Exhibit 10.40


 


AMENDMENT TO

HADDRILL EMPLOYMENT AGREEMENT


 


This
Amendment to the Employment Agreement (the “Amendment”) is made and
entered into as of December 22, 2004 (the “Effective Date”), by and
between Alliance Gaming Corporation, a Nevada corporation (the “Company”),
and Richard Haddrill, currently residing at 3394 Knollwood Drive, Atlanta,
Georgia  30305 (“Haddrill”).


 


WHEREAS,
the Company and Haddrill are parties to that certain Employment Agreement dated
as of June 30, 2004 (the “Employment Agreement”) pursuant to which
Haddrill is employed as the Company’s Chief Executive Officer;


 


WHEREAS,
pursuant to the Employment Agreement, the Company granted to Haddrill
non-statutory stock options to acquire 500,000 shares of the Company’s common
stock (the “Options”) and 377,030 restricted stock units (the “Restricted
Stock Units”) under the Company’s Amended and Restated 2001 Long Term
Incentive Plan (the “Plan”); and


 


WHEREAS,
the Company and Haddrill desire to amend the Employment Agreement to grant
additional non-statutory stock options and restricted stock units and to modify
the date by which Haddrill is to acquire the Alliance Stock (as such term is
defined herein).


 


NOW
THEREFORE, on the basis of the foregoing premises and in consideration of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:


 


1.                                       As of the Effective Date, the Company shall
grant Haddrill additional non-statutory stock options to acquire 300,000 shares
of the Company’s common stock under the Plan (the “Additional Options”),
at an exercise price per share equal to the fair market value of a share of the
Company’s common stock as of the Effective Date (as determined in accordance
with the Plan).  The Additional Options
shall vest and be subject to the terms and conditions set forth on Schedule A-1
hereto.


 


2.                                       As of the Effective Date, the Company shall
grant Haddrill a number of additional restricted stock units under the Plan
(the “Additional Restricted Stock Units”), in an amount equal to $1.9
million, as calculated in accordance with Schedule B-1 hereto.  The Additional Restricted Stock Units shall
vest and be subject to the terms and conditions set forth on Schedule B-1
hereto.


 


3.                                       Sections 8(a), (b), (c) and (d)(i) of the
Employment Agreement are hereby amended and restated in their entirety to read
as follows:


 


“8.                                 Payments Upon Termination or Change of
Control.


 


(a)                                  If Haddrill’s employment is terminated under
paragraph 7(a) or 7(d) hereof, (i) the Company shall have no further obligation
under this Agreement, except the obligation to pay Haddrill an amount equal to
the portion of his compensation 


 


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and
out-of-pocket business expenses as may be accrued and unpaid on the date of
termination and (ii) Haddrill shall be entitled to retain the rights granted
hereunder to [a] that number of Restricted Stock Units and Additional
Restricted Stock Units that have vested through the date of termination in
accordance with the vesting schedules set forth on Schedules B and B-1,
respectively, hereof and [b] that number of Options and Additional Options that
have vested in accordance with the vesting schedules set forth in Schedules A
and A-1, respectively, hereof.  All non-vested
Restricted Stock Units, Additional Restricted Stock Units, Options and
Additional Options shall be immediately forfeited.


 


(b)                                 If Haddrill’s employment is terminated under
paragraphs 7(b) or 7(c) hereof, (i) the Company shall [a] pay Haddrill an
amount equal to the portion of his compensation and out-of-pocket business
expenses as may be accrued and unpaid on the date of termination; [b] pay
Haddrill severance pay in an amount equal to the base salary for a period of
one year from the date of termination or until the expiration of this Agreement,
whichever first occurs; and (ii) Haddrill shall be entitled to retain the
rights granted hereunder to [a] the Restricted Stock Units and Additional
Restricted Stock Units to the extent provided in Schedules B and B-1,
respectively, hereof; provided that the Restricted Stock Units and Additional
Restricted Stock Units shall be pro rated through the 12-month period following
the month in which the date of termination occurs (i.e., the number of
Restricted Stock Units and Additional Restricted Stock Units to which Haddrill
shall be entitled shall be equal to the aggregate of all  Restricted Stock Units and Additional
Restricted Stock Units multiplied by a fraction, the numerator of which shall
be the number of partial or whole months served by Haddrill under this
Agreement from and after the Commencement Date plus 12, and the denominator of
which shall be 36), and [b] (i) all Options in which price targets have been
achieved at the date of termination regardless of the time vesting requirement,
(ii) the portion of Additional Options pro rated through the month in which the
date of termination occurs and (iii) all other time vesting options with
respect to which the price targets have not been achieved (“Time Vested
Options”) shall be pro rated through the month in which the date of
termination occurs; provided that the Time Vested Options shall be exercisable
only to the extent the price targets are achieved within the time periods
specified on Schedule A attached hereto. 
Except as provided herein, all non-vested Restricted Stock Units,
Additional Restricted Stock Units, Options and Additional Options shall be
immediately forfeited.


 


(c)                                  If Haddrill’s employment is terminated under
paragraph 7(e) or 7(f), (i) the Company shall [a] pay to Haddrill or Haddrill’s
Estate, as the case may be, an amount equal to the portion of his compensation
and out-of-pocket business expenses as may be accrued and unpaid as of the date
of his termination; and [b] pay Haddrill or Haddrill’s Estate the base salary
for a period of one year from the date of Haddrill’s termination of employment
or until expiration of the term of this Agreement, whichever occurs first; and
(ii) Haddrill or Haddrill’s Estate shall be entitled to retain the rights
granted hereunder to [a] that number of Restricted Stock Units and Additional
Restricted Stock Units that have vested through the date of termination in
accordance with the vesting schedules set forth on Schedules B and B-1,
respectively, hereof and [b] the number of Options and Additional Options that
have vested at the date of termination in accordance with the vesting schedules
set forth in Schedules A and A-1, respectively, 


 


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hereof.  Except as provided herein, all non-vested
Restricted Stock Units, Additional Restricted Stock Units, Options and
Additional Options shall be immediately forfeited.


 


(d)                                 (i) Upon a Change of Control, as hereinafter
defined, [a] the Company shall pay to Haddrill $980,000, and [b] Haddrill shall
be entitled to retain the rights granted hereunder to [1] all of the Restricted
Stock Units and Additional Restricted Stock Units granted to him irrespective
of the vesting schedules or distribution provisions set forth on Schedules B
and B-1, respectively, hereof; provided that he shall not be entitled to
receive a distribution of the shares represented by the Restricted Stock Units
or Additional Restricted Stock Units until the occurrence of one of the
distribution events listed in Section 409A(a)(2)(a) of the Internal Revue Code
(the “Code”) and [2] all of the Options and Additional Options granted to him
irrespective of the vesting schedules set forth in Schedules A and A-1,
respectively, hereof, and all such Restricted Stock Units, Additional
Restricted Stock Units, Options and Additional Options shall vest
immediately.  Notwithstanding paragraphs
8(a) through (c), upon a Change of Control the Company shall have no further
obligations under this Agreement other than as set forth in this paragraph
8(d).  For purposes of this paragraph
8(d), “Change of Control” shall mean (i) the acquisition, directly or
indirectly, by any unaffiliated person, entity or group (a “Third Party”)
of beneficial ownership of more than 50% of the combined voting power of the
Company’s then outstanding voting securities entitled to vote generally in the
election of directors; (ii) consummation of (1) a reorganization, merger or
consolidation of the Company, or (2) a liquidation or dissolution of the
Company or (3) a sale of all or substantially all of the assets of the Company
(whether such assets are held directly or indirectly) to a Third Party; or
(iii) the individuals who as of the date of this Agreement are members of the
Board of Directors (together with any directors elected or nominated by a
majority of such individuals) cease for any reason to constitute at least a
majority of the members of the Board of Directors; except that any event or
transaction which would be a “Change of Control” under (i) or (ii) (1) of this
definition, shall not be a Change of Control if persons who were the equity
holders of the Company immediately prior to such event or transaction (other
than the acquiror in the case of a reorganization, merger or consolidation),
immediately thereafter, beneficially own more than 50% of the combined voting
power of the Company’s or the reorganized, merged or consolidated company’s
then outstanding voting securities entitled to vote generally in the election
of directors.”


 


4.                                       Section 9 of the Employment Agreement is
hereby amended and restated in its entirety to read as follows:


 


“9.                                 Purchase of Company Stock. 
Prior to the June 30, 2005, Haddrill shall, subject to the Company’s
policies relating to the purchase of shares of the Company’s common stock by
persons deemed to be Insiders, increase his holdings of shares of the Company’s
common stock (such holdings of shares, the “Alliance Stock”) to a point
at which, as of June 30, 2005, such holdings have an aggregate acquisition cost
to Haddrill of at least $1.0 million. 
Subject to his compliance with applicable State and Federal securities
laws, Haddrill shall be entitled to sell the Alliance Stock commencing on the
earlier of (i) October 1, 2007 or (ii) the day after he is no longer employed
as CEO of the Company under this Agreement.”


 


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5.                                       Except as expressly modified by this
Amendment, the Employment Agreement shall remain unchanged and shall remain in
full force and effect.


 


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IN
WITNESS WHEREOF, the Company and Haddrill have duly executed this Amendment as
of the date first above written.


 


 


	
   

  	
  ALLIANCE
  GAMING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Richard
  Haddrill

  
							



 





















 


Schedule A-1


 


ADDITIONAL OPTIONS


 


1.                                       The Company shall issue to Haddrill 300,000
Additional Options under the Company’s Amended and Restated 2001 Long Term
Incentive Plan (the “Plan”).


 


2.                                       Except as otherwise provided in the
Employment Agreement, as amended, the Additional Options shall vest as
follows:  (i) 200,000 Additional Options
shall vest in one-third equal installments on each of October 1, 2005, October
1, 2006 and October 1, 2007, if Haddrill is continuously employed by the Company
as Chief Executive Officer until each such respective vesting date, and (ii)
the remaining 100,000 Additional Options shall vest on October 1, 2007, if
Haddrill is continuously employed by the Company as Chief Executive Officer
through that date.


 


3.                                       Once the Additional Options become
exercisable hereunder, they shall remain exercisable until October 1, 2014
without regard to whether Haddrill continues to be employed by the Company
prior to or on such date.


 





















 


Schedule B-1


 


ADDITIONAL RESTRICTED STOCK UNITS


 


1.                                       The Company shall issue to Haddrill
Additional Restricted Stock Units (“Additional RSUs”) under the Company’s
Amended and Restated 2001 Long Term Incentive Plan (the “Plan”) in a
number determined by dividing $1.9 million by the average per share closing
price of the Company’s common stock on the stock exchange in which the stock is
principally traded for the 20 business days immediately prior to the date of
the grant or such other method as the parties shall mutually agree to, provided
that such method complies with the Plan.


 


2.                                       Except as provided in the Employment
Agreement, as amended, the Additional RSUs will vest on October 1, 2010;
provided that the vesting of 50% of the Additional RSUs will be accelerated to
each of October 1, 2005 and October 1, 2006 upon the attainment in each case of
strategic and/or financial measures specified for the approximately nine month
period ending October 1, 2005 and for the twelve month period ending October 1,
2006 to be mutually agreed to between the Board of Directors and Mr. Haddrill.


 


3.                                       Each vested Additional RSU represents
Haddrill’s right to receive one (1) share of Company common stock, as follows:


 


a.               75% of the shares represented by the vested
Additional RSUs shall be issued to Haddrill (1) on the later of (a) October 1,
2007 or (b) the date that is six (6) months following the date Haddrill’s
employment with the Company terminates for any reason or such shorter period as
may be permissible pursuant to regulations promulgated under Section 409A of
the Internal Revenue Code (the “Code”), or (2) in the event the Employment
Agreement, as amended, is terminated prior to October 1, 2007, on the date that
is six (6) months following the date Haddrill’s employment with the Company is
terminated or such shorter period as may be permissible pursuant to regulations
promulgated under Section 409A of the Code.


 


b.              The remaining 25% of the shares represented
by the vested Additional RSUs shall be issued to Haddrill (1) on the later of
(a) October 1, 2008 or (b) the date that is six (6) months following the date
Haddrill’s employment with the Company terminates for any reason or such
shorter period as may be permissible pursuant to regulations promulgated under
Section 409A of the Code, or (2) in the event the Employment Agreement, as
amended, is terminated prior to October 1, 2007, on the date that is six (6)
months following the date Haddrill’s employment with the Company is terminated
or such shorter period as may be permissible pursuant to regulations
promulgated under Section 409A of the Code.


 


4.                                       Except as provided in the Employment
Agreement, as amended, if Haddrill ceases to be the CEO, all nonvested
Additional RSUs shall be immediately forfeited.