form) with the intention that the
Executive may sell such shares in compliance with the Securities Act of 1933
(whether or not he is employed by the Company at the time of the sale). The
Executive acknowledges that any sale of such Shares may be subject to other
restrictions under the federal securities laws including those relating to the
possession of non-public information (which the Executive may not have the right
to disclose under this Agreement).
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9. Non-Disclosure Covenant. Executive acknowledges that during the
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Employment Relationship (as defined below), he has had and will have access to
information treated as confidential or proprietary by the Company, including
plans for future developments and information about costs, customers, profits,
markets, sales, products, key personnel, pricing policies, operational methods,
technical processes, know-how, research and development, strategic planning and
other business affairs and methods and other information not available to the
public or in the public domain (the "Confidential Information"). Confidential
Information shall not include any information known generally to the public or
any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that of the Company. In
recognition of the foregoing, during and at all times following the Executive's
Employment Relationship, the Executive shall hold in confidence and not use,
copy or create, or directly or indirectly disclose, any descriptions, analyses,
lists or records (of any kind) of any Confidential Information or proprietary
data of the Company, except to the extent authorized in writing by the Board or
required by law or any court or administrative agency, other than such use,
copying, creation or disclosure to an employee of the Company or other person,
in each case, which is reasonably necessary or appropriate in connection with
the performance by the Executive of duties germane to the Executive's position
with the Company. The term "Employment Relationship" shall mean the period,
prior to the Termination Date, during which the Executive received compensation
from the Company for services rendered to the Company either as an employee or
as a consultant, including periods prior to the date of this Agreement (whether
pursuant to the Prior Employment Agreement or otherwise) and during the
Employment Term. This Section 9 shall survive the termination of this Agreement
and the termination of the Executive's employment hereunder.
10. Covenant Not to Compete: Non-interference.
-----------------------------------------
(a) Competition. The Executive agrees that during the Employment Term
and for a period of the greater of eighteen months after the Termination Date or
the period after the Termination Date during which (or in respect of which) the
Executive continues to receive payments or employee benefits from the Company
pursuant to Section 8 (such greater period of time is hereinafter referred to as
the "Restricted Period"), without the prior written approval of the Board, he
will not participate in the management of, be employed by or own any equity
interest in any business in competition with any of the principal businesses of
the Company (including any business segment which is "significant" within the
meaning of Regulation S-X) in a geographical area in which the Company engages
in or solicits business or as of the Termination Date is actually planning to
engage in or solicit business; provided, however, that nothing in this Section
10(a) shall prohibit the Executive from owning stock of a competitor amounting
to less that five percent (5%) of the outstanding capital stock of such
competitor where the Executive does not otherwise participate in the management,
control or operation of such competitor's business which competes with the
Company. The invalidity of any part of this provision shall not render invalid
the remainder of the provision and if any portion of this provision is so broad
as to be unenforceable it shall be interpreted to be only so broad as is
enforceable.
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(b) lnterference. The Executive hereby agrees that during the
Employment Term and, following the Termination Date, for the Restricted Period,
he will not interfere with the Company's relationship with, or endeavor to
employ or entice away from the Company, any person, firm, corporation,
governmental entity or other business organization who or which was an employee,
customer or supplier of, or maintained a business relationship with, the Company
at any time (whether before or after the Termination Date), or which the Company
has solicited or prepared to solicit (by preparation or submission of a bid or
otherwise) within one (1) year prior to the Termination Date. The Executive
agrees to promptly notify the Company if any such party contacts the Executive
regarding any proposal or solicitation (whether orally or in writing) which, if
accepted, might result in a violation of this Section 10(b).
11. Ownership of Trade Secrets, Etc.
-------------------------------
(a) All written materials, documents and records (of any kind) created
by the Executive or coming into his possession during the Employment
Relationship concerning the business affairs of the Company shall be and become
the sole property of the Company, and, upon the Termination Date or upon the
request of the Company during the Employment Term, the Executive shall promptly
deliver the same to the Company.
(b) The Executive agrees that any trade secret, invention,
improvement, patent, patent application or writing, and any program, method,
process, system or novel technique (whether or not capable of being trademarked,
copyrighted or patented), conceived, devised, developed, or otherwise obtained
by him during the Employment Relationship relating to the business of the
Company, shall be and become the sole property of the Company and the Executive
agrees to give the Company prompt written notice of his conception, invention,
authorship, development or acquisition of any such trade secret, invention,
improvement, patent application, writing, program, method, process, system or
novel technique and to execute such instruments of transfer, assignment,
conveyance or confirmation and such other documents, and to do all appropriate
lawful acts, as may be requested by the Company to transfer, assign, confirm,
and perfect in the Company all legally protectable rights in any such trade
secret, invention, improvement, patent, patent application, writing, program,
method, process, system or novel technique.
12. Understanding and Remedies. For purposes of Sections 9, 10, 11 and 12,
--------------------------
the term "Company" shall include Video Lottery Technologies, Inc. ("VLT") as
well as current and future majority-owned subsidiaries of VLT and all current
and future joint ventures in which VLT is involved. It is understood by the
Executive and the Company that the covenants contained in this Section 12 and in
Sections 9, 10, and 11 are essential elements of this Agreement and that, but
for the agreement of the Executive to comply with such covenants, the Company
would not have agreed to enter into this Agreement. The Executive and the
Company have independently consulted with their respective counsel and have been
advised concerning the reasonableness and propriety of such covenants with
specific regard to the nature of the business conducted by the Company. The
Executive hereby agrees that all covenants contained in this Section 12 and
Sections 9, 10, and 11 of this Agreement are reasonable and valid. The
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Executive acknowledges that the Company may have no adequate remedy at law if
the Executive violates any of the terms hereof. In such event, the Company shall
have the right, in addition to any other rights it may have, to obtain in any
court of competent jurisdiction injunctive relief to restrain any breach or
threatened breach hereof or otherwise to specifically enforce any of the
provisions hereof and the Executive hereby waives any and all rights to assert
any claim or defense that the Company has an adequate remedy at law for any
breach. In addition, the Executive waives all rights to a jury trial in any
other action to adjudicate the rights of the Company and the Executive
hereunder. The provisions of Sections 9, 10, 11, and 12 of this Agreement shall
survive the termination of this Agreement and the termination of the Executive's
employment hereunder.
13. Consideration for Chief Executive Officer. The Company agrees to
--------------------------------------------
consider the Executive for promotion to the position of Chief Executive Officer
within six months of the date hereof.
14. Relocation and Other Expenses. Notwithstanding the last sentence of
------------------------------
Section 2 hereof, the Executive agrees to relocate the Company's headquarters to
Bozeman, Montana and/or Las Vegas, Nevada as the Executive and the Board shall
mutually determine, and to establish personal residence in such city or cities.
The Company shall reimburse the Executive for all actual costs incurred by the
Executive in connection with the establishment of his personal residence in such
city, including, without limitation, the costs of selling the Executive's home
in Atlanta, Georgia (including real estate commissions and legal fees), moving
expenses, the costs of storing the Executive's furnishings, the costs of
temporary housing (not to exceed six (6) months) in either Bozeman, Montana or
Las Vegas, Nevada, as the case may be, and the costs of relocation visits
(collectively, "Relocation Expense"), which amount shall be net of any federal
and state income taxes payable by the Executive in connection with the
Relocation Expense reimbursement. In addition, the Company shall compensate the
Executive for the actual costs of furnishing his home(s) in Bozeman, Montana
and/or Las Vegas, Nevada (the "Furnishing Allowance"), up to $24,000, which
amount shall be net of any federal and state income taxes payable by the
Executive in connection with the Furnishing Allowance, and for membership fees
and annual dues for the Executive's membership in a golf club in either Bozeman,
Montana or Las Vegas, Nevada as agreed upon by the Chairman of the Board or his
designee. Notwithstanding anything in this Section 14 to the contrary, in lieu
of any reimbursement for the costs of hotel accommodations, automobile rental
and meals in Bozeman, Montana and Las Vegas, Nevada, the Executive shall receive
a reimbursement allowance of $2,500 per month for a period of six (6) months
from the date of relocation of the Company's headquarters to Bozeman, Montana or
Las Vegas, Nevada; provided, however, that the Board may, in its discretion,
determine to extend such six-month period.
15. Withholding. Anything to the contrary herein notwithstanding, all
payments required to be made by the Company hereunder to the Executive, or his
estate or beneficiaries, shall be subject to the withholding of such amounts as
the Company may reasonable determine it should withhold pursuant to any
applicable tax law or regulation.
15
16. Successors and Assigns.
----------------------
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns and the Company shall require
any successor or assign to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. The term "the
Company" as used herein shall include such successors and assigns. The term
"successors and assigns" as used herein shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company
(including this Agreement) whether by merger, court order, operation or law or
otherwise.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representative.
17. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in this Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
18. Non-exclusivity of Rights. Nothing in this Agreement shall limit or
--------------------------
reduce such rights as the Executive may have under any other agreements with the
Company or any of its subsidiaries concerning subject matter other than that
which is addressed herein; provided, however, that the payments and benefits
provided under Section 8 shall be in lieu of any other termination benefits
(including severance, notice, and pay and salary continuation) to which the
Executive may otherwise be entitled under any other agreement, plan, policy or
practice of the Company or under applicable law and the Executive hereby waives
any and all rights to such other termination benefits. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company of any of its subsidiaries shall be payable in
accordance with such plan or program, except as explicitly modified by this
Agreement.
19. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No agreement or
representations,
16
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
20. Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of Georgia without giving
effect to the conflict of law principles thereof.
21. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
22. Entire Agreement. Except to the extent expressly provided herein, this
----------------
Agreement constitutes the entire agreement between the parties hereto and
supersedes all prior agreements, understandings and arrangements, oral or
written, between the parties hereto with respect to the subject matter hereof,
including, without limitation, the Prior Employment Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.
VIDEO LOTTERY TECHNOLOGIES, INC.
BY: /S/
----------------------------------------
XXXXXXX X. XXXX
Chairman of the Board
BY: /S/
---------------------------------------
XXXXXXX X. XXXXXXXX
17
