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EXHIBIT 10(6)
CHANGE OF CONTROL AGREEMENT
This Agreement (the "Agreement") is made effective as of this ____ day of
__________, 2001 (the "Effective Date"), by and between _______________________
an individual resident of the State of Nevada (the "Executive") and Innovative
Gaming Corporation of America, a Minnesota corporation, including its
subsidiaries and affiliates (collectively, "Employer" or the "Company").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company to employ and retain Executive
as a member of the senior management team of the Company; and
WHEREAS, the Board wishes to encourage the Executive to continue his
employment with the Company and the Board believes that this objective can be
best served by providing for a compensation arrangement for the Executive upon
the Executive's termination of employment under certain circumstances in the
event of a Change Of Control (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual promises and covenants of
the Company and Executive set forth below the Company and Executive agree as
follows:
1. Termination Following a Change Of Control.
x. Xxxxxxxxx Payment. Subject to the provisions to Section 1(c), in the
event that Executive's employment is terminated within one (1) year following a
Change Of Control (as hereinafter defined) and such termination is either (i)
Without Cause; or (ii) is a Constructive Termination, Executive shall receive,
in addition to all compensation due and payable to or accrued for the benefit of
Executive as of the date of termination, a lump sum payment, twenty-one days
(21) days after execution and delivery of the Release, attached as Annex A
(provided that such Release has not been revoked), equal to (a) two times
Executive's Annual Compensation (as hereinafter defined) and (b) Executive's
Benefits (as hereinafter defined) (the "Severance Payment"); and all outstanding
options to purchase shares of stock in the Company shall immediately vest and
become immediately exercisable and, Executive or Executive's legal
representative shall have until the date which is two (2) years after the date
on which Executive ceases to be employed by the Company to exercise Executive's
right to purchase shares of stock of the Company under any such option
agreements (whether entered into before or after the
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date of this Agreement. Employer shall also use its best efforts to convert any
then existing life insurance and accidental death and disability insurance
policies to individual policies in the name of the Executive.
The provisions of this Section 1(a) shall apply following any Change Of Control
(as hereinafter defined) notwithstanding any provision otherwise in any stock
option agreement between the Company and the Executive which provides for the
grant to Executive of the right to purchase shares of stock of the Company.
b. Exclusive Severance Payments. Severance Payments made hereunder shall be
in lieu of any other payments owed by Company to Executive pursuant to any other
Company severance policy.
c. Release. As a condition for receiving the Severance Payment, Executive
shall execute and deliver to the Company the Release attached hereto as Annex A.
d. Excise Tax.
i. Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise would constitute an "excess parachute payment" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the
"IRC"), Executive shall be paid an additional amount (the "Gross-Up
Payment") as indicated in Annex B.
2. Indemnification.
Following a Change of Control, the Executive shall be entitled to
indemnification and, (i) to the extent available on commercially reasonable
terms, and (ii) for a period of not less than three years after the effective
date of the resignation or termination of the Executive, insurance coverage
therefor, with respect to the various liabilities as to which the Executive has
been customarily indemnified prior to the Change of Control. In the event of any
discrepancies between the provisions of this paragraph and the terms of any
Company insurance policy covering executive or any indemnification contract by
and between the Company and Executive, such insurance policy or indemnification
contract shall control.
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3. Certain Definitions.
a. Annual Compensation. For the purposes of this Agreement, Annual
Compensation shall mean Executive's annual base salary.
b. Benefits. For the purposes of this Agreement, Benefits shall mean an
amount equal to the six month cost to Executive of obtaining health care
coverage comparable to that currently provided by Employer (grossed-up to
compensate Executive for the taxable nature of such payment), and an amount
equal to the six month cost to Executive of obtaining life insurance and
insurance coverage for accidental death and disability insurance comparable to
that provided by Employer (all as grossed-up to compensate Executive for the
taxable nature of such payments).
c. Change of Control.
i. For the purposes of this Agreement, a "Change of Control" shall
mean:
(1) The acquisition by any person, entity or "group", within the
meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange
Act of 1934 (the "Exchange Act") (excluding, for this purpose, any
acquisition by (A) the Company or (B) any employee benefit plan of the
Company or its subsidiaries which acquires beneficial ownership of
voting securities of the Company of beneficial ownership, (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of either the then outstanding shares of common stock or the
combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of directors; or
(2) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14 a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the
Incumbent Board; or
(3) Approval by the shareholders of the Company of (A) a
reorganization, merger or consolidation, in each case, with respect to
which persons who were
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the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately
thereafter, own more than 50% of the combined voting power of the
reorganized, merged or consolidated company's then outstanding voting
securities entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company, provided that this
provision shall not apply to the proposed merger with Xertain, Inc. or
(B) a liquidation or dissolution of the Company or (C) the sale of all
or substantially all of the assets of the Company.
d. Termination Without Cause.
(i) For the purposes of this Agreement, "Termination Without Cause"
shall mean termination of the Executive by the Company for reasons other
than:
(1) the commission of a felony;
(2) the theft or embezzlement of property of Employer or the
commission of any similar act involving moral turpitude; or
(3) the failure of Executive to substantially perform his
material duties and responsibilities under this Agreement for any
reason other than the Executive's death or disability, which failure
is not cured within thirty (30) days (or if such cure is commenced
within such thirty (30) day period and thereafter diligently pursued
such longer period, not to exceed ninety (90) days, as is reasonably
required to cure such failure), after written notice of such failure
from the Company's Board of Directors specifying such failure.
e. Constructive Termination.
1. For the purposes of this Agreement, "Constructive Termination"
shall mean :
(1) a material, adverse change of Executive's responsibilities,
authority, status, position, offices, titles, duties or reporting
requirements (including directorships);
(2) an adverse change in Executive's annual compensation or
benefits;
(3) a requirement to relocate in excess of fifty (50) miles from
Executive's then current place of employment without Executive's
consent; or
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(4) the breach by the Company of any material provision of this
Agreement or failure to fulfill any other contractual duties owed to
the Executive.
For the purposes of this definition, Executive's responsibilities,
authority, status, position, offices, titles, duties and reporting requirements
are to be determined as of the date of this Agreement.
4. Confidentiality; Nonsolicitation.
a. Except to the extent required by law, Executive shall keep confidential
and shall not, without the Company's prior, express written consent, disclose to
any third party, other than as reasonably necessary or appropriate in connection
with Executive's performance of his duties under this Agreement or any
employment agreement, if any, any information regarding the Company, its
business, methods of operation, employees, projects, plans and prospects, which
information has not been released to the public by the Company. The provisions
of this Section 4 shall remain in effect after the expiration or termination of
this Agreement.
b. For a period of one (1) year following termination of Executive
employment with the Company, for any reason or no reason, Executive hereby
agrees not to, without the prior written consent of the Company's Board,
directly or indirectly, solicit for employment, endeavor to entice away from the
Company or otherwise interfere with the Company's relationship with any person
who is employed by or otherwise engaged to perform services for the Company,
whether for Executive's own account or for the account of any other individual,
partnership, firm or corporation or other business entity.
c. Executive agrees that the restrictions on disclosure and solicitation in
this Agreement are fair, reasonable and necessary for the protection of the
interests of the Company. Executive further agrees that a breach of any of the
covenants set forth in Section 4 of this Agreement will result in irreparable
injury and damage to the Company for which the Company would have no adequate
remedy at law, and Executive further agrees that in the event of a breach, the
Company will be entitled to an immediate restraining order and injunction to
prevent such violation or continued violation, without having to prove damages,
in addition to any other remedies to which the Company may be entitled to at law
or in equity.
5. Notification to Subsequent Employers.
Executive grants the Company the right to notify any future employer or
prospective employer of Executive concerning the existence of and terms of this
Agreement and grants the Company the right to provide a copy of this Agreement
to any such subsequent employer or prospective employer.
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6. Full Settlement.
The Company's obligations to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against Executive or others. In no event
shall Executive be obligated to seek other employment or take any other action
by way of mitigation of the amounts payable to Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not Executive obtains other employment. Employer agrees to pay promptly as
incurred, to the full extent permitted by law, all legal fees and expenses which
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive regarding the amount of any payment pursuant to this Agreement), plus
in each case interest on any delayed payment at the rate published from time to
time in The Wall Street Journal as the prime rate of interest, plus two percent
(2%).
7. Resolution of Disputes.
If there shall be any dispute between the Company and the Executive (i) in
the event Executive's employment termination was Without Cause, or (ii) in the
event of a Constructive Termination of employment by the Company, then, unless
and until there is a final, nonappealable judgment by a court of competent
jurisdiction declaring that such termination was not Without Cause or that the
determination by the Executive of the existence of a Constructive Termination
was not made in good faith, the Company shall pay, and provide all benefits to
Executive and/or Executive's family or other beneficiaries, as the case may be,
that the Company would be required to pay or provide pursuant to this Agreement,
as though such termination were by the Company Without Cause or was a
Constructive Termination by the Company; provided, however, that the Company
shall not be required to pay any disputed amounts pursuant to this Section
except upon receipt of an undertaking by or on behalf of Executive to repay all
such amounts to which Executive is ultimately adjudged by such court not to be
entitled.
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8. Withholding.
The Company may withhold from any amounts payable under this Agreement the
minimum Federal, state and local taxes as shall be required to be withheld
pursuant to any applicable law, statute or regulation.
9. Successors and Assigns.
This Agreement is binding upon, and shall inure to the benefit of the
Company and the Executive, and all successors and assigns of the Company. This
Agreement shall be binding upon and inure to the benefit of the Executive and
his heirs and personal representatives. The Company will require any successor
(whether direct or indirect, by purchase, merger or consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such agreement,
prior to the effectiveness of any such succession shall be a material breach of
this Agreement and shall entitle the Executive to any Severance Payment payable
pursuant hereto.
10. Term and Renewal.
This Agreement shall have a one-year term following the Effective Date and
shall automatically renew on each anniversary of the Effective Date (each such
date an "Anniversary Date") unless either party objects to such automatic
renewal by providing the other party with a written notice of such objection at
least 60 or more days prior to the Anniversary Date.
11. Miscellaneous.
a. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Nevada, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
b. All notices and other communications under this Agreement shall be in
writing and shall be given by hand to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
IF TO EXECUTIVE:
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IF TO COMPANY:
Innovative Gaming Corporation of America
Attention: Secretary
000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
or to such other address as either party furnishes to the other in writing in
accordance with this Section. Notices and communications shall be effective when
actually received by the addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with the law.
d. The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
e. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one and
the same instrument.
12. Entire Agreement.
Except for the provisions of any stock option agreement(s), if any, between
Executive and the Company (as the same may be superseded by the terms of this
Agreement), this Agreement constitutes the entire agreement between the parties,
supersedes all prior agreements and understandings between the parties with
respect to the subject matter hereof and may not be modified or terminated
orally. No modification, termination or attempted waiver of this Agreement shall
be valid unless in writing and signed by the party against whom the same is
sought to be enforced.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and
pursuant to the due authorization of its Board, the Company has caused this
Agreement to be executed in its name and on its behalf, all as of the day and
year first written above.
INNOVATIVE GAMING CORPORATION EXECUTIVE:
OF AMERICA
By: ______________________________ ____________________________________
Its: _________________________
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ANNEX B
EXCISE TAX PAYMENTS
i. The net amount retained by the Executive after deduction of any excise
tax imposed under Section 4999 of the IRC, and any federal, state and local
income and employment tax and excise tax imposed upon the Gross-Up Payment shall
be equal to the Severance Payment. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income tax and
employment taxes at the highest marginal rate of federal income and employment
taxation in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the effective date of the
Executive's termination or resignation, net of the maximum reduction in federal
income taxes that may be obtained from the deduction of such state and local
taxes.
ii. All calculations to be made under this Section 1 shall be made by the
Company's independent public accountant immediately prior to the Change of
Control (the "Accounting Firm"), which firm shall provide its conclusions and
any supporting calculations both to the Company and the Executive within 10 days
of the effective date of the Executive's resignation or termination, as the case
may be. Any such determination by the Accounting Firm shall be binding upon the
Company and the Executive.
(1) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than twenty (20) business days after the
Executive knows of such claim and Executive shall apprise the Company of
the nature of such claim and the date on which such claim is requested to
be paid. The Executive shall not pay such claim prior to the expiration of
the thirty day period following the date on which he gives such notice to
the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(a) give the Company any information reasonably requested by the
Company relating to such claim;
(b) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company;
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(c) cooperate with the Company in good faith in order to
effectively contest such claim; and
(d) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties, with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 1, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearing and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
resolution before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, however, that if the Company directs the Executive
to pay such claim and xxx for a refund the Company shall advance the amount of
such payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and provided further that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(2) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to this Section, the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of subsection(i), (ii) and (iii) of this
Section) promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company pursuant to
this Section, a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of thirty days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
(3) All of the fees and expenses of the Accounting Firm in performing the
determinations referred to in subsections (i) and (ii) above shall be borne
solely by the Company.
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