EMPLOYMENT AGREEMENT
This Agreement is made as of January 1, 2001 (the "Effective Date") between
Interlott Technologies, Inc., a Delaware corporation ("Employer") and Xxxxx X.
Xxxxxxx ("Employee").
Employer and Employee agree as follows:
1. Employment. By this Agreement, Employer and Employee set forth the terms of
Employer's employment of Employee on and after the Effective Date.
2. Term of Agreement. The term of this Agreement initially shall be the
five-year period commencing on the Effective Date. On the fourth
anniversary of the Effective Date and on each subsequent anniversary of the
Effective Date, the term of this Agreement automatically shall be extended
a period of one additional year, unless Employer or Employee gives written
notice of termination prior to such anniversary date. Notwithstanding the
foregoing, the term of this Agreement is subject to termination as provided
in Section 7.
3. Duties.
A. Employee will serve as President and Chief Executive Officer ("CEO")
of Employer.
B. Employee shall furnish such managerial, executive, financial,
technical, and other skills, advice, and assistance in operating
Employer as Employer may reasonably request.
C. Employee shall devote Employee's entire time, attention, and energies
to the business of Employer. The words "entire time, attention, and
energies" are intended to mean that Employee shall devote Employee's
full effort during reasonable working hours to the business of
Employer and shall devote at least 40 hours per week to the business
of Employer.
4. Compensation.
A. Employee shall receive a base salary (the "Base Salary") of at least
$220,000 per year, payable not less frequently than monthly, for each
year during the term of this Agreement, subject to proration for any
partial year. Such Base Salary, and all other amounts payable under
this Agreement, shall be subject to withholding as required by law.
B. In addition to the Base Salary, Employee shall be entitled to receive
an annual bonus (the "Bonus") for each calendar year for which
services are performed under this Agreement. Employee's Bonus shall be
an amount equal to two and one half percent (2 1/2%) of Employer's
annual net after tax income as reflected in the Employer's audited
annual financial statements for each year, plus an additional amount
equal to 5% of Employer's calendar year over year after tax net income
growth commencing with the year 2001. The Bonus will be due and
payable within ninety (90) days of the end of each calendar year
commencing with the year 2001.
C. Employee shall receive a one time bonus in recognition of his efforts
during 2000 ("2000 Bonus") of $100,000.00, to be paid within two weeks
of the Effective Date.
D. As of the Effective Date, Employee shall also receive under the
Company's incentive stock option plan, options for 200,000 shares of
the Company's stock ("Option Grant") with a strike price equal to the
closing price of the Company's stock on the date of grant, with 25% of
the options being vested upon grant and an additional 25% to vest at
the beginning of each calendar year thereafter until 100% vested. The
Option Grant shall be in addition to any other options awarded to
Employee on an annual or other basis under the Company's incentive
stock option plan.
E. On at least an annual basis, Employee shall receive Base Salary
increases reflecting changes in the cost of living as reflected in the
Consumer Price Index for All Urban Consumers (CPI-U) and shall receive
a performance review and be considered for performance based increases
as well.
F. Employee shall be granted a car expense allowance of Seven Hundred
Fifty Dollars ($750) each month.
5. Expenses. All reasonable and necessary expenses incurred by Employee in the
course of the performance of Employee's duties to Employer shall be
reimbursable in accordance with Employer's then current travel and expense
policies.
6. Benefits.
A. While Employee remains in the employ of Employer, Employee shall be
entitled to participate in all of the various employee benefit plans
and programs, or equivalent plans and programs, which are made
available to similarly situated officers of Employer, including
benefits set forth in Attachment A.
B. Notwithstanding anything contained herein to the contrary, the Base
Salary and Bonuses otherwise payable to Employee shall be reduced by
any benefits paid to Employee by Employer under any disability plans
made available to Employee by Employer.
C. In Each year of this Agreement, Employee will be granted stock options
as determined by the Company's Board of Directors under Employer's
incentive stock option plan.
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7. Termination.
A. (i) Employer or Employee may terminate this Agreement upon Employee's
failure or inability to perform the services required hereunder
because of any physical or mental infirmity for which Employee
receives disability benefits under any disability benefit plan made
available to Employee by Employer (the "Disability Plans"), over a
period of one hundred twenty consecutive working days during any
twelve consecutive month period (a "Terminating Disability").
(ii) If Employer or Employee elects to terminate this Agreement in the
event of a Terminating Disability, such termination shall be effective
immediately upon the giving of written notice by the terminating party
to the other.
(iii) Upon termination of this Agreement on account of Terminating
Disability, Employer shall pay Employee Employee's accrued
compensation hereunder, whether Base Salary, Bonus or otherwise
(subject to offset for any amounts received pursuant to the Disability
Plans), to the date of termination. For as long as such Terminating
Disability may exist, Employee shall continue to be an employee of
Employer for all other purposes and Employer shall provide Employee
with disability benefits and all other benefits according to the
provisions of the Disability Plans and any other Employer plans in
which Employee is then participating.
(iv) If the parties elect not to terminate this Agreement upon an
event of a Terminating Disability and Employee returns to active
employment with Employer prior to such a termination, or if such paid
disability exists for less than one hundred twenty consecutive working
days, the provisions of this Agreement shall remain in full force and
effect.
B. This Agreement terminates immediately and automatically on the death
of the Employee, provided, however, that the Employee's estate shall
be paid Employee's accrued compensation hereunder, whether Base
Salary, Bonus or otherwise, to the date of death.
C. Employer may terminate this Agreement immediately, upon written notice
to Employee, for Cause. For purposes of this Agreement, Employer shall
have "Cause" to terminate this Agreement only if Employer's Board of
Directors determines that there has been fraud, misappropriation or
embezzlement on the part of Employee.
D. Employer may terminate this Agreement immediately, upon written notice
to Employee, for any reason other than those set forth in Sections
7(A), (B) and (C); provided, however, that Employer shall have no
right to terminate under this Section 7(D) within two years after a
Change in Control. In the event of a termination by Employer under
this Section 7(D), Employer shall, within five days after the
termination, pay Employee an amount equal to the greater of (i) two
times the sum of the annual Base Salary rate in effect at the time of
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termination plus the amount of the immediately preceding Bonus earned
by Employee, or (ii) if the Current Term is longer than two years, the
sum of the Base Salary for the remainder of the Current Term (at the
rate in effect at the time of termination) plus an amount equal to the
immediately preceding Bonus earned by Employee for each calendar year
commencing or ending during the remainder of the Current Term (subject
to proration in the case of any calendar year ending after the Current
Term). For the remainder of the Current Term, Employer shall continue
to provide Employee with medical, dental, vision and life insurance
coverage comparable to the medical, dental, vision and life insurance
coverage in effect for Employee immediately prior to the termination;
and, to the extent that Employee would have been eligible for any
post-retirement medical, dental, vision or life insurance benefits
from Employer if Employee had continued in employment through the end
of the Current Term. To the extent not precluded by the Employer's
1994 Incentive Stock Option Plan ("Option Plan"), for purposes of any
stock option or restricted stock grant outstanding immediately prior
to the termination, Employee's employment with Employer shall not be
deemed to have terminated until the end of the Current Term. In
addition, Employee shall be entitled to receive, as soon as
practicable after termination, an amount equal to the sum of (i) any
forfeitable benefits under any qualified or nonqualified pension,
profit sharing, 401(k) or deferred compensation plan of Employer which
would have vested prior to the end of the Current Term if Employee's
employment had not terminated plus (ii) if Employee is participating
in a qualified or nonqualified defined benefit plan of Employer at the
time of termination, an amount equal to the present value of the
additional vested benefits which would have accrued for Employee under
such plan if Employee's employment had not terminated prior to the end
of the Current Term and if Employee's annual Base Salary and Bonus had
neither increased nor decreased after the termination. For purposes of
this Section 7(D), "Current Term" means the longer of (i) the two year
period beginning at the time of termination or (ii) the unexpired term
of this Agreement at the time of the termination, determined as
provided in Section 2 but assuming that there is not automatic
extension of the Agreement term after the termination. For purposes of
this Section 7(D) and Section 7(E), "Change in Control" means a change
in control as defined in Employer's 1994 Incentive Stock Option Plan,
excepting that Board of Directors approval or ratification shall not
be considered in determining whether a Change in Control has occurred
for purposes of this Agreement.
E. This Agreement shall terminate automatically in the event that there
is a Change in Control and either (i) Employee elects to resign within
90 days after the Change in Control or (ii) Employee's employment with
Employer is actually or constructively terminated by Employer within
two years after the Change in Control for any reason other than those
set forth in Sections 7(A), (B) or (C). For purposes of the preceding
sentence, a "constructive" termination of Employee's employment shall
be deemed to have occurred if, without Employee's consent, there is a
material reduction in Employee's authority or responsibilities or if
there is a reduction in Employee's Base Salary or Bonus formula from
the amount in effect immediately prior to the Change in Control or if
Employee is required by Employer to relocate from the city where
Employee is residing immediately prior to the Change in Control. In
the event of a termination under this Section 7(E), Employer shall pay
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Employee an amount equal to two times the sum of the annual Base
Salary rate in effect at the time of termination plus an amount equal
to the amount of the immediately preceding bonus earned by Employee,
to the extent not precluded by the Option Plan all stock options shall
become immediately exercisable (and Employee shall be afforded the
opportunity to exercise them), and the restrictions applicable to all
restricted stock shall lapse. For the remainder of the Current Term,
Employer shall continue to provide Employee with medical, dental,
vision and life insurance coverage in effect for Employee immediately
prior to the termination; and, to the extent that Employee would have
been eligible for any post-retirement medical, dental, vision or life
insurance benefits from Employer if Employee had continued in
employment through the end of the Current Term, Employer shall provide
such post-retirement benefits to Employee after the end of the Current
Term. Employee's accrued benefit under any nonqualified pension or
deferred compensation plan maintained by Employer or any Affiliate
shall become immediately vested and nonforfeitable, as well as
benefits under any qualified pension or profit sharing or 401(k) plan
maintained by Employer or any Affiliate plus (ii) if Employee is
participating in a qualified or nonqualified defined benefit plan of
Employer or any Affiliate at the time of termination, an amount equal
to the present value of the additional benefits which would have
accrued for Employee under such plan if Employee's employment had not
terminated prior to the end of the Current Term and if Employee's
annual Base Salary and Bonus target had neither increased nor
decreased after the termination. Finally, to the extent that Employee
is deemed to have received an excess parachute payment by reason of
the Change in Control, Employer shall pay Employee an additional sum
sufficient to pay (i) any taxes imposed under section 4999 of the Code
plus (ii) any federal, state and local taxes applicable to any taxes
imposed under section 4999 of the Code. For purposes of this Section
7(E), "Current Term" means the longer of (i) the two year period
beginning at the time of termination or (ii) the unexpired term of
this Agreement at the time of the termination, determined as provided
in Section 2 but assuming that there is no automatic extension of the
Agreement term after the termination.
F. Employee may resign upon 60 days' written notice to Employer. In the
event of a resignation under this Section 7(F), this Agreement shall
terminate and Employee shall be entitled to receive Employee's Base
Salary through the date of termination, any Bonus earned but not paid
at the time of termination and any other vested compensation or
benefits called for under any compensation plan or program of
Employer.
G. Upon termination of this Agreement as a result of an event of
termination described in this Section 7 and except for Employer's
payment of the required payments under this Section 7 (including any
Base Salary accrued through the date of termination, any Bonus earned
for the year preceding the year in which the termination occurs and
any nonforfeitable amounts payable under any employee plan), all
further compensation under this Agreement shall terminate.
8. Assignment. As this is an agreement for personal services involving a
relation of confidence and a trust between Employer and Employee, all
rights and duties of Employee arising under this Agreement, and the
Agreement itself, are non-assignable by Employee.
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9. Notices. Any notice required or permitted to be given under this Agreement
shall be sufficient, if in writing, and if delivered personally or by
certified mail to Employee at Employee's place of residence as then
recorded on the books of Employer or to Employer at its principal office.
10. Waiver. No waiver or modification of this Agreement or the terms contained
herein shall be valid unless in writing and duly executed by the party to
be charged therewith. The waiver by any party hereto of a breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by such party.
11. Governing Law. This agreement shall be governed by the laws of the State of
Ohio.
12. Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to Employee's employment by Employer. There are no
other contracts, agreements or understandings, whether oral or written,
existing between them except as contained or referred to in this Agreement.
13. Severability. In case any one or more of the provisions of this Agreement
is held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or other enforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if such
invalid, illegal, or unenforceable provisions have never been contained
herein.
14. Successors and Assigns. Subject to the requirements of Section 7, above,
this Agreement shall be binding upon Employee, Employer and Employer's
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
INTERLOTT TECHNOLOGIES, INC.
By: ________________________________
EMPLOYEE
________________________________
Xxxxx X. Xxxxxxx
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Attachment A
EMPLOYEE BENEFITS
Automobile Allowance 750
Group Accident Life $500,000 Employee
Long Term Disability Insurance Yes
Short Term Disability Supplement Yes
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