EXHIBIT 10.5
EMPLOYMENT AGREEMENT

 
This Agreement is made as of the 7th day of September 2005 (the “Effective
Date”), by and between WMS GAMING INC., a Delaware corporation, with offices at
800 S. Northpoint Boulevard, Waukegan, Illinois 60085 (hereinafter called the
"Corporation") and Larry J. Pacey, an individual residing at 3002 Rennes Court,
Northbrook, Illinois 60062 (hereinafter called "Employee").

 
WITNESSETH:

 
WHEREAS, Employee and the Corporation are parties to that certain Employment
Agreement dated as of July 22, 2004 (the “Original Agreement”);

 
WHEREAS, Employee and the Corporation desire to amend and restate the Original
Agreement in its entirety as hereinafter set forth; and

 
WHEREAS, the Corporation desires to employ Employee and Employee is willing to
accept such employment on the terms and subject to the conditions hereinafter
set forth.

 
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the parties hereto agree as follows:

 
1. Employment by Corporation.   The Corporation hereby agrees to employ Employee
to perform such duties on behalf of the Corporation and its affiliates as the
Chief Executive Officer or the Board of Directors of the Corporation
("Management"), may from time to time determine, including without limitation,
duties with respect to the design and development of gaming devices (“Games”) to
be manufactured and sold or leased by the Corporation or by one or more of the
other corporations under common control with the Corporation
(“Affiliates”).  Employee’s title shall be Senior Vice President – Product
Development, reporting to the Executive Vice President and Chief Operating
Officer, which title and reporting may change at any time in the sole discretion
of Management.

 
2. Employee's Acceptance of Employment.  Employee 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
its Affiliates, he will perform the duties assigned to him pursuant to Paragraph
1 hereof, subject, at all times, to the direction and control of Management and
he will do such reasonable traveling as may be required of him in the
performance thereof.

 
Employee shall at all times be subject to, observe and carry out such rules,
regulations, policies, directions and restrictions as the Corporation shall from
time to time establish. During the period of his employment by the Corporation,
Employee agrees to be bound by the Corporation's Code of Conduct and any
amendments adopted thereto, a copy of which Employee hereby acknowledges he has
received and read, and Employee agrees that he shall not, without the prior
written approval of Management, directly or indirectly, accept employment or
compensation from or perform services of any nature for, any business enterprise
other than the Corporation or other corporations under common control with the
Corporation (its “Affiliates”) and such enterprises previously disclosed to the
Corporation in writing.

 
3. Term. Employee shall be employed for a term ("Term") of two (2) years
commencing on the date hereof. The term shall renew automatically for additional
two-year terms at the end of each two-year period thereafter, unless Employee's
employment is terminated voluntarily by Employee or by the Corporation for cause
in accordance with Paragraph 6 hereof, in which case the Term shall terminate
immediately. If Employee's employment is terminated by the Corporation other
than by reason of cause, Employee shall be entitled to receive as liquidated
damages in consideration of a complete release of any claims against the
Corporation and additional undertakings hereunder, including but not limited to
those set forth in Paragraph 7 hereof, a severance payment equal to the annual
base salary compensation to which Employee would otherwise be entitled during a
twenty-four (24) month period, which amounts will be paid in regular payroll
intervals. Each year of the Term is hereafter referred to as an "Employment
Year."

 
4.             Compensation/Benefits.

 
4.1           The Corporation will pay to Employee as compensation for his
services hereunder an annual base salary of Three Hundred Sixty Thousand Dollars
($360,000).   Such salary may be adjusted annually based upon annual performance
evaluations and is to be payable in equal installments no less frequently than
semimonthly.

 
4.2           Employee shall be entitled to receive an annual discretionary
bonus in an amount of up to seventy-five percent (75%) of Employee's then
current base salary, payable pro rata during the first fiscal year from the
effective date of this Agreement.  Such bonus shall be within the sole
discretion of Management and will be based upon the extent to which the
Corporation and Employee achieve corporate and personal performance criteria and
objectives established by Management of the Corporation for such fiscal year;
provided, however, that for any fiscal year in which the Corporation is
profitable, Employee shall receive an annual bonus in an amount of not less than
Thirty-seven and one half percent (37.5%) of Employee’s then current base
salary.   Employee may also participate, in the sole discretion of Management,
in such other profit sharing, incentive or other bonus arrangements that may be
in effect from time to time.

 
 
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4.3 Employee shall be entitled to participate, to the extent he is eligible
under the terms and conditions thereof, in any bonus, pension, retirement,
disability, hospitalization, insurance, medical service, or other 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 period of
his employment hereunder, including the Exec-U-Care insurance program.  The
Corporation shall be under no obligation to institute or continue the existence
of any such employee benefit plan.

 
4.4 Employee shall be entitled to twenty-seven (27) days paid-time off ("PTO
days") during each Employment Year. Any such PTO days are to be taken in
accordance with the policies set forth in the Company's Employee Handbook
("Handbook") and any amendments adopted thereto, a copy of which Employee hereby
acknowledges he has received and read. Notwithstanding the provisions set forth
in the Handbook, Employee shall be eligible to bank up to ten (10) PTO days per
year or sell back up to Five (5) PTO days and bank additional PTO days up to an
aggregate of Ten (10) days, inclusive of the PTO days sold back to the
Corporation per year.

 
5. Business Expenses.  The Corporation shall reimburse Employee for all
authorized expenses reasonably incurred by him in accordance with the
Corporation's "Travel and Entertainment Policy and Procedure" and any amendment
thereof that the Corporation may adopt during his employment.

 
6. Termination.  In addition to all other rights and remedies which the parties
may have under applicable law, Employee and the Corporation hereby agree: that
the Corporation may terminate this Agreement and the services of Employee,
effective upon the occurrence of any of the following events, any one of which
shall be considered cause for termination:  (i) a material failure by Employee
to perform his obligations under this Agreement in a satisfactory manner; (ii)
the death of Employee or his disability due to physical or mental illness for a
period of three (3) consecutive months; (iii) Employee fails to follow the
Corporation's "Code of Conduct," and any amendment thereof that the Corporation
may adopt during his employment; or (iv) in the event that Employee shall act,
whether with respect to his employment or otherwise, in a manner which is in
violation of the criminal laws of the United States or any State or subdivision
thereof (excluding minor violations) or which is reasonably likely to result in
the loss of a gaming license held by the Corporation or by any Affiliate or in
such entity's inability to become so licensed.

 
7. Non-Competition.  In consideration of the Corporation's entering into this
Agreement:

 
7.1           Employee agrees that during the Term hereof and, (i) in the event
Employee voluntarily terminates his employment or the Corporation terminates
Employee's employment for cause, prior to the expiration of two (2) years
following such termination of Employee's employment, or (ii) in the event
Employee is terminated for reasons other than for cause, then for such period
(not to exceed two (2) years) as the Corporation continues to pay Employee's an
amount equal to his annual base salary pursuant to Paragraph 3 he will not
directly or indirectly 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, manufacture
and/or sale of any gaming devices or any business entity which is engaged in any
other business in which the Corporation or any of its Affiliates is engaged
within any country in the world where Employer does business. Nothing herein
contained shall be deemed to prohibit Employee 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
Employee's holdings therein represent less than five percent (5%) of the total
number of shares or principal amount of other securities of such company
outstanding.  Employee acknowledges that the Corporation's business is
international in scope, and that this limitation upon Employee will not
interfere with Employee's ability to gain future employment.

 
7.2           Employee agrees that Employee will not, during the Term hereof or
prior to the expiration of two (2) years following the termination of the
Employee's employment for any reason, without the written consent of the
Corporation, directly or indirectly, by action alone or in concert with others,
induce or influence, or seek to induce or influence any person who is engaged by
the Corporation or any of its Affiliates as an employee, agent, independent
contractor or otherwise, to terminate his employment or engagement, nor shall
Employee, 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.

 
7.3           Employee acknowledges that the provisions of this Paragraph 7 are
reasonable in scope and duration and are necessary for the protection of the
Corporation. In the event that any provision of this Paragraph 7, 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.

 
7.4           Employee agrees that the restrictions of this Paragraph 7 shall be
assignable by Employer, whether by operation of law or otherwise, to any
successor in interest to either the game development operations or substantially
all of the assets or operations the Corporation.  Employee acknowledges and
agrees that Ten percent (10%) of Employee’s annual base salary shall be paid for
and in consideration of Employer’s right to assign Employee’s agreement not to
compete under this Paragraph 7.

 
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8.           Confidentiality Agreement.

           8.1           As used herein, the term "Confidential Information"
shall mean the terms of this Employment Agreement and any and all information of
the Corporation and of its Affiliates (for purposes of Paragraphs 8, 9, 10 and
11 of this Agreement, the Corporation's Affiliates shall be deemed included
within the meaning of "Corporation"), 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, shareholders, 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 representation of the Corporation; (vii) any other information and
knowledge with respect to all gaming 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 Employee's
employment 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 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.
 
8.2           Employee acknowledges and agrees that the Corporation is engaged
in the highly competitive gaming device business 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, Employee acknowledges and agrees that, unless the
Confidential Information becomes publicly known through legitimate origins not
involving an act or omission by Employee:

 
(i) the Confidential Information is, and at all times hereafter shall remain,
the sole property of the Corporation;

 
(ii) Employee 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;

 
(iii) unless the Corporation gives Employee prior express written permission,
during his employment and thereafter, Employee 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 Employee
may obtain, learn about, develop or be entrusted with as a result of Employee's
employment by the Corporation; and (iv) except in the ordinary course of the
Corporation's business, Employee shall not seek or accept any Confidential
Information from any former, present or future employee of the Corporation.

 
8.3           Employee also acknowledges and agrees that all documentary and
tangible Confidential Information including, without limitation, such
Confidential Information as Employee has committed to memory, is supplied or
made available by the Corporation to the Employee solely to assist his in
performing his services under this Agreement. Employee further agrees that after
his employment with the Corporation is terminated for any reason:

(i) Employee shall not remove from the property of the Corporation and shall
immediately return to the Corporation, all documentary or tangible Confidential
Information in 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

 
(ii) Employee 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.

 
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9.           Invention Disclosure. Employee agrees to disclose to the
Corporation promptly and fully all ideas, inventions, discoveries, developments
or improvements ("Inventions") that may be made or conceived by his and all
"Intellectual Material" (as defined below) that may be created or developed by
his (whether such Inventions or "Intellectual Material" are developed solely by
him or jointly with others) either during his employment by the Corporation or
during a period of one (1) year after the termination of his employment with the
Corporation which either (i) in any way is connected with or related to the
actual or contemplated business, work, research or undertakings of the
Corporation or (ii) results from or is suggested by any task, project or work
that he may do for, in connection with, or on behalf of the Corporation.
Employee agrees that such Inventions and "Intellectual Material" shall become
the sole and exclusive property of the Corporation and Employee hereby assigns
to the Corporation all of his rights to any such Inventions and "Intellectual
Material." 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.  With respect to Inventions and
Intellectual Material, Employee 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 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 Employee's employment with the Corporation, the Corporation shall
reimburse Employee for his lost wages or salary and the reasonable expenses
incurred by him in rendering such assistance.  Anything contained in this
paragraph to the contrary notwithstanding, this paragraph does not apply to an
Invention or Intellectual Material for which no equipment, supplies, facilities,
or trade secret information of the Corporation was used and which was developed
entirely on the Employee's own time, unless the Invention or Intellectual
Material relates: (i) to the business of the Corporation, (ii) to the
Corporation's actual or demonstrably anticipated research or development, or
(iii) the Invention or Intellectual Material results from any work performed by
the Employee for the Corporation.

 
10.           Nondisparagement.  Employee agrees that he will not disparage or
make any statements or disclosures injurious to, or which may reasonably be
taken to be injurious or prejudicial or in any way detrimental to, the
Corporation or its Affiliates.  In the event that Employee breaches this
Paragraph 10 while receiving severance payments pursuant to Paragraph 3,
Corporation shall have the right, without waiving any other remedies in law or
equity, to cease any further payments pursuant to Paragraph 3.  Notwithstanding
such cessation of payments, all of Employees obligations hereunder shall be
continuing and enforceable.

 
11.           Remedies.  Employee acknowledges and agrees that the business of
the Corporation is highly competitive and that the provisions of Paragraphs 7,
8, 9 and 10 are reasonable and necessary for the protection of the Corporation
and its Affiliates and that any violation of such covenants would cause
immediate, immeasurable and irreparable harm, loss and damage to the Corporation
not adequately compensable by a monetary award.  Accordingly, the Employee
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
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 Employee for any
actual or threatened violation of any of said covenants and if the Corporation
prevails in such litigation, then, Employee 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.

12.           Change of Control.
 
12.1           If at any time during the term of this Agreement, (a) individuals
who presently constitute the Board of Directors of WMS Industries Inc. or the
then ultimate parent corporation of the Corporation (the “Parent Corporation”),
or who have been recommended for election to such Board by two-thirds of such
Board consisting of individuals who are either presently on such Board or such
recommended successors, cease for any reason to constitute at least a majority
of such Board or (b) both of the following occur (i) any person or entity or
group of affiliated persons or entities who are not owners of at least 15% of
the outstanding shares of voting securities of the Parent Corporation on the
Effective Date acquire more than 25% of the outstanding shares of voting
securities of the Parent Corporation and (ii) within 180 days of such
acquisition of 25% of the outstanding shares of voting securities the
Corporation terminates Employee’s employment for any reason other than for
cause, death or disability (the events in clause (a) or (b) being hereafter
referred to as a “Change of Control”) and, in the case of clause (a), Employee
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 Employee, as severance pay and in lieu of any other rights or
remedies which might otherwise be available to him under this Agreement, an
amount equal to the annual base salary compensation to which Employee would
otherwise be entitled during a twenty-four (24) month period, which amount will
be paid in regular payroll intervals.

 
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12.3           In the event of a Change of Control of the Parent Corporation, or
if 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
Parent Corporation on the date hereof acquires more than 25% of the outstanding
shares of the Parent Corporation’s voting securities (each such event being an
“Accelerated Vesting Event”), all unexpired stock options and stock equity
grants owned by Employee 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 or equity grants.  All
options and stock equity grants hereafter granted to Employee by the Parent
Corporation shall provide for substantially similar accelerated vesting.

 
13.           Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the matters set forth herein and no
amendment or modification hereof shall be valid or binding unless made in
writing and signed by both parties hereto.

 
14.           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
certified mail, return receipt requested, postage and fees prepaid as follows:

 
if to the Corporation at:

 
its address set forth above,
Attention: Brian R. Gamache, President

 
and, if to Employee, at his address set forth above.

 
Either of the parties hereto may at any time and from time to time change the
address to which notice shall be sent hereunder by notice to the other party
given as provided herein. The date of the giving of any notice hereunder shall
be the date delivered or if sent by mail, shall be the date of the posting of
the mail.

 
15.           Non-Assignability. Neither this Agreement nor the right to receive
any payments hereunder may be assigned by Employee. This Agreement shall be
binding upon Employee and inure to the benefit of his heirs, executors and
administrators and be binding upon the Corporation and inure to the benefit of
its successors and assigns.

       16.           Choice of Law And Forum.  This Agreement shall be governed,
interpreted and construed under the laws of the State of Illinois without regard
to its conflict of law principles. The parties agree that any dispute or
litigation arising in whole or in part hereunder shall, at the option of the
Corporation, be litigated in any state or Federal court of competent subject
matter jurisdiction sitting in Cook County, Illinois, to the jurisdiction of
which and venue in which Employee irrevocably consents.

      17.           Waiver.  No course of dealing nor any delay on the part of
any party 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.

        18.           Severability.  If any provision of this Agreement
including any paragraph, sentence, clause or part thereof, shall be deemed
contrary to law or invalid or unenforceable in any respect by a court of
competent jurisdiction, the remaining provisions of such paragraph, sentence,
clause or part thereof 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.

 
19.           Survival at Termination.   The termination of Employee's
employment hereunder shall not affect his obligations to the Corporation
hereunder which by the nature thereof are intended to survive any such
termination including, without limitation, Employee's obligations under
Paragraphs 7, 8 9 and 10.

 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above set forth.

 
WMS GAMING INC.

 
By: /s/ Brian R. Gamache
Brian R. Gamache
President

 
EMPLOYEE:

 
By: /s/ Larry J. Pacey
Larry J. Pacey

 
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