EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of July 1, 1996,
by and between John F. Acres of 3324 N.W. Elmwood Drive, Corvallis, Oregon
("Employee") and Acres Gaming, Inc., a Nevada corporation whose principal place
of business is located at 815 N.W. 9th Street, Corvallis, Oregon ("Employer").
RECITALS
WHEREAS Employer is engaged in developing, manufacturing, and marketing of
electronic casino, accounting, game monitoring and game promotion systems; and
WHEREAS Employee is willing to be employed by Employer and Employer is
willing to employ Employee on the terms, conditions and agreements hereinafter
set forth.
For the reasons set forth above, and in consideration of the mutual
promises and agreements hereinafter set forth, Employer and Employee hereby
agree as follows:
SECTION 1. EMPLOYMENT
1.1 EMPLOYMENT
Employer hereby employs Employee for a term commencing July 1, 1996 through
June 30, 2001 (the "Term").
1.2 DUTIES
During the term of this Agreement, Employee shall perform faithfully and
to the best of Employee's ability such management duties as may be assigned
from time to time by the Board of Directors of Employer, which shall be as
the Chief Executive Officer. The parties recognize that a significant
portion of Employee's time shall be devoted to research, creating new
products and business opportunities for Employer and that Employee is most
effective if he is not required to maintain regular hours in Employer's
facilities. Therefore, there is no requirement that Employee be present in
Employer's facilities for any specific periods or hours.
SECTION 2. TERM
The initial term of employment under this Agreement shall be for five
years, commencing on July 1, 1996, subject, however, to prior termination as
hereinafter provided.
SECTION 3. COMPENSATION
Employer shall pay Employee:
(a) A base annual salary as indicated below:
Beginning July 1, 1996 $250,000.00
Beginning July 1, 1997 $300,000.00
Beginning July 1, 1998 $350,000.00
Beginning July 1, 1999 $400,000.00
Beginning July 1, 2000 $450,000.00
Such salary shall be payable at the same intervals as the other officers of
Employer are paid and shall be subject to customary withholding taxes and
other employment taxes as required by law.
(b) An annual bonus ("Bonus") payable on or before September 30 of each
year with respect to the preceding fiscal year, determined in accordance with
the table below.
Fiscal
Year Ending Profits Bonus
- --------------- -------------------------- ----------------------------------
June 30, 1997 If less than $1,000,000 $50,000
If $1,000,000 or more $100,000, plus 5% of the
amount by which Profits
exceed $1,000,000
- -------------------------------------------------------------------------------
June 30, 1998 If less than $1,000,000 None
If $1,000,000 or more but $50,000
less than $2,000,000
If $2,000,000 or more $100,000, plus 5% of the
amount by which Profits
exceed $2,000,000
- -------------------------------------------------------------------------------
June 30, 1999 If less than $2,000,000 None
If $2,000,000 or more but $50,000
less than $3,000,000
If $3,000,000 or more $100,000, plus 5% of the
amount by which Profits
exceed $3,000,000
- -------------------------------------------------------------------------------
June 30, 2000 If less than $2,000,000 None
If $2,000,000 or more but $50,000
less than $3,000,000
If $3,000,000 or more $100,000, plus 5% of the
amount by which Profits
exceed $3,000,000
- -------------------------------------------------------------------------------
June 30, 2001 If less than $2,000,000 None
If $2,000,000 or more but $50,000
less than $3,000,000
If $3,000,000 or more $100,000, plus 5% of the
amount by which Profits
exceed $3,000,000
"Profits" of Employer shall mean Income Before Income Taxes as adjusted to
add back any bonus paid pursuant to this Section 3(b). Profits for each fiscal
year shall be calculated by the certified public accountants regularly employed
to audit the books of Employer. Such calculation shall be in accordance with
generally accepted accounting principles applied on a basis consistent with the
practices of Employer.
(c) Employee shall have the right to receive and participate in any
additional "fringe benefits," which may from time to time be made generally
available to Employer's executive officers, including, but not limited to,
health and accident insurance, disability insurance or other insurance
programs any pension or profit-sharing plans and stock option plans.
SECTION 4. FACILITIES AND EXPENSES/ADDITIONAL BENEFITS
Employer shall provide Employee with an office, secretarial and technical
help, and such other facilities and services as may be suitable to his
position and adequate for the performance of his duties. Employee is
expected, from time to time, to incur expenses which the Employee deems
reasonable and necessary for promoting and conducting the business of
Employer, including expenses for civic club membership and participation,
entertainment, travel (including first-class air fare, when Employee deems it
appropriate), and similar items. Employer shall reimburse Employee for
out-of-pocket expenses actually and necessarily incurred by him in the
promotion and conduct of the business of Employer against reasonable
substantiation submitted to Employer with respect thereto, provided, however,
that Employee must receive the written approval of the Board of Directors
prior to incurring reimbursable expenses for travel and entertainment which
would total more than $25,000 in any calendar month.
SECTION 5. TRADE SECRETS/COVENANT NOT TO COMPETE
(a) For purposes of this Agreement, the term "Confidential Information"
means any and all information not generally known by others with whom
Employer does or plans to do business or with whom Employer directly or
indirectly competes and includes, but is not limited to, information relating
to Employer's research and development activities, its inventions,
discoveries, findings, designs and ideas, products and services, sales and
marketing, manufacturing processes and methods, costs, sources of supply,
customer lists, profits and profit margins, pricing policies or methods,
personnel information and business relationships, intellectual property and
the filing or pendency of patent applications. Confidential Information also
includes information comparable to the foregoing and that Employer may
receive or has received belonging to customers, suppliers, consultants and
others who do business with Employer. Employee shall not, either during or
after the Term of this Agreement, disclose to any person or organization
other than Employer or its affiliates, or utilize for the benefit or profit
of Employee or any other person or organization other than Employer or its
affiliates, any Confidential Information. Employee shall not keep elsewhere
than on Employer premises, nor remove therefrom, any property of Employer or
its affiliates, except and only so long as may be required for the
performance of Employee's duties for Employer. In the event of
termination of Employee's employment with Employer, Employee shall
immediately return to Employer any property of Employer or its affiliates in
Employee's possession, under Employee's control or removed by Employee from
Employer's premises.
(b) Employee will not, during the term of employment hereunder, (i) be
engaged or interested in any manner, directly or indirectly, as a partner,
officer, director, stockholder (ownership of up to 5% of the outstanding shares
of any publicly held company excepted), advisor, employee or in any other
capacity, in any other activity, business, or entity which is competitive with
or substantially similar to the then existing or proposed business of Employer
or any subsidiary or (ii) directly or indirectly solicit or entice or in any way
divert any customer or supplier of Employer or any subsidiary away therefrom.
(c) At the option of Employer, covenants contained in Section 5(b) shall
continue in effect after termination of Employee's employment hereunder for the
remainder of the Term as follows:
(i) If Employee's employment is terminated pursuant to
Sections 10(b), (c)(i) or (f), Employer shall continue to pay Employee the
base salary set forth in Section 3(a) at the rates, the times and for the
periods specified in Section 3(a); and
(ii) If Employee's employment is terminated pursuant to
Sections 10(a), (c)(ii), (d) or (g), Employer shall pay Employee amounts
equal to 50% of the base salary set forth in Section 3(a) at the rates, the
times and for the periods specified in Section 3(a).
If Employer fails to make any payment under this Section 5(c)within 30 days
of the date due, Employee will have no further obligations under Sections
5(b) or 5(c). Whether an activity is competitive or substantially similar to
the then-existing or proposed business of Employer or subsidiary shall be
determined by reference to business actually being done or which had been
specifically approved by Employer's (or subsidiary's) board of directors
prior to the date Employee terminated employment.
(d) Employee acknowledges that the provisions of this Section 5 are
essential to Employer; that Employer would not enter into this Agreement if it
did not include covenants not to disclose confidential information, compete with
Employer or any affiliated entities thereof, or solicit customers of Employer or
any such affiliated entities; and that damages sustained by Employer as a result
of a breach of any of these covenants cannot be adequately remedied by damages,
and Employee agrees that Employer, in addition to any other remedy it may have
under this Agreement or at
law, shall be entitled to injunctive and other equitable relief to prevent or
curtail any breach of any provision of this Section 5 and that the salary and
bonuses provided for herein constitute bonafide advancement within the
meaning of ORS 653.295.
SECTION 6. INTELLECTUAL PROPERTY
(a) "Intellectual Property" means and shall include, but not be limited
to, inventions, findings, ideas, improvements, designs, discoveries (whether or
not patentable and whether or not reduced to practice), copyrights, and
copyrightable material, Confidential Information and know-how, made or conceived
by Employee (whether made solely by Employee or jointly with others) during the
term and within the scope of Employee's employment with Employer which directly
relate to the actual or demonstrably anticipated business of Employer or its
affiliates or which are suggested by or result from any task assigned to
Employee on behalf of Employer or which Employee created at Company facilities.
"Intellectual Property" does not mean and shall not include Employee Property
(as defined in Section 6(c) below).
(b) All Intellectual Property and any patent, patent application,
trademark or trademark registration, copyright or copyright registration or
record resulting therefrom shall be the exclusive property of Employer or its
designee.
(c) The following shall be the property of Employee and not of Employer
("Employee Property"):
any tangible or intangible property developed in whole or in part by
Employee for which no equipment, supplies, facility, Intellectual
Property nor Confidential Information of Employer was used and which
was developed entirely on Employee's own time and which does not
directly relate to the actual or demonstrably anticipated business of
Employer, and which does not result from any work performed by
Employee for Employer.
SECTION 7. DISCLOSURE OF INTELLECTUAL PROPERTY
Employee shall immediately disclose to Employer or its designee and keep
adequate records relating to any Intellectual Property which is conceived,
discovered or made by Employee, either solely or jointly with others, during the
term and in the scope of Employee's employment with Employer.
SECTION 8. ASSIGNMENT OF INTELLECTUAL PROPERTY
(a) Employee agrees to assign to Employer Employee's entire world-wide
right, title and interest in and to any Intellectual Property heretofore
developed or developed during the Term.
(b) Employee further agrees to make all lawful oaths and declarations and
to execute documentation requested by Employer at any time during or after
Employee's employment with Employer, including an assignment for each item of
Intellectual property that Employer may request and on such forms as Employer
may provide. If Employee is unable or unwilling to execute such forms of
assignment and/or documents relating to such assignment, Employee agrees and
hereby grants to Employer an irrevocable limited power of attorney to execute
such forms or documents on Employee's behalf.
(c) Employee further agrees to assist Employer during and subsequent to
Employee's employment with Employer and thereafter during the period of any
extension of the covenants contained in Section 5(b) in every lawful way
including but not limited to testifying and/or otherwise supporting Employer in
the obtaining and/or enforcement of its Intellectual Property, without
reimbursement other than normal compensation as an employee of Employer, or, if
Employee's employment with Employer has been terminated, at mutually agreed upon
times and for compensation at the rate of $3000 per day plus expenses, to obtain
for the benefit of Employer patents, trademarks, copyrights, design protection
and similar legal protections of Intellectual Property in any and all countries,
irrespective of whether Employee believes such Intellectual Property to be
patentable, subject to trademark protection, copyrightable or otherwise
protectable.
SECTION 9. EMPLOYEE'S OBLIGATIONS AFTER TERMINATION OF THIS AGREEMENT
Except as set forth in the next sentence, all of Employee's duties,
obligations and liabilities end with the termination of this Agreement.
Sections 5, 6, 7, 8 and 9 shall survive the termination of Employee's employment
with Employer and the expiration of the term of this Agreement.
SECTION 10. TERMINATION
In the event of termination of Employee's employment, all compensation and
benefits set forth in this Agreement shall terminate except as specifically
provided in this Section 10 and Section 5(c). No termination of employment
under this Section 10 shall affect the provisions of Section 5.
(a) Employer's Board of Directors shall have the right to immediately and
without notice terminate Employee's employment hereunder in the event of any
fraud, embezzlement, dishonesty or other illegal act by Employee, which
adversely affects Employer or any other act or omission which substantially
impairs Employer's business, good will or reputation or any incident which
materially compromises Employee's reputation or ability to represent Employer
with the public. If Employee's employment is terminated pursuant to this
Section 10(a), Employee will be paid any unpaid annual salary which has accrued
as of the date of such termination but shall not be entitled to receive any
bonus in respect of the year in which termination occurs.
(b) Employer's Board of Directors shall have the right, after February 1,
1999, to terminate Employee's employment hereunder without cause, in which case
Employee will be paid a bonus under Section 3(b) for the entire applicable
fiscal year in which employment is terminated, plus six (6) months' severance
pay at the rate then in effect under Section 3(a).
(c) (i) In the event of a material breach or evasion by Employer of any
of the terms of this Agreement which has not been cured within thirty (30) days
after written notice specifying such breach or evasion has been given by
Employee, Employee thereupon may immediately and without further notice,
terminate his employment hereunder and shall be entitled to immediate payment of
liquidated damages equal to 12 months of salary at the then current rate plus an
amount equal to the prior fiscal year's bonus.
(ii) In the event of a material breach or evasion by Employee of any
of the terms of this Agreement (including, but not limited to, failure of or
refusal by Employee to carry out the directions of Employer's Board of
Directors, which directions are reasonably consistent with the other duties
herein set forth to be performed by Employee), which has not been cured within
thirty (30) days after written notice specifying such breach or evasion has been
given by Employer, Employer thereupon may immediately and without further
notice, terminate Employee's employment. If Employee's employment is terminated
pursuant to this Section 10(c)(ii), Employee will be paid any unpaid annual
salary which has accrued as of the date of such termination but shall not be
entitled to receive any bonus in respect of the year in which termination
occurs.
(d) Anything herein contained to the contrary notwithstanding, in the
event that Employer shall sell substantially all of its assets, or if more than
thirty-five percent (35%) of the voting power of then issued and outstanding
capital stock of Employer should be acquired by any investor or by one
affiliated group of investors acting in concert during the term of this
Agreement, then Employee may, in his sole discretion, elect to terminate
employment hereunder immediately. Such election to
terminate employment may be made by Employee within 60 days of the last day
of the month on which closing of said sale or transfer occurs. If Employee's
employment is terminated pursuant to this Section 10(d), Employee will be
paid any unpaid annual salary which has accrued as of the date of such
termination but shall not be entitled to receive any bonus in respect of the
year in which termination occurs. [pro rata bonus?]
(e) In the event of Employee's death during the term of this Agreement,
this Agreement shall terminate immediately and without notice and the Employee's
estate shall be entitled to receive any unpaid annual salary which has accrued
as of the date of such termination plus a pro rata portion, based on the number
of days worked for the applicable fiscal year, of any bonus under Section 3(b)
for the fiscal year in which such termination occurs.
(f) Employee's employment shall terminate immediately and without notice,
unless otherwise agreed by Employer's Board of Directors, in the event Employee
shall become permanently disabled (i.e., shall have been continuously unable or
unwilling to perform his material duties hereunder for at least ninety percent
(90%) of the time during any consecutive six (6) month period, because of ill
health, physical or mental disability or for any cause beyond his control). If
Employee's employment is terminated pursuant to this Section 10(f), Employee
will be paid any unpaid annual salary which has accrued as of the date of such
termination, but shall not be entitled to receive any bonus in respect of the
year in which termination occurs.
(g) Employee may terminate employment hereunder without cause after
February 1, 1999, in which case Employee will be paid any unpaid annual salary
accrued to the date of termination, but shall not be entitled to receive any
bonus under Section 3(b) in respect of the year in which termination occurs. If
Employee voluntarily terminates employment before [February 1, 1999], Employer
shall have the right to seek damages for breach of this Agreement.
SECTION 11. KEY MAN INSURANCE
Employee will cooperate with Employer, including taking such medical
examinations as Employer reasonably shall deem necessary if Employer shall
desire to obtain a "key man" insurance policy with respect to Employee, which
policy shall be owned by Employer and shall name Employer as beneficiary.
SECTION 12. ENTIRE AGREEMENT
This Agreement contains the complete agreement concerning the employment
arrangement between the parties and shall, as of the effective date hereof,
supersede all other prior agreements between the parties with respect to the
subject matter
hereof. Neither party has relied on any prior representations in entering
into this Agreement.
SECTION 13. MODIFICATION OF CONTRACT
No cancellation, waiver, amendment, alteration or modification of this
Agreement or of any covenant, condition, or limitation herein contained shall be
valid unless in writing and duly executed by the party to be charged therewith.
No failure on the part of Employer to exercise, and no delay in exercising, any
right, power, privilege or remedy granted herein shall operate as a waiver
thereof; nor shall any single or partial exercise of such right, power,
privilege or remedy preclude any other or further exercise thereof or the
exercise of any other right. Unless otherwise stated in writing, no waiver of
any breach of any provisions of this Agreement shall be, or be construed to be,
a waiver of any preceding or succeeding breach of the same or any other
provision. The parties further agree that the provisions of this Section may
not be waived or amended except as set forth in this Section and that any oral
or implied agreement which conflicts with any of the foregoing shall be void,
unenforceable and of no force and effect.
SECTION 14. SEVERABILITY OF TERMS
If any term or provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law or public policy, all other terms,
covenants, conditions and provisions of this Agreement shall nevertheless remain
in full force and effect, provided that the invalidity, illegality or
unenforceability of such term or provision does not materially impair either
(i) the parties' ability to consummate their respective duties with respect to,
or (ii) the economic substance of, the employment relationship established
hereby. If the invalidity, illegality or unenforceability of any term or other
provision materially impairs either (i) a party's ability to consummate its
duties hereunder in the manner contemplated hereby, or (ii) the economic
substance of the employment relationship, the parties shall, if at all possible,
amend this Agreement so as to effect the original intention of the parties to
the fullest extent otherwise possible.
SECTION 15. ASSIGNMENT
The parties agree that the services covered by this Agreement are strictly
personal and that this Agreement is not assignable or transferable by Employee
or Employer, either voluntarily or by operation of law, without the prior
written consent of the other party.
SECTION 16. NOTICES
All notices, requests, approvals, demands or other communication of any
kind which any party may be required or may desire to serve on the other in
connection with this Agreement shall be in writing and shall be deemed to have
been duly and sufficiently given if addressed to the parties at their respective
addresses designated below and:
(a) personally delivered with proof of delivery thereof (any notice so
delivered shall be deemed to have been received at the time so delivered);
(b) sent by Federal Express (or other similar overnight courier)
designating next day delivery (any notice so delivered shall be deemed to have
been received on the next business day following receipt by the courier);
(c) sent by United States registered or certified mail, return receipt
requested, postage prepaid (any notice so sent shall be deemed to have been
received three (3) business days after mailing in the United States); or
(d) sent by telecopier or facsimile machine which automatically generates
a transmission report that states the date and time of the transmission, the
length of the document transmitted and the telephone number of the recipient's
telecopier or facsimile machine (with a copy thereof sent in accordance with
subparagraphs (a), (b) or (c) above) (any notice so delivered shall be deemed to
have been received (i) on the date of transmission, if so transmitted before
5:30 p.m. (local time of the recipient) on a business day, or (ii) on the next
business day, if so transmitted on or after 5:30 p.m. (local time of the
recipient) on a business day or if transmitted on a day other than a business
day).
All notices shall be addressed to the parties at the addresses as set forth
below. Either party may, by notice given pursuant to this Section, change the
person or persons and/or address or addresses, or designate an additional person
or persons or an additional address or addresses, for its notices, but notice of
a change of address shall only be effective upon receipt as set forth above.
If to Employer:
Acres Gaming, Inc.
815 N.W. 9th Street
Corvallis, OR 97330
Telecopier No.: (541) 753-7524
If to Employee:
John F. Acres
3324 N.W. Elmwood Drive
Corvallis, OR 97330
Telecopier No.: ______________
SECTION 17. JURISDICTION/ATTORNEY'S FEES
If legal action is initiated relative to this Agreement or the rights or
obligations of any party hereunder, the parties hereto stipulate and agree that
such action must be initiated, maintained and continued in Oregon. The
nonprevailing party in such action shall pay the reasonable attorneys' fees of
the prevailing party, with the amounts to be determined by the court, or the
arbitrators, in said action.
SECTION 18. CAPTIONS
Captions of the Sections of this Agreement are for the convenience of
reference only, and the words contained therein shall in no way be held to
explain, modify, amplify, or aid in the interpretation, construction or meaning
of the provisions of this Agreement.
SECTION 19. CUMULATIVE RIGHTS
The rights and remedies provided herein are cumulative and not exclusive of
any other rights or remedies which Employer or Employee shall otherwise have at
law or equity.
SECTION 20. CHOICE OF LAW
It is the intention of the parties hereto that this Agreement and the
performance hereunder and all suits and special proceedings hereunder be
governed by and construed in accordance with and pursuant to the laws of the
State of Oregon.
SECTION 21. ARBITRATION
All claims, disputes and questions whatsoever, except those requiring an
equitable remedy (e.g., an injunction against a breach of any restrictive
covenant), which shall arise either during the term of this Agreement or
afterward between the parties hereto or their respective representatives,
relating to this Agreement, or the construction or application hereof, or any
other matter in any way relating to the rights, duties, and liabilities of
either party hereunder, shall be referred to a board of arbitration as follows:
Each party shall select one arbitrator, within ten (10) calendar days of its
receipt of a written demand therefor, and these two arbitrators so chosen
shall, within ten (10) calendar days of their appointment, appoint a third
arbitrator, and said arbitrators shall, by majority decision within sixty
(60) calendar days thereafter, determine the matter in dispute. Such
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association then in effect. The arbitrators' determination shall
be final and binding upon the parties. Judgment may be entered upon such
determination and may be enforced in accordance with applicable law in any
court having jurisdiction thereof.
THE UNDERSIGNED EMPLOYEE ACKNOWLEDGES THAT HE HAS READ THE FOREGOING
AGREEMENT AND FULLY UNDERSTANDS THE MEANING AND CONSEQUENCES OF THE TERMS
CONTAINED HEREIN. THE UNDERSIGNED EMPLOYEE FURTHER ACKNOWLEDGES THAT, TO THE
EXTENT DEEMED APPROPRIATE, HE HAS EMPLOYED AND CONSULTED WITH HIS OWN COUNSEL
CONCERNING THIS AGREEMENT AND, HAVING CONSIDERED SUCH LEGAL ADVICE, HE HAS
EXECUTED IT AS HIS FREE AND VOLUNTARY ACT AND DEED.
IN WITNESS WHEREOF, the parties have executed this Agreement at Las Vegas,
Nevada as of the date above written.
EMPLOYEE EMPLOYER
Acres Gaming Inc.,
a Nevada corporation
_________________________________ By: ______________________________
John F. Acres Name: Joseph A. Huseonica
Its: President