EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of the 1st day of January, 1998 (date
hereof) by and between Powerhouse Technologies, Inc., (the "Company"), and
Xxxxxxx X. Xxxxxxxx, an individual (the "Executive") (hereinafter collectively
referred to as "the parties").
WHEREAS, the Company and the Executive desire to establish an
employment relationship on the terms set forth herein, which shall (except to
the extent expressly provided herein) supersede and replace those set forth in
that certain Employment Agreement dated as of December 2, 1996 by and between
the Company and the Executive (the "Prior Employment Agreement"),
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Employment Term. Subject to the terms and provisions of this
Agreement, the Company hereby agrees to employ the Executive and Executive
hereby agrees to be employed by the Company for the period commencing on the
date hereof and ending on January 1, 2002, unless terminated sooner as
hereinafter provided (the "Employment Term"); provided, however, that the
Employment Term shall be extended automatically by one (1) year on the 31st day
of each December during the Employment Term, unless notice to the contrary is
provided by either party hereto not later than the 1st day of such December.
2. Duties. During the Employment Term the Executive shall serve as
President and Chief Executive Officer of the Company. The Executive shall
perform such services and duties as are incident to such position and such other
duties as determined from time to time by the Board of Directors of the Company
(the "Board") which are consistent with such positions. All officers of the
Company and its subsidiaries shall report to the Executive, and the Executive
shall have the authority, consistent with guidelines adopted by the Board, to
hire, terminate and determine the compensation of such officers and other
employees of the Company and such subsidiaries. The Executive's duties shall
include, without additional compensation, the performance of similar services
for any Affiliates (as defined below) of the Company as may be reasonably
requested by the Board from time to time. The Executive shall devote his full
business time, attention and skills to the performance of such duties, services
and responsibilities, and will use his best efforts to promote the interests of
the Company. The Executive will not, without the prior written approval of the
Board, engage in any other business activity which would interfere with the
performance of his duties, services and responsibilities hereunder or which is
in violation of policies established from time to time by the Company and
provided to the Executive; provided, however, that Executive may manage his
personal finances and investments. The Executive may participate in civic and
charitable activities and serve on Boards of Directors to the extent they do not
affect the Executive's ability to perform his duties as an officer of the
Company provided they are approved by the Chairman of the Board in advance,
which approval will not be unreasonably withheld. An "Affiliate" of the Company
shall mean any entity, whether a corporation, firm, partnership or other legal
entity or business unit or division that directly or indirectly is controlled by
the Company, including, but not limited to, Automated Wagering International,
Inc., Video Lottery Consultants Inc. and United Wagering Systems International,
Inc., or their successors. The Executive's principal place of employment shall
be located, at the discretion of the Executive, in the greater Bozeman,
Montana, the greater Atlanta, Georgia or the greater Las Vegas, Nevada
metropolitan area and the Company shall not require the Executive to relocate
from such area without the Executive's prior written consent.
3. Compensation. In order to induce the Executive to continue as
President of the Company and to assume the responsibilities of Chief Executive
Officer of the Company, and in consideration of the performance by the Executive
of the Executive's obligations during the Employment Term (including any
services as an officer, director, employee, member of any committee of the
Company, or otherwise), the Company will:
(a) during the Employment Term pay the Executive a salary (the
"Base Salary") at an annual rate of not less than $380,000
for each of the twelve-month periods ending December 31,
1998, December 31, 1999, December 31, 2000 and December 31,
2001, payable in accordance with the normal payroll
practices of the Company then in effect for other officers
of the Company. The Board shall have the authority, in its
sole discretion, to increase, but not decrease, such Base
Salary and will review it in conjunction with a significant
change in the scale and scope of the Executive's duties;
(b) during the Employment Term pay the Executive annual bonuses
of amounts up to two (2) times Base Salary for each
respective twelve-month period if financial or other
performance criteria related to the Company and its
businesses are attained, which criteria shall be subject to
reasonable agreement by the Executive that they are
appropriate in connection with performance-based criteria
for the Executive and other senior management of the Company
and shall be proposed by the Executive no later than
December 31 of each such year and approved or modified by
the Board no later than the following February 15;
(c) award the Executive as of February 26, 1998 restricted stock
(the "Restricted Stock Award") of 100,000 shares of the
Company's common stock, of which 25,000 shares shall fully
vest on January 1, 1999, 25,000 shares shall fully vest on
January 1, 2000, 25,000 shares shall fully vest on January
1, 2001 and 25,000 shares shall fully vest on January 1,
2002 (unless the Executive's employment hereunder shall have
been terminated for any reason prior to such vesting, in
which case all unvested shares of such restricted stock
shall be forfeited; provided, however, that upon the
occurrence of a "change in control" as defined in the
Company's 1994 Stock Incentive Plan (the "Plan") (which Plan
shall not be amended inconsistent with this Agreement), all
restrictions on such restricted stock shall lapse
immediately and no such stock shall be forfeited regardless
of whether the Executive remains an employee of the
Company); and provided, further, that the Company and the
Executive acknowledge and agree that, (i) pursuant to the
Prior Employment Agreement, the Company awarded to the
Executive restricted stock of 30,000 shares of the Company's
common stock, of which 10,000 shares fully vested on
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September 9, 1997, 10,000 shares shall fully vest on
September 9, 1998 and 10,000 shares shall fully vest on
September 9, 1999, and (ii) pursuant to that certain
Employment Agreement dated as of November 1, 1994 by and
between the Company and the Executive (the "1994 Employment
Agreement"), the Company awarded to the Executive restricted
stock of 70,000 shares of the Company's common stock, of
which 17,500 shares fully vested on November 1, 1995, 17,500
shares fully vested on November 1, 1996, 17,500 shares full
vested on November 1, 1997, and an additional 17,500 shares
shall fully vest on November 1, 1998 (unless the Executive's
employment shall have been terminated for any reason prior
to such vesting, in which case all unvested shares of such
restricted stock shall be forfeited, except that, upon the
occurrence of a "change in control" as defined in the Plan,
all restrictions on such restricted stock shall lapse
immediately and no such stock shall be forfeited regardless
of whether the Executive remains an employee of the
Company);
(d) subject to the provisions of Section 4 hereof, as of
February 13, 1998, grant the Executive options to purchase
an aggregate of 50,000 shares of the Company's common stock
(the "Option Grant") all of which shall be fully vested as
of the date of grant. (Each option shall have a term of ten
years from the date of grant and shall be granted under and
subject to the terms of the Plan and shall be incentive
stock options within the meaning of Section 422 of the
Internal Revenue Code.) Notwithstanding the foregoing
provisions of this Section 3(d) and the provisions of
Section 22 hereof, the Company and the Executive acknowledge
and agree that (i) the Company granted to the Executive
pursuant to the 1994 Employment Agreement options (the "1994
Options") to purchase an aggregate of 140,000 shares of the
Company's common stock, which 1994 Options shall continue to
be governed by the terms and conditions of the 1994
Employment Agreement and (ii) the Company granted to the
Executive pursuant to the Prior Employment Agreement options
(the "1996 Options") to purchase an aggregate of 140,000
shares of the Company's common stock, which 1996 Options
shall continue to be governed by the terms and conditions of
the Prior Employment Agreement; provided, however, that upon
the occurrence of a "change in control" as defined in the
Plan, all stock options shall become immediately and fully
exercisable and any termination of the Executive's
employment shall not affect his right to exercise such
options for a period of at least 90 days after such
termination, it being understood that, in the event of the
liquidation or dissolution of the Company or a merger or
consolidation of the Company (a "Transaction"), the options
shall continue in effect in accordance with their terms and
the Executive shall be entitled to receive in respect of
each share subject to any outstanding stock option granted
to him pursuant to this Agreement, upon exercise of any such
option, the same number and kind of stock, securities, cash,
property, or other consideration that each holder of a share
of the Company's common stock was entitled to receive in the
Transaction in respect of a share; and provided, further,
that in no
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event shall the exercise prices of the 1994 Options or the
1996 Options be reduced or modified; and
(e) consider (i) additional awards of restricted stock, or
equivalent consideration, to the Executive two (2) to three
(3) years from the date hereof, and (ii) annually additional
grants to the Executive of options to purchase shares of the
Company's common stock.
4. Stockholder Approval. The Restricted Stock Award and the Option
Grant shall be subject to, and conditioned upon, approval by the Company's
stockholders, at the next Annual Meeting of the Company's Stockholders (the
"Meeting"), of an amendment to the Plan increasing the maximum number of shares
that any Eligible Employee may receive pursuant to the Plan in respect of
Options and Awards (as such capitalized terms are defined in the Plan). Should
the Company's stockholders fail to approve such amendment at the Meeting, the
parties hereto shall, within thirty (30) days of the Meeting, agree upon
comparable consideration (such as phantom stock, stock appreciation rights or
loans to the Executive to purchase stock) to be substituted for the Restricted
Stock Award and the Option Grant.
5. Benefits. During the Employment Term, the Executive shall be
entitled to participate in any employee benefit plans (including, but not
limited to, any life insurance, disability, medical, dental, hospitalization,
savings, retirement and other benefit plans of the Company) then in effect for
executive officers and receive any other fringe benefits that the Company then
provides to executive officers of the Company to the extent the Executive meets
the eligibility requirements for any such plan or benefit. The Company will pay
annual premiums of $11,400 for the Executive's split-dollar life insurance
policy now in effect and subject to assignment to the Company of benefits from
the policy equal to the premium paid by the Company of such policy.
(Notwithstanding the foregoing, the Company shall have no obligation other than
that set forth in Section 3 to provide the Executive stock-based compensation or
to pay the Executive any bonuses or other incentive or performance-based
compensation). In addition, during the Employment Term, the Company shall
provide the Executive with such other perquisites reasonably requested by the
Executive and customarily provided to senior officers of companies comparable in
size to the Company, including, without limitation, (i) an automobile in each of
two (2) locations, to be determined by the Executive, (ii) reimbursement for the
expenses of first-class or business-class air travel on all flights exceeding
ninety (90) minutes taken by the Executive on Company business, (iii)
reimbursement of up to $8,000 annually for financial, tax, accounting and
regulatory compliance professional fees incurred by the Executive, (iv)
reimbursement of the Executive's dues for memberships at the two (2) clubs at
which he currently holds membership, (v) reimbursement of the expense of the
Executive's annual physical examination and (vi) reimbursement of the expense of
the Executive's business and professional organization memberships.
6. Reimbursements for Business Expenses. Subject to compliance by the
Executive with such policies regarding expenses and expense reimbursement as may
be adopted from time to time by the Company, during the Employment Term, the
Executive is authorized to incur reasonable expenses in the performance of his
duties hereunder in the furtherance of the business of the Company and the
Company shall reimburse the Executive for all such reasonable
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expenses. In addition, the Executive may request reimbursement of actual
expenses in excess of the foregoing and the Company shall not unreasonably
refuse any such request.
7. Vacations. During the Employment Term the Executive shall be
entitled to paid vacations in accordance with the policies of the Company in
effect from time to time; provided that the Executive shall be entitled to at
least four weeks paid vacation during each year of the Employment Term.
8. Termination. The Executive's employment hereunder may be terminated
under the following circumstances:
(a) Death. The Executive's employment hereunder shall be terminated
automatically upon the Executive's death.
(b) Disability. The Company may terminate the Executive's
employment after having established the Executive's Disability. For purposes of
this Agreement, "Disability" means a physical or mental infirmity which impairs
the Executive's ability to substantially perform his duties under this Agreement
for one hundred and eighty (180) consecutive days or for two hundred and ten
(210) days during any twelve (12) month period or for two hundred and seventy
(270) days during any twenty-four (24) month period.
(c) Cause. The Company may terminate the Executive's employment for
"Cause." A termination for Cause is a termination evidenced by a finding adopted
in good faith by the Board that the Executive (i) willfully and continually
failed to substantially perform his duties with the Company (other than a
failure resulting from the Executive's incapacity due to physical or mental
illness) and such failure continues after written notice to the Executive
providing a reasonable description of the basis for the determination that the
Executive has failed to perform his duties, (ii) indicted for a criminal offense
other than misdemeanors not disclosable under the federal securities laws, (iii)
has breached this Agreement in any material respect and such breach is not
susceptible to remedy or cure or has not already materially damaged the Company,
or is susceptible to remedy or cure and no such damage has occurred, is not
cured or remedied reasonably promptly after written notice to the Executive
providing a reasonable description of the breach, (iv) engaged in conduct to the
material detriment of the Company that is dishonest, fraudulent, unlawful or
grossly negligent or which is not in compliance with the Company's Code of
Conduct or similar applicable set of standards or conduct and business practices
set forth in writing and provided to the Executive prior to such conduct, or (v)
any regulatory authority, gaming commission, lottery agency or similar authority
in any jurisdiction in which the Company is conducting business or intends to
submit a proposal or conduct business finds the Executive unsuitable or unfit to
continue to act as a representative, officer, director or employee of the
Company, the Company has received notice from such authority of such a finding
or the Executive fails to file appropriate applications with, provide requested
information to, or otherwise fails to cooperate with, any such authority. No
act, nor failure to act, on the Executive's part, shall be considered "willful"
for purposes of (i) above unless he has acted or failed to act with an absence
of good faith and without a reasonable belief that his action or failure to act
was in the best interest of the Company. Notwithstanding anything contained in
this Agreement to the contrary, no failure to perform by the Executive after
Notice of Termination is given by the Executive shall constitute Cause for
purposes of this Agreement.
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Termination for Cause shall be by action of the Board after giving the Executive
and his legal advisors an opportunity to meet with the Board, contest the basis
for termination, and to demonstrate that the Executive's continued employment is
in the best interests of the Company. In addition, the Company may require that
the Executive take a paid leave of absence if the Board determines that there is
a reasonable basis to believe that a regulatory authority, gaming commission,
lottery agency or similar authority may likely find the Executive unsuitable or
unfit or there are serious concerns regarding the honesty, integrity or possible
misconduct of the Executive. During the leave of absence the Executive will be
entitled to demonstrate to the Board that such concerns are unfounded. However,
if at any time following three months after the start of the leave of absence,
the Board reasonably determines that a continuation of the Executive's
employment will jeopardize the good standing of the Company with any such
authority, commission or agency, the Company may terminate the Executive for
Cause.
(d) (1) Good Reason. The Executive may terminate his employment for
"Good Reason." As used in this Section 8(d), the term "Company" shall also refer
to its successor entity or any entity which has acquired control of the Company.
For purposes of this Agreement, Good Reason shall mean the occurrence of any of
the events or conditions described in Subsections (i) through (vii) hereof:
(i) the Executive is no longer serving as President and Chief
Executive Officer of the Company, the Executive is directed to
report to other than the Chairman of the Board, or the assignment
to the Executive of any duties or responsibilities which are
inconsistent with the status, title, position or responsibilities
of such positions (which assignment is not rescinded after the
Company receives written notice from the Executive providing a
reasonable description of such inconsistency);
(ii) after a Change in Control (as hereinafter defined in Section
8(e), the Company's requiring the Executive to be based at any
place outside a 30-mile radius from the principal location from
which the Executive served as an employee of the Company
immediately prior to the Change in Control;
(iii) after a Change in Control, the failure by the Company to
provide the Executive with compensation and benefits substantially
comparable, in the aggregate, to those provided for under the
employee benefit plans, programs and practices in effect
immediately prior to the Change in Control (other than stock option
and other equity based compensation plans);
(iv) after a Change in Control, the insolvency or the filing (by
any party including the Company) of a petition for bankruptcy of
the Company;
(v) any material breach by the Company of any provision of this
Agreement (which breach, if susceptible to cure, has not been cured
within thirty (30) days by the Company after reasonable notice in
writing from the Executive providing a reasonable description of
the breach);
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(vi) after a Change in Control, the failure of the Company to
obtain an agreement, satisfactory to the Executive, from any
successor or assign of the Company to assume and agree to perform
this Agreement, as contemplated in Section 16 hereof; and
(vii) the Executive determines within eighteen (18) months of a
Change in Control to terminate his employment with the Company.
(2) Any event or condition described in Section 8(d)(1)(i), (ii),
(iii) or (v) above which occurs prior to a Change in Control but which was at
the request of a third party who has taken steps reasonably calculated to effect
a Change in Control, shall constitute Good Reason for purposes of this Agreement
notwithstanding that it occurred prior to a Change in Control.
(3) The Executive's right to terminate his employment pursuant to
this Section 8(d) shall not be affected by his incapacity due to physical or
mental illness.
(e) For purposes of this Agreement, a "Change in Control" shall
mean any of the following events:
(1) The "acquisition" by any "Person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") of "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of any securities of the Company which generally entitles the holder
thereof the vote for the election of directors of the Company (the
"Voting Securities") which, when added to the Voting Securities then
Beneficially Owned by such Person, would result in such Person
Beneficially Owning forty percent (40%) or more of the combined voting
power of the Company's then outstanding Voting Securities; provided,
however, that for purposes of this paragraph (1), a Person shall not
be deemed to have made an acquisition of Voting Securities if such
Person: (i) acquires Voting Securities as a result of a stock split,
stock dividend or other corporate restructuring in which all
stockholders of the class of such Voting Securities are treated on a
pro rata basis; (ii) becomes the Beneficial Owner of more than the
permitted percentage of Voting Securities solely as a result of the
acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by such Person; (iii) is the
Company or any corporation or other Person of which a majority of its
voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Controlled Entity") or (iv)
acquires Voting Securities in connection with a "Non-Control
Transaction" (as defined in paragraph (3) below);
(2) The individuals who, as of the date of this Agreement
were members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least a majority of the Board; provided,
however, that if either the election of any new director or the
nomination for election of any new director by the Company's
stockholders was approved by a vote of at least a majority of the
Incumbent Board, such new director shall be considered as a member of
the Incumbent Board; provided further, however, that no
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individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened election Contest" (as described in Rule 14a-11 promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board
(a "Proxy Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest;
(3) The consummation or effectiveness of:
(i) A merger, consolidation or reorganization involving the
Company (a "Business Combination"), unless
(A) the stockholders of the Company, immediately
before the Business Combination, own, directly or indirectly
immediately following the Business Combination, at least
fifty-one percent (51 %) of the combined voting power of the
outstanding voting securities of the corporation resulting
from the Business Combination (the "Surviving Corporation")
in substantially the same proportion as their ownership of
the Voting Securities immediately before the Business
Combination,
(B) all or a portion of the individuals who were
members of the Incumbent Board immediately prior to the
execution of the agreement providing for the Business
Combination constitute at least a majority of the members of
the Board of Directors of the Surviving Corporation, and
(C) no Person (other than the Company or any
Controlled Entity), a trustee or other fiduciary holding
securities under one or more employee benefit plans or
arrangements (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation or any
Controlled Entity, or any Person who, immediately prior to
the Business Combination, had Beneficial Ownership of forty
percent (40%) or more of the then outstanding Voting
Securities) has Beneficial Ownership of forty percent (40%)
or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities (a
transaction described in this subparagraph (i) shall be
referred to as a "Non-Control Transaction");
(ii) A complete liquidation or dissolution of the Company;
or
(iii) The sale or other disposition of all or substantially
all of the assets of the Company to any Person (other than a transfer
to a Controlled Entity); or
(4) A Person acquires 10% or more of the combined voting
power of the Company's then outstanding Voting Securities from any of
the Company's stockholders who, as of the date of this Agreement, owns
in excess of 10% of such voting power and who has representation on
the Board unless such Person becomes party to a stockholders agreement
imposing restrictions on its ability to exercise control substantially
similar to that agreed to by such current 10% stockholders.
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Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because forty percent (40%) or more of the then
outstanding Voting Securities is Beneficially Owned by (A) a trustee
or other fiduciary holding securities under one or more employee
benefit plans or arrangements (or any trust forming a part thereof)
maintained by the Company or any Controlled Entity or (B) any
corporation which, immediately prior to its acquisition of such
interest, is owned directly or indirectly by the stockholders of the
Company in the same proportion as their ownership of stock in the
Company immediately prior to such acquisition.
(f) Notice of Termination. Any purported termination of the
Executive's employment hereunder by the Company or by the Executive for Good
Reason shall be communicated by written Notice of Termination to the other. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
indicates the specific termination provision in this Agreement relied upon as a
basis for termination. For purposes of this Agreement, no such purported
termination of employment shall be effective without such
Notice of Termination.
(g) Termination Date. "Termination Date" shall mean in the case of the
Executive's death, his date of death, or in all other cases, the date specified
in the Notice of Termination; provided, however, that if the Executive
terminates his employment for Good Reason, the date specified in the Notice of
Termination shall not be more than 30 days from the date the Notice of
Termination is given to the Company and if the Company terminates the
Executive's employment other than for Cause, the date specified in the Notice of
Termination shall be no less than 30 days from the date the Notice of
Termination is given to the Executive.
9. Compensation Upon Termination. Upon termination of the Executive's
employment during the Employment Term, the Executive shall be entitled to the
following benefits:
(a) If the Executive's employment is terminated by the Company for
Cause or by the Executive (other than for Good Reason), or by reason of the
Executive's death, the Company shall pay to the Executive (or to the Executive's
legal representatives) all amounts earned or accrued hereunder through the
Termination Date but not paid as of the Termination Date, including (i) Base
Salary, (ii) reimbursement (in accordance with Company policy) for any and all
monies advanced or expenses incurred in connection with the Executive's
employment for reasonable and necessary expenses incurred by the Executive on
behalf of the Company for the period ending on the Termination Date, (iii)
accrued but unpaid vacation pay, (iv) any previously awarded and vested, but
unpaid, bonus or incentive compensation and (v) any previous compensation which
the Executive has previously deferred (including any interest earned or credited
thereon)(collectively, "Accrued Compensation. Executive's entitlement to any
other benefits shall be determined in accordance with the Company's employee
benefit plans and other applicable programs and practices then in effect and all
unvested stock options and unvested shares of restricted stock shall be
forfeited. If the Executive's employment is terminated by the Company for
Disability, the Company shall pay to the Executive (or to the Executive's legal
representatives) all such amounts earned or accrued hereunder through the
Termination Date, plus an amount equal to the Base Salary in effect as of the
Termination Date.
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(b) Subject to Section 9(c), if the Executive's employment is
terminated (i) by the Company prior to a Change in Control for any reason other
than for Cause, death or Disability, or (ii) by the Executive for Good Reason,
the Company shall pay to the Executive all Accrued Compensation plus any bonus
or portion thereof which would be payable if the Executive's employment had
continued because the performance targets relating thereto had been achieved as
of the Termination Date ("Earned Bonus") and, to the extent not covered by the
foregoing, Accrued Bonus (as hereinafter defined). The term "Accrued Bonus"
shall mean the amount of the bonus which would have been payable to the
Executive pursuant to Section 3(b) or (c) hereof in respect of the year of the
Employment Term in which the Termination Date occurs and calculated as if the
Executive were employed by the Company as of the end of such year (but, to the
extent the bonus is contingent on the achievement of performance targets, based
on whether such targets were actually achieved) multiplied by a fraction, the
numerator of which shall be the number of days in such year which have elapsed
prior to the Termination Date and the denominator of which shall be the number
of days in such year. In addition, subject to Executive's compliance with the
provisions of Sections 10, 11 and 12 hereof, the Executive shall receive (i)
within ten days a lump sum cash amount equal to two (2) times the sum of (A) the
Executive's Base Salary at (y) the highest rate in effect at any time within the
ninety (90) day period ending on the date the Notice of Termination is given, or
(z) the rate in effect immediately prior to the Change in Control, whichever of
(y) or (z) is greater and (B) (y) the annual bonus paid to the Executive in the
year preceding the termination of Employment, or (z) the sum of the Earned Bonus
and the Accrued Bonus, whichever of (y) or (z) is greater and (ii) until the end
of the Employment Term, the life insurance, medical, dental and hospitalization
benefits which the Executive would have been entitled to receive if he had
continued his employment with the Company until the last day of the Employment
Term, on the terms and conditions applicable to other executive officers of the
Company as in effect from time to time during such period. Executive's
entitlement to any other benefits shall be determined in accordance with the
Company's employee benefit plans and other programs and practices then in effect
and all unvested shares of restricted stock shall be forfeited upon such
termination of employment and unvested stock options shall vest or be forfeited
as set forth in the following sentence. If a termination of the Executive's
employment hereunder which is governed by this Section 9(b) occurs on or prior
to the second anniversary of the date hereof, then, to the extent not previously
vested, all stock options which would have vested by such second anniversary
shall vest and become exercisable and the termination of the Executive's
employment shall not affect his right to exercise such options for a period of
at least 90 days after such termination and, if such a termination of the
Executive's employment occurs after the second anniversary of the date hereof,
the number of unvested stock options equal to the number of options which would
have vested on the anniversary of the date hereof following the Termination Date
multiplied by a fraction, the numerator of which shall be the number of days in
the year beginning on the anniversary of the date hereof immediately preceding
the Termination Date which have elapsed prior to the Termination Date and the
denominator shall be the number of days in such year which ends on the
anniversary of the date hereof, shall vest and become exercisable (and the
termination of the Executive's employment shall not affect his right to exercise
such options for a period of at least 90 days after such termination) and all
other unvested stock options granted pursuant to the Agreement shall be
forfeited upon such termination of employment.
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(c) If the Executive's employment by the Company is terminated by the
Company other than for Cause, death or Disability or by the Executive for Good
Reason at any time after a transaction or other actions have been proposed to or
by the Company or to its stockholders, which if consummated or completed would
constitute a Change in Control, and such transaction or other action ultimately
is consummated or completed, then (whether or not the Executive was employed
following a Change in Control), the Executive's employment shall be deemed to
have been terminated following a Change in Control and the Executive shall be
entitled to the benefits to which the Executive is entitled in such event
pursuant to Section 9(b) hereof, and the shares of restricted stock and stock
options granted pursuant to the 1994 Employment Agreement, the Prior Employment
Agreement or this Agreement and outstanding prior to such termination of the
Executive's employment shall be treated as though the Change in Control occurred
immediately before the Termination Date.
(d) The amounts (other than any life insurance and medical, dental and
hospitalization coverage) provided for in this Section 9 shall be paid within
five (5) business days after the Executive's Termination Date. The continuation
of any life insurance, medical, dental or hospitalization benefits pursuant to
Section 9(b) shall be in satisfaction of the Company's obligations under Section
4980B of the Internal Revenue Code of 1986, or any similar state law requiring
continuation of such insurance or benefits, with respect to the period of time
during which such insurance or benefits are continued hereunder.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment.
(f) The amounts payable by the Company pursuant to this Section 9
shall be in full satisfaction of any claims the Executive might assert in
connection with severance and claims of wrongful termination and fraudulent
inducement or similar claims based on this Agreement or relating to an
employer/employee relationship.
(g) The Company shall use its best efforts to ensure that shares of
the Company's common stock obtained by the Executive from the Company by reason
of the exercise of stock options or the award of shares of restricted stock in
accordance with this agreement shall be covered by an effective registration
statement on Form S-8 (or similar or successor form) with the intention that the
Executive may sell such shares in compliance with the Securities Act of 1933
(whether or not he is employed by the Company at the time of the sale). The
Executive acknowledges that any sale of such Shares may be subject to other
restrictions under the federal securities laws including those relating to the
possession of non-public information (which the Executive may not have the right
to disclose under this Agreement).
(h) The Company shall consider purchasing some or all of the Company's
common stock owned by the Executive, upon terms to be negotiated by the Company
and the Executive.
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10. Non-Disclosure Covenant. Executive acknowledges that during the
Employment Relationship (as defined below), he has had and will have access to
information treated as confidential or proprietary by the Company, including
plans for future developments and information about costs, customers, profits,
markets, sales, products, key personnel, pricing policies, operational methods,
technical processes, know-how, research and development, strategic planning and
other business affairs and methods and other information not available to the
public or in the public domain (the "Confidential Information"). Confidential
Information shall not include any information known generally to the public or
any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that of the Company. In
recognition of the foregoing, during and at all times following the Executive's
Employment Relationship, the Executive shall hold in confidence and not use,
copy or create, or directly or indirectly disclose, any descriptions, analyses,
lists or records (of any kind) of any Confidential Information or proprietary
data of the Company, except to the extent authorized in writing by the Board or
required by law or any court or administrative agency, other than such use,
copying, creation or disclosure to an employee of the Company or other person,
in each case, which is reasonably necessary or appropriate in connection with
the performance by the Executive of duties germane to the Executive's position
with the Company. The term "Employment Relationship" shall mean the period,
prior to the Termination Date, during which the Executive received compensation
from the Company for services rendered to the Company either as an employee or
as a consultant, including periods prior to the date of this Agreement (whether
pursuant to the Prior Employment Agreement or otherwise) and during the
Employment Term. This Section 10 shall survive the termination of this Agreement
and the termination of the Executive's employment hereunder.
11. Covenant Not to Compete: Non-interference.
(a) Competition. The Executive agrees that during the Employment Term
and for a period of the greater of eighteen months after the Termination Date or
the period after the Termination Date during which (or in respect of which) the
Executive continues to receive payments or employee benefits from the Company
pursuant to Section 9 (such greater period of time is hereinafter referred to as
the "Restricted Period"), without the prior written approval of the Board, he
will not participate in the management of, be employed by or own any equity
interest in any business in competition with any of the principal businesses of
the Company (including any business segment which is "significant" within the
meaning of Regulation S-X) in a geographical area in which the Company engages
in or solicits business or as of the Termination Date is actually planning to
engage in or solicit business; provided, however, that nothing in this Section
11(a) shall prohibit the Executive from owning stock of a competitor amounting
to less that five percent (5%) of the outstanding capital stock of such
competitor where the Executive does not otherwise participate in the management,
control or operation of such competitor's business which competes with the
Company. The invalidity of any part of this provision shall not render invalid
the remainder of the provision and if any portion of this provision is so broad
as to be unenforceable it shall be interpreted to be only so broad as is
enforceable.
(b) lnterference. The Executive hereby agrees that during the
Employment Term and, following the Termination Date, for the Restricted Period,
he will not interfere with the Company's relationship with, or endeavor to
employ or entice away from the Company, any
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person, firm, corporation, governmental entity or other business organization
who or which was an employee, customer or supplier of, or maintained a business
relationship with, the Company at any time (whether before or after the
Termination Date), or which the Company has solicited or prepared to solicit (by
preparation or submission of a bid or otherwise) within one (1) year prior to
the Termination Date. The Executive agrees to promptly notify the Company if any
such party contacts the Executive regarding any proposal or solicitation
(whether orally or in writing) which, if accepted, might result in a violation
of this Section 11(b).
12. Ownership of Trade Secrets, Etc.
(a) All written materials, documents and records (of any kind) created
by the Executive or coming into his possession during the Employment
Relationship concerning the business affairs of the Company shall be and become
the sole property of the Company, and, upon the Termination Date or upon the
request of the Company during the Employment Term, the Executive shall promptly
deliver the same to the Company.
(b) The Executive agrees that any trade secret, invention,
improvement, patent, patent application or writing, and any program, method,
process, system or novel technique (whether or not capable of being trademarked,
copyrighted or patented), conceived, devised, developed, or otherwise obtained
by him during the Employment Relationship relating to the business of the
Company, shall be and become the sole property of the Company and the Executive
agrees to give the Company prompt written notice of his conception, invention,
authorship, development or acquisition of any such trade secret, invention,
improvement, patent application, writing, program, method, process, system or
novel technique and to execute such instruments of transfer, assignment,
conveyance or confirmation and such other documents, and to do all appropriate
lawful acts, as may be requested by the Company to transfer, assign, confirm,
and perfect in the Company all legally protectable rights in any such trade
secret, invention, improvement, patent, patent application, writing, program,
method, process, system or novel technique.
13. Understanding and Remedies. For purposes of Sections 10, 11, 12 and 13
hereof, the term "Company" shall include Powerhouse Technologies, Inc.
("Powerhouse") as well as current and future majority-owned subsidiaries of
Powerhouse and all current and future joint ventures in which Powerhouse is
involved. It is understood by the Executive and the Company that the covenants
contained in this Section 13 and in Sections 10, 11 and 12 are essential
elements of this Agreement and that, but for the agreement of the Executive to
comply with such covenants, the Company would not have agreed to enter into this
Agreement. The Executive and the Company have independently consulted with their
respective counsel and have been advised concerning the reasonableness and
propriety of such covenants with specific regard to the nature of the business
conducted by the Company. The Executive hereby agrees that all covenants
contained in this Section 13 and Sections 10, 11 and 12 of this Agreement are
reasonable and valid. The Executive acknowledges that the Company may have no
adequate remedy at law if the Executive violates any of the terms hereof. In
such event, the Company shall have the right, in addition to any other rights it
may have, to obtain in any court of competent jurisdiction injunctive relief to
restrain any breach or threatened breach hereof or otherwise to specifically
enforce any of the provisions hereof and the Executive hereby waives any and all
rights to assert any claim or defense that the Company has an adequate remedy at
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law for any breach. In addition, the Executive waives all rights to a jury trial
in any other action to adjudicate the rights of the Company and the Executive
hereunder. The provisions of Sections 10, 11, 12 and 13 of this Agreement shall
survive the termination of this Agreement and the termination of the Executive's
employment hereunder.
14. Relocation and Other Expenses. The Company shall reimburse the
Executive for all actual costs incurred by the Executive in connection with the
establishment of his personal residences in Las Vegas, Nevada, Atlanta, Georgia
or Bozeman, Montana (to be determined by the Executive no later than December
31, 1998), including, without limitation, moving expenses and the costs of
storing the Executive's furnishings, and the costs of relocation visits
(collectively, "Relocation Expense"), which amount shall be net of any federal
and state income taxes payable by the Executive in connection with the
Relocation Expense reimbursement. In addition, the Company shall reimburse the
Executive up to $4,000 per month for the expense of maintaining a second
residence in one of Las Vegas, Nevada, Atlanta, Georgia or Bozeman, Montana.
15. Withholding. Anything to the contrary herein notwithstanding, all
payments required to be made by the Company hereunder to the Executive, or his
estate or beneficiaries, shall be subject to the withholding of such amounts as
the Company may reasonable determine it should withhold pursuant to any
applicable tax law or regulation.
16. Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns and the Company shall require
any successor or assign to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. The term "the
Company" as used herein shall include such successors and assigns. The term
"successors and assigns" as used herein shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company
(including this Agreement) whether by merger, court order, operation or law or
otherwise.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representative.
17. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
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18. Non-exclusivity of Rights. Nothing in this Agreement shall limit or
reduce such rights as the Executive may have under any other agreements with the
Company or any of its subsidiaries concerning subject matter other than that
which is addressed herein; provided, however, that the payments and benefits
provided under Section 9 shall be in lieu of any other termination benefits
(including severance, notice, and pay and salary continuation) to which the
Executive may otherwise be entitled under any other agreement, plan, policy or
practice of the Company or under applicable law and the Executive hereby waives
any and all rights to such other termination benefits. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company of any of its subsidiaries shall be payable in
accordance with such plan or program, except as explicitly modified by this
Agreement.
19. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
20. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Georgia without giving
effect to the conflict of law principles thereof.
21. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
22. Entire Agreement. Except to the extent expressly provided herein, this
Agreement constitutes the entire agreement between the parties hereto and
supersedes all prior agreements, understandings and arrangements, oral or
written, between the parties hereto with respect to the subject matter hereof,
including, without limitation, the 1994 Employment Agreement and the Prior
Employment Agreement.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
POWERHOUSE TECHNOLOGIES, INC.
BY: /s/ Xxxxxxx X. Xxxx
---------------------------
XXXXXXX X. XXXX
Chairman of the Board
BY: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
XXXXXXX X. XXXXXXXX
0126267.09
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