Document:

Exhibit 10.1

 

***
Confidential Treatment Requested Under 17 C.F.R. Section 240.24b-2

 

Elixir Group Limited

 

and

 

Melco International Development Limited

 

and

 

Stargames Corporation Pty Ltd

ACN 001 660 537

ABN 69 001 660 537

 

and

 

Shuffle Master Inc

 

 

Asia
Representative Agreement

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page no.

  
	
   

  	
   

  	
   

  
	
  1

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
  1

  
	
   

  	
  1.2

  	
  Words and
  expressions

  	
  5

  
	
   

  	
  1.3

  	
  Other rules of
  interpretation

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  2

  	
  Term

  	
  7

  
	
   

  	
   

  	
   

  
	
  3

  	
  Grant of rights

  	
  7

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Grant of
  Exclusive Rights

  	
  7

  
	
   

  	
  3.2

  	
  Distribution of
  Relevant Table Gaming Products

  	
  8

  
	
   

  	
  3.3

  	
  Consideration
  of Possible Grant of Certain Non-Exclusive Rights

  	
  8

  
	
   

  	
  3.4

  	
  Licence

  	
  9

  
	
   

  	
  3.5

  	
  Retail Prices

  	
  9

  
	
   

  	
  3.6

  	
  Agency

  	
  9

  
	
   

  	
  3.7

  	
  Reserved Rights

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  4

  	
  Servicing of Products

  	
  10

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Right to service

  	
  10

  
	
   

  	
  4.2

  	
  Second level
  support

  	
  10

  
	
   

  	
  4.3

  	
  Acquisition of
  Spare Parts

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  5

  	
  Exclusivity and Non-Competition

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Exclusivity of
  Representative

  	
  11

  
	
   

  	
  5.2

  	
  Exceptions

  	
  11

  
	
   

  	
  5.3

  	
  Representative’s
  remedy

  	
  11

  
	
   

  	
  5.4

  	
  Referral of
  Customers

  	
  11

  
	
   

  	
  5.5

  	
  Adjustments as
  a consequence of certain Supplier sales outside the Exclusive Territory

  	
  12

  
	
   

  	
  5.6

  	
  Sales Outside
  the Territory

  	
  12

  
	
   

  	
  5.7

  	
  Exclusive
  distribution of Products

  	
  12

  
	
   

  	
  5.8

  	
  Exceptions to
  exclusivity

  	
  13

  
	
   

  	
  5.9

  	
  Adjustments as
  a consequence of Representative’s sales outside the Exclusive Territory

  	
  13

  
	
   

  	
  5.10

  	
  Stargames’
  remedy

  	
  13

  
	
   

  	
  5.11

  	
  Termination by
  [***]

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  6

  	
  Joint Co-operation

  	
  14

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Right of
  refusal over new opportunities

  	
  14

  
	
   

  	
  6.2

  	
  Originating
  Party may pursue

  	
  14

  
	
   

  	
  6.3

  	
  Related Party
  sales

  	
  14

  
	
   

  	
  6.4

  	
  Access to
  information

  	
  14

  
	
   

  	
  6.5

  	
  Access to
  Technology and Improvements

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  7

  	
  Obligations of the Representative

  	
  15

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Representative’s
  Obligations

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  8

  	
  Obligations of each Supplier

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Supplier’s
  Obligations

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  9

  	
  Obligations of all Parties

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Costs and
  Expenses

  	
  20

  
	
   

  	
  9.2

  	
  R & D
  Centre Agreement

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  10

  	
  Warranties

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Warranties of
  Stargames

  	
  20

  
	
   

  	
  10.2

  	
  Warranties of
  the Representative

  	
  21

  
	
   

  	
  10.3

  	
  Status of
  warranties

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  11

  	
  Products warranty

  	
  22

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Factory
  Warranty

  	
  22

  
	
   

  	
  11.2

  	
  Product
  Liability

  	
  22

  
	
   

  	
  11.3

  	
  Limited
  Warranty

  	
  22

  
	
   

  	
  11.4

  	
  Excluded Claims

  	
  22

  
	
   

  	
  11.5

  	
  Limitation of
  Liabilities

  	
  23

  

***Confidential Treatment Requested

 

i

 

	
  12

  	
  Orders and deliveries

  	
  23

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Order Forms

  	
  23

  
	
   

  	
  12.2

  	
  Deliveries

  	
  24

  
	
   

  	
  12.3

  	
  [***]
  Adjustment

  	
  24

  
	
   

  	
  12.4

  	
  Accepted Order
  Forms

  	
  24

  
	
   

  	
  12.5

  	
  Products
  manufactured in Australia

  	
  24

  
	
   

  	
  12.6

  	
  Stargames’
  rights

  	
  25

  
	
   

  	
  12.7

  	
  Advance payment
  or credit

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  13

  	
  Manufacture of Relevant Gaming Machines

  	
  25

  
	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Stargames to
  initially manufacture Relevant Gaming Machines

  	
  25

  
	
   

  	
  13.2

  	
  Representative
  to be able to monitor manufacturing

  	
  25

  
	
   

  	
  13.3

  	
  No Obligation

  	
  25

  
	
   

  	
  13.4

  	
  Representative’s
  ability to commence manufacturing

  	
  26

  
	
   

  	
  13.5

  	
  Ownership of
  Manufacturing Plant

  	
  26

  
	
   

  	
  13.6

  	
  Limitation on
  Representative’s ability to manufacture

  	
  26

  
	
   

  	
  13.7

  	
  Products
  warranty

  	
  27

  
	
   

  	
  13.8

  	
  Manufacture of
  Relevant Table Gaming Products

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  14

  	
  Payments for Relevant Gaming Machines

  	
  27

  
	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Royalties

  	
  27

  
	
   

  	
  14.2

  	
  Payment of Cost
  and Royalty

  	
  27

  
	
   

  	
  14.3

  	
  Minimum Royalty

  	
  28

  
	
   

  	
  14.4

  	
  Audit Rights

  	
  28

  
	
   

  	
  14.5

  	
  Stargames [***]

  	
  28

  
	
   

  	
  14.6

  	
  Changes to the
  Gaming Machine Cost

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  15

  	
  Payments for Relevant Table
  Gaming Products

  	
  29

  
	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Table Gaming
  Product Prices

  	
  29

  
	
   

  	
  15.2

  	
  [***] Table
  Gaming Products

  	
  29

  
	
   

  	
  15.3

  	
  Changes to the
  Relevant Table Gaming Product Distribution Price

  	
  30

  
	
   

  	
  15.4

  	
  Audit Rights

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  16

  	
  Ownership and protection of Intellectual Property

  	
  30

  
	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Pre-Existing
  Intellectual Property

  	
  30

  
	
   

  	
  16.2

  	
  Improvements

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  17

  	
  Confidentiality

  	
  30

  
	
   

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Confidential
  Information

  	
  30

  
	
   

  	
  17.2

  	
  Exclusions

  	
  30

  
	
   

  	
  17.3

  	
  Compliance by
  employees, agents and sub-contractors

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  18

  	
  Gaming Machine branding

  	
  31

  
	
   

  	
   

  	
   

  
	
   

  	
  18.1

  	
  Branding of
  Relevant Gaming Machines

  	
  31

  
	
   

  	
  18.2

  	
  Stargames’ Name

  	
  31

  
	
   

  	
  18.3

  	
  Trademark

  	
  31

  
	
   

  	
  18.4

  	
  Branding of
  Relevant Gaming Machines

  	
  31

  
	
   

  	
  18.5

  	
  Joint Logo

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  19

  	
  Escrow

  	
  32

  
	
   

  	
   

  	
   

  
	
   

  	
  19.1

  	
  Escrow of
  Stargames’ Intellectual Property

  	
  32

  
	
   

  	
  19.2

  	
  Release from
  Escrow of Stargames’ Intellectual Property

  	
  32

  
	
   

  	
  19.3

  	
  Escrow of the
  Representative’s Intellectual Property

  	
  32

  
	
   

  	
  19.4

  	
  Release from
  Escrow of the Representative’s Intellectual Property

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  20

  	
  [***] Representative

  	
  32

  
	
   

  	
   

  	
   

  
	
   

  	
  20.1

  	
  [***]

  	
  32

  
	
   

  	
  20.2

  	
  Participation
  by Shuffle Master

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  21

  	
  Indemnity

  	
  33

  
	
   

  	
   

  	
   

  
	
   

  	
  21.1

  	
  Indemnity by Each
  Party

  	
  33

  
	
   

  	
  21.2

  	
  Indemnity by
  Stargames

  	
  33

  
	
   

  	
  21.3

  	
  Indemnity by
  Representative

  	
  33

  
	
   

  	
  21.4

  	
  Regulatory
  compliance

  	
  34

  
	
   

  	
  21.5

  	
  Status of
  indemnities

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  22

  	
  Termination

  	
  34

  
	
   

  	
   

  	
   

  
	
   

  	
  22.1

  	
  Termination by
  the Representative

  	
  34

  
	
   

  	
  22.2

  	
  Termination by
  Stargames

  	
  34

  

***Confidential Treatment Requested

ii

 

	
   

  	
  22.3

  	
  Termination by
  either Party

  	
  35

  
	
   

  	
  22.4

  	
  Interest

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  23

  	
  Obligations and rights following termination

  	
  36

  
	
   

  	
   

  	
   

  
	
   

  	
  23.1

  	
  Confidential
  Information, Products and Services

  	
  36

  
	
   

  	
  23.2

  	
  Rights and
  liabilities of Parties

  	
  36

  
	
   

  	
  23.3

  	
  Survival of
  certain terms and conditions

  	
  36

  
	
   

  	
  23.4

  	
  Notice to
  Stargames

  	
  36

  
	
   

  	
  23.5

  	
  Election of
  Stargames

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  24

  	
  Relationship of Parties

  	
  37

  
	
   

  	
   

  	
   

  
	
   

  	
  24.1

  	
  Position of
  Stargames

  	
  37

  
	
   

  	
  24.2

  	
  Relationship of
  Parties

  	
  38

  
	
   

  	
  24.3

  	
  No power to
  bind

  	
  38

  
	
   

  	
  24.4

  	
  Responsible for
  sub-contractors

  	
  38

  
	
   

  	
  24.5

  	
  No relief from
  obligations

  	
  38

  
	
   

  	
  24.6

  	
  No liability
  for tax

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  25

  	
  Publicity

  	
  38

  
	
   

  	
   

  	
   

  
	
  26

  	
  Non-solicitation

  	
  39

  
	
   

  	
   

  	
   

  
	
   

  	
  26.1

  	
  Non-solicitation

  	
  39

  
	
   

  	
  26.2

  	
  Exceptions to
  non-solicitation

  	
  39

  
	
   

  	
  26.3

  	
  Employment

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  27

  	
  Dispute Resolution

  	
  39

  
	
   

  	
   

  	
   

  
	
   

  	
  27.1

  	
  No court
  proceedings

  	
  39

  
	
   

  	
  27.2

  	
  Notice

  	
  39

  
	
   

  	
  27.3

  	
  Initial Period

  	
  39

  
	
   

  	
  27.4

  	
  Appointment of
  mediator

  	
  39

  
	
   

  	
  27.5

  	
  Role of
  mediator

  	
  40

  
	
   

  	
  27.6

  	
  Referral if no
  resolution

  	
  40

  
	
   

  	
  27.7

  	
  Venue and
  representation

  	
  40

  
	
   

  	
  27.8

  	
  Timeframe

  	
  40

  
	
   

  	
  27.9

  	
  Confidentiality

  	
  40

  
	
   

  	
  27.10

  	
  Costs

  	
  40

  
	
   

  	
  27.11

  	
  Litigation

  	
  40

  
	
   

  	
  27.12

  	
  Limits of
  Review

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  28

  	
  Notices

  	
  41

  
	
   

  	
   

  	
   

  
	
   

  	
  28.1

  	
  Method

  	
  41

  
	
   

  	
  28.2

  	
  Receipt

  	
  41

  
	
   

  	
  28.3

  	
  Address of
  Parties

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  29

  	
  General

  	
  42

  
	
   

  	
   

  	
   

  
	
   

  	
  29.1

  	
  Entire
  agreement

  	
  42

  
	
   

  	
  29.2

  	
  Paramountcy of
  document

  	
  42

  
	
   

  	
  29.3

  	
  No merger

  	
  42

  
	
   

  	
  29.4

  	
  Amendment

  	
  42

  
	
   

  	
  29.5

  	
  Assignment

  	
  42

  
	
   

  	
  29.6

  	
  Severability

  	
  42

  
	
   

  	
  29.7

  	
  Waiver

  	
  42

  
	
   

  	
  29.8

  	
  Rights,
  remedies additional

  	
  42

  
	
   

  	
  29.9

  	
  Further
  assurances

  	
  43

  
	
   

  	
  29.10

  	
  Costs

  	
  43

  
	
   

  	
  29.11

  	
  Counterparts

  	
  43

  
	
   

  	
  29.12

  	
  Force Majeure

  	
  43

  
	
   

  	
  29.13

  	
  Waiver

  	
  43

  
	
   

  	
  29.14

  	
  Governing law
  and jurisdiction

  	
  43

  
	
   

  	
  29.15

  	
  Circumvention

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE 1 - COUNTRIES IN THE ASIAN REGION IN WHICH THE SALE OF GAMING
  MACHINES IS LAWFUL AND ARE WITHIN THE EXCLUSIVE TERRITORY, AS OF THE
  COMMENCEMENT DATE

  	
  45

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE 2 - EXISTING ELIXIR AGREEMENTS

  	
  46

  

 

iii

 

	
   

  	
  SCHEDULE 3 - [***]

  	
  47

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE 4 - EXISTING AND PROPOSED STARGAMES AND SHUFFLE MASTER
  AGREEMENTS

  	
  48

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE 5 - RELEVANT TABLE GAMING PRODUCT DISTRIBUTION PRICES AS OF
  THE DATE OF THIS AGREEMENT

  	
  49

  

***Confidential Treatment Requested

 

iv

 

	
  THIS ASIA REPRESENTATIVE AGREEMENT is made
  on

  	
  2006

  

 

PARTIES

 

ELIXIR GROUP LIMITED

of 38/F.,
The Centrium, 60 Wyndham Street, Central, Hong Kong

(“Elixir”)

 

and

 

MELCO INTERNATIONAL DEVELOPMENT LIMITED

of 38/F., The Centrium, 60 Wyndham Street, Central, Hong
Kong

(“Melco”)

 

and

 

STARGAMES CORPORATION

ACN 001 660 537

of 1 Sheridan
Close, Milperra, New South Wales, Australia

(“Stargames”)

 

and

 

SHUFFLE MASTER
INC

of 1106
Palms Airport Drive,
Las Vegas, Nevada, United States of America

(“Shuffle Master”)

 

BACKGROUND

 

Subject to each of the terms and
conditions of this Agreement, Stargames and Shuffle Master have agreed to appoint the Representative and the Representative hereby accepts such
appointment, as their sole and exclusive distributor and system
integrator for promoting, selling and distributing Products to Casinos in the
Exclusive Territory.

 

AGREED TERMS

 

1              Definitions

 

1.1          Definitions

 

In this Agreement, unless the context requires otherwise:

 

“Actioned Material Breach on the part of the
Representative” means:

 

(a)           the Representative is in
material breach of any of the provisions of this Agreement and has failed to
cure that breach within any applicable grace period; and

 

(b)           as a consequence of that breach,
Stargames has purported to terminate this Agreement.

 

“Agreement” means this Asia
Representative Agreement as amended, modified or replaced from time to time.

 

1

 

“Associated Company” means
a company in which the relevant Party and/or any of its holding companies has
an interest (whether directly or indirectly and whether aggregate or otherwise)
of not less than 19.9%.

 

“Bank” means a
corporation authorised by law in a jurisdiction to carry on the general
business of banking in that jurisdiction.

 

“Business Day”
means a day on which Banks are open for general banking business in Sydney,
Australia, excluding Saturdays, Sundays and public holidays.

 

“Casino” means
any legally-operating, under the applicable laws of its jurisdiction, venue
(including cruise ships based in the Exclusive Territory) in which Gaming
Machines and/or Table Gaming Products are legally permitted to be installed and
played, under the applicable laws of the jurisdiction.

 

“Claim” means,
in relation to a Party, a demand, claim, action or proceeding made or brought
by or against the Party, however arising (whether under contract, tort
(including negligence) or statue), in respect of the obligations imposed upon
the Parties by this Agreement and includes a claim for breach of warranty.

 

“Commencement Date”
means 11 April 2006.

 

“Competitive Products”
means any products (including without limitation, Gaming Machines and Table
Gaming Products) which are the same or substantially similar to any of the
Products.

 

“Confidential Information”
means all customer, marketing, design and technical information and data and
computer software developed by a Party and any other information received from
a Party which at the time of disclosure is clearly labelled or identified as
being confidential to that Party or is otherwise provided in circumstances of
confidence by that Party.

 

“Designated Client”
means:

 

(a)           any Casino in Macau that
operates under the concession granted to SJM or any sub-concession granted by
SJM; and

 

(b)           any other Casino if SJM, STDM,
Melco or the Melco-PBL Venture have a direct or indirect legal or beneficial
interest of at least 19.9% of the equity interest in the entity that owns,
manages or operates that Casino.

 

“Distributor” means any distributor or agent of the Representative that has been
approved in advance by Stargames, which approval will not be unreasonably
withheld or delayed.

 

“Exclusive Territory”
means:

 

(a)           each Designated Client, no
matter where located;

 

(b)           the countries listed in Schedule
1 (including cruise ships based in such countries);

 

(c)           subject to Shuffle Master’s
consent, which consent will not be unreasonably withheld, any other countries
in the Asian region, excluding Australia and New Zealand, in which Shuffle
Master, acting reasonably, but with due regard, in its sole and final
discretion, for, and subject to any regulatory issues, agrees that the
operation of Casinos, and the selling and installation of the relevant Product
(whether operated from that country or from a cruise ship based in that
country) has become lawful;

 

2

 

(d)           if Shuffle Master’s planned
distribution agreement in [***] does not eventuate for any reason, then [***];
and

 

(e)           with respect to Relevant Table
Gaming Products, when the Intergaming Distribution Agreement listed in Schedule
4 is no longer in full force and effect, then [***] (excluding the [***]) and
if the [***] Agreement is terminated then all of [***].

 

“F.O.B.” means free on board.

 

“Game Concept”
means a game that is played on a Gaming Machine other than a game which is not
capable of being reasonably produced in any form by any Supplier due to the
fact that to do so would infringe the rights of any third party.

 

“Gaming Machines”
means electronic gaming machines and multi-terminal gaming machines.

 

“Gaming Machine Cost”
in respect of any Relevant Gaming
Machine means the labour and material costs, the allocation of factory overhead
costs and transportation costs (including insurance) from the factory to the
destination specified by the Representative, that the Supplier has actually
incurred in accordance with United States generally accepted accounting
principles consistently applied in manufacturing that Relevant Gaming Machine
as determined by the Parties on an open book basis.

 

“GST” has the
meaning given to that term in the GST Act.

 

“GST Act” means
the Act known as A New Tax System (Goods and
Services Tax) Act 1999 (Cth).

 

“Gross Margin”
means [***].

 

“Group” in relation to any
Party means, any subsidiary, Associated Company or holding company or related
body corporate of the relevant Party or any subsidiary or Associated Company of
such holding company from time to time.

 

“Hong Kong” means Hong Kong Special Administrative Region of the People’s Republic
of China.

 

“ICC” means International Chamber of Commerce.

 

[***]

 

“Improvements”
means all improvements, modifications or adaptations effected to any component
of the Technology after the Commencement Date.

 

“Insolvency Event”,
in relation to a person, means the occurrence of any of the following events in
relation to that person:

 

(a)           the person enters into
bankruptcy, liquidation, administration or other type of insolvency;

 

(b)           the person is wound up,
dissolved or the person suspends payment of its debts; or

 

(c)           the person ceases or threatens
to cease to carry on all or a material part of its business or becomes unable
to pays its debts when they fall due.

 

“Intellectual
Property” means patents, copyright, registered and unregistered
design rights, registered and unregistered trade marks, rights in know-how,
inventions,

***Confidential Treatment Requested

 

3

 

improvements, trade secrets, formulae, discoveries,
business names, databases and Confidential Information and all other
intellectual and industrial property rights (without limitation) and similar or
analogous rights existing under the laws of any country and all rights to apply
for or register such rights.

 

“Intellectual Property
Rights” means all rights (whether registered or unregistered) in any
Intellectual Property.

 

“Joint Ownership
Period” means any period of time in which the R & D Centre is
jointly owned and funded by Shuffle Master and Stargames, on the one hand, and
the Representative, on the other hand.

 

“Macau”
means Macau Special Administrative Region of the People’s
Republic of China.

 

“Melco”
means Melco International Development Limited.

 

“Melco-PBL
Venture” means the venture between PBL and Melco in Asia.

 

“Minimum Royalty”
has the meaning given that term in clause 14.3.

 

“Minimum Table
Gaming Product Units” has the meaning given that term in clause 15.2(a).

 

“Party”
means each party to this Agreement.

 

“PBL”
means Publishing and Broadcasting Limited (ACN 009 071 167).

 

“Pre-Existing
Representative Intellectual Property” means all Intellectual
Property owned or acquired by any member of the Representative’s Group prior to
the Commencement Date.

 

“Pre-Existing Shuffle
Master Intellectual Property” means all Intellectual Property owned
or acquired by any member of the Shuffle Master Group prior to the Commencement
Date.

 

“Products”
means Relevant Gaming Machines and Relevant Table Gaming Products.

 

“R & D Centre”
means the R & D Centre that Elixir is planning to establish in Macau or
mainland China or such other place as the parties to the R & D Centre
Agreement may mutually agree for undertaking research and development of
Relevant Gaming Machines, Relevant Table Gaming Products and other gaming
technologies or products.

 

“R & D Centre
Agreement” means the R & D Centre Agreement to be entered into between
the Representative, Stargames and Shuffle Master as soon as practicable after
the date of this Agreement.

 

“related body corporate”
has the meaning given to that term in the Corporations Act (Cth) 2001;

 

“Relevant Gaming Machine”
means a Gaming Machine but, (subject to clause 5.11, does not include any [***]
Gaming Machines that Stargames is distributing) that utilises the Technology in
its operation and Spare Parts for each such Gaming Machine.

 

“Relevant Table Gaming
Product” means a Table Gaming Product that is offered for sale by a
Supplier (either directly or through a distributor) and the Spare Parts for
each such Relevant Table Gaming Product.

***Confidential Treatment Requested

 

4

 

“Relevant Table Gaming Product Distribution Price”
in respect of any Relevant Table Gaming Product means the price of a Relevant
Table Gaming Product payable to the Supplier by the Representative in
accordance with clause 3.2(c).

 

“Representative” means Elixir Group Limited and its subsidiaries from time to time, (which includes,
without limitation, Elixir Group (Macau) Limited).

 

“Retail Prices”
means the sales prices of the Products and/or Services determined by the
Representative for selling or providing the same to Casinos in the Exclusive
Territory.

 

[***]

 

[***]

 

“Services”
means the services related to the Products provided by the Representative as
contemplated in clause 4.

 

“SJM”
means Sociedade de Jogos de Macau.

 

“SJM Concession”
means the gaming concession held by SJM for operating a gaming business in
Macau or any sub-concession granted by SJM

 

“Spare Part” means any part or component of a Relevant Gaming
Machine or Relevant Table Gaming Product.

 

“Stargames”
means Stargames Corporation Pty Ltd (ABN 69 001 660 537), and each of its
present and future subsidiaries.

 

“STDM”
means Sociedade de Turismo e Diversoes de Macau, S.A.

 

“Supplier” in
relation to a Product means Shuffle Master or any member of its Group
including, without limitation, Stargames or any other Group company of
Stargames that supplies that Product.

 

“Table Gaming Product”
means shufflers, intelligent shoes, roulette chip sorters,  deck checkers and verifiers, proprietary
table games, intelligent table system components (excluding RFID chips) and
wireless gaming devices.

 

“Technology”
means the current and future Intellectual Property and Confidential Information
of any member of the Supplier relating to the design and manufacture of Gaming
Machines and includes without limitation all Intellectual Property and
Confidential Information in the source code and the PC3 and PC4 hardware
platforms and in the design and manufacture of the “Table Master”
multi-terminal gaming machines.

 

“Term” means
the period commencing on the Commencement Date and ending on the twentieth
anniversary of the Commencement Date or any earlier date on which this
Agreement is terminated.

 

[***] Gaming Machine” means a Relevant
Gaming Machine utilizing games developed by [***] or a related body corporate
thereof, designed to operate utilizing the Technology.

 

1.2          Words
and expressions

 

In this
Agreement, unless the context requires otherwise:

 

(a)           the singular includes the plural
and vice versa;

 

(b)           words denoting any gender
include all genders;

***Confidential Treatment Requested

 

5

 

(c)           where a word or phrase is
defined, its other grammatical forms have a corresponding meaning;

 

(d)           a reference to a party, clause,
paragraph, schedule or annexure is a reference to a party, clause, paragraph,
schedule or annexure to or of this Agreement;

 

(e)           a reference to this Agreement
includes any schedules or annexures;

 

(f)            headings are for convenience and
do not affect interpretation;

 

(g)           the background or recitals to
this Agreement are adopted as and form part of this Agreement;

 

(h)           a reference to any document or
agreement includes a reference to that document or agreement as amended,
novated, supplemented, varied or replaced from time to time;

 

(i)            a general reference in one
clause to other provisions of this Agreement (as opposed to a specific cross
reference to another clause) is not intended to override any other provision
that specifically deals with that subject matter;

 

(j)            any reference to the
Representative or Melco being in material breach of any of the provisions of
this Agreement (or words to that effect) are taken to refer to a material
breach that has not been rectified within any applicable grace period;

 

(k)           any reference to Stargames or
any Supplier being in material breach of any of the provisions of this Agreement
(or words to that effect) are taken to refer to a material breach that has not
been rectified within any applicable grace period;

 

(l)            a reference to “HK$” is a
reference to Hong Kong currency; all other references to “$” shall mean United
States dollars;

 

(m)          a reference to “A$” is a
reference to Australian currency; all other references to “$” shall mean United
States dollars;

 

(n)           a reference to a time is a
reference to Australian Eastern Standard time, or where applicable, Australian
Eastern Summer time;

 

(o)           a reference to a party includes
its executors, administrators, successors, substitutes (including persons
taking by novation) and permitted assigns;

 

(p)           a reference to writing includes
any method of representing words, figures or symbols in a permanent and visible
form;

 

(q)           words and expressions denoting
natural persons include bodies corporate, partnerships, associations, firms,
governments and governmental authorities and agencies and vice versa;

 

(r)            a reference to any legislation
or to any provision of any legislation includes:

 

(i)            any modification or re-enactment
of the legislation;

 

(ii)           any legislative provision
substituted for, and all legislation, statutory instruments and regulations
issued under, the legislation or provision; and

 

(iii)          where relevant, corresponding
legislation in any other jurisdiction;

 

(s)           no rule of construction applies
to the disadvantage of a party because that party was responsible for:

 

(i)            the preparation of this
Agreement or any part of it; or

 

(ii)           the inclusion or amendment of
any provision of this Agreement; or

 

(iii)          the deletion of any provision
from any draft of this Agreement reviewed by the Parties in the course of
negotiating this Agreement; and

 

6

 

(t)            the words “including”, “for
example”, “such as” or other similar expressions (in any form) are not words of
limitation.

 

1.3          Other
rules of interpretation

 

In this
Agreement, unless expressly provided otherwise:

 

(a)           (method of  payment)
any payment of money by one Party to another will be made in United States
currency by bank cheque or by credit of cleared funds to a bank account
specified by the recipient.

 

(b)           (consents and approvals) other than where expressly stated to
the contrary in this Agreement (such as where a provision provides that a
decision or act is within a Party’s sole and final discretion), if the doing of
any act, matter or thing requires the consent, approval or agreement of any
Party, that consent, approval or agreement must not be unreasonably withheld or
delayed;

 

(c)           (joint and several liability) a promise, representation or
warranty given by or in favour of two or more persons under this Agreement is
given by them or for their benefit jointly and severally;

 

(d)           (Business Days) if:

 

(i)            the day on or by which any act,
matter or thing is to be done is a day other than a Business Day, the act,
matter or thing will be done on the next Business Day; and

 

(ii)           any money falls due for payment
on a date other than a Business Day, that money will be paid on the next
Business Day (without interest or any other amount being payable in respect of
the intervening period); and

 

(e)           (inconsistency within document) if a clause of this Agreement
is inconsistent with a schedule or annexure of this Agreement, the clause
prevails to the extent of the inconsistency.

 

2              Term

 

This Agreement
will commence on the Commencement Date and will continue in full force and
effect for the Term.

 

3              Grant of rights

 

3.1          Grant
of Exclusive Rights

 

(a)           Subject to clause 3.6 and to
each of the other terms and conditions in this Agreement, and further provided
that there is no Actioned Material Breach of this Agreement on the part of the
Representative, Stargames (on its own behalf and on behalf of each relevant
Supplier) grants to the Representative the exclusive rights to promote, sell
and distribute (either directly or through Distributors) the Relevant Gaming
Machines on an exclusive basis to Casinos in the Exclusive Territory for use in
the Exclusive Territory. In addition, subject to clause 13 and to each of the
other terms and conditions in this Agreement provided that there is no Actioned
Material Breach on the part of the Representative, Stargames grants to the
Representative the exclusive rights to manufacture Relevant Gaming Machines for
sale to Casinos in the Exclusive Territory, and, if applicable and if otherwise
mutually agreed to, in writing, also for sale by the Supplier to any of the
Supplier’s customers in other jurisdictions. For the avoidance of doubt, all of
the rights referred to in this clause 3.1(a) extend to any Relevant Gaming
Machines that any Supplier has developed or may in the future develop.

 

7

 

(b)           The Representative may not
assign or delegate any of its rights under this clause 3 to any other party or
entity unless that party or entity is a Distributor, provided that any
manufacturing rights granted to the Representative shall not be assignable,
sub-licensable or delegatable to any other party, entity or person, including
Distributor, except as may be permitted by clause 13. If the Representative or
a Distributor wants to lease a Relevant Gaming Machine to a customer, the
Parties shall first mutually agree, in writing, on the terms of such leasing
arrangement.

 

(c)           If the Representative or a
Distributor wants to lease a Relevant Gaming Machine for distribution in the
Exclusive Territory, the Parties shall first mutually agree, in writing, on the
terms of such leasing arrangement.

 

(d)           The exclusive rights granted in
this clause 3.1 are subject to:

 

(i)            agreements that Shuffle Master
or Stargames have entered into or are at an advanced state of negotiations in
respect of the manufacture or distribution of Products, as disclosed in
schedule 4 but only for the term of those agreements;

 

(ii)           if applicable, the rights
previously granted by Stargames to [***] in respect of the [***], that
terminate 90 days from 21 February 2006; and

 

(iii)          with respect to manufacturing
rights, the provisions of clause 13.

 

3.2          Distribution
of Relevant Table Gaming Products

 

Subject to
clauses 3.6 and 15.2, and to each of the other terms and conditions in this
Agreement, and further provided that there is no Actioned Material Breach on
the part of the Representative, Stargames (on its own behalf and on behalf of
each relevant Supplier) grants to the Representative the right to purchase
Relevant Table Gaming Products, at the Relevant Table Gaming Product
Distribution Prices, for distribution, sale and use only by Casinos in the
Exclusive Territory, and the exclusive rights to promote, sell and distribute
(either directly or through Distributors) Relevant Table Gaming Products on an
exclusive basis:

 

(a)           in the first year of the Term,
only to Designated Clients for use by Designated Clients and the Parties agree
that there will be [***] relating to the distribution of Relevant Table Gaming
Products during the [***]; and

 

(b)           thereafter, for the remainder of
the Term, to Casinos in the Exclusive Territory for use in the Exclusive
Territory, on terms to be negotiated in good faith, including the Minimum Table
Gaming Product Units as required by clause 15.2(a);

 

(c)           The Relevant Table Gaming
Product Distribution Prices as of the date of this Agreement are set forth in
Schedule 5. The Parties’ intent is that at all times during the Term where
commercially reasonable, and subject to competitive factors in the Asian
Market, that the Representative be able to obtain a gross profit representing
approximately [***] and the Supplier be able to sell at the [***] that each
normally achieves in comparable circumstances; or

 

(d)           if the Representative or a
Distributor wants to lease a Relevant Table Gaming Product, the Parties shall
first mutually agree, in writing, on the terms of such leasing arrangement.

 

3.3          Consideration
of Possible Grant of Certain Non-Exclusive Rights

 

(a)           During the Term, if a Casino
(other than a Designated Client) located outside the Exclusive Territory
approaches the Representative for the supply of Relevant Gaming Machines,
Stargames and the Representative will negotiate in good faith on a case-by-case
basis, (with Stargames’ refusal being permitted where it considers in its sole
and final discretion that to permit the Representative to do so would be
against either Stargames’ or Shuffle Master’s commercial interests, or

***Confidential Treatment Requested

 

8

 

where to do so, would trigger the provisions of clauses 22.2(c),
22.2(d), 22.2(e) or 22.2(f)), whether the Representative should distribute and
sell Relevant Gaming Machines to that Casino, and if so, the terms and
conditions of any such sales.

 

(b)           During the Term, if a Casino
(other than a Designated Client) located outside the Exclusive Territory
approaches the Representative for the supply of Relevant Table Gaming Products,
Stargames and the Representative will negotiate in good faith on a case-by-case
basis, (with Stargames’ refusal being permitted where it considers, in its sole
and final discretion, that to permit the Representative to do so would be
against its commercial interests, or where to do so, would trigger the
provisions of clauses 22.2(c), 22.2(d), 22.2(e) or 22.2(f)), whether the
Representative should distribute and sell the Relevant Table Gaming Products to
that Casino, and if so, the terms and conditions of any such sales.

 

(c)           For the avoidance of doubt and
subject to the provisions of clause 5, the Representative agrees not to sell
any Relevant Gaming Machines and/or Relevant Table Gaming Products to any
person outside the Exclusive Territory who is not a Designated Client, unless
the express written consent of Stargames is first obtained, which consent may
be withheld or delayed in Stargames’ sole and final discretion in the
circumstances described in clauses 3.3(a) and 3.3(b).

 

3.4          Licence

 

Subject to each
of the terms and conditions in this Agreement, and further provided that there
is no Actioned Material Breach on the part of the Representative, Stargames (on
its own behalf and on behalf of each Supplier) grants to the Representative a [***]
licence for the Term to use, adapt, alter and modify the Technology and any
Improvements that belong to any Supplier (whether or not developed by the
Supplier or any of its agents, contractors or otherwise) for the purposes of
enabling the Representative to design, manufacture, deliver, modify and/or
install Relevant Gaming Machines in the Exclusive Territory, provided however,
that any alteration or modification of any such Technology or Improvements shall
first require, prior to being used in a Relevant Gaming Machine that is to be
delivered or installed by the Representative, the written consent of Stargames,
which consent shall not be unreasonably withheld, particularly where the
relevant alteration or modification does not adversely affect the performance
of the Products nor the ability to gain or maintain any registered intellectual
property rights in respect of those Products. Upon the commencement of the
Joint Ownership Period, any alterations or modifications to the Technology will
only be able to be made by Representative in the R & D Centre and in
accordance with the requirements of the R & D Centre Agreement.

 

3.5          Retail
Prices

 

The Representative shall have the right to determine the
Retail Prices of the Products and Services at its sole discretion provided
always that the Retail Prices that are determined by the Representative from
time to time shall be normal commercial and arms length selling prices, and
shall be established in good faith by the Representative.

 

3.6          Agency

 

(a)           The Parties acknowledge that
Stargames may appoint [***] as its direct distributor for a period not
exceeding one year from the Commencement Date (“Initial Period”) in respect of the distribution and sale of:

 

(i)            Relevant Gaming Machines and
Relevant Table Gaming Products in the [***]; and

 

(ii)           if [***] is so appointed, the
Parties will agree to reduce the [***] based on Stargames’ [***] which have
been used as the basis for determining the [***].

 

(b)           The Parties agree to investigate
options to enable [***] to be appointed as a sub-distributor of the
Representative rather than as a distributor of Stargames

***Confidential Treatment Requested

 

9

 

(including by way of an assignment of any existing
distribution agreement) provided that the economic impact of such an
appointment on the Parties will be nil. For the avoidance of doubt:

 

(i)            during the Initial Period, any
commission or fees (whether by way of cash, discount, rebate, free units or
otherwise) paid to [***] as a sub-distributor of the Representative shall be
borne by Stargames;

 

(ii)           during the Initial Period, the
Representative will not receive any [***] in respect of the [***] if [***] is
appointed as a sub-distributor in the [***]; and

 

(iii)          after the Initial Period, in
case the Representative continues to engage [***] as its Distributor, any
commissions or fees (whether by way of cash, discount, rebate, free units or
otherwise) paid to [***] as Distributor of the Representative shall be borne by
the Representative.

 

3.7          Reserved
Rights

 

All rights to
the Products not expressly granted to the Representative in this Agreement or
in any other written agreement executed concurrently or hereafter by Shuffle
Master, Stargames or the Supplier with the Representative shall be fully
reserved and retained by the applicable Supplier in its sole and final
discretion.

 

4              Servicing of Products

 

4.1          Right
to service

 

The
Representative shall, at its sole cost and subject to clause 4.2
responsibility, provide services related to all Relevant Gaming Machines and
Relevant Table Gaming Products sold by it in the Exclusive Territory (which
such services include but are not limited to maintenance services, training
services, installation services and customisation services), and shall be
solely entitled to any service fees received from such customers.

 

4.2          Second level support

 

(a)           With respect to any
Products manufactured by a Supplier, at the reasonable request of the
Representative, Stargames shall procure each Supplier to provide
second level maintenance and support services to customers in the Exclusive Territory, within 10 days from any written
notification issued by the Representative requesting such services and such
second level maintenance and support services shall include, without
limitation, the actual remedial action taken and/or correction made on the
Products.

 

(b)           The cost of such second level maintenance and support services shall be
borne by the Supplier where:

 

(i)            the
Product has been manufactured by the Supplier; and

 

(ii)           the maintenance and support is required to correct an inherent defect in
a Relevant Gaming Machine or Relevant Table Gaming Product that requires the
Supplier’s involvement to remedy.

 

In all other cases, the costs of any servicing, support and remedying
any Product problems or defects shall be at the Representative’s sole cost.

 

4.3          Acquisition of Spare Parts

 

During the Term, and subject to each of the terms and conditions in this
Agreement, and
further provided that there is no Actioned Material Breach on the part of the
Representative, the Representative will be entitled to acquire
Spare Parts at [***] on the then retail price offered by the Supplier to
comparable customers at the time the Representative places an order for those
Spare Parts and in sufficient volumes to enable the Representative, to maintain
and service the Products.

***Confidential Treatment Requested

 

10

 

5              Exclusivity and Non-Competition

 

5.1          Exclusivity
of Representative

 

Subject to clause 5.2 and to each of the other terms and conditions in
this Agreement and further provided that there is no Actioned Material
Breach on the part of the Representative, during the Term,
Stargames undertakes that, except through the Representative, it will not, and
will ensure that no Supplier nor any of its or any Supplier’s other
distributors or agents will:

 

(a)           either solely or jointly with or on behalf of any other person directly
or indirectly promote, sell, provide, offer for sale or distribute any Products
or Services to persons in the Exclusive Territory or procure, solicit
or accept any purchase order for any Products or Services from any persons
in the Exclusive Territory;

 

(b)           exercise
or appoint any other third party as reseller, distributor or agent (whether on an exclusive basis or not) of
similar rights or functions as conferred on the Representative under this
Agreement in respect of the Products or Services being offered to persons in
the Exclusive Territory;

 

(c)           promote, distribute or sell the Products and/or Services to, or accept
any purchase order for any Products or Services from, any persons outside the
Exclusive Territory, where any Supplier (or any of the Supplier’s other distributors
or agents) has actual knowledge, or a reasonable person in that entity’s
circumstances would, (without any duty of inquiry or diligence, except in the
circumstance where such entity actually suspects, or a reasonable person in
such entity’s circumstances would actually suspect (without any duty of inquiry
or diligence) that the person intends to resell, lease, licence or otherwise
part with the possession of the relevant Products and/or Services to any Casino
in the Exclusive Territory), consider it more probable than not, at the time of
the relevant sale, that the person will resell, lease, licence or otherwise
part with the possession of the relevant Products and/or Services to any Casino
in the Exclusive Territory,

 

5.2          Exceptions

 

Nothing in clause 5.1 prevents the Supplier:

 

(a)           from distributing Relevant Table Gaming Products during the [***] of the
Term as contemplated in clause 3.2;

 

(b)           appointing [***] as a distributor as contemplated in clause 3.6; or

 

(c)           selling, promoting, licensing or distributing Products, in its sole and
final discretion, outside of the Exclusive Territory, provided that the
Supplier is not in breach of clause 5.1.

 

5.3          Representative’s
remedy

 

If it is agreed
by the Parties that a Supplier may sell direct to persons in the
Exclusive Territory, Stargames will procure that that Supplier will pay the
Representative:

 

(a)           a [***] earned by it on the sale
of the Relevant Gaming Machine and [***] earned by the Supplier shall be [***]
in accordance with clause 14.3; and

 

(b)           an amount that is equivalent to [***]
that the Representative would have received on the sale of any Relevant Table
Gaming Products and an [***] that apply in that year pursuant to clause 15.2.

 

5.4          Referral of Customers

 

Subject to clause 5.3 and to each of the other terms and conditions in
this Agreement, and further provided that there is no Actioned Material
Breach on the part of the Representative, and further
subject to the rights of Stargames to have the Relevant Table

***Confidential
Treatment Requested

 

11

 

Gaming Products distributed by the Supplier within the Exclusive
Territory in the [***] of the Term as referred to in clause 3.2, during the
Term Stargames shall procure that each Supplier shall refer all customers or
potential customers of, and any query that they or any Supplier receives regarding the
purchase of, any Products or Services in the Exclusive Territory
that comes to their attention to the Representative for handling.

 

5.5          Adjustments as a consequence of certain Supplier
sales outside the Exclusive Territory

 

If any Supplier
or any distributor or agent of any Supplier is in breach of clauses 5.1(a) or 5.1(b)
or if any Supplier or any distributor, agent or customer of any Supplier, within
three (3) years of its purchase, sells or resells Relevant Gaming Machines to
any person outside the Exclusive Territory which are subsequently transferred
into the Exclusive Territory in violation of clause 5.1(c), Stargames will pay,
as the Representative’s sole remedy, to the Representative:

 

(a)           in respect of the
Relevant Gaming Machine, [***] that would have been earned by the
Representative or [***] earned by the Supplier on the sale, (excluding fees,
commissions or price discounts paid or allowed to any distributor or agent (as
the case may be) by the Supplier) and the [***] earned by the Supplier or which
would have been earned by the Supplier if the Representative had made the sale
shall be [***] in accordance with clause 14.3; and

 

(b)           in respect of a
Relevant Table Gaming Product, an amount representing [***] of the Relevant
Table Gaming Product.

 

5.6          Sales
Outside the Territory

 

Nothing
contained in this Agreement shall in any way prohibit, prevent or hinder a
Supplier in its sole and absolute discretion, from selling, leasing or
distributing any Products outside the Exclusive Territory or to Casinos inside
the Exclusive Territory where the Products are intended for transportation and
installation, as soon as reasonably practicable, outside the Exclusive
Territory, at prices and in a manner that is solely determined, in its sole and
final discretion, by the Supplier.

 

5.7          Exclusive
distribution of Products

 

Subject to clause 5.8, during the Term, the Representative
will not, and will ensure that none of its subsidiaries (including without
limitation, Elixir Group (Macau) Limited) will sell, promote, distribute,
accept orders for, or market, (or exercise or appoint any other person to do
any of the foregoing) any Competitive Products manufactured, developed, owned
or being marketed by any person, other than the Supplier to:

 

(a)           any person or Casino in the
Exclusive Territory; or

 

(b)           any person or Casino outside the
Exclusive Territory if either the Representative or Melco or any subsidiary of
the Representative or Melco or any of its or their respective distributors or
agents have actual knowledge, or a reasonable person in their circumstances
would (without any duty of inquiry or diligence,
except in the circumstance where such entity actually suspects, or a reasonable
person in that entity’s circumstances would actually suspect (without any duty
of inquiry or diligence) that the person intends to resell, lease, licence or
otherwise part with the possession of the relevant Competitive Products and/or
related Services to any Casino in the Exclusive Territory) consider it more
probable that not, at the time of the relevant sale, that the person will
resell, lease, license or otherwise part with possession of the relevant
Products to any person in the Exclusive Territory.

 

For the avoidance of doubt, Melco will not establish nor
permit any of its subsidiaries, nor any of its Group entities which it owns or
controls, to establish a business or subsidiary that competes with the
Representative in the distribution, selling or manufacturing of Gaming Machines
and Table Gaming Products.

 

***Confidential Treatment Requested

 

12

 

5.8          Exceptions
to exclusivity

 

Nothing in clause 5.7 prevents the Representative from:

 

(a)           During the twelve month period
commencing on the Commencement Date the Representative may sell Products
manufactured, developed, owned or being marketed by a person other than a
Supplier only in order to honour any agreement that is in existence and legally
binding on it at the Commencement Date, as disclosed in schedule 2, provided
that from the date that is six months after the Commencement Date, the
Representative will pay [***] that it receives on any such sale to Stargames
and in respect of the sale of a Gaming Machine, [***] and provided further that
under the agreement with [***] the Representative shall not at any time sell
any Competitive Products manufactured by [***]

 

(b)           selling Gaming Machines that are
not multi-player Gaming Machines, developed and manufactured by [***]; or

 

(c)           selling, after 6 months’ prior
written notice to Stargames, any Gaming Machine based on a Game Concept that
any Supplier is unable to reasonably supply, with the same or substantially the
same Game Concept and in the quantities or with the material quality available
to the Representative from other suppliers, for so long as any Supplier is
unable to reasonably supply such a Gaming Machine.

 

5.9          Adjustments as a consequence of Representative’s
sales outside the Exclusive Territory

 

(a)           If,
the Representative is in breach of clause 5.7, or if without the prior,
written, express consent of Stargames the Representative sells any Relevant Gaming
Machines or Table Gaming Products outside the Exclusive Territory in violation
of clause 5.7, the sole remedy of Stargames:

 

(i)            with respect to a Relevant
Gaming Machine, shall be the payment by the Representative of a [***] earned by
the Representative or [***] which would have been earned by Supplier; and

 

(ii)           with respect to a Relevant Table
Gaming Product, shall be the payment by the Representative of the [***] on sale
of said Table Gaming Product or [***] which would have been received by
Supplier from its sale of said Table Gaming Product.

 

(b)           If a customer of the Representative
subsequently resells any Relevant Gaming Machines or
Table Gaming Products (unless such Product was sold to said customer more than
3 years prior to such resale) outside the Exclusive Territory in violation of
clause 5.7, the sole remedy of Stargames:

 

(i)            with respect to a Relevant
Gaming Machine,  shall be the payment by
the Representative of [***] which had been previously earned by the
Representative on the sale of said Relevant Gaming Machine to the customer; and

 

(ii)           with respect to a Relevant Table
Gaming Product, shall be the payment by the Representative of [***] of said
Table Gaming Product which had been sold by the Representative to said
customer.

 

5.10        Stargames’
remedy

 

If it is
expressly agreed in writing by the Parties that the Representative may sell
Relevant Gaming Machines or Relevant Table Gaming Products to persons outside
the Exclusive Territory, the obligations of the Representative to pay to
Stargames a royalty under clause 14 in respect of the Relevant Gaming Machines
sold or to pay for the Relevant Table Gaming Products under clause 15 will
extend to this sale.

***Confidential Treatment Requested

 

13

 

5.11        Termination
by [***]

 

(a)           [***], the Parties will
co-operate to attempt to ensure that the Representative is able to sell [***]
Gaming Machines under this Agreement, under the same conditions, limitations, [***]
as set forth in clause 5.8(a) as applies to [***] Gaming Machines.

 

(b)           If the Parties are able to
arrange for the Representative to be able to sell [***] Gaming Machines under
this Agreement then from that time on, the [***] Gaming Machines will be deemed
for the purposes of this Agreement to be “Relevant Gaming Machines” and to come
within the meaning of that term in clause 1.1.

 

(c)           Stargames will ensure that no
Supplier enters into or alters any arrangements with any other person that
would permit [***] Gaming Machines to be distributed or sold in the Exclusive
Territory other than in the circumstances contemplated in this clause 5.11.

 

6              Joint Co-operation

 

6.1          Right
of refusal over new opportunities

 

The Parties
agree that they will consult with each other on any merger or acquisition or
business development opportunities expressly intended to apply solely to persons
in the Exclusive Territory [***] in respect of Gaming Machines or gaming
technologies and provide the other with a first right of refusal to match such
opportunities on terms no less favourable to either Shuffle Master or Stargames
or the Representative (as applicable) as those of any such opportunity.

 

6.2          Originating Party may pursue

 

Any Party may
pursue any such opportunity without prejudice if the other Parties decline to
match the terms of that opportunity provided that the pursuit of such opportunity
by that Party will not constitute a breach by that Party of the terms of this
Agreement.

 

6.3          Related Party sales

 

The Parties
agree that the purpose of this Agreement is to maximise the profitability of
the promotion, sale and distribution of the Products. Accordingly, any Product
sold by a Party to any member of that Party’s Group will be sold on arms length
commercial terms.

 

6.4          Access
to information

 

Shuffle Master and Stargames each
agree and confirm that during the Term it will:

 

(a)           keep the Representative informed
of any changes to Products and Services (including but not limited to any
revision of the specifications or release of new models) or new Products or
Services;

 

(b)           keep the
Representative informed of any change to the Gaming Machine Costs (in respect
of Relevant Gaming Machines) and/or the Table Gaming Product Prices (in respect
of Relevant Table Gaming Products), provided that in the case of any material
changes to the specifications of the existing Products and Services, any cessation
of production or support of any existing Products and Services, the Supplier
shall give at least 60 days prior written notice to the Representative
informing the same;

 

(c)           reasonably consider any request
by the Representative for Shuffle Master or Stargames, as the case may be, to
provide the Representative with access to all of its and any of its Group’s
Confidential Information (to the extent not covered by clause 6.5) and
personnel and answer any queries that the Representative may have regarding the
matters related to the Products, which include but without limitation to, the
design, delivery, installation, operation and maintenance of the

***Confidential
Treatment Requested

 

14

 

Products being undertaken anywhere by Shuffle Master or
Stargames. In determining whether to give its consent, Shuffle Master and
Stargames will consider the extent that the requested information is relevant
and relates to the business of the Representative; and

 

(d)           on request from the
Representative permit the Representative to reasonably audit (at its sole
cost), no more than once every 12 months, the Gaming Machine Costs and the
Relevant Table Gaming Distribution Prices charged to it by any Supplier.

 

6.5          Access
to Technology and Improvements

 

(a)           Subject to each of the terms and
conditions of this Agreement and provided that there is no Actioned Material
Breach on the part of the Representative, Stargames will provide the
Representative [***] with access to and a right to use, adapt. alter and modify
the Technology and to any Improvements that belong to any Supplier (whether
developed by the Supplier itself or any of its agents, contractors or
otherwise) including updates to the existing Suppliers’ products and/or to the
existing software and the PC3 and PC4 hardware platforms and new products, new
software or hardware platforms developed by any Supplier, as and when they are
released by the relevant Supplier. Until such time as the Joint Ownership
Period commences, Stargames agrees to reasonably assist the Representative in
securing the necessary resources to effectively establish and operate the R
& D Centre on its own account.

 

(b)           Stargames will ensure that no
Supplier will exercise any rights that it might have to prevent the
Representative from having access to, using, adapting, altering or modifying
any Improvements that have been developed during the Joint Ownership Period and
that are jointly owned by the Representative and a Supplier.

 

(c)           The Representative will provide
Stargames [***] with access to and a right to use, adapt, alter and modify any
alteration or modification to any Technology or any Supplier’s Improvements
that were made by the Representative in exercising the rights granted to it
under clause 3.4.

 

(d)           The Representative will not
exercise any rights that it might have to prevent any Supplier from having
access to, using, adapting, altering or modifying any Improvements that have
been developed during the Joint Ownership Period and that are jointly owned by
the Representative and a Supplier.

 

7              Obligations of the Representative

 

7.1          Representative’s Obligations

 

Subject to any rights previously granted by any Supplier to [***] in
respect of the [***] being consistent with clause 3.6, the Representative shall
use its best efforts to further the promotion, marketing and distribution of
each of the Products in each of the countries or to each Designated Client
within the Exclusive Territory. Without limiting the generality of the
foregoing, the Representative shall have each of the following obligations with
respect to marketing and distribution of each of the Products:

 

(a)           to promote, market and distribute each of the Products strictly limited
to (unless otherwise expressly agreed to in a prior writing signed by both
parties) in each country of and to each Designated Client within the Exclusive
Territory;

 

(b)           to participate actively in sales or merchandising programs prepared by
Supplier that are appropriate for the Exclusive Territory and to promote and demonstrate
the Products in all major fairs and exhibitions in the Exclusive Territory and
to develop and implement distribution programs for the promotion of the
Products, at a minimum, to promote, show and demonstrate Products during the
most

***Confidential Treatment Requested

 

15

 

important trade shows in the
Exclusive Territory. The Representative is solely responsible for costs of such
shows including but not limited to transportation and importation costs;

 

(c)           to respond as promptly as is reasonable in the circumstances to all
inquiries from customers, including complaints, to process all orders and to
effect or request the Supplier to effect all shipments of Products;

 

(d)           to investigate diligently all leads, which it considers to be
worthwhile, with respect to potential customers referred to it by the Supplier;

 

(e)           to keep the Supplier fully informed of all inquiries and orders received
by the Representative from customers located outside the Exclusive Territory on
a timely basis;

 

(f)            to provide the Supplier not later than thirty (30) days from the end of
each calendar month with a report of its marketing, distribution, service and
installation activities with respect to the Products sold or leased in the
Exclusive Territory during such month, which report shall be in such form and
in such detail as the Supplier may reasonably require;

 

(g)           to notify the Supplier of all installations including customer’s name
and installation address as soon as possible but in any event within thirty
(30) days of such installations;

 

(h)           to use its best efforts (as may be reasonable in the circumstances) to
obtain and maintain in good standing, at the Representative’s sole expense, all
necessary licenses to allow the Representative to market, sell, store and
distribute the Products in each country of the Exclusive Territory and to each
country in which any Designated Client is located provided that if the
Representative is not able to obtain or maintain a necessary licence in any
such country, the Representative may request that that country or Designated
Client be removed from the Exclusive Territory and if this occurs during the [***]
of the Term, the Parties will negotiate in good faith an appropriate [***]
having regard to such factors as any additional cost to Stargames in supplying
that country directly:

 

(i)            upon the Supplier’s request, to obtain copies of all gaming licenses
possessed by any customer to whom the Representative sells a Product;

 

(j)            to notify the Supplier of any apparent infringement of the Supplier’s
Intellectual Property rights related to the Products. The Supplier maintains
the exclusive right to prosecute any infringement of its Intellectual Property,
which right the Supplier shall exercise or elect not to exercise at its sole
and final discretion, but, in connection therewith, the Supplier shall
reasonably consult with the Representative;

 

(k)           to refrain from making any false or misleading representations or
statements about any Supplier or any of the Products;

 

(l)            to
adhere to all legal requirements with respect to its activities pursuant to the
rights granted to it under this Agreement.  Directors, officers, or
employees of the Representative or of any member of the Representative’s Group
shall not, directly or indirectly, offer, promise or pay any bribes or other
improper payments for the purposes of promoting the Products to any individual,
corporation, government official or agency, or other entity. No gift, benefit
or contribution in any way related to the Parties or the sale of the Products
shall be made to political or public officials or candidates for public office
or to political organisations, regardless of whether such contributions are
permitted by local laws;

 

(m)          to
abide by all of Stargames’ policies and standards regarding conflicts of
interest and ethics as may be communicated to the Representative
by Stargames from time to time (the receipt of the policies and standards in
force on the date of this

***Confidential Treatment Requested

 

16

 

Agreement is hereby acknowledged
by the Representative), such policies and standards being incorporated herein
by written notification.  The terms of the policies and standards will not
imply or impose any interference
with the lawful commercial use of the Products;

 

(n)           both
prior to and at any time after the execution of this Agreement, to promptly
respond to the Compliance Committees of Stargames or Shuffle Master as either
may reasonably request information related to the Distributor (including its
officers, directors, and controlling shareholders), financial condition,
litigation, indictments, criminal proceedings, and the like in which they are
or may have been involved, if any, in order to determine that the information
does not disclose any fact which would jeopardise, in any manner, any gaming
licence, permit or approval held by Stargames, Shuffle Master or any of its
Group entities with any gaming regulators;

 

(o)           ensuring that the details of the
financial arrangements with the Supplier are kept strictly confidential and are
not disclosed to any of the Supplier’s customers or competitors;

 

(p)           providing the Supplier with full
access to the Representative’s data and technical and other information that
relates to sales made by the Representative of the entire Product range in the
Exclusive Territory, which information shall be kept current by the
Representative at the Representative’s cost throughout the Term, and to the
extent that it is and continues to be confidential shall be Confidential
Information of the Representative;

 

(q)           keeping the Supplier informed of
any changes made by the Representative to the technical or content
specifications of any existing Product;

 

(r)            obtaining all approvals required
for all Products solely developed by the Representative at the Representative’s
sole cost;

 

(s)           contributing to [***] in
obtaining all approvals in a country in the Exclusive Territory that are
necessary to enable the Products solely developed by the Supplier to be sold
and distributed in that country provided that such approval is not also
required in a jurisdiction outside the Exclusive Territory in which the
Supplier operates;

 

(t)            ensuring that no written
communication is initiated with any owner, operator or management company of a
Casino outside the Exclusive Territory regarding the sale of Products unless
Stargames is copied on that correspondence and invited on reasonable notice to
be present at any meeting (whether conducted in person or by means of any
telecommunication facility); and

 

(u)           diligently
providing Stargames with all leads of which it is aware and which it considers
to be worthwhile, with respect to potential customers outside the Exclusive
Territory to be referred to Stargames.

 

8              Obligations of each Supplier

 

8.1          Supplier’s
Obligations

 

Subject to each of the terms and conditions of this
Agreement and further provided that there is no Actioned
Material Breach on the part of the Representative, Stargames shall be responsible for procuring that each Supplier provides all reasonable
assistance, relevant to the Exclusive Territory, but at no out-of-pocket cost
to any Supplier (except as where provided for below), requested by the Representative,
which assistance must be provided in a professional and timely manner
as follows:

 

(a)           contributing to [***]
in obtaining all approvals in a country in the Exclusive Territory that are
necessary to enable the Products solely developed by a Supplier to be sold and
distributed in that country provided that such approval is

 

***Confidential Treatment Requested

17

 

not also required in a jurisdiction outside of the Exclusive
Territory in which the Supplier operates in which case such approval shall be
at the Suppliers sole cost;

 

(b)           abiding
by all policies and standards of the Representative regarding conflicts of
interest and ethics as may be communicated in writing to Stargames by the
Representative from time to time such policies and standards being incorporated
herein by written notification. The terms of the policies and standards will
not imply or impose any interference with the lawful commercial use of the
Products;

 

(c)           providing, at the [***] of each Product intended for sale in the Exclusive
Territory for display in the showroom which the Representative is planning to
open, at the Representative’s sole cost, in Macau;

 

(d)           the provision of reasonably adequate training to employees of the
Representative so as to reasonably enable them to be able to understand the
functionalities and/or components of the Products and Services and the correct
operation and/or maintenance of the same to the extent relevant to the
Exclusive Territory;

 

(e)           the preparation and provision,
at Supplier’s sole cost, to the Representative of artwork for relevant
marketing materials, to be produced at the Representative’s sole cost and the
Representative shall have absolute discretion to determine whether to adopt the
same or not;

 

(f)            providing
the Representative with full access to each Supplier’s data and technical and
other information relating to the entire Product range to the extent relevant
to the Exclusive Territory, which shall be kept current by the Supplier [***]
throughout the Term, and to the extent that it is and continues to be
confidential shall be Confidential Information of the Supplier;

 

(g)           keeping
the Representative informed of new Product releases and any changes to the
technical or content specifications of any existing Product

 

(h)           diligently providing the Representative with all leads of which it is
aware and which it considers to be worthwhile, with respect to potential
customers in the Exclusive Territory to be referred to the Representative;

 

(i)            supplying the Products for the
Exclusive Territory on a timely basis and in particular, but subject to every
other applicable term or provision of this Agreement, including without
limitation, clause 12, using all reasonable endeavours to accept every order
placed by the Representative (which for the avoidance of doubt will not include
[***] except if the relevant Supplier and the Representative mutually agree
that there is a valid commercial reason);

 

(j)            providing the Representative
with not less than 30 days’ prior written notice of any change that is proposed
to come into effect in respect of the Gaming Machine Cost or the Relevant Table
Gaming Product Distribution Price, to the extent that the same relates to the
Exclusive Territory;

 

(k)           ensuring that the prices at
which it supplies Products and Spare Parts to the Representative for the
Exclusive Territory is [***] to the Representative than the prices at which it
supplies Products and Spare Parts to any comparable distributor, which orders
the same or a substantially similar quantity of comparable Products or Spare
Parts;

 

(l)            maintaining its existing (or
substantially similar) Product range (both in terms of equipment and content)
and in particular with respect to Relevant Gaming Machines (both multi-terminal
and single player Gaming Machines) and Relevant Table Gaming Products that are
suitable and approved for the Asian market, provided however that Stargames
shall have the right to discontinue any specific Product in its sole and final
discretion, after the [***] of the Commencement Date and if Stargames decides
to do so:

 

***Confidential Treatment Requested

18

 

(i)            it must provide the
Representative with not less than 60 days’ prior written notice of its
intention to discontinue that specific Product;

 

(ii)           Stargames and the Representative
shall enter into good faith negotiations with regard to the continuation of the
supply of sufficient quantities of Spare Parts for that Product and/or any
second level support from Stargames as contemplated in clause 4.2 as are
necessary to enable the Representative to continue to service all of its
customers that have acquired that specific Product;

 

(m)          maintaining the operational
protocols and other platforms and technology (or substantially similar versions)
on which the Products operate that are consistent (or substantially consistent)
with earlier models;

 

(n)           informing the Representative of
its manufacturing capability and in particular, regularly providing the
Representative with estimates of the duration of time required to meet all
potential and accepted Product orders;

 

(o)           ensuring that the details of the
[***] with the Representative are kept strictly confidential and are not
disclosed to any of the Representative’s customers or competitors and are [***];

 

(p)           ensuring that no written
communication is initiated with any owner, operator or management company of a
Casino in the Exclusive Territory regarding the sale of Products unless the
Representative is copied on that correspondence and invited on reasonable
notice to be present at any meeting (whether conducted in person or by means of
any telecommunication facility);

 

(q)           until such time as the
Representative commences manufacturing under clause 13 all of the Products
required by it, ensuring that Stargames and each other Supplier has the
capability, in a reasonable manner, to supply those Products so as to fulfil in
a timely manner the Representative’s accepted orders for the Products;

 

(r)            for the earlier of the Term or
until such time as both the Joint Ownership Period commences and the
manufacturing agreement contemplated in clause 13.4(b) has been entered into,
each Supplier will continue as a material obligation under this agreement to
meet its obligations to the Representative under clauses 3.4, 6.5;

 

(s)           for the earlier of the Term or
until such time as the manufacturing agreement contemplated in clause 13.4(b)
has been entered into, each Supplier will continue as a material obligation
under this agreement to meet its obligations to the Representative under clause
13.2; and

 

(t)            using reasonable efforts to
obtain, but with respect to regulatory issues at Stargames’ sole and final
discretion and at Stargames’ sole cost the necessary regulatory consents or
approvals:

 

(i)            in relation to the co-investment
and joint operation of the R & D Centre between Stargames and Shuffle
Master on the one hand and the Representative on the other; and

 

(ii)           as contemplated under clause 13.4(c).

***Confidential Treatment Requested

 

19

 

9              Obligations of all
Parties

 

9.1          Costs and Expenses

 

Unless otherwise stated in this
Agreement or agreed by the Parties in writing, the Parties acknowledge and
agree that:

 

(a)           each Party shall bear its own costs and expenses and provide all staff
or labour for performing its obligations under this Agreement;

 

(b)           the respective representatives of the Parties shall meet at regular
intervals (whether in person or by telephone conference) to discuss the market
conditions and requirements for the Products and Services offered to persons in
the Exclusive Territory;

 

(c)           unless
required by any applicable law or regulation, or by any gaming regulatory
authority, neither Stargames nor any Supplier shall make any public
announcement regarding any purchase order secured by the Representative
or details of work covered by such purchase order without the Representative’s prior written approval
(such approval not to be unreasonably withheld); and

 

(d)           each
Party shall promptly inform the other if it comes to its attention that the
Products or Services may have infringed the Intellectual Property Rights of any
third party.

 

9.2          R & D Centre Agreement

 

Each of Shuffle Master, Stargames and the Representative shall continue
to negotiate in good faith with a view to finalising the terms of and executing
the R & D Centre Agreement as soon as practicable after the Commencement
Date and in any case on or before [***].

 

10           Warranties

 

10.1        Warranties of
Stargames

 

Stargames represents and warrants to the Representative that:

 

(a)           it possesses the
requisite authority to enter into and perform its obligations under this
Agreement and it has the full, free and unrestricted
rights to appoint, subject to each of the
provisions of this Agreement, the Representative as the sole
and exclusive
distributor and systems integrator of Products in the Exclusive Territory for each Supplier under this
Agreement and
that all the rights granted to the Representative under this Agreement will not infringe any rights, claims
or authorisations of any third party;

 

(b)           provided that Representative
makes no changes or modifications thereto (other than changes or modifications
which have been authorised in writing by a Supplier), and to the best knowledge
of each Supplier, the Products developed solely or manufactured by a
Supplier, and the promotion, sale and distribution of the same by the Representative and/or any of its Representatives under the terms of this
Agreement will not, in the Exclusive Territory, infringe any Intellectual
Property Rights or other proprietary rights of any third party;

 

(c)           no Supplier is a party to any
legal action or proceedings applicable to the Exclusive Territory concerning
the Intellectual Property Rights of any Supplier
in the Products
or any part thereof, which Intellectual Property Rights
are material to the sale, distribution, use or operation of a Product or are
material to enable it to perform its obligations under this Agreement, and to the best knowledge of each Supplier, no such claim has been made nor
is there any such threatened action or
proceedings;

 

(d)           to the best knowledge of each
Supplier, the Intellectual Property utilised or embedded in the Technology, in
any Improvement that belongs to a Supplier and the Products may be used by the Representative
and its customers in the Exclusive Territory free of any third party claims or
interests, and without limiting the generality of the foregoing, no Supplier
has assigned or conveyed any

***Confidential Treatment Requested

 

20

 

interest in any such Intellectual Property which may be
inconsistent with the rights granted under this Agreement;

 

(e)           save for the appointment of the
Representative under this Agreement and as contemplated under clause 3.6 and in
Schedule 4, neither it nor any Supplier has appointed any distributor or agent,
whether in the Exclusive Territory or elsewhere, to promote, sell or distribute
the Products and Services to any persons in the Exclusive Territory, which
appointment shall remain in effect as of the Commencement Date;

 

(f)            before signing this Agreement
and at all times during the Term, it obtained and maintains or will after the
date of this Agreement obtain and maintain all necessary licences, permissions,
approvals and consents required to enter into this Agreement and perform its
obligations hereunder in the Exclusive Territory;

 

(g)           neither the execution of this
Agreement nor the performance by it of its obligations under this Agreement
will cause it to be in breach of any agreement or undertaking to which it is a
party or is subject;

 

(h)           no Supplier shall take any
action or omission which jeopardizes or puts at risk any of the Representative’s licenses or permits, and

 

10.2        Warranties of
the Representative

 

The Representative represents and warrants to Stargames that:

 

(a)           it possesses the
requisite authority to enter into and perform its obligations under this
Agreement and it has the full, free and unrestricted
rights to accept its appointment as the sole and exclusive
distributor and systems integrator of Products in the Exclusive Territory for each Supplier under this
Agreement, and that Representative’s exercise of its rights and obligations
under this Agreement will not infringe any rights, claims or authorisations
granted by the Representative to any third party;

 

(b)           before signing this Agreement
and at all times during the Term, it obtained and maintains, or will after the
date of this Agreement obtain and maintain, all necessary licences,
permissions, approvals and consents required for the purposes of this
Agreement;

 

(c)           neither the execution of this
Agreement nor the performance by it of its obligations under this Agreement
will cause it to be in breach of any agreement or undertaking to which it is a
party or is subject;

 

(d)           it has made full disclosure of
all information within its reasonable and actual knowledge which would be
material to the decision of Stargames to enter into this Agreement;

 

(e)           the information given by it or
on its behalf to Stargames with respect to this Agreement is true, complete and
accurate in all material respects and none of that information is misleading,
whether by inclusion of misleading information or omission of material
information or both;

 

(f)            provided that the Supplier
makes no changes or modifications thereto (other than changes or modifications
which have been authorised in writing by the Representative), and to the best
knowledge of the Representative, the Products developed solely or
manufactured by the Representative or which are material to enable it to
perform its obligations under this Agreement, and the promotion, sale and
distribution of the same by the Representative or any of its Distributors
under the terms of this Agreement will not, in the Exclusive Territory,
infringe any Intellectual Property Rights or other proprietary rights of any
third party;

 

(g)           the Representative is not
a party to any legal action or proceedings applicable to the Exclusive
Territory concerning any of its Intellectual Property Rights or any part thereof which are material to enable it to perform its obligations
under this

 

21

 

Agreement and to the best knowledge of the Representative, no claim has been made nor is there any
such threatened action or proceedings;

 

(h)           the Representative shall
take no action or omission which knowingly or with reckless disregard
jeopardizes or puts at risk, or a reasonable person in the Representative’s
circumstances would (without any duty of inquiry or diligence) consider it more
probable than not, will jeopardize or put at risk, any of the Supplier’s
licenses or permits;

 

(i)            the Representative will
comply with all laws, statutes and regulations applicable to it, including
without limitation, all relevant provisions of the United States Foreign
Corrupt Practices Act;

 

(j)            for the Term, the Representative
will continue as a material obligation under this Agreement, to operate the
business of distributing Products as a core business activity, it being the
intent of the Parties that the maximum profitable sales will be achieved for
the benefit of the Parties; and

 

(k)           [***]

 

10.3        Status
of warranties

 

All
representations and warranties in this Agreement survive the execution,
delivery and termination of this Agreement and are repeated on each day during
the Term and are given with the intent that liability under those
representations and warranties will not be confined to breaches discovered
prior to the date of this Agreement.

 

11           Products warranty

 

11.1        Factory
Warranty

 

All Products
manufactured and supplied by each Supplier or manufactured by Representative,
shall carry a [***] warranty against faulty parts manufacture and workmanship. Such
warranty period shall commence following acknowledgement of satisfactory
installation from the end user.

 

11.2        Product
Liability

 

The liability
of each Supplier or the Representative in respect of any Product manufactured
by it, if any, for damages relating to any defective Products or any breach of
warranty or condition in relation to the Products will be limited to the
replacement of those defective Products.

 

11.3        Limited
Warranty

 

The warranties
set forth in this clause 11 are intended solely for the benefit of the party
for whom the Product is manufactured (“Buyer”).
All claims hereunder shall be made by the Buyer and may not be made by Buyer’s
customers. The limited warranties set forth above are in lieu of all other
warranties, express or implied, by statute or otherwise, all of which are, to
the extent permitted by law, hereby disclaimed and excluded by the party
manufacturing the Product (“Manufacturer”),
including without limitation any warranty of merchantability or fitness for a
particular purpose or use and all obligations or liabilities on the part of the
Manufacturer for damages arising out of or in connection with the use, repair
or performance of the Products.

 

11.4        Excluded
Claims

 

The
Manufacturer shall have no obligation under any warranty in the event that:

 

(a)           repair or replacement of any
Products shall have been required by normal wear and tear or necessitated in
whole or in part by events attributable to force majeure or the negligence of
the Buyer or its customers;

 

***Confidential Treatment Requested

22

 

(b)           the Product shall have been
modified in any manner without prior written consent of the Manufacturer;

 

(c)           the Product shall not have been
maintained or used in accordance with the Manufacturer’s or Supplier’s
applicable operating and/or maintenance manuals, whether by the Buyer or its
customer;

 

(d)           claims are made for shuffling
Products and the customer of the Buyer has not used cards approved by the
Manufacturer or the Supplier; or

 

(e)           damages or defects resulting
from improper handling and/or non-usage of the original packing and the
applicable packing instruction.

 

11.5        Limitation
of Liabilities

 

(a)           Save and except for the agreed
remedies as stated in clauses 5.5 and 5.9, in no event shall a party (the “Defaulting
Party”), its directors, employees or agents be liable for any indirect or
consequential loss, damage, cost or expense of any kind whatever and however
caused whether arising under contract, tort (including negligence) or statute
including but without limitation to loss of production, loss of or corruption
to data, loss of profits or contracts, loss of operational time and/ or loss of
goodwill or anticipated savings (collectively “Consequential Loss”), suffered
or incurred by the other party or the other party’s customers (even if the
Defaulting Party shall have been advised of the possibility of such potential
loss or damage) arising from performance or non-performance of the Product or
breach of any warranties, representations or terms or conditions under this
Agreement provided that the exclusion of Consequential Loss in this clause
shall not be applied if the breach relates to an unlawful termination of this
Agreement by the Defaulting Party.

 

(b)           Nothing in this Agreement shall
exclude or limit liability for death or personal injury resulting from the
negligence of any of the parties or its employees while acting in the course of
their employment.

 

12           Orders and deliveries

 

12.1        Order
Forms

 

Unless
otherwise agreed in writing by the Parties:

 

(a)           all orders for the Products and
Services by the Representative shall be in writing using the format prescribed
by the Supplier (the “Order Form(s)”)
and shall be communicated to the Supplier by facsimile or email;

 

(b)           the Order
Forms shall contain details of the descriptions and quantities of the Products, scope of works of the Services,
time line required for delivery and the designated port of delivery,
but each Order Form shall indicate that delivery is EX WORKS (as defined in
clause 12.2), Supplier’s manufacturing facility;

 

(c)           each Order Form from the
Representative is subject to acceptance in writing by Supplier at its principal
office in Milperra, Australia, which acceptance shall be delivered by
registered mail, e-mail or facsimile. Each Order Form shall be deemed to be an
offer by the Representative to purchase Products pursuant to the terms of this
Agreement and, when accepted by the Supplier as hereinabove provided, shall
give rise to a contract under the terms of this Agreement to the exclusion of
any additional or contrary terms set forth in the Representative’s Order Form
or any other document not signed by the parties; and

 

(d)           time shall be of the essence in
respect of the required delivery time set out in each accepted Order Form
(which delivery time shall not be less than the minimum delivery time agreed in
advance by the Parties) and the Representative shall be entitled to demand from
Stargames, as its sole remedy, [***] under the

 

***Confidential
Treatment Requested

23

 

relevant accepted Order Form from the date the relevant
Products are due for delivery until the date of shipment of the same provided
that the Supplier shall not be liable to pay such [***] for any delay in
delivery of any Products due to a cause for such delay that is beyond its
reasonable control.

 

12.2        Deliveries

 

All deliveries
of Products shall be EX WORKS Supplier’s manufacturing facility. For the
purposes of this Agreement, EX WORKS shall be construed in accordance with
INCOTERMS 2000 of the International Chamber of Commerce (save that
notwithstanding that definition the Supplier shall be responsible for
organising the transport of the Products, including insurance costs, but all at
the Representative’s cost and for the Representative’s account. The Supplier
shall be responsible for organising shipment and shall have no further
responsibility for the Products and all risk of damage, loss or delay in the
Products shall pass to the Representative upon their delivery, at the EX WORKS
manufacturing facility by the common carrier selected by the Supplier, which
shall be for the Representative’s account. Legal ownership and title to a
Product shall pass to the Representative upon shipment of the Product, but the
Supplier shall retain a security interest in the Product until the
Representative shall have paid the Product’s purchase price in full (including
transportation and insurance costs to the location nominated by the
Representative) and in connection therewith Stargames reserves the right whilst
any delinquency in payment is continuing to require the Representative to
execute any documents to legally validate, create or perfect a Supplier’s
security interest. The Representative is obliged to state the retention of
title in its books. The Supplier shall procure that the common carrier ensures
that all Products are fully insured by the common carrier from the EX WORKS
manufacturing facility. In the event of an extended delivery time, the Supplier
shall notify the Representative of the delay as soon as practicable and in any
event within 2 weeks of receiving the order. The Representative shall be
responsible for all import/export taxes and costs. The Supplier reserves all
rights with respect to shipped or delivered Products permitted by applicable
law including, without limitation, the rights of rescission, repossession,
resale and stoppage in transit until the full amount due from the
Representative has been paid.

 

12.3        [***]
Adjustment

 

For the
avoidance of doubt, whilst all transportation and insurance costs and import
and export duties and import and export taxes are for the Representative’s
account, they nonetheless constitute a [***].

 

12.4        Accepted
Order Forms

 

An accepted
Order Form shall become binding and shall not be subject to cancellation or
change by the Representative, either in whole or in part, unless the request for cancellation or change is made in writing not
less than 21 days prior to the expected shipment date stated in that Order Form. The Supplier shall
deliver the Products to the shipping port or flight terminal of the
manufacturing place of the Products on or before the shipping date set out in
the Order Form, all consistent with the above EX WORKS delivery terms.

 

12.5        Products
manufactured in Australia

 

All Products
sold to the Representative which are manufactured or shipped from Australia
shall be exported from Australia [***] of such Products; if this does not occur
as a consequence of any action taken by the Representative or omission on the
part of the Representative intended or which is reasonably foreseeable to delay
the export of such Products, the Representative shall pay all GST which is or
becomes due on such Products.

 

***Confidential Treatment Requested

24

 

12.6        Stargames’
rights

 

Notwithstanding
the foregoing, Stargames may refuse to accept any purchase orders or cancel or
delay shipment of any order for Products previously accepted by Stargames if:

 

(a)           the Representative is overdue in
its payments to Stargames;

 

(b)           the Representative is deemed to
be insolvent, has an administrator or liquidator appointed, or is otherwise
unable to pay its debts;

 

(c)           the Representative is in breach
of any material provision of this Agreement;

 

(d)           the Representative does not
meet, at the time of each order, Stargames’ or any Associated Companies’ credit
worthiness policies or review;

 

(e)           Stargames believes (acting
reasonably and in good faith), but in its sole and final discretion, it is at
risk of not being timely paid in full by the Representative for any Products,

 

provided that
if the refusal is based on any of the grounds set out in sub-clauses (d) or (e)
of this clause 12.6, Stargames shall provide details of such grounds and the
basis of such belief in writing at the time that it notifies the Representative
of the refusal of the relevant order and shall consider in good faith, but in
its sole and final discretion, any response provided by the Representative.

 

12.7        Advance
payment or credit

 

Notwithstanding
the foregoing, Stargames shall have the right in its sole and final discretion,
to require either payment in advance or an irrevocable letter of credit or bank
guaranty for any Product ordered, and before said Product is supplied, if
Stargames reasonably believes it is at risk of not being promptly paid in full
by the Representative. In connection therewith, Stargames agrees to give
reasonable written notice to the Representative of Stargames’ belief (which
shall contain details of the basis of its belief) and will consider in good
faith, but in its sole and final discretion, any response provided by the
Representative.

 

13           Manufacture of Relevant Gaming Machines

 

13.1        Stargames
to initially manufacture Relevant Gaming Machines

 

Until such time
as the Representative has built or acquired a manufacturing plant which
satisfies each of the conditions, obligations, limitations and/or requirements
of clause 13.4, Stargames and/or another Supplier will supply to and
manufacture or procure the manufacturing of Relevant Gaming Machines for sale
by the Representative. Each such Relevant Gaming Machine [***] the Gaming
Machine Cost.

 

13.2        Representative
to be able to monitor manufacturing

 

Stargames will
ensure that at all times that it is manufacturing Relevant Gaming Machines for
supply to and sale by the Representative, the Representative will have
reasonable access at its cost (provided that no Supplier will charge the
Representative a fee for providing the Representative with such reasonable
access),to all of the necessary technical and other staff of Stargames and/or
any Supplier to enable it to reasonably monitor all material aspects of the
manufacturing of those Relevant Gaming Machines reasonably sufficient to enable
it to build a manufacturing plant.

 

13.3        No
Obligation

 

Notwithstanding
any other clause of this Agreement that refers to the manufacturing
arrangements, the Representative is not obliged to manufacture any Product
until suitable arrangements have been agreed by both Stargames and the
Representative, and until such time, each Supplier shall continue to have the
exclusive right to

 

***Confidential
Treatment Requested

 

25

 

manufacture its
Products and the Representative shall have no manufacturing rights to the
Products.

 

13.4        Representative’s
ability to commence manufacturing

 

The
Representative intends at a future point in time to build or acquire a
manufacturing plant [***] that will manufacture Gaming Machines. The
Representative will keep Stargames fully informed about the construction or
acquisition of the manufacturing plant. Subject to:

 

(a)           to Stargames’ reasonable
satisfaction, the manufacturing plant becoming fully operational and capable of
manufacturing sufficient quantities of Relevant Gaming Machines at a
competitive cost and of appropriate quality (in accordance with pre-determined
specifications set out in any separate manufacturing agreement entered into by
the Parties);

 

(b)           the Representative and Stargames
entering into a written manufacturing agreement consistent with the applicable
terms of this Agreement;

 

(c)           all necessary regulatory
consents being obtained;

 

(d)           the manufacturing relationship
between the Representative and Stargames not causing any jeopardy or risk to
any gaming License or approval held (at any time) by any Supplier;

 

(e)           Stargames or Shuffle Master (as
the case may be) having completed such additional due diligence on the
Representative as it elects;

 

(f)            the Representative having fully
cooperated with any regulatory due diligence needed to be done by Stargames or
Shuffle Master (as the case may be) for regulatory compliance; and

 

(g)           the Representative not being in
material breach of this Agreement:

 

(i)            the Representative will
manufacture [***] intended for Casinos in the Exclusive Territory at that
manufacturing plant;

 

(ii)           subject to any existing legal
obligations of Stargames and Stargames not being put in breach of any existing
legal obligations, Stargames will [***] intended for persons in the Exclusive
Territory that it has in place in the Asian region and will appoint the
Representative [***] for persons in the Exclusive Territory; and

 

(iii)          thereafter, the Parties will
negotiate in good faith regarding the appointment of the Representative if
appropriate [***]. Before making this appointment, Supplier will need to be
reasonably satisfied, in its sole and final discretion, that, among other
things, the plant is capable of manufacturing sufficient quantities of Relevant
Gaming Machines at a competitive cost and of appropriate quality and in a
manner so as to timely deliver same as Stargames require and as Stargames is
currently doing.

 

13.5        Ownership
of Manufacturing Plant

 

The parties
recognise that the manufacturing plant may not be wholly owned by the
Representative and that the manufacturing plant may be co-owned with third
parties, but the Representative will always have control and majority equity
interests in the ownership of the manufacturing plant. This provision shall not
be deemed to modify or reduce any of the Representative’s obligations
respecting the manufacturing of Gaming Machines.

 

13.6        Limitation
on Representative’s ability to manufacture

 

Without the
prior written express consent of Stargames, the Representative will not
manufacture any Gaming Machines or Table Gaming Products (other than Relevant

***Confidential
Treatment Requested

 

26

 

Gaming Machines
or Relevant Table Gaming Products) either for its own account or for any other
Gaming Machine or Table Gaming Product supplier in the manufacturing plant as
contemplated in clause 13.3, nor will Representative, without the prior
written consent of Stargames, assist any other entity in doing any of the
activities which it is not permitted by this clause 13.6 to do.

 

13.7        Products
warranty

 

Subject to
clause 13.3 above:

 

(a)           all Relevant Gaming Machines
manufactured by the Representative in its manufacturing plant shall carry a
return to factory warranty against faulty parts, manufacture and workmanship.
The length and starting date of such warranty period shall be agreed by the
parties prior to the Representative commencing to manufacture any Relevant
Gaming Machines.

 

(b)           The liability of the
Representative, if any, for damages relating to any allegedly defective Gaming
Machines manufactured by the Representative or any breach of warranty or
condition in relation to the Gaming Machines manufactured by the Representative
will be limited to replacement of the Gaming Machines or the refund of the
actual price paid for such Gaming Machines.

 

13.8        Manufacture
of Relevant Table Gaming Products

 

If during the
Term the Representative desires to also manufacture the Relevant
Table Gaming Products
it will notify Stargames of this intention and upon doing so the Representative
and Stargames will meet and negotiate in good faith regarding the merits of the
Representative also manufacturing the Relevant Table Gaming Products, with
Stargames having the final decision, in its sole and final discretion, as to
whether to have Representative so manufacture.

 

14           Payments for Relevant Gaming Machines

 

14.1        Royalties

 

The Representative will pay to Stargames a royalty of [***]
earned or received by either the Representative or any Distributor on all
Relevant Gaming Machines sold to Casinos in the Exclusive Territory by the
Representative or any Distributor.

 

14.2        Payment
of Cost and Royalty

 

(a)           [***] to the Representative:

 

(i)            all Gaming Machine Costs will be
paid based on the number of Relevant Gaming Machines that the Representative or
any Distributor of the Representative has ordered from Supplier and which has
been shipped to the Representative and has not been lawfully returned due to
defects therein pursuant to the provisions of clause 12 hereof;

 

(ii)           the Representative will also pay
the royalty on all Relevant Gaming Machines shipped to Designated Clients that
have not been lawfully returned by the Representative due to defects therein;
and

 

(iii)          the royalty on all other Gaming
Machines shipped in the Exclusive Territory (or, if applicable, outside the
Exclusive Territory) will be [***].

 

(b)           At
the end of each month or on another date in each month mutually agreed to by
the Parties for this purpose (“Statement Date”), the Representative shall send
to Stargames a truthful and accurate written statement (“Statement”) of the
Representative’s invoices issued to its customers for the previous monthly
period, listing the names and addresses of each of the Representative’s
customers

***Confidential
Treatment Requested

 

27

 

(end-users), the invoiced amount
of each sale, and the amount already settled and paid by such customers.

 

14.3        Minimum
Royalty

 

(a)           During the Term, subject to
clause 3.6 (if applicable), and provided that neither Stargames nor Shuffle
Master is in material breach (which breach has not been remedied as provided in
clause 22.1(b) in a manner that has not materially affected the
Representative’s ability to sell and distribute Relevant Gaming Machines to
Casinos in the Exclusive Territory) of any of its obligations under this
Agreement which breach adversely and directly affects in any material manner
the Representative’s ability to sell and distribute any Relevant Gaming
Machines to Casinos in the Exclusive Territory, 
then the Representative will ensure that the royalty paid to Stargames,
for each of the first three (3) contract years, in respect of the distribution
of the Relevant Gaming Machines to Casinos in the Exclusive Territory will be
at least the following amounts in each contract year:

 

	
  A$

  	
   

  	
  First Contract Year from

  Commencement

  Date

  	
   

  	
  Second Contract Year from

  Commencement

  Date

  	
   

  	
  Third Contract Year from

  Commencement

  Date

  
	
  Minimum
  Royalty

  ("Minimum Royalty")

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

(b)           Any Royalty paid to Stargames
[***] payable in a contract year may be [***]. In any contract year [***].

 

(c)           The [***] only relates to sales
of Relevant Gaming Machines to Casinos in the Exclusive Territory.

 

(d)           [***].

 

14.4        Audit
Rights

 

Stargames shall
have full audit rights (at its sole cost) regarding all sales or other
distributions of Relevant Gaming Machines or otherwise in order to verify the
royalties due.

 

14.5        Stargames
[***]

 

(a)           Stargames will pay or will
procure each Supplier to pay [***] that are sold, after the Commencement
Date,  which Products incorporate any of
the Intellectual Property that is developed, after the Commencement Date, by
the Representative either solely or jointly with a Supplier.

 

(b)           The amount of the [***] will be
determined from time to time by agreement between the Parties at the time that
any Intellectual Property that is developed, after the Commencement Date, by
the Representative either solely or jointly with a Supplier is incorporated
into any Gaming Machine or Table Gaming Products which is sold by any Supplier.

 

(c)           To the extent that any Gaming
Machines or Table Gaming Products that incorporate any of the Intellectual
Property that is developed by the Representative either solely or jointly with
a Supplier are sold to persons in the Exclusive Territory the amount of the
[***] to the Representative pursuant to this clause 14.5 will be [***] by the
Representative to Stargames pursuant to clause 14.1. Notwithstanding [***] made
pursuant to this clause, the [***] pursuant to clause 14.1 will be taken into
account when calculating whether the Representative has satisfied its
obligation to pay the [***] as required by clause 14.3.

***Confidential
Treatment Requested

 

28

 

(d)           If any sales of such Gaming
Machines or Table Gaming Products containing Intellectual Property that is
developed, after the Commencement Date, by the Representative either solely or
jointly with a Supplier are made by any Supplier outside the Exclusive
Territory, Stargames will provide the Representative with monthly reports
within 30 days of the end of each month detailing the number of such Gaming
Machines and such Table Gaming Products sold in that month in respect of which
[***] pursuant to this clause and will [***] within 30 days of the end of that
month.

 

(e)           Nothing in this clause requires
Stargames to utilise any Intellectual Property that is developed, after the
Commencement Date, by the Representative either solely or jointly with a
Supplier in any Gaming Machines or Table Gaming Products that are sold by any
Supplier.

 

14.6        Changes
to the Gaming Machine Cost

 

Any changes to
the Gaming Machine Cost must only be effected by a Supplier in accordance with
any other applicable provisions of this Agreement and such change will not be
capable of being applied to any unfilled order placed by the Representative
prior to the date on which any notice of a change in the Gaming Machine Cost
becomes effective.

 

15           Payments for Relevant Table Gaming Products

 

15.1        Table
Gaming Product Prices

 

The Representative will pay to Stargames, or if it so
directs to the relevant Supplier, the Relevant Table Gaming Product Distribution
Price for the Relevant Table Gaming Products ordered by the Representative,
[***] to the Representative by Stargames or the applicable Supplier.

 

15.2        [***]
Table Gaming Products

 

(a)           During the Term, and provided
that neither Stargames nor Shuffle Master is in material breach (which breach
has not been remedied as provided in clause 22.1(ii) in a manner that has not
materially affected the Representative’s ability to sell and distribute
Relevant Table Gaming Products to Casinos in the Exclusive Territory) of any of
its obligations under this Agreement which breach adversely and directly
affects in any material manner the Representative’s ability to sell and
distribute any Relevant Table Gaming Products to Casinos in the Exclusive
Territory, then the Representative will ensure that [***] Casinos in the
Exclusive Territory [***] agreed by the parties in respect of each such year.

 

(b)           The Representative and Stargames
will use all reasonable endeavours to agree on the [***]:

 

(i)            shufflers;

 

(ii)           easy chippers; and

 

(iii)          intelligent shoes,

 

within three
(3) months of the Commencement Date. If the Representative and Stargames are
not able to reach agreement within that time then the Representative shall have
no distribution or other rights in respect of Relevant Table Gaming Products
and clause 3.2 shall have no further force or effect, in which case any
Supplier shall be entitled to sell, distribute or market Relevant Table Gaming
Products in the Exclusive Territory, in such Supplier’s sole and final
discretion.

 

(c)           Any Relevant Table Gaming
Products ordered by the Representative in the [***] for that year may be [***],
but the [***] of Relevant Table Gaming Products that [***] required to be
ordered in that year.

***Confidential
Treatment Requested

 

29

 

(d)           [***]

 

(e)           The [***] only relates to sales
of Relevant Table Gaming Products to Casinos in the Exclusive Territory.

 

15.3        Changes
to the Relevant Table Gaming Product Distribution Price

 

Any changes to the Relevant Table Gaming Product
Distribution Price must only be effected by a Supplier in accordance with any
other applicable provisions of this Agreement and such change will not be
capable of being applied to any unfilled order placed by the Representative
prior to the date on which any notice of a change in the Relevant Table Gaming
Product Distribution Price becomes effective.

 

15.4        Audit
Rights

 

Stargames shall have full audit rights (at its sole cost)
regarding all sales or other distributions of Relevant Table Gaming Products or
otherwise in order to verify the amounts due for the Relevant Table Gaming
Products ordered.

 

16           Ownership and protection of Intellectual Property

 

16.1        Pre-Existing Intellectual Property

 

The Parties
agree that all right, title and interest, in and to, the Pre-existing
Representative Intellectual Property and the Pre-Existing Shuffle Master
Intellectual Property will, at all times, remain the sole and exclusive
property of the Representative and Stargames, respectively.

 

16.2        Improvements

 

The Parties
agree that, subject to the foregoing provisions of this Agreement, each Party
will own all Intellectual Property in, and to, any and all Improvements and/or
any other gaming technologies, which are developed or created by such Party
prior to the commencement of the Joint Ownership Period, including any
Improvements which have been developed as a consequence of any involvement or
assistance received from any other Party.

 

17           Confidentiality

 

17.1        Confidential
Information

 

Each Party
agrees and undertakes to every other Party that during the Term and [***], it
will (and it will ensure that the members of its Group will):

 

(a)           maintain the confidential and
secret nature of all Confidential Information received by it from any other
Party and will not disclose such Confidential Information to any third party
otherwise than in the performance of its obligations under this Agreement; and

 

(b)           not directly or indirectly use
or attempt to use any such Confidential Information in a manner that may injure
or cause loss either directly or indirectly to any other Party or contravene
the provisions of this clause.

 

17.2        Exclusions

 

Clause 17.1
shall not however apply to:

 

(a)           disclosures required by law,
statutory bodies or regulatory authorities;

 

(b)           disclosures to employees, agents
or contractors who have a need to know and only to the extent necessary for each
of them to perform his or her duties;

***Confidential Treatment Requested

 

30

 

(c)           disclosure
or use of any information which was, is in or enters the public domain other than by breach
of this Agreement;

 

(d)           disclosure
or use of any information which is independently developed by the relevant
Party as
evidenced by written records; or

 

(e)           disclosure
or use of any information which is received in good faith by one Party from a third party
not subject to a duty of confidentiality.

 

17.3        Compliance
by employees, agents and sub-contractors

 

Each Party
undertakes to every other party that it will take all reasonable steps as shall
from time to time be necessary to ensure compliance with the provisions of this
clause by its (and/or its Designated Clients’) employees, agents and
sub-contractors.

 

18           Gaming Machine branding

 

18.1        Branding
of Relevant Gaming Machines

 

Subject to
clause 18.2, the Parties agree that any Relevant Gaming Machines sold by the
Representative will bear, such branding, name and trademarks as the Parties may
consider as being the most attractive to its customers.

 

18.2        Stargames’
Name

 

Each Relevant
Gaming Machine will bear Stargames’ name in such reasonable position as may be
acceptable to all parties.

 

18.3        Trademark

 

(a)           During the Term and subject to
each of the terms and conditions in this Agreement and provided there is no
Actioned Material Breach on the part of the Representative, the Representative
shall have the non-exclusive right to use each Supplier’s trademarks in
promoting the sale of Products and Services to persons in the Exclusive
Territory.

 

(b)           The Representative agrees to
comply with the instructions issued by each Supplier relating to the form and
manner in which that Supplier’s trade name and trademarks are used.

 

(c)           The Representative agrees to
discontinue upon notice from Stargames any practice or use of the trademarks
that might adversely affect the rights or interest of a Supplier in its
trademarks.

 

18.4        Branding
of Relevant Gaming Machines

 

The Parties
jointly agree that any Relevant Gaming Machines sold by the Representative will
bear, such branding, name and trademarks as the Parties may consider as being
the most attractive to the Representative’s customers and in doing so the
Supplier will licence the Representative to use its trade marks.

 

18.5        Joint
Logo

 

The Parties
agree to work in good faith to develop a joint logo for the Relevant Gaming
Machines.

 

31

 

19           Escrow

 

19.1        Escrow
of Stargames’ Intellectual Property

 

Subject to any regulatory requirements, limitations or
prohibitions, Stargames must ensure that during the Term all Intellectual
Property in tangible form including all source code and all Improvements that
are used by a Supplier:

 

(a)           in any Relevant Gaming Machine;
and

 

(b)           where the Parties have
otherwise, in writing, agreed, in any Relevant Table Gaming Product,

 

are deposited with and are held by an independent escrow
agent acceptable to all Parties.

 

19.2        Release
from Escrow of Stargames’ Intellectual Property

 

The terms of the escrow referred to in clause 19.1 shall
permit the deposited materials to be released to the Representative for
unconditional use (in any manner permitted under this Agreement or the R &
D Centre Agreement) if this Agreement is terminated due to the insolvency or
material uncured breach, after written notice and a 30 day cure period, of
Stargames or any applicable member of the Stargames Group of any of its
obligations under this Agreement. If the deposited materials are released to
the Representative otherwise than as a consequence of the insolvency of
Stargames then the Representative shall only be permitted to use the deposited
materials for the balance of the twenty years that the Term would have
continued.

 

19.3        Escrow
of the Representative’s Intellectual Property

 

The Representative must ensure that during the Term all
Intellectual Property of the Representative in tangible form including all
source code and all Improvements that are used by a Supplier in any Product are
deposited with and are held by an independent escrow agent acceptable to all
Parties.

 

19.4        Release
from Escrow of the Representative’s Intellectual Property

 

The terms of the escrow referred to in clause 19.3 shall
permit the deposited materials to be released to Stargames for unconditional
use (in any manner permitted under this Agreement or the R & D Centre
Agreement) if this Agreement is terminated due to the insolvency or material
breach of the Representative of any of its obligations under this Agreement. If
the deposited materials are released to Stargames otherwise than as a
consequence of the insolvency of the Representative then Stargames shall only
be permitted to use the deposited materials for the balance of the twenty years
that the Term would have continued.

 

20           [***] of the Representative

 

20.1        [***]

 

 [***]

 

20.2        Participation
by Shuffle Master

 

[***] Shuffle
Master will be [***].

***Confidential Treatment Requested

 

32

 

21           Indemnity

 

21.1        Indemnity
by Each Party

 

Subject to
clause 11.5, each Party (“Indemnifying Party”)
releases and indemnifies each other Party (each an “Indemnitee”), its directors, officers, servants and agents
against all Claims (including the cost of defending or settling any Claim)
which may be instituted against any Indemnitee arising out of:

 

(a)           a breach by the Indemnifying
Party (or any sub-contractor, agent or employee of the Indemnifying Party) of
any of the Indemnifying Party’s material obligations or warranties under this
Agreement; or

 

(b)           any claim made against an
Indemnitee in relation to workers’ compensation or by any taxation authority in
connection with the employees or activities of the Indemnifying Party,

 

and the amount
of all claims, damages, costs and expenses which may be paid, suffered or
incurred by an Indemnitee in respect of any such loss, damage or injury shall
be made good at the Indemnifying Party’s expense and may be deducted from any
monies due or becoming due to the Indemnifying Party.

 

21.2        Indemnity by Stargames

 

Subject to
clause 11.5, Stargames shall indemnify, defend and save and hold harmless the Representative, its Group and their Associated Companies, and the
directors, officers, employees, representatives and agents (either of the Representative’s or of any member of its Group) from and against all
claims, lawsuits, losses and expenses arising out of or resulting from:

 

(a)           any breach
or inaccuracy of any of the representations or warranties set out in clause 10.1; or

 

(b)           any breach of Stargames or
Shuffle Master’s or any Supplier’s obligations or agreements under this
Agreement,

 

provided that Stargames’
liability under this clause shall be reduced
proportionately if the Representative’s negligence, wilful default or
breach of the Agreement has contributed to the relevant claims, lawsuits,
losses or expenses incurred by the Representative, its
Group entities, and its and their Associated Companies, or their directors, officers,
employees, representatives or agents.

 

21.3        Indemnity by Representative

 

Subject to
clause 11.5, the Representative shall indemnify, defend and save
and hold harmless Shuffle Master, any Supplier, its and their
Group entities, and its and their Associated Companies, and the directors, officers,
employees, representatives and agents, of any of the foregoing from and against
all claims, lawsuits, losses and expenses arising out of or resulting from:

 

(a)           any breach or inaccuracy of any of the representations or warranties set for
in clause 10.2; or

 

(b)           any breach of any of
the Representative’s or Melco’s obligations or agreements under this Agreement,

 

provided that the
Representative’s liability under this clause shall be reduced
proportionately if a Supplier’s negligence, wilful default or breach
of the Agreement has contributed to the relevant claims, lawsuits, losses or
expenses incurred by Shuffle
Master, any Supplier, its and their Group entities, and
its and their Associated Companies, and their directors, officers, employees,
representatives and agents.

 

33

 

21.4        Regulatory
compliance

 

Throughout the
continuance of this Agreement, the Indemnifying Party shall conform at its own
cost and expense with all laws of any applicable jurisdiction and all
regulations, by-laws, ordinances or orders made under them and the lawful
requirements of any public, municipal or other authority so far as they may
affect or apply to the Indemnifying Party or the performance of its obligations
under this Agreement and the Indemnifying Party shall indemnify each Indemnitee
from and against any and all actions, costs, charges, claims and demands in
respect of them.

 

21.5        Status
of indemnities

 

Each indemnity
in this Agreement:

 

(a)           is a continuing obligation;

 

(b)           constitutes a separate and
independent obligation of the Party giving the indemnity from its other
obligations under this Agreement; and

 

(c)           survives termination of this
Agreement.

 

22           Termination

 

22.1        Termination
by the Representative

 

(a)           The Representative may terminate
this Agreement immediately by notice in writing to Stargames if:

 

(i)            an Insolvency Event occurs in
relation to Stargames, Shuffle Master or any Supplier; or

 

(ii)           either Shuffle Master, Stargames
or any other Supplier commits a material breach of any of its obligations,
representations or warranties under this Agreement which:

 

(A)          if capable of being remedied, is
not remedied within [***] of notice from the Representative specifying the
breach and requiring it to be remedied, except that the period for remedying a
breach of any financial obligation or obligation to make a payment shall be
[***] from said notice; or

 

(B)           is not capable of remedy; or

 

(b)           After the [***], the
Representative may terminate this Agreement on [***] in writing to Stargames
(or such shorter period as Stargames may specify) if:

 

(i)            Stargames has decided to [***]
in its sole and final discretion in accordance with clause 8.1(l) that the
Representative has been selling in the Exclusive Territory; and

 

(ii)           Stargames has [***]; and

 

(iii)          such discontinuation will, in
the sole and final opinion of the Representative, render it [***]; and

 

(iv)          the Representative has given
notice of this to Stargames and the Parties [***] have not been able to come up
with mutually acceptable arrangement that will render it [***].

 

22.2        Termination
by Stargames

 

Stargames may
terminate this Agreement immediately by notice in writing to the Representative
if:

 

(a)           an Insolvency Event occurs in
relation to the Representative or Melco; or

***Confidential Treatment Requested

 

34

 

(b)           either the Representative or
Melco commits a material breach of any of its obligations, representations or
warranties under this Agreement which:

 

(i)            if capable of being remedied, is
not remedied within [***] of notice from Stargames specifying the breach and
requiring it to be remedied, except that the period for remedying a breach of
any financial obligation or obligation to make a payment shall be [***] from
said notice; or

 

(ii)           is not capable of remedy;

 

(c)           the Representative, any
Associated Company or any Group entity of the Representative takes any action
or fails to take any action which jeopardizes or puts at risk any corporate,
gaming or other regulatory licence, permit and/or approval (existing or
pending) (each a “Licence”) of
either Stargames or Shuffle Master in any jurisdiction;

 

(d)           any governmental agency takes
any action against the Representative, any Associated Company, or any Group
entity of the Representative which governmental action jeopardizes any Licence
of Shuffle Master or Stargames in any jurisdiction;

 

(e)           any regulatory or governmental
agency indicates that Shuffle Master’s or Stargames’ relationship or transaction
of business with the Representative or Associated Company or Group entity of
the Representative puts at jeopardy or risk any Licence of Shuffle Master or
Stargames;

 

(f)            If there is a change in the
ownership of the controlling shareholder of the Representative or Melco and
such material change is made in a manner that jeopardizes or puts at risk any
Licence of Shuffle Master or Stargames; or

 

(g)           any failure by Representative to
pay any royalties, costs, Minimum Royalties or other payments due under clauses
14 or 15, within 10 days after written notice of such payments being due.

 

For the
avoidance of doubt but without modifying or limiting Stargames rights under
this clause 22.2, Stargames shall not use any regulatory issues as a subterfuge
to improperly terminate this Agreement. Stargames shall also not be entitled to
terminate this Agreement solely because it is of the view that on termination
of this Agreement it or any Supplier or any other person would be able to
perform the obligations of the Representative under this Agreement in a manner
that is superior to the manner in which the Representative has performed its
obligations, provided that nothing contained in this clause shall prevent,
delay or hinder any Supplier from terminating this Agreement in the event of a
material breach by the Representative of its obligations under this Agreement
which is not rectified within any applicable cure period.

 

22.3        Termination
by either Party

 

A Party may
terminate this Agreement if permitted to do so by clause 29.12(b).

 

22.4        Interest

 

If any payment
is not made by a Party when due, interest accrues on such payment at the
penalty interest rate fixed by the Attorney-General under the Penalty Interest
Rates Act (Vic) 1983 on a daily basis from the due date for payment up to the
date of actual payment and is compounded monthly, both before and after
judgment (as a separate and independent obligation).

***Confidential Treatment Requested

 

35

 

23           Obligations and rights following termination

 

23.1        Confidential
Information, Products and Services

 

Upon
termination of this Agreement for any reason, or
expiration of the Term:

 

(a)           subject
to clause 19, each Party shall return all Confidential Information which
belongs to any other Party; and

 

(b)           the
Representative shall cease promoting, selling and distributing the Products and Services and shall cease using each Supplier’s trade name and trade marks.

 

23.2        Rights
and liabilities of Parties

 

(a)           Any termination or
expiration of this Agreement shall be without prejudice to any rights or
liabilities of any Party to or against any other Party accrued at the date of
termination or expiration or in respect of any breach of any other Party of any
of its obligations under this Agreement or any amount owing, due or payable
under this Agreement. Further, and subject to clause 11.5 the terminating Party
shall be entitled to pursue all rights, remedies and damages against the
non-terminating Party as may exist under applicable law.

 

(b)           If this Agreement is lawfully
terminated by the Representative pursuant to clause 22.1, the Representative
shall cease to be liable to pay nor remain committed to pay any portion of the
[***] referred to in clause 14.3 or any amount committed to be paid pursuant to
clause 15.2 on account of the [***] in respect of the contract year in which
this Agreement is terminated nor in respect of any subsequent contract year.

 

(c)           If this Agreement is terminated
by Stargames pursuant to clause 22.2(c) (provided that the action or inaction
on the part of the Representative referred to in that clause does not, in and
of itself, constitute a breach by the Representative of its obligations under
this Agreement), 22.2(e) or clause 22.2(f):

 

(i)            within [***] of the Commencement
Date then the Representative shall not be liable to pay or remain committed to
pay any amount on account of the [***] or any amount committed to be paid
pursuant to clause 15.2 on account of the in respect of the [***]; and

 

(ii)           at any other time during the
[***] after the Commencement Date, then the Representative shall only be liable
for the proportion of the [***] for that contract year or the proportion of the
payment in respect of the [***] for that contract year that the number of days
elapsed in that contract year prior to the termination date bears to the three
hundred and sixty five days of that contract year.

 

(d)           In no event, shall the
Representative be relieved of its obligation to fully pay any royalties or
other amounts in connection with any Product which, pursuant to clause 12.2,
has been shipped to the Representative.

 

23.3        Survival
of certain terms and conditions

 

Any terms or conditions of this Agreement which are capable of having
effect after the termination or expiration of this Agreement shall remain in
full force and effect following the termination or expiration of this
Agreement.

 

23.4        Notice
to Stargames

 

Within [***]
after any termination or expiration of this Agreement, the Representative shall
by written notice inform Stargames of its stock of the Relevant Gaming Machines
and Relevant Table Gaming Products on hand at the time of such termination or
expiration.

 

23.5        Election
of Stargames

 

Stargames will
have [***] from the date of termination to elect to purchase Representative’s
stock of Relevant Gaming Machines and Relevant Table Gaming Products, and if it
elects to do so Stargames agrees to repurchase:

 

(a)           the [***]; and

***Confidential Treatment Requested

 

36

 

(b)           the [***],

 

from the
Representative and pay the Representative for the same within [***] days from
the date of delivery of such Products. All transportation and insurance costs
for such repurchase shall be borne by Stargames unless the termination is due
to a breach of this Agreement by the Representative and the relevant Products
shall be deemed delivered by the Representative to the Supplier at the relevant
shipping port or flight terminal as notified by the Representative. If the
Supplier does not elect to purchase any or all of such stock of Products from
the Representative, the Representative shall have [***] from the end of said
[***] period to sell said stock, but such sales shall only be permitted within
the countries which were within the Exclusive Territory when this Agreement was
in effect.

 

24           Relationship of Parties

 

24.1        Position
of Stargames

 

(a)           Shuffle Master confirms and
agrees that Stargames has been duly authorised and empowered by Shuffle Master
to represent Shuffle Master and each Supplier under this Agreement in relation
to the supply, sale and if applicable, manufacture of Relevant Table Gaming
Products but only as same relate to the Exclusive Territory. Accordingly, all
commitments and decisions made by Stargames and all rights conferred by
Stargames under or in respect of this Agreement are made with the express
consent and support of Shuffle Master and to the extent that they require any
action on the part of Shuffle Master or any Supplier to be performed will be
binding on Shuffle Master and each relevant Supplier. Shuffle Master will not
take any action that conflicts with any commitments or decisions made or rights
conferred on the Representative by Stargames under this Agreement. Shuffle
Master understands and agrees that the Representative is entering into this
Agreement in reliance on this clause 24.1(a).

 

(b)           Melco
confirms and agrees that the Representative has been duly authorised and
empowered by Melco to enter into and perform all of its obligations under this
Agreement. Accordingly,
all commitments and decisions made by the Representative and all rights
conferred by the Representative under or in respect of this Agreement are made
with the express consent and support of Melco and to the extent that they
require any action on the part of Melco to be performed will be binding on
Melco. Melco will not take any action that conflicts with any commitments or
decisions made or rights conferred on Stargames by the Representative under
this Agreement. Melco understands and agrees that the Representative is
entering into this Agreement in reliance on this clause 24.1(b).

 

(c)           Shuffle Master shall
indemnify, defend and save harmless the Representative, its Group and the
directors, officers, employees, representatives and agents (either of the Representative or of any member of its Group) from and against all
claims, lawsuits, losses and expenses arising out of or resulting from any breach by Stargames of any of its obligations under this Agreement or
any breach by Shuffle Master of its obligations pursuant to clause 24.1(a) provided that Shuffle Master’s liability under this clause shall
be reduced proportionately if the Representative’s
negligence, wilful default or breach of the Agreement has contributed to the
relevant claims, lawsuits, losses or expenses incurred by the Representative;
however, this indemnity will cease to apply on the first date on which both of
the following are true:

 

(i)            Stargames
is listed on any recognised stock exchange; and

 

(ii)           Shuffle
Master no longer owns or controls more than 50% of the voting shares of or
economic interests in Stargames.

***Confidential
Treatment Requested

 

37

 

(d)           The Representative’s parent company, Melco, shall indemnify, defend
and save harmless Stargames, its Group and the directors, officers,
employees, representatives and agents (either of Stargames or of any
member of its Group) from
and against all claims, lawsuits, losses and expenses arising out of or
resulting from any breach by the Representative of any of its
obligations under this Agreement (other than the Representative’s obligations
to pay the [***] or acquire the [***] or any breach by Melco of its obligations
pursuant to clause
24.1(b) provided that Melco’s liability under this clause
shall be reduced proportionately if a
Supplier’s negligence, wilful default or breach of the Agreement has
contributed to the relevant claims, lawsuits, losses or expenses incurred by
the Supplier, and further provided that Melco’s indemnity shall include
Representative’s obligations to order sufficient Relevant Gaming Machines to
cover the [***] and to acquire the [***] and to pay for those Relevant Gaming
Machines and Relevant Table Gaming Products. This
indemnity will cease to apply on the first date on which both of the following
are true:

 

(i)            the Representative is listed on any recognised stock exchange; and

 

(ii)           Melco no longer owns or controls more than 50% of the voting shares of
or the economic interests in the Representative.

 

24.2        Relationship
of Parties

 

The
relationship between the Parties is contractual only and this Agreement does
not create a partnership, employment, joint venture, fiduciary or any other
legal relationship.

 

24.3        No
power to bind

 

No Party has
(and will not represent that it has) any power, right or authority to bind any
other or to assume or create any obligation or responsibility, express or
implied, on behalf of any other Party or in any other Party’s name.

 

24.4        Responsible
for sub-contractors

 

Any
sub-contractor, Distributor, or agent engaged by a Party with the consent of
each other Party will be the commercial and contractual responsibility of the
Party engaging that sub-contractor and will be subject to the terms and
conditions of this Agreement.

 

24.5        No
relief from obligations

 

A Party will
not be relieved of any of its obligations under this Agreement as a result of
entering into any sub-contracts.

 

24.6        No
liability for tax

 

It is expressly
agreed between the Parties that the other party will not be liable for any
income, withholding, or other tax which may be levied by any jurisdiction on
the royalties paid by a Party.

 

25           Publicity

 

Unless required
by law, regulation or gaming authority, each Party agrees that it will not,
issue any news release, public announcement, or advertisement relating to this
Agreement or its subject matter, nor will it otherwise publicise this Agreement
or its subject matter, without first obtaining the written approval of all
other Parties.

***Confidential Treatment Requested

 

38

 

26           Non-solicitation

 

26.1        Non-solicitation

 

Subject to
clauses 26.2 and 26.3, except with the express written consent of the other
Parties, each Party covenants with every other Party that it will not and will ensure that none of the members of its Group will, during the Term and
for a period of [***] thereafter, on its own behalf or on behalf of any person,
firm or company, directly or indirectly endeavour to entice
away or hire from any other Party and/or employ any person who is or was any
other Party’s employee or who has at any time during the [***] period
immediately preceding the termination or expiration of this Agreement, been
employed or engaged by any other Party.

 

26.2        Exceptions
to non-solicitation

 

Clause 26.1
does not apply where an employee of a Party seeks employment with another Party
in response to an advertisement placed into the public domain for that position
unless that other Party has solicited, directly or indirectly, the application
from that employee for that position.

 

26.3        Employment

 

Stargames
hereby consents to the employment by the Representative of Mr Damien Huang,
Software Team Leader.

 

27           Dispute Resolution

 

27.1        No
court proceedings

 

If a dispute
arises out of or in relation to this Agreement (“Dispute”) no Party to the Dispute (“Disputant”) will start court proceedings (except proceedings
seeking interlocutory relief) unless it has complied with this clause 27.

 

27.2        Notice

 

A Party
claiming that a Dispute has arisen must notify each other Disputant in writing
giving details of the Dispute and its proposal for a resolution.

 

27.3        Initial
Period

 

For a [***]
period after a notice is given (“Initial
Period”) each Disputant must use all reasonable endeavours to
resolve the Dispute and the chief executive officer, or his designee, of each
Disputant will meet within the first [***] of that period with that aim.

 

27.4        Appointment
of mediator

 

(a)           If the Dispute remains
unresolved at the end of the Initial Period, it must be referred for mediation
at the request of any Disputant to:

 

(i)            a person mutually agreed on by
the Disputants; or

 

(ii)           if agreement is not reached
within [***] of the end of the Initial Period, a mediator nominated pursuant to
the rules of the ICC.

 

(b)           The
mediation process will cease if the dispute has not been settled within [***]
after the mediator being appointed, or any longer time agreed by the parties (Mediation Period).

***Confidential Treatment Requested

 

39

 

27.5        Role
of mediator

 

The role of any
mediator is to assist in negotiating a resolution of the Dispute. A mediator
may not make a decision that is binding on a Disputant unless that Disputant
has agreed to this in writing.

 

27.6        Referral if no resolution

 

If the Disputants are unable to resolve the Dispute
within the Initial Period and the Mediation Period, each Disputant agrees that
the Dispute must be referred to ICC arbitration before 1
arbitrator, who shall be experienced in commercial and intellectual property
disputes, at the written request of either
Disputant. The
rules of the ICC shall govern the arbitration. The arbitration shall be
conducted in the English language.

 

27.7        Venue
and representation

 

Unless
otherwise mutually agreed between the Disputants, any mediation and, if
relevant, arbitration will take place in Melbourne, Australia and the
Disputants will be entitled to legal representation.

 

27.8        Timeframe

 

Each Disputant
will use all reasonable endeavours to resolve the Dispute through mediation
and, if relevant arbitration as soon as is practical, including, but not
limited to, providing the mediator and, if relevant, arbitrator with all
information relevant to the Dispute.

 

27.9        Confidentiality

 

Any information
or documents disclosed by a Disputant under this clause must be kept
confidential and may not be used except to attempt to resolve the Dispute.

 

27.10      Costs

 

Each Disputant
must bear its own costs of complying with this clause 27. The Disputants
must bear equally the mediator’s costs. The Disputants must bear the relevant
arbitrator’s costs in such proportions as the arbitrator may determine. The
prevailing Disputant, if any, as determined by the arbitrator, shall be
entitled in addition to any other award or damages to its attorney fees and
arbitration costs against the unsuccessful Disputant.

 

27.11      Litigation

 

If a party is
aggrieved by the decision of the arbitrator it may appeal that decision to the
courts of the State of Victoria, Australia and the courts of appeal therefrom.

 

27.12      Limits
of Review

 

(a)           Notwithstanding anything
contained herein to the contrary, even if a Party’s reasonableness or good
faith is required, any consent, approval, disapproval, rejection or decision
which may be made in a Party’s sole and final discretion, shall not be capable
of being delayed or prevented by any mediation, arbitration or other dispute
resolution means.

 

(b)           Notwithstanding the provisions
of clause (a), a Party that is aggrieved by the exercise of the discretion of
another Party and considers that it is entitled to a legal remedy in respect of
the exercise of that discretion (such as where the discretion is exercised in
bad faith) shall be entitled to seek damages or any other remedy (other than
specific performance) in respect of the exercise of that discretion.

 

40

 

28           Notices

 

28.1        Method

 

All notices,
requests, demands, consents, approvals, offers, agreements or other
communications (“notices”) given
by a Party under or in connection with this Agreement must be:

 

(a)           in writing;

 

(b)           signed by the Party giving
notice or a person duly authorised by that Party;

 

(c)           directed to the recipient’s
address (as specified in clause 28.3 or as varied by any notice);

 

(d)           hand delivered, sent by prepaid
post or transmitted by facsimile to that address; and

 

(e)           sent to each other Party.

 

28.2        Receipt

 

A notice given
in accordance with this clause is taken as having been given and received:

 

(a)           if hand delivered at or before
4.30 pm, Melbourne time, on a Business Day, on delivery, otherwise at
9.30 am, Melbourne time, on the next Business Day;

 

(b)           if sent by prepaid post:

 

(i)            within Australia, on the second
Business Day after the date of posting;

 

(ii)           to or from a place outside
Australia, on the seventh Business Day after the date of posting; or

 

(c)           if transmitted by facsimile at
or before 4.30 pm on a Business Day, at the time recorded on the
transmission report indicating successful transmission of the entire notice,
otherwise at 9.30 am on the next Business Day.

 

28.3        Address
of Parties

 

Unless varied
by notice in accordance with this clause 28,
the Parties’ addresses and other details are:

 

	
  Party:

  	
  Elixir
  Group Limited

  
	
  Attention:

  	
  General
  Counsel and Managing Director

  
	
  Address:

  	
  19/F., Zhu Kuan Building, Avenida Xian Xing Hai, Macau

  
	
  Facsimile:

  	
  +852 3162 3579 and to +853 755 165

  
	
   

  	
   

  
	
  Party:

  	
  Stargames
  Limited

  
	
  Attention:

  	
  General
  Counsel and Managing Director

  
	
  Address:

  	
  1
  Sheridan Close, Milperra, New South Wales, Australia

  
	
  Facsimile:

  	
  +61 2 9773 0828

  

 

41

 

	
  Party:

  	
  Shuffle
  Master Inc

  
	
  Attention:

  	
  General Counsel

  
	
  Address:

  	
  1106 Palms Airport Drive, Las Vegas, Nevada, United
  States of America

  
	
  Facsimile:

  	
  702-270-5326

  

 

29           General

 

29.1        Entire
agreement

 

This Agreement
constitutes the entire agreement between the Parties in relation to its subject
matter. All prior discussions, undertakings, agreements, representations,
warranties and indemnities in relation to that subject matter are replaced by
this Agreement and have no further effect.

 

No Party shall
make any amendment or modification to the terms of this Agreement unless the
same is in writing and signed by the other Parties.

 

29.2        Paramountcy
of document

 

If this
Agreement conflicts with any other document, agreement or arrangement, this
Agreement prevails to the extent of the inconsistency.

 

29.3        No
merger

 

The provisions
of this Agreement will not merge on completion of any transaction contemplated
in this Agreement and, to the extent any provision has not been fulfilled, will
remain in force.

 

29.4        Amendment

 

This Agreement
may not be amended or varied unless the amendment or variation is in writing
signed by all Parties.

 

29.5        Assignment

 

No Party may
assign, transfer or otherwise deal with this Agreement or any right or
obligation under this Agreement without the prior written consent of every
other Party, which must not be unreasonably withheld.

 

29.6        Severability

 

Part or all of
any provision of this Agreement that is illegal or unenforceable will be severed
from this Agreement and will not affect the continued operation of the
remaining provisions of this Agreement.

 

29.7        Waiver

 

Waiver of any
power or right under this Agreement:

 

(a)           must be in writing signed by the
Party entitled to the benefit of that power or right; and

 

(b)           is effective only to the extent
set out in that written waiver.

 

29.8        Rights,
remedies additional

 

Any rights and
remedies that a person may have under this Agreement are in addition to and do
not replace or limit any other rights or remedies that the person may have.

 

42

 

29.9        Further
assurances

 

Each Party must
do or cause to be done all things necessary or reasonably desirable to give
full effect to this Agreement and the transactions contemplated by it
(including, but not limited to, the execution of documents).

 

29.10      Costs

 

Each Party must
bear its own legal, accounting and other costs for the preparation and
execution of this Agreement.

 

29.11      Counterparts

 

This Agreement
may be executed in any number of counterparts and all counterparts taken
together will constitute one document.

 

29.12      Force
Majeure

 

(a)           No Party will be liable for any
failure or delay in performance of its obligation under this Agreement other
than to make payment of the amounts due as a result of any contingency beyond
its reasonable control (“Force Majeure”)
including but not limited to acts of God, fires, floods, wars, sabotage,
lockouts, labour disputes or any other labour difficulties, any legislations,
government rules or regulations, inability to obtain (other than due to the
financial circumstances of the Party seeking to obtain the same) supplies,
energy, raw materials, product, equipment or transportation and any other
similar or different contingency. The Party suffering the inability to perform
will notify each other Party of the existence of such delay within [***] of the
first day of such delay that comes to its knowledge and in such event the time
for performance hereunder (except to make payment of amounts due) will be
extended for a period equalling the total period of such delay.

 

(b)           Should the performance by any
Party (“the Affected Party”) of its obligations or any part thereof under this
Agreement (other than to make payment of the amount due) be wholly prevented or
materially and adversely affected by Force Majeure for a period of not less
than [***], the other Party shall be entitled at the expiry of such period of
[***] to give to the Affected Party immediate notice in writing terminating
this Agreement.

 

(c)           If the termination of this
Agreement by reason of Force Majeure occurs at any time during the [***], then
the Representative shall only be liable for the proportion of the [***] for
that contract year or the proportion of the payment in respect of the [***] for
that contract year that the number of days elapsed in that contract year prior
to the date of the first occurrence of the relevant Force Majeure bears to the
three hundred and sixty five days of that contract year.

 

29.13      Waiver

 

Any failure by any Party to enforce at any time or for any period of
time any of the provisions under this Agreement will not be construed as a
waiver of such provisions or of the right of such Party thereafter to enforce
each and every provision under this Agreement.

 

29.14      Governing
law and jurisdiction

 

This Agreement
will be governed by and construed in accordance with the laws in force in the
State of Victoria, Australia and each Party submits to the exclusive
jurisdiction of the courts of that State.

 

29.15      Circumvention

 

Neither Party
shall use, form or dissolve any affiliated entity or related body corporate
which, in any manner, directly or indirectly, circumvents, avoids or reduces
the rights or

***Confidential Treatment Requested

 

43

 

obligations of
a Party hereunder, or the intent of this Agreement, nor shall either Party
transfer or assign any assets or liabilities with the intent, purpose or effect
of doing or causing any of same.

 

44

 

SCHEDULE
1 - COUNTRIES IN THE ASIAN REGION IN WHICH THE SALE OF GAMING MACHINES IS
LAWFUL AND ARE WITHIN THE EXCLUSIVE TERRITORY, AS OF THE COMMENCEMENT DATE

 

Cambodia

Korea (but only with respect
to Relevant Table Gaming Machines)

Laos

Malaysia

Mongolia

Myanmar

Nepal

Philippines

Vietnam

Taiwan

Any cruise ship based in any of
the foregoing countries

 

45

 

SCHEDULE
2 - EXISTING ELIXIR AGREEMENTS

 

	
  Company Name

  	
   

  	
  Agreement type

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Agreement (Exclusive
  Distributorship)

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Distributor Agreement

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Sales Agent Agreement

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Distributor Agreement

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Sales Representative Agreement

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Agreement (Grant of
  Sub-Distributorship)

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Distributor Agreement

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Representative Agreement

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  The Sale and Purchase of the [***]
  Product & NDA

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  Partnership Agreement

  

***Confidential Treatment Requested

 

46

 

SCHEDULE 3 – [***]

 

	
  Relevant Gaming Machines

  	
   

  	
  Table Gaming Product

  
	
   

  	
   

  	
   

  
	
  Cambodia

  	
   

  	
  Malaysia

  
	
   

  	
   

  	
   

  
	
  Laos

  	
   

  	
  Philippines

  
	
   

  	
   

  	
   

  
	
  Mongolia

  	
   

  	
  Cambodia

  
	
   

  	
   

  	
   

  
	
  Singapore

  	
   

  	
  Laos

  
	
   

  	
   

  	
   

  
	
  Vietnam

  	
   

  	
  Mongolia

  
	
   

  	
   

  	
   

  
	
  Malaysia

  	
   

  	
  Singapore

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Vietnam

  
	
   

  	
   

  	
   

  
	
  And Cruise
  Ships based in these Territories.

  	
   

  	
  And Cruise
  Ships based in these Territories.

  

***Confidential Treatment Requested

 

47

 

SCHEDULE
4 - EXISTING AND PROPOSED STARGAMES AND SHUFFLE MASTER AGREEMENTS

 

Relevant Table Gaming Product

 

[***]

 

[***]

 

[***]

***Confidential Treatment Requested

 

48

 

SCHEDULE 5 - RELEVANT TABLE
GAMING PRODUCT DISTRIBUTION PRICES AS OF THE DATE OF THIS AGREEMENT

 

	
   

  	
   

  	
  Distributor Price

  (Retail – [***])

  	
   

  	
  Suggested Retail

  Price

  	
   

  
	
   

  	
   

  	
  USD

  	
   

  	
  USD

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CARD one2six

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  SM King (refurbished)

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  SM ACE

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  SM MD 1.1

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  SM MD2

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  SM MD2/card recognition

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  SM MD2 workstation

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  SM Deck Mate

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  CARD Easy Chipper

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Table Games

  	
   

  	
  Monthly Licence Fees

  	
   

  	
  Monthly Licence Fees

  	
   

  
	
  Four
  Card Poker

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Casino
  War

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Crazy
  4 Poker

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Royal
  Match 21

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Fortune
  Pai Gow Poker

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Dragon
  Bonus

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Let
  It Ride

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Let
  It Ride Bonus

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Three
  Card Poker

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Table Master (incl. BJ only)

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Table Master Upgrade TCP

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Table Master Upgrade LIRM

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bacc-Shoe (ISB)

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Intelligent Shoe (IST)

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  

***Confidential Treatment Requested

 

49

 

	
  EXECUTED as an AGREEMENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED on behalf of ELIXIR GROUP

  LIMITED by its duly authorised

  representative in the presence of

  	
  )

  )

  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Gordon Yuen

  
	
  Signature of witness

  	
   

  	
  Signature of representative

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Gordon Yuen, CEO

  
	
  Name of witness (print)

  	
   

  	
  Name of representative (print)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED on behalf of MELCO

  INTERNATIONAL DEVELOPMENT

  LIMITED by its duly authorised

  representative in the presence of

  	
  )

  )

  )

  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Lawrence Ho

  
	
  Signature of witness

  	
   

  	
  Signature of representative

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Lawrence Ho, Chairman & CEO

  
	
  Name of witness (print)

  	
   

  	
  Name of representative (print)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED on behalf of STARGAMES

  CORPORATION by its duly authorised

  representative in the presence of

  	
  )

  )

  )

  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ John Rouse

  
	
  Signature of witness

  	
   

  	
  Signature of representative

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  John Rouse, President & Managing
  Director

  
	
  Name of witness (print)

  	
   

  	
  Name of representative (print)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED on behalf of SHUFFLE MASTER

  INC. by its duly authorised representative in

  the presence of

  	
  )

  )

  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Mark Yoseloff 

  
	
  Signature of witness

  	
   

  	
  Signature of representative

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mark Yoseloff, Chairman & CEO

  
	
  Name of witness (print)

  	
   

  	
  Name of representative (print)Exhibit 4.3

Attachment to Certificate of
Designation

SMALL WORLD KIDS, INC.

CERTIFICATE OF DESIGNATION
OF THE

CLASS A-1 CONVERTIBLE PREFERRED STOCK

 

Pursuant to Section 78.195 of the General
Corporation Law of the State of Nevada

 

 

of
Preferred Stock which have the status of authorized but unissued shares that
are available for issuance.

RESOLVED
FURTHER, the Board of Directors of the Corporation hereby establishes a series
of Class A-1 Convertible Preferred Stock to consist of 12,000,000
shares, and hereby fixes the powers, designation, preferences and relative
participating, optional and other rights of such series of Class A-1
Convertible Preferred Stock, and the qualifications, limitations and
restrictions thereof, as follows:

1.             Designation.

(a)           The designation of
the series of Class A-1 Convertible Preferred Stock created by this
resolution shall be “Class A-1 Convertible Preferred Stock”
(hereinafter called the “Class A-1 Preferred Stock”).

(b)           All shares of Class A-1
Preferred Stock shall be identical with each other in all respects.

2.             Liquidation
Rights.

(a)           General.
In the event of any liquidation, dissolution or winding up, whether voluntary
or involuntary, holders of each share of Class A-1 Preferred Stock
shall be entitled to be paid out of the assets or surplus funds of the
Corporation legally available for distribution to holders of the Corporation’s
capital stock of all classes (whether such assets are capital, surplus, or
earnings) before any sums shall be paid or any assets or surplus funds
distributed among the holders of Common Stock or to the holders of any series
of Preferred Stock which may be junior in right of preference to Class A-1
Preferred Stock, an amount equal to $1.65 per share (as adjusted for any stock
dividend, combination or splits with respect to such shares) of Class A-1
Preferred Stock plus any cumulative and/or accrued and unpaid dividends thereon
(the “Stated Value”). After payment to the holders of the Class A-1
Preferred Stock of the amount set forth in this Section 2(a), the
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock and the Class A-1 Preferred Stock in proportion to the shares
of Common Stock then held by them and the shares of Common Stock which they
would have a right to acquire upon 

 

 

conversion of the shares of the Class A-1 Preferred Stock
held by them (but no such conversion shall be required in order to receive such
distribution).

(b)           Distributions
Other than Cash. Whenever the distribution provided for in this Section 2
shall be paid in property other than cash, the value of such distribution shall
be the fair market value of such property as determined in good faith by the
Board of Directors of the Corporation. In each such case, the holders of the Class A-1
Preferred Stock shall be entitled to a proportionate share of any such
distribution in accordance with the provisions hereof.

If
the assets of the Corporation shall be insufficient to permit the payment in
full to holders of the Class A-1 Preferred Stock of the preferential
amount set forth in this Section 2, then the entire assets of the
Corporation available for such distribution shall be distributed ratably among
the holders of the Class A-1 Preferred Stock in accordance with the
aggregate liquidation preference of the shares of Class A-1
Preferred Stock held by each of them.

The
sale, lease or exchange (for cash, shares of stock, securities or other
consideration) of all or substantially all the property and assets of the
Corporation, or the merger, consolidation or reorganization of the Corporation
into or with any other corporation, or the merger or consolidation or
reorganization of any other corporation into or with the Corporation or any other
transaction or series of related transactions, in each case where the
shareholders of the Corporation do not continue to hold the majority of the
voting power after such merger, consolidation or reorganization, shall be
deemed to be a liquidation for the purposes of this section.

3.             Conversion.

The
holders of Class A-1 Preferred Stock shall have conversion rights as
follows:

(a)           Right to Convert.
Each share of Class A-1 Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for the Class A-1
Preferred Stock, into such number of fully paid and non-assessable shares of
Common Stock as is determined by dividing the purchase price ($1.10) of one
share of Class A-1 Preferred Stock by the Conversion Price (the “Conversion
Price”) at the time in effect for a share Class A-1 Preferred Stock.
The Conversion Price per share of Class A-1 Preferred Stock
initially shall be $1.10, subject to adjustment from time to time as provided
below.

(b)           Intentionally
Deleted.

(c)           Mechanics of
Conversion. No fractional shares of Common Stock shall be issued upon
conversion of the Class A-1 Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
applicable Conversion Price of the Class A-1 Preferred Stock. Before
any holder of Class A-1 Preferred Stock shall be entitled to convert
the same into shares of Common Stock pursuant to Section 3(a), such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Class A-1
Preferred Stock, and shall give written notice by mail, postage prepaid, to the
Corporation at its principal corporate office, of the election to convert the
same, and such 

 2
 

 

 

conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Class A-1 Preferred
Stock to be converted. The Corporation shall, as soon as practicable
thereafter, issue and deliver to such address as the holder may direct, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled. The Corporation shall pay all documentary,
stamp, transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any shares of Class A-1
Preferred Stock; provided that the Corporation shall not be required to
pay any taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such shares in a name other than
that of the holder of the shares of Preferred Stock in respect of which such
shares are being issued.

(d)           Status of
Converted Stock. In the event any shares of Class A-1 Preferred
Stock shall be converted pursuant to this Section 3, the shares so
converted shall be canceled and shall not be reissued as Class A-1 Preferred
Stock by the Corporation. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock to be created by resolution or resolutions
of the board of directors, subject to the conditions and restrictions on
issuance set forth herein.

(e)           Certain
Adjustments and Distributions.

(i)            Adjustments for
Subdivisions or Combinations of Common Stock. In the event the outstanding
shares of Common Stock shall be subdivided by stock split, stock dividend or
otherwise, into a greater number of shares of Common Stock, the Conversion
Price of each share of Class A-1 Preferred Stock then in effect
shall, concurrently with the effectiveness of such subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated into a lesser number of shares of Common Stock, the
Conversion Price of each share of Class A-1 Preferred Stock then in
effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.

(ii)           Stock Dividends
and Other Distributions. In the event the Corporation makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, any distribution (excluding repurchases of securities by the
Corporation not made on a pro rata basis) payable in property or in securities
of the Corporation other than shares of Common Stock, and other than as
otherwise adjusted for in this Section 3 or as provided for in Section 1
in connection with a dividend, then and in each such event the holders of Class A-1
Preferred Stock shall receive, at the time of such distribution, the amount of
property or the number of securities of the Corporation that they would have
received had their Class A-1 Preferred Stock been converted into
Common Stock on the date of such event.

(iii)          Reorganizations,
Recapitalizations, Reclassifications or Similar Events. If the Common Stock
shall be changed into the same or a different number of shares of any other
class or classes of stock or other securities or property, whether by capital
reorganization, recapitalization, reclassification or otherwise, then each
share of Class A-1 Preferred Stock shall thereafter be convertible
into the number of shares of stock or other securities or property to which a
holder of the number of shares of Common Stock of the Corporation deliverable
upon conversion of such shares of Class A-1 Preferred Stock shall
have 

 3
 

 

 

been entitled
upon such reorganization, recapitalization, reclassification, merger,
consolidation or other event.

(iv)          Adjustments for
Diluting Issues. In addition to the adjustment of the Conversion Prices
provided above, the Conversion Price of the Class A-1 Preferred
Stock shall be subject to further adjustment from time to time as follows:

(A)          Special
Definitions.

(1)           “Options” shall mean
rights, options or warrants to subscribe for, purchase or otherwise acquire
either Common Stock or Convertible Securities.

(2)           “Original Issue Date”
shall mean the date on which the first share of Class A-1 Preferred
Stock was first issued.

(3)           “Convertible
Securities” shall mean securities convertible into or exchangeable for Common
Stock, either directly or indirectly, including the Class A-1
Preferred Stock.

(4)            “Additional Shares
of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 3(e)(iv)(C) deemed
to be issued) by the Corporation after the Original Issue Date.

(B)           No Adjustment of
Conversion Price. No adjustment in the Conversion Price shall be made
pursuant to Section 3(e)(iv)(D) unless the consideration per share
for an Additional Share of Common Stock issued (or, pursuant to Section 3(e)(iv)(C),
deemed to be issued) by the Corporation is less than the Conversion Price in
effect on the date of, and immediately prior to, such issue, and provided that
any such adjustment shall not have the effect of increasing the Conversion
Price to an amount which exceeds the Conversion Price existing immediately
prior to such adjustment.

(C)           Deemed Issuance
of Additional Shares of Common Stock. Except as otherwise provided in Section 3(e)(iv)(A) or
3(e)(iv)(B), in the event the Corporation at any time or from time to time
after the Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of any holders of any class of
securities entitled to receive any such Options or Convertible Securities, then
the maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent adjustment
of such number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of business on such record
date, provided that in any such case in which additional shares of Common Stock
are deemed to be issued:

(1)           no further
adjustment in the Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such Options
or conversion or exchange of such Convertible Securities;

 

 4

 

(2)           if such Options or
Convertible Securities by their terms provide, with the passage of time or
otherwise, for any increase or decrease in the consideration payable to the
Corporation, or increase or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof or upon the occurrence of a
record date with respect thereto, and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease;

(3)           upon the expiration
of any such Options or any rights of conversion or exchange under such
Convertible Securities which shall not have been exercised, the Conversion Price
computed upon the original issue thereof or upon the occurrence of a record
date with respect thereto, and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:

(i)            in the case of
Convertible Securities or Options for Common Stock, the only Additional Shares
of Common Stock issued were shares of Common Stock, if any, actually issued
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, and the consideration received therefor was the
consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration actually received by
the Corporation upon such exercise, or for the issue of all such Convertible
Securities, whether or not converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such
conversion or exchange; and

(ii)           in the case of
Options for Convertible Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued at the time of issue of
such Options and the consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been then issued was the
consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration deemed to have been
received by the Corporation upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;

(4)           no readjustment
pursuant to Section 3(e)(iv)(C)(2) or (3) above shall have the
effect of increasing the Conversion Price to an amount which exceeds the
Conversion Price existing immediately prior to the original adjustment with
respect to the issuance of such Options or Convertible Securities, as adjusted
for any Additional Shares of Common Stock issued (or, pursuant to Section 3(e)(iv)(C),
deemed to be issued) between such original adjustment date and such
readjustment date; and

(5)           in the case of any
Option or Convertible Security with respect to which the maximum number of
shares of Common Stock issuable upon exercise or conversion or exchange thereof
is not determinable, the adjustment to the Conversion Price, if any, shall be
initially made based on the minimum number of such shares with a subsequent
adjustment once the maximum number of such shares becomes determinable.

(D)          Adjustment of
Conversion Price Upon Issuance of Additional Shares of Common Stock. Subject
to the limitation set forth in Section 3(e)(iv)(B), above, except for
Options issued pursuant to the Company’s stock option or compensation plans

 5
 

 

 and Additional Shares of Common Stock issued
pursuant to the conversion or exercise of Convertible Securities outstanding as
of the date hereof, if Additional Shares of Common Stock are issued (or,
pursuant to Section 3(e)(iv)(C), deemed to be issued) for a consideration
per share (computed on an as-converted to Common Stock basis) less than the
Conversion Price in effect on the date of, and immediately prior to, such
issue, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price (rounded to the nearest cent)
determined by multiplying such Conversion Price by a fraction, (x) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Conversion
Price, and (y) the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of
such Additional Shares of Common Stock so issued. For the purposes of this Section 3(e)(iv)(D),
all shares of Common Stock issuable upon exercise of outstanding Options, upon
conversion of outstanding Convertible Securities and upon conversion of
Convertible Securities following exercise of outstanding Options therefor,
shall be deemed to be outstanding, and immediately after any Additional Shares
of Common Stock are deemed issued pursuant to Section 3(e)(iv)(C), such
Additional Shares of Common Stock shall be deemed to be outstanding.

(E)           Determination of
Consideration. For purposes of this Section 3(e)(iv), the
consideration received by the Corporation for any Additional Shares of Common
Stock issued (or, pursuant to Section 3(e)(iv)(C), deemed to be issued)
shall be computed as follows:

(1)           Cash and Property.
Such consideration shall:

(i)            insofar as it
consists of cash, be computed at the aggregate amount of cash received by the
Corporation after deducting any commissions paid by the Corporation with
respect to such issuance, but without deduction of any expenses payable by the Corporation;

(ii)           insofar as it
consists of property other than cash, be computed at the fair market value
thereof at the time of such issuance, as determined in good faith by the Board
of Directors of the Corporation; and

(iii)          if Additional
Shares of Common Stock are issued (or, pursuant to Section 3(e)(iv)(C),
deemed to be issued) together with other shares or securities or other assets
of the Corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (i) and
(ii) above, as determined in good faith by the Board of Directors of the
Corporation.

(2)           Options and
Convertible Securities. The consideration received by the Corporation for
Additional Shares of Common Stock deemed to have been issued pursuant to Section 3(e)(iv)(C),
relating to Options and Convertible Securities, shall be the sum of (x) the
total amount, if any, received or receivable by the Corporation as
consideration for the issue of such Options or Convertible Securities, plus (y) the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such

 6
 

 

 consideration) payable to the Corporation upon
the exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion or exchange of
such Convertible Securities.

(f)            Certificate as
to Adjustments. Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Section 3, the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of Class A-1
Preferred Stock to which such adjustment pertains a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Class A-1 Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (i) such adjustments and readjustments, (ii) the Conversion
Prices at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of such holder’s Class A-1 Preferred
Stock.

(g)           No Impairment.
The Corporation will not, through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 3 and in the taking of all such action
as may be necessary or appropriate in order to protect the conversion rights of
the holders of Class A-1 Preferred Stock against impairment. This
provision shall not restrict the Corporation’s right to amend its Amended
Articles of Incorporation with the requisite shareholder consent.

(h)           Notices of Record
Date. In the event of any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, any
right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property or to receive any other right,
the Corporation shall mail to each holder of Class A-1 Preferred
Stock at least twenty (20) days prior to such record date, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution or right, and the amount and character of such
dividend, distribution or right.

(i)            Reservation of
Stock Issuable Upon Conversion. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock
solely for the purpose of effecting the conversion of the shares of Class A-1
Preferred Stock such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of Class A-1
Preferred Stock and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Class A-1 Preferred Stock, the Corporation
will take such corporate action as may be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.

(j)            Notices. Any
notice required by the provisions of this Section 3 to be given to any
holder of Class A-1 Preferred Stock shall be deemed given if
deposited in the 

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United States
mail, postage prepaid, and addressed to each holder of record at such holder’s
address appearing on the Corporation’s books.

4.             Covenants. The
Corporation is prohibited from taking any actions to amend or repeal any
provision of, or add any provision to, the Corporation’s Amended Articles of
Incorporation, Bylaws or this Certificate of Designation, if such action would
change adversely the preferences, rights, privileges or powers of, or
restrictions provided for the benefit of, the Class A-1 Preferred
Stock.

5.             Dividends.

(a)           The holders of the outstanding
Class A-1 Preferred Stock shall be entitled to receive, out of funds
legally available therefore, cumulative dividends at the annual rate of 6%
per annum of the per share purchase price ($1.10) of the Class A-1
Preferred Stock. Such dividends shall be payable in shares of the Company’s Class A-1
Preferred Stock quarterly, on the fifteenth day of October, January, April and
July (each of such dates being a “Dividend Payment Date”) commencing on
the date of issuance, and shall be pro-rated for the first such quarterly
period if the same is less than 91 (ninety-one) days. All shares of common
stock shall be valued at the Fair Market Value thereof.  As used herein Fair Market Value shall mean in
the case of stock on a given date, the average of the closing bid prices for
the Company’s common stock for the ten trading days immediately preceding the
Dividend Payment Date. Such dividends shall accrue on each such share
commencing on the date of issue, and shall accrue from day to day, whether or
not earned or declared. Such dividends shall be cumulative so that if such
dividends in respect of any previous quarterly dividend period shall not have
been paid on, the deficiency shall be fully paid on or declared and set apart
for such shares before the Corporation makes any distribution (as hereinafter
defined) to the holders of Common Stock. Accrued but unpaid dividends shall not
bear interest. “Distribution” in this Section 5 means the transfer of cash
or property without consideration, whether by way of dividend or otherwise
(except a dividend in shares of the Corporation) or the purchase or redemption
of shares of the Corporation for cash or property (except for an exchange of
shares of the Corporation or shares acquired by the Corporation from employees
pursuant to the terms of any employee incentive plan, agreement or arrangement)
including any such transfer, purchase or redemption by a subsidiary of the
Corporation. The time of any distribution by way of dividend shall be the date
of declaration thereof and the time of any distribution by purchase or
redemption of shares shall be the day cash or property is transferred by the
Corporation, whether or not pursuant to a contract of an earlier date; provided
that where a negotiable debt security is issued in exchange for shares the time
of the distribution is the date when the Corporation acquires the shares in
such exchange. The Board of Directors may fix a record date for the
determination of holders of Class A-1 Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be no
more than sixty (60) days.

(b)           In addition to the dividends
specified in subparagraph (a) above, if dividends are declared or paid on
the Common Stock, then such dividends shall be declared and paid pro rata on the Common Stock and the Class A-1
Preferred Stock, treating each share of Class A-1 Preferred Stock as
the greatest whole number of shares of Common Stock then issuable upon
conversion thereof pursuant to Section 3 above.

 

 8

 

 

(c)           If full cash dividends are not
paid or made available to the holders of all outstanding shares of Class A-1
Preferred Stock, and funds available shall be insufficient to permit payment in
full in cash to all such holders of the preferential amounts to which they are
then entitled, the entire amount available for payment of cash dividends shall
be distributed among the holders of the Class A-1 Preferred Stock
ratably in proportion to the full amount to which they would otherwise be
respectively entitled, and any remainder not paid in cash to the holders of the
Class A-1 Preferred Stock shall cumulate as provided in
subparagraph 5(d) below.

(d)           Dividends shall be paid to the
holders of record of the Class A-1Preferred Stock as their names
appear on the share register of the Corporation upon a liquidation, dissolution
or winding up pursuant to Section 2 above. If, on any Dividend Payment
Date, the holders of the Class A-1 Preferred Stock shall not have
received the full dividend provided for in the other provisions of this Section 5,
then such dividends shall cumulate, whether or not earned or declared, with
additional dividends thereon for each succeeding full dividend period during
which such dividends shall remain unpaid. Unpaid dividends for any period less
than a full dividend period shall cumulate on a day-to-day basis and shall be
computed on the basis of a 360-day year.

6.             Voting Rights.

(a)           General. Each
holder of shares of Class A-1 Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Common Stock into which
the Class A-1 Preferred Stock could be converted and shall have
voting rights and powers equal to the voting rights and powers of the Common
Stock.

(b)           Approval by
Holders of Class A-1 Preferred Stock. The Corporation shall not,
without first obtaining the approval of the holders of a majority of the then
outstanding shares of Class A-1 Preferred Stock:

(i)            Amend, waive or
repeal any provision of, or add any provision to, the Corporation’s Amended
Articles of Incorporation or Bylaws if such action would adversely alter or
change in any way the rights, preferences, privileges, or restrictions of the Class A-1
Preferred Stock;

(ii)           Issue any
Additional Shares of Common Stock, except in connection with or pursuant to (x) an
equity financing of not less that $10,000,000 for capital raising purposes,
provided that the majority of such financing is provided by investors who are
not shareholders of the Company at the time of such financing (a “Qualified
Financing”); (y) a debt financing that does not require a series vote
under subsection (v) below; (z) an acquisition or merger
approved by a majority of the Board of Directors where part or all of the
consideration for such acquisition or merger is paid in capital stock of the
Company; (xx) Options issued in connection with the Company’s stock option
or stock compensation plans; or (yy) the exercise or conversion of
Convertible Securities outstanding as of the date hereof.

(iii)          Authorize, create
and/or issue any class or series of equity or equity-linked securities that is
senior to the Class A-1 Preferred Stock in any respect whether by
reclassification or otherwise;

 9
 

 

 

 

(iv)          Pay, declare or set
aside for payment any dividends or distributions on or pursuant to the redemption
of any capital stock of the Company except as set forth in Section 5
above;

(v)           Authorize, create
and/or issue any debt securities in one transaction or series of related
transactions in the aggregate amount in excess of $10,000,000 other than in
connection with the Company’s current credit facilities with Laurus Master Fund
Ltd. as such facilities may exist from time to time;

(vi)          Alter the authorized
number of the Company’s board of directors, other than (i) increases to
give an investor in a Qualified Financing a board seat or (ii) increases
to give a board seat to a shareholder who has acquired Preferred Stock or
Common Stock in connection with a merger or acquisition which is valued at
least $30,000,000 and that does not require a vote under subsection (ii) above;

(vii)         Effect any
consolidation, sale or merger of the Company or other transaction in which
control of the Company is transferred except for transactions in which the Class A-1
Preferred Stock will receive at least the Stated Value multiplied by the number
of shares of Class A-1 Preferred Stock than outstanding in cash or
registered and freely tradable securities valued at the fair market value;

(viii)        Alter, amend or
change any of the provisions of this Certificate of Designation; and

(ix)           Redeem, repurchase
or declare a dividend with respect to any security of the Corporation, except
that the Corporation may repurchase shares of its capital stock issued pursuant
to the Corporation’s stock compensation plans.

(c)           Election of
Director. The holders of a majority of the outstanding shares of Class A-1
Preferred Stock shall have the right voting as a class to elect one member of
the Company’s board of directors (the “Preferred Director”), including to fill
a vacancy as to the Preferred Director. Any Preferred Director may be removed,
with or without cause, by the affirmative vote of the holders of a majority of
the then outstanding shares of Class A-1 Preferred Stock.

(d)           Expiration of
Voting Rights. The provisions of paragraph (b), subsections (ii)-(vi) and
paragraph (c) of this Section 6 shall no longer be in force and
effect at such time as the aggregate Stated Value of the shares of Class A-1
Preferred Stock outstanding is less than $250,000.

 

 10

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