Exhibit 10.1


 


EMPLOYMENT AGREEMENT


 


[Gerald W. Koslow]


 


 


THIS AGREEMENT
is made and entered into as of the 1st day of February, 2003, by and between
Shuffle Master, Inc., a Minnesota corporation (the “Company”), and Gerald
Koslow (the “Employee”), a resident of the State of Nevada.


 


RECITALS:


 


A.                                   The
Company is in the business of developing, manufacturing, distributing and
otherwise commercializing gaming equipment, games, and operating systems for
gaming equipment and related products and services throughout the United States
and in Canada and other countries (the “Business”).


 


B.                                     Company
and Employee want to create an at-will employment relationship that protects
the Company with appropriate confidentiality and non-compete covenants, and
compensates and rewards the Employee for performing his obligations for the
full term of this contract or such shorter term, as it may be determined in
accordance with the terms and conditions of this Agreement.


 


C.                                     The
Company and Employee desire that Employee be employed by the Company on the
terms and conditions of this Agreement.


 


AGREEMENT


 


In
consideration of the mutual promises contained herein, Employee and the Company
agree as follows:


 


1.                                       Employment.  The Company hereby employs Employee as its
Senior Vice President and Chief Financial Officer reporting to the Chief
Executive Officer of the Company. 
Employee shall perform the normal duties of that position.  Employee’s employment under this Agreement
with the Company is for an initial term of three (3) years (the “Term”),
beginning February 1, 2003 (the “Commencement Date”), through January 31, 2006.


 


2.                                       Salary,
Bonus and Benefits.


 


a.               From
the Commencement Date through January 31, 2004, Employee shall be paid an
annual base salary of One Hundred Ninety Thousand Dollars ($190,000.00), paid
in the same intervals as other Employees of the Company; and if employed
through October 31, 2003, Employee will be eligible to receive an executive
bonus in accordance with the terms and conditions of the executive bonus
program authorized by the Board of Directors of the Company (the “Board”) for
other senior management executives of the Company for fiscal year 2003, in a
range of percentages, but with a target bonus of 50% of Employee’s base salary.


 

















 


b.              During
each of the last two years of this Agreement, Employee will receive an annual
base salary of no less than his annual base salary for the first year of this
Agreement, and will also be eligible to participate in an executive bonus
program and/or in an individual performance bonus program as authorized by the
Board for said two years.


 


c.               Employee
shall receive stock option grants to purchase 40,000 shares of the Company’s
common stock applicable for the first year of this Agreement, as determined by
the Company’s Board of Directors. 
Future stock option grants will be at the discretion of the Board of
Directors.


 


d.              The
Company agrees to provide Employee with the same benefits it provides the other
members of its senior management executive team.  Employee will not, however, be eligible to participate in the
Company’s non-executive bonus program.


 


e.               All
stock options granted at any time to Employee shall vest in accordance with the
terms and conditions set forth in the applicable grant by the Board and, as
otherwise may be applicable, with any relevant terms and conditions of either
the 1993 Stock Option Plan, as amended, or the 2002 Stock Option Plan as
amended (the “Plan”), whichever is applicable.


 


f.                 Employee’s
salary is set in the expectation that (except for vacation days and holidays)
Employee’s full time will be devoted to Employee’s duties hereunder.


 


g.              During
Employee’s employment with the Company, the Company will promptly pay or
reimburse Employee for reasonable travel, entertainment and other expenses
incurred by Employee in the furtherance of or in connection with the
performance of Employee’s duties.  Such
reimbursement will be in accordance with Company policies in existence from
time to time.


 


3.                                       Outside
Services or Consulting.  Employee
shall devote Employee’s full professional time and best professional efforts to
the Company.  Employee may render other
professional or consulting services to other persons or businesses from time to
time during the Term, only if Employee meets all of the following requirements:


 


a.               The
services do not interfere in any manner with the Employee’s ability to fulfill
all of his duties and obligations to the Company.


 


b.              The
services are not rendered to any business which may compete with the Company in
any area of the Business or do not otherwise violate paragraph 4 hereof.


 


c.               The
services do not relate to any products or services, which form part of the
Business.


 


d.              Employee
informs and obtains the consent of the Chief Executive Officer of the Company.


 


4.                                       Non-competition.  In consideration of the provisions of this
Agreement, Employee hereby agrees that he shall not, during the term of his
full-time employment and for a period of twenty-four (24) months thereafter:


 


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a.               Directly
or indirectly own, manage, operate, participate in, consult with or work for
any business, which is engaged in the Business anywhere in the United States or
Canada.


 


b.              Either
alone or in conjunction with any other person, partnership or business, directly
or indirectly, solicit, hire, or divert or attempt to solicit, hire or divert
any of the Employees, independent contractors, or agents of the Company (or its
affiliates or successors) to work for or represent any competitor of the
Company (or its affiliates or successors), or to call upon any of the customers
of the Company (or its affiliates or successors).


 


c.               Directly
or indirectly provide any services to any person, company or entity, which is
engaged in the Business anywhere in the United States or Canada.


 


5.                                       Confidentiality; Inventions.


 


a.               Employee
shall fully and promptly disclose to the Company all inventions, discoveries,
software and writings that Employee may make, conceive, discover, develop or
reduce to practice either solely or jointly with others during Employee’s
employment with the Company, whether or not during usual work hours.  Employee agrees that all such inventions,
discoveries, software and writing shall be and remain the sole and exclusive
property of the Company, and Employee hereby agrees to assign, and hereby
assigns all of Employee’s right, title and interest in and to any such
inventions, discoveries, software and writings to the Company.  Employee agrees to keep complete records of
such inventions, discoveries, software and writings, which records shall be and
remain the sole property of the Company, and to execute and deliver, either
during or after Employee’s employment with the Company, such documents as the
Company shall deem necessary or desirable to obtain such letters patent,
utility models, inventor’s certificates, copyrights, trademarks or other
appropriate legal rights of the United States and foreign countries as the
Company may, in its sole discretion, elect, and to vest title thereto in the
Company, its successors, assigns, or nominees.


 


b.              “Inventions,”
as used herein, shall include inventions, discoveries, improvements, ideas and
conceptions, developments and designs, whether or not patentable, tested,
reduced to practice, subject to copyright or other rights or forms of
protection, or relating to data processing, communications, computer software
systems, programs and procedures.


 


c.               Employee
understands that all copyrightable work that Employee may create while employed
by the Company is a “work made for hire,” and that the Company is the owner of
the copyright therein.  Employee hereby
assigns all right, title and interest to the copyright therein to the Company.


 


d.              Employee
has no inventions, improvements, discoveries, software or writings useful to
the Company or its subsidiaries or affiliates in the normal course of business,
which were conceived, made or written prior to the date of this Agreement.


 


e.               Employee
will not publish or otherwise disclose, either during or after Employee’s
employment with the Company, any published or proprietary or confidential
information


 


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or secret
relating to the Company, the Business, the Company’s operations or the
Company’s products or services. 
Employee will not publish or otherwise disclose proprietary or
confidential information of others to which Employee has had access or obtained
knowledge in the course of Employee’s employment with the Company.  Upon termination of Employee’s employment
with the Company, Employee will not, without the prior written consent of the
Company, retain or take with Employee any drawing, writing or other record in
any form or nature which relates to any of the foregoing.


 


f.                 Employee
understands that Employee’s employment with the Company creates a relationship
of trust and confidence between Employee and the Company.  Employee understands that Employee may
encounter information in the performance of Employee’s duties that is
confidential to the Company or its customers. 
For the Term hereof, and until the information falls into the public
domain, Employee agrees to maintain in confidence all information pertaining to
the Business or the Company to which Employee has access including, but not
limited to, information relating to the Company’s products, inventions, trade
secrets, know how, systems, formulas, processes, compositions, customer
information and lists, research projects, data processing and computer software
techniques, programs and systems, costs, sales volume or strategy, pricing, profitability,
plans, marketing strategy, expansion or acquisition or divestiture plans or
strategy and information of similar nature received from others with whom the
Company does business.  Employee agrees
not to use, communicate or disclose or authorize any other person to use,
communicate or disclose such information orally, in writing, or by publication,
either during Employee’s employment with the Company or thereafter except as
expressly authorized in writing by the Company unless and until such information
becomes generally known in the relevant trade to which it relates without fault
on Employee’s part, or as required by law.


 


6.                                       Termination or Non-Extension by Company Without Just
Cause


 


a.               Employee’s
employment by the Company is “at will” therefore, subject to the terms and
conditions hereof, the Company may terminate Employee’s full-time employment at
any time either with or without just cause. In the event of any termination of
Employee’s full-time employment with the Company without just cause, or in the
event that Employee’s full-time employment is not extended or renewed beyond
the Term on terms at least as favorable to Employee as Employee is receiving
during the last year of the Term, then Employee will remain bound to the
covenants not to compete and confidentiality obligations of paragraphs 4 and 5
of this Agreement, according to their terms, and each one of the following
shall apply:


 


i.                  Employee shall
be paid an amount equal to one year of his then annual base salary paid over a
period of  twenty-four (24) months from
Employee’s termination in equal monthly installments and at the same intervals
as other Employees of the Company are then being paid their base salaries;


 


ii.               Employee shall
continue to receive, during the twenty-four (24) months from Employee’s
termination, all medical insurance and any other benefits or insurance
coverages which Employee would have received had his employment not been so
terminated, or not extended, provided however, if the Employee is not eligible
for said


 


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medical
insurance, the Company shall pay the COBRA premiums for continuation coverage
during the said twenty-four (24) month period;


 


iii.            Employee shall receive
additional compensation for his covenant not to compete equal to the average
annual bonus which Employee has received for the three most recent fiscal years
during which Employee was employed, provided however that if Employee has not
been employed for three full fiscal years, then the Company shall use the
actual number of full fiscal years that the Employee was employed; The amount
due under this paragraph 6(a)(iii) shall be paid in the same intervals as other
Employees of the Company are then being paid their base salaries;


 


iv.           Notwithstanding anything
else contained herein to the contrary, during the 24-month period referred to
in this paragraph 6, Employee shall remain a part-time employee of the
Company’s and, subject to Employee’s other professional duties, shall be
available to the Chief Executive Officer of the Company.


 


b.              For
purposes hereof, any of the following acts or events shall, at Employee’s
option, constitute a termination without just cause under this paragraph 6 (but
the following is not the entire list of reasons or events which may constitute
a “termination without just cause”):


 


i.                  any material
diminution or reduction of Employee’s title, position, duties or
responsibilities, except as caused by the acts or omissions of Employee; or


 


ii.               any material breach
by Company of this Agreement that is not cured within thirty (30) days  after written notice by Employee of such
breach.


 


c.               In
the event that, at the end of the Term, the Company elects not to extend or
renew Employee’s full-time employment beyond the Term on terms at least
favorably to Employee as Employee is receiving during the last fiscal year of
the Term, then such non-renewal shall be treated as a termination without
cause.  In such case, the provisions of
paragraphs 6(a)(i) through (iv) shall apply and Employee shall be bound to the
provisions of paragraphs 4 and 5 hereof for the period of time during which
Employee is being paid pursuant to paragraph 6(a).


 


7.                                       Early
Termination by Company for Just Cause.  The Company may terminate Employee for just cause.  In the event the Company terminates the
Employee for just cause, the Employee will remain bound under the provisions of
paragraphs 4 and 5, but will not be entitled to any compensation or benefits
following his termination of employment under this Agreement.  Termination for “just cause” shall mean:


 


a.               dishonesty
as to a matter which is materially injurious to the Company,


 


b.              the
commission of a willful act or omission intended to materially injure the
business of the Company,


 


c.               a
violation of any of the material provisions of Sections 4 and/or 5 hereof,  or


 


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d.              a
determination in good faith by the Board that the Employee has failed to make a
good faith effort to fully perform his duties as assigned by either the CEO or
the Board, which is not remedied by the Employee within thirty (30) days
following the CEO’s specific written notice stating such alleged failure from
the Board.


 


8.                                       Voluntary Termination by Employee.


 


a.               In
the event Employee voluntarily terminates his employment with the Company,
Employee will remain bound under the provisions of paragraphs 4 and 5 hereof,
but will not be entitled to receive any compensation and benefits following his
termination of employment except for any payments or benefits required by law.


 


b.              Voluntary
termination means an intentional termination by the Employee without good
reason and without pressure by the Company; and further, provided that there
was not a material breach of this Agreement by the Company, prior to any such
termination which remains uncured.


 


9.                                       Cooperation
with Change in Control. 
Employee will reasonably cooperate with the Company in the event of a
Change in Control.


 


10.                                 No
Conflicting Agreements. 
Employee has the right to enter into this Agreement, and hereby confirms
Employee has no contractual or other impediments to the performance of
Employee’s obligations including, without limitation, any non-competition or
similar agreement in favor of any other person or entity.


 


11.                                 Company
Policies.  During the term of
Employee’s employment, Employee shall engage in no activity or employment which
may conflict with the interest of the Company, and Employee shall comply with
all policies and procedures of the Company including, without limitation, all
policies and procedures pertaining to ethics.


 


12.                                 Independent
Covenants.  The covenants and
agreements on the part of the Employee contained in paragraphs 4 and 5 hereof
shall be construed as agreements independent of any other provision in this
Agreement; thus, it is agreed that the relief for any claim or cause of action
of the Employee against the Company, whether predicated on this Agreement or
otherwise, shall be measured in damages and shall not constitute a defense or
bar to enforcement by the Company of those covenants and agreements.


 


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13.                                 Injunctive
Relief; Attorneys’ Fees.  In
recognition of the irreparable harm that a violation by Employee of any of the
covenants contained in either paragraphs 4 or 5 hereof would cause the Company,
the Employee agrees that, in addition to any other relief afforded by law, an
injunction (both temporary and permanent) against such violation or violations
may be issued against him or her and every other person and entity concerned
thereby, it being the understanding of the parties that both damages and an
injunction shall be proper modes of relief and are not to be considered
alternative remedies.  Employee consents
to the issuance of such injunctive relief without the posting of a bond or
other security.  In the event of any
such alleged violation, THE LOSING PARTY AGREES TO PAY THE COSTS, EXPENSES AND
REASONABLE ATTORNEYS’ FEES INCURRED BY THE PREVAILING PARTY IN PURSUING OR
DEFENDING ANY OF ITS RIGHTS WITH RESPECT TO SUCH ALLEGED VIOLATIONS, IN
ADDITION TO THE ACTUAL DAMAGES SUSTAINED BY THE PREVAILING PARTY AS A RESULT
THEREOF.


 


14.                                 Notice.  Any notice sent by registered mail to the
last known address of the party to whom such notice is to be given shall
satisfy the requirements of notice in this Agreement.


 


15.                                 Entire
Agreement.  This Agreement is
the entire agreement of the parties hereto concerning the subject matter hereof
and supersedes and replaces in its entirety any oral or written existing
agreements or understandings between the Company and the Employee relating
generally to the same subject matter. 
Company and Employee hereby acknowledge that there are no agreements or
understandings of any nature, oral or written, regarding Employee’s employment,
apart from this Agreement, and Employee acknowledges that no promises or
agreements not contained in this Agreement have been made or offered by the
Company.


 


16.                                 Severability.  It is agreed and understood by the parties
hereto that if any provision of this Agreement should be determined by an
arbitrator or court to be unenforceable in whole or in part, it shall be deemed
modified to the minimum extent necessary to make it reasonable and enforceable
under the circumstances, and the court shall be authorized by the parties to
reform this Agreement in the least way necessary in order to make it reasonable
and enforceable.


 


17.                                 Governing
Law.  This Agreement shall be
construed and enforced in accordance with the laws of the State of Nevada,
without giving effect to the principles of conflicts of laws thereof.


 


18.                                 Heirs,
Successors and Assigns.  The
terms, conditions, obligations, agreements and covenants hereof shall extend
to, be binding upon, and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors, assigns, and/or
acquirers, including any entity which acquires, merges with, or obtain control
of the Company.


 


19.                                 Waiver of
Breach.  The waiver by either
the Company or the Employee of any breach of any provision of this Agreement
shall not operate as or be deemed a waiver of any subsequent breach by either
the Company or the Employee.


 


20.                                 Dispute
Resolution.  Except for the
Company’s right (either pursuant to paragraph 13 hereof or otherwise) to
injunctive relief to enforce the provisions of paragraphs 4 and 5 hereof, the
exclusive forum for the resolution of any dispute arising under this Agreement
or any question of interpretation regarding the provisions of this Agreement
(other than disputes relative to paragraphs 4 or 5 hereof) shall be resolved by
arbitration, to be held in Clark County, Nevada, in accordance with the rules
of the American Arbitration Association. 
Such arbitration shall be before an


 


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arbitrator, who must be a
member of the National Academy of Arbitrators; chosen in accordance with the
rules then in effect, of the American Arbitration Association.  In the event the Employee and Company fails
within a reasonable period of time to agree on an arbitrator, the arbitrator
shall be chosen by the American Arbitration Association.  The decision of the arbitrator shall be
final, conclusive and binding upon the Company and Employee.


 


21.                                 Amendment.  This Agreement may be amended only by a
document in writing signed by both the Employee and an officer of the Company,
and no course of dealing or conduct of the Company shall constitute a waiver of
any of the provisions of this Agreement.


 


22.                                 Fees and
Costs.  In any action bought
by one party against the other pursuant to this Agreement or in the event of
any dispute over the meaning of this Agreement, the successful party, in
addition to recovering its awarded damages and other relief, shall be entitled
to recover its attorney’s fees and costs from the unsuccessful party.


 


23.                                 D & O
Policy.  During Employee’s
employment with the Company, the Company shall maintain director and officer
liability insurance in reasonable scope and amounts which insurance will cover
Employee.


 


24.                                 Non-Disparagement and Cooperation.


 


a.               During
any period of time wherein the Company is paying any base salary to Employee,
whether during the Term hereof or during any time after the termination or
expiration of this Agreement, and for a period of three (3) years thereafter,
Employee shall not disparage or otherwise make any negative comments about the
Company, its policies, products, Employees or management.  The Company may enforce these
non-disparagement provisions by resort to injunctive relief as set forth in
paragraph 13, in addition to any other damages that it may be entitled to under
this Agreement or otherwise at law.


 


b.              Employee
agrees to fully cooperate with the Company and its affiliates during the entire
scope and duration of any litigation or administrative proceedings involving any
matters with which Employee was involved during Employee’s employment with the
Company.


 


c.               In
the event Employee is contacted by parties or their legal counsel involved in
litigation adverse to the Company or its affiliates, Employee (i) agrees to
provide notice of such contact as soon as practicable; and (ii) acknowledges
that any communication with or in the presence of legal counsel for the Company
(including without limitation the Company’s outside legal counsel, the
Company’s inside legal counsel, and legal counsel of each related or affiliated
entity of the Company) shall be privileged to the extent recognized by law and,
further, will not do anything to waive such privilege unless and until a court
of competent jurisdiction decides that the communication is not
privileged.  In the event the existence
or scope of the privileged communication is subject to legal challenge, then
the Company must either waive the privilege or pursue litigation to protect the
privilege at the Company’s sole expense.


 


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


 


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  EMPLOYER:

  	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  	
   

  
	
  SHUFFLE MASTER, INC.

  	
   

  	
  GERALD W. KOSLOW

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Mark L. Yoseloff

  	
   

  	
   

  	
  By:

  	
  /s/ Gerald W. Koslow

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  Chairman, Chief Executive

  Officer and President.

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President and Chief Financial

  Officer

  	
   

  



 


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