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EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT made as of the 15th day of June, 2001, by and between WMS
Industries Inc., a Delaware corporation (the "Corporation"), and Brian R.
Gamache ("Executive").
WITNESSETH:
WHEREAS, the Corporation and Executive are parties to an employment
agreement dated as of March 21, 2000 (the "Old Employment Agreement"); and
WHEREAS, the Corporation and Executive desire to terminate the Old
Employment Agreement and enter into a new employment agreement on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree as follows:
1. TERMINATION OF OLD EMPLOYMENT AGREEMENT. The Old Employment Agreement is
hereby terminated and of no further force and effect.
2. EMPLOYMENT; DUTIES. The Corporation hereby employs Executive as an
executive of the Corporation to perform services as President and Chief
Executive Officer and to perform such other supervisory, managerial or executive
duties on behalf of the Corporation as the Board of Directors of the Corporation
may from time to time determine. Executive has been elected as a director of the
Corporation. Executive agrees to serve in such capacity in accordance with the
Corporation's by-laws.
3. ACCEPTANCE AND LOYALTY. Executive hereby accepts such employment and
agrees that throughout the period of his employment hereunder, he will devote
his full time, attention, knowledge and skills, faithfully, diligently and to
the best of his ability, in furtherance of the business of the Corporation and
will perform the duties assigned to him pursuant to
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Section 2 hereof. Executive shall perform all duties and responsibilities in a
professional manner consistent with the skill, competence and efficiency
expected of an executive employee performing the duties assigned to Executive
and subject to the direction and control of the Board of Directors of the
Corporation. Executive will do such traveling as may be reasonably required of
him in the performance of his obligations hereunder. Executive shall at all
times be subject to, observe and carry out such rules, regulations, policies,
directions and restrictions as the Corporation may from time to time establish.
During his employment hereunder, Executive shall not, without the written
approval of the Board of Directors of the Corporation first had and obtained in
each instance, directly or indirectly, accept employment or compensation from or
perform services of any nature for, any business enterprise other than the
Corporation or any of its subsidiaries or affiliates. Notwithstanding the
foregoing, Executive may render without compensation investment services to any
immediate member of Executive's family, which shall include the Executive and
any trust or account which is comprised entirely of assets held for the benefit
of such Executive and/or immediate members of his family. During Executive's
employment hereunder, Executive shall not be entitled to additional compensation
for serving in any office, including as a director, of the Corporation or any of
its subsidiaries or affiliates to which he may be elected. Executive represents
and warrants that, to his best knowledge, there are no contractual, licensing or
other impediments to the performance of Executive's services hereunder.
4. TERM. The term of Executive's employment hereunder shall commence on the
date hereof (the "Commencement Date") and shall terminate on June 30, 2004 (the
"Original Term"); provided, however, that the term of Executive's employment
shall be deemed automatically extended from time to time such that the term of
such employment shall at no time
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be less than three years (the "Extended Term"); and provided further, that
Executive's services hereunder may be terminated (i) by either party effective
upon expiration of the Original Term or the Extended Term upon written notice
from the terminating party to the other party dated and received at least three
years prior to the respective termination date, or (ii) by the Corporation
effective on the Date of Termination as defined in Section 14.6 if such
termination is for "cause" as defined in Section 14.3, or (iii) by Executive
effective on the Date of Termination as defined in Section 14.6 if such
termination is for "good reason" as defined in Section 14.4. The Original Term
and the Extended Term are hereafter collectively referred to as the "Term" and
each full year of the Term is hereafter referred to as an "Employment Year."
5. COMPENSATION AND BENEFITS.
5.1 BASE SALARY. The Corporation shall pay to Executive a base salary
("Base Salary") at the rate of Five Hundred Fifty Thousand Dollars ($550,000)
per annum for each Employment Year, or such greater amount as the Board of
Directors of the Corporation shall from time to time determine. Base salary
shall be payable in equal installments in accordance with the Corporation's
normal payroll policy and will be reviewed by the Board of Directors of the
Corporation at least once each Employment Year.
5.2 BONUS. Commencing with the fiscal year of the Corporation
beginning July 1, 2001, and each fiscal year thereafter during the Term,
Executive shall be paid a bonus in the amount equal to the lesser of (i) One
Million Dollars ($1,000,000); or (ii) one percent (1%) of "adjusted pre-tax
income." The term "adjusted pre-tax income" means the "income before tax
provision and extraordinary items" of the Corporation as reported on its audited
consolidated statements of operations with respect to the applicable fiscal
year, but modified to eliminate the effect of the bonus payable pursuant to this
Section 5.2, such modification to be determined by
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the Board of Directors in accordance with generally accepted accounting
principles. The amount of the bonus, if any, to which Executive becomes entitled
pursuant to this Section shall be paid within 15 days after the Corporation
publicly announces its audited results for the applicable fiscal year. With
respect to the fiscal year of the Corporation during which Executive's
employment hereunder terminates for any reason, Executive shall be entitled to a
pro rata bonus based upon the number of days in such fiscal year during which
Executive was employed by the Corporation. If requested by Executive, the
Corporation shall make quarterly interest free advances against the bonus in
amounts mutually agreeable to the Corporation and Executive. If such advances
exceed the bonus to which Executive is entitled for any fiscal year, such excess
shall be repaid by Executive to the Corporation within 15 days after the
Corporation publicly announces its audited results for the applicable fiscal
year. In its discretion, the Board of Directors of the Corporation may award to
Executive a bonus greater than that provided for in this Section.
5.3 HEALTH INSURANCE, ETC. Executive shall be entitled to participate,
to the extent he is eligible under the terms and conditions thereof, in any
disability, hospitalization, insurance, medical service, or other health-related
employee benefit plan which is generally available to executive employees of the
Corporation and which may be in effect from time to time during the Term,
including the Exec-U-Care insurance program. If the Corporation changes the
terms of any health insurance policies which cover Executive or members of his
family, the Corporation will use reasonable efforts to provide for such changed
policies to cover any pre-existing condition of Executive or such covered
members of his family at the time of such change. The Corporation shall be under
no obligation to institute or continue the existence of any such generally
available employee benefit plan.
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6. BUSINESS EXPENSES. The Corporation shall reimburse Executive for all
authorized expenses reasonably incurred by him in accordance with the
Corporation's travel and entertainment policies and procedures in effect during
the Term. Executive shall be entitled to fly first class on the Corporation's
business. So long as the Corporation retains its rights to use a corporate
aircraft, Executive will have the right to reasonable use of that aircraft for
corporate purposes.
7. STOCK OPTIONS.
7.1 Within 90 days after the Commencement Date on a date designated by
Executive, which date shall not be earlier than the date on which such
designation is made, the Corporation will grant Executive non-qualified options
to purchase One Hundred Seventy Five Thousand (175,000) shares of the
Corporation's common stock at the fair market value of such shares on the date
of grant under one or more of the Corporation's existing stock option plans. The
options will be exercisable for 58,334 shares on or after the first anniversary
of the date of grant, an additional 58,333 shares on or after the second
anniversary of the date of grant and an additional 58,333 shares on or after the
third anniversary of the date of grant, will provide for acceleration of vesting
as set forth in Section 16.3, and will otherwise provide for the normal terms
and conditions of options granted from time to time by the Corporation to
executive level employees.
7.2 Beginning with the fiscal year ending June 30, 2002, in each
fiscal year during the Term in which the Executive is employed by the
Corporation for the full fiscal year and in which the Corporation's diluted
earnings per share from continuing operations, as reported in the Corporation's
audited consolidated statements of operations, equals or exceeds the Minimum EPS
Amount, as defined below, for that fiscal year, the Corporation will grant
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Executive, within 30 days after the Corporation publicly announces its audited
results for such fiscal year, non-qualified options to purchase a minimum of One
Hundred Thousand (100,000) shares of the Corporation's common stock at the fair
market value of such shares on the date of grant. The options will be
exercisable for one-third of the shares covered thereby on or after the first
anniversary of the date of grant, an additional one-third of the shares covered
thereby on or after the second anniversary of the date of grant, and an
additional one-third of the shares covered thereby on or after the third
anniversary of the date of grant, will provide for acceleration of vesting as
set forth in Section 16.3, and will otherwise provide for the normal terms and
conditions of options granted from time to time by the Corporation to executive
level employees. The "Minimum EPS Amount" for fiscal 2002 shall mean 1.15 times
the Corporation's diluted earnings per share from continuing operations for
fiscal 2001 (such fiscal 2001 earnings per share to be computed before charges
for the payments to Louis J. Nicastro pursuant to the agreement dated June 12,
2001 between Mr. Nicastro and the Corporation); and the Minimum EPS Amount for
each subsequent fiscal year shall mean 1.15 times the Minimum EPS Amount for the
immediately preceding fiscal year. For example, if the Corporation's earnings
per share for fiscal 2001 are $1.40, the Minimum EPS Amount for fiscal 2002
would be $1.61, the Minimum EPS Amount for fiscal 2003 would be $1.85 and the
minimum EPS Amount for fiscal 2004 would be $2.13. Appropriate adjustments to
Minimum EPS Amounts shall be made for recapitalizations of the Corporation and
forward and reverse stock splits.
8. VACATION. Executive shall be entitled to four weeks paid vacation per
Employment Year. Vacation time shall not be accumulated from year to year.
9. KEY MAN LIFE INSURANCE. The Corporation may purchase and maintain
insurance covering the life of Executive ("Key-man Insurance") in an amount
determined by the
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Corporation. The Corporation shall be the sole owner and beneficiary of the
Key-man Insurance and may apply to the payment of premiums thereunder any
dividends declared and paid thereon. Executive shall submit himself from time to
time to such physical examinations as the Board of Directors of the Corporation
may deem necessary or desirable in connection with the purchase and maintenance
of the Key-man Insurance.
10. NON-COMPETITION AND NON-RAIDING. In consideration of the Corporation's
entering into this Agreement:
10.1 NON-COMPETITION. Executive agrees that during a period from the
Commencement Date until the greater of (i) two years after the termination of
Executive's employment hereunder for any reason, or (ii) such period of time as
Executive is receiving retirement benefits pursuant to Section 15 hereof, he
will not, directly or indirectly, without the prior written consent of the
Corporation, own, manage, operate, join, control, participate in, perform any
services for, invest in, or otherwise be connected with, in any manner, whether
as an officer, director, employee, consultant, partner, investor or otherwise,
any business entity which is engaged in the design, importation, manufacture
and/or sale of electronic gaming devices or coin-operated amusement games or any
business entity which is engaged in any other business in which the Corporation
or any affiliate of the Corporation is engaged at the end of the Term or the
time of termination of Executive's employment or, to the knowledge of Executive,
is planning to be engaged within one year after such termination. Nothing herein
contained shall be deemed to prohibit Executive from investing his funds in
securities of a company if the securities of such company are listed for trading
on a national stock exchange or traded in the over-the-counter market and
Executive's holdings therein represent less than five percent of the total
number of shares or principal amount of other securities of such company
outstanding.
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10.2 NON-RAIDING. Executive agrees that during a period from the
Commencement Date until the greater of (i) two years after the termination of
Executive's employment hereunder for any reason, or (ii) such period of time as
Executive is receiving retirement benefits pursuant to Section 15 hereof, he
will not, directly or indirectly, without the prior written consent of the
Corporation, induce or influence, or seek to induce or influence, any person who
is engaged by the Corporation or any affiliate of the Corporation as an
employee, agent, independent contractor or otherwise, to terminate his
employment or engagement, nor shall Executive directly or indirectly, through
any other person, firm or corporation, employ or engage, or solicit for
employment or engagement, or advise or recommend to any other person or entity
that such person or entity employ or engage or solicit for employment or
engagement, any person or entity employed or engaged by the Corporation or any
affiliate of the Corporation.
10.3 MODIFICATION. Executive acknowledges that the provisions of this
Section 10 are reasonable and necessary for the protection of the Corporation.
In the event that any provision of this Section 10, including any sentence,
clause or part hereof, shall be deemed contrary to law or invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions shall not be affected, but shall, subject to the discretion of such
court, remain in full force and effect and any invalid and unenforceable
provisions shall be deemed, without further action on the part of the parties
hereto, modified, amended and limited to the extent necessary to render the same
valid and enforceable.
11. CONFIDENTIALITY AGREEMENT.
11.1 As used herein, the term "Confidential Information" shall mean
any and all information of the Corporation and of its affiliates (for purposes
of this paragraph, the Corporation's affiliates shall be deemed included within
the meaning of "Corporation"),
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including, but not limited to, all data, compilations, programs, devices,
strategies, or methods concerning or related to (i) the Corporation's finances,
financial condition, results of operations, employee relations, amounts of
compensation paid to officers and employees and any other data or information
relating to the internal affairs of the Corporation and its operations; (ii) the
terms and conditions (including prices) of sales and offers of sales of the
Corporation's products and services; (iii) the terms, conditions and current
status of the Corporation's agreements and relationship with any customer or
supplier; (iv) the customer and supplier lists and the identities and business
preferences of the Corporation's actual and prospective customers and suppliers
or any employee or agent thereof with whom the Corporation communicates; (v) the
trade secrets, manufacturing and operating techniques, price data, costs,
methods, systems, plans, procedures, formulas, processes, hardware, software,
machines, inventions, designs, drawings, artwork, blueprints, specifications,
tools, skills, ideas, and strategic plans possessed, developed, accumulated or
acquired by the Corporation; (vi) any communications between the Corporation,
its officers, directors, stockholders, or employees, and any attorney retained
by the Corporation for any purpose, or any person retained or employed by such
attorney for the purpose of assisting such attorney in his or her representation
of the Corporation; (vii) any other information and knowledge with respect to
all products developed or in any stage of development by the Corporation; (viii)
the abilities and specialized training or experience of others who as employees
or consultants of the Corporation during the Term have engaged in the design or
development of any such products; and (ix) any other matter or thing, whether or
not recorded on any medium, (a) by which the Corporation derives actual or
potential economic value from such matter or thing being not generally known to
other persons or entities who might obtain
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economic value from its disclosure or use, or (b) which gives the Corporation an
opportunity to obtain an advantage over its competitors who do not know or use
the same.
11.2 Executive acknowledges and agrees that the Corporation is engaged
in highly competitive businesses and has expended, or will expend, significant
sums of money and has invested, or will invest, a substantial amount of time to
develop and maintain the secrecy of the Confidential Information. The
Corporation has thus obtained, or will obtain, a valuable economic asset which
has enabled, or will enable, it to develop an extensive reputation and to
establish long-term business relationships with its suppliers and customers. If
such Confidential Information were disclosed to another person or entity or used
for the benefit of anyone other than the Corporation, the Corporation would
suffer irreparable harm, loss and damage. Accordingly, Executive acknowledges
and agrees that, unless the Confidential Information becomes publicly known
through legitimate origins not involving an act or omission by Executive:
(1) the Confidential Information is, and all times hereafter shall
remain, the sole property of the Corporation;
(2) Executive shall use his best efforts and the utmost diligence to
guard and protect the Confidential Information from disclosure to any
competitor, customer or supplier of the Corporation or any other
person, firm, corporation or other entity;
(3) unless the Corporation gives Executive prior express written
permission, during his employment and thereafter, Executive shall not
use for his own benefit, or divulge to any competitor or customer or
any other person, firm, corporation, or other entity, any of the
Confidential Information which Executive may obtain,
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learn about, develop or be entrusted with as a result of Executive's
employment by the Corporation; and
(4) except in the ordinary course of the Corporation's business,
Executive shall not seek or accept any Confidential Information from
any former, present or future employee of the Corporation.
11.3 Executive also acknowledges and agrees that all documentary
and tangible Confidential Information including, without limitation, such
Confidential Information as Executive has committed to memory, is supplied or
made available by the Corporation to the Executive solely to assist him in
performing his services under this Agreement. Executive further agrees that
after his employment with the Corporation is terminated for any reason:
(1) Executive shall not remove from the property of the
Corporation and shall immediately return to the Corporation, all
documentary or tangible Confidential Information is his possession,
custody, or control and not make or keep any copies, notes, abstracts,
summaries, tapes or other record of any type of Confidential
Information; and
(2) Executive shall immediately return to the Corporation any and
all other property of the Corporation in his possession, custody or
control, including, without limitation, any and all keys, security
cards, passes, credit cards and marketing literature.
11.4 In the event that Executive is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process) to
disclose any of the Confidential Information, Executive shall provide the
Corporation with prompt written notice of any such request or
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requirement so that, if practical, the Corporation may seek a protective order
or other appropriate remedy and/or waive compliance with the provisions of this
Agreement. If, in the absence of a protective order or other remedy or the
receipt of a waiver, Executive receives advice of counsel that he is nonetheless
legally compelled to disclose Confidential Information to any tribunal or else
stand liable for contempt or suffer other censure or penalty, Executive may,
without liability hereunder, disclose to such tribunal only that portion of the
Confidential Information which such counsel advises is legally required to be
disclosed, provided that Executive exercises his reasonable efforts to preserve
the confidentiality of the disclosed Confidential Information, including,
without limitation, by cooperating with the Corporation to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the disclosed Confidential Information by such tribunal.
12. INVENTION DISCLOSURE. Any invention, improvement, design, development
or discovery conceived, developed, created or made by Executive alone or with
others, during the period of his employment hereunder and applicable to the
business of the Corporation or its affiliates, whether or not patentable or
registrable, shall become the sole and exclusive property of the Corporation.
Executive hereby assigns to the Corporation, all of his rights to any
"intellectual material" created or developed by him during the course of his
employment. As used herein, "intellectual material" shall include, but shall not
be limited to, ideas, titles, themes, production ideas, methods of presentation,
artistic renderings, sketches, plots, music, lyrics, dialogue, phrases, slogans,
catch words, characters, names and similar literary, dramatic and musical
material, trade names, trademarks and service marks and all copyrightable
expressions in audio visual works, computer software, electronic circuitry and
all mask works for integrated circuits. Executive shall disclose the
intellectual material promptly and completely to the
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Corporation and shall, during the period of his employment hereunder and at any
time and from time to time hereafter (a) execute all documents requested by the
Corporation for vesting in the Corporation or any of its affiliates the entire,
right, title and interest in and to the same, (b) execute all documents
requested by the Corporation for filing and prosecuting such applications for
patents, trademarks and/or copyrights as the Corporation, in its sole
discretion, may desire to prosecute, and (c) give the Corporation all assistance
it reasonably requires, including the giving of testimony in any suit, action or
proceeding, in order to obtain, maintain and protect the Corporation's right
therein and thereto. If any such assistance is required following the
termination of this Agreement, the Corporation shall reimburse Executive for his
time and the reasonable expenses incurred by him in rendering such assistance.
Anything contained in this paragraph to the contrary notwithstanding, this
Section does not apply to an invention for which no equipment, supplies,
facilities, or trade secret information of the Corporation or its affiliates was
used and which was developed entirely on the Executive's own time, unless (d)
the invention relates: (i) to the business of the Corporation or its affiliates,
or (ii) to the Corporation's or any of its affiliates' actual or demonstrably
anticipated research or development, or (e) the invention results from any work
performed by the Executive for the Corporation or its affiliates.
13. REMEDIES. Executive acknowledges and agrees that the business of the
Corporation is highly competitive and that violation of any of the covenants
provided for in Paragraphs 10, 11 and 12 of this Agreement would cause
immediate, immeasurable and irreparable harm, loss and damage to the Corporation
not adequately compensable by a monetary award. Accordingly, Executive agrees,
without limiting any of the other remedies available to the Corporation, that
any violation of said covenants, or any one of them, may be enjoined or
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restrained by any court of competent jurisdiction, and that any temporary
restraining order or emergency, preliminary or final injunctions may be issued
by any court of competent jurisdiction, without notice and without bond. In the
event any proceedings are commenced by the Corporation against Executive for any
actual or threatened violation of any of said covenants and if the Corporation
prevails in such litigation, then, Executive shall be liable to the Corporation
for, and shall pay to the Corporation, all costs and expenses of any kind,
including reasonable attorneys' fees, which the Corporation may incur in
connection with such proceedings.
14. TERMINATION OF EMPLOYMENT.
14.1 DEATH. Executive's employment shall terminate automatically
upon the death of Executive.
14.2 DISABILITY. If the Corporation determines in good faith that
the permanent disability of Executive has occurred during the Term (pursuant to
the definition of "permanent disability" set forth below), it may give to
Executive written notice in accordance with Section 18 of its intention to
terminate Executive's employment. In such event, Executive's employment with the
Corporation shall terminate effective on the 30th day after receipt of such
notice by Executive (the "Disability Effective Date"), provided that, within the
30 days after such receipt, Executive shall not have returned to full-time
performance of Executive's duties. For purposes of this Agreement, "permanent
disability" shall mean the absence of Executive from Executive's duties with the
Corporation on a full-time basis for 90 consecutive business days, or for six
months in any 12-month period during the Term, as a result of incapacity due to
mental or physical illness which is determined to be total and permanent by a
physician selected by the Corporation or its insurers and acceptable to
Executive or Executive's legal representative.
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14.3 CAUSE. The Corporation may terminate Executive's employment
during the Term for "cause." For purposes of this Agreement, "cause" means (i)
conviction (pursuant to a final or non-appealable judgment) of a felony or any
other crime involving fraud, larceny or dishonesty; (ii) failure and refusal to
follow a reasonable direction of the Board of Directors of the Corporation after
notice in writing of such failure or refusal and a cure period of ten days
thereafter; (iii) commission of any dishonest, willful or grossly negligent act
which has or is reasonably likely to have a material adverse effect on the
Corporation or its customer or trade relationships; or (iv) failure or refusal
to provide accurate and reasonably complete information with respect to
Executive's personal history to the Corporation or to governmental agencies
regulating the business of the Corporation, failure or refusal to reasonably
cooperate with such regulators or failure to obtain necessary regulatory
licensing approvals or clearances because of intentionally inaccurate,
intentionally incomplete or falsified information provided by Executive. It is
understood that poor financial performance of the Corporation shall not in
itself constitute grounds for the termination of Executive for "cause."
14.4 GOOD REASON. Executive's employment may be terminated by
Executive for "good reason." For purposes of this Agreement, "good reason" shall
mean (i) a material breach by the Corporation of any material provision of this
Agreement, after the Executive has provided the Corporation with notice thereof
and a reasonable opportunity to cure such breach, (ii) Executive is placed in
any position of lesser stature than that of President and Chief Executive
Officer of the Corporation or is assigned duties inconsistent with such
position, or is required to report to anyone other than the Board of Directors
of the Corporation; (iii) the Corporation reduces the amount of compensation to
which Executive is entitled under the terms of this Agreement; (iv) Executive is
removed from or not re-elected to the Board of Directors of
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the Corporation; or (v) the Corporation moves its headquarters to a location
other than its present location or to 3401 North California Avenue, Chicago,
Illinois without Executive's consent so that such headquarters are located more
than 40 miles farther from Executive's current place of residence than the
Corporation's headquarters are presently located.
14.5 NOTICE OF TERMINATION. Any termination by the Corporation for
"cause", or by Executive for "good reason", shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 18 of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than thirty days
after the giving of such notice). The failure by Executive or the Corporation to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of "good reason" or "cause" shall not waive any right
of Executive or the Corporation, respectively, hereunder or preclude Executive
or the Corporation, respectively, from asserting such fact or circumstance in
enforcing Executive's or the Corporation's rights hereunder.
14.6 DATE OF TERMINATION. "Date of Termination" means (i) if
Executive's employment is terminated by the Corporation for "cause", or by
Executive for "good reason", the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if Executive's
employment is terminated by the Corporation other than for "cause" or
"disability", the Date of Termination shall be the date on which the Corporation
notifies
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Executive of such termination and (iii) if Executive's employment is terminated
by reason of death or "disability", the Date of Termination shall be the date of
death of Executive or the Disability Effective Date, as the case may be.
14.7 PAYMENTS AS A RESULT OF TERMINATION. (a) If, during the Term,
the Corporation shall terminate Executive's employment other than for "cause",
death or "permanent disability", or Executive shall terminate employment for
"good reason:"
(i) the Corporation shall pay to Executive within 30 days
after the Date of Termination Executive's annual Base Salary
payable under Section 5.1 through the Date of Termination to
the extent not theretofore paid, and
(ii) within 30 days after the Corporation publicly announces
its audited results for the fiscal year in which the Date of
Termination occurs, the product of (x) the annual bonus payable
under Section 5.2 (the "Annual Bonus") and (y) a fraction (the
"Proration Fraction"), the numerator of which is the number of
days in the applicable fiscal year through the Date of
Termination, and the denominator of which is 365, less any
payments theretofore made to Executive in respect of the Annual
Bonus (the sum of the amounts described in clauses (i) and (ii)
shall be hereinafter referred to as the "Accrued Obligations");
and
(iii) the amount equal to the product of three times the sum
of one year's Base Salary and One Year's Bonus. "One Year's
Bonus" means the average annual bonus earned by Executive
during the two full fiscal years preceding the Date of
Termination or if there have not been two full
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fiscal years preceding the Date of Termination, One Year's
Bonus means the bonus earned by Executive during the one full
fiscal year preceding the Date of Termination or if there has
not been one full fiscal year preceding the Date of
Termination, One Year's Bonus means Five Hundred Thousand
Dollars ($500,000).
(b) If Executive's employment shall be terminated for "cause" or
the Executive terminates employment without "good reason" during the Term,
Executive's employment under this Agreement shall terminate without further
obligations by the Corporation to Executive other than the obligation to pay to
Executive the Accrued Obligations.
(c) If Executive's employment terminates at the expiration of the
Original term or the Extended Term, or by reason of death or permanent
disability, Executive's employment under this Agreement shall terminate without
further obligation of the Corporation to Executive other than the obligation to
pay to Executive the Accrued Obligations, such obligations as are provided in
Section 15, and if such termination is by reason of death, Executive's Base
Salary shall continue to be paid to his designated beneficiaries for a period of
six months after the date of death.
15. RETIREMENT. The Corporation will pay to Executive during the Payment
Period (as defined below), an annual retirement benefit equal to one-half (1/2)
of the annual base salary payable to Executive as of the Retirement Date (as
defined below), but no less than Two Hundred Seventy Five Thousand Dollars
($275,000) per annum. The annual retirement benefit shall be paid in equal
monthly installments beginning on the first day of the first month following
Executive's Retirement Date and on the first day of each month thereafter. In
the event that Executive shall die after his Retirement Date, but before the
retirement benefits
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provided for herein shall be fully paid, the balance thereof shall thereafter be
payable in monthly installments to his estate. "Retirement Date" shall mean the
date of termination of Employee's employment under this Agreement, for whatever
reason. The "Payment Period" means the period beginning on the Retirement Date
and ending on the expiration of the lesser of (a) ten years, or (b) the number
of years or fractions thereof after March 21, 2000 that Executive is employed by
the Corporation.
16. CHANGE OF CONTROL
16.1 If at any time during the Term, individuals who presently
constitute the Board of Directors of the Corporation, or who have been
recommended for election to the Board by two-thirds of the Board consisting of
individuals who are either presently on the Board or such recommended successors
cease for any reason to constitute at least a majority of such Board (such event
being hereafter referred to as a "Change of Control") and Executive gives
written notice to the Corporation within 60 days after such Change of Control of
his election to terminate his employment hereunder, the Corporation shall pay to
Executive within 15 days after Executive's delivery of such notice, as severance
pay and liquidated damages, in lieu of any other rights or remedies which might
otherwise be available to him under this Agreement, and without mitigation of
any kind or amount, whether or not Executive shall seek or accept other
employment, a lump sum payment equal in amount to (i) the sum of (A) the annual
Base Salary payable to Executive under Section 5.1; and (B) One Year's Bonus
payable to Executive under Section 5.2; (ii) multiplied by three. In addition,
the amount of retirement benefits which would be payable to Executive if he had
retired on the date of such Change of Control shall be paid in full in a lump
sum. The health benefits provided for Executive by the Corporation on the date
of Change of Control shall continue to be provided for 18 months thereafter at
the Corporation's
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expense. The payments provided for in this Section 16.1 shall be paid in full,
without discount to present value.
16.2 If it shall be determined that any amount payable under
Section 16.1 by the Corporation to or for the benefit of Executive (a "Base
Payment") would be subject to the excise tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then
Executive shall be entitled to receive an additional payment (the "Gross-Up
Payment") in an amount such that the net amount retained by Executive, after the
calculation and deduction of any Excise Tax on the Base Payment shall be equal
to the Base Payment, less any federal, state and local income taxes. The
Gross-Up Payment shall be reduced by income or Excise Tax withholding payments
made by the Corporation to any federal, state or local taxing authority with
respect to the Gross-Up Payment that was not deducted from compensation payable
to the Executive. All determinations required to be made under this Section
16.2, including whether and when a Gross-Up Payment is required, the amount of
such Gross-Up Payment, and the assumptions to be utilized in arriving at such
determination, except as specified above, shall be made by the Corporation's
auditors (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Corporation and Executive within fifteen business days
after the receipt of notice from Executive that there should be a Gross-Up
Payment. The determination of tax liability made by the Accounting Firm shall be
subject to review by Executive's tax advisor, and, if Executive's tax advisor
does not agree with the determination reached by the Accounting Firm, then the
Accounting Firm and Executive's tax advisor shall jointly designate a nationally
recognized public accounting firm, which shall make the determination. All fees
and expenses of the accountants retained by the Corporation or
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jointly designated and retained shall be borne by the Corporation. Any
determination by a jointly designated public accounting firm shall be binding
upon the Corporation and Executive.
16.3 Effective from and after July 16, 2001, in the event of (i)
Executive's death; (ii) termination of Executive's employment by reason of
permanent disability as provided in Section 14.2; (iii) Change of Control of the
Corporation as defined in Section 16.1, or (iv) any person or entity or group of
affiliated persons or entities who are not the owners of at least 15% of the
outstanding shares of voting securities of the Corporation on the date hereof,
acquiring more than 25% of the outstanding shares of the Corporation's voting
securities (each of the events referred to in clauses (i) - (iv) being an
"Accelerated Vesting Event"), all unexpired options to purchase shares of the
Corporation's Common Stock owned by Executive on the date of the Accelerated
Vesting Event shall, if unvested, vest fully on the date of the Accelerated
Vesting Event notwithstanding any vesting provisions of such options.. All
options granted pursuant to Section 7 of this Agreement and all options
hereafter granted by the Corporation shall provide for accelerated vesting
pursuant to this Section 16.3.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto with respect to Executive's employment with the Corporation
and no amendment or modification hereof shall be valid or binding unless made in
writing and signed by the party against whom enforcement thereof is sought.
18. NOTICES. Any notice required, permitted or desired to be given
pursuant to any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or sent by
telephone facsimile or sent by certified mail, return receipt requested, or sent
by responsible overnight delivery service, postage and fees prepaid, to the
parties hereto at their respective addresses set forth below. Either of the
parties hereto may at
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any time and from time to time change the address to which notice shall be sent
hereunder by notice to the other party given under this Section 18. The date of
the giving of any notice sent by mail shall be three business days following the
date of the posting of the mail, if delivered in person, the date delivered in
person, if sent by overnight delivery service, the next business day following
delivery to an overnight delivery service or if sent by telephone facsimile, the
date sent by telephone facsimile.
If to the Corporation:
800 South Northpoint Boulevard
Waukegan, IL 60085
Facsimile: (847) 785-3789
Attention: General Counsel
If to the Executive:
680 Leland Court
Lake Forest, IL 60045
Facsimile: (847) 735-1689
19. WITHHOLDING TAXES. All payments made to Executive under this Agreement
shall be subject to applicable payroll taxes and withholding requirements.
20. NO ASSIGNMENT. Neither this Agreement nor the right to receive any
payments hereunder may be assigned by Executive. This Agreement shall be binding
upon Executive, his heirs, executors and administrators and upon the
Corporation, its successors and assigns.
21. NO WAIVER. No course of dealing nor any delay on the part of the
Corporation in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
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22. GOVERNING LAW. This Agreement shall be governed, interpreted and
construed in accordance with the substantive laws of the State of Illinois
applicable to agreements entered into and to be performed entirely therein.
23. SEVERABILITY. If any clause, paragraph, section or part of this
Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any arbitrator or court of competent jurisdiction, such provision
shall be ineffective but shall not in any way invalidate or affect any other
clause, paragraph, section or part of this Agreement. The parties intend that
all clauses, paragraphs, sections or parts of this Agreement shall be
enforceable to the fullest extent permitted by law.
24. AFFILIATE. As used in this Agreement, "affiliate" means any person or
entity controlled by or under common control with the Corporation.
25. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which counterparts, when taken together, shall constitute
but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
WMS INDUSTRIES INC.
By: /s/ Orrin J. Edidin
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Name: Orrin J. Edidin
Title: Executive Vice President
/s/ Brian R. Gamache
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BRIAN R. GAMACHE
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