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EXHIBIT 10(A)
THIRD AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 1, 1996, by and between WMS INDUSTRIES INC.
("WMS"), a Delaware corporation with offices at 0000 Xxxxx Xxxxxxxxxx Xxxxxx,
Xxxxxxx, XX 00000 and XXXX X. XXXXXXXX ("Xxxxxxxx"), residing at 000 Xxxxx
Xxxxxxxx Xxxx, Xxxx Xxxxxx, Xxxxxxxx 00000.
W I T N E S S E T H :
WHEREAS, Xxxxxxxx is the President, Chief Executive Officer, Chief Operating
Officer and a director of WMS and has been performing services for WMS pursuant
to the terms of a Second Amended and Restated Employment Agreement dated as of
October 12, 1993 (the "Old Agreement"); and
WHEREAS, WMS and Xxxxxxxx desire to amend and restate the Old Agreement,
pursuant to this Agreement, which will supersede the Old Agreement and shall
constitute the complete agreement of the parties with respect to, and set forth
all of the terms of, the continued employment of Xxxxxxxx;
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements hereinafter set forth, the parties hereto agree as follows:
1. WMS hereby employs Xxxxxxxx, and Xxxxxxxx agrees to be employed by WMS
pursuant hereto, to perform the duties of the President, Chief Executive
Officer and Chief Operating Officer of WMS and such other supervisory or
executive duties on behalf of WMS as the Board of Directors of WMS shall
determine. Except with the consent of Xxxxxxxx, the
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principal office in which he shall perform his duties shall be located in
Chicago, Illinois, or its environs.
2. The term of Xxxxxxxx'x employment hereunder shall commence on the date
hereof and terminate on June 30, 2001 (the "Original Term"); provided, however,
that the term of Xxxxxxxx'x employment shall be deemed automatically extended
from time to time such that the term of such employment shall at no time be
less than three years (the "Extended Term"); and provided further, that
Xxxxxxxx'x services hereunder may be terminated by either party, effective upon
expiration of the Original Term or the Extended Term upon written notice from
the terminating party to the other party dated and received at least three (3)
years prior to the respective termination date, and, provided further, that in
the event of the "total disability" of Xxxxxxxx (as hereinafter defined), any
right of WMS to terminate Xxxxxxxx'x services shall be subject to the
provisions of Paragraph 7 of this Agreement.
3. (a) WMS shall pay to Xxxxxxxx in respect of each year of his employment
hereunder, a base salary at the rate of $300,000 per annum, payable in equal
bi-weekly installments, or such greater amount as the Board of Directors of WMS
shall from time to time determine.
(b) Commencing with the fiscal year of WMS beginning July 1, 1996 and
each fiscal year thereafter during the term of this Agreement, Xxxxxxxx shall
be paid a bonus in the amount equal to two percent (2%) of "adjusted pre-tax
income." The term "adjusted pre-tax income" means the "Income before tax
provision and extraordinary items" of WMS as reported on its audited
consolidated statements of operations with respect to the applicable fiscal
year, but modified to eliminate the effect of (A) any adjustment for taxes,
penalties or interest payable
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with respect to any fiscal year beginning before July 1, 1996 and (B) the bonus
payable pursuant to this subparagraph and further modified to deduct (in the
case of income) and add (in the case of loss) an amount equal to (i) the
pre-tax income or loss of Midway Games, Inc. ("Midway") multiplied by (ii) the
percentage of outstanding shares of capital stock of Midway not owned by WMS,
all such modifications to be determined by the Board of Directors in accordance
with generally accepted accounting principles. The amount of the bonus, if
any, to which Xxxxxxxx becomes entitled pursuant to this subparagraph shall be
paid within fifteen (15) days after WMS releases its audited financial
statements for the applicable fiscal year. With respect to the fiscal year of
WMS during which Xxxxxxxx'x employment hereunder terminates for any reason,
Xxxxxxxx shall be entitled to a pro-rata bonus based upon the number of days in
such fiscal year during which Xxxxxxxx was employed by WMS. If requested by
Xxxxxxxx, WMS shall make quarterly interest free advances against the bonus in
amounts mutually agreeable to WMS and Xxxxxxxx.
(c) In addition to other compensation hereunder, Xxxxxxxx shall be
entitled to participate in and receive the benefits of all pension and
retirement plans, bonus plans, health, life, hospital, medical and dental
insurance plans, and all other employee benefits and perquisites, including,
without limitation, vacations (not less than four (4) weeks per annum)
generally available to senior executive employees of WMS. In addition, WMS
shall provide Xxxxxxxx with One Million Dollars ($1,000,000) in additional life
insurance coverage, payable to such beneficiary as Xxxxxxxx shall designate
from time to time, in such form and manner as WMS and Xxxxxxxx shall determine
as appropriate in order to minimize the income tax consequences of such
coverage to Xxxxxxxx.
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4. During the term of this Agreement, WMS shall reimburse Xxxxxxxx for all
medical and dental expenses incurred by him, his spouse and his children
twenty-one (21) years of age or younger, to the extent such expenses are not
otherwise reimbursed by insurance provided by WMS. WMS shall also reimburse
Xxxxxxxx for all expenses reasonably incurred by him in connection with the
business of WMS, including, but not limited to, such items as entertainment,
traveling, hotel, gifts and similar items as shall be deemed necessary and
commensurate with his position as President, Chief Executive Officer and Chief
Operating Officer of WMS. Xxxxxxxx will present receipts or vouchers for any
requested reimbursements in accordance with WMS' normal policy and will comply
with any appropriate procedures established by WMS to provide for payment or
withholding of income or other taxes as may be required by law to be paid or
withheld in connection with any such reimbursements.
5. (a) Xxxxxxxx agrees that, throughout the period in which he is required
to perform services hereunder, he will devote his attention, knowledge and
skills faithfully, diligently and to the best of his ability in furtherance of
the business of WMS and businesses in which WMS has an interest, and in the
full performance of the duties assigned to him hereunder, subject at all times,
to the direction and control of the Board of Directors of WMS, and he shall
not, throughout such period, enter into the service of, or be employed in any
capacity or for any purpose whatsoever by, any person, firm or corporation
other than WMS and businesses in which WMS has an interest, except as permitted
in this Paragraph 5(a) and in Paragraph 5(b) below with respect to Xxxxxxxx'x
activities on behalf of Midway if such other services or employment would
interfere with the performance of his duties hereunder. Nothing contained in
this paragraph shall be deemed to prohibit Xxxxxxxx from (i) investing his
assets or funds, so
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long as the business of any such entity in which he shall make his investments
shall not be in direct competition with that of WMS, except that Xxxxxxxx may
invest in a corporate entity in competition with WMS if such corporation's
stock is listed for trading on a national stock exchange or traded in the
over-the-counter market and Xxxxxxxx'x holdings therein represent less than 5%
of the outstanding stock thereof; or (ii) acting as a director, trustee,
officer, or upon a committee of any other firm, trust or corporation where such
positions do not unreasonably interfere with the services to be rendered by
Xxxxxxxx hereunder. WMS acknowledges that Xxxxxxxx may continue to perform
services for businesses in which WMS had an interest at the time his services
commenced even after WMS' interest terminates, so long as such services do not
unreasonably interfere with the services to be rendered by Xxxxxxxx hereunder.
(b) WMS acknowledges that Xxxxxxxx currently serves as Chairman of the
Board of Directors, President and Chief Executive Officer of Midway, a
subsidiary of WMS, pursuant to the terms of an Employment Agreement dated as of
July 1, 1996 between Midway and Xxxxxxxx, and that he will divide his time and
attention between the business of Midway and the business of WMS in such manner
as he shall consider appropriate. Any termination of this Agreement by WMS
by reason of WMS's determination that Xxxxxxxx has not devoted sufficient time
and attention to the business of WMS shall be deemed a termination in violation
of this Agreement.
6. (a) In the event Xxxxxxxx shall die during the term of this Agreement
but prior to his "Retirement Date" (as hereinafter defined), WMS shall, in
addition to the benefits, which may become payable pursuant to subparagraph
3(c), pay death benefits as hereinafter provided to such person or persons as
Xxxxxxxx shall, at his option, from time to time designate by written
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instrument delivered to WMS, each subsequent designation to be deemed to revoke
all prior designations, or if no such designation is made, to his estate, for a
period of seven (7) years, in equal monthly payments commencing the first day
of the first month following death. Such annual death benefit shall be equal
to one-half (1/2) of the aggregate annual base salary payable to Xxxxxxxx as of
the date of death, but in no event shall be less than One Hundred Fifty
Thousand Dollars ($150,000) per annum.
(b) "Retirement Date" shall mean the later to occur of (i) the date
on which Xxxxxxxx shall become forty-five (45) years old or (ii) the date of the
termination of Xxxxxxxx'x employment by WMS. WMS will pay to Xxxxxxxx on the
first day of the first month following his Retirement Date, and on the first
day of each month thereafter for a period of seven (7) years in equal monthly
payments, an annual retirement income benefit equal to one-half (1/2) of the
aggregate annual base salary payable to Xxxxxxxx as of the date of termination
of his employment by WMS, but in no event less than One Hundred Fifty Thousand
Dollars ($150,000) per annum. In the event that Xxxxxxxx shall die after his
Retirement Date, but before the retirement benefits provided for herein shall
be fully paid, the balance thereof shall thereafter be payable in monthly
installments to his estate.
(c) The death and retirement benefits provided by subparagraphs 6(a)
and (b) hereof shall be payable notwithstanding the termination of Xxxxxxxx'x
employment by WMS for any reason or the resignation of Xxxxxxxx at any time
after the date hereof.
7. Xxxxxxxx shall receive full compensation for any period of illness or
incapacity during the term of his employment hereunder. Notwithstanding the
foregoing, if such illness or incapacity shall have disabled Xxxxxxxx from
performing his duties hereunder for a period of
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more than six (6) consecutive months (hereinafter referred to as "total
disability"), WMS shall thereafter have the right to terminate Xxxxxxxx'x
employment under this Agreement upon giving at least thirty (30) days' written
notice of its intention to do so. If Xxxxxxxx shall resume his duties within
thirty (30) days following the receipt of such notice, and shall perform such
duties on a regular basis for two (2) consecutive months thereafter, this
Agreement and Xxxxxxxx'x employment hereunder shall continue in full force and
WMS' notice of intention to terminate shall have no further force or validity.
In the event that WMS shall give such notice of termination and Xxxxxxxx shall
not timely resume his duties hereunder, Xxxxxxxx'x employment under this
Agreement shall terminate on the date set forth in the notice but all other
applicable terms of this Agreement, including, among other things, the
obligation of WMS to pay death and retirement benefits under Paragraph 6 above,
shall remain in full force and effect.
8. Subject to Xxxxxxxx'x duties to Midway and except as permitted in
Paragraph 5 hereof, Xxxxxxxx covenants and agrees as follows:
(a) During the period of his employment hereunder, and for a further
period of one (1) year thereafter he shall not, directly or indirectly own,
manage, operate, join, control, participate in, invest in, or otherwise be
connected with, in any manner, whether as an officer, director, employee,
partner, investor or otherwise, or allow his name to be used in any business or
enterprise which competes in any way with WMS in any city or trade territory in
the United States (including Puerto Rico) or Canada where WMS is directly or
indirectly, through distributors or others, engaged in the operation of its
business.
(b) During the term of this Agreement and thereafter, he shall hold
in a fiduciary capacity for the benefit of WMS, all information, knowledge and
data relating to or
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concerned with its operations, sales, businesses and affairs, and he shall not
disclose or divulge any such information, knowledge or data to any person, firm
or corporation other than to WMS or its designees, except as may otherwise be
required in connection with the business and affairs of WMS.
Xxxxxxxx acknowledges that the provisions of this Paragraph 8 are reasonable
and necessary for the protection of WMS, and that each provision, and the
period or periods of time, geographic areas and types and scope of restrictions
on the activities specified herein are, and are intended to be, divisible. In
the event that any provision of this Paragraph 8, including any sentence,
clause or part hereof, shall be deemed contrary to law or invalid or
unenforceable in any respect by a court of competent jurisdiction, the
remaining provisions shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect and any invalid and
unenforceable provisions shall be deemed, without further action on the part of
the parties hereto, modified, amended and limited to the extent necessary to
render the same valid and enforceable. WMS acknowledges that Xxxxxxxx'x duties
to Midway may, at such time as Midway is permitted to engage in businesses
competitive with that of WMS, include activities competitive with that of WMS
and that any termination of this Agreement by WMS by reason of the foregoing
shall be deemed a termination in violation of this Agreement.
9. (a) Except as provided in the next succeeding subparagraph, in the
event of a breach or threatened breach by either WMS or Xxxxxxxx of any
obligations under this Agreement, the parties hereto acknowledge that WMS or
Xxxxxxxx, as the case may be, will not have an adequate remedy at law, and
shall be entitled to such equitable and injunctive relief as may be available
to restrain violations of the provisions of this Agreement. Nothing in this
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subparagraph shall be construed as prohibiting the parties hereto from pursuing
any other remedies available for such breach or threatened breach, including
the recovery of damages for such breach or threatened breach.
(b) Notwithstanding anything contained in the preceding
subparagraph to the contrary:
(i) (A) If WMS terminates Xxxxxxxx'x employment in violation
of this Agreement and Xxxxxxxx gives the written notice to WMS
provided for in subparagraph 9(c) hereof; or (B) if at any time during
the term of this Agreement, individuals who presently constitute the
Board of Directors of WMS, or who have been recommended for election
to the Board by two-thirds of the Board consisting of individuals who
are either presently on the Board or such recommended successors (such
present directors or recommended directors being hereafter referred to
as "Acceptable Directors"), cease for any reason to constitute at
least a majority of such Board, and Xxxxxxxx gives the written notice
to WMS provided for in subparagraph 9(d) hereof, WMS shall pay to
Xxxxxxxx within fifteen (15) days (or, if later, five (5) business
days after Xxxxxxxx'x delivery of the notice of determination
described in subparagraph 9(b)(iii) below) after such termination
pursuant to clause (A) or (B) hereof, as the case may be, as severance
pay and liquidated damages, in lieu of any other rights or remedies
which might otherwise be available to him under this Agreement, and
without mitigation of any kind or amount, whether or not Xxxxxxxx
shall seek or accept other employment, a lump sum payment equal in
amount to the sum of:
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(I) the aggregate base salary which would have been payable to Xxxxxxxx
pursuant to subparagraph 3(a) of this Agreement during the remaining term
hereof (for purposes of this subparagraph 9(b)(I), the rate of Xxxxxxxx'x
base salary shall be deemed to be Xxxxxxxx'x base salary at the highest
annual rate in effect during the one-year period immediately preceding
termination);
(II) the aggregate bonus which would have been payable to Xxxxxxxx
pursuant to subparagraph 3(b) of this Agreement during the remaining term
hereof, assuming adjusted pre-tax income of WMS during the remaining term
hereof is earned at the highest level achieved in either of the last two
full fiscal years prior to such termination; and
(III) the aggregate retirement benefits which would have been payable to
Xxxxxxxx pursuant to subparagraph 6(b) of this Agreement (for purposes of
this subparagraph 9(b)(III), Xxxxxxxx'x Retirement Date shall be deemed the
date of such termination if such Retirement Date has not yet actually
occurred);
but in no event shall the payment pursuant to this subparagraph 9(b)(i) be
less than three times Xxxxxxxx'x base salary at the highest annual rate in
effect during the one-year period immediately preceding termination. Each
of the payments provided for in this subparagraph 9(b)(i) shall be paid in
full, without discount to present value. In addition to such lump sum
payment to Xxxxxxxx, Xxxxxxxx shall have the right, exercisable within
thirty (30) days after such termination pursuant to clauses (A) or (B)
hereof, to sell to WMS any or all options held by Xxxxxxxx to purchase WMS
common stock and options to purchase the securities of any other company
(other than Midway and its subsidiaries) at least 20% of the voting
securities of which are owned by WMS (a "Related Company") at a price per
option equal to the amount by which (i) the average closing price of the WMS
common stock or the securities of such Related Company, as the case may be,
on the New York Stock Exchange (or other applicable trading market if not
listed on the New York Stock Exchange) during the thirty-day period
immediately
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preceding the date on which he notifies WMS of his election to
sell such options plus the fair market value per share of other
securities or assets which Xxxxxxxx would be entitled to receive upon
exercise of such options exceeds (ii) the option exercise price for
each such share. All options not yet fully exercisable shall be
deemed fully exercisable for purposes of the foregoing computation.
Such payments shall be made by WMS at the time provided in this
subparagraph 9(b)(i) and shall not require any further authorization
or approval of the Board of Directors of WMS.
(ii) If it shall be determined that any amount payable under
subparagraph 9(b) by WMS to or for the benefit of Xxxxxxxx (a "Base
Payment") would be subject to the excise tax (the "Excise Tax")
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), then Xxxxxxxx shall be entitled to receive an
additional payment (the "Gross-up Payment") in an amount such that the
net amount retained by Xxxxxxxx, after the calculation and deduction
of any Excise Tax on the Base Payment and any federal, state, and
local income taxes and Excise Tax on the Gross-Up Payment, shall be
equal to the Base Payment. In determining this amount, the amount of
the Gross-Up Payment attributable to federal income taxes shall be
reduced by the maximum reduction in federal income taxes that could be
obtained by the deduction of the portion of the Gross-Up Payment
attributable to state and local income taxes. Finally, the Gross-Up
Payment shall be reduced by income or Excise Tax withholding payments
made by WMS to any federal, state, or local taxing
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authority with respect to the Gross-Up Payment that was not
deducted from compensation payable to Xxxxxxxx.
(iii) All determinations required to be made under this
subparagraph 9(b)(ii), including whether and when a Gross-Up Payment
is required, the amount of such Gross-Up Payment, and the assumptions
to be utilized in arriving at such determination, except as specified
above, shall be made by WMS's independent auditors (the "Accounting
Firm"), which shall provide detailed supporting calculations both to
WMS and Xxxxxxxx within fifteen business days after the receipt of
notice from Xxxxxxxx that there should be a Gross-Up Payment. The
determination of tax liability made by the Accounting Firm shall be
subject to review by Xxxxxxxx'x tax advisor, and, if Xxxxxxxx'x tax
advisor does not agree with the determination reached by the
Accounting Firm, then the Accounting Firm and Xxxxxxxx'x tax advisor
shall jointly designate a nationally recognized public accounting
firm, which shall make the determination. All fees and expenses of
the accountants and tax advisors retained by either Xxxxxxxx or WMS
shall be borne by WMS. Any Gross-Up Payment shall be paid by WMS to
Xxxxxxxx within five days after the receipt of the determination. Any
determination by a jointly designated public accounting firm shall be
binding upon WMS and Xxxxxxxx.
(c) WMS shall be deemed to have terminated Xxxxxxxx'x employment in
violation of this Agreement for all purposes hereunder, if, among other things,
without his prior written consent:
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(i) Xxxxxxxx is placed in any position of lesser stature than
that of President, Chief Executive Officer and Chief Operating Officer
of WMS; is assigned duties inconsistent with such positions or duties
which, if performed, would result in a significant change in the
nature or scope of powers, authority, functions or duties inherent in
such positions on the date hereof; is assigned performance
requirements or working conditions which are at variance with the
performance requirements and working conditions in effect on the date
hereof; or is accorded treatment on a general basis which is in
derogation of his status as President, Chief Executive Officer and
Chief Operating Officer;
(ii) Xxxxxxxx ceases to serve as a member of the Board of
Directors of WMS;
(iii) WMS discontinues or reduces (from the highest level in
effect during the term of this Agreement) the amount of base salary or
bonus payable to Xxxxxxxx pursuant to subparagraphs 3(a) or 3(b) of
this Agreement; or
(iv) WMS discontinues or reduces (from the level in effect
on the date hereof) the perquisites or fringe benefits inherent in
Xxxxxxxx'x position on the date hereof;
and Xxxxxxxx gives written notice of his election to deem such act to
constitute termination, in which event termination pursuant to this
subparagraph 9(c) shall be deemed to have occurred upon the date of the giving
of such notice.
(d) In the event of a change in the constitution of the Board of
Directors of WMS such that it does not include a majority of Acceptable
Directors as provided in Clause (B) of
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subparagraph 9(b)(i) hereof, and in the further event that at any time
thereafter, Xxxxxxxx gives written notice of his election to terminate this
Agreement, termination pursuant to this subparagraph 9(d) shall be deemed to
have occurred upon the date of the giving of such notice.
10. This Agreement may not be assigned by Xxxxxxxx but shall inure to the
benefit of and shall be binding upon the successors and assigns of WMS.
11. All notices shall be addressed to each party hereto at its address set
forth on the first page of this Agreement or as such address may be changed
from time to time by notice in accordance with this Paragraph 11 and shall be
delivered in person or sent by mail with first class postage prepaid or by
express mail service for next day delivery or other responsible overnight
delivery service, and, if sent by mail shall be deemed to have been given and
received two business days after the date of deposit in the mails and, if sent
by express mail service or overnight delivery service shall be deemed to have
been given and received on the next business day after the date of the delivery
of the notice to such service.
12. Any waiver by either WMS or Xxxxxxxx of any breach of any provisions
of this Agreement by the other party shall not operate or be construed as a
waiver of any other or subsequent breach hereof.
13. This Agreement shall be governed and construed in accordance with the
substantive laws of the State of Illinois applicable to agreements to be
performed entirely therein.
14. No amendment or modification of this Agreement shall be valid and
binding unless made in writing and signed by both of the parties hereto.
15. In the event that any provision of this Agreement, including any
sentence, clause or part hereof, shall be deemed contrary to law or invalid or
unenforceable in any respect by
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a court of competent jurisdiction, the remaining provisions shall not be
affected, but shall, subject to the discretion of such court, remain in full
force and effect and any invalid and unenforceable provision shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited to the extent necessary to render the same valid and enforceable.
16. Notwithstanding anything to the contrary contained herein, this
Agreement is subject to, and shall have no force and effect until, the
completion of the initial public offering of common stock by Midway.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
WMS INDUSTRIES INC.
By: /s/ XXXXXX X. XXXX, XX.
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Xxxxxx X. Xxxx, Xx.
Vice President - Finance
/s/ XXXX X. XXXXXXXX
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XXXX X. XXXXXXXX
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