Document:

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT
(the “Agreement”) is entered into as of this 10th day of June, 2005 (the “Commencement
Date”) by and between Penn National Gaming, Inc., a Pennsylvania
corporation (the “Company”), and Jordan B. Savitch, an individual residing in
Pennsylvania (“Executive”).

 

WHEREAS, Executive and the
Company are party to a certain Employment Agreement, dated as of
September 3, 2002 (as amended and extended from time to time, the “Initial
Agreement”), the initial term of which terminated on September 3, 2004 and
which, by its terms, automatically renewed for an additional one year period;
and

 

WHEREAS, the parties now
desire to terminate the Initial Agreement and to enter into a new agreement
reflecting, among other things, certain additional covenants and consideration
exchanged by the parties, all as more specifically set forth herein.

 

NOW, THEREFORE, the parties
hereto, intending to be legally bound, hereby agree as follows:

 

1.    Employment.    The
Company hereby agrees to employ Executive and Executive hereby accepts such
employment, in accordance with the terms, conditions and provisions hereinafter
set forth.

 

1.1.    Duties and Responsibilities.    Executive
shall serve as Senior Vice President and General Counsel of the Company.
Executive shall perform all duties and accept all responsibilities incident to
such position as may be reasonably assigned to him by the Chief Executive
Officer and the Board of Directors of the Company (the “Board”). Executive’s principal
place of employment shall be in Wyomissing, Pennsylvania.

 

1.2.    Term.    The
term of this Agreement shall begin on the date hereof and shall terminate at
the close of business on the third anniversary of the Commencement Date (the “Initial
Term”), unless earlier terminated in accordance with Section 3 hereof.
This Agreement shall automatically renew for additional three-year periods
(each, a “Renewal Term” and, together with the Initial Term, the “Employment
Term”) unless either party has delivered written notice of non-renewal at least
60 days prior to the start of a Renewal Term or unless earlier terminated
in accordance with Section 3 hereof.

 

1.3.    Extent of Service.    Executive
agrees to use Executive’s best efforts to carry out Executive’s duties and
responsibilities and, consistent with the other provisions of this Agreement,
to devote substantially all of Executive’s business time, attention and energy
thereto. The foregoing shall not be construed as preventing Executive from
serving on the board of philanthropic organizations, or providing oversight
with respect to his personal investments, so long as such service does not
materially interfere with Executive’s duties hereunder.

 

2.    Compensation.    For
all services rendered by Executive to the Company, the Company shall compensate
Executive as set forth below.

 

2.1.    Base Salary.    The
Company shall pay Executive a base salary (“Base Salary”), commencing on the
Commencement Date, at the annual rate of three hundred sixty-five thousand
($365,000), payable in installments at such times as the Company customarily
pays its other senior executives (“Peer Executives”). Executive’s performance
and Base Salary shall be reviewed annually. Any increase in Base Salary or
other compensation shall be made at the discretion of the Board or the
compensation committee of the Board (the “Compensation Committee”).

 

2.2.    Cash Bonuses.    Executive
shall participate in the Company’s incentive compensation plan for senior
management as such may be adopted, amended and approved, from time to time, by
the Compensation Committee.

 

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2.3.    Equity Compensation.    The
Company may grant to Executive options or other equity compensation pursuant
to, and subject to the terms and conditions of, the then current equity
compensation plan of Penn National Gaming, Inc. The Compensation Committee
shall set the amount and terms of such options or other equity compensation.

 

2.4.    Other Benefits.    Executive
shall be entitled to participate in all other employee benefit plans and
programs, including, without limitation, health, vacation, retirement, deferred
compensation or SERP, made available to other Peer Executives, as such plans
and programs may be in effect from time to time and subject to the eligibility
requirements of the each plan. Nothing in this Agreement shall prevent the
Company from amending or terminating any retirement, welfare or other employee
benefit plans or programs from time to time, as the Company deems appropriate.

 

2.5.    Vacation, Sick Leave and
Holidays.    Executive shall be entitled in each
calendar year to four (4) weeks of paid vacation time. Each vacation shall
be taken by Executive at such time or times as agreed upon by the Company and
Executive, and any portion of Executive’s allowable vacation time not used
during the calendar year shall be subject to the Company’s payroll policies
regarding carryover vacation. Executive shall be entitled to holiday and sick
leave in accordance with the Company’s holiday and other pay for time not
worked policies.

 

2.6.    Reimbursement of Expenses.    Executive
shall be provided with reimbursement of reasonable expenses related to
Executive’s employment by the Company on a basis no less favorable than that
authorized from time to time for Peer Executives.

 

3.    Termination.    Executive’s
employment may be terminated prior to the end of the Employment Term in
accordance with, and subject to the terms and conditions, set forth below.

 

3.1.    Termination by the Company.

 

(a)    Without Cause.    The
Company may terminate Executive at any time without Cause (as such term is
defined in subsection (b) below) upon delivery of written notice to
Executive, which notice shall set forth the effective date of such termination.

 

(b)    With Cause.    The
Company may terminate Executive at any time for Cause effective immediately
upon delivery of written notice to Executive. As used herein, the term “Cause”
shall mean:

 

(i)    Executive
shall have been convicted of a felony or any misdemeanor involving allegations
of fraud, theft, perjury or conspiracy;

 

(ii)   Executive
is found disqualified or not suitable to hold a casino or other gaming license
by a governmental gaming authority in any jurisdiction where Executive is
required to be found qualified, suitable or licensed;

 

(iii)  Executive
materially breaches any material Company policy or any material term hereof,
including, without limitation, Sections 4 through 7 and, in each case, fails to
cure such breach within 15 days after receipt of written notice thereof;
or

 

(iv)  Executive
misappropriates corporate funds as determined in good faith by the Board.

 

3.2.    Termination by the Executive.    Executive
may voluntarily terminate employment for any reason effective upon 60 days’
prior written notice to the Company, unless the Company waives such notice
requirement (in which case the Company shall notify Executive in writing as to
the effective date of termination).

 

3.3.    Termination for Death or
Disability.    In the event of the death or
total disability of Executive, this Agreement shall terminate effective as of
the date of Executive’s death or total disability. The term “total disability”
shall have the definition set forth in the Company’s Long Term Disability
Insurance Policy in effect at the time of such determination.

 

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3.4.    Payments Due Upon
Termination.

 

(a)    Generally.    Upon
any termination described in Sections 3.1, 3.2 or 3.3 above, Executive shall be
entitled to receive any amounts due for Base Salary earned or expenses incurred
through the effective date of termination and any benefits accrued or earned on
or prior to such date in accordance with the terms of any applicable benefit
plans and programs.

 

(b)    Certain Circumstances.    In
the event the Company terminates Executive’s employment without Cause or due to
death or a total disability or in the event that the Company elects not to
renew this Agreement, and subject to Executive executing the release attached
hereto as Exhibit A,
Executive shall be entitled to receive the following in lieu of any other
severance:

 

(i)    Executive
shall receive a payment equal to Executive’s monthly Base Salary at the highest
rate in effect for Executive during the 24-month period immediately preceding
the effective date of termination and Executive’s monthly bonus value
(determined by dividing the highest amount of annual cash bonus compensation
paid to Executive in respect of either the first or second full calendar year
immediately preceding the effective date of termination by twelve) for a period
equal to the greater of (1) the number of months remaining in the
Employment Term or (2) 24 months (the “Severance Period”).

 

(ii)   Executive
shall continue to receive the health benefits coverage in effect on the
effective date of termination (or as the same may be changed from time to time
for Peer Executives) for Executive and, if any, Executive’s spouse and
dependents for the Severance Period. At the option of the Company, the Company
may elect to pay Executive cash in lieu of such coverage in an amount equal to
Executive’s after-tax cost of obtaining generally comparable coverage for such
period.

 

(iii)  Executive
shall continue to serve as a non-officer employee of the Company during the
Severance Period and, as such, all options granted to Executive shall continue
vesting for such period.

 

(c)    Payments.    Cash
Payments due under this Section 3.4 shall be made as follows: 75% shall be
made within 15 days of the effective date of termination and the balance
shall be made in accordance with the payroll practices in effect on the date of
termination, unless, at the Company’s sole option, the Company elects to make
all such payments in a single lump sum. Except as otherwise provided in this
Section 3.4, Section 8 or Section 9, no other payments or
benefits shall be due under this Agreement to Executive.

 

3.5.    Notice of Termination.    Any
termination of Executive’s employment shall be communicated by a written notice
of termination delivered within the time period specified in this
Section 3. The notice of termination shall (i) indicate the specific
termination provision in this Agreement relied upon, (ii) briefly
summarize the facts and circumstances deemed to provide a basis for a
termination of employment and the applicable provision hereof, and
(iii) specify the termination date in accordance with the requirements of
this Agreement.

 

4.    No Conflicts of Interest.    Executive
agrees that throughout the period of Executive’s employment hereunder or
otherwise, Executive will not perform any activities or services, or accept
other employment that would materially interfere with or present a conflict of
interest concerning Executive’s employment with the Company. Executive agrees
and acknowledges that Executive’s employment by the Company is conditioned upon
Executive adhering to and complying with the business practices and
requirements of ethical conduct set forth in writing from time to time by the
Company in its employee manual or similar publication. Executive represents and
warrants that no other contract, agreement or understanding to which Executive
is a party or may be subject will be violated by the execution of this
Agreement by Executive.

 

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5.    Confidentiality.    Executive
recognizes and acknowledges that Executive will have access to certain
confidential information of the Company and that such information constitutes
valuable, special and unique property of the Company (including, but not
limited to, information such as business strategies, identity of acquisition or
growth targets, marketing plans, customer lists, and other business related
information for the Company’s customers). Executive agrees that Executive will
not, for any reason or purpose whatsoever, during or after the term of
employment, disclose any of such confidential information to any party, and
that Executive will keep inviolate and secret all confidential information or
knowledge which Executive has access to by virtue of Executive’s employment
with the Company, except as otherwise may be necessary in the ordinary course
of performing Executive’s duties with the Company.

 

6.    Non-Competition.

 

(a)   As
used herein, the term “Restriction Period” shall mean a period equal to the
greater of (i) the remainder of the Employment Term in effect on the
effective date of termination and (ii) the Severance Period, if
applicable; provided, however, that, if on or before the Trigger Date,
Executive has been terminated for one of the reasons contemplated by
Section 3.4(b), Executive may elect to terminate the Restriction Period at
any time following the first anniversary of the effective date of termination
by delivering written notice to the Company that Executive has made such
election and that, in consideration therefore, is waiving the right to receive
any continued payments under Section 3.4(b).

 

(b)   During
Executive’s employment by the Company and for the duration of the Restriction
Period thereafter, Executive shall not, except with the prior written consent
of the Company, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with, or use or
permit Executive’s name to be used in connection with, any business or
enterprise which owns or operates a gaming or pari-mutuel facility located
within 150 miles of any gaming or pari-mutuel facility owned or operated by the
Company or any of its affiliates.

 

(c)   The
foregoing restrictions shall not be construed to prohibit Executive’s ownership
of less than 5% of any class of securities of any corporation which is engaged
in any of the foregoing businesses and has a class of securities registered
pursuant to the Securities Exchange Act of 1934, provided that such ownership
represents a passive investment and that neither Executive nor any group of
persons including Executive in any way, either directly or indirectly, manages
or exercises control of any such corporation, guarantees any of its financial
obligations, otherwise takes any part in its business, other than exercising Executive’s
rights as a shareholder, or seeks to do any of the foregoing.

 

(d)   Executive
acknowledges that the covenants contained in Sections 5 through 7 hereof are
reasonable and necessary to protect the legitimate interests of the Company and
its affiliates and, in particular, that the duration and geographic scope of
such covenants are reasonable given the nature of this Agreement and the
position that Executive will hold within the
Company.    Executive further agrees to disclose the
existence and terms of such covenants to any employer that Executive works for
during the Restriction Period.

 

7.    Non-Solicitation.    During
Executive’s employment by the Company and for a period equal to the greater of
the Restriction Period or one year after the effective date of termination,
Executive will not, except with the prior written consent of the Company,
(i) directly or indirectly, solicit or hire, or encourage the solicitation
or hiring of, any person who is, or was within a six month period prior to such
solicitation or hiring, an executive or management employee of the Company or
any of its affiliates for any position as an employee, independent contractor,
consultant or otherwise or (ii) divert or attempt to divert any existing
business of the Company or any of its affiliates.

 

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8.    Change of Control.

 

8.1.    Consideration

 

(a)    Change of Control.    In
the event of a Change of Control (as defined below), Executive shall be
entitled to receive a cash payment in an amount equal to the product of three
times the sum of (i) the highest annual rate of Base Salary in effect for
Executive during the 24-month period immediately preceding the effective date
of the Change in Control (the “Trigger Date”) and (ii) the highest amount
of annual cash bonus compensation paid to Executive in respect of either the
first or second full calendar year immediately preceding the Trigger Date.

 

(b)    Restrictive Provisions.    As
consideration for the foregoing payments, Executive agrees not to challenge the
enforceability of any of the restrictions contained in Sections 5, 6 or 7 of
this Agreement upon or after the occurrence of a Change of Control. Executive
and Company acknowledge that, as additional consideration for the change of
control payments, Executive has also agreed to limit Executive’s ability to opt
out of the Restriction Period in Section 6(a) to periods prior to the
Trigger Date.

 

8.2.    Payment Terms.    This
change of control payment shall be made in two lump sum payments as follows:
(i) 75% to Executive on the Trigger Date; and (ii) 25% into a
mutually acceptable escrow account on the Trigger Date, payable to Executive on
the 90th day following the Trigger Date. Notwithstanding any of the
foregoing to the contrary, the payment contemplated by clause (ii) shall
be paid immediately upon the occurrence of any of the following:
(a) Executive’s employment is terminated by the Company; or
(b) Executive terminates employment for Good Reason (as defined below).

 

8.3.    Certain Other Terms.    In
the event payments are being made to Executive under this Section 8, no
payments shall be due under Section 3.4(b)(i) of this Agreement with
respect to any termination of Executive’s employment following a Change of
Control. At the option of the Company, the Company may require Executive to
execute the release attached hereto as Exhibit A;
provided, however, that this requirement shall not in any way alter the timing
of the payments to be made under Section 8.2. The provisions of this
Section 8 shall continue to apply to Executive if, during the 24-month
period immediately preceding the Trigger Date, the Company terminates Executive’s
employment without Cause or due to a total disability or the Company elects not
to renew this Agreement; provided, however, that, in such event, any payments
due under Section 8 shall be reduced by any prior payments made under
Section 3.4(b)(i).

 

8.4.    Defined Terms.

 

(a)    Change of Control.    The
occurrence of one or more of the following events: (i) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company;
(ii) the election of two (2) or more persons to the Board who do not
constitute Continuing Directors; or (iii) the ownership or acquisition by
any Person or Group of the power, directly or indirectly, to vote or direct the
voting of securities having more than forty percent (40%) of the ordinary
voting power for the election of directors of the Company.

 

(b)    Good Reason.    The
occurrence of any of the following events that the Company fails to cure within
10 days after receiving written notice thereof from Executive:
(i) assignment to Executive of any duties inconsistent in any material respect
with Executive’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities or inconsistent with
Executive’s legal or fiduciary obligations; (ii) any reduction in
Executive’s compensation or substantial reduction in Executive’s benefits taken
as a whole; (iii) any travel requirements materially greater than
Executive’s travel requirements prior to the Change of Control; or
(iv) breach of any material term of this Agreement by the Company.

 

5

 

(c)    Continuing Directors.    Any
person who, as of the date of determination, either (i) was a member of
the Board as of the date of this Agreement or (ii) was nominated for
election or elected to the Board with the affirmative vote of a majority of
directors comprising the Board or, if applicable, the Nominating Committee of
the Board, who were Continuing Directors immediately prior to such nomination
or election.

 

(d)    Group.    Any
group of related Persons for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended.

 

(e)    Person.    Any
individual, partnership, joint venture, trust, corporation, limited liability
entity, unincorporated organization or other entity (including a governmental
entity).

 

9.    Certain Tax Matters.

 

9.1.    Generally.    In
the event Executive becomes entitled to receive the payments (the “Severance
Payments”) provided under Section 3 or Section 8 hereof or under any
other plan or arrangement providing for payments under circumstances similar to
those contemplated by such sections, and if any of the Severance Payments will
be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), the Company shall pay
to Executive at the time specified for such payments, an additional amount (the
“Gross-Up Payment”) such that the net amount retained by Executive shall be
equal to the amount of the Severance Payments after deducting normal and
ordinary taxes but not deducting (a) the Excise Tax and (b) any
federal, state and local income tax and Excise Tax payable on the payment
provided for by this Section 9.

 

9.2.    Illustration.    For
example, if the Severance Payments are $1,000,000 and if Executive is subject
to the Excise Tax, then the Gross-Up Payment will be such that Executive will
retain an amount of $1,000,000 less only any normal and ordinary taxes on such
amount. The Excise Tax and federal, state and local taxes and any Excise Tax on
the payment provided by this Section 9 will not be deemed normal and
ordinary taxes.

 

9.3.    Certain Terms.    For
purposes of determining whether any of the Severance Payments will be subject
to the Excise Tax and the amount of such Excise Tax, the following will apply:

 

(a)   Any
other payments or benefits received or to be received by Executive in
connection with a Change in Control of the Company or Executive’s termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company shall be treated as “parachute
payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess
parachute payments” within the meaning of Section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Company’s Compensation Committee and acceptable to Executive,
such other payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to
the Excise Tax;

 

(b)   The
amount of the Severance Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (y) the total amount of the
Severance Payments or (z) the amount of excess parachute payments within
the meaning of Section 280G(b)(1) (after applying clause (a), above);
and

 

(c)   The
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company’s independent auditors in accordance with proposed,
temporary or final regulations under Sections 280G(d)(3) and (4) of the
Code or, in the absence of such regulations, in accordance with the principles
of Section 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Executive shall be deemed to
pay Federal income taxes at the highest marginal rate of federal income
taxation in the calendar year

 

6

 

in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of Executive on the Trigger Date,
net of the maximum reduction in Federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that the amount of
Excise Tax attributable to Severance Payments is subsequently determined to be
less than the amount taken into account hereunder at the time of determination
then, subject to applicable law, appropriate adjustments will be made with
respect to the payments hereunder.

 

9.4.    Fees and Expenses.    The
Company shall reimburse Executive for all reasonable legal fees and expenses
incurred by Executive in connection with any tax audit or proceeding to the
extent attributable to the application of Section 4999 of the Code or any
regulations pertaining thereto to any payment or benefit provided hereunder.

 

10.    Document Surrender.    Upon
the termination of Executive’s employment for any reason, Executive shall
immediately surrender and deliver to the Company all documents, correspondence
and any other information, of any type whatsoever, from the Company or any of
its agents, servants, employees, suppliers, and existing or potential
customers, that came into Executive’s possession by any means whatsoever,
during the course of employment.

 

11.    Governing Law.    This
Agreement shall be governed by and construed in accordance with the internal
laws (and not the law of conflicts) of the Commonwealth of Pennsylvania.

 

12.    Jurisdiction.    The
parties hereby irrevocably consent to the jurisdiction of the courts of the
Commonwealth of Pennsylvania for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agree that any
action instituted under this Agreement shall be commenced, prosecuted and
continued only in the state or federal courts having jurisdiction for matters
arising in Wyomissing, Pennsylvania, which shall be the exclusive and only
proper forum for adjudicating such a claim.

 

13.    Notices.    All
notices and other communications required or permitted under this Agreement or
necessary or convenient in connection herewith shall be in writing and shall be
deemed to have been given when hand delivered, delivered by guaranteed next-day
delivery or sent by facsimile (with confirmation of transmission) or shall be
deemed given on the third business day when mailed by registered or certified
mail, as follows (provided that notice of change of address shall be deemed
given only when received):

 

If to the Company, to:

 

Penn National
Gaming, Inc.

825 Berkshire Boulevard, Suite 200

Wyomissing, PA 19610

Fax:    (610) 376-2842

 

Attention: Chairman

 

If to Executive, to:

 

Jordan B. Savitch

c/o Penn National Gaming, Inc.

825 Berkshire Boulevard, Suite 200

Wyomissing, PA 19610

Fax:    (610) 376-2842

 

or to such other names or addresses as the
Company or Executive, as the case may be, shall designate by notice to each
other person entitled to receive notices in the manner specified in this
Section.

 

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14.    Contents of Agreement;
Amendment and Assignment.

 

14.1. This Agreement
sets forth the entire understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior or contemporaneous
agreements or understandings with respect to thereto, including without
limitation, the Initial Agreement which is hereby terminated. This Agreement
cannot be changed, modified, extended, waived or terminated except upon a
written instrument signed by the party against which it is to be enforced.

 

14.2. Executive may not
assign any of his rights or obligations under this Agreement. The Company may
assign its rights and obligations under this Agreement to any successor to all
or substantially all of its assets or business by means of liquidation, dissolution,
merger, consolidation, transfer of assets or otherwise.

 

15.    Severability.    If
any provision of this Agreement or application thereof to anyone or under any
circumstances is adjudicated to be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect any other
provision or application of this Agreement which can be given effect without
the invalid or unenforceable provision or application and shall not invalidate
or render unenforceable such provision or application in any other
jurisdiction. If any provision is held void, invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances. In addition, if any court determines that
any part of Sections 5, 6 or 7 hereof is unenforceable because of its duration,
geographical scope or otherwise, such court will have the power to modify such
provision and, in its modified form, such provision will then be enforceable.

 

16.    Remedies.

 

16.1. No remedy
conferred upon a party by this Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be
in addition to any other remedy given under this Agreement or now or hereafter existing
at law or in equity.

 

16.2. No delay or
omission by a party in exercising any right, remedy or power under this
Agreement or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by such party
from time to time and as often as may be deemed expedient or necessary by such
party in its sole discretion.

 

16.3. Executive
acknowledges that money damages would not be a sufficient remedy for any breach
of this Agreement by Executive and that the Company shall be entitled to
specific performance and injunctive relief as remedies for any such breach, in
addition to all other remedies available at law or equity to the Company.

 

17.    Construction.    This
Agreement is the result of thoughtful negotiations and reflects an arms’ length
bargain between two sophisticated parties, each represented by counsel. The
parties agree that, if this Agreement requires interpretation, neither party
should be considered “the drafter” nor be entitled to any presumption that
ambiguities are to be resolved in his or her favor.

 

18.    Beneficiaries/References.    Executive
shall be entitled, to the extent permitted under any applicable law, to select
and change a beneficiary or beneficiaries to receive any compensation or
benefit payable under this Agreement following Executive’s death by giving the
Company written notice thereof. In the event of Executive’s death or a judicial
determination of Executive’s incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to Executive’s
beneficiary, estate or other legal representative.

 

19.    Withholding.    All
payments under this Agreement shall be made subject to applicable tax
withholding, and the Company shall withhold from any payments under this
Agreement all federal, state and local taxes, as the Company is required to
withhold pursuant to any law or governmental rule or regulation. Except as
specifically provided otherwise in this Agreement, Executive shall bear all

 

8

 

expense of, and be solely responsible for,
all federal, state and local taxes due with respect to any payment received
under this Agreement.

 

20.    Regulatory Compliance.    The
terms and provisions hereof shall be conditioned on and subject to compliance
with all laws, rules, and regulations of all jurisdictions, or agencies, boards
or commissions thereof, having regulatory jurisdiction over the employment or
activities of Executive hereunder.

 

IN WITNESS WHEREOF, the
undersigned, intending to be legally bound, have executed this Agreement as of
the date first above written.

 

	
   

  	
   

  	
  PENN NATIONAL
  GAMING, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/  PETER M.
  CARLINO

  	
   

  
	
   

  	
   

  	
   

  	
  Name:  Peter M.
  Carlino

  
	
   

  	
   

  	
   

  	
  Title:    Chairman
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/  JORDAN B.
  SAVITCH

  	
   

  
	
   

  	
   

  	
  Jordan B. Savitch

  

 

9EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of June
13, 2005 and shall be effective as of July 5, 2005 (the "Effective Date") by and
between Patient Safety Technologies, Inc., a Delaware corporation, with an
office located at 100 Wilshire Boulevard, Suite 1500, Santa Monica, California,
90401 (the "Company") and William B. Horne, an individual with an address 25946
S.E. 22nd Place, Sammamish, Washington, 98075 ("Individual").

WHEREAS, the parent Company is in the business of patient safety products and
content and the subsidiaries are in the business of investment management, real
estate, media and internet assets; and

WHEREAS, Individual has experience in the operations of businesses providing
accounting and financial services with an expertise in private equity; and

WHEREAS, the Company desires to retain the services of Individual; and

WHEREAS, Individual is willing to be employed by the Company.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows:

1. Employment. Individual is hereby employed and engaged to serve the Company as
the Chief Financial Officer of the Company and its subsidiaries, or such
additional titles as the Company shall specify from time to time, and Individual
does hereby accept, and Individual hereby agrees to such engagement and
employment.

2. Duties. Individual shall be responsible for the overall finances and
accounting of the Company and its subsidiaries. In addition, Individual's duties
shall be such duties and responsibilities as the Company shall specify from time
to time, and shall entail those duties customarily performed by the Chief
Financial Officer of a company with a sales volume and number of employees
commensurate with those of the Company. Individual shall have such authority,
discretion, power and responsibility, and shall be entitled to office,
secretarial and other facilities and conditions of employment, as are customary
or appropriate to his position. Individual shall diligently and faithfully
execute and perform such duties and responsibilities, subject to the general
supervision and control of the Company's Chief Executive Officer and board of
directors. Individual shall be responsible and report only to the Company's
Chief Executive Officer. The Company's Chief Executive Officer and board of
directors, in its sole and absolute discretion, shall determine Individual's
duties and responsibilities and may assign or reassign Individual to such duties
and responsibilities as it deems in the Company's best interest. Individual
shall devote his full-time attention, energy, and skill during normal business
hours to the business and affairs of the Company and shall not, during the
Employment Term, as that term is defined below, be actively engaged in any other
business activity, except with the prior written consent of the Company's Chief
Executive Officer and board of directors.

Nothing in this Agreement shall preclude Individual from devoting reasonable
periods required for:

      (a)   serving as a director or member of a committee of any organization
            or corporation involving no conflict of interest with the interests
            of the Company;

      (b)   serving as a consultant in his area of expertise (in areas other
            than in connection with the business of the Company), to government,
            industrial, and academic panels where it does not conflict with the
            interests of the Company; and

      (c)   managing his personal investments (following B/D reg) or engaging in
            any other non-competing business; provided that such activities do
            not materially interfere with the regular performance of his duties
            and responsibilities under this Agreement as determined by the
            Company.

                                       1
<PAGE>

3. Best Efforts of Individual. During his employment hereunder, Individual
shall, subject to the direction and supervision of the Company's Chief Executive
Officer and board of directors, devote his full business time, best efforts,
business judgment, skill, and knowledge to the advancement of the Company's
interests and to the discharge of his duties and responsibilities hereunder.
Notwithstanding the foregoing, nothing herein shall be construed as preventing
Individual from investing his assets in any business.

4. Employment Term. Unless terminated pursuant to Section 12 of this Agreement,
the term of this Agreement shall commence as of the Effective Date of this
Agreement and shall continue for a term of twenty-four (24) months (the "Initial
Term"), and shall be automatically renewed for successive one (1) year terms
(the "Renewal Term") unless a party hereto delivers to the other party written
notice of at least thirty (30) days.

5. Compensation of Individual.

(a)   Base Compensation. As compensation for the services provided by Individual
      under this Agreement, the Company shall pay Individual an annual salary of
      One Hundred Fifty Thousand Dollars ($150,000).

(b)   Stock and Stock Options. Individual shall also be eligible to receive
      shares of the Company's authorized restricted stock or stock options to
      purchase shares of the Company's authorized stock from time to time as
      determined by the board of directors, but specifically detailed hereto:
      Individual will receive One Hundred Thousand Dollars ($100,000) in
      restricted stock per each year of the Contract, vesting quarterly, for the
      length of the two (2) year term, at a strike price of the closing price of
      PST stock the day of execution. Further, Individual's first year of
      restricted stock shall be reduced by the value of unvested restricted
      stock that Individual has received.

6. Benefits. Individual shall also be entitled to participate in any and all
Company benefit plans, from time to time, in effect for employees of the
Company. Such participation shall be subject to the terms of the applicable plan
documents and generally applicable Company policies.

7. Vacation, Sick Leave and Holidays. Individual shall be entitled to three (3)
weeks of paid vacation, with such vacation to be scheduled and taken in
accordance with the Company's standard vacation policies. In addition,
Individual shall be entitled to such sick leave and holidays at full pay in
accordance with the Company's policies established and in effect from time to
time.

8. Business Expenses. The Company shall promptly reimburse Individual for all
reasonable out-of-pocket business expenses incurred in performing Individual's
duties and responsibilities hereunder in accordance with the Company's policies,
provided Individual promptly furnishes to the Company adequate records of each
such business expense. Company shall pay for Individual's travel to main office
until such time as Individual relocates to Southern California.

9. Location of Individual's Activities. Individual's principal place of business
in the performance of his duties and obligations under this Agreement shall be
at a place to be determined by the Chief Executive Officer and Individual.
Notwithstanding the preceding sentence, Individual will engage in such travel
and spend such time in other places as may be necessary or appropriate in
furtherance of his duties hereunder. Individual shall have a monthly office
expense of Five Hundred Dollars ($500) to use towards office rent, supplies or
any other related cost.

10. Confidentiality. Individual recognizes that the Company has and will have
business affairs, products, future plans, trade secrets, customer lists, and
other vital information (collectively "Confidential Information") that are
valuable assets of the Company. Individual agrees that he shall not at any time
or in any manner, either directly or indirectly, divulge, disclose, or
communicate in any manner any Confidential Information to any third party
without the prior written consent of the Company's board of directors.
Individual will protect the Confidential Information and treat it as strictly
confidential.

                                       2
<PAGE>

11. Non-Competition. Individual acknowledges that he has gained, and will gain
extensive knowledge in the patient safety business conducted by the Company and
has had, and will have, extensive contacts with customers and vendors of the
Company. Accordingly, Individual agrees that he shall not compete directly or
indirectly in the patient safety area with the Company, either during the
Employment Term or during the two (2) year period immediately after the
termination of Individual's employment under Section 12 and shall not, during
such period, make public statements in derogation of the Company. For the
purposes of this Section 11, competing directly or indirectly with the Company
shall mean engaging, directly or indirectly, as principle owner, officer,
partner, consultant, advisor, investor, or otherwise, either alone or in
association with others, in the operation of any entity engaged in a business
similar to that of the Company's.

12. Termination. Notwithstanding any other provisions hereof to the contrary,
Individual's employment hereunder shall terminate under the following
circumstances:

      (a)   Voluntary Termination by Individual. Individual shall have the right
            to voluntarily terminate this Agreement and his employment hereunder
            at any time during the Employment Term.

      (b)   Voluntary Termination by the Company. The Company shall have the
            right to voluntarily terminate this Agreement and Individual's
            employment hereunder at any time during the Employment Term.

      (c)   Termination for Cause. The Company shall have the right to terminate
            this Agreement and Individual's employment hereunder at any time for
            cause. As used in this Agreement, "cause" shall mean refusal by
            Individual to implement or adhere to lawful policies or directives
            of the Company's Chief Executive Officer or board of directors,
            breach of this Agreement, Individual's conviction of a felony, other
            conduct of a criminal nature that may have a material adverse impact
            on the Company's reputation, breach of fiduciary duty or the
            criminal misappropriation by Individual of funds from or resources
            of the Company. Cause shall not be deemed to exist unless the
            Company shall have first given Individual a written notice thereof
            specifying in reasonable detail the facts and circumstances alleged
            to constitute "cause" and ten (10) days after such notice such
            conduct has, or such circumstances have, as the case may be, not
            entirely ceased and not been entirely remedied.

      (d)   Termination Upon Death or for Disability. This Agreement and
            Individual's employment hereunder, shall automatically terminate
            upon Individual's death or upon written notice to Individual and
            certification of Individual's disability by a qualified physician or
            a panel of qualified physicians if Individual becomes disabled
            beyond a period of twelve (12) months and is unable to perform the
            duties contain in this Agreement.

      (e)   Effect of Termination. In the event that this Agreement and
            Individual's employment is voluntarily terminated by Individual
            pursuant to Section 12(a), or in the event the Company voluntarily
            terminates this Agreement pursuant to Section 12(b) or for cause
            pursuant to Section 12(c), all obligations of the Company and all
            duties, responsibilities and obligations of Individual under this
            Agreement shall cease. Upon such termination pursuant to Section
            12(b) whereas the Company voluntarily terminates this Agreement, the
            Company shall (i) pay Individual a cash sum equal to (i) all accrued
            base salary through the date of termination plus all accrued
            vacation pay and cash bonuses, if any, plus (ii) as severance
            compensation, an amount equal to Individual's then base salary for
            the remaining Employment Term of this Agreement, but only through
            July 5, 2007. In addition, if Individual voluntarily terminates, all
            unvested restricted stock and stock options will be forfeited. In
            the event that the Company voluntarily terminates, Individual shall
            not receive any further restricted stock. In the event of a merger,
            consolidation, sale, or change of control, the Company's rights
            hereunder shall be assigned to the surviving or resulting company,
            which company shall then honor this Agreement with Individual.

13. Resignation as Officer. In the event that Individual's employment with the
Company is terminated for any reason whatsoever, Individual agrees to
immediately resign as an Officer and/or Director of the Company and any related
entities. For the purposes of this Section 13, the term the "Company" shall be
deemed to include subsidiaries, parents, and affiliates of the Company.

14. Governing Law, Jurisdiction and Venue. This Agreement shall be governed by

                                       3
<PAGE>

and construed in accordance with the laws of the State of California without
giving effect to any applicable conflicts of law provisions.

15. Business Opportunities. During the Employment Term Individual agrees to
bring to the attention of the Company's board of directors all written business
proposals that come to Individual's attention and all business or investment
opportunities of whatever nature that are created or devised by Individual and
that relate to areas in which the Company conducts business and might reasonably
be expected to be of interest to the Company or any of its subsidiaries.

16. Employee's Representations and Warranties. Individual hereby represents and
warrants that he is not under any contractual obligation to any other company,
entity or individual that would prohibit or impede Individual from performing
his duties and responsibilities under this Agreement and that he is free to
enter into and perform the duties and responsibilities required by this
Agreement. Individual hereby agrees to indemnify and hold the Company and its
officers, directors, employees, shareholders and agents harmless in connection
with the representations and warranties made by Individual in this Section 16.

17. Indemnification.

      (a)   The Company agrees that if Individual is made a party, or is
            threatened to be made a party, to any action, suit or proceeding,
            whether civil, criminal, administrative or investigative (a
            "Proceeding"), by reason of the fact that he is or was a director,
            officer or employee of the Company or is or was serving at the
            request of the Company as a director, officer, member, employee or
            agent of another corporation, partnership, joint venture, trust or
            other enterprise, including service with respect to employee benefit
            plans, whether or not the basis of such Proceeding is Individual's
            alleged action in an official capacity while serving as a director,
            officer, member, employee or agent, Individual shall be indemnified
            and held harmless by the Company to the fullest extent permitted or
            authorized by the Company's certificate of incorporation or bylaws
            or, if greater, by the laws of the State of California, against all
            cost, expense, liability and loss (including, without limitation,
            attorney's fees, judgments, fines, ERISA excise taxes or penalties
            and amounts paid or to be paid in settlement) reasonably incurred or
            suffered by Individual in connection therewith, and such
            indemnification shall continue as to Individual even if he has
            ceased to be a director, member, employee or agent of the Company or
            other entity and shall inure to the benefit of Individual's heirs,
            executors and administrators. The Company shall advance to
            Individual to the extent permitted by law all reasonable costs and
            expenses incurred by him in connection with a Proceeding within 20
            days after receipt by the Company of a written request, with
            appropriate documentation, for such advance. Such request shall
            include an undertaking by Individual to repay the amount of such
            advance if it shall ultimately be determined that he is not entitled
            to be indemnified against such costs and expenses.

      (b)   Neither the failure of the Company (including its board of
            directors, independent legal counsel or stockholders) to have made a
            determination prior to the commencement of any proceeding concerning
            payment of amounts claimed by Individual that indemnification of
            Individual is proper because he has met the applicable standard of
            conduct, nor a determination by the Company (including its board of
            directors, independent legal counsel or stockholders) that
            Individual has not met such applicable standard of conduct, shall
            create a presumption that Individual has not met the applicable
            standard of conduct.

      (c)   The Company agrees to continue and maintain a directors' and
            officers' liability insurance policy covering Individual to the
            extent the Company provides such coverage for its other executive
            officers.

      (d)   Promptly after receipt by Individual of notice of any claim or the
            commencement of any action or proceeding with respect to which
            Individual is entitled to indemnity hereunder, Individual shall
            notify the Company in writing of such claim or the commencement of
            such action or proceeding, and the Company shall (i) assume the
            defense of such action or proceeding, (ii) employ counsel reasonably
            satisfactory to Individual, and (iii) pay the reasonable fees and
            expenses of such counsel. Notwithstanding the preceding sentence,
            Individual shall be entitled to employ counsel separate from counsel
            for the Company and from any other party in such action if
            Individual reasonably determines that a conflict of interest exists

                                       4
<PAGE>

            which makes representation by counsel chosen by the Company not
            advisable. In such event, the reasonable fees and disbursements of
            such separate counsel for Individual shall be paid by the Company to
            the extent permitted by law.

      (e)   After the termination of this Agreement and upon the request of
            Individual, the Company agrees to reimburse Individual for all
            reasonable travel, legal and other out-of-pocket expenses related to
            assisting the Company to prepare for or defend against any action,
            suit, proceeding or claim brought or threatened to be brought
            against the Company or to prepare for or institute any action, suit,
            proceeding or claim to be brought or threatened to be brought
            against a third party arising out of or based upon the transactions
            contemplated herein and in providing evidence, producing documents
            or otherwise participating in any such action, suit, proceeding or
            claim. In the event Individual is required to appear after
            termination of this Agreement at a judicial or regulatory hearing in
            connection with Individual's employment hereunder, or Individual's
            role in connection therewith, the Company agrees to pay Individual a
            sum, to be mutually agreed upon by Individual and the Company, per
            diem for each day of his appearance and each day of preparation
            therefore.

18. Notices. All demands, notices, and other communications to be given
hereunder, if any, shall be in writing and shall be sufficient for all purposes
if personally delivered, sent by facsimile or sent by United States mail to the
address below or such other address or addresses as such party may hereafter
designate in writing to the other party as herein provided.

Company: Patient Safety Technologies, Inc.  Individual:  William B. Horne
         100 Wilshire Blvd., Suite 1500                  25946 S.E. 22nd Place
         Santa Monica, CA 90401                          Sammamish, WA 98075
         Fax: (310) 752-1486                             Fax: (206) 262-0843
         Phone: (310) 752-1416                           Phone: (206) 769-6000

19. Entire Agreement. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement,
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties. This Agreement may be modified or amended, if
the amendment is made in writing and is signed by both parties. This Agreement
is for the unique personal services of Individual and is not assignable or
delegable, in whole or in part, by Individual. This Agreement may be assigned or
delegated, in whole or in part, by the Company and, in such case, shall be
assumed by and become binding upon the person, firm, company, corporation or
business organization or entity to which this Agreement is assigned. The
headings contained in this Agreement are for reference only and shall not in any
way affect the meaning or interpretation of this Agreement. If any provision of
this Agreement shall be held to be invalid or unenforceable for any reason, the
remaining provisions shall continue to be valid and enforceable. The failure of
either party to enforce any provision of this Agreement shall not be construed
as a waiver or limitation of that party's right to subsequently enforce and
compel strict compliance with every provision of this Agreement. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument
and, in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts.

                  [Remainder of page intentionally left blank.]

                                       5
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the 13th day
June, 2005.

Company:   Patient Safety Technologies, Inc.    INDIVIDUAL:

By:         /s/ Milton Ault                     /s/ William B. Horne
           --------------------------------     --------------------------
Name:      Milton C. Ault, III                  William B. Horne
Title:     Chairman and CEO

                                       6

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