Employment Agreement - Autotote Corp. and Thomas C. DeFazio
AUTOTOTE CORPORATION
888 SEVENTH AVENUE
SUITE 1808
NEW YORK, NEW YORK 10106
April 17, 1995
Mr. Thomas C. DeFazio
3l1 Codfish Lane
Weston, Connecticut 06883
Dear Mr. DeFazio:
Autotote Corporation (the "Company") wishes to retain your services upon the
following terms and conditions:
1. Employment and Offices. You will serve the Company as its Executive Vice
President and Chief Financial Officer, and as such you will have direct
reporting responsibility for all financial and administrative functions of the
Company. Additionally, as the Company's second-ranking senior officer, you
will work with the Company's Chief Executive Officer to oversee and implement
the Company's strategy and operations on a world-wide basis.
2. Term. The term of this Agreement shall commence on the date you join the
Company, which shall be no later than April 17, 1995 (the "Effective Date")
and shall end three (3) years thereafter (the "Initial Term"); provided,
however, that the term of this Agreement shall be automatically extended for
successive, additional terms of twelve months each (each, an "Additional
Term") at the end of the Initial Term and each Additional Term, unless either
you or the Company shall have given written notice to the other at least
twelve months prior thereto that the term of this Agreement shall not be so
extended.
3. Services. You agree to accept employment on a full time basis and to
perform, to the best of your ability, the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken
and exercised by a chief financial officer of a publicly-held corporation,
without commitment to other business endeavors, except that you may serve as a
director of businesses and charities with the approval of the Board of
Directors of the Company.
4. Compensation.
(a) Base Salary. As base salary for your services as described in Section
3 above, and for the covenants set forth in Section 7 hereof, the Company
will pay you a base salary of $275,000 per year ("Base Salary"), payable
according to the Company's regular pay practices.
(b) Performance Bonus. In addition to the amount payable as provided in
Section 4(a) hereof, you shall be eligible to receive an annual performance
bonus of up to 45% of Base Salary (the "Bonus") as follows:
(i) 50% of the Bonus shall be based on the formula applicable to
Group A executives as set forth in the Company's executive incentive
compensation plan as in effect from time to time; and
(ii) 50% of the Bonus shall be based on the achievement of objectives
to be established by the Chief Executive Officer of the Company and the
Board of Directors in their sole discretion, it being understood that
no performance bonus is required by this Section 4(b)(ii).
(c) You will be granted a five-year option (the "Option") to purchase
200,000 shares of the Company's Class A Common Stock, $.01 par value per
share (the "Common Stock"), which shall become exercisable in three equal
installments, on each of the first, second and third anniversaries of the
date of grant. The exercise price of the Option shall be the closing price
of the Common Stock on the NASDAQ National Market System on the Effective
Date. Following the first anniversary of the Effective Date, the
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Chief Executive Officer and the Compensation Committee of the Board of
Directors will review your stock option position as part of your overall
first year performance review.
(d) The Company will reimburse you for all reasonable costs of interim
housing incurred by you for housing in New York, New York beginning on the
Effective Date for a period not to exceed six months. The Company also
agrees to pay you on the Effective Date a relocation allowance of $110,000;
provided, however, that if you terminate this Agreement or the Company
terminates this Agreement for Cause at any time before the second
anniversary of the Effective Date, you will promptly repay to the Company
an amount equal to the product of (i) $110,000 and (ii) a fraction, the
numerator of which is the number of full months between the date of
termination of the Agreement and the second anniversary of the Effective
Date and the denominator of which is twenty-four (24) or, at your
discretion, a number of shares of the Company's Class A Common Stock equal
to the product of (x) 20,000 and (y) the fraction described in clause (ii)
above.
5. Termination of Employment.
(a) Notice. You may terminate this Agreement upon thirty (30) days' prior
written notice to the Company. The Company may terminate this Agreement
upon twelve (12) months' prior written notice to you; provided, however,
that if the Company terminates this Agreement prior to the third
anniversary of the date hereof, the Company shall promptly pay to you the
greater of (i) an amount equal to one year's base salary at the then
current rate or (ii) an amount equal to the product of (i) your then
current monthly salary and (ii) the number of months, or fraction thereof
remaining under the initial three-year term, except that the Company may
terminate your employment hereunder for Cause, as defined in Section 5(d),
at any time upon notice to you.
(b) Termination Otherwise than for Cause Upon a Change in Control. If
during the Initial Term or any Additional Term a Change of Control, as
defined in Section 5(d), occurs and the Company terminates your employment
other than for Cause within twelve (12) months following such Change of
Control, you shall be entitled:
(i) to collect from the Company a lump-sum payment equal to Base
Salary for the remainder of the Initial Term, or any Additional Term
then in effect, as the case may be; and
(ii) the Option shall be accelerated to become fully vested and
exercisable in full 10 days prior to the anticipated effective date of
the Change in Control and will terminate as of the effective date of
the Change in Control.
For purposes of this Section 5(b), a termination nominally at your
initiative but in fact induced without Cause by the Company shall be deemed a
termination by the Company without Cause, rather than a voluntary termination,
and in that event the Company shall make the payments to you provided in this
Section 5(b).
(c) Voluntary Termination or Termination by the Company. If during the
Initial Term or any Additional Term your employment should terminate by
reason of your voluntary act, or if the Company shall terminate your
employment, you shall not be entitled to any compensation after such
termination, except as otherwise provided in Section 5(b).
(d) Definitions. For purposes of this Agreement,
(i) "Cause" shall mean (A) conviction of fraud, crimes of moral
turpitude or other conduct which reflects on the Company in a material
and adverse manner; (B) a willful failure to carry out a directive of
the Board of Directors or the Chief Executive Officer; (C) disloyalty,
bad faith or embezzlement of funds of the Company; or (D) gross
negligence or willful misconduct that is materially harmful to the
Company. Cause shall be established by the good faith determination of
the Board of Directors; and
(ii) "Change of Control" means the acquisition of substantially all
the Company's outstanding stock by a single person or entity or by a
group of persons and/or entities acting in concert or the sale or
transfer of substantially all the Company's assets.
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(e) Death. Upon your death this Agreement shall terminate. The Company
shall be obligated to make all Base Salary payments to you or your legal
representative accrued up to the date of death.
(f) Disability. In the event of your disability (whether total or
partial, and whether temporary or permanent) which prevents your performing
your duties hereunder, you shall be entitled to receive your Base Salary
hereunder pursuant to Section 5(a) for the period of disability; provided,
however, that if at any time after six months of disability your disability
is total and permanent, or you are, as a result thereof, incapable of
performing your duties under this Agreement, the obligation of the Company
to make payments to you pursuant to this paragraph shall terminate from and
after such date and this Agreement shall terminate. Disability shall be
determined by a physician selected by mutual agreement of you and the
Company.
(g) Limitations. Notwithstanding anything in this Agreement to the
contrary, the maximum amount of cash and other benefits payable (whether on
a current or deferred basis and whether or not includible in income for
income tax purposes) under this Agreement (the "Contract Benefits") shall
be limited to the extent necessary to avoid causing any portion of such
Contract Benefits, or any other payment in the nature of compensation to
you, to be treated as a "parachute payment" within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended. Any adjustment
required to satisfy the limitation described in the preceding sentence
shall be accomplished first by reducing any cash payments that would
otherwise be made to you and then, if further reductions are necessary, by
adjusting other benefits as determined by the Company.
6. Insurance for the Benefit of the Company. You agree that the Company may
at any time or times and for the Company's own benefit (or for a lender to the
Company) apply for and take out life, health, accident and other insurance
covering you, either independently or together with others, in any amount
which the Company may deem to be in its best interests. The Company shall own
all rights in such insurance and proceeds thereof and you shall not have any
right, title or interest therein. You agree to assist the Company at the
Company's expense in obtaining any such insurance by, among other things,
submitting to the customary examinations and correctly preparing, signing and
delivering such applications and other documents as reasonably may be
required.
7. Restrictive Covenants.
(a) You agree that you will not, during your employment with the Company
and for a period of twenty-four (24) months after termination thereof,
engage (whether for compensation or without compensation) in any business
activity, either as principal, proprietor, consultant, partner, officer,
director, employee, agent or in any other capacity, which competes with any
business then being conducted or planned (at the time of such termination)
by the Company, its subsidiaries or affiliates in any geographic area in
which the Company, its subsidiaries or affiliates are then engaged in such
business. For purposes of this Section 7(a), the term "business activity"
shall mean any activity whether conducted for profit or not for profit by
an individual, partnership, firm, corporation, government or any other
entity which competes with the Company. For purposes of this section 7(a),
"Planned" shall refer to any business which has been actively discussed as
a potential new business for the company during the twelve months prior to
such termination.
(b) You agree that, except as required in the performance of your duties
hereunder, you will not at any time disclose to any person or entity any
trade secrets, secret processes or any other confidential information
belonging or relating to the Company, its business practices, personnel or
those of its subsidiaries or affiliates; provided, however, this
prohibition shall not apply to any such secret or confidential data which
becomes generally publicly known or is publicly disclosed through or by
persons other than you. This Section 7(b) shall survive the termination of
this Agreement.
(c) During your employment with the Company and for a period of twenty-
four (24) months after termination of your employment with the Company, you
will not, directly or indirectly, recruit or otherwise solicit employees of
the Company, its subsidiaries or affiliates or otherwise induce such
employees to leave
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the Company, its subsidiaries or affiliates and to join or otherwise become
employed by or associated with you or any company or organization with
which you may then be employed or associated.
(d) Upon the termination of this Agreement, all documents, records,
notebooks, computer programs, data systems and similar repositories
containing trade secrets or other confidential information, whether
prepared by you or others, will be left with the Company.
(e) You agree that any violation of the covenants in this Section 7 will
cause the Company irreparable injury and agree that the Company may enforce
said covenants by seeking injunctive or other equitable relief (in addition
to any other remedies the Company may have at law for damages or otherwise)
from a court of competent jurisdiction. In the event such court declares
these covenants to be too broad to be specifically enforced, the covenants
shall be enforced to the largest extent for the Company's protection as may
be allowed by such court. You agree that no breach by the Company of, or
other failure by the Company to perform, any of the covenants and
obligations of the Company under this Agreement shall relieve you of any of
your obligations under this Section 7, and that in the event of any such
breach or failure of performance, you will seek no remedy other than
damages at law.
8. Other Benefits. You shall be eligible for four weeks of paid vacation for
each year of service under this Agreement. The Company will also provide you
with all fringe benefits routinely furnished to senior executives of the
Company.
9. Representation by Employee. You represent and warrant that your
execution, delivery and performance of this Agreement will not violate, result
in a breach of or constitute a default under any agreement, understanding or
instrument to which you are a party or by which you are bound.
10. Miscellaneous.
(a) This Agreement shall be binding on and inure to the benefit of the
parties hereto and their respective heirs, legal representatives,
successors and assigns. You may not assign this Agreement to any person or
entity. In the event that the Company consolidates with or merges into
another corporation and the Company is not the surviving corporation, or
substantially all of the assets of the Company are sold to another
corporation, this Agreement and the obligations of the parties shall
survive such consolidation, merger or sale and shall bind the company
and/or successor in interest of the Company. This Agreement may be modified
or amended only by a written agreement signed by the parties hereto.
(b) Each party hereby consents and submits to the jurisdiction of the
federal and state courts in and of the State of Delaware and will accept
service of process by registered or certified mail or the equivalent
directed to the addresses set forth herein or such other addresses as shall
have been furnished for this purpose by the parties or by whatever other
means are permitted by such court.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware (other than internal conflict of law
rules).
(d) The waiver of any breach of any term or condition of this Agreement
shall not be deemed to constitute a waiver of any other term or condition
hereof. If any term or provision of this Agreement or the application
thereof to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
(e) All notices pursuant to this Agreement shall be in writing and shall
be given by depositing said notices in the United States, registered or
certified mails, return receipt requested, addressed to the parties hereto
at the addresses set forth below, or to such other addresses as may
hereafter be specified by notice in writing given in the same manner by any
party.
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Notice to the Company:
Autotote Corporation
888 Seventh Avenue
Suite 1808
New York, New York 10106
Attention: Chief Executive Officer
Notice to Employee:
Thomas C. DeFazio
31 Codfish Lane
Weston, CT 06883
(f) This Agreement constitutes the entire Agreement between the parties
and supersedes all prior communications, agreements and understandings,
written or oral, with respect to the terms of your employment with the
Company.
If you accept and agree to the foregoing, please so signify by signing and
returning a counterpart of this letter, whereupon this letter will become a
binding agreement between you and the Company as of the date first written
above.
Very truly yours,
Autotote Corporation
/s/ Larry J. Lawrence
By: _________________________________
Larry J. Lawrence
Chairman, Executive Committee of
the Board of Directors
Accepted and Agreed to:
/s/ Thomas C. DeFazio
_____________________________________
Thomas C. DeFazio
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