EXHIBIT 10.19
CONFIDENTIAL TREATMENT REQUESTED
EXECUTIVE EMPLOYMENT AGREEMENT
XXXX X. XXXXXXX
THIS AGREEMENT is made and entered into as of the 1st day of December,
1999, by and between Shuffle Master, Inc., a Minnesota corporation (the
"Company"), and Xxxx X. Xxxxxxx (the "Employee").
RECITALS
A. The Company is in the business of developing, manufacturing,
distributing and otherwise commercializing gaming equipment,
games, and operating systems for gaming equipment and related
products and services throughout the United States and in
Canada and other countries (the "Business").
B. Company and Employee want to create an at-will employment
relationship that protects the Company with appropriate
confidentiality and non-compete covenants and rewards the
Employee with a severance package for performing his
obligations for the full term of this contract or such shorter
term as may be created by his earlier termination by the
Company or its successors without just cause.
C. The Company and employee desire that Employee be employed by
the Company on the terms and conditions of this Agreement.
AGREEMENT
In consideration of the mutual promises contained herein, Employee and
the Company agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee as its Secretary,
Treasurer/Chief Financial Officer. Employee shall perform the duties of those
positions and shall perform such other related duties as the Company may direct
from time to time. Employee's employment with the Company is for a term of one
year, but may be terminated earlier in accordance with the provisions of this
Agreement.
2. SALARY AND BENEFITS. Employee shall be paid an annual base salary of
One Hundred Fifty-six Thousand and No/100 Dollars ($156,000.00), paid in the
same intervals as other employees of the Company. If the Employee is employed
with the Company through October 31, 2000, Employee will be eligible to receive
an executive bonus in accordance with the terms and conditions of the executive
bonus program authorized by the Board of Directors of the Company, as set forth
on Exhibit A attached hereto. Employee will receive a stock option grant to
purchase 25,000 shares of the Company's common stock in accordance with and
subject to the terms and conditions imposed by the Board of Directors at its
November 4th, 1999 meeting and the 1993 Employee Stock Option Plan. Employee's
salary is set on the expectation (except for vacation days and holidays) that on
average at least 40 hours per week of Employee's time will be devoted to
Employees duties hereunder. The Company agrees to provide Employee with the
benefits it provides its executive team. Employee will not, however, be eligible
to participate in the Company's non-executive bonus program.
3. OUTSIDE CONSULTING. Employee shall devote Employee's full time and
best efforts to the Company. Employee may render consulting services to other
businesses from time to time only if Employee meets all of the following
requirements:
(a) the consulting services do not interfere in any manner with
the Employee's ability to fulfill all of his duties and
obligations to the Company;
(b) the consulting services are not rendered to any business which
may compete with the Company in any area of the Business;
(c) the consulting services do not relate to any products or
services which form part of the Business.
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4. NON-COMPETITION. In consideration of the provisions of this
agreement and the severance benefits for which Employee is eligible pursuant to
Section 6, Employee shall not, while employed by the Company or its successor,
and for one (1) year thereafter:
(a) directly or indirectly own, manage, operate, participate in,
consult with or work for any business which is engaged in the
Business anywhere in the United States or Canada.
(b) either alone or in conjunction with any other person,
partnership or business, directly or indirectly, solicit or
divert or attempt to solicit or divert any of the employees or
agents of the Company or its affiliates to work for or
represent any competitor of the Company or its affiliates or
to call upon any of the customers of the Company or its
affiliates.
5. CONFIDENTIALITY; INVENTIONS.
(a) Employee shall fully and promptly disclose to the Company all
inventions, discoveries, software and writings that Employee
may make, conceive, discover, develop or reduce to practice
either solely or jointly with others during Employee's
employment with the Company, whether or not during usual
working hours. Employee agrees that all such inventions,
discoveries, software and writing shall be and remain the sole
and exclusive property of the Company, and Employee hereby
agrees to assign, and hereby assigns all of Employee's right,
title and interest in and to any such inventions, discoveries,
software and writings to the Company. Employee agrees to keep
complete records of such inventions, discoveries, software and
writings, which records shall be and remain the sole property
of the Company, and to execute and deliver, either during or
after Employee's employment with the Company, such documents
as the Company shall deem necessary or desirable to obtain
such letters patent, utility models, inventor's certificates,
copyrights, trademarks or other appropriate legal rights of
the United States and foreign countries as the Company may, in
its sole discretion, elect, and to vest title thereto in the
Company, its successors, assigns, or nominees.
(b) "Inventions," as used herein, shall include inventions,
discoveries, improvements, ideas and conceptions, developments
and designs, whether or not patentable, tested, reduced to
practice, subject to copyright or other rights or forms of
protection, or relating to data processing, communications,
computer software systems, programs and procedures.
(c) Employee understands that all copyrightable work that Employee
may create while employed by the Company is a "work made for
hire," and that the Company is the owner of the copyright
therein. Employee hereby assigns all right, title and interest
to the copyright therein to the Company.
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(d) Employee has no inventions, improvements, discoveries,
software or writings useful to the Company or its subsidiaries
or affiliates in the normal course of business, which were
conceived, made or written prior to the date of this
Agreement.
(e) Employee will not publish or otherwise disclose, either during
or after Employee's employment with the Company, any
unpublished or proprietary or confidential information or
secret relating to the Company, the Business, the Company's
operations or the Company's products or services. Employee
will not publish or otherwise disclose proprietary or
confidential information of others to which Employee has had
access or obtained knowledge in the course of Employee's
employment with the Company. Upon termination of Employee's
employment with the Company, Employee will not, without the
prior written consent of the Company, retain or take with
Employee any drawing, writing or other record in any form or
nature which relates to any of the foregoing.
(f) Employee understands that Employee's employment with the
Company creates a relationship of trust and confidence between
Employee and the Company. Employee understands that Employee
may encounter information in the performance of Employee's
duties that is confidential to the Company or its customers.
Employee agrees to maintain in confidence all information
pertaining to the Business or the Company to which Employee
has access including, but not limited to, information relating
to the Company's products, inventions, trade secrets, know
how, systems, formulas, processes, compositions, customer
information and lists, research projects, data processing and
computer software techniques, programs and systems, costs,
sales volume or strategy, pricing, profitability, plans,
marketing strategy, expansion or acquisition or divestiture
plans or strategy and information of similar nature received
from others with whom the Company does business. Employee
agrees not to use, communicate or disclose or authorize any
other person to use, communicate or disclose such information
orally, in writing, or by publication, either during
employee's employment with the Company or thereafter except as
expressly authorized in writing by the Company unless and
until such information becomes generally known in the relevant
trade to which it relates without fault on employee's part, or
as required by law.
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6. SEVERANCE BENEFITS. In the event this Agreement is terminated under
Section 7, during the one (1) year period immediately following Employee's last
day of employment, Employee will receive the following benefits:
(a) Employee will be paid an annual salary in the amount of One
Hundred Fifty-Six Thousand Dollars plus twelve (12) times the
average "deemed monthly bonus" received over the thirty-six
(36) months preceding termination. The deemed monthly bonus
amounts to be included in the average shall equal one twelfth
(1/12) of the annual bonus received by the Employee (or which
would have been received if the Employee worked the full
fiscal year in which he was terminated pursuant to Section 7)
in each fiscal year in which each such month in the thirty-six
(36) month period falls. To the extent that the above
calculation includes bonus amounts for a fiscal year not ended
at time of Employee's termination, the average deemed monthly
bonus will be determined as of the end of the month following
the Employee's last day of employment and the deemed monthly
bonus for the then current fiscal year will be based on the
Company's actual year-to-date EBT as of the end of such month
compared to the budgeted year-to-date EBT as of the end of
such month. If actual EBT equals or exceeds budgeted EBT, the
Employee's deemed monthly bonus amount for that fiscal year
shall equal 1/12 of the Employee's bonus target (50% of
salary). Employee will be paid this salary over the one (1)
year period immediately following his last date of employment,
at the same time as other Employees of the Company. In
addition, during the period of severance payments the Employee
shall continue to receive all of the Company's employee
benefits, if eligible, and if not eligible for health
benefits, the Company shall pay the COBRA premiums for
continuation coverage during the period of severance payments.
This will be Employee's sole remedy for termination without
just cause prior to the end of the term set forth in Section
1.
(b) Any stock option previously granted to the Employee (not
already exercisable and vested) will become exercisable and
all stock options will become fully vested on the first day
immediately following Employee's last day of employment.
Employee will be entitled to exercise said options during the
eighteen (18) month period following Employee's last day of
employment, in accordance with the terms of the Company's
stock option plan as amended from time to time (including
limitations on exercise not inconsistent with this paragraph),
unless during such eighteen (18) month period there is a sale
or merger of the Company that constitutes a change in control
as defined in the Company's stock option plan. In the event of
such a change in control Employee will reasonably
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cooperate with the Company, and exercise his stock options in
a way as to not hinder the progress or closing of the sale or
merger transaction, and in no event later than three (3)
months following the closing.
7. EARLY TERMINATION BY COMPANY WITHOUT JUST CAUSE. Employee's
employment by the Company is "at will"; the Company may terminate this Agreement
at any time either with or without just cause. Further, in the event the Company
is sold or merged with another company during the term hereof, the successor
company may terminate Employee's employment on 30 days' notice or refrain from
offering employment to Employee on these terms and in a similar capacity, in
which case Employee shall be considered to have been terminated without just
cause. Notwithstanding any such termination by either the Company or its
successor, Employee will remain bound under the covenants not to compete and
confidentiality obligations of Sections 4 and 5 of this Agreement and the
Severance Benefits provided under Section 6 will remain in full force and
effect.
8. EARLY TERMINATION BY COMPANY FOR JUST CAUSE. The Company may
terminate Employee for just cause. In the event the Company terminates the
Employee for just cause, the Employee will remain bound under the covenant not
to compete and confidentiality obligations contained in Sections 4 and 5 and
will not be entitled to any of the severance benefits provided under Section 6.
Termination for "just cause" shall include, but not be limited to:
(a) chronic inattention to duty;
(b) dishonesty as to a matter which is materially injurious to the
Company;
(c) the commission of a willful act or omission intended to
materially injure the business of the Company;
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(d) a violation of any material provision of this Agreement,
including, in particular, the provisions of Sections 4 and 5
hereof; or
(e) a determination in good faith by the vote of a majority of the
Company's board of directors that the Employee has failed to
make a good faith effort to perform his duties as assigned by
the Company's CEO or Board of Directors;
provided, that if the Company desires to terminate Employee for the reasons
stated in subsection 8(f), it shall first give Employee written notice of such
intention, stating the specific reasons for the termination, and Employee shall
have 30 days from the date of receipt of such notice to cure the alleged
wrongdoing to the reasonable satisfaction of the Company; provided further, that
the provisions of subsection (f) shall be inapplicable following a sale of the
Company or a change in control.
9. EARLY TERMINATION BY EMPLOYEE. In the event Employee voluntarily
terminates his employment with the Company (or its successor) prior to December
1, 2000, Employee will remain bound under the confidentiality and non-compete
obligation of Sections 4 and 5 and will not be entitled to receive any of the
severance benefits provided under Section 6. Voluntary termination means any
termination by the Employee without just cause. Just cause is defined as a
material breach of a substantial provision of this Agreement by the Employer.
Voluntary termination includes a termination caused by the death of Employee or
by the disability of Employee for more than six (6) months. In the event a
voluntary termination occurs due to the death or disability of Employee, in
addition to any other benefits to which Employee is entitled under this
Agreement, Employee will receive the full benefits under Section 6(b) of this
Agreement.
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10. NO CONFLICTING AGREEMENTS. Employee has the right to enter into
this Agreement, and hereby confirms Employee has no contractual or other
impediments to the performance of Employee's obligations including, without
limitation, any non-competition or similar agreement in favor of any other
person or entity.
11. COMPANY POLICIES. During the term of Employee's employment,
Employee shall engage in no activity or employment which may conflict with the
interest of the Company, and Employee shall comply with all policies and
procedures of the Company including, without limitation, all policies and
procedures pertaining to ethics.
12. INDEPENDENT COVENANTS. The covenants on the part of the Employee
contained in Sections 4 and 5 hereof shall be construed as agreements
independent of any other provision in this Agreement; it is agreed that the
relief for any claim or cause of action of the Employee against the Company,
whether predicated on this Agreement or otherwise, shall be measured in damages
and shall not constitute a defense to enforcement by the Company of those
covenants.
13. INJUNCTIVE RELIEF; ATTORNEYS' FEES. In recognition of the
irreparable harm that a violation by Employee of any of the covenants contained
in Sections 4 and 5 hereof would cause the Company, the Employee agrees that, in
addition to any other relief afforded by law, an injunction (both temporary and
permanent) against such violation or violations may be issued against him or her
and every other person and entity concerned thereby, it being the understanding
of the parties that both damages and an injunction shall be proper modes of
relief and are not to be considered alternative remedies. Employee consents to
the issuance of such injunction relief without the posting of a bond or other
security. In the event of any such
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violation, THE EMPLOYEE AGREES TO PAY THE COSTS, EXPENSES AND REASONABLE
ATTORNEYS' FEES INCURRED BY THE COMPANY IN PURSUING ANY OF ITS RIGHTS WITH
RESPECT TO SUCH VIOLATIONS, IN ADDITION TO THE ACTUAL DAMAGES SUSTAINED BY THE
COMPANY AS A RESULT THEREOF.
14. NOTICE. Any notice sent by registered mail to the last known
address of the party to whom such notice is to be given shall satisfy the
requirements of notice in this Agreement.
15. ENTIRE AGREEMENT. This Agreement is the entire agreement of the
parties hereto concerning the subject matter hereof and supersedes and replaces
any oral or written existing agreements between the Company and the Employee
relating generally to the same subject matter. Company and Employee hereby
acknowledge that there are no agreements or understandings of any nature, oral
or written, regarding Employee's employment, apart from this Agreement.
16. SEVERABILITY. It is further agreed and understood by the parties
hereto that if any provision of this Agreement should be determined by a court
to be unenforceable in whole or in part, it shall be deemed modified to the
minimum extent necessary to make it reasonable and enforceable under the
circumstances.
17. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota, without giving effect to the
principles of conflicts of laws thereof.
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18. HEIRS, SUCCESSORS AND ASSIGNS. The terms, conditions, and covenants
hereof shall extend to, be binding upon, and inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
19. LIMITATION ON PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that qualified independent certified public
accountants retained by the Company for the purpose (the
"Auditors") determine that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or
payable (or distributed or distributable) pursuant to the
terms of this Agreement or otherwise (a "Payment"), would be
nondeductible by the Company for federal income tax purposes
because of section 280G of the Internal Revenue Code of 1954,
as amended (the "Code"), then the aggregate present value of
the amounts payable or distributable to or for the benefit of
the Employee pursuant to this Agreement (the "Agreement
Payments") shall be reduced (but not below zero) to the
Reduced Amount. The "Reduced Amount" shall be an amount
expressed in present value which maximizes the aggregate
present value of Agreement Payments without causing any
Payment to be nondeductible by the Company because of section
280G of the Code.
(b) If the Auditors determine that any Payment would be
nondeductible by the Company because of section 280G of the
Code, then the Company shall promptly give the Employee notice
to that effect and a copy of the detailed calculation thereof
and of the Reduced Amount, and the Employee may then elect, in
Employee's sole discretion, which and how much of the
Agreement Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the
Agreement Payments equals the Reduced Amount) and shall advise
the Company in writing of his election within 10 days of his
receipt of notice. If no such election is made by the Employee
within such 10-day period, then the Company may elect which
and how much of the Agreement Payments shall be eliminated or
reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and
shall notify the Employee promptly of such election. Present
values shall be determined in accordance with section 280G(d)
(4) of the Code. All determinations made by the Auditors under
this section shall be binding upon the Company and the
Employee and shall be made within 60 days of the Employee's
termination of employment with the Company.
(c) As a result of the uncertainty in the application of section
280G of the Code at the time of the initial determination by
the Auditors hereunder, it is possible that Agreement Payments
will have been made by the Company which should not
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have been made (an "Overpayment") or that additional Agreement
Payments which will not have been made by the Company could
have been made (an "Underpayment"). In the event that the
Auditors, based upon the assertion of a deficiency by the
Internal Revenue Service against the Company or the Employee
which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment
shall be treated for all purposes as a loan to the Employee
which Employee shall repay to the Company, together with
interest at the applicable federal rate provided for in
section 7872(f)(2) of the Code; provided, however, that no
amount shall be payable by the Employee to the Company if and
to the extent that such payment would not reduce the amount
which is subject to taxation under section 4999 of the Code.
In the event that the Auditors determine that an Underpayment
has occurred, such Underpayment shall promptly be paid by the
Company to or for the benefit of the Employee, together with
interest at the applicable federal rate provided for in
Section 7872(f)(2)(A) of the Code.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day, month and year first above written.
EMPLOYER: EMPLOYEE:
SHUFFLE MASTER, INC.
By /s/ Xxxxxx X. Xxxxx /s/ Xxxx X. Xxxxxxx
----------------------------------- -----------------------------------
Its President and CEO Xxxx X. Xxxxxxx
------------------------------
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EXHIBIT A
Employee may earn a percentage of Employee's base salary as a bonus
during fiscal year 2000, which will vary depending on the percentage of targeted
income before taxes (REDACTED; CONFIDENTIAL TREATMENT REQUESTED) earned by the
Company:
COMPANY EARNINGS AS %
OF TARGETED INCOME
BEFORE TAXES BONUS
------------ -----
a. Less than 90% 0
b. 90% $62,400.00 (40% of base salary)
c. 90% - 100% $62,400.00 + $1,560 for each increase of one percent
(1%) over ninety percent (90%)
d. 100% $78,000.00 (50% of base salary)
e. 100% - 120% $78,000.00 + $780 for each increase of one percent
over 100%
f. 120% $93,600.00 (60% of base salary)
g. over 120% 60% of base salary plus an additional 1% of base
salary for each increase of one percent over 120%.
For example, if the Company earns 100% of its targeted income before
taxes during fiscal 2000, Employee would be paid a performance bonus of
$78,000.00 ($156,000.00 x 50%). If the Company earns 90% of its targeted income
before taxes during fiscal 2000, Employee would be paid a performance bonus of
$62,400.00 ($156,000.00 x 40%). If the Company earns 120% of its targeted income
before taxes, then Employee's performance bonus would be $93,600.00 ($156,000.00
x 60%). If the Company earns more than 120% of its targeted income before taxes,
Employee's performance bonus would further increase by an amount equal to one
percent (1%) of his base salary for each percent by which the percentage
increase in income before taxes exceeds 120% of the target. In no event shall
the amount of the bonus exceed twice his annual base salary.
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