EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into on October 6,
2003 to be effective as of July 1, 2003 between XXXXXXXX.XXX CORP., a Delaware
corporation ("Employer"), and XXXXX XXXXXX ("Executive").
R E C I T A L
Employer wishes to employ Executive, and Executive agrees to serve, as
Chief Executive Operating Officer and Chief Financial Officer of Employer,
subject to the terms and conditions set forth below.
A G R E E M E N T
It is agreed as follows:
1. TERM OF EMPLOYMENT. Employer hereby employs Executive, and Executive
hereby accepts employment with Employer, for a period of two (2) years
terminating July 1, 2005 ("Employment Period"); provided that this Agreement
shall be automatically renewed for successive two (2) year terms unless either
party elects not to renew this Agreement by delivering written notice of its
election to the other party no later than ninety (90) days prior to the end of
the current term. Notwithstanding anything in this Section 1 to the contrary,
this Agreement may be terminated at any time in accordance with Section 6.
2. DUTIES OF EMPLOYEE. Executive shall serve in the capacity as Chief
Executive Officer and Chief Financial Officer of Employer at Employer's office
in San Diego, California. Executive accepts such employment and agrees to
perform services for the Company. Executive shall perform such other services
and duties as may from time to time be assigned to Executive by Employer's Board
of Directors provided that such other services and duties are not inconsistent
with any other term of this Agreement. Except during vacation periods or in
accordance with Employer's personnel policies covering Executive leaves and
reasonable periods of illness or other incapacitation, Executive shall devote
his services to Employer's business and interests in a manner consistent with
Executive's title and office and Employer's needs for his services. Executive
shall perform the duties of Executive's office and those assigned to Executive
by the Employer's Board of Directors with fidelity, to the best of Executive's
ability, and in the best interest of Employer.
3. COMPENSATION OF EMPLOYEE.
3.1 BASE COMPENSATION. As compensation for Executive's
services hereunder, Executive shall receive a base salary ("Base Salary"), which
will be at least Two Hundred Thousand Dollars ($200,000) per year, of which
Thirty Five Thousand Dollars is deferred until the Company has reached two
consecutive cash flow profitable quarters. The term Base Salary as utilized in
this Agreement shall refer to Base Salary and any increase in Base Salary shall
not serve to limit or reduce any other obligation to Executive under this
Agreement. Base Salary shall not be reduced at any time during the Employment
Period.
3.2 BONUS COMPENSATION.
3.2.1 CASH INCENTIVE BONUSES. As additional
compensation and incentive for Executive's services hereunder, Executive shall
be entitled to a cash bonus equivalent to five per cent (5%) of net profit
generated by new products for which the Company receives regulatory approvals,
such as game of chance, class II games and lottery products, other than the
Company's existing Race and Sports Book software. This bonus is earned provided
the executive is employed by the Company and is not to exceed $250,000 per year.
3.2.2 AUTOMOBILE ALLOWANCE. The Company shall pay
Executive an automobile allowance of $500 per month. Said amount shall be
payable to Executive no later than the tenth day of each month.
3.2.3 STOCK OPTIONS PLAN. The Company shall issue
stock options to Executive pursuant to the Company's Stock Option Plan or any
successor thereto. Upon execution of this agreement, Employer shall issue to
Executive an option to purchase 700,000 of common stock priced at $0.62 (October
1st, 2003 closing stock price) per share, exercisable for a period of 5 years
and shall vest and become exercisable on July 1, 2005 regardless of Executive's
employment status with the Company. In the event of the Company carrying out a
"rights offering" of its stock, the Company shall issue Executive additional
stock options as an anti-dilution measure to provide the same percentage as
prior to the offering.
3.2.4 HEALTH INSURANCE PLAN. The Company shall
provide Executive and his immediate family members with comprehensive health
insurance, which shall cover medical and dental.
4. EXPENSE REIMBURSEMENTS. Executive shall be reimbursed for reasonable
and actual out-of-pocket expenses incurred by Executive in performance of
Executive's duties and responsibilities hereunder in accordance with Employer's
established personnel policy covering Executive officer expense reimbursements;
as such policy may be amended, revised or otherwise changed from time to time.
Executive shall furnish proper vouchers and expense reports and shall be
reimbursed only for those expenses, which shall be reimbursable.
5. VACATION AND SICK DAYS. Executive shall be entitled to fifteen (15)
days vacation time each year without loss of compensation. In the event that
Executive is unable for any reason to take the total amount of vacation time
authorized herein during any year, any unused vacation time shall carry over
from year to year. Executive shall also be entitled to leaves for illness or
other incapacitation.
6. TERMINATION.
6.1 TERMINATION BY EMPLOYER FOR CAUSE. Employer may terminate
this Agreement and Executive's employment hereunder for Cause (as defined
herein) any time effective upon written notice to Executive. As used herein, the
term "Cause" shall mean:
6.1.1 Habitual neglect in the performance of
Executive's material duties as set forth in Section 2 which continues
uncorrected for a period of thirty (30) days after written notice thereof by
Employer to Executive;
-2-
6.1.2 Gross negligence involving misfeasance or
nonfeasance by Executive in the performance of Executive's material duties as
set forth in Section 2 which continues uncorrected for a period of thirty (30)
days after written notice thereof by Employer to Executive;
6.1.3 Insubordination in the form of the unexcused or
unexcusable failure to carry out the written instructions of the Board of
Directors of Employer, which continues uncorrected for a period of thirty (30)
days after written notice thereof by Employer to Executive. Any claimed
insubordination will be excusable on the basis that the Board of Directors'
instructions propose a violation of law or actions beyond the control of
Executive.
Upon termination for Cause, Executive will as soon as practicable be paid: (A)
Executive's Base Salary at the usual rate through the date of termination
specified in such notice; and (B) any amounts which Executive has earned under
any Employer benefit plan in accordance with the terms of such plan through the
date of termination.
6.2 TERMINATION WITHOUT CAUSE. Either Executive or Employer
may terminate this Agreement and Executive's employment without Cause on thirty
days' prior written notice. In the event of termination pursuant to this Section
6.2, compensation will be paid and benefits will be provided to Executive as
follows:
6.2.1 If the termination is by Executive without Good
Reason (as defined in Section 6.4 below), Executive will as soon as practicable
be paid: (A) Executive's Base Salary at the usual rate through the date of
termination specified in such notice (but not to exceed thirty days from the
date of such notice); and (B) any amounts which Executive has earned under any
Employer benefit plan in accordance with the terms of such plan through the date
of termination; or
6.2.2 If the termination is by Employer, and except
as provided under Section 6.5, Employer will as soon as practicable pay
Executive: (A) a lump sum payment equal to the Executive's Base Salary for the
remainder of the then-current two-year Employment Period following the date of
termination; (B) the proportionate amount of any unpaid bonus or incentive
deemed earned for the year in which the termination takes place; (C) a lump sum
payment equal to any retirements benefits lost as a result of not having been
employed for the remaining term of the Agreement; and (D) a reasonable amount of
outplacement assistance (not to exceed fifteen percent of Executive's Base
Salary).
6.2.3 Without limiting the generality of the
foregoing, termination on account of Executive's retirement, whether voluntary
or mandatory, and whether normal or early approved, will be considered a
termination by Executive other than for Good Reason.
6.3 TERMINATION UPON DEATH OR DISABILITY. This Agreement and
Executive's employment hereunder shall terminate upon Executive's death or
Disability (as defined herein). For this purpose, "Disability" means incapacity,
whether by reason of physical or mental illness or disability, which prevents
Executive from substantially performing Executive's material duties as set forth
in Section 2 for six (6) months. Upon termination for death, and unless Employer
shall have in force a disability insurance policy providing for benefits in an
amount at least equal thereto, upon termination for Disability, Employer shall
continue to pay the Executive's Base Salary to the surviving spouse of Executive
(or if there is none to Executive's estate) in the case of death and to
Executive or Executive's court appointed conservator in the case of Disability
for six (6) months thereafter. Termination for death shall become effective upon
the occurrence of such event and termination for Disability shall become
effective upon written notice by Employer to Executive.
-3-
6.4 TERMINATION FOR GOOD REASON. Executive may terminate this
Agreement and Executive's employment upon thirty days' prior written notice to
Employer for Good Reason, which notice must be given within sixty days of the
occurrence of an event constituting Good Reason or will be deemed waived. For
purposes of this Agreement, "Good Reason" means: (i) a reduction by Employer in
Executive's Base Salary to a rate less than the initial Base Salary rate set
forth in this Agreement; (ii) a change in the eligibility requirements or
performance criteria under any employee benefit plan or incentive compensation
arrangement under which Executive is covered on the effective date of this
Agreement, and which materially adversely affects Executive; (iii) the
assignment to Executive of any duties or responsibilities which are materially
inconsistent with Executive's status or position as a member of Employer's
executive management group; or (iv) Executive's good faith and reasonable
determination, after consultation with nationally-recognized counsel, that
Executive is being unduly pressured or required by the Board or a senior
Executive of Employer to directly or indirectly engage in criminal activity. In
the event of termination for Good Reason pursuant to this Section 6.4., Employer
will pay Executive the amounts and provide the benefits described under Section
6.2.2.
6.5 NO MITIGATION REQUIRED. Executive shall not be required to
mitigate the amount of any payments provided for in this Section 6 by seeking
other employment or otherwise, nor shall the amount of any payments provided for
in this Section 6 be reduced by any compensation earned by Executive as the
result of employment by another employer after the date of Executive's
termination by Employer, or otherwise.
6.6 EVENTS UPON TERMINATION. The termination of this Agreement
pursuant to Section 6 shall also result in the termination of all rights and
benefits of Executive under this Agreement except for any rights to compensation
accrued under Section 6 prior to the date of termination or rights to expense
reimbursement under Section 4.
7. EXECUTIVE'S REPRESENTATIONS. Executive represents and warrants that
Executive is free to enter into this Agreement and to perform each of the
provisions contained herein. Executive represents and warrants that Executive is
not restricted or prohibited, contractually or otherwise, from entering into and
performing this Agreement, and that Executive's execution and performance of
this Agreement is not a violation or breach of any agreement between Executive
and any other person or entity.
8. GENERAL PROVISIONS.
8.1 SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be judicially
unenforceable, in whole or in part, the remaining provisions shall nevertheless
be binding and enforceable.
8.2 ASSIGNMENT. This Agreement shall be binding upon and shall
inure to the benefit of Employer, its successors and assigns and Employer shall
require any successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that Employer would be
-4-
required to perform if no such succession or assignment had taken place. The
term "Employer" 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 Employer
(including this Agreement) whether by operation of law or otherwise. Neither
this Agreement nor any of the rights or obligations of Executive hereunder shall
be assignable except by operation of law or the rules of descent.
8.3 ATTORNEYS' FEES. If any legal action arises under this
Agreement or by reason of any asserted breach of it, the prevailing party shall
be entitled to recover all costs and expenses, including reasonable attorneys'
fees, incurred in enforcing or attempting to enforce any of the terms, covenants
or conditions, including costs incurred prior to commencement of legal action,
and all costs and expenses, including reasonable attorneys' fees, incurred in
any appeal from an action brought to enforce any of the terms, covenants or
conditions.
8.4 NOTICES. Any notice to be given to Employer under the
terms of this Agreement shall be addressed to Employer at the address of
Employer's principal place of business, and any notice to be given to Executive
shall be addressed to Executive at his home address last shown on the records of
Employer, or at such other address as either party may hereafter designate in
writing to the other. Any notice required or permitted under this Agreement
shall be in writing and shall be deemed effective: (i) upon receipt in the event
of delivery by hand, including delivery made by private delivery or overnight
mail service where either the recipient or delivery agent executes a written
receipt or confirmation of delivery; or (ii) 72 hours after deposited in the
Swiss mail, postage prepaid.
8.5 WAIVER. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, or prevent that party thereafter from
enforcing each and every other provision of this Agreement.
8.6 ENTIRE AGREEMENT; AMENDMENTS. With the exception of the
Company's Employee Manual which shall remain unaffected by this Agreement, this
Agreement supersedes any and all other agreements, either oral or in writing,
between the parties hereto with respect to the employment of Executive by
Employer and contains all of the covenants and Agreements between the parties
with respect to the employment of Executive by Employer. Each party to this
Agreement acknowledges that no representations, inducements, promises or
agreements, orally or otherwise, have been made by any party, or anyone acting
on behalf of any party, which are not embodied herein, and that no other
agreement, statement or promise not contained in this Agreement will be
effective only if it is in writing signed by the party to be charged.
8.7 TITLES AND HEADINGS. Titles and headings to sections of
this Agreement are for the purpose of reference only and shall in no way limit,
define or otherwise affect the interpretation or construction of such
provisions.
8.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of California.
-5-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"EMPLOYER"
XXXXXXXX.XXX CORP.,
a Delaware corporation
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------
XXXXX XXXXXXXXX
President and Board Member
"EXECUTIVE"
/s/ Xxxxx Xxxxxx
----------------------------------------
Xxxxx Xxxxxx
-6-
