AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated September 19,
1997, effective as of July 14, 1997, by and between GTECH Holdings Corporation,
a Delaware corporation (the "Company"), GTECH Corporation, a Delaware
corporation (the "Subsidiary"), and Xxxxxxx X. X'Xxxxxx ("Executive").
WHEREAS, the Company and Executive are parties to an Employment
Agreement dated October 27, 1994, as subsequently amended (the "1994
Agreement"); and
WHEREAS, Executive, the Company, the Subsidiary and Executive now
desire to amend and restate the 1994 Agreement to reflect certain changes in the
terms and provisions thereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby covenant and agree as
follows:
1. Definitions.
Capitalized terms used in this Agreement and not otherwise
defined herein shall have the following meanings:
"Affiliate" shall mean any joint venture or other entity in which the
Company or any of its subsidiaries has an equity interest of at least 20%.
"Base Salary" has the meaning set forth in Section 5(a)
hereof.
"Board" means the Board of Directors of the Company.
"Cause" means any of the following:
(i) any willful and continuing failure by Executive to
substantially perform his employment duties which has
a demonstrable, material adverse affect on the
Company;
(ii) any engaging by Executive in serious, willful and
continuing misconduct which is demonstratably and
materially injurious to the Company, its subsidiaries
or Affiliates;
(iii) any willful and continuing material breach by
Executive of the terms of this Agreement, including,
without limitation, Sections 11 and 12 hereof which
has a demonstrable, material adverse affect on the
Company;
(iv) Executive's conviction of or pleading nolo contendere
to a crime involving fraud or misrepresentation, a
gambling-related offense or a felony where such crime
or offense has a demonstrable, material adverse
affect on the Company; or
(v) Executive's abuse of illegal drugs or other
controlled substances or his habitual intoxication;
provided that in no event shall Executive's failure to perform the duties
associated with his position caused by a mental or physical disability
constitute Cause for his termination.
"Change in Control" has the meaning set forth in Section
10(d) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" has the meaning set forth in Section 5(a)
hereof.
"Common Stock" means the Common Stock, par value $.01 per
share, of the Company.
"Company" means GTECH Holdings Corporation and any
successor thereto.
"Disability" means the inability (as determined by the Board in its
sole discretion after affording Executive a reasonable opportunity to present
his case) of Executive to render his agreed-upon, full-time services to the
Company due to physical and/or mental infirmity.
"Executive" means Xxxxxxx X. X'Xxxxxx.
"Good Reason" means any of the following events:
(i) the assignment to Executive of duties,
responsibilities and/or reporting
relationship that are inconsistent, in a
material respect, with those associated
with Executive's position as stated in
Sections 4(a) and 4(b) hereof, excluding
any interim relieving of Executive's
duties pursuant to Section 8(b) hereof);
(ii) the Company's failure to pay Executive any amounts
otherwise vested and due hereunder or under any plan
or policy of the Company;
(iii) a reduction in the compensation or
benefits payable to Executive hereunder
(including without limitation any
compensation provided for in the
appendices hereto), or a material adverse
change in the terms or conditions on
which such compensation or benefits are
payable;
(iv) a reduction in the title of Executive from President
and Chief Executive Officer of the Company or in the
authority, duties or responsibilities of
Executive;
(v) if Executive's principal place of employment by the
Company is relocated more than 50 miles from West
Greenwich, Rhode Island, or Boca Raton, Florida,
without the written consent of Executive;
(vi) the events constituting Good Reason specified in
Section 4(a) hereof;
(vii) the failure by the Company to obtain an agreement in
form and substance reasonably satisfactory to
Executive from any successor to the business of the
Company to assume and agree to perform this
Agreement; or
(viii) any material breach by the Company of the terms of
this Agreement.
"Life Insurance Coverage" has the meaning set forth in Section 9(c)
hereof and as described in Section 6(b) hereof.
"Medical Coverage" has the meaning set forth in Section 9(c) hereof and
as described in Appendix B hereto.
"Performance Bonus" has the meaning set forth in Section
5(b) hereof.
"Retirement" means retirement from active employment with the Company
with the express consent of the Board or in accordance with the retirement
policies of the Company applicable to other senior executives generally.
"Term" has the meaning set forth in Section 3 hereof.
2. Employment.
The Company hereby agrees to employ and retain Executive, and
Executive agrees to be employed and retained by the Company, to render services
to the Company and its subsidiaries, Affiliates and divisions for the period, at
the rate of compensation and upon the other terms and conditions hereinafter set
forth.
3. Term.
The term of Executive's employment hereunder shall commence on
July 14, 1997, and shall continue in accordance with the terms of this Agreement
until terminated in accordance herewith (the "Term").
4. Position and Duties.
(a) Position. During the Term, Executive shall be retained and
shall serve as President and Chief Executive Officer of the Company, reporting
directly to the Board. At such time as Xxx X. Xxxxxxx steps down as Chairman of
the Board of the Company (the "Chairman"), it is the expectation that the Board
will consider Executive as a candidate for that position to succeed Xx. Xxxxxxx.
However, whether Executive, in fact, will be elected by the Board to that
position, and if so when, shall be in the sole discretion of the Board. If
Executive is not elected Chairman when Xx. Xxxxxxx steps down, the failure so to
elect him shall be deemed Good Reason for Executive to terminate his employment
Term. During the Term, Executive also agrees to serve, if elected, as a senior
executive officer and/or director of any subsidiary or Affiliate of the Company.
(b) Duties. During the Term, Executive shall have the
authority and power to perform such duties consistent with those of the
President and Chief Executive Officer and shall not be required without his
written consent to undertake responsibilities not commensurate with his
position. If Executive becomes Chairman, then he also shall have the authority
and power to perform the duties consistent with such position. Executive shall
comply fully and promptly with the various policies, procedures and rules
governing employees promulgated and/or as amended from time to time by the
Company and any applicable subsidiary or Affiliate of the Company (including,
without limitation, the Company's Ethical Conduct and Conflicts of Interest
Policy and Government Relations Policy) and with any applicable disclosure and
other requirements of any governmental authority and of any other entity with
which the Company, its subsidiaries and Affiliates are doing or propose to do
business. Except for illness, vacations, and holidays in accordance with
then-current Company policy (or, if applicable, this Agreement), and (subject to
the approval of the Board) reasonable leaves of absence, Executive shall devote
his full business time, attention, skill, undivided loyalty and best efforts to
the faithful performance of his duties hereunder; provided, however, that with
the approval of the Board (which approval shall not unreasonably be withheld),
from time to time, Executive may serve, or continue to serve, on the board of
directors of, and hold any other offices or positions, in companies or
organizations, which in the Board's judgment, will not present any conflict of
interest with the Company, its subsidiaries or Affiliates, or materially
adversely affect the performance of Executive's duties pursuant to this
Agreement.
(c) Principal Place of Employment. Executive's principal place
of employment shall be at the Company's offices (in West Greenwich, Rhode
Island, or in Boca Raton, Florida) or at such other location as the Company and
Executive mutually may agree in writing. Executive agrees to reside within
reasonable daily commuting distance by car of such principal place of
employment. The Company shall not require Executive to travel away from
Executive's principal place of employment for more than 21 consecutive days, nor
for more than an aggregate of 180 days in any year during the Term.
(d) Nomination as Director. Assuming the Term has not been
terminated, the Board agrees to nominate Executive as a candidate for election
to the Board at each of the Company's Annual Meetings of Shareholders at which
Executive's term as a director is scheduled to expire, and Executive agrees
(subject to Section 8(d) hereof) to continue to serve as a director if elected.
5. Compensation and Reimbursement of Expenses.
(a) Base Salary. For all services rendered by Executive in all
capacities with the Company, its subsidiaries and Affiliates during the Term,
the Company shall pay or cause to be paid to Executive as compensation a salary
at an annual rate of $550,000 (the "Base Salary"), payable in equal installments
not less frequently than monthly. The Base Salary shall be increased on the
first day of each fiscal year of the Company commencing with fiscal year 1999,
and each annual anniversary thereof (the "Annual Adjustment Date") during the
Term at a rate equal to the annual rate of increase, if any, in the All Cities
Consumer Price Index for Urban Wage Earners and Clerical Workers ("CPI-W"), as
published by the United States Department of Labor, Bureau of Labor Statistics,
applicable for the calendar year immediately preceding the applicable Annual
Adjustment Date. The Base Salary also shall be subject to possible further
increase from time to time in the sole discretion of the Board or the
Compensation Committee of the Board or another Committee of the Board designated
for such purpose (the "Committee"). The Base Salary shall not be subject to
decrease.
(b) Performance Bonus. With respect to each fiscal year of the
Company during the Term commencing with fiscal year 1998, Executive shall be
eligible to earn a performance bonus of up to a maximum of four times
Executive's Base Salary then in effect (the "Performance Bonus"). The amount of
the Performance Bonus for a given fiscal year shall be determined using a matrix
of selected reasonable quantitative metrics yet to be determined but which
likely shall include Company stock price appreciation, profit growth, return on
capital and the like. The matrix will provide for possible bonus values up to
four times Base Salary. The criteria and attainment levels for the Performance
Bonus shall be established each year by and in the discretion of the Committee,
and may be changed each year in the good faith discretion of the Committee. Any
Performance Bonus to which Executive is entitled shall be paid at the time
executive bonuses customarily are paid by the Company, but in no event later
than 120 days after the end of the fiscal year with respect to which such
Performance Bonus is payable.
(c) Increase of Compensation. All compensation payable to
Executive hereunder shall be subject to possible further increase from time to
time in the sole discretion of the Board or the Committee.
(d) Certain Requirements. Notwithstanding anything contained
in this Agreement to the contrary (including Sections 9 and 10 hereof), if
Executive's employment hereunder has terminated for any reason, except by the
Company for Cause or by the Executive voluntarily without Good Reason prior to
the end of a given fiscal year, Executive shall receive a Performance Bonus in
an amount determined by multiplying the average of the Performance Bonuses
awarded to Executive for the preceding three years (or all years, if less than
three years after the Term begins) by a fraction, the numerator of which is the
number of complete months of such fiscal year during which Executive was
employed with the Company, and the denominator of which is twelve.
(e) Reimbursement of Expenses. Consistent with the Company's
established policies, the Company shall pay or reimburse Executive for all
reasonable and necessary travel and other expenses of Executive incurred by
Executive in performing his duties hereunder upon receipt of written
substantiation of such expenses.
6. Benefits.
(a) Benefit Plans. The payments provided in Section 5 hereof
are in addition to any benefits to which Executive may be, or may become,
entitled under any benefit plan, program or arrangement (excluding any increase
in salaries, generally) of the Company for which senior executives are or may
become eligible, including any Supplemental Retirement Plan for Senior
Executives ("SERP"). Further, except as otherwise expressly provided herein,
Executive shall be entitled to receive, during the Term, benefits at least at
the level provided generally to other senior executives under any such benefit
plan, program or arrangement, subject, to Executive's meeting the eligibility
requirements of such plans, programs or arrangements, and in the case of benefit
plans, programs or arrangements providing for discretionary grants or awards, to
the discretion of the Board or applicable Committee.
(b) Term Life Insurance. During the Term, the Company shall
provide Executive with and shall pay the premium on a policy of term life
insurance in the face amount of 3.5 times his Base Salary, with the primary
beneficiary to be Executive's wife, Xxxxxx Xxxxxx X'Xxxxxx.
(c) Stock Options. Executive shall be eligible for annual
grants of stock options under the Company's option plans for employees, any such
grants to be in the discretion of the Committee based upon its evaluation of
Executive's performance.
The terms and provisions of the stock options provided for in
Section 6(d) of the 1994 Agreement and any stock options granted to Executive
hereafter are and shall be as set forth in Appendix A hereto. In addition, the
Company expressly acknowledges that Executive has been granted Restricted Stock
Rights pursuant to a certain agreement with the Company dated June 30, 1995.
(For the purposes of that agreement "Cause" shall be conclusively defined as in
this Agreement.) The Company shall use its best efforts to file, and cause to be
effective under the Securities Act of 1933, as amended, a registration statement
on Form S-8 (or a comparable form) with respect to the shares (or other rights)
of equity issued as provided for or referenced by the foregoing provisions of
this Section 6(c) or, if applicable, issuable upon exercise of rights so
provided for or referenced. The Company will also use its best efforts to ensure
that each grant provided for under Appendix A or referenced above shall meet the
requirements for exemption under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(d) Certain Specific Benefits and Arrangements. Without
limiting the generality of subsection (a) above (except as may otherwise be
specified in Appendix B hereto), Executive shall be entitled to the specific
benefits and arrangements set forth in Appendix B hereto.
7. Benefits Payable During Term Upon Disability.
(a) Disability Benefits. In the event of Disability of
Executive during the Term of his employment hereunder, the Company shall
continue to pay Executive the compensation and extend to him the benefits
provided in Sections 5 and 6 hereof during the period of Disability, subject to
Section 9(f) hereof and to the extent permitted by applicable law, provided that
in the event of Executive's Disability for an aggregate period of time exceeding
150 calendar days in any 12-consecutive-month period during the Term, the
Company, at its election, may terminate the Term of Executive's employment in
which event Executive shall receive the benefits provided in Section 9(c).
(b) Services During Disability. During the Term,
notwithstanding any Disability, Executive shall, to the extent that he is
physically and mentally able to do so, furnish information and assistance to the
Company, and, in addition, upon the reasonable request in writing on behalf of
the Board, or a senior executive officer designated by the Board, from time to
time, he shall make himself available to the Company, its subsidiaries and
Affiliates to undertake reasonable assignments consistent with his position and
his physical and mental health. During such period of service, he shall be
responsible and report to, and shall be subject to the supervision of, the
Board, or a senior executive officer designated by the Board, as to the method
and manner in which he shall perform such assignments and shall keep the Board,
or such senior executive officer, as the case may be, appropriately informed of
his progress in each such assignment.
8. Termination of Employment.
(a) Expiration and Earlier Termination.
Executive's Term of employment shall terminate:
(i) upon the death or Retirement of Executive;
(ii) at the election of the Company in the event
of Executive's Disability (as provided in
Section 7(a) hereof);
(iii) upon discharge of Executive by the Company
for Cause or resignation of Executive other
than for Good Reason; and
(iv) upon discharge of Executive without Cause or
Executive's resignation for Good Reason.
(b) Certain Obligations of the Company. The Company shall give
Executive not less than 60 days prior written notice of any intended termination
of Executive's employment by the Company for Cause, without Cause or due to
Executive's Disability. In the event of such a proposed termination for Cause,
such notice shall specify the grounds for such termination, and the Company
shall only be entitled to terminate Executive for such Cause if Executive shall
have failed to cure the grounds for such termination within said 60-day notice
period. However, after giving such notice, the Company may relieve Executive of
his duties on an interim basis. Further, Cause shall in no event be deemed to
exist except upon a finding reflected in a resolution of the Board approved by
at least 75% of the members of the Board, whose finding shall not be binding
upon or entitled to any deference by any court, arbitrator or other
decision-maker ruling on this Agreement, at a meeting of which Executive shall
have been given proper notice and at which Executive (and Executive's counsel)
shall have a reasonable opportunity to present Executive's case.
(c) Certain Obligations of Executive. Executive shall give the
Company not less than 60 days prior written notice of any intended termination
by Executive of Executive's employment whether for Good Reason or other than for
Good Reason. In the event of a proposed termination for Good Reason, such notice
shall specify the grounds for such termination, and Executive shall only be
entitled to terminate his employment for Good Reason if the Company shall have
failed to correct the specified grounds within said 60-day notice period.
Executive shall not be entitled to terminate for Good Reason unless he has given
notice to the Company of his intention so to terminate within 60 days following
the occurrence of the event alleged to constitute such Good Reason, except that
notice of Executive's intention to terminate for the reason set forth in Section
4(a) hereof may be given within six months of Xx. Xxxxxxx'x stepping down as
Chairman. After Executive provides such notice to the Company, the Company shall
have 30 days from the date of receipt of such notice to effect a cure of the
condition constituting Good Reason, and, upon cure thereof by the Company, such
event shall no longer constitute Good Reason; provided that the Company shall
only be permitted the opportunity to cure one time during the Term (except that
the limitation to one such opportunity to cure shall not apply in the case of
immaterial reallocation of benefits which are provided for under Section 6(a)
hereof, (but not under Sections 6(b), (c), or (d)) from one type of benefit to
another). Notwithstanding the foregoing, in the event that Executive has given
the Company notice of his intention to resign for "Good Reason" or otherwise,
the Board may elect to have such resignation become effective immediately or at
such other date, not later than the effective date specified in the notice, as
the Board may determine.
(d) Upon termination of Executive's Term of employment,
Executive (unless otherwise requested by the Board) concurrently shall resign
any directorships which he holds with the Company, its subsidiaries and
Affiliates.
9. Compensation, Benefits, etc. upon, and Effects
of, Termination.
(a) Death, Retirement, Discharge for Cause and Resignation for
Other than for Good Reason. If the Term of Executive's employment is terminated
by reason of his death, Retirement, discharge by the Company for Cause or
resignation other than for Good Reason, the Company shall pay or cause to be
paid to Executive or his estate or beneficiaries, as the case may be, at the
time such payment is due (i) his Base Salary accrued through the effective date
of such termination at the rate in effect immediately prior to such termination,
and (ii) any other amounts to which Executive is entitled under the terms of
Sections 5 and 6 hereof through the effective date of such termination.
Executive also shall be entitled, to the extent not inconsistent with this
Agreement, to receive such additional benefits, if any, as he may be entitled to
under the express terms of the applicable benefit plans (other than bonus and
severance plans) of the Company, its subsidiaries and Affiliates.
(b) Retirement at or after 65. If the Term of Executive's
employment is terminated by reason of Executive's Retirement on or after
attaining the age of 65, in addition to the payments and benefits provided in
subsection (a) above, the Company shall continue, at its expense, to provide
until Executive's death (i) medical coverage (including, hospitalization,
dental, orthodontic and optical) for executive and eligible family members at
substantially the same level of the most comprehensive medical coverage as is
provided, from time to time, to any senior executive of the Company, with such
coverage to continue to be available after Executive's death to his spouse and
family members at their expense at rates available to the Company except to the
extent such continuation is prohibited by applicable federal or state law, and
(ii) term life insurance as provided in Section 6(b) hereof.
(c) Disability, Discharge Without Cause and Resignation for
Good Reason. If the Term of Executive's employment is terminated by the Company
by reason of Executive's Disability as provided in Section 7(a) hereof, by the
Company without Cause or by reason of Executive's resignation for Good Reason,
the Company shall pay or cause to be paid to Executive or his estate, as the
case may be, (i) an amount equal to three times the average of each of
Executive's Base Salary, Performance Bonus and payments under the Company's
Executive Perquisites Program for the prior three full fiscal years, plus (ii)
in consideration of Executive's obligations under Section 12 hereof, the sum of
$1,500,000. The amounts specified in clauses (i) and (ii) above shall be paid
within 45 days of the effective date of termination of Executive's employment
pursuant to this subsection (c). Further, Executive shall be entitled to the
compensation and benefits set forth in subsection (a) above, and the Company
shall (i) for a period of three years following the effective date of such
termination, or until Executive's earlier death, continue, at its expense, to
provide the life insurance specified in Section 6(b) hereof in the amount in
effect immediately prior to the effective date of such termination ("Life
Insurance Coverage"), (ii) the Company shall provide Executive with out
placement services through a bona fide out placement organization acceptable to
Executive that, at a minimum, agrees to supply Executive with out placement
counseling, a private office and administrative support, including telephone
service until such time that Executive secures suitable employment, and (iii)
for a period of three years following the effective date of such termination, or
until Executive's earlier death, continue to provide the medical (including
dental, orthodontic and optical) coverage specified in Appendix B ("Medical
Coverage") and on the terms and conditions so specified at substantially the
same level as provided to Executive and his spouse, and his dependents from time
to time, at the effective date of such termination, and, thereafter, medical,
prescription drug, vision, dental, orthodontic, etc., coverage under the
medical, prescription drug, vision, dental, orthodontic, etc., plans applicable
to senior executives of the Company on the same terms as the most comprehensive
medical coverage available to any senior executive of the Company, with such
coverage (together with the gross-up referred to in the last sentence of Section
4 of Appendix B hereto, if applicable) to continue for an additional year (or
portion thereof) after such three-year period for every year (or portion
thereof) Executive is employed by the Company after the date hereof (the
"Continuation Period"). Following the expiration of the Continuation Period,
Executive shall be entitled to whatever medical coverage, if any, as is required
to be provided by applicable law.
Further, upon such termination of Executive's employment, all
restricted stock then held by Executive shall vest and become immediately
transferable free of restrictions and Executive will become fully vested in the
Company's SERP in existence as of the date hereof and in any other
non-qualified, deferred compensation, incentive compensation or retirement plan
currently in effect or adopted by the Company subsequent to the date hereof, and
any successor plan or plans (together with the SERP, the "Non-qualified Plans").
Within 30 days after Executive's termination of employment, the Company shall
pay to Executive the sum of (i) the present value of all benefits accrued under
the Non-qualified Plans (as supplemented by any early retirement subsidies),
using such actuarial assumptions as are then used to fund the Company's
tax-qualified defined benefit pension plan (or, if there is no such plan, such
actuarial factors as would reasonably be used by comparable companies in funding
defined benefit pension plans (but including, in all events, an interest rate no
greater than the rate that would then be used by the Pension Benefit Guaranty
Corporation to value immediate annuities upon plan termination)), and (ii) an
amount equal to three times the average benefit accrued (in the case of plans
providing for accruals of identified future benefits) and Company contributions
(in the case of other plans) made to the Company's tax-qualified defined benefit
plan and profit-sharing and 401(k) retirement plan and the Non-qualified Plans
over the previous three fiscal years (as supplemental by, in the case of accrued
benefits, any early retirement subsidies). The Company shall also pay to
Executive (i) any amount in Executive's account under the Company's profit
sharing and 401(k) plan forfeited by the Executive due to his termination, and
(ii) the present value of any accrued benefit (as supplemented by any early
retirement subsidies) under any defined benefit plan of the Company forfeited by
Executive due to his termination, determined using such actuarial assumptions as
are then used to fund such plan.
(d) Termination of Certain Benefits Upon Reemployment. In the
event that, following termination of Executive's employment as a result of
Executive's Retirement at or after age 65 or his Disability, by the Company
without Cause or by Executive for Good Reason, Executive secures other
employment (including employment as a consultant) during the period in which the
Company is obligated to continue Life Insurance Coverage and/or medical coverage
under subsections (b) and (c) above as applicable, the Company may offset such
obligations by any life insurance coverage or medical coverage which Executive
receives during the applicable continuation period from a successor employer, so
long as the aggregate coverage (from the Company and the successor employer) is
no less, as to each and every amount payable or other benefit, than the coverage
otherwise applicable under such provisions of (b) and (c) above; provided that
nothing contained herein shall limit any continuation of coverage required by
law. However, subject to subsection (f) below, the securing of such other
employment by Executive shall not affect the Company's obligations with respect
to the continued payment to Executive of the other payments provided in this
Section 9. Executive shall notify the Company promptly of his securing of any
such employment (including employment as a consultant).
(e) Consulting Services by Executive. If Executive's Term of
employment is terminated by the Company for Disability, by the Company without
Cause or by Executive for Good Reason, Executive, in consideration of the
payments and benefits under Section 9(c) hereof, as applicable, shall provide
for a period of three years following the effective date of termination of his
employment hereunder, to the extent that he is physically and mentally able to
do so, such reasonable consulting services to the Company as the Company may
from time to time request; provided that, unless otherwise agreed to by
Executive, such services (i) shall not require in excess of an aggregate of 60
hours during any fiscal quarter, (ii) may be rendered by telephone and shall not
require Executive's presence in person, and (iii) subject to Sections 11(b) and
12 hereof, shall not preclude Executive from engaging in other employment or
activities. Such services shall be at the direction and control of the Board or
a senior executive officer designated by the Board.
(f) Reductions, Forfeitures, etc. Notwithstanding the
foregoing or Section 10 hereof, (i) any payments or benefits required to be paid
or provided to Executive pursuant to Sections 7(a), 9(c) and 10(b) hereof on
account of Executive's Disability shall be reduced to the extent that comparable
payments or benefits are received by Executive for such Disability during such
period under the Company's disability plan, as in effect from time to time, and
(ii) except as otherwise expressly provided herein, the payments and benefits
required by this Section 9 shall be made or provided at such times as they would
have been paid or provided if Executive's employment had not been terminated.
(g) Full Settlement. In the event of the termination of
Executive's employment, the payments and other benefits provided for by this
Agreement (and as otherwise provided under the express terms of any compensation
or benefit plans of the Company, its subsidiaries or Affiliates, to the extent
not inconsistent with this Agreement, or as may otherwise be required by
applicable law) shall constitute the entire obligation of the Company, its
subsidiaries and Affiliates to Executive for compensation and benefits and shall
also constitute full and complete settlement of any claim under law or in equity
that the Executive might otherwise assert against the Company, its subsidiaries
or Affiliates, for compensation and benefits or any of its or their respective
directors, officers or employees on account of such termination of employment.
10. Change in Control, Tax Gross-up; etc.
(a) In the event of a Change in Control (as defined
in subsection (d) below):
(i) any and all restricted stock and restricted stock
rights then held by Executive shall thereupon fully
vest and become immediately transferable free of
restrictions, other than restrictions imposed by
applicable securities laws;
(ii) (A) any and all outstanding unvested stock
options and stock appreciation rights held by
Executive shall thereupon vest and become immediately
exercisable, (B) such options and rights shall
otherwise be exercisable in accordance with their
terms, and (C) notwithstanding anything to the
contrary contained in clause (B), all options and
stock appreciation rights held by Executive shall be
exercisable for three years (one year (or less for
incentive stock options) in the case of options
granted under the Company's 1994 Stock Option Plan to
the extent required by such Plan) after termination
of employment (regardless of the party initiating the
termination, for any reason or no reason (including
without limitation by virtue of Cause, death or
Disability)), except that this clause (C) shall not
extend the generally applicable term of the options
or rights which is measured from the date of grant
thereof, nor shall it preclude earlier termination of
options, to the extent required, in the event of a
corporate transaction, in accordance with Section
3(b) of the 1994 and the 1997 Stock Option Plans; and
(iii) any and all benefits accrued by Executive under
the terms of any Non-qualified Plans shall thereupon
fully vest and the Company shall immediately
contribute to a rabbi trust for the benefit of
Executive the full amount of all such accrued
benefits (and the Company shall make additional
contributions to such rabbi trust equal to the full
amount of any additional benefits accrued by
Executive pursuant to such plans).
(b) In addition to the payments and benefits provided
in subsection (a) above, in the event of any
termination of Executive's employment for any of
the reasons set forth in Section 9(c) hereof
within the 24-month period following a Change in
Control, or if Executive shall voluntarily
terminate his employment at any time not earlier
than six months nor later than one-year following
a Change in Control, or if Executive's employment
with the Company is terminated for any of the
reasons set forth in 9(a) (except for Retirement)
in the 12-month period following a Change in
Control:
(i) the Company shall pay or cause
to be paid to Executive (or his
estate, as the case may be) (A)
his Base Salary accrued through
the effective date of such
termination, at the rate in
effect immediately prior to such
termination, (B) any other
amounts to which Executive is
entitled under the terms of
Section 5 and 6 hereof through
the effective date of such
termination, and (C) such
additional benefits, if any, as
he may be entitled to under the
express terms of the applicable
benefit plans (other than
severance plans) of the Company,
its subsidiaries and Affiliates;
(ii) the Company shall pay to
Executive (or his estate, as the
case may be) an amount equal to
2.99 times the sum of (A)
Executive's Base Salary, at the
rate in effect immediately prior
to such termination, (B) the
annual amount to which he then
is entitled under the Company's
Executive Perquisites Program,
and (C) the most recent
Performance Bonus awarded to
Executive, or, if higher, the
Performance Bonus most recently
awarded to him before the Change
in Control, such amount to be
paid no later than three
business days after such
termination;
(iii) the Company shall continue for a
period of four years following
the effective date of such
termination, or until
Executive's earlier death, to
provide the Life Insurance
Coverage specified in Section
6(b) hereof;
(iv) the Company shall continue to
provide for a period of four
years following the effective
date of such termination, the
medical (including dental,
orthodontic and optical)
coverage specified in Appendix B
hereto and on the terms and
conditions so specified at
substantially the same level as
provided to Executive and his
spouse and his eligible
dependents from time to time,
and following the four-year
period, Executive and such other
parties shall be entitled to
(together with the gross-up
referred to in the last sentence
of Section 4 of Appendix B
hereto, if applicable), lifetime
medical, prescription drug,
vision, dental, orthodontic,
etc., coverage under the
medical, prescription drug,
vision, dental, orthodontic,
etc., plans applicable to senior
executives of the Company on the
same terms as the most
comprehensive medical coverage
available to any senior
executive of the Company;
provided that the Company may
offset its obligations under the
foregoing provisions of this
Section 10(b)(iv) by any health
benefits which Executive
receives during the applicable
period from a successor
employer, so long as the
aggregate coverage (from the
Company and the successor
employer) is no less, as to each
and every amount payable and
other benefit, than the coverage
otherwise applicable with
respect to such period hereunder
under the provisions of this
Section 10(b)(iv) without regard
to this proviso;
(v) Executive will become fully
vested in the Company's
Non-qualified Plans and no later
than 30 days after Executive's
termination of employment, the
Company shall pay to Executive
the sum of (A) the present value
of all benefits accrued under
the Non-qualified Plans (as
supplemented by any early
retirement subsidies) using such
actuarial assumptions as are
then used to fund the Company's
tax-qualified defined benefit
pension plan (or, if there is no
such plan, such actuarial
factors as would reasonably be
used by comparable companies in
funding defined benefit pension
plans (but including, in all
events, an interest rate no
greater than the rate that would
then be used by the Pension
Benefit Guaranty Corporation to
value immediate annuities upon
plan termination)); (B) an
amount equal to four times the
average benefit accrued (in the
case of plans providing for
accruals of identified future
benefits) and Company
contributions (in the case of
other plans) made to the
Company's tax-qualified defined
benefit plan and profit-sharing
and 401(k) retirement plan and
the Non-qualified Plans over the
previous three fiscal years (as
supplemental by, in the case of
accrued benefits, any early
retirement subsidies); (C) any
amount in Executive's account
under the Company's profit
sharing and 401(k) plan
forfeited by the Executive due
to his termination; and (D) the
present value of any accrued
benefit (as supplemented by any
early retirement subsidies)
under any defined benefit plan
of the Company forfeited by
Executive due to his
termination, determined using
such actuarial assumptions as
are then used to fund such plan;
and
(vi) the Company shall provide
Executive with out placement
service through a bona fide out
placement organization
acceptable to,, Executive that,
at a minimum, agrees to supply
Executive with out placement
counseling, a private office and
administrative support including
telephone service until such
time that Executive secures
suitable employment.
(c) If all, or any portion, of the payments
or other benefits provided under any
section of this Agreement (including,
without limitation, Sections 9 and 10
hereof), either alone or together with
other payments and benefits which
Executive receives or is entitled to
receive from the Company or its
Affiliates, would constitute an excess
"parachute payment" within the meaning of
Section 280G of the Code (whether or not
under an existing plan, arrangement or
other agreement) (each such excess
parachute payment, a "Parachute
Payment"), and would result in the
imposition on Executive of an excise tax
under Section 4999 of the Code, then, in
addition to any other benefits to which
Executive is entitled under this
Agreement, Executive shall be paid by the
Company an amount in cash equal to the
sum of the excise taxes payable by
Executive by reason of receiving
Parachute Payments plus a gross-up amount
necessary to offset any and all
applicable federal, state and local
excise, income or other taxes incurred by
Executive by reason of the Company's
payment of the amount of such excise
taxes or incurred by reason of the
gross-up payments made pursuant to this
Section 10(c). The amount of the
payments under this Section 10(c) (the
"Parachute Gross-up") shall be computed
by Ernst & Young LLP or by another
certified public accounting firm of
national reputation mutually agreeable to
the Company and Executive. If either the
Company or Executive desires to dispute
the computation rendered by such
accounting firm, the disputing party may
select an alternative certified public
accounting firm of national reputation to
perform the applicable computations. If
the two accounting firms cannot agree
upon the computations, Executive and the
Company will jointly appoint a third
certified public accounting firm of
national reputation, reasonably
acceptable to Executive and the Company,
within 10 calendar days after the two
conflicting computations have been
rendered. Such third accounting firm
shall be asked to determine within 30
calendar days the computation of the
Parachute Gross-up to be paid to
Executive, and payments shall be made
accordingly. In any event, the Company
will pay to Executive or pay on
Executive's behalf the Parachute Gross-up
as computed by the initial accounting
firm by the time any taxes payable by
Executive as a result of the Parachute
Payments become due, with Executive
agreeing promptly to return the excess
amount of such payment over the final
computation rendered from the process
described in this Section 10(c).
Executive and the Company will provide
the accounting firms with all information
which any such accounting firm reasonably
deems necessary in computing the
Parachute Gross-up to be paid to
Executive. The costs and expenses of all
of the accounting firms retained to
perform the computations described above
shall be borne by the Company.
(d) For purposes of this Agreement, "Change in Control"
shall mean the happening of any of the following:
(i) the members of the Board at the
beginning of any consecutive 24
calendar month period (the
"Incumbent Directors") cease for
any reason other than due to
death to constitute at least a
majority of the members of the
Board, provided that any
director whose election, or
nomination for election by the
Company's stockholders, was
approved by a vote of at least a
majority of the members of the
Board then still in office who
were members of the Board at the
beginning of such 24 calendar
month period, shall be deemed an
Incumbent Director;
(ii) any "person", including a
"group" (as such terms are used
in Sections 13(d) and 14(d) of
the Exchange Act, but excluding
the Company, any of its
Affiliates, or any employee
benefit plan of the Company or
any of its Affiliates) is or
becomes the "beneficial owner"
(as defined in Rule 13(d)(3)
under the Exchange Act),
directly or indirectly, of
securities of the Company
representing 30% or more of the
combined voting power of the
Company's then outstanding
securities;
(iii) the stockholders of the Company
shall approve a definitive
agreement (A) for the merger or
other business combination of
the Company with or into another
corporation if (1) a majority of
directors of the surviving
corporation were not directors
of the Company immediately prior
to the effective date of such
merger or (2) the stockholders
of the Company immediately prior
to the effective date of such
merger own less than 50% of the
combined voting power in the
then outstanding securities in
such surviving corporation or
(B) for the sale or other
disposition of all or
substantially all of the assets
of the Company; or
(iv) the purchase of Common Stock
pursuant to any tender or
exchange offer made by any
"person", including a "group"
(as such terms are used in
Sections 13(d) and 14(d) of the
Exchange Act), other than the
Company, any of its Affiliates,
or any employee benefit plan of
the Company or any of its
Affiliates, for 30% or more of
the Common Stock of the Company.
(e) If Executive's employment with the
Company is terminated prior to the date
on which a Change in Control occurs, and
if it is reasonably demonstrated by
Executive that such termination of
employment (i) was at the request of a
third party who has taken steps
reasonably calculated to effect a Change
in Control or (ii) otherwise arose in
connection with or in anticipation of a
Change in Control, then, for all purposes
of this Agreement, such termination shall
be treated as a termination following a
Change in Control and shall be covered by
this Section 10 accordingly.
(f) It is the intention of the parties that
the provisions of this Section 10 shall
govern the determination of the payments
and benefits to which Executive is
entitled in the event of termination of
his employment (in the circumstances
specified in subsection (b) above)
following a Change in Control (and in the
circumstances specified in subsection (e)
above), and in the event of any such
specified terminations of employment the
provisions of this Section 10 shall
supersede the provisions of Sections
9(a), (b), (c), (d) and (e) hereof.
11. Certain Obligations of Executive.
Executive further covenants with the Company as follows. As
used in Sections 11 and 12 hereof, the term the "Company" shall include GTECH
Holdings Corporation and its subsidiaries and Affiliates.
(a) Assistance in Litigation. During the Term, and for a
period of three years thereafter, Executive, upon reasonable notice, shall
furnish such information and proper assistance to the Company as may reasonably
be required in connection with any litigation in which the Company is, or may
become, a party. If such information or assistance is required in the three-year
period following the Term, Executive shall be reimbursed by the Company for any
and all reasonable expenses incurred by him in providing such information and
assistance and shall be compensated by the Company at a reasonable hourly rate
to be agreed upon by the parties for the time he spends providing such
information and assistance.
(b) Confidential Information, Proprietary Rights, etc. (i)
Executive shall not knowingly use for his own benefit or disclose or reveal to
any unauthorized person, during or after the Term, except as appropriate in
connection with Executive's performance of his duties, any trade secret or other
confidential information relating to the Company, including any customer lists,
customer needs, price and performance information, processes, specifications,
hardware, software, firmware, programs, devices, supply sources and
characteristics, business opportunities, marketing, promotional, pricing and
financing techniques, or other information relating to the business of the
Company; provided that such restriction on confidential information shall not
apply to information which is (i) proven to be generally available in the
industry, (ii) disclosed in published literature or (iii) obtained by Executive
after the Term from a third party without binder of secrecy. Executive agrees
that, except as otherwise agreed by the Company, he will return to the Company,
promptly upon the request of the Board or any executive officer designated by
the Board, any physical embodiment of such confidential information, except that
in any event Executive may retain his rolodex.
(ii) All rights, title and interest in and to any ideas,
inventions, technology, processes, know-how, works, hardware, software,
firmware, programs, devices, trade secrets, trade names, trademarks or service
marks, which Executive may conceive, create, organize, prepare or produce during
the period of his employment with the Company and which relate to the business
of the Company, and all rights, title and interest in and to any patents, patent
applications, copyright registrations and copyright applications resulting
therefrom, shall be owned by the Company, and Executive agrees to execute
instruments or documents, to provide evidence and testimony, and to otherwise
assist the Company in establishing, enforcing and maintaining such rights, title
and interest of the Company during the Term. Executive further agrees to provide
reasonable assistance to the Company, including executing documents, providing
evidence and testimony, in establishing, enforcing and maintaining such rights,
title and interest of the Company after the Term; provided that the Executive
shall be compensated at a reasonable hourly rate to be agreed upon by the
parties and reimbursed for any and all reasonable expenses incurred as well as
for any compensation from other sources that Executive can demonstrate was
foregone by virtue of providing such assistance.
(iii) Executive does hereby irrevocably constitute, authorize,
empower and appoint the Company, or any of its officers, such Executive's true
and lawful attorney (with full power of substitution and delegation) in
Executive's name, and in Executive's place and stead, or in the Company's name,
to take and do such action, and to make, sign, execute, acknowledge and deliver
any and all instruments or documents which the Company, from time to time, may
deem desirable or necessary to vest in the Company, its successors and assigns,
any of the rights, title or interest granted pursuant to clause (ii) above for
the use and benefit of the Company, its successors and assigns.
12. Non-Competition. (a) For a period of three years following
termination of Executive's employment (irrespective of the reason for such
termination), Executive shall not engage or propose to engage, directly or
indirectly (which includes owning, managing, operating, controlling, being
employed by, acting as a consultant to, giving financial assistance to,
participating in or being connected in any material way with any business or
person so engaged) anywhere in the United States, including its territories and
possessions, or in any foreign country (the United States and any such foreign
country being deemed to be a separate "Territory") in any business which
competes or proposes to compete with any business (including, without
limitation, the Lottery and Gaming Business, the EBT Business and network
communications services) in which the Company was engaged or proposed to be
engaged in such Territory at the time of the termination of Executive's
employment; provided, that Executive's ownership as a passive investor of less
than one percent of the issued and outstanding stock or equity, or $100,000
principal amount of any debt securities, of any corporation, partnership or
other entity so engaged shall not by itself be deemed to constitute such
engagement by Executive.
As used herein, the "Lottery and Gaming Business" shall mean
the provision of products or services of every nature relating to the operation
of all manner of lotteries, non-lottery games of chance and parimutuel wagering
however and wherever conducted, and "EBT Business" shall mean the provision of
products or services of every nature relating to the distribution by electronic
means of payments or payments in kind, and the conducting by electronic means of
financial transactions, relating to governmental public assistance programs.
The parties acknowledge that the business of the Company is
subject to change and they agree periodically to update, by Addendum to this
Agreement, the description of the business in which the Company is engaged and
to which this subsection (a) relates to reflect accurately material changes
which occur while the Executive is employed by the Company.
(b) Further, for a period of three years following termination
of Executive's employment (irrespective of the reason for such termination),
Executive shall not (i) intentionally disturb or interfere with any business
relationship between the Company and any of its employees, dealers, customers,
suppliers or similar business associates, or (ii) solicit or cause to be
solicited any officer or employee of the Company to terminate such person's
relationship with the Company.
13. Tax Withholding.
The Company may withhold from any benefits payable under this
agreement all Federal, State, City, or other taxes as shall be required pursuant
to any law or governmental regulations or ruling.
14. Effect of Prior Agreements.
This Agreement, including the Appendices hereto, contains the
entire understanding between the parties hereto with respect, to the matters
covered herein and supersedes any prior agreement (including the 1994
Agreement), condition, practice, custom, usage and obligation with respect to
such matters insofar as any such prior agreement, condition, practice, custom,
usage or obligation might have given rise to any enforceable right.
15. General Provisions.
(a) Indemnification; Liability Insurance. Executive shall,
from time to time, be indemnified by the Company in connection with his
performance of services hereunder, at the maximum level permitted by law. The
Company shall cause Executive (together with other officers and directors) to be
covered from time to time by directors and officers liability insurance
substantially similar to that provided to the Company's directors and officers
immediately before the beginning of the Term, but in no event shall such
liability insurance provide less than $20,000,000 of coverage for all such
directors and officers, including Executive. The Company shall continue to
indemnify Executive as provided above, and maintain such liability insurance
with coverage for Executive, after the Term has ended for any claims that may be
made against Executive with respect to his service as a director or officer of
the Company.
(b) Non-assignability. Neither this Agreement nor any rights
or interest hereunder shall be assignable by Executive, his beneficiaries, or
legal representatives without the Company's prior written consent. In the event
of any sale, transfer or other disposition of all or substantially all of the
Company's assets or business, whether by merger, consolidation or otherwise to
any entity or person other than the Company, this Agreement, and the rights and
obligations of the Company under it, shall be transferred to such entity or
person pursuant to an agreement in form and substance reasonably satisfactory to
Executive from any successor to the business of the Company to assume and agree
to perform this Agreement, but such assignment or transfer shall not limit the
Company's liability under this Agreement to Executive. Notwithstanding the
foregoing, in no event shall any such assignment of this Agreement adversely
affect Executive's rights upon the occurrence of a Change in Control as provided
for in Section 10 herein.
(c) Binding Agreement. This Agreement shall be binding upon,
and accrue to the benefit of, Executive and the Company and their respective
heirs, executors, administrator, successors and permitted assigns, including, in
the case of the Company, any person or entity acquiring all or substantially all
of the Company's assets.
(d) Amendment of Agreement. This Agreement may not be modified
or amended except by an instrument in writing signed by the parties hereto.
(e) Disputes; Remedies etc.. Executive acknowledges and agrees
that the possible restrictions on his activities which may occur as a result of
his performance of his obligations under Sections 11(b) and 12 hereof are
required for the reasonable protection of the Company, its subsidiaries and
Affiliates, and Executive expressly acknowledges and agrees that such
restrictions are fair and reasonable for that purpose. Executive further
expressly acknowledges and agrees that damages alone will be an inadequate
remedy for any breach or violation by him of this Agreement and that the
Company, its subsidiaries and Affiliates, in addition to all other remedies at
law or in equity, shall be entitled as a matter of right to injunctive relief,
including specific performance, with respect to any such breach or violation, in
any court of competent jurisdiction including, without limitation, any state or
federal court in Rhode Island. If any of the provisions of such Sections are
held to be in any respect an unreasonable or unlawful restriction upon
Executive, then they shall be deemed to extend only over the maximum period of
time, geographic area, and/or range of activities as to which they may be
enforceable.
The Company shall pay, at least monthly, all costs and
expenses, including attorney's fees and disbursements, incurred by Executive in
connection with any legal proceeding (including an arbitration), whether or not
instituted by the Company or Executive, relating to any provisions of this
Agreement, including but not limited to the interpretation, enforcement or
reasonableness thereof; provided that, (i) if Executive instituted the
proceeding and the judge or other decision-maker presiding over the proceeding
affirmatively finds that Executive has failed to prevail on all material issues,
or (ii) if at issue is whether or not Executive was discharged by the Company
for Cause and such judge or other decision-maker finds that Executive was
properly so discharged for Cause in accordance with this Agreement (except that
this clause (ii) shall not apply if Executive is seeking to enforce his rights
to amounts or benefits to which he may be entitled hereunder as a result of his
discharge for Cause), Executive shall pay his own costs and expenses (and, if
applicable, return any amounts theretofore paid to Executive or on his behalf
under this Section 15(e)).
The parties further agree that, except as expressly otherwise
provided in this Agreement, the state and federal courts of Rhode Island shall
have exclusive jurisdiction over disputes arising with respect to this
Agreement, and the parties hereby submit to such jurisdiction.
(f) Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel.
(g) Severability. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not so held invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
(h) Notices. For the purposes of this Agreement, notice and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when hand delivered or mailed by United
States certified or registered express mail, return receipt requested, postage
prepaid, if to Executive, addressed to the address set forth on the signature
page of this Agreement, with a copy to Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000-0000, directed to the attention of Xxxxxx X. Xxxxxxx, Esq.;
if to the Company, addressed to GTECH Holdings Corporation, 00 Xxxxxxxxxx Xxx,
Xxxx Xxxxxxxxx, Xxxxx Xxxxxx 00000 and directed to the attention of the Board
with a copy to the Secretary of the Company; if to a member of the Board,
addressed to each member at his respective address on file with the Secretary of
the Company with a copy to the Company, or to such other address as either party
may have furnished to the others in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
(i) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(j) Indulgences, Etc. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence.
(k) Headings. The headings of Sections and paragraphs herein
are included solely for convenience of reference and shall not affect the
meaning or interpretation of any of the provisions of this Agreement.
(l) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
(m) Joint and Several Liability. Notwithstanding any other
provision of this Agreement, each of the Company and Subsidiary, and their
successors and assigns, shall be jointly and severally liable for all
obligations of any of them to Executive hereunder. In the event that a
substantial portion of the assets of the Company or the Subsidiary are
transferred to any other direct or indirect subsidiary or other affiliate of the
Company, whether in one transaction or a series of transactions, the Company or
the Subsidiary, as applicable, shall cause (prior to or concurrently with each
transfer) the transferee to become a signatory to this Agreement and to become
jointly and severally liable for all obligations or any of them to Executive
hereunder.
IN WITNESS WHEREOF, GTECH Holdings Corporation and GTECH
Corporation has caused this Agreement to be executed by their duly authorized
officers, and Executive has signed this Agreement, all as of the day and year
first above written.
GTECH HOLDINGS CORPORATION
Attest:/s/ Xxxxxxxxxx Xxxxxxx By: /s/ Xxx X. Xxxxxxx
Name:Xxxxxxxxxx Xxxxxxx Name: Xxx X. Xxxxxxx
Title:Exec. Assistant Title: Chairman of the Board
GTECH CORPORATION
Attest: /s/ Xxxxxxxxxx Xxxxxxx By: /s/ Xxx X. Xxxxxxx
Name:Xxxxxxxxxx Xxxxxxx Name:Xxx X. Xxxxxxx
Title:Exec. Assistant Title: Chairman of the Board
Witness: /s/ Xxxxx Xxxxxxxxx EXECUTIVE
/s/ Xxxxxxx X. X'Xxxxxx
Xxxxxxx X. X'Xxxxxx
Address: 00 Xxxxxxxxxx Xxx
Xxxx Xxxxxxxxx, XX 00000
APPENDIX A
Summary of Terms of Stock Options
The stock options granted to Executive as provided in Section 6(d) of
the 1994 Agreement were granted pursuant to the Company's 1994 Stock Option Plan
and are subject to the terms and conditions of that Plan and the stock option
agreements dated December 20, 1994, January 30, 1995, August 9, 1995 and January
2, 1996, governing such options (provided, however, that "Cause" and "Good
Reason" for purposes thereof shall be exclusively as defined in this Agreement),
as well as the provisions of Section 10(a) of this Agreement. Any future stock
options granted to Executive shall have the following attributes:
Nature of Options - Nonqualified unless otherwise determined by the
Committee.
Exercisability - Options shall become exercisable (i.e. vest) in four equal
annual installments commencing one year from the dates of grant of the
particular option and subject to acceleration under the terms of the applicable
Plan.
Option Price - Fair market value at the date of the grant of
the particular option.
Term - Ten years from the date of grant of the particular option,
subject to earlier termination in certain circumstances under the terms of the
applicable Plan.
Termination of Employment - In the event
Executive's employment is terminated: (i) by reason of death or Retirement, by
the Company for Disability or without Cause, or by Executive's resignation for
Good Reason, his outstanding options, whether or not they have vested on the
date of such termination of employment, shall accelerate and become vested in
full and shall remain exercisable for a period of one year; and (ii) for any
reason other than those listed in (i) above, Executive's outstanding options
(i.e, options which have been granted but have not been exercised or terminated
and have not expired), to the extent they are vested at the date of such
termination, shall remain exercisable for a period of six months, provided that
in no event shall any option be exercisable after the expiration of its term.
Notwithstanding the foregoing, (i) the period of exercisability of options
granted under the Company's 1994 and 1997 Stock Option Plans following
termination of employment specified above is subject to possible reduction in
certain circumstances to the extent required under the terms of Section 3(b) of
the 1994 and 1997 Stock Option Plans, (ii) in the event of a Change in Control,
the provisions of Section 10(a) of the Agreement shall be applicable to all
Executive's stock options whether heretofore or hereafter granted, and (iii) in
no event shall any option be exercisable after the expiration of its term.
APPENDIX B
Summary of Certain Benefits and Arrangements
1. Housing & Related Matters.
(a) Possible Relocation. Executive currently owns a home in
New Jersey and has the use of a condominium in Rhode Island. If Executive
commits to relocate his primary residence within one year from the date of this
Agreement to either the West Greenwich, Rhode Island, or Boca Raton, Florida,
areas, the Company shall:
(i) extend the due date of the Company's outstanding 6%
$500,000 principal amount loan to Executive from November 1, 1999 to January 1,
2000 and forgive $125,000 of the principal of such loan in four installments,
commencing August 1, 1997 and on January 1, 1998, 1999 and 2000; provided,
however, that Executive shall remain responsible for making the interest
payments on the outstanding balance of such loan and for any taxes arising from
the forgiveness of principal;
(ii) provide Executive with an unsecured $1,000,000 revolving
line of credit for the purpose of facilitating the move to and/or renovating his
new primary residence in the West Greenwich or Boca Raton area, any such line of
credit loan to bear interest at the lowest Applicable Federal Rate established,
from time to time, by the Internal Revenue Service, such line of credit to
terminate and any loan outstanding thereunder to become payable in full on the
earlier of ten days following the sale of Executive's home in New Jersey or July
14, 2002; and
(iii) pay Executive's moving expenses to Florida or Rhode
Island, as the case may be, and in the event that Executive incurs federal,
state or local income taxes attributable to the Company's bearing such moving
expenses, the Company shall pay Executive a gross-up payment sufficient to
offset any such income taxes (excluding any interest or penalties) and any such
income taxes imposed by reason of the gross-up payment.
Notwithstanding the foregoing, the outstanding balances of
the above loan and line of credit, if not earlier due, shall become due and
payable 120 days after Executive's Term of employment has terminated for any
reason, other than a termination by the Company without Cause or a termination
by Executive for Good Reason.
The above loan and line of credit shall be evidenced by such
promissory notes and collateral documents as the Company may reasonably request.
(b) During the Term, the Company, at its expense, shall
provide Executive with the use of a suitable furnished condominium in whichever
of the West Greenwich or Boca Raton area as to which he does not relocate his
primary residence, or in one of such areas if he does not choose to relocate his
primary residence to either such area. The Company shall pay Executive gross-up
payments in the same manner as specified in subsection (a)(iii) above for any
taxes attributable to the Company's bearing such condominium expenses or to the
gross-up payment.
(c) The benefits provided in this Section 1 are in lieu of
any other benefits under the Company's relocation policy.
2. Vacation. During the Term, Executive shall be entitled to
a paid vacation of four weeks per year.
3. Automobile. During the Term, the Company shall make
available to Executive for his own use a passenger automobile, such as a BMW
750i or its equivalent, as Executive may select. Executive shall be entitled to
select a new automobile once every three years. All expenses of operating,
repairing, insuring, garaging and otherwise maintaining such automobile shall be
borne by the Company. Further, in the event that Executive incurs federal, state
or local income taxes attributable to the Company's providing such automobile
and bearing such expenses, the Company shall pay Executive a gross-up payment
sufficient to offset any such income taxes (excluding interest or penalties) and
any such income taxes imposed by reason of the gross-up payment.
4. Medical. During the Term (and thereafter as and to the
extent expressly provided in the Agreement), the Company shall bear the cost of
all medical expenses reasonably incurred by Executive and his family (family
eligibility to be determined in accordance with the Company's general policies
concerning medical coverage), including hospitalization (private room), dental,
orthodontic, optical and choice of physicians such coverage to be 100% of
expenses and to be at no cost to Executive nor his family, including without
limitation no premiums, no deductibles and no co-payments. Further, during the
Term, the cost of Executive's annual physical examination also shall be borne by
the Company. The Company shall pay Executive a gross-up payment sufficient to
offset any income taxes as may arise by virtue of Section 105(h) of the Code and
any such income taxes imposed by reason of the gross-up payment.
5. Spousal Travel. During the Term, the Company shall bear
the expense of first class air travel and related travel living expenses for
Executive and his spouse on Executive's business trips. Further, in the event
that Executive incurs federal, state or local income taxes attributable to the
Company's bearing such travel expenses for his wife, the Company shall pay
Executive a gross-up payment sufficient to offset any such income taxes
(excluding any interest or penalties) and any such income taxes imposed by
reason of the gross-up payment.
6. Tax Preparation. During the Term, the Company shall bear
the expense for annual tax preparation for Executive. The Company shall pay
Executive gross-up payments in the same manner as set forth in Section 5 above
for any taxes attributable to the Company's bearing such tax preparation
expenses or to the gross-up payment.
7. Certain Fees. During the Term, the Company shall provide
Executive with a reasonable allowance for health club, country club and other
similar club memberships, for home security and for computer, facsimile and
other similar equipment; and the Company shall pay Executive gross-up payments
in the same manner as set forth in Section 5 above for any taxes attributable to
such allowances or to the gross-up payment.
8. Perquisite Plan. During the Term, Executive shall be
entitled to participate in the Company's Executive Perquisites Plan. Among the
items which may be selected under the Plan (subject to the Plan's cap) are
estate planning and other financial services. The Company shall pay Executive
gross-up payments in the same manner as set forth in Section 5 above for any
taxes attributable to items selected under the Executive Perquisites Plan or to
the gross-up payment. Benefits specifically numbered above in this Appendix B
shall not be deemed to be provided under the Plan or subject to the Plan's cap.
9. Professional Fees. The Company shall pay the reasonable
professional fees of Executive in connection with the negotiation and
preparation of this Agreement, including attorneys' fees, compensation
consultants' fees and their related expenses and disbursements.
