Document:

Exhibit
10.1

 

 

 

 

PURCHASE AGREEMENT

 

BY AND BETWEEN

 

CASINOS AUSTRIA AKTIENGESELLSCHAFT

 

AND

 

CAI CASINOINVEST
MIDDLE EAST GMBH

 

ON THE ONE HAND

 

AND

 

SHUFFLE MASTER
MANAGEMENT-SERVICE GMBH

 

AND

 

SHUFFLE MASTER GMBH

 

ON THE OTHER HAND

 

 

DATED AS
OF May 13, 2004

 

 

 

 

INDEX OF EXHIBITS

 

	
  I.

  	
   

  
	
  Agreements to be signed
  or handed over at Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Patents Transfer
  Agreement

  	
   

  
	
  Exhibit B

  	
   

  	
  Application to
  Commercial Register

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  II.

  	
   

  	
   

  	
   

  
	
  Other Exhibits

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit I

  	
   

  	
  Closing Financial
  Statements

  	
   

  
	
  Exhibit II

  	
   

  	
  Latest Financial
  Statements

  	
   

  

 

INDEX OF
SCHEDULES

 

	
  Schedule 6.3

  	
   

  	
  Capitalization

  	
   

  
	
  Schedule 6.5

  	
   

  	
  Subsidiaries;
  Investments

  	
   

  
	
  Schedule 6.6

  	
   

  	
  Absence of Conflicts

  	
   

  
	
  Schedule 6.8

  	
   

  	
  Absence of Undisclosed
  Liabilities

  	
   

  
	
  Schedule 6.9

  	
   

  	
  Absence of Certain
  Developments

  	
   

  
	
  Schedule 6.10(b)

  	
   

  	
  Title to Properties,
  Sufficiency of Assets (Real Property; Leases)

  	
   

  
	
  Schedule 6.10(c)

  	
   

  	
  Title to Properties,
  Sufficiency of Assets (Personal Property)

  	
   

  
	
  Schedule 6.11

  	
   

  	
  Accounts Receivable

  	
   

  
	
  Schedule 6.12

  	
   

  	
  Taxes

  	
   

  
	
  Schedule 6.13

  	
   

  	
  Contracts and
  Commitments

  	
   

  
	
  Schedule  6.14(a)

  	
   

  	
  Material Proprietary
  Rights

  	
   

  
	
  Schedule 6.14(b)

  	
   

  	
  Material Licensed
  Proprietary Rights

  	
   

  
	
  Schedule 6.14(c)

  	
   

  	
  Material Limitations
  regarding Proprietary Rights

  	
   

  
	
  Schedule 6.18

  	
   

  	
  Litigation, Proceedings

  	
   

  
	
  Schedule 6.20

  	
   

  	
  Governmental Licenses
  and Permits

  	
   

  
	
  Schedule 6.21

  	
   

  	
  Employees

  	
   

  
	
  Schedule 6.22

  	
   

  	
  Employee Benefit Plans

  	
   

  
	
  Schedule 6.23

  	
   

  	
  Environmental, Health
  and Safety Matters

  	
   

  
	
  Schedule 6.24

  	
   

  	
  Insurance

  	
   

  
	
  Schedule 6.25

  	
   

  	
  Officers and Directors;
  Bank Accounts

  	
   

  
	
  Schedule 6.26

  	
   

  	
  Affiliate Transactions

  	
   

  
	
  Schedule 6.28

  	
   

  	
  Powers of Attorney;
  Guarantees

  	
   

  
	
  Schedule 6.29

  	
   

  	
  Product Warranties

  	
   

  
	
  Schedule 7.6

  	
   

  	
  Sellers’ Assets

  	
   

  
	
  Schedule 10.11

  	
   

  	
  Settlement of Mutual
  Claims

  	
   

  

 

2

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT
(this “Agreement”) is made as of May 13, 2004, by and between Casinos
Austria Aktiengesellschaft, a stock corporation organized, duly established and
validly existing under the laws of Austria, with the corporate seat in Vienna
and business address at Dr. Karl Lueger Ring 14, A-1010 Vienna, Austria,
registered with the Commercial Register under FN99639d (“CASAG”), and
CAI Casinoinvest Middle East GmbH, a limited liability company organized, duly
established and validly existing under the laws of Austria with corporate seat
in Vienna and business address at Dr. Karl Lueger Ring 14, A-1010 Vienna,
Austria, registered with the Commercial Register under FN196567w (“CAI”)
on the one hand and Shuffle Master Management-Service GmbH, a limited liability
company organized, duly established and validly existing under the laws of
Austria with corporate seat in Vienna and business address at Dr. Karl
Lueger Ring 14, A-1010 Vienna, Austria, registered with the Commercial Register
under FN247570z (“SHFMMS”) and Shuffle Master GmbH, a limited liability
company organized, duly established and validly existing under the laws of
Austria with corporate seat in Vienna and business address at Dr. Karl
Lueger Ring 14, A-1010 Vienna, Austria, registered with the Commercial Register
under FN247566v (“SHFM”) on the other hand. (CASAG and CAI are
collectively referred to herein as the “Sellers” and individually as “Seller”.
SHFMMS and SHFM are collectively referred to herein as the “Buyers” and
individually as “Buyer”).  The
Sellers and the Buyers are collectively referred to herein as the “Parties”
and individually as a “Party.”

 

CASAG is the only limited
partner (“Kommanditist”)
and holds the limited partnership interest (“Kommanditanteil”) of one
million Euros (€1,000,000) (the “Limited KG Share”) representing the
entire share capital (“Gesellschaftskapital”) in CARD Casinos
Austria Research & Development GmbH & Co KG, a limited
partnership duly established and validly existing under the laws of Austria
with corporate seat in Vienna and business address at Dr. Karl Lueger Ring 14
A-1015 Vienna, Austria, registered with the Commercial Register under FN
247789x (the “Company”; for purposes of definition, and unless expressly
stated otherwise herein, the term “Company” also includes its predecessor CARD,
as defined below).  CAI is the only
general partner (“Komplementär”) of the Company and holds the general
partnership interest (“Komplementäranteil”) (the “Unlimited KG
Share”) The Company has been established by way of a transformation (“errichtende
Umwandlung”) of CARD Casinos Austria Research & Development
GmbH, a limited liability company organized, duly established and validly
existing under the laws of Austria with corporate seat in Vienna and business
address at Dr. Karl Lueger Ring 14 A-1015 Vienna, Austria, registered with the
Commercial Register under FN 75379b (“CARD”).

 

SHFMMS desires to acquire
from CASAG, and CASAG desires to sell to SHFMMS, the Limited KG Share. SHFM
desires to acquire from CAI, and CAI desires to sell to SHFM, the Unlimited KG
Share.  (The Limited KG Share and the
Unlimited KG Share are collectively referred to hereinafter as the “Shares”).  In consideration for the Shares, Buyers
shall pay the Sellers cash as well as common stock of Buyers’ indirect parent
Shuffle Master, Inc., a 

 

3

 

Minnesota corporation, with its corporate business address at 1106
Palms Airport Drive, Las Vegas, Nevada 89119, USA (“SMI”).

 

NOW, THEREFORE, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1 Definitions  For purposes of this Agreement, the
following terms shall have the meanings set forth below:

 

“Affiliate” of any
particular Person means any other Person controlling, controlled by or under
common control with such particular Person, where “control” means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person whether through the ownership of voting securities or
otherwise.  In the case of the Buyers,
Affiliates, inter
alia, include SMI. Any Subsidiary shall also be deemed an Affiliate.

 

 “Austrian GAAP” means Austrian
generally accepted accounting principles in accordance with Austrian law, in
particular Section 189 et sequ of the Austrian Commercial Code (Handelsgesetzbuch).

 

“Closing Financial
Statements” means the  unaudited
balance sheet of the Company, as of 30 April 2004 and the related statements of
income and notes, if any, (“Anhang”) thereto, for the four months then ended,
that have been prepared in accordance with Austrian GAAP. The Closing Financial
Statements also mean the unaudited report for CARD Casinos Austria Research and
Development Limited (“CARD NZ”), the Company’s New Zealand Affiliate, for the
month of April 2004. The Closing Financial Statements are attached to this
Agreement as Exhibit I.

 

“Commercial Register”
means the commercial register (“Firmenbuch”) of the Commercial Court
Vienna (“Handelsgericht
Wien”).

 

“Company” means
collectively (i) CARD Casinos Austria Research & Development
GmbH & Co KG and (ii) its predecessor, CARD, unless expressly stated
otherwise.

 

“Contract” means
any contract, license, sublicense, franchise, mortgage, hypothecation, purchase
order, indenture, loan agreement, lease, sublease, agreement, contractual
obligation, instrument or other arrangement or any commitment to enter into any
of the foregoing (in each case in writing, unless explicitly stated otherwise)
to which the Company or any of its Subsidiaries are a party or by which any of
their assets are bound.

 

 “Environmental, Health,
and Safety Requirements” means, with respect to Austria and any
other relevant jurisdictions, all federal, state, local, and foreign statutes,

 

4

 

regulations, ordinances, and other provisions having the force or
effect of law, all judicial and administrative orders and determinations, (and
all common law in the United Kingdom) concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including, without limitation, all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances, or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, or radiation, each as amended and as now or hereafter in
effect.  In the case of Austria,
Environmental, Health and Safety Requirements shall include the following
statutes and all rules, regulations and interpretations thereunder: Trade Code
(“Gewerbeordnung”),
Water Protection Act (“Wasserrechtsgesetz”), Law on the Control
of Waste (“Abfallwirtschaftsgesetz”),
provincial laws on the protection of nature (“Naturschutzgesetze”), the
Act on the Clean-Up of Contaminated Sites (“Altlastensanierungsgesetz”), as well as
any and all administrative ordinances (“Verordnungen”) issued thereunder.

 

“Indebtedness”
means (i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by
any note, bond, debenture or other debt security, (iii) any indebtedness for
the deferred purchase price of property or services with respect to which a
Person is liable, as obligor or otherwise, (iv) any commitment by which a
Person assures a creditor against Loss (including, without limitation,
contingent reimbursement Liabilities with respect to letters of credit), (v)
any indebtedness guaranteed in any manner by a Person (including, without
limitation, guarantees in the form of an agreement to repurchase or reimburse),
(vi) any Liabilities under capitalized leases with respect to which a Person is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or with
respect to which Liabilities a Person assures a creditor against Loss, (vii)
any indebtedness secured by a Lien on a Person’s assets (including, without
limitation, any mortgage), (viii) any amounts owed to any Person under any  consulting arrangements; (ix) any
Intercompany Liabilities; and (x) any prorated amounts due any of the Company’s
employees prior to May 1, 2004, 09:00 a.m. Vienna time.

 

“Intercompany
Liabilities” means any amounts, if any owed by the Company or any of its
Subsidiaries to the Sellers or to any Subsidiary of the Sellers.

 

“International Trade
Laws and Regulations” means, with respect to Austria and any other relevant
jurisdictions, all federal, state, local and foreign statutes, executive order,
decrees, proclamations, regulations, rules, directives, ordinances and similar
provisions having the force or effect of law and all judicial and
administrative orders , rulings, determinations and common law concerning the
importation of merchandise, the export or reexport of products, services and
technology.

 

“Knowledge” as
used in the phrases “to the Knowledge of the Sellers” “to the Sellers’
Knowledge” or phrases of similar import shall mean and be deemed to exist, for
all purposes under this Agreement and under Austrian law and under the laws of
any jurisdiction in the world, if, on or prior to Closing (i) any TWO of the
managing directors of CASAG or ONE of the managing directors of CASAG AND Mr.
Josef Leutgeb had actual knowledge, or (ii) both the following TWO managing directors
of CARD (i.e. jointly): Mr. Ernst Blaha (“Blaha”) PLUS

 

5

 

Mr. Ewald Kirschenmann, (“Kirschenmann”) had actual knowledge,
or (iii) if either Blaha OR Kirschenmann had actual knowledge, PLUS the existence
of a written document (including but not limited to electronic versions
thereof) which existed in electronic or hardcopy form prior to Closing and
which evidences that one of these two managing directors had such actual
knowledge prior to Closing.  Knowledge
as used in the phrases “to the Knowledge of the Buyers,” “to the Buyers’
Knowledge” or phrases of similar import shall mean and be deemed to exist for
all purposes under this Agreement and under Austrian law and under the laws of
any jurisdiction in the world, if, on or prior to Closing, (i) any two of the
following four persons had actual knowledge: Paul Meyer, Jerry Smith, Jerry
Koslow, or Dana Kelley; or (ii) the documents, information and materials that
are disclosed on the Schedules hereto. Any information contained in the
Schedules and Exhibits attached hereto (for the avoidance of doubt, this also
includes the documents mentioned in any of the Schedules which documents are
contained in the disclosure bundle which was initialed by the Parties at
Closing) are disclosed and shall be deemed Knowledge of Buyers.

 

“Latest Financial
Statements” means the unaudited, balance sheet plus profit and loss
statement and notes, of the Company as of December 31, 2003 and the related
statements of income and any notes thereto for the year ended which have been
prepared according to Austrian GAAP. The Latest Financial Statements also
include the Annual Report for CARD NZ for the year ended December 31, 2003. The
Latest Financial Statements are attached as Exhibit II.

 

“Letter of Intent”
means that certain letter of intent, dated February 20, 2004, by and among
CARD, CASAG and SMI including the amendment thereof, dated February 23, 2004.

 

“Liability” means
any liability, debt, obligation, deficiency, Tax, penalty, fine, claim, cause
of action or other loss, cost or expense of any kind or nature whatsoever,
including without limitation, any Intercompany Liabilities, which, under
Austrian GAAP, should have been disclosed on the Company’s Closing Financial
Statements.

 

“Liens” means any
ownership rights of third parties, mortgage, hypothecation (“Hypothek”),
pledge (“Pfandrecht”),
assignment of rights (“Sicherungsabtretung”), assignment of
ownership (“Sicherungsübereignung”),
and any security interest, encumbrance, right of first refusal, adverse claim,
Tax, lien or charge or restriction of any kind or right of others of any nature
(including, without limitation, any conditional sale or other title retention
agreement or lease in the nature thereof) or any agreement to file any of the
foregoing.

 

“Material” means
any matter that, in the aggregate with all other related matters, has resulted
in or might result in costs, expenses, damages, payments or other Liabilities
of, to or involving, or claims by or against the Company involving €50.000 or
more or in a decrease in the earnings, cash flow, net worth or value of the
Company involving €50,000 or more.

 

“Material Adverse
Effect” means an event, transaction, condition or change which has a
material adverse effect on the business of the Company in the amount of €50.000
or more (a “Material Adverse Effect”).

 

6

 

“Ordinary Course of
Business” means in the ordinary course of business consistent with past
custom and practice (including with respect to quantity and frequency) or usual
in the trade.

 

“Person” means a
physical or legal person (“juristische Person”) or a person legally treated as
such (e.g., partnership, association).

 

“Proprietary Rights”
means all of the following: (i) patents, patent applications (including
continuations, continuations-in-part and divisionals), inventions (whether or
not reduced to practice); (ii) utility models (“Gebrauchsmuster”), utility
models applications (including continuations, continuations-in-part and
divisionals); (iii) registered trademarks, service marks, industrial designs,
trade dress, trade names, corporate names, logos and slogans (and all
translations, derivations and combinations of each of the foregoing) and
Internet domain names (together with all good-will associated with all
foregoing); (iv) copyrights and copyrightable works; (v) registrations and
applications for any of the foregoing; (vi) trade secrets and confidential
information (including, without limitations, ideas, inventions (whether or not
reduced to practice), formulae, compositions, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, designs, plans, proposals, technical data, financial, business and
marketing plans, costumer supplier lists and related information); (vii)
computer software and software systems (including, without limitation, source
code, executable code, data, databases and documentation).

 

 “SMI” means Shuffle Master, Inc., a
Minnesota corporation located at 1106 Palms Airport Drive, Las Vegas, Nevada
89119, USA.

 

“Subsidiary”
means, with respect to any Person, any corporation, partnership, limited
liability company, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a partnership, limited
liability company, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries
of that Person or a combination thereof. 
For purposes hereof, a Person or Persons shall be deemed to have a
majority ownership interest in a partnership, limited liability company,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, limited liability company, association or
other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, limited liability company,
association or other business entity.

 

“Tax” or “Taxes”
means, with respect to Austria and other relevant jurisdiction, any federal,
state, provincial, local tax and any income, gross receipts, capital gains,
franchise, alternative or add-on minimum, estimated, sales, use, goods and
services, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, environmental, customs, duties, personal
property, capital stock, social security, unemployment, employment, disability,
payroll, license, employee tax, social security contributions or other
withholding, contributions, Austrian real estate transfer tax (“Grunderwerbsteuer”),
capital duty 

 

7

 

(“Gesellschaftsteuer”),
stamp duty (“Gebühren”) or other tax, of any kind whatsoever, including
any fines, interest, penalties or additions to tax.

 

“Tax Returns”
means returns, declarations, reports, claims for refund, information returns or
other documents filed or required to be filed in connection with the
determination, assessment or collection of Taxes of the Company and its
Subsidiaries.

 

“Transaction Documents”
means this Agreement, the Lease Agreements and the Patent Transfer Agreement.

 

“US GAAP” means
United States generally accepted accounting principles as in effect from time
to time.

 

8

 

ARTICLE II

PURCHASE AND SALE OF SHARES

 

2.1
Purchase of Shares, of rights to the name CARD and certain Company Proprietary
Rights  2.1.1 On and
subject to the terms and conditions set forth in this Agreement, including
without limitation the representations and warranties contained in Article VI,
Article VII and Article VIII, simultaneously and with economic
effect as of May 1, 2004, 9:00 a.m. Vienna time (a) SHFM herewith purchases,
acquires and accepts the transfer of the Unlimited KG Share from CAI, and CAI
herewith sells, assigns and transfers to SHFM, all of the right, title and
interest in the Unlimited KG Share, including all rights pertaining thereto,
free and clear of any Liens or other rights of third parties; and (b) SHFMMS
herewith purchases, acquires and accepts the transfer of the Limited KG Share
from CASAG, and CASAG sells, assigns and transfers to SFMMS all of the right,
title and interest in the Limited KG Share, including all rights pertaining
thereto, including without limitation the balance standing to the credit of the
capital account (“Kapitalkonto”) as of May 1, 2004, 9:00 a.m. Vienna time as
well as any rights CASAG may have in relation to the name CARD and any Company
Proprietary Rights owned or controlled by CASAG, all free and clear of any
Liens or other rights of third parties; and (c) in consideration of the sale of
the Shares as set forth herein the Buyers shall deliver to the Sellers the
consideration specified in Section 2.3 (the “Limited KG Payment”)
and Section 2.4 (the “Unlimited KG Payment”) (collectively, the “Purchase
Price”).

 

2.1.2      CASAG herewith also
grants its written consent to the sale and transfer of the Unlimited KG Share,
as contemplated herein, under Article VII(1) of the articles of incorporation
(“KG-Vertrag”) of the Company .

 

2.1.3      Title to the Shares
shall transfer from the respective Seller to the respective Buyer as specified
herein against (i) receipt by the Sellers of the full and unreduced amounts of
the Limited KG Payment and the Unlimited KG Payment, as defined above and as
set forth in Sections 2.3 and 2.4, and (ii) registration of the Buyers as
holders of the Shares in the Commercial Register, whichever is later.

 

2.2 Closing
Transactions.

 

(a)  Closing.  The closing of the transactions contemplated by this Agreement
(the “Closing”) takes place both at the offices of Deutsche Bank, 280
Park Ave,
New York, USA, and at the offices of Fiebinger, Polak, Leon & Partners, Am
Getreidemarkt 1, A-1060 Vienna, Austria, commencing at 08:00 a.m., Vienna time
on May 13, 2004 and continuing in New York City at 9:00 a.m., New York time.
The date and time of the Closing are herein referred to as the “Closing Date.”

 

(b)  Closing Transactions.  The Parties shall consummate the following “Closing
Transactions” on the Closing Date in the following chronological order:

 

(i)            Signing of this Agreement (in
Vienna).

 

9

 

(ii)           Signing of an application and filing
with the Commercial Register, the application substantially in the form of Exhibit
B (both in Vienna).

 

(iii)          Payment and receipt of the full and unreduced
amounts of (x) the Limited KG Payment as set forth in Section 2.3 which shall
consist of the Cash Payment, and the Shares Payment, and (y) the Unlimited KG
Payment as set forth in Section 2.4.

 

The Limited KG Payment, is set forth in Section 2.3 and
shall be delivered by SHFMMS to CASAG as follows:

 

(A) SHFMMS shall deliver the Cash Payment by
intra-bank funds transfer of immediately available funds from an Austrian bank
account of SHFMMS with ERSTE Bank der oesterreichischen Sparkassen AG, Vienna,
to an account designated by CASAG with ERSTE Bank der oesterreichischen
Sparkassen AG, Vienna ; and

 

(B) SHFMMS shall cause the delivery, in New York of
the Shares Payment by delivery of a stock certificate registered in the name of
CASAG.

 

The Unlimited KG Payment is set forth in Section
2.4 and shall be delivered by SHFM by intra-bank funds transfer of
immediately available funds to an account or accounts designated by CAI;

 

(iv)          The Lease Agreements and the Patent
Transfer Agreement, shall be signed by all respective parties to such
agreements.

 

(v)           The Sellers shall deliver to the
Buyers evidence that Mr. Ernst Blaha has resigned as managing director of CAI
and of CAST Casinos Austria Sicherheitstechnologie GmbH, Vienna, Austria, and
as holder of a special power of attorney (“Prokurist”) of CASAG, effective on
or before the Closing Date.

 

(vi)          Registration of the Buyers as
shareholders of the Company in the Commercial Register.

 

All
Closing transactions described herein are part of the Closing of this Agreement
and the transactions contemplated thereby and shall be deemed simultaneously
occurred.

 

2.3 The Limited KG Payment.

 

The Limited KG Payment shall equal forty one million
seven hundred forty-four thousand Euros (€41,744,000).  The Limited KG Payment shall consist of the
Cash Payment and the Shares Payment and shall be paid free of any bank charges,
transfer fees, similar transfer taxes and free of any other withholdings, costs
or reductions of any kind. For the avoidance of doubt it is explicitly agreed
that the Sellers will be responsible for their own income taxes, but under no
circumstances will the Buyers be entitled to make any deductions or
withholdings for Sellers’ income taxes.

 

10

 

(a)  The Cash Payment shall be twenty five
million nine hundred thirty one thousand Euros (€25,931,000) The Cash Payment
shall be payable by intra-bank transfer at Closing.

 

(b)  The Shares Payment is 767,076 (seven hundred
sixty seven thousand and seventy six) shares of SMI common  stock (hereinafter referred to as the “SMI
Stock” or “SMI Shares”) (which was determined based on the following
agreed formula: the number of shares of SMI Stock obtained when fifteen million
eight hundred thirteen thousand Euros (EUR 15,813,000), translated into an
equivalent amount of U.S. dollars based on the conversion rate of 1 Euro equals
$1.2289, is divided by the Average Price, where the “Average Price”
equals the sum of (i) 50% of the average closing price of SMI’s Stock during
the ten (10) trading days prior to the third business day prior to the Closing
Date; and (ii) 50% of the average closing price of SMI’s Stock during the ten
trading days prior to SMI’s issuance of its press release announcing the
signing of the Letter of Intent; provided, however, that in no event shall the
Average Price exceed twenty-five dollars and thirty tree cents ($25.3333) per
share for purposes of determining the number of shares of common stock of SMI.
The Parties acknowledge that the Shares Payment and the “Average Price” have
been adjusted for the 3 for 2 stock split of SMI’s common stock which occurred
on April 16, 2004.)

 

2.4  The Unlimited KG Payment

 

The Unlimited KG Payment shall equal four thousand
Euros (EUR 4,000). The Unlimited KG Payment shall be payable by funds transfer
at Closing.

 

2.5          Late
Payment 

 

In
the event of late payment of the Limited KG Payment or the Unlimited KG
Payment, or any parts thereof by more than two business days from Closing,
without prejudice to any other remedies which Sellers may have under applicable
law, Sellers shall be entitled to default interest at a rate of 6 months’
EURIBOR plus 2% (two per cent) per year for any unpaid amount of Purchase Price
starting as from the day after the Closing until full payment.

 

11

 

ARTICLE III

DELETED

 

 

ARTICLE IV

PRE-CLOSING COVENANTS AND AGREEMENTS

 

Each of the Parties (as
applicable) agrees as follows that, except as otherwise expressly noted, with
respect to the period between December 31, 2003 and the Closing:

 

4.1 General  Since February 20, 2004, the Buyers and the
Sellers agree that they shall not have taken (and Sellers agree that the
Company has not taken) any action which would require disclosure under Articles
VI, VII and VIII below, or which would violate any of their respective
representations and warranties contained therein.

 

4.2 Allocation
of Profits  On a
contractual basis, the Buyers and the Sellers agree that all rights and
obligations and the economic risk connected with the Shares shall pass from
Sellers to Buyers on   May 1st,
2004, 9:00 a.m. Vienna time.  SHFMMS
shall, however, be entitled to receive any profits or dividends attributable to
the share in CARD or the Limited KG Share, which are attributable to or which
have been resolved to be distributed or withdrawn after December 31, 2003,
12:00 p.m.

 

The
legal title in the Shares shall pass, subject to (i) registration of the Buyers
in the Commercial Register and (ii) receipt by the Sellers of the payment of
the Limited KG Payment and the Unlimited KG Payment, from the Sellers to the
Buyers on the Closing Date. Therefore, the Buyers shall only become
shareholders of the Company when the registration of the Buyers in the
Commercial Register shall have been effected and the Limited KG Payment and the
Unlimited KG Payment shall have been received by the Sellers.

 

The
Sellers shall not be entitled nor obligated to participate in any business of
the Company which is pending at December 31, 2003, 12:00 p.m. Vienna time (“schwebende
Geschäfte”).

 

12

 

ARTICLE V

TRANSFER OF RESTRICTED SECURITIES

 

5.1 General
Provisions 
Subject to Section 5.2, the SMI Stock issued under this
Agreement may not be offered for sale, sold, reoffered, resold, transferred,
assigned, pledged or otherwise disposed of, except (A) pursuant to (i) an
effective registration statement under the U.S. Securities Act of 1933, as
amended (including the rules and regulations promulgated thereunder, the “Securities
Act”), (ii) an offshore transaction complying with Regulation S under the
Securities Act (or any similar rule or rules then in force) if such regulation
is available and if the prospective acquiror thereof makes available to CASAG
in advance of such transfer information demonstrating compliance with Regulation
S or (iii) Rule 144 or Rule 144A under the Securities Act (or any similar rule
or rules then in force) if such rule is available and, as applicable, if the
prospective acquiror thereof makes available to CASAG in advance of such
transfer information demonstrating compliance with Rule 144 or Rule 144A, respectively,
and (B) in accordance with all applicable securities laws of the states of the
United States and other jurisdictions.

 

5.2 Holding
Period 
Notwithstanding Section 5.1, and notwithstanding any registration of the
SMI Stock, CASAG agrees that it will not offer for sale, sell, transfer,
assign, pledge or otherwise dispose of more than 50% of the SMI Stock prior to
November 13, 2004; and the remaining 50% of the SMI Stock prior to May 13, 2005.  Thereafter, CASAG may offer, sell, pledge,
transfer or otherwise dispose of the common stock of SMI Stock;
provided that any such offer for sale, sale, transfer, assignment, pledge or
disposition will be subject to and must be made in compliance with the
Securities Act (including without limitation, if applicable, Rule 144, Rule
144A and Regulation S) and any other applicable securities laws of the states
of the United States and other jurisdictions of which such compliance shall be
CASAG’s sole responsibility and shall be at CASAG’s sole expense.

 

5.3
Right of First Refusal.

 

(a) Provided that the
registration agreement regarding the SMI Stock shall have become effective by
November 30, 2004, CASAG shall not sell, transfer, assign, pledge or otherwise
dispose of (whether with or without consideration) (with the exception of
transfers between CASAG and its Affiliates, provided that the transferee
agrees, also vis-à-vis SMI, to be bound by this right of first refusal, i.e.
contract for the benefit of SMI; “echter Vertrag zugunsten Dritter”) by way of
a private placement or offshore transaction or 
a sale executed through NASDAQ NMS) any interest in any SMI Stock (a “Transfer”)
without first delivering to SMI written notice (the “Sale Notice”).  The Sale Notice shall disclose in reasonable
detail the number of shares to be Transferred, the identity of the purchaser
(unless for sales through NASDAQ NMS or another stock exchange), the price or
price formula (including all relevant criteria for calculating the price) and
any other terms and conditions of the proposed Transfer. Any such proposed
Transfer shall be bona fide and to a bona fide purchaser. The Sale Notice shall
constitute a binding offer to sell all, but not less than all, of the subject
shares to SMI on the same terms and conditions specified in the Sale Notice.
Unless CASAG shall have received (i) SMI’s

 

13

 

Election Notice (i.e., the written acceptance of CASAG’s offer) within
five New York business days after the Sale Notice was delivered to SMI, (or two
New York business days after the Sales Notice, if for a sale through NASDAQ, as
the case may be) and (ii) the full and unreduced purchase price for the
SMI stock specified in the Sale Notice from SMI within five New York business
days, CASAG shall be free to sell the SMI stock specified in the Sale Notice.

 

(b) SMI may elect to
purchase all (but not less than all) of the shares of SMI stock to be
transferred pursuant to the Sale Notice and at the exact conditions described
in the Sale Notice by delivering a written notice of such election (the “Election
Notice”) to SMI within five (or two, if for a sale through NASDAQ) New York
business days after the Sale Notice has been delivered to SMI, provided that the
Election Notice shall be valid and effective only if it contains an express,
unconditional and irrevocable undertaking of SMI to pay the full and unreduced
purchase price stated in the Sale Notice, free of any withholdings, set-offs or
reductions, within five New York business days from delivery of the Election
Notice to CASAG. Within five New York business days after receipt of the
Election Notice, SMI shall pay the full and unreduced purchase price stated in
the Sale Notice, free of any withholdings, set-offs or reductions, concurrently
with and against delivery of the share certificates of the SMI stock specified
in the Sale Notice.

 

(c) If within such five
(or two, if for a sale through NASDAQ) New York business days, SMI does not
elect to purchase all of the shares of SMI stock specified in the Sale Notice,
or fails to pay the full and unreduced purchase price for such shares, to be
calculated as defined in the Sale Notice, to CASAG, CASAG may Transfer the
shares of SMI stock, subject to the provisions of Section 5.2 hereof
(e.g., the remaining holding period, if any, needs to be observed) without any
restrictions and for any consideration determined by CASAG whenever CASAG so
desires.  If SMI has elected to purchase
shares of SMI stock specified in the Sale Notice, the sale of such shares,
against full and unreduced payment of the respective purchase price, shall be
consummated as soon as practical after the delivery of the Election Notice to
CASAG, but in any event within five New York business days after SMI delivers
to CASAG the Election Notice.

 

If SMI shall have
delivered an Election Notice, but shall subsequently fail to pay the full and
unreduced purchase price for the SMI stock in time, CASAG shall alternatively
be entitled, at its discretion, to demand payment of the applicable purchase
price under the Election Notice against transfer of the SMI stock; in such
case, SMI shall be obliged to pay to CASAG the applicable purchase price under
the Election Notice plus default interest at a rate of 6-months EURIBOR plus
two per cent per year. If SMI should fail to pay the full and unreduced
purchase price for the SMI stock plus default interest, CASAG, notwithstanding
any other right or remedy available under applicable law and this Agreement,
shall also be entitled to rescind the sale to SMI by giving at least five New
York business days’ prior written notice; and in the event of such rescission,
SMI shall hold CASAG harmless for any Loss which CASAG may incur due to SMI’s
failure to pay the purchase price for the SMI shares.

 

(d) All rights under this
Section 5.3 shall be for the exclusive benefit of SMI as a third party
beneficiary (“echter Vertrag zugunsten Dritter”), and, therefore only SMI, but
not the Buyers nor any third parties shall have any rights under this Section
5.3.

 

14

 

5.4 Restrictive
Legends  Unless
the stock of SMI is registered prior to the execution of this Agreement, each
certificate or instrument representing the common stock shall be imprinted with
a legend in substantially the following form:

 

“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  THE SECURITIES MAY NOT BE SOLD OR OFFERED
FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT, OR IN COMPLIANCE WITH REGULATION S, RULE 144A OR RULE 144 UNDER
THE SECURITIES ACT OR PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION AND (B)
IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES AND OTHER JURISDICTIONS.  THE
SECURITIES ARE SUBJECT TO A HOLDING PERIOD AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF FOR A PERIOD OF
ONE YEAR FROM MAY 13, 2004, PURSUANT TO A PURCHASE AGREEMENT.”

 

5.5          Legend Removal  When the common stock becomes eligible for
sale (including, without limitation, pursuant to Rule 144 under the Securities
Act), SMI shall, upon the request of the holder of such common stock, remove
the legend set forth in Section 5.4 from the certificates or
instruments representing such common stock.

 

5.6          CASAG’s Put Option of SMI Stock

 

At any time prior
to the effective date of the registration of the SMI Stock (i.e. Sellers are
free to sell the SMI Stock, but for the right of first refusal and the agreed
holding period), CASAG shall have the right to request SHFMMS to cause SMI or
to directly request SMI to buy back all, but not less than all, of the SMI
Stock based on a share price of USD 25.3333 (twenty five dollars and thirty
three point thirty three cents) per share, for a total price of EUR 15,813,000
(fifteen million eight hundred thousand and thirteen thousand Euros) (i.e.
based on a fixed and agreed exchanged rate of 1 Euro equals USD 1.2289). After
the registration of the SMI Stock, CASAG’S rights and SHFMMS’s obligations
under this Clause 5.6 shall fully terminate.

 

15

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

WITH RESPECT TO THE COMPANY AND ITS SUBSIDIARIES

 

With respect to the
Company and its Subsidiaries, each Seller hereby jointly and severally
represents and warrants to the Buyers that:

 

6.1 Organization
and Corporate Power 
The Company is a limited partnership (“Kommanditgesellschaft”)
being duly organized and validly existing and in good standing under the laws
of Austria and is qualified to do business in 
and holds all necessary material licenses in those jurisdictions where
the Company conducts its business. The Company has full corporate power and
authority and all material public licenses, public permits and public
authorizations necessary to own and operate its properties, to carry on its business
as now conducted.  All of the Company’s
and its Subsidiaries’ organizational documents reflect all amendments made
thereto at any time prior to the date of this Agreement and are correct and
complete.  Neither the Company nor any
Subsidiary of the Company is in default under or in violation of any provision
of their respective organizational documents.

 

6.2 Authorization
of Transactions 
The Company has full corporate power and authority to consummate the
transactions contemplated by the Transaction Documents.  The shareholders (“Gesellschafter”) of the
Company have duly approved all Transaction Documents to which the Company is a
party and have duly authorized the execution and delivery of all Transaction
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby.  No
other corporate proceedings are necessary to approve and authorize the
execution and delivery of this Agreement or the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby.  Upon execution by the Sellers, this
Agreement and each of the other Transaction Documents shall have been duly
executed and delivered by the respective Seller and shall constitute valid and
binding obligations upon the Sellers, enforceable in accordance with their
terms and applicable law.

 

6.3 Capitalization  The authorized, issued and outstanding share
capital, and ownership thereof, of the Company, as well as the ownership of the
Shares are as set forth on Schedule 6.3 respectively.  The Shares are validly existing and
nonassessable, are not subject to, nor issued in violation of, any preemptive
rights or rights of first refusal, and are owned of record and beneficially by
Sellers free and clear of all options, warrants, rights, Contracts, calls,
puts, rights to subscribe, conversion rights and other Liens.  There are no outstanding or authorized
options, warrants, rights, Contracts, calls, puts, rights to subscribe,
conversion rights or other agreements or commitments to providing for the
issuance, disposition or acquisition of any interest in the Company.  There exists no obligation to contribute
further funds, with the exception of the statutory obligations of an unlimited
partner in a limited partnership to be personally liable, without any limits of
liability.  There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
the Company (other than this Agreement). 
There are no voting trusts, proxies or any other agreements or understandings
with respect to the Shares (other than this Agreement).  The Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
interest in the Company.  The Company
has not violated any applicable federal, provincial or state securities

 

16

 

laws of Austria or any other jurisdiction in connection with the offer,
sale or issuance of any shares, including the offer and sale of the Shares.  Since registration of the Company
as a limited partnership in the Commercial Register, the shareholders have not
made any withdrawal (“Entnahme”) from the accounts
(“Kapitalkonten”) or other accounts (“Verrechnungskonten”, “Privatkonten”).
..  For clarification purposes, it is
explicitly stated and agreed that the Company has paid, prior to Closing, the
Intercompany Liabilities.

 

6.4 Transformation
of CARD  The
Limited KG Share has been fully contributed by the Seller in the course of the
transformation (“errichtende Umwandlung”) of CARD into the Company as a limited
partnership. In the course of the transformation of CARD into the Company as a
limited partnership, , the whole business, all contracts and all rights and
entitlements of CARD have been lawfully and fully transferred to the Company,
and thereby, to the Knowledge of the Sellers, no contracts have been or will be
terminated.

 

It
is explicitly agreed that the Sellers shall not be responsible for any negative
consequences, costs, expenses, Losses or Taxes which may have occurred or will
occur due to such transformation which may or may not qualify as a
non-recognition transaction for Austrian tax purposes. In the course of the
transformation of CARD into the Company as a limited partnership all form and
other requirements of applicable law have been complied with in all material
respects. In particular the shares in the Subsidiaries, all Company Proprietary
Rights, and all Licenses have been validly and duly transferred from CARD to
the Company in such transformation by universal succession.

 

With
the exception of the registration of the transformation in the Commercial
Register, which was effected by the Sellers and the Company, it will be the
Buyers’ obligation to make all applications, notifications and filings and to
obtain all consents in this respect which might be necessary due to applicable
law, such that all assets including all rights, Proprietary Rights, privileges
and Licenses shall lawfully and fully, without restrictions or Liens, be vested
in the Company. The Sellers make no respective representations and warranties
and assume no respective liability with respect to such Buyers’ obligations and
the results thereof as mentioned in this paragraph.

 

6.5 Subsidiaries;
Investments  Schedule 6.5
sets forth a complete and accurate list of all of the direct or indirect
Subsidiaries of the Companies and the jurisdiction of organization of each such
Subsidiary.  Each such Subsidiary is
duly organized, validly existing and in good standing under the laws of its jurisdiction
of organization and is qualified to do business in its respective jurisdiction
of incorporation, except where the failure to so qualify has not had or would
not reasonably be expected to have a Material Adverse Effect.  All jurisdictions in which each Subsidiary
is registered or holds trade or other licenses are set forth on Schedule 6.5.  All of the outstanding shares of capital
stock of each such Subsidiary are validly issued, fully paid and nonassessable,
and all such shares are owned by the Company as set forth on Schedule 6.5,
free and clear of any Lien and not subject to any option or right to purchase
any such shares.  Except as set forth on
Schedule 6.5, none of the Company or its Subsidiaries own or hold
any stock, units or any other security or interest in any other Person or any
rights to acquire any such stock, units or other security or interest, and none
of the Company or its Subsidiaries has ever owned any further Subsidiary.

 

17

 

6.6 Absence
of Conflicts 
Except as set forth on Schedule 6.6 ,  the execution, delivery and performance of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby by each of the Company and/or
Sellers do not and shall not (a) conflict with or result in any breach of any
of the Material terms, conditions or provisions of, (b) constitute a Material
default under, (c) result in a Material violation of, (d) give any third party
the right to modify, terminate or accelerate any Material obligation under, (e)
result in the creation of any Lien upon the Shares or the assets of the Company
and its Subsidiaries, or (f) limited to aspects of corporate existence and
organization, require any authorization, consent, approval, exemption or other
action by or notice or declaration to, or filing with, any court or
administrative or other governmental body or agency, under the organizational
documents of the Company or any Subsidiary or any Contract to which the Company
or any Subsidiary are bound or affected, or any law, statute, rule or
regulation to which the Company or any Subsidiary are subject or any judgment,
order or decree to which the Company or any Subsidiary are subject.

 

6.7 Financial
Statements  The
Sellers have furnished Buyers with copies of (i) the “Closing Financial
Statements” and (ii) the “Latest Financial Statements”. Each of the
foregoing financial statements (including in all cases the notes thereto, if
any) (the “Financial Statements”) (i) have been prepared to be accurate
and complete in all Material respects; (ii) have been prepared to be consistent
with the Company’s books and records (which, in turn, are accurate and complete
in all Material respects); (iii) have been prepared to present fairly in all
Material respects the Company’s financial condition and results of operations
as of the times and for the periods referred to therein; and (iv) have been
prepared in accordance with Austrian GAAP consistently applied (The Latest
Financial Statements were also prepared in accordance with US GAAP for purposes
of information only.  Nothing contained
herein or therein shall be construed as a warranty of any of the foregoing
under US GAAP).

 

6.8 Absence
of Undisclosed Liabilities  All Liabilities of the Company, to the extent that such
Liabilities must be reflected on the Closing Financial Statements under
Austrian law and Austrian GAAP, are reflected on the Closing Financial
Statements and the Company has no additional Material current Liabilities other
than the current Liabilities which have arisen after the date of the Closing
Financial Statements in the Ordinary Course of Business or otherwise in
accordance with the terms and conditions of this Agreement (none of which is a
Material liability for breach of contract, breach of warranty, tort or
infringement or a claim or lawsuit or an environmental liability)and the
Company has those additional Liabilities disclosed on Schedule  6.8;
provided, however, that no liabilities or Indebtedness of the Company at the
Closing Date shall include any Intercompany Liabilities or any amounts or
obligations owed or due Clarence Rudd. Notwithstanding the foregoing, Buyers
shall be solely responsible for the payment of any Distributor Termination Fees
(irrespective of whether or not such fees become due and owing as a result of
termination decisions made by Buyers). . The Company’s reserves for severance
payments (“Abfertigung”) were calculated and funded in accordance with Austrian
laws; any additional warranty or liability of the Sellers with respect to such
severance payments is excluded.

 

6.9 Absence
of Certain Developments 
Except as set forth on Schedule 6.9 and except as expressly
contemplated by this Agreement, since December 31, 2003, neither the Company nor
any of their Subsidiaries, other than in the Ordinary Course of Business:

 

18

 

(a) suffered a Material
Adverse Effect or suffered any theft, damage, destruction or casualty loss in
excess of €25,000, to its assets, with the exclusion of damages  covered by insurance, or suffered any
substantial destruction of the Company’s books and records;

 

(b) redeemed or
repurchased, directly or indirectly, any interest in the Company or declared,
set aside, paid or resolved to pay any withdrawal (“Entnahme”) or any dividend
with respect to the Company, or any distributions or made any other dividends
(whether in cash or in kind) with respect to any shares of capital stock or
other equity security of the Company, no matter for which period and for the
avoidance of doubt also covering the period prior to the transformation of CARD
into a limited partnership; for the avoidance of doubt, any of these acts shall
under no circumstances be considered to be in the Ordinary Course of Business;

 

(c) issued, sold or
transferred any notes, bonds or other debt securities, any equity securities,
any securities convertible, exchangeable or exercisable into any interest in
the Company or other equity securities, or warrants, options or other rights to
acquire any interest in the Company;

 

(d) borrowed any amount
or incurred or become subject to any Indebtedness or other Liabilities, except
current Liabilities incurred in the Ordinary Course of Business;

 

(e) discharged or
satisfied any Lien or paid any Liability (other than current Liabilities paid
in the Ordinary Course of Business or other than Intercompany Liabilities) or
prepaid any amount of Indebtedness;

 

(f) subjected any portion
of their properties or assets to any Lien;

 

(g) sold, leased,
licensed, assigned or transferred (including, without limitation, transfers to
Sellers or any Insider) a portion of its tangible (corporeal) or intangible
(incorporeal) assets (including, without limitation, any Company Proprietary
Rights), except for sales of inventory (or replacement of fixed assets with a
value of less than EUR 10,000) in the Ordinary Course of Business, or canceled
without fair consideration any debts or claims (of more than EUR 10,000) owing
to or held by them, or disclosed any confidential information (other than
pursuant to agreements requiring the party to whom the disclosure is made to
maintain the confidentiality of and preserving all rights of the Company and
its Subsidiaries in such confidential information);

 

(h) suffered any Material
extraordinary losses or waived any rights of Material value, unless in the
Ordinary Course of Business;

 

(i) entered into, amended
in a Material respect, or terminated any Material Contract or taken any other
Material action or entered into any other Material transaction other than in
the Ordinary Course of Business;

 

(j) entered into any
other Material transaction or Materially changed any business practice;

 

(k) made or granted or
promised any bonus or any wage, salary or compensation increase (other than the
required increases (none of which are Material) under the collective

 

19

 

bargaining agreement for white collar trade employees) in excess of EUR
5.000 per year to any director, officer, employee or sales representative,
group of employees or consultant or made or granted or promised any increase in
any employee benefit plan or arrangement, or amended or terminated any existing
employee benefit plan or arrangement or adopted any new employee benefit plan
or arrangement;

 

(l) made any other change
in employment terms for any of their directors, officers, and employees outside
the Ordinary Course of Business or entered into any transaction with any
Insider, or except as specifically contemplated by this Agreement, entered into
any Contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm’s length, with Persons who are Affiliates or Insiders;

 

(m) incurred Intercompany
Liabilities or conducted its cash management customs and practices other than
in the Ordinary Course of Business (including, without limitation, with respect
to maintenance of working capital balances, collection of accounts receivable
and payment of accounts payable); all Intercompany Liabilities were cleared as
per April 30, 2004 and no Material Intercompany Liabilities were incurred since
then;

 

(n) made any Material
capital expenditure;

 

(o) made any loans or
advances to, or guarantees for the benefit of, any Persons (other than (a)
guarantees to customers in the Ordinary Course of Business and consistent with
the policies and practices disclosed to Buyers or SMI and (b) a loan of EUR
3.000 granted to one employee of the Company);

 

(p) made any charitable
contributions, pledges, or paid any association fees or dues in excess of EUR
25,000;

 

(q) changed or authorized
any change in its organizational documents other than CARD’s transformation
into a limited partnership as per December 31, 2003;

 

(r) materially delayed or
postponed the repair and maintenance of its properties or the payment of
accounts payable, accrued Liabilities and other Liabilities;

 

(s) instituted any court
proceeding or settled any claim pending in court or lawsuit involving equitable
or injunctive relief or involving more than EUR 10,000 in the aggregate;

 

(t) granted any
performance guarantees to their customers other than in the Ordinary Course of
Business and consistent with the policies and practices within the Knowledge of
Buyers or SMI;

 

(u) acquired any other
business or entity (or any significant portion or division thereof), whether by
merger, consolidation or reorganization or by the purchase of its assets or
stock or acquired any other Material assets, with the exception of the
transformation of CARD into a limited partnership;

 

20

 

(v) engaged in any
transaction with Sellers or its Affiliates other than on arm’s-length terms;

 

(w) lost, had suspended,
conditioned or revoked any License; or

 

(x) committed or agreed
to any of the foregoing.

 

6.10 Title
to Properties; Sufficiency of Assets  

 

(a) Neither the Company nor any of its Subsidiaries
owns any real property.

 

(b) The real property
leases and subleases described on Schedule 6.10(b) are valid,
binding, enforceable and in full force and effect and have not been modified
(except within the Knowledge of Buyers), and the Company or a Subsidiary holds valid
and existing rights and interests as lessee under such leases or subleases for
the term set forth on Schedule 6.10(b).  The leases and subleases described on Schedule 6.10(b)
(the “Leased Properties”) constitute all of the leases and subleases
under which the Company or any Subsidiary hold rights and interests as lessee
in real property.  The Sellers have
delivered to Buyers and Buyers have Knowledge of complete and accurate copies
of each of the leases or subleases described on Schedule 6.10(b).  The Leased Properties constitute all of the
real property used or occupied by the Company and its Subsidiaries.  With respect to each lease and sublease
listed on Schedule 6.10(b):

 

(i) the lease or sublease shall continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the Closing (with the exception of landlords’ potential rights to
increase the rent following a change of ownership, as provided in § 12a of the
Austrian Rental Act or similar provisions of laws other than Austrian laws);

 

(ii) neither the Company (nor any of its Subsidiaries)
nor any other party to the lease or sublease is in Material breach or Material
default, and no event has occurred which, with notice or lapse of time, would
constitute such a Material breach or default or permit termination,
modification or acceleration under the lease or sublease;

 

(iii) no party to the lease or sublease has repudiated
any provision thereof and there are no disputes, Material oral agreements or
forbearance programs in effect as to the lease or sublease;

 

(iv) neither the Company nor any of its Subsidiaries
has assigned, transferred, conveyed, mortgaged, hypothecated, deeded in trust
or encumbered any of its rights and interests in the leases or subleases;

 

(v) such leases or subleases do not prohibit the
transactions contemplated hereunder and under the other Transaction Documents.

 

(c) Except as set forth
on Schedule 6.10(c), the Company and its Subsidiaries own good and
marketable title to, or a valid leasehold interest in, free and clear of all
Liens, all of the personal property and assets which are shown on the Latest
Financial Statements or acquired thereafter by them.

 

21

 

(d) The personal
properties, vehicles and other tangible (corporeal) assets of the Company owned
by the Company are operated in conformity with all Material applicable laws and
regulations,  are in the condition and
repair which is in line with the value attributed to these assets in the Latest
Financial Statements, reasonable wear and tear excepted.  The Company or a Subsidiary own or lease
under valid leases all Material buildings, machinery, equipment and other
Material tangible assets necessary for the conduct of their business.

 

(e) The assets and
properties (whether real (immoveable) or personal (moveable), tangible
(corporeal) or intangible (incorporeal)), including but not limited to,
Proprietary Rights owned or leased by the Company or a Subsidiary constitute
all of the assets and properties used for the unimpaired operation of the
business presently conducted by the Company.

 

6.11        Accounts Receivable  Except as set forth on Schedule 6.11,
all of the notes and accounts receivable of the Company and its Subsidiaries
reflected on the Closing Financial Statements are good, valid and fully
collectible receivables (subject to no counterclaims or offset) and shall be
collected (net of the allowance for doubtful accounts recorded on the
applicable Closing Financial Statements) within 2004 at the aggregate amount
recorded therefore on the Latest Financial Statements.  There are no individual accounts receivable
which are over EUR 10,000 and 60 days past due, except as set forth on Schedule 6.11.  As of the Closing Date, no Person shall have
any Lien on such receivables or any part thereof, and no agreement for
deduction, free goods, discount or other deferred price or quantity adjustment
shall have been made with respect to any such receivables. However, there are
commissions and compensations payable to the inventors, as disclosed on
Schedule 6.21 and Schedule 6.14(c).

 

22

 

6.12        Taxes   (i)
all Tax Returns which are required to be filed with respect to the Company and
its Subsidiaries have been timely filed or shall be timely filed on or before
the Closing Date, and all such Tax Returns are true, complete and accurate, and
complete and correct copies of all such returns and other documents filed in
respect of the three fiscal years of the Company and its Subsidiaries ending
prior to the date hereof have been provided to Buyers; as for the Corporate Tax
Returns required to be filed by the Company and its Subsidiaries under the
applicable law for fiscal year 2003 (and for the New Zealand Subsidiary, for
the FY ending March 31, 2004), the Sellers undertake to and Buyers agree that
the Sellers will prepare and file the Tax Returns of the Company by June 30,
2004 at the latest and the Tax Returns of the Subsidiaries no later than
September 30, 2004, if such filing deadline, as regards the Subsidiaries, is
feasible under applicable law but no later than the earliest point of time when
such Tax Returns can be filed under applicable law.

 

(ii) all Taxes due and payable or required to be
collected or remitted by or on behalf of the Company and its Subsidiaries on or
before the Closing Date, whether or not shown on a Tax Return, have been paid,
collected or remitted or shall be paid, collected or remitted by the Company
and its Subsidiaries or Sellers on or before the Closing Date in an amount
pursuant to and in line with Austrian tax law or – as the case may be – foreign
tax law - and all Taxes incurred prior to the Closing Date, but not due and
payable prior to or on the Closing Date have been determined pursuant to and in
line with Austrian tax law or – as the case may be – foreign tax law and
accrued but not yet due are shown on the Closing Financial Statements  and no Taxes are delinquent;

 

(iii) with respect to any periods for which Tax
Returns have not yet been required to be filed or for which Taxes have been
incurred but are not yet due and payable, the Company and its Subsidiaries have
incurred Liabilities for Taxes only in the Ordinary Course of Business and in a
manner consistent with prior periods; it being understood that such Liabilities
for Taxes incurred in prior years were incurred based upon an accurate,
diligent and lawful application of the applicable tax law and recognition and
determination of the relevant tax base on which such taxes were levied,
provided that any tax consequence out of or in connection with the
transformation of CARD into a limited partnership shall be for the account of
the Buyers;

 

(iv) with respect to any period before the Closing
Date including but not limited to periods for which Tax Returns have or have
not yet been required to be filed or for which Taxes have been due and payable
or have been incurred but are not yet due and payable including but not limited
to the period January 1, 2004 through the Closing Date the Company and its
Subsidiaries (i) have accurately and diligently recorded all of their business
transactions in their books thereby duly considering Austrian GAAP and – as the
case may be – foreign GAAP and (ii) have fully complied with Austrian tax law and
- as the case may be - foreign tax law and (iii) have paid or accrued for any
Austrian or foreign tax for which the Company and its Subsidiaries can be held
liable pursuant to Austrian and – as the case may be — foreign tax law;

 

(v) no deficiency for any amount of Tax has been
asserted or assessed by a taxing authority against the Company and its
Subsidiaries and the Company and its Subsidiaries do not reasonably expect that
any such assertion or assessment of Tax liability will be made,

 

23

 

(vi) Austrian corporate income tax assessments have
been issued to the Company covering all past periods up to and including the
fiscal year ended December 31, 2002,

 

(vii) the Company and its Subsidiaries have withheld
from each amount paid or credited to any Person the amount of Taxes required to
be withheld therefrom and has remitted such Taxes to the proper Tax or other
governmental authorities within the time required under applicable law,

 

(viii) there is no investigation, action, suit,
proceeding or audit or any notice of inquiry of any of the foregoing pending
against or with respect to the Company and its Subsidiaries regarding Taxes
and, to the Knowledge of Sellers, no investigation, action, suit, proceeding or
audit has been threatened against or with respect to the Company and its
Subsidiaries regarding Taxes,

 

(ix) the Company and its Subsidiaries have not
consented to extend or otherwise waive the time in which any Tax may be
assessed or collected by any taxing authority,

 

(x) the Company and its Subsidiaries have not been a
member of an affiliated group for tax purposes,

 

(xi) no pending claim has been made by a taxing
authority in a jurisdiction where the Company and its Subsidiaries do not file
Tax Returns that the Company and its Subsidiaries is or may be subject to Taxes
assessed by such jurisdiction,

 

(xii), deleted

 

(xiii) the Company and its Subsidiaries have withheld
and paid all Taxes required to have been withheld and paid before Closing, in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party,

 

(xiv) deleted

 

(xv) the Company and its Subsidiaries have not made
any agreement with any taxing authority adversely affecting the treatment of
Taxes of the Company and its Subsidiaries,

 

(xvi) the Company and its Subsidiaries will not be
required (A) as a result of a change made by the Company or its Subsidiaries
prior to the Closing in method of accounting for a taxable period ending on or
prior to the Closing Date, to include any adjustment in taxable income for any
taxable period (or any portion thereof) or (B) as a result of a tax ruling or
similar agreement reached prior to Closing with a competent tax office of the
Company or its Subsidiaries to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date and

 

(xvii) for 
the period prior to Closing the Company and its Subsidiaries have collected
from each receipt from any of the past and present customers (or other persons
paying amounts to the Company and its Subsidiaries) the amount of all Taxes
(including VAT) required to be collected and have remitted such Taxes when due,
in the form required under the appropriate legislation or made adequate
provision for the payment of such amount to the proper receiving

 

24

 

authorities; the Company and its Subsidiaries have accurately
calculated any deducted input VAT and fulfilled all legal prerequisites to
claim such input VAT.

 

(xviii) Schedule 6.12  contains a list of states, provinces,
territories and jurisdictions (whether foreign or domestic) in which the
Company and its Subsidiaries have been 
required to file Tax Returns prior to Closing.  The Company and its Subsidiaries have not at any time benefited
from a forgiveness of debt or entered into any transaction or arrangement
(including conversion of debt into shares of 
their share capital) which could have resulted in penalties under
Austrian tax law (or comparable provisions under any applicable provincial
statute).

 

(xix) The Company and its Subsidiaries have not
acquired property from or rendered services to, or disposed of property or
provided services to a Person with whom they do not deal at arm’s length for an
amount that is other than the fair market value of such property or services,
or has been deemed to have done so for purposes of all applicable tax laws.  There are no contingent Liabilities or any
grounds that could prompt an assessment or reassessment of Taxes, including,
but without limitation, aggressive treatment of income, expenses, deductions,
credits or other amounts in the filing of Tax Returns.

 

(xx) Taxes incurred by
SHFMMS and/or SHFM as partners of the Company for periods (or portions thereof)
starting as from the date of Closing due to the fact that the Company, prior to
Closing, has been found to have violated applicable Austrian or applicable
foreign tax law with respect to any tax wise relevant business transaction
effected in a period (or portions thereof) prior to Closing shall be borne by
Sellers.

 

(xxi) In the case of any
Taxes that are imposed on a periodic basis and are payable for a taxable period
that includes (but does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such taxable period ending on the Closing Date
shall (x) in the case of any Taxes other than Taxes based upon or related to
income or receipts (the latter including but not limited to Corporate Income
Tax (“Körperschaftsteuer”), VAT (“Umsatzsteuer”), Insurance Tax
(“Versicherungsteuer”), Fire Brigade Tax (“Feuerschutzsteuer”), Energy Tax
(“Energieabgaben”), Wage Tax (“Lohnsteuer”), Social Insurance (“Sozialversicherungsabgaben”),
Contribution to the Family Burden Equalization Fund (“Dienstgeberbeitrag zum
Familienlastenausgleich”) and Surcharge thereon (“DZ”) Municipal Wage Tax
(“Kommunalsteuer”)), be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (y) in the case
of any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant taxable period ended on the
Closing Date.

 

Nothwithstanding anything
to the contrary contained herein, it is expressly agreed by Buyers and Sellers
that:

 

(a) neither Party nor any
of their Affiliates has, at Closing, any Knowledge of any breach or untruth of
any representation or warranty or any obligation contained in Section 6.12, and

 

25

 

(b) no breach or untruth
of any representation or warranty or any obligation contained in Section 6.12
is disclosed or contained on any Schedule, Exhibit or disclosure bundle or on
any document, information or material that is disclosed on or in the Schedules.

 

6.13        Contracts and Commitments

 

(a)           Except
as specifically contemplated by this Agreement and except as set forth on Schedule 6.13,
to the Knowledge of Sellers, neither the Company nor any Subsidiary is a party
to or bound by any written:

 

(i)            Collective bargaining agreement, works
council agreement or Contract with any labor union or any bonus, commissions,
pension, profit sharing, retirement or any other form of deferred compensation
plan or any stock purchase, stock option, hospitalization insurance or similar
plan or practice, whether formal or informal;

 

(ii)           Contract for the employment of any
officer, individual employee or other person on a full-time or consulting basis
or any notice, severance or change-of-control agreements;

 

(iii)          Contract or indenture relating to the
borrowing of money or to mortgaging, pledging or otherwise placing a Lien on
any of their assets;

 

(iv)          Contracts with respect to the lending
or investing of funds;

 

(v)           Contracts (in particular licensing
rights) relating to the Company Proprietary Rights by the Company or any
Subsidiary to any Person or by any Person to the Companies or any Subsidiary,
or Contracts affecting the Company’s or any Subsidiary’s ability to use or
disclose any Proprietary Rights;

 

(vi)          guaranty, surety or letter of comfort
with regard to any obligation, other than endorsements made for collection;

 

(vii)         Contract under which any of the Company
or its Subsidiaries is lessee of, or holds or operates, any personal property
owned by any other party calling for payments in excess of EUR 50,000 annually
or under which it is lessor of or permits any third party to hold or operate
any property, real or personal, owned or controlled by it;

 

(viii)        Contract or group of related Contracts
with the same party for the purchase or sale of supplies, products or other
personal property or for the furnishing or receipt of services which either
calls for performance over a period of more than one year (except if such
Contracts do not involve a sum in excess of EUR 50,000 annually) or involves a
sum in excess of EUR 50,000;

 

(ix)           Contract or group of related
Contracts with the same party continuing over a period of more than six months
from the date or dates thereof, not terminable by the Company or its
Subsidiaries, as the case may be, on 90 days or less notice without penalties
or involving more than EUR 50,000;

 

26

 

(x)            Contract relating to the
distribution, marketing or sales of its products (on a regular basis, such as
agency contracts);

 

(xi)           Contracts pursuant to which the
Company or its Subsidiaries subcontract work to third parties, involving more
than EUR 50,000;

 

(xii)          formal power of attorney;

 

(xiii)         warranty Contract with respect to their
services rendered or their products sold, leased or licensed which contains
terms and conditions that differ in any Material respect from the standard
warranty terms and conditions of the Company and its Subsidiaries;

 

(xiv)        Contract relating to the acquisition or
sale of its business (or any Material portion thereof); or

 

(b) Except as disclosed
on Schedule 6.13, to the Knowledge of Sellers (i) no Contract
required to be disclosed on Schedule 6.13 has been breached in a
Material respect or canceled by the other party, and Sellers have no Knowledge
of any anticipated breach by any other party to any Contract set forth on Schedule 6.13,
(ii) since December 31, 2003, no Material customer or supplier has indicated in
writing to the Sellers that it shall stop or materially decrease the rate of
business done with the Company or a Subsidiary or that it desires to
renegotiate its Contract with the Company or its Subsidiaries in a Material
aspect and with materially detrimental consequences for the Company, (iii) the
Company and its Subsidiaries have performed all the Material obligations
required to be performed by it in connection with the Material Contracts
required to be disclosed on Schedule 6.13 and are not in Material
default under or in Material breach of any Material Contract required to be
disclosed on the Schedule 6.13, and no event has occurred which
with the passage of time or the giving of notice or both would result in a
default or breach thereunder, (iv) 
deleted (vi) each Material Contract is legal, valid, binding, enforceable
and in full force and effect, with the exception of any terms and clauses which
may not be valid or enforceable under applicable laws, and will continue as
such following the consummation of the transactions contemplated hereby,
(vii)  deleted (viii)  neither the Company nor any Subsidiary are a
party to any Contract requiring it to purchase goods or services or lease
property above or below, as the case may be, prevailing market rates and prices
or to sell goods or services below prevailing market rates or below the cost of
such goods of services to the Company or such Subsidiaries, and (ix) with
regard to any commercial agency agreement and distribution agreement of the
Company and its Subsidiaries statutory entitlement for a compensation fee (“Ausgleichsanspruch”)
or similar entitlement exist in case of termination of such agreement, and it
is explicitly agreed that these will be for the account of the Buyers.

 

(c) Schedule 6.13
lists the ten largest customers of the Company during the 12-month period ended
December 31, 2003.

 

(d) The Sellers have
provided Buyers with a true and correct copy of all written Material Contracts
which are required to be disclosed on Schedule 6.13, in each case
together

 

27

 

with all Material amendments, waivers or other changes thereto (all of
which are disclosed on Schedule 6.13).

 

(e) To the
Knowledge of the Sellers, no Material Contract contains a change of control
provision, the implementation of which would have a Material Adverse Effect
unless disclosed in Schedules to this Agreement.

 

6.14 Proprietary Rights

 

(a)           To the Knowledge of the Sellers, Schedule
6.14(a) sets forth a complete and correct list of all of the following that
are owned by the Company or any Subsidiary: (i) Material patents and utility
models and pending patent and utility model applications; (ii) Material
registered trademarks and Material registered service marks, corporate names
and Internet domain names. Sellers have delivered to Buyers correct and
complete lists of all such Material Proprietary Rights, as listed on Schedule
6.14(a).

 

(b)         To the Knowledge of Sellers (i) the Company or its Subsidiaries own and
possess all right, title and interest in and to any of the Proprietary Rights
set forth on Schedule 6.14(a), and (ii) the Company or its Subsidiaries have
valid and enforceable licenses to use the Proprietary Rights listed on Schedule
6.14(b), pursuant to a written license agreement (for the time, terms and scope
described in the respective license agreements) as disclosed in Schedule
6.14(b).

 

The Material Proprietary Rights listed on Schedule 6.14(a) and 6.14(b)
are herein referred to as the “Company Proprietary Rights”.

 

(c)          To the Knowledge of Sellers, except as set forth on Schedule 6.14(c),

 

a.               other than the proceedings between SMI and its Affiliates on the one
hand and CASAG and its Affiliates on the other hand no action, suit,
proceeding, injunction, judgment, hearing or investigation is pending, and
Sellers have no Knowledge of any filed claims, that challenge the legality or
validity of the Company Proprietary Rights, and which, if successfully pursued
against the Company, would affect the validity and enforceability of the
Company’s Proprietary Rights.;

b.              there are no claims by third Persons that the Company’s or its Subsidiaries’
products or Company Proprietary Rights, as they are developed or manufactured
as of the Closing, infringe or violate any patent, intellectual property or
other Proprietary Right of any such third Person.

c.               other than the  claims of Blaha
and Krenn, no present or former employee of the Company or the Sellers has made
or is making any claim of ownership, in any Company Proprietary Right.

 

No other
representation or warranty is given, and all liability regarding the validity
and enforceability of the Company Proprietary Rights is excluded.

 

28

6.15 Supplemental
Intellectual Property Issues.

 

 

Digital, Techno-Consult and Lumitech.  Neither Digital-Elektronik Gesellschaft mit beschränkter Haftung,
Gartenau-St Leonhard, Austria , Techno-Consult nor Lumitech Holding GmbH,
Jennersdorf, nor any of their employees, have ever asserted or claimed and are
not now asserting or claiming any ownership or other interest in any of the
Company Proprietary Rights to the products.

 

6.16        Deleted

 

6.17 Inventory  The inventory of the Company and its
Subsidiaries consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods, all of which is merchantable and
fit for the purpose for which it was procured or manufactured, and none of
which is slow-moving, obsolete, damaged, or defective, subject only to the
reserve for inventory writedown set forth on the face of the Latest Financial
Statements (or in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Company and its Subsidiaries.

 

6.18 Litigation; Proceedings  To the Knowledge of Sellers, except as set
forth on Schedule 6.18 , there are no actions, suits, proceedings
(including but not limited to administrative proceedings), orders, judgments,
decrees or investigations pending or, to the Sellers’ Knowledge, threatened
against or affecting the Company or any Subsidiary, at law or in equity, or
before or by any Austrian or other federal, provincial, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, and to the Knowledge of Sellers and the Company and any
Subsidiary there is no basis known for any of the foregoing.    Neither the Company nor any Subsidiary are
subject to any outstanding order, judgment or decree issued by any court or
quasi-judicial or administrative agency of any federal, provincial, state,
local or foreign jurisdiction or any arbitrator.

 

6.19 Brokerage (Companies)  There are no claims for brokerage
commissions, finders’ fees or similar compensation in connection with the
transactions contemplated by this Agreement payable by or on behalf of the
Company and its Subsidiaries.

 

6.20 Governmental Licenses and
Permits  Schedule 6.20
contains to the Knowledge of Sellers a complete listing and summary description
of all Material permits, licenses, certificates, approvals, certificates of
authorization, registrations and other authorizations of Austrian and other
federal, provincial, state and local governments, administrations or departments
or other similar rights, including, without limitation, any of the foregoing
issued by any gaming entity, commission, agency or authority, or any authority
that regulates the foregoing, and whether related to CARD or a Subsidiary or
any product of CARD or a Subsidiary (collectively, the “Licenses”) owned
or possessed by CARD or a Subsidiary or used by CARD or a Subsidiary in the
conduct of their business.  Except as
indicated on Schedule  6.20 the Company, before the transformation,
or a Subsidiary owned or possessed all right, title and interest in and to all
Licenses which were necessary to conduct their business as presently
conducted  and it shall be the Buyers’
obligation to  maintain all such
Licenses and to have them transferred to CARD

 

29

 

(after the transformation and after the change of Company’s
shareholders).  CARD and its
Subsidiaries were in compliance with the terms and conditions of such
Licenses.  Until the transformation, no
loss or expiration of any License was pending , to Sellers’ and the Company’s
Knowledge, or threatened or reasonably foreseeable (excluding, however, as a
result of the transformation and of the transactions contemplated hereby
although, after such transformation, the Company has not received any notice
and has no Knowledge that any License is or has been suspended), other than
expiration in accordance with the terms thereof, which terms may or may not
expire as a result of the consummation of the transactions contemplated hereby
(which shall be the risk of the Buyers). 
Neither the Company nor any Subsidiary has ever had a License
conditioned, suspended or revoked.

 

6.21 Employees  Except as set forth on Schedule 
6.21, to the Knowledge of Sellers and the Company, no executive, key
employee, or group of employees has any plans to terminate employment with the
Company or any of its Subsidiaries as a cause of the transactions contemplated
hereby. Neither the Company nor any of its Subsidiaries is a party to or bound
by any collective bargaining agreement (“Kollektivvertrag” - except re the Company
for the collective bargaining agreement for the white collar trade employees –
“Kollektivvertrag
der Handelsangestellten”) or any works council agreement (“Betriebsvereinbarung”),
nor has any of them experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. In the business of the
Company no labor practice (“betriebliche Übung”) exist which have a
Material adverse effect on the business of the Company. Neither the Company nor
any of its Subsidiaries has committed any unfair labor practice.  The Company does not have a works council (“Betriebsrat”).
The works council of CASAG is not competent to represent any of the employees of
the Company and has never acted on behalf of the Company’s employees. The
Company and its Subsidiaries have complied in all material respects with all
applicable laws relating to the employment of personnel and labor, including
provisions thereof relating to wages, hours, vacation, overtime, notice, pay in
lieu of notice, termination and severance pay obligations, human rights,
occupational health and safety, equal opportunity and the payment of social
security and other Taxes.  Schedule 6.21
sets forth the names, present annual or, as the case may be, hourly rate of
compensation (including base salary, bonuses and commissions) and all other
Material employment arrangements like any royalty arrangements, fringe
benefits, the date of the start of employment and any other (potential)
entitlements of the employee like severance payment entitlements (“Abfertigung”),
if any, of all persons employed by the Company and its Subsidiaries (including
independent contractors) and their job descriptions. Except as set forth on
Schedule 6.21, any employees who have been previously employed by CASAG but who
provided services to the Company (i) are not entitled to any severance payment,
(ii) any pension entitlements accrued until Closing have been fully settled and
have been paid in by CASAG into the pension fund of ÖPAG Pensionskassen AG,
Vienna and (iii) therefore no claims of employees arising out of or in
connection with pension entitlements accrued until Closing exist. For all other
employees only severance payments as set out in Schedule 6.21 exist and the
aggregate maximum exposure of the Company to accrued pension entitlements as of
the Closing Date amounts to EUR 10,000. The Company and its Subsidiaries are
not, and, to the Knowledge of Sellers and the Company, none of the employees of
the Company or its Subsidiaries are, subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar Contract , in each case
relating to, affecting or in conflict with the present or proposed business activities
of the Company and its Subsidiaries (other than such Contracts with and in
favor of the Company).  Except as set
forth on Schedule 6.21,

 

30

 

the Company and its Subsidiaries are not party to any employment
agreement and there is no agreement for the employment of any other person. Any
employment of persons set forth on Schedule 6.21 who have been
previously employed by CASAG but who provided services to the Company does not
trigger a transfer of employment relationships of employees of CASAG who are
not listed on Schedule 6.21.  Except as
set forth on Schedule 6.21 to the Knowledge of Seller, the Company and
its Subsidiaries are not subject to any claim for wrongful dismissal,
constructive dismissal or any other claim or complaint, actual or threatened,
or any litigation, actual or threatened, relating to employment, discrimination
or termination of employment of any employee or former employee of the Company
or a Subsidiary.

 

6.22 Employee Benefit Plans   (a) Except as provided by compulsory law or
as set forth on Schedule  6.22 (which also contains a list of all
entitled employees setting out their respective individual pension entitlements
and payments to be made by the Company and its Subsidiaries) the Company and
its Subsidiaries neither maintain nor ever have maintained, contribute to nor
have ever contributed to, have nor ever have had any obligation to contribute
to, nor have nor ever have had any liability or potential liability with
respect to any (i) funded or unfunded, registered or unregistered, pension,
retirement, superannuation or other employee pension benefit plans or
retirement income arrangements (whether or not terminated) (“Employee
Pension Plans”); (ii) ongoing or terminated funded or unfunded
hospitalization, medical, dental, vision care, health, life, disability,
accident or other employee welfare benefit plans (“Employee Welfare Plans”);
or (iii) plan, policy, program or arrangement (whether individual or
collective, whether or not terminated) which provides deferred compensation
benefits, stock purchase, stock option, bonus benefits or compensation,
incentive benefits or compensation, severance or salary continuation benefits
or compensation, “change of control” benefits or compensation or any program,
plan, policy or arrangement which provides any vacation, tuition reimbursement,
car allowance, service awards or other fringe benefits (“Other Plans”).  The Company and its Subsidiaries do not
participate in or contribute to and has never participated in or contributed to
any multiemployer plan (“Multiemployer Plan”), nor do the Company and
its Subsidiaries have any other liability, including, without limitation, any
potential withdrawal liability, with respect to any Multiemployer Plan, and the
Company and its Subsidiaries have not incurred any current or potential
withdrawal liability as a result of a complete or partial withdrawal (or
potential partial withdrawal) from any Multiemployer Plan.  Except as set forth on Schedule 6.22,
the Company and its Subsidiaries do not maintain or have any obligation to
contribute to (or any other liability with respect to) any funded or unfunded
Employee Welfare Plan, Multiemployer Plan or Other Plan which provides
post-retirement benefits to current or former employees, current or former
independent contractors, current or future retirees, their spouses, dependents
or beneficiaries.  (Any Employee Pension
Plan, any Employee Welfare Plan, any Other Plan and any Multiemployer Plan
shall be referred to herein collectively as the “Plans”).

 

(b) All Plans (and related trusts and insurance
contracts) comply in form and in operation in all material respects with the
requirements of applicable law.  All
required reports and descriptions with respect to the Plans for which the
Companies are responsible have been properly and timely filed with the
appropriate government agency, if any, and distributed to participants as
required.

 

(c) The Company and its Subsidiaries have not incurred
any Liability to any governmental agency, any Multiemployer Plan or any other
Person with respect to any Plan currently or previously maintained by the
Company and its Subsidiaries that has not been satisfied in full, and

 

31

 

no condition exists that presents a risk to the Company or any
Subsidiary of incurring such a liability.

 

(d) With respect to each Plan, all contributions which
are required to be paid by the Company and its Subsidiaries under the terms of
the applicable Plan or bylaws have been made (including all employer
contributions and employee salary reduction contributions), all contributions
for prior plan years which are not yet due and with respect to the current plan
year for the period ending on the Closing Date have been made or accrued in
accordance with Austrian GAAP and appear on the Closing Statement.  The Sellers do not have any liability (other
than Liabilities accruing after the Closing Date) with respect to any of the Plans.

 

(e)           With
respect to each of the Plans listed on Schedule  6.22, Sellers have
furnished to Buyers true and complete copies of the respective (i) plan
documents, summary plan descriptions and summaries of material modifications
and other material employee communications, (ii) all related trust
agreements, insurance contracts or other funding agreements which implement
such plans and (iii) all contracts relating to each such plan, including,
without limitation, service provider agreements, insurance contracts,
investment management agreements and record keeping agreements.

 

6.23 Environmental, Health, and
Safety Matters 
(a) The Company, each of its Subsidiaries, and their respective
predecessors and Affiliates have complied and are in compliance with all
Material Environmental, Health, and Safety Requirements.

 

 (b) Without limiting the generality of the
foregoing, the Company, each of its Subsidiaries, and their respective
Affiliates have obtained and complied with, and are in compliance with, all
material obligations under permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements for the
occupation of their facilities and the operation of their business; a list of
all such permits, licenses and other authorizations is set forth on Schedule
6.23.

 

 (c) Neither the Company, nor any of its
Subsidiaries, nor their respective predecessors or Affiliates has received any
written or oral notice, report or other information regarding any actual or
alleged violation of Environmental, Health, and Safety Requirements, or any
Liabilities or potential Liabilities, including any investigatory, remedial or
corrective obligations, relating to any of them or their facilities arising
under Environmental, Health, and Safety Requirements.

 

 (d) None of the following exists at any
property or facility owned or operated by the Company or its Subsidiaries: (1)
underground storage tanks, (2) asbestos-containing material in any form or
condition, (3) materials or equipment containing polychlorinated biphenyls, or
(4) landfills, surface impoundments, or disposal areas.

 

 (e) Neither the Company, nor any of its
Subsidiaries, nor their respective predecessors or Affiliates have treated,
stored, disposed of, arranged for or permitted the disposal of, transported, handled,
or released any substance, including without limitation any hazardous
substance, or owned or operated any property or facility (and no such property
or facility is contaminated by any such substance) in a manner that has given
or would give rise to Liabilities,

 

32

 

including any Liability for response costs, corrective action costs,
personal injury, property damage, natural resources damages or attorney fees,
pursuant to the applicable Environmental, Health, and Safety Requirements.

 

(f)            To the Sellers’ Knowledge, neither
this Agreement nor the consummation of the transaction that is the subject of
this Agreement will result in any obligations for site investigation or
cleanup, or notification to or consent of government agencies or third parties,
pursuant to any of the so-called “transaction-triggered” or “responsible
property transfer” Environmental, Health, and Safety Requirements.

 

(g)           Neither the Company, nor any of its
Subsidiaries, nor any of their respective predecessors or Affiliates have,
either expressly or by operation of law, assumed or undertaken any Liability,
including without limitation any obligation for corrective or remedial action,
of any other Person relating to Environmental, Health, and Safety Requirements,
and neither the Seller nor the Company have received an unfulfilled assessment
of correction (“behördliche Auflage”) by any public authority.

 

(h)           To the Knowledge of Sellers, no
facts, events or conditions relating to the past or present facilities,
properties or operations of the Company, its Subsidiaries, or any of their
respective predecessors or Affiliates will prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental,
Health, and Safety Requirements, or give rise to any other Liabilities pursuant
to Environmental, Health, and Safety Requirements, including without limitation
any relating to onsite or offsite releases or threatened releases of hazardous
materials, substances or wastes, personal injury, property damage or natural
resources damage.

 

33

 

6.24 Insurance  Schedule  6.24 lists and briefly
describes each insurance policy maintained by or on behalf of the Company or
its Subsidiaries with respect to their properties, assets and business,
together with a claims history for the past five years.  It is expressly agreed that Buyers, within
30 days of the Closing,  will be
exclusively responsible for securing appropriate insurance coverage after the
Closing Date and the Sellers shall have no respective duties or liabilities.

 

6.25 Officers and Directors; Bank
Accounts  Schedule 
6.25 lists all officers and directors of the Company and its Subsidiaries,
and all bank accounts, (designating each authorized signatory with respect
thereto) and there are no safety deposit boxes and no lock boxes, for the
Company and its Subsidiaries.

 

6.26 Affiliate Transactions  Except as disclosed on Schedule 
6.26 no officer, director, employee, shareholder, or Affiliate of the
Company or any individual related by marriage or adoption to any such
individual or any entity in which any such Person owns any beneficial interest
(collectively, the “Insiders”), is a party to any Contract or
transaction with the Company and its Subsidiaries or which is pertaining to the
business of the Company and its Subsidiaries or has any interest in any
property, real or personal or mixed, tangible or intangible, used in or
pertaining to the business of the Company and its Subsidiaries.  Schedule  6.26 hereto describes
all intercompany or affiliated services provided to or on behalf of the Company
or its Subsidiaries by Sellers or any of their Affiliates and to or on behalf
of Sellers and such Affiliates by the Company or its Subsidiaries and all
intercompany transactions or Contracts among the Company or its Subsidiaries
and Sellers or their Affiliates (including, in each case, the costs charged to
the Company or its Subsidiaries) and all intercompany transactions or Contracts
among the Company and any Subsidiary. Unless disclosed to the Buyers or SMI,
all such intercompany transactions shall comply with arm’s length principles
and except as disclosed on Schedule  6.26 or as reflected in the
Closing Financial Statements, no claims of Sellers and any of their Affiliates
exist against the Company and its Subsidiaries.

 

6.27 Compliance with Laws  To the Sellers’ Knowledge, the Company, its
Subsidiaries and their respective officers and directors, when acting on behalf
of the Company or its Subsidiaries have complied with all Material applicable
laws, regulations and ordinances of Austrian or other federal, provincial,
state and local governments and all agencies thereof which are applicable to
the business, business practices (including, but not limited to, their
marketing, sales and distribution of their products and services) or any owned
or leased properties of the Company or any Subsidiary or to which the Company
or any Subsidiary may be subject, and no claims have been filed against the
Company or any Subsidiary alleging a violation of any such laws or regulations,
and the Company and its Subsidiaries have not received notice of any such violations.

 

34

 

6.28 Powers of Attorney; Guarantees  Except as set forth on Schedule 6.28
, there are no outstanding formal powers of attorney executed on behalf of
the Company or any Subsidiary.  Neither
the Company nor any Subsidiary are a guarantor or otherwise liable for any
indebtedness of any other person, firm or corporation other than endorsements
for collection in the Ordinary Course of Business.

 

6.29 Product Warranties  To the Knowledge of Sellers, the Company and
its Subsidiaries have not made any warranties with respect to the products or
services manufactured, rendered and/or sold by them which contain terms and
conditions that differ in any Material respect from those warranties usual in
the trade or expressly made in the respective contracts or in the literature
accompanying such products;  copies of
sample documents, which the Company prefers to use but which are not always
accepted by customers, are attached hereto as Schedule 6.29.

 

6.30 Product Liability  To the Knowledge of Sellers, neither the
Company nor any of its Subsidiaries have any Liability (and there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by the Company or any of its Subsidiaries, which would exceed the
aggregate of the respective reserves being accrued for such purposes in the
Company’s accounts and the insurance coverage which was in place until the
Closing Date, if any.

 

6.31 International Trade Laws and
Regulations  To
the Knowledge of Sellers:

 

(a) The Company, its Subsidiaries have complied and
are in compliance with all International Trade Laws and Regulations applicable
to the Company and its Subsidiaries in connection with the conduct of the
Company’s and its Subsidiaries’ business .

 

(b) Neither the Company nor the Subsidiaries are or
have been the subject of any civil or criminal investigation, litigation,
audit, penalty, proceeding or assessment, liquidated damages proceeding or
claim, forfeiture or forfeiture action, claim for additional customs duties or
fees, denial orders, suspension of export privileges, governmental sanctions,
or any other action, proceeding or claim, in each of the above cases, by any
Austrian or other federal, state or local governmental agency involving or
otherwise relating to any alleged or actual violation of International Trade
Laws and Regulations or relating to any alleged or actual underpayment of
customs duties, fees, taxes or other amounts owed pursuant to any International
Trade Laws and Regulations, in each case in connection with the conduct of the
Company’s and its Subsidiaries’ 
business, and, to the Knowledge of Sellers and the Company, there is no
basis for any of the foregoing.

 

(c) Neither the Company nor its Subsidiaries have
knowingly made or provided any Material false statement or Material omission to
any agency of any federal, state or local government, purchaser of products or
services, or foreign government or foreign agency, in connection with the
importation of merchandise (including the valuation or classification of
imported merchandise, the duty treatment of imported merchandise, the
eligibility of imported

 

35

 

merchandise for favorable duty rates or other special treatment,
country-of-origin marking, or other statements or certificates concerning
origin, quota or visa rights) or other approvals required by a foreign
government or agency or any other requirement relating to any International
Trade Laws and Regulations in connection with the conduct of the Company’s and
its Subsidiaries’ business.

 

(d) Neither the Company nor the Subsidiaries have made
any payment, offer, gift, promise to give, or authorized or otherwise
participated in, assisted or facilitated any payment or gift that is prohibited
by the United States Foreign Corrupt Practices Act or any similar Austrian or
European Union law.

 

(e) Neither the Company nor its Subsidiaries have
engaged in or otherwise participated in, assisted or facilitated any
transaction that is prohibited by any applicable embargo or related trade
restriction imposed by the United States Office of Foreign Assets Control or
any other agency of the United States government or any agency of the Austrian
government with similar authority or the European Union.

 

6.32 No Acceleration of Rights or
Benefits  Neither
the Companies nor any Subsidiary have made, nor is any such entity obligated to
make, any payment to any Person in connection with the transactions
contemplated by the Transaction Documents. 
No rights or benefits of any Person have been (or will be) accelerated
or increased as a result of the consummation of the transactions contemplated
by the Transaction Documents.

 

6.33 Disclosure  Neither this Agreement, the other
Transaction Documents nor any of the Schedules, attachments or Exhibits hereto,
contain any untrue statement of a material fact or omit a material fact
necessary to make each statement contained herein or therein, not misleading,
which has a Material Adverse Effect on the Company.  In the course of the due diligence process, Sellers have provided
to the Buyers’ and SMI’s representatives all information relating to the
Company and its Subsidiaries requested by them that would be Material to a
purchaser of the Shares.  All such
information is, to the Knowledge of Sellers in all material respects, true and
correct and not misleading and no Material facts have been omitted therefrom
that would make such information misleading. 
There is no fact which has not been disclosed to Buyers or SMI of which
Sellers have Knowledge which has a Material Adverse Effect.

 

6.34 Closing Date  All of the representations and warranties of
Sellers contained in this Article VI and elsewhere in this
Agreement and all information delivered in any Schedule, attachment or Exhibit
hereto or in any writing delivered by the Company are true and correct in all
material respects on the date of this Agreement which is also the Closing Date,
unless explicitly otherwise stated herein or 
in the Schedules or Annexes hereto.

 

ARTICLE VII

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLERS

 

Each Seller jointly and
severally represents and warrants to Buyers that:

 

7.1 Authorization
of Transactions 
Sellers have full power, authority and legal capacity to enter into this
Agreement and the other Transaction Documents to which Sellers are a

 

36

 

party and to perform their obligations hereunder and thereunder. .  The execution, delivery and performance of
this Agreement and the other Transaction Documents to which Sellers are a party
have been duly and validly authorized by all requisite corporate action on the
part of Sellers and no other corporate proceedings on their part are necessary
to authorize the execution, delivery or performance of this Agreement.  This Agreement constitutes, and each of the
other Transaction Documents to which Sellers are a party shall when executed
constitute, a valid and binding obligation of Sellers, enforceable in accordance
with their terms.

 

7.2 Absence
of Conflicts 
Neither the execution and delivery of this Agreement and the other
Transaction Documents to which Sellers are a party, nor the consummation of the
transactions contemplated hereby and thereby, nor the payment of any portion of
the Purchase Price shall, with respect to the Sellers, (a) conflict with,
result in a breach of any of the provisions of, (b) constitute a default under,
(c) result in the violation of, (d) give any third party the right to terminate
or to accelerate any obligation under, (e) result in the creation of any Lien
upon the Shares owned by Sellers, or (f) require any authorization, consent,
approval, execution or other action by or notice to any court or other
governmental or regulatory body, the provisions of any License, indenture,
mortgage, lease, loan agreement or other agreement or instrument to which
Sellers are bound or affected, or any statute, regulation, rule, judgment,
order, decree or other restriction of any government, governmental agency or
court to which Sellers are subject.  No
notice to, filing with or authorization, consent or approval of any government,
regulatory or governmental agency by Sellers is necessary for the consummation
of the transactions contemplated by this Agreement and the other Transaction
Documents to which Sellers are a party.

 

7.3 Governmental
Authorities and Consents 
Sellers are not required to submit any notice, report or other filing
with any governmental authority in connection with the execution or delivery by
them of this Agreement and the other Transaction Documents to which they are a
party or the consummation of the transactions contemplated hereby or thereby.

 

7.4 Brokerage
(Seller)  There
are no claims for brokerage commissions, finders’ fees or similar compensation
in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Sellers.

 

7.5 Shares  Sellers hold of record and owns legally and
beneficially the Shares, and at the Closing, Sellers transfer to Buyers good
and marketable title to the Shares, in each case free and clear of any Liens,
restrictions on transfer, options, warrants, rights, calls, commitments,
proxies or other contract rights. 
Sellers are not a party to any option, warrant, right, Contract, call,
put or other agreement or commitment providing for the disposition or
acquisition of any interest in the Company (other than this Agreement).  Sellers are not a party to any voting trust,
proxy or other agreement or understanding with respect to the voting of the
Shares (other than this Agreement).

 

7.6 Seller
Assets  At
Closing, Sellers do not or will not own or lease or possess any right, title or
interest in any Material assets or properties (whether real (immoveable) or
personal (moveable), tangible (corporeal) or intangible (incorporeal)),
including but not limited to, Proprietary Rights, that are used in either the
operation of the Company’s and its Subsidiaries’ business as presently
conducted, or with respect to Company’s products in

 

37

 

development or in existence. Except as set forth on Schedule 7.6,
Sellers do not provide the Company or a Subsidiary of the Company any services,
employees or independent contractors.

 

7.7 Litigation  There are no actions, suits, proceedings or
orders pending or, to Sellers’ knowledge, threatened against or affecting
Sellers at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would adversely affect Sellers’ performance under
this Agreement and the other Transaction Documents to which Sellers are a party
or the consummation of the transactions contemplated hereby or thereby.

 

7.8 Company
Transactions 
Sellers are not a party to or bound by any agreement with respect to a
Company Transaction other than this Agreement, and Sellers have terminated all
discussions with third parties (other than Buyer) regarding Company
Transactions, if any.

 

7.9 Closing
Date  All of the
Sellers’ representations and warranties contained in this Article VII
and elsewhere in this Agreement and all information delivered in any Schedule,
attachment or Exhibit hereto or in any writing delivered by Sellers are true
and correct in all Material respects on the date of this Agreement which is
also the Closing Date.

 

38

 

7.10        Adherence to Securities Laws  At all times, Sellers and its Affiliates
will adhere to all United States securities laws respecting the common stock
(and any transfers thereof) of SMI transferred under this Agreement.

 

7.11        Accredited Investor  CASAG is an “accredited investor,” as
defined in Regulation D, promulgated under the Securities Act.

 

 

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES OF BUYERS

 

Each of the Buyers hereby
jointly and severally represents and warrants to Sellers that:

 

8.1 Organization
and Corporate Power 
Each of the Buyers is a limited liability company, duly organized,
validly existing and in good standing under the laws of Austria, with full
corporate power and authority to enter into this Agreement and the other
Transaction Documents to which Buyers are a party and perform its obligations
hereunder and thereunder.

 

8.2 Authorization
of Transaction 
The execution, delivery and performance of this Agreement and the other
Transaction Documents to which Buyers are a party have been duly and validly
authorized by all requisite corporate action on the part of Buyers and no other
corporate proceedings on its part are necessary to authorize the execution,
delivery or performance of this Agreement. 
This Agreement constitutes, and each of the other Transaction Documents
to which Buyers are a party shall when executed constitute, valid and binding obligations
of Buyers, enforceable in accordance with their terms.

 

8.3 No
Violation  Buyers
are not subject to or obligated under their certificate of incorporation, their
by-laws, any applicable law, or rule or regulation of any governmental
authority, or any agreement or instrument, or any license, franchise or permit,
or subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement and the
other Transaction Documents to which they are a party.

 

8.4 Governmental
Authorities and Consents 
Except for any applicable gaming regulatory authorities, Buyers are not
required to submit any notice, report or other filing with any governmental
authority in connection with the execution or delivery by it of this Agreement
and the other Transaction Documents to which they are a party or the
consummation of the transactions contemplated hereby or thereby.  .

 

8.5 Litigation  There are no actions, suits, proceedings or
orders pending or, to Buyers’ knowledge, threatened against or affecting Buyers
at law or in equity, or before or by

 

39

 

any federal, provincial, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which would adversely affect Buyers’ performance under this Agreement
and the other Transaction Documents to which Buyers are a party or the
consummation of the transactions contemplated hereby or thereby.

 

8.6 SEC Documents and Other Reports   SMI has timely filed with the
Securities and Exchange Commission all documents required to be filed by it
since January 1, 2001 under the Securities Act or the Securities Exchange Act
of 1934, as amended (the “Exchange Act”, and together with the
Securities Act, the “SMI SEC Documents”).  As of their respective filing dates, the SMI SEC Documents
complied in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, each as in effect on the date so
filed, and at the time filed with the SEC none of the SMI SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  To the Knowledge of Buyers,
the financial statements of SMI included in the SMI SEC Documents complied as
of their respective dates in all material respects with the then applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with US GAAP (except in the case
of the unaudited statements, as permitted by Form 10-Q under the Exchange Act)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly present in all material
respects the consolidated financial position of SMI and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).  Sellers acknowledge that they are
voluntarily accepting the SMI Stock as part of the Purchase Price and without
any reliance on any representations (whether by Buyers or any Affiliate of the
Buyers, none of which has been made), about SMI or the value of the SMI Stock
,as may be contained in this Section 8.6 . The foregoing sentence shall not
reduce or eliminate any indemnification obligations which may be applicable
with respect to any other Section in this Article VIII.

 

40

 

8.7 SMI
Stock  All of the
SMI Stock is duly authorized and validly issued; provided that the Sellers have
complied with the Sellers’ representations in Section 7.10 and 7.11, is
transferred pursuant to a valid exemption from registration under the Securities
Act, and is fully paid and non-assessable and free of preemptive or other
similar  rights. There was no additional
stock split or similar measure taken by SMI regarding the SMI shares, following
the  3
for 2 stock split of SMI’s common stock which occurred on April 16, 2004. For
the avoidance of doubt, notwithstanding the warranties given under this Article
8, no further warranties or representations are made regarding SMI, SMI’s
business, or the SMI Stock.

 

8.8 Brokerage
(Buyer)  There are
no claims for brokerage commissions, finders’ fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Buyers.

 

8.9 Taxes

 

It is hereby agreed that
any Taxes incurred by CASAG and/or CAI as partners of the Company for periods
(or portions thereof) prior to Closing due to the fact that the Company after
Closing is found to have violated applicable Austrian tax law with respect to
any tax wise relevant business transaction effected in a period (or portions
thereof) after Closing shall be borne by Buyers.

 

8.10 Closing
Date  All of the
representations and warranties of Buyers contained in this Article VIII
and elsewhere in this Agreement and all information delivered in any Schedule,
attachment or Exhibit hereto or in any writing delivered by Buyers are true and
correct in all material respects on the date of this Agreement which is also
the Closing Date.

 

41

 

ARTICLE IX

GENERAL PROVISION REGARDING CLAIMS UNDER THIS AGREEMENT

 

9.1 Survival

 

(a) Survival of
Representations, Warranties, Covenants and Agreements.  All representations, warranties, covenants
and agreements set forth in this Agreement, the Transaction Documents or in any
writing or certificate delivered in connection with this Agreement shall
survive the Closing Date.

 

Notwithstanding the foregoing, Buyers shall not be
entitled to recover for any Loss and Sellers shall not be entitled to recover
for any Loss unless written notice of a claim thereof is delivered to the other
Party prior to the Applicable Limitation Date, and, in addition, a request for
arbitration is filed with the ICC and delivered to the other Party within six
months from the Applicable Limitation Date.

 

For purposes of this Agreement, the term “Applicable
Limitation Date” shall mean December 31, 2005; unless explicitly agreed
otherwise hereinafter:

 

(i)            with respect to any Loss arising
from a breach of the representations and warranties of the Sellers set forth in
Section 7.6 (Seller Assets), the Applicable Limitation Date shall mean
June 30, 2006;

 

(ii)           with respect to any Loss arising from
a breach of the representations and warranties of the Buyers set forth in Section
8.7 (SMI Stock), the Applicable Limitation Date shall mean the sooner of
May 12, 2009 or six months after the Sellers shall have sold all the SMI Stock;

 

(iii)          with respect to any Loss arising from
a breach of the representations and warranties of the Sellers set forth in Section 6.12
(Taxes), the Applicable Limitation Date shall be six months after the final
Tax assessment (which is not and cannot be subject to any review or amendment
or reassessment whatsoever, and where there can not be any new or additional
assessment) regarding the Company and its respective Subsidiary by the relevant
tax authority in the respective jurisdiction with respect to the event which
gave rise to such Loss is issued,

 

(iv)          with respect to any Loss arising from
a breach of the representations and warranties of the Sellers set forth in Section 6.1
(Organization and Corporate Power), Section 6.2 (Authorization of
Transactions)  Section 6.4 (Transformation of CARD),  Section 7.1 (Authorization of
Transaction), or Section 7.2 (Absence of Conflicts) there shall be no
Applicable Limitation Date; and

 

(v)           with respect to any Loss arising
from  a breach of the representations
and warranties of Buyers set forth in Section 8.1(Organization and
Corporate Power) or Section 8.2 (Authorization of Transaction)
there shall be no Applicable Limitation Date.

 

42

 

(b) Special Rule For
Fraud.  Notwithstanding anything in
this Section 9.1 to the contrary, and subject to Section 9.3
below, in the event of any breach of a representation or warranty by a Party
that constitutes actual fraud (“List” in the sense of Section 870 of the
Austrian Civil Code), such representation or warranty shall survive
consummation of the transactions contemplated in this Agreement and continue in
full force and effect without any time limitation.

 

9.2 Claims.

 

9.2.1        Buyers’
Claims.  Subject to
the Provisions of Article IX, the Sellers shall jointly and severally indemnify
the Buyers, SMI (which shall be entitled to demand payment of Claims on behalf
of the Buyers) and permitted (see Clause 11.3) assigns (collectively, the “Buyers
Parties”) and hold each of them harmless from and against and pay on behalf
of or reimburse such Buyers in respect of any loss, liability, cost, damage,
deficiency, Tax, penalty, fine or expense, whether or not arising out of third
party claims (including, without limitation, reasonable interest, and, with
respect to third person claims, attorneys fees, as provided in Section 9.4.3),
(collectively, “Losses” and individually, a “Loss”) which any
such Buyers Party suffers from:

 

(i)            the breach of any representation or
warranty made by the Sellers contained in Sections VI and VII of this Agreement
or any Exhibit or Schedule hereto or thereto; or

 

(ii)           the breach of any covenant or
agreement made by the Sellers contained in this Agreement or any Exhibit or
Schedule hereto or thereto;

 

unless, in each case,

 

(a) Buyers or SMI had
Knowledge of such breach of representation or warranty at or prior to the
Closing, and

 

(b) only if and unless
stated otherwise herein to the extent that no sufficient reserves or provisions
for such purposes were included in the Closing Financial Statements.

 

9.2.2 Sellers’ Claims.

 

Subject to the Provisions of Article IX, the
Buyers shall jointly and severally indemnify the Sellers and permitted (see
Clause 11.3) assigns (collectively, the “Sellers Parties”) and hold each
of them harmless from and against and pay on behalf of or reimburse such
Sellers in respect of any Loss which any such Sellers Party suffers from:

 

(i)            the breach of any representation or
warranty made by the Buyers contained in Sections VIII of this Agreement or any
Exhibit or Schedule hereto or thereto; or

 

(i)           the breach of any covenant or
agreement made by the Buyers contained in this Agreement or any Exhibit or
Schedule hereto or thereto;

 

unless, in each case, Sellers had Knowledge of such
breach of representation or warranty at or prior to the Closing.

 

43

 

9.3 Limitations on Claims.  The claims provided for in Sections 9.1
and 9.2 above are subject to the following limitations:

 

9.3.1 No Party will be liable hereunder with respect
to claims referred to in Section 9.2 above unless the other Party gives
prior written notice of a claim or a potential claim prior to the Applicable
Limitation Date, so as to allow the other Party to minimize the Loss.

 

Notwithstanding any implication to the contrary
contained in this Agreement, so long as a Party (x) so delivers written notice
of a claim and (y) files an arbitral action with the ICC with six months from
the Applicable Limitation Date and (z) serves the request for arbitration on
the other Parties within six months from the Applicable Limitation Date, the
other Party shall be required to compensate as provided in and within the
limitations of Article IX hereof, for all Losses and within the
limitations so claimed by the Party requesting the indemnification.

 

9.3.2 The Sellers shall not be liable for any claim
arising out of or in connection with this Agreement, including, without
limitation, for any Loss arising under Clause 9.2.1 above, unless,
except otherwise provided below, the amount of the Loss exceeds EUR 50,000
(fifty thousand Euros) individually (the “De Minimis”) or EUR 250,000 (two
hundred and fifty thousand Euros) in the aggregate (the “Basket”), in
which case the Sellers shall be liable for all such Losses (provided that the
amount of these exceed EUR 50,000) the total of which exceed the Basket;
further provided that once the Basket is achieved from all Losses (except De
Minimis losses), there shall no longer be any De Minimis or Basket;

 

The Basket limitation and the De Minimis limitation
shall not apply with respect to any Loss arising from a breach of the
representations and warranties of the Sellers set forth in Section 6.1
(Organization), Section6.2 (Authorization of Transactions), Section
6.3 (Capitalization), Section 6.4 (Transformation of CARD), Section
6.12 (Taxes) and Sections 7.1 through 7.3 and Section 7.6.

 

The De Minimis amounts and the Basket amounts for each
of Section 6.7 (Financial Statements) and Section 6.8
(Undisclosed Liabilities) shall be EUR 10,000 and EUR 100,000, respectively.

 

9.3.3 The Buyers shall not be liable for any claim
arising out of or in connection with the Transaction Documents, including,
without limitation, for any Loss arising under Clause 9.2.2 above,
unless the amount of such Losses exceeds EUR 50,000 individually (the “De
Minimis”) or EUR 250,000 in the aggregate (the “Basket”), in which
case the Buyers shall be liable for all such Losses (provided that the amount
of these exceed EUR 50,000) the total of which exceed the Basket; further
provided that once the Basket is achieved from all Losses (except De Minimis
losses), there shall no longer be any De Minimis or Basket;

 

The Basket limitation and the De Minimis limitation
shall not apply with respect to any Loss arising from or related to a breach of
the representations and warranties of the Buyers set forth in Section 8.2
(Authorization of Transaction) or Section 8.7 (SMI Shares);

 

9.3.4 The aggregate liability of each of the
respective Sellers for all such Losses and for any and all claims out of
or in connection with this Agreement shall not exceed 50% (fifty per cent) of
the Limited KG Payment (Cash and Stock) in case of CASAG and of the Unlimited
KG Payment

 

44

 

in case of CAI, which, in each case, was  actually received by the respective Seller; however, there shall
be no limit on the aggregate liability for a breach of Sellers’ representation
under Section 6.1 (Organization), Section 6.2 (Authorization
of Transactions), Section 6.3 (Capitalization), Section 6.4
(Transformation of CARD), Section 6.12 (Taxes) and Sections 7.1
through 7.3 and Section 7.6.

 

As a sub-threshold within such 50% threshold, in no
event shall the aggregate liability of CASAG for all Losses arising out of or
in connection with Proprietary Rights, including, without limitation, under
Sections 6.14 and 6.15 hereof, exceed EUR 4,000.000 (four million Euros).

 

9.3.5 The Buyers’ aggregate liability for all such
Losses and for any and all claims out of or in connection with this
Agreement, other than the Purchase Price, shall not exceed EUR 4,000.000 (four
million Euros); however, there shall be no limit for the aggregate liability of
Buyers for a breach of Buyers’ representations under Section 8.2
(Authorization of Transaction), and there shall be a limit for the aggregate
liability of Buyers in the amount of EUR 15,813,000 (fifteen million eight
hundred thirteen thousand Euros) for a breach of Buyers representations under Section
8.7 (SMI Shares).

 

9.4 Procedure.

 

9.4.1 No Party shall
raise a claim under this Agreement, unless such party (the “Compensated
Party”) shall have promptly (no later than 10 business days) given written
notice to the other Party(ies) (the “Compensating Party”) after
receiving written notice of any action, lawsuit, proceeding, investigation or
other claim against it (if by a third person) or discovering the potential
liability, obligation or facts giving rise to such potential claim for
compensation, describing, if and as known, the claim, the amount thereof (if
known and quantifiable) and the basis thereof; failure to so notify the
Compensating Party within six weeks after the Compensated Party has obtained
knowledge of the relevant circumstances shall relieve the Compensating Party of
its Liabilities hereunder, to the extent that the Compensating Party is
actually prejudiced.

 

9.4.2  Sellers shall, at their own expense, assume
the defense of any such suit, action or proceeding, provided that (i) the
Sellers’ counsel is reasonably acceptable to the Buyers, (ii) the Sellers shall
thereafter consult with the Buyers upon the Buyers’ reasonable request for such
consultation from time to time, and Buyers shall be entitled to participate at
their own expense with respect to such suit, action or proceeding and (iii) the
Sellers shall not, without the Buyers’ consent, agree to any settlement
(provided that no Party shall be obligated to accept a settlement that contains
an admission of fraud) provided that if Sellers would be prepared to accept a
settlement and to pay out of the settlement for periods prior to Closing and
Buyers refuse their consent to the settlement, Sellers shall, provided they
first pay to Buyers the proposed settlement amount, be free of their respective
payment obligation under the respective representation and warranty, and Buyers
shall solely be responsible for the continuation and handling (including without
limitation the ultimate payment of any such claim). If the ultimate resolution
by the Buyers of said claim results in the Buyers paying less than the
settlement amount previously paid by Sellers to Buyers, Buyers shall promptly
refund the excess amount to Sellers, but only after deduction of 100% of any
unreimbursed attorneys fees, expert fees and court fees.

 

45

 

Participation of the Compensating Party in the defense
of any claim shall not be deemed an acknowledgement of any obligation to
indemnify the Compensated Party, and shall not constitute a waiver of any
defenses which the Compensating Party may have against any claim for
indemnification raised by the Compensated Party.

 

9.4.3 Except as otherwise provided herein, 30% of all reasonable
attorneys fees, expert fees and court costs of such defense against such claims
shall be reimbursed by CASAG and 70% shall be borne by the Company or Buyers,
as the case may be; provided, however, that with respect to the representations
and warranties of the Sellers contained in Sections 6.2, 6.12, and 7.2 the
Indemnifying Party (i.e., the Sellers) shall pay and be responsible for 100% of
the attorneys fees, expert fees and court cost).

 

9.4.4 In proceedings between the Sellers and the
Buyers or SMI, the arbitral tribunal shall decide of the allocation of the
costs and fees among the parties to the dispute.

 

9.5 Offset.

 

Notwithstanding any other provision contained in this
Agreement, any Loss which any of the Parties suffers, sustains or becomes
subject to and with respect to which such Party is entitled to indemnification
from the respective other Party pursuant to this Article IX may, at the option of such Party, be
satisfied (to the extent of such offset) by setting off all or any portion of
such Losses against any amounts which such Party owes to the respective other
Party.

 

9.6 Payment of Claims by Sellers.

 

Sellers shall be entitled to fulfill any obligation
under this Agreement to any of the Buyers or SMI by delivering to SMI such
number of shares of SMI common stock valued at the average closing price of
SMI’s common stock during the 10 (ten) trading days prior to the third New York
business day prior to the due date of such payment (the “Compensation Price”).  The conversion rate for any Euro obligation
thereunder shall be 1 Euro equals $1.2289. Thus, for example, if an obligation
of 100 Euros shall be paid, the Sellers may deliver SMI Stock, based on the
Compensation Price, with a value of $122.89.

 

The Parties agree that they will take all necessary
and appropriate actions in order to avoid an unlawful repayment of equity and
holding of parent shares.

 

9.7           No
Rescission Rights or Similar Rights

 

9.7.1        The
Buyers and the Sellers shall not be entitled to challenge, rescind or terminate
this Agreement, in whole or in part, in particular based on any warranty claims
and no Party shall be entitled to challenge, rescind or terminate this
Agreement based on error, or for any similar reason.

 

9.7.2        No
warranties are given other than those contained in Articles VI, VII and VIII,
and these shall not constitute guaranties (i.e., no “echte oder unechte”
“Garantien”). None of the representations and warranties given by the Sellers
under this Agreement constitute and the Sellers do not make any representation,
express or implied, with respect to the inherent value of the Company or the
present or future performance for the Company or its Affiliates. None of the

 

46

 

representations and warranties given by the Buyers under this Agreement
constitute and neither Buyers nor its Affiliates make any representation,
express or implied, with respect to the inherent value of the Buyers or SMI or
the present or future performance of the Buyers or SMI.

 

9.7.3        The
remedies agreed in Section 9.2 shall be the sole and exclusive remedies for a
Party for or in connection with any of the matters described in and breaches of
any of the representations and warranties made in Articles VI, VII and VIII. Without
limiting the generality of the foregoing, under no circumstances shall any of
the Parties be entitled to loss of earnings or profits, diminution in value,
indirect or consequential losses, damages and costs, or punitive damages.

 

9.7.4        Deleted .

 

9.7.5        Section
924 of the Austrian General Civil Code shall not apply.

 

9.7.6        Disclosures
made against one representation and warranty in this Agreement in any of the
Schedules or Exhibits hereto or thereto shall be deemed made against all and
any representations and warranties herein.

 

9.7.7        Facts
which constitute violations of more than one representation or warranty given
by Sellers or Buyers shall not result in a double counting of warranty claims.
To the extent a violation of representations and warranties has Tax
implications, the De Minimis and Basket for Tax representations and Warranties
(i.e., zero and zero) shall always apply. In all other situations where more
than one representation and warranty is violated by the same set of facts, the
De Minimis and the Basket for such representation shall apply, which is the
“lex specialis” (i.e., the more specific rule).

 

ARTICLE
X

ADDITIONAL AGREEMENTS

 

10.1 General  In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole, actual cost and out of pocket expense
of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Article IX).  The Sellers
acknowledge and agree that from and after the Closing, the Company will be
entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the Company
and its Subsidiaries.

 

10.2 Litigation Support  In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company or any of its Subsidiaries, each of
the other Parties will cooperate with it and its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense,

 

47

 

all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefore under Article IX.

 

10.3 Tax Matters.

 

10.3.1 Transfer Taxes.  All transfer, documentary, sales, use,
stamp, registration and other such taxes and fees (including any penalties and
interest thereon) incurred in connection with this Agreement (for the avoidance
of doubt, with the exclusion of Sellers’ income taxes, if any) shall be paid by
Buyers when due, and Buyers shall, at their own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and if required by
applicable law, Sellers shall, and shall cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.

 

10.3.2 Cooperation on Tax Matters.  Buyers and Sellers shall cooperate fully and
Sellers (for periods prior to Closing) and Buyers (for periods after the
Closing) shall cause the Company and its Subsidiaries as and to the extent
reasonably requested by any other Party, in connection with the preparation and
filing of Tax Returns and the taxwise handling of Tax issues relating to
periods prior to Closing but affecting periods thereafter of the Company and
its Subsidiaries and any audit, litigation or other proceeding with respect to
Taxes of the Company and its Subsidiaries. 
Such cooperation shall include the retention and (upon any such Party’s
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.  The Sellers shall agree:

 

(i) to retain all
of Seller’s books and records with respect to Tax matters and pertinent to the
Company relating to any taxable period beginning before the Closing Date until
the expiration of the period during which the relevant tax authority may assess
or reassess elements relating to the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing authority;

 

(ii) to specifically
assist and support Buyers as reasonably requested to fulfill Company’s
obligation to prepare the Company’s Tax Return 2004 as required pursuant to sec
188 Federal Fiscal Code (Bundesabgabenordnung); this includes but
is not limited to assistance and support to:

 

(a) accurately determine
each of Seller’s and Buyer’s tax relevant profit share in the Company for
Company’s Fiscal Year 2004 which profit shares shall be calculated based upon a
tax relevant Closing Financial Statements and Closing Profit and Loss Account
considering the Closing Date and

(b) to determine Seller’s
tax relevant taxable capital gain achieved through the sale of KG Shares at
closing; and

(c) to specifically
assist and support Buyers as reasonably requested to determine Buyers’ tax wise
cost of acquisition of each of the Company’s assets and liabilities acquired
through the consummation of this Agreement, such assistance and support
including but not limited to the provision of such information and data that
allows the Buyer to exactly determine the assets and liabilities acquired at
closing so that Buyer can

 

48

 

accurately capitalize for tax purposes all of these
assets and liabilities on a per item basis at closing.

 

10.3.3      Tax Audits.

 

At Sellers’ option and own expense Sellers are
permitted to assume the conduct of any tax audit relating to the Company and/or
its Subsidiaries insofar such tax audits cover the periods ending on or prior
to December 31, 2003 (or in case of the New Zealand Subsidiary periods ending
on or prior to March 31, 2004). If Sellers assume the conduct of any tax audit
as mentioned in the presecing sentence, Sellers shall have the right to employ
counsel separate from counsel employed by the Buyers in any such tax audit
provided that (i) the Sellers’ counsel is reasonably acceptable to the Buyers,
(ii) the Sellers shall thereafter consult with the Buyers upon the Buyers’
reasonable request for such consultation from time to time with respect to such
tax audit and (iii) the Sellers shall not, without the Buyers’ consent, agree
to any settlement with respect to any Tax.

 

In case the Sellers assume the conduct of any tax
audit Buyers shall be entitled at their own expense to participate in any such
tax audit, including but not limited to participation in any meeting with the
tax auditors, up front coordination regarding any correspondence with the tax
auditors and, as reasonably requested by Buyers, participation in any
preparatory meeting by the Sellers to develop an appropriate tax audit
strategy. For the purpose of the aforesaid Buyers shall be entitled to employ
counsel, separate from the counsel employed by the Sellers.

 

10. 3.4 Tax Controversies.  Buyers shall give prompt notice to the
Sellers of the assertion of any claim, or the commencement of any suit, action
or proceeding with respect to any Tax liability of the Company for which
Sellers are responsible under Section 6.12 (by application of Section IX
and shall give the Sellers such information with respect thereto as the
Sellers may reasonably request.

 

At Sellers’ option and at their own expense Sellers
shall be permitted to assume the defense of any such suit, action or
proceeding, provided that (i) the Sellers’ counsel is reasonably acceptable to
the Buyers, (ii) the Sellers shall thereafter consult with the Buyers upon the
Buyers’ reasonable request for such consultation from time to time with respect
to such suit, action or proceeding and (iii) Buyers shall always have the right
to participate in the defense, and (iv) the Sellers shall not, without the
Buyers’ consent, agree to any settlement with respect to any Tax.

 

If Sellers’ conduct the defense and propose a
settlement which is acceptable by the competent tax office in charge of the
proceeding and the Buyers fail to consent to such proposed settlement (but
provided that no Party shall be obligated to accept a settlement that contains
an admission of fraud), the Buyers’ claims for Indemnification against the
Sellers shall be limited to the claims which the Buyers would have had, had the
settlement been accepted by the Buyers, provided that Sellers first pay the
Buyer the proposed settlement amount.

 

In the event that the Sellers do not assume the
defense or, after having assumed the defense, fail to timely undertake the
defense of any Tax claim under Section 6.12, then Buyers shall have the right
to defend and settle any such Tax claim in their sole and reasonable discretion
and Sellers

 

49

 

shall be solely liable for any Tax assessed or settlement including
without limitation reasonable attorneys fees, expert fees and court costs
pursuant to Sellers indemnification obligation under section 9.2.1.

 

10.4        Press Releases and Announcements  At and prior to the Closing Date, no press
releases related to this Agreement and the transactions contemplated herein, or
other announcements to the employees, customers or suppliers of the
Company  shall be issued without the
mutual approval of all Parties, except for any public disclosure which is
required of a Party by law or regulation. 
During the first sixteen days after the Closing Date, no press releases
related to this Agreement and the transactions contemplated herein, or other
announcements to the employees, customers or suppliers of the Company, shall be
issued without Buyers’ prior written consent.

 

10.5        Further Transfers  Each Party shall do such additional acts,
and shall execute and deliver such further documents and instruments of
conveyance and transfer and take such additional action as the respective other
Party may reasonably request to effect, consummate, confirm or evidence the
transfer to the Buyers of the Shares and the payment to the Sellers of the
Purchase Price and any other transactions contemplated or intended hereby.

 

10.6
Deleted

 

10.7
Expenses.  Except
as otherwise provided herein, the Sellers and the Buyers shall pay all of their
own fees, costs and expenses (including, without limitation, fees, costs and
expenses of legal counsel, investment bankers, accountants, brokers or other
representatives and consultants and appraisal fees, costs and expenses)
incurred in connection with the negotiation of the Letter of Intent, this
Agreement, the other Transaction Documents, the performance of their
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby; it being understood that the Company shall pay
the fees, costs and expenses of the Company (including without limitation its
legal and accounting fees, costs and expenses up to an amount of EUR 25,000
(twenty five thousand Euros) as well as any Taxes) and that the Company shall
not pay any of Sellers’ fees, costs and expenses (including, without
limitation, Sellers’ legal and accounting fees, costs and expenses) arising in
connection with the transactions contemplated hereby if the transactions are
consummated.

 

10.8
Confidentiality.

 

10.8.1      Confidential
Information.  Each Party shall treat
and hold as confidential any information concerning the business and affairs of
the other Party and its Subsidiaries that is not already generally available to
the public (the “Confidential Information”), refrain from using any of
the Confidential Information except in connection with this Agreement.  In the event that any Party or any Affiliate
of any Party is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, such notifying Party shall notify the respective other Party
promptly of the request or requirement so that the other Party may seek an
appropriate protective order or waive compliance with the provisions of this
Section

 

50

 

If, in the absence of a protective order or the receipt of a waiver
hereunder, the notifying Party is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, the notifying Party may disclose the Confidential Information to the
respective court, authority, tribunal, etc; provided that such disclosing party
shall use its best efforts to obtain, at the request of the respective other
Party, an order or other assurance that confidential treatment shall be
accorded to such portion of the Confidential Information required to be
disclosed as the other Party shall designate. Notwithstanding the foregoing,
any Party shall be entitled to disclose and confidential information, as
required by applicable law, regulation or regulatory entity.

 

10.8.2      Non-disclosure.  The Parties shall keep confidential the
subject matter described herein and the fact that negotiations were taking
place until the content and timing of a public announcement are mutually agreed
or until the Closing, whichever is earlier, and, in such case only pursuant to Section
10.8.2 except if otherwise required by applicable law, statute, regulation
of regulatory entity.

 

10.9
Protection of Business 
The Sellers shall not in any manner take any action which is designed or
intended to have the effect of discouraging customers, suppliers, vendors,
service providers, employees, lessors, licensors and other business relations
from maintaining the same business relationships with the Company  after the date of this Agreement and after
the Closing Date, provided that nothing contained herein shall be construed to
restrain any of the Sellers in any way in the operation of its core business
areas, including in particular the operation of casinos. This obligation shall
terminate on March 31, 2009.

 

10.10
Covenant Not to Compete 
For a period of five years from and after the Closing Date, neither
Sellers nor its  subsidiaries will
engage directly or indirectly in any area of the world in the business that the
Buyers, the Companies or any of their Subsidiaries conduct as of the Closing
Date, limited, however, to the design, manufacture, sale or leasing of
automatic card shuffling machines or roulette chip sorting machines; provided, however, that no owner of less
than 5% of the outstanding stock of any publicly-traded corporation shall be
deemed to engage solely by reason thereof in any of its businesses, provided
further that Sellers shall in no way be prevented from purchasing or leasing
from any third person any product similar to those of the Company, for use in
casinos co-owned or co-operated by Sellers. 
If the final judgment of a court of competent jurisdiction declares that
any term or provision of this Section 10.10 is invalid or unenforceable,
the Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.

 

If, for any reason, Sellers breach the 5 years non-compete period, or
if such period is shortened by any court or administrative ruling, then Sellers
agree to return and refund to SMI or the Company (as the case may be) any
refunds or rebates which any Seller or its Affiliates received as a result of
any supply arrangement between Buyers and/or its Affiliates and Sellers and/or
its Affiliates (i.e. any refunds or rebates).

 

51

 

10.11 Settlement
of Mutual Claims

 

Any
and all pending and non-pending claims, court cases and arbitral proceedings,
between SMI and/or any of SMI’s Affiliates on the one hand and CASAG and/or any
of CASAG’s Affiliates and/or the Company or its Subsidiaries on the other hand,
including, in particular, those proceedings listed on Schedule 10.11
(the “Proceedings”), are herewith settled by mutual agreement and no Party, as
well as any Party’s and its Affiliates and assigns, shall have any further
claims against the respective other party to any of these Proceedings,  irrespective of whether or not such rights
or claims were subject to or alleged in the Proceedings.

 

The
Parties as well as SMI and its Affiliates and assigns shall promptly take any
necessary steps to have all pending actions, petitions, complaints, challenges
to patents, etc. withdrawn, to have all Proceedings formally closed and to have
all court orders, judgments, injunctions, etc. vacated and to have all security
bonds or similar deposits repaid to such party to the Proceedings who deposited
them. Each party to the Proceedings shall bear its own costs, attorneys fees
and other expenses incurred in the past or future, including any costs,
attorneys fees or other expenses, if any, which shall become payable in the
process of closing the Proceedings. Any expert fees shall be paid by the party
to the Proceedings who requested the appointment of such expert. To the extent
that rulings, decrees, awards, etc. have been issued on or before the Closing
or shall be issued after the Closing (including, in particular, rulings
ordering one party to the Proceedings to pay any amount to another party, or to
refrain from or carry out any acts), the Parties will take all required steps
to have such decrees vacated; if this should not be possible, the party to the
Proceedings who is entitled under such decrees shall not make use of them (in
particular, by demanding enforcement or other compliance with such decrees).

 

10.12 Corporate Names 

 

In
addition to the transfer of any and all rights in the expression “CARD”, if
any, the Sellers expressly consent that the Company and its Subsidiaries are
entitled to bear the term “CARD” as part of their respective corporate names,
for an unlimited term (“Zustimmung zur Firmenfortführung”). The Buyers covenant
and agree that they will take all necessary corporate actions and will make all
necessary filings, and will cause the Company to do the same, to effect that
the combination of the words “Casinos Austria”, “Austrian Casinos” (or any
confusingly similar expressions or translations or any other names, marks,
logos et
cetera, used by any of the Sellers or their Affiliates, whether
registered or not) (hereinafter the “Protected Names”) will be removed from all
corporate names of the Company and its Subsidiaries, at the latest three months
after the Closing.

 

Furthermore,
the Buyers undertake and agree that as (a) from the Closing, they will cause
the Company to discontinue the usage of and will refrain from using the
Protected Names in any context and for any purposes whatsoever, and (b) that
the Buyers and their Affiliates, including in particular, SMI and its
Affiliates, will at all times (before or after the Closing) refrain from using
any of the Protected Names for any purpose whatsoever, and (c) that any forms,
advertising materials, price lists, or other documents, objects or items of the
Company

 

52

 

or its Subsidiaries on which the Protected Names appear, shall be
destroyed within fifteen business days after the Closing and (d) that the
Company, the Subsidiaries nor  SMI or
any Affiliates of SMI will take any step or omission which would create the
impression to any third party that the Company or the Subsidiaries or SMI or
any of SMI’ Affiliates is associated with any of the Sellers or, in particular,
that any of the Sellers is liable for any obligations of any of these
companies.

 

10.13      Compliance  Each Party acknowledges that each
Party:  (a) operates under privileged
licenses in a highly regulated industry; and (b) maintains a compliance program
to (i) protect and preserve its name, reputation, integrity, and good will
through a thorough review and determination of its integrity and fitness, both
initially and thereafter, of any person or company that performs work for
either Party or with which those companies are otherwise associated, and (ii)
to monitor compliance with the requirements established by gaming regulatory
authorities or authorities that regulate the gaming industry in various
jurisdictions around the world.  Each
Party shall cooperate with the other Party and its compliance committee as
reasonably requested and provide the relevant committee with such information
as it may reasonably request on appropriate notice. 

 

ARTICLE
XI

 

MISCELLANEOUS

 

11.1
Amendment and Waiver 
This Agreement may be amended and any provision of this Agreement may be
waived, provided  that any such amendment or waiver shall be
binding upon a Party only if such amendment or waiver is set forth in a writing
executed by the Buyers and the Sellers. 
No course of dealing between or among any persons having any interest in
this Agreement shall be deemed effective to modify, amend or discharge any part
of this Agreement or any rights or Liabilities of any Party under or by reason
of this Agreement.

 

11.2
Notices  All
notices, demands and other communications given or delivered under this
Agreement shall be in writing and shall be deemed to have been given when
personally delivered, or delivered by express courier service or telecopied
(with confirmation of receipt and hard copy by courier to follow). Notices,
demands and communications to the Sellers shall be sent to the address or
telecopy number of the Sellers at the address or telecopy number indicated
below, unless another address or telecopy for the Sellers is specified in writing
and shall be deemed received by both Sellers if received by CASAG, and notices,
demands and communications to the Company and the Buyers shall, unless another
address is specified in writing, be sent to the address or telecopy number
indicated below, and shall be deemed received by both Buyers and the Company if
received by SMI:

 

	
  Notices to the Sellers:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Casinos Austria
  Aktiengesellschaft

  
	
   

  	
   

  	
  Dr. Karl Lueger Ring 14

  
	
   

  	
   

  	
  1015 Vienna, Austria

  
	
   

  	
   

  	
  Attention:

  	
  Managing Board
  (“Vorstand”)

  
	
   

  	
   

  	
  Telecopy:

  	
  +43-1-53440 515

  

 

53

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CAI Casinoinvest Middle
  East GmbH

  
	
   

  	
   

  	
  Dr. Karl Lueger Ring 14

  
	
   

  	
   

  	
  1015 Vienna, Austria

  
	
   

  	
   

  	
  Attention:

  	
  Managing Directors
  (“Geschäftsführung”)

  
	
   

  	
   

  	
  Telecopy:

  	
  +43-1-53440 515

  

 

	
  with copies to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fiebinger, Polak, Leon
  & Partner

  	
   

  	
   

  
	
   

  	
   

  	
  Am Getreidemarkt 1

  	
   

  	
   

  
	
   

  	
   

  	
  1060 Vienna, Austria

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Peter M. Polak

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
  +43-1-582 582

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Notices to the Buyers:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shuffle Master
  Management–Service GmbH

  	
   

  	
   

  
	
   

  	
   

  	
  1106 Palms Airport
  Drive

  	
   

  	
   

  
	
   

  	
   

  	
  Las Vegas, Nevada 89119

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  Jerome R. Smith, General Counsel

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
  +001-702-270-5161

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shuffle Master GmbH

  	
   

  	
   

  
	
   

  	
   

  	
  1106 Palms Airport
  Drive

  	
   

  	
   

  
	
   

  	
   

  	
  Las Vegas, Nevada 89119

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  Jerome R. Smith, General Counsel

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
  +001-702-270-5161

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  with copies to:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shuffle Master, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
  1106 Palms Airport
  Drive

  	
   

  	
   

  
	
   

  	
   

  	
  Las Vegas, Nevada 89119

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  Jerome R. Smith, Senior Vice President and
  General Counsel

  
	
   

  	
   

  	
  Telecopy:

  	
  +001-702-270-5161

  	
   

  	
  Kirkland &
  Ellis LLP

  
	
   

  	
   

  	
  200 East Randolph Drive

  	
   

  	
   

  
	
   

  	
   

  	
  Chicago, IL 60601

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  Keith S. Crow, P.C.

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:  (312) 861-2200

  	
   

  	
   

  
								

 

11.3
Binding Agreement; Assignment  This Agreement shall be binding upon and inure to the benefit of
the Parties named herein and their respective successors and permitted
assigns.  No Party may assign either
this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the Buyers and the Sellers, which
approval shall be at the sole and free discretion of the Party asked for such
approval; provided, however, that the Sellers shall be obligated
to agree to the assignment by Buyers of all or part of their rights, interests
and obligations hereunder to one of their Affiliates (the “Designated
Affiliate”) if and

 

54

 

provided that prior to such assignment (i) both the Buyers and
the Designated Affiliate confirm to and agree with the Sellers in writing that
each of the Buyers and the Designated Affiliate shall be jointly and severally
liable to each of the Sellers for all and any obligations out of or in
connection with any of the Transaction Documents; and (ii) the Designated
Affiliate has counter-signed this Agreement, in particular, the arbitration
clause (see Section 11.12 hereof) and (iii) so that any arbitral award
thereunder, if any, will be enforceable against the Designated Affiliate and
its assets.

 

11.4
Severability 
Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.  Any arbitrator or court shall be authorized
by the Parties to reform and “blue pencil” this Agreement in the least way
necessary in order to make it enforceable and consistent, to the maximum extent
possible, with the original intent of the Parties.

 

11.5 No
Partnership, Joint Venture or Fiduciary Relationship  This Agreement does not create and shall not
be deemed to create any partnership, joint venture, fiduciary relationship, or
trust relationship, of any kind, express or implied by or between the Buyers
(including the Buyers’s parent, SMI), on the one hand, and the Sellers, on the
other hand.  The only legal relationship
between the Buyers (including the Buyers’s parent, SMI), on the one hand, and
the Sellers, on the other hand, shall be contractual, consistent with and
pursuant to this Agreement.  The Parties
expressly waive any presumptions to the contrary which might exist or be
implied.

 

11.6
Construction  The
language used in this Agreement shall be deemed to be the language jointly
chosen by the Parties to express their mutual intent, and no rule of strict
construction shall be applied against any person. The inclusion or deletion of
various provisions in prior drafts of this Agreement shall not be admissions,
express or implied, by or against any Party and shall not be indicative of any
intent of any Party. All Schedules and Exhibits hereto and all documents attached
to the Schedules and Exhibits hereto shall be deemed read, understood and
acknowledged by each of the Parties and Knowledge of the Buyers, even if they
are not written in English.

 

11.7
Captions  The
captions used in this Agreement are for convenience of reference only and do
not constitute a part of this Agreement and shall not be deemed to limit,
characterize or in any way affect any provision of this Agreement, and all
provisions of this Agreement shall be enforced and construed as if no caption had
been used in this Agreement.

 

11.8
Entire Agreement 
The Schedules identified in this Agreement are incorporated herein by
reference.  This Agreement and the
documents referred to herein contain the entire agreement between the Parties
and supersede any prior understandings, agreements, draft

 

55

 

versions of this Agreement,  or
representations by or between the Parties, written or oral, which may have
related to the subject matter hereof in any way, including, without limitation,
the Letter of Intent.

 

11.9
Counterparts  This
Agreement may be executed in four counterparts, one for each Party.

 

11.10
Governing Law  All
questions concerning the construction, validity and interpretation of this
Agreement shall be governed by and construed in accordance with the laws of
Austria applicable therein, without giving effect to any choice of law or
conflict of law provision (whether of Austria or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than
Austria.  The
application of the United Nations Convention on Contracts for the International
Sale of Goods is specifically excluded by the Parties.

 

11.11
Parties in Interest 
Nothing in this Agreement, express or implied, is intended to confer on
any person other than the Parties and their respective successors and assigns
any rights or remedies under or by virtue of this Agreement.

 

11.12
Arbitration (a) 
All disputes, controversies, or claims arising under or relating to this
Agreement, however with the exclusion of the Transaction Documents (other than
this Agreement), or any breach or threatened breach of this Agreement or
violation, termination or nullity of this Agreement (“Arbitrable Dispute”),
shall be finally settled under the Rules of Arbitration of the International
Chamber of Commerce by three arbitrators appointed in accordance with the said
Rules.

 

 (b) As more
than two persons are party to this Agreement, it is expressly stipulated that
more than one claimant and/or more than one defendant are permitted. For the
purpose of the nomination of arbitrators, there is deemed to be only one
claimant party and one defendant party, regardless of whether multiple parties
appear.

 

(c) All such arbitration proceedings shall take place
in London, United Kingdom.  The language
of the arbitration shall be the English language.

 

11.13
Deleted

 

 

11.14
Deleted

 

11.15
Currency To the extent that an amount in any currency is
required from time to time to be converted into another currency pursuant to
this Agreement or any other Transaction Document and except as otherwise
expressly set forth herein, such conversion shall be made using the Euro
foreign exchange reference rates as published by the European Central Bank (these
reference rates are based on the regular daily concertation procedure between
central banks within and outside the European System of Central Banks, which
normally takes place at 2.15 p.m. ECB time (CET). The reference exchange rates
are published by ECB both by

 

56

 

electronic market information providers and on the ECB’s website
shortly after the concertation procedure has been completed). For those
currencies for which the European Central Bank does not or ceases to publish
any such reference rates, such conversion shall be made by using the Currency
exchange rates published by the Financial Times, London, on its web-site
(presently: www.marketprices.ft.com/markets/currencies/ab ) for each
currency, on the end of the London business day preceding the date of such
calculation (unless otherwise stated herein).

 

11.16
Governing Language. 
English shall be the governing language of this Agreement.

 

IN WITNESS WHEREOF, the
Parties have executed this Purchase Agreement as of the date first written
above.

 

	
   

  	
  CASINOS
  AUSTRIA AKTIENGESELLSCHAFT

  (“CASAG”)

  
	
   

  	
   

  
	
   

  	
    /s/

  	
   

  
	
   

  	
   By: 

  	
  Peter Pollak

  	
   

  
	
   

  	
   Its: 

  	
  Im Vollmachtsnamen

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CAI CASINOINVEST MIDDLE EAST GMBH

  (“CAI”)

  
	
   

  	
   

  
	
   

  	
    /s/

  	
   

  
	
   

  	
   By: 

  	
  Peter Pollak

  	
   

  
	
   

  	
   Its: 

  	
  Im Vollmachtsnamen

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SHUFFLE MASTER MANAGEMENT-SERVICE

  GMBH

  (“SHFMMS”)

  
	
   

  	
   

  
	
   

  	
    /s/

  	
   

  
	
   

  	
   By: 

  	
  Rene Schneider

  	
   

  
	
   

  	
   Its: 

  	
  Im Vollmachtsnamen

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SHUFFLE MASTER GMBH

  (“SHFM”)

  
	
   

  	
   

  
	
   

  	
    /s/

  	
   

  
	
   

  	
   By: 

  	
  Rene Schneider

  	
   

  
	
   

  	
   Its: 

  	
  Im Vollmachtsnamen

  	
   

  
						

 

57Exhibit
10.2

 

EXECUTION
COPY

 

 

REGISTRATION
RIGHTS AGREEMENT

 

Dated as of
May 13, 2004

 

by and between

 

SHUFFLE
MASTER, INC.

 

and

 

CASINOS AUSTRIA AG

 

 

TABLE OF
CONTENTS

 

	
  1.

  	
  Definitions.

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Shelf Registration.

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Liquidated Damages.

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Registration Procedures.

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Registration Expenses.

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Indemnification.

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Rules 144 and 144A.

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Underwritten Registrations.

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Miscellaneous.

  	
   

  

 

i

 

REGISTRATION
RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”)
is dated as of May 13, 2004, by and between Shuffle Master, Inc., a
Minnesota corporation (the “Company”), and Casinos Austria AG (“Initial
Shareholder”).

 

This Agreement is entered into in connection
with the Stock Purchase Agreement dated May 13, 2004 (the “Stock
Purchase Agreement”) by and between Shuffle Master Management-Service GmbH
and Shuffle Master GmbH, on the one hand, and Casinos Austria
Aktiengesellschaft and CAI Casinovest Middle East GmbH, on the other hand,
which provides for the acquisition of CARD Casinos Austria Research and
Development GmbH & Co. KG (“CARD”) by the Company and, among other
transactions, provides for the issuance by the Company to the Initial
Shareholder of 767,076 shares of common stock, par value $.01 per share, of the
Company (the “Shares”), together with the rights evidenced by such
Shares to the extent provided for in the Shareholder Rights Agreement dated as
of June 26, 1998 between the Company and Norwest Bank Minnesota, N.A., as
Rights Agent.

 

In order to induce the Initial Shareholder to
enter into the Stock Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Shareholder and subsequent holders of the Shares as provided herein.  The execution and delivery of this Agreement
is a condition to the Initial Shareholder’s obligation to acquire the Shares
pursuant to the Stock Purchase Agreement.

 

The parties hereto hereby agree as follows:

 

1.             Definitions.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Agreement”:  See the first introductory paragraph hereto.

 

“Amendment Effectiveness Deadline Date”:  See Section 2(d)(i) hereof.

 

“Business Day”:  Any day that is not a Saturday, Sunday or a
day on which banking institutions in the City of New York are authorized or
required by law or executive order to be closed.

 

“CARD”:  See the second introductory paragraph hereto.

 

“Closing Date”:  May 13, 2004.

 

“Company”:  See the first introductory paragraph hereto.

 

“Controlling Person”:  See Section 6 hereof.

 

“Deferral Period”:  See Section 3(b) hereof.

 

“Designated Counsel”:  One nationally recognized firm of counsel
experienced in securities laws matters chosen by the Holders of a majority of
the Registrable Securities to be

 

 

included in a Registration Statement for a
Shelf Registration, with the consent of the Company (which consent will not be
unreasonably withheld).

 

“Effectiveness Date”:  The 210th day after the Closing
Date.

 

“Effectiveness Period”:  See Section 2(a) hereof.

 

“Exchange Act”:  The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.

 

“Filing Date”:  The 120th day after the Closing
Date.

 

“Holder”:  Any beneficial owner from time to time of Registrable Securities.

 

“Indemnified Holder”:  See Section 6 hereof.

 

“Indemnified Person”:  See Section 6 hereof.

 

“Indemnifying Person”:  See Section 6 hereof.

 

“Initial Shareholder”:  See the first introductory paragraph hereto.

 

“Initial Shelf Registration”:  See Section 2(a) hereof.

 

“Inspectors”:  See Section 4(k) hereof.

 

“Liquidated Damages”:  See Section 3(a) hereof.

 

“Liquidated Damages Payment Date”:  See Section 3(c) hereof.

 

“Notice and Questionnaire”: means a
written notice delivered to the Company containing substantially the
information called for by the Form of Selling Securityholder Notice and
Questionnaire attached as Appendix A hereto.

 

“Person”: An individual, partnership,
corporation, limited liability company, unincorporated association, trust or
joint venture, or a governmental agency or political subdivision thereof.

 

“Prospectus”: The prospectus included
in any Registration Statement (including, without limitation, any prospectus
subject to completion and a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration statement
in reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

 

“Records”:  See Section 4(k) hereof.

 

2

 

“Registrable Securities”:  All Shares upon original issuance thereof
and at all times subsequent thereto, together with (a) any additional shares of
SMI common stock issued or distributed by way of a dividend, stock split or
other distribution in respect of the Shares, and (b) any shares of SMI common
stock acquired by way of any rights offering or similar offering made in
respect of the Shares (all shares of SMI common stock so issued, distributed or
acquired pursuant to clauses (a) or (b), “Additional Shares”); provided, that all such Shares and
Additional Shares shall cease to be Registerable Securities, in any case, upon
the earliest to occur of (i) a Registration Statement covering such Shares or
such Additional Shares having been declared effective by the SEC and such
Shares or such Additional Shares having been disposed of in accordance with
such effective Registration Statement, (ii) such Shares or such Additional
Shares having been sold in compliance with Rule 144 or being able to (except
with respect to affiliates of the Company within the meaning of the Securities
Act) be sold in compliance with Rule 144(k), or (iii) such Shares or such
Additional Shares ceasing to be outstanding.

 

“Registration Default”:  See Section 3(a) hereof.

 

“Registration Statement”: Any
registration statement of the Company filed with the SEC pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective
amendments, all exhibits and all documents incorporated by reference or deemed
to be incorporated by reference in such registration statement.

 

“Rule 144”: Rule 144 promulgated under
the Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC
providing for offers and sales of securities made in compliance therewith
resulting in offers and sales by subsequent holders that are not affiliates of
an issuer of such securities being free of the registration and prospectus
delivery requirements of the Securities Act.

 

“Rule 144A”: Rule 144A promulgated
under the Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144) or regulation hereafter adopted by the SEC.

 

“Rule 415”: Rule 415 promulgated under
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.

 

“SEC”:  The U.S. Securities and Exchange Commission.

 

“Securities Act”:  The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.

 

“Selling Holder”: On any date, any
Holder that has delivered a Notice and Questionnaire to the Company on or prior
to such date.

 

“Shares”:  See the second introductory paragraph hereto.

 

“Shelf Registration”:  See Section 2(b) hereof.

 

3

 

“Shelf Registration Statement”:  See Section 2(b) hereof.

 

“Stock Purchase Agreement”:  See the second introductory paragraph
hereto.

 

“Subsequent Shelf Registration”:  See Section 2(b) hereof.

 

“Underwritten Registration” or “Underwritten
Offering”: A registration in which Registrable Securities are sold to an
underwriter for reoffering to the public.

 

2.             Shelf Registration.

 

(a)         Shelf Registration.  The Company shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Registrable Securities (the “Initial
Shelf Registration”) on or prior to the Filing Date.

 

The Initial Shelf Registration shall be on
Form S-3 or another appropriate form permitting registration of the Registrable
Securities for resale by Holders in the manner or manners designated by them (excluding
Underwritten Offerings) and set forth in the Initial Shelf Registration.  The Company shall not permit any securities
other than the Registrable Securities to be included in the Initial Shelf
Registration or any Subsequent Shelf Registration (as defined below).

 

The Company shall use its commercially
reasonable efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act on or prior to the Effectiveness Date and to
keep the Initial Shelf Registration continuously effective under the Securities
Act until the date (A) that is two years after the Closing Date (such period,
as it may be shortened pursuant to clauses (i), (ii) or (iii) immediately
following, the “Effectiveness Period”), or such shorter period ending when
(i) all of the Registrable Securities covered by the Initial Shelf Registration
have been sold in the manner set forth and as contemplated in the Initial Shelf
Registration, (ii) the date on which all the Registrable Securities (x) held by
Persons who are not affiliates of the Company may be resold pursuant to Rule
144(k) under the Securities Act or (y) cease to be outstanding, (iii) all the
Registrable Securities have been resold pursuant to Rule 144 under the
Securities Act or (B) a Subsequent Shelf Registration covering all of the
Registrable Securities has been declared effective under the Securities Act.

 

(b)        Subsequent Shelf
Registrations.  If the Initial Shelf
Registration ceases to be effective for any reason at any time during the
Effectiveness Period (other than because of the sale of all of the Registrable
Securities registered thereunder), the Company shall use its commercially
reasonable efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner reasonably
expected by the Company to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional “shelf” Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a “Subsequent
Shelf Registration”).  If a
Subsequent Shelf Registration is filed, the Company shall use its commercially
reasonable efforts to cause the Subsequent Shelf Registration to be declared
effective under the Securities Act as soon as practicable after such filing (or
if filed during a Deferral Period, after expiration of such Deferral Period)
and to keep such Registration

 

4

 

Statement
continuously effective for the balance of the Effectiveness Period.  As used herein, the term “Shelf
Registration” means the Initial Shelf Registration or any Subsequent Shelf
Registration and the term “Shelf Registration Statement” means any
Registration Statement filed in connection with a Shelf Registration.

 

(c)         Supplements
and Amendments.  The Company shall
promptly supplement and amend a Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority of the Registrable Securities covered by
such Shelf Registration Statement.

 

(d)        Notice
and Questionnaire.  Each Holder agrees
that if such Holder wishes to sell Registrable Securities pursuant to a Shelf
Registration Statement and related Prospectus, it will do so only in accordance
with this Section 2(d) and Section 4A hereof.  Each Holder wishing to sell Registrable
Securities pursuant to a Shelf Registration Statement and related Prospectus
when the Initial Shelf Registration Statement first becomes effective agrees to
deliver a Notice and Questionnaire to the Company at least five (5) Business
Days prior to the date that the Initial Shelf Registration is declared
effective under the Securities Act. 
From and after the date the Initial Shelf Registration Statement is
declared effective, the Company shall, as promptly as practicable after the
date a fully completed and legible Notice and Questionnaire, together with such
other information as the Company may reasonably request, is received by the
Company, and in any event upon the later of (x) forty-five (45) days after such
date or (y) ten (10) Business Days after the expiration of any Deferral Period
in effect when the Notice and Questionnaire is received by the Company:

 

(i)            if
required by applicable law, file with the SEC a post-effective amendment to the
Shelf Registration Statement  or a
Subsequent Shelf Registration or prepare and, if required by applicable law,
file a supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that the Holder delivering such Notice and Questionnaire is named as a
selling securityholder in the Shelf Registration Statement and the related
Prospectus in such a manner as to permit such Holder to deliver such Prospectus
to purchasers of the Registrable Securities (subject to the rights of the Company
under Section 3(b) to create a Deferral Period) in accordance with
applicable law and, if the Company shall file a post-effective amendment to the
Shelf Registration Statement, use its commercially reasonable efforts to cause
such post-effective amendment to be declared effective under the Securities Act
as promptly as reasonably practicable, but in any event by the date (the “Amendment
Effectiveness Deadline Date”) that is forty-five (45) days after the date
such post-effective amendment is required by this clause to be filed;

 

(ii)           provide
such Holder copies of any documents filed pursuant to Section 2(d)(i); and

 

5

 

(iii)          notify
such Holder as promptly as practicable after the effectiveness under the Securities
Act of any post-effective amendment filed pursuant to Section 2(d)(i); provided
that if such Notice and Questionnaire is delivered during a Deferral Period,
the Company shall so inform the Holder delivering such Notice and Questionnaire
and shall take the actions set forth in clauses (i) and (ii) above upon
expiration of the Deferral Period. 
Notwithstanding anything contained herein to the contrary, (i) the
Company shall be under no obligation to name any Holder that has not delivered
a fully complete and legible Notice and Questionnaire to the Company, together
with such other information as the Company may reasonably request, in
accordance with this Section 2(d) and (ii) the Amendment Effectiveness
Deadline Date shall be extended by up to ten (10) Business Days from the
expiration of a Deferral Period (and the Company shall incur no obligation to
pay Liquidated Damages during such extension) if such Deferral Period shall be
in effect on the Amendment Effectiveness Deadline Date.

 

3.             Liquidated Damages.

 

(a)         The
Company and the Initial Shareholder agree that the Holders of Registrable
Securities will suffer damages if the Company fails to fulfill its obligations
under Section 2 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. 
Accordingly, the Company agrees to pay liquidated damages on the
Registrable Securities (“Liquidated Damages”) under the circumstances
and to the extent set forth below (each of which shall be given independent
effect; each a “Registration Default”):

 

(i)            if
the Initial Shelf Registration is not filed on or prior to the Filing Date,
then commencing on the day after the Filing Date;

 

(ii)           if
a Shelf Registration is not declared effective by the SEC on or prior to the
Effectiveness Date, then commencing on the day after the Effectiveness Date;

 

(iii)          if
a Shelf Registration has been declared effective and such Shelf Registration
ceases to be effective at any time during the Effectiveness Period (other than
as permitted under Section 3(b)), then commencing on the day after the
date such Shelf Registration ceases to be effective;

 

(iv)          if
any post-effective amendment filed pursuant to Section 2(d)(i) has not
become effective under the Securities Act on or prior to the Amendment
Effectiveness Deadline Date, then commencing on the day after the Amendment
Effectiveness Deadline Date; and

 

(v)           if
the aggregate duration of Deferral Periods in any period exceeds the number of
days permitted in respect of such period pursuant to Section 3(b), then
commencing on the day that caused the limit on the aggregate duration of
Deferral Periods to be exceeded,

 

6

 

Liquidated
Damages shall accrue on the Registrable Securities (in the case of clauses (i),
(ii), (iii) and (v)), or solely on the Registrable Securities that are
registered by such post-effective amendment in the case of clause (iv), at a
rate of US$0.05 per annum per
share of Registrable Securities (based on the number of shares of the Company’s
common stock issued and outstanding on the Closing Date, to be adjusted
appropriately for stock splits, stock dividends, stock recombinations and the
like) for the first 90 days (whether or not consecutive) during which a
Registration Default exists, and at a rate of US$0.10 per annum per share of Registrable
Securities (based on the number of shares of the Company’s common stock issued
and outstanding on the Closing Date, to be adjusted appropriately for stock
splits, stock dividends, stock recombinations and the like) thereafter if a
Registration Default exists for more than 90 days (whether or not consecutive);
provided
that Liquidated Damages on the Registrable Securities may not accrue under more
than one of the foregoing clauses (i), (ii), (iii), (iv) and (v) at any one
time; and provided
further that (1) upon the filing of the Initial Shelf Registration
as required hereunder (in the case of clause (a)(i) of this Section 3),
(2) upon the effectiveness of a Shelf Registration as required hereunder (in
the case of clause (a)(ii) of this Section 3), (3) upon the effectiveness
of a Shelf Registration which had ceased to remain effective (in the case of
clause (a)(iii) of this Section 3), (4) upon the effectiveness of a
post-effective amendment as required hereunder (in the case of clause (a)(iv)
of this Section 3), or (5) upon the termination of the Deferral Period
that caused the limit on the aggregate duration of Deferral Periods to be
exceeded (in the case of clause (a)(v) of this Section 3), Liquidated
Damages on the Registrable Securities as a result of such clause shall cease to
accrue.  It is understood and agreed
that, notwithstanding
any provision to the contrary, no Liquidated Damages shall accrue on any
Registrable Securities that are then covered by, and may be sold under, an
effective Shelf Registration Statement. 
Notwithstanding the foregoing, no Liquidated Damages shall accrue as to
any security from and after the earlier of (x) the date such security ceases to
be a Registrable Security and (y) expiration of the Effectiveness Period.

 

(b)        Notwithstanding
Section 3(a), the Company, upon written notice to the Holders, shall be
permitted to suspend the availability of a Registration Statement covering the
Registrable Securities for any bona fide reason whatsoever for up to 30
consecutive days (the “Deferral Period”) in any 90-day period without
being obligated to pay Liquidated Damages; provided
that Deferral Periods may not total more than 90 days in the
aggregate in any twelve-month period. 
The Company shall not be required to specify in the written notice to
the Holders the nature of the event giving rise to the Deferral Period.

 

(c)         So
long as the Shares remain outstanding, the Company shall notify the Holders
within five Business Days after each and every date on which an event occurs in
respect of which Liquidated Damages are required to be paid.  Any amounts of Liquidated Damages due
pursuant to clause (a)(i), (a)(ii), (a)(iii), (a)(iv) or (a)(v) of this Section 3
will be payable in cash on April 15 and October 15 of each year
(each, a “Liquidated Damages Payment Date”), commencing with the first
such Liquidated Damages Payment Date occurring after any such Liquidated
Damages commences to accrue, to holders of record of the applicable Registrable
Securities on the immediately preceeding April 1 and October 1,
whether or not such day is a Business Day. 
The amount of Liquidated Damages for Registrable Securities will be
determined by multiplying the applicable rate of Liquidated Damages by the
number of shares of Registrable Securities outstanding on the first Liquidated
Damages Payment Date

 

7

 

following such
Registration Default in the case of the first such payment of Liquidated
Damages with respect to a Registration Default (and thereafter at the next
succeeding Liquidated Damages Payment Date until the cure of such Registration
Default), multiplied by a fraction, the numerator of which is the number of
days such Liquidated Damages rate was applicable during such period (determined
on the basis of a 360-day year comprised of twelve 30-day months and, in the
case of a partial month, the actual number of days elapsed), and the
denominator of which is 360.  The parties
agree that the sole monetary damages payable for a violation of the terms of
this Agreement with respect to which Liquidated Damages are expressly provided
shall be such Liquidated Damages.

 

4.             Registration
Procedures.

 

In connection with its registration
obligations pursuant to Section 2 hereof, the Company shall:

 

(a)         Prepare and file
with the SEC, on or prior to the Filing Date, a Registration Statement or
Registration Statements as prescribed by Section 2 hereof, and use its
commercially reasonable efforts to cause each such Registration Statement to
become effective and remain effective as provided herein;  provided
that before filing any Registration Statement or Prospectus or any amendments
or supplements thereto, the Company shall furnish to and afford the Initial
Shareholder a reasonable opportunity to review copies of all such documents
proposed to be filed (in each case, where possible, at least three Business
Days prior to such filing, or such later date as is reasonable under the
circumstances) and the Initial Shareholder shall have the right to object to
any information pertaining to the Initial Shareholder that is contained therein
and the Company will make the corrections reasonably requested by the Initial
Shareholder with respect to such information prior to filing any such documents.

 

(b)        Prepare
and file with the SEC such amendments and post-effective amendments to each
Shelf Registration as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period; cause the related
Prospectus to be supplemented by any prospectus supplement required by
applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities Act; and
comply with the provisions of the Securities Act applicable to it with respect
to the disposition of all Registrable Securities covered by such Registration
Statement during the Effectiveness Period in accordance with the intended
methods of distribution set forth in such Registration Statement as so amended
or in such Prospectus as so supplemented.

 

(c)         Notify
the Selling Holders and Designated Counsel, if any, promptly (but in any event
within five Business Days), (i) when a Prospectus or any prospectus supplement
or post-effective amendment to a Registration Statement has been filed, and,
with respect to a Registration Statement or any post-effective amendment, when
the same has become effective under the Securities Act (including in such
notice a written statement that any Holder may, upon request, obtain, at the
sole expense of the Company, one conformed copy of such Registration Statement
or post-effective amendment, including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and exhibits),
(ii)

 

8

 

of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any Prospectus or the initiation of any proceedings for
that purpose, (iii) of the happening of any event, the existence of any
condition or any information becoming known but not the nature or details
concerning such event, condition or information that makes any statement made
in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in or amendments or
supplements to such Registration Statement, Prospectus or documents so that, in
the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and that
in the case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (provided, however, that no notice of the Company pursuant to
this clause (iii) shall be required in the event that the Company promptly
files a prospectus supplement to update the Prospectus or a Current Report on
Form 8-K or other appropriate Exchange Act report that is incorporated by
reference into the Registration Statement, which, in either case, contains the
requisite information with respect to such event, condition or information that
results in such Registration Statement no longer containing any untrue
statement of a material fact or omitting to state a material fact necessary to
make the statements contained therein not misleading and promptly furnishes to
the Selling Holders and Designated Counsel a reasonable number of copies of
such prospectus supplement) and (iv) of the Company’s determination that a
post-effective amendment to a Registration Statement would be appropriate which
notice may in any case, at the discretion of the Company state that it
constitutes a notice of deferral under Section 3(b) hereof.

 

(d)        Use
its commercially reasonable efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus and, if any such order is
issued, to use its commercially reasonable efforts to obtain the withdrawal of
any such order at the earliest possible moment or if any such order or
suspension is during any Deferral Period, at the earliest possible time after
such Deferral Period ends, and provide prompt notice to the Selling Holders of
the withdrawal of any such order.

 

(e)         Furnish
as promptly as reasonably practicable after the filing of such documents with
the SEC to each Selling Holder and Designated Counsel, if any, upon request and
at the sole expense of the Company, such number of conformed copies of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and all
documents incorporated or deemed to be incorporated therein by reference and
all exhibits as such Selling Holder and Designated Counsel may reasonably
request.

 

(f)         Deliver
during the Effectiveness Period (except during any Deferral Period) to each
Selling Holder and Designated Counsel, if any, at the sole expense of the
Company, as many copies of the Prospectus (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference

 

9

 

therein as such Persons may reasonably request; and, subject to
Sections 4A(a) and 4A(c) hereof, the Company hereby consents (except during any
Deferral Period) to the use of such Prospectus and each amendment or supplement
thereto by each of the Selling Holders of Registrable Securities and dealers,
if any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto in the
manner set forth therein.

 

(g)        Cause
the Company’s counsel to perform Blue Sky law investigations and to file
registrations and qualifications required to be filed in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities or offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Selling Holder reasonably requests, use its commercially reasonable efforts
to keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective in connection with such Holder’s offer and sale of Registrable
Securities pursuant to such registration or qualification (or exemption
therefrom) and do any and all other acts or things reasonably necessary or
advisable under Blue Sky laws to enable the disposition in such jurisdictions
of the Registrable Securities in the manner set forth in the Registration
Statement; provided that the
Company shall not be required to (i) qualify generally to do business or as a
dealer in any jurisdiction where it is not then so qualified, (ii) take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (iii) subject itself to
taxation in any such jurisdiction where it is not then so subject.

 

(h)        Cooperate
with the Selling Holders and their respective counsel to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
sold, which certificates shall not bear any restrictive legends and shall be in
a form eligible for provision to the transfer agent and registrar; and enable
such Registrable Securities to be in such denominations and registered in such
names as the Selling Holders may reasonably request at least two (2) Business
Days prior to any sale of such Registrable Securities.

 

(i)          Upon
the occurrence of any event contemplated by Sections 4(c)(ii), 4(c)(iii) or
4(c)(iv) hereof, as promptly as practicable prepare and (subject to
Section 4(a) hereof) file with the SEC, at the sole expense of the
Company, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, any such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

 

(j)          Prior
to the effective date of the first Registration Statement relating to the
Registrable Securities, (i) provide the transfer agent and registrar with
certificates for the Registrable Securities and (ii) provide a CUSIP number for
the Registrable Securities.

 

10

 

(k)         During
the Effectiveness Period, if requested in connection with a disposition of
Registrable Securities pursuant to a Registration Statement, make available at
reasonable times for inspection by one or more representatives of the Selling
Holders and any attorney or accountant retained by any such Selling Holders
(collectively, the “Inspectors”), at the offices where normally kept,
during reasonable business hours, at such time or times as shall be mutually
convenient for the Company and the Inspectors, all financial and other records,
pertinent corporate documents and instruments of the Company and its
subsidiaries (collectively, the “Records”) as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the
Company and its subsidiaries to supply all information reasonably requested by
any such Inspector in connection with such Registration Statement in accordance
with this Section; provided that
the Company shall have no obligation to provide any such information prior to
the execution by the party receiving such information of a confidentiality
agreement in a form reasonably acceptable to the Company.  Records that the Company determines, in good
faith, to be confidential and any Records that it notifies the Inspectors are
confidential shall not be used for any purpose other than satisfying “due
diligence” obligations under the Securities Act and exercising rights under
this Agreement and shall not be disclosed by any Inspector unless (i) the
disclosure of such Records is necessary to avoid or correct a material
misstatement or material omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction, (iii) disclosure of such information is, in
the opinion of counsel for the Selling Holder or any Inspector, necessary or
advisable in connection with any action, claim, suit or proceeding, directly
involving or potentially involving such Selling Holder or Inspector and arising
out of, based upon, relating to, or involving this Agreement or any
transactions contemplated hereby or arising hereunder or (iv) the information
in such Records has been made generally available to the public other than
through the acts of such Inspector in breach of this Agreement; provided that prior notice shall be
provided as soon as practicable to the Company of the potential disclosure of
any information by such Inspector pursuant to clauses (ii) or (iii) of this
sentence to permit the Company to obtain a protective order (or waive the
provisions of this Section 4(k)). 
Each Inspector shall take such actions as are reasonably necessary to
protect the confidentiality of such information (if practicable) to the extent
such actions are otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector, unless
and until such information in such Records has been made generally available to
the public other than as a result of a breach of this Agreement (it being
understood that “reasonably necessary” for the purposes of this sentence will
be defined by reference to those actions taken by such Inspector in protecting
the confidentiality of its own information).

 

(l)          During
the Effectiveness Period, comply with all rules and regulations of the SEC
applicable to any Registration Statement and make generally available to its
security holders as soon as reasonably practicable earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act) no
later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) commencing on the
first day of the first fiscal quarter of the Company after the effective date
of a Registration Statement, which statements shall cover said 12-month
periods.

 

11

 

(m)        If
requested by Designated Counsel, if any, or the Holders of a majority of the
Registrable Securities, (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the Designated Counsel, if any, or
such Holders reasonably determine is necessary to be included therein, (ii)
make all required filings of such prospectus supplement or such post-effective
amendment as soon as reasonably practicable after the Company has received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment and (iii) supplement or make amendments to such
Registration Statement.

 

(n)        Use
its commercially reasonable efforts to take all other steps necessary or
advisable to effect the registration of the Registrable Securities covered by a
Registration Statement contemplated hereby; provided that the Company shall not be required to take any
action in connection with an Underwritten Offering.

 

(o)        Beginning
not later than the effective date of the first Registration Statement relating
to the Registrable Securities, use its commercially reasonable efforts to cause
such Shares (in each case, that are then eligible for listing) to be listed on
any national securities exchange or automated quotation system upon which the
Company’s common stock is then listed.

 

(p)        Use
its commercially reasonable efforts to notify the Holders at least ten (10)
Business Days prior to the anticipated effective date of the first Registration
Statement relating to the Registrable Securities.

 

4A.          Holders’
Obligations. (a) Each Holder agrees, by acquisition of the Registrable
Securities, that no Holder shall be entitled to sell any of such Registrable
Securities pursuant to a Registration Statement or to receive a Prospectus
relating thereto, unless such Holder has furnished the Company with a Notice
and Questionnaire as required pursuant to Section 2(d) hereof (including
the information required to be included in such Notice and Questionnaire) and
the information set forth in the next sentence.  Each Selling Holder agrees promptly to furnish to the Company all
information required to be disclosed in order to make the information
previously furnished to the Company by such Selling Holder not misleading and
any other information regarding such Selling Holder and the distribution of
such Registrable Securities as the Company may from time to time reasonably
request.  Any sale of any Registrable
Securities by any Holder shall constitute a representation and warranty by such
Holder that the information relating to such Holder and its plan of
distribution is as set forth in the Prospectus delivered by such Holder in
connection with such disposition, that such Prospectus does not as of the time
of such sale contain any untrue statement of a material fact relating to or
provided by such Holder or its plan of distribution and that such Prospectus
does not as of the time of such sale omit to state any material fact relating
to or provided by such Holder or its plan of distribution necessary to make the
statements in such Prospectus, in the light of the circumstances under which
they were made, not misleading.

 

(b)           The
Company may require each Selling Holder of Registrable Securities as to which
any registration is being effected to furnish to the Company such additional
information regarding such Holder and its plan of distribution of such
Registrable Securities as

 

12

 

the Company may, from time to
time, reasonably request to the extent necessary or advisable to comply with
the Securities Act.  The Company may
exclude from such registration the Registrable Securities of any Selling Holder
if such Holder fails to furnish such additional information within five (5) Business
Days after receiving such request.  Each
Selling Holder as to which any Shelf Registration is being effected agrees to
furnish promptly to the Company all information required to be disclosed so
that the information previously furnished to the Company by such Holder is not
materially misleading and does not omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made.

 

(c)           Each
Holder of Registrable Securities agrees by acquisition of such Registrable
Securities that, upon actual receipt of any notice from the Company suspending
the availability of the Registration Statement pursuant to Section 3(b)
hereof, or upon the happening of any event of the kind described in Section 4(c)(ii),
4(c)(iii) or 4(c)(iv) hereof (each Holder agrees to keep any such notice
confidential), such Holder will forthwith discontinue disposition of such
Registrable Securities covered by such Registration Statement or Prospectus
until such Holder’s receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(i) hereof, or until it is advised in
writing by the Company that the use of the applicable Prospectus may be
resumed, and it has received copies of any additional or supplemental filings
that are incorporated or deemed incorporated by reference in such Prospectus
thereto.

 

5.             Registration
Expenses.

 

(a)         All
fees and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company, including, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses of compliance with state securities or Blue Sky
laws, including, without limitation, reasonable fees and disbursements of its
counsel in connection with Blue Sky qualifications of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as provided in
Section 4(g) hereof), (ii) printing expenses, including, without
limitation, expenses of printing certificates for Registrable Securities in a
form eligible for provision to the transfer agent and registrar and of printing
prospectuses if the printing of prospectuses is requested by the Holders of a
majority of the Registrable Securities included in any Registration Statement,
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements
of counsel for the Company, (v) Securities Act liability insurance, if the
Company desires such insurance, (vi) fees and expenses of all other Persons
retained by the Company, (vii) internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), (viii) the expense of any
annual audit, (ix) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange, if
applicable, and any NASD fees and (x) the expenses relating to printing, word processing
and distributing all Registration Statements and any other documents necessary
in order to comply with this Agreement. 
Notwithstanding anything in this Agreement to the contrary, each Holder
shall pay all brokerage commissions with respect to any Registrable Securities
sold by it and, except as set forth in Section 5(b) below, the Company
shall not be responsible for the fees and expenses of any counsel, accountant
or advisor for the Holders.

 

13

 

(b)        The
Company shall bear or reimburse the Holders of the Registrable Securities being
registered in a Shelf Registration for the reasonable fees and disbursements of
Designated Counsel.

 

6.             Indemnification.

 

(a)           The Company agrees to indemnify and
hold harmless (x) each Holder (which, for the absence of doubt, for purposes of
this Section 6 shall include the Initial Shareholder), (y) each Person, if
any, who controls any Holder within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act) (any of the Persons
referred to in this clause (y) being hereinafter referred to as a “Controlling
Person”) and (z) the respective officers, directors, partners, employees,
representatives and agents of any Holder (including any predecessor holder) or
any Controlling Person (any person referred to in clause (x), (y) or (z) may
hereinafter be referred to as an “Indemnified Holder”), against any
losses, claims, damages, expenses or liabilities, joint or several, to which
such Indemnified Holder may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, expenses or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Registration Statement or Prospectus, or any amendment or supplement
thereto or any related preliminary prospectus or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a Prospectus, in the
light of the circumstances under which they were made), in each case, not
misleading; provided that the
Company will not be liable under this Section 6(a), (x) to the extent that
any such loss, claim, damage, expense or liability arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission made in any such Registration Statement or Prospectus, or any
amendment or supplement thereto or any related preliminary prospectus in
reliance upon and in conformity with written information relating to any Holder
furnished to the Company by or on behalf of such Holder specifically for use
therein, (y) with respect to any untrue statement or alleged untrue statement,
or omission or alleged omission made in any preliminary prospectus if the
person asserting any such loss, claim, damage, expense or liability who
purchased Registrable Securities which are the subject thereof did not receive
a copy of the Prospectus (or the preliminary prospectus as then amended or
supplemented if the Company shall have furnished such Indemnified Holder with
such amendment or supplement thereto on a timely basis) at or prior to the
written confirmation of the sale of such Registrable Securities to such person
and, in any case where such delivery is required by applicable law and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact made in such preliminary prospectus was corrected in the
Prospectus (or the preliminary prospectus as then amended or supplemented if
the Company shall have furnished such Indemnified Holder with such amendment or
supplement thereto on a timely basis) or (z) arising from the offer or sale of
Registrable Securities during any Deferral Period, if notice thereof was given
to such Holder.  The Company shall
notify such Indemnified Holder promptly of the institution, threat or assertion
of any claim, proceeding (including any governmental investigation) or
litigation in connection with the matters addressed by this Agreement that
involves the Company or such Indemnified Holder.

 

14

 

(b)        Subject to
Section 6(d) below, the Company agrees to reimburse each Indemnified
Holder upon demand for any reasonable legal or other out-of-pocket expenses
reasonably incurred by such Indemnified Holder in connection with investigating
or defending any such loss, claim, damage, expense or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to
the offering of the Registrable Securities, whether or not such Indemnified
Holder is a party to any action or proceeding.  In the event that
it is finally judicially determined that an Indemnified Holder was not entitled
to receive payments for legal and other expenses pursuant to this
Section 6, such Indemnified Holder will promptly return all sums that had
been advanced pursuant hereto.

 

(c)         Each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, each of
its directors and officers and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) to the same extent as the indemnity
provided in Section 6(a) from the Company to each Holder, provided, however, that such Holder will
be liable in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission has been
made in any Registration Statement or Prospectus, or any amendment or
supplement thereto or any related preliminary prospectus, in reliance upon and
in conformity with written information furnished to the Company by such Holder
specifically for use in the preparation thereof.  The liability of any Holder under this Section 6(c) shall in
no event exceed the proceeds received by such Holder from sales of Registrable
Securities giving rise to such obligation.

 

(d)        In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to
Section 6(a) or  (c), such Person
(the “Indemnified Person”) shall promptly notify the Person or Persons
against whom such indemnity may be sought (each an “Indemnifying Person”)
in writing.  No indemnification provided
for in Section 6(a) or  (c) shall
be available to any Person who shall fail to give notice as provided in this
Section 6(d) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially
prejudiced by the failure to give such notice, but the failure to give such
notice shall not relieve the Indemnifying Person or Persons from any liability
which it or they may have to the Indemnified Person for contribution or
otherwise than on account of the provisions of Section 6(a) or (c).  In case any such proceeding shall be brought
against any Indemnified Person and it shall notify the Indemnifying Person of
the commencement thereof, the Indemnifying Person shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other Indemnifying Person similarly notified, to assume the defense thereof,
with counsel satisfactory to such Indemnified Person and shall pay as incurred
(or within 30 days of presentation) the fees and disbursements of such counsel
related to such proceeding.  In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel at its own expense. 
Notwithstanding the foregoing, the Indemnifying Person shall pay as
incurred (or within 30 days of presentation) the reasonable fees and expenses
of the counsel retained by the Indemnified Person in the event (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to
the retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying Person and the
Indemnified Person and representation of both parties by the same counsel would
be

 

15

 

inappropriate
due to actual or potential differing interests between them or (iii) the
Indemnifying Person shall have failed to assume the defense and employ counsel
acceptable to the Indemnified Person within a reasonable period of time after
notice of commencement of the action. 
It is understood that the Indemnifying Person shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees and expenses of more than one separate firm for all
such Indemnified Persons.  Such firm
shall be designated in writing by Holders of a majority of the Registrable
Securities in the case of parties indemnified pursuant to Section 6(a) and
by the Company in the case of parties indemnified pursuant to
Section 6(c).  The Indemnifying
Person shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the Indemnifying Person agrees to indemnify
the Indemnified Person from and against any loss or liability by reason of such
settlement or judgment.  In addition,
the Indemnifying Person will not, without the prior written consent of the
Indemnified Person, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any Indemnified Person
is an actual or potential party to such claim, action or proceeding) unless
such settlement, compromise or consent includes an unconditional release of
each Indemnified Person from all liability arising out of such claim, action or
proceeding.

 

(e)         To the extent the indemnification
provided for in this Section 6 is unavailable to or insufficient to hold
harmless an Indemnified Person under Section 6(a) or (c) in respect of any
losses, claims, damages, expenses or liabilities (or actions or proceedings in
respect thereof) referred to therein, then each Indemnifying Person shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages, expenses or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Indemnifying Person on the one hand and
the Indemnified Person on the other hand from the issuance and sale of the
Shares pursuant to the Stock Purchase Agreement and the Registrable Securities
pursuant to any Shelf Registration.  If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each Indemnifying Person shall contribute to
such amount paid or payable by such Indemnified Person in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Indemnifying Person on the one hand and the Indemnified Person on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages, expenses or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations.  The relative benefits received by the
Company shall be deemed to be equal to the total net proceeds (before deducting
expenses) received by the Company under the Stock Purchase Agreement from the
offering and sale of the Registrable Securities giving rise to such
obligations.  The relative benefits received
by any Holder shall be deemed to be equal to the value of receiving
registration rights for the Registrable Securities under this Agreement.  The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand,
such Indemnified Holder on the other, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

 

16

 

(f)         The Company and
the Initial Shareholder agree that it would not be just and equitable if
contribution pursuant to Section 6(e) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in Section 6(e).  The amount paid or payable by an Indemnified
Person as a result of the losses, claims, damages, expenses or liabilities (or
actions or proceedings in respect thereof) referred to in Section 6(e)
shall be deemed to include any reasonable legal or other expenses reasonably
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim.  Notwithstanding
the provisions of Section 6(e) and (f), (i) in no event shall any Holder
be required to contribute any amount in excess of the amount by which the net
proceeds received by such Holder from the offering or sale of the Registrable
Securities pursuant to a Shelf Registration Statement exceeds the amount of
damages which such Holder would have otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission and
(ii) no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.

 

(g)        In any proceeding
relating to any Registration Statement or Prospectus or any supplement or
amendment thereto or any related preliminary prospectus, each party against
whom contribution may be sought under this Section 6 hereby consents to
the jurisdiction of any court having jurisdiction over any other contributing
party, agrees that process issuing from such court may be served upon it by any
other contributing party and consents to the service of such process and agrees
that any other contributing party may join it as an additional defendant in any
such proceeding in which such other contributing party is a party.

 

(h)        Any losses, claims,
damages, liabilities or expenses for which an Indemnified Person is entitled to
indemnification or contribution under this Section 6 shall be paid by the
Indemnifying Person to the Indemnified Person as such losses, claims, damages,
liabilities or expenses are incurred.

 

(i)          The remedies provided
for in this Section 6 are not exclusive and shall not limit any rights or
remedies that may otherwise be available to any indemnified party at law or in
equity.

 

(j)          The indemnity and
contribution agreements contained in this Section 6 shall remain operative
and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Holder or any
Person controlling any Holder or by or on behalf of the Company, its officers
or directors or any other Person controlling the Company and (iii) sale under
the Registration Statement of any of the Registrable Securities.  A successor to any Holder or Controlling
Person, or to the Company, its directors or officers or any person controlling
the Company, shall be entitled to the benefits of the indemnity, contribution
and reimbursement agreements contained in this Section 6.

 

7.             Rules 144 and 144A.

 

The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC

 

17

 

thereunder in
a timely manner in accordance with the requirements of the Securities Act and
the Exchange Act and, if at any time before the expiration of the Effectiveness
Period the Company is not required to file such reports, it will, upon the
request of any Holder, make available such information necessary to permit
sales pursuant to Rule 144A under the Securities Act.  The Company further covenants that until the Effectiveness Period
has expired, it will use all reasonable efforts to take such further action as
any Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 and Rule 144A under the Securities Act, as such
rules may be amended from time to time. 
The Company will provide a copy of this Agreement to prospective
purchasers of Registrable Securities identified to the Company by the Initial
Shareholder upon request.  Upon the
request of any Holder, the Company shall deliver to such Holder a written
statement as to whether it is subject to and has complied with such reporting
requirements.  Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the
Company to register any of its securities pursuant to the Exchange Act.

 

8.             Underwritten
Registrations.

 

No Holder of Registrable Securities may participate
in any Underwritten Registration hereunder.

 

9.             Miscellaneous.

 

(a)         No
Inconsistent Agreements.  The
Company has not, as of the date hereof, and the Company shall not, after the
date of this Agreement, enter into any agreement with respect to any of its
securities that conflicts with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.

 

(b)        Adjustments
Affecting Registrable Securities. 
The Company shall not take any action with respect to the Registrable
Securities as a class with the intent of adversely affecting the ability of the
Holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement.

 

(c)         Amendments
and Waivers.  The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, otherwise than with
the prior written consent of the Company and the Holders of not less than a
majority of the Registrable Securities; provided
that Section 6 and this Section 9(c) may not be amended, modified or
supplemented without the prior written consent of the Company and each Holder
(including, in the case of an amendment, modification or supplement of
Section 6, any Person who was a Holder of Registrable Securities disposed
of pursuant to any Registration Statement). 
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Securities may be given by Holders of at least a majority of the Registrable
Securities being sold by such Holders pursuant to such Registration Statement.

 

18

 

Each Holder of Registrable Securities outstanding at the time of any
amendment, modification, supplement, waiver, or consent or thereafter shall be
bound by any such amendment, modification, supplement, waiver, or consent
effected pursuant to this Section, whether or not any notice of such amendment,
modification, supplement, waiver, or consent is delivered to such Holder.

 

(d)        Notices.  All notices, requests and other
communications provided for or permitted hereunder shall be made in writing and
delivered by hand-delivery, registered first-class mail, next-day air courier
or facsimile:

 

(1)           if
to a Holder of Registrable Securities, at the most current address of such
Holder set forth on the stock ledger of the Company, unless any Holder shall
have provided notice information in a Notice and Questionnaire or any amendment
thereto, in which case such information shall control.

 

(2)           if
to the Initial Shareholder:

 

CASINOS AUSTRIA AG

Dr. Karl Lueger Ring 14, A-1010

Vienna, Austria

Facsimile No.: +43-1-53440 515

Attention: Managing Board

 

with a copy to:

 

Milbank, Tweed, Hadley & McCloy

Frankfurter Welle

An der Welle 4 

60422 Frankfurt, Germany

Facsimile No.: 49-69-7593-8303

Attention:              Helfried J.
Schwarz

 

(3)           if
to the Company:

 

Shuffle Master, Inc.

1106 Palms Airport Drive

Las Vegas, Nevada 89119

Facsimile No.: (702) 270-5161

Attention: General Counsel

 

with a copy to:

 

Latham & Watkins LLP 

885 Third Avenue

New York, New York 10022

Facsimile No.: (212) 751-4864

Attention:              Kirk A. Davenport
II

 

19

 

All such notices, requests and communications shall
be deemed to have been duly given: when delivered by hand, if personally
delivered; the earlier of the date indicated on the notice of receipt and five
(5) Business Days after being deposited in the mail, postage prepaid, if
mailed; one Business Day after being timely delivered to a next-day air courier;
and when the addressor receives facsimile confirmation, if sent by facsimile
during normal business hours, and otherwise on the next Business Day during
normal business hours.

 

(e)         Successors
and Assigns.  This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto, including the Holders; provided
that this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless and except to the extent such successor
or assign holds Registrable Securities.

 

(f)         Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, including
via facsimile, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

 

(g)        Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

(h)        Governing
Law.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.  EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION
OF THE FEDERAL AND NEW YORK STATE COURTS SITTING IN MANHATTAN, NEW YORK CITY,
THE STATE OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT.

 

(i)          Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 

(j)          Securities
Held by the Company or Its Affiliates. 
Whenever the consent or approval of Holders of a specified percentage of
the Registrable Securities is required hereunder, Registrable Securities held
by the Company or its affiliates (as such term is defined in Rule 405 under the
Securities Act) other than the Initial Shareholder or Holders deemed to be
affiliates solely by reason of their holdings of such Registrable Securities
shall not be counted

 

20

 

in determining whether such consent or approval was given by the
Holders of such required percentage; provided
that Registrable Securities that the Company or an affiliate of the Company
offers to purchase or acquires pursuant to an offer, exchange offer, tender
offer or otherwise shall not be deemed to be held by the Company or such
affiliate until legal title to such Registrable Securities passes to the
Company or such affiliate, as the case may be.

 

(k)         Third-Party
Beneficiaries.  Holders of
Registrable Securities are intended third party beneficiaries of this Agreement
and this Agreement may be enforced by such Persons.

 

(l)          Entire
Agreement.  This Agreement, together
with the Stock Purchase Agreement, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Shareholder on
the one hand and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof
are merged herein and replaced hereby.

 

21

 

IN WITNESS WHEREOF, the parties have executed
this Registration Rights
Agreement as of the date first written above.

 

	
   

  	
  SHUFFLE
  MASTER, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Mark
  Yoseloff

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mark
  Yoseloff

  
	
   

  	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CASINOS
  AUSTRIA AG

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Paul
  Herzfeld

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul
  Herzfeld

  
	
   

  	
   

  	
  Title:

  	
  Executive
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CASINOS
  AUSTRIA AG

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Leo
  Wallner

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Leo Wallner

  
	
   

  	
   

  	
  Title:

  	
  CEO

  
						

 

[Signature Page to Registration
Rights Agreement]

 

 

APPENDIX A

 

SHUFFLE MASTER, INC.

 

Form of Selling Securityholder Notice and
Questionnaire

 

The
undersigned beneficial holder of shares of common stock, par value $.01 per
share (the “Common Stock”), of Shuffle Master, Inc., a Minnesota
corporation (the “Company”), understands that the Company has filed or
intends to file with the Securities and Exchange Commission a registration
statement (the “Shelf Registration Statement”) for the registration and
resale under Rule 415 of the Securities Act of 1933, as amended, of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement, dated on or about May 13, 2004 (the “Registration Rights
Agreement”), between the Company and Casinos Austria AG. A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

Each
beneficial owner of Registrable Securities is entitled to the benefits of the
Registration Rights Agreement. In order to sell or otherwise dispose of any
Registrable Securities pursuant to the Shelf Registration Statement, a
beneficial owner of Registrable Securities generally will be required to be
named as a selling securityholder in the related prospectus, deliver a
prospectus to purchasers of Registrable Securities and be bound by those
provisions of the Registration Rights Agreement applicable to such beneficial
owner (including certain indemnification provisions, as described below).
Beneficial owners that do not complete this Notice and Questionnaire and
deliver it to the Company as provided below will not be named as selling
securityholders in the prospectus and therefore will not be permitted to sell
any Registrable Securities pursuant to the Shelf Registration Statement.
Beneficial owners are encouraged to complete and deliver this Notice and
Questionnaire prior to the effectiveness of the Shelf Registration Statement so
that such beneficial owners may be named as selling securityholders in the
related prospectus at the time of effectiveness. Upon receipt of a completed Notice
and Questionnaire from a beneficial owner following the effectiveness of the
Shelf Registration Statement, the Company will prepare and file (a) a
prospectus supplement as soon as practicable or (b) if required, such
amendments to the Shelf Registration Statement or an additional Shelf
Registration Statement within 45 days of the receipt of such questionnaire, in
either case as are necessary to permit such holder to deliver such prospectus
to purchasers of Registrable Securities. The Company has agreed to pay
liquidated damages pursuant to the Registration Rights Agreement under certain
circumstances as set forth therein.

 

Certain legal
consequences arise from being named as a selling securityholder in the Shelf
Registration Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Shelf Registration Statement and the
related prospectus.

 

A-1

 

NOTICE

 

The
undersigned beneficial owner (the “Selling Securityholder”) of
Registrable Securities hereby gives notice to the Company that it may sell or
otherwise dispose of Registrable Securities beneficially owned by it and listed
below in Item 3 (unless otherwise specified under Item 3) pursuant to the Shelf
Registration Statement. The undersigned, by signing and returning this Notice
and Questionnaire, understands that it will be bound by the terms and
conditions of this Notice and Questionnaire and the Registration Rights
Agreement.

 

If you need
more space for these responses, please attach additional sheets of paper.
Please be sure to indicate you name and the number of the item being responded
to on each such additional sheet of paper, and to sign each such additional
sheet of paper before attaching it to this Questionnaire. Please note that you
may be asked to answer additional questions depending on your responses to the
following questions.

 

The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate and complete:

 

QUESTIONNAIRE

 

1.             (a)  Full Legal Name of Selling Securityholder:

 

 

(b)           Full Legal Name of Registered Holder
(if not the same as (a) above) through which Registrable Securities listed in
Item (3) below are held:

 

 

(c)           Full Legal Name of DTC Participant
(if applicable and if not the same as (b) above) through which Registrable Securities
listed in Item (3) below are held:

 

 

2.             Address for Notices to Selling
Securityholder:

 

 

Telephone:

 

Fax:

 

A-2

 

Contact Person:

 

3.             Number of shares of Registrable
Securities beneficially owned:

 

 

4.             Nature of Your Beneficial
ownership:

 

(a)           If the name of the beneficial owner
of the Registrable Securities set forth in your response to Item 1(a) above is
that of a limited partnership, state the names of the general partners of such
limited partnership:

 

 

 

(b)           With respect to each general partner
listed in Item 4(a) above who is not a natural person, and is not publicly
held, name each shareholder (or holder of partnership interests, if applicable)
of such general partner. If any of these named shareholders are not natural
persons or publicly held entities, please provide the same information. This
process should be repeated until you reach natural persons or a publicly held
entity.

 

 

 

(c)           If you are not publicly held, name
the entity that exercises voting and dispositive power over the Registrable
Securities set forth in Item 3 above (the “Controlling Entity”). If the
Controlling Entity is not a natural person or a publicly held entity, please
name the entity that controls such Controlling Entity and provide the same
information for the entity controlling the Controlling Entity. This process
should be repeated until you reach natural persons or a publicly held entity.

 

(i)            Full legal name of Controlling
Entity(ies) or natural person(s) who have sole or shared voting or dispositive
power over the Registrable Securities:

 

 

(ii)           Business address (including street
address) (or residence if no business address), telephone number and facsimile
number of such person(s):

 

Address:                

 

A-3

 

Telephone:

Fax:

 

(iii)          Name(s) of shareholders:

 

5.             Beneficial Ownership of other of
the Company’s securities owned by the Selling Securityholder:

 

Except as set forth below in this Item (5), the undersigned is not the
beneficial or registered owner of any securities of the Company other than the
Registrable Securities listed above in Item (3).

 

(a)           Type and Amount of other securities
beneficially owned by the Selling Securityholder:

 

 

(b)           CUSIP No(s). of such other securities
beneficially owned:

 

 

6.             Relationship with the Company:

 

Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equityholders (5% or more) has
held any position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three years.

 

State any
exceptions here:

 

 

7.             Plan of Distribution:

 

Except as set forth below, the undersigned (including its donees or
pledgees) may distribute the Registrable Securities listed above in Item (3)
pursuant to the Shelf Registration Statement only as follows (if at all):
Subject to the limitations and restricitions set forth in the Stock Purchase
Agreement, such Registrable Securities may be sold from time to time directly
by

 

A-4

 

the undersigned or, alternatively, through underwriters, broker-dealers
or agents. If the Registrable Securities are sold through underwriters or
broker-dealers, the Selling Securityholder will be responsible for underwriting
discounts or commissions or agents’ commissions. Subject to the limitations and
restricitions set forth in the Stock Purchase Agreement, such Registrable
Securities may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. Such sales may be effected in
transactions (which may involve cross or block transactions) (i) on any
national securities exchange or quotation service on which the Registrable
Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or services or in the over-the-counter market, or (iv) through the writing of
options. Subject to the limitations and restricitions set forth in the Stock
Purchase Agreement, the undersigned may also sell the Company’s Common Stock
short and deliver Registrable Securities to close out such short positions, or
loan or pledge Registrable Securities to broker-dealers that in turn may sell
such securities.

 

State any
exceptions here:

 

 

Note:      In no event will such method(s) of
distribution take the form of an underwritten offering of the Registrable
Securities without the prior agreement of the Company.

 

By signing
below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items (1) through (7) above and the inclusion of such
information in the Shelf Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the
Company in connection with the preparation or amendment of the Shelf
Registration Statement and the related prospectus.

 

Once this
Notice and Questionnaire is executed by the undersigned and received by the
Company, the terms of this Notice and Questionnaire, and the representations
and warranties contained herein, shall be binding on, shall inure to the
benefit of and shall be enforceable by the respective successors, heirs,
personal representatives, and assigns of the Company and the undersigned with
respect to the Registrable Securities beneficially owned by the undersigned and
listed in Item (3) above. THIS NOTICE AND QUESTIONNAIRE SHALL BE GOVERNED IN ALL
RESPECTS BY THE LAWS OF THE STATE OF NEW YORK.

 

A-5

 

IN WITNESS
WHEREOF, the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly
authorized agent.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Beneficial Owner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
						

 

 

PLEASE RETURN THE COMPLETED AND EXECUTED
NOTICE

AND QUESTIONNAIRE TO:

 

Shuffle Master, Inc.

1106 Palms Airport Drive

Las Vegas, Nevada 89119

Attention: Jerome R. Smith

Fax: (702) 270-5161

 

A-6

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