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EXHIBIT 10.53
SEVERANCE BENEFITS AND EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 1st day of January,
1998, by and between Scientific Games Holdings Corp., a Delaware corporation
(hereinafter called the "Company"), and Xxxxxxx X. Xxxxxx (hereinafter called
"Officer").
WITNESSETH:
The Board of Directors of the Company ("Board") recognizes that
Officer's contributions to the past and future growth and success of the Company
have been, and are expected to continue to be, substantial. The Board therefore
desires to assure the Company of Officer's services as an employee of, and for
the benefit of, the Company and its Affiliates in an executive, managerial
capacity now, and in the event that the Company were to be faced with a takeover
possibility.
In order to induce Officer to remain in the employ of the Company, this
agreement (the "Agreement") sets forth employment and severance benefits which
the Company shall pay to Officer in connection with his employment and in the
event of a severance of Officer's employment with the Company including, but not
limited to, in connection with a "Change in Control of the Company" (as defined
in Section 10 below).
NOW THEREFORE FOR AND IN CONSIDERATION of the mutual representations
and promises herein contained, and other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, the parties
mutually agree as follows:
1. CERTAIN DEFINITIONS. The following defined terms are in
addition to those set forth elsewhere in this Agreement:
(a) "Change in Control of the Company", for purposes of
this Agreement, shall be deemed to have occurred if (i) the Board or the
stockholders of the Company shall approve (x) any consolidation or merger of the
Company pursuant to which the holders of Voting Securities of the Company
immediately prior to such merger or consolidation do not have more than fifty
percent (50%) of the combined voting power of the Voting Securities of the
Company or such surviving or parent entity immediately after the consolidation
or merger, (y) any sale, lease, exchange or other transfer of all or
substantially all of the assets of the Company (determined on a consolidated
basis) in one transaction or a series of related transactions other than a
transfer to a wholly-owned subsidiary of the Company, (ii) the Board or
stockholders of the Company shall adopt any plan or proposal for the liquidation
or dissolution of the Company; (iii) any "person" or "group" of persons (as such
terms are determined pursuant to Sections 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations promulgated thereunder), other than the Management Stockholders,
either alone or in conjunction with their Affiliates (as that term is defined in
Rule 405 promulgated under the Exchange Act), becomes the beneficial owner,
directly or indirectly, of voting securities of the Company representing, or
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securities convertible into, or exchangeable for, securities representing, more
than fifty percent (50%) of the combined voting power of the Company's then
outstanding Voting Securities; or (iv) any "person" or "group" of persons (as
such terms are determined pursuant to Sections 13(d)(3) and 14(d)(2) of the
Exchange Act and the rules and regulations promulgated thereunder), other than
the Management Stockholders, either alone or in conjunction with their
Affiliates (as that term is defined in Rule 405), acquires the right or power to
nominate and/or control, directly or indirectly, whether through the ownership
of Voting Securities of the Company, by contract or otherwise, a majority of the
members of the Company's Board.
(b) "Date of Termination" shall mean (A) if Officer's
employment is terminated by Officer under circumstances referred to in Section
10(a) hereof, the date on which Officer delivers Notice of Termination to the
Company, (B) if Officer's employment is terminated by the Company for
Disability, thirty (30) days after Notice of Termination is given by the Company
(provided that Officer shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period, (C) if Officer's
employment is terminated due to his death, the date of the Officer's death, (D)
if Officer resigns pursuant to Section 11(a), the effective date of the
termination of Officer's employment as specified in the notice (unless Officer's
employment is earlier terminated by the Company), or (E) if Officer's employment
is terminated by the Company for any other reason, the date on which a Notice of
Termination is given.
(c) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(d) "Executive Officer" or "Executive Officers" as used
herein shall have the meaning set forth in Section 3b-7 of the Exchange Act.
(e) "Governmental Authority" shall mean any nation,
province, state or political subdivision thereof, and any government or any
Person exercising executive, legislative, regulatory or administrative functions
of or pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing having jurisdiction over the Person and the subject matter.
(f) "Index" shall mean the consumer price index for all
urban consumers, all item as published by the Bureau of Labor Statistics of the
United States Department of Labor.
(g) "Management Directors" shall mean the persons set
forth on Exhibit D hereto under such caption.
(h) "Management Stockholders" shall mean the persons set
forth on Exhibit D hereto under such caption.
(i) "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts
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and circumstances claimed to provide a basis for termination of Officer's
employment under the provision so indicated. For purposes of this Agreement, no
such purported termination shall be effective without Notice of Termination. If
the date of termination is to be later than the date of deliver of such Notice
of Termination, such date shall be specified in the Notice of Termination. No
Notice of Termination shall be effective prior to the date of its delivery to
Officer.
(j) "Person" shall mean an individual, corporation,
partnership, association, trust, business trust, limited liability company,
joint venture, joint stock company, pool, syndicate, sole proprietorship,
unincorporated organization, Governmental Authority or any other form of entity
or group.
(k) "Senior Executive Officers" shall mean those
"Executive Officers" of the Company identified as Senior Executive Officers on
Exhibit D hereto or, if such persons cease to be Executive Officers of the
Company performing their duties and functions as of the date of this Agreement,
then those persons performing similar duties for the Company at the applicable
time or, in the event of a Change In Control of the Company, immediately prior
to such Change in Control of the Company.
(l) "Voting Securities" shall mean as to any securities of an
entity ordinarily and generally having the right to vote in the election of
directors of such entity and shall not include securities whose voting rights
accrue under special circumstances, unless such circumstances shall have
occurred and be continuing).
2. EMPLOYMENT TERM. The Company employs Officer and Officer
accepts employment with the Company in the position of Chairman of the Board,
President and Chief Executive Officer for the Company (and such of its
Affiliates that the Officer or the Board deems necessary or advisable for
Officer to serve as Chairman of the Board, President, Chief Executive Officer
and/or other executive officer thereof, which initially shall include all
Significant Subsidiaries of the Company) upon the terms and conditions
hereinafter set forth. The term of Officer's employment is subject to
termination by the Company at any time without cause upon sixty (60) days'
written notice, subject to Officer's right to receive the applicable severance
benefits described herein. Except as otherwise provided herein, Officer may
terminate his employment with the Company upon sixty (60) days prior written
notice or such shorter period as the Company may allow. Except as otherwise
specifically provided in this Agreement, no severance benefits shall be due in
the event of Officer's voluntary termination of employment hereunder. The
initial term of this Agreement shall be for five (5) years from, and including,
the date first written above; provided, however, that this Agreement shall
automatically extend for subsequent terms of an additional five (5) years on
each anniversary date of the fifth anniversary of the Agreement unless the
Company or Officer shall give notice to the other party of their decision not to
extend the term of this Agreement by giving at least one hundred eighty (180)
days written notice prior to the end of such initial term or a successive term
in which event this Agreement shall have a remaining term equal to then
remaining initial or current term of the Agreement.
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3. DUTIES AND EXTENT OF SERVICES. Officer will, during the
continuance of his employment hereunder, perform the duties of Chairman of the
Board, President and Chief Executive Officer of the Company and Scientific
Games, Inc. Officer will devote his full working time, attention and abilities
(subject to the Company's policies, as in effect prior to any Change in Control,
and the provisions of this Agreement, in each case, with respect to vacations,
illness, government service, sabbaticals, etc.) to his duties as Chairman of the
Board, President and Chief Executive Officer and will use his best reasonable
efforts to promote the interests and welfare of the Company. For purposes of
this Agreement, the Company and Officer agree that Officer has heretofore
devoted his full working time, attention and abilities to his duties and further
agree that such standard of performance shall be applicable in assessing whether
Officer has devoted his full time, attention and abilities to his duties under
this Agreement. In such capacities, the Officer shall perform such duties and
shall have such responsibilities as are normally associated with such positions
and as otherwise may be assigned to the Officer from time to time by or upon the
authority of the Board. Should any question arise between the Officer and the
Company as to whether such Officer is devoting or has devoted full time,
attention and abilities to his duties, the reasonable, good faith opinion of the
Board (which shall consider Officer's historical work pattern in making its
assessment and the work patterns of chief executive officers of comparable
companies, both within and without the Company's line of business, whose
executives are required, whether by contract or practice, to devote their "full
time, attention and abilities" to their duties) pursuant to the affirmative vote
of a two-thirds the Company's entire Board (excluding Officer) shall be
dispositive of such question. To the extent not inconsistent with his duties
hereunder, Officer may pursue other business or personal activities, provided
(i) all other business activities (including such activities which would
conflict with the Company's business) are disclosed in writing in advance to,
and approved in advance by, the Company's Board (provided, however, that passive
investments in businesses other than business in competition with the business
of the Company need not be approved in advance, so long as Officer's investment
therein is less than five percent (5%) of the voting securities of such entity)
and (ii) such personal activities would not have a material adverse effect on
the Officer's performance of his duties. The Officer shall not pursue any
material outside business activity to which the Company's Board shall have
previously consented, if the entire Board (excluding Officer) by the affirmative
vote of two-thirds of its members expresses objection in writing to such
Officer; provided, however, that if the Board expresses such objection, Officer
shall be afforded a commercially reasonable time to terminate such activities in
a manner reasonably calculated to result in no material financial detriment to
Officer, unless the Company shall agree to indemnify Officer against any
material financial detriment which Officer may suffer from the immediate
termination of such previously permitted outside activities. Officer agrees,
upon receipt of the Notice from the Board of Board's objection to previously
permitted outside activities, to use his best efforts to terminate such
activities as soon as practicable, consistent with the standards set forth in
the immediately preceding sentence. Officer's office and principal place of
employment will be located in metropolitan Atlanta, Georgia. Officer
acknowledges that his duties and services will involve usual and customary
travel required of the Company's employees currently located in Atlanta,
Georgia. Officer shall have direct reporting authority to the Company's Board.
All existing
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obligations of the Company to the Officer with respect to employment prior to
the effective date of this Agreement shall not be affected hereby, except that
this Agreement shall supersede the Severance Benefits Agreement, dated March 4,
1994, between the Company and Officer and the Employment Agreement dated October
1, 1991, as amended August 23, 1993, between Scientific Games Inc. ("SGI") and
Officer.
4. COMPENSATION.
(a) Base Salary.
(i) For all services to be rendered by Officer
in any capacity during the period of his employment under this Agreement,
including, without limitation, services as an executive, officer, director or
member of any committee of the Company and its Affiliates, Officer shall be paid
as compensation a base salary ("Base Salary") at the rate of not less than
$440,000 per annum for each year during which Officer is employed under this
Agreement commencing with the year beginning January 1, 1998 and ending December
31, 1998 ("fiscal 1998"), or at such higher rate as may from time to time be
fixed by the Compensation Committee (the "Committee") of the Board of the
Company, payable in accordance with the customary payroll practices of the
Company, but in no event less frequently than monthly. Under no circumstance
shall any increase in Base Salary (i) limit or reduce any other obligation to
Officer under this Agreement, or (ii) be later reduced or eliminated, once
effective, as to any future periods.
(ii) The Officer's annual Base Salary shall be
increased each year by an amount no less than the greater of (A) the product of
the Officer's annual Base Salary in effect during the immediately preceding year
and a fraction, the numerator of which shall be the excess of the Index for
December of such first mentioned year over the Index for December of the
immediately preceding year and the denominator of which shall be the Index for
December of the immediately preceding year, or (B) the percentage increase in
the annual Base Salaries of the Company's Senior Executive Officers (as defined
in Exhibit D) taken as a group; provided, however, that in the event of the
occurrence of a Change In Control of the Company, the amount of the annual
increase in Officer's Annual Base Salary shall be the greater of: (1) the amount
established by the greater of clauses (A) or (B) above, or (2) five percent (5%)
of the Officer's annual Base Salary for the immediately preceding year.
(b) Incentive Compensation. As additional compensation
for all services rendered by Officer during the period of his employment under
this Agreement, Officer will, after consultation with the Board and Compensation
Committee of the Company ("Committee") be awarded an annual bonus under the
Company's Annual Incentive Compensation Plan and under the Company's
Intermediate Incentive Plan, each as further described on Exhibit A hereto, the
amount of which, in each case, shall be determined annually by the Committee in
accordance with such plans. Nothing under this Agreement shall be construed to
limit the amount Officer may earn as his annual bonus under either plan.
Compensation payable for the annual bonuses shall be payable no
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later than ninety (90) days after the end of the fiscal year for which such
compensation is awarded, unless Officer shall otherwise timely elect to defer
the receipt of some or all of such compensation pursuant to a deferred
compensation plan then in effect in which Officer is entitled to participate.
(c) Reimbursement of Expenses. The Company shall pay, or
reimburse Officer in accordance with the Company's prevailing corporate policy,
for reasonable travel, continuing education, and other expenses incurred by
Officer in performing his duties under this Agreement in accordance with
corporate policy. Notwithstanding the foregoing, reasonable travel expenses
shall include first class (or business class, as applicable), subsonic air
travel when such level of service is reasonably appropriate in light of
Officer's position with the Company and other factors, such as the duration of
the applicable flight, the nature, if any, of other business travelers traveling
with Officer, and the extent to which such level of service will facilitate the
productivity of Officer during or after such travel.
(d) Participation in Benefit Plans. The payments provided
for in other paragraphs of this Section 4 are in addition to any benefits and
perquisites to which Officer may be or may become entitled under any present or
future employment benefit and perquisite plan or program, or executive
contingent compensation plan of the Company for which corporate officers are or
shall become eligible, and Officer shall be eligible to receive during the
period of his employment under this Agreement, benefits and emoluments for which
either corporate officers or Company employees, in general, are eligible under
every plan or program to the extent permissible under the general terms and
provisions thereof. The foregoing notwithstanding, but only so long as no Change
in Control of the Company shall have occurred, the Company may change, or
discontinue any such other benefits; provided, however, that so long as any
benefit is made available to corporate officers or employees generally, such
benefit will be extended to Officer on the same terms such benefit is made
available to other corporate officers or employees, and provided that the
Company shall use commercially reasonable efforts to continue to provide to
Officer such other benefits as are made generally available to the Company's
Senior Executive Officers as of the date of this Agreement. In determining the
commercial reasonableness of such efforts, the Company shall be entitled to
consider the cost of providing such equivalent benefits to its Senior Executive
Officers as a group. In the event of a Change In Control of the Company, the
Company may change or discontinue any other benefits only so long as the total
economic value of the benefits provided to Officer is not diminished. The
Company also may change or discontinue other benefits at any time to adjust for
change in the tax laws, ERISA, or other applicable laws and any regulations
promulgated pursuant thereto.
(e) Insurance. In further consideration of his employment
by the Company, Officer shall be entitled to the following insurance benefits:
(i) Health and accident insurance for Officer, his spouse
and dependents and long-term disability insurance for Officer, all in amounts
and coverage comparable to that presently provided by the Company to its Senior
Executive Officers, which amounts may be changed
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from time to time by the Committee, provided that the Company shall have used
commercially reasonable efforts to continue to provide coverage substantially
similar to the levels of coverage provided to Officer as of the date of this
Agreement. In determining the commercial reasonableness of such efforts, the
Company shall be entitled to consider the cost of providing such equivalent
benefits to its Senior Executive Officers as a group. The foregoing
notwithstanding, but only so long as no Change In Control of the Company shall
have occurred, the Company may change or discontinue any such benefit if Officer
is treated no less favorably than any other Senior Executive Officer under such
new benefits. In the event of a Change In Control of the Company, the Company
may change or discontinue such insurance benefits only so long as the total
economic value of the insurance benefits provided to Officer is not diminished.
The Company also may change or discontinue such insurance benefits at any time
to adjust for change in the tax laws, ERISA, or other applicable laws and
regulations promulgated pursuant thereto. In the event of a Change In Control of
the Company, then in all the foregoing cases, the Company shall provide to
Officer proof that Officer and his dependents are properly covered by all of the
aforesaid types of insurance without any exclusion or exceptions for
pre-existing conditions to the maximum extent permitted by law and applicable
regulations; and
(ii) Term life insurance for Officer in the amount of
$4,000,000, the beneficiary of which will be designated in the sole discretion
of Officer. The foregoing notwithstanding, but only so long as no Change In
Control of the Company shall have occurred, the Company may change or
discontinue any such benefit if Officer is treated no less favorably than any
other Senior Executive Officer under such new benefits. If for any reason during
the term of this Agreement any required policy or coverage is canceled or
coverage denied for any reason, the Company agrees to use commercially
reasonable efforts to provide Officer with replacement insurance in the required
amount so long as said insurance is available at commercially reasonable rates.
The Company shall cause so much of said insurance to be included under an
Employee Group Term Life Insurance Plan which qualifies under IRC ss. 79 so that
the cost of said insurance, to the maximum extent allowable by law, will not be
includable in the gross taxable income of Officer. In the event of a Change In
Control of the Company, the Company may change or discontinue such term
insurance benefits only so long as the total economic value of such term
insurance benefits provided to Officer is not diminished. The Company also may
change or discontinue such term insurance benefits at any time to adjust for
change in the tax laws, ERISA, or other applicable laws and regulations
promulgated pursuant thereto.
(f) Vacation. The Company shall provide Officer five (5)
weeks of annual paid vacation.
(g) Sick Leave. The Company shall provide Officer a
reasonable number of paid sick days as established from time to time by
corporate policy or as approved by the Committee and taken solely in the
discretion of Officer.
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(h) Transportation Allowance. The Company shall furnish a
transportation allowance of $15,988 per year for the benefit of Officer. Such
transportation allowance shall include the cost of providing the motor vehicle,
gas, maintenance and repairs thereon and insurance therefor (which may be the
allocable cost of group insurance for the Company's owned motor vehicles). The
Officer's annual transportation allowance shall be increased each year by an
amount equal to the product of the previous year's Transportation Allowance and
a fraction, the numerator of which shall be the excess of the Index for December
of such first mentioned year over the Index for December of the immediately
preceding year and the denominator of which shall be the Index for December of
the immediately preceding year, of this Agreement. The transportation allowance
shall be utilized by the Company to purchase or lease a motor vehicle suitable
for Officer's position, in each case, with a manufacturer's list price not to
exceed Seventy-Five Thousand Dollars ($75,000). The Company also shall pay on
behalf of Officer or reimburse Officer in the form of an additional
transportation allowance for all parking expenses and for any other motor
vehicle related expenses incurred by Officer for which the Company generally
pays or reimburses pays or reimburses its Senior Executive Officers, as of the
date of this Agreement.
(i) Deferred and Supplemental Compensation Programs. The
Company shall use commercially reasonable efforts to maintain (A) a deferred
compensation plan, and (B) a supplemental executive retirement plan,
substantially in the form of the deferred compensation plan and the supplemental
executive retirement plan, in each case, maintained by the Company as of the
date of this Agreement for the Company's Senior Executive Officers and Officer
shall be entitled to participate in such plans or any successors thereto at a
participation level not less than the maximum level at which Officer is entitled
to participate in such plans as of the date of this Agreement, so long as such
participation shall not have a material adverse effect on the Company or its
ability to maintain such plans for its Senior Executive Officers as a group, and
further provided that if the Company is unable to maintain such plans, it will
use commercially reasonable efforts to provide other benefits with substantially
equivalent economic value to the Officer. In determining the commercial
reasonableness of such efforts, the Company shall be entitled to consider the
cost of providing such equivalent benefits to its Senior Executive Officers as a
group. The foregoing notwithstanding, but only so long as no Change In Control
of the Company shall have occurred, the Company may change or discontinue any
such plans if Officer is treated no less favorably than any other Senior
Executive Officer under such new benefits. In the event of a Change In Control
of the Company, the Company may change or discontinue such plans only so long as
the total economic value of the benefits provided to Officer is not diminished.
The Company also may change or discontinue such plans at any time to adjust for
change in the tax laws, ERISA, or any other applicable laws and regulations
promulgated pursuant thereto.
(j) Stock Options. Officer shall be granted stock options
entitling Officer to purchase 200,000 shares of the Company's Common Stock in
accordance with the terms of Exhibit B and the employee benefit plan or plans
referenced therein.
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(k) Registration Rights Agreement. Officer and the
Company shall, contemporaneously with the execution of this Agreement, enter
into a registration rights agreement substantially in the form attached as
Exhibit C hereto.
(l) Medical Examinations. The complete cost of an annual
physical examination to be conducted by a physician, that is Board certified to
be selected by Officer and acceptable to the Committee, shall be borne by the
Company if not otherwise paid by insurance furnished by the Company. The
Committee of the Board of the Company shall be furnished the results of said
physical examination: (i) if Officer should request a leave of absence in excess
of the sum of his then accrued annual vacation (including carried over
vacation), plus the number of days of paid sick leave previously established by
corporate policy or the Committee, or (ii) if Officer shall have been absent
from his duties for one hundred eighty (180) consecutive business days in order
to establish when or if Officer may be reasonably expected to return to work and
perform his duties. Officer shall submit to such annual physical exam upon
reasonable notice at any time during any calendar year.
(m) Other Compensation. The Company may provide as
additional compensation to the Officer such awards of Company securities,
including restricted stock grants and stock options, as may be approved in the
sole discretion of the Company's Board, the Committee or pursuant to delegated
authority therefrom, provided, however, that the Company shall provide Officer
with such other benefits as are generally provided to other Senior Executive
Officers of the Company after taking into account the grant of stock options
provided for above, it being the current judgment of the Committee and Officer
that such options currently provide appropriate stock option compensation to
Officer for the period January 1, 1998 through December 31, 2000.
5. LOAN. The Company shall provide Officer with the right to
borrow up to $650,000, which right may be exercised at any time and from time to
time during the life of this Agreement, subject to the limitations set forth
below. Borrowings under such loan shall be secured by a security interest in
property reasonably acceptable to the Company (which acceptable security shall
include, without limitation, shares of Common Stock of the Company). A draw
under such loan may be made by Officer upon reasonable advance notice to the
Company, during the initial or any subsequent term of this Agreement; provided,
however, that no more than one (1) advancement of funds shall be made in any
period of twelve (12) consecutive months. Such loan shall bear interest at a
floating rate equal to the interest rate available to the Company for borrowings
under the bank credit agreement with the lowest interest rate as in effect as of
the most recent date of borrowing (whether total or partial, initial or
subsequent) under this provision or, if no such agreement shall exist, at an
interest rate equal to the rate of interest on any senior indebtedness of the
Company for money borrowed or, if no such indebtedness shall then be
outstanding, then at the "prime rate" as established from time to time by First
Union National Bank of Georgia, N.A. (such interest rates hereinafter,
individually and collectively, the "Reference Rate"). The interest rate on
borrowings under the loan shall be adjusted at such times and under such
conditions as the applicable Reference Rate with installments of interest only
payable annually on December 31 of each year. Upon termination of this
Agreement, no advances shall be permitted under the Section and the then
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existing borrowing thereunder (if any) shall be repayable in equal total
quarterly installments of principal and interest sufficient to fully amortize
the loan over a period of two (2) years. All borrowings under the loan may be
prepaid, without penalty, at any time.
6. INDEMNITY, PROFESSIONAL AND OFFICERS LIABILITY INSURANCE.
(a) The Company agrees to indemnify and save harmless
Officer from all liability and costs incurred (including reasonable attorney's
fees and disbursements) as a consequence of claims by third parties, whether or
not derivatively on behalf of the Company (or, after a Change in Control of the
Company as defined in Section 11(a) hereof, by the Company against the Officer
or by the Officer against the Company), resulting from or growing out of
Officer's past, present or future status as or as a result of his being or
having been a director and/or officer of the Company or any subsidiary or
affiliate thereof to the full extent permitted by law (provided, however, that
the Company shall not obligated to indemnify against any amount paid in
settlement unless the Company has consented to such settlement, which consent
shall not be unreasonably withheld); so long as (i) Officer shall not have been
terminated for Just and Substantial Cause with respect to, or as a result of,
the matter for which indemnification is sought, and (ii) acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interest
of the Company. The termination of any threatened or actual action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
Officer did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful. The terms, provisions and conditions of the indemnity
provided for hereunder shall be in addition to those presently provided for
under the Articles of Incorporation and Bylaws of the Company. The terms,
provisions and conditions of indemnity under this Agreement shall remain an
independent, contractual obligation of the Company to Officer from and after the
date hereof regardless of how the Company might hereafter amend or change its
Articles of Incorporation or Bylaws to provide for different terms, conditions
and provisions of indemnity for other officers and directors of the Company. In
the event the Company should amend its articles of Incorporation or Bylaws to
provide for different terms, conditions and provisions of indemnity after the
effective date hereof, Officer shall be notified in writing of the change.
Officer shall thereafter have thirty (30) days to elect in writing to accept the
changed conditions of indemnity as a modification to the Company's contractual
obligation hereunder or to continue under the terms of indemnity as provided for
herein. If Officer fails to make such election, such failure shall be deemed to
be an election to continue under the terms of indemnity as provided for herein.
The Company's agreement to provide indemnity hereunder shall survive the
termination of this contract regardless of the cause of termination. The Company
shall advance promptly as incurred reasonable fees and disbursements of counsel
for Officer in defending Officer against any claims for which the Company would
be so required to indemnify Officer provided (i) Officer shall otherwise comply
with such mandatory requirements of Delaware law as may be required for such
indemnification and (ii) Officer shall cause such counsel to cooperate fully
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in good faith with such requests as the Company or its counsel may reasonably
make in order to endeavor to keep such legal fees at a minimum level consistent
with an adequate defense of Officer.
(b) Officers and Directors' Liability Insurance. The
Company agrees to provide, at no expense to the Officer, insurance insuring
Officer in his capacity as an officer and director of the Company in such form
and amount substantially equal to that presently maintained by the Company for
or covering its Senior Executive Officers and directors or in such other form
and amounts as Officer and Company may, from time to time, in good faith agree
are reasonable and appropriate for Senior Executive Officers and directors of
corporations substantially similar in size to the Company.
7. TERMINATION OF EMPLOYMENT BY COMPANY FOR JUST AND
SUBSTANTIAL CAUSE. The Company may terminate Officer's employment at any time
for "Just and Substantial Cause" but only after written Notice of Termination
(as defined in this Agreement) to Officer as approved by the Board (excluding
Officer) as set forth below specifying the cause of such action. Just and
Substantial Cause shall mean: (a) conviction of Officer of a crime constituting
a felony; (b) commission of an act or acts of dishonesty on the part of Officer
when such acts are intended to result, directly or indirectly, in substantial
wrongful gain or substantial wrongful personal enrichment of Officer at the
expense of the Company; or (c) the engaging by Officer in willful misconduct
materially injurious to the Company with respect to which (i) Officer knew or
reasonably should have known that such conduct would result in material
financial injury to the Company, (ii) such conduct actually results in material
financial injury to the Company provided that, in the case of conduct not
expressly contrary to the specific directives or policies of the Company as
established by the Board or any committee thereof, Just and Substantial Cause
shall also require the damage resulting from such conduct shall not have been
cured (if the same is reasonably susceptible to cure) within a reasonable time
following receipt by Officer of written notice thereof from the Company
referring to this Agreement. Notwithstanding the foregoing, Officer shall not be
deemed to have been terminated for Just and Substantial Cause unless and until
there shall have been delivered to Officer a copy of a resolution duly adopted
by the affirmative vote of not less than two-thirds of the entire membership of
the Company's Board (excluding Officer) at a meeting of the Board called, duly
noticed and held for the purpose (after a reasonable notice to Officer and an
opportunity for Officer, together with Officer's counsel, to be heard before the
Board), finding that in the reasonable good faith opinion of the Board, Officer
was guilty of conduct set forth in the second sentence of this Section 7 and
specifying the particulars thereof in detail and that as a result, Officer is
being terminated for Just and Substantial Cause. Any termination by the Company
pursuant to this Section 7 above shall be communicated by written Notice of
Termination. For purposes of any determination by the Board of whether Just and
Substantial Cause exists, if the employment of a Management Director is proposed
to be severed, the vote of that Management Director on whether Just and
Substantial Cause exists shall be ignored and shall not be required for any such
purpose of this Agreement. In the event Officer shall be terminated for Just and
Substantial Cause, Officer shall be entitled to all salary actually earned prior
to termination, vested stock
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options, vested bonuses, vested restricted shares and all deferred compensation.
No severance pay would be owing in the event of termination pursuant to this
Section for Just and Substantial Cause.
8. TERMINATION OF EMPLOYMENT IN THE EVENT OF OFFICER'S ILLNESS OR
DISABILITY. Officer and the Company agree that Officer may not reasonably be
expected to be able to perform his duties and the essential functions of his
office if Officer shall have been absent from his duties with the Company, or
not otherwise be performing the duties of his office due to physical or mental
illness, in each case, on a full-time basis for one hundred eighty (180) days.
Accordingly, if, in the reasonable, good faith opinion of the Board, as a result
of Officer's incapacity due to physical or mental illness, Officer shall have
been absent from his duties with the Company on a full time basis for one
hundred eighty (180) consecutive business days, and within thirty (30) days
after written notice of intent to terminate is given by the Company, Officer
shall not have returned to the full time performance of his duties, Officer's
employment shall be terminated for "Disability", in which event Officer shall be
entitled to receive severance benefits under this Agreement and Officer shall be
compensated pursuant to the provisions of this Section 8 as if Officer's
employment had been terminated under Section 10 of this Agreement without Just
and Substantial Cause. Payments of severance benefits under this Section 8 shall
be reduced by the present value of any disability payments provided Officer as a
result of the coverage maintained pursuant to Section 4(e)(i)(A) or in any other
Company-sponsored disability plan providing benefits to Officer and which are
payable to Officer in the first three (3) years following Officer's Disability.
The present value of such payments shall be determined using the average of the
Index for the most recent available twelve (12) months. Officer's employment
shall not be terminable under this Section if Officer is absent from his duties
upon a bona fide leave of absence granted by the Company other than pursuant to
physical or mental illness. In the event that the Company and Officer are unable
to agree whether Officer has returned or is able or not able to return to the
full time performance of his duties because of sickness or disability said
decision shall be made by three physicians, one of whom is to be selected by
Officer, one of whom is to be selected by the Board, and the third of whom is to
be selected by the previous two. The decision of said three physicians shall be
binding upon the parties and the cost of such examinations shall be borne by the
Company.
9. TERMINATION OF EMPLOYMENT IN THE EVENT OF DEATH DURING
EMPLOYMENT.
(a) Subject to Section 9(b) below, if Officer dies during
the term of this Agreement, the Company shall pay and provide to Officer's
designated beneficiary severance benefits pursuant to this Section 9(a) the same
as if Officer's employment had been terminated under Section 10 of this
Agreement without Just and Substantial Cause; provided that no benefits need be
provided under Section 10(f) with respect to Club membership.
(b) If, at any time, there shall exist any dispute
between any beneficiary of Officer with respect to the payment or exercise of
any benefits hereunder, or if at any time the Company is unable to determine, to
the Company's good faith satisfaction, the proper payment of any portion of
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the benefits or the Company's proper actions with respect to its obligations
hereunder, then the Company may, in its sole discretion, take either or both of
the following actions:
(i) suspend the performance of any of its
obligations (including without limitation any disbursement obligations) under
this Agreement until such dispute or uncertainty shall be resolved to the good
faith satisfaction of the Company; provided, however, that the Company shall
invest all monies payable hereunder in one or more of the following: (A) direct
obligations of the United States of America or obligations the principal of and
the interest on which are unconditionally guaranteed by the United States of
America; (B) certificates of deposit issued by any bank, bank and trust company,
or national banking association, which certificates of deposit are insured by
the Federal Deposit Insurance Corporation or a similar governmental agency; (C)
any money market fund substantially all of which is invested in the foregoing
investment categories; and/or
(ii) petition (by means of an interpleader action
or any other appropriate method) any court of competent jurisdiction in any
venue convenient to the Company, for instructions with respect to such dispute
or uncertainty, and to the extent required by law, pay into such court, for
holding and disposition in accordance with the instructions of such court, all
funds payable by it under this Agreement, after deduction and payment to the
Company of all fees and expenses (including court costs and attorneys' fees)
reasonably payable to, reasonably incurred by, or reasonably expected to be
incurred by, the Company in connection with the performance of its duties and
the exercise of its rights under this Section 9(b).
The Company shall have no liability to Officer's estate, any beneficiary of
Officer or any other Person with respect to any such suspension of performance
or disbursement into court, specifically including any liability or claimed
liability that may arise, or be alleged to have arisen, out of or as a result of
any delay in the disbursement of funds or any delay in or with respect to any
other action required or requested of the Company, so long as the Company shall
have acted in good faith.
10. TERMINATION OF EMPLOYMENT WITHOUT JUST AND SUBSTANTIAL CAUSE;
CONSTRUCTIVE TERMINATION OTHER THAN IN CONNECTION WITH A CHANGE IN CONTROL.
(a) Should the Company (i) change the location of
Officer's office or of the Company's principal executive offices from
metropolitan Atlanta, Georgia to a place other than a location within fifty (50)
miles of the location of the Company's principal executive offices as specified
in Section 14 and otherwise within metropolitan Atlanta, Georgia, or change the
location of Officer's office from the location of the Company's principal
executive office, (ii) fail to appoint or reappoint Officer to the offices and
positions Officer holds by virtue of this Agreement or such other position held
immediately prior to any Notice of Termination (or to higher or equivalent
offices and positions to which Officer agrees in writing, such agreement not to
be unreasonably withheld), (iii) make any reduction in Officer's Base Salary,
(iv) adversely change the methodology
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pursuant to which Officer's bonus is determined or make any other material
adverse change in any of Officer's employee benefits (other than any such
benefit which is immaterial or inconsequential or any change which is required
by law) (A) unless such change in methodology is binding on all participants in
the plan under which Officer's bonus is awarded or does not otherwise
discriminate against the Officer, and (B) in the case of benefits, substantially
equivalent economic benefits cannot be provided to Officer by commercially
reasonable efforts at commercially reasonable cost, (v) make any material change
in Officer's function, duties or responsibilities which would cause Officer's
position with the Company to become of less responsibility, importance or scope,
in any material respect, than the position and attributes thereof immediately
prior to the date of this Agreement, (vi) change the person or persons to whom
Officer reports at the date hereof (i.e., the Board of Directors) to a person or
persons of lesser rank, title or responsibility, (vii) fail to obtain the
express written assumption of this Agreement by any successor of the Company or
any assignee of all or substantially all of its assets at or prior to such
succession or assignment (such succession or assignment not relieving the
Company of any liability hereunder), (viii) breach this Agreement in any
material respect which is not cured within fifteen (15) days after written
notice from Officer to the Company, or (ix) fail to renew this Agreement for not
less than an additional five (5) year term on terms materially no less favorable
to Officer (in the event the Company gives notice pursuant to Section 2 of its
decision not to automatically renew this Agreement, then the failure to renew
shall be deemed to occur at the end of the initial term or, if this Agreement
has been renewed at the end of the then current term), Officer shall be entitled
to (A) resign from the Company's employ and (B) receive severance benefits under
this Agreement as set forth in the remainder of this Section 10 (regardless of
whether Officer resigns) upon the giving of Notice of Termination from Officer
to the Company (unless in any case referred to in the preceding clauses (i)
through (ix), the Company shall at such time have grounds to terminate Officer
for Just and Substantial Cause and shall have delivered to Officer a copy of a
resolution of the Board contemplated by Section 10 hereof except that it does
not specify that Officer is being terminated at that time). The occurrence of
one or more of the events described in clauses (i) through (ix) above are
hereinafter referred to as a "Constructive Termination."
(b) Base Salary and Bonus Based Severance Benefits. The
Company shall pay to Officer (or, in the event of his death, pay his beneficiary
or beneficiaries or his estate, as the case may be), as severance benefits under
this Section:
(i) a lump sum on the thirtieth (30th) day
following the Date of Termination, in an amount equal to the sum of (a)
Officer's full Base Salary through the Date of Termination to the extent such
Base Salary has not previously been paid through such date, at the rate in
effect at the time written notice of termination is given and (b) any bonus or
awards theretofore made to Officer which have not yet been paid to Officer; and
(ii) a lump sum, also on the thirtieth (30th) day
following the Date of Termination, in an amount equal to three (3) times the
average of: the sum of Officer's annual Base Salary plus all bonuses paid to
Officer during the twenty-four (24) month period immediately
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preceding the Date of Termination. For purposes of this Agreement, salary and
bonus are deemed paid when earned and are not affected by the deferral of any
compensation.
(c) Insurance Benefits. The Company, at its expense,
shall maintain in full force and effect, for the continued benefit of Officer,
his spouse and dependents until the earlier of: (i) the third anniversary of
Officer's Date of Termination; (ii) eighteen (18) months after Officer's Date of
Termination if at such time Officer, his spouse or dependents, as applicable, is
uninsurable under the Company's life, accident, medical and dental insurance
plans; or (iii) the date Officer, his spouse and dependents become entitled to
participate in similar plans, programs or arrangements provided by Officer's
subsequent employer: all life, accident, medical and dental insurance benefit
plans and programs or arrangements in which Officer, his spouse and dependents
were entitled to participate immediately prior to the Date of Termination
provided that the continued participation of Officer, his spouse and dependents,
as applicable, is possible under the general terms and provisions of such plans
and programs. In the event that the participation of Officer, his spouse or
dependents in any such plan or program is barred, the Company shall arrange to
provide Officer, his spouse or dependents, as the case may be, to the fullest
extent permitted by law or applicable regulation for a period of not less than
thirty-six (36) months (eighteen (18) months if the reason the participation of
Officer, his spouse or dependents are barred is that Officer, his spouse or
dependents, as applicable, are uninsurable) following Officer's Date of
Termination, with benefits substantially similar to those which Officer, his
spouse and dependents would have been entitled to receive under such plans and
program; provided, however, that, if the reason Officer, his spouse or
dependents are barred is not the fact that one or more of such persons are
uninsurable and such reasons are applicable to the Company's Senior Executive
Officers, as a whole, then, unless a Change In Control of the Company shall have
occurred, the Company need only use commercially reasonable efforts to provide
benefits beyond eighteen (18) months and that, for purposes of determining the
commercial reasonableness of providing substantially similar benefits, costs
which are similar to the cost Officer would incur for such benefits by making a
COBRA election for such period shall be considered reasonable.
(d) Stock Options & Restricted Stock. Simultaneous with
the Date of Termination (other than in the case of Officer's voluntary
resignation, other than under circumstances as contemplated by the definition of
Date of Termination, including, without limitation, Sections 10(a) and 11(a) of
this Agreement, or a termination for Just and Substantial Cause) (i) all stock
options which have theretofore been granted to Officer shall immediately vest
and be exercisable, and (ii) all restrictions on all restricted stock awards
shall terminate and such shares shall immediately vest, in each case, regardless
of any contrary provisions in any employee benefit plan or other agreement under
which such stock options or restricted stock awards were granted. In the event
Officer voluntarily terminates his employment under circumstances in which this
Section 10(d) does not apply, vesting, acceleration and removal of restrictions
shall be governed by the applicable award agreement and plan under which such
securities were awarded.
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(e) Motor Vehicle. As a further benefit, the Company, at
its expense, shall cause to be vested in Officer, free and clear title to the
motor vehicle then being furnished to Officer by the Company at or prior to
Officer's Date of Termination.
(f) Club Membership. As a further benefit, the Company
shall, at its expense, use its best efforts to cause the conversion of the
Company's corporate membership in the Golf Club of Georgia into a comparable
individual membership and the transfer of such membership to Officer, provided
that, in no event, shall the cost to the Company to transfer such membership
exceed $1,000.
(g) Payments In the Event of Constructive Receipt. As a
further benefit, if at any time it is determined that Officer must include a
portion or all of the severance benefits provided pursuant to this Section in
Officer's gross income for federal income tax purposes prior to the time Officer
receives payment of such benefits, then the Company agrees to pay Officer, as
soon as administratively feasible, an amount of cash sufficient to enable
Officer to pay the full federal and state tax liability attributable to the
inclusion of the severance benefits, or a portion thereof, in Officer's gross
income. Any cash so paid to Officer shall directly reduce the amount of future
installments, pro rata, of severance benefits payable to Officer as provided
hereunder.
11. TERMINATION IN THE EVENT OF A CHANGE IN CONTROL.
(a) Except as otherwise expressly provided in Sections
11(c) and 11(d) below, no benefits shall be payable under this section unless
and until (i) there shall have been a "Change in Control of the Company," as
defined in this Section 11, and (ii) Officer is then an employee of the Company
or, if Officer is not then an employee of the Company, Officer's employment was
severed within six (6) months prior to such Change in Control of the Company for
any reason other than for Just and Substantial Cause.
(b) In the event of a Change in Control of the Company,
Officer shall have, in addition to any other rights provided under this
Agreement, the right to terminate his employment under this Agreement by (i)
resignation on not less than sixty (60) days' prior written notice given within
six (6) calendar months after the occurrence of the Change in Control of the
Company. If the Company shall terminate Officer's employment in connection with
a Change in Control of the Company as defined in Section 11(a) above, or if
Officer shall resign from the Company under circumstances referred to in this
Section 11(b), then the Company shall (i) pay and provide to Officer as
severance pay under this Section the compensation and benefits which would be
payable under, and provided pursuant to, Section 9 in the event of the
termination of Officer's employment without Just and Substantial Cause, and (ii)
pay and provide the additional benefits set forth in this Article 11.
(c) Option Exercise Loan. In order to facilitate the
exercise of options and other rights to purchase Company Stock awarded under
employee benefit plans, the Company shall, in the event Officer's employment
with the Company is severed without Just and Substantial Cause within
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one (1) year following a Change in Control, make, if Officer so requests, an
unsecured loan to Officer (without the necessity of Officer demonstrating
financial need or otherwise) in an amount not less than the sum of the aggregate
exercise price of such options plus the amount of state and federal income tax
payable by Officer in respect of such exercise (an "Exercise Loan"). Such
Exercise Loan shall be for a three (3) year term and bear interest at the
generally prevailing prime commercial rate at the time of such loan. If the
Company shall so request, the Exercise Loan shall, if and to the extent legally
permissible, be secured by a pledge of the Common Stock purchased pursuant to
the exercise of the stock options or other rights, plus such number of other
shares of Common Stock owned by Officer, if any, as are necessary to meet any
applicable federal margin rules. In no event will Officer be required to pledge
any other security, including without limitation, the pledge of any options or
rights to purchase Common Stock held by Officer. Officer shall, promptly and, in
no event later than thirty (30) days after the date of sale, use the Net
Proceeds (as defined below) from any sale of Common Stock acquired with the
proceeds of the Exercise Loan to prepay such loan, in whole or in part. For
purposes of this Section, Net Loan Proceeds means the net proceeds from the sale
of such stock after deduction for all applicable transaction costs incurred in
connection with such sale and all applicable taxes on such sale and the proceeds
thereof. In the case of taxes not yet due and payable, the amount of taxes may
be based on Officer's reasonable good faith estimate of such liability.
(d) Excess Parachute Payment. In the event that any
payment or benefit, or any combination of payment or benefits, to Officer
hereunder with respect to a termination in connection with a Change in Control
of the Company is determined to be an "excess parachute payment" pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), then
the Company, at the time such determination becomes final, shall pay to Officer,
as additional severance pay, an amount which would equal, after deducting all
state and federal income taxes incurred by the Officer with respect to receipt
of such payment, would equal to the excise tax, if any, imposed on Officer
pursuant to Section 4999 of the Code.
(e) Certain Legal Fees. In addition to the rights
provided to Officer by Section 12 of this Agreement, the Company shall pay all
costs, legal fees and expenses as and when incurred by Officer in connection
with Officer's interpretation of, or determinations under any actual, threatened
or contemplated litigation or legal or administration or other proceeding
involving the provisions of this Section 11, whether or not initiated by
Officer.
(f) Duty to Provide Services Prior to Change In Control.
In the event any "person" or "group" of persons (as defined in Section 11(a)
above) begins a tender or exchange offer, circulates a proxy to stockholders or
takes other steps to effect a Change in Control of the Company, Officer agrees
that Officer will not voluntarily leave the employ of the Company, and will
render services to the Company commensurate with Officer's position, until such
"person" or "group" has abandoned or terminated efforts to effect a Change in
Control of the Company or until a Change in Control of the Company has occurred.
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12. LEGAL FEES; MITIGATION OF DAMAGES. The Company shall
reimburse, as and when incurred, such costs, legal fees and expenses as may be
reasonably incurred by Officer in contesting or disputing any such termination,
or in seeking to obtain or enforce any right or benefit provided by this
Agreement, and Officer shall have no obligation to reimburse the Company for
such costs if Officer is successful in any material respect in connection with
enforcing any of Officer's rights or the Company's obligations under this
Agreement in such dispute. Officer shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Agreement be
reduced by any compensation earned by Officer as the result of employment by
another employer after the Date of Termination, or otherwise. The Company and
its subsidiaries shall have no right to set off payments owed to Officer under
this Agreement against amounts claimed to be owed by the Officer to any of such
Persons under this Agreement or otherwise, but shall be entitled (in each case
without duplication) to offset any payments owed against amounts owed to such
Persons which are evidenced by one or more final, non-appealable judgments in
favor of such Persons against Officer.
13. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor (whether
direct or indirect, by purchaser, merger, consolidation or otherwise) to the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement shall constitute a material breach of this
Agreement and shall entitle Officer to compensation from the Company in the same
amount and on the same terms as Officer would be entitled hereunder if such
succession had not occurred, except that for purposes of implementing the
foregoing, the date of which any such succession becomes effective shall be
deemed the Date of Termination. In connection with any transaction with, or any
proposed transaction with, any successor to the Company approved or recommended
by Officer and the Board, Officer agrees to consider, but shall not be obligated
to agree to, a waiver, deferral or amendment of any right or benefit conferred
on Officer under this Agreement, if requested in good faith by the Board of the
Company. As used in this Agreement, "Company" shall mean the Company and its
Significant Subsidiaries as hereinbefore defined and any successor to its
consolidated business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 13 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law. The
obligations of the Company and its Significant Subsidiaries shall be joint and
several.
(b) This Agreement shall inure to the benefit of and be
enforceable by Officer's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Officer should die while any amounts are still payable to Officer hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Officer's devisee, legatee, or other designee of,
if there be no such designee, to Officer's estate.
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14. NOTICE. For the purposes of this Agreement, notices,
Notices of Termination, and all other communication provided for in this
Agreement shall be in writing and shall be deemed to have been duly given only
when personally delivered or mailed by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Company:
Scientific Games Holdings Corp.
0000 Xxxxxxxxx Xxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: C. Xxxx Xxxxxx, Xx.
Vice President and General Counsel
If to Officer:
Xxxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
or, in either case, to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
15. MISCELLANEOUS. Officer's interest in the severance benefits
hereunder is an unsecured claim against the general assets of the Company. To
the extent that any applicable state or federal law, rule or regulation confers
upon Officer any greater benefit or right than that set forth in this Agreement,
such law, rule or regulation shall control in lieu of the provisions hereof
relating to such benefit or right.
16. ADDITIONAL REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to Officer that this Agreement is the legal, valid and
binding agreement of the Company, that the Company has full power and authority
to enter into this Agreement without further action, and that the Company is not
now and will not in the future become a party to any contract, agreement or
understanding which would prevent the fulfillment by the Company of its
obligations under this Agreement. To the extent that any applicable state or
federal law, rule or regulation confers upon Officer any greater benefit or
right than that set forth in this Agreement, such law, rule or regulation shall
control in lieu of the provisions hereof relating to such benefit or right. The
Company will, upon Officer's request, whether in connection with a Change of
Control of the Company or otherwise, cause this Agreement to be expressly
confirmed and ratified by its Board. Failure to cause such action to be taken
shall be a material breach and shall entitle Officer to liquidated damages as
provided below; it being agreed by the parties that the actual damages which
might be sustained by Officer by reason of the Company's breach of this Section
are uncertain
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and difficult to ascertain. It is further agreed that in the event of the breach
of any of the representations, warranties or covenants contained in this
Section, that the Officer shall be entitled to an amount equal to all sums which
would be payable under Sections 10 and 11 in the event of a Change in Control of
the Company the same as if (i) Officer's employment had been terminated under
Section 10 of this Agreement, and (ii) a Change In Control had occupied under
Section 11 of this Agreement even though a triggering event may not have
otherwise occurred with respect to such sections. The parties agree that this
sum is reasonable and just compensation for such breach and in the event of a
breach, Company agrees to pay, and Officer agrees to accept such sum, as
liquidated damages, and not as a penalty.
17. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not effect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement is held to be illegal, invalid, or unenforceable
under present or future laws effective, such provision shall be fully severable
and this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and still be legal, valid or enforceable. It is
acknowledged that any payment which may be made by the Company to Officer under
this Agreement is in the nature of employment and/or severance and not a penalty
payment. Should the obligation to make any payment hereunder be held to be void
or voidable as a penalty by a final non-appealable court of competent
jurisdiction, this Agreement shall be deemed to provide an obligation on the
part of the Officer to render such consulting services as the Company may
reasonably request during the period of and in exchange for such payments as
would otherwise have been made by the Company as severance benefits and the
parties agree such payments shall constitute reasonable compensation for the
value of Officer's services during such period.
18. OFFICER'S OBLIGATIONS UPON TERMINATION OF EMPLOYMENT.
Upon the termination of his employment hereunder for whatever
reason (other than death) Officer shall:
(a) Forthwith tender his resignation from any
directorship or office he may hold in the Company; and
(b) Not at any time represent himself still to be
connected or to have any connection with the Company.
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19. EFFECT OF TERMINATION.
The provisions of this Agreement shall survive the termination
of this Agreement and the termination of Officer's employment with the Company
to the extent required to give full effect to the covenants and agreements
contained herein.
20. CONFIDENTIALITY.
(a) Officer agrees that, both during the term of this
Agreement and after the termination of this Agreement, Officer will hold in a
fiduciary capacity for the benefit of the Company, and shall not directly or
indirectly use or disclose, except as authorized by the Company in connection
with the performance of Officer's duties, any Confidential Information, as
defined hereinafter, that Officer may have or acquire (whether or not developed
or compiled by Officer and whether or not Officer has been authorized to have
access to such Confidential Information) during the term of this Agreement. The
term "Confidential Information" as used in this Agreement shall mean and include
any information, data and know-how relating to the business of the Company that
is disclosed to Officer by the Company or known by him as a result of his
relationship with the Company and not generally within the public domain
(whether constituting a trade secret or not), including without limitation, the
following: financial information, supply and service information, marketing
information, personnel information, customer information and information with
respect to any corporate affairs that the Company agreed to treat as
confidential.
The term "Confidential Information" does not include information that
has become generally available to the public by the act of one who has the right
to disclose such information without violating any right of the Company or the
client to which such information pertains.
(b) The covenant contained in this Section 20 shall
survive the termination of Officer's employment with the Company for any reason
for a period of three (3) years; provided, however, that with respect to those
items of Confidential Information which constitute trade secrets under
applicable law, Officer's obligations of confidentiality and non-disclosure as
set forth in this Section 20 shall continue to survive after said three (3) year
period to the greatest extent permitted by applicable law. These rights of the
Company are in addition to those rights the Company has under the common law or
applicable statutes for the protection of trade secrets.
21. NON-COMPETITION.
(a) So long as Officer is employed by the Company, and
for a period of three (3) years after termination of his employment for any
reason, Officer agrees not to engage in any "Competitive Activity" within the
"Noncompete Territory" (as those terms are defined in subsection (b) below).
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(b) As used herein, the term "Noncompete Territory" shall
mean any geographic area in which the Company has business or operations which
were performed, supervised by or assisted in by the Officer, or in which the
Company has customers or actively sought prospective customers with whom Officer
had Material Contact while employed by the Company. As used herein, the term
"Competitive Activity" shall mean any activity in which the Officer directly or
indirectly owns, manages, operates, controls, is employed by (either as an
Officer or independent contractor) or participates in the ownership, management,
operation or control of, any business (a "Competitor") that is engaged in the
manufacture or distribution of lottery products and services that are comparable
in type to the lottery products and services manufactured, distributed or
provided by the Company.
(c) "Material Contact" shall, for the purposes of
Sections 21(b) and 22(a) of this Agreement, exist between Officer and each
customer or potential customer: (i) with whom Officer dealt; (ii) whose dealings
with the Company were coordinated or supervised by Officer; (iii) about whom
Officer obtained confidential information in the ordinary course of business as
a result of Officer's association with the Company; or (iv) who receives
products or services authorized by the Company, the sale or provision of which
results or resulted in compensation, commissions, or earnings for Officer,
directly or indirectly, within two (2) years prior to the date of termination of
Officer's employment with the Company.
(d) For purposes of this Agreement, the determination of
whether a particular geographic area is within the Noncompete Territory or
whether a particular activity is a Competitive Activity shall be made at the
earlier of the time that enforcement of this covenant is sought, or the date the
Officer ceases, for any reason, to be an Officer of the Company.
(e) The Company and Officer acknowledge and agree, based
upon the current activities of the Company and a good faith projection of its
future activities, that the Noncompete Territory shall be presumed to be the
entire world; provided, however, that in the event this presumption is in
conflict at the time of determination with the definition contained in
subsection (b) above, then the Noncompete Territory shall comprise only that
portion of the world as falls within such definition.
(f) Nothing herein contained, however, shall restrict the
Officer from making any investments in not more than four and nine-tenths
percent (4.9%) of the voting securities in any Person whose stock is listed on a
national securities exchange or actively traded in the over-the-counter market,
so long as such investment does not give the Officer the right to control or
influence the policy decisions of any such business or enterprise which is, or
might be, directly or indirectly in competition with the Business of the
Company.
(g) The provisions of this Section 21 shall survive the
termination of the Officer's employment hereunder, irrespective of the reason
therefor until three (3) years after the date of termination.
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22. NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS.
(a) Officer agrees that he will, for so long as he is
employed hereunder and for a period of three (3) years after termination of his
employment, refrain from (i) recruiting or hiring, or attempting to recruit or
hire, directly or by assisting others, any other employee of the Company who is
employed by the Company or any successor or affiliate of the Company, if the
Company or its successor or affiliate is then engaged in the business of
manufacturing or distributing products or providing services that are the same
as or substantially comparable in type to the products manufactured or
distributed by, or the services provided by, the Company or any of its
Affiliates at such time of termination were being and continue to be provided by
the Company, unless such employee (1) resigns voluntarily (without any
solicitation from Officer or his Affiliates, or (2) is terminated by the Company
or its Affiliates, or (ii) soliciting, enticing or inducing any Person with whom
Officer had Material Contact, that then presently is, or at any time during such
period shall be, a customer or potential customer of the Company, or any of its
Affiliates, to become a customer of any other Person for products or services
the same as, or comparable in type to, those products and services which, at
such time of termination, were being and continue to be provided by the Company
or any of its Affiliates and the Officer shall not approach any such Person for
such purpose or authorize or knowingly approve the taking of such actions by any
other Person, or assist any such Person in taking such action.
(b) The provisions of this Section 22 shall survive the
termination of the Officer's employment hereunder, irrespective of the reason
therefor until three (3) years after the date of termination.
23. TOLLING OF PERIOD OF RESTRAINT.
Officer hereby expressly agrees that any purported violation
of the restraints set forth in Sections 20 through 22 shall automatically toll
and suspend the period of the restraint for the amount of time from the date
Officer or the Corporation commences litigation with respect to the
enforceability of such provisions and/or such purported violation until a final,
non-appealable decision is rendered or the parties otherwise resolve the
purported violation; provided that the applicable period of restraint shall not
be extended unless there shall have been a violation of the restraints set forth
in the applicable section at issue during such period of time.
24. ACKNOWLEDGMENTS.
Officer hereby acknowledges and agrees that the restrictions
contained in Sections 20, 21 and 22 are fair and reasonable and necessary for
the protection of the legitimate business interests of the Company. Officer
acknowledges that in the event Officer's employment with the Company terminates
for any reason, Officer will be able to earn a livelihood without violating the
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restrictions contained in Sections 20, 21 and 22. Officer acknowledges that such
restrictions are a material condition to Officer's employment and continued
employment with the Company.
25. RIGHTS TO MATERIALS.
All records, files, memoranda, reports, price lists, customer
lists, drawings, plans, sketches, documents and the like (together with all
copies thereof) relating to the business of the Company, which Officer shall use
or prepare or come in contact with in the course of, or as a result of, his
employment shall, as between the parties hereto, remain the sole property of the
Company. Upon the termination of his employment or upon the prior demand of the
Company, he shall immediately return all such materials and shall not thereafter
cause removal thereof from the premises of the Company; provided that, for the
avoidance of doubt, upon termination of his employment, Officer shall be
entitled to retain or to have furnished to him, at Company expense the following
documents: originals of Officer's appointment and desk calendars, copies of
travel and entertainment reports and requests for reimbursement and associated
supporting documentation; and further provided that, for the avoidance of doubt,
the Company shall be entitled, at its sole cost and expense, to make copies of
the foregoing original records which officer is entitled to retain, provided
that if Officer's employment is terminated, a request to copy any original
records to which Officer is entitled must be communicated by Notice to Officer
no later than sixty (60) days following the termination of his employment.
26. INVENTIONS.
Officer will promptly disclose to the Company and to no other,
any Invention (as hereinafter defined) which Officer may conceive or make either
alone or in conjunction with others during his employment by the Company or
which Officer may conceive or make within one (1) year after termination of his
employment with the Company for any reason. Moreover, Officer will execute all
papers deemed proper by Company to enable it, at its expense, to prepare and
file any and all original, divisional, continuation, continuation-in-part,
refile, renewal, reissue and other applications for Letters Patent of the United
States and of other countries covering such Inventions, to establish and
maintain the Company's title to and obtain for the Company or its designee
patents on said applications or any other patent owned or claimed by the
Company, all at the option of the Company, and to vest the Officer's entire
right, title and interest in and to said Inventions, patent applications and
patents in the Company or its designee. Officer will also execute all such
proper and necessary papers to perfect or otherwise protect the Company's rights
in such Inventions as may be presented to the Officer at any time during or
after the termination of his employment with the Company. For purposes of this
provision, the term "Invention" shall mean and include any invention or
technical information related to the business of the Company in the nature of a
new design, art, machine, process, formula, procedure, computer program, method
of manufacture, composition matter or any new or useable improvements thereof,
whether or not patentable.
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27. WORKS MADE FOR HIRE.
All Works (as hereinafter defined) and all copyrights and
other rights, titles and interests whatsoever in and to the Works, belong
solely, irrevocably and exclusively throughout the world to the Company as
"works made for hire." Moreover, if and to the extent any court or agency should
conclude that the Works (or any of them) do not constitute or qualify as a "work
made for hire" the Officer hereby assigns, grants and delivers, solely,
irrevocably, and exclusively throughout the world unto the Company, all
copyrights and other rights, titles and interests whatsoever in and to Works.
Officer shall execute (whether or not any court or agency has concluded that the
Works, or any of them, do not constitute or qualify as "works made for hire")
such further grants and assignments of all rights which the Company from time to
time reasonably may request for the purpose of evidencing, enforcing,
registering or defending its complete, exclusive, perpetual and worldwide
ownership of the Works. Without limiting the preceding provisions of this
Section, Officer acknowledges and agrees that the Company may edit and otherwise
modify, and use, publish and otherwise exploit, the Works (and any of them or
part of them) in any media and in such manner as the Company in its sole
discretion may determine, provided, however, that the Company shall expressly
disclaim Officer's involvement with any edited or modified work unless Officer
shall consent to the use of his name with respect thereto. For purposes of this
provision, the term "Works" shall mean and include all writings, tapes,
recordings, computer programs and other works in any tangible medium of
expression, regardless of the form of the medium, which have been or are
prepared by the Officer, or to which the Officer contributes, in connection with
his employment by the Company, whether created within or without the Company's
facilities and whether created before, during or after normal business hours.
28. INJUNCTIVE RELIEF. Officer understands, acknowledges and
agrees that in the event of a breach or threatened breach of any of the
covenants and promises contained in Sections 20, 21, 22, 26, and 27, the Company
will suffer irreparable injury for which there is no adequate remedy at law and
the Company will therefore be entitled to injunctive relief enjoining said
breach or threatened breach. Officer further acknowledges, however, that the
Company shall have the right to seek a remedy at law as well as or in lieu of
equitable relief in the event of any such breach.
29. ENTIRE AGREEMENT; CHOICE OF LAW. This Agreement sets forth the
entire understanding of the parties and supersedes all prior agreements or
understandings, whether written or oral, with respect to the subject matter
hereof. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. The validity, interpretation
construction and performance of this Agreement shall be governed by the laws of
the State of Georgia and any applicable federal laws of the United States of
America. No terms, conditions, warranties, other than those contained herein,
and no amendments or modifications hereto shall be binding unless made in
writing and signed by the parties hereto. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by Officer and a Senior Executive Officer of the
Company or such other employee of the Company
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as may be specifically designated by the Board of the Company, whose authority
is evidenced by a resolution of the Compensation Committee and such other
Committee or the entire Board as necessary to establish the authority of such
Senior Executive Officer or such employee of the Company as may be specifically
designated by the Board of the Company. No waiver by either party hereto at any
time of any breach by the other part hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
30. BINDING EFFECT. This Agreement shall extend to and be binding
upon and inure to the benefit of the parties hereto, their respective successors
and assigns; provided, however, that neither party shall have the right to
assign this Agreement without the prior written consent of the other party
hereof, which consent shall not unreasonably be refused upon the provision of
assurances of performance reasonably satisfactory to Officer and assumption of
the Agreement in the manner contemplated herein. Officer may not assign, pledge
or otherwise hypothecate Officer's interest in the severance benefits payable
hereunder, and any attempt by Officer to do so will not be recognized by the
Company.
31. TITLES. Titles of the headings herein are used solely for
convenience and shall not be used for interpretation or construing any work,
section clause, paragraph, or provision of this Agreement.
32. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
33. ENFORCEMENT. The provisions of this Agreement may be enforced
by all legal and equitable remedies available to the parties including specific
performance and injunction. Nothing herein shall be construed as prohibiting
either party from pursuing any other remedies available to it, including
recovery of damages.
34. CONSTRUCTION. Each of the parties has agreed to the use of the
particular language of the provisions of this Agreement and all attached
Exhibits, and any questions of doubtful interpretation shall not be resolved
solely by any rule or interpretation against the draftsman but rather in
accordance with the fair meaning thereof. The Company acknowledges it was
represented by independent counsel in connection with the negotiation and
execution of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
SCIENTIFIC GAMES HOLDINGS CORP.
By:
-------------------------------------------
Xxxxx X. Xxxxxxx
Vice President and Chief Financial Officer
Attest
By:
-------------------------------------------
C. Xxxx Xxxxxx, Xx.
Its: Vice President and General Counsel
Accepted and Agreed as of the
date first above written:
-----------------------------------------
(Signature)
XXXXXXX X. XXXXXX
(Print Name)
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EXHIBIT A
INCENTIVE COMPENSATION PLANS
ANNUAL INCENTIVE COMPENSATION PLAN
An Annual Incentive Compensation Plan (the "AICP") has been instituted
by the Company which provides an annual cash bonus plan for senior management.
The amount of the annual bonus shall be determined annually by the Compensation
Committee (the "Committee") of the Board of Directors of the Company in relation
to results achieved by participants in the AICP based on the degree of
achievement by the Company of its strategic and financial targets for the
preceding year. The degree to which the targets are achieved will produce a
payout for participants proportionately greater for above target performance and
proportionately smaller for below target performance. Targets may include, but
are not limited to, such items as earnings before interest, taxes, depreciation
and amortization ("EBITDA"), earnings per share ("EPS"), stock price levels,
cash flow and operating income as established by the Committee after
consultation with the Chief Executive Officer or pursuant to authority delegated
by the Committee.
Under the AICP, Officer shall be eligible initially for incentive
compensation of 48% of his Base Salary at December 31 of any year for
performance at target. Bonus payments to Officer under the AICP will be in
accordance with each AICP, as approved by the Committee. Enhancements to amounts
annually payable under the AICP may be made by the Committee, at its discretion,
based on the officer's individual evaluation and performance and any such
enhancement payments (or lack thereof) need not be uniform with respect to
individual performance based payments to other Executive Officers, including,
without limitation, Senior Executive Officers. Under the AICP, Officer will be
eligible for incentive compensation according to the terms of the AICP, as
approved from time to time by the Committee.
The AICP shall be subject to amendment, modification and interpretation
by the Committee provided that any such amendment, modification or
interpretation shall not materially reduce the right of Officer to any payment
or benefit earned thereunder and provided that any amendment, modification or
interpretation of the AICP shall be binding on all participants affected
thereby.
INTERMEDIATE INCENTIVE COMPENSATION PLAN
An Intermediate Incentive Compensation Plan ("IICP") has been
established by the Company. Under the IICP, Officer is eligible for, and annual
cash bonuses are earned based on, the Company's achievement of a specified
financial performance goal based upon the compounded growth in the Company's
earnings per share over rolling three-year periods beginning with the three-
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year period ending December 31, 1995. If the Company's actual results fall short
of the performance goal specified during any three-year period, no amounts will
be payable under the IICP for such three-year period; however, if the target is
met or exceeded, Officer will be eligible to receive a cash bonus payable over
the following three (3) years. To receive any payment under the IICP, Officer
must be an employee of the Company on the first business day of any year in
which payments become payable. The total amount payable to Officer will vary
within the range established under the IICP, with a minimum amount specified for
meeting the target and a maximum amount specified for exceeding the target by a
specified percentage or more. Under the IICP, Officer will be eligible for
incentive compensation according to the terms of the IICP, as approved from time
to time by the Committee.
The IICP shall be subject to amendment, modification and interpretation
by the Committee provided that any such amendment, modification or
interpretation shall not materially reduce the right of Officer to any payment
or benefit earned thereunder and provided that any amendment, modification or
interpretation of the IICP shall be binding on all participants affected
thereby.
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EXHIBIT B
SCIENTIFIC GAMES HOLDINGS CORP.
FORM OF STOCK OPTION AWARD AGREEMENT
You have been selected to be a Participant in the Scientific Games
Holdings Corp. 1996 Key Employee Stock Option Plan (the "Plan") as specified
below.
The Plan provides complete details of all of your rights under the Plan
and this Award Agreement, as well as all of the conditions and limitations
affecting such rights. All capitalized terms appearing in this Award Agreement
shall have the meanings ascribed to them in the Plan or that certain Employment
and Severance Benefits Agreement between Participant and the Company dated as of
January 1, 1998 (the "ESBA"), as the context requires. If there is any
inconsistency between the terms of this Award Agreement and the terms of the
Plan, the Plan's terms shall completely supersede and replace the conflicting
terms of this Award Agreement.
1. NUMBER OF SHARES GRANTED UNDER THIS OPTION: 200,000
2. DATE OF GRANT: November 18, 1998
3. EXERCISE PRICE: $
--------------------------------
4. EXERCISE OF OPTIONS: Subject to the terms of the Plan, the
Shares covered by this Option may be purchased according to the following
schedule:
Portion of Option Cumulative Number of
Which Becomes Shares Which May Be
Date Exercisable Purchased
January 1, 2000 50,000 50,000
January 1, 2001 50,000 100,000
January 1, 2002 50,000 150,000
January 1, 2003 50,000 200,000
5. EXPIRATION DATE OF OPTION: January 1, 2008 subject to Plan
provisions in the case of death or permanent disability.
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6. RESTRICTION ON TRANSFERABILITY: A Participant may not sell,
pledge, encumber, transfer or by pursuant to a gift, or bequest or otherwise
transfer or dispose of, and may not permit to be sold, pledged, encumbered or
transferred or disposed of in any manner, all or any portion of, or any direct
interest in, any Shares acquired pursuant to the Plan, except:
(a) that options granted hereunder may be transferred by
the Participant, subject to such rules as the Committee may adopt to preserve
the purposes of the Plan, to one or more of:
(i) the Participant's spouse, children or
grandchildren, parents, grandparents,[siblings, mothers-in-law, fathers-in-law,
sons-in-law, daughters-in-law, brothers-in-law and sisters-in-law (including, in
each case, adopted and step relationships) (collectively, the "Immediate
Family");
(ii) a trust or trusts solely for the benefit of
the Participant and/or his or her Immediate Family; or
(iii) a partnership or limited liability company,
the partners or shareholders of which are limited to the Participant and his or
her Immediate Family members;
(each transferee described in clauses (i), (ii) and (iii) above is hereinafter
referred to as a "Permitted Transferee"); provided that (A) the Participant
gives the Committee advance written notice describing the terms and conditions
of the proposed transfer and the Committee notifies the Participant in writing
that such a transfer would comply with the requirements of the Plan and this
award agreement, (B) such transfer can be effected at no out-of-pocket cost to
the Company, (C) such transfer will not result in a material adverse effect on
the Company or any plan under which such options were granted, and (D) the
Participant shall have appointed, and given written notice to the Company of the
same, not less than three (3) Persons (at least one of whom shall be a law firm,
trust department of a bank, or other institutional fiduciary), each ready,
willing and able at the time of appointment to serve as guardian or similar
advisor if Participant is found to be mentally incompetent or as a
representative of Participant's estate (hereinafter, a "Representative"), in
each case, for the purpose of acting on behalf of Permitted Transferees under
this Agreement, including, without limitation, Section 8 hereof. For purposes of
this Agreement, Participant shall designate from his Representatives (i) a
primary Representative, (ii) a first alternate Representative (who shall serve
as the Representative hereunder if the primary Representative(s) is unwilling or
unable to serve, and (iii) a second alternate Representative(s) (who shall serve
as the Representative hereunder if both the primary Representative and the first
alternate Representative(s) are unwilling or unable to serve. The Participant
may require that one or more of the primary Representative, the first alternate
Representative or the second alternate Representative act in concert to take any
action on behalf of the Permitted Transferees. No transfer of Options awarded by
this Agreement shall be permitted unless or until the Participant shall have
furnished notice to the Company of the identity of Participant's Representatives
and such other information as the Company reasonably may request to confirm that
such Persons are ready, willing and able to act as a Representative hereunder.
The
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Participant may, from time to time, change the identity and priority of one or
more Persons serving as a Representative of Participant by notice to the
Company, given as provided in that certain Employment and Severance Benefits
Agreement between the Participant and the Company, dated as of January 1, 1998.
The terms of any option transferred in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee, except that (a) a
Permitted Transferee shall not be entitled to transfer any options, other than
by will or the laws of descent and distribution; and (b) Permitted Transferee
shall not be entitled to exercise any transferred options unless there shall be
in effect a registration statement on an appropriate form covering the shares to
be acquired pursuant to the exercise of such option, if the Committee determines
that such a registration statement is necessary or appropriate; and
(b) or otherwise as further permitted by the Plan and, in
each case, in accordance with and subject to the terms of the Plan and this
Award Agreement.
Any transfer by the Participant contrary to the terms of the Plan shall
be void and shall vest no right, title, or interest in the transferee.
7. ACCELERATED EXERCISABILITY: In the event the employment of a
Participant is terminated, either voluntarily or involuntarily, by reason of
death, permanent disability, or Change in Control or Constructive Termination,
except, in each case, with Just and Substantial Cause, all Shares under this
Option shall become immediately exercisable one hundred percent (100%), and
shall remain exercisable for their entire term and any period of restriction
shall immediately terminate. In the event Participant otherwise voluntarily
terminates his employment with the Company, Options shall vest and be
exercisable only as provided for by the ESBA or the Plan.
8. MANNER OF EXERCISE: As further described in the Plan, a
Participant entitled to exercise the Option or any portion thereof may do so by
delivering written notice of exercise in person or addressed and mailed,
certified mail, postage-prepaid, to the Company at its executive office in
Alpharetta, Georgia or such other address as the Company may, from time to time,
specify, except as otherwise limited hereby. Such written notice shall specify
the number of Shares with respect to which the Option is being exercised, the
purchase price of each Share, the aggregate purchase price for all Shares being
purchased under said notice, and the date (which shall not be more than ninety
(90) days after the notice) upon which the Shares shall be purchased. Such
notice shall be signed by such Participant (or other person authorized to
exercise such Options) and shall be accompanied by payment, whether in cash, by
check, by shares of Common Stock (whether issuable in connection with the
exercise of the Option if permitted by the Committee in its sole discretion
following prior written request by the Participant or previously acquired by the
Participant if acquired more than six months prior to the date of exercise of
the Option), or any combination thereof, as elected by the Participant subject
to the limitations stated above, in full for such aggregate purchase price. The
Committee's decision to allow payments to be made in the form of Shares
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issuable in connection with the exercise of the Option shall be made by giving
written notice to the Participant (or other person exercising the Option).
Notwithstanding anything in this Agreement to the contrary, the Company
shall not be obligated to take any action under this Agreement on behalf of, or
with respect to, any Permitted Transferee unless permitted to do so in writing
(i) by the Participant, if the Participant is still living and has not been
found to be mentally incompetent (and no guardian or similar advisor shall have
been appointed with respect to his affairs) or (ii) if the Participant is
deceased or shall have been found to be mentally incompetent, and a guardian or
similar advisor shall have been appointed with respect to his affairs, from the
representative of Participant's estate or such guardian or advisor, as the case
may be. The above provision only addresses the obligations of the Company with
respect to Permitted Transferees, as to whom the Company shall have no liability
for its acts or failure to act as provided in the foregoing sentence, and does
not address the relative rights and obligations between the original
Participant, on the one hand, and any Permitted Transferees, on the other hand.
9. RESTRICTION ON EXERCISE AND RESALE OF SHARES: Participant
acknowledges that the Shares to be acquired upon exercise of this Option are not
presently registered under the Securities Act of 1933, as amended (the
"Securities Act"). If at any time during which this Option would otherwise be
exercisable according to its terms, there is no effective registration statement
on file with the Securities and Exchange Commission covering the Shares which
would then be acquirable hereunder, the Options to acquire such Shares shall not
be exercised until the Shares are registered pursuant to the Securities Act;
provided, however, the Committee may, by written action, waive such restriction
on exercise and may condition such exercise upon its receipt of such
representations, factual assurances and legal opinions as it shall reasonably
deem necessary to determine and document the availability of an exemption from
the registration requirements of the Securities Act (and such state securities
laws as shall be applicable).
Participant agrees that until and unless registration occurs the
certificates representing any Shares acquired hereunder may be imprinted with a
restrictive legend substantially as follows and that appropriate stop transfer
orders may be issued by the Company to its transfer agent:
"The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be transferred or otherwise disposed of in the absence
of such registration or of an opinion in form and from counsel
reasonably satisfactory to the Company to the effect that such
registration is not required."
10. REGISTRATION RIGHTS OF SHARES: Certificates representing
Options and certificates for underlying Shares which are entitled to
Registration Rights under that certain Registration Rights Agreement between the
Company and Participant shall, in each case, also bear a legend referring such
rights, and any person asserting rights thereunder shall be required to
establish, to the
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Company's reasonable satisfaction, the identity of the Holder's transferor and,
in the case of Shares, that such Shares were issued pursuant to Options granted
under this Agreement.
11. ACKNOWLEDGMENT AND ACCEPTANCE: Please acknowledge your
agreement to participate in this Plan and this Agreement, and to abide by all of
the governing terms and provisions, by signing the following representation:
Agreement to Participate
By signing a copy of this Agreement and returning it to the
Company, I acknowledge that I have read the Plan, and that I
fully understand all of my rights under the Plan, as well as
all of the terms and conditions which may limit any
eligibility to exercise this Option and/or transfer Shares
acquired under this Option.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Date of Grant.
SCIENTIFIC GAMES HOLDINGS CORP.
By:
-------------------------------------------------
Xxxxx X. Xxxxxxx
Vice President and Chief Financial Officer
Attest:
By:
-------------------------------------------------
C. Xxxx Xxxxxx, Xx.
Its: Vice President and General Counsel
(Participant's Signature)
--------------------------------
Name:
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Transfer History
[To be Completed By the Company]
Initial Holder Subsequent Transferee
-------------- ---------------------
Transfers of Options may not be unilaterally made by the Holder of the
Options evidenced by this Certificate
No proposed transfer shall be effective unless and until the Company shall issue
a new option certificate in the name of the transferee and shall have completed
this box on the new option certificate and all conditions to any such transfer
shall have been complied with by the proposed transferor and the proposed
transferee.
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EXHIBIT C
SCIENTIFIC GAMES HOLDINGS CORP.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of
_____________, __ 1998 by and between SCIENTIFIC GAMES HOLDINGS CORP., a
Delaware corporation (the "Company"), and XXXXXXX X. XXXXXX ("Officer").
RECITALS
WHEREAS, the Company and Officer are parties to that certain Employment
and Severance Benefits Agreement of even date herewith (the "ESB Agreement) and;
WHEREAS, Capitalized terms appearing herein and not otherwise defined
have the meanings such terms are assigned in the ESB Agreement; and
WHEREAS, the Company expects to receive substantial benefits as a
result of the transactions contemplated by the ESB Agreement, and the Company's
agreement to enter into this Agreement is a condition to execution of the ESB
Agreement by Officer;
NOW, THEREFORE, in consideration of the premises and the mutual
obligations and covenants hereinafter set forth, the parties hereto agree as
follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Affiliate" shall mean, with respect to any person or entity, any
person or entity which directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with such
person or entity.
"Commission" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock of the Company, par value
$0.001 per share.
"Company Notice" shall have the meaning assigned to such term in
Section 2.1.
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"ESB Agreement" has the meaning set forth in the Recitals hereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal rule or statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean Officer, so long as such individual holds the
Registrable Stock, and any person holding the Registrable Stock to whom the
rights under this Agreement have been transferred in accordance with Section 9,
so long as such individual holds Registrable Stock.
"Permitted Transferees" shall have the meaning ascribed to such term in
the Option Award Agreement between Officer and the Company dated as of the same
date as this Agreement and awarded pursuant to the Company's 1996 Employee Stock
Option Plan.
"Person" shall mean an individual, partnership, corporation (including
a business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Priority Shares" shall mean other Registrable Securities senior in
priority of registration rights to the Registrable Stock. The Registrable Stock
shall not constitute Priority Shares.
"Recitals" shall mean the recitals to this Agreement which constitute
integral terms hereof and conditions hereto.
"Registrable Securities" shall mean (a) shares of Registerable Stock
and (b) any other shares of the capital stock of the Company having similar
registration rights; provided, however, that such securities shall only be
treated as Registrable Securities if and so long as (i) they have not been
registered or sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, (ii) they have not been sold
pursuant to Rule 144, or (iii) the registration rights with respect to such
shares have not otherwise terminated.
"Registrable Stock" shall mean (a) shares of Common Stock issued to
Officer by the Company or issuable upon the exercise of options to purchase
Common Stock issued to Officer by the Company, (b) any other shares of Common
Stock acquired by Officer while an Affiliate of the Company, (including shares
issuable upon the exercise of options transferred to Permitted Transferees) (c)
any other shares of Common Stock acquired by a Permitted Transferee but only if,
while and so long as, such Person is or may be deemed to be an Affiliate of the
Company, and (d) any shares issued or issuable to Officer or his Permitted
Transferees upon or as a result of any stock split, stock dividend,
recapitalization, conversion or similar event; provided, however, that, in the
case of clauses (a)-(d), such securities shall only be treated as Registrable
Stock if and so long as (i) they have not been registered or sold to or through
a broker or dealer or underwriter in a public distribution or a public
securities transaction, (ii) they have not been sold pursuant to
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Rule 144, or (iii) the registration rights with respect to such shares have not
otherwise terminated.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as otherwise
stated below, incurred in complying with Section 2.1, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expense of any special audits incident to or required by any
such registration, compensation of regular employees of the Company and expenses
of all marketing and promotional efforts reasonably requested by the managing
Underwriter relating to all securities being offered in an offering and which
are customarily paid by issuers or sellers of securities and such other fees and
disbursements of Underwriters customarily paid by issuers or sellers of
securities (but not the fees and disbursements of Underwriters' counsel);
provided, however, that each Holder shall bear all fees and expenses of its own
counsel, underwriting discounts and commissions, brokerage fees or commissions
and transfer taxes, in each case, if any, relating to the sale of its
Registrable Stock.
"Registration Rights Period" shall mean, (a) with regard to any
non-Affiliate Holder and the shares of Registrable Stock then held by such
Holder, that period during which the shares of Registrable Stock held by such
Holder constitute Registrable Stock; provided, however, that notwithstanding
anything contained herein to the contrary, the Registration Rights Period for
any non-Affiliate Holder shall end no later than the first date on which the
Registrable Stock held by such Holder may be publicly sold pursuant to Rule 144
and free of any contractual restriction on sale under this Agreement or the ESB
Agreement; and (b) with respect to any Holder who is an Affiliate of the
Company, until the later of (i) ninety (90) days after such Holder ceases to be
an Affiliate of the Company, or (ii) would not be deemed an underwriter under
Section 2(11) of the Securities Act with respect to the sale of the Registrable
Stock.
"Restricted Stock" shall mean the Registerable Stock constituting
restricted securities as defined in Rule 144.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar Federal rule or statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Holder" shall mean a Holder who offers or sells Registrable
Stock pursuant to a registration statement in which such Holder participates
pursuant to this Agreement.
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"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal in an underwritten offering and not as part of such
dealer's market-making activities.
"Withdrawal Election" shall have the meaning assigned to such term in
Section 2.2(a)(v).
2. Piggyback/Incidental Registration.
(a) Notice of Registration. If at any time or from time
to time during the Registration Rights Period the Company shall determine to
register any of its equity securities, either for its own account or the account
of stockholders of the Company, other than (a) registration relating solely to
employee benefit plans registered on Form S-8 or any successor form thereto (but
only so long as securities issuable upon the exercise of transferable options
may not be and are not being registered thereunder), (b) a registration relating
solely to a transaction meeting the requirements of Rule 145 under the
Securities Act transaction (a "Rule 145 transaction"), (c) a registration in
which the only equity security being registered is Common Stock issuable upon
conversion of convertible debt securities which are also being registered, or
(d) constituting a registered exchange offer or shelf registration entered into
pursuant to or in connection with an offering pursuant to Rule 144A under the
Securities Act, the Company will give written notice (the "Company Notice"), at
its expense, to all Holders of Registrable Stock of its intention to do so at
least fifteen (15) days prior to the filing of a registration statement with
respect to such registration with the Commission. If any Holder or Holders of
Registrable Stock desires to dispose of all or part of its or their Registrable
Stock, such Holder or Holders may request registration thereof in connection
with Company's registration by delivering to the Company, within ten (10) days
after receipt of the Company's Notice, written notice of such request (the
"Holder's Notice") stating the number of shares of Registrable Stock to be
disposed of and the intended method of disposition of such shares by such Holder
or Holders. The Company shall use its reasonable best efforts to cause all
shares of Registrable Stock specified in the Holder's Notice to be registered
under the Securities Act pursuant to the registration statement referred to in
the Company Notice (and any related qualification under blue sky laws) so as to
permit the sale or other disposition (in accordance with the intended methods
thereof as aforesaid) by such Holder or Holders of the Registrable Stock so
registered, subject, however, to the limitations set forth in Section 2.2; and,
provided, however, that the Company shall not be required to grant any
concession or additional rights or other consideration to any other Person to
secure the right of any Holder of Registrable Stock to participate in such
registration.
(b) Limitations on Piggyback/Incidental Registration.
(i) If the registration of which the Company
gives notice pursuant to Section 2.1 above is for the purpose of permitting the
disposition of securities by the Company or any other Person pursuant to a firm
commitment underwritten offering, the Company shall so advise the Holder as a
part of the Company Notice given pursuant to Section 2.1. In such event,
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the right of the Holder to registration pursuant to Section 2.1 shall be
conditioned upon the Holder's participation in such underwriting (if any), and
the inclusion of Registrable Stock in the offering and/or underwriting shall be
limited to the extent provided herein. Holders of Registrable Stock electing to
register all or part of their shares of Registrable Stock in the registration
shall sell such shares to or through the Underwriter(s) (if any) of the
securities being registered for the account of the Company (or otherwise
selected by the Company, in its sole discretion, to manage such underwriting)
upon terms generally comparable to the terms applicable to the Company (except
that the Company shall bear all Registration Expenses to the extent provided in
Section 4).
If requested in writing to do so in good faith by the managing
Underwriter of an underwritten offering, the Company shall have the right to
limit the aggregate size of the offering or decrease the number of shares to be
included therein by Holders of Registrable Stock to the extent necessary to
reduce the number of securities to be included in the registration to the level
recommended by the managing Underwriter, and only securities which are to be
included in the underwriting may be included in the registration. Each Holder
participating in such offering shall (together with the Company and other
holders of the Registrable Securities distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing Underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2.2, if the
managing Underwriter (or, if there is no managing Underwriter, then the Company)
determines that marketing factors or its contractual obligations with respect to
Priority Shares require a limitation of the number of securities to be
underwritten or offered, then the Company shall so advise all holders of
Registrable Securities requesting to be included in the registration and
underwriting, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
holders of Registrable Securities requesting to be included in the registration
and underwriting as follows:
(i) Whenever the number of shares which may be
registered pursuant to Section 2.1 is limited by the provisions of subsection
(a), the Holders of Registrable Stock shall have priority as to sales over the
other holders of the Company's securities without registration rights, and the
Company shall cause such other holders to withdraw from such offering to the
extent necessary to allow all requesting Holders of Registrable Stock, together
with the holders of Registrable Securities that have the right to participate in
the firm commitment underwritten offering pursuant to registration rights
granted by the Company prior to the date of this Agreement, to include all of
the shares so requested to be included within such registration.
(i) Whenever the number of shares which may be
registered pursuant to Section 2.1 is still limited by the provisions of this
Section 2.2, after the withdrawal of the other holders of the Company's
securities, the Company, together with the holders of Priority
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Shares that have the right to participate in the firm commitment underwritten
offering pursuant to registration rights granted by the Company (but only to the
extent required by the terms of any grants of such registration rights), shall
have priority as to participation in such registration over the Holders of
Registrable Stock. In furtherance thereof, each Holder further agrees that it
shall withdraw its Registrable Stock from such registration to the extent
necessary to allow the Company to include (A) all the securities which the
Company desires to sell for its own account and (B) all shares of Registrable
Securities which are required to be included in such registration pursuant to
the exercise of any demand registration rights which entitle the holder thereof
to include Registrable Securities in such registration.
(i) The Holders of Registrable Stock given
rights by Section 2.1, together with the holders of Registrable Securities that
have the right to participate in the firm commitment underwritten offering
pursuant to incidental registration rights granted by the Company prior to the
date of this Agreement, shall, unless such incidental registration rights
provide to the contrary, share in the available amount of securities which may
be included in the registration in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by them at the time of filing
the registration statement from and to the extent the Company may reasonably
bind such other holders to do so, except that Registrable Securities (other than
Priority Shares), shall be excluded in proportion, as nearly as practicable, to
the respective amounts of such securities held by the holders thereof at the
time of filing the registration statement before any Priority Shares requested
to be included in the registration and underwriting are excluded.
(i) In making the determinations contemplated by
Section 2.1, a managing Underwriter or the Company may consider whether the
inclusion of any securities will affect the number of securities that can be
sold in an orderly fashion within a price range acceptable to the Company (or,
if the Company is not selling any securities in such registration to the
prospective selling holders) and the Company shall not be required to grant any
concession or additional rights or pay any additional consideration to any
holder of Registrable Securities to secure the right of any Holder of
Registrable Stock to participate in any registration.
(i) If (A) as a result of the proration
provisions of this Section 2.2 (a) any Holder of Registrable Stock is not
entitled to include all such Registrable Stock which such Holder requested to
include in such registration, or (B) the terms of the proposed compensation to
the Underwriters change in a manner materially adverse to the Holder from those
described in the Company Notice, such Holder may by notice in writing elect to
withdraw his request to include any Registrable Stock in such registration (a
"Withdrawal Election"); provided, however, that a Withdrawal Election shall be
irrevocable and a Holder of Registrable Stock who has made a Withdrawal Election
shall no longer have any right to include any Registrable Stock in the
registration as to which such Withdrawal Election was made. The Holder shall
give any Withdrawal Election as promptly as possible and, in no event, later
than five (5) business days of notice of the terms of the proposed underwriting.
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(i) To facilitate the allocation of shares in
accordance with the above provisions, the Company or the Underwriters may round
the number of shares allocated to any holder of Registrable Securities to the
nearest 100 shares.
(i) The Company shall use its reasonable best
efforts to provide that the number of shares of Registrable Securities required
to satisfy any Underwriters' over-allotment option shall be allocated pro rata
among the Company and all holders of securities to be included in the offering
on the basis of the relative number of securities otherwise to be included by
each of them in the registration provided that the Company shall not be required
to grant any concession or additional rights or pay any additional consideration
to any holder of Registrable Securities to secure such allocation.
(ii) Designation of Underwriter. In the case of
any registration which is proposed to be effected as to which Section 2.1 is
applicable, the Company shall have the sole and exclusive right to designate the
Underwriter(s) therefore (if any), and all Holders of Registrable Stock
participating in the registration shall sell their shares of Registrable Stock
only pursuant to such underwriting (if any).
(iii) Right to Terminate Registration. The Company
shall have the right to terminate or withdraw any registration initiated by it
or pursuant to the demand registration rights of any Person, which registration
gives rise to rights of Holders of Registrable Stock under Section 2.1, prior to
the effectiveness of such registration whether or not any Holder of Registrable
Stock has elected to include securities in such registration.
3. Lock-Up Agreement. If requested in writing by the Company or
by the managing Underwriter of any offering effected pursuant to this Agreement
each Holder of Registrable Stock who is an officer or director of the Company,
or an Affiliate thereof, or who owns of record more than one percent (1%) of the
shares of Common Stock then outstanding (including for purpose of such
calculation all shares of Common Stock a Holder of Registrable Stock has the
right to acquire) agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of or transfer its economic
risk with respect to any securities of the Company (other than those included in
the registration) within seven (7) days before or one hundred eighty (180) days
after the effective date of a registration statement filed pursuant to this
Agreement, unless such limitations are waived in writing by the Company and the
managing Underwriter. The Holder agrees that the Company may instruct its
transfer agent to place stop transfer notations in its records to enforce the
provisions of this Section 3.
4. Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with all registrations undertaken
pursuant to Section 2, subject to the limitations set forth in the definition of
Registration Expenses. Notwithstanding the foregoing, the Company shall not be
required to pay for any Registration Expenses of any registration
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proceeding begun under Section 2, the request for which has been subsequently
withdrawn by the Holder other than pursuant to Section 2.2(a)(v) or is otherwise
not successfully completed due to no fault of the Company, unless the withdrawal
is based upon material adverse information concerning the Company, which the
Company had not yet publicly disclosed at the time of such request.
5. Registration Procedures.
(a) Obligations of the Company. In the case of each
registration effected by the Company pursuant to this Agreement, the Company
will keep the Selling Holders advised in writing as to the initiation of such
registration and as to the completion thereof. The Company will:
(i) Prepare and file with the Commission a
registration statement and such amendments and supplements as may be necessary
and use its reasonable best efforts to cause such registration statement to
become and remain effective for at least ninety (90) days or until the
distribution described in the registration statement has been completed,
whichever first occurs;
(ii) Furnish to each Selling Holders and to the
Underwriters of the securities being registered such reasonable number of copies
of the registration statement, preliminary prospectus, final prospectus and such
other documents as such Underwriters may reasonably request in order to
facilitate the public offering of such securities;
(iii) Use its reasonable best efforts to register
or qualify the securities covered by such registration statement under such
other securities or state blue sky laws of such jurisdictions as the
Underwriters or any Selling Holders shall reasonably request, and to do any and
all other acts and things which may be necessary under such securities or blue
sky laws to enable each Selling Holders to consummate the public sale or other
disposition in such jurisdictions of the securities owned by such Selling
Holder; provided that the Company shall not be required in connection therewith
or as an election thereto to qualify to do business or to file a general consent
to service of process in any such jurisdiction or to take any action which could
subject it to tax, including tax on its corporate income or assets, or to the
service of process (other than in connection with such registration) in any
state where it is not subject thereto; and
(iv) Use its reasonable best efforts to cause all
such Registrable Stock registered pursuant hereto to be listed on the principal
securities exchange or automated quotation system on which similar securities
issued by the Company are then listed, if the listing of such securities is then
permitted under the rules of such exchange, or trading market or quotation
system on which such securities issued by the Company are then listed.
(b) Obligations of the Holders.
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(i) As a condition to including any Registrable
Stock in a registration, the Company may require (i) that each Holder furnish to
the Company such information regarding such Holder and the contemplated
distribution of such Holder's Registrable Stock as is required to be included in
the Registration Statement, and (ii) that such information be furnished to the
Company in writing and signed by such Holder and stated to be specifically for
use in the related registration statement, prospectus, offering circular or
other document incident thereto.
(ii) The Holder shall not (until further notice)
effect sales of Registrable Stock after receipt of written notice from the
Company to suspend sales to permit the Company to correct or update a
registration statement or prospectus, and the Company shall make such amendment
in a reasonably commercial manner; provided, that the Company is able to do so
in compliance with the federal securities laws. The period during which the
registration statement remains effective pursuant to the Agreement shall be
extended for a period of time equal to the period for which the Holders
refrained from selling pursuant to this Section 5.2(b).
6. Indemnification.
(a) The Company will indemnify each Selling Holder and
each person controlling such Selling Holder within the meaning of Section 17 of
the Securities Act, with respect to which registration has been effected
pursuant to this Agreement, against all claims, losses, damages or liabilities
(or actions in respect thereof), to which such Selling Holder or controlling
person may be subject under the Securities Act or under any other statute or at
common law, insofar as such losses, claims, damages or liabilities arise out of
or are based upon (i) any untrue statement (or alleged untrue statement) of any
material fact contained, on the effective date thereof, in the applicable
registration statement under which such Registrable Stock were registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein, or any summary prospectus issued in connection with any Registrable
Stock being registered or offered for sale, or any amendment or supplement
thereto, or (ii) any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading provided, however, that the Company shall not be liable to any
Selling Holder or controlling person in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or omission made in such Registration Statement, preliminary
prospectus, summary prospectus, prospectus, or amendment or supplement thereto,
or any other document, in reliance upon and in conformity with written
information furnished to the Company by any Selling Holder, underwriter, other
selling agent or controlling person, respectively, specifically for use therein.
The indemnity provided for herein shall remain in full force and effect
regardless of any investigation made by or on behalf of such Selling Holder,
underwriter, other selling agent or controlling person, and shall survive the
transfer of such securities by such Selling Holder.
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(b) The Company may require, as a specific condition to
including any Registrable Stock of a Holder in any registration statement filed
pursuant to Section 2.1, that such Holder shall enter into and deliver to the
Company an undertaking satisfactory to it from such Holder of such Registrable
Stock, severally and not jointly, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in this Section 6) the Company, each
director of the Company, each officer of the Company who shall sign such
Registration Statement and each other Person, if any, who controls the Company
within the meaning of the Securities Act (except the indemnifying holder, if
such indemnifying holder so controls the Company), and each other Holder or
controlling person participating in the offering with respect to any untrue
statement of material fact or omission of material fact from such Registration
Statement, any preliminary prospectus or final prospectus contained therein, any
summary prospectus issued in connection with any Registrable Stock being
registered or offered for sale, or any amendment or supplement thereto, in each
case if such statement or omission was made in reliance on and in conformity
with written information furnished to the Company by such Holder specifically
for use in preparing any such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus or amendment or supplement thereto. Each
Holder hereunder shall promptly provide such undertaking to indemnify in
accordance with this Section 6.2 upon request. In the event the undertaking to
indemnify under this subsection is given by Holder, it shall remain in full
force and effect regardless of any investigation made by or on behalf of the
indemnified party and shall survive any transfer of the Registrable Stock held
by the indemnifying party.
(c) If the indemnification provided for in Sections 6.1
or 6.2 is unavailable or insufficient to hold harmless an indemnified party
under this Section 6, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of the claims, losses, damages or liabilities (or
actions in respect thereof) referred to in Sections 6.1 or 6.2: (a) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the securities or (b) if the allocation
provided by clause (a) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (a) above but also the relative fault of each indemnifying party in
connection with the statements or omissions that resulted in such claims,
losses, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by each indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
agree that it would not be just and equitable if contributions pursuant to this
Section 6.3 were to be determined by pro rata allocation or by any other method
of allocation which does not take into account the equitable considerations
referred to in the first sentence of this Section 6.3. The amount paid by an
indemnified party as a result of the claims, losses, damages or liabilities (or
actions in respect thereof) referred to in the first
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sentence of this subsection (c) shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending against any
action or claim which is the subject of this Section 6.3. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Company may require, as a
specific condition to including any Registrable Stock of a Holder in any
registration statement filed pursuant to Section 2 that such Holder shall enter
into and deliver to the Company an undertaking reasonably satisfactory to it
from such Holder of such Registrable Stock, severally and not jointly, to
contribute to the amount paid or payable by an indemnified party hereunder as
and to the extent set forth in this Section 6.3, and each Holder participating
in such offering hereunder shall promptly provide such undertaking upon request.
(d) Each party entitled to indemnification or
contribution under this Section 6 (the "Indemnified Party") shall give notice to
the party required to provide indemnification or contribution (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity or contribution may be sought, provided that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further, that if the defendants in
any such action include both the Indemnified Party and the Indemnifying Party
and the Indemnified Party shall have reasonably concluded that there may be
legal defenses available to it and/or other Indemnified Parties which are
materially different from or additional to those available to the Indemnifying
Party, the Indemnified Party or Parties shall have the right to select separate
counsel to assert such legal defenses (in which case the Indemnifying Party
shall not have the right to direct the defense of such action on behalf of the
Indemnified Party or parties). Upon the permitted assumption by the Indemnifying
Party of the defense of such action, and approval by the Indemnified Party of
counsel, the Indemnifying Party shall not be liable to such Indemnified Party
under this Section 6.4 for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof (other than
reasonable costs of investigation) unless (a) the Indemnified Party shall have
employed separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence, (b) the Indemnifying
Party shall not have employed counsel satisfactory to the indemnified party to
represent the Indemnified Party within a reasonable time, or (c) the
Indemnifying Party has authorized the employment of counsel for the Indemnified
Party at the expense of the Indemnifying Party. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party (whose consent shall not be unreasonably withheld),consent to
entry
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of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
7. Information by Holder. If a Holder has Registrable Stock
included in any registration, such Holder shall furnish to the Company such
information regarding the Holder, the Registrable Stock held by the Holder and
the distribution proposed by the Holder as the Company may reasonably request in
writing and as shall be required in connection with any registration referred to
in this Agreement.
8. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Stock to the public without
registration, so long as a public market exists for the Common Stock, the
Company agrees to furnish to any holder of Registrable Stock, upon request, a
written statement executed by the Company as to the steps it has taken to comply
with the current public information requirements of Rule 144.
9. Transfer of Registration Rights.
(a) Permitted Transfers. The rights to cause the Company
to register securities granted to any Holder under Section 2.1 may be assigned
to a transferee or assignee reasonably acceptable to the Company in connection
with any transfer or assignment of Registrable Stock by the Holder, provided
that: (a) such transfer is otherwise effective in accordance with applicable
securities laws and the terms of this Agreement, (b) the Company is promptly
given written notice, (c) such transferee agrees to be bound by the provisions
of this Agreement; provided, however, that in each case the proposed transferor
shall furnish such representations and warranties and legal opinion of counsel
acceptable to the Company and its counsel that any such transfer will be exempt
from registration under the federal securities laws and any applicable state
securities or blue sky laws.
(b) Limitation of Rights of Transferee Holders.
Notwithstanding anything in this Agreement to the contrary, if the Initial
Holder transfers or assigns Registrable Stock at any time and for any reason
(unless such Registrable Stock ceases to be Registrable Stock upon or as a
result of such transfer or assignment), the Company shall not be obligated to
take any action under this Agreement on behalf of any Holder unless permitted to
do so by the written consent of (i) the Initial Holder if the Initial Holder is
still living and has not been found to be mentally incompetent (or no guardian
or similar advisor shall have been appointed with respect to his affairs), or
(ii) if the Initial Holder is deceased or shall have been found to be mentally
incompetent or a guardian or similar advisor shall have been appointed with
respect to his affairs, the Holders who hold more than fifty (50%) percent of
the Registrable Stock then held by all such Holders. Any such action shall bind
each and every Holder.
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10. Amendment. Any provision of this Agreement may be amended or
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the mutual
written consent of the Company and (i) the Initial Holder if the Initial Holder
is still living and has not been found to be mentally incompetent (or no
guardian or similar advisor shall have been appointed with respect to his
affairs), or (ii) if the Initial Holder is deceased or shall have been found to
be mentally incompetent or a guardian or similar advisor shall have been
appointed with respect to his affairs, the Holders of more than fifty (50%)
percent of the Registrable Stock. Any amendment or waiver effected in accordance
with this Section 11 shall be binding upon each party to this Agreement and each
transferee of securities subject to this Agreement.
11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS BY THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
CONFLICT OF LAWS PROVISIONS.
12. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement among the parties regarding the matters set
forth herein. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon the successors,
assigns, heirs, executors and administrators of the parties hereto.
13. Notices, etc. All notices, demands or other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered, by hand
or by messenger, addressed:
(a) If to the Holder, to the address shown in the ESB
Agreement or to such other address as such Holder shall have furnished to the
Company.
(b) If to the Company, to:
Scientific Games Holdings Corp.
0000 Xxxxxxxxx Xxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: C. Xxxx Xxxxxx, Xx., Esq.
Vice President & General Counsel
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or to such other address as the Company shall have furnished to the Holder, with
a copy to:
Xxxxx, Xxxxxxxx & Xxxxxxx, XXX
Xxxxx 0000, Xxxxxxxxx XX
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attn: M. Xxxxxxx Xxxxx, Esq.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if in
writing and delivered personally, or, if sent by mail, postage pre-paid, at the
earlier of its receipt or 72 hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed, pre-paid and mailed as aforesaid. Any party may change by such notice
the address to which notices to it are to be addressed.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
15. Captions and Section Headlines. Section titles or captions
contained in this Agreement are inserted as a matter of convenience and for
reference purposes only, and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
16. Singular and Plural, Etc. Whenever the singular number is used
herein and where required by the context, the same shall include the plural, and
the neuter gender shall include the masculine and feminine genders.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY: SCIENTIFIC GAMES HOLDINGS CORP.
By:
---------------------------------------------
Xxxxx X. Xxxxxxx
Vice President and Chief Financial Officer
Attest:
By:
---------------------------------------------
C. Xxxx Xxxxxx, Xx.
Its: Vice President and General Counsel
HOLDER:
-------------------------------------------------
XXXXXXX X. XXXXXX
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EXHIBIT D
MANAGEMENT DIRECTORS
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxx
MANAGEMENT STOCKHOLDERS
Xxxxxxx X. Xxxxxx*
Xxxxxxx X. Xxxx*
Xxxxxx X. Xxxxxx*
Xxxxx X. Xxxxxxx*
C. Xxxx Xxxxxx, Xx.*
Xxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxx, Xx.
Xxxxxx X. XxxXxxx
Xxxxxxx X. Xxxxxx
Xxxx X. Xxxxx
or such other persons as may be designated from time to time, in writing, by the
Company or Officer, in each case, with the consent of the non-designating party.
*denotes Senior Executive Officer of the Company
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