AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is effective as of the 17th day of
May, 1996, by and between Capital Gaming International, Inc., a New Jersey
corporation, (the "Company") and William S. Papazian (the "Employee") an
individual, residing at P.O. Box 336, 894 Fawn Road, Lakeville, PA 18438.
Recitals
A. Employee is presently employed under an Employment
Agreement made as of June 2, 1994; and
B. It is deemed by the Company to be in the best interests
of the Company and its shareholders and creditors to assure
continuation of Employee's employment with the Company upon the
terms and conditions set forth herein; and
C. Employee desires assurance of a long-term future with the
Company, and is willing to enter into a long-term agreement with
the Company upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth herein, the parties hereby agree as follows:
AGREEMENT
1. Term of Employment: Unless earlier terminated as herein
provided, the Term of Employee's employment with the Company shall
be extended for a period of three (3) years and such term shall end
on June 1, 1999; provided, however, that this Agreement and the Term of the
Employee's employment with the Company hereunder shall automatically be extended
for one year commencing on June 2, 1999 and on each successive one year
anniversary of June 2, 1999 unless the Employee or the Company shall have given
written notice to the other at least ninety (90) days prior to June 1, or any
such anniversary of June 1, 1999 that the Term shall expire at the end of the
then-current Term, as applicable. For purposes of this Agreement, the "Term" of
this Agreement shall mean and include cumulatively (a) the initial term of this
Agreement from the effective date hereof through June 1, 1999 and (b) any and
all one-year extension(s) of the initial term of this Agreement. In the event of
the occurrence of any of the one-year extensions of this Agreement, the
Employee's salary and other compensation for the extension year shall be
negotiated in good faith; and in the event that agreement is not reached by the
beginning of the one-year extension period, then all of the terms of this
Agreement in effect immediately prior to the commencement of the one-year
extension shall be continued for the then-commencing year. Various provisions of
this Agreement are intended to survive the expiration or termination of the Term
as expressly stated therein.
2. Duties and Authority of Employee: During the Term, the
Employee shall be Senior Vice President, General Counsel and Corporate Secretary
of the Company, and shall devote his best efforts to rendering services to the
Company and its subsidiaries
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in such capacity. As Senior Vice President, General Counsel and Corporate
Secretary the Employee shall report to the Chief Executive Officer and the Board
of Directors. The Employee shall perform such duties and services, consistent
with his position as senior legal counsel to the Company, as may be assigned to
him from time to time by the Chief Executive Officer or the Board of Directors.
Employee warrants and agrees to use his best efforts to perform well and
faithfully such duties and other reasonable executive duties and
responsibilities, consistent with his position as Senior Vice President, General
Counsel and Corporate Secretary as are properly assigned to him. Employee shall
not be required, without his consent, to undertake responsibilities not
commensurate with his position, nor shall the Company limit or restrict his
authority or responsibility in the performance of those duties.
3. Time to be Devoted to Employment. The Employee agrees to
devote his full business time, attention, and energies to the best
interests of the Corporation.
4. Restrictions on Other Employment. During the Term of
employment, the Employee agrees that, unless he has the express prior written
approval of the Chairman of the Board of Directors or CEO of the Company, he
shall not accept a membership on a Board of Directors, act as an officer,
employee or consultant, or engage in any other business activity that would in
any way conflict with the business of Company or the time needed by Employee to
perform his duties. It is understood that the Employee's employment during the
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Term shall be on an exclusive basis, except that the Employee may, subject to
the provisions of Paragraph 10 hereof, undertake, or continue to conduct, other
business, civic, or charitable activities during the Term if such activities do
not materially interfere, directly or indirectly, with the duties of the
Employee hereunder, and do not compete with any business of the Company;
provided, however, that no additional outside business activities shall be
undertaken without the prior consent of the Board. Notwithstanding the
foregoing, nothing contained in this Employment Agreement shall be deemed to
preclude Employee from owning less than one percent (1%) in market value of the
publicly traded capital stock of an entity, whether or not in competition with
the business of the Company or its subsidiaries or affiliates, or from carrying
on activities normally incident to managing passive investments. Employee shall
be deemed to be engaged in or concerned with a duty or pursuit which is contrary
to any provision of this Agreement only if he has received written notice to
such effect, setting forth with reasonable specificity the basis of such claim,
from the Company and has not, within thirty (30) days from the date of his
receipt of any such written notice, initiated steps to eliminate his engagement
in or concern with such duties or pursuits as are specified in such notice as
being contrary to this Agreement.
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5. Obligations of the Company. All obligations of the
Company hereunder shall in all respects be joint and several obligations of the
Company and each of the subsidiaries of the Company.
6. Compensation:
a. Salary:
i. During the Term, the Employee shall be paid
a base salary (herein "Salary"), which may be increased, from time to time, at
the election of the Board, or any committee of the Board to which such power has
been delegated by the Board. Employee shall be entitled to annual salary reviews
in June of each year of this Agreement (or as soon as is practicable after the
fiscal year-end audit is complete). Because the Company anticipates that it will
soon enter into discussions regarding its debt restructuring, Employee has
voluntarily elected to defer discussions relating to an increase in his Salary
which is currently One Hundred Sixty Thousand Dollars ($160,000) annually. The
Company and the Employee agree to negotiate in good faith with respect to such
increase in the Employee's Salary in conjunction with discussions concerning the
Company's debt restructuring, said increase to be retroactive to April 1, 1996.
ii. The Employee's Salary shall be paid in the
same installments which prevail for other senior corporate officers of the
Company (but in no event less frequently than monthly), or such
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other installments as are agreed upon between the Employee and the
Company.
b. Bonus and Incentive Compensation: Employee shall be paid
bonus or other additional cash compensation (herein "Incentive Compensation") in
such amounts and at such times as shall be determined before the end of each
fiscal year by the Executive Compensation Committee of the Board of Directors.
c. Stock Options: The Company acknowledges the grant, and the
Employee acknowledges his receipt, of a total of 200,000 common stock purchase
options.
d. Other Benefits: The Employee shall, to the extent deemed
appropriate by the Board (or any applicable committee of the Board), participate
at a level consistent with his rank as a senior executive in profit sharing,
stock appreciation rights, stock bonus, stock option, deferred compensation, and
other similar plans or benefits which are made available to other senior
executives employed by the Company during the Term. Also, during the Term,
Employee shall continue to participate in all fringe benefits and perquisites
currently being provided to Employee and other senior executives of the Company.
In the event that the Company establishes an individual or group retirement
plan, or continues with the existing plan, the Employee shall be entitled to
participate, to the extent deemed appropriate by the Board (or any applicable
committee of the Board), in such retirement plan consistent with his rank in the
Company. In addition, Employee
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shall participate, to the extent deemed appropriate by the Board (or any
applicable committee of the Board), consistent with his rank in any other fringe
benefits or perquisites hereafter adopted by the Company and made applicable to
its senior executives. Further, during the Term, the Company will provide, at
its expense, life, business travel, disability (in an amount sufficient to fund
not more than Employee's Salary), medical, dental and hospitalization insurance
for the Employee and his dependents in amounts and on terms as favorable as
those provided for any other senior executive officer of the Company.
e. Withholding: All compensation shall be subject to normal
required tax withholdings.
f. Reimbursement for Professional Memberships: The Corporation
shall reimburse the Executive, in accordance with standard business practices of
accounting and receipts, for the cost of all bar dues for jurisdictions in which
Executive is or may be admitted to practice law, all professional association
memberships reasonably attendant thereto and all continuing legal education and
gaming conference expenses.
7. Vacation: Employee shall be entitled to four (4) weeks vacation time
for each year during the Term. At Employee's option, vacation may be taken,
either in whole or in part, consecutively or not, in the year that Employee's
entitlement to that vacation accrues or, if unused during such year, such
vacation time shall be carried over (subject to no limitation on maximum
accrual), and may
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be used in any subsequent year during the Term, provided that no more than
thirty (30) days of vacation may be taken in any one calendar year. Upon
termination of Employee's employment with the Company for any reason whatsoever,
Employee shall be paid his Salary for all unused then accrued vacation (except
for vacation days for which Employee shall have received payment pursuant to the
immediately following sentence), at the Salary rate then existing at the date of
termination of Employee's employment with the Company, with no limitation on the
maximum accrual of such vacation days for which the Employee shall receive such
payment. At any time or times upon written request made by Employee to the
Company (with no limitation as to the number or frequency of such requests),
Employee shall be paid his Salary for the quantity (as specified in such
request) of the unused then accrued vacation days, at the Salary rate existing
on the date of such request, with no limitation on the maximum accrual of such
vacation days for which the Employee may receive such payment.
8. Expenses: The Company will reimburse Employee for all expenses
reasonably incurred by Employee in the performance of his duties under this
Agreement. Reimbursement shall be made in accordance with the practices and
requirements generally applied by the Company in connection with reimbursement
of expenses incurred by its employees. In the event that the Company is ever the
subject of an audit, and expenses of the Employee which the Company has
reimbursed to the Employee pursuant to this Agreement are ever
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found to have been expended for a personal use by the Employee, such
reimbursement of the Employee's business expenses shall be considered to be
additional Salary, and the Employee shall not be liable for such reimbursed
business expenses. It is understood that the Company will pay to Employee an
automobile allowance. The Company also will pay for the insurance, operation,
maintenance and repair of such car (including gasoline and oil), or a car used
by Employee in lieu of a furnished car if Employee elects the automobile
allowance. The allowance, all payments with respect to the automobile, and any
other taxable benefits will be grossed-up for tax purposes for cash benefits,
and taxes with respect to such benefits will be paid by the Company for non-cash
benefits, so that Employee shall not be responsible for the payment of income
taxes except with respect to his Salary and bonus.
9. Termination of Term and/or Agreement:
a. Termination by the Company for Cause:
i. The Company may, at any time, at its
election, terminate the Term for cause prior to the Term's expiration as a
result of any of the following events: (1) Employee acting fraudulently in his
relations with the Company or on behalf of the Company, (2) Employee
misappropriating or doing material, intentional damage to the property of the
Company, (3) Employee being convicted of a felony, (4) Employee's acts or
omissions amounting to willful misconduct or recklessness by the Employee in the
performance of his duties under this Agreement or the habitual
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neglect of such duties, (5) failure of the Employee to obtain or retain for any
reason, any permit, license or approval which shall be required by any
regulatory agency or entity with jurisdiction over any portion of the Company's
business or any business of a subsidiary of the Company, or (6) any other
material breach by the Employee of any of the terms of this Agreement.
ii. Any such termination shall be effective upon
the Company's giving of written notice to the Employee setting forth in
reasonable detail the grounds for the termination, provided, however, that in
the event of a notice of termination under Paragraph 9(a)(i)(5) hereof, if
Employee first failed to cure such condition within thirty (30) days after
notice thereof or, if a cure was not possible within thirty (30) days, failed to
take all diligent action within such period leading to a cure within 120 days
after such notice, and if such cure is not completed within 120 days after such
notice, the Company may elect to terminate the Term notwithstanding the
Employee's diligent action to cure.
iii. In the event that there is a termination of
the Term by the Company under this Paragraph 9(a), and the cause is solely the
cause described under Paragraph 9(a)(i)(5) above, and not within any other
subparagraph of Paragraph 9(a)(i), Employee shall be entitled to severance pay
equivalent to one (1) year's Salary payable on the same basis as his Salary had
been paid at the date of termination, and to the continuation of all fringe
benefits and insurance described in Paragraph 6(d) for a one (1) year period
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following such termination (which continuation shall not, however, duplicate
insurance already provided by Paragraph 6(d) for such period), provided that the
actions or inactions of Employee leading to the loss of or failure to obtain or
retain the applicable permit, license or approval were made in the good faith
belief that his actions or inactions were for the benefit of, and in the best
interests of, the Company, and not in violation of any law, and provided further
that Employee used his best efforts to obtain or retain (as the case may be)
such license, permit or approval.
iv. In the event of a termination for cause
under this Paragraph 9(a), the Company's obligations to pay Salary and other
compensation and benefits to the Employee shall terminate simultaneously with
the effectiveness of the termination of the Term.
b. Disability: In the event that Employee shall become subject
to a Disability (as defined below) during the Term, the Term shall immediately
terminate, but the current Salary payable to Employee shall be continued for a
period of (6) months, and shall thereafter be reduced to sixty percent (60%) of
the Salary in effect at the date of the Disability, subject to maximum annual
compensation equal to Employee's Salary then in effect. Such reduced
compensation shall continue until the termination of Employee's Disability, the
expiration of the Term, the Employee's attaining age 65, or the expiration of
thirty-six (36) months from the inception of the Disability, whichever occurs
first (the
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"Disability Period"). During any such Disability Period, the Company shall also
keep in force for the benefit of Employee and Employee's dependents all life,
health and medical insurance policies maintained for Employee's benefit under
the terms of this Agreement, and Employee shall be considered to be employed for
purposes of the vesting and accrual of benefits of all other plans and programs
of the Company in which Employee is a participant, and which vest or accrue
benefits over a period of time. All stock options which vest during the
Disability Period shall be exercisable until the fifth (5th) anniversary date
from the date they became first exercisable by Employee. Notwithstanding the
foregoing, the Company shall not be required to add Employee to any bonus,
profit sharing, stock bonus, stock option, deferred compensation, and other
similar plans, or make any new awards to Employee under this Agreement with
respect to such new or presently existing plans during the period of such
Disability. All Salary payments pursuant to this Paragraph 9(b) due to Employee
under its terms shall be reduced by any disability payments made in accordance
with any existing disability program or disability insurance of the Company.
Employee expressly acknowledges that the Company may obtain disability insurance
with respect to the Employee in order to fund Salary payments to Employee during
any period of Disability. Employee also expressly acknowledges that he will
fully cooperate with the Company in submitting to all necessary physical or
mental examinations requested by the Company
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in determining Employee's Disability. For purposes of this Agreement, Employee
shall be deemed to have become subject to a disability (herein "Disability") if,
because of any physical or mental condition, Employee shall be unable to perform
his duties and responsibilities to the extent reasonably necessary for Employee
to give the Company substantially the value of his services for a consecutive
one hundred eighty (180) day period, or for an aggregate of one hundred eighty
(180) days within any period of twelve (12) consecutive months, and either the
Company or the Employee shall thereafter give written notice to the other of
such party's election that Employee be treated as subject to a Disability. The
date of such Disability shall be the third calendar day immediately following
transmittal of such written notice of Disability.
c. Death: The Term will automatically terminate upon
the death of the Employee; however, the Company will pay death benefits equal to
sixty percent (60%) of Employee's Salary (up to an annual maximum equal to
Employee's then current Salary in effect) at his death to any surviving spouse
of Employee (or, if there shall be no surviving spouse, to Employee's surviving
children) for twelve (12) months after Employee's death, or so long as the
spouse (or children, if applicable) survives Employee, whichever ends first, and
there shall be full acceleration of vesting or exercisability upon death of all
outstanding unvested stock options and stock awards, including, without
limitation,
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those awards under the 1990 Stock Option Plan, as amended, or any similar stock
plans or agreements of the Company (whether such awards are made before or after
the date of this Agreement), and delivery to the appropriate person of all stock
pursuant to the terms of any such plans or agreements. All stock options which
have their vesting accelerated pursuant to this Paragraph 9(c) shall,
notwithstanding the provisions of the relevant stock option agreement to which
they pertain, terminate unless previously exercised by Employee's heirs or
assigns prior to the fifth anniversary date from the date of Employee's death.
d. Termination by the Company Without Cause:
i. Termination Without Cause Described: If,
during the Term, Employee is not re-elected to, or is removed from, the position
of Senior Vice President, General Counsel and Corporate Secretary, or is
otherwise not serving as the Senior Legal Counsel of the Company, other than
pursuant to Paragraph 9(a),(b),(c) or (f), or if the Company otherwise
materially breaches this Agreement and fails to complete the cure of such breach
within thirty (30) days after written notice from Employee, then at any time
within three (3) months after the date upon which Employee is removed from such
position or the breach date, as the case may be, Employee may elect, by notice
in writing to the Chief Executive Officer of the Company, to treat the situation
as a "Termination Without Cause" of Employee's employment by the Company
effective one (1) week after the notice, and to discontinue his
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obligations to perform services hereunder. The Term shall end at
such effective date.
ii. Employee's Obligations After Termination
Without Cause: In the event of a Termination Without Cause, Employee's
obligations under Paragraph 2 shall cease as of the date notice of such
termination is given; provided, however, that all payments and benefits provided
to Employee hereunder because of a Termination Without Cause shall be upon the
condition of, and partly in consideration for, Employee's continued compliance
with any covenants in this Agreement (including the covenants contained in
Paragraph 10) which, by their terms, apply during the Term or thereafter.
iii. Payments and Benefits to Employee after a
Termination Without Cause: In the event of any Termination Without Cause, the
Company shall pay the Employee (a) within five (5) days of the date notice of
such termination is given, any amounts which have become payable under other
provisions of this Agreement, or other obligations of the Company to Employee
which have accrued but have not yet been paid, including, without limitation,
Salary earned prior to the date the notice is given and compensation for unused
vacation, and (b) in accordance with the other provisions of this Agreement, all
entitlements of Employee. The Company shall also be obligated as follows:
(1) Within five (5) days following the
date notice of such termination is given, the Company shall pay the
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Employee an amount equal to sixty (60%) percent of the present value of the sum
of (x) all Salary which would have been earned but for such Termination Without
Cause for a period of three (3) years commencing on the date of such Termination
Without Cause based on Employee's then current Salary, plus (y) the present
value of an amount determined by multiplying the amount of Incentive
Compensation (as herein defined) earned by Employee for the last full fiscal
year of the Company preceding the date of termination by three (3) ("Severance
Compensation"). The term Incentive Compensation shall include compensation
earned pursuant to any profit sharing, pension, bonus, stock option, stock
bonus, deferred compensation and similar plans or arrangements. In making the
present value calculation, the projected Incentive Compensation shall be assumed
to be earned pro rata over three (3) years. For this purpose, the rate used for
the determination of the present value shall be the average of the five (5) year
treasury notes rate effective at the end of each of the six (6) calendar months
immediately preceding the month in which the termination of employment occurs.
The remaining forty (40%) percent of the Severance Compensation shall be paid to
Employee in twelve (12) equal monthly installments commencing on the first month
after the month in which Employee was terminated.
(2) During the remaining Term, the
Company shall keep in force for the benefit of Employee and Employee's
dependents all life insurance policies maintained for Employee's
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benefit under the terms of this Agreement. During such period, the Company shall
not be required to add Employee to any new profit sharing, stock bonus, stock
option, bonus, deferred compensation, and other similar plans, or make any
awards to Employee under this Agreement with respect to new or old plans of such
nature. In the event of a Termination Without Cause, all existing stock options
previously granted to Employee and any awards previously made to Employee under
the 1990 Stock Option Plan, or any similar stock plans or agreements of the
Company (whether made before or after this Agreement) shall be accelerated with
respect to vesting or exercisability so as to become fully vested or exercisable
immediately upon the effective date of Employee's Termination Without Cause
pursuant to Paragraph 9(d)(i) above. All stock options which have their vesting
accelerated pursuant to this Paragraph 9(d)(iii)(2) shall, notwithstanding the
provisions of the relevant stock option agreement to which they pertain,
terminate on the fifth anniversary date of the effective date of Employee's
Termination Without Cause.
(3) Notwithstanding Paragraph
9(d)(iii)(2) above, any life insurance afforded Employee under this Agreement
shall be only supplementary or secondary to any such protection provided by
other employment or through Medicare.
e. Employee's Additional Election and Rights after a
Change in Control:
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i. Employee's Right to Elect Termination after
a Change in Control:
(1) Permitted Period for Elective
Termination: In the event of a Change in Control (as defined in Paragraph 15
hereof), Employee shall have the right to elect to terminate the Term (and his
obligation to render services under this Agreement) by notice in writing to the
Chief Executive Officer of the Company within twenty-four (24) months after the
Change in Control.
(2) Payments and Benefits to Employee
after Elective Termination: If the Employee elects termination under Paragraph
9(e)(i)(1), the Employee shall be entitled to and the Company shall be obligated
to provide the Employee with all rights and benefits he would be entitled to
upon a Termination Without Cause pursuant to Paragraph 9(d)(iii).
(3) Limitation on Amounts:
(a) Notwithstanding the
foregoing, in the event that any payment or benefit received, or to be received,
by Employee (whether pursuant to the terms of this Agreement or any other plan,
arrangement, or agreement with the Company, or any other plan, arrangement or
agreement with any person whose actions result in a Change in Control, or any
person affiliated with the Company or such person) (all such payments and
benefits being hereinafter called "Total Payments") would not be deductible (in
whole or in part) as a result of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), by the Company, an
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affiliate or other person making such payment or providing such benefit, then,
to the extent necessary to make such portion of the Total Payments deductible,
the Total Payments shall be reduced in one of the two alternative orders set
forth in Paragraph 9(e)(i)(3)(b) hereof.
(b) If the Total Payments all
become payable at approximately the same time, (i) the benefits under the first
sentence of Paragraph 9(d)(iii)(2) shall first be reduced (if necessary, to
zero), (ii) the payment pursuant to Paragraph 9(e)(iii), if applicable, shall
then be reduced (if necessary, to zero), (iii) acceleration of vesting of awards
under stock options, the 1990 Stock Option Plan, or any similar stock plans or
agreements of the Company under Paragraph 9(d)(iii)(2) shall next be reduced (if
necessary, to zero), and (iv) other portions of the Total Payments shall be
reduced as necessary. If the Total Payments do not become due and payable at the
same time, the respective Total Payments shall be paid in full in the order in
which they become payable until any portion thereof would not be deductible, and
such portion (and any subsequent portions) of the Total Payments shall be
reduced to zero.
(c) For purposes of this
limitation, (i) no portion of the Total Payments, the receipt or enjoyment of
which the Employee shall have effectively waived in writing prior to the date of
termination shall be taken into account; (ii) no portion of the Total Payments
shall be taken into account which, in the
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opinion of tax counsel selected by the Company's independent auditors and
acceptable to the Employee, does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, including by reason of Section
280G(b)(4)(A) of the Code; (iii) the payments in Paragraph 9(d)(iii) (1) through
(3), and Paragraph 9(e)(iii), if applicable, shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in Paragraphs
9(e)(i)(3)(c)(i) or (ii)) in their entirety constitute reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4) of the
Code, or are otherwise not subject to disallowance as deductions, in the opinion
of the tax counsel referred to in Paragraph 9(e)(i)(3)(c)(ii); and (iv) the
value of any non-cash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the Code.
Notwithstanding any dispute as to the total amount to be paid to Employee,
payments will be made with respect to the amounts clearly deductible under
Section 280G of the Code within the time period specified above in Paragraph
9(d)(iii) and 9(e)(iii), as applicable.
(d) If it is established,
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that, notwithstanding the good faith of Employee and the Company in
applying the terms of this Paragraph 9(e)(i)(3), the
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aggregate Total Payments paid to or for Employee's benefit are in an amount that
would result in any portion of such Total Payments not being deductible by
reason of Section 280G of the Code, then Employee shall have an obligation to
pay the Company, on the fifth (5th) business day after demand by the Company, an
amount equal to the sum of (i) the excess of the aggregate Total Payments paid
to or for Employee's benefit over the aggregate Total Payments that could have
been paid to or for Employee's benefit without any portion of such Total
Payments not being deductible by reason of Section 280G of the Code (such excess
constituting a loan by the Company to Employee); and (ii) notwithstanding
Paragraph 16(c) hereof, interest on the loan amount set forth in clause (i) of
this sentence at the rate provided in Section 1274(b)(2)(B) of the Code from the
date of Employee's receipt of such excess until the date of such payment.
(4) Employee's Obligations After
Elective Termination: If Employee elects to terminate his obligations to render
services under this Agreement pursuant to Paragraph 9(e)(i)(1), his obligations
under Paragraph 2 shall cease as of the date notice of such termination is
given. Employee agrees that all payments made because of such elective
termination shall be upon the condition of, and partly in consideration for, his
continued compliance with any covenants under Paragraph 10 and Paragraph 11 of
this Agreement, which by their terms apply during the Term, or thereafter.
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ii. Agreement in Full Effect after a Change in
Control: Upon and after a Change in Control, until and unless Employee makes a
written election pursuant to Paragraph 9(e)(i)(1), this Agreement shall continue
in full force and effect, in accordance with all the provisions hereof.
iii. Additional Payments and Provisions after
Termination Without Cause upon or after a Change in Control: In the event of a
Termination Without Cause of Employee by the Company upon or after a Change in
Control (or upon or after the occurrence of any other event which constitutes a
change in ownership or effective control of the Company, or in the ownership of
its assets, or which would be deemed to be such a change under Section 280G of
the Code, or the regulations or other legal authority developed thereunder), the
Company shall provide Employee with the payments and benefits required by
Paragraph 9(d)(iii), and shall also pay Employee to the extent permitted by law
and without regard to any forfeiture provisions, a lump sum payment equal to the
benefits payable to Employee pursuant to any retirement plan which may be
established for the benefit of Employee.
f. Voluntary Resignation: A "Voluntary Resignation"
shall mean a termination of employment by the Employee on his own initiative
other than a termination due to Disability or pursuant to Paragraph 9(e) hereof.
Such a termination shall not be deemed a breach of this Agreement and shall
entitle the Employee to all the rights and benefits to which he would be
entitled in the event
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of a termination for cause pursuant to Paragraph 9(a) hereof, other than any
special rights or benefits obtained in the event of a termination pursuant to
Paragraph 9(a)(i)(5).
10. Confidential Information: "Confidential Information" is defined as
information obtained by Employee as a result of his current or prior positions
with the Company, concerning the businesses, finances, clients, affairs,
business plans, strategies, methods, results from operations, regulatory matters
or investigations by others, and present and future plans relating to the
Company, any subsidiaries, parent or affiliates thereof or any company formed or
funded by the Company at any time for any reason or purpose whatsoever. It is
not intended to include business information that is available in the public
domain or information that was possessed by Employee prior to his employment
with the Company. Employee agrees that he will not, at any time during or after
the Term of employment, disclose, reproduce, assign or transfer to any person,
firm, corporation or other business entity, except as required by law, any
Confidential Information without the Company's express written consent; nor
shall Employee make use of any such Confidential Information for his own purpose
or for the benefit of any person, firm, corporation or other business entity,
except the Company or any subsidiary or affiliate thereof. Upon termination of
employment for any reason, Employee will immediately return all books, files,
papers, records and documents (including
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those contained in computer disks) relating to the business of the
Company.
11. Right to Injunctive Relief: The Employee acknowledges that the
Company will suffer irreparable injury, not readily susceptible of valuation in
monetary damages, if the Employee breaches any of his obligations under
Paragraph 10 above. Accordingly, the Employee agrees that the Company shall be
entitled, in addition to, and not in lieu of, any other available remedies, to
seek and obtain injunctive relief against any breach or prospective breach by
the Employee of the Employee's obligations under Paragraph 10 of this Agreement,
in any Federal or State court sitting in the State of New Jersey. The Employee
hereby submits to the jurisdiction of those courts for the purposes of any
actions or proceedings instituted by the Company to obtain such injunctive
relief, and agrees that process may be served by registered mail, addressed to
the last address of the Employee known to the Company, or in any other manner
authorized by law.
12. Liability Insurance:
a. Insurance: Subject only to the provisions of Paragraph
12(b) below, the Company hereby agrees that, so long as Employee shall continue
to serve as a director, officer, employee or consultant of the Company (or shall
continue at the request of the Company to serve as a director, officer,
employee, partner, consultant, or agent of another corporation, partnership,
joint venture, trust or other enterprise), and thereafter so long as
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Employee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative
by reason of the fact that Employee was a director, officer, or employee of the
Company (or served in any of said other capacities), the Company will purchase
and maintain in effect for the benefit of Employee one or more valid, binding
and enforceable policies of directors and officers insurance providing, in all
respects, aggregate coverage of at least $20,000,000, after a deductible payable
by Employee of at least $150,000 (the "Insurance Policies").
b. Limitation on Company Obligation: The Company shall not be
required to maintain the Insurance Policies in effect if said insurance is not
reasonably available or if, in the reasonable business judgment of the then
Board, either (i) the premium cost for such insurance is substantially
disproportionate to the amount of coverage, or (ii) the coverage provided by
such insurance is so limited by exclusions that there is insufficient benefit
from such insurance.
c. Legal Malpractice Insurance: The Company agrees to exercise
reasonable efforts to secure legal malpractice insurance to cover the Employee
with respect to all legal matters relating to the Company in which the Employee
is involved, provided such insurance is available for in-house general counsel.
13. Indemnity:
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a. Subject only to the exclusions set forth in Paragraph 13(b)
below and the restrictions set forth in the New Jersey Business Corporation Act,
and in addition to any rights of Employee under the By-Laws of the Company, any
applicable state law, Paragraph 12 of this Agreement, or any other agreement,
the Company hereby further agrees to hold harmless and indemnify Employee:
i. Against any and all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by Employee in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Company, its
subsidiaries and/or affiliates) to which Employee is, was, or at any time
becomes, a party, or is threatened to be made a party, by reason of the fact
that Employee is, was, or at any time becomes, a director, officer, employee,
consultant, or agent of the Company (its subsidiaries and/or affiliates), or is,
or was, serving, or at any time serves, at the request of the Company, as a
director, officer, employee, consultant, partner, trustee or agent (regardless
of his title) of another corporation, partnership, joint venture, trust or other
enterprise; and
ii. Otherwise to the fullest extent as may be
provided to Employee by the Company under the provisions of the By-
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Laws of the Company and the New Jersey Business Corporation Act; and
iii. From any and all income and excise taxes
(and interest and penalties relating thereto) imposed on Employee with reference
to any payment under this Paragraph 13 (including, without limitation, payments
in indemnity for such taxes).
b. Notwithstanding the foregoing, no indemnity pursuant
to this Paragraph 13 shall be paid by the Company:
i. except to the extent the aggregate of losses
to be indemnified thereunder exceed the sum of Five Hundred Dollars ($500), plus
the amount of such losses for which the Employee has already been indemnified,
either pursuant to the By-Laws of the Company or any subsidiary, or pursuant to
any Insurance Policies purchased and maintained by the Company pursuant to
Paragraph 12 above;
ii. in respect to remuneration paid to Employee
if it shall be determined by a final judgment or other final adjudication that
such remuneration was in violation of law;
iii. on account of any suit in which judgment is
rendered against Employee for an accounting of profits made from the purchase or
sale by Employee of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, and amendments thereto, or
similar provisions of any Federal, state or local statutory law;
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iv. on account of actions or omissions by the
Employee which are finally adjudicated to have been material to the cause of
action adjudicated and (x) were in breach of his duty of loyalty to the Company
or its shareholders, (y) were not in good faith or involved a knowing violation
of law or (z) resulted in receipt by Employee of an improper personal benefit;
or
v. if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification to
Employee is not lawful.
c. All agreements and obligations of the Company contained
herein shall continue during the period Employee is a director, officer,
employee, consultant or agent of the Company (or is, or was, serving at the
request of the Company as a director, officer, employee, partner, consultant, or
agent of another corporation, partnership, joint venture, trust or other
enterprise), and shall continue thereafter so long as Employee shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Employee was an officer or director of the Company, or serving in any other
capacity referred to herein.
d. The Company shall not be liable to indemnify
Employee under this Agreement for any amounts paid in settlement of any action
or claim effected without its written consent. The Company shall not settle any
action or claim in any manner which
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would impose any penalty or limitation on Employee without Employee's written
consent. Neither the Company nor Employee will unreasonably withhold consent to
any proposed settlement.
e. The Company will pay all expenses immediately upon the
presentment of bills for such expenses. Employee agrees that Employee will
reimburse the Company for all reasonable expenses paid by the Company in
defending any civil or criminal action, suit or proceeding against Employee in
the event, and only to the extent, that it shall be ultimately determined that
Employee is not entitled to be indemnified by the Company for such expenses
under the provisions of the applicable state statute, the By-Laws, this
Agreement, or otherwise. This Agreement shall not affect any rights of Employee
against the Company, any insurer, or any other person to seek indemnification or
contribution.
f. If the Company fails to pay any expenses (including,
without limiting the generality of the foregoing, legal fees and expenses
incurred in defending any action, suit or proceeding), Employee shall be
entitled to institute suit against the Company to compel such payment, and the
Company shall pay Employee all costs and legal fees incurred in enforcing such
right to prompt payment.
g. To the extent allowable under New Jersey law, the burden of
proof with respect to any proceeding or determination with respect to employee's
entitlement to indemnification under this Agreement shall be on the Company.
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h. Neither the failure of the Company, its Board of Directors,
independent legal counsel, nor its stockholders, to have made a determination
that indemnification of the Employee is proper in the circumstances because he
has met the applicable standard of conduct set forth in the New Jersey Business
Corporation Act, nor an actual determination by the Company, its Board of
Directors, independent legal counsel, or its shareholders, that the Employee has
not met such applicable standard of conduct shall be a defense to any action on
the part of Employee to recover indemnification under this Agreement, or create
a presumption that Employee has not met the applicable standard of conduct.
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14. Change in Control:
a. For purposes of this Agreement, "Change in Control" shall
have the meaning given to the term "Change of Control" in Section 1.1 of the
Indenture dated February 17, 1994 among the Company, certain of its subsidiaries
and First Trust National Association, as Trustee, relating to the Company's
$135,000,000 11 1/2% Senior Secured Notes due 2001 (the "Indenture"); provided,
however, that for purposes of this Agreement, all references to "35% of the
total voting power" of the Company in such definition shall be amended to read
"25% of the total voting power."
15. Miscellaneous:
a. Employee Representations: The Employee represents
and warrants to the Company that there is no restriction or limitation, by
reason of any agreement or otherwise, upon the Employee's right or ability to
enter into this Agreement and fulfill his obligations under this Agreement.
b. Termination of Employment Agreements: All other
agreements between the Company and Employee with respect to employment (except
stock option agreements) shall be terminated and superseded hereby upon
execution of this Agreement.
c. Interest on Amounts Due: In the event any amount
due either to Employee or the Company under this Agreement is not paid when due,
it shall thereafter bear interest at the rate equivalent to the Citibank, N.A.,
New York, New York (or its successor), prime rate as it shall vary from time to
time over the
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period until paid. Such interest shall be compounded on a monthly basis.
d. Key Man Insurance: Employee expressly acknowledges
that the Company may obtain up to $5 million in Key Man insurance coverage with
respect to Employee and Employee shall cooperate fully in order for the Company
to obtain such insurance.
e. Priority Over Stock Option Agreements: In the event
of a conflict between this Agreement and any of the stock option agreements
previously entered into between the Company and Employee, the terms and
conditions of this Agreement shall control.
f. Amendment: This Agreement shall not be changed or
terminated except in writing signed by both parties.
g. Governing Law: This Agreement shall be governed by,
and construed under, the substantial laws of the State of New Jersey without
regard to choice of law doctrines.
h. Successors and Assigns: The terms and provisions of this
Agreement shall inure to the benefit of the personal representatives, heirs and
legatees of the Employee, and shall be binding upon and inure to the benefit of
any successors or assigns of the Company. This Agreement shall survive any
merger or voluntary or involuntary dissolution, and shall bind any person
acquiring the Company's assets in such event.
i. Notices: Any notices or other communications
required or permitted to be given under this Agreement shall be
deemed given on the day when delivered in person, on the next day
32
after being sent via overnight mail (such as Federal Express), or on the third
business day after the day on which mailed by first class mail from within the
United States of America addressed to the party receiving the communication at
the principal office of the Company, or such other address as the party
receiving the communication shall have designated to the other in writing.
j. Consents and Approvals: As to any paragraph of this
Agreement providing for the consent or approval of any party to this Agreement,
such provision shall be deemed to include the restriction that any such exercise
of approval or consent shall be reasonable and not unreasonably denied
regardless of whether such provision actually sets forth a specification that
such an approval or consent shall not be unreasonably denied.
k. Severability: If any provision of this Agreement is found
to be invalid or unenforceable, the remainder of this Agreement shall,
nevertheless, remain in full force and effect. If any provision is held invalid
or unenforceable with respect to particular circumstances, it shall nevertheless
remain in full force and effect in all other circumstances. If the provision
held invalid or substantially limited involves the compensation or benefits of
Employee, Employee shall have the option for thirty (30) days following the
final decision holding such provision to be invalid to terminate this Agreement
by written notice to the Company.
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l. Captions: Captions in this Agreement are merely to
facilitate references, and shall not affect the interpretation of any of the
provisions.
m. Dispute Resolution: Except as provided for in Paragraph 11
hereof, all claims or disputes regarding or arising out of this Agreement shall
be resolved using arbitration. Such dispute shall be resolved pursuant to the
procedural rules of the American Arbitration Association using a panel of three
(3) arbitrators. Either party may deliver a written demand for arbitration of
the claim or dispute to the other and to the American Arbitration Association.
Both parties must then select one (1) arbitrator no later than twenty (20) days
after delivery and receipt of such notice of arbitration. Both such arbitrators
shall have experience in the gaming industry. The third arbitrator will be
selected by the first two arbitrators from a panel obtained from the American
Arbitration Association and shall be an attorney. Once the panel is established,
it shall hold a hearing in Trenton, New Jersey within thirty (30) days to
resolve the dispute under the Agreement. The determination and award of the
panel shall be binding on both parties and may be enforced in any court of
competent jurisdiction.
n. Independent Counsel: Employee and the Company acknowledge
and agree that the Company has been represented in connection with this
Agreement by the law firm of Mason, Briody, Gallagher & Taylor and Employee has
had an opportunity to consult
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with his own independent counsel with respect to this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed at Atlantic
City, New Jersey, on the day and year first above written.
CAPITAL GAMING INTERNATIONAL, INC.
Dated: May 17, 1996 By: /s/ Edward M. Tracy
-------------- ----------------------------------
Edward M. Tracy,
Chief Executive Officer
EMPLOYEE
Dated: May 17, 1996 /s/ William S. Papazian
-------------- -------------------------------------
William S. Papazian
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