EXHIBIT 10.1
EMPLOYMENT AND SEVERANCE BENEFITS AGREEMENT
This Agreement is made and entered into as of 19th day of November , 2002,
by and between SCIENTIFIC GAMES INTERNATIONAL, INC., a Delaware corporation
(hereinafter called the "Company"), and XXXXXX X. XXXXXXX (hereinafter called
"Executive").
W I T N E S S E T H:
WHEREAS, at the date of consummation of the tender offer ("Commencement
Date") contemplated under that certain Agreement and Plan of Merger dated
November 19, 2002 (the "Merger Agreement"), by and among the Company, Blue Suede
Acquisition Co. and MDI Entertainment, Inc. ("MDI"), MDI shall become a
majority-owned direct subsidiary of the Company;
WHEREAS, at the effective date of the Merger contemplated under the Merger
Agreement, MDI shall become a wholly owned direct subsidiary of the Company; and
WHEREAS, the Company desires to obtain, and the Executive desires to
provide, the services of Executive to the Company beginning at the Commencement
Date.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. EMPLOYMENT; TERM.
As of the Commencement Date, upon the terms and conditions set forth
herein, the Company hereby employs Executive and Executive hereby accepts
employment with the Company in the position of Senior Vice President-MDI for the
Company and President and Chief Executive Officer of MDI. The term of
Executive's employment is subject to termination by the Company at any time
without cause upon sixty (60) days' written notice, subject to Executive's right
to receive the applicable payments and other severance benefits from and to the
extent described herein. Except as otherwise provided herein, Executive may
terminate his employment with the Company upon sixty (60) days' prior written
notice or such shorter period as the Company may allow. If Executive terminates
this Agreement voluntarily, except pursuant to Section 9, he shall not be
entitled to any severance pay or severance benefits, but shall be entitled to
all other consideration, compensation and reimbursement otherwise due to him
under the terms of this Agreement but only through the date of such termination.
Subject to Section 24 hereof, the term of this Agreement shall be from the
Commencement Date through December 31, 2005. The parties agree that a failure to
renew this Agreement for a term beyond December 31, 2005 by either party shall
not act as or constitute an early termination of this Agreement, with or without
cause, or a constructive termination by either party and shall not give rise to
any rights to severance or other compensation hereunder. The Company's
obligations to provide Executive with remuneration, salary or any other benefits
described herein shall cease, in the case of a non-renewal, as of December 31,
2005, except as to (i) payments due hereunder at December 31, 2005 or becoming
due thereafter for periods ending on or before December 31, 2005, and (ii)
payments that may become due pursuant to the indemnification obligations under
Section 5(a) of this Agreement.
2. DUTIES.
(a) In his position as Senior Vice President-MDI and, so long as the
Company maintains the separate corporate existence of MDI (or otherwise
maintains MDI as a distinct operating division), in his position as President
and Chief Executive Officer of MDI, Executive shall manage and oversee the
day-to-day operations of MDI, subject to the direction of the Board of Directors
of the Company and MDI, respectively. In his position as Senior Vice
President-MDI for the Company, Executive shall also have direct reporting
authority to the Chief Executive Officer of Scientific Games Corporation, the
parent of the Company ("Parent") and the Company. Executive also shall report to
such officer of the Company as shall be designated by the Chief Executive
Officer of the Company. During the term of this Agreement, but only so long as
the Company maintains the separate corporate existence of MDI, the Company shall
nominate and cause Executive to be elected as a member of the Board of Directors
of MDI. Executive shall participate directly in and be responsible for the
timely creation, modification and amendment of all operating and financial
plans, budgets and projections, and marketing strategies relating to MDI or its
business (collectively, the "Business Plans"), subject to the review and
approval of such Business Plans by the Board of Directors of MDI and the
Chairman of the Company.
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(b) During the term of this Agreement, Executive also shall perform such
other duties and shall have such other responsibilities with the Company and MDI
as are normally associated with the positions set forth in Section 1 and as
otherwise may be reasonably assigned to the Executive from time to time by or
upon the authority of the Board of Directors of MDI or the Chairman of the
Company.
(c) Executive acknowledges that, as an officer of the Company, he may, from
time to time, be assigned other duties and responsibilities by the Company
consistent with his seniority and position as an officer of the Company so long
as such duties and responsibilities would not, without Executive's consent which
shall not unreasonably be refused, (i) materially increase Executive's workload
without a commensurate reduction in his workload with respect to the business
operations of MDI, and (ii) materially and significantly change his overall
responsibilities with the Company. Subject to the foregoing and Section 9(a),
Executive's functions, duties and responsibilities are subject to reasonable
changes as the Company may in good faith determine.
(d) In addition to his other express duties set forth in this Agreement,
throughout the term of his employment under this Agreement, Executive shall, in
all capacities: (i) diligently perform such duties and fulfill such
responsibilities as are normally associated with such positions and with such
other positions as otherwise may be assigned to the Executive from time to time
in accordance with this Agreement; (ii) serve the Company and MDI to the best of
his ability in the capacities described hereunder or assumed pursuant hereto and
devote all of his business effort, time, attention, energy, and skill to the
duties of employment hereunder (subject to (A) the policies of the Company with
respect to vacations and absences due to illness, government services,
sabbaticals, etc. and (B) Executive's right to make and supervise investments on
a personal or family basis (including trusts, funds and investment entities in
which Executive or members of his family have an interest) so long as these
activities do not result in any material deviation from Executive's duty to
devote his full business effort, time, attention, energy and skill to his duties
or materially interfere with the performance of his duties hereunder or violate
any noncompetition or other fiduciary obligations Executive has to Company or
any of its Affiliates); (iii) faithfully, loyally, and industriously perform his
duties; (iv) diligently follow and implement all lawful management policies and
decisions of the Company, MDI, Parent and any other Affiliates of Company that
are made known to him or are otherwise generally disseminated to employees or
executive officers of the Company; (v) comply with all of the policies,
procedures and regulations of the Company, MDI, and Parent that are generally
applicable to and generally disseminated to employees, executive officers or
management of the Company, as well as all applicable law and regulations; (vi)
comply with all reasonable and lawful requests and instructions made by the
Company, MDI or Parent; (vii) provide such explanations, information and
assistance as the Company, MDI or Parent may reasonably require; and (viii)
travel for business purposes to the extent reasonably necessary or appropriate
in the performance of his duties. Executive acknowledges that he has received
and familiarized himself with the policies and procedures of the Company and its
Parent as set forth in the Standard Operating Procedures Manual for the Company
(the "Company Manual").
(e) Executive acknowledges that Parent has determined that, as of the
Commencement Date, Executive will not be an "Executive Officer" of Parent for
purposes of Section 16(b) of the Securities Exchange Act. Executive further
acknowledges that such determination is subject to review from time to time by
Parent and that such status is subject to change either as a result of changes
in Parent, the Company or MDI, or in the Executive's duties with any of them or
in applicable rules and regulations.
3. SITUS OF EXECUTIVE AND MDI.
Executive shall render his services hereunder initially from offices
located in Fort Worth, Texas until his relocation to Atlanta, Georgia or its
proximate vicinity (including Alpharetta, Georgia). Until the operations of MDI
are relocated from Fort Worth, Texas to the Company's headquarters in
Alpharetta, Georgia, MDI shall provide such resources as are reasonably
necessary to support Executive in performing his duties consistent with his
residence and MDI's operations in Fort Worth, Texas. Executive acknowledges that
MDI and its operations shall be relocated to the Company's headquarters in
Alpharetta, Georgia as promptly as is commercially practicable. Upon the
relocation of Executive's primary residence or the operations of MDI to Atlanta,
Georgia or proximate vicinity (including Alpharetta, Georgia), Executive shall
be provided with an executive office at the Company's headquarters in
Alpharetta, Georgia.
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4. COMPENSATION.
As compensation to the Executive for performance of the services required
hereunder and as consideration for his execution and delivery of this Agreement,
the Company shall pay or provide, as applicable, to him or cause to be paid or
provided, as applicable, to him, and the Executive agrees to accept, the
following salary and other compensation and benefits:
(a) Salary. The Executive shall receive an initial base salary, payable in
accordance with the Company's normal procedures, which need not be made more
frequently than in equal monthly installments, at the rate of $250,000 per
annum, hereinafter referred to as "Base Salary"). The Executive's Base Salary
shall be reviewed periodically and may be increased by the Company from time to
time and the Executive's Base Salary shall be increased each year by an amount
equal to the percentage increases in base salary generally provided to the
executive officers of the Company.
(b) Benefit Plans. The Executive shall be offered and shall be permitted to
participate in disability, medical, dental, hospitalization, health, life and
accident insurance plans upon terms and conditions and at coverage levels and
coverage scope (including spouses and dependents) substantially equivalent,
taken as a whole, to those from time to time then generally available to
executive officers of the Company. The Executive also shall be entitled during
the term of his employment under this Agreement and thereafter to participate in
any retirement, savings or other plans of the Company (or any similar plans of
Parent in which executives of the Company generally are eligible to participate)
upon terms and conditions substantially equivalent, taken as a whole, from time
to time generally available to all executive officers of the Company.
(c) Bonus Plans. Executive shall be eligible for calendar year 2003 and
thereafter to be considered for annual performance bonuses of up to 50% of his
Base Salary based on the attainment of performance objectives established by the
Board of Directors of the Company and Executive's contributions to the
attainment of those objectives. Such bonuses, if any, shall be awarded and
payable in accordance with the Company's management incentive plans applicable
to executive officers of the Company. The criteria for such bonus shall be based
upon substantially the same criteria as annual cash bonuses generally awarded to
executive officers of the Company, which may take into account intrinsic
differences in job duties and responsibilities. Any actual bonus award shall be
in such amount and payable in such manner, and otherwise be on such terms, as
are determined by the Board of Directors of the Company in good faith. The
Company agrees that after the Closing of the Offer, Executive is entitled to
receive a bonus of $125,000 for services provided to MDI in 2002 prior to, and
in connection with, the Offer. The Company agrees that such bonus shall be
payable by the Company following the Closing of the Offer (and on or before the
time that bonuses for 2002 are paid to executive officers of the Company under
its management incentive plan), contingent upon the Closing of the Offer.
Executive represents and warrants that he has not and will not receive any other
bonus from MDI for 2002 and acknowledges that such bonus shall be inclusive of
all bonuses Executive shall be entitled to receive with respect to 2002 from the
Company and its Affiliates. Executive agrees such bonus will be reduced by the
amount of any other bonus from either MDI or the Company paid after the date of
this Agreement in or with respect to the year 2002.
(d) Reimbursement of Expenses. The Company shall pay, or reimburse
Executive in accordance with the Company's prevailing corporate policy, for
reasonable business travel, continuing education, and other expenses incurred by
Executive in performing his duties under this Agreement in accordance with and
subject to corporate policy and applicable Internal Revenue Service regulations.
(e) Stock Options. Executive shall be eligible to be considered for an
annual grant of stock options entitling the Executive to purchase shares of
Parent common stock. The criteria for such awards shall be based upon
substantially the same criteria as option grants generally awarded to executive
officers of Parent, which may take into account intrinsic differences in job
duties and responsibilities.
(f) Transportation Allowance. The Executive shall be entitled to a
transportation allowance on the basis of substantially the same criteria as is
generally employed with respect to executive officers of the Company. The
Company shall furnish an annual transportation allowance in an amount equal to
that furnished to executive officers of the Company, which amount is $16,536 as
of the date of this Agreement. Such initial transportation allowance shall be
increased annually in the same amount of increase as is generally granted to all
executive officers of the Company. The transportation allowance shall be payable
in equal monthly installments and pro rated for any partial year.
(g) Vacation. Executive shall be entitled to vacation time and to days off
for religious and personal reasons in accordance with the Company's policy for
its executive officers based on credited years of service as set forth in the
Company Manual, after giving effect to Executive's employment with MDI as
provided in Section 3(i);
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(h) Relocation Assistance. In connection with Executive's relocation of his
residence to Atlanta, Georgia or the proximate vicinity, including Alpharetta,
Georgia ("Atlanta Metropolitan Area"), the Company will, for such relocation,
reimburse Executive for the following, which Executive acknowledges may be
taxable to Executive:
(i) usual and customary expenses incurred if Executive sells his home
himself or through a broker; however, reimbursement for the
broker's commission (if Executive utilizes the services of a
broker) may not exceed six (6) percent of the sales proceeds;
(ii) difference between the cost basis of Executive's current Fort
Worth, Texas home (including documented improvements) and the
actual sales price of such home not to exceed $50,000; provided,
however, that this subsection (ii) shall only apply with respect
to a sale made within one (1) year of the Commencement Date and
so long as Executive has used his reasonable best efforts to sell
his home at prevailing market prices;
(iii)reasonable expenses incurred in moving furniture, normal
household goods and personal belongings to the new location and
incidental expenses related to the move;
(iv) reasonable expenses (including travel and hotel) while
house-hunting, including four trips to the new location with
Executive's spouse and children;
(v) reasonable and customary closing costs incurred in buying
Executive's new home; and
(vi) reasonable temporary living expenses incurred while awaiting
occupancy in Executive's new dwelling.
(i) Tenure Considerations. For purposes of determining Executive's rights
and entitlements under any provision of this Section 4, his tenure with and
service to MDI or its subsidiaries during all periods prior to the Commencement
Date shall be given full consideration and weight from and to the extent
generally permitted by the terms of any benefit plan and applicable law;
provided, however, that no such tenure or service need be recognized with
respect to any employee benefit plan if it would result in any disqualification
of any employee benefit plan, result in any determination that any employee
benefit plan is "top heavy" or result in any other material adverse effect on
any employee benefit plan or the participants therein.
(j) Stock Options. The Company will recommend to the Compensation Committee
of Parent that Executive be granted, as of the Commencement Date, options to
acquire 100,000 shares of the Class A Common Stock of Parent; such options to be
awarded pursuant to a stock option award agreement of Parent containing the same
terms as are generally applicable to other executive officers of the Company.
(k) No Additional Compensation for Services in Multiple Capacities. The
remuneration and benefits set forth in this Section 4 shall be the only
compensation payable to Executive with respect to his employment hereunder, and
Executive shall not be entitled to receive any compensation in addition to that
set forth in this Section 4 for any services rendered by him in any capacity to
the Company or any Affiliate of the Company unless agreed to in writing by the
Company or such Affiliate of the Company. The Company may change, or discontinue
any such benefits; provided, however, that so long as any benefit is made
available to corporate officers or employees generally, such benefit will be
extended to Executive on substantially the same terms such benefit is made
available to other executive officers or employees as a whole.
5. INDEMNITY, PROFESSIONAL AND OFFICERS LIABILITY INSURANCE.
(a) Indemnity. The Company agrees to indemnify and save harmless Executive
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, resulting from or growing out of (i)
Executive's status as, or as a result of his having been an officer or director
of the Company or any Affiliate of Parent, in each case, from and after the date
hereof, or (ii) the performance bonds issued prior to the date of this Agreement
and set forth on Schedule "A" hereto (the "Performance Bonds") in each case, to
the full extent permitted by law. Executive represents and warrants that no
claim or demand has been asserted or, to his knowledge, has been threatened to
be asserted with respect to such Performance Bonds. In no event shall the terms,
provisions and conditions of the indemnity provided for hereunder be less than
the same as those presently provided for under the Articles of Incorporation and
By-Laws of the Company to the extent permitted by law. Said terms, provisions
and conditions of indemnity shall remain an independent, contractual obligation
of the Company to Executive from and after the date hereof regardless of how the
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Company might hereafter amend or change its Articles of Incorporation or By-Laws
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 By-Laws to provide for different terms, conditions
and provisions of indemnity after the effective date hereof, Executive shall be
notified in writing of the change. Executive 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. The Company's agreement to
provide indemnity hereunder shall survive the termination of this contract
regardless of the cause of termination. Subject to applicable law, the Company
shall advance, promptly as incurred, reasonable fees and disbursements of
counsel for Executive in defending Executive against any claims for which the
Company would be so required to indemnify Executive; provided (i) Executive
shall otherwise comply with such mandatory requirements of Delaware law as may
be required for such indemnification, and (ii) Executive shall cause his counsel
to cooperate fully in good faith with such requests as the Company or its
counsel may reasonably make in order to endeavor to minimize such legal fees,
but consistent with providing an adequate defense of Executive.
(b) Officers and Directors' Liability Insurance. The Company agrees to
provide, or cause Parent to provide, at no expense to the Executive, insurance
insuring Executive in his capacity as an officer and/or director of the Company
(and/or as an officer or director of any controlled Affiliates of the Parent for
which Executive serves in such capacities) as a consequence of claims arising
out of Executive's service as an officer and/or director of the Company and/or
as an officer or director of any Affiliates of Parent for which Executive serves
in such capacities as may be specified from time to time, in each case, from and
after the date of this Agreement in such form and amount substantially equal to
that presently maintained by Parent for or covering executive officers of the
Company or in such other form and amount as Parent may, from time to time,
determine are reasonable and appropriate. It is expressly agreed that this
obligation to provide insurance is not intended to require insurance for, or
intended to cover, prior acts at MDI which are the subject of a separate
obligation under the terms of the Merger Agreement.
6. TERMINATION OF EMPLOYMENT BY COMPANY FOR CAUSE.
(a) The Company may terminate Executive's employment at any time for
"Cause" (as defined below), but only after a written notice in form and
substance, as approved by the Chief Executive Officer of the Company or the
Chief Executive Officer of Parent, and materially complying with Section 6(b)
below (a "Termination Notice") shall be delivered to Executive and any
applicable cure period prescribed below has passed.
(b) The Termination Notice shall (i) set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive's employment (the "Statement of Cause"); and (ii) if applicable,
stating that Executive has right to cure and any time period by which such cure
must occur.
(c) For purposes of this Agreement:
(i) "Cause" shall mean: (a) plea of guilty or nolo contendere or
conviction of Executive of a felony or plea of guilty or nolo
contendere or conviction of Executive of any other crime
involving moral turpitude (excluding for the avoidance of doubt,
minor traffic offenses); (b) the commission of an act or acts of
dishonesty on the part of Executive when such acts are intended
to result, directly or indirectly, in substantial wrongful gain
or substantial wrongful personal enrichment of Executive at the
expense of the Company or any of its Affiliates; (c) the engaging
by Executive in misconduct materially injurious to the Company or
any of its Affiliates with respect to which (1) Executive knew or
reasonably should have known that such conduct likely would
result in more than de minimis financial injury to the Company or
any of its Affiliates, and (2) such conduct actually results in
more than de minimis injury to the Company or any of its
Affiliates; (d) the engaging by Executive in wrongful conduct
which is reasonably likely to have a material adverse effect on
an application or existing license issued by any governmental
entity or on the likelihood that any Governmental Entity will
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issue a Gaming Approval to the Parent or any of its Affiliates,
where such conduct cannot be halted or cured in a manner which
will prevent such material adverse effect; (e) Executive is
expressly precluded from having any continuing interest in or
relationship with the one or more of the Company or any of its
Affiliates as a condition to, or the continued validity of, any
Gaming Approval by any Government Entity; (f) intoxication with
alcohol or drugs while on the business of the Company or any of
its Affiliates during regular business hours, except in cases
where alcohol is served at sanctioned office functions, such as
holiday parties; (g) a knowing or reckless violation by Executive
of any law, rule or regulation in the course of performance of
any duties hereunder that would reasonably be deemed to cause
harm, or reasonably be deemed likely to cause harm to the Company
or the controlled Affiliates of Parent; (h) an act of disloyalty
to the Company or any of its Affiliates by Executive which is
detrimental to any material extent or in any material manner to
the welfare of the Company or any of its Affiliates; (i) the
willful failure or refusal of Executive to follow the reasonable
directives of the Board of Directors of the Company or MDI or of
the Chief Executive Officer of the Company or its Parent; (j) any
intentional or reckless conduct by Executive which constitutes a
material violation of the policies of the Company or any of its
Affiliates that are made known to him; (k) any intentional or
reckless conduct by Executive which causes Parent or any of its
Affiliates to violate any law, rule or regulation applicable to
Parent or any of its Affiliates; (l) if, at any time beginning
two (2) years after the Commencement Date, Executive's material
or substantial failure in the reasonable good faith opinion of
the Company, to adequately and properly perform Executive's job
duties, following notice and an opportunity to cure if such
conduct is reasonably susceptible to cure; (m) any material
breach by Executive of any representation or warranty of
Executive contained in this Agreement following notice and an
opportunity to cure if such conduct is reasonably susceptible to
cure.
(ii) "Gaming Laws" shall mean any Federal, state, local or foreign
statute, ordinance, rule, regulation, permit, consent,
registration, qualification, finding of suitability, approval,
license, judgment, order, decree, injunction or other
authorization, including any condition of limitation placed
thereon, governing or relating to the current or contemplated
lottery and other gaining activities and operations of Company or
any of the controlled Affiliates of Parent.
(iii)"Governmental Entity" shall mean a court, arbitral tribunal,
administrative agency or commission or other governmental or
other regulatory authority or agency.
(d) In the event Executive shall be terminated for Cause, Executive shall
be entitled to all salary actually earned prior to termination, pay for all
vacation accrued prior to termination, all stock options vested prior to or
vesting upon termination, all bonuses vested prior to or vesting upon
termination, all restricted shares vested prior to or vesting upon termination
and reimbursements of all allowable expenses incurred prior to the termination.
No other severance pay or other consideration would be owing in the event of
termination pursuant to this Section 6 for Cause.
7. TERMINATION OF EMPLOYMENT IN THE EVENT OF EXECUTIVE'S DISABILITY.
(a) Executive and the Company agree that Executive may not reasonably be
expected to be able to perform his duties and the essential functions of his
office if Executive shall have been permanently disabled (as defined below) or
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) business days in the time periods
specified below. Accordingly, if, in the reasonable, good faith opinion of the
Board, as a result of Executive's incapacity due to physical or mental illness,
(i) Executive shall have been permanently disabled, within the meaning of the
applicable disability policy then maintained for the benefit of Executives of
the Company (and the insurance company shall not have disputed such
determination), or (ii) if no such disability policy shall be in force and
effect covering Executive, (A) Executive shall have been absent from his duties
with the Company on a full time basis for one hundred eighty (180) consecutive
business days or for shorter periods aggregating one hundred eighty (180)
business days during any 52-week period, and, within thirty (30) days after
written notice of intent to terminate is given by the Company, Executive shall
not have returned to the full time performance of his duties or (B) Executive
shall be entitled to disability retirement benefits under the federal Social
Security Act, then Executive's employment shall be terminated for "Disability."
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(b) If Executive's employment is terminated for Disability, then Executive
shall not be entitled to receive severance benefits under this Agreement and
Executive shall be compensated pursuant to the provisions of this Section 7 as
follows: (i) Executive's Base Salary shall continue at the level as provided in
Section 4(a) for a period of twelve (12) months from the date of termination and
the Company shall pay all vacation benefits accrued to the date of termination;
(ii) all disability, life, medical and dental insurance provided by the Company
to Executive, his spouse and dependents prior to termination shall continue for
a period of twelve (12) months from the date of such termination; and (iii)
Executive shall also be entitled to retain all stock options vested prior to or
vesting upon termination, all unpaid non-performance-based bonuses which are
vested prior to or vesting upon termination, together with that pro rata portion
of any performance based bonus (whether or not vested) for the then-current
fiscal year prorated to date of termination (based upon performance against
target through the date of termination for disability), all restricted stock
vested prior to or vesting upon termination, reimbursement of all allowable
expenses incurred prior to the date of termination and all other benefits vested
prior to or vesting upon termination for disability.
(c) Payments of Base Salary under this Section 7 shall be reduced by any
disability payments provided Executive as a result of any disability plan
sponsored by the Company or its Affiliates providing benefits to Executive, if
the payments to Executive hereunder and thereunder would exceed one hundred
percent (100%) of Executive's Base Salary.
(d) Executive's employment shall not be terminable under this Section 7 if
Executive is absent from his duties upon a bona fide leave of absence granted by
the Company other than pursuant to physical or mental illness.
8. TERMINATION OF EMPLOYMENT IN THE EVENT OF DEATH DURING EMPLOYMENT.
(a) If Executive dies during the term of this Agreement, the Company shall
pay to the last beneficiary designated by the Executive by written notice to the
Company or, failing such designation, to Executive's estate, compensation which
would otherwise be payable to Executive pursuant to this Agreement up to the end
of the month in which his death occurs. The compensation payable under this
Section 8 also shall include all stock options vested prior to or vesting upon
termination, all unpaid non-performance based bonuses which are vested prior to
or vesting upon termination, together with the portion of any performance-based
bonus (whether or not vested) for the then-current fiscal year prorated to the
date of death (based upon performance against target through the date of death),
all restricted stock and all other benefits vested prior to or vesting upon
termination, reimbursement of all expenses accrued prior to Executive's death,
and all other benefits vested prior to or vesting upon Executive's death.
(b) The Executive shall have the right to name, from time to time, any one
person as beneficiary hereunder or, with the consent of the Board of Directors
of the Company, he may make other forms of designation of beneficiary or
beneficiaries. The Executive's designated beneficiary or personal
representative, as the case may be, shall accept the payments provided for in
this Section 8 in full discharge and release of the Company of and from any
further obligations under this Agreement (other than to pay compensation or
benefits which accrued prior to the date of such termination).
9. TERMINATION OF EMPLOYMENT WITHOUT CAUSE OR IN CONNECTION WITH
CONSTRUCTIVE TERMINATION.
(a) Should the Company (i) change the office and position Executive holds
with the Company, other than to a higher or equivalent office and position to
which Executive agrees, such agreement not to be unreasonably withheld, (ii) so
long as the Company maintains the separate corporate existence of MDI, (iii)
change the office held by Executive with MDI, so long as the Company maintains
the separate corporate existence of MDI (or otherwise maintains MDI as a
distinct operating division), (iv) so long as the Company maintains the separate
corporate existence of MDI, fail to elect Executive to the Board of Directors of
MDI, (v) make any reduction in Executive's Base Salary, (vi) adversely change
the methodology (taken as a whole) pursuant to which Executive's bonus is
determined or make any other material adverse change in any of Executive's
employee benefits (other than any such benefit which is immaterial or
inconsequential or any change which is required by law), (vii) make such change
or changes as would, taken as a whole, result in a material diminution in the
functions, duties and responsibilities of Executive's position as an officer of
the Company or, so long as the Company maintains the separate corporate
existence of MDI (or otherwise maintains MDI as a distinct operating division),
in the functions, duties and responsibilities of Executive's position as an
officer of MDI, or (viii) materially reduce the seniority of the person or
persons within the Company to whom Executive reports as of the date hereof (for
the avoidance of doubt, recognizing, however, that no such changes shall have
occurred as a result of the change in the status of MDI to that of a
wholly-owned, direct or indirect subsidiary of Company as a result of the
Merger, or, subsequent to the Merger to that of a division of the Company,
including, without limitation, for the avoidance of doubt, the reconstitution of
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the Board of Directors of MDI in a customary or appropriate manner for a
subsidiary corporation or the elimination or diminution of those functions,
duties or responsibilities associated with various positions at (1) a public
company which are assumed by a parent company in a consolidated group of
companies, or (2) at a company which becomes a division of another company), or
(vi) breach this Agreement in any material respect which is not cured within
thirty (30) days after written notice from Executive to the Company
(collectively, a "Constructive Termination"), then Executive shall have sixty
(60) days from the consummation of the event or period described above to
deliver to the Company written notice that his employment has been
constructively terminated (a "Constructive Termination Notice") and his
employment hereunder shall then terminate on the 60th day after such
Constructive Termination Notice has been delivered. Any such Constructive
Termination Notice shall automatically constitute Executive's resignation from
all positions with the Company, Parent, and all controlled Affiliates of Parent,
whether as an officer, director or employee.
(b) In the event of a Constructive Termination and Executive's resignation
from all positions with the Company and its Affiliates, or any termination of
Executive from his position with MDI without Cause (other then in the event of
Executive's resignation, death or disability), the Company shall pay to
Executive as severance benefits under this Section 9:
(i) a lump sum on the first regularly scheduled payroll date
following the Date of Termination, in an amount equal to the sum
of (a) Executive'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 Executive which have not yet been paid
to Executive.
(ii) no later than ninety (90) days following the end of the fiscal
year in which the Date of Termination occurs, that pro rata
portion of any bonus or award which would have been payable to
Executive had Executive remained in employment with the Company
during the entire year in which the Date of Termination occurred;
and
(A) if such termination without cause or constructive
termination occurs after the date of this Agreement, but on
or prior to the date of the first (1st) anniversary thereof,
a sum each month for a period of three (3) years after the
Date of Termination equal to one-twelfth (1/12th) of
Executive's Base Salary then in effect;
(B) if such termination without cause or constructive
termination occurs after the date of the first (1st)
anniversary of this Agreement, but on or before the date of
the second (2nd) anniversary thereof, a sum each month for a
period of two (2) years after the Date of Termination, equal
to one twelfth of Executive's Base Salary then in effect;
and
(C) if such termination without cause or constructive
termination occurs after the date of the second (2nd)
anniversary of this Agreement but on or before the date of
the third (3rd) anniversary thereof, a sum each month for a
period of one (1) year after the Date of Termination, equal
to one twelfth of Executive's Base Salary then in effect.
(c) As a further severance benefit, the Company, at its expense, shall
maintain in full force and effect, for the continued benefit of Executive, his
spouse and dependents until the earliest of (i) during the applicable period in
which severance is being paid under Section 9(b)(iii) (the "Severance Payment
Period"), (ii) eighteen months after Executive's Date of Termination if at such
time Executive is uninsurable under the Company's life, accident, medical and
dental insurance plans, or (iii) the date Executive becomes entitled to
participate in similar plans, programs or arrangements provided by Executive's
subsequent employer: all life, accident, medical and dental insurance benefit
plans and programs or arrangements in which Executive was entitled to
participate immediately prior to the Date of Termination provided that
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that Executive's
participation in such plan or program is legally or contractually barred, the
Company shall use commercially reasonable efforts to provide Executive for a
period of not less than the Severance Period (eighteen (18) months if the reason
Executive's participation is barred is that Executive is uninsurable) following
Executive's Date of Termination, with benefits substantially similar to those
which Executive would have been entitled to receive under such plans and
programs or, if it is commercially unreasonable for the Company to do so, then
8
the Company will pay to Executive in a lump sum an amount of cash equal to the
cost to the Company of previously providing to Executive the benefits provided
to Executive under Section 4(b) (but which it is commercially unreasonable for
the Company to provide or cause to be provided) for the period specified or if
Executive's benefits can be continued by a COBRA election, and Executive makes
such election, then the Company shall pay the amount of increased premiums
arising as a result of such election. In no event shall the Company's liability
under this Section 9(c) exceed the sum of applicable COBRA premiums for such
benefits plus $25,000.
(d) For the avoidance of doubt, Executive expressly acknowledges and agrees
that all amounts payable or distributable under that certain Escrow and
Shareholder's Agreement between Executive and Company and the Escrow Agent
thereunder, dated as of an even date herewith, do not constitute compensation or
other remuneration to Executive for any purpose under this Agreement.
10. LEGAL FEES; MITIGATION OF DAMAGES; SET OFF.
(a) The Company shall reimburse such costs, legal fees and expenses as may
be reasonably incurred by Executive in contesting or disputing any such
termination, or in seeking to obtain or enforce any right or benefit provided by
this Agreement if Executive is successful in any material respect in connection
with enforcing any of Executive's rights or the Company's obligations under this
Agreement in such dispute.
(b) The amount of any payment by the Company provided for in this Agreement
shall be reduced by any compensation earned by Executive as the result of
employment by another employer after the Date of Termination through December
31, 2005 or if the term of this Agreement is extended, through the then current
expiration date of this Agreement. The Company and its subsidiaries and
Affiliates shall have the right to set off payments owed to Executive under this
Agreement against amounts owed or claimed to be owed by the Executive to any of
such persons under this Agreement or otherwise, in each case, to the maximum
extent permitted by law.
11. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will use commercially reasonable efforts to cause 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 Executive to compensation
from the Company in the same amount and on the same terms as Executive 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. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 11 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts are still payable to Executive hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisee, legatee, or other designee or, if there
be no such designee, to Executive's estate.
12. NOTICE.
All notices and other communications to be given or otherwise to be made to
any party to this Agreement shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by certified mail or by a
recognized national courier service, postage or charges prepaid, (a) to the
Company at 0000 Xxxxxxxxx Xxxxx Xxxxxxx, Xxxxxxxxxx, Xxxxxxx 00000, (b) to the
Executive, at the address set forth on the last page of this Agreement, or (c)
to such other replacement address as may be designated in writing by the
addressee to the addressor, or if no such address is given, or if such address
is different from that set forth on the last page of this Agreement, then to the
address last given by Executive to Company for payroll purposes.
9
13. NO OUTSTANDING INDEBTEDNESS; TERMINATION OF OLD EMPLOYMENT AGREEMENT.
(a) Executive shall cause his Second Amended and Restated Employment
Agreement between Executive and Media Drop-In Productions, Inc., dated August 8,
1997, as amended by the First Amendment to such agreement dated September 21,
1998 (the "Old Employment Agreement") to be terminated as of the Commencement
Date (i) such that no compensation shall be due to him except for (A)
Executive's accrued but unpaid regular salary up until the Commencement Date,
and (B) any reimbursement of accrued but unpaid expenses not to exceed $3,000,
and (ii) under terms whereby no additional rights to future payments or other
compensation shall inure to Executive, whether as a result of the termination of
Executive's Old Employment Agreement, the Merger Agreement, or the transactions
contemplated thereby or hereby, including, without limitation, any rights
arising from, or as a result of, a change in control of MDI. Executive warrants
and represents there are no other agreements between Executive and his
controlled Affiliates or his immediate family members pursuant to which
Executive, such controlled Affiliates or such immediate family members of
Executive are entitled to any compensation from MDI or any of its controlled
Affiliates, except for that certain Amended and Restated Agreement between Media
Drop-In Productions, Inc. and 1010 Productions, Inc. dated as of August 8, 1994,
as amended by that certain first amendment thereto dated as of ___________ ___,
2002. In particular, Executive shall waive and by this Agreement does hereby
further waive all rights to any compensation, including, without limitation, any
bonus or other payment under, or in lieu of, the Old Employment Agreement,
including, without limitation, the "2% of gross revenue" bonus contemplated
thereunder, except (i) for ordinary salary due under the terms of the Old
Employment Agreement as of the Commencement Date and documented expenses as of
the Commencement Date reasonably incurred and which are consistent with past
corporate practice of MDI and its subsidiaries, and (ii) the $125,000 bonus
permitted to be paid by MDI pursuant to Section 4(c) hereof. Executive
represents and warrants that, except as contemplated by the preceding sentence,
no compensation due to him under his Old Employment Agreement has been deferred
or not otherwise paid in the ordinary course of business of MDI. Executive
further warrants and represents that no indebtedness is owed by the Company to
him or any member of his immediate family under any loan, note or other similar
agreements.
(b) To the extent that any applicable state or federal law, rule or
regulation confers upon Executive 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.
14. VALIDITY; SEVERABILITY.
The invalidity or unenforceability of any provision of this Agreement shall
not affect 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 Executive
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 judgment, this
Agreement shall be deemed to provide an obligation on the part of the Executive
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 Executive's services
during such period.
15. CONFIDENTIALITY AND RELATED COVENANTS.
(a) The term "Confidential Information" as used in this Agreement, shall
mean and include any information, data and know-how relating to the business of
Parent and its controlled Affiliates that is disclosed to Executive by Parent or
any of its controlled Affiliates, including the Company, or known by him as a
result of his relationship with Parent or any of its controlled Affiliates,
including the Company, and not generally within the public domain (whether
constituting a trade secret or not and whether in tangible form or intangible
form) or which the Parent or its controlled Affiliates, including the Company,
have taken reasonable measures to protect, including, without limitation, the
following: business methods, business plans, data bases, computer programs,
designs, models, operating procedures, financial information; supply and service
10
information; marketing information; personnel information; customer information;
customer product, research and development operations, game, branding, and
pricing strategies (including prices, costs, sales and terms), processes,
techniques; and all other information with respect to any corporate affairs that
Parent or any of its controlled Affiliates treat or have agreed to treat as
confidential, whether owned, developed or possessed by the Parent or its
controlled Affiliates, including the Company.
(b) During the term of his employment under this Agreement, and thereafter
during the Severance Payment Period (but, in no event, longer than two (2) years
after the term of this Agreement), the Executive will not use or disclose,
furnish or make accessible to anyone any Confidential Information, except (i) in
the course of performing his duties for the Company or its Affiliates, (ii) with
the Company's express written consent, (iii) to the extent that any such
information generally is in the public domain other than as a result of his
breach of any of his obligations hereunder, or (iv) where required to be
disclosed by court order, subpoena or other government process.
(c) Notwithstanding anything to the contrary contained in this Section 15,
in the event that the Executive is required to disclose any Confidential
Information by court order or decree or in compliance with the rules and
regulations of a governmental agency or in compliance with law, the Executive
will provide the Company with prompt notice of such required disclosure so that
the Company may seek an appropriate protective order and/or waive the
Executive's compliance with the provisions of this Section 15. If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Executive is advised by his counsel that such disclosure is necessary to comply
with such court order, decree, rule, regulation or law, he may disclose such
information without liability hereunder.
16. DEDUCTIONS AND WITHHOLDING.
The Executive agrees that the Company and/or its subsidiaries or affiliated
companies shall withhold from any and all compensation required to be paid to
the Executive pursuant to this Agreement all Federal, state, local and/or other
taxes which the Company determines are required to be withheld in accordance
with applicable statutes and/or regulations from time to time in effect.
17. ENTIRE AGREEMENT; GOVERNING LAW; AMENDMENT; WAIVER.
At the Commencement Date, 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, with respect to Company and its Affiliates on the one hand and Executive
on the other hand, including any prior employment or severance benefit
agreement, including the Old Employment Agreement. 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
Delaware without giving effect to the conflict of laws principles thereof, 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
and signed by Executive and the Chief Executive Officer of the Company or such
executive of the Company as may be specifically designated by the Chief
Executive Officer of the Company. No waiver by either party hereto at any time
of any breach by the other party 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.
18. 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, transfer or convey
this Agreement.
19. TITLES.
Titles of the headings herein are used solely for convenience and shall not
be used for interpretation or construing any word, section, clause, paragraph,
or provision of this Agreement.
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20. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original and all of which taken together shall constitute one and the
same Agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
21. 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.
22. CERTAIN DEFINITIONS.
"Affiliates" has the meaning set forth in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended.
"Board" means the Board of Directors of the Company.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended and the rules and regulation promulgated thereunder.
23. 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.
24. SPECIAL TERMINATION. Notwithstanding the term set forth in Section 1 of
this Agreement, in the event the Merger Agreement terminates for any reason
prior to the consummation of the Offer contemplated thereby, this Agreement
shall automatically terminate as of the date of the termination of the Merger
Agreement (the "Special Termination Date") without further obligation on the
part of any party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
SCIENTIFIC GAMES INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Its: Vice President and General Counsel
----------------------------------
EXECUTIVE
/s/ Xxxxxx X. Xxxxxxx
---------------------
XXXXXX X. XXXXXXX
(PRINT NAME)
0000 Xxxxxx Xxxxx
-----------------
Xxxx Xxxxx, Xxxxx 00000
------------------------
(ADDRESS FOR NOTICE)
12
SCHEDULE A
Loss Payee Amount of Bond
State of Wisconsin $200,000
