EX - 10.26
Employment Agreement - Xxxx Xxxxxxxxxx
EXHIBIT 10.26
CONFIDENTIAL TREATMENT REQUEST
EMPLOYMENT AGREEMENT
XXXX XXXXXXXXXX
THIS AGREEMENT is made and entered into as of the 30th day of April,
2001, by and between Shuffle Master, Inc., a Minnesota corporation (the
"Company"), and Xxxx Xxxxxxxxxx (the "Employee"), a resident of the State of
Nevada.
RECITALS:
A. The Company is in the business of developing, manufacturing,
distributing and otherwise commercializing gaming equipment,
games, and operating systems for gaming equipment and related
products and services throughout the United States and in
Canada and other countries (the "Business").
B. Company and Employee want to create an at-will employment
relationship that protects the Company with appropriate
confidentiality and non-compete covenants and rewards the
Employee with a severance package for performing his
obligations for the full term of this contract or such shorter
term as may be determined in accordance with the terms and
conditions of this Agreement.
C. The Company and Employee desire that Employee be employed by
the Company on the terms and conditions of this Agreement.
AGREEMENT
In consideration of the mutual promises contained herein, Employee and
the Company agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee as its Executive
Vice President, reporting to the Chief Executive Officer and the President of
the Company. Employee shall perform the duties of that position and shall
perform such other related duties as the Company may direct from time to time.
Employee's employment with the Company is for a term beginning April 30, 2001
through October 31, 2002, but may be terminated earlier in accordance with the
provisions of this Agreement.
2. SALARY AND BENEFITS. During the Company's fiscal year ending October
31, 2001: (a) Employee shall be paid an annual base salary of One Hundred Fifty
Thousand Dollars ($150,000.00) (from his initial hiring date through September
30, 2001, at which time Employee, shall be paid an annual base salary of One
Hundred Eighty Thousand Dollars ($180,000)), paid in the same intervals as other
employees of the Company; and (b) if employed through October 31, 2001, Employee
will be eligible to receive an executive bonus in accordance with the terms and
conditions of the executive bonus program authorized by the Board of Directors
of the Company,
1
as set forth on Exhibit A attached hereto. (REDACTED; CONFIDENTIAL TREATMENT
REQUESTED) During the Company's fiscal year commencing November 1, 2001,
Employee will receive a base salary no less than that set forth above and if
employed through October 31, 2002 will be eligible to participate in an
executive bonus program authorized by the Board of Directors of the Company for
that year, which is expected to be generally similar to that set forth in
Exhibit A, but with a full year of employment required and such performance
targets and bonus percentages as may be adopted by the Board. Employee will
receive a stock option grant to purchase 50,000 shares of the Company's common
stock at its closing price on March 28, 2001, in accordance with and subject to
the terms and conditions imposed by the Board of Directors at its March 28, 2001
meeting and to the extent not inconsistent with the terms of the granting
resolution, in accordance with, and subject to the terms and conditions of the
1993 Employee Stock Option Plan, as amended. The stock underlying this option
grant will come from the authorized but unissued shares of the Company and not
from the pool of stock authorized for issuance under the 1993 Stock Option Plan.
Vesting of the above option grants occurs, unless otherwise
accelerated, as follows: one-third on April 30, 2002, provided the employee is
employed with the Company on such date; and one-third on April 30, 2003,
provided the employee is employed with the Company on such date; and one-third
on April 30, 2004, provided the employee is employed with the Company on such
date.
The Company shall register the 50,000 shares of common stock underlying
the stock option grant for sale on or before March 15, 2002. Employee will have
twelve (12) months from his last day of Employment, or six (6) months following
any severance period whichever period is longer, during which to exercise any
vested stock options. Employee, unless required to do so earlier, must exercise
any vested stock option on or before March 27, 2011 or such option will forfeit
and be of no further force and effect.
Employee's salary is set on the expectation that (except for vacation
days and holidays) Employee's full time will be devoted to Employee's duties
hereunder. The Company agrees to provide Employee with the benefits it provides
its executive team. Employee will not, however, be eligible to participate in
the Company's non-executive bonus program. Employee shall receive three (3)
weeks paid vacation per calendar year prorated based on the number of weeks
actually employed during any such calendar year.
During Employee's employment with the Company, the Company will
promptly pay or reimburse Employee for reasonable travel, entertainment and
other expenses incurred by Employee in the furtherance of or in
2
connection with the performance of Employee's duties. Such reimbursement will be
in accordance with Company policies in existence from time to time.
3. OUTSIDE CONSULTING. Employee shall devote Employee's full time and
best efforts to the Company. Employee may render consulting services to other
businesses from time to time only if approved in writing by the Chief Executive
Officer or by the President of the Company. Company acknowledges and approves
that Employee during the first two (2) weeks of his employment with Company will
be providing consulting services to Employees' previous Company which may
significantly reduce the amount of time Employee can devote to Company during
the first two (2) weeks of his employment. Company approves such consulting by
Employee during the first two (2) weeks of his employment. Employee may serve in
any capacity with any civic, educational or charitable organization, provided
such service does not prevent Employee meeting his fiduciary obligation to
Company.
4. NON-COMPETITION. In consideration of the provisions of this
Agreement and the severance benefits for which Employee is eligible pursuant to
Section 9, Employee shall not, while employed by the Company or its successor
and thereafter until November 1, 2002:
(a) directly or indirectly own, manage, operate, participate in,
consult with or work for any business which is engaged in the
Business anywhere in the United States or Canada.
(b) either alone or in conjunction with any other person,
partnership or business, directly or indirectly, solicit or
divert or attempt to solicit or divert any of the employees or
agents of the Company or its affiliates or successors to work
for or represent any competitor of the Company or its
affiliates or successors or to call upon any of the customers
of the Company or its affiliates or successors.
5. CONFIDENTIALITY; INVENTIONS.
(a) Employee shall fully and promptly disclose to the Company all
inventions, discoveries, software and writings that Employee
may make, conceive, discover, develop or reduce to practice
either solely or jointly with others during Employee's
employment with the Company, whether or not during usual
working hours. Employee agrees that all such inventions,
discoveries, software and writing shall be and remain the sole
and exclusive property of the Company, and Employee hereby
agrees to assign, and hereby assigns all of Employee's right,
title and interest in and to any such inventions, discoveries,
software and writings to the Company. Employee agrees to keep
complete records of such inventions, discoveries, software and
writings, which records shall be and remain the sole property
of the Company, and to execute and deliver, either during or
after Employee's employment with the Company, such documents
as the Company shall deem necessary or desirable to obtain
such letters patent, utility models, inventor's certificates,
copyrights, trademarks or other appropriate legal rights of
the United States and foreign countries as the Company may, in
its sole discretion, elect, and to vest title thereto in the
Company, its successors, assigns, or nominees.
3
(b) "Inventions," as used herein, shall include inventions,
discoveries, improvements, ideas and conceptions, developments
and designs, whether or not patentable, tested, reduced to
practice, subject to copyright or other rights or forms of
protection, or relating to data processing, communications,
computer software systems, programs and procedures.
(c) Employee understands that all copyrightable work that Employee
may create while employed by the Company is a "work made for
hire," and that the Company is the owner of the copyright
therein. Employee hereby assigns all right, title and interest
to the copyright therein to the Company.
(d) Employee has no inventions, improvements, discoveries,
software or writings useful to the Company or its subsidiaries
or affiliates in the normal course of business, which were
conceived, made or written prior to the date of this
Agreement.
(e) Employee will not publish or otherwise disclose, either during
or after Employee's employment with the Company, any
unpublished or proprietary or confidential information or
secret relating to the Company, the Business, the Company's
operations or the Company's products or services. Employee
will not publish or otherwise disclose proprietary or
confidential information of others to which Employee has had
access or obtained knowledge in the course of Employee's
employment with the Company. Upon termination of Employee's
employment with the Company, Employee will not, without the
prior written consent of the Company, retain or take with
Employee any drawing, writing or other record in any form or
nature which relates to any of the foregoing.
(f) Employee understands that Employee's employment with the
Company creates a relationship of trust and confidence between
Employee and the Company. Employee understands that Employee
may encounter information in the performance of Employee's
duties that is confidential to the Company or its customers.
Employee agrees to maintain in confidence all information
pertaining to the Business or the Company to which Employee
has access including, but not limited to, information relating
to the Company's products, inventions, trade secrets, know
how, systems, formulas, processes, compositions, customer
information and lists, research projects, data processing and
computer software techniques, programs and systems, costs,
sales volume or strategy, pricing, profitability, plans,
marketing strategy, expansion or acquisition or divestiture
plans or strategy and information of similar nature received
from others with whom the Company does business. Employee
agrees not to use, communicate or disclose or authorize any
other person to use, communicate or disclose such information
orally, in writing, or by publication, either during
employee's employment with the Company or thereafter except as
expressly authorized in writing by the Company unless and
until such information becomes generally known in the relevant
trade to which it relates without fault on employee's part, or
as required by law.
6. EARLY TERMINATION BY COMPANY WITHOUT JUST CAUSE. Employee's
employment by the Company is "at will"; the Company may terminate Employee's
employment at any time either with or without just cause. Notwithstanding any
termination without just cause, Employee will remain bound under the covenants
not to compete and confidentiality obligations of Sections 4 and 5 of this
Agreement and the Severance Benefits provided under Section 9 will remain in
full force and effect.
4
7. EARLY TERMINATION BY COMPANY FOR JUST CAUSE. The Company may
terminate Employee for just cause. In the event the Company terminates the
Employee for just cause, the Employee will remain bound under the covenant not
to compete and the confidentiality obligations contained in Sections 4 and 5 and
will not be entitled to any of the severance benefits provided under Section 9.
Termination for "just cause" shall include:
(a) repeated inattention to duty, which has not been remedied by
Employee within thirty (30) days following written notice
thereof;
(b) dishonesty as to a matter which is materially injurious to the
Company;
(c) the commission of a willful act or omission intended to
materially injure the business of the Company; or
(d) a violation of any material provision of this Agreement,
including, in particular, the provisions of Sections 4 and 5
hereof.
8. VOLUNTARY TERMINATION BY EMPLOYEE. In the event Employee voluntarily
terminates his employment with the Company (or its successor), Employee will
remain bound under the confidentiality and non-compete obligation of Sections 4
and 5 and will not be entitled to receive any of the severance benefits provided
under Section 9. Voluntary termination means any termination by the Employee on
or before September 30, 2001, without a material breach of a substantial
provision of this Agreement by the Company and any termination by the Employee
after September 30, 2001 without a material breach of a substantial provision of
this Agreement by the Company (REDACTED; CONFIDENTIAL TREATMENT REQUESTED).
Voluntary termination includes a termination caused by the death of Employee or
disability of Employee for more than six (6) months.
9. SEVERANCE BENEFITS. In the event that Employee is terminated without
"just cause" (as defined in Section 7) or leaves his employment involuntarily
(as defined in Section 8) prior to the end of the term set forth in Section 1
hereof, then:
(a) During the period immediately following Employee's last day of
employment through October 31, 2002 (the "Severance Period"),
Employee will be paid each month, as Employee's sole remedy,
an amount equal to Employee's then prevailing monthly base
salary. In addition, during the Severance Period the Employee
shall continue to receive all of the Company's employee
benefits, if eligible; if Employee is not eligible for health
benefits, the Company shall pay the COBRA premiums for
continuation coverage during the period of severance payments.
(b) Provided that Employee has not breached his obligations
contained in Sections 4 and 5, Employee's option to purchase
16,666 shares of the Company's common stock that was scheduled
to vest on April 30, 2002, in the event of the Employee's
continued employment through such date, if it hasn't already
vested, will vest on April 30, 2002, notwithstanding
Employee's termination of employment.
5
10. COOPERATION WITH CHANGE IN CONTROL. Employee will reasonably
cooperate with the Company in the event of a change in control, and exercise his
stock options in a way as to not hinder the progress or closing of the
transaction, and in no event later than three (3) months following the closing.
11. NO CONFLICTING AGREEMENTS. Employee has the right to enter into
this Agreement, and hereby confirms Employee has no contractual or other
impediments to the performance of Employee's obligations including, without
limitation, any non-competition or similar agreement in favor of any other
person or entity.
12. D & O POLICY. During Employee's employment with the Company, the
Company shall maintain director and officer liability insurance in reasonable
scope and amounts. Notwithstanding the existence of such insurance, Employee
shall also be entitled to indemnification in accordance with the by-laws of the
Company.
13. INDEPENDENT COVENANTS. The covenants on the part of the Employee
contained in Sections 4 and 5 hereof shall be construed as agreements
independent of any other provision in this Agreement; it is agreed that the
relief for any claim or cause of action of the Employee against the Company,
whether predicated on this Agreement or otherwise, shall be measured in damages
and shall not constitute a defense to enforcement by the Company of those
covenants.
14. INJUNCTIVE RELIEF; ATTORNEYS' FEES. In recognition of the
irreparable harm that a violation by Employee of any of the covenants contained
in Sections 4 and 5 hereof would cause the Company, the Employee agrees that, in
addition to any other relief afforded by law, an injunction (both temporary and
permanent) against such violation or violations may be issued against him or her
and every other person and entity concerned thereby, it being the understanding
of the parties that both damages and an injunction shall be proper modes of
relief and are not to be considered alternative remedies. Employee consents to
the issuance of such injunction relief without the posting of a bond or other
security. In the event of any such violation, and the issuance of an preliminary
injunction against Employee pursuant to Nevada Rules of Civil Procedure 65, THE
EMPLOYEE AGREES TO PAY THE COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES
INCURRED BY THE COMPANY IN PURSUING ANY OF ITS RIGHTS WITH RESPECT TO SUCH
VIOLATIONS, IN ADDITION TO THE
6
ACTUAL DAMAGES SUSTAINED BY THE COMPANY AS A RESULT THEREOF; provided, however,
that if there is a final determination by the Court that the Employee did not
violate any of the covenants contained in Sections 4 and 5 hereof, Employee
shall have no obligation to pay the foregoing costs, expenses and attorneys'
fees of the Company and the Company agrees to pay the costs, expenses and
reasonable attorneys' fees incurred by the Employee in defending himself with
respect to such alleged violations.
15. NOTICE. Any notice sent by registered mail to the last known
address of the party to whom such notice is to be given shall satisfy the
requirements of notice in this Agreement.
16. ENTIRE AGREEMENT. This Agreement is the entire agreement of the
parties hereto concerning the subject matter hereof and supersedes and replaces
any oral or written existing agreements between the Company and the Employee
relating generally to the same subject matter. Company and Employee hereby
acknowledge that there are no agreements or understandings of any nature, oral
or written, regarding Employee's employment, apart from this Agreement.
17. SEVERABILITY. It is further agreed and understood by the parties
hereto that if any provision of this Agreement should be determined by a court
to be unenforceable in whole or in part, it shall be deemed modified to the
minimum extent necessary to make it reasonable and enforceable under the
circumstances.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada, without giving effect to the
principles of conflicts of laws thereof.
19. HEIRS, SUCCESSORS AND ASSIGNS. The terms, conditions, and covenants
hereof shall extend to, be binding upon, and inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day, month and year first above written.
COMPANY: EMPLOYEE:
SHUFFLE MASTER, INC.
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxx Xxxxxxxxxx
-------------------------------- ----------------------------------
Its: Chief Executive Officer Xxxx Xxxxxxxxxx
7
EXHIBIT A
EXECUTIVE BONUS PROGRAM - F/Y/E 10/31/2001
Employee may earn a percentage of Employee's base salary (actually
received during the Company's fiscal year ending 10/31/01) as a bonus during
fiscal year 2001, which will vary depending on the percentage of targeted income
before taxes (REDACTED; CONFIDENTIAL TREATMENT REQUESTED) earned by the Company:
COMPANY EARNINGS AS %
OF TARGETED INCOME BEFORE TAXES BONUS
------------------------------- -----
a. Less than 90% 0
b. 90% 40% of base salary actually received during
the Company's fiscal year ending 10/31/01.
c. 90% - 100% 40% of base salary actually received during
the Company's fiscal year ending 10/31/01
plus an additional one percent (1%) of base
salary actually received during the
Company's fiscal year ending 10/31/01 for
each increase of one percent (1%) over
ninety percent (90%).
d. 100% 50% of base salary actually received during
the Company's fiscal year ending 10/31/01.
e. 100% - 120% 50% of base salary actually received during
the Company's fiscal year ending 10/31/01,
plus an additional one-half percent (.05%)
of base salary for each increase of one
percent (1%) over 100%.
f. 120% 60% of base salary actually received during
the Company's fiscal year ending 10/31/01.
g. over 120% 60% of base salary actually received during
the Company's fiscal year ending 10/31/01,
plus an additional 1% of base salary for
each increase of one percent over 120%.
For example, if the Company earns 100% of its targeted income before
taxes during fiscal 2001, and assuming Employee had been employed by Company for
the entire fiscal year ending October 31, 2001, Employee would be paid a
performance bonus of $75,000(150,000 x 50%). If the Company earns 90% of its
targeted income before taxes during fiscal 2001, and assuming Employee had been
employed for the entire fiscal year ending October 31, 2001, Employee would be
paid a performance bonus of $60,000 ($150,000 x 40%). If the Company earns 120%
of its targeted income before taxes and assuming Employee had been employed by
Company for the entire fiscal year ending October 31, 2001, Employee's
performance bonus would be $90,000 ($150,000 x 60%). If the Company earns more
than 120% of its targeted income before taxes, and assuming that Employee had
been employed by Company for the entire fiscal year ending October 31, 2001,
Employee's performance bonus would further increase by an amount equal to one
percent (1%) of his base salary for each percent by which the percentage
increase in income before taxes exceeds 120% of the target. In no event shall
the amount of Employee's bonus exceed 2 times the Employee's annual base salary
actually received during the fiscal year ending October 31, 2001.
