EXHIBIT 10.26
EMPLOYMENT AGREEMENT
XXXXXX X. XXXXX
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is made as of October 1, 2000, by
and between, JACKPOT ENTERPRISES, INC., a Nevada corporation, with its
principal office at 0000 Xxxxx Xxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000 (the
"COMPANY"), and XXXXXX X. XXXXX residing at 0000 Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxx 00000 ("EXECUTIVE").
WITNESSETH:
WHEREAS, effective June 21, 2000 (the "COMMENCEMENT DATE"), the Company
employed Executive as its President and Chief Operating Officer, and
Executive accepted such employment; and
WHEREAS, the Company and Executive desire to enter into this Agreement
as to the terms of his employment by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment.
Except for earlier termination as provided in Section 7 hereof,
Executive's employment under this Agreement shall be for a three (3) year
term (the "EMPLOYMENT TERM") commencing on the Commencement Date and ending
on June 21, 2003 (the "EXPIRATION DATE").
2. Position.
(a) Executive shall serve as the Executive Vice President and Chief
Financial Officer of the Company (the "EXECUTIVE VICE PRESIDENT"), reporting
directly to the Chief Operating Officer of the Company and the Chief
Executive Officer of the Company. If requested by the Board of Directors of
the Company (the "BOARD"), the Chief Executive Officer or the Chief Operating
Officer, Executive shall also serve on the Board and committees thereof, as
an executive, officer and director of subsidiaries of the Company and/or as a
director of associated companies of the Company without additional
compensation and subject to any policy of the Compensation Committee of the
Company's Board (the "COMPENSATION COMMITTEE") with regard to retention or
turnover of the director's fees.
(b) Executive shall have such duties and authority, consistent with his
position, as shall be assigned to him from time to time by the Chief
Executive Officer.
(c) During the Employment Term, Executive shall devote substantially all
of his business time and efforts to the performance of his duties hereunder.
Nothing contained herein shall be construed to prohibit Executive from (i)
owning less than ten percent (10%) of the outstanding securities of any
publicly traded entity, (ii) pursuing any business opportunity that is not in
Competition, as such term is defined in Section 10(b) below, with the Company
or its subsidiaries or any portfolio company in which the Company or its
subsidiaries hold securities (other than entities in which the Company or its
subsidiaries make a nominal investment) (provided the time devoted by
Executive to such personal investment does not materially interfere with
Executive's duties hereunder), (iii) continuing service as a managing
director, manager, partner, or member, directly or indirectly, of any
investment management business in which Executive serves in such capacity on
the Commencement Date, (iv) continuing service on any board of directors on
which Executive serves as of the Commencement Date or service as a director
of a company that is not in Competition with the Company or its subsidiaries
or any portfolio company in which the Company or its subsidiaries hold
securities (other than entities in which the Company or its subsidiaries make
a nominal investment), provided, however, that Executive shall not hold more
than three (3) board seats at any time exclusive of his membership (if any)
on the Board or the board of directors of any subsidiary or affiliate of the
Company, or (v) service on the boards of directors of a reasonable number of
charitable organizations so long as such service is not inconsistent with his
position and duties hereunder (such activities described in clause (i), (ii),
(iii), (iv) or (v) immediately preceding being herein referred to as the
"ALLOWED ACTIVITIES"). Executive shall be entitled to retain any
consideration that he receives from service permitted by clauses (iii) and
(iv) of the immediately preceding sentence on any board of directors of a
corporation unrelated to the Company. For purposes hereof, a "nominal
investment" of the Company or its subsidiaries will be determined in relation
to the size of investments made from time to time by the Company or its
subsidiaries in its portfolio companies (including, without limitation,
investments made in exchange for cash, securities or services rendered).
3. Base Salary.
During the Employment Term, the Company shall pay Executive a Base Salary
at the annual rate of Two Hundred and Fifty Thousand Dollars ($250,000). Base
Salary shall be payable in accordance with the usual payroll practices of the
Company. Executive's Base Salary may be reviewed annually by the Board or the
Compensation Committee and may be increased, but not decreased, from time to
time by the Board or the Compensation Committee. The Base Salary as
determined as aforesaid, from time to time for the applicable fiscal year
shall constitute "BASE SALARY" for purposes of this Agreement.
4. Incentive Compensation.
(a) Bonus. For each fiscal year or portion thereof during the Employment
Term, Executive shall be entitled to participate in an incentive bonus plan
established by the Company on such terms and conditions, and subject to such
standards, as shall be determined from time to time in the sole discretion of
the Board or the Compensation Committee. Such incentive bonus for any such
fiscal year shall be payable in cash and shall not be greater than fifty
percent (50%) of Executive's rate of Base Salary in effect for the fiscal
year to which such incentive bonus relates. During the Employment Term, the
Company shall maintain an incentive bonus plan providing a target bonus equal
to not less than fifty percent (50%) of Executive's rate of Base Salary in
effect for the fiscal year to which the bonus relates.
(b) Stock Options. Executive acknowledges that as of the Commencement
Date the Stock Option Committee of the Board authorized the issuance to
Executive stock options (the "STOCK OPTIONS") to purchase 200,000 shares of
Common Stock of the Company. The Stock Options were granted pursuant to a
stock option award agreement or agreements between Executive and the Company.
The exercise price for such Stock Options was $13.125 per share of Common
Stock. Subject to the terms and provisions of the Stock Option Grants, the
Stock Options shall become exercisable on the dates indicated below as to
that number of shares of Common Stock of the Company as set forth below
opposite each such date.
June 21, 2001 66,667 shares
June 21, 2002 66,666 shares
June 21, 2003 66,666 shares
The foregoing schedule to the contrary notwithstanding, the Stock
Options shall become fully and immediately exercisable in the event the
Employment Term terminates prior to the Expiration Date by reason of
termination of the Executive's employment hereunder by Executive for Good
Reason or by the Company without Cause (as such terms are hereinafter
defined). The Stock Options shall in all events expire on the date ten years
after the Commencement Date, if not terminated or canceled earlier. The
Executive shall be permitted to transfer the Stock Options to the Executive's
immediate family members and/or lineal descendents (or a trust or family
limited partnership established solely for the benefit of any such immediate
family member and/or lineal descendent). Notwithstanding anything in the
Stock Option Grants to the contrary, to the extent any provisions contained
therein are inconsistent with or differ from the explicit terms and
conditions of this Agreement, the terms and conditions of this Agreement
shall control. To the extent this Agreement does not specifically address an
issue or term set forth in the Stock Option Grants, then the provisions and
terms of the Stock Option Grants shall apply.
(c) Adjustments. As more fully specified in the Stock Option Grants, the
number of shares covered by, and the option price per share of, the Stock
Options will be subject to adjustment by the Company for any stock split,
reclassification, combination or similar change in the Company's capital
stock.
(d) In addition the Company will loan the Executive up to $250,000 in
connection with his purchase of the Company's convertible notes.
5. Employee Benefits and Vacation.
(a) During the Employment Term, Executive shall be entitled to
participate in all pension, profit sharing, long-term incentive compensation,
retirement, savings, welfare and other employee benefit plans and
arrangements and fringe benefits and perquisites generally maintained by the
Company from time to time for the benefit of senior executive officers of the
Company of a comparable level, in each case in accordance with their
respective terms as in effect from time to time (other than any special
arrangement entered into by contract with an executive or that applies on a
grandfathered basis). Without limiting the foregoing, the Company shall pay
all premiums for Executive and his dependent family members under health,
hospitalization, disability, dental, life and other employee benefit plans
that the Company may have in effect from time to time. Executive acknowledges
that the Company does not currently provide a profit sharing plan, and has no
current intention of providing profit sharing benefits to its employees.
(b) During the Employment Term, Executive shall be entitled to at least
three (3) weeks paid vacation each year in accordance with the Company's
policies in effect from time to time. Executive shall also be entitled to
such periods of sick leave as is customarily provided by the Company to its
senior executive employees.
6. Business Expenses.
The Company shall reimburse Executive for the reasonable travel,
entertainment and other business expenses incurred by Executive, subject to
such pre-approval procedures as may be established from time to time by the
Board, in the performance of his duties hereunder, in accordance with the
Company's policies as in effect from time to time.
7. Termination.
(a) The employment of Executive and the Employment Term shall terminate
as provided in Section 1 hereof or, if earlier, upon the earliest to occur of
any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by the due to
Executive's Disability (as defined "Exhibit A") pursuant to Section 7(b)
hereof;
(iii) the termination of Executive's employment by for Good Reason
(as defined in "Exhibit A") pursuant to Section 7(c) hereof,
(iv) termination of Executive's employment by the Company without
Cause (as defined in "Exhibit A") to Section 7(e) hereof;
(v) termination of employment by Executive without Good Reason upon
thirty (30) days prior written pursuant to Section 7(f) hereof; or
(vi) termination of Executive's employment by the Company for Cause
pursuant to Section 7(d) hereof.
(b) Disability. If Executive is unable to perform his material duties
hereunder due to a physical or mental condition and the Company desires to
terminate Executive's employment for Disability (as defined in "Exhibit A"),
the Company shall deliver to Executive a written Notice of Disability
Termination (herein so called), effective upon the date (the "DISABILITY
TERMINATION DATE") which is the later of (i) the date such condition becomes
a Disability or (ii) thirty (30) days following the delivery of the Notice of
Disability Termination; provided that the Disability Termination Date shall
be suspended, and the Employment Term shall not terminate, so long as
Executive returns to the full performance of his duties by and following such
date.
(c) Termination for Good Reason. A Termination for Good Reason (herein
so called) means a termination by Executive by written notice given within
thirty (30) days after Executive knows of the occurrence of the Good Reason
event, unless such circumstances are corrected prior to the date of
termination specified in the Notice of Termination for Good Reason and the
Company informs Executive of such correction prior to such date. In such
event, the Employment Term shall not terminate. A Notice of Termination for
Good Reason shall mean a notice that shall indicate the specific Good Reason
event in Section (d) of "Exhibit A" relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
Termination for Good Reason. The failure by Executive to set forth in the
Notice of Termination for Good Reason any facts or circumstances which
contribute to the showing of Good Reason shall not waive any right of
Executive hereunder or preclude Executive from asserting such fact or
circumstance in enforcing his rights hereunder. The Notice of Termination for
Good Reason shall provide for a date of termination not less than thirty (30)
nor more than sixty (60) days after the date such Notice of Termination for
Good Reason is given.
(d) Cause. Subject to the notification provisions of this Section 7(d),
Executive's employment hereunder may be terminated by the Company for Cause.
A Notice of Termination for Cause (herein so called) shall mean a notice that
shall indicate the specific termination provision in Section (a) of "Exhibit
A" relied upon and shall set forth in reasonable detail the facts and
circumstances which provide for a basis for Termination for Cause. The
effective date of termination for a Termination for Cause shall be the date
indicated in the Notice of Termination. Any purported Termination for Cause
which is held by a court by a non-appealable final judgment not to have been
based on the grounds set forth in this Agreement or not to have followed the
procedures set forth in this Agreement shall be deemed a termination by the
Company without Cause.
(e) Termination without Cause. The Company may terminate its employment
of Executive for reasons other than Cause at any time upon thirty (30) days
prior written notice.
(f) Voluntary Resignation. Executive may terminate his employment with
the Company at any time upon thirty (30) days prior written notice.
8. Consequences of Termination of Employment.
Executive shall be entitled to the following compensation from the
Company (in lieu of all other sums owed or payable to Executive) upon the
termination of employment as described below:
(a) Death, Disability, Voluntary Resignation without Good Reason or by
the Company with Cause. If Executive's employment and the Employment Term are
terminated (1) by reason of Executive's death or Disability, (2) by Executive
without Good Reason or (3) by the Company for Cause, the employment period
under this Agreement shall terminate without further obligations to Executive
or Executive's legal representatives under this Agreement except for: (i) any
Base Salary earned but unpaid, any accrued but unused vacation pay payable
pursuant to the Company's policies and any unreimbursed business expenses
payable pursuant to Section 6 (which amounts, in the case of the death of
Executive, shall be promptly paid in a lump sum to Executive's estate), (ii)
any other amounts or benefits earned, accrued and owing to Executive under
the then applicable employee benefit plans, long term incentive plans or
equity plans and programs of the Company, including, without limitation, any
earned but unpaid incentive bonus for any prior completed fiscal year, and
(iii) except in the case of a termination by the Company for Cause or by
Executive without Good Reason, a pro-rata portion (based on the number of
days Executive is employed by the Company during the fiscal year of such
termination) of Executive's incentive bonus earned for the fiscal year in
which termination occurs, which, in any case, shall be paid in accordance
with the applicable plans, programs and agreements, and any unpaid
reimbursable business expenses (such amounts referred to in clauses (i) and
(ii), collectively, the "ACCRUED AMOUNTS").
(b) Termination by Executive for Good Reason or Termination by Company
without Cause. If Executive's employment and the Employment Term are
terminated (i) by Executive for Good Reason, or (ii) by the Company without
Cause (and other than for Disability or as a result of expiration of the
Employment Term), Executive shall be entitled to receive the Accrued Amounts
and shall, subject to Sections 9(b), 9(c) and 10 hereof, be entitled to
receive equal monthly payments of an amount equal to his monthly rate of Base
Salary in effect at the time of such termination plus his incentive bonus
paid for the most recently ended fiscal year (provided, however, if Executive
was employed hereunder for only a portion of such prior fiscal year, such
bonus shall be annualized for purposes of this calculation, and, if no bonus
was paid for such prior fiscal year, the current fiscal year's bonus, at 100
percent of target, shall be deemed to be the incentive bonus paid for the
most recently ended fiscal year for purposes of this calculation) divided by
twelve (12) for a period equal to the greater of (x) twelve (12) months or
(y) the remaining period of time from the date of such termination through
the Expiration Date. Notwithstanding the immediately preceding sentence to
the contrary, (1) if Executive's employment is terminated by the Company
without Cause (and other than for Disability or as a result of expiration of
the Employment Term), or if Executive terminates his employment for Good
Reason, other than Good Reason as defined in clause (i)(b) or clause (iv) of
Section (d) of "Exhibit A", the Severance Payments shall be paid to Executive
in a lump-sum following such termination, and (2) if Executive terminates his
employment for Good Reason as defined in clause (i)(b) or clause (iv) of
Section (d) of "Exhibit A", he shall, following the date which is six (6)
months following the date of such termination, upon his request, receive
payment in a lump-sum of the Severance Payments remaining unpaid on such
date.
(c) Termination Upon Expiration of Employment Term. If Executive's
employment with the Company terminates on the Expiration Date by reason of
expiration of the Employment Term, Executive shall be entitled to receive the
Accrued Amounts and shall, subject to Sections 9(b), 9(c) and 10 hereof, be
entitled to receive equal monthly payments of an amount equal to his monthly
rate of Base Salary in effect immediately prior to the Expiration Date plus
his incentive bonus paid for the most recently ended fiscal year divided by
twelve (12) for a period of twelve (12) months.
9. No Mitigation; No Set-Off.
(a) In the event of any termination of employment under Section 8,
Executive shall be under no obligation to seek other employment and there
shall be no offset against any amounts due Executive under this Agreement on
account of any remuneration attributable to any subsequent employment that
Executive may obtain. Any amounts due under Section 8 are in the nature of
severance payments and are not in the nature of a penalty. Such amounts are
inclusive, and in lieu of any amounts payable under any other salary
continuation or cash severance arrangement of the Company and to the extent
paid or provided under any other such arrangement shall be offset from the
amount due hereunder.
(b) (i) Executive agrees that, as a condition to receiving the payments
and benefits provided under Section 8(b) or (c) hereunder he will execute,
deliver and not revoke (within the time period permitted by applicable law) a
release of all claims of any kind whatsoever against the Company, its
affiliates, officers, directors, employees, agents and shareholders in the
then standard form being used by the Company for senior executives (but
without release of the right of indemnification hereunder or under the
Company's By-laws or rights under benefit or equity plans that by their terms
are intended to survive termination of his employment or claims that the
Company fulfill its obligations under this Agreement).
(ii) The Company agrees that, as a condition to Executive's
agreements under Section 10 hereof, the Company will execute and deliver a
release of all claims of any kind whatsoever against Executive (but without
release of claims that Executive fulfill his obligations under this
Agreement). The Company's release under this paragraph (b)(ii) of this
Section 9 shall be executed and delivered simultaneously with the execution
and delivery of Executive's release under paragraph (b)(i) of this Section 9.
The releases referred to in this paragraph (b) of this Section 9 shall apply
to all claims described in this paragraph existing from the beginning of time
through the date of each party's execution of his or its release.
(c) Upon any termination of employment, Executive hereby resigns as an
officer and director of the Company, any subsidiary and any affiliate and as
a fiduciary of any benefit plan of any of the foregoing. Executive shall
promptly execute any further documentation thereof as requested by the
Company and, if Executive is to receive any payments from the Company,
execution of such further documentation shall be a condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of
the Company.
(a) (i) Executive acknowledges that as a result of his employment by
the Company, Executive will obtain secret and confidential information as to
the Company and its affiliates and create relationships with customers,
suppliers and other persons dealing with the Company and its affiliates and
the Company and its affiliates will suffer irreparable damage, which would be
difficult to ascertain, if Executive should use such confidential
information or take advantage of such relationships and that because of the
nature of the information that will be known to or obtained by Executive and
the relationships created it is necessary for the Company and its affiliates
to be protected by the prohibition against Competition as set forth herein,
as well as the confidentiality restrictions set forth herein.
(ii) Executive acknowledges (A) that the retention of non clerical
employees, employed by the Company and its affiliates in which the Company
and its affiliates have invested training and depends on for the operation of
their businesses, is important to the businesses of the Company and its
affiliates, and (B) that Executive will obtain unique information as to such
employees as an executive of the Company and will develop a unique
relationship with such persons as a result of being an executive of the
Company. Therefore, it is necessary for the Company and its affiliates to be
protected from Executive's Solicitation (defined below) of such employees as
set forth below.
(iii) Executive acknowledges that the provisions of this Agreement
are reasonable and necessary for the protection of the businesses of the
Company and its affiliates and that part of the compensation paid under this
Agreement and the agreement to pay severance in certain instances is in
consideration for the agreements in this Section 10.
(b) COMPETITION shall mean: participating, directly or indirectly, as an
individual proprietor, partner, stockholder, officer, employee, director,
joint venturer, investor, lender with equity participation, consultant or in
any capacity whatsoever (within the United States of America, or in any
country where the Company or its affiliates do business) in a Competing
Business; provided, however, that such participation shall not include (i)
the ownership of not more than ten percent (10%) of the total outstanding
stock of a publicly held company; (ii) following a termination of Executive's
employment thereunder, the ownership of not more than five percent (5%) of
the total outstanding stock of a private company if Executive is neither a
member of, or represented on, the board of directors of such private company
and does not have an executive officer role in such private company; (iii)
the Allowed Activities; or (iv) any activity engaged in with the prior
written approval of the Board. As used herein, "Competing Business" means any
business that the Company and/or its subsidiaries and/or any entity in which
the Company and/or its subsidiaries holds securities (other than entities in
which the Company or its subsidiaries make a "nominal investment" (determined
as described in Section 2(c) hereof)) are engaged in (I) from time to
time(while Executive is employed by the Company) or (II) at the time of
termination (upon termination of Executive's employment) (consisting
principally of the services described in the Company's Registration Statement
on Form 10 under the Securities Exchange Act of 1934, as amended, and any
amendments thereof). For purposes of the immediately preceding sentence, but
solely following a termination of Executive's employment hereunder, the
Company and its subsidiaries shall be deemed to have made a "nominal
investment" in an entity if, at the time of such termination of employment,
the Company and its subsidiaries own or control less than ten percent (10%)
of the outstanding equity interests, on a fully diluted basis, of such entity
and are not represented on the board of directors of such entity. The Company
shall furnish Executive with a list of all Competing Businesses on or
promptly following termination of his employment hereunder.
(c) SOLICITATION shall mean: recruiting, soliciting or inducing, of any
non clerical employee or employees of the Company or its affiliates to
terminate their employment with the Company or its affiliates or hiring or
assisting another person or entity to hire any nonclerical employee of the
Company or its affiliates or any person who within twelve (12) months before
had been a nonclerical employee of the Company or its affiliates and were
recruited or solicited for such employment or other retention while an
employee of the Company, provided, however, that solicitation shall not
include any of the foregoing activities engaged in with the prior written
approval of the Board.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in
arbitration, to be unenforceable because it extends for too long a period of
time or over too great a range of activities or in too broad a geographic
area, it shall be interpreted to extend over the maximum period of time,
range of activities or geographic area as to which it may be enforceable. In
the event that the agreements in this Section 10shall be determined by any
court of competent jurisdiction to be unenforceable by reason of their
extending for too great a period of time or over too great a geographical
area or by reason of their being too extensive in any other respect, they
shall be interpreted to extend only over the maximum period of time for which
they may be enforceable and/or over the maximum geographical area as to which
they may be enforceable and/or to the maximum extent in all other respects as
to which they may be enforceable, all as determined by such court in such
action.
(e) During the Employment Term and for two (2) years following a
termination of Executive's employment for any reason whatsoever, whether by
the Company or by Executive and whether or not for Cause, Good Reason or non-
extension of the Employment Term, Executive shall hold in a fiduciary
capacity for the benefit of the Company and its affiliates all secret or
confidential information, knowledge or data relating to the Company and its
affiliates, and their respective businesses, including any confidential
information as to customers of the Company and its affiliates, (i) obtained
by Executive during his employment by the Company and its affiliates and (ii)
not otherwise public knowledge or known within the applicable industry.
Executive shall not, without prior written consent of the Company, unless
compelled pursuant to the order of a court or other governmental or legal
body having jurisdiction over such matter, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In the event Executive is compelled by order of a court or
other governmental or legal body to communicate or divulge any such
information, knowledge or data to anyone other than the foregoing, he shall
promptly notify the Company of any such order and he shall cooperate fully
with the Company in protecting such information (at the Company's expense) to
the extent possible under applicable law.
(f) Upon termination of his employment with the Company and its
affiliates, or at any time as the Company may request, Executive will
promptly deliver to the Company, as requested, all documents(whether prepared
by the Company, an affiliate, Executive or a third party) relating to the
Company, an affiliate or any of their businesses or property which he may
possess or have under his direction or control other than documents provided
to Executive in his capacity as a participant in any employee benefit plan,
policy or program of the Company or any agreement by and between Executive
and the Company with regard to Executive's employment or severance.
(g) During the Employment Term and for two (2) years following a
termination of Executive's employment for any reason whatsoever, whether by
the Company or by Executive and whether or not for Cause, Good Reason or non-
extension of the Employment Term, Executive will not engage in Solicitation.
(h) During the Employment Term and for the Restricted Period (as
hereinafter defined) following a termination of Executive's employment,
Executive will not enter into Competition with the Company. The Restricted
Period shall be (i) for a termination for Cause, twelve(12) months following
the date of termination, (ii) for termination without Cause by the Company,
or by Executive for Good Reason, as defined in clause (i)(b) or clause (iv)
of Section (d) of "Exhibit A", the period in which the Company is making
payments to Executive as specified in Section 8(b) above, (iii) for a
termination as a result of the voluntary resignation of Executive without
Good Reason, twelve (12)months from the date of termination; and (iv)
termination as a result of expiration or non-renewal of this Agreement, after
the Company has made a good faith offer for continued employment, nine (9)
months following the date of termination. For avoidance of doubt, there shall
be no Restricted Period following termination of Executive's employment
without Cause by the Company (and other than for Disability or as a result of
expiration of the Employment Term) or for Good Reason by Executive (other
than as defined in clause (i)(b) or clause (iv) of Section (d) of "Exhibit
A"), or if the Employment Term expires and the Company fails to make a good
faith offer for continued employment.
(i) In the event of a breach or potential breach of this Section 10,
Executive acknowledges that the Company and its affiliates will be caused
irreparable injury and that money damages may not be an adequate remedy and
agree that the Company and its affiliates shall be entitled to injunctive
relief (in addition to its other remedies at law) to have the provisions of
this Section 10 enforced. It is hereby acknowledged that the provisions of
this Section 10 are for the benefit of the Company and all of the affiliates
of the Company and each such entity may enforce the provisions of this
Section 10 and only the applicable entity can waive the rights hereunder with
respect to its confidential information and employees.
(j) Furthermore, in addition to and not in limitation of another
remedies provided herein or at law or in equity, in the event of breach of
this Section 10 by Executive, while he is receiving amounts under Section
8(b) or (c) hereof, Executive shall not be entitled to receive any future
amounts pursuant to Section 8(b) or (c) hereof after the earlier to occur of
(i) ninety (90) days following the Company's notification of Executive of its
good faith determination of such breach, specifying in reasonable detail the
grounds for such determination, and (ii) a final determination by an
arbitrator or court of competent jurisdiction of such breach, and, upon such
final determination, which is not appealable, he shall reimburse the Company
for any amounts previously paid to Executive pursuant to Section 8(b) or (c)
hereof.
11. Indemnification.
The Company shall indemnify and hold harmless Executive to the extent
provided in the Certificate of Incorporation, the By-Laws of the Company and
the Delaware General Corporation Law as amended and as applicable, for any
action or inaction of Executive while serving as an officer and director of
the Company or, at the Company's request, as an officer or director of any
subsidiary or affiliate of the Company, as a fiduciary of any benefit plan or
as a director of any entity in which the Company or any of its affiliates has
made an investment . The Company shall cover Executive under directors and
officers liability insurance both during and, while potential liability
exists, after the Employment Term in the same amount and to the same extent
as the Company covers its other officers and directors.
12. Intellectual Property.
(a) Executive shall disclose promptly to the Company copyrights, trade
secrets, proprietary information, patents, unpatented inventions, trademarks,
service marks, processes, techniques, methods, know-how, flow charts,
diagrams, computer programs and/or databases, and any and all significant
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not (all of the foregoing, collectively, "INTELLECTUAL
PROPERTY"), which are conceived, created, developed or made by Executive,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are substantially related to the business or
activities of the Company or its subsidiaries which Executive conceived,
created, developed or made as a result of his employment by the Company or
any of its subsidiaries. Executive hereby assigns and agrees to assign all of
his right, title and interest throughout the world in any Intellectual
Property to the Company or its nominee. Whenever requested to do so by the
Company, Executive shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and
obtain registrations of copyrights or marks, or Letters Patent of the United
States or any foreign country or to otherwise protect the Company's interest
in Intellectual Property.
(b) Executive agrees that he will not, during or after the Employment
Term, disclose the specific terms of the Company's relationships or
agreements with its significant vendors or customers or any other significant
material trade secrets of the Company, whether in existence or proposed
(other than any of the foregoing that becomes public knowledge other than
through disclosure by Executive), to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever, except as is
disclosed in the ordinary course of business, unless compelled by a court
order upon advice of counsel.
13. Legal and Other Fees and Expenses.
In the event that a claim for payment or benefits under this Agreement is
disputed, the Company shall pay all reasonable attorney, accountant and other
professional fees and reasonable expenses incurred in such dispute unless the
finder of fact determines that the Company is the prevailing party in such
dispute.
14. Certain Additional Payments.
Executive shall be grossed up for any excise tax payable under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), in
accordance with "Exhibit B" attached hereto.
15. Resolution of Disputes.
The parties shall use their best efforts and good will to settle all
disputes by amicable negotiations. The Company and Executive agree, for
purposes of the resolution of any disputes under this Agreement, that such
disputes shall be settled by arbitration in Dallas, Texas, or such other
place agreed to by the parties, in accordance with the rules and procedures
of the American Arbitration Association, as follows:
(a) Any such arbitration shall be heard before a panel consisting of one
to three arbitrators, each of who shall be impartial. All arbitrators shall
be appointed in the first instance by agreement between the parties hereto.
If the parties cannot agree upon a single arbitrator, each of the Company and
the Executive shall be entitled to appoint one arbitrator. These two
appointed arbitrators shall then appoint a third arbitrator by their mutual
agreement.
(b) An arbitration may be commenced by either party to this Agreement by
the service of a written request for arbitration upon the other affected
party. Such request for arbitration shall summarize the controversy or claim
to be arbitrated. If the panel of arbitrators is not appointed within thirty
(30) days following such service, either party may apply to any court within
the State of Texas for an order appointing arbitrators qualified as set forth
below. No request for arbitration shall be valid if it relates to a claim,
dispute, disagreement or controversy that would have been time barred under
the applicable statute of limitations had such claim, dispute, disagreement
or controversy been submitted to the courts of the State of Texas.
(c) The parties hereby expressly waive punitive damages, and under no
circumstances shall an award contain any amount that in anyway reflects
punitive damages.
(d) Judgment on the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without reference to
principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the instruments
contemplated herein, contain the entire understanding of the parties with
respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements between the Company and
Executive with respect thereto. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with
respect to the subject matter herein other than those expressly set forth
herein and therein. This Agreement may not be altered, modified, or amended
except by written instrument signed by the parties hereto.
(c) Construction and Severability. If any provision of this Agreement
shall be held invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the parties
undertake to implement all efforts which are necessary, desirable and
sufficient to amend, supplement or substitute all and any such invalid,
illegal or unenforceable provisions with enforceable and valid provisions
which would produce as nearly as may be possible the result previously
intended by the parties without renegotiation of any material terms and
conditions stipulated herein.
(d) No Waiver. Any failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver
of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement. Any such waiver must be in writing and signed by Executive or an
authorized officer of the Company, as the case may be.
(e) Assignment. This Agreement shall not be assignable by Executive.
This Agreement shall be assignable by the Company only to an entity which is
owned, directly or indirectly, in whole or in part by the Company or by any
successor to the Company or an acquirer of all or substantially all of the
assets of the Company or all or substantially all of the assets of a group of
subsidiaries and divisions of the Company, provided such entity or acquirer
promptly assumes all of the obligations hereunder of the Company in a writing
delivered to Executive and otherwise complies with the provisions hereof with
regard to such assumption. Upon such assignment and assumption, all
references to the Company herein shall be to such assignee.
(f) Successors; Binding Agreement; Third Party Beneficiaries. This
Agreement shall inure to the beneficiaries and permitted assignees of the
parties hereto. In the event of Executive's death while receiving amounts
payable pursuant to Section 8(b) hereof, any remaining amounts shall be paid
to Executive's estate.
(g) Communications. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given (i) when faxed or delivered, or (ii)
two (2) business days after being mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the initial page of this Agreement,
provided that all notices to the Company shall be directed to the attention
of the General Counsel and Secretary of the Company, or to such other address
as any party may have furnished to the other in writing in accordance
herewith. Notice of change of address shall be effective only upon receipt.
(h) Withholding Taxes. The Company may withhold from any and all amounts
payable under this Agreement such Federal, state and local taxes as may be
required to be withheld pursuant to any applicable law or regulation.
(i) Survivorship. The respective rights and obligations of the parties
hereunder, including without limitation Section 10 and Section11 hereof,
shall survive any termination of Executive's employment to the extent
necessary to the agreed preservation of such rights and obligations.
(j) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
(l) Executive's Representation. Executive represents and warrants to the
Company that there is no legal impediment to him entering into this
Agreement, and entering into this Agreement will not violate any agreement to
which he is a party or any other legal restrictions, and he has provided to
the Company true and complete copies of any agreements or covenants to which
he is a party that could restrict or adversely affect his performance under
this Agreement. Executive further represents and warrants that in performing
his duties hereunder he will not wrongfully use or disclose any confidential
information of any prior employer or other person or entity.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
JACKPOT ENTERPRISES, INC., a Nevada corporation
By:
Name:
Title:
XXXXXX X. XXXXX
"EXHIBIT A" TO THE EMPLOYMENT AGREEMENT BETWEEN
JACKPOT ENTERPRISES, INC. AND XXXXXX X. XXXXX
DEFINITIONS
(a) Cause. For purposes of this Agreement, the term "CAUSE" shall be limited
to the following:
(i) Executive's willful misconduct with regard to Company or its
affiliates or their business, or employees (including, without limitation
Executive's fraud or embezzlement), or willful misconduct other than the
foregoing, in any case has a material adverse impact on Company or its
affiliates, whether economic, reputationwise or otherwise, each as determined
the Board, and which is not fully rectified or cured, if susceptible to
rectification or cure within thirty (30) days after written notice is given
to Executive; provided, however, that this clause (i) shall not include an
action or omission of Executive done or omitted to be done in his good faith
exercise of business judgment or in good faith reliance on advice of legal
counsel to the Company;
(ii) Executive's conviction of, or pleading nolo contendere to, a felony
or other crime involving fraud or dishonesty;
(iii) Executive's refusal or willful failure to follow the lawful written
direction of the Board, the Chief Executive Officer or his designee which is
not remedied within ten (10) business days after receipt by Executive of a
written notice specifying the details thereto;
(iv) Executive's breach of Section 10 or Section 12 hereof, which has a
material adverse economic impact on the Company or its affiliates, as
determined by the Board; or
(v) the representations or warranties in Section 16(l) hereof prove false,
which has a material adverse economic impact on the Company or its
affiliates, as determined by the Board.
(vi) Executive being found unsuitable for licensing, by any regulatory
agency applicable to the Company;
(b) Change in Control. For purposes of this Agreement, the term "CHANGE IN
CONTROL" shall mean the occurrence of any of the following:
(i) any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 ("Act") (other than (a) Permitted Assignees,
(b) the Company, (c) any trustee or other fiduciary holding securities under
any employee benefit plan of the Company, or (d) any company owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Common Stock of the Company) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing fifty percent (50 %) or
more of the combined voting power of the Company's then outstanding
securities. Permitted Assignees shall mean the holders of the equity
securities (whether or not voting) of any shareholder of the Company owning
more than fifteen percent (15%) of the Company on the date after the date of
execution of this Agreement;
(ii) during any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause (i),
(iii), or (iv) of this paragraph) whose election by the Board or nomination
for election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the two-year period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at
least a majority of the Board;
(iii) a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or the sale or disposition by the Company of
assets where the proceeds thereof are not retained by the Company, in a
single transaction or a series of related transactions, that result in a 66-
2/3 percent or greater decline in the enterprise value of the Company, valued
based on the weighted average fair market value of any outstanding class of
stock of the Company plus the book value of the outstanding indebtedness of
the Company.
(c) Disability. For purposes of this Agreement, "DISABILITY" shall mean if
Executive is unable to perform his material duties pursuant to this
Agreement, as determined by the Board, because of mental or physical
incapacity, including, without limitation, alcoholism or drug abuse, which
requires a leave of absence in excess of ninety (90) consecutive days in any
twelve (12) month period.
(d) Good Reason. For purposes of this Agreement, "GOOD REASON" shall mean
the occurrence, without Executive's express written consent, in the case of
(i), (ii), or (iii), of any of the following circumstances: (i) (a) any
material demotion of Executive from his position as President or (b) any
assignment of duties to Executive materially and adversely inconsistent with
Executive's position as President (except in connection with the termination
of Executive's employment for Cause or due to Disability or as a result of
Executive's death, or temporarily as a result of Executive's illness or other
absence); (ii) a failure by the Company to pay to Executive any amounts due
under this Agreement in accordance with the terms hereof, which failure is
not cured within fifteen (15) days following receipt by the Company of
written notice from Executive of such failure; (iii) any other material
breach by the Company of this Agreement that remains uncured for fifteen (15)
days after written notice thereof by Executive to the Company; or (iv) a
Change in Control.
"EXHIBIT B" TO THE EMPLOYMENT AGREEMENT BETWEEN
JACKPOT ENTERPRISES, INC. AND XXXXXX X. XXXXX
XXXXX-UP PAYMENT
As provided in Section 14 of the Employment Agreement of which this "Exhibit
C" is a part:
(a) In the event that Executive shall become entitled to payments and/or
benefits provided by this Agreement or any other amounts in the "nature of
compensation" (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions
result in a change of ownership or effective control covered by Section
280G(b)(2) of the Code or any person affiliated with the Company or such
person) as a result of such change in ownership or effective control
(collectively the "Company Payments"), and such Company Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code,
the Company shall pay to Executive, subject to required withholding, at the
time specified in subsection (d) below an additional amount (the "Gross-up
Payment") such that the net amount retained by Executive, after deduction of
any Excise Tax on the Company Payments and on the Gross-Up Payment provided
for under this paragraph (a) and any U.S. federal, state, and local income or
payroll tax upon the Gross-up Payment provided for by this paragraph (a), but
before deduction for any U.S. federal, state, and local income or payroll tax
on the Company Payments, shall be equal to the Company Payments.
(b) In the event that the Excise Tax is subsequently determined by the
Company to be less than the amount taken into account hereunder at the time
the Gross-up Payment is made, Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined,
the portion of the prior Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up Payment attributable to the Excise Tax and
U.S. federal, state and local income tax imposed on the portion of the Gross-
p Payment being repaid by Executive), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is later determined by the Company or the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Gross-up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-up
Payment), the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest or penalties payable with respect to such
excess) at the time that the amount of such excess is finally determined.
(c) The Gross-up Payment or portion thereof provided for in subsection (c)
above shall be paid not later than the thirtieth (30th) day following
delivery by Executive to the Company of notice that an event that subjects
Executive to the Excise Tax has occurred; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to Executive on such
day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) promptly following such time as the amount thereof has been determined.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code).
(d) In the event of any controversy with the Internal Revenue Service (or
other taxing authority) with regard to the Excise Tax, Executive shall permit
the Company to control issues related to the Excise Tax, but Executive shall
control any other issues. In the event of any conference with any taxing
authority as to the Excise Tax or associated income taxes, Executive shall
permit the representative of the Company to accompany Executive, and
Executive and Executive's representative shall cooperate with the Company and
its representative.
(e) The Company and Executive shall promptly deliver to each other copies of
any written communications, and summaries of any verbal communications, with
any taxing authority regarding the Excise Tax covered by this "Exhibit C".
