Employment
Agreement
This
employment agreement (the "Agreement") is made and entered into as
of February 8, 2008, by and between Galaxy Gaming, Inc., a Nevada
corporation (the "Company") and William E. O'Hara (the
"Employee").
Recitals
A. The
Company is engaged in the business of developing, distributing and
otherwise commercializing gaming equipment, games, operating
systems for gaming equipment and related products and services
throughout the United States, Canada and other
countries.
B. Employee
understands that Employee will be employed in a sensitive position
with access to, and requiring knowledge of confidential and
commercially valuable information of the Company and its
subsidiaries and affiliates, the unauthorized use or disclosure of
which, during and following Employee's separation of employment,
could cause the Company and its subsidiaries serious and
irreparable injury,
C. Employee
also acknowledges that, by virtue of Employee's position with the
Company, Employee will have dealings with customers who have close
and ongoing relationships with the Company and that Employee's
competition for or solicitation of such customers following
Employee's separation of employment would cause the Company serious
and irreparable injury.
D. Employee
acknowledges that the Company would not have entered into this
Agreement without Employee's express understanding of and agreement
with the confidentiality, non-competition and non-solicitation
provisions set forth in this Agreement.
E. The
Company desires to employ Employee, and Employee desires to serve
as an employee of the Company, on the terms and conditions set
forth in this Agreement.
In
consideration of the mutual covenants and promises of the parties,
the Company and Employee agree as follows:
1.
Duties
During
the Term of this Agreement, Employee will be employed by the
Company to serve as Operations Manager of the Company and its
subsidiaries and affiliates. If the Company achieves public company
status during the Term, Employee's title will be Chief Operating
Officer but all other terms and conditions of this Agreement shall
continue in effect unchanged. Employee shall devote
substantially all of Employee's business time, attention, energy,
knowledge, and skill solely and exclusively to the conduct of the
business of the Company as may be reasonably necessary to
effectively discharge Employee's duties under this Agreement and,
subject to the supervision and direction of the Chief Executive
Officer of the Company, will perform those duties and have such
authority and powers as are customarily associated with the offices
of a Chief Operating Officer of a company engaged in a business
that is similar to the business of the Company and/or assigned to
him by the President, including (Without limitation): (a) the
authority to direct and manage the day-to-day operations and
affairs of the Company and (b) the authority to hire and discharge
employees of the Company. Unless the parties agree otherwise in
writing, during the term of this Agreement, Employee will not be
required to perform services under this Agreement other than at
Company's principal place of business in Clark County, Nevada;
provided, however, that Company may, from time to time, require
Employee to travel temporarily to other locations
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O'Hara
Employment Agreement
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Employee
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on the
Company’s business. Prior written consent of
Company shall be required before Employee may undertake to perform
any services whether as an employee, consultant officer, director,
etc, of a business, commercial or professional nature, whether for
compensation or otherwise, Although Company's consent may not be
unreasonably withheld, it shall hereby be" deemed reasonable for
Company to deny its consent with respect to any and all outside
gaming activities.
For
purposes of this Agreement the following terms have the following
meanings:
(a) 'Severance
Period" means that period of time commencing on the date that a
Termination Other than for Cause is effected and continuing for
twelve (12) months if the Termination Other than for Cause is
effected during the first twelve (12) months of the contract, nine
(9) months if the Termination Other than for Cause is effected
during the second twelve (12) months of the contract and six (6)
months if the Termination other than for Cause is effected at any
time thereafter.
(b) “Termination
for Cause" means termination by Company of Employee's employment by
reason of: (i) Employee's material fraud, dishonesty, willful
misconduct or gross negligence in the performance of Employee's
duties hereunder, including willful failure to perform such duties
as may be properly assigned him hereunder; (ii) Employee's breach
of the Confidentiality or Non-competition provisions of this
Agreement at Sections 5.1 and 5.2; (iii) Employee's material breach
of any provision of this Agreement; (iv) Employee's willful or
habitual failure to abide by the policies established by the
Company; (v) by reason of Employee's gross negligence or
intentional misconduct with respect to the performance of
Employee's duties under this Agreement (Vi) conviction of or a
guilty or nolo contendre plea to a felony or misdemeanor involving
moral turpitude; or (vii) Employee's failure to qualify (or, having
so qualified, being thereafter disqualified or suspended) or
Company’s reasonable determination that Employee would not
qualify or would not continue to be qualified under any suitability
or licensing requirements to which Employee may be subject by
reason of Employee's position with the Company or any of its
subsidiaries or affiliates, under the laws of any applicable gaming
jurisdiction, except that any such failure to qualify or
disqualification or suspension resulting from Employee's corporate
conduct, rather than individual conduct, shall not constitute
Termination for Cause hereunder; provided however that unless such
cause constitutes a crime or jeopardizes the safety or welfare of
the Company's property, licenses, employees, or customers (in which
case no cure period shall apply) no such termination will be deemed
a Termination for Cause under subsections 2.1 (a)(iii),(iv) or (v)
unless the Company has provided Employee with written notice of
what it reasonably believes are the grounds for any Termination for
Cause and Employee fails to cure such grounds to the Company's
reasonable satisfaction during the 30 day period following receipt
of such written notice.
(c)
“Termination Other than for Cause” means
termination by Company of Employee's employment at any time in the
Company's sole discretion for reasons other than those which
constitute Termination for Cause.
(d)
“Voluntary Termination” means termination by the
Employee of the Employee's employment with the Company, excluding
termination by reason of Employee's death or disability as
described In Sections 2.5 and 2.6.
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Employment Agreement
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Employee
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The
Term of employment of employee by the company will commence on
February 18, 2008 and will extend through the period ending on
February 28, 2011 (the "Termination Date"). Company and Employee
may extend the term of this Agreement by mutual written
agreement.
2.3 Termination
for Cause
Termination
for Cause may be effected by Company at any time during the term of
this Agreement and may be effected by written notification to
Employee; provided, however, that no Termination for Cause will be
effective unless Employee has been provided with the prior written
notice and opportunity for remedial action described in Section 2.1
(a). If the Company believes Employee has engaged in conduct that
would constitute Termination for Cause, the Company may suspend
Employee with pay until such time as Company has made a decision
whether to terminate Employee for cause. Upon Termination for
Cause, Employee is to be immediately paid all accrued salary,
incentive compensation to the extent earned, vested deferred
compensation (other than stock, pension or profit sharing plan
benefits, which will be paid in accordance with the applicable
plan), accrued vacation pay and reimbursable business expenses, all
to the date of termination, but Employee will not be paid any
severance compensation. All the provisions and obligations of
Employee under Sections 51 and 5.2 will survive Termination for
Cause.
2.4 Termination
Other Than for Cause
Notwithstanding
anything else in this Agreement, Company may effect a Termination
Other Than for Cause at any time upon giving notice to Employee of
such Termination Other Than for Cause. Upon any Termination Other
Than for Cause, Employee will immediately be paid all accrued
salary, all incentive compensation to the extent earned, severance
compensation as provided in Section 4, vested deferred compensation
(other than stock, pension or profit sharing plan benefits, which
will be paid in accordance with the applicable plan), accrued
vacation pay and reimbursable business expenses, all to the date of
termination. All the provisions and obligations of Employee under
Sections 5.1 and 5.2 will survive Termination Other Than for
Cause.
2.5 Termination
Due to-Disability
In the
event that, during the term of this Agreement, Employee should, in
the reasonable judgment of the Company, fail after reasonable
accommodation by Company to perform Employee’s duties under
this Agreement because of illness or physical or mental incapacity
("Disability ") for more than 30 days in the aggregate in any
12-month period, Company will have the right to terminate
Employee's employment under this Agreement by 30 day written
notification to Employee and payment to Employee of all
accrued salary and incentive compensation to the extent earned,
vested deferred compensation (other than stock, pension or profit
sharing plan benefits, which will be paid in accordance with the
applicable plan), all accrued vacation pay, and reimbursable
business expenses all to the date of termination. All the
provisions and obligations of Employee under Sections 5.1 and 5.2
will survive Termination Due to Disability.
In the
event of Employee's death during the term of this Agreement,
Employee’s employment is to be deemed to have terminated as
of date of death, and Company will pay to Employee's estate
accrued
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Employee
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salary,
incentive compensation to the extent earned, vested deferred
compensation (other than pension plan or profit sharing plan
benefits, which will be paid in accordance with the applicable
plan), accrued vacation pay, and reimbursable business expenses,
all to the date of termination. Company shall, make the
payments to Employee's estate or beneficiary as applicable. If
Employee dies during the Severance Period, the remaining Severance
due will be paid in a lump sum to the Employee's estate and
Employee's estate and/or beneficiary(ies).
2.7 Voluntary
Termination
Employee
may voluntarily terminate Employee's employment with the Company by
providing the Company with 30-day notice. in the event of a
Voluntary Termination, Company will immediately pay to Employee all
accrued salary, all incentive compensation to the extent earned,
vested deferred compensation (other than pension plan or profit
sharing plan benefits, which will be paid in accordance with the
applicable plan), accrued vacation pay, and reimbursable business
expenses, all to the date of termination, but Employee will not be
paid any severance compensation, All the provisions and obligations
of Employee under Sections 5.1 and 5.2 will survive Voluntary
Termination.
3. Salary,
Benefits and Other Compensation
As
payment for the services to be rendered by Employee as provided in
Section 1 and subject to the terms and conditions of Section 2,
Company agrees to pay to Employee a "Base Salary," in equal
bi-monthly installments The Base Salary will be as
follows:
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Month
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Monthly
Salary
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February
2008
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$8000.00
pro-rata
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March
2008
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$8,000.00
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April
2008
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$8,500.00
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May
2008
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$9,000.00
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June
2008
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$9,500.00
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July
2008
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$10,000.00
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August
2008
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$10,500.00
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September
2008
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$11,000.00
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October
2008
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$11,500.00
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November
2008 and thereafter
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$12,000.00
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3.2 Revenue
Growth Incentive
Company
agrees to also pay to Employee a Monthly Gross Recurring Revenue
Increase Incentive on the 20th of each month based on the prior
month's increase over the highest monthly gross recurring revenue
during the Term. Increased revenue arising from acquisitions,
mergers; joint ventures and the like shall not be included. The
Monthly Gross Recurring Revenue Increase Incentive will be as
follows:
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Employment Agreement
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Employee
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Month
Payable
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Monthly
Gross Recurring Revenue Increase Incentive
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February
and March 2008
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No
Incentive payable
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April
2008 based on increase inMarch 2008
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15% of
Monthly Gross Recurring Revenue Increase
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May
2008 based on increase in April 2008
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15% of
Monthly Gross Recurring Revenue Increase
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June
2008 based on increase in May 2008
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15% of
Monthly Gross Recurring Revenue Increase
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July
2008 based on increase inJune 2008
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12.5%
of Monthly Gross Recurring Revenue Increase
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August
2008 based on increase in July 2008
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12.5%
of Monthly Gross Recurring Revenue Increase
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September
2008 based on increase in August 2008
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12.5%
of Monthly Gross Recurring Revenue Increase
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October
2008 based on increase in September 2008
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10% of
Monthly Gross Recurring Revenue Increase
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November
2008 based on increase in October 2008
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1 0%
of Monthly Gross Recurring Revenue Increase
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December
2008 based on increase in November 2008
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1 0%
of Monthly Gross Recurring Revenue Increase
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January
2008 and thereafter
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10% of
Monthly Gross Recurring Revenue Increase
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The
Monthly Gross Recurring Revenue Increase shall mean that month's
increase in gross recurring revenue over the highest monthly gross
recurring revenue occurring at any time during the Term. For
example:
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If
the Company's monthly gross recurring revenue in March 2008 is
$100,000 and in April 2008 is $110,000, Company would pay to
Employee on May 20,2008 a Revenue Growth Incentive of $10,000.00 x
15% 0= 5;1500.00
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If
the Company's monthly gross recurring revenue history is as
follows:
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Month
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Gross
Monthly Recurring Revenue
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March
2008
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$100,000
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April
2008
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$110,000
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May
2008
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$105,000
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June
2008
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$108,000
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July
2008
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$112,000
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Employee
would receive Revenue Growth incentives as follows:
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May
20,
2008
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$10,000
(increase in April) x 15% = $1500
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$0
monthly gross recurring revenue decreased in May
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$0
monthly gross recurring revenue increased in June over May
but not over highest previous point which occurred in
April
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$2,000
(increase in July over previous high in April) x 12.5% =
$250
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Employment Agreement
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3.3 Section
125 Plan Benefits
As
Employee becomes eligible per Company's policy, Employee will
receive Section 125 Plan Benefits as a level 4 employee pursuant to
Appendix B attached hereto as may be amended from time to time by
Company.
3.4 Incentive
Bonus Plans
If
Company becomes a public company and if there is a public offering,
to the extent allowed by Securities and Exchange regulations and
other applicable laws and regulations. Employee shall be eligible
for pre-public offering stock purchase and to participate in any
Company stock option programs on the same basis as an employee of
comparable position and compensation as Employee, provided however:
(i) Company is not obligated to and there is no guaranty that it
will become a public company; (ii) Company is making no
representation and is not obligated to provide any stock options to
its employees or Employee at all; (iii) Company may structure its
stock option plan(s), if any, in its sole discretion in accord with
its business plans and purposes; and (iv) the Company's Board of
Director(s) shall have sole discretion in determining who may or
may not be entitled to stock options under the plan. As
Employee becomes eligible, Employee shall be entitled to
participate in all bonus, incentive, stock option, savings, and
retirement plans, policies, and programs made available by the
Company to other peer employees of the
Company.
During
the term of Employee's employment under this Agreement, the
Employee is eligible to participate in all employee benefit plans
to the extent maintained by the Company, including (without
limitation) any life, disability, health, accident and other
insurance programs, paid time off, and similar plans or programs,
subject in each case to the generally applicable terms and
conditions of the plan or program in question and to the
determinations of any committee administering such plan or program.
On termination of the Employee for any reason, the Employee will
retain all of Employee's rights to benefits that have vested under
such plans, but the Employee's rights to participate in these plans
will cease on the Employee's termination (unless contrary to law,
e.g., COBRA rights) unless the termination is a Termination Other
Than for Cause, in which case Employee's rights of participation
will continue for a period of six (6) months following Employee's
termination,
The
Employee understands that the services to be rendered by Employee
under this Agreement will cause the Employee to recognize taxable
income, which is considered under the Internal Revenue Code of
1986, as amended, and applicable regulations thereunder as
compensation income subject to the Withholding of income tax (and
Social Security or other employment taxes). The Employee hereby
consents to the withholding of such taxes as are required by the
Company.
As
Employee becomes eligible per Company's policy, Employee will
receive paid time off to be used for vacation, sick and/or personal
days as a level 4 employee pursuant to Appendix B attached hereto
as may be amended from time to time by Company.
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During
the term of this Agreement, Company will reimburse Employee for
employee's reasonable out-of-pocket expenses incurred in connection
with Company’s business, Including travel expenses, food and
lodging while away from home, subject to such policies
as Company may from time to time reasonably establish for its
employees.
The
Company reserves the right to modify, suspend, not implement or
discontinue any and all of the above-mentioned plans, practices,
policies, benefits, and programs at any time as long as such action
is taken generally with respect to other similarly situated peer
employees of the Company and may structure the plan, practices,
policies, benefits and programs, if any, in its sole discretion in
accord with its business plans and purposes.
4.
Severance Compensation
4.1
Termination Other Than for Cause
In the
event Employee's employment is terminated in a Termination Other
Than for Cause, Employee will be paid as severance pay Employee's
Base Salary at that time plus Section 125 plan benefits during the
Severance Period, on the dates specified in Section 3.1 for payment
of Employee's Base Salary, provided, however, that Employee's
entitlement to any such payments or benefits shall be expressly
Subject to, contingent upon, and in consideration of (i) the
continued validity and enforceability of Sections 5.1 and 5.2
hereunder, and (ii) the Company receiving a release prepared by the
Company and executed by Employee, waiving and releasing the
Company, its subsidiaries and affiliates, and their officers,
directors, agents, benefit plan trustees and employees from any and
all claims, whether known or unknown, and regardless of type, cause
or nature, including but not limited to claims arising under all
salary, bonus, stock, paid time off, insurance and other benefit
plans and all state and federal anti-discrimination, civil rights
and human rights laws, ordinances and statutes, including Title VII
of the Civil Rights Act of 1964 and 1991, the Age Discrimination in
Employment Act as amended by the Older Workers Benefit Protection
Act of 1990, and the American's with Disabilities Act covering
Employee's employment with the Company, its subsidiaries and
affiliates, and the cessation of that employment.
During
the Severance Period, Employee shall remain an employee of the
Company solely for group health and life insurance purposes and for
the ability to exercise stock options, and shall receive service
credit therefore during that period. Employee will be responsible
for the employee portion of the cost of such insurance during the
Severance Period similar to other employees.
Notwithstanding
anything to the contrary in this Section 4.1, the Company's
obligations under this Section 4.1 shall cease (except for
obligations pursuant to the terms of any benefit plan or law, e.g.,
COBRA) and Employee shall immediately return all severance payments
previously) received during the Severance Period if Employee
breaches in any material respect any of the covenants set forth in
Sections 5.1 or 5.2 of this Agreement and such breach is not cured
to the Company's satisfaction within ten days from the date written
notice thereof is given to Employee by the Company. Employee
understands that the Company additionally shall have the right to
seek enforcement of Employee's obligations under Sections 5.1 and
5.2
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Employee
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In the
event of " Voluntary Termination, Termination for Cause,
Termination for Death, or Termination Due to Disability, Employee
or Employee's estate will not be entitled to any severance
pay.
5. Confidentiality
and Non-competition
(a)
Employee's position with the Company will or has resulted in
exposure and access to confidential and proprietary information
which Employee did not have access to prior to holding the
position, which information is of great value to the Company and
the disclosure of which, directly or indirectly, would be
irreparably injurious and detrimental to the Company, Employee
agrees to use best efforts and to observe the utmost diligence to
guard and protect all confidential or proprietary information
relating to the Company from disclosure to third parties, Employee
shall not at any time use or make available, either directly or
indirectly, to any competitor or potential competitor of the
Company or any of its subsidiaries, or their affiliates or divulge,
disclose, communicate to any firm corporation or other business
entity in any manner whatsoever, any confidential or proprietary
information covered or contemplated by this Agreement unless
exp
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