Exhibit 10.2
SEPARATION AND CONSULTING
AGREEMENT
This Separation and
Consulting Agreement (the “Agreement”) is entered into
as of June 30, 2004 by and between Alliance Gaming
Corporation, a Nevada Corporation (the “Company”) and
Robert L. Miodunski (the “Executive”).
WHEREAS
, the Executive is a
member of the Company’s Board of Directors and employed by
the Company as its President and Chief Executive Officer pursuant
to the terms of an Executive Employment Agreement, dated and
effective as of April 24, 2001 (the “Employment
Agreement”);
WHEREAS
, the Company and the
Executive have agreed that the Executive will resign from his
position as a member of the Company’s Board of Directors and
as President and Chief Executive Officer of the Company effective
as of October 1, 2004, or such other date as provided
herein;
WHEREAS
, the Company and the
Executive wish to fully settle all matters between them arising out
of the Employment Agreement, Executive’s employment, and his
resignation from his position as a member of the Board of Directors
and President and Chief Executive Officer of the
Company;
WHEREAS
, this Agreement shall
supercede and replace the Employment Agreement in its entirety;
and
WHEREAS
, as a result of the
experience and personalized knowledge gained by the Executive
during his employment by the Company, the Company desires to retain
the services of the Executive as an independent consultant
following his resignation.
NOW
THEREFORE ,
in consideration of the mutual promises contained herein, the
parties hereto, intending to be legally bound, agree as
follows:
1.
Agreement to
Resign; Salary; Bonuses and Benefits .
1.1
The Executive hereby
resigns, effective October 1, 2004, or such other date as
provided below (the “Resignation Date”), from his
position as the Company’s President and Chief Executive
Officer, as a member of the Company’s Board of Directors and
any other positions that he may hold in the Company or any of its
subsidiaries, except as otherwise specifically provided for
herein. Notwithstanding the foregoing, the Company may, in
its sole discretion, modify the Resignation Date to any date from
the date hereof until December 31, 2004. Until the
Resignation Date, the Executive will continue to serve as a member
of the Company’s Board of Directors and devote his full time
and best efforts to performing his duties as the Company’s
President and Chief Executive Officer. Notwithstanding the
Resignation Date, the Executive will continue to be an employee of
the Company, subject to the terms of this Agreement until
December 31, 2004, at which time he will cease to be an
employee of the Company.
1.2
At such time as a new
Chief Executive Officer has been selected by the Company, Executive
will cooperate and work with the new Chief Executive Officer to
provide a smooth transition (the “Transition
Plan”).
1.3
Until December 31,
2004, the Company will continue to pay the Executive his regular
base salary of $500,000 per year in installments on the regularly
recurring paydays in accordance with the Company’s
practice. Executive shall be entitled to an annual cash bonus
based upon performance of the Company through the fiscal year
ending June 30, 2005 pursuant to the Bonus Matrix attached as
Exhibit A hereto for fiscal 2004 and a substantially similar
Bonus Matrix for fiscal 2005 payable in August 2004 with
respect to fiscal 2004, and payable in August 2005 with
respect to fiscal 2005, in such manner as the Company normally pays
such bonuses (less required withholding for 2004 and not subject to
withholding for 2005). The Bonus Matrix for 2005 shall be a
matrix substantially similar to Exhibit A with the
“Budget/Guidance” EPS target to be the Board of
Directors approved EPS budget figure for Fiscal 2005 expanded and
contracted by 20% in the same number of increments as in Exhibit
A . The “% of Target EPS” and “% of
Base Salary” columns in Exhibit A will be the same for
the Bonus Matrix for Fiscal 2005, and the Base Salary to be used in
the calculation shall be $500,000.
1.4
Until December 31,
2004, the Executive may continue to utilize any vacation time he
has accrued under the Company’s vacation policy. As
soon as practicable following December 31, 2004, the Company
shall pay the Executive in a single lump sum payment, less
applicable withholding, for any accrued, but unused vacation time
in accordance with the terms of the Company’s vacation
policy. The Executive shall also be entitled to reasonable
periods of sick leave with compensation and all paid holidays given
by the Company to its senior executive officers.
1.5
Until December 31,
2004, the Executive may continue to participate in the
Company’s various retirement, life insurance, medical and
hospitalization, disability, welfare and fringe benefit plans,
programs, policies and arrangements (“Executive Benefit
Plans”) for which the Executive is otherwise eligible,
pursuant to the terms of such plans. Following
December 31, 2004, the Executive generally will cease to
participate in the Executive Benefit Plans, except to the extent
provided in the Executive Benefit Plan, herein, or by applicable
law. Nothing in this Agreement or the Consulting Agreement
(as defined in Section 6.1) shall be interpreted to expand any
right the Executive may have under the Executive Benefit Plans
unless otherwise expressly provided herein.
1.6
Following
December 31, 2004, the Executive will be eligible for
continued medical and dental coverage for himself and his
dependants in accordance with the terms of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (“COBRA”). The
Executive shall be required to pay one-hundred percent (100%) of
the COBRA premiums for such coverage.
1.7
As recognition of the
contributions of Executive in the successful divestiture of United
Coin Machine Co., a Nevada corporation and an indirect wholly owned
subsidiary of the Company, Executive shall receive a special bonus
of $1,000,000
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upon the consummation of
the transaction (the “United Coin Bonus”). The
United Coin Bonus shall be payable as follows: (a) $500,000
within 30 days of the consummation of the transaction and (b)
$500,000 payable in twenty four (24) equal monthly installments of
$20,833.33 on the first business day of each month commencing on
January 1, 2005.
2.
Stock
Options . The Company agrees that any
issued and outstanding stock options granted to the Executive under
the Company’s Stock Option Plans (the “Options”)
shall continue to vest and be exercisable as if the Executive were
still actively employed by the Company. In addition, the
Company agrees that upon any “Change of Control” (as
defined below) of the Company, all of the Options shall immediately
vest and become exercisable. “Change of Control” shall be deemed
to have occurred upon (i) the consummation of a tender for or
purchase of fifty percent (50%) or more of the Company’s
Common Stock by a third party, (ii) a merger, consolidation or
recapitalization of the Company such that the stockholders of the
Company immediately prior to the consummation of such transaction
possess less than fifty percent (50%) of the voting securities
of the surviving entity immediately after the transaction
(determined on a fully-diluted basis assuming the conversion of all
convertible securities of such person), or (iii) the sale, lease or
other disposition of all or substantially all of the assets of the
Company, in any of cases (i), (ii) or (iii) in a single transaction
or series of transactions. Exhibit B details the
outstanding options held by Executive at June 30,
2004.
3.
Perquisites
. The Company
agrees to provide to Executive such computer network access as is
required by the Executive to fulfill his obligations under this
Agreement through the Term (as defined in Section 7.7 below);
provided that, the Company expressly reserves the right to remove
or block any and all secret, confidential, proprietary or other
sensitive information, software, program, or application relating
to the Company that the Company determines, in its sole and
absolute discretion, is necessary or advisable. The Company
shall continue to pay for Executive’s cell phone usage
related to the Consulting Agreement throughout the Term.
4.
No Other
Severance . Except as provided in this
Agreement, the Executive shall not be entitled to receive any other
payment, benefit or other form of compensation as a result of his
employment or his resignation therefrom. Specifically, the
Executive shall not be eligible for severance benefits under any
plan, program or arrangement sponsored or funded by the Company,
and he hereby waives any right to any such benefits.
5.
Return of Company
Property . Subject to Section 3
above, no later than December 31, 2004, the Executive agrees
to return any Company property in the Executive’s possession
or control, including all equipment, the original and all copies of
books, notebooks, documents, reports, files, memoranda, records,
computer software and programs, correspondence, mailing lists,
client or contact lists, calendars, card files, rolodexes, cardkey
passes, door, file and computer keys, computer access codes or
disks, company charge cards, instructional employee manuals, and
other Company property which the Executive received or had control
over during his employment with the Company, except to the extent
the Company and the Executive mutually agree such item or items may
be required by the Executive in connection with the performance of
services under the Consulting Agreement.
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6.
Consulting
Agreement .
6.1
Agreement for
Services . For four years from
January 1, 2005 until December 31, 2008 (each such year
shall be referred to hereinafter as a “Consulting
Year”), the Executive agrees to make himself available at the
Company’s reasonable request (made by either members of the
Board of Directors or the Chief Executive Officer) to provide
services that the Company may reasonably request in accordance with
the terms set forth below (the “Consulting
Agreement”). Such services may include, but not be
limited to, implementing the Transition Plan, attending and
participating in meetings with the executive officers of the
Company, and attending and participating in meetings of the Board
of Directors of the Company and any committees thereof (including
any meetings of the Office of the Chairman). Such services
shall be performed principally in Las Vegas, Nevada, but also at
such locations as the Company may reasonably request, and the
Executive agrees to use his best skill, efforts and judgment in
performing such services. The Company and the Executive agree and
understand that the services performed by the Executive under the
Consulting Agreement will not require the Executive to engage in
full-time efforts or work, but instead shall be periodic and
limited in nature and that the Executive shall be entitled to
accept other employment and pursue other activities and interests,
so long as such employment, activities and interests do not
otherwise breach the Executives covenants and obligations under
Section 8 of this Agreement. The Company shall not
terminate the Agreement, or any part of it, for any failure or
inability by the Company to utilize or request the services of the
Executive under the Consulting Agreement. The Company agrees to pay the Executive an
“Annual Consulting Fee” as set forth below. The
Annual Consulting Fee shall be payable in twelve (12) equal monthly
installments, in arrears. The Company agrees to reimburse the
Executive for all reasonable travel and other reasonable and
necessary out-of-pocket business related expenses incurred by the
Executive at the request of the Company in connection with the
performance of services under the Consulting Agreement; provided
that the Executive shall be required to submit reasonable
documentation of such expenses to the Company prior to receiving
reimbursement. The Annual Consulting Fee for each of the
Consulting Years following the Executive’s Resignation Date
shall be as follows:
|
Consulting Year
|
|
Annual Consulting
Fee
|
|
|
2005
|
|
$
|
250,000
|
|
|
2006
|
|
$
|
250,000
|
|
|
2007
|
|
$
|
250,000
|
|
|
2008
|
|
$
|
250,000
|
|
6.2
Independent
Contractor. The Executive shall perform
the services requested by the Company under the Consulting
Agreement as an independent contractor and shall not be deemed an
employee of the Company. Accordingly, the Company will not
withhold federal or state income, social security, or other taxes
from the consulting fee paid under the terms of the Consulting
Agreement, unless otherwise required by law.
4
7.
Termination
.
7.1
Disability.
If the Executive, becomes
disabled or incapacitated for six or more consecutive months or for
noncontinuous periods aggregating to twenty-six weeks in any
twelve-month period, the Company may terminate this Agreement on
thirty days’ notice, whereupon the obligations of the Company
and the rights of the Executive under this Agreement shall
terminate, except that:
(a)
The Company shall pay the
Executive’s salary or Annual Consulting Fee, as applicable,
on a pro-rata basis through the date of termination, offset by any
benefits payable to the Executive under any disability insurance
policy paid for by the Company; and
(b)
One-half of any unvested Options
shall vest and become exercisable by the Executive for two years
after the date of termination.
7.2
Death . In the event of the Executive’s
death, this Agreement shall terminate as of the date of his death,
in which case the obligations of the Company and the rights of the
Executive under this Agreement shall terminate except
that:
(a)
The Company shall continue to pay
the Executive’s salary or Annual Consulting Fee, as
applicable, for six months after the date of death, offset by any
benefits payable to the Executive or the Executive’s estate
under any life insurance policy paid for by the Company;
and
(b)
The Company shall reimburse the
Executive’s estate for all expenses incurred and reimbursable
under Section 6.1; and
(c)
One-half of any unvested Options
shall vest and become exercisable by the Executive’s estate
for two years after the date of the Executive’s
death.
7.3
Termination by Company for
Cause .
(a)
The Company may terminate this
Agreement for “Cause” (as defined below) at any time
immediately on notice to the Executive, in which case the
Company’s obligations and the Executive’s rights under
this Agreement shall terminate. For purposes of this
provision, the term “Cause” includes, but is not
limited to:
(1)
The Executive’s
insubordination, fraud, disloyalty, dishonesty, willful misconduct,
or gross negligence in the performance of the Executive’s
duties under this Agreement, including willful failure to perform
such duties as may properly be assigned to the Executive under this
Agreement.
(2)
The Executive’s material
breach of any provision of this Agreement.
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(3)
The Executive’s failure to
qualify (or having so qualified being thereafter disqualified)
under any suitability or licensing requirement of any jurisdiction
or regulatory authority to which the Executive may be subject by
reason of his position as an officer, director or employee of the
Company or its affiliates or subsidiaries.
(4)
The Executive’s commission of
a crime against the Company or violation of any law, order, rule,
or regulation pertaining to the Company’s
business.
(5)
The Executive’s inability
(other than because of death or disability under Sections 7.1
and 7.2) to perform the job functions and responsibilities assigned
in accordance with standards established, whether or not in
writing, from time to time by the Company, in its sole
discretion.
(6)
The Company obtains from any source
information with respect to the Executive or this Agreement that
would, in the opinion of both the Company and its outside counsel,
jeopardize the gaming licenses, permits, or status of the Company
or any of its subsidiaries or affiliates with any gaming
commission, board, or similar regulatory or law enforcement
authority.
(b)
Any termination by the Company for
Cause shall not be in limitation of any other right or remedy the
Company may have under this Agreement or otherwise.
7.4
Termination by Company without
Cause . The Company
may terminate this Agreement at any time without Cause, whereupon
the Co
