EMPLOYMENT AGREEMENT
EXHIBIT
10.4
This
Employment Agreement (this
“Agreement”), dated as of the 29th
day of
September, 2005, between VendingData Corporation, a Nevada corporation (together
with its successors or assigns as permitted under this Agreement, the
“Company”), and Xxxx Xxxxxxx, an individual (the “Executive”).
RECITALS
The
Company desires to employ the Executive and enter into this Agreement embodying
the terms of such employment and the Executive desires to enter into this
Agreement and to accept such employment.
In
consideration of the mutual covenants and for other good and valuable
consideration, the Company and the Executive (individually a “Party” and
together the “Parties”) agree as follows:
Definitions
(a) “Base
Salary”
shall
mean the salary provided for in Section 4
below
subject to such increases as may be made from time to time.
(b) “Cause”
shall
mean:
(i) the
conviction of (including any act as a result of pleading nolo contendere) or
entry of judgment against the Executive by a civil or criminal court of
competent jurisdiction of a felony, or any other offense or wrongdoing involving
embezzlement, fraud, misappropriation of funds, any act of moral turpitude
or
dishonesty;
(ii) the
indictment of the Executive by a state or federal grand jury or the filing
of a
criminal complaint or information for a felony, or any other offense involving
embezzlement, fraud, misappropriation of funds, any act of moral turpitude
or
dishonesty, unless such indictment or filing is dismissed within one hundred
eighty (180) days from the date of such indictment or filing. The Board
may elect to suspend and extend the Term of Employment by such one hundred
eighty (180) day period or the number of days actually taken by the Executive
to
dismiss such indictment or filing, whichever is less; provided that the
Executive notifies the Company in writing that the Executive intends to contest
in good faith such indictment or filing and pursues the dismissal of such
indictment or filing with reasonable diligence. During such period
of
suspension, Executive may be relieved of duties, but shall be entitled to
receive Base Salary;
(iii) the
written confession by the Executive of embezzlement, fraud, misappropriation
of
funds, any act of moral turpitude or dishonesty or acts constituting a
felony;
(iv) the
finding by a court of competent jurisdiction in a criminal or civil action
or by
the U.S. Securities and Exchange Commission or state blue sky agency in an
administrative proceeding that the Executive has willfully violated any federal
or state securities law;
(v) the
engagement by the Executive in willful and continued misconduct, or the
Executive’s willful and continued failure
to
substantially
perform
the
Executive’s obligations;
(vi) the
use
by the Executive of alcohol or any controlled substance to an extent that it
interferes, in the sole discretion of the Board, on a continuing and material
basis
with the
performance of the
Executive’s duties under the Agreement;
(vii) the
willful, unauthorized disclosure by the Executive of Confidential Information,
as defined in Section 12, concerning the Company or any Subsidiary,
unless
such disclosure was (A) believed in good faith by the Executive to be
appropriate in the course of properly carrying out duties under the Agreement,
or (B) required by an order of a court having jurisdiction over the
subject
matter or a summons, subpoena or order in the nature thereof of any legislative
body (including any committee thereof) or any governmental or administrative
agency;
(viii) performance
of services by the Executive, other than in the course of properly carrying
out
his or her duties under the Agreement and as otherwise provided herein, for
any
other corporation or person that competes with the Company while the Executive
is employed by
the
Company
(ix) misconduct
in connection with the performance of any of Executive's duties, including,
without limitation, misappropriation of funds or property of the Company,
securing or attempting to secure personally any profit in connection with any
transaction entered into on behalf of the Company, misrepresentation to the
Company, or any violation of law or regulations on Company premises or to which
the Company is subject;
(x) commission
by Executive of an act involving moral turpitude, dishonesty, theft or unethical
business conduct, or conduct which impairs or injures the reputation of, or
xxxxx, the Company;
(xi) disloyalty
by Executive, including without limitation, aiding a competitor;
(xii) any
breach of this Agreement or Company rules; or
(xiii) any
other
bad act or misconduct by Executive;
(c) “Change
in Control”
means,
and shall be deemed to occur upon the happening of the acquisition, directly
or
indirectly, in a single transaction or a series of related transactions by
any
person resulting in the beneficial ownership of 50% or more of the combined
voting power of the then outstanding voting securities of the Company entitled
to vote;
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(d) “Term
of Employment”
shall
mean the initial two-year period specified in Section 2
below
and if, but only if, automatically renewed as provided in
Section 2,
shall
include the period of such renewal.
(e) “Voting
Securities”
means
securities of the Company, the holders of which are entitled to vote for the
election of directors.
Term
of Employment
(a) The
Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company, in the position and with the duties and
responsibilities as set forth in Section 3
below
for the Term of Employment, subject to the terms and conditions of the
Agreement.
(b) The
initial Term of Employment shall commence on September 29th,
2005
and shall terminate on September 30, 2007, unless terminated earlier as provided
in Section 8; provided that the Term of Employment shall automatically
renew for successive one-year periods unless (i) it has sooner terminated
as provided in Section 8 or (ii) either party has notified the
other
in writing at least thirty (30) days prior to the otherwise scheduled expiration
of the Term of Employment that such Term of Employment shall not so
renew.
Position,
Duties and Authorities
During
the Term of Employment, the Executive shall be employed as the President and
Chief Executive Officer of the Company. Subject to supervision and in accordance
with the policies and directives established by the Board of Directors, the
Executive’s duties and responsibilities shall include those duties set forth on
Exhibit ‘A’, attached hereto, and such other duties, responsibilities and
authorities customarily associated with such positions.
Base
Salary
During
the Term of Employment, the Executive shall be paid by the Company a Base Salary
payable no less frequently than in equal monthly installments at an annualized
rate of $250,000.00; subject to increase as may be determined by the Company
within its sole discretion.
Options
Executive
will receive options (“Options”) to purchase 750,000 shares of the Company’s
common stock at an exercise price of $1.34 per share, which options shall be
exercisable upon a Change in Control, and which Options vest upon a Change
in
Control. Except for any conflicting provisions in this Agreement, which shall
prevail, the Options shall be issued under and governed by the terms of the
Company’s 1999 Stock Option Plan. These Options are intended to benefit
Executive upon a Change in Control, and are in addition to stock options already
granted to Executive in connection with Executive’s employment.
Bonus
The
Executive will be entitled to receive a performance-based bonus of up to 50%
of
the Executive’s annual Base Salary for the calendar year commencing January 1,
2006 and for each calendar year during the remainder of the Term of Employment.
The performance bonus shall be subject to the Executive’s satisfaction of
certain performance goals determined by the Board of Directors. Prior to January
1, 2006 and the commencement of each calendar year thereafter during the
remainder of the Term of Employment, the Board of Directors shall determine,
in
its sole and absolute discretion, the performance goals for the Executive and
deliver a written description of those goals to Executive. The written
description shall be incorporated into and become a part of this Agreement.
All
payments of bonuses earned during any calendar year shall be due and payable
no
later than March 31st
of the
following year. The determination of whether the Executive has satisfied the
performance goals shall be made by the Board of Directors in its reasonable
discretion.
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For
the
calendar year 2005, Executive shall receive a signing bonus in the amount of
$75,000.00 in lieu of a performance bonus. The one-time signing bonus shall
be
earned upon the execution of this Agreement and payable one-half ($37,500.00)
upon execution and the remaining one-half ($37,500.00) on or after December
15,
2005, at Executive’s discretion.
Employee
Benefit Programs
During
the Term of Employment, the Executive and his dependents shall be entitled
to
participate in, at the Company’s expense, whatever employee benefit plans the
Company endorses to obtain, if any, such as medical, surgical, hospitalization,
dental and visual insurance coverage. The Company will pay all expenses for
these insurance program(s) or plan(s).
Termination
of Employment
(a) Termination
by the Company for Cause.
At any
time after learning of an event constituting Cause, the Company may elect to
give the Executive written notice of its intention to terminate for Cause,
specifying in such notice the event forming the basis for Cause. Termination
shall be effective immediately upon delivery of notice hereunder. In the event
the Executive’s employment is terminated by the Company for Cause, the Executive
shall be entitled only to:
(i) Base
Salary, at the rate in effect at the time of termination, accrued and payable
through the date of termination of employment;
(ii) reimbursement
for expenses incurred but not yet reimbursed by the Company; and
(iii) any
other
compensation and benefits accrued and to which the Executive is entitled under
applicable plans, programs and agreements of the Company as of the date of
termination of employment.
The
Executive’s entitlement to the foregoing shall be without prejudice to the right
of the Company to claim or xxx for any damages or other legal or equitable
remedy to which the Company may be entitled as a result of such Cause; provided,
however, that offset shall not be available to the Company in any
event.
(b) Termination
Without Cause.
In the
event the Executive’s employment is terminated by the Company without Cause
(which shall not include a termination pursuant to Section 8(a)), the
Executive shall be entitled only to those items described in the subsections
(i)
through (vi) below. Termination Without Cause shall be effective immediately,
unless a later date is stated, upon delivery of a written notice of such
termination from the Company to the Executive.
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(i) Base
Salary, at the rate in effect at the time of termination, accrued and payable
through the date of termination of employment;
(ii) an
amount
equal to the greater of (a) the Base Salary owing over the balance of the term
of this agreement or (b) 12 months’ Base Salary (Base Salary as used in this
section shall be determined at the rate of compensation in effect as of the
date
of termination Without Cause) (the “Base Salary Termination
Payment”);
(iii) in
lieu
of any bonus under Section 6, an amount equal to 50% of the Base Salary
Termination Payment;
(iv) reimbursement
for expenses incurred but not yet reimbursed by the Company;
(v) any
amounts due to the Executive under Section 9; and
(vi) any
other
compensation and benefits accrued and to which the Executive is entitled under
applicable plans, programs and agreements of the Company as of the date of
Termination Without Cause.
(c) Voluntary
Termination.
A
“Voluntary Termination” shall mean a termination of employment by the Executive
on his own initiative other than a termination under Section 8(a)
or
8(b).
In
the event of a Voluntary Termination, the Executive shall be entitled only
to:
(i) Base
Salary, at the rate in effect at the time of termination, accrued and payable
through the date of termination of employment;
(ii) reimbursement
for expenses incurred but not yet reimbursed by the Company; and
(iii) any
other
compensation and benefits accrued and to which the Executive is entitled under
applicable plans, programs and agreements of the Company.
A
Voluntary Termination shall not, solely due to a Voluntary Termination, be
deemed a breach of this Agreement and shall be effective upon the expiration
of
30 days after written notice is delivered to the Company, unless another period
of time is agreed to in writing by the Parties.
(d) No
Mitigation; No Offset.
In the
event of any termination of the Executive’s employment under the Agreement
without Cause, the Executive shall be under no obligation to seek other
employment, and there shall be no offset against amounts due the Executive
under
the Agreement on account of any remuneration attributable to any subsequent
employment that the Executive may obtain.
(e) Nature
of Payments.
Any
amounts due the Executive under the Agreement in the event of any termination
of
employment with the Company are in the nature of severance payments, or
liquidated damages which contemplate both direct damages and consequential
damages that the Executive may suffer as a result of the termination of
employment, or both, and are not in the nature of a penalty.
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Payments
in case of change in control
Upon
a
Change in Control, as such term is defined herein, and in addition to any other
payments to which Executive is entitled under Section 8 or any other provision
of this Agreement, Executive shall be entitled to:
(i) an
amount
equal to 12 months’ Base Salary in effect as of the effective date of the Change
in Control; and
(ii) an
amount
equal to 50% of the annual Base Salary in effect as of the effective date of
the
Change in Control.
Conditions
of Entitlement to Payment
THE
CONSIDERATION DESCRIBED IN SECTION 8(B)(I) AND (II) AND SECTION 9
ARE
DUE
AND OWING IF AND ONLY IF ALL OF THE CONDITIONS SET FORTH
IN
THIS
SECTION 10 ARE SATISFIED:
(a) Executive
must have signed and delivered to the Chairman of the Board of the Company
upon
the termination of employment a release in substantially the form attached
as
Exhibit B (the “Release”) subject to the timing and effectiveness requirements
set forth in the Release; Executive must have substantially complied with all
written contractual obligations owed to the Company, including without
limitation obligations of Executive under this Agreement. This subpart (a)
is
applicable to payments under Section 9 only if prior to the Change in Control
the Executive has received notice of termination without Cause to take effect
upon the Change in Control or within 30 days thereafter.
(b) No
cash
payments shall be due or owing to Executive under this Agreement if the Company
is (i) out of compliance with any covenants imposed by its senior lenders and
such lenders have failed to waive the non-compliance or grant a forbearance,
or
(ii) is insolvent, or (iii), in the good faith discretion of the Board of
Directors of the Company, any such payment or payments, by itself or when
combined with any other obligations of the Company, would cause the Company
to
be out of compliance with such covenants (and the Board of Directors in its
sole
judgment has determined that it is unlikely that its senior lenders will waive
the non-compliance or grant a forbearance) or insolvent. In the event of
application of (i), (ii) or (iii) above, the cash payment shall be become due
and owing and shall be paid promptly after the Board of Directors in its good
faith determines that sections (i), (ii) and (iii) cease to apply.
(c) No
payments shall have been made previously under this Agreement with regard to
a
prior Change in Control.
Covenant
not to compete
In
the
event of a termination of this Agreement prior to the scheduled expiration
of
the Term of Employment, the Executive shall not, for the remaining Term of
Employment or 12 months, whichever is longer, engage in competition with the
Company. For purposes of this Section 11, the Executive shall be engaging
in competition with the Company if the Executive engages in the manufacture
of
playing card shufflers, playing card readers and/or playing card deck setters
in
Xxxxx County, Nevada or any other location in which the Company is engaging
in
business at the time of the termination of the Executive’s employment, whether
as an employee, executive, partner, principal, agent, representative,
stockholder or consultant (other than as a holder of not more than a 10% equity
interest) or in any other corporate or any capacity, so long as the Company
is
engaged in business in the location in question.
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Covenants
to protect confidential information
The
Executive shall not, during the Term of Employment or anytime thereafter,
without prior written consent of the Company, divulge, publish or otherwise
disclose to any other person any Confidential Information regarding the Company
except in the course of carrying out the Executive’s responsibilities on behalf
of the Company (e.g., providing information to the Company’s attorneys,
accountants, bankers, etc.) or if required to do so pursuant to the order of
a
court having jurisdiction over the subject matter or a summons, subpoena or
order in the nature thereof of any legislative body (including any committee
thereof and any litigation or dispute resolution method against the Company
related to or arising out of this Agreement) or any governmental or
administrative agency. For this purpose, Confidential Information shall include,
but is not limited to, the Company’s financial position and results of
operations, trades secrets and intellectual property, products and product
development plans, marketing and promotional plans and strategies, customer
lists and customer data bases. Confidential Information does not include
information that is generally available to the public other than through a
breach of the Agreement on the part of the Executive.
Non-solicitation
Except
with the prior written consent of the Company, Executive shall not solicit
customers, clients, or employees of the Company or any of its affiliates for
a
period of twelve (12) months after the date of the expiration or termination
of
this Agreement. Without limiting the generality of the foregoing, Executive
will
not, for a period of twelve (12) months after the date of the expiration or
termination of this Agreement, willfully canvas or solicit any such business
in
competition with the business of the Company from any customers of the Company
with whom Executive had contact during, or of which Executive had knowledge
solely as a result of, his performance of services for the Company pursuant
to
this Agreement. Executive will not, for a period of twelve (12) months after
the
date of the expiration or termination of this Agreement, directly or indirectly
request, induce or advise any customers of the Company with whom Executive
had
contact during the term of this Agreement to withdraw, curtail or cancel their
business with the Company. Executive will not, for a period of twelve (12)
months after the date of the expiration or termination of this Agreement, induce
or attempt to induce any employee of the Company to terminate his/her employment
with the Company.
Remedies
(a) Executive
acknowledges and agrees that immediate and irreparable harm, for which damages
would be an inadequate remedy, would occur in the event any of the provisions
of
Sections 12, 11, 12 and 13 of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, Executive
agrees that Company shall be entitled to an injunction or injunctions to prevent
breaches of such provisions of this Agreement and to enforce specifically the
terms and provisions thereof without the necessity of proving actual damages
or
securing or posting any bond or providing prior notice, in addition to any
other
remedy to which it may be entitled at law or equity.
(b) Nothing
herein contained is intended to waive or diminish any rights Company may have
at
law or in equity at any time to protect and defend its legitimate property
interests (including its business relationship with third parties), the
foregoing provisions being intended to be in addition to and not in derogation
or limitation of any other rights the Company may have at law or
equity.
(c) Executive
shall have no rights, remedies or claims for damages, at law, in equity or
otherwise with respect to any termination of Executive’s employment by the
Company other than as set forth in Section 8 of this
Agreement.
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Representation
The
Company and the Executive respectively represent and warrant to each other
that
each respectively is fully authorized and empowered to enter into the Agreement
and that their entering into the Agreement and the performance of their
respective obligations under the Agreement will not violate any agreement
between the Company or the Executive respectively and any other person, firm
or
organization or any law or governmental regulation.
Entire
agreement
This
Agreement contains the entire agreement between the Parties and supersedes
all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties.
Amendment
or waiver
This
Agreement cannot be changed, modified or amended without the consent in writing
of both the Executive and the Company. No waiver by either Party at any time
of
any breach by the other Party of any condition or provision of the Agreement
shall be deemed a waiver of a similar or dissimilar condition or provision
at
the same or at any prior or subsequent time. Any waiver must be in writing
and
signed by the Executive or an authorized officer of the Company, as the case
may
be.
Severability
The
provisions of this Agreement shall be severable and the invalidity, illegality
or unenforceability of any provision of this Agreement shall not affect, impair
or render unenforceable this Agreement or any other provision hereof, all of
which shall remain in full force and effect. If any provision of this Agreement
is adjudicated by a court of competent jurisdiction as invalid, illegal or
otherwise unenforceable, but such provision may be made enforceable by a
limitation or reduction of its scope, the Parties agree to abide by such
limitation or reduction as may be necessary so that said provision shall be
enforceable to the fullest extent permitted by law. The Parties further intend
to and hereby confer jurisdiction to enforce the covenants contained in Sections
11, 12 and 13 (the “Restrictive Covenants”) upon the courts of any jurisdiction
within the geographical scope of such Restrictive Covenants. If the courts
of
any one or more of such jurisdictions hold any Restrictive Covenant
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the Company and Executive that such determination not bar or in
any
way affect the right of the Company to the relief provided for in this section
in the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenant as to breaches of such Restrictive Covenant in such other
respective jurisdictions (such Restrictive Covenant as it relates to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants).
-8-
Survival
The
respective rights and obligations of the Parties shall survive any termination
of this Agreement to the extent necessary to the intended preservation of such
rights and obligations.
Governing
law
This
Agreement shall be governed by and construed under the law of the State of
Nevada, disregarding any principles of conflicts of law that would otherwise
provide for the application of the substantive law of another jurisdiction.
The
Parties each hereby consents to the jurisdiction and venue of the state courts
of Xxxxx County, Nevada and the United States district courts with jurisdiction
in Nevada with respect to any matter arising out of or relating to this
Agreement other than matters that are subject to the arbitration provisions
of
Section 21 of this Agreement.
Settlement
of disputes
Except
for equitable actions seeking to enforce the provisions of Sections 11, 12
and
13 of this Agreement which may be brought by a court in any competent
jurisdiction, in the event a dispute, claim or controversy arises between the
parties relating to the validity, interpretation, performance, termination
or
breach of this Agreement, (collectively, a "Dispute"), the Parties agree to
hold
a meeting regarding the Dispute, attended by individuals with decision-making
authority, to attempt in good faith to negotiate a resolution of the Dispute
prior to pursuing other available remedies. If, within thirty (30) days after
such meeting or after good faith attempts to schedule such a meeting have
failed, the Parties have not succeeded in negotiating a resolution of the
Dispute, the Dispute shall be resolved through final and binding arbitration
to
be held in Nevada in accordance with the rules and procedures of the American
Arbitration Association. The prevailing party in such proceeding shall be
entitled to recover the costs of the arbitration from the other party,
including, without limitation, reasonable attorneys’ fees.
Headings
The
headings of the paragraphs contained in this Agreement are for convenience
only
and shall not be deemed to control or affect the meaning or construction of
any
provision of this Agreement.
Counterparts
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
Taxes
The
Compensation payable is stated in gross amounts and shall be subject to such
withholding taxes and other taxes as may be required by law.
Acknowledgment
The
Executive acknowledges that he/she has been given a reasonable period of time
to
study this Agreement before signing it and has had an opportunity to secure
counsel of his/her own. The Executive certifies that he/she has fully read
and
completely understands the terms, nature, and effect of this Agreement. The
Executive further acknowledges that he/she is executing this Agreement freely,
knowingly, and voluntarily and that the Executive’s execution of this Agreement
is not the result of any fraud, duress, mistake, or undue influence whatsoever.
In executing this Agreement, the Executive does not rely on any inducements,
promises, or representations by the Company other than that which is stated
in
this Agreement.
-9-
Waiver
of jury trial
Each
Party waives, to the fullest extent permitted by applicable law, any right
it
may have to a trial by jury in respect of any litigation arising out of or
relating to this Agreement and Executive’s employment by the Company. Each Party
(a) certifies that no representative, agent or attorney of the other Party
has
represented, expressly or otherwise, that such other Party would not, in the
event of litigation, seek to enforce the foregoing waiver and (b) acknowledges
that it has been induced to enter into this Agreement by, among other things,
the mutual waivers and certifications set forth in this section.
In
Witness Whereof,
the
undersigned have executed the Agreement as of the date first written
above.
|
VENDINGDATA
CORPORATION,
a
Nevada corporation
|
|
|
By:
|
|
|
Its:
|
|
|
EXECUTIVE
|
|
|
Xxxx
Xxxxxxx
|
|
-10-
ADDENDUM
TO EXECUTIVE EMPLOYMENT AGREEMENT
This
Addendum shall modify the Executive Employment Agreement dated September
29th,
2005
between Xxxx Xxxxxxx (“Executive”) and VendingData Corporation (“Company”). All
terms of the Executive Employment Agreement shall remain in full force and
effect except as modified by this Addendum.
The
parties agree that section 1(b), the definition of “Cause”, shall be amended to
include the following:
(xiv)
(1)
a finding by any lawfully appointed gaming authority in any jurisdiction that
Company does business (“Gaming Authority”) the Executive is “unsuitable”, or the
equivalent, (2) the mandatory request by any Gaming Authority that the Company
not associate with Executive, or (3) the failure by Executive to qualify for
any
license that any Gaming Authority requires that Executive possess.
This
Addendum shall be effective as of the effective date of the Executive Employment
Agreement.
Agreed
to
by the parties on October ____, 2005.
| VENDINGDATA | EXECUTIVE | ||
| /s/ | /s/ | ||
|
|
|
||
|
By:
Its:
Date:
|
Xxxx
Xxxxxxx
Date:
|
-11-
