EXHIBIT 1
EMPLOYMENT AGREEMENT
AGREEMENT dated as of April 6, 1998, by and between WMS INDUSTRIES INC.
("WMS"), a Delaware corporation with offices at 0000 Xxxxx Xxxxxxxxxx Xxxxxx,
Xxxxxxx, XX 00000 and XXXXX X. XXXXXXXX ("Xxxxxxxx"), residing at 000 Xxxxxx
Xxxx, Xxxx Xxxxx, Xxxxxxx 00000.
W I T N E S S E T H :
WHEREAS, Xxxxxxxx was Chief Executive Officer of WMS for many years prior
to his resignation on July 1, 1996; and
WHEREAS, in order to facilitate the spin-off of the shares of stock of
Midway Games Inc. ("Midway") owned by WMS to the stockholders of WMS, the
current Chief Executive Officer and Chief Operating Officer of WMS has been
requested to relinquish his positions as an officer of WMS to devote his full
time to Midway; and
WHEREAS, WMS desires to assure the continuation of experienced executive
leadership and toward that end desires to employ Xxxxxxxx as its President,
Chief Executive Officer; and Chief Operating Officer, and Xxxxxxxx is willing to
be so employed.
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.
2. The term of Xxxxxxxx'x employment hereunder shall commence on the date
hereof and terminate on June 30, 2000 (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 two 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 two (2) years
prior to the respective termination date.
3. (a) WMS shall pay to Xxxxxxxx in respect of each year of his employment
hereunder, a base salary at the rate of $450,000 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) In addition to other compensation hereunder, Xxxxxxxx shall be
entitled to participate in and receive the benefits of all employee benefits and
perquisites generally available to senior executive employees of WMS. Xxxxxxxx
shall also be entitled to receive such special bonuses as may be determined from
time to time by the Board of Directors of WMS.
(c) Currently herewith, WMS is granting to Xxxxxxxx ten (10) year
options to purchase 500,000 shares of WMS Common Stock at the closing price of
such stock on the New York Stock Exchange on the date hereof. Such options shall
be exercisable by Xx. Xxxxxxxx or, in the event of Xx. Xxxxxxxx'x death, his
estate, for their full ten (10) year term whether or not Xx. Xxxxxxxx remain
employed by WMS; provided, however, such options shall not be exercisable at any
time after Xxxxxxxx becomes employed on a full time basis by a competitor of WMS
in violation of Paragraph 6(a) of this Agreement.
4. WMS confirms its commitment, pursuant to a letter agreement dated July
1, 1996, that during the life of Xxxxxxxx and Xxxxxxxx'x wife Xxxxxx, if she
survives him, to reimburse them for all medical and dental expenses incurred by
them 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. 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. Nothing contained in this
paragraph shall be deemed to prohibit Xxxxxxxx from (i) investing his assets or
funds, so 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 are not in
violation of WMS' conflicts of interest policy then in effect; 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.
6. 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.
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(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 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 6 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 6, 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.
7. (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 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 7(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 7(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 termination described in
subparagraph 7(c) 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 three times Xxxxxxxx'x
base salary at the highest annual rate in effect during the one-year
period immediately preceding termination. The payment provided for in
this subparagraph 7(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
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purchase WMS common stock and options to purchase the securities of any
other company 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
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 7(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 7(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 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 subparagraph
7(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' 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 payable to
Xxxxxxxx pursuant to subparagraph 3(a) 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 7(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 subparagraph 7(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
7(d) shall be deemed to have occurred upon the date of the giving of such
notice.
8. 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.
9. 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 9 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.
10. 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.
11. 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.
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12. No amendment or modification of this Agreement shall be valid and
binding unless made in writing and signed by both of the parties hereto.
13. 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 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.
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/ Xxxxx X. Xxxxxxxx
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XXXXX X. XXXXXXXX
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