Document:

Exhibit 10.44

 

AMENDMENT NO. 2 TO

MARKETING
AND DISTRIBUTION AGREEMENT

BETWEEN

VITAL
IMAGES, INC.

AND

TOSHIBA
MEDICAL SYSTEMS CORPORATION

 

THIS AMENDMENT NO. 2 TO MARKETING AND DISTRIBUTION AGREEMENT
(the “Amendment”), is made and entered into this 12th day of December, 2003 by
and between Vital Images, Inc., a Minnesota corporation having its principal
place of business at 3300 Fernbrook Lane N., Suite 200, Plymouth, Minnesota
55447 USA (“Vital Images”) and Toshiba Medical Systems Corporation, having its
place of business at 1385, Shimoishigami, Otawara-Shi, Tochigi 324-8550, Japan
(“Toshiba”).

 

RECITALS:

 

WHEREAS, Vital
Images and Toshiba Corporation, acting through its Medical Systems Company,
previously executed that certain Marketing and Distribution Agreement (the
“Agreement”) dated January 21, 2002, and effective October 1, 2001;
and

 

WHEREAS,
Vital Images and Toshiba Corporation previously executed that certain Amendment
No. 1 to Marketing and Distribution Agreement (the “First Amendment”)
dated January 9, 2003, and effective October 1, 2002; and

 

WHEREAS, Section 14 of the First Amendment
provides that the term of the Agreement would expire on September 30,
2003; and

 

WHEREAS,
as of October 1, 2003, Toshiba succeeded to all of the Toshiba
Corporation’s medical equipment and system business including its rights and
obligations relating thereto, and Vital Images confirms such succession through
signing this Amendment; and

 

WHEREAS, Vital Images and  Toshiba now desire to extend the term of the Agreement to
December 31, 2004 and amend certain terms of the Agreement retroactively
effective as of October 1, 2003 as set forth below.

 

AGREEMENT:

 

NOW, THEREFORE, in
consideration of the premises and the mutual covenants and agreements
hereinafter contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.                                       Article 1 of the Agreement is hereby
amended by adding new Section 1.10, such new sections to read as follows:

 

 

1.10                           Floating License. 
“Floating License” shall mean one software license for a Product which
instead of being restricted to one (1) access point (i.e., a computer
workstation), can be used at more than one (1) access point, provided that such
use shall be restricted to one access point at a time.

 

2.                                       Section 1.2
of the Agreement is hereby restored to the original wording of Section 1.2
in the Agreement, and the amended Section 1.2 as presented in Paragraph 2
of the First Amendment is hereby rescinded.

 

3.                                       Section 2.2 of the Agreement is hereby
amended by deleting the last sentence of said Section 2.2.

 

4.                                       Section 3.1(c) of the Agreement is
hereby restored to the original wording of Section 3.1(c) in the
Agreement, and the amended Section 3.1(c) as presented in Paragraph 4 of
the First Amendment is hereby rescinded.

 

5.                                       Section 3.1(f) of the Agreement is
hereby amended by deleting said Section 3.1(f) and replacing it with the
following:

 

(f)                                    To maintain an adequately trained and
staffed sales and technical support group for the marketing and distribution of
the Products in the Territory, for the First Level Installation in the United
States, and for the First Level Installation 
and First Level Maintenance outside the United States.

 

6.                                       Section 3.3 of the Agreement is hereby
amended by adding the following new paragraph at the end of said
Section 3.3:

 

In
addition, upon written request of Toshiba and/or its Dealer Associates,
Vital Images agrees to grant to Toshiba and/or its Dealer Associates up to four
(4) royalty free software licenses, in total at any time, for the latest
version of the Products solely for use at four (4) mutually agreed-upon
customer sites (“National Show Sites”) in the Territory for purposes of
referrals and business development, provided that such customers do not already
have software licenses for the Products, and subject to the Terms and
Conditions for the Demonstration License attached hereto as Exhibit D.  Vital Images also agrees to provide Toshiba
and/or its Dealer Associates with such update or upgrade releases of the
Products as would be provided to their customers pursuant to Vital Images’
standard software maintenance program, free of charge, during the term of these
National Show Site licenses.  It is
understood and agreed that the National Show Sites are expected by Vital Images
to become “clinical collaborators” pursuant to Vital Images’ standard
collaboration agreement.

 

7.                                       Section 3.6 of the Agreement is hereby
amended by deleting its first sentence and replacing it with the following:

 

Toshiba and its
Dealer Associates assume full responsibility for all its own costs and expenses
incurred in carrying out its obligations under this Agreement, including but
not limited to all rents, salaries, commissions, advertising, 

 

2

 

demonstrations,
travel and accommodations; provided, however, Vital Images will provide to
Toshiba and its Dealer Associates at no charge training for (a) one hundred
(100) of Toshiba’s and the Dealer Associates’ sales and technical support
staff, and (b) two (2) of Toshiba America Medical Systems, Inc.’s (“TAMS”)
clinical managers, at Vital Images’ facilities or at any other
mutually-agreeable location, in the function, application, installation and the
First Level Maintenance of the Products and in the provision of assistance to
Vital Images in the Second Level Maintenance, provided, however, Toshiba or the
Dealer Associates shall pay the salaries and all transportation and living
expenses for its staff.

 

8.                                       Article 3 of the Agreement is hereby
amended by adding new Section 3.7, such new section to read as
follows:

 

3.7                                 Clinical Support License. Upon written request of Toshiba,
Vital Images agrees to grant to Toshiba and/or its Dealer Associates up to five
(5) royalty free software licenses, in total at any time, for the latest
version of the Products solely for their own clinical support uses, subject to
the Terms and Conditions for the Demonstration License attached hereto as Exhibit
D.  Three (3) of the clinical support
licenses shall be available for use in the U.S., and two (2) of the clinical
support licenses shall be available for use outside the United States.  Vital Images also agrees to provide Toshiba
and/or its Dealer Associates with such update or upgrade releases of the
Products as would be provided to their customers pursuant to Vital Images’
standard software maintenance program, free of charge, during the term of these
clinical support licenses.  Toshiba
hereby acknowledges and agrees that these licenses will be solely for the
internal use of Toshiba and/or its Dealer Associates and shall not be used at
any time by or for their customers.

 

9.                                       Section 4.5 of the Agreement is hereby
amended by deleting the words “(excluding TMSJ)” in the second and third
sentences of the second paragraph.

 

10.                                 Section 5.2 of the Agreement is hereby
amended by deleting said Section 5.2 and replacing it with the following:

 

5.2                                 First Level Maintenance Service.  In
accordance with their technical ability, and based upon their prior experience
and training by Vital Images, Toshiba and/or the Dealer Associates shall use
their reasonable best efforts to provide the First Level Maintenance to
customers outside the United States. 
Vital Images shall provide First Level Maintenance to customers within
the United States.  If Vital Images
requests on-site assistance from Toshiba or TAMS in the United States, such
assistance will be provided at a *% discount off of Toshiba’s or TAMS’
prevailing labor rates.

 

*                 The material has been omitted pursuant to a
request for confidential treatment and the material has been filed separately
with the Office of the Secretary of the Securities and Exchange Commission.

 

3

 

11.                                 Section 6.1 of the Agreement is hereby
amended by adding the following new paragraph at the end of said
Section 6.1:

 

In recognition of the
purchase commitments made by Toshiba and its Dealer Associates pursuant to
Section 4.5 of this Agreement, Vital Images hereby covenants and agrees
that the transfer price charged to Toshiba and its Dealer Associates for the
Products shall at all times be lowest transfer price charged by Vital Images to
its vendors, unless a vendor makes purchase commitments in excess of those made
by Toshiba and its Dealer Associates.

 

12.                                 Section 8.1(c) of the Agreement is
hereby amended by deleting said Section 8.1(c) and replacing it with the
following:

 

8.1(c)  Warranty Extension.  Replacement or correction of all or any part
of the Products does not extend the Warranty Period, which shall begin on the
delivery date.  Notwithstanding the
foregoing, and notwithstanding Section 8.1(a) above, in the event that the
Products have been installed on a hardware platform which has been recommended
by Vital Images, and do not perform as a result of problems with such hardware,
the Warranty Period shall not commence until the date on which all issues
defined in the customer’s warranty claim have been resolved.  Vital Images and its third party licensors
expressly disclaim any commitment to provide maintenance or support of the
Products beyond the Warranty Period, in the absence of entering into a separate
software maintenance arrangement with Vital Images and except to the extent
stated in Section 5.1 for the 6-month post warranty grace period.
Furthermore, the Products are derived from and include software from third
party licensors, who make no warranty, express or implied, regarding the
Products, who disclaim any and all liability for the Products and who will not
undertake to provide any information or support regarding the Products.

 

13.                                 Exhibit A to the Agreement, setting forth the
Products, is hereby amended and restated as set forth on attached Exhibit A
to this Amendment.

 

14.                                 Exhibit C to the Agreement, setting forth the List of
Dealer Associates, is hereby amended and restated as set forth on attached Exhibit
C to this Amendment.

 

15.                                 Exhibit E to the Agreement, setting forth Product Prices, is hereby amended and
restated as set forth on attached Exhibit E to this Amendment.

 

16.                                 Exhibit F to the Agreement, setting forth Product Commitments, is hereby amended
and restated as set forth on attached Exhibit F to this Amendment.

 

17.                                 Notwithstanding Section 14.1 of the
Agreement, setting forth the Term of the Agreement, this Amendment No. 2
shall extend the Term of the Agreement until December 31, 2004.

 

18.                                 This Amendment shall take effect
retroactively as of October 1, 2003.

 

4

 

19.                                 Vital
Images hereby confirms and agrees to Toshiba’s succession to all of Toshiba
Corporation’s rights and obligations under the Agreement, as amended by the First Amendment and this Amendment No. 2.

 

20.                                 Except as amended hereby, the Agreement, as
amended by the First Amendment, shall remain in full force and effect in
accordance with its original terms. 
The amended portions of the Agreement shall be read, wherever reasonable
to do so, to be consistent with the portions not so amended; provided that the
amended portions shall be deemed to control and any conflict shall be resolved
in favor of such amended portions.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

5

 

IN WITNESS WHEREOF, the parties hereto have
executed this Amendment effective the day and year first above written.

 

	
  VITAL IMAGES, INC.

  	
  TOSHIBA MEDICAL SYSTEMS

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ Jay D. Miller

  	
   

  	
  By

  	
  /s/ Kenichi Komatsu

  
	
   

  	
   

  	
   

  
	
  Name

  	
  Jay D. Miller

  	
   

  	
  Name

  	
  Kenichi Komatsu

  
	
   

  	
   

  	
   

  
	
  Title

  	
  President & CEO

  	
   

  	
  Title

  	
  Chief Technology
  Executive

  
									

 

6

 

VITAL IMAGES, INC. AND TOSHIBA
MEDICAL SYSTEMS CORPORATION

MARKETING AND
DISTRIBUTION AGREEMENT

 

EXHIBIT A

PRODUCTS

 

 

Vitreaâ
2

 

VScoreÔ

 

VScore with EKG GateÔ

 

VScore with AutoGateÔ

 

3D
Angiography Option

 

CT Colonography Option

 

Automated Vessel Measurements Option

 

CT Perfusion Option

 

CT Cardiac Option with CFA

 

CT Cardiac Option with CFA and
Peripheral Vessel Probe Option

 

Peripheral Vessel Probe Option

 

Fusion 7D OptionTM

 

ImageChecker LN 500 OptionTM

 

ImageChecker LN 1000 OptionTM

 

Upgrade from ImageChecker LN
500TM  to ImageChecker LN 1000TM

 

Bone Mineral Analysis Option

 

 

VITAL IMAGES, INC. AND TOSHIBA
MEDICAL SYSTEMS CORPORATION

MARKETING AND
DISTRIBUTION AGREEMENT

 

EXHIBIT C 

LIST OF DEALER ASSOCIATES

 

	
  Company Name

  	
   

  	
  MAIN COUNTRY

  	
   

  	
  Address

  
	
  *

  	
   

  	
  *

  	
   

  	
  *

  

 

*                 The material has been omitted pursuant to a
request for confidential treatment and the material has been filed separately
with the Office of the Secretary of the Securities and Exchange Commission.

 

 

VITAL IMAGES, INC. AND TOSHIBA
MEDICAL SYSTEMS CORPORATION

MARKETING AND
DISTRIBUTION AGREEMENT

 

EXHIBIT E

PRODUCT PRICE LIST (EFFECTIVE FROM
OCTOBER 1, 2003)

 

	
   

  	
   

  	
  Platform Configuration

  Required

  	
   

  	
  Pricing

  	
   

  	
  Annual Software

  Maintenance Pricing

  	
   

  
	
  License

  	
   

  	
   

  	
  U.S.(1)

  	
   

  	
  Non-U.S.(2)

  	
   

  	
  U.S.

  	
   

  	
  Non-U.S.

  	
   

  
	
  Vitrea  â 2

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  VScoreÔ
  option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  VScore with EKG GateÔ
  option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  VScore with
  AutoGateÔ option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  3D Angiography
  Option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  CT Perfusion Option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  CT Colongraphy Option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  Automated Vessel Measurements
  Option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  CT Cardiac Option with CFA

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  CT Cardiac Option with CFA and
  Peripheral Vessel Probe Option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  Peripheral Vessel Probe Option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  Fusion 7D OptionTM

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  ImageChecker LN 500 OptionTM

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  ImageChecker LN 1000 OptionTM

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  Upgrade from ImageChecker LN
  500TM  to ImageChecker LN 1000TM

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  Bone Mineral Analysis Option

  	
   

  	
  Windows Platform

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  Floating License

  	
   

  	
   

  	
   

  	
  $*, plus $* for
  each additional access point (3)(4)

  	
   

  	
  $*, plus $* for
  each additional access point (4)

  	
   

  	
  *

  	
   

  	
   

  	
   

  

 

 

(1)   Includes warranty pursuant to
Section 8.1(a) of the Agreement, end user training, and, subject to
Section 3.6 of the Agreement, the Second Level Installation.

 

(2)  Includes warranty pursuant to
Section 8.1(a) of the Agreement, the CT Colonography Option, the Automated
Vessel Measurements Option, and, subject to Section 3.6 of the Agreement,
the Second Level Installation.

 

(3)  When TAMS is able to perform installation in
the United States, the pricing for each additional access point will decrease
to $* for each additional access point.

 

(4)   The charge for additional access points
applies for each access point in excess of the one (1) access point covered by
the base Vitreaâ 2 Software License.

 

ADDITIONAL MAINTENANCE PRICING
(EFFECTIVE FROM OCTOBER 1, 2003)

 

	
   

  	
   

  	
  Pricing

  	
   

  
	
  Maintenance Package

  	
   

  	
  U.S.

  	
   

  	
  Non-U.S.

  	
   

  
	
  Premium Maintenance Package

  Includes 24x7 support, 4 hour on-site response, proactive support and
  preventative maintenance

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  530 Memory Upgrade
(530 Systems Only)

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  ATI Graphics Upgrade
(530 and 650 Systems Only)

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  License Transfer
  Fee

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  Technology
  Refresh

  Toshiba provides new hardware within 18-24 months of initial sale; Vital
  Images provides configuration information and administration, and license
  transfer (U.S. only)

  	
   

  	
  *

  	
   

  	
  *

  	
   

  

 

*                 The material has been omitted pursuant to a
request for confidential treatment and the material has been filed separately
with the Office of the Secretary of the Securities and Exchange Commission.

 

 

VITAL IMAGES, INC. AND TOSHIBA CORPORATION

MARKETING
AND DISTRIBUTION AGREEMENT

 

EXHIBIT F

PRODUCT COMMITMENTS

 

Toshiba and/or its Dealer
Associates shall purchase from Vital Images during the fifteen (15) month
period ended December 31, 2004 the following Vitrea  â 2 Software License minimums:

 

YEAR 1

 

	
   

  	
   

  	
  Commitment

  	
   

  	
  Cumulative
  Total

  	
   

  
	
   

  	
   

  	
  U.S.

  	
   

  	
  Non-U.S.

  	
   

  	
  U.S.

  	
   

  	
  Non-U.S.

  	
   

  
	
  QUARTER
  4  Oct. 1, 2003 - Dec. 31, 2003

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  

 

YEAR 2

 

	
   

  	
   

  	
  Commitment

  	
   

  	
  Cumulative
  Total

  	
   

  
	
   

  	
   

  	
  U.S.

  	
   

  	
  Non-U.S.

  	
   

  	
  U.S.

  	
   

  	
  Non-U.S.

  	
   

  
	
  QUARTER
  1  Jan. 1, 2004 - Mar. 31, 2004

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  QUARTER
  2  April 1, 2004 - June 30,
  2004

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  QUARTER
  3  July 1, 2004 - Sept. 30, 2004

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  QUARTER
  4  Oct. 1, 2004 - Dec. 31, 2004

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  

 

Any purchases made by Toshiba and/or its Dealer Associates pursuant to
Sections 3.2 and 3.3 of this Agreement shall not be credited against the Commitment.

 

*                 The material has been omitted pursuant to a
request for confidential treatment and the material has been filed separately
with the Office of the Secretary of the Securities and Exchange Commission.Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

Mark L. Yoseloff

 

THIS AGREEMENT is
made and entered into as of the 23rd day of February, 2004, by and between
Shuffle Master, Inc., a Minnesota corporation (the “Company”), and Mark L.
Yoseloff (the “Employee”), a resident of the State of Nevada.

 

RECITALS:

 

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

 

B.                                     The
Company and Employee want to create a Fixed employment relationship that
protects the Company with appropriate confidentiality and non—compete covenants
and rewards the Employee for performing his obligations for the full term of
this contract or such shorter term as may be created by his earlier termination
by the Company or its successors pursuant to this Agreement.

 

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

 

D.                                    Nothing
contained in this Agreement precludes the Company and Employee from extending,
renegotiating, or otherwise modifying Employee’s employment relationship by
mutual agreement of the Company and Employee.

 

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 Chief Executive Officer and Chairman of
the Board of Directors. Employee shall perform the duties of those positions
and shall perform such other related duties as the Company’s

 

 

Board of Directors may direct from time to
time. Employee’s employment with the Company is for the period beginning
February 23, 2004 through October 31, 20072 but may be terminated earlier in accordance with the
provisions of this Agreement, or extended or otherwise modified by the mutual
agreement of Employee and the Company.

 

2. Salary
and Benefits. During the period from February 23, 2004 through
October 31, 2007. (a) Employee shall be paid an annual base salary of Four
Hundred Thousand Dollars ($400,000.00), paid in the same intervals as other
employees of the Company; and (b) for each fiscal year during which Employee is
employed through October 31, 2007, Employee will be eligible to receive an
executive bonus in accordance with the terms and conditions of the executive
bonus program as authorized each year by the Board of Directors of the Company.
Employee has received a stock option grant to purchase one hundred sixty-five
thousand (165,000) shares of the Company’s common stock in accordance with, and
subject to, the terms and conditions imposed by the Board of Directors at its
February 23rd, 2004 meeting and the Company’s Employee Stock Option Plans. This
stock option grant will vest and become exercisable in accordance with the
terms and conditions imposed by the Board of Directors including the following:

 

A.            Fifty-five thousand (55,000) shares will become
exercisable the earlier of October 31st 2005 or the date on which
the Company’s closing stock price has increased by thirty (30) per cent from
its closing price on February 23rd 2004.

 

B.            Fifty- five thousand
(55,000) shares will become exercisable the earlier of October 31st
2005, or the date on which the Company’s closing stock price has increased by
forty (40) per cent from its closing price on February 23rd 2004.

 

 

C. Fifty-five thousand (55,000) shares will
become exercisable the earlier of April 30`h, 2006, or the date on which
the Company’s closing stock price has increased by fifty (50) per cent from its
closing price on February 23rd, 2004.

 

The Board does not anticipate making
additional stock option grants to the Employee during the term of this
contract. However, future Stock Option grants to the Employee are at the
discretion of the Company’s Board of Directors. Employee’s salary is set on the
expectation that (except for vacation days and holidays) Employee’s full time
will be devoted to Employee’s duties hereunder. In addition, in the event that
the Company’s shareholders approve a restricted stock plan, the Company’s Board
of Directors will develop a performance based bonus plan that provides the
employee with an opportunity to receive shares of restricted stock. The Company
agrees to provide Employee with the benefits it provides its executive team.
Employee will not, however, be eligible to participate in the Company’s
non-executive bonus program.

 

3.
Strategic Performance Bonus. The Board of Directors of
the Company believes that long-range, strategic planning is among the most
important duties of the Company’s Chief Executive Officer, including
identifying and working toward the successful growth and diversification of the
Company and the creation and maintenance of a succession plan for the Company’s
executives. In order to motivate and reward Employee regarding these duties,
the Company’s Board of Directors, in its discretion, may grant employee special
bonuses based upon specific factors determined by the Company’s Board of
Directors from time to time and communicated to Employee.

 

 

4.             Outside
Consulting. Employee shall devote Employee’s full-time and best
efforts to the Company. Employee may render consulting services to other
businesses from time to time if Employee first obtains the consent of the Board
of Directors of the Company.

 

5.             Non-competition.
In consideration of the provisions of this Agreement, Employee shall
not, while employed full-time by the Company or its successor:

 

(a)                                  directly
or indirectly own, manage, operate, participate in, consult with or work for
any business which is engaged in the Business.

 

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

 

In further
consideration of the provisions of this Agreement Employee is entering into a
Covenant Not to Compete Agreement effective February 23rd 2004
covering Employee during the three year period immediately following his last
day of employment

 

6.             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 working 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 unpublished 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.

 

(f)                                    Employee
understands that Employee’s employment with the Company creates a relationship
of trust and confidence between Employee and the Company. Employee understands
that Employee may encounter information in the performance of Employee’s duties
that is confidential to the Company or its customers. 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.

 

7. Early Termination by the Company for Just Cause. The
Company may terminate Employee for just cause. In the event the Company (or its
successor) terminates the Employee for just cause, in consideration of the
Company’s obligations under this Agreement, the Employee will remain bound
under the Covenant Not to Compete Agreement entered into between the Company
and Employee effective February 23rd, 2004 for a period of three years
immediately following his last day of employment, and the confidentiality
obligations contained in Section 6 for as long as the information covered by
Section 6 remains confidential. Termination for “just cause” shall include, but
not be limited to:

 

(a)                                       dishonesty
as to a matter which is materially injurious to the Company;

 

(b)                                      the
commission of a willful act or omission which materially injures the business
of the Company;

 

(c)                                       a
violation of any material provision of this Agreement, including, in
particular, the provisions of Sections 4 and 5 hereof;

 

(d)                                      any
determination by a gaming regulatory body that Employee is found unsuitable as
a key employee qualifier, or the actions of the Employee result in the loss of
a gaming license that permits the Company to engage in business within a
jurisdiction; or

 

 

(e) a determination in good faith by the vote of all outside members of
the Company’s Board of Directors that the Employee has failed to make a good
faith effort to perform his duties as assigned by the Board of Directors;

 

provided, that if the Company
desires to terminate Employee for the reasons stated in subsection 7(d), it
shall first give Employee written notice of such intention, stating the
specific reasons for the termination, and Employee shall have thirty (30) days
from the date of receipt of such notice to cure the alleged wrongdoing to the
reasonable satisfaction of the outside members of the Company’s Board of
Directors.

 

8.             Employee’s Voluntary Termination and Employee’s
Termination Without Cause. In the event Employee voluntarily
terminates his employment with the Company (or its successor), in the event the
Company (or its successor) terminates the Employee without just cause or in the
event the Company (or its successor) does not renew this Agreement on terms at
least as favorable to Employee as Employee is receiving on February 23, 2004,
then Employee will be bound under the confidentiality obligations of Section 6
for as long as the information remains confidential and the Covenant Not to
Compete Agreement entered into between the Company and Employee effective
February 23rd, 2004 Voluntary termination means any termination by
the Employee except for one made in response to an attempt by the Company to
terminate Employee for just cause under Section 7. Voluntary termination
includes a termination caused by the death of Employee or disability of
Employee for more than six (6) months.

 

9.             Part-time Employment. In the event that
Employee is terminated during the term of this Agreement without “just cause”
(as defined in Section 7), then during the three (3) year period immediately
following Employee’s last day of employment (the Part-time Employment Period”),
Employee will be paid each month as Employee’s sole

 

 

remedy an amount determined as follows:
Employee’s annualized base salary as of his last day of employment will be
added to Employee’s average annual bonus awarded under the annual executive
bonus program over the last three (3) years. The resulting amount will be paid
to Employee in equal amounts at the same intervals as other employees of the Company
over the two and one-half (2 1/2) year period immediately following his last
day of employment.

 

Employee’s salary during the Part-time
Employment Period is set on the expectation that Employee’s time will be spent
as reasonably needed to perform his duties to assist the Company’s new Chief
Executive Officer and Chairman of the Board. The Company will not require that
Employee travel more than two (2) nights per month during his Part-time
Employment Period. The Company agrees to provide Employee with the general
benefits it provides its non-executive employees during his Part-time
Employment Period. Employee will not, however, receive any vacation, be
eligible to participate in the Company’s non-executive bonus program, nor will
Employee be eligible to participate; in the Company’s executive bonus program
and the executive stock option plan.

 

10.
Change in Control. For the purposes of this Agreement,
“Change in Control” of the Company shall be defined the same as the conditions
for acceleration of an employee’s stock options, pursuant to the Company’s 2003
Stock Option Plan as amended (the “Plan”),. Any compensation or payments to
Employee resulting from a Change in Control shall be determined in its entirety
under the terms provided in the Covenant Not to Compete Agreement. In the event
of a Change in Control Employee will reasonably cooperate with the Company and
exercise his stock options in a way as to

 

 

not hinder the progress or
closing of the transaction, and in no event later than three (3) months
following the closing.

 

11.           Stock
Options. All stock options granted at any time to Employee shall
vest in accordance with the terms and conditions set forth in the applicable
grant by the Board and, as otherwise may be applicable, with any relevant terms
and conditions of the 2003 Stock Option Plan as amended (the “Plan”), to the
extent that said options are from the Plan, or, for any options issued out of
the New Plan, then pursuant to the New Plan.

 

12.           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.

 

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

 

14.           Independent Covenants. The covenants on the
part of the Employee contained in Sections 5 and 6 hereof shall be construed as
agreements independent of any other provision in this Agreement; 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 to enforcement by the Company of
those covenants.

 

15.           Injunctive Relief; Attorneys’ Fees. In
recognition of the irreparable harm that a violation by Employee of any of the
covenants contained in Sections 5 and 6

 

 

hereof would cause the Company, the Employee
agrees that, in addition to any other relief afforded by law, an injunction
(both temporary and permanent) against such violation or violations may be
issued against him or her and every other person and entity concerned thereby,
it being the understanding of the parties that both damages and an injunction
shall be proper modes of relief and are not to be considered alternative
remedies. Employee consents to the issuance of such injunction relief without
the posting of a bond or other security. In the event of any such violation, THE
EMPLOYEE AGREES TO PAY THE COSTS, EXPENSES AND REASONABLE ATTORNEYS’ FEES
INCURRED BY THE COMPANY IN PURSUING ANY OF ITS RIGHTS WITH RESPECT TO SUCH
VIOLATIONS, IN ADDITION TO THE ACTUAL DAMAGES SUSTAINED BY THE COMPANY AS A
RESULT THEREOF.

 

16.           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.

 

17.           Entire
Agreement. This Agreement is the entire agreement of the parties
hereto concerning the subject matter hereof and supersedes and replaces any
oral or written existing agreements between the Company and the Employee
relating generally to the same subject matter. The Company and Employee hereby
acknowledge that there are no agreements or understandings of any nature, oral
or written, regarding Employee’s employment, apart from this Agreement.

 

18.           Severability. It is further agreed and
understood by the parties hereto that if any provision of this Agreement should
be determined by a 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.

 

19.           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.

 

20.           Heirs, Successors and Assigns. The terms,
conditions, 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 and assigns.

 

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.

  	
   

  
	
   

  	
  /s/ Mark L.
  Yoseloff

  	
   

  
	
  By:

  	
  /s/ Paul C.
  Meyer

  	
   

  	
  Mark L.
  Yoseloff

  
	
  Its:
  President and Chief Operating Officer

  	
   

  
	
   

  	
   

  
	
  APPROVED:

  	
   

  
	
   

  	
   

  
	
  /s/ Garry
  Saunders

  	
   

  	
   

  
	
  Garry
  Saunders

  	
   

  
	
  Chairman

  	
   

  
	
  Shuffle
  Master Compensation Committee

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