exv10w12



 






Exhibit 10.12




EMPLOYMENT AGREEMENT




     THIS EMPLOYMENT AGREEMENT (“AGREEMENT”) is made and entered into as of June 6, 2005,
(“Effective Date”) by and between MIKOHN GAMING CORPORATION dba Progressive Gaming International
Corporation, a Nevada corporation (“MIKOHN” or the “Company”), and Thomas M. Galanty (“Employee”).



WITNESSETH:




     WHEREAS, MIKOHN and Employee deem it to be in their respective best interests to enter into an
agreement providing for MIKOHN’s employment of Employee pursuant to the terms herein stated.



     NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements
contained herein, it is hereby agreed as follows:



     1. Term. MIKOHN hereby employs and Employee hereby accepts employment with MIKOHN for
a period of three (3) years beginning on June 20, 2005 (“Term”). Unless MIKOHN or Employee gives
written notice that this Agreement shall be allowed to expire and the employment relationship
thereby terminated (a “Non-renewal Notice”) at least thirty (30) days prior to the expiration of
the Term or any Renewal Term (as defined herein), this Agreement shall continue in effect for
additional terms of (1) one year each (“Renewal Term”).



     2. Duties of Employee. Employee’s position with MIKOHN will be Executive Vice
President and Chief Technology Officer. Employee shall do and perform all services, acts, or
things reasonably necessary or advisable to accomplish the objectives and complete the tasks
assigned to Employee by MIKOHN’s Chief Executive Officer. MIKOHN may assign Employee to another
position commensurate with Employee’s training and experience so long as the compensation paid to
Employee is equal to or greater than the compensation provided in this Agreement and the position
and related title, reporting level and responsibilities are of equal or greater nature, status and
prestige.



     3. Devotion of Time to MIKOHN’s Business. Employee shall be a full-time employee of
MIKOHN and shall devote such substantial and sufficient amounts of his productive time, ability,
and attention to the business of MIKOHN during the Term of this Agreement as may be reasonable and
necessary to accomplish the objectives and complete the tasks assigned to Employee. Prior written
consent of MIKOHN shall be required before Employee shall undertake to perform any outside services
of a business, commercial, or professional nature, whether for compensation or otherwise. The
foregoing notwithstanding, Employee may devote reasonable time to activities other than those
required under this Agreement, including activities involving professional, charitable, community,
educational, religious and similar types of organizations, speaking engagements, membership on the
boards of directors of other organizations and similar types of activities to the extent that such
activities do not inhibit or prohibit the performance of services under this Agreement.



     4. Uniqueness of Services. Employee hereby acknowledges that the services to be
performed by him under the terms of this Agreement are of a special and unique value. Accordingly,
the obligations of Employee under this Agreement are non-assignable.



     5. Compensation of Employee.




          a. Base Annual Salary. As compensation for services hereunder, Employee shall receive
a Base Annual Salary at the rate of not less than $260,000 per annum payable in accordance with
MIKOHN’s ordinary payroll practices (and in any event no less frequently than monthly). On each
anniversary date of June 20, 2005 (the “Commencement Date”), Employee’s Base Annual Salary shall be
increased by not less than 5% per annum.




          b. Signing Bonus/Moving Allowance. Upon the execution of this Agreement, Employee
shall be paid $80,000 as a combined signing bonus and moving allowance. Such bonus shall be
“grossed up” to cover Employee’s personal income taxes payable in connection therewith. This sum
is given in consideration of Employee’s commitment not to terminate this Agreement prior to the
initial expiration date, other than as permitted pursuant to Sections 6(c) or 19 below. If
Employee terminates this Agreement (other than as permitted pursuant to






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Sections 6(c) or 19 below)
or if Employee is terminated for Cause (as defined Section 6(b) below) prior to the expiration of
three (3) years from the Commencement Date, Employee will be obligated to return and remit a pro
rata portion of the sum to MIKOHN. (For example, if Employee should terminate this Agreement after
one year as described above, Employee will be required to remit the sum of $53,333.34.)



          c. Bonus. Employee shall be eligible for an annual bonus payment of up to 60% or 80%
of Employee’s Base Salary pursuant to the executive incentive compensation plan approved by the
Board of Directors on August 10, 2004 (the “Executive Incentive Compensation Plan”); provided,
however that MIKOHN and Employee, as applicable, achieve the relevant bonus targets set forth in
the Executive Incentive Compensation Plan, as such targets may be determined (and/or modified and
revised, as applicable) by the Chief Executive Officer and the Board of Directors in consultation
with Employee.




          d. Stock Options. MIKOHN has granted to Employee options to purchase 100,000 shares
of MIKOHN Common Stock (the “Options”) under MIKOHN’s Stock Option Plan (“Option Plan”). The
Options are subject to the terms and conditions of the Option Plan (a copy of which is attached
hereto), and shall additionally provide as follows:




               (1) The Options shall be designated as Incentive Options.



               (2) Monthly, 1/48th of the Option Shares shall become eligible for purchase by Employee.



               (3) The Options shall terminate on (i) the expiration date specified in the Stock Option
Agreements or (ii) such earlier date as termination may occur according to the terms and conditions
of the Option Plan and/or the Stock Option Agreements. Upon termination of this Agreement for any
reason, Employee and/or his successors and assigns shall have only such rights with respect to the
Option as are specified in the Plan, the Stock Option Agreements, or this Agreement, and shall not
be entitled to any compensation in any form for the loss of any other right with respect thereto.



               (4) All Options to acquire common stock of MIKOHN granted to Employee during the term of this
Agreement shall become 100% vested (i) upon any “Change in Control” as defined in Section 19 below;
(ii) if MIKOHN or any successor or assignee of MIKOHN should terminate this Agreement other than
for Cause or deliver a Non-renewal Notice to Employee pursuant to Section 1 above; (iii) if
Employee should terminate this Agreement for Good Reason as permitted in Section 6(c) below; or
(iv) upon Employee’s death or permanent disability as described in Section 6(e) below; provided,
however, that in the case of (ii), (iii) or (iv) above, such vesting shall be conditioned on
Employee (or Employee’s estate) furnishing to MIKOHN an effective waiver and release of claims (a
form of which is attached hereto as Exhibit A).



               (5) Employee shall have not less than 90 days to exercise any options which are vested as of
the effective date of termination of his employment with MIKOHN, regardless of the reason therefor.



          e. Automobile. MIKOHN shall provide Employee an automobile allowance in the amount of
$1,000 per month.




          f. Country Club Membership. MIKOHN shall provide Employee with the use of a
membership in a country club of Employee’s choice, the initial cost of which shall not exceed
$35,000. In addition, MIKOHN shall reimburse Employee up to $500 per month for country club dues.
Such monthly amounts shall be “grossed up” to cover Employee’s personal income taxes payable in
connection therewith.




          g. Employee Benefits. Employee shall receive such benefits, fringe benefits and
entitlements as is usual and customary for MIKOHN to provide an executive employee of like status
and position and are consistent with MIKOHN’s established policies on employment, which may be
revised from time to time in the sole discretion of MIKOHN, including but not limited to:
Executive medical benefits for Employee and his family and an




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Annual Life Insurance premium payment
by MIKOHN for Employee of up to $15,000 per annum for the duration of the Agreement.



          h. Business Expenses. MIKOHN will reimburse Employee for reasonable business expenses
incurred in performing Employee’s duties and promoting the business of MIKOHN.




          i. Restricted Stock. MIKOHN has granted Employee 35,000 restricted shares (“Shares”)
that are governed by, and vested in accordance with the terms of MIKOHN’s Restricted Stock Plan
(”Stock Plan”). The Fair Market Price for the Shares is $13.46. The Shares have been granted
pursuant to the form of MIKOHN’s standard Restricted Stock Grant Agreement (a copy of which is
attached hereto) and are subject to the terms and conditions thereof.




     6. Termination of Employment.



          a. Either party shall have the right to terminate this Agreement upon thirty (30) days written
notice to the other. If MIKOHN delivers a Non-renewal Notice to Employee, or if MIKOHN should
terminate this Agreement other than for “Cause” as defined in Section 6(b) below (“termination
without Cause”) or Employee should resign for “Good Reason” as defined in Section 6(c) below (in
either instance except as described in Section 19 below, in which case the provisions of Section 19
shall apply), MIKOHN shall, upon the Employee’s furnishing to MIKOHN an effective waiver and
release of claims (a form of which is attached hereto as Exhibit A), pay to Employee (x) a sum
equal to Employee’s Base Salary for the most recent 18 months, and (y) an amount equal to
Employee’s COBRA health insurance premiums for the 18 month period immediately following
such termination. In such event, MIKOHN shall also reimburse Employee for reasonable expenses
associated with outplacement employment activities for Employee, as well pay Employee the sum of
$25,000 (including a “gross up” amount to cover Employee’s personal income taxes payable in
connection therewith) for Employee’s relocation. Any sums payable under this Section shall be paid
in full upon the effective date of the termination of the employment relationship between MIKOHN
and Employee.




          b. Termination For Cause. MIKOHN shall have the right to terminate Employee’s
employment at any time for Cause by giving Employee written notice of the effective date of
termination. In the event of termination for Cause, Employee shall be paid Employee’s salary and
accrued and unused vacation benefits through the effective date of termination on the date of
termination. After the effective date of termination, Employee shall not be entitled to accrue or
vest in any further salary, severance pay, benefits, fringe benefits or entitlements except as may
be required by statute or regulation of any agency or competent jurisdiction; provided, however,
that in the event of a termination pursuant to Section 6(b)(e) below, pay Employee the sum of
$25,000 (including a “gross up” amount to cover Employee’s personal income taxes payable in
connection therewith) for Employee’s relocation. For the purposes of this Agreement, “Cause” shall
mean:





	 	(a)	 	The willful and continued failure by the Employee to substantially
perform his duties with MIKOHN (other than any such failure resulting from the
Employee’s being Disabled), within a reasonable period of time after a written
demand for substantial performance is delivered to the Employee by the Board of
Directors (“Board”), which demand specifically identifies the manner in which
the Board believes that the Employee has not substantially performed his
duties;
	 
	 	(b)	 	The willful engaging by the Employee in conduct which is
demonstrably and materially injurious to MIKOHN, monetarily or otherwise;
	 
	 	(c)	 	Employee’s conviction of a crime involving serious
moral turpitude to the extent that, in the reasonable judgment of the MIKOHN’s
Board, the Employee’s credibility and reputation no longer conform to the
standard of MIKOHN’s Employees;




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	 	(d)	 	The knowing or repeated violation of any material MIKOHN policy
applicable to the Employee following written notice from MIKOHN of such
violations.






	 	(e)	 	The loss, revocation, suspension of, or failure to obtain any
license or certification of Employee necessary for Employee to discharge
Employee’s duties on behalf of MIKOHN. Any issues involving the loss,
revocation, suspension of or failure to obtain of such licenses and/or
certifications will be provided in writing to the Employee, and Employee, with
the assistance of MIKOHN, will have a reasonable period of time to remedy the
respective issue.
	 
	 	(f)	 	Willful acts or omissions by Employee which jeopardize any
governmental registration, license, permit or other governmental permission
material to the business of MIKOHN in any jurisdiction in which MIKOHN does
business or seeks to do business;
	 
	 	(g)	 	The solicitation or acceptance of payment or gratuity from any
existing or potential customer or supplier of MIKOHN without the prior written
consent of MIKOHN’s Chief Executive Officer.





          c. Resignation For Good Reason. Employee may terminate his employment under this
Agreement for “Good Reason” (as defined hereunder) at any time, by providing written notice to
MIKOHN of same following the provision to MIKOHN of a thirty (30) day opportunity to cure such Good
Reason. Any termination for Good Reason shall have the same legal effect under this Agreement as a
termination without Cause by MIKOHN. For purposes of this Agreement, the term “Good Reason” shall
mean, with respect to the Employee, the occurrence of one or more of the following events without
such Employee’s express written consent: (i) a material reduction in the Employee’s duties,
responsibilities, title or reporting relationships; (ii) a material reduction in the Employee’s
base salary or total target annual cash compensation; or (iii) a permanent relocation of the
Employee’s business office to a location more than fifty (50) miles from the location at which the
Employee currently performs his or her duties.




          d. For purposes of this Agreement, no act, or failure to act, on the Employee’s part shall be
deemed “willful” unless done, or omitted to be done, intentionally by the Employee not in good
faith and without reasonable belief that the Employee’s action or omission was in the best interest
of MIKOHN.




          e. This Agreement shall terminate automatically in the event that: (i) Employee fails or is
unable to perform Employee’s duties due to injury, illness or other incapacity for ninety (90) days
in any twelve (12) month period (except that Employee may be entitled to disability payments
pursuant to MIKOHN’s disability plan, if any); or (ii) Death of Employee. Upon termination of this
Agreement as the result of the death or disability of Employee, all vested stock options and
restricted stock provided herein shall become the property of the Employee’s estate.




     7. Covenant of Confidentiality. All documents, records, files, manuals, forms,
materials, supplies, computer programs, trade secrets and other information which comes into
Employee’s possession from time to time during Employee’s employment by MIKOHN, and/or any of
MIKOHN’s subsidiaries or affiliates, shall be deemed to be confidential and proprietary to MIKOHN
and shall remain the sole and exclusive property of MIKOHN. Employee acknowledges that all such
confidential and proprietary information is confidential and proprietary and not readily available
to MIKOHN’s business competitors. On the effective date of the termination of the employment
relationship or at such other date specified by MIKOHN, Employee agrees that he will return to
MIKOHN all such confidential and proprietary items (including, but not limited to, company badge
and keys) in his control or possession, and all copies thereof, and that he will not remove any
such items from the offices of MIKOHN.



     8. Covenant of Non-Disclosure. Without the prior written approval of MIKOHN, Employee
shall keep confidential and not disclose or otherwise make use of any of the confidential or
proprietary information or trade secrets referred to in Section 7 nor reveal the same to any third
party whomsoever, except as required by law.



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     9. Covenant of Non-Solicitation. During the Term of this Agreement and for a period
of two (2) years following the effective date of termination, Employee, either on Employee’s own
account or for any person, firm, company or other entity, shall not solicit, interfere with or
induce, or attempt to induce, any employee of MIKOHN, or any of its subsidiaries or affiliates to
leave their employment or to breach their employment agreement, if any, with MIKOHN.



     10. Covenant of Cooperation. Employee agrees to cooperate with MIKOHN in any
litigation or administrative proceedings involving any matters with which Employee was involved
during his employment by MIKOHN. MIKOHN shall reimburse Employee for reasonable expenses incurred
in providing such assistance.



     11. Covenant Against Competition.



          a. Scope and Term. During the Term of this Agreement and for an additional period
ending one (1) year after the effective date of termination or expiration of this Agreement,
whichever occurs first, Employee shall not directly or indirectly engage in or become a partner,
officer, principal, employee, consultant, investor, creditor or stockholder of any business,
proprietorship, association, firm, corporation or any other business entity which is engaged or
proposes to engage or hereafter engages in any business which competes with the business of MIKOHN
and/or any of MIKOHN’s subsidiaries or affiliates in any geographic area in which MIKOHN conducts
business at the time of the termination or expiration of the employment relationship. Ownership by
Employee, as a passive investment, of less than two percent (2%) of the outstanding shares of
capital stock of any corporation with one or more classes of its capital stock listed on a national
securities exchange or publicly traded on the Nasdaq Stock Market or in the over-the-counter market
shall not constitute a breach of this paragraph.




          b. Option to Extend Term of Covenant. Upon thirty (30) days’ written notice to
Employee given prior to the expiration of the term of the Covenant Against Competition specified in
Section 11(a) above, MIKOHN shall have the option to extend said term for a period of up to one (1)
additional year upon payment of the following consideration to Employee:




               (1) If Employee is terminated without Cause or this Agreement expires without renewal, or
Employee terminates his employment pursuant to Sections 6(c) or 19, the sum of $300,000.00 payable
in 12 monthly installments; or



               (2) If Employee terminates this Agreement other than as permitted in Sections 6(c) or 19 or is
terminated by MIKOHN for Cause, the sum of $120,000.00 payable in 12 monthly installments.



     12. Rights to Inventions.



          a. Inventions Defined. “Inventions” means discoveries, concepts, and ideas, whether
patentable or not, relating to any present or contemplated activity of MIKOHN, including without
limitation devices, processes, methods, formulae, techniques, and any improvements to the
foregoing.




          b. Application. This Section 12 shall apply to all Inventions made or conceived by
Employee, whether or not during the hours of his employment or with the use of MIKOHN facilities,
materials, or personnel, either solely or jointly with others, during the Term of his employment by
MIKOHN. This Section 12 does not apply to any invention disclosed in writing to MIKOHN by Employee
prior to the execution of this Agreement.




          c. Assignment. Employee hereby assigns and agrees to assign to MIKOHN all of his
rights to Inventions described in (b) above and to all proprietary rights therein, based thereon or
related thereto, including without limitation applications for United States and foreign letters
patent and resulting letters patent.




          d. Reports. Employee shall inform MIKOHN promptly and fully of each Invention by a
written report, setting forth in detail the structures, procedures, and methodology employed and
the results achieved (“Notice of Invention”). A report shall also be submitted by Employee upon
completion of any study or research project




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undertaken on MIKOHN’s behalf, whether or not in
Employee’s opinion a given study or project has resulted in an Invention.



          e. Patents. At MIKOHN’s request and expense, Employee shall execute such documents
and provide such assistance as may be deemed necessary by MIKOHN to apply for, defend or enforce
any United States and foreign letters patent based on or related to such Inventions.




     13. Remedies. Notwithstanding any other provision in this Agreement to the contrary,
Employee acknowledges and agrees that if Employee commits a material breach of the Covenant of
Confidentiality (Section 7), Covenant of Non-Disclosure (Section 8), Covenant of Non-Solicitation
(Section 9), Covenant of Cooperation (Section 10), Covenant Against Competition (Section 11), or
Rights to Inventions (Section 12), MIKOHN shall have the right to have the obligations of Employee
specifically enforced by any court having jurisdiction on the grounds that any such breach will
cause irreparable injury to MIKOHN and money damages will not provide an adequate remedy. Such
equitable remedies shall be in addition to any other remedies at law or equity, all of which
remedies shall be cumulative and not exclusive. Employee further acknowledges and agrees that the
obligations contained in Sections 7 through 12, of this Agreement are fair, do not unreasonably
restrict Employee’s future employment and business opportunities, and are commensurate with the
compensation arrangements set out in this Agreement.



     14. Survivability. Sections 7 through 13, of this Agreement shall survive termination
of the employment relationship and this Agreement.



     15. General Provisions.



          a. Arbitration. Any controversy involving the construction, application,
enforceability or breach of any of the terms, provisions, or conditions of this Agreement,
including without limitation claims for breach of contract, violation of public policy, breach of
implied covenant, intentional infliction of emotional distress or any other alleged claims which
are not settled by mutual agreement of the parties, shall be submitted to final and binding
arbitration in accordance with the rules of the American Arbitration Association. The cost of
arbitration shall be borne by the losing party. In consideration of each party’s agreement to
submit to arbitration any and all disputes that arise under this Agreement, each party agrees that
the arbitration provisions of this Agreement shall constitute his/its exclusive remedy and each
party expressly waives the right to pursue redress of any kind in any other forum. The parties
further agree that the arbitrator acting hereunder shall not be empowered to add to, subtract from,
delete or in any other way modify the terms of this Agreement. Notwithstanding the foregoing, any
party shall have the limited right to seek equitable relief in the form of a temporary restraining
order or preliminary injunction in a court of competent jurisdiction to protect itself from actual
or threatened irreparable injury resulting from an alleged breach of this Agreement pending a final
decision in arbitration.




          b. Authorization. MIKOHN and Employee each represent and warrant to the other that
he/it has the authority, power and right to deliver, execute and fully perform the terms of this
Agreement.




          c. Entire Agreement. Employee understands and acknowledges that this document
constitutes the entire agreement between Employee and MIKOHN with regard to Employee’s employment
by MIKOHN and Employee’s post-employment activities concerning MIKOHN. This Agreement supersedes
any and all other written and oral agreements between the parties with respect to the subject
matter hereof. Any and all prior agreements, promises, negotiations, or representations, either
written or oral, relating to the subject matter of this Agreement not expressly set forth in this
Agreement are of no force and effect. This Agreement may be altered, amended, or modified only in
writing signed by all of the parties hereto. Any oral representations or modifications concerning
this instrument shall be of no force and effect.




          d. Severability. If any term, provision, covenant, or condition of this Agreement is
held by a court or other tribunal of competent jurisdiction to be invalid, void, or unenforceable,
the remainder of such provisions and all of the remaining provisions hereof shall remain in full
force and effect to the fullest extent permitted by law and shall in no way be affected, impaired,
or invalidated as a result of such decision.




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          e. Governing Law. Except to the extent that federal law may preempt Nevada law, this
Agreement and the rights and obligations hereunder shall be governed, construed and enforced in
accordance with the laws of the State of Nevada.




          f. Taxes. Except as otherwise specifically provided in this Agreement, all
compensation payable hereunder is gross and shall be subject to such withholding taxes and other
taxes as may be provided by law. Except as otherwise specifically provided in this Agreement,
Employee shall be responsible for the payment of all taxes attributable to the compensation
provided by this Agreement except for those taxes required by law to be paid or withheld by MIKOHN.




          g. Assignment. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of MIKOHN. Employee may not sell, transfer, assign, or pledge any of his
rights or interests pursuant to this Agreement.




          h. Waiver. Either party’s failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or provisions, or
prevent that party thereafter from enforcing such provision or provisions and each and every other
provision of this Agreement.




          i. Captions. Titles and headings to sections in this Agreement are for the purpose of
reference only and shall in no way limit, define, or otherwise affect any provisions contained
therein.




          j. Breach — Right to Cure. A party shall be deemed in breach of this Agreement only
upon the failure to perform any obligation under this Agreement after receipt of written notice of
breach and failure to cure such breach within ten (10) days thereafter; provided, however, such
notice shall not be required where a breach or threatened breach would cause irreparable harm to
the other party and such other party may immediately seek equitable relief in a court of competent
jurisdiction to enjoin such breach.




     16. Acknowledgement. Employee acknowledges that he has been given a reasonable period
of time to study this Agreement before signing it. Employee certifies that he has fully read, has
received an explanation of, and completely understands the terms, nature, and effect of this
Agreement. Employee further acknowledges that he is executing this Agreement freely, knowingly,
and voluntarily and that Employee’s execution of this Agreement is not the result of any fraud,
duress, mistake, or undue influence whatsoever. In executing this Agreement, Employee does not
rely on any inducements, promises, or representations by MIKOHN other than the terms and conditions
of this Agreement.



     17. [Reserved].



     18. Indemnification For Employee Officers. MIKOHN will, to the maximum extent
permitted by law, defend, indemnify and hold harmless the Employee and the Employee’s heirs,
estate, executors and administrators against any costs, losses, claims, suits, proceedings, damages
or liabilities to which the Employee may become subject which arise out of, are based upon or
relate to the Employee’s employment by MIKOHN (and any predecessor company to MIKOHN), or the
Employee’s service as an officer or member of the Board of Directors of MIKOHN (or any predecessor
company of MIKOHN) or any Affiliate, including without limitation reimbursement for any legal or
other expenses reasonably incurred by the Employee in connection with investigation and defending
against any such costs, losses, claims, suits, proceedings, damages or liabilities.



MIKOHN may maintain directors and officers liability insurance in commercially reasonable amounts
(as reasonably determined by the Board), and, in the event such insurance is obtained, the Employee
shall be covered under such insurance to the same extent as other senior management employees (and
directors, with respect to the Employee’s role as a director, as may be applicable); provided,
however, that MIKOHN shall not be required to maintain such insurance coverage unless the Board
determines that it is obtainable at reasonable cost.



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     19. Change in Control Provision.  Notwithstanding any Agreement provisions to the
contrary, for a period of twelve (12) months following a Change in Control, in the event of a
termination of Employee other than for Cause, or if the Employee resigns for “Good Reason” as that
term is defined in Section 6(c) above, Employee shall be entitled to receive a sum equal to three
times the Employee’s annualized Base Salary for the most recently completed calendar year payable
in a lump sum upon termination. At any point during the thirteenth month following a Change in
Control, Employee shall be entitled to terminate the Agreement and receive a sum equal to the
amount they would otherwise be entitled to pursuant to termination by MIKOHN other than for Cause
at the time of such election. In addition to the foregoing, upon a Change in Control and
separation of the Employee from MIKOHN, MIKOHN agrees to reimburse Employee for reasonable expenses
associated with outplacement employment activities for Employee. For the purposes of this
Agreement, the following definitions shall apply:



     (i) a “Change in Control” of MIKOHN means the occurrence, in a single transaction or in a
series of related transactions, of any one or more of the following events:



          a. Any Exchange Act Person becomes the Owner, directly or indirectly, of securities of MIKOHN
representing more than fifty percent (50%) of the combined voting power of MIKOHN’s then
outstanding securities other than by virtue of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (a) on account of
the acquisition of securities of MIKOHN by an investor, any affiliate thereof or any other Exchange
Act Person from MIKOHN in a transaction or series of related transactions the primary purpose of
which is to obtain financing for MIKOHN through the issuance of equity securities or (b) solely
because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the
designated percentage threshold of the outstanding voting securities as a result of a repurchase or
other acquisition of voting securities by MIKOHN reducing the number of shares outstanding,
provided that if a Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of voting securities by MIKOHN, and after such share acquisition, the
Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase
or other acquisition had not occurred, increases the percentage of the then outstanding voting
securities Owned by the Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;




          b. There is consummated a merger, consolidation or similar transaction involving (directly or
indirectly) MIKOHN and, immediately after the consummation of such merger, consolidation or similar
transaction, the stockholders of MIKOHN immediately prior thereto do not Own, directly or
indirectly, either (a) outstanding voting securities representing more than fifty percent (50%) of
the combined outstanding voting power of the surviving Entity in such merger, consolidation or
similar transaction or (b) more than fifty percent (50%) of the combined outstanding voting power
of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each
case in substantially the same proportions as their Ownership of the outstanding voting securities
of MIKOHN immediately prior to such transaction;




          c. The stockholders of MIKOHN approve or the Board approves a plan of complete dissolution or
liquidation of MIKOHN, or a complete dissolution or liquidation of MIKOHN shall otherwise occur;




          d. There is consummated a sale, lease, license or other disposition of all or substantially
all of the consolidated assets of MIKOHN and its subsidiaries, other than a sale, lease, license or
other disposition of all or substantially all of the consolidated assets of MIKOHN and its
subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting
securities of which are Owned by stockholders of MIKOHN in substantially the same proportions as
their Ownership of the outstanding voting securities of MIKOHN immediately prior to such sale,
lease, license or other disposition; or




          e. Individuals who, on the date this Agreement is executed, are members of the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the members of the
Board; provided, however, that if the appointment or election (or nomination for election) of any
new Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new




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member
shall be considered as a member of the Incumbent Board.


     (ii) “Entity” means a corporation, partnership or other entity.



     (iii) “Exchange Act” means the Securities Exchange Act of 1934, as amended.



     (iv) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(A) MIKOHN or any subsidiary of MIKOHN, (B) any employee benefit plan of MIKOHN or any subsidiary
of MIKOHN or any trustee or other fiduciary holding securities under an employee benefit plan of
MIKOHN or any subsidiary of MIKOHN, (C) an underwriter temporarily holding securities pursuant to
an offering of such securities, or (D) an Entity Owned, directly or indirectly, by the stockholders
of MIKOHN in substantially the same proportions as their Ownership of stock of MIKOHN.



     (v) “Own,” “Owned,” “Owner,” “Ownership” — A person or Entity shall be deemed to “Own,” to
have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or
Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.



     20. Parachute Payments. If any payment or benefit the Employee would receive from
MIKOHN pursuant to this Agreement or otherwise (“Payment”) would (i) constitute a “parachute
payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”), and (ii) be subject to the excise tax imposed by Section 4999 of the Code (the “Excise
Tax”), then the Employee will receive an additional payment (the “Gross-up”) from MIKOHN such that
after taking into account all applicable federal, state and local employment taxes, income taxes,
the Excise Tax and all applicable taxes on the Gross-up (all computed at the highest applicable
marginal rate), results in the Employee’s receipt, on an after-tax basis, of the full amount of the
Payment. MIKOHN’s principal outside accounting firm or principal outside tax advisors, as selected
by MIKOHN and Employee, will make all determinations hereunder and shall provide its calculations,
together with detailed supporting documentation, to MIKOHN and the Employee within fifteen (15)
calendar days after the date on which the Employee’s right to a Payment is triggered (if requested
at that time by MIKOHN or Employee) or such other time as requested by MIKOHN or the Employee. The
accounting firm or tax advisors shall furnish MIKOHN and the Employee with an opinion reasonably
acceptable to the Employee regarding the application of the Excise Tax to such Payment. MIKOHN
shall be entitled to rely upon the accounting firm’s or tax advisors’ determinations, as
applicable, which shall be final, binding and conclusive on Employee and MIKOHN.



     IN WITNESS WHEREOF, the parties hereto have read, understood, and voluntarily executed this
Agreement as of the day and year first above written.



	 	 	 	 	 	 	 	 	 
	EMPLOYEE	 	 	 	MIKOHN GAMING CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Thomas M. Galanty
 

THOMAS M. GALANTY

	 	 	 	By:
	 	/s/ Michael F. Dreitzer
 

	 	 
	 

	 	 	 	Title:
	 	E.V.P. & General Counsel	 	 






9









 






EXHIBIT A




RELEASE AND WAIVER OF CLAIMS




     In consideration of the payments and other benefits set forth in Section 5(d)(4) and Section
6(a) of the Employment Agreement dated      , to which this form is attached, I, Thomas M.
Galanty, hereby furnish Progressive Gaming International Corporation (the “Company”),
with the following release and waiver (“Release and Waiver”).



     In exchange for the consideration provided to me by the Employment Agreement that I am not
otherwise entitled to receive, I hereby generally and completely release the Company and its
directors, officers, employees, shareholders, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, Affiliates, and assigns from any and all
claims, liabilities and obligations, both known and unknown, that arise out of or are in any way
related to events, acts, conduct, or omissions occurring prior to my signing this Release and
Waiver. This general release includes, but is not limited to: (1) all claims arising out of or in
any way related to my employment with the Company or the termination of that employment; (2) all
claims related to my compensation or benefits from the Company, including, but not limited to,
salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits,
stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing;
(4) all tort claims, including, but not limited to, claims for fraud, defamation, emotional
distress, and discharge in violation of public policy; and (5) all federal, state, and local
statutory claims, including, but not limited to, claims for discrimination, harassment,
retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964
(as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination
in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act
(as amended).



     I also acknowledge that I have read and understand Section 1542 of the California Civil Code
which reads as follows: “A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release, which if known by him
must have materially affected his settlement with the debtor.” I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any jurisdiction of similar
effect with respect to any claims I may have against the Company.



     I acknowledge that, among other rights, I am waiving and releasing any rights I may have under
ADEA, that this Release and Waiver is knowing and voluntary, and that the consideration given for
this Release and Waiver is in addition to anything of value to which I was already entitled as an
executive of the Company. If I am 40 years of age or older upon execution of this Release and
Waiver, I further acknowledge that I have been advised, as required by the Older Workers Benefit
Protection Act, that: (a) the release and waiver granted herein does not relate to claims under
the ADEA which may arise after this Release and Waiver is executed; (b) I have the right to consult
with an attorney prior to executing this Release and Waiver (although I may choose voluntarily not
to do so); and (c) I have twenty-one (21) days from the date of termination of my employment with
the Company in which to consider this Release and Waiver (although I may choose voluntarily to
execute this Release and Waiver earlier); (d) I have seven (7) days following the execution of this
Release and Waiver to revoke my consent to this Release and Waiver; and (e) this Release and Waiver
shall not be effective until the seven (7) day revocation period has expired.



     If I am less than 40 years of age upon execution of this Release and Waiver, I acknowledge
that I have the right to consult with an attorney prior to executing this Release and Waiver
(although I may choose voluntarily not to do so); and (c) I have five (5) days from the date of
termination of my employment with the Company in which to consider this Release and Waiver
(although I may choose voluntarily to execute this Release and Waiver earlier).



     This Release and Waiver constitutes the complete, final and exclusive embodiment of the entire
agreement between the Company and me with regard to the subject matter hereof. I am not relying on
any promise or representation by the Company that is not expressly stated herein. This Release and
Waiver may only be modified by a writing signed by both me and a duly authorized officer of the
Company.



	 	 	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 






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