EMPLOYMENT AGREEMENT
PARTIES: Innovative Gaming Corporation of America
a Minnesota Corporation
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▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
(the "Company")
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W1450 First National Bank Building
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▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(the "Executive")
DATE: December 20, 2001
INTRODUCTION:
A. The Company desires to continue to employ Executive on the terms and
conditions stated in this Agreement;
B. The Executive wishes to receive compensation from the Company for the
Executive's continued services and desires to accept continued employment
pursuant to the terms and conditions of this Agreement; and
C. The Parties agree that this Agreement supercedes any existing employment
agreement, written or oral, between the Parties.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the parties hereto agree as follows:
AGREEMENT:
The Company and the Executive, each intending to be legally bound, agree as
follows:
1. Employment. Subject to the terms and conditions of this Agreement, the
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Company shall employ the Executive as the Chief Executive Officer ("CEO") of the
Company, and the
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Executive accepts such employment.
2. Duties. The Executive will devote a substantial amount of time during
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business hours to accomplish his duties and, during such time, make the best use
of his energy, knowledge, and training to advance the Company's interests. The
Executive will diligently and conscientiously perform the duties of the
Executive's position within the general guidelines to be determined by the
Company's Board of Directors (the "Board of Directors") including, without
limitation, primary responsibility for the areas of: (i) day-to-day management
of the Company; (ii) supervision of other executives of the Company in their
assigned areas of responsibility; (iii) negotiation of mergers and acquisitions;
and (iv) other tasks as directed by the Board of Directors. The Executive shall
further act as an interface to Wall Street and the financial community at large
(including analysts, investment brokerages, etc.) and work in conjunction with
the Company's outside investor relations firm, media consultant and others.
While the Executive is employed by the Company, Executive will keep the Company
informed of any other business activities, and will promptly stop any activity
or employment that conflicts with the Company's interests or adversely affects
the performance of the Executive's duties for the Company.
3. Outside Consulting and Activities. The Executive may render consulting
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services to other businesses from time to time if the Executive meets all of the
following requirements: (a) the consulting services do not interfere with the
Executive's ability to fulfill his duties and obligations to the Company; (b)
the consulting services are not rendered to any business which competes with the
Company in any area of the Company's business; and (c) the consulting services
do not relate to any products or services which form part of the Company's
business. Anything herein to the contrary notwithstanding, nothing shall
preclude the Executive from engaging in any of the following, provided that none
of the activities shall materially interfere with the proper performance of his
duties and responsibilities which fall within the scope of his employment: (i)
serving on the Board of Directors of any outside corporation; (ii) engaging in
charitable community and business affairs; (iii) managing any and all personal
investments and affairs of a personal or familial nature; (iv) providing
services to any person or entity not a direct competitor of the Company in which
the Executive maintained a business relationship prior to the effective date of
this Agreement; or (v) engaging in the practice of law with his Minnesota law
firm or its affiliates. The Company acknowledges and agrees that this Section
expressly permits the continuation of Executive's business activities through
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇, PLC, PACE/Minnesota, LLC and Indian
Country Ventures, LLC.
4. Term. This Agreement will remain in effect for the period commencing
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October 16, 2001 and ending December 31, 2001 ("term"), unless it is terminated
in accordance with Section 5; provided, however, that the term shall
automatically be extended for successive thirty (30) day terms until such time
as the Company or Executive elects to terminate the Agreement on thirty (30)
days' advance notice.
5. Termination. Subject to the respective continuing obligations of the
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Company and the Executive under Sections 7, 8, and 9:
a. The Company may terminate this Agreement immediately upon written
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notice to the Executive "for cause," which is defined as: (i) dishonesty,
fraud, or material and deliberate injury or attempted material and
deliberate injury, in each case related to the Company or its business;
(ii) any criminal activity of a serious nature; (iii) the Executive's
continued failure to satisfactorily perform the duties assigned to him
pursuant to Section 2 of this Agreement for a period of 60 days after a
written demand by the Board of Directors for such satisfactory performance
which demand specifically identifies the manner in which it is alleged that
Executive has not satisfactorily performed such duties; or (iv) if
Executive fails to receive a gaming license in a jurisdiction in which the
Company has applied for a license. In the event this Agreement is
terminated for cause pursuant to this Section 5(a), within thirty (30) days
of the date of termination, Executive shall be paid at the usual rate of
Executive's annual Base Salary through the date of termination specified in
any notice of termination and shall be paid bonuses for work performed
prior to the date of termination, and Executive will have no right to
receive any bonus for work performed after the termination occurs.
Any termination by the Company other than for a reason enumerated in
this Section 5(a) shall be deemed to be a termination "without cause." The
executive shall also be deemed to be terminated without cause in the event:
(A) the Executive is removed from his capacity as an executive of the
Company; or (B) the Executive has had his authority and position diminished
from that provided in Section 2. For all "without cause" terminations, the
Executive shall receive severance pay as provided in Section 6(g).
b. This Agreement will terminate upon the Executive's death or
permanent disability and all earned and unpaid compensation and bonuses
shall be payable to the Executive, his estate or designated beneficiary.
c. The Executive may terminate this Agreement at any time, with or
without cause, by providing sixty (60) days written notice of his
resignation to the Company. If the Executive voluntarily resigns, the
Executive shall be entitled to receive his then current Base Salary and
bonuses for work performed prior to his last day of employment. The Base
Salary shall be paid in the regular course of the Company's payroll
practices and all Bonuses shall be paid within thirty (30) days of the
Executive's final day of employment. However, if the Executive in good
faith believes that the Company is in material breach of this Agreement,
the Executive may terminate this Agreement, effective immediately, by
providing written notice of the material breach and resignation to the
Company. If the Executive terminates this Agreement based upon his good
faith belief that the Company has materially breached the Agreement, the
Executive shall be entitled to receive severance pay as provided in Section
6(g). If it is subsequently determined that the Company was not in material
breach of this Agreement, the Company's obligations to pay severance to the
Executive shall cease.
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6. Compensation.
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a. Base Salary. In consideration for the Executive's services under
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this Agreement, the Company agrees to pay the Executive a base salary as
follows: (i) from October 16, 2001, through December 31, 2001, a base
salary at a rate of Ten Thousand Dollars ($10,000) per month, and (ii) from
January 1, 2002 through December 31, 2002, a base salary of Fifteen
Thousand Dollars ($15,000) per month (as applicable, the "Base Salary").
The Base Salary shall be paid no less often than monthly in accordance with
the standard payroll practices of the Company; provided, however, that (i)
the Base Salary shall be accrued but shall not be paid prior to January,
2002, and (ii) the Base Salary shall be paid as and when the Company has
available funds from operations and may be paid in installments over a
reasonable period of time as agreed by the Company and the Executive. The
Base Salary may be adjusted from time to time by the Board of Directors but
may not be decreased during the term of this Agreement.
b. Bonus. In addition to other compensation to be paid under Section
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6(a), the Company may pay Executive an annual bonus or a merit increase of
up to 25% of the current year's Base Salary for each year during which he
performs services under this Agreement, the exact amount to be determined
in the sole and complete discretion of the Compensation Committee of the
Board of Directors.
c. Stock Options. In connection with this Agreement, the parties
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hereto shall have entered into a Stock Option Agreement pursuant to which
the Company shall grant to Executive the right and option to purchase up to
500,000 shares of the Company's Common Stock subject to the terms and
conditions set forth in the form of Stock Option Agreement attached hereto
as Exhibit A. The exercise price of the share options shall be the average
of the closing price of the stock for the five trading days immediately
preceding the execution of this Agreement. The option for 350,000 shares
shall vest immediately upon execution of this Agreement. The remaining
options for 150,000 shares shall vest upon Executive discontinuing as Chief
Executive Officer of the Company. The Stock Option Agreement shall include
anti-dilution adjustments regarding increase in the Company's number of
Common Stock, capital stock reorganization or reclassification, or any
other action by the Company that would unfairly hinder the option rights of
Executive.
d. Reimbursement of Business Expenses. In addition to the payment of
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Base Salary, the Company shall reimburse the Executive for all reasonable
out-of-pocket business expenses incurred by the Executive on behalf of the
Company; provided that the Executive properly accounts to the Company for
all such expenses in accordance with the rules and regulations of the
Internal Revenue Service under the Internal Revenue Code of 1986, as
amended, and in accordance with the standard policies of the Company
relating to reimbursement of business expenses.
e. Benefits and Vacation. The Executive will be entitled to
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participate in all benefit plans adopted by the Company to the extent that
the terms of such benefit plans permit the Executive to participate. The
Executive will be entitled to an annual paid vacation of three weeks and
all legal
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holidays observed by the Company, in each case in accordance with the
Company's policies and consistent with the benefits provided to the
Company's other executives in effect from time to time.
f. Life Insurance. The Executive shall be entitled to have the Company
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pay all premiums of a life insurance policy insuring the Executive's life
and for the Executive's benefit or any other person designated by the
Executive as beneficiary of such policy, in the amount of One Million
Dollars (1,000,000.00).
7. Inventions.
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a. "Inventions," as used in this Section 7, means any discoveries,
improvements and ideas (whether or not they are in writing or reduced to
practice) or works of authorship (whether or not they can be patented or
copyrighted) that the Executive makes, authors, or conceives (either alone
or with others) and that:
(i) concern directly the Company's business or the Company's
present or demonstrably anticipated future research or development;
(ii) result from any work the Executive performs for the
Company;
(iii) use the Company's equipment, supplies, facilities, or
trade-secret information; or
(iv) the Executive develops during the time the Executive is
performing employment duties for the Company.
b. The Executive agrees that all Inventions made by the Executive
during the term of this Agreement will be the Company's sole and exclusive
property. The Executive will, with respect to any Invention:
(i) keep current, accurate, and complete records that shall
belong to the Company and be kept and stored on the Company's premises
while the Executive is employed by the Company;
(ii) promptly and fully disclose the existence and describe
the nature of the Invention to the Company in writing;
(iii) assign (and the Executive does hereby assign) to the
Company all of his rights to the Invention, any applications he makes
for patents or copyrights in any country, and any patents or
copyrights granted to him in any country; and
(iv) acknowledge and deliver promptly to the Company any
written instruments, and perform any other acts necessary in the
Company's reasonable opinion to preserve property rights in the
Invention against forfeiture, abandonment or loss and to obtain and
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maintain letters patent and/or copyrights to the Invention and to vest
the entire right and title to the Invention in the Company.
The requirements of this subsection 7(b) do not apply to an Invention for which
no equipment, supplies, facility or trade-secret information of the Company was
used and which was developed entirely on the Executive's own time, and which (1)
does not relate directly to the Company's business or to the Company's actual or
demonstrably anticipated research or development, or (2) does not result from
any work the Executive performed for the Company. Except as previously disclosed
to the Company in writing, the Executive does not have, and will not assert, any
claims to or rights under any Inventions as having been made, conceived,
authored, or acquired by the Executive prior to his employment by the Company.
With respect to any obligations performed by the Executive under this subsection
7(b) following termination of employment, the Company will pay the Executive
reasonable hourly compensation (consistent with the highest Base Salary) and
will pay or reimburse all reasonable out-of-pocket expenses.
8. Confidential Information.
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a. "Confidential Information," as used in this Section 8, means
information that is not generally known and that is proprietary to the
Company or that the Company treats or is obligated to treat as proprietary.
Any information that the Executive reasonably considers Confidential
Information, or that the Company treats as Confidential Information, will
be presumed to be Confidential Information (whether the Executive or others
originated it and regardless of how the Executive obtained it).
b. Except as specifically permitted by an authorized officer of the
Company or by written Company policies, the Executive will never, either
during or after his employment by the Company, use Confidential Information
for any purpose other than the business of the Company or disclose it to
any person who is not also an Executive of the Company. When the
Executive's employment with the Company ends, the Executive will promptly
deliver to the Company all records and any compositions, articles, devices,
apparatuses and other items that disclose, describe, or embody Confidential
Information, including all copies, reproductions, and specimens of the
Confidential Information in the Executive's possession, regardless of who
prepared them and will promptly deliver any other property of the Company
in the Executive's possession, whether or not Confidential Information.
9. Competitive Activities. The Executive agrees that during the term of
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employment with the Company the Executive will not alone or in any capacity with
another firm:
a. directly engage in any commercial activity that competes with the
Company's business, as a gaming machine manufacturer, within any state in
the United States or within any country in which the Company directly
markets or services products or provides services;
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b. in any way interfere or attempt to interfere with the Company's
relationships with any of its then current customers; or
C. employ or attempt to employ any of the Company's then Executives on
behalf of any other entity competing with the Company.
Provided, however, that the provisions of this Section 9 shall not apply in
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the event that the Executive is terminated without cause and the Company fails
to pay the severance as provided in Section 6(g) hereof. This Section 9 shall
cease to be applicable to any activity of the Executive from and after such time
as the Company (i) shall have ceased all business activities for a period of 60
days or (ii) shall have made a decision through its Board of Directors not to
continue, or shall have ceased for a period of 60 days, the business activities
with which such activity of the Executive would be competitive. Company
acknowledges and agrees that this Section does not apply to business placed
through ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇, PLC, PACE/Minnesota, LLC, or
Indian Country Ventures, LLC.
10. Conflicts of Interest. The Executive agrees that he will not, directly
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or indirectly, transact business with the Company personally, or as agent,
owner, partner or shareholder of any other entity; provided, however, that any
such transaction may be entered into if approved by the Board of Directors.
11. No Adequate Remedy. The Executive understands that if the Executive
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materially breaches Sections 8, 9 or 10 of this Agreement, the damages to the
Company would be difficult to determine. Therefore, in addition to any other
rights or remedies available to the Company at law, in equity, or by statute,
the Executive hereby consents to the specific enforcement of Sections 8, 9 or 10
by the Company through an injunction or restraining order issued by an
appropriate court.
12. Miscellaneous.
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a. Successors and Assigns. This Agreement is binding on and
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inures to the benefit of the Company's successors and assigns, all of
which are included in the term the "Company" as it is used in this
Agreement; provided, however, that the Company may assign this
Agreement only in connection with a merger, consolidation, assignment,
sale or other disposition of substantially all of its assets or
business.
b. Modification. This Agreement may be modified or amended only
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by a writing signed by both the Company and the Executive.
c. Governing law. The laws of Minnesota will govern the validity,
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construction, and performance of this Agreement. Any legal proceeding
related to this Agreement shall be brought in an appropriate Minnesota
court, and both the Company and the Executive hereby consent to the
exclusive jurisdiction of the appropriate court(s) in Minnesota for
this purpose.
d. Construction. Wherever possible, each provision of this
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Agreement will be interpreted so that it is valid under the applicable
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law. If any provision of this Agreement is to any extent invalid under
the applicable law, the remaining portion of that provision will be
effective to the extent it remains valid. The remainder of this
Agreement also will continue to be valid, and the entire Agreement
will continue to be valid and enforceable.
e. Waivers. No failure or delay by either the Company or the
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Executive in exercising any right or remedy under this Agreement will
waive any provision of the Agreement. Nor will any single or partial
exercise by either the Company or the Executive of any right or remedy
under this Agreement preclude either of them from otherwise or further
exercising these rights or remedies, or any other rights or remedies
granted by any law or any related document.
f. Captions. The headings in this Agreement are for convenience
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only and do not affect this Agreement's interpretation.
g. Sections. Except as otherwise required or indicated by the
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context, all references to Sections in this Agreement refer to the
specified Section of this Agreement.
h. Entire Agreement. This Agreement supersedes all previous and
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contemporaneous oral negotiations, commitments, writings and
understandings between the parties concerning the matters in this
Agreement, including without limitation any policy or personnel
manuals of the Company.
i. Notices. All notices and other communications required or
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permitted under this Agreement shall be in writing and shall be hand
delivered or sent by registered or certified first-class mail, postage
prepaid, and shall be effective upon delivery if hand delivered, or
three days after mailing if mailed to the addresses stated at the
beginning of this Agreement. These addresses may be changed at any
time by like notice.
j. Attorneys' Fees. In the event of any litigation between the
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parties arising out if the terms, conditions and obligations set forth
in this Agreement, each party in such litigation shall bear its own
reasonable attorneys' fees and costs incurred in the litigation.
13. Necessary Corporate Action. Company hereby represents and warrants that
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this Agreement has been approved, adopted and ratified by the Board of Directors
of the Company and that all necessary corporate action has been taken to legally
bind the Company to the terms and provisions of this Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement effective as of the date first above written.
INNOVATIVE GAMING CORPORATION ▇▇▇ ▇▇▇▇▇
OF AMERICA
By / s / / s /
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Name: ▇▇▇▇▇▇ Tottenham
One of its Directors
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EXHIBIT A
Form of Stock Option Agreement
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