Document:

exhibit1012.htm

    EXHIBIT
10.12

    The
portion of this Exhibit 10.12 marked “******” has been omitted and
confidentially filed with the Securities and Exchange Commission pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as
amended.

     

    

     

     

    
      	
               
      

            	
              SHIPSALES  CONTRACT

            

    

     

     

    FOR

     

     

    PURE CAR
TRUCK CARRIER VESSEL

     

     

    (HULL NO.
2253)

     

    

     

     

    

     

     

    

     

     

    MADE BY
AND BETWEEN

     

     

    CLIO
MARINE INC.

     

     

    AND

     

     

    EAST GULF
SHIPHOLDING, INC.

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    CONTENTS

     

     

    

     

    ARTICLE
I                            -    DESCRIPTION
AND CHARACTERISTICS

    

    ARTICLE
II                            -    CONTRACT
PRICE AND PAYMENT

    

    ARTICLE
III                            -    ADJUSTMENT
OF CONTRACT PRICE

    

    ARTICLE
IV                            -    SUPERVISION
AND INSPECTION

    

    ARTICLE
V                            -    MODIFICATIONS,
CHANGES AND SUBSTITUTION

    

    ARTICLE
VI                            -    BUYER’S
SUPPLIES

    

    ARTICLE
VII                            -    TRIALS

    

    ARTICLE
VIII                          -    DELIVERY

    

    ARTICLE
IX                            -    FORCE
MAJEURE

    

    ARTICLE
X                            -    WARRANTY
OF QUALITY

    

    ARTICLE
XI                            -    INSURANCE

    

    ARTICLE
XII                            -    BUYER’S
DEFAULT

    

    ARTICLE
XIII                          -    SELLER’S
DEFAULT

    

    ARTICLE
XIV                          -    ARBITRATION

    

    ARTICLE
XV                           -    ASSIGNMENT
OF CONTRACT

    

    ARTICLE
XVI                          -    TAXES
AND DUTIES

    

    ARTICLE
XVII                        -    PATENTS,
TRADE MARKS, COPYRIGHTS

    

    ARTICLE
XVIII                       -    INTERPRETATION

    

    ARTICLE
XIX                         -    NOTICE

    

    ARTICLE
XX                          
-    EFFECTIVE DATE

     

    

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    2

     

     

    

     

     

    SHIPSALES
CONTRACT

     

     

    

     

     

    This CONTRACT, made and entered into
this __ 21st
day of  September, 2007, by
and between CLIO MARINE INC., a corporation organized and existing under the
laws of Liberia (hereinafter called the "Seller") and EAST GULF SHIPHOLDING,
INC., a corporation organized and existing under the laws of Marshall Islands
(hereinafter called the "Buyer").

     

     

    

     

     

    

     

     

     

     

    Witnesseth:

     

     

     

        In
consideration of the mutual covenants contained herein, the Seller agrees to
cause MITSUBISHI HEAVY INDUSTRIES, LTD., a corporation organized and existing
under the laws of Japan, (hereinafter called the "Builder"), to construct,
launch, equip and complete one (1) Pure Car Truck Carrier Vessel identified in
Article I.(hereinafter called the "Vessel") hereof at its Nagasaki Shipyard
& Machinery Works (hereinafter referred to as the "Shipyard"), and to sell
and deliver the same to the Buyer at the Shipyard and the Buyer agrees to
purchase from the Seller and to take delivery of the Vessel, upon the terms and
conditions hereinafter set forth. It is agreed and understood that the Seller
may at its discretion construct and deliver the Vessel at Builder's shipyard in
Japan other than the Shipyard mentioned above, provided that the provisions of
this Contract shall not be altered thereby in any other respects.

     

     

    

     

     

    3

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                         I - DESCRIPTION AND
CHARACTERISTICS

     

     

    I)        DESCRIPTION

     

     

    Subject
to the provisions hereof the Vessel shall be of the following description: Pure
Car Truck Carrier Vessel of about 6,400 cars, which shall have the Builder's
Hull Number 2253, shall
be documented under the Panamanian flag to be registered at Republic of Panama
at the Buyer's expense, and shall be constructed, launched, equipped and
completed in accordance with the provisions of this Contract and the
Specifications and the accompanying plans to the Specifications identified by
D.No.23-7109A (hereinafter collectively referred to as the "Specifications" or
the "Specifications and Plans") signed by both parties for identification
purpose and attached to this Contract as an integral part hereof.

     

     

    

     

     

    2)        CHARACTERISTICS AND
DIMENSIONS

     

    The
Vessel shall have the following characteristics and dimensions:

    Length, over
all                                                                           less
than 200.00 m

    Length, between
perpendiculars                                                              192.00
m

    Breadth,
moulded                                                                                         32.26
m

    Depth, moulded (to Strength Dk: Garage
Deck)                                      34.52
m

    Depth, moulded (to Freeboard Dk:No,7
Car
Deck)                                 14.70
m

    Designed draught,
moulded                                                                        8.80
m

    Scantling draught,
moulded                                                                        9.70
m

    

    Machinery                                                                Mitsubishi-UE
Type Diesel Engine,Model “7UEC60LSII (P/U)”—1 setMaximum rating
(BHP)

    14,315kW (19,460PS) x 105.0
min-1Normal rating (BHP)

    12,170kw (16,540PS) x 99.5
min-1

    

    Trial speed,
guaranteed                                         21.45
knots at Normal rating (BHP)12,170kw (16,540PS) at 99.5 min-1of main engine on
about 20,000 metricton displacement

    

     

    

     

     

    

     

     

    

     

     

    4

     

    

     

    Fuel
Consumption,
guaranteed                           166.6gr/kW/hr
at 12,170kW (16,540PS) of main engine only onthe basis of fuel oil of 42,700
kJ/kg (10,200 kcal/kg) in
lower       calorific value with 3%
tolerancemargin at I.S.O. condition.

     

     

    
      	
              Number
      of loadable cars guaranteed

            	
              5,200
      cars of standard
      car             determined
      on the “CAR LOADING PLAN”

            

    

     

     

    

     

     

    The
details of the above particulars as well as the definitions and method of
calculations and measurements are as stated in the Specifications.

     

     

    

     

     

    

     

     

    

     

     

    3)        CLASSIFICATION. RULES AND
REGULATIONS

     

    The
Vessel, including its machinery, equipment and outfittings shall be constructed
in accordance with the rules and regulations (the edition and amendments thereto
being current as of the date of execution of this Contract) and under special
survey of Nippon Kaiji Kyokai (hereinafter called "Classification Society"), and
shall be distinguished in the register by the symbol of NS*(RORO EQ C V), MNS*
(MO).

    Decisions
of the Classification Society as to compliance or non-compliance with the
Classification shall be final and binding upon both parties hereto.

    The
Vessel shall also comply with the rules and regulations as described in the
Specifications.

    All fees
and charges incidental to the Classification and with respect to compliance with
the above referred rules and regulations shall be for the account of the
Builder.

    

     

    5

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                     II - CONTRACT PRICE AND
PAYMENT

     

     

    
      	
              1)  

            	
              CONTRACT
      PRICE

            

    

     

     

    The
purchase price of the Vessel shall be ****** (hereinafter referred to as the
"Contract Price") as the technical services required to be rendered to the Buyer
under the terms of this Contract. The Contract Price shall be net receivable by
the Seller in Tokyo and exclusive of articles to be supplied by the Buyer as
provided in Article VI hereof, and shall be subject to adjustment as hereinafter
provided in this Contract.

     

     

    
      	
              2)  

            	
              DEFINITION OF DUE DATE
      AND CURRENCY

            

    

     

     

    All
payments by the Buyer under this Contract shall be received by the Seller on the
day each payment becomes due in Tokyo. All payments to the Seller under this
Contract shall be made in Japanese Yen.

     

     

    
      	
              3)  

            	
              TERMS OF
      PAYMENT

            

    

     

     

    The Buyer
shall pay the Contract Price to the Seller in accordance with the following
terms and conditions:

     

     

    (a) First
Installment

     

     

    ******
percent (******%) of the Contract Price, amounting to ****** shall be paid to
the Seller upon ******.

     

     

    (b) Second
Installment

     

     

    ******
percent (******%) of the Contract Price, amounting to ****** shall be paid to
the Seller upon ******.

     

     

    

     

     

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          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (c) Third
Installment

     

     

    ******
percent (******%) of the Contract Price, amounting to ****** shall be paid to
the Seller upon ******.

     

     

    (d) Fourth
Installment

     

     

    The sum
of ****** percent (******%) of the Contract Price, amounting to ******, plus
****** or minus ****** and/or ******, if any, plus the price of ******, shall be
paid to the Seller upon ******.

     

     

    

     

     

    4)        METHOD OF
PAYMENT

     

     

    ( a) 1st
Installment:

     

     

    Within
two (2) Business Days (Business Day means a day, other than Saturday, Sunday and
national holiday, on which the Builder, Seller and the Buyer are working and on
which leading banks in Japan and New York are open for business of foreign
exchange, remittance and lending of money) after signing of this Contract, the
Buyer shall pay the amount of this Installment by telegraphic transfer to a bank
in Tokyo, Japan nominated by the Seller (hereinafter called the "BANK") for the
account of the Seller.

     

     

    (b) 2nd
Installment:

     

     

    Within
two (2) Business Days after receipt by the Buyer of either fax or e-mail from
the Seller confirming the keel-laying of the Vessel, the Buyer shall pay the
amount of this Installment by telegraphic transfer to the BANK for the account
of the Seller.

     

     

    

     

     

    7

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (c) 3rd
Installment:

     

     

    Within
two (2) Business Days after receipt by the Buyer of either fax or e-mail from
the Seller confirming the completion of the launching of the Vessel, the Buyer
shall pay the amount of this Installment by telegraphic transfer to the BANK for
the account of the Seller.

     

     

    (d) 4th
Installment:

     

     

    The Buyer
shall, at least three (3) Business Days prior to the scheduled delivery date of
the Vessel subject of any changes to the delivery date in accordance with this
Contract, make a cash deposit with the BANK, covering the amount of this
Installment (as adjusted in accordance with the provisions of this Contract),
with an irrevocable instruction that the said amount shall be released to the
Seller's favour and account against presentation to the BANK by facsimile of a
duly signed copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE of the Vessel as set
forth in Paragraph 3 of Article VII hereof. Any cost and expense related to such
remittance and deposit shall be bourne by the Buyer.

     

     

    No
payment under this Contract shall be delayed or withheld by the Buyer on account
of any dispute or disagreement of whatever nature arising between the parties
hereto.

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    8

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                     III - ADJUSTMENT OF CONTRACT
PRICE

     

     

    The
Contract Price shall be subject to adjustment as hereinafter set
forth:

     

     

    
      	
              1)  

            	
              DELAYED
      DELIVERY

            

    

     

     

    No
adjustment shall be made, and the Contract Price shall remain unchanged, for the
first thirty (30) days of delay in delivery of the Vessel beyond the date on which
delivery is required under the terms of this Contract.

     

     

    If the
delivery of the Vessel is delayed more than thirty (30) days beyond the said
delivery date, the Contract Price shall be reduced by deducting therefrom the
sum of ******, as liquidated damages, for each day of such delay beyond the
above said thirtieth (30th) day.

     

     

    However,
unless the parties agree otherwise, the total reduction in the Contract Price
shall not exceed the amount due to cover the delay of one hundred and twenty
(120) days after the above thirtieth (30th) day as computed at the rate of
reduction specified in the above.

     

     

    But, if
the delay in delivery of the Vessel continues for a period of more than one
hundred twenty (120) days from the thirtieth (30th) day after the date on which
delivery is required under the terms of this Contract, the Buyer may, at its
option, rescind this Contract by serving upon the Seller a written notice of
rescission of this Contract.

     

     

    Such
rescission shall be effective as of the date the notice thereof is received by
the Seller, and the Seller, after receipt of such notice, shall refund to the
Buyer all installments paid by the Buyer, together with interest at two point
five percent (2.5%) over the long-term prime rate in Japan per annum from the
date of each payment. Such refund by the Seller to the Buyer of all installments
paid by the Buyer on account of the Vessel shall forthwith discharge all
obligations, duties and liabilities of each of the parties hereto to the other
under this Contract.

     

     

    In case
the Buyer has not served notice of rescission, the Seller shall immediately
after the expiration of such period of delay in delivery, propose a future
delivery date and demand

     

     

    

     

     

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          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    that the
Buyer shall make an election. The Buyer shall, within fourteen (14) days after
such demand is received by the Buyer, notify the Seller by facsimile confirmed
in writing of its intention to rescind the Contract or of its consent to accept
the Vessel at an agreed future date, it being understood by the parties that if
the Vessel is not delivered by such future date, the Buyer shall have the same
right of rescission upon the same terms as hereinbefore provided. If the Buyer
fails to notify the Seller of its intention to rescind the Contract as above
specified, within the aforementioned fourteen (14) days, the Buyer shall be
deemed to have consented to the delivery of the Vessel at the later date
proposed by the Seller.

     

     

    For the
purpose of this Paragraph, the delivery of the Vessel shall be deemed to be
delayed when and if the Vessel, after taking into full account extension of the
delivery date by reason of permissible delays as herein provided, is not
delivered by the date upon which delivery is required under the terms of this
Contract.

     

     

    
      	
              2)  

            	
              INSUFFICIENT
      SPEED

            

    

     

     

    The
Contract Price of the Vessel shall not be affected or changed if the speed of
the Vessel on trials, as determined in accordance with the Specifications, is
less than the guaranteed speed of the Vessel, provided such deficiency is not
more than one-fifth (1/5) of one (I) knot below the guaranteed
speed.

     

     

    In the
event, however, that the deficiency in the speed exceeds one-fifth (1/5) of one
(I) knot below the guaranteed speed, the Contract Price shall be reduced, as
liquidated damages, by ****** for such deficiency of each 0.1 knots (any
fractions to be pro-rated but disregarding fractions of one­-hundredth
(11100) of one (I) knot).

     

     

    If the
deficiency of the Vessel's speed on trials exceeds one (1) full knot below the
guaranteed speed, the Buyer at its option may accept the Vessel at a reduction
in the Contract Price as above specified for an insufficient speed of one (1)
full knot, that is at a total reduction of ******, or, subject to the provisions
of Paragraph 4) of Article VII, may reject the Vessel and rescind
this

     

     

    

     

     

    

     

     

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          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    Contract,
in which case the provisions in Paragraph 1) of this Article regarding the
Buyer's rescission of the Contract shall be applied.

     

     

    3)         EXCESSIVE FUEL
CONSUMPTION

     

     

    The
Contract Price of the Vessel shall not be affected or changed if the fuel
consumption of the main engine at the normal output during the shop trial, as
determined in accordance with the Specifications, does not exceed three (3)
percent above one hundred and sixty six point six grams per kilo watt per hour
(166.6gr/kW/hr) at 42,700kW of main engine only on the basis of fuel oil of
42,700 kJ/kg in lower calorific value at 1.S.0. condition.

     

     

    In the
event, however, that the fuel consumption exceeds three (3) percent, on the
above specified conditions, the Contract Price shall be reduced, as liquidated
damages by the sum of ****** for each full one (1) percent in excess of the
above said three (3) percent.

     

     

    If the
fuel consumption as above stated exceeds by seven (7) percent or more in excess
of the above said three (3) percent, the Buyer at its option may accept the
Vessel at a reduction in the Contract Price as above specified for a fuel
consumption in excess of seven(7) percent above said three (3) percent, that is,
at a total reduction of ******, or, subject to the provisions of Paragraph 4) of
Article VII, may reject the Vessel and rescind this Contract, in which case the
provisions in Paragraph 1) of this Article regarding the Buyer's rescission of
the Contract shall be applied.

     

     

    
      	
              4)  

            	
              CAR
      CAPACITY

            

    

     

     

    If the
car capacity of the Vessel, as determined in accordance with the Specifications,
is below the guaranteed car capacity of the Vessel, the Contract Price of the
Vessel shall be reduced by ****** as liquidated damages for the deficiency of
each car unit.

     

     

    If the
deficiency in the car capacity exceeds one hundred (100) units below the
guaranteed car capacity, the Buyer at its option may accept the Vessel at a
reduction in the Contract Price

     

     

    

     

     

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          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    of
******, or subject to the provisions of Paragraph 4) of Article VIT, may reject
the Vessel and rescind this Contract, in which case the provisions in Paragraph
I) of this Article regarding the Buyer's rescission of the Contract shall be
applied.

     

     

    

     

     

    

     

     

    

     

     

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          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE

     

     

    IV -
SUPERVISION AND INSPECTIO

     

    

     

    1) SUPERVISION BY
SELLER:

     

     

    Scope of
Works : The Seller shall carry out the supervision on the construction of the
Vessel by the Builder, including, without limitation, (i) approval of the plans
and drawings, (ii) inspections on the Vessel, its machinery, equipment and
outfitting, (iii) attendance of trials and tests and (iv) making comments as to
conformity with the Specifications.

     

     

    Seller's
Appointment: The Seller appoints ****** or similar quality entities as
supervising company.

     

     

    Seller's
Technical Decision: Any decision regarding the approval of plans and drawings,
supervision of construction and acceptance of the Vessel under the Shipbuilding
Contract between the Seller and the Builder dated 25th July,
2007 shall be made by the Seller in its absolute discretion and that such
decision shall not require any prior consultation with or approval of the Buyer
or its representatives. During the construction of the Vessel, the Seller shall
give to the Buyer, upon their request, an technical information which they are
holding, and shall make best endeavors to obtain information and documents which
the Buyer might need. The Seller shall undertake that the supervision of
construction of the Vessel shall be carried out as if the Vessel was for their
internal account and management.

     

     

    2) NO SUPERVISION BY
BUYER:

     

     

    The Buyer
shall not have the right of supervision but shall have the right to send its
representatives in the capacity of observers pursuant to Clause 3)
hereof.

     

     

    3) BUYER'S
OBSERVANCE:

     

     

    
      	
               
      

            	
              Buyer's
      Observance: The Buyer may send one (1) observer to the Shipyard
      periodically as follows to review progress of construction of the Vessel
      at the Buyer's risk and expenses
without

            

    

     

     

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          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    interfering
with the construction of the Vessel.:

     

     

                  (a)At the time of keel-laying of the
Vessel.

     

     

                  (b)At the time of launching of the
Vessel.

     

     

    
      	
               
      

            	
              (c)

            	 	
              At
      the time of significant test/trials for main engine during shipbuilding
      period of the Vessel

            

    

     

     

    
      	
               
      

            	
              (d)

            	
              At
      the time of significant test/trials for diesel generator sets during
      shipbuilding period of the Vessel.

            

    

     

     

    
      	
               
      

            	
              (e)

            	 	
              Maximum
      duration per one observation mentioned above shall be four (4) calendar
      days.

            

    

     

     

    
      	
               
      

            	
              (f)

            	 	
              At
      any time during the entire duration of Sea Trials in which case the
      Buyer's observer as well as three (3) Buyer's crew including Master and/or
      Chief Engineer and/or (I) Technical Manager to be joined by the Buyer's
      observer. Such Buyer's crew shall be permitted to be in attendance on the
      Vessel at the sea trial of the Vessel at Buyer's risk and expenses and for
      familiarization purpose only.

            

    

     

     

    
      	
               
      

            	
              (g)

            	
              The
      Buyer' Observer shall not attend and not be stationed at the Shipyard
      and/or any other Builder's shipyard without the attendance of the Seller's
      supervisor.

            

    

     

     

    
      	
               
      

            	
              (h)

            	
              At any other time
      requested by Buyer but maximum three (3) times and subject to Seller's
      approval and acceptance.

            

    

     

     

    Seller's Liability:
The Seller shall be under no liabilities in respect of any loss, damage or
injury suffered by such representatives, and the Buyer shall indemnify the
Seller against any loss, damage or liability sustained or incurred by the Seller
howsoever caused as a consequence of or arising out of or in connection with the
attendance of such representatives on board the Vessel during its acceptance
trials.

     

     

    Restriction on
Observance: The representatives referred to in this Clause shall not
interfere with or obstruct in any way the Seller's supervision on board the
Vessel during its acceptance sea trials and/or sea trials schedule of the
Builder.

     

     

    Buyer's Comment: The
Buyer's comment(s), if any, during sea trials of the Vessel shall not be
unreasonably withheld by the Seller and the Seller shall take action if
necessary, provided that such comment( s) shall not affect the price, cost of
the Vessel and the sea trials schedule of the Builder.

     

     

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          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE V - MODIFICATIONS,
CHANGES AND SUBSTITUTION

     

     

    1) VOLUNTARY MODIFICATIONS
BY MUTUAL AGREEMENT

     

     

    The
Specifications may be modified and/or changed by written agreement of the
parties hereto, provided that such modifications and/or changes or an
accumulation thereof will not, in the Seller's judgment, adversely affect
Builder's planning or program in relation to the Seller's other commitments, and
provided, further, that the Buyer shall first agree, before such modifications
and/or changes are carried out, to alterations in the Purchase Price, the
Delivery Date and other terms and conditions of this Contract and Specifications
occasioned by or resulting from such modifications and/or changes. Such
agreement may be effected by exchange of letters signed by the authorized
representatives of the parties hereto or by email or facsimile confirmed by such
letters manifesting agreements of the parties hereto which shall constitute
amendments to this Contract and/or the Specifications.

     

     

    
      	
              2)  

            	
              COMPULSORY
      MODIFICATION

            

    

     

     

    
      	
               
      

            	
              (I)
      Change in
      Class: In the event that, after the date of this Contract, any
      requirements as to class, or as to rules and regulations to which the
      construction of the Vessel is required to conform are altered or changed
      by the Classification Society or the other regulatory bodies authorized to
      make such alterations or changes, the following provisions shall
      apply:

            

    

     

     

    
      	
               
      

            	
              (a)
      If such alterations or changes are compulsory for the Vessel, either of
      the parties hereto, upon receipt of such information from the
      Classification Society or such other regulatory bodies, shall promptly
      transmit the same to the other in writing, and the Seller shall thereupon
      cause the Builder to incorporate such alterations or changes into the
      construction of the Vessel, provided that the Buyer shall first agree to
      adjustments required by the Seller in the Purchase Price, the Delivery
      Date and other terms and conditions of this Contract and the
      Specifications occasioned by or resulting from such alterations or
      change.

            

    

     

     

    (b) If
such alterations or changes are not compulsory for the Vessel, but the
Buyer

     

     

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          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    desires
to incorporate such alterations or changes into the construction of the Vessel,
then, the Buyer shall notify the Seller of such intentions. The Seller may
accept such alterations or changes if they will not, in the judgment of the
Seller, adversely affect the Builder's planning or program in relation to the
Seller's other commitments, and provided, further, that the Buyer shall first
agree to adjustments required by the Seller in the Purchase Price, the Delivery
Date and other terms and conditions of this Contract and the Specifications
occasioned by or resulting from such alterations or changes.

     

     

    
      	
               
      

            	
              (2)
      Change in
      Class: Agreement as to such alterations or changes under (1) above
      shall be made in the same manner as provided in Sub-Clause VI) hereof for
      modifications or changes to the
Specifications.

            

    

     

     

    
      	
              3)  

            	
              SUBSTITUTION OF
      MATERIALS

            

    

     

     

    In the
event that any of the materials required in the construction of the Vessel under
this Contract and the Specifications and Plans cannot be procured in time to
effect delivery, or are in short supply to maintain the Delivery Date of the
Vessel, the Seller may, provided that the Seller shall so notify the Buyer,
cause the Builder to supply other available materials which are capable of
meeting the requirements of class and of the rules and regulations with which
the construction of the Vessel must comply. Any agreement as to the substitution
of materials may be effected in the manner provided in Sub-Clause VI) of this Article, and
shall likewise, include reasonable alterations in the Contract Price and other
terms and conditions of this Contract, if any, occasioned by or resulting from
the substitution.

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    16

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                             VI - BUYER'S
SUPPLIES

     

     

    
      	
              1)  

            	
              RESPONSIBILITY OF THE
      BUYER

            

    

     

     

    The Buyer
shall, at its cost and expense, supply all articles to be supplied by the Buyer,
as specifically listed in the Specifications (hereinafter referred to as the
"Buyer's Supplies"), to the Seller at the Shipyard in perfect condition ready
for installation and by the date designated by the Seller and/or the Builder to
meet the building schedule of the Vessel.

     

     

    In order
to facilitate the installation of the Buyer's Supplies by the Builder, the Buyer
shall furnish the Seller with the necessary plans, instruction books, test
reports and certificates required by rules or regulations, and if so requested
by the Seller and/or the Builder, shall cause the representative(s) of the
manufacturers of these articles to assist the Builder in installation and/or
make necessary adjustment thereof at the Shipyard, for the Buyer's
account.

     

     

    The Buyer
shall be liable for any expenses incurred by the Seller and/or the Builder for
repair of the Buyer's Supplies due to defective material or poor workmanship or
performance or due to damage under transportation.

     

     

    Should
the Buyer fail to deliver to the Seller any item of the Buyer's Supplies
including the necessary plans, instruction books, test reports and certificates
mentioned above by the time designated by the Seller and/or the Builder, the
delivery of the Vessel shall automatically be extended for a period of such
delay, provided such delay in delivery shall affect delivery of the Vessel. In
such event the Buyer shall pay to the Seller all losses and damages (except for
the consequential loss or damage) sustained by the Seller and/or the Builder due
to such delay in delivery of the Buyer's Supplies, and such payment shall be
made upon delivery of the Vessel. In case that the delay in delivery of such
Buyer's Supplies should exceed thirty (30) days beyond the date specified for
delivery thereof, the Seller shall be entitled to cause the Builder to proceed
with construction of the Vessel without installation of such item(s) in or onto
the Vessel, without prejudice to the Seller's right hereinabove provided, and
the Buyer shall accept the Vessel so completed.

     

     

    

     

     

    17

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
              2)  

            	
              RESPONSIBILITY OF THE
      BUILDER

            

    

     

     

    The Buyer
and the Seller hereby confirm that the Builder shall be responsible for storing
and handling of the Buyer's Supplies after delivery to the Shipyard, and shall
install them on board the Vessel at the Builder's expense; it being agreed,
however, the Seller and the Builder are not responsible for quality, performance
and/or efficiency of any equipment of the Buyer's Supplies and is under no
obligation with respect to guarantee of such equipment against any defects
caused by poor quality, performance and/or efficiency of the Buyer's Supplies
themselves.

     

     

    This
provision does not apply to, and the Seller and the Builder shall not be
responsible for, the items such as ship stores which the Seller and the Builder
are not required to install on board the Vessel under the
Specifications.

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    18

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE VII - TRIALS

     

     

    
      	
              I)  

            	
              NOTICE

            

    

     

     

    The
Seller shall notify the Buyer, at least fourteen (14) days in advance, of the
time and place of the trial of the Vessel, and the Buyer shall promptly
acknowledge receipt of such notice. Buyer's observance of the sea trials of the
Vessel shall be carried out pursuant to Article N. 3) hereof. Failure in
attendance of the observer at the trial run of the Vessel for any reason
whatsoever after due notice to the Buyer as above provided shall be deemed to be
a waiver by the Buyer of its right to have the Buyer's observer on board the
Vessel at the trial run.

     

     

    2)             WEATHER
CONDITIONS

     

     

    The trial
shall be carried out under the weather condition which is deemed favorable
enough by the judgment of the Seller. In the event of unfavorable weather on the
date specified for the trial, same shall take place on the first available day
thereafter that the weather conditions permit. The parties hereto recognize that
the weather conditions in Japanese waters in which the trial runs are to take
place are such that great changes in weather may arise momentarily and without
warning, and therefore, it is agreed that, if, during the trial run, such change
in the weather should occur as precludes the continuance of the trial, the trial
run shall be discontinued and postponed until the first day next following which
is deemed favorable enough by the judgment of the Seller; unless the Buyer shall
assent to acceptance of the Vessel on the basis of trials made prior to such
change in weather conditions. Any delay of the trial run caused by such
unfavorable weather conditions shall operate to extend the date for delivery of
the Vessel by the period of delay involved, and such delay shall be deemed as
permissible delay in the delivery of the Vessel.

     

     

    3)        HOW
CONDUCTED

     

     

    

     

     

    

     

     

    19

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    All
expenses in connection with the trial of the Vessel are to be for the account of
the Seller, and the Seller shall cause the Builder to provide at its own expense
the necessary materials and the necessary crew to comply with conditions of safe
navigation. The trial shall be conducted in the manner prescribed in the
Specifications, and shall prove fulfillment of the performance requirements for
the trials as set forth in the Specifications. All trials of the Vessel shall be
conducted on the trial course determined by the Seller.

     

     

    
      	
              4)  

            	
              METHOD OF ACCEPTANCE
      OR REJECTION

            

    

     

     

    Upon
completion of the trial run, the Builder shall give the Seller a notice by email
or facsimile confirmed in writing of completion of the trial run, as and if the
Builder considers that the results of the trial run indicate conformity of the
Vessel to this Contract and the Specifications. The Seller shall, within three
(3) Business Days after receipt of such notice from the Builder, notify the
Builder by email or facsimile confirmed in writing of its acceptance or
rejection of the Vessel. Such acceptance of the Vessel shall be made provided
that the Vessel is deemed to satisfy the requirements of this Contract and the
Specifications. The Buyer shall be deemed to have accepted the Seller's such
decision.

     

     

    However,
should the result of the trial run indicate that the Vessel or any part or
equipment thereof does not conform to the requirements of this Contract and/or
the Specifications, and if the Builder is in agreement to non-conformity as
specified in the Seller's notice of rejection to the Builder, then the Seller
shall cause the Builder to correct such non-conformity and perform such further
test as may be deemed necessary until the Builder are able to prove satisfaction
of the same with requirements of this Contract and/or the
Specifications.

     

     

    The Buyer
shall follow the decision of the Seller, and shall give notice of acceptance to
the Seller as long as the Seller make a decision of acceptance of the Vessel,
except in the case that the Buyer proves to the Seller's satisfaction that the
Vessel is not materially and substantially in conformity with the Specifications
with evidences, in which case the Seller shall review the opinion and evidences
submitted by the Buyer and discuss in good faith. Except where the Seller
reasonably judges that the Buyer's opinion of substantial non-

     

     

    20

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    conformity
is obviously wrong or abuse of the right, then a matter shall first referred to
judgment of the Classification Society, but if the Classification Society fails
to make a judgment or cannot do so, the matter shall be referred to an
arbitration.

     

     

    
      	
              5)  

            	
              EFFECT OF
      ACCEPTANCE

            

    

     

     

    Acceptance
of the Vessel as above provided shall be final and binding so far as conformity
of the Vessel to this Contract and the Specifications is concerned and shall
preclude the Buyer from refusing formal delivery of the Vessel as hereinafter
provided, if the Seller complies with all other procedural requirements for
delivery as provided for in Article VlII hereof. The Seller will exercise good
faith in determining acceptance or rejection of the Vessel.

     

     

    
      	
              6)  

            	
              DISPOSITION OF SURPLUS
      CONSUMABLE STORES

            

    

     

     

    Should
any fuel oil, fresh water (except fresh water used as ballast) and other
consumable stores, furnished by the Seller for trial runs remain on board the
Vessel after acceptance of the Vessel by the Buyer, the Buyer agrees to buy the
same from the Seller at the price the Seller paid to the local supplier through
the Builder evidenced by voucher, and payment shall be effected at the time of
delivery of the Vessel.

     

     

    Lubricating
oils and greases necessary for the operation of the Vessel shall be supplied by
the Buyer prior to the trial runs, and the Seller shall pay upon delivery of the
Vessel the cost of the quantities of lubricating oils and greases consumed
during the trial runs at original purchase price by the Buyer evidenced by
voucher.

     

     

    

     

     

    

     

     

    

     

     

    21

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE VIII  -
DELIVERY

     

     

    
      	
              1)  

            	
              TIME AND
      PLACE

            

    

     

     

    The
Vessel shall be delivered by the Seller to the Buyer at the Shipyard, not
earlier than ******, but not later than ******, subject, however, to the
provisions relating to permissible delays, and extension of the time of delivery
of the Vessel under this Contract.

     

     

    It is
understood and agreed by both parties hereto that the Seller shall use due
diligence to cause the Builder to construct, complete and deliver the Vessel at
the earliest possible time and the Buyer shall promptly accept the Vessel if and
when the Seller shall tender earlier delivery of the Vessel, provided that the
Seller shall have performed all its obligations under this
Contract.

     

     

    
      	
              2)  

            	
              WHEN AND HOW
      EFFECTED

            

    

     

     

    Provided
that the Buyer shall concurrently pay to the Seller all sums due and payable
upon delivery of the Vessel, the delivery of the Vessel shall be forthwith
effected upon acceptance thereof by the Buyer, as herein provided, by the
concurrent delivery by each of the parties hereto to the other of a PROTOCOL OF
DELIVERY AND ACCEPTANCE acknowledging delivery of the Vessel by the Seller and
acceptance thereof by the Buyer, which PROTOCOL shall be prepared in duplicate
and executed by each of the parties hereto.

     

     

    
      	
              3)  

            	
              DOCUMENTS TO BE
      DELIVERED TO THE BUYER

            

    

     

     

    Acceptance
of the Vessel by the Buyer shall be conditioned upon receipt by the Buyer of the
following duly authenticated documents to be provided by the Seller and/or the
Builder, which shall accompany the aforementioned PROTOCOL OF DELIVERY AND
ACCEPTANCE:

     

     

    (a)
COMMERCIAL INVOICE.

     

     

    22

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
               
      

            	
              (b)

            	
              DECLARATION
      OF WARRANTY of the Seller that the Vessel is delivered to the Buyer free
      and clear of any and all liens, claims or other encumbrances upon the
      Vessel and Buyer's title thereof, and in particular, that the Vessel is
      absolutely free of all burdens in the nature of imposts, taxes or charges
      imposed by the city, state or country of the port of delivery, as well as
      of all liabilities arising from the construction or operation of the
      Vessel in trial runs or otherwise, prior to delivery and
      acceptance.

            

    

     

     

    (c)            PROTOCOL
OF TRIALS of the VESSEL made pursuant to the Specifications.

     

     

    
      	
               
      

            	
              (d)

            	
              PROTOCOL
      OF INVENTORY of the equipment of the VESSEL, including spare parts and the
      like, all as specified in the
specifications.

            

    

     

     

    
      	
               
      

            	
              (e)

            	
              PROTOCOL
      OF STORES OF CONSUMABLE NATURE referred to under paragraph 6) of Article
      VII hereof, including the original purchase price thereof. (f) FINISHED
      DRAWINGS AND PLANS and instruction books pertaining to the Vessel as
      stipulated in the Specifications.

            

    

     

     

    
      	
               
      

            	
              (f)

            	
              FINISHED
      DRAWINGS AND PLANS and instruction books pertaining to the Vessel as
      stipulated in the Specifications.

            

    

     

     

    (g)            BILL
OF SALE (being Notarized & Legalized or Apostilled)

     

     

    
      	
               
      

            	
              (h)

            	
              BUILDER'S
      CERTIFICATE (being Notarized & Legalized or Apostilled) and all other
      CERTIFICATE(S) required to be furnished upon delivery of the Vessel
      pursuant to the Specifications.

            

    

     

     

    
      	
              4)  

            	
              TITLE AND
      RISK

            

    

     

     

    Title to
and risk of the Vessel shall pass to the Buyer upon acceptance thereof by the
Buyer as stated above; it being expressly understood that, until such acceptance
is effected, the Vessel and its equipment are at the title and risk of the
Seller.

     

     

    
      	
              5)  

            	
              REMOVAL OF THE
      VESSEL

            

    

     

     

    The Buyer
shall take possession of the Vessel immediately upon acceptance thereof, and if
so requested by the Seller, shall remove the Vessel from the Shipyard within
three (3) days after acceptance of the Vessel.

     

     

    

     

     

    23

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE

     

     

    IX - FORCE
MAJEURE

     

    

     

    
      	
              1)  

            	
              CAUSES OF
      DELAY

            

    

     

     

    If, at
any time before the actual delivery, either the construction of the Vessel or
any performance required as a prerequisite of delivery of the Vessel is delayed
due to Acts of God; acts of princes or rulers; requirements of government
authorities; war or other hostilities or preparations therefor; blockade;
revolution, insurrections, mobilization, civil war, civil commotion or riots;
vandalism; sabotages, strikes, lockouts or other labor disturbances; labor
shortage, plague or other epidemics; quarantine; flood, typhoons, hurricanes,
storms or other weather conditions not included in normal planning; earthquakes;
tidal waves; landslides; fires, explosions, collisions or strandings; embargoes;
delays or failure in transportation; shortage of materials, machinery or
equipment; import restrictions; inability to obtain delivery or delays in
delivery of materials, machinery or equipment, provided that at the time of
ordering the same could reasonably be expected by the Seller and/or the Builder
to be delivered in time; prolonged failure, shortage or restriction of electric
current, oil or gas; defects in materials, machinery or equipment which could
not have been detected by the Seller and/or the Builder using reasonable care;
casting or forging rejects or the like not due to negligence; delays caused by
the Classification Society or other bodies whose documents are required;
destruction of or damage to the Shipyard or works of the Builder, its
subcontractors or suppliers, or of or to the Vessel or any part thereof, by any
causes herein described; delays in the Builder's other commitments resulting
from any causes herein described which in turn delay the construction of the
Vessel or the Seller's and/or the Builder's performance under this Contract;
other causes or accidents beyond control of the Seller and/or the Builder, its
subcontractors or suppliers of the nature whether or not indicated by the
foregoing words; all the foregoing provided that these events could not be
foreseen at the day of signing this Contract; then and in any such case, the
delivery date shall be postponed for a period of time which shall not exceed the
total accumulated time of all such delays.

     

     

    24

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
              2)  

            	
              NOTICE OF
      DELAY

            

    

     

     

    Within
twelve (12) days after the date of occurrence of any cause of delay, on account
of which the Seller claims that it is entitled under this Contract to a
postponement of the delivery date, the Seller shall notify the Buyer in writing
or by email or facsimile confirmed in writing of the date such cause of delay
occurred. Likewise, within twelve (12) days after the date of ending of such
cause of delay, the Seller shall notify the Buyer in writing or by facsimile
confirmed in writing of the date such cause of delay ended. The Seller shall
also notify the Buyer of the period by which the delivery date is postponed by
reason of such cause of delay, with all reasonable dispatch after it has been
determined. Failure of the Buyer to object to the Seller's claim for
postponement of the delivery date within five (5) days after receipt by the
Buyer of such notice of claim shall be deemed to be a waiver by the Buyer of its
right to object to such postponement of the delivery date.

     

     

    
      	
              3)  

            	
              DEFINITION OF
      PERMISSIBLE DELAY

            

    

     

     

    Delays on
account of such causes as specified in Paragraph I) of this Article and any
other delays of a nature which under the terms of this Contract permits
postponement of the delivery date shall be understood to be permissible delays
and are to be distinguished from unauthorized delays on account of which the
Contract Price is subject to adjustment as provided for in Article III
hereof.

     

     

    
      	
              4)  

            	
              RIGHT TO RESCIND FOR
      EXCESSIVE DELAY

            

    

     

     

    If the
total accumulated time of all delays on account of the causes specified in
Paragraph 1) of this Article, excluding delays of a nature which under the terms
of this Contract permit postponement of the delivery date, amounts to one
hundred and fifty (150) days or more, then in such event, the Buyer may rescind
this Contract by serving upon the Seller a written notice of cancellation. Such
cancellation shall be effective as of the date the first arriving notice thereof
is received by the Seller, and the Seller, after receipt of such notice, shall
refund to the Buyer the full amount of all sums paid to the Seller on account
of

     

     

    25

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    the
Vessel. Such refund shall forthwith discharge all obligations, duties and
liabilities of each of the parties hereto to the other under this Contract. The
Seller may, at any time, after the aggregate of the aforementioned delays shall
exceed one hundred and fifty (150) days, as aforesaid, demand in writing that
the Buyer shall make an election, in which case the Buyer shall, within ten (10)
days after such demand is received, either notify the Seller of its intention to
rescind, or agree to an extension of the time for delivery to a future date
specified by the Seller.

     

     

    It being
understood and agreed by the parties that if further delay occurs on account of
the causes specified in this Article beyond such extended delivery date, the
Buyer immediately shall again have the same right of rescission.

     

     

    

     

     

    

     

     

     

    26

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                        X - WARRANTY OF
QUALITY

     

     

    1)         GUARANTEE OF MATERIALS AND
WORKMANSHIP

     

     

    The
Seller shall cause the Builder, for the period of twelve (12) months from the
date of delivery of the Vessel, to guarantee the Vessel, her hull, her engines,
her machineries, outfittings and accessories and all parts and equipments,
excluding Buyer's Supplies stipulated in Article VI hereof, against all defects
which are due to defective material and/or poor workmanship of the Builder
and/or its subcontractors and are neither the result of incompetence,
mismanagement, negligence, accident or willful neglect of the Buyer, its
employees or agents or of any persons other than employees or agents of the
Seller and/or the Builder, nor the effect of perils of the seas or river or
normal wear and tear. The Seller and/or the Builder shall have no obligation
under this guarantee for any defects discovered prior to the expiry date of the
guarantee unless notice of such defects is received by the Seller not later than
thirty (30) days after such expiry date.

     

     

    However,
in case that the Buyer is unable to enter the Vessel in the dry-dock within the
guarantee period as provided above, the Builder's guarantee for the underwater
part of the Vessel which cannot be discovered unless the Vessel is dry-docked,
may be extended until the time of the first dry-docking after the delivery of
the Vessel, subject to the mutual agreement of the parties hereto.

     

     

    
      	
              2)  

            	
              NOTICE OF
      DEFECTS:

            

    

     

     

    The Buyer
shall notify the Seller in writing, or by email or facsimile confirmed in
writing,

     

     

    of any
defects for which claim is made under this guarantee as promptly as possible
after discovery thereof. The Buyer's written notice shall describe the nature
and extent of the defects.

     

     

    3)        EXTENT OF THE SELLER'S AND
THE BUILDER'S LIABILITY

     

     

    

     

     

    

     

     

    27

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    The
Seller and/or the Builder shall be under no obligation with respect to defects
discovered after the expiration of the period of guarantee specified above. The
Seller and/or the Builder shall not be responsible for any consequential damages
occasioned by any defects or for any loss of time in operating or repairing the
Vessel, or both, caused by any defects. Nor shall there be any liability of the
Seller and/or the Builder hereunder for defects in the Vessel or any part or
equipment thereof, caused by fire or accident at sea or elsewhere or by
mismanagement, accidents, negligence or willful neglect on the part of the
Buyer, its employees or agents, or of any persons other than employees or agents
of the Seller and/or the Builder. Likewise, the Seller and/or the Builder shall
not be liable for defects in the Vessel, or any part or equipment thereof, that
are due to repairs which were made by other than the Builder at the direction of
the Buyer, as hereinafter provided.

     

     

    The
provisions of this Article X exclude and negate any other or further
responsibility or liability imposed on the Seller and/or the Builder by statute
or otherwise.

     

     

    
      	
              4)  

            	
              REMEDY OF
      DEFECTS

            

    

     

     

    The
Seller shall cause the Builder to remedy any defects against which the Vessel,
or any part or equipment thereof is guaranteed under this Article, by repairing
or replacing the defective parts at the Builder's shipyard, unless the Vessel
can not be conveniently brought to such shipyard for such repairs.

     

     

    In case
the Vessel can not be conveniently brought to the shipyard of the Builder, the
Buyer may cause necessary repairs or replacements to be made elsewhere at the
direction of the Buyer. In such case the Buyer shall first give the Seller the
notice thereof, and the Seller shall have the right to verify by its own or the
Builder's representative the nature and extent of the defects complained of, and
shall, after such verification, promptly advise the Buyer of its acceptance or
rejection of the defects as one/those that is/are subject to the guarantee
herein provided. Any dispute shall be referred to arbitration in accordance with
the provisions of Article XIII hereof. If the Seller accepts the defects as
one/those justifying remedy under this Article, the Seller shall pay to the
Buyer, unless otherwise agreed upon between the parties hereto, actual cost
incurred for such repairs and replacements.

     

     

    

     

     

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          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    Upon
reasonable requests from the Buyer, duly endorsed by the Builder's engineer if
he is then on board, the Seller shall cause the Builder to forward to the Vessel
necessary parts and/or equipment, by sea freight at Seller's expense, to replace
those which have been found defective in accordance with provisions hereof. If
the Buyer should reasonably require same to be forwarded by air freight, the
Seller shall do so at Seller's expense, provided that, such parts and/or
equipment are essential to and urgently required for the seaworthiness of the
Vessel.

     

     

    The
guarantee contained in this Article shall not be assigned to any party in any
case including but not limited to the case that the Vessel is sold by the Buyer
to the third party, unless prior consent of the Seller is given in
writing.

     

     

    

    
 

     

     

    

     

     

    29

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE

     

     

    XI -
INSURANCE

     

    

     

    
      	
              1)  

            	
              EXTENT OF INSURANCE
      COVERAGE

            

    

     

     

    The
Seller shall cause the Builder, at the Builder's own cost and expense, to insure
the Vessel and all machinery, equipment, appurtenances and outfits, including
the Buyer's Supplies, built into or installed in or upon the Vessel, with first
class insurance company or underwriters in Japan. The amount of such insurance
coverage shall not be less than the aggregate amount of all installments paid by
the Buyer to the Seller, plus the value of the Buyer's Supplies in the custody of
the Shipyard.

     

     

    
      	
              2)  

            	
              APPLICATION OF
      RECOVERED AMOUNTS

            

    

     

     

    In the
event that the Vessel shall be damaged from any insured cause at any time before
delivery of the Vessel, and in the further event that such damage shall not
constitute an actual or a constructive total loss of the Vessel, the amount
received in respect of the insurance shall be applied by the Builder in repair
of such damage, satisfactory to the Classification requirements, and the Buyer
shall accept the Vessel under this Contract if completed in accordance with this
Contract and the Specifications, subject, however, to the extension of delivery
time under Article VIII hereof.

     

     

    Should
the Vessel from any cause become an actual or constructive total loss, the
Seller shall either:

     

     

    
      	
               
      

            	
              (
      a)

            	
              cause
      the Builder to proceed in accordance with the terms of this Contract, in
      which case the amount received in respect of the insurance shall be
      applied to the reconstruction and repair of the damage of the Vessel,
      provided the parties hereto shall have first agreed thereto in writing and
      to such reasonable extension of delivery time as may be necessary for the
      completion of such reconstruction and repair, delays due to such extension
      being deemed to be permissible delays;
or

            

    

     

     

    

     

     

    

     

     

    30

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
               
      

            	
              (b)

            	
              Refund
      promptly to the Buyer the full amount of all sums paid by the Buyer to the
      Seller as installments in advance of delivery of the Vessel and deliver to
      the Buyer all Buyer's Supplies (or the insurance proceeds paid with
      respect thereto), in which case this Contract shall be deemed to be
      automatically terminated and all rights, duties, liabilities and
      obligations of each of the parties to the other shall forthwith cease and
      terminate.

            

    

     

     

    3)  TERMINATION OF
SELLER'S AND/OR BUILDER'S OBLIGATION TO INSURE

     

     

    The
Seller and/or the Builder shall be under no obligation to insure the Vessel
hereunder after delivery of the Vessel to the Buyer.

     

     

    

     

     

    

    
 

     

     

    31

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                      XII - BUYER'S
DEFAULT

     

     

    
      	
              1)  

            	
              DEFINITION OF
      DEFAULT

            

    

     

     

    The Buyer
shall be deemed to be in default of performance of its obligations under this
Contract in the following cases:

     

     

    
      	
              (a)

            	
              If
      the Buyer fails to pay the 1st Installment to the Seller within three (3)
      Business Days after the day and year first above written under the
      provisions of Article II hereof; or

            

    

     

     

    
      	
              (b)

            	
              If
      the Buyer fails to pay the 2nd and 3rd Installments to the Seller within
      three (3) Business Days after such Installment becomes due and payable
      under the provisions of Article II hereof;
or

            

    

     

     

    
      	
              (c)

            	
              If
      the Buyer fails to pay the 4th Installment to the Seller concurrently with
      the delivery of the Vessel by the Seller to the Buyer as provided in
      Article II hereof; or (d) If the Buyer fails to take delivery of the
      Vessel, when the Vessel is duly tendered for delivery by the Seller under
      the provisions of Article VIII hereof;
or

            

    

     

     

    
      	
              (
      e)

            	
              If
      the Buyer cancels or terminates or purports to cancel or terminate or
      issues a notice of cancellation or termination in respect of this Contract
      (save and except as the result of the proper exercise of its rights under
      this Contract); or

            

    

     

     

    
      	
              (f)

            	
              If
      any court order or other order having a legally binding effect on the
      Buyer is requesting the Buyer to cease purchase of the Vessel;
      or

            

    

     

     

    
      	
              (g)

            	
              If,
      after the date of this Contract, a petition is filed or an order is made
      or and effective resolution is passed for the winding up of the Buyer;
      or

            

    

     

     

    
      	
              (h)

            	
              If
      the Buyer ceases to carry on its business or declares its intention to
      cease to carry on its business or generally is subjected to any applicable
      insolvency procedure; or (i) If a receiver, trustee, liquidator or
      sequestrator of, or for, the Buyer or any substantial part of their
      property is appointed.

            

    

     

     

    
      	
              (i)

            	
              If
      a receiver, trustee, liquidator or sequestrator of, or for, the Buyer or
      any substantial part of their property is
  appointed.

            

    

     

     

    32

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
              2)  

            	
              INTEREST
      CHARGE

            

    

     

     

    If the
Buyer is in default of payment as to any installment mentioned above, the Buyer
shall, commencing with and including the due date, pay interest on such unpaid
installment at the rate of two point five percent (2.5%) over the Long-term
prime rate in Japan per annum until such installment including interest thereon
is fully paid.

     

     

    It is
expressly understood that the rate of interest specified in this Contract shall
be the net rate to be received by the party entitled thereto.

     

     

    
      	
              3)  

            	
              RESCISSION BY
      SELLER

            

    

     

     

    If such
default continues for a period of ten (10) days thereafter, the Seller may, at
its option, rescind this Contract by giving notice to the Buyer by email or
facsimile confirmed in writing. Upon receipt of such notice of rescission by the
Buyer, this Contract shall forthwith be rescinded and cancelled, and any lien,
interest or property right that the Buyer may have in and to the Vessel or to
any part or equipment thereof and to any material or part acquired for
construction of the Vessel but not yet utilized for such purpose, shall
forthwith cease, and the Vessel and all parts and equipment thereof shall become
the sole property of the Seller, and any installment or installments theretofore
paid by the Buyer to the Seller on account of this Contract shall be retained by
the Seller, however, the retainment of installments shall not preclude the
Seller from claiming proven loss or damages (except for the consequential loss
or damages), if any, which are suffered by the Seller consequent on rescission
of this Contract.

     

     

    
      	
              4)  

            	
              SALE OF
      VESSEL

            

    

     

     

    In the
event of rescission of this Contract as provided above, the Seller shall have
full right and power either to complete or not to complete the Vessel as it
deems fit, and to sell the Vessel at a public or private sale on such terms and
conditions as the Seller thinks fit without being answerable for any loss or
damage.

     

     

    When the
sale of the Vessel is made, the proceeds shall be received by the Seller and
shall be applied by the Seller as follows:

     

     

    33

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (a) In case of sale of the
Vessel in incomplete state:

     

     

    Firstly
to payment of (1) all costs and expenses attending the sale and otherwise
incurred by the Seller and the Builder as a result of the Buyer's default and
then to (2) compensation to the Seller and the Builder for all costs and
expenses relating to the construction of the Vessel and interest thereon at the
rate of two point five percent (2.5%) over the Long-term prime rate in Japan per
annum and for reasonable loss of profit consequent on the rescission of this
Contract.

     

     

    If the
proceeds of sale plus the installment or installments paid by the Buyer is
sufficient to pay all of the above (1) and (2), the balance shall be paid to the
Buyer, however, if the proceeds of sale is deficient to pay the same, such
deficiency shall forthwith be paid by the Buyer upon demand of the
Seller.

     

     

    (b) In case of sale of the
Vessel after completion:

     

     

    Firstly
to payment of (1) all costs and expenses attending the sale and otherwise
incurred by the Seller and/or the Builder as a result of the Buyer's default and
then to (2) all unpaid installments of the Contract Price and interest of such
installments at the rate of two point five percent (2.5%) over the Long-term
prime rate in Japan per annum from the respective due dates thereof to the date
of application.

     

     

    If there
is any balance left of the proceeds of sale after full payment of all above (1)
and (2), the balance shall be paid to the Buyer, however, if the proceeds of
sale are deficient to pay all of the above (I) and (2), such deficiency shall
forthwith be paid by the Buyer upon demand of the Seller.

     

     

    

     

     

    

     

     

    34

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
              3)  

            	 

    

     

     

    
      	
              4)  

            	 

    

     

     

    ARTICLE XIII - SELLER'S
DEFAULT

     

     

    
      	
              I)  

            	
              DEFINITION OF
      DEFAULT

            

    

     

     

    The
Seller shall be deemed to be in default of performance of its obligations under
this Contract in the following cases:

     

     

    
      	
              (a)

            	
              If
      the Seller cancels or terminates or purports to cancel or terminate or
      issues a notice of cancellation or termination in respect of this Contract
      (save and except as the result of the proper exercise of its rights under
      this Contract); or

            

    

     

     

    
      	
              (b)

            	
              If
      any court order or other order having a legally binding effect on the
      Seller is requesting the Seller to cease sale of the Vessel;
      or

            

    

     

     

    
      	
              (
      c)

            	
              If,
      after the date of this Contract, a petition is filed or an order is made
      or and effective resolution is passed for the winding up of the Seller;
      or

            

    

     

     

    
      	
              (d)

            	
              If
      the Seller ceases to carry on its business or declares its intention to
      cease to carry on its business or generally is subjected to any applicable
      insolvency procedure; or ( e) If a receiver, trustee, liquidator or
      sequestrator of, or for, the Seller or any substantial part of their
      property is appointed.

            

    

     

     

    2) RESCISSION BY
BUYER

     

     

    The payments made by the
Buyer prior to the delivery of the Vessel shall be in the nature of advances to
the Seller. If such default continues for a period of ten (10) days thereafter.
the Buyer may, at its option, rescind this Contract by giving notice to the
Seller by email or facsimile confirmed in writing. Upon receipt of such notice
of rescission by the Seller, this Contract shall forthwith be rescinded and
cancelled.

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    35

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    

     

     

    

     

     

    3).
REFUND BY SELLER:

     

     

    Thereupon
the Seller shall promptly refund to the Buyer the full amount of all sums paid
by the Buyer to the Seller on account of the Vessel, unless the Seller proceeds
to the arbitration under the provisions of Article XIV hereof.

     

     

    In such event, the Seller
shall pay to the Buyers interest at the rate of two point five percent (2.5%)
per annum on the amount required to be refunded to the Buyer, computed from the
respective dates on which such sums were paid by the Buyer to the Seller to the
date of remittance by the Seller.

     

     

    4).
DISCHARGE OF OBLIGATIONS:

     

     

    Upon such
refund by the Seller to the Buyer, all obligations, duties and liabilities of
each of the parties hereto to the other under this Contract shall be forthwith
completely discharged.

     

     

    ARTICLE XIV -
ARBITRATION

     

     

    1)           TECHNICAL
DISPUTES

     

     

    Any
dispute or any difference of opinion between the parties hereto relating to
conformity of the construction of the Vessel or material used to the
Classification requirements or relating to any other technical matters shall be
referred to the Classification Society for settlement by and between the parties
and the Classification Society.

     

     

    In the
event that the settlement cannot be reached by the three parties
above-mentioned, then such matter shall be referred to arbitration as
hereinafter provided.

     

     

    

     

     

    

     

     

    36

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
              2)  

            	
              ARBITRATION

            

    

     

     

    Except
for the case in which the dispute is settled under Paragraph I) hereof, any
dispute arising under or by virtue of this Contract or any difference of opinion
between the parties hereto concerning their rights and obligations under this
Contract, shall be referred to arbitration in Tokyo in accordance with the
prevailing rules and regulations of Japan Shipping Exchange, Inc.

     

     

    
      	
              3)  

            	
              ALTERATION OF DELIVERY
      TIME

            

    

     

     

    In the
event of arbitration of any dispute arising or occurring prior to delivery of
the Vessel, an award of the arbitrators shall include a finding as to whether or
not the delivery date of the Vessel is in any way altered thereby.

     

     

    

     

     

    

     

     

    37

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                               XV-

     

     

    ASSIGNMENT
OF CONTRACT

     

    

     

    

     

     

    Neither
party may assign this Contract in whole or in part to any other individual or
company unless the prior consent of the other party is given in written
agreement.

     

     

    In case
of assignment by the Buyer, such assignment shall further be subject to approval
of the Japanese Government, and the Buyer shall remain liable under this
Contract.

     

     

    This
Contract shall inure to the benefit of and shall be binding upon the lawful
successors or the legitimate assigns of either or both parties.

     

     

    

     

     

     

     

    

     

     

    38

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                      XVI - TAXES AND
DUTIES

     

     

    
      	
              1)  

            	
              TAXES

            

    

     

     

    All taxes
and charges of any kind incurred in connection with this Contract in Japan
except stamp duty in Japan which shall be shared by both parties, shall be borne
by the Seller, and those incurred in countries other than Japan shall be borne
by the Buyer.

     

     

    
      	
              2)  

            	
              DUTIES

            

    

     

     

    The
Seller shall hold the Buyer harmless from any payment of a duty imposed in Japan
upon materials or supplies which the Seller may acquire at its cost and by its
own discretion from abroad for construction of the Vessel. However, the import
duties, if any, on any materials or apparatus which, under the terms of this
Contract and/or Specifications, may be supplied by the Buyer from abroad for
construction of the Vessel, and or any other materials, stores, provisions or
any other goods which the Buyer or its employees may take in from abroad shall
be borne by the Buyer.

     

     

    

     

    

     

     

    

     

     

    39

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                             XVII - PATENTS, TRADE MARKS,
COPYRIGHTS

     

     

    
      	
              1)  

            	
              PATENTS, TRADEMARKS
      AND COPYRIGHTS

            

    

     

     

    Machinery
and equipment of the Vessel may bear the patent numbers, trade marks or trade
names of the manufacturers, Nothing contained herein shall be construed as
transferring any patent or trade mark rights or copyrights in equipment covered
by this Contract, and all such rights are hereby expressly reserved to the true
and lawful owners thereof.

     

     

    The
Seller shall cause the Builder to defend the Buyer and hold it harmless from
patent liability or claim of patent infringement of any nature or kind,
including costs and expenses for, or on account of, any patented or unpatented
invention made or used in the performance of the Contract and also including
costs and expenses of litigation, if any, provided, however, that the Buyer
shall defend the Seller and hold it harmless in respect of infringement of any
patent rights on account of parts or equipment for the Vessel supplied by the
Buyer.

     

     

    
      	
              2)  

            	
              GENERAL PLANS,
      SPECIFICATIONS AND WORKING
DRAWINGS

            

    

     

     

    The Buyer
hereby agrees with the Seller that the Builder retains all rights with respect
to the Specifications, plans, working drawings, technical descriptions,
calculations, test results and other data, information and documents concerning
the design and construction of the Vessel and the Buyer undertakes therefore not
to disclose the same or divulge any information contained therein to any third
parties, without the prior written consent of the Builder, excepting where it is
necessary for usual operation, repair and maintenance of the
Vessel.

     

     

    
 

     

     

    40

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE

     

     

    XVIII-
INTERPRETATION

     

    

     

    In the
event of a conflict or inconsistency between the terms of this Contract and any
of the terms of the Specifications attached hereto, the Specifications shall
prevail in all technical respects and the Contract shall prevail in all other
respects. Should there be any inconsistency or contradiction between the Plans
and the Specifications, the Specifications shall govern.

     

     

    This
Contract shall be construed, take effect and be enforceable in accordance with
and under the laws and regulations prevailing in Japan.

     

     

    

     

     

     

     

    

     

     

    41

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    ARTICLE                         XIX -
NOTICE

     

     

    All
notices and communications in connection with this Contract, except as otherwise
specifically provided, shall be addressed as follows:

     

     

    To the
Buyer:

     

     

    Facsimile:

     

     

    To the
Seller:                                       c/o
Mitsui & Co., LTD.

     

     

    2-1, Otemach 1-chome

     

     

    Chiyoda-ku, Tokyo
100-0004

     

     

    Japan

     

     

    

     

     

    Facsimile:                                81-3-3285-9838

     

     

    

     

     

    To the
Builder:                                MITSUBISHI
HEAVY INDUSTRIES, LTD.

     

     

    16-5, Konan 2-chome

     

     

    Minato-ku, Tokyo 108-8215

     

     

    Japan

     

     

    

     

     

     Facsimile:                                          81-3-6716-5822

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    42

     

     

    

     

     

    

     

     

    ARTICLE                      XX - EFFECTIVE
DATE

     

     

    This
Contract shall become effective upon execution thereof by the Buyer and the
Seller.

     

     

    

     

     

     

    

     

     

    

     

     

    

     

     

    43

     

    
      
        
          {N1783113.1.2}

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Contract to be duly
executed.

     

     

    For the
Buyer:                                                                           For
the Seller:

     

     

    

     

     

    

     

     

    

     

     

    By:                                                                By:

     

     

    Title:                                                                           Title:

     

     

    

     

     

     

     

    

     

     

    

     

     

    44

     

    
      
        
          {N1783121.3}a10k011420097.htm

     

    
      

      

    

    
 

    EXHIBIT
10.1

    

    

    

    AMENDED
AND RESTATED

    EMPLOYMENT
AGREEMENT

    

    Jerry
Smith

    

    THIS AMENDED AND RESTATED
AGREEMENT (the “Agreement”) is made and entered into as of the 31st day of
December, 2008, by and between Shuffle Master, Inc., a Minnesota corporation
(the “Company”), and Jerry Smith (the “Employee”), a resident of the State of
Nevada.

    

    

    RECITALS:

    

    A.           The
Company is in the business of developing, manufacturing, distributing and
otherwise commercializing card shufflers and its proprietary table games (both
live and electronic) (the “Business”), throughout the world.

    

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

    

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

    

    D. On or
about May 14, 2008 (the “Execution Date”), the Employee and Company previously
entered into an employment agreement dated as of May 14th, 2008
(the “Previous Agreement”), as amended by that First Amendment dated November
16, 2008.

    

    E. The
Company and the Employee desire to amend and restate the Previous Agreement
solely in order to make changes to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”).

    

    

    AGREEMENT

    

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

    

    1.           Employment.  The
Company hereby employs Employee as its Executive Vice President, General Counsel
and Corporate Secretary reporting to the Chief Executive Officer of the
Company.  Employee shall perform the normal duties of that
position.  Subject to the other terms and conditions hereof,
Employee’s employment under this Agreement with the Company is for an initial
term of three years and six months (the “Term”), beginning May 1, 2008 (the
“Commencement Date”), through October 31, 2011.  The parties
acknowledge that from the Commencement Date through November 16, 2008, Employee
was employed as the Company’s Senior Vice President and General
Counsel.

    

    2.           Salary,
Bonus and Benefits.

    

    
      	
              a.  

            	
              From
      the Commencement Date and if employed through October 31, 2008, Employee
      shall be paid an annual base salary of no less than Two Hundred Fifty
      Thousand Dollars ($250,000.00), paid in the same intervals as other
      employees of the Company; and if employed through October 31, 2008,
      Employee will also be eligible to receive an executive bonus in accordance
      with the terms and conditions of the executive bonus program authorized by
      the Board of Directors of the Company (the “Board”) for other senior
      management executives of the Company for fiscal year 2008, which, for
      fiscal year 2008, shall have a target bonus of no less than 50% of
      Employee’s base salary.

            

    

    

    
      	
              b.  

            	
              For
      any subsequent year after Fiscal Year 2008, Employee will receive an
      annual base salary of no less than his annual base salary for the
      immediately prior year of this Agreement, as adjusted upward by the
      Company, and will also be eligible to participate in an executive bonus
      program and/or in an individual performance bonus program as authorized by
      the Board for said period.

            

    

    

    
      	
              c.  

            	
              Stock
      option, restricted shares or other equity grants (“Equity”), if any, will
      be at the sole discretion of the
Board.

            

    

    

    
      	
              d.  

            	
              Except
      as modified herein, any Equity issued at any time to Employee shall vest
      in accordance with the terms and conditions set forth in the applicable
      grant by the Board and, as otherwise may be applicable, with any relevant
      terms and conditions of Shuffle Master, Inc.’s 2004 Equity Incentive Plan
      (the “Plan”) or any subsequent plan, except as modified by the terms and
      conditions of the applicable grant by the
Board.

            

    

    

    
      	
              e.  

            	
              During
      the Term, the Company agrees to provide Employee with the same benefits it
      provides all of the other senior management level employees of the
      Company.  Employee will not, however, be eligible to participate
      in the Company’s non-executive bonus
program.

            

    

    

    
      	
              f.  

            	
              Except
      as otherwise set forth herein, Employee’s salary is set in the expectation
      that Employee’s full professional time during the Term will be devoted to
      Employee’s duties hereunder.

            

    

    

    
      	
              g.  

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

            

    

    

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

    

    
      	
              a.  

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

            

    

    

    
      	
              b.  

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

            

    

    

    
      	
              c.  

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

            

    

    

    
      	
              d.  

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

            

    

    

    4.           Non-competition.  In
consideration of the provisions of this Agreement, Employee hereby agrees that
he shall not, during the Term and for a period (the “Non-Compete Period”) of
twenty-four (24) months thereafter:

    

    
      	
              a.  

            	
              Directly
      or indirectly own, manage, operate, participate in, consult with or work
      for any business, which is engaged in the Business anywhere in the
      world.  Notwithstanding the foregoing, it is understood and
      agreed that Employee may hold up to one percent (1%) of the shares of any
      publicly traded company.

            

    

    

    
      	
              b.  

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

            

    

    

    
      	
              c.  

            	
              Directly
      or indirectly provide any services to any person, company or entity, which
      is engaged in the Business anywhere in the
  world.

            

    

    

    5.           Confidentiality;
Inventions.

    

    
      	
              a.  

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

            

    

    

    
      	
              b.  

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

            

    

    

    
      	
              c.  

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

            

    

    

    
      	
              d.  

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

            

    

    

    
      	
              e.  

            	
              Employee
      will not publish or otherwise disclose, either during or after Employee’s
      employment with the Company, any published or proprietary or confidential
      information or secret relating to the Company, the Business, the Company’s
      operations or the Company’s products or services.  Employee will
      not publish or otherwise disclose proprietary or confidential information
      of others to which Employee has had access or obtained knowledge in the
      course of Employee’s employment with the Company.  Upon
      termination of Employee’s employment with the Company, Employee will not,
      without the prior written consent of the Company, retain or take with
      Employee any drawing, writing or other record in any form or nature which
      relates to any of the foregoing.  Notwithstanding the foregoing,
      Employee shall have the right, as reasonably necessary, to retain copies
      of this Agreement, any employee stock option and restricted stock
      agreements, any other documents, information or materials related to
      Employee’s compensation or benefits from the Company (in order to
      confidentially review such items with Employee’s professional advisors or
      immediate family members), and any other documents which relate to
      Employee’s duties or obligations (fiduciary, ethical or otherwise) to the
      Board or the shareholders.  In addition, and subject to the
      provisions of paragraph 24 hereof, nothing in this paragraph 5(e) or in
      paragraph 5(f) below shall be construed to prevent or preclude Employee
      from responding to legal process or testifying
  truthfully.

            

    

    

    
      	
              f.  

            	
              With
      respect to any confidential information, Employee understands that
      Employee’s employment with the Company creates a relationship of trust and
      confidence between Employee and the Company.  Employee
      understands that Employee may encounter information in the performance of
      Employee’s duties that is confidential to the Company or its
      customers.  For the Term hereof, and until the information falls
      into the public domain, Employee agrees to maintain in confidence all
      information pertaining to the Business or the Company to which Employee
      has access including, but not limited to, information relating to the
      Company’s products, inventions, trade secrets, know how, systems,
      formulas, processes, compositions, customer information and lists,
      research projects, data processing and computer software techniques,
      programs and systems, costs, sales volume or strategy, pricing,
      profitability, plans, marketing strategy, expansion or acquisition or
      divestiture plans or strategy and information of similar nature received
      from others with whom the Company does business.  Employee
      agrees not to use, communicate or disclose or authorize any other person
      to use, communicate or disclose such information orally, in writing, or by
      publication, either during Employee’s employment with the Company or
      thereafter except as expressly authorized in writing by the Company unless
      and until such information becomes generally known in the relevant trade
      to which it relates without fault on Employee’s part, or as required by
      law.  Subject to the foregoing, Employee shall have the rights
      set forth in the final two grammatical sentences of paragraph 5(e)
      above.  Confidential information shall not include any
      information in the public domain or otherwise generally available to the
      public.

            

    

    

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

    

    
      	
              a.  

            	
              Employee’s
      employment by the Company is “at will;” therefore, subject to the terms
      and conditions hereof, the Company may terminate Employee’s full-time
      employment at any time either with or without just
      cause.  Because Employee, as of the Execution Date, a) is over
      55 years of age; b) has been either a “C-level” employee with the Company
      or the Company’s General Counsel for at least the last 6 consecutive
      years; and c) has been employed by the Company for at least the last 6
      consecutive years and was over the age of 50 in each of these years,
      therefore, in the event of any termination of Employee’s full-time
      employment with the Company without just cause (including a termination
      without just cause that qualifies as a “Company Termination Without Just
      Cause”, as defined in paragraph 6(b) hereof), or in the event that
      Employee’s full-time employment is not extended or renewed beyond the Term
      on terms at least as favorable to Employee as Employee is receiving during
      the last year of the Term, then Employee will remain bound to the
      covenants not to compete and confidentiality obligations of paragraphs 4
      and 5 of this Agreement, according to their terms, and, subject to Section
      26, each one of the following shall
apply:

            

    

    

    i. Employee
shall be paid a severance amount (the “Severance”) equal to twelve (12) months
of his then monthly base salary paid over a period of twenty-four (24) months
from Employee’s termination, except that, if the termination without just cause
qualifies as a Company Termination Without Just Cause as set forth in any of
paragraphs 6(b)(i), 6(b)(ii), 6(b)(iii) or 6(b) (iv), then the Severance amount
shall be equal to twenty-four (24) months of Employee’s then monthly base salary
paid over a period of twenty-four (24) months from Employee’s termination; and,
in any of said cases, in equal monthly installments and at the same intervals as
other employees of the Company are then being paid their base
salaries;

    

    ii. Employee
shall continue to receive, during the 24 months from Employee’s termination, the
same medical and dental insurance, (including without limitation prescription
drugs), (collectively, “Health Insurance”), and any other benefits or insurance
coverages which Employee would have received had his employment not been so
terminated, or not extended, (but in no event less coverage than Employee is
receiving on the Execution Date, or that is at least equal to the coverage being
received by any senior management level employee); provided, however, if the
Employee is not eligible for said Health Insurance, the Company shall pay the
COBRA premiums for continuation coverage during the said 24-month period;
further provided that, at Employee’s sole option, during said 24-month period,
Employee can elect to also have his spouse covered under said Health Insurance,
with the Employee paying the Company the incremental monthly cost which the
Company incurs to so cover his spouse.  (For the avoidance of doubt,
the Company and Employee agree that it is the intent of this language and of
this paragraph 6(a), and that this language means, among other things, that
Employee will continue to vest in all Equity awards and receive all benefits
during said 24-month period after Employee’s termination);

    

    iii. Employee
shall receive, during the 24-month period from Employee’s termination,
additional compensation (the “Additional Compensation”) for his agreeing herein
to a covenant not to compete, equal to the amount of the average of all of the
annual bonuses which Employee has received over the last five (5) full fiscal
years while working full-time for the Company (the “5-year Bonus Average”), also
paid at the same intervals as Employee is then being paid his base salary,
except that if the termination without just cause qualifies as a Company
Termination Without Just Cause, then the Additional Compensation shall be equal
to the 5-year Bonus Average multiplied by two (2);

    

    iv. During
the 24-month period from Employee’s termination, Employee shall be available to
perform services on a part-time basis (on a guaranteed “no dismissal” basis and
not subject to any termination, other than for just cause) for the Company and,
subject to Employee’s other professional and/or personal duties or time
commitments, shall be reasonably available, by telephone or email, to the Chief
Executive Officer of the Company, but shall not be required to be physically in
the Company’s offices or to travel on behalf of the Company, provided, however,
that, for the avoidance of doubt, the Employee shall perform services during
such 24 month period at a level of no more than 20 percent of the average level
of bona fide services the Employee performed over the immediately preceding 36
month period such that the Employee shall have incurred a “separation from
service” within the meaning of Section 1.409A-1(h) of the Department of Treasury
Regulations on the date of the Employee’s termination of
employment.

    

    

    v. At the
expiration of the 24 month period from Employee’s termination, and continuing
for the rest of Employee’s life, the Employee shall be eligible to participate
in and receive, and the Company shall provide, at no cost to Employee, all
Health Insurance coverage that Employee would have received had the Term not
ended or if the Employee had remained employed on a full-time basis, but in no
event less coverage than Employee was receiving on the Execution Date; provided,
however, if the Employee is not legally eligible for said Health Insurance, the
Company shall pay the COBRA or equivalent premiums for continuation or
equivalent Health Insurance coverage for the rest of Employee’s
life;  further, provided that, at Employee’s sole option, Employee can
elect to also have his spouse covered under said Health Insurance for the
balance of the spouse’s life, with the Employee paying the Company the
incremental monthly cost which the Company incurs to so cover his
spouse.

    

    vi. One (1)
business day before the expiration of the 24-month period from Employee’s
termination, any Equity which is or remains unvested as of said day shall
accelerate vest and be fully vested on such day.

    

    vii. It is
acknowledged that Employee is receiving Health Insurance, as provided herein,
for the rest of his life because, as of the Execution Date, Employee meets the
requirements for such benefits, as follows:

    

    
      	
              (1)  

            	
              the
      Employee is 55 years of age or
older;

            

    

    
      	
              (2)  

            	
              the
      Employee has been either a “C-level” employee with the Company or the
      Company’s General Counsel for at least the last 6 consecutive years;
      and

            

    

    
      	
              (3)  

            	
              the
      Employee has been employed with the Company for at least the last 6
      consecutive years, and was over the age of 50 in each of those
      years.

            

    

    

    
      	
              b.  

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

            

    

    

    i. any
material diminution or reduction of Employee’s title, position, duties,
reporting relationship or responsibilities, except as solely caused by the acts
or omissions of Employee, or Employee no longer reports to the Company’s
CEO;

    

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

    

    iii. the
Company electing (other than for just cause) to end Employee’s full-time
employment, for any reason or no reason, after a new CEO is elected to succeed
Mark Yoseloff;

    

    iv. Employee’s
ending of his employment (whether intentionally or otherwise, or by retirement
or resignation, and irrespective of whether or not the Company is offering
Employee continuing employment), at any time after there is a Change of
Control;

    

    v. Employee’s
ending of his employment (whether intentionally or otherwise, or by retirement
or resignation, and irrespective of whether or not the Company is offering
Employee continuing employment), any time after October 31, 2011;

    

    Provided,
however, that any of the events listed in paragraphs 6(b)(i), 6(b)(ii),
6(b)(iii), and 6(b)(iv) herein shall each qualify as a Company Termination
Without Just Cause; and if there are multiple reasons for Employee’s termination
without just cause, and one of them qualifies as a Company Termination Without
Just Cause, then said termination shall be deemed and treated as a Company
Termination Without Just Cause;

    

    
      	
              c.  

            	
              In
      the event that, at the end of the
Term:

            

    

    

    i)           the
Company elects not to extend or renew Employee’s full-time employment beyond the
Term on terms at least as favorably to Employee as Employee is receiving during
the last fiscal year of the Term, then such non-extension or non-renewal shall
be deemed and treated as a Company Termination Without Just Cause.

     

    ii)           
irrespective of whether or not the Company offers Employee continued employment
or otherwise offers to extend this Agreement, Employee, intentionally or
otherwise, by retirement or resignation, ends his employment, then such
non-renewal, non-extension, or ending of his employment shall be deemed and
treated as a termination without just cause, and governed by the provisions of
paragraph 6(b)(v).

     

    iii)           In
either of such cases, each of the applicable provisions of paragraph 6(a) shall
apply and Employee shall be bound to the provisions of paragraphs 4 and 5 hereof
for the 24-month period of time during which Employee is being paid pursuant to
paragraph 6(a).

     

    
      	
              d.  

            	
              Employee’s
      termination of employment by reason of death or total “Disability” shall
      not be a termination without just cause under paragraph 6; in either such
      event, and notwithstanding any other provisions contained herein, however,
      Employee shall still be entitled upon a termination of employment by
      reason of death or Disability to receive:  a lump sum payment of
      6 months of his then base salary: the acceleration and immediate vesting
      of all Equity; any disability, life insurance, or other benefits to which
      Employee is entitled; and the continuation of the Health Insurance for the
      rest of Employee’s life.  For purposes of this Agreement,
      “Disability” shall mean the total disability as determined by the Board in
      accordance with standards and procedures similar to those under the
      Company’s long-term disability plan, or, if none, a physical or mental
      infirmity which impairs Employee’s ability to perform substantially his
      duties for a period of 180 consecutive days, provided, however, to the
      extent required for purposes of compliance with Code Section 409A, a
      disability shall not be deemed to have occurred unless the disability
      constitutes a “Disability” within the meaning of Code Section
      409A.

            

    

    

    

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

    

    
      	
              a.  

            	
              material
      dishonesty as to a matter which is materially injurious to the Company,
      which act or omission is not remedied by the Employee within thirty (30)
      days following the Board’s specific written notice stating such alleged
      act or omission;

            

    

    

    
      	
              b.  

            	
              the
      commission of a willful act or omission intended to materially injure the
      business of the Company, which act or omission is not remedied by the
      Employee within thirty (30) days following the Board’s specific written
      notice stating such alleged act or
omission;

            

    

    

    
      	
              c.  

            	
              a
      material violation of any of the material provisions of Sections 4 and/or
      5 hereof, which violation is not remedied by the Employee within thirty
      (30) days following the Board’s specific written notice stating such
      alleged violation; or

            

    

    

    
      	
              d.  

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

            

    

    

    8.           Voluntary
Termination by Employee.

    

    
      	
              a.  

            	
              In
      the event Employee “voluntarily quits” (as defined in and subject to
      paragraph 8(b)) his employment with the Company, Employee will remain
      bound under the provisions of paragraphs 4 and 5 hereof, for a period of
      24 months from such voluntary quit, but will not be entitled to receive
      any compensation and benefits following his termination of employment
      except for (and which he shall receive):  any accrued but unpaid
      salary; any other benefits required by law; and any already vested Equity;
      and Employee shall nonetheless still be entitled to receive the Health
      Insurance coverage, from the date of any “voluntary quit” and for the rest
      of Employee’s life, as described in paragraph
  6(a)(v).

            

    

    

    
      	
              b.  

            	
              “Voluntary
      Quit” means an intentional termination by the Employee without good reason
      and without pressure by the Company; and further, provided that, at the
      time of such “Voluntary Quit”, there was not a material breach of this
      Agreement by the Company.  Notwithstanding the foregoing,
      “Voluntary Quit” shall not, in any event, mean and not be deemed to have
      occurred if Employee, intentionally or otherwise, by resignation or
      retirement, and irrespective of whether or not the Company is offering
      Employee continuing employment, either ends his employment pursuant to or
      under any of the provisions of paragraph 6(b) hereof, or if there is any
      termination without just cause.

            

    

    

    9.           Change in
Control.  A Change in Control of the Company shall mean any of
the following:

     

    
      	
              a.  

            	
              The
      Company is no longer a U.S. listed public company for a period of 3
      consecutive months;

            

    

     

    
      	
              b.  

            	
              Fifty
      percent (50%) or more of the Company’s Equity is acquired by or merged
      with another entity or entities; or

            

    

     

    
      	
              c.  

            	
              An
      event defined as a Change in Control in any of the Company’s employee
      stock plans occurs.

            

    

     

    After any
Change in Control, if Employee ends his employment pursuant to 6(b)(iv), then
Employee shall not be required to be physically present in the Company’s offices
or to travel on behalf of the Company during the applicable 24-month period, but
shall be allowed to perform any work required of him during the 24-month period
from a remote location, and by telephone or email, but, at all times, subject to
Employee’s other duties or time commitments; and, further, notwithstanding any
such Change in Control and the provisions of this paragraph 9, each of the
provisions of paragraphs 4, 5 and 6 shall continue to fully apply to
Employee.

     

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

     

    11.           Company
Policies.  Except as otherwise set forth herein, during the
Term, Employee shall engage in no activity or employment which may conflict with
the interest of the Company, and Employee shall comply with all policies and
procedures of the Company including, without limitation, all policies and
procedures pertaining to ethics; provided, however, this paragraph 11 shall not
apply in the event of a Change of Control.

     

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

     

    13.           Injunctive
Relief.  In recognition of the irreparable harm that a
violation by Employee of any of the covenants contained in either paragraphs 4
or 5 hereof would cause the Company, the Employee agrees that, in addition to
any other relief afforded by law, an injunction (both temporary and permanent)
against such violation or violations may be issued against him or her and every
other person and entity concerned thereby, it being the understanding of the
parties that both damages and an injunction shall be proper modes of relief and
are not to be considered alternative remedies; provided, however, that the issue
and amount, if any, of damages shall be litigated through arbitration as
required by paragraph 20 below.  Employee consents to the issuance of
such injunctive relief without the posting of a bond or other
security.  In the event any such alleged violation, THE LOSING PARTY
AGREES TO PAY THE COSTS, EXPENSES AND REASONABLE ATTORNEYS’ FEES INCURRED BY THE
PREVAILING PARTY IN PURSUING OR DEFENDING ANY OF ITS RIGHTS WITH RESPECT TO SUCH
ALLEGED VIOLATIONS, IN ADDITION TO THE ACTUAL DAMAGES SUSTAINED BY THE
PREVAILING PARTY AS A RESULT THEREOF.

     

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

     

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

     

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

     

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

     

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

     

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

     

    20.           Dispute
Resolution.  Except for the Company’s right (either pursuant to
paragraph 13 hereof or otherwise) to injunctive relief to enforce the provisions
of paragraphs 4 and 5 hereof, the exclusive forum for the resolution of any
dispute arising under this Agreement or any question of interpretation regarding
the provisions of this Agreement (other than disputes relative to paragraphs 4
or 5 hereof) shall be resolved by arbitration, to be held in Clark County,
Nevada, in accordance with the rules of the American Arbitration Association
(“AAA”).  Such arbitration shall be before an arbitrator, chosen in
accordance with the rules then in effect of the AAA.  In the event the
Employee and Company fails within a reasonable period of time to agree on an
arbitrator, the arbitrator shall be chosen by the AAA.  The decision
of the arbitrator shall be final, conclusive and binding upon the Company and
Employee.

     

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

     

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

     

    23.           D & O
Policy.  During the Term and for the five (5) year period
thereafter, the Company shall maintain director and officer liability insurance
which shall cover, among others, Employee, and, in connection therewith,
Employee shall be entitled to any applicable indemnification and defense cost
provisions, if any, as provided for in the Company’s By-Laws or under any
applicable director and officer liability insurance
policy.  Employee’s coverage under any director and officer liability
insurance policy shall be no less than that of the most senior corporate officer
of the Company, or, in the event of a Change in Control, no less than that of
the most senior corporate officer of any acquiring entity.

    

    24.           Non-Disparagement
and Cooperation.

     

    
      	
              a.  

            	
              During
      any period of time wherein the Company is paying any base salary to
      Employee, whether during the Term hereof or during any time after the
      termination or expiration of this Agreement, and for a period of three (3)
      years thereafter, Employee shall not disparage or otherwise make any
      negative comments about the Company, its policies, products, employees or
      management.  The Company may enforce these non-disparagement
      provisions by resort to injunctive relief as set forth in paragraph 13, in
      addition to any other damages that it may be entitled to under this
      Agreement or otherwise at law.  Notwithstanding the foregoing,
      nothing in this paragraph 24(a) shall preclude Employee from fully
      pursuing any legitimate claims he may have or from testifying truthfully
      in an arbitration or other legal
proceeding.

            

    

    

    
      	
              b.  

            	
              Employee
      agrees to fully cooperate with the Company and its affiliates during the
      entire scope and duration of any litigation or administrative proceedings
      involving any matters with which Employee was involved during Employee's
      employment with the Company.  Such cooperation shall be subject
      to the reasonable demands of any subsequent employment undertaken by
      Employee, and Company shall cover any reasonable out-of-pocket expenses of
      Employee in so cooperating, excluding, any attorney’s fees incurred by
      Employee, unless said attorney’s fees are expressly authorized, permitted,
      or required under paragraph 23
hereof.

            

    

    

    
      	
              c.  

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

            

    

    

    25.           Limitation
on Benefits.

     

    If any
payment or benefit received or to be received by Employee (including any payment
or benefit received pursuant to any employee stock plan or otherwise) would be
(in whole or part) subject to the excise tax imposed by Section 4999 or Section
280G of the Internal Revenue Code, or any successor provision thereto, or any
similar tax imposed by state or local law, or any interest or penalties with
respect to such excise tax (such tax or taxes, together with any such interest
and penalties, are hereafter collectively referred to as the “Excise Tax”),
then, the payments and benefits provided hereunder shall be reduced to the
extent necessary to make such payments and benefits not subject to such Excise
Tax (with payments scheduled later in time being reduced first, and those
scheduled earlier in time being reduced last), but only if such reduction
results in a higher after-tax payment to Employee after taking into account the
Excise Tax and any additional taxes Employee would pay if such payments
and  benefits were not reduced.

     

    

    26.           Section 409A
Compliance.

    

    
      	
              a.  

            	
              This
      Agreement is intended to comply with Section 409A of the Code (to the
      extent applicable) and, to the extent it would not adversely impact the
      Company, the Company agrees to interpret, apply and administer this
      Agreement in a manner necessary to comply with such requirements and
      without resulting in any diminution in the value of payments or benefits
      to the Employee. Notwithstanding any other provisions of this Agreement,
      the Company does not guarantee that payments will be exempt or comply with
      Section 409A of the Code, nor will the Company indemnify, defend or hold
      harmless Employee with respect to the tax consequences of any such
      failure.

            

    

     

    
      	
              b.  

            	
              It
      is intended that (i) each installment of the payments provided under this
      Agreement is a separate “payment” for purposes of Section 409A of the
      Code, (ii) that the payments satisfy, to the greatest extent possible, the
      exemptions from the application of Section 409A of the Code provided under
      Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(9)(iii), and
      1.409A-1(b)(9)(v) and (iii) all amounts set forth in Section 6 shall be
      payable only upon a termination of the Employee’s employment that
      constitutes a “separation from service” within the meaning of Treasury
      Regulation 1.409A-1(h).

            

    

     

    
      	
              c.  

            	
              Notwithstanding
      anything to the contrary in this Agreement, if the Company determines (i)
      that on the date the Employee’s employment with the Company terminates,
      the Employee is a “specified employee” (as such term is defined under
      Treasury Regulation 1.409A-1(i)(1)) of the Company and (ii) that any
      payments to be provided to the Employee pursuant to this Agreement are or
      may become subject to the additional tax under Section 409A(a)(1)(B) of
      the Code or any other taxes or penalties imposed under Section 409A of the
      Code if provided at the time otherwise required under this Agreement then
      such payments shall be delayed until the date that is six months after the
      date of the Employee’s “separation from service” with the Company, or, if
      earlier, the date of the Employee’s death.  Any payments delayed
      pursuant to this Section 26 shall be made in a lump sum on the first day
      of the seventh month following the Employee’s “separation from service”
      (as such term is defined under Treasury Regulation 1.409A-1(h)), or, if
      earlier, the date of the Employee’s
death.

            

    

     

    
      	
              d.  

            	
              To
      the extent that any reimbursement, fringe benefit or other, similar plan
      or arrangement in which the Employee participates during the term of
      Employee’s employment under this Agreement or thereafter provides for a
      "deferral of compensation" within the meaning of Section 409A of the Code,
      (i) the amount eligible for reimbursement or payment under such plan or
      arrangement in one calendar year may not affect the amount eligible for
      reimbursement or payment in any other calendar year (except that a plan
      providing medical or health benefits may impose a generally applicable
      limit on the amount that may be reimbursed or paid), and (ii) subject to
      any shorter time periods provided herein or the applicable plans or
      arrangements, any reimbursement or payment of an expense under such plan
      or arrangement must be made on or before the last day of the calendar year
      following the calendar year in which the expense was
    incurred.

            

    

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

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

    

    

    
      	
              EMPLOYER:

            	 
      	
              EMPLOYEE:

            
	
               

              SHUFFLE
      MASTER, INC.

            	 
      	
               

              JERRY
      SMITH

            
	
               

               

              BY:   /s/ Mark L.
      Yoseloff

            	 
      	
               

               

              BY:   /s/ Jerry
      Smith

            
	
               

              ITS:  Chief Executive
      Officer

            	 
      	 
      

    

    

    

    

    
      	
              APPROVED:

            	 
      	 
      
	
               

              COMPENSATION
      COMMITTEE

            	 
      	 
      
	
               

               

              BY:   /s/ Lou
      Castle

            	 
      	 
      
	
               

              ITS:  Chairman

            	 
      	 
      

    

    

    

    

    

    

    

    

    
      
         

      

      
        2

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