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EXHIBIT 10.1
SEVERANCE AGREEMENT AND RELEASE
This SEVERANCE AGREEMENT AND RELEASE ("Agreement") is made as of the 5th
day of July, 2000, by and among GTECH Holdings Corporation, GTECH Corporation
(together with their respective direct and indirect subsidiaries and affiliates
and any of their respective officers, directors or employees (collectively
"GTECH" or the "Company") and William Y. O'Connor ("Mr. O'Connor").
WITNESSETH:
WHEREAS, the parties have agreed that it is in their mutual best interest
that Mr. O'Connor and GTECH sever their relationship; and
WHEREAS, the parties wish to set forth their agreement respecting the
terms and conditions thereof.
NOW, THEREFORE, the parties hereby agree as follows:
1. Termination of Employment. It is hereby agreed that Mr. O'Connor's
employment terminates effective July 5, 2000 (the "Termination Date"),
and as of the Termination Date Mr. O'Connor shall no longer serve: (a) as
an employee, director and Chairman of the Board of Directors of GTECH
Holdings Corporation; (b) as an employee, director and Chairman of the
Board of Directors of GTECH Corporation, and (c) as an employee, officer
and director of all direct and indirect subsidiaries and other affiliates
of GTECH Holdings Corporation.
2. Severance Payment. (a) GTECH shall make to Mr. O'Connor a lump sum
payment with respect to post-employment severance of $8,748,785 (before
deduction of any tax withholdings) immediately after this Agreement
becomes effective in accordance with Section 19 below.
(b) This payment and the other benefits provided for in this Agreement
constitute the entire obligation of GTECH, represent full and complete
satisfaction by GTECH of all obligations under that certain Employment
Agreement dated as of September 19, 1997, as amended or clarified (the
"Employment Agreement"), and constitute full and complete settlement of
any claim under law or equity that Mr. O'Connor might otherwise assert
against GTECH for compensation, benefits or remuneration of any form.
3. Benefits. From and after the Termination Date, Mr. O'Connor shall not be
eligible for any GTECH benefits or perquisites, and shall no longer be
eligible to participate in any GTECH benefit program or plan, except as
expressly set forth below:
a. GTECH shall (i) for a period of three years following the Termination
Date, or until Mr. O'Connor's earlier death, continue, at its expense, to
provide Mr. O'Connor with the term life insurance policy in accordance
with the policy requirements provided for in Section 6(b) of the
Employment Agreement (or if higher the amount in effect as of the
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Termination Date) ("Life Insurance Coverage"), (ii) for a period of
eighteen months following the Termination Date but in no circumstances
commencing not later than one year after the Termination Date, provide
Mr. O'Connor with out placement services through a bona fide out
placement organization acceptable to Mr. O'Connor that, at a minimum,
agrees to supply Mr. O'Connor with out placement counseling, a private
office and administrative support, including telephone service, and (iii)
for a period of six years following the Termination Date, or until Mr.
O'Connor's earlier death, continue to provide the medical (including
dental, orthodontic and optical) coverage specified in Section 4 of
Appendix B of the Employment Agreement ("Medical Coverage") and on the
terms and conditions so specified at substantially the same level as
provided to Mr. O'Connor and his spouse, and his dependents, as of the
Termination Date. Thereafter, Mr. O'Connor shall be entitled to whatever
medical coverage, if any, as is required to be provided by applicable
law.
b. Mr. O'Connor will become fully vested in the GTECH's Supplemental
Retirement Plan for Senior Executives ("SERP") in existence as of the
date hereof and in any other non-qualified, deferred compensation,
incentive compensation or retirement plan currently in effect (together
with the SERP, the "non-qualified Plans"). Within 30 days after the
Termination Date, GTECH shall pay to Mr. O'Connor the sum of (i) the
present value of all benefits accrued under the Non-qualified Plans (as
supplemented by any early retirement subsidies), using such actuarial
assumptions as are then used to fund GTECH's tax-qualified defined
benefit pension plan (or, if there is no such plan, such actuarial
factors as would reasonably be used by comparable companies in funding
defined benefit pension plans (but including, in all events, an interest
rate no greater than the rate that would then be used by the Pension
Benefit Guaranty Corporation to value immediate annuities upon plan
termination)), and (ii) an amount equal to three times the average
benefit accrued (in the case of plans providing for accruals of
identified future benefits) and GTECH contributions (in the case of other
plans) made to GTECH's tax-qualified defined benefit plan and
profit-sharing and 401(k) retirement plan and the Non-qualified Plans
over the previous three fiscal years (as supplemental by, in the case of
accrued benefits, any early retirement subsidies). GTECH shall also pay
to Mr. O'Connor (i) any amount in Mr. O'Connor's account under GTECH's
profit sharing and 401(k) plan forfeited by the Mr. O'Connor due to the
termination of his employment, and (ii) the present value of any accrued
benefit (as supplemented by any early retirement subsidies) under any
defined benefit plan of GTECH forfeited by Mr. O'Connor due to the
termination of his employment, determined using such actuarial
assumptions as are then used to fund such plan.
c. To the extent not otherwise addressed herein, Mr. O'Connor shall
receive the full benefit of all tax gross-ups provided for under the
Employment Agreement for benefits in effect up to and through, or which
continue after the Termination Date and any payments hereunder in respect
of benefits subject to a gross-up obligation under the Employment
Agreement that would have continued after the Termination Date, without
duplication of any such gross-up obligation for any benefits.
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d. GTECH shall also bear the expense of : (i) tax preparation services
for Mr. O'Connor for the 2000 calendar year and (ii) reasonable
attorneys' fees incurred by Mr. O'Connor in the negotiation and
preparation of this Agreement. In addition, GTECH shall reimburse Mr.
O'Connor for all reasonable and necessary business expenses incurred but
not yet reimbursed up through the Termination Date and GTECH shall be
responsible for the costs of the country club, health club and spa
memberships and payments with respect to the automobile which the Company
had been covering until the Termination Date, after which time those
expenses shall be the exclusive responsibility of Mr. O'Connor.
e. In the event that Mr. O'Connor secures other employment (including
employment as a consultant) during the period in which the Company is
obligated to continue Life Insurance Coverage and/or Medical Coverage
under subsection (a) above as applicable, GTECH may offset such
obligations by any Life Insurance Coverage or Medical Coverage which Mr.
O'Connor receives during the applicable continuation period from a
successor employer, so long as the aggregate coverage (from GTECH and the
successor employer) is no less than the aggregate coverage provided by
GTECH as of the Termination Date; provided that nothing contained herein
shall limit any continuation of coverage required by law. Mr. O'Connor
shall notify the Company promptly of his securing of any such employment
(including employment as a consultant).
f. Mr. O'Connor shall be indemnified by the Company in connection with
his performance of services under his Employment Agreement and the
termination of his employment at the maximum level permitted by law. The
Company shall cause Mr. O'Connor to continue to be covered by directors
and officers liability insurance substantially similar to that provided
to the Company's directors and officers, but in no event shall such
liability insurance provide less than $20,000,000 of coverage for such
directors and officers, including Mr. O'Connor. The Company shall
continue to indemnify Mr. O'Connor as provided above, and maintain such
liability insurance with coverage for Mr. O'Connor, for any claims that
may be made against Mr. O'Connor with respect to his service as a
director or officer of the Company for claims arising out of conduct on
or before the Termination Date.
4. Continuing Obligations. Mr. O'Connor further covenants with GTECH as
follows:
a. For a period of three years after the Termination Date, Mr. O'Connor,
upon reasonable notice, shall furnish such information and proper
assistance to the Company as may reasonably be required in connection
with any third party claims, investigations, litigation or similar
proceedings which may involve the Company with respect to the period of
Mr. O'Connor's employment with the Company. If such information or
assistance is required, Mr. O'Connor shall be reimbursed by the Company
for any and all reasonable expenses incurred by him in providing such
information and assistance and shall be compensated by the Company at a
reasonable hourly rate to be agreed upon by the parties for the time he
spends providing such information and assistance.
b. Mr. O'Connor shall not knowingly use for his own benefit or disclose
or reveal to any unauthorized person any trade secret or other
confidential information relating to the Company, including any customer
lists, customer needs, price and performance
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information, processes, specifications, hardware, software, firmware,
programs, devices supply sources and characteristics, business
opportunities, marketing, promotional, pricing and financing techniques,
or other information relating to the business of the Company, provided
that such restriction on additional information shall not apply to
information which is (i) proven to be generally available in the
industry, (ii) disclosed in published literature or (iii) obtained by Mr.
O'Connor after the Termination Date from a third party without binder of
secrecy. Mr. O'Connor agrees that, except as otherwise agreed by the
Company, he will return to the Company, within seven days after the
Termination Date, any physical embodiment of such confidential
information, except that in any event Mr. O'Connor may retain his
rolodex.
c. All rights, title and interest in and to any ideas, inventions,
technology, processes, know-how, works hardware, software, firmware,
programs, devices, trade secrets, trade names, trademarks or service
marks, which Mr. O'Connor may have conceived, created, organized,
prepared or produced during the period of his employment with the Company
and which relate to the business of the Company, and all rights, title
and interest in and to any patents, patent applications, copyright
registrations and copyright applications resulting therefrom, are owned
by the Company, and Mr. O'Connor agrees to provide reasonable assistance
to the Company, including executing documents, providing evidence and
testimony, in establishing, enforcing and maintaining such rights, title
and interest of the Company; provided that the Mr. O'Connor shall be
compensated at a reasonable hourly rate to be agreed upon by the parties
and reimbursed for any and all reasonable expenses incurred as well as
for any compensation from other sources that Mr. O'Connor can demonstrate
was foregone by virtue of providing such assistance.
d. Mr. O'Connor does hereby irrevocably constitute, authorize, empower
and appoint the Company, or any of its officers, such Mr. O'Connor's true
and lawful attorney (with full power of substitution and delegation) in
Mr. O'Connor's name, and in Mr. O'Connor's place and stead, or in the
Company's name, to take and do such action, and to make, sign, execute,
acknowledge and deliver any and all instruments or documents which the
Company, from time to time, may deem desirable or necessary to vest in
the Company, its successors and assigns, any of the rights, title or
interest granted pursuant to subsection (c) above for the use and benefit
of the Company, its successors and assigns.
5. Release. (a) Mr. O'Connor hereby releases and forever discharges GTECH,
its present and former directors, officers, employees, agents,
subsidiaries, shareholders, successors and assigns from any and all
liabilities, causes of action, debts, claims and demands (including
without limitation claims and demands for monetary payment) both in law
and in equity, known or unknown, fixed or contingent, which he may have
or claim to have based upon or in any way related to employment (as an
officer, director or employee), rights or entitlements related thereto or
termination of such employment by GTECH and hereby covenants not to file
a lawsuit or charge to assert such claims. This includes but is not
limited to claims of breach of contract and wrongful termination and
claims arising under the Federal Age Discrimination in Employment Act,
and any other federal, state or local laws prohibiting employment
discrimination or claims growing out of any legal restrictions on GTECH's
right to terminate its employees. Any rights which Mr.
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O'Connor may have to sell unregistered shares of GTECH Holdings
Corporation Common Stock pursuant to Rule 144 shall not be unreasonably
infringed by GTECH.
(b) GTECH hereby releases and forever discharges Mr. O'Connor and his
estate from any and all liabilities, causes of action, debts, claims and
demands both in law and in equity, known or unknown, fixed or contingent,
which the Company may have or claim to have against Mr. O'Connor based
upon or in any way related to his employment at GTECH as of and through
the Termination Date or his termination of his employment.
(c) These releases shall not apply to any breach of this Agreement.
6. Advice of Counsel. Mr. O'Connor understands that various State and
Federal laws prohibit employment discrimination based on age, sex, race,
color, national origin, religion, handicap or veteran status. These laws
are enforced through the Equal Employment Opportunity Commission (EEOC),
Department of Labor and State Human Rights Agencies. Mr. O'Connor
acknowledges that he has been advised by GTECH to discuss this Agreement
with his attorney and has been encouraged to take this Agreement home for
up to twenty-one days so that he can thoroughly review and understand the
effect of this Agreement before acting on it.
7. Non-Competition and Other Restrictions. Mr. O'Connor further covenants
with GTECH as follows and, with respect to Section 7(a), expressly agrees
that $1,500,000 of the cash payment hereunder is subject to his
compliance with that subsection.
a. For a period of three years after the Termination Date, Mr. O'Connor
shall not engage or propose to engage, directly or indirectly (which
includes owning, managing, operating, controlling, being employed by,
acting as a consultant to, giving financial assistance to, participating
in or being connected in any material way with any business or person so
engaged) anywhere in the United States, including its territories and
possessions, or in any foreign country (the United States and any such
foreign country being deemed to be a separate "Territory") in any
business which competes or proposes to compete with any business
(including, without limitation, the Lottery and Gaming Business, the EBT
Business and network communications services) in which the Company was
engaged or proposed to be engaged in such Territory at the time of the
termination of Mr. O'Connor's employment; provided, that Mr. O'Connor's
ownership as a passive investor of less than one percent of the issued
and outstanding stock or equity, or $100,000 principal amount of any debt
securities, of any corporation, partnership or other entity so engaged
shall not by itself by deemed to constitute such engagement by Mr.
O'Connor. As used herein, the "Lottery and Gaming Business" shall mean
the provision of products or services of every nature relating to the
operation of all manner of lotteries, non-lottery games of chance and
parimutuel wagering however and wherever conducted, and "EBT Business"
shall mean the provision of products or services of every nature relating
to the distribution by electronic means of payments or payments in kind,
and the conducting by electronic means of financial transactions,
relating to governmental public assistance programs.
b. Further, for a period of three years after the Termination Date, Mr.
O'Connor shall not (i) intentionally disturb or interfere with any
business relationship between the Company
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and any of its employees, dealers, customers, suppliers or similar
business associates, or (ii) solicit or cause to be solicited any officer
or employee of the Company to terminate such person's relationship with
the Company.
c. Mr. O'Connor recognizes that the possible restrictions on Mr.
O'Connor's activities which may occur as a result of his performance of
his obligations under this Section 7 and Section 4(b) are required for
the reasonable protection of GTECH and its investments, and Mr. O'Connor
expressly acknowledges that such restrictions are fair and reasonable for
that purpose. Mr. O'Connor further expressly acknowledges that damages
alone will be an inadequate remedy for any breach or violation of any of
the provisions of this Section 7 and Section 4(b), and that GTECH, in
addition to all other remedies hereunder and at law or equity, shall be
entitled, as a matter of right, to injunctive relief, including specific
performance, with respect to any such breach or violation, in any court
of competent jurisdiction. If any of the provisions of this Section 7 are
held to be in any respect an unreasonable restriction upon Mr. O'Connor
then they shall be deemed to extend only over the maximum period of time,
geographic area, and/or range of activities as to which they may be
enforceable.
8. Assistance. After the Termination Date, GTECH shall make itself available
in any third party claims, investigations, litigation or similar
proceedings to answer any questions relating to Mr. O'Connor's employment
or actions as an employee, officer or director of GTECH, including
without limitation attendance at any deposition or similar proceeding.
9. Return of Property. Mr. O'Connor shall return to GTECH any GTECH property
in his possession, custody or control within fourteen days of the
Termination Date; provided, however, that Mr. O'Connor may retain the car
which GTECH provided him during his employment for the current wholesale
value as customarily determined and he may retain the office equipment
currently located in his home office in New Jersey. Within such time,
GTECH shall ship by professional movers which are insured, to Mr.
O'Connor's home, at GTECH's expense, personal property of Mr. O'Connor
presently on GTECH's business premises or the condominium in East
Greenwich.
10. Comments. Mr. O'Connor shall at no time make or cause to be made any
derogatory or disparaging comments regarding GTECH, its business, or its
present or past directors, officers or employees.
11. Tax Withholding. The Company may withhold from any compensation or
benefits payable under this agreement all Federal, State, City, or other
taxes as shall be required pursuant to any law or governmental
regulations or ruling.
12. No Admission. The execution of this Agreement does not represent and
shall not be construed as an admission of a violation of any statute or
law or breach of any duty or obligation by either GTECH or Mr. O'Connor.
13. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof,
and this Agreement shall be construed in all respects as if such invalid
and unenforceable provisions were omitted.
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14. Non-assignability. (a) Neither this Agreement nor any rights or interest
hereunder shall be assignable by Mr. O'Connor, his beneficiaries, or
legal representatives without the Company's prior written consent. In the
event of any sale, transfer or other disposition of all or substantially
all of the Company's assets or business, whether by merger, consolidation
or otherwise to any entity or person other than the Company, this
Agreement, and the rights and obligations of the Company under it, shall
be transferred to such entity or person pursuant to an agreement in form
and substance reasonably satisfactory to Mr. O'Connor from any successor
to the business of the Company to assume and agree to perform this
Agreement, but such assignment or transfer shall not limit the Company's
liability under this Agreement to Mr. O'Connor.
(b) This Agreement shall be binding upon, and accrue to the benefit of,
Mr. O'Connor and the Company and their respective heirs, executors,
administrator, successors and permitted assigns, including, in the case
of the Company, any person or entity acquiring all or substantially all
of the Company's assets.
15. Governing Law; Attorneys' Fees. (a) This Agreement is made pursuant to
and shall be governed by the laws of the State of Rhode Island, without
regard to its rules regarding conflict of laws. The parties agree that
the courts of the State of Rhode Island, and the Federal Courts located
therein, shall have exclusive jurisdiction over all matters arising from
this Agreement and further agree to accept service of process with
respect to any such proceedings.
(b) GTECH shall pay, at least monthly, all costs and expenses, including
attorney's fees and disbursements, incurred by Mr. O'Connor in connection
with any legal proceeding (including an arbitration), whether or not
instituted by GTECH or Mr. O'Connor, relating to any provisions of this
Agreement, including but not limited to the interpretation, enforcement
or reasonableness thereof; provided that if Mr. O'Connor instituted the
proceeding and the judge or other decision maker presiding over the
proceeding affirmatively finds that Mr. O'Connor has failed to prevail on
all material issues, Mr. O'Connor shall pay his own costs and expenses
(and, if applicable, return any amounts theretofore paid to Mr. O'Connor
under this subsection 15(b).
16. Entire Agreement. This Agreement contains the entire understanding
between Mr. O'Connor and GTECH regarding the subject matter hereof and,
except as expressly set forth herein, supersedes any prior agreements,
written or oral, including without limitation the Employment Agreement. `
17. Stock Options. (a) Mr. O'Connor's outstanding options, whether or not
they have vested as of the Termination Date, shall accelerate and become
vested in full and shall remain exercisable following the Termination
Date, unless subject to earlier expiration or termination in accordance
with the terms of the stock option plan in effect as of the Termination
Date. However, notwithstanding any provision of this Agreement, in no
event shall Mr. O'Connor be treated in a manner less favorable with
respect to stock options or Restricted Stock then as provided for in the
Employment Agreement as though
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Mr. O'Connor's departure from the Company was termination not for cause
for purposes of the Employment Agreement.
(b) The Company shall use his best efforts to file, and cause to be
effective under the Securities Act of 1933, as amended, a registration
statement on Form S-8 (or a comparable form) with respect to the
restricted stock shares (or other rights) of equity, if any, issued by
the Company as of or before the Termination Date under the Employment
Agreement. The Company will also use its best efforts to ensure that each
grant provided for under or otherwise contemplated by the Employment
Agreement shall meet the requirements for exemption under Rule 16b-3
under the Securities Exchange Act of 1934, as amended.
18. Modification. This Agreement may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought. Mr.
O'Connor acknowledges that he has not relied upon any representation or
statement, written or oral, not set forth in this Agreement.
19. Revocation; Effective Date. Mr. O'Connor may revoke his agreement to the
terms hereof at any time during the seven-day period immediately
following the date of his signature below ("Revocation Period") by
delivering written notice of his revocation to the GTECH. This Agreement
shall become effective upon the expiration of the Revocation Period.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth below.
GTECH Holdings Corporation Attest:
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by
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GTECH Corporation Attest:
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by
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Witness:
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William Y. O'Connor
date