82
EMPLOYMENT AGREEMENT
(Personal Service Agreement)
AND
COVENANT NOT TO COMPETE
THIS AGREEMENT is made and entered into this 31st day of March, 1996, by and
between CASINOVATIONS INCORPORATED, a Washington corporation (hereinafter
referred to as "Employer and/or "Corporation" and/or "Company") and ▇▇▇▇▇ ▇.
▇▇▇▇▇, a resident of Washington, (hereinafter referred to as "Employee"
and/or Individual).
WHEREAS, Corporation is engaged in the rendering of services related
to the invention, development, marketing, and manufacturing of gaming and
gaming related products, and other related services and areas to come before
the Corporation;
WHEREAS, Corporation desires to employ Employee upon the terms and
conditions hereinafter set forth, and Employee desires to accept such
employment; and
WHEREAS, the Employee entered into a Funding Agreement as of January
15, 1996 with various parties (to include Sharps International Limited
Partnership) and such Funding Agreement provided Employee enter into this
Personal Service Agreement;
Now, Therefore, IT IS AGREED for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, as follows:
1. Purpose and Employment. The purpose of this agreement is to define
the relationship between Corporation as an employer of Employee and Employee
as an employee of Corporation. hereby employs Employee and Employee hereby
accepts employment by Corporation upon the terms and conditions as set forth
herein.
2. Duties. Corporation hereby employs, engages, and hires Employee as
employee to provide a multitude of services on behalf of Corporation to
include but not be limited to the inventing, developing, conceptualizing,
marketing, manufacturing, and licensing of gaming and gaming related
products
and services. Employee may also be an officer and/or a director of
Corporation. Employee will carry out the policies and procedures relating
to
such employment as such policies and procedures are formulated by
Corporations shareholders, Board of Directors and Officers. Employee hereby
accepts and agrees to such hiring, engagement and employment subject to the
general supervision, orders, advice and direction of Corporation. Employee
shall perform such duties as are customarily performed by one holding such
position in the same or similar businesses or enterprises as that engaged in
by Corporation, and shall additionally render such other related and
unrelated services and duties as may be reasonably assigned to Employee from
time to time by Corporation. Employee agrees that Employee will, at all
times, faithfully, industriously and to the best of Employee's ability,
experience and talents perform all of the duties which may be reasonably
required of and from Employee pursuant to the express and implicit terms of
this agreement and to the reasonable satisfaction of Corporation. Such
duties shall be rendered in the States of Washington and Nevada and such
other place or places as Corporation shall, in good faith, require or as the
interests, needs, businesses or opportunities of Corporation shall require.
Employee shall furnish the hours Employee, in Employee's sole discretion,
deems necessary for the fulfillment of Employee's obligations hereunder and
the rendering services on behalf of Corporation in furtherance of its best
interests.
3. Term. The term of employment under this agreement shall be from
January 15, 1996 and ending at such time as this Agreement is terminated as
hereinafter provided.
4. Compensation. Except as provided in paragraph B. below, Corporation
shall pay to Employee and Employee shall accept from Corporation, in full
payment for Employee's services, compensation at the rate of Ten Thousand
and
no/100 Dollars ('10,000.00) per month for full time employment; or a pro
rata
share of Ten Thousand and no/100 Dollars ($10,000.00) per month in the event
Employee provides services to any other entity(ies), to include Employee's
own businesses.
5. Fringe Benefits. Employee shall be entitled to participate with all
other employees of Corporation in all Employee group fringe benefits which
may be authorized and adopted from time to time by the Board of Directors of
Corporation.
6. Working Facilities and Expenses. Employee is encouraged and
expected, from time to time, to incur reasonable expenses for the promotion
of the business of Corporation, including expenses for an automobile and
transportation, home telephone, maintaining necessary facilities for
consultation with Corporation's clients in Employee's home, social and civic
membership and participation, entertainment, travel and similar items.
Corporation shall solely at the discretion of the Board of Directors,
reimburse Employee for any such legitimate, ordinary, customarily and
necessary expenses upon documentation by Employee pursuant to the provisions
of internal Revenue Code Section 274(d).
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7. Meetings and Seminars. Employee is encouraged and expected, at
such
time or times as may be approved by Corporation's Board of Directors, to
attend business seminars, meetings and conventions and business education
courses and to freely participate in organized business activities.
The cost of travel, tuition or registration and food and lodging
for
attending such activities shall be paid by Employee. However, because of
unusual circumstances, the Board of Directors of Corporation may determine
that the costs of Employee's attendance at business seminars, meetings and
conventions should be authorized as an expense of Corporation. Should any
such additional expense of attendance be so authorized, Employee shall be
reimbursed therefor upon presentation to Corporation of an itemized expense
voucher that complies with Corporation policy and Internal Revenue Code
requirements for adequate documentation of expenses.
8. Termination. This Agreement is for a two (2) year period effective
as of January 15, 1996 and is subject to automatic renewals for consecutive
two (2) year terms thereafter unless and until Corporation and/or Employee
gives written notice of non-renewal at least sixty (60) days prior to
expiration of then current term, further subject to earlier termination as
provided herein. Except as provided below, in the event of termination,
Corporation shall only be obligated to continue to pay Employee the salary
due Employee under this agreement up to the termination date. Following any
such notice of termination, Employee shall fully cooperate with Corporation
in all matters relating to the winding up of Employee's pending work on
behalf of Corporation and to the orderly transfer of any such pending work
to
other employees of Corporation as may be designated by the Board of
Directors
of Corporation. Such termination shall not affect any liability or other
obligation which may have accrued prior to such termination, including but
not limited to any liability for loss or damage on account of default.
Employee shall not be entitled to retain or copy any corporate information
or
documents in the event of termination and Employee shall remain bound by the
other terms and conditions of this Agreement to include paragraphs 14.
through 18.
The Corporation may terminate this Agreement for Adequate Cause (defined
below) immediately upon giving written notice to the Individual. If
terminated for Adequate Cause, the Corporation's compensation obligations
shall terminate upon the last day of the employment relationship as
specified
in the termination notice.
The Corporation may also terminate this Agreement without Adequate Cause,
but
in such event (other than Disassociation, defined below), the Corporation
shall be obligated to pay Employee compensation for a period equal to the
longer of six (6) months or the balance of the then current term of this
Agreement, at a monthly rate equal to the average monthly compensation paid
by the Company to the Employee during the six (6) month period immediately
preceding the month in which termination occurs. Notwithstanding the
preceding sentence, in the case of a Mandatory Disassociation (defined
below), Employee shall be entitled to compensation at the rate determined in
accordance with the preceding sentence for a period of six (6) months
following the termination. As used herein, the term "Mandatory
Disassociation" means a termination of Employee by the Company as a result
of
any circumstance in which, in the reasonable opinion of counsel to the
Corporation and after giving effect to paragraph 19 below, the continuation
of this Agreement would render the Corporation unable to obtain any material
gaming or other license, franchise, permit or approval required for the
Corporation to sell, lease, license and distribute its products and
otherwise
engage in its business activities.
As used herein, the term "Adequate Cause" means and includes any of
the following:
a. Employee's failure or refusal to carry out the reasonable
directions of the Board of Directors of Corporation, provided that the
directions are reasonably consistent with the normal duties performed by
Employee, which failure or refusal continues for thirty (30 days) after the
Employee's receipt or written notice thereof;
b. Employee's willful failure or refusal to comply in any
material respect with the reasonable policies and procedures of the
Corporation as in effect from time to time, which failure or refusal
continues for thirty (30) days after Employee's receipt of written notice
thereof;
c. Employee's breach of this Agreement, including but not
limited to, his failure, inability, or refusal in any material respect to
perform his or her duties in accordance with this Agreement, which breach
remains uncured for thirty (30) days after Employee's receipt of written
notice of the breach; or
d. Any deceptive, fraudulent, dishonest or illegal act (or failure
to act) or breach of fiduciary duty by the Employee with respect to
Corporation or with respect to Sharps International Limited Partnership, a
Nevada limited partnership.
In addition to the Corporation's rights of termination, the
Employee
may terminate this Agreement voluntarily upon giving at least sixty (60)
days
prior written notice to Corporation and Employee's compensation shall cease
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on termination date. In addition, after notice of termination has been
given, or prior to such time in the event Employee has decided to terminate
his employment with Employer but not yet notified Employer, Employee
agrees that he will not:
(a). Make any statement or perform any act intended to advance
an interest of any existing or prospective competitor of Employer in any way
that will, or may, injure an interest of Employer in its relationship and
dealings with existing or potential customers and clients, or solicit or
encourage any other employee of Employer to do any act that is disloyal to
Employer, or inconsistent with Employer's
interests, or in violation of any provision of this Agreement;
(b) Discuss with any other employee the formation or operation
of any business intended to compete with Employer, or the possible
future employment of such other Employee by any such business, if Employee
has or expects to acquire a proprietary interest in such business, or is or
expects to be made an officer or director of such business;
(c) Inform any existing or potential customer of Employer that
Employee intends to resign, or make any statement or do any act intended
to cause any existing or potential customer of Employer to learn of
Employee's intention to resign, or to terminate his employment, whether
voluntarily or involuntarily, without having first given a corporate officer
of Employer at least ten (10) days notice, in writing, of such intention,
and
the names of each representative of an existing or potential customer whom
Employer intends to inform or cause to be informed of such intention, and
having gained written approval for such contact in advance; and
(d) Discuss with an existing or potential customer of
Employer,
the present or future availability of services or products by a business, if
Employee has or expects to acquire a proprietary interest in such business,
or such services or products are competitive with services or products which
Employer provides.
On or before the effective date of termination of employment with Employer,
Employee shall tender his resignation as an officer and director of that
company if he is then serving in that capacity. In addition, in the event
Employee gives notice of termination, such notice shall also include his
tender of resignation as an officer and director of the Corporation.
9. Notices. Any and all notices required or permitted to be
given under this Agreement shall be sufficient if furnished in writing and
sent by registered or certified mail to the last known residence of Employee
or to the principal office of Corporation.
10. Choice of Law and Venue. This agreement shall be
interpreted, construed and governed according to the laws of the State of
Washington, and venue shall be in Spokane County, State of Washington.
11. Captions. Headings used in this Agreement are solely for
convenience and shall not affect or be used in connection with the
interpretation of this Agreement.
12. Internal Revenue Code References. Whenever reference is
made herein to the Internal Revenue Code or any section thereof, such
reference shall be construed to mean the Internal Revenue Code of 1986 as
amended, or such section thereof as the case may be as heretofore or
hereafter amended, supplemented or superseded by subsequent laws of similar
effect.
13. Amendments. Except as otherwise provided herein, no
amendments or additions to this Agreement shall be binding unless in writing
and signed by both parties.
14. Non-Competition. In consideration of the compensation and
other benefits to be paid to the Employee under this Agreement and other
additional valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and in view of the unique value to Corporation of the
services of Employee and the confidential information obtained by or
disclosed to Employee pursuant to the employment relationship embodied
herein, for and in additional consideration of One Hundred and no/100
Dollars
($100.00), which is payable within ninety (90) days of termination of
employment and additional valuable consideration (such additional
consideration acknowledged by Corporation and Employee as including but not
limited to Employee's employment and Employee's continued employment), the
Employee agrees that, beginning on the data of this agreement and continuing
for two (2) years after the date which is the later of (a) the termination
of
the Employee's employment with the Corporation (including any period of this
Employee's continued employment or engagement as an employee or consultant
following expiration of the term of this Agreement) (the "Termination Date")
he shall not, directly or indirectly, for his own account or as agent,
employee, officer, director, trustee, member, consultant or partner, or as a
stockholder or equity owner of any corporation or any other entity (except
that he may own securities constituting less than five percent (5%) of any
class of securities of a public company) , or member of any firm or
otherwise, (a) engage or attempt to engage, in the Restricted Territory (as
hereinafter defined) , in the business (as hereinafter defined) or any other
business or activity which is the same as, substantially similar to or
directly or
indirectly competitive with the business conducted by the corporation at the
Employee's termination date,
(b) employ or solicit the employment of any person who is employed by the
Corporation at the Employee's termination date or at any time during the
six-
month period preceding the Employee's termination date, (c) canvass or
solicit business in competition with the business conducted by the
Corporation immediately prior to the termination date from any person or
entity who during the six-month period preceding the termination date shall
have been a customer or client of the Corporation, or from any person or
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entity which the Employee has reason to believe might thereafter become a
customer or client of the Corporation as a result of marketing, contacts or
other facts and circumstances of which the Employee is aware, (d) willfully
dissuade or discourage any person or entity from using, employing or
conducting business with the Corporation or (e) disrupt or interfere with,
or
seek to disrupt or interfere with, the business or contractual relationship
between the Corporation and any supplier who during the six-month period
preceding the termination date shall have supplied components, materials or
services to the Corporation. For purposes of this Agreement, the term
Restricted Territory shall mean anywhere in the world. Business is defined
as the inventing, developing, marketing, sales, and manufacture of gaming
and
gaming related products and services and any other lawful business activity
engaged in by the Corporation on the termination date.
Notwithstanding the foregoing, the restrictions imposed by this
Section 14. or Sections 15. through 17. hereof shall not in any manner be
construed to prohibit, directly or indirectly, the Employee from serving as
an employee of the Corporation in accordance with the terms and conditions
of
this Agreement.
15. Confidential Information. Employee shall take all
reasonable precautions to safeguard the confidential nature of all
confidential information of or belonging to the Corporation and its
Affiliates and shall take any other precautions with respect thereto which
the Corporations in its sole discretion, may reasonably request. For
purposes of this Agreement, "confidential information" shall mean all
information pertaining to the business and operations of the Corporation and
its Affiliates which is not generally available to the public and which the
Corporation desires to keep confidential, including, but not limited to,
trade secrets, proprietary rights and information, technology, concepts,
inventions, ideas, financial information, developments, information as to
customers and customer lists, sales and marketing information, information
as
to suppliers, manufacturing, production and pricing information, information
as to business methods, practices and strategies, and all documents,
electronic records and other tangible items relating to or containing any
such information.
16. Personal Property. The Employee agrees that the
Corporation shall own all right, title, and interest in and to all
developments and confidential information the Employee receives, invents,
conceives, or develops, either alone or with others, during the term of his
employment hereunder. Without limiting the generality of the foregoing, all
notes, notebooks, memoranda, working papers, graphs, charts, pictures, data,
drawing, documents and all other items containing or relating in any way to
confidential information made, compiled or obtained by the Employee, and all
copies thereat, together with all rights associated with ownership of such
items (such as copyright, patent, trade secret and other proprietary rights)
shall become the property of the Corporation when so made, compiled or
obtained, whether or not delivered to the Corporation, and shall be held by
the Employee in trust for the Corporation and shall be delivered to
the Corporation upon request and, in any event, upon termination of the
Employee's employment hereunder.
17. Developments.
(a) The Employee agrees to immediately communicate to the
Board
of Directors of the Corporation or to such other individual the Board of
Directors may designate, a full and complete disclosure of each Development
(as defined in subsection (e) below) conceived, made, or otherwise developed
by the Employee prior to December 31, 1992 during the term of his employment
hereunder and during the two (2) year covenant period per paragraph 14.,
whether solely or jointly with others, and whether or not while actually
engaged in performing work for the Corporation.
(b) The Employee agrees to assign and transfer to the
Corporation, without any separate remuneration or compensation, his entire
right, title and interest in and to all Developments and any United States
and foreign patent, copyright and any other proprietary rights in and
respect
to all such Developments, conceived, made or otherwise developed by the
Employee after December 31, 1992 and during the term of his employment
hereunder, whether a full or partial interest, and whether or not while
engaged in performing work for the Corporation. The Employee understands
and
agrees that the Corporation will determine, in its sole and absolute
discretion, whether an application for a copyright, patent or other
proprietary right registration will be filed on the Employee's Development
and whether any such application will be abandoned prior to issuance of a
patent, copyright or other proprietary right registration.
(c) The Employee shall take such action including, but not
limited to, execution, acknowledgment, delivery and assistance in
preparation
of documentation as may reasonably be requested by the Corporation for the
Implementation or continuing performance of subsection 17. (b) of this
Agreement. Without limiting the generality of the foregoing, the Employee
shall execute, acknowledge, deliver and assist in preparing such instrument
of conveyance, patent or copyright application, or assignment or further
assurance as the Corporation may reasonably request, to evidence, transfer,
vest and confirm the right, title and interest transferred or granted or to
be transferred or granted to the Corporation under subsection 17. (b) of
this
Agreement. The Employee shall not contest the validity of any patent,
copyright or other proprietary right, either United States or foreign, which
is transferred, conveyed, granted, vested or otherwise assured to the
Corporation for concepts or inventions conceived or invented after December
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31, 1992, or while an Employee, to which the Employee made any contribution
or in which the Employee participated in any way, and shall not assist any
other party in any way to contest the validity of such patent, copyright, or
proprietary right.
(d) The Employee has prepared and attached hereto as Exhibit
"A" a list of all inventions, developments, patent applications and patents
that were made, developed, conceived or first reduced to practice by the
Employee prior to December 31, 1992 and the commencement of the term of his
employment hereunder that are subject to prior agreements or that the
Employee desires to exclude from this Agreement. If no such list is
attached, the Employee represents and warrants that there are no such
inventions, developments, patent applications or patents.
(e) "Developments" means (1) any invention, discovery, concept
or idea, whether or not patentable; (2) any writing, drawing, design or
other
creative expression, whether or not copyright or trademark applications are
filed thereon; (3) any computer program, discovery, idea, device, process,
design, development, improvement, conception, concept, application,
technique
or know-how; or (4) any other invention, whether patentable or
copyrightable,
and whether or not reduced to practice, and, with respect to all of items
(1)
through (4) of this subsection (e) , that is (a) within the scope of the
Corporation's business, research or investigation; (b) results from or is
suggested by any work performed by the Employee for Corporation and related
to the business of the Employee's employment with the Corporation or under
the Employee's direction, whether or not it is made or discovered,
conceived,
made or discovered during normal working hours or on the premises of the
Corporation; or (c) results from the use of the Corporation's
facilities, equipment, property, or other assets. Developments shall
include, but not be limited to articles, processes, methods, formulas,
systems, computer source codes and techniques as well as improvements
thereof
and know-how related thereto. All developments are the property of the
Corporation with the exception of the "Literary Rights" as defined in
Section
19.
18. Equitable Remedies. The Employee represents and warrants
that he has had an opportunity to consult with his attorney regarding this
Agreement, has thoroughly and completely reviewed Agreement with his
attorney, and fully understands the hereof. Furthermore, the Employee (a)
acknowledges that a remedy at law for his failure to comply with Sections
14., 15.,16 and 17 of this Agreement may be inadequate; and (b) consents to
the Corporation obtaining from a court having jurisdiction specific
performance, an injunction, a restraining order or any equitable relief in
order to enforce any such provision. The right to obtain such equitable
relief shall be in addition to any remedy to which the Corporation is
entitled under applicable law (including, but not limited to, monetary
damages). The Parties acknowledge that ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, P.C. is
attorney
only for the Corporation and not for Employee and Employee has been advised
to consult independent legal counsel and has had sufficient time to do so.
19. Transfers. Employee hereby transfers to the Corporation,
without additional compensation, royalty or other consideration, full
ownership of any inventions, ideas, or other intellectual property (other
than the Literary Rights) heretofore developed by the Employee and/or ▇▇▇▇▇-
▇▇▇▇▇, a Nevada partnership, or hereafter developed by Employee while
employed or retained by the Corporation that (a) relate to the present or
future business of the Corporation or (b) are developed on the Corporation's
premises or using the facilities, property or the assets of the Corporation.
The transfers herein shall not be deemed to restrict the ability of
Employee to write or develop articles, books, movie scripts, motion
pictures,
sound recordings or other literary works about the Inventions transferred to
Corporation by Employee and future Corporation Inventions or the story
behind
the development thereof, including any copyrights therein (collectively the
"Literary Rights") ; provided, however, exercise of such rights shall not
involve disclosure of confidential information of Corporation which may have
commercial value to the business of Corporation or its successors.
The Employee agrees to timely take all actions and execute all
documents to transfer all right, title, and interest to Corporation in all
gaming and other inventions, licenses, developments, franchises, permits and
approvals required for the Company to sell, lease, license and distribute
its
products and otherwise engage in its business activities.
20. Restrictions. In the event any provision of Paragraphs 14
and 15 relating to time period and/or areas of restriction shall be declared
by a court of competent jurisdiction to exceed the maximum time period or
areas as such court deems reasonable and enforceable, said time period
and/or
areas of restriction shall be deemed to become and thereafter be the maximum
time period and/or areas which such court deems reasonable and enforceable.
21. Burden and Benefit. This agreement shall be binding upon
and inure to the benefit of Employee and Corporation and their respective
successors, heirs, and assigns.
22. Survival of Covenants. The covenants and provisions of
this Agreement shall survive the termination of the employment relationship
embodied herein.
23. Schedules and Exhibits. All schedules and exhibits
attached to this Agreement shall be deemed part of this Agreement and
incorporated herein where applicable, as if fully set forth herein.
24. Interpretation. This Agreement is the product of
negotiation and amendment, and shall not be interpreted particularly for or
against either party because that party's legal representative drafted
this Agreement or a portion of it.
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25. Timely Compensation. In the event the compensation due
Employee by Employer is not timely made, Employee shall be entitled to
interest, along with all Employee's other rights and remedies available,
at the rate of nine and one-half percent (9 1/2%) per annum.
26. Funding Agreement. Incorporated by reference as Exhibit
"B" is a Funding Agreement dated January 15, 1996 by and among ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, an individual, Sharps International Limited Partnership, Nevada
limited partnership, ▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ an
individual, ▇▇▇▇▇-▇▇▇▇▇ Partnership, a Nevada general partnership, and
▇▇▇▇▇▇
▇. ▇▇▇▇▇, an individual. Said Exhibit "B" sets forth terms and conditions
not otherwise provided for in this Agreement.
IN WITNESS WHEREOF, the parties have executed this agreement as of the day
and year first above written.
"CORPORATION"
CASINOVATIONS INCORPORATED
a Washington corporation
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
"EMPLOYEE"
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
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FUNDING AGREEMENT
THIS FUNDING AGREEMENT is entered into as of the 15th day of
January, 1996, by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
("▇▇▇▇▇"), SHARPS INTERNATIONAL LIMITED PARTNERSHIP, a Nevada
limited partnership ("Sharps"), ▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
("Sines"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual ("Forte"), SINES ▇▇▇▇▇
PARTNERSHIP, a Nevada general partnership consisting of Sines and
Forte (the "Partnership") and, solely for purposes of Sections 4
and 5 below, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
RECITALS:
Huson, Sines, and Forte each own a significant percentage of the
outstanding partnership interests ("Units") in Sharps;
The Partnership licenses certain inventions, ideas, patents,
trademarks and other intellectual property to Sharps,
▇▇▇▇▇ wishes to purchase from ▇▇▇▇▇ and -Forte some of their
limited partnership Units and acquire from them an option to
purchase additional limited partnership Units, and ▇▇▇▇▇ and ▇▇▇▇▇
wish to sell such Units and provide such an option to ▇▇▇▇▇;
Sharps has requested a loan from ▇▇▇▇▇, and ▇▇▇▇▇ is willing to
make such a loan on certain terms and conditions, including certain
modifications of the Partnership's licensing arrangements with
Sharps, and the Partnership is willing to commit to such
modifications.
The parties wish to clarify prior agreements and understandings and
make certain additional agreements concerning the reorganization of
Sharps' business.
In consideration of the mutual promises and covenants contained
herein, the parties hereto agree as follows:
AGREEMENT:
SECTION 1. PURCHASE OF PARTNERSHIP UNITS AND RELATED MATTERS
1.1 Purchase of Partnership Units. Subject to the terms and
conditions set forth herein, ▇▇▇▇▇ and Forte (collectively the
"Sellers") hereby sell to ▇▇▇▇▇ and ▇▇▇▇▇ hereby purchases from the
Sellers a total of 42 limited partnership ▇▇▇▇▇, ▇▇ from ▇▇▇▇▇ and
21 from Forte (the 'Transferred Units"). The transfer of the
Transferred Units shall be duly reflected on Sharps' books and
records as provided in the Sharps International Limited Partnership
Agreement ("Sharps Partnership Agreement").
1.2 Purchase Price. Subject to the adjustments listed in Section
1.4, ▇▇▇▇▇ will pay to the Sellers an aggregate amount equal to Two
Hundred Sixty Five Thousand and No/100 Dollars ($265,000.00) (the
"Purchase Price") for the Units.
1.3 Payment of Purchase Price. The Purchase Price will be paid to
the Sellers as follows.
1.3.1 Upon execution of this Agreement, ▇▇▇▇▇ shall deliver a check
to
Sellers in the amount of ONE HUNDRED THOUSAND AND No/100 DOLLARS
($100,000.00) payable to Sellers; and
1.3.2 Upon execution of this Agreement, ▇▇▇▇▇ and his wife shall
execute and deliver to Sellers a promissory note in the form
attached hereto as Exhibit A (the "Purchase Price Promissory
Note").
1.4 Adjustments to Purchase Price. Upon complete repayment of the
Loan to
Sharps (as defined and described in Section 2), and if one of the
two contingencies listed below is met by July 15, 1996, the
Purchase Price shall be increased to THREE HUNDRED NINETY SEVEN
THOUSAND FIVE HUNDRED DOLLARS ($397,500.00). The contingencies are:
1.4.1 (a) (i) The "Random Ejection Card Shuffler" product shall be
licensed by Sharps to Shufflemaster, Inc. substantially pursuant to
the terms of the draft agreement attached hereto as Exhibit B, or
(ii) Sharps' products shall be licensed or sold to a third party
pursuant to an agreement which provides for a payment to Sharps
concurrently with the execution of such agreement of at least
$1,000,000 in cash or cash equivalents, which payment shall not be
subject to any contractual right of offset, cancellation,
rescission, return or other condition, and (b) a minimum of ONE
MILLION FIVE HUNDRED THOUSAND AND No/100 DOLLARS ($1,500,000.00) in
cash or cash equivalents shall be received by Sharps from investors
who have purchased Units in Sharps after the date of this Agreement
at a minimum amount of $9,456 per Unit. If, pursuant to Section 5,
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the Reorganization described therein has then been completed,
clause (b) of the preceding sentence shall be deemed to require
that any shares of Casinovations stock be purchased for a minimum
per-share price of $1.50; OR
1.4.2 A total of Two MILLION FIVE HUNDRED THOUSAND AND No/100
DOLLARS ($2,500,000.00) in cash or cash equivalents shall be
received by Sharps from investors who have purchased Units in
Sharps after the date of this Agreement at a minimum amount of
$9,456 per Unit (or $1.50 per-share of Casinovations stock).
Payment of Adjusted Purchase Price. in the event the Purchase Price
is adjusted as set forth in Section 1.4 of this Agreement, the
additional ONE HUNDRED THIRTY Two THOUSAND FIVE HUNDRED DOLLARS AND
No/100 ($132,500.00) shall be paid by ▇▇▇▇▇ in cash upon repayment
of the Loan.
SECTION 2. LOAN
2.1 Loan by ▇▇▇▇▇ to Sharps. Upon execution of this Agreement,
▇▇▇▇▇ shall loan to Sharps Three Hundred Thousand and No/100
Dollars ($300,000) (the "Loan"), and Sharps shall execute and
deliver to ▇▇▇▇▇ a promissory note in the form attached hereto as
Exhibit C (the "Loan Promissory Note"). The Loan shall be secured
by a pledge of certain limited partnership Units ("Pledged Units")
of Sharps owned by ▇▇▇▇▇ and ▇▇▇▇▇ in accordance with the terms of
a Partnership Pledge and Security Agreement attached hereto as
Exhibit D (the "Partnership Pledge Agreement"). Upon execution of
this Agreement, ▇▇▇▇▇ and Forte shall execute and deliver to ▇▇▇▇▇
the Partnership Pledge Agreement and shall cause their spouses to
execute and deliver spousal consents in the forms attached hereto
as Exhibits E-1 and E-2. If ▇▇▇▇▇ acquires ownership of any or all
of the Pledged Units, ▇▇▇▇▇ and ▇▇▇▇▇ shall have an option to re-
purchase 50% of the acquired Units pursuant to the terms of the
Partnership Pledge Agreement.
2.2 Assignment of Loan Promissory Note. Notwithstanding any other
provision of this Agreement, if ▇▇▇▇▇ should at any time acquire
all or a portion of the Pledged Units, then ▇▇▇▇▇ shall immediately
assign and endorse the Loan and Note to ▇▇▇▇▇ and Forte who shall
have unconditional right, title and interest in the Note and Loan
in the principal amount of $300,000, without recourse to ▇▇▇▇▇.
The foregoing shall be in addition to any rights of subrogation
which ▇▇▇▇▇ and Forte may have under applicable law.
SECTION 3. OPTION TO PURCHASE ADDITIONAL UNITS
3.1 Option to Purchase Additional Units. Subject to the terms and
conditions contained in Sections 3.2. and 3.3. below, ▇▇▇▇▇ shall
have an option (the "Option") to purchase from Sellers up to an
additional 43 Units ("Option Units"), 21.5 limited partnership
Units from ▇▇▇▇▇ and 21.5 limited partnership Units from Forte, at
the price of $405,000 for all such Option Units or $9,456 per Unit
(the "Option Price"). The Option shall be exercised, if at all,
within 90 days from the date the Loan is repaid in full.
3.2 Default on Loan. In the event the Loan is not repaid in fall
on or before the maturity date specified in the Loan Promissory
Note, the Option described in Section 3.1 shall be extinguished and
▇▇▇▇▇ shall have no rights with respect to it.
3.3 Adjustment to Option Price, In the event that the Loan is
repaid in full on or before the maturity date specified in the Loan
Promissory Note but neither of the contingencies listed in Section
1.4.l. or 1.4.2 is satisfied as of the date the Loan is repaid, the
Option Price shall be reduced from $9,456 per Option Unit to $6,304
per Option Unit.
3.4 Exercise of Option. To exercise the Option, ▇▇▇▇▇ shall give
written notice to Sellers of his election to exercise the Option.
The notice shall specify the number of Option Units which ▇▇▇▇▇
elects to purchase, The sale and purchase of the Option Units which
▇▇▇▇▇ has elected to purchase shall be closed at a mutually agreed
time and place within 30 days after ▇▇▇▇▇'▇ notice of exercise. At
the closing of such purchase, ▇▇▇▇▇ shall pay 50 % of the Option
Price and the purchase of the Option Units shall be duly reflected
on Sharps' books and records in accordance with the Sharps
Partnership Agreement. At the closing ▇▇▇▇▇ shall also execute and
deliver to Sellers a promissory note in substantially the form
attached as Exhibit F for the balance of the Option Price, except
that the principal amount and related terms of the Note shall be
appropriately adjusted in the actual note to reflect any change in
the Option Price pursuant to Section 3.3 or to reflect a purchase
of less than all of the Option Units.
3.5 Conversion to Casinovations Shares. If the Reorganization has
then been effected, the Option shall apply to 270,000 shares of
Casinovations stock at $1.50 per share, subject to reduction to
$1.00 per share on the terms described above.
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SECTION 4. INTELLECTUAL PROPERTY RIGHTS
4.1 Intellectual Property Rights. Sharps and the Partnership have
previously entered into an Exclusive License Agreement dated June
6, 1994 (the "Licensing Agreement") pursuant to which the
Partnership granted to Sharps a license with respect to certain
inventions. The Partnership, Sines, Forte, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
hereby transfer, convey and assign to Sharps all of the right,
title and interest in and to the Licensed Inventions, Licensed
Technology, Licensed Patent Rights, Copyrights, Licensed Copyright
Works, Licensed Technology Rights, Licensed Products, Licensed
Trademarks, and Licensed Trademark Rights as those terms are
defined and used in the Licensing Agreement (the "Total
Inventions"), excluding from such transfer the "Safety Peek Dealing
Shoe" and the Slow "Roll-Reel Vision" slot machine concept (the
"Retained Inventions"). The Total Inventions, excluding the
Retained Inventions and the Literary Rights, defined below, are
referred to herein as the "Transferred Inventions". The transfers
herein shall not be deemed to restrict the ability of ▇▇▇▇▇, ▇▇▇▇▇
or ▇▇▇▇▇▇ L, ▇▇▇▇▇ to write or develop articles, books, movie
scripts, motion pictures, sound recordings or other literary works
about the Total Inventions or the story behind the development
thereof, including any copyrights therein (collectively, the
"Literary Rights"); provided, however, exercise of such rights
shall not involve disclosure of confidential information of Sharps
which may have commercial value to the business of Sharps or its
successors.
4.1.1 ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ and the Partnership will take
any and all steps necessary to enable Sharps to record the
assignment of the Transferred Inventions. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇ and the Partnership will sign all documents necessary to
confirm that the Transferred Inventions is owned by Sharps, and
will take all steps necessary to otherwise effect transfer of
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇'▇, ▇▇▇▇▇' and the Partnership's rights in
the Transferred Inventions to Sharps.
4.1.2 ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ and the Partnership will, at
the request of Sharps, assist in preparing United States and
foreign trademark and or patent applications covering the
Transferred Inventions. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ and the
Partnership will sign and deliver to Sharps all such applications.
Sharps will bear all expenses to be incurred in connection with all
trademark and patent applications.
4.2 Royalties for Initial Products. The Licensing Agreement is
hereby terminated as to the Transferred Inventions but shall remain
in full force and effect in all other respects. In lieu of the
royalties, license fees and other consideration provided for in the
License Agreement, the Partnership shall receive from Sharps (a) a
quarterly royalty fee of 3 % of the "Net Revenues" (as defined
below) earned by Sharps with respect to the Initial Products, and
(b) an option to purchase from Sharps 6 of its limited partnership
Units at a price of $6,304.00 per Unit or 40,000 shares of
Casinovations at a price of $1.00 per share upon completion of the
Reorganization described in Section 5 below (the "Inventions
Option"). The term "Initial Products" means the following
products: the "Random Ejection Shuffler" (including future
improvements thereto and variations thereof), the "Safety Peek
Cards" and the table-game version of "Fantasy 21 " (but not any
computer, home version or other variation thereof). The term "Net
Revenues" means gross cash revenues received by Sharps for the
relevant quarter attributable to sales of the Initial Products,
minus Sharps' cost of such goods sold for such quarter. Unless
otherwise agreed, the determination of the cost of goods sold shall
be made in accordance with generally accepted accounting
principles, consistently applied. The royalty fee provided for
herein shall be paid in accordance with and subject to the terms of
a Royalty Agreement which Sharps and the Partnership shall enter
into by April 1, 1996. The other terms and conditions of the
Royalty Agreement shall be as provided in the Licensing Agreement
(including the duration of the royalty obligations and provisions
for termination), but if not provided for therein, shall be
mutually acceptable to Sharps, the Partnership and ▇▇▇▇▇.
4.2.1 To exercise the Inventions Option, the Partnership shall
give written notice to Sharps of its election to exercise the
Inventions Option. The notice shall specify the number of
Inventions Option Units which the Partnership elects to purchase.
The sale and purchase of the Inventions Option Units which the
Partnership has elected to purchase shall be closed at a mutually
agreed time and place within 30 days after the Partnership's notice
of exercise. At the closing of such purchase, the Partnership
shall pay Sharps the applicable purchase price for the Units, and
the purchase of the Inventions Option Units shall be duly reflected
on Sharps' books and records in accordance with the Sharps
Partnership Agreement.
4.2.2 The Inventions Option may be exercised by the one year period
beginning on the second anniversary of the date of this Agreement.
91
4.3 Consideration. The par-ties agree that the transfer of the
Transferred Inventions, of the License Agreement, the agreement to
enter into a Royalty Agreement with respect to the Initial Products
and the Inventions Options reflect a negotiated resolution by the
parties.
4.4 Personal Services Agreements.
4.4.1 On or before the closing of the Reorganization (defined
below), but in any event by April 1, 1996, ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, individually, (as applicable, the Individual"), shall each
enter into employment or consulting agreements with Sharps or
Casinovations, as applicable, as the "Company" (the "Personal
Services Agreements").
4.4.2
(a) Each of the Personal Services Agreements shall obligate the
Company to pay compensation to the Individual at a rate of $10,000
per month, subject to pro rata reductions for any amount of work
time spent by the Individual on business not related to the
Company. Each Personal Services Agreement shall be for a term of
two years subject to automatic renewals for consecutive two year
terms thereafter unless and until either the Company or the
Individual gives written notice of non-renewal at least sixty (60)
days prior to expiration of the then current term, and subject to
earlier termination as provided in the remainder of this Section
4.4.2.
(b) The Company may terminate a Personal Services Agreement for
Adequate Cause (defined in Section 4.4.3 below) immediately upon
the Company giving written notice to the Individual. If terminated
for Adequate Cause, the Company's compensation obligations shall
terminate upon the last day of the employment or consulting
relationship as specified in the termination notice.
(c) The Company may also terminate a Personal Services Agreement
without Adequate Cause, but in such event (other than a Mandatory
Disassociation, defined below), the Company shall be obligated to
pay the terminated Individual compensation for a period equal to
the longer of six (6) months or the balance of the then current
term, at a monthly rate equal to the average monthly compensation
paid by the Company to the terminated Individual during the six (6)
month period immediately preceding the month in which termination
occurs. Notwithstanding the preceding sentence, in the case of a
Mandatory Disassociation (defined below), the terminated Individual
shall be entitled to compensation at the rate determined in
accordance with the preceding sentence for a period of six (6)
months following the termination. As used herein, the term
"Mandatory Disassociation" means a termination of the Individual by
the Company as a result of any circumstance in which, in the
reasonable opinion 4.4.7 below, the opinion of counsel to the
Company and after giving effect to the continuation of the Personal
Services Agreement would render the Company unable to obtain any
material gaming or other license, franchise, permit or approval
required for the Company to sell, lease, license and distribute its
products and other-wise engage in its business activities.
(d) In addition to the Company's rights of termination, the
Individual may terminate his Personal Services Agreement
voluntarily upon giving at least sixty (60 days prior written
notice.
4.4.3 As used herein, the term "Adequate Cause" means and includes
any of the following: (a) The Individual's failure or refusal to
carry out the reasonable directions of the Board of Directors of
Casinovations following the Reorganization described in Section 5,
provided that the directions are reasonably consistent with the
normal duties performed by the Individual, which failure or refusal
continues for thirty (30) days after the Individual's receipt of
written notice thereof;
(b) The Individual's willful failure or refusal to comply in any
material respect with the reasonable policies and procedures of the
Company as in effect from time to time, which failure or refusal
continues for thirty (30) days after the Individual',- receipt of
written notice thereof-,
(c) The Individual's breach of the Personal Services Agreement,
including but not limited to, his failure, inability or refusal in
any material respect to perform his or her duties in accordance
with the Personal Services Agreement, which breach remains uncured
for thirty (30) days after the Individual's receipt of written
notice of the breach; or
(d) Any deceptive, fraudulent, dishonest or illegal act (or
failure to act) or breach of fiduciary duty by the Individual with
respect to Sharps or Casinovations.
4.4.4 Each Personal Services Agreement shall include provisions
transferring to the Company, without additional compensation,
royalty or other consideration, full ownership of any inventions,
92
ideas or other intellectual property (other than the Literary
Rights) heretofore developed by the Individual or hereafter
developed by the Individual while employed or retained by the
Company that (a) relate to the present or future business of the
Company or (b) are developed on the Company's premises or using the
facilities, property or the assets of the Company Each of the
Personal Services Agreements shall contain confidentiality
provisions, provisions preventing the Individual from competing,
directly or indirectly, with the business of the Company during the
employment or consulting term and for a period of two (2) years
thereafter and provisions preventing the use of the Company's trade
secrets and other proprietary information at any time except in
furtherance of the interests of the Company.
4.4.5 The Personal Services Agreement for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall
permit him to continue to engage in his gaming industry consulting
business as presently conducted (which does not include product
development or improvement), and shall allow ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to
maintain ownership of intellectual property inventions for
products, other patentable matter and information developed under
clause (b) in Section 4.4.4, all of which shall be the property of
the Company pursuant to Section 4.4.4,
4.4.6 The other terms and provisions of the Personal Services
Agreements shall be reasonably acceptable to the Company and ▇▇▇▇▇
or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as applicable.
4.4.7
NotwithstandingSections4.4.lthrough4.4.6,thepartiesagreetostructure
(or subsequently restructure as appropriate) the terms of the
Personal Services Agreement in such a manner as to enable the
Company to obtain all gaming and other licenses, franchises,
permits and approvals required for the Company to sell, lease,
license and distribute its products and otherwise engage in its
business activities.
4.5 Transfer of Retained Inventions. Each of Sines, Forte, ▇▇▇▇▇▇
▇. Forte, Huson, the Partnership and Sharps agree and consent that,
as part of the Reorganization, (a) the Partnership shall acquire
from ▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ any residual interest or
rights any of such individuals may have in the Retained Inventions,
(b) the Partnership will transfer all right, title and interest in
the Retained Inventions to Casinovations in an Internal Revenue
Code Section 351 transaction, and (c) Casinovations will issue the
Partnership 1,261,000 Casinovations Shares (defined below).
SECTION 5. AGREEMENT TO REORGANIZE
5.1 Capitalization of Casinovations. As soon as reasonably
practicable following the date of this Agreement, but in no event
later than March 15, 1996, all parties hereto agree to vote their
Units and/or take all other actions necessary or appropriate
consistent with their respective obligations set forth below to
attempt in good faith to cause a reorganization of Sharps involving
substantially the following elements (the "Reorganization"):
5.1.1 Sellers have formed Casinovations, Inc., a Washington
corporation ("Casinovations").
5.1.2 Sellers represent that at the time of the Reorganization
Casinovations' articles of incorporation and bylaws will (a)
authorize Casinovations to issue only up to 10,000,000 shares of
common stock, $1.00 par value (the "Shares") and no other class of
securities, (b) provide for pre-emptive rights to the extent
permitted under Washington law, including RCW 23B.02.010 and
23B.06.3W.
5.1.3 The Reorganization shall involve the issuance by
Casinovations of a
maximum of 5,390,000 Shares, allocated as follows and issued or
reserved for issuance as described below:
92,513,000 Shares shall be issued to all of the existing holders of
Units in Sharps in exchange for all such Units, on a pro rata basis
so that the relative ownership interests among such holders
following such transaction is the same as immediately prior to such
transaction.
1,261,900 Shares shall be issued to the Partnership in return for
its contribution of the Retained Inventions pursuant to Section
4.5.
*Up to 1,020,000 Shares shall be offered by Casinovations for sale
in a private placement of securities at a price per Share of not
less than $1.50.
555,000 Shares shall be issued or reserved for issuance to the
persons listed on exhibit H to this Agreement.
93
40,000 Shares shall be reserved for issuance to the Partnership in
connection with the option under Section 4.2.
5.1.4 Casinovations shall, directly or indirectly, succeed to and
assume all of the assets and liabilities of Sharps.
5.1.5 The transactions described in Sections 5.1.1, 5.1.2, 5.1.3
and 5.1.4 shall have no material adverse tax consequences to
Sharps, Casinovations and the existing holders of Units in Sharps.
5.1.6 Casinovations will enter into the Personal Services
Agreements described in Section 4.3 if Sharps has not already done
so.
5.1.7 All the parties hereto agree that if all outstanding Units
of Sharps are not transferred in exchange for Shares in
Casinovations as provided in Section 5.1.3 by March 15, 1996, they
shall vote their respective Units in favor of the transfer of, and
otherwise attempt to cause Sharps to transfer, all of Sharps'
assets and liabilities to Casinovations by April 10, 1996 in
exchange for 2,513,100 Shares issued to Sharps.
5.1.8 All parties hereto agree to vote to eliminate (a) Article X,
Section
10. 1 (c)(2) of the Sharps Partnership Agreement, (b) and the
requirement in Article X, Section 10.2(a) of the Sharps Partnership
Agreement that the general partner receive an opinion of counsel
for Sharps stating that the transfer or encumbrance of Units by the
general partner will not cause the termination of Sharps for
federal income tax purposes, and (c) any other related sections of
the Sharps Partnership Agreement and to bring such changes to a
vote of all Sharps' partners as soon as possible following the
execution of this Agreement.
5.2 Effect of Reorganization on Contemplated Transactions. The
parties agree, upon closing of the Reorganization, that:
5.2.1 Casinovations shall assume all liabilities of Sharps under
this Agreement and the documents executed in connection herewith.
5.2.2 ▇▇▇▇▇ shall permit the Pledged Units to be converted to
Shares (at 6304 Shares per Unit) upon his receipt of the
certificates evidencing the shares and an executed Stock Pledge
Agreement from Sellers on terms and conditions substantially
identical to the Partnership Pledge Agreement
5.2.3 The rights and obligations of Sellers and ▇▇▇▇▇ with respect
to the Transferred Units, the Pledged Units, the Option Units and
the Eligible Re-Purchase Units (as defined and described in the
Partnership Pledge Agreement) shall attach to the Shares which are
attributable thereto, and all numerical adjustments shall be made
as necessary to reflect the Reorganization.
SECTION 6. REPRESENTATIONS AND WARRANTEES OF SHARPS, THE SELLERS
AND THE PARTNERSHIP
As a material inducement to Buyer to enter into this Agreement and
purchase the Units and make the Loan, Sharps, the Sellers and the
Partnership (collectively, the "Warranting Parties"), jointly and
severally, represent and warrant that:
6.1 Organization and Corporate Power. To the best of each
Warranting Party's knowledge, Sharps is a limited partnership
validly existing, and in good standing under the laws of the State
of Nevada. To the best of each Warranting Party's knowledge,
Sharps has all requisite power and authority and all licenses,
permits, and authorizations necessary to own and operate its
properties, and to carry on its business as now conducted.
Notwithstanding the foregoing, the parties acknowledge that Sharps
presently has no gaming licenses.
6.2 Capital Securities and Related Matters. Sharps' Units are
distributed as set forth on Exhibit G, attached hereto, and copies
of all outstanding options are attached hereto as Exhibit H and no
other partnership Units of Sharps are issued and outstanding.
Other than as set forth in this Agreement, Sharps does not have
outstanding and has not agreed, orally or in writing, to issue any
Units convertible or exchangeable for any of its Units, nor does it
have outstanding nor has it agreed, orally or in writing, to issue
any options or rights to purchase or otherwise acquire any Units of
Sharps. Sharps is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any of its
Units. All of the outstanding Units of Sharps are validly issued,
fully paid, and nonassessable, The Sellers have, and upon purchase
thereof by Buyer pursuant to the terms of this Agreement Buyer will
have, good and marketable title to the Transferred Units, the
Pledged Units and the Option Units, free and clear of all security
interests, liens, encumbrances, or other restrictions or claims,
subject only to restrictions as to marketability imposed by
securities laws and the Sharps Partnership Agreement.
94
6.3 Authorization; No Breach. The execution, delivery, and
performance of this Agreement and all other agreements contemplated
hereby to which Sharps, the Sellers or the Partnership are parties
have been duly authorized by Sharps, or the Sellers, or the
Partnership, as the case may be, To best of each Warranting Party's
knowledge, this Agreement and each other agreement contemplated
hereby, when executed and delivered by the parties thereto, will
constitute the legal, valid, and binding obligation of Sharps, the
Sellers, or the Partnership, or all of them as the case may be,
enforceable against such parties in accordance with its terms
except as the enforceability thereof may be limited by the
Partnership Agreement, the application of bankruptcy, insolvency,
moratorium, or similar laws affecting the rights of creditors
generally or judicial limits on the right of specific performance.
Except as provided in this Agreement, the execution and delivery by
Sharps, the Sellers and the Partnership of this Agreement and all
other agreements contemplated hereby to which Sharps or the Sellers
or the Partnership is a party, the offering and sale of the Units
hereunder and the fulfillment of and compliance with the respective
terms hereof and thereof by Sharps, the Sellers and the Partnership
do not and will not (1) conflict with or result in a breach of the
terms, conditions or provisions of, (2) constitute a default under,
(3) result in the creation of any lien, security interest, charge,
or encumbrance upon the capital securities or assets of the Sellers
or Sharps pursuant to, (4) give any third party the right to
accelerate any obligation under, (5) to the best of each Warranting
Party's knowledge, result in a violation of, or (6) to the best of
each Warranting Party's knowledge, require any authorization,
consent, approval, exemption, or other action by or notice to any
court or administrative or governmental body pursuant to the
charter or bylaws of Sharps or any law, statute, rule, or
regulation to which the Sellers, Sharps or the Partnership is
subject, or any agreement, instrument, order, judgment, or decree
to which the Sellers, Sharps or the Partnership is subject,
including but not limited to the Sharps Partnership Agreement.
▇▇▇▇▇ acknowledges that he has been informed that his acquisition
of the Option Units and/or Pledged Units may result in a
"termination" of Sharps for federal income tax purposes, which may
cause him to suffer adverse tax consequences and may be contrary to
the Sharps Partnership Agreement.
6.4 Litigation. There are no actions, suits, proceedings, orders,
investigations, or claims pending or threatened against Sharps, the
Sellers or the Partnership, or any of their respective properties,
at law or in equity, or before or by any governmental department,
commission, board, bureau, agency, or instrumentality; Sharps, the
Sellers and the Partnership are not currently participating in any
arbitration proceedings under collective bargaining agreements or
otherwise, or any governmental investigations or inquiries; and
there is no basis for any of the foregoing,
6.5 Tax Matters. To the best of each Warranting Party's
knowledge, (a) Sharps has filed all federal, state, local, and
foreign tax returns and reports heretofore required to be filed by
it and has paid all taxes shown as due thereon (including interest
and penalties), (b) no taxing authority has asserted any
deficiency in the payment of any tax or informed Sharps that it
intends to assert any such deficiency or to make any audit or other
investigation of Sharps for the purpose of determining whether such
a deficiency should be asserted against Sharps and (c) Sharps has
paid any and all withholding, payroll or employment taxes required
to be paid by, or assessed against, Sharps.
6.6 Compliance with Laws. To the best of each Warranting Party's
knowledge, Sharps is, in the conduct of its business, in compliance
with all laws, statutes, ordinances, regulations, orders,
judgments, or decrees applicable to it, the enforcement of which,
if Sharps were not in compliance therewith, would have a materially
adverse effect on the business of Sharps taken as a whole. Neither
the Sellers nor Sharps has received any notice of any asserted
present or past failure by Sharps to comply with such laws,
statutes, ordinances, regulations, orders, judgments, or decrees.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a
written agreement signed by Buyer, the Sellers and the Partnership.
7.2 Waiver of Compliance; Consents
7.2.1 Any failure of any party to comply with any obligation,
covenant, agreement, or condition herein may be waived by the party
entitled to the performance of such obligation, covenant, or
agreement or who has the benefit of such condition, but such waiver
or failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition will not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
95
7.2.2 Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent will be given in a manner
consistent with the requirements for a waiver of compliance as set
forth above.
7.3 Notices. All notices, requests, demands, and other
communications required or permitted hereunder will be in writing
and will be deemed to have been duly given when delivered by hand
or two days after being mailed by certified or registered mail,
return receipt requested, with postage prepaid:
If to ▇▇▇▇▇:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
The Crabbe Huson Company
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to: Ater ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ 222 S.W.
Columbia, Suite 1800 ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Attn-. ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
or to such other person or address as Buyer furnishes to the
Sellers pursuant to the above.
If to Sharps,
▇▇▇▇▇ ▇. ▇▇▇▇▇, or the
Partnership:
c/o ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Attorney At Law
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
If to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇: ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address as any of such parties furnishes to Buyer
pursuant to the above.
7.4 Assignment. This Agreement can be assigned by a party hereto
upon such party's giving prior written notice to the other parties
hereto. No assignment will release the assignor from its
obligations hereunder. Subject to the foregoing, this Agreement
and all of the provisions hereof will be binding upon and inure to
the benefit of the parties hereto and their respective successors,
assigns, heirs, executors, and personal representatives. Nothing
in this Agreement, express or implied, is intended to confer on any
person other than the parties hereto, or their respective
successors, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement.
7.5 Governing Law. All matters with respect to this Agreement,
including but not limited to matters of validity, construction,
effect, and performance, will be governed by the laws of the State
of Oregon applicable to contracts made and to be performed therein
between residents thereof, regardless of the laws that might be
applicable under principles of conflicts of law.
7.6 Counterparts. This Agreement may be executed in two or more
fully or partially executed counterparts, each of which will be
deemed an original binding the signer thereof against the other
signing parties, but all counterparts together will constitute one
and the same instrument.
7.7 Entire Agreement. This Agreement and the agreements to be
entered into pursuant to the provisions hereof (the terms of which
are incorporated herein by this reference) embody the entire
agreement and understanding of the parties hereto as to the subject
matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings other than
those expressly set forth or referred to in such documents. This
Agreement and such documents supersede all prior agreements and
understandings among the parties with respect to the subject matter
hereof.
7.8 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement, or affecting the
validity or enforceability of any of the terms or provisions of
this Agreement.
95
7.9 Attorney Fees. If any action is brought by any party to this
Agreement to enforce or interpret its terms or provisions, the
prevailing party will be entitled to reasonable attorney fees and
costs incurred in connection with such action prior to and at trial
and on any appeal therefrom.
7.10 Payment of Fees and Expenses. Each party to this Agreement
will be responsible for, and will pay, all of its own fees and
expenses, including those of its counsel and accountants, incurred
in the negotiation, preparation, and consummation of the Agreement
and the Purchase.
7.11 Further Assurances. Upon the reasonable request of a party,
the other parties will take all action and will execute all
documents and instruments necessary or desirable to consummate and
give effect to this Agreement.
7.12 Legal Representation. Each party to this Agreement has been
advised to obtain independent legal counsel prior to executing this
Agreement and has had a full and fair opportunity to do so and
either obtained such representation or voluntarily declined to do
so. Each party acknowledges that ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, P.C. is the
attorney only for ▇▇▇▇▇ ▇. ▇▇▇▇▇ individually and that Ater ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ are the attorneys only for ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇.
7.13 Effective Date. Regardless of when it is signed by any or
all of the parties, this Agreement and the agreements to be
executed concurrently herewith shall be effective as of January 15,
1996.
7.14 Securities Laws. The Units which are the subject to the
transactions
contemplated by this Agreement have been issued pursuant to the
Sharps Partnership Agreement and have not been registered with the
Securities and Exchange Commission under the Securities Act of
1933, as amended, or under the securities acts of Washington,
Oregon, Nevada, or under any other state securities laws. The sale
or other disposition of the Units is restricted, as stated in the
Sharps Partnership Agreement, By acquiring any Unit represented by
the Sharps Partnership Agreement, the acquiring party represents
that such party has acquired the Units for investment and that such
party will not sell or other-wise dispose of the Units without
registration or other compliance with the aforesaid acts and the
rules and regulations thereunder. Each of the parties acknowledges
that such party has read the Sharps Partnership Agreement and
agrees to remain bound by its terms and conditions.
[SIGNATURES ON NEXT PAGE]
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
SINES/▇▇▇▇▇ international LIMITED PARTNERSHIP, a Nevada limited
partnership
By:
Title:
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ PARTNERSHIP, a Nevada general
partnership
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Partner
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Partner
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, solely for purposes of
Sections 4 and 5
97
EXHIBIT A
PROMISSORY NOTE
$165,000.00
Portland, Oregon
January 15, 1996
1. Promise to Pay. FOR VALUE RECEIVED, the undersigned, ▇▇▇▇▇▇▇
▇.
▇▇▇▇▇ ("Maker"), does hereby promise to pay to the order of ▇▇▇▇▇
▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Holders"), at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as Holders may
from time to time designate in writing, the principal sum Of ONE
HUNDRED SIXTY-FIVE THOUSAND AND No/100 DOLLARS ($165,000.00),
together with all interest thereon and other sums herein referred
to.
2. Interest and Payment Terms. The unpaid principal hereof shall
bear interest from the date of this Note until default at the rate
of nine and one-half percent (9.5%) per annum.
This Note shall be paid in eight (8) equal monthly installments of
principal, together with all accrued interest on the date of each
such payment. The first monthly payment shall be due May 15, 1996,
and subsequent monthly payments shall be due on the 15th day of
each month thereafter until December 15, 1996, when the remaining
principal balance and all accrued, unpaid interest shall be due and
payable.
3. Calculation of Interest and Application of payments. Interest
shall be calculated on a 365 or 366-day year, as applicable, based
on actual days elapsed. Each installment hereunder shall be first
applied to the payment of costs and expenses for which Maker is
liable hereunder, next to the payment of accrued interest, and
lastly to the reduction of principal. This Note shall continue to
bear interest at the Note rate (or at the Default Rate, as
hereinafter defined, if and so long as any default exists
hereunder) until and including the date of collection, and all
payments hereunder shall be calculated by and shall be payable in
the lawful money of the United States which shall be legal tender
for public and private debts at the time of payment.
4. prepayment. Maker shall have the right at any time to prepay
the whole or any part of this Note without prepayment premium or
fee.
5. Default Rate. If and so long as any default exists under this
Note, the interest rate on this Note, and on any 'judgment obtained
for the collection of this Note, shall be increased from the date
the default is declared to a rate (the "Default Rate") equal to
five percent (5 %) per annum in excess of the Note rate. Maker
acknowledges that the imposition of the Default Rate will result in
the then effective interest on this Note being increased from 9.5 %
per annum to 14.5 % per annum.
6. Costs of Collection. Maker promises to pay all costs, expenses
and attorneys' fees incurred by Holders in the exercise of any
remedy (with or without litigation), in any proceeding for the
collection of the debt, or the realization upon any security
securing this Note, in protecting or sustaining the lien or
priority of said security, or in any litigation or controversy
arising from or connected with this Note, including any bankruptcy,
receivership, injunction or other proceeding, or any appeal from or
petition for review of any of the foregoing, in which Holders
prevail. If a 'judgment is obtained thereon which includes an
award of attorneys' fees, such attorneys' fees, costs and expenses
shall be in such amount as the court shall deem reasonable. All
collection costs, expenses and attorneys' fees are payable on
demand, shall bear interest at the Default Rate from the date of
demand to and including the date of payment to Holders.
7. Defaults, Acceleration. Time is of the essence of this Note.
The occurrence of any of the following shall, without notice,
demand or opportunity to cure, constitute an event of default under
this Note:
(a) Failure of Maker to make any payment required to be paid by
Maker under this Note in strict accordance with the terms thereof;
(b) Failure of Maker to perform any other covenant, agreement or
other obligation contained in this Note;
(c) Any warranty, representation, or statement made or furnished
to Holders by or on behalf of Maker proving to be or having been
false in any material respect when made or furnished;
(d) If any assignment by Maker for the benefit of creditors
shall be made, or
98
(e) If Maker shall voluntarily file a petition under the Federal
Bankruptcy Act, as such Act may from time to time be amended, or
under any similar or successor Federal statute relating to
bankruptcy, insolvency arrangements or reorganizations, or under
any state bankruptcy or insolvency act, or file an answer in an
involuntary proceeding admitting insolvency or inability to pay
debts, or if Maker shall fail to obtain a vacation or stay of
involuntary proceedings brought for the reorganization, dissolution
or liquidation of Maker or if Maker shall be adjudged a bankrupt,
or upon dissolution, business failure or discontinuance of Maker as
a going business (except for labor disputes), or if a trustee or
receiver shall be appointed for Maker, or Maker's property, or if
the partnership interests of Maker shall become subject to the
jurisdiction of a Federal bankruptcy court, or similar state court,
or if Maker shall make an assignment for the benefit of creditors,
or if there is an attachment, execution or other judicial seizure
of any portion of Maker's assets and such seizure is not discharged
within ten (10) days;
then, upon the occurrence of any such event of default, after
expiration of any applicable notice and cure period, the entire
principal sum, with accrued interest thereon due under this Note,
shall, at the option of Holders, become due and payable forthwith,
without further notice. No failure to exercise such option shall
be deemed a waiver on the part of holders of any right accruing
thereafter.
8. Maker's Right to Cure. Upon an event of default, except as
otherwise provided below, Holders shall not accelerate this debt,
make any payments for which Maker is primarily liable, or foreclose
upon or attach any assets of Maker unless it first gives Maker
written notice of such default at Maker's address and in the manner
described for notices described in Section 15 below and unless such
default is not fully cured within the following periods:
(a) three (3) days after such notice is given in the event of any
failure to make a monetary payment to any person;
(b) fifteen (15) days after such notice is given in the event of
nonmonetary defaults not subject to other provisions of this
Section, provided (i) within five (5) days after such notice is
given, Maker communicates its cure and submits to Holders in
writing its plan to cure; and (ii) the cure is continuously pursued
by Maker with due diligence, If in Holders' sole judgment such
default is not reasonably capable of being cured within fifteen
(15) days, Maker shall have such additional time as is reasonably
necessary to complete the cure, but in no event more than thirty
(30) days after the notice of default is given; or
(c) sixty (60) days after the filing of any involuntary petition
in bankruptcy against or for the appointment of a receiver for
Maker (except for petitions filed by Holders), with the dismissal
of such petitions by the court within such period being deemed to
cure such default.
Notwithstanding the above provisions, the notice and cure period
provided for in this Section shall not apply:
(1) if a petition shall be filed by Maker under the Federal
Bankruptcy Act, or Acts amendatory thereof or supplemental thereto,
or under any statute either of the United States or any state in
connection with insolvency or reorganization, or for the
appointment of a receiver or trustee of all or a portion of Maker's
property; or
(ii) if any assignment by Maker for the benefit of creditors shall
be made.
The provisions of this Section shall apply to defaults under all
documents executed as such documents any security for this Note,
and unless expressly stated to the contrary in such notice or cure
period referred to therein shall be deemed to incorporate said
provisions. If any of said documents are inconsistent with this
Section, this section shall be controlling, unless said other
document expressly provides otherwise. Where additional notice or
cure periods are provided in this or any other such documents or
are required by any other contract or by law, said periods and
those contained in this ' section shall run concurrently. Nothing
in this section shall be construed as extending the term of this
Note or the date upon which a default occurs, and no decision to
forego any remedy for any given default shall be deemed a waiver on
the part of Holders of any right relating to any other default. No
failure to give any notice of any default shall constitute a waiver
of such default or any remedy which may be available in connection
therewith. This section shall be strictly construed, and shall not
impair the exercise of any remedy not referred to above immediately
upon default, including, without limitation, the seeking of any
mandatory or prohibitive injunction or restraining order or
appointment of receiver.
99
9. Usury. Maker hereby represents that this loan is for
commercial use and not for personal, family or household purposes.
It is the specific intent of the Maker and Holders that this Note
bear a lawful rate of interest, and if any court of competent
jurisdiction should determine that the rate herein provided for
exceeds that which is statutorily permitted for the type of
transaction evidenced hereby, the interest rate shall be reduced to
the highest rate permitted by applicable law, with any excess
interest theretofore collected being applied against principal or,
if such principal has been fully repaid, returned to Maker on
demand.
10. Renewals. Maker, and all others who may become liable for all
or any part of this obligation, consent to any number of renewals
or extensions of the time of payment hereof and to the release of
all or any part of the security for the payment hereof. Any such
renewals, extensions or releases may be made without notice to any
of said parties and without affecting their liability.
11. Waivers. Maker hereby waives presentment, demand of payment,
notice of dishonor, protest, and notice of nonpayment, and any and
all other notices and demands whatsoever. No covenant, condition,
right or remedy in this Note or modified orally, by course of
conduct or previous acceptance or other-wise unless such waiver or
modification is specifically agreed to in writing executed by the
Holders.
12. Construction. This Note shall be governed by and construed in
accordance with the laws of the State of Oregon, and all sums
referred to herein shall be calculated by reference to and payable
in the lawful currency of the United States. This Note has been
reviewed and negotiated by Maker and Holders at arms' length with
the benefit of or opportunity to seek the assistance of legal
counsel and shall not be construed against either party. The
titles and captions in this Note are inserted for convenience only
and in no way define, limit, extend, or modify the scope or intent
of this Note. In any case where Holders is permitted to act in its
"sole discretion," "sole option" or the like, Holders shall be
entitled to exercise unfettered discretion and may act without
application of principles of law, if any, requiring good faith or
fair dealing or reasonableness in exercising Holder's options.
13. Partial Invalidity. If any section or provision of this Note
is declared invalid or unenforceable by any court of competent
Jurisdiction, said determination shall not affect the validity or
enforceability of the remaining terms hereof. No such
determination in one jurisdiction shall affect any provision of
this Note to the extent it is otherwise enforceable under the laws
of any other applicable jurisdiction.
14. Addresses for Notice, Etc. All notices, requests, demands,
directions and other communications required under this Note shall
be in writing (including telegraphic communication) and mailed by
United States mail or facsimiled or delivered by overnight courier
or by hand to the applicable party at the addresses indicated
below:
if to Maker:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
121 ▇.▇. ▇▇▇▇▇▇▇▇, Suite 1400
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
if to Holders:
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
or, as to any party, at such other address as shall be designated
by such party in a written notice to each other party complying as
to delivery with the terms of this Section 15. All such notices,
requests, demands, directions and other communications so mailed or
telecopied or delivered shall be effective when received if sent by
mail, when delivered if delivered by courier or by hand, or when
transmitted if sent by facsimile.
Maker:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
100
EXHIBIT B
EXCLUSIVE LICENSE AGREEMENT
CASINOVATIONS INCORPORATED
AND
SHUFFLER MASTER, INC.
TABLE OF CONTENTS
i. Parties,.; 1
2. Background 1
3. Definitions 1
4. Grant of Exclusive Technology and Patent License 2
5, Geographical Scope of the Exclusive Technology
and Patent License 2
6. License to Sublicense Technology and Patent Rights 1
2
7. Grant of Trademark License 3
8. Geographical Scope of Trademark license 3
9. License to Sublicense Trademarks 3
10. Quality Control Involving Trademarks 3
11. Inspection Involving Trademarks 3
12. Marking of Trademarks 4
13. License of Copyright Works 4
14. Development of Prototypes of Licensed Products 4
15. Limitation on Licensee's Rights 4
16. Sublicense 4
17. Certification of Products 5
18. Manufacture of Licensed
Products for Sale to Licensor 5
19, Initial Production Run 5
20. Continuing Sales of Licensed Products 5
21. Compensation to Licensor 6
22. Transfer of Documentation 8
23. Disclosure of Technology 8
24. Confidentiality of Disclosure and Licensed Products 8
25. Patent Applications 9
26. Registration of License 9
27. Performance by Licensee 9
28. Reimbursement for Expenses 10
29. Improvements and Developments in Licensed Technology 11
30. Employee Invention Agreements 11
31. Reports and Accounting 11
32. Marking of Products Embodying Patent
Rights and Copyrights 12
33. Assignment of Rights and Obligations 12
34. Liability Risk 12
35. Insurance Policy for Manufacturing and Sale
of Products 12
36. Best Efforts and Diligence 13
37. Warranties of Licensor 13
38. Disclaimer of Warranties by Licensor 13
39. Enforcement of Patent Rights 13
40. Notification of Infringement 13
41. Interchange of Technical and Market Information 13
42. Compliance with Export of Technology and Other LAWS 13
43. Conversion 14
44. Termination by Licensor 14
45. Effect of Termination by Licensor 14
46. Termination by Licensee 15
47. Effect of Termination by licensee 15
48. Modification of Agreement 15
49. No Waiver 15
50. Severability 15
51. Applicable Law 15
52. Jurisdiction and Venue 15
53. Headings 16
54. Notices 16
55. Relationship of die Parties 16
56. Attorney's Fees 16
57. Integration, Entire Agreement 16
58. Counterpart Original Agreements 16
59. Effective Date of Agreement and Term of Agreement 16
60. Arbitration .. 17
61. Execution by Licensor - Casinovations Incorporated 18
62. Execution by Licensor - Shuffle Master, Inc 18
63. Appendix A - Licensed Trademarks 19
1. Parties
1.1 This Agreement is made by and between:
(a) Casinovations Incorporated, a Washington corporation, whose
business address is ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, hereinafter referred to as
"Licensor":
and.
(b) Shuffle Master, whose address is ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, hereinafter referred to as 'Licensee".
101
2. BACKGROUND
2.1 Licensor has developed improved technology directed EOM an
apparatus for automatically shuffling playing cards in random
sequence and has devoted substantial time, effort and money to that
development. As a result of Licensor's efforts it now owns certain
claims to patent rights, trade secrets, know-how and other
proprietary information relating to such technology.
2.2 Licensee is engaged in the development of equipment in the
gaming industry. Licensee desires to acquire exclusive rights in
the technology developed by or for Licensor and to distribute,
sell, lease, use, service and promote products utilizing such
technology, or sublicense others to do so.
2.3 In consideration of the premises, covenants and agreements
contained herein, and intending to be legally bound hereby. the
parties hereto have agreed to the terms and 2)conditions provided
in this Agreement.
3. Definitions
3.1 Licensor is the owner of all right, title. and inventions
described in.
(a) U.S. Patent Application Serial No. 081228,609, filed April 18,
1994, entitled '?laying Card Shuffler".
(b) U.S. Patent Application Serial No. 08/423,408; filed April 18,
t995, entitled 'Playing Card Shuffling Machines and Methods".
(c) Any and all foreign patents and/or patent applications claiming
priority to any one of the above-reference patents or patent
applications.
3.2 The inventions so described will be referred to herein as the
"Licensed inventions". Licensed Inventions also include any
inventions included in any application filed on Licensed Technology
as defined hereinafter. Said patent applications and any other
patents granted on the Licensed Inventions will be referred to
herein as the 'Licensed Patents'. 'The Licensed Patents have
associated 'Licensed Patent Rights".
3.3 In addition to the technical information contained in the
referenced patent applications, other related technical and
business information have also been developed by Licensor generally
relating to the inventions described in the above-referenced patent
applications and prototypes and subsequent designs developed for
the filing of such patent applications. Exclusive rights under the
laws of trade secrets and know-how protect all or substantially all
of such proprietary information. The Licensed Inventions, all
Licensed Patent Rights which may be granted thereon, and related
trade secrets, know-how and other proprietary information arc to be
licensed under this Agreement and are hereinafter referred to for
convenience and brevity As 'Licensed Technology'.
3.4 Additionally, Licensor may provide works having copyrights
(herein referred to as the "Copyrights") in certain writings,
including computer software, business plans. technical
descriptions, and related drawings, writings and other works
produced by or for Licensor which relate specifically to the
Licensed Technology. Such works are also being licensed under this
Agreement and are hereinafter referred to as the "Licensed
Copyright Works". The subject matter of such Licensed Copyright
Works may include proprietary, trade secret or know-how information
within the definition of Licensed Technology.
3.5 Licensor has exclusive property rights under the laws of the
United States and foreign countries in such Licensed Technology
including potential patent rights, copyrights, trade secret rights,
know-how rights and technical information rights. Such exclusive
rights shall herein be referred to as the Licensed Technology
Rights. Additionally, there are rights in the Licensed Copyright
Works which exist for the written. graphic or other expression
which is legally and conceptually separable from the technological
content being expressed. Such expressions are protected under the
Copyrights associated with such Licensed Copyright Works. and the
Copyrights associated therewith may outlive any exclusive rights in
the Licensed Technology.
3.6 Products which use the Licensed Technology are herein
referred to as 'Licensed Products'. Use of the Licensed Technology
for purposes of this definition shall include products which
incorporate designs which are based on the Licensed Technology,
products which use any products included in the Licensed
Technology, and products which are produced using any new
production processes included in the Licensed Technology.
3.7 Licensor further desires to license certain trademarks which
may be created for use in connection with the Licensed
'[Technology. Any such trademarks art agreed to be licensed
hereunder by the parties and herein referred to as "Licensed
Trademarks". The
102
rights associated with such Licensed Trademarks are the "Licensed
Trademark Rights'. Further trademarks created by Licensor may be
added to the subject matter of licensed Trademarks
through written Trademark Addenda submitted by Licensor and
accepted by Licensee.
3.8 Licensee wishes to gain access to the proprietary information
embodying and describing the Licensed Technology and to obtain
exclusive licenses under the Licensed Technology Rights, Licensed
Copyrights and Licensed Trademark Rights for purposes of conducting
business using such Licensed Technology, Licensed Copyrights and
Licensed Trademarks and for potentially sublicensing such Licensed
Technology Rights, Licensed Copyrights and Licensed
trademark Rights to others for similar purposes.
4. GRANT of exclusive, Technology AND Patent LICENSE
4.1 Licensor hereby grants to Licensee exclusive licenses under the
Licensed Technology to:
(a) Distribute, sell. lease, use, service and promote products or
practice methods under the Licensed Patents,
(b) Distribute, sell. lease, use, service and promote products
which incorporate or use the Licensed Technology;
(c) Practice methods contained in the Licensed Technology; and
(d) Practice methods or processes contained in the Licensed
Technology.
4.2 The rights provided in this part include an exclusive license
under the Licensed Patent Rights obtained by Licensor on the
Licensed Technology, except as otherwise provided in this
Agreement.
Geographical Scope OF THE ExCLUSIVE TECHNOLOGY AND PATENT RIGHTS
The licenses granted under part 4 above shall apply to the U.S. and
all foreign countries, except as otherwise provided in this
Agreement.
6. LICENSE To SUBLICENSE TECHNOLOGY AND PATENT RIGHTS
6.1 Licensor hereby grants to Licensee an exclusive license
allowing it to sublicense others to exclusively or non-exclusively
practice the following rights within the scope of rights licensed
to Licensee under part 4.
(a) Distribute, sell. lease, use. service and promote products or
practice methods protected under the Licensed Patents;
(b) Distribute, sell, lease, use, service and promote products
which incorporate or use the Licensed Technology., and
(c) Practice methods contained in the Licensed Technology.
6.2 Part 5 shall apply to define the geographical scope of the
exclusive license to sublicense granted in this part.
6.3 The grant of all or substantially all of the exclusive Patent
Rights by Licensee to another party shall be considered an
assignment and not a sublicense.
7. GRANT of TRADEMARK LICENSE
Licensor hereby grants to Licensee a non-exclusive trademark
license to use the Licensed Trademarks, in connection with the
sale, distribution, promotion or use the Licensed Products.
8. Geographical SCOPE OF TRADEMARK LICENSE,
The geographical scope of the trademark license of part 7 shall be
the United States of America and all foreign countries, except as
otherwise provided in this Agreement.
9. LICENSE TO SUBLICENSE MARKS 2t) Licensor agrees that Licensee
shall have the right to sublicense others to use one or more 2 1 of
the Licensed Trademarks in one or more of the manners of use
allowed to Licensee. All
agreements to sublicense by Licensee shall include terms requiring
at least the requirements of parts 10-12 below.
10. QUALITY CONTROL INVOLVING TRADEMARKS
10.1 Licensee shall notify Licensor in writing prior to the initial
distribution of any new 2 7 products marked with the Licensed
Trademarks, hereinafter 'Trademarked Products'. The notification
shall explain the Trademarked Products to be distributed and the
planned date of first distribution. Licensor shall have at least
four weeks to review each such Trademarked Product prior to the
planned date of first distribution. Thereafter Licensor shall
approve distribution, or indicate the reasons for which approval is
denied, or indicate the changes needed for approval. The Licensee
may not distribute any such Trademarked Product until written
approval from the Licensor. Licensor shall not make requirements
for quality which are unreasonable in light of standard industry
practices.
103
10.2 The Licensee agrees to permit the Licensor or its
representative to inspect facilities where Trademarked Products are
being manufactured and packaged.
10.3 In the event that the above-stated quality standards are not
met or maintained throughout the term of this Agreement, the
Licensor has the right to require that the Licensee comply with
such quality standards.
10.4 The provisions of 10.1-10.3 immediately above shall apply
fully to all sublicensees and all sublicenses shall so provide.
11. INSPECTION INVOLVING TRADEMARKS
Licensor shall have the right at any reasonable time to enter upon
or have its representatives enter upon the premises of Licensee or
any sublicenses to inspect the quality of goods being sold,
services being rendered, or goods of services which otherwise use
the Licensed Trademark.
12. MARKING OF TRADEMARKS
Licensee agrees to ▇▇▇▇ all labels, advertising, packaging and
other instances of use of the Licensed Trademarks with the
notification (TM) or with the symbol consisting of an R within a
circle to indicate such trademarks are registered, if and when such
trademarks do become registered by the United States Patent and
Trademark Office. usage of the Licensed Trademarks by Licensee
or any Sublicensees in the U.S. and/or any foreign country shall
comply with all established practices of such Countries for
notifying or indicating that the Licensed Trademarks are claimed as
exclusive.
13, license OF COPYRIGHT WORKS
Licensor hereby grants to Licensee a non-exclusive license to
exercise any rights available under copyrights in the United States
and all foreign countries in which there are rights in the
Licensed Copyright Works, except as otherwise provided in this
Agreement, The license granted under this part also includes the
right to sublicense others to perform any acts Licensee has a right
to perform with respect to the Licensed Copyright Works in the
United States and all foreign countries, except as otherwise
provided in this Agreement.
14. DEVELOPMENT OF PROTOTYPES OF LICENSED PRODUCTS
14.1 Licensor agrees to develop six (6) prototype units of the
Licensed Product for Licensee by July 1. 1996. These prototypes
shall be used for testing and submission for certification to
various certifying entities, as described in part 17 below.
14.2 Licensee shall advance Licensor $80,000 for the development of
said prototypes. Any funds remaining from the $80,000 following
development of the prototypes shall be returned to Licensee within
sixty (60) days of completion of development of the prototypes.
Licensee agrees to provide Licensor with engineering and machining
assistance as requested by Licensor to allow Licensor to
manufacture said prototypes.
15. LIMITATION ON LICENSEES RIGHTS
15.1 All rights granted herein to Licensee shall be limited to only
apply with respect to automated playing card shuffling machines
which are capable of simultaneously shuffling at least four (4)
playing card decks, each playing card deck having approximately
fifty-two playing Cards.
15.2 Licensee shall have no rights with respect to other card
shuffling machines which are protected by the Licensed Technology.
15.3 All rights not granted to Licensee herein arc specifically
reserved to Licensor of Licensor's designee.
16. SUBLICENSING
16.1 Sublicenses granted hereunder shall be limited to the scope of
rights and privileges granted to Licensee and subject to the same
terms, renditions and obligations.
16.2 Licensee shall notify Licensor of any sublicense granted
hereunder.
16.3 If Licensee grants any sublicense hereunder for which Licensee
receives monetary or other remuneration or value other than profits
on the sale of Licensed Products, then Licensee shall report such
grant of sublicensed rights and one third of all value received
shall be paid to Licensor.
16.4 Any Sublicensee authorized by Licensee shall be obligated to
pay royalties or make other payments as specified herein as
obligations of Licensee, if any such Sublicensee receives benefits
equivalent to those granted to Licensee and Licensee fails to pay,
and any sublicense shall so provide. Any such Sublicense shall
only be obligated with respect to benefits received by that
Sublicensee and not benefits granted to other Sublicensees or
retained by Licensee.
104
17. CERTIFICATION of licensed PRODUCTS
17.1 Licensee shall submit prototypes developed under part 14 to
the following state gaming commissions and laboratory for approval.
licensing, or other certification as required or deemed desirable:
Nevada, New Jersey, Mississippi and Gaming Laboratories, Inc.
(individually, "Certifying Authority', collectively, 'certifying
Authorities'). Should the prototype not receive certification,
licensing or approval by the above-listed entities, then Licensor
shall cc have the opportunity to redesign and remanufacture a
prototype, and Licensee shall resubmit said prototype to said
Certifying Authorities for certification, licensing or approval
Thereinafter collectively known as 'Certification').
17.2 licensee and Licensor shall share evenly all such costs of
certification. Licensee shall advance to Licensor, Licensor's
share of such costs.
1S. MANUFACTURE OF LICENSED PRODUCTS FOR SALE TO LICENSOR
18.1 Licensed or Manufactured Product. Licensor shall be the
exclusive supplier of Licensed Product to Licensee. Licensor may
either manufacture the Licensed Products directly or have such
manufactured by other-, in its behalf.
19. INITIAL PRODUCTION RUN
19.1 Licensor shall initially manufacture 100 units of Licensed
Product for Licensee. Licensee shall advance Licensor $689.445 for
the manufacture of said 100 units. This includes: (a) $300,125 of
costs for initial tooling; and, (b) The remaining $389,320 includes
the expected variable costs and costs for testing.
19.2 Licensee will pay $3893.20 per unit for each of the initial
production run of 100 units of the Licensed Product. Licensee will
be obligated to purchase the initial production run up to 100
units. Said first 100 units shall be delivered to Licensee on or
before December 31, 1996. Licensee shall not be obligated to pay
royalties under part 21.2 for the initial production run of 100
units.
19.3 The tooling costs will be advanced by Licensee to Licensor or
its designated manufacturing subcontractor. Licensee may treat the
amounts actually advanced for tooling costs is prepayment of
royalties. However, the amounts advanced for such tooling costs
will only be deductible to the extent of reducing the royalties
otherwise owed by fifty percent (50%), The reduction of royalties
for tooling costs will also not be allowed until any other
applicable setoff against royalties have been fully setoff and
cannot be taken simultaneously with any other diminution in
royalties provided for in this agreement.
19.4 Licensor shall be the owner of all production tooling
developed by or for Licensor for manufacture of Licensed Product.
Licensee shall acquire a security interest in any production
tooling purchased or produced using the advance of funds from
Licensee. However, Licensee shall acquire a security interest in
said tooling only to the extent that advances for the first 100
units to be produced have not been repaid 29 provided under part
20. Continuing Sale of Licensed Products
20.1 The Licensor will the sole supplier of Licensed Products
to Licensee. The sales price for units delivered by Licensor to
Licensee other than the initial production run under part 19, shall
be $2,500 per unit F.O.B. Spokane, Washington. After December 31.
1996, Licensor shall be allowed to increase the cost of Licensed
Product sold to Licensee. Increases will be no more than the
increase in the reported increases in the U.S. Government producer
price index plus an additional 0.5 percent per year. Price
increases are adjustable by Licensor with the same frequency that
changes are published by U.S. Government in such index.
20.2 The pricing provided for in this part of the Agreement shall
not be in effect beyond December 31, 1997 if Licensor can
demonstrate actual costs of production are in excess of $2000 per
unit. In Such case. Licensor and Licensee shall negotiate in good
faith for a modified sale price.
21.1 Advance Payments.
(a) Licensor shall make payments to Licensee of $1.2 million upon
the following schedule
(1) $600,000 to be paid as follows: S200,000 at the time of
signing this Agreement, and $100,000 per month for four (4) months
following the signing of this Agreement, with the first $100,000
payment due 30 days from the date of signing this Agreement,
(2) $600,000 following certification as described in part 17 per
the following schedule: S300,000 following certification by Nevada,
$100.000 following certification by New Jersey; $100,000 following
certification by Mississippi. $100,000 following certification by
Gaming Laboratories, Inc.
(b) The payments made under this part shall be advances against
royalties owed by Licensee to Licensor.
105
21.2 Royalties
(a) Licensee shall pay to Licensor royalties equal to 20 percent
of' Gross Profits associated with the sale of all Licensed
Products. 'gross Profit' shall be defined as the difference
between Net Invoice Price less the price charged by Licensor to
Licensee for Licensed Product per part 20.1. 'Net Invoice Price"
shall be the price invoiced by Licensee to its customers for
Licensed Product. Net Invoice Price does not include packing and
shipping charges, rebates, normal trade discounts nor the
deductions listed in part 21.7 hereof, but only if such items are
shown on the sales invoice for the Licensed Product as a separate
charge item. No royalties shall be due on the initial production
run of 100 units.
(b) The minimum Net Invoice Price charged by Licensee shall be
$7.500 per unit.
(c) Licensee is only obligated to pay royalties as provided for in
parts 21.2 and 21.6 for a period which expires with the expiration
date of the last of any Licensed Patent. If no Licensed Patent
issues, then royalties shall be paid for twenty (20) years from the
filing date of the last filed Licensed Patent.
21.3 Options to Purchase Shares of Licensee Stock
(a) In addition to the royalties to be paid to Licensee under parts
21.2 and 21.6, Licensee shall also make available to Licensor
shares in Licensee's company as follows:
(1) An option to purchase up to 50,000 shares of common stock in
Licensee's at the fair market price of such stock at the date of
signing this Agreement. Such options to vest after the successful
completion of certification under part 17. The above described
stock options shall be exercisable for five (5) years following the
date of signing of this Agreement.
(2) Licensee shall make available to Licensor additional stock
options in Licensee based on sales or leases of Licensed Product by
Licensor to Licensee according to the following schedule: the first
option shall be for 10,000 shares after the sale or lease of the
next 1,000 units of Licensed Product; the second option shall be
for 7,500 shares following the sale or lease of the next 1,000
units of Licensed Products; the third option shall be for 5,000
shares of stock following the sale or least of the subsequent 1,000
units of Licensed Product; the fourth option shall be for 2,500
shares following the sale or lease of the next 1,000 units of
Licensed Products. Each of these options shall be granted within
30 days of achieving the sales or leases indicated and will be
offered at the fair market value of the stock on the date that the
sales level was achieved. Each option shall be exercisable a
period of five (5) years from the date of maturing. Licensor shall
require any entity which acquires Licensee's company or any
substantial part thereof to offer an equivalent option in the
acquiring company's stock to Licensor as are made available
hereunder. The above-described options shall be to stock in
Licensee, or upon Licensor's acceptance. any company which Licensee
intends to operate as or under for purposes of the licensing
activities under this Agreement.
21.4 Setoff Against Royalties
(a) Payments actually made to Licensor under part 21.1 shall be
setoff against royalties owed under parts 21.2 and 21.6. No
interest shall be calculated or due to Licensee on any advances
paid to Licensor hereunder, and no royalties shall be withheld to
repay any interest or other fees associated with the advances.
(b) Following full setoff of the advances under part 21.4(a) above,
shall be entitled to diminish royalty payments owed to Licensor by
50 percent to setoff against the expenses actually advanced to
Licensor under parts 14-2. 17 and 19.1(a) until the amounts
advanced under these parts has been fully set off. No interest
shall be due on any amounts to be set off under this section.
21.5 Royalties on Licensed Products sold in conjunction with or
as part of products sold by Licensor.
(a) It is anticipated that Licensor will sell gaming tables, or
gaming systems other than shuffling machines which require or
incorporate Licensed Products therein or therewith 'Licensor
Products'. Any Licensor Products for which Licensee provides
Licensed Products, or for which Licensee seances such Licensed
Product or such Licensor Product shall bear royalties US follows:
for any Licensed Product sold in conjunction with a Licensor
Product. Licensee shall pay to Licensor the royalty described under
part 21.2 but at a royalty rate of 50 percent instead of 20
percent; for any services provided to Licensed Product sold as part
of a Licensor Product, or for services" provided for Licensor
Product, Licensee Shall pay to Licensor 50 percent of the Net
Invoice Price for such services.
21.6 Royalties on Licensed Products. If Licensee leases Licensed
Product instead of selling or having others sell on their behalf,
or if a lease of Licensed Product otherwise occurs under this
Agreement, then Licensee shall be obligated to pay Licensor
royalties at a rate of 20 percent of Gross Lease Profit. Gross
Lease Profit is defined as the monthly lease price minus the cost
of
106
Licensed Product sold which will include the monthly depreciation
cost for the Licensed Product as well as depreciation on backup
units of Licensed Products, plus the cost of servicing the leased
units of Licensed Product. The cost of such servicing shall not
exceed 20 percent of the net lease revenues derived from Licensee
by lease of Licensed Products. Such treatment of leasing for
determination of royalties shall not apply where third party pays
Licensee and acts as a financial leasing agent, or where Licensee
actually receives payments on a basis other than the actual lease
payments. In such cases royalties are determined based on the
amount and timing of payments received by Licensee and not those
received by any financing and leasing organization.
21.7 Licensee shall be entitled to a deduction for the amount of
royalties otherwise payable or paid for:
(a) Licensed Product sold rendered by Licensee under this Agreement
but for which full credit is granted to a customer due to defect in
the Licensed Product. and
(b) Licensed Product that arc lost or damaged in transit and for
which Licensee is not reimbursed by insurance payments or
otherwise.
21.8 If any product sold by Licensee or any Sublicensee
incorporates or uses Licensed Copyright Works after the obligation
to pay royalties under parts 21.2 or 21.6 has ceased, then
Licensee and all Sublicensees shall pay royalties in an amount
equal to five (5.0%) of the Net Invoice Price and shall otherwise
be treated in a manner similar to Licensed Products.
21.9 If no royalties ire being paid on the Licensed Product as
provided for in part 21.2 or 21.6. then Licensee agrees to pay a
royalty on products sold or services tendered which use the
Licensed Trademarks in an amount equal to ten percent (10.0%) of
the Net Invoice Price and shall otherwise be created in a manner
similar to Licensed Products.
21.10 Royalties and any other payments owed under this Agreement
will be paid four times a year unless specified otherwise herein.
Payment will be made by January 31 for amounts owed which accrued
during the previous royalty period including October, November and
December (last quarter). Payment will be made by April 30 for
amounts owed which accrued during the previous period including
January, February, and March (first quarter). Payment will be made
by July 31 for amounts owed which accrued during the previous
period including April. May and June (second quarter). Payment
will be made by October 31 for amounts owed which accrued during
the previous period including July, August. and September (third
quarter).
21.11 All monetary amounts specified in this Agreement are in
United States Dollars.
21.12 Licensee bears all risk of exchange rate changes with any
invoices made in foreign currencies considered converted at the
average of buy and sell rates specified in the Wall Street Journal
for the invoiced date.
21.13 All payments made by Licensee hereunder shall be made to
Licensor at Licensor's address indicated herein. or at such place
as shall be designated by Licensor from time to time.
21.14 Any royalties, payments or other compensation not paid by the
due date shall bear interest at the rate of one and one-half
percent (l 1/2%) per month or any part of a month overdue, unless a
smaller rate applies by law in which case the legal rate nearest
thereto shall apply.
22. TRANSFER OF DOCUMENTATION
Licensor shall disclose to Licensee at its chosen location,
equipment and documentation, including without limitation,
drawings, lab books, sketches, design layouts. software, hardware,
source codes, copies of patents, copies of patent applications, and
related matters reasonably needed by Licensee to sell, lease and
service the Licensed Product.
23. DISCLOSURE OF TECHNOLOGY
23.1 The Licensed Technology communicated to Licensee hereunder
shall remain the exclusive property of Licensor subject to the
licenses granted herein. Except as otherwise expressly
contemplated, Licensee agrees to use its best efforts to prevent
the disclosure of the Licensed Technology insofar as it 'Ls
proprietary to Licensor to any third party not affiliated with
Licensee
23.2 Licensor agrees to disclose all pertinent information
concerning the Licensed Technology to Licensee including:
(a) All information concerning designs for the Licensed Technology;
(b) Licensor further agrees to disclose improvements as set forth
in part 29 10 this Agreement.
107
24, CONFIDENTIALITY OF DISCLOSURE AND LICENSED TECHNOLOGY
24.1 Licensee agrees (hat &U disclosure from Licensor to Licensee
under this Agreement is done in confidence except for the
information contained in any issued Licensed Patent. All materials
embodying Licensed Technology shall be maintained in confidence as
a trade secret 1949 and not disclosed except ax expressly allowed
in this Agreement. Incidental writings and information included in
the materials describing and disclosing Licensed Technology are not
bound to secrecy and nondisclosure if such writings and information
are generally known in the trade or if such writings or information
later become generally known in the trade or to the public through
no fault of Licensee, and such writings and information do not
contain confidential information concerning the Licensed
Technology.
24.2 Licensor agrees that Licensee can disclose confidential
information contained in the Licensed Technology to sublicensees
who are also bound by agreement to receive such information in
confidence, to maintain the secrecy thereof, and to not disclose
the content of such information. under at least the same conditions
as described above with respect to Licensee.
24.3 Licensee agrees to ▇▇▇▇ all materials which include
confidential information relating to the Licensed Technology and
that said materials shall be marked 'proprietary", `Confidential",
'Secret". or with words of similar meaning. All materials embodying
confidential Licensed Technology shall remain the property of
Licensor. All sublicenses shall similarly require that
materials embody in confidential Licensed Technology shall be the
property of Licensee. subject to the rights of Licensor as
indicated in this Agreement.
24.5 Nothing herein shall be implied as restricting Licensee's
ability to market Licensed Products.
25. PATENT APPLICATION
25.1 Rights to File - Licensor shall have the right to have
applications for patents, utility models. design patents and
similar forms of legal protection (hereinafter collectively
referred to as 'patents') filed on all patentable inventions or
otherwise protectible interests contained within the Licensed
Technology. Licensee agrees that Licensor shall have primary
responsibility
for preparing, filing and prosecuting any such patent applications,
and that all such work shall be done with expenses shared equally
between Licensor and Licensee. except as provided below. If
Licensee elects in writing not to pay or pursue efforts, refuses to
pay Licensee's share of the costs, or to elects to terminate
efforts to secure patent protection in any country, then Licensor
may proceed at its own expense. If Licensor Proceeds with efforts
to obtain patent protection in any such country, then all patent
rights and other Technology Rights in such country(s) shall be the
exclusive property of Licensor, and Licensee shall not have any
license under this Agreement in the country(s) in which Licensor
elects not to proceed.
26, REGISTRATION OF LICENSE
If under the law of any jurisdiction other than the United States
of America the execution or registration of any registered user or
similar agreement in respect of any of the Patents or Licensed
Technology is required or permitted in order for Licensee to obtain
the full benefit of this Agreement, Licensee may, at its own cost
and expense. register this Agreement or execute or register the
appropriate registered user or similar agreement in order that
Licensee shall obtain such full benefit as aforesaid.
27. PERFORMANCE BY LICENSEE
27.1 Licensee shall sell or lease Licensed Product according to
the schedule below. Failure by Licensee to achieve the specified
sale or lease of Licensed Products shall be deemed a material
breach of the contract and shall justify Licensor in immediate
termination under part 44.1. For purposes of this section, "Start
Date' shall be defined as the day the second Certification is
received under part 17.
27.2 Licensee shall sell or lease 200 units of Licensed Product
within 18 months of the Start Date. Thereafter Licensee shall sell
or lease 300 additional units of Licensed Product per each calendar
year.
27.3 Should Licensee fail to sell or lease the minimum units
described under part 27.2, then Licensor shall, at its sole
discretion. have the option to either a) terminate this License
Agreement as provided under part 44.1 or b) convert Licensee's
rights hereunder so that all rights are non-exclusive.
108
27.4 If Licensee fails to meet the 18 month minimum sales or
leases of Licensed Products, and Licensor elects to terminate under
part 27.3. then Licensor shall repay the advances paid i to
Licensor under part 21.1. Licensor shall have no obligation to
repay To Licensee any advances paid under parts 14. 17, or 18, for
development, certification. or manufacture respectively of Licensed
Products.
27.5 If in months 19 through 30 following the Start Date.
Licensee fails to sell an additional 300 units of licensed Product
and Licensor elects to terminate under part 27.3 then Licensor
shall repay to Licensee S600,000 of the advance paid under part
21.1. and no other refunds of any advances paid hereunder shall be
due. No interest shall be due or payable on any amounts to be
refunded hereunder.
27.6 If in months 33 through 42 following the Start Date.
Licensee fails to sell an additional 400 units of Licensed Product
and Licensor elects to terminate under part 27,3 then Licensor
shall repay to Licensee $300,000 of the advance paid under part
21.1. and no other refunds of any advances paid hereunder shall be
due. No interest shall be due or payable on any amounts to be
refunded hereunder.
27.7 If in months 43 through 54 following the Start Date,
Licensee fails to sell an additional 500 units of Licensed Product
and Licensor elects to terminate under part 27.3 then Licensor
shall repay to Licensee $150,000 of the advance paid under part 21
, and no other refunds of any advances paid hereunder shall be due.
No interest shall be due or payable on any amounts to be refunded
hereunder.
27.8 If in months 55 through 66 following the Start Date.
Licensee fails to sell an additional 500 units of Licensed Product
and Licensor elects to terminate under part 27.3 then Licensor
shall repay to Licensee $75,000 of the advance paid under part
21.1, and no other refunds of any advances paid hereunder shall be
due. No interest shall be due or payable on any amounts to be
refunded hereunder,
27.9 Should Licensee fail to meet the sales and lease minimums of
500 Licensed Product in any calendar year following month 67 after
the Start Date and Licensor elects to terminate as authorized under
part 273, then no financial compensation to Licensor by Licensee
shall he required.
27.10 Minimum Royalty. Notwithstanding any of the other provisions
in this part 27, Licensee shall make the following minimum royalty
payments to Licensor:
(a) In the eighteen (18) months following the Start Date, $
(b) In months 19 through 30 following the Start Date, $
(c) In months 33 through 42 following the Start Date, $
(d) In months 43 through 54 following the Start Date. $
(e) In months 55 through 66 following the Start Date, $
(f) In any month following month 66 from the Start Date, $
27.11 The obligations to make minimum sales and loans and pay
minimum royalties is contingent upon Licensor's ability to provide
Licensed Product to Licensee. The obligations to provide minimum
sales and royalty payments shall be adjusted proportionately should
any shortfall in the supply of Licensed Product which is the fault
of Licensor occur.
27.1.2 Should the manufacture Or certification of Licensed Product
be delayed or restricted as a result of the design and/or
manufacture of the Licensed Product, then the Parties agree to
negotiate in good faith to reschedule the minimum sales and lease
requirements and the minimum royalty payments required hereunder.
28. REIMBURSEMENT FOR EXPENSES
Licensor in its sole discretion may make available to Licensee
technical support at Licensee's request. Licensee agrees to
reimburse Licensor for any such services at Licensor then
prevailing rates. including travel and other expenses incurred in
providing such services.
29. IMPROVEMENTS AND DEVELOPMENTS IN LICENSED TECHNOLOGY
29.1 Improvements by Licensor - Improvements, enhancements and
additional inventions hereinafter 'Licensor Improvements) shall
Technology unless such falls within the scope part 3.1. Licensee
shall have the same rights and obligations with respect to such
Licensor Improvements, starting with disclosure to Licensee, as
applies to Licensed Technology in general under this Agreement.
patent applications on any Licensor Improvements shall be handled
as indicated in part 25.
29.2 Improvements by Licensee - Improvements, enhancements and
additional inventions relating to the Licensed Technology by
employees Of Licensee (hereinafter "Licensee Improvements"), shall
109
be disclosed to Licensor within one, (1) month of discovery, Rights
in any improvements shall revert to Licensor. Licensee shall be
responsible for any and all costs of obtaining patent protection on
any Licensee in movements. Licensee employees shall be responsible
for any and all costs of obtaining patent protection on any
Licensee Improvements. Licensee employees shall provide Licensor
such reasonable assistance as is necessary to allow Licensor to
file any patent applications on Licensee improvements.
29-3 Improvements by Sublicensees - Improvements. enhancements and
additional inventions relating to the Licensed Technology by
employees of any sublicensees (hereinafter 'Sublicensee
Improvements'), shall be governed by the sublicense under which the
Sublicensee is licensed. Sublicensees must agree to disclose all
such Sublicensee improvements to Licensee within one (1) month of
discovery. Licensee agrees to disclose any such Sublicensee
Improvements to Licensor within one (1) month of disclosure by a
Sublicensee to Licensee. Licensor shall accede to all rights
granted to Licensee in any Sublicensee Improvements as 2i provided
in the sublicenses governing the license of Licensed Technology to
the Sublicensee. The filing of patent applications and allocation
of costs and responsibility therefor on Sublicensee Improvements
shall be as provided in part 25 to the extent possible under the
rights and obligations of Licensee under the applicable sublicense.
30. EMPLOYEE INVENTION AGREEMENTS
Licensee agrees that all Licensee employees, agents and consultants
given access to the Licensed Technology shall sign a
confidentiality agreement and invention assignment agreement
whereby any improvements. enhancements and new inventions relating
to the Licensed Technology are required to be disclosed and
assigned to the Licensee.
31. REPORTS AND ACCOUNTING
31.1 Reports - Licensee shall provide to Licensor quarter-yearly
reports indicating the total quantity of Licensed Product sold.
rented, or leased by Licensee, any sublicensees or others who have
been authorized by Licensee to practice any of rights licensed by
Licensor to Licensee under this Agreement. Such reports shall
indicate the total number of such Licensed product categorized by
each organization and the total value of the Net Invoice Price and
Gross Profit associated with the total number of such Licensed
Product. Such reports shall also indicate the number of products
sold in each certifying state identified under part 17. The
reports shall further indicate the royalties and any other payments
owed by Licensee and all sublicensees. The reports shall be made
to Licensee by the same due date as any royalty payments which are
due or would be due. Reports shall be made even if no royalties
are believed owed.
31.2 Accounting - Licensor shall have the right to inspect the
records of Licensee and sublicensees which are relevant to indicate
the amount of royalties or other compensation owed or paid in
connection with this Agreement. Licensor shall also have the right
to inspect the records of Licensee and all Sublicensee which are
relevant to the quality of Licensed Products so produced by or for
Licensee and all sublicensees. The rights to inspect indicated
herein include the right to have an audit conducted by an
appropriate auditing or accounting firm. If an audit indicates
that an amount in excess of Five Thousand Dollars is owed Lo
Licensor which should have been previously paid under the
provisions of this Agreement, then the cost of the audit shall be
fully paid by Licensee or the Sublicensee who owes such amount.
32. MARKING OF PRODUCTS EMBODYING PATENT RIGHTS AND COPYRIGHTS
32.1 Licensee agrees that all Products and equipment sold, leased
or distributed hereunder which is within the scope of any claim
issued in a U.S. or foreign patent shall be marked with one or more
patent numbers or other notices in a manner consistent with and as
required by the laws of the jurisdiction in which the products and
equipment are to be sold or otherwise used or distributed. Failure
to so ▇▇▇▇ all patented products and equipment will subject
Licensee to liability to Licensor for losses associated with such
failure to ▇▇▇▇.
32.2 Licensee also agrees to ▇▇▇▇ all reproductions. copies and
derivative works based on Licensed Copyright Works with notice of
the claim to copyrights as required to fully protect such Licensed
Copyright Works under the laws of the jurisdiction in which the
reproductions, copies or derivative works are to be sold or
distributed.
32.3 The provisions of this part shall apply to sublicensees and
all sublicenses shall provide.
32.4 Licensee agrees to indicate Licensor's invention of Licensed
Products in promotional and advertising materials.
110
33. ASSIGNMENT OF RIGHTS AND OBLIGATIONS
33.1 Because of the nature of Rights and obligation granted
hereunder, neither Licensor nor Licensee can assign any rights or
obligations under this Agreement unless the proposing assignor has
received written authorization from the other party.
34. LIABILITY RISK
34.1 Licensee agrees to assume all risk of legal liability which
may arise from Licensee activities, including without limitation,
providing services, sublicensing, designing, manufacturing
transporting, distributing and selling products licensed under this
Agreement. Licensee further warrants and agrees to hold harmless,
defend and indemnify Licensor against claims arising from
Licensee's activities.
35. INSURANCE POLICY FOR MANUFACTURING AND SALE OF PRODUCTS
If Licensee is engaged in the manufacture or sale of any services
other than technical consulting relating to the Licensed
Technology, then Licensee shall, throughout the term of this
Agreement, obtain and maintain at its own cost and expense, from a
qualified insurance company, standard Product Liability Insurance,
the form of which must be acceptable to the Licensor, naming the
Licensor as an additional named insured. Such policy shall provide
protection against any and all claims, demands, and cause of
action-arising out of any defects or failure to perform, alleged or
otherwise, of the Licensed Products, or any use thereof. The
amount of coverage shall be in an amount which License and Licensor
shall establish from time to time. The policy shall provide for
thirty (30) days notice to the Licensor from the insurer by
Certified Mail, return receipt requested, in the event of any
modification, cancellation, or termination. The Licensee agrees
to furnish the Licensor a certificate of insurance evidencing same
before beginning manufacture or sale of any product or beginning
services other than technical consulting services relating to the
Licensed Technology. All sublicenses shall Provide for similar or
better coverage by all sublicensees.
36. BEST EFFORTS AND DILIGENCE
Licensee shall use its best efforts to diligently market Licensed
Products and Licensed Services. A determination of best efforts
and diligence under this part may consider various relevant
factors.
37, WARRANTIES OF LICENSOR
37.1 Licensor makes only the warranties expressly made below.
(a) Licensor has no information indicating that the subject matter
of the Licensed patents infringes any U.S. or foreign patents.
(b) Licensor warns that the Licensed products which it provides to
Licensee shall meet the warranties of fitness for a particular
purpose.
(c) Licensor makes no other warranties.
38. DISCLAIMER OF WARRANTIES BY LICENSOR
38.1 Licensor hereby disclaims all warranties not expressly made
herein and further specifically disclaims as set forth below.
(a) No warranty or representation is made that practice of the
Licensed Technology by Licensee or its sublicensees as allowed
under this Agreement will not infringe upon patent or trademark
rights of a third party.
(b) No warranty or representation is made that additional patent
protection will necessarily be obtained on the Licensed Technology.
(c) No warranty is made to indemnify Licensee for any claims
arising from Licensee's activities under this Agreement.
39, - ENFORCEMENT OF PATENT rights
Licensee shall be primarily responsible for enforcing any U.S.
patents against infringers thereof. Licensee shall not be
obligated to institute legal proceedings for infringement. If
Licensee refuses to institute legal action, then Licensor may at
its election ▇▇▇ for infringement or other cause. Any recovery
under such legal actions shall be first used to pay attorney fees,
court costs and all other litigation expenses, and second be used
to pay Licensor for any payments which are due under this
Agreement. The remainder shall be divided between the parties based
upon their relative payment of the total litigation costs.
Licensor agrees to allow Licensee to take legal action solely in
Licensee's name and to additionally include or join Licensor as a
party, if necessary.
40. notification OF Infringement
Licensee and Licensor both agree to notify the other within ten
(10) days of becoming aware of any infringement of Licensed
Technology by third parties.
111
41, INTERCHANGE OF TECHNICAL AND MARKET INFORMATION
Licensor and Licensee agree to Interchange all technical and market
information which relates to the Licensed Technology in the
marketing, sale, distribution, design and other aspects of
licensing development and marketing of the Licensed Technology.
42. COMPLIANCE WITH EXPORT OF TECHNOLOGY AND OTHER LAWS
Licensee agrees to comply with all U.S. and foreign government
statutes governing import and export of technological information,
taxes and other applicable laws. Since the technological
information licensed hereunder is initially subject to the laws of
the United States, no disclosure to individuals or organizations
which constitutes a violation of the export of technology laws or
other U.S. or state statute of similar nature or effect, shall
occur by Any further improvements or inventions which become part
of the Licensed Technology shall similarly be controlled by U.S.
law or the law of any foreign nation in which such inventions or
improvements are created, or as otherwise made applicable under
such U.S. or foreign law.
43. CONVERSION
43.1 If Licensee fails to comply with the terms of this Agreement,
then Licensor may convert one or more of the exclusive licenses
granted to Licensee hereunder into non-exclusive license(s).
Conversion shall also be possible if Licensee becomes insolvent.
bankrupt or unable to conduct business. Such conversion shall be
effectuated by Licensor sending a certified letter, return receipt
requested, containing a notice indicating the breach of this
Agreement upon which conversion is to be based. Licensee shall
then have a cure period with a duration as set forth in part 43.2
of this part starting from the date the notice of breach is
delivered or presented at the last known notification address
during which to cure the breach. If Iicensee fails to cure, then
conversion shall occur upon Licensor's mailing of a notice of
conversion after the expiration of the cure period. Conversion
shall not diminish Licensee's obligation to make
payments hereunder. Conversion of this Agreement from an exclusive
to a nonexclusive license shall not change the status of
sublicenses entered into by Licensee in accordance with this
Agreement, unless the sublicense(s) are exclusive in which case
they shall become non-exclusive and limited to the same extent as
the licenses held after conversion by Licensee. No further
sublicenses shall be granted by Licensee after conversion without
specific written authorization and confirmation from Licensor.
43.2 The cure period used in this part shall be six (6) months
under part 36; thirty (30) days under part 24 and with respect to
monetary payments due under part 21; zero (0) days under part 32,
and ninety (90) days in all other cases.
44. TERMINATION By LICENSOR
44.1 If Licensee fails to comply with any of the provisions of
parts 4-25 or 27-36. or if Licensee falls to make payments under
this Agreement, or if Licensee becomes insolvent, bankrupt or
unable to conduct business, or if Licensee otherwise materially
breaches this Agreement, then Licensor may terminate the licenses
granted herein. Such termination shall he effectuated by Licensor
sending a certified letter, return receipt requested, containing a
notice indicating the breach and that termination pursuant to this
Agreement will be made if Licensee does not cure the breach.
Licensee shall then have a cure period with a duration as set forth
in part 44.2 of this part starting from the date the notify of
breach is delivered or presented at the last known notification
address during which to cure the breach. If Licensee fails to
cure. then termination shall occur upon Licensor's mailing of a
notice of termination after the expiration of the cure period.
44.2 The cure period used in this part shall be six (6) months
under part 36; thirty (30) days under part 24 and with respect to
monetary payments due under part 21, zero (0) days under part 32;
and ninety (90) days in all other cases.
45, EFFECT OF TERMINATION BY LICENSOR
45.1 If this Agreement is terminated, no Licensed Products may be
sold or distributed or any promotional material used, or any
Technology Rights, Trademark Rights or Copyrights sublicensed
without the prior express approval of the Licensor, except that
Licensee may continue to use the same for a period of six (6)
months thereafter to complete Licensee's performance under any
contracts which were awarded prior to such termination and to
dispose of stocks of inventory and Licensed Products subject to the
payment of the royalties provided herein. Such continued action
shall accrue royalties which must be paid to Licensor.
111
45.2 Upon termination of this Agreement, all payments then owed
shall become immediately due and payable, All amounts owed after
termination shall be paid within thirty (30) days of the invoiced
sale, rental payment or other event creating an obligation to pay.
45.3 After termination of this Agreement, all rights licensed
herein shall revert to the Licensor who may assign or license
others to use the Licensed Technology, Licensed Trademarks,
Licensed Copyrights. Licensee agrees to stop all further use of
the Licensed Technology and turn over to the Licensor materials
which relate to the Licensed Technology. 'The Licensee shall be
responsible for any damages caused by the unauthorized use of Such
materials or reproduction materials which are not turned over.
45.4 Sublicenses entered into by Licensee will be transferred to
Licensor if Licensee's rights and obligations under this Agreement
are terminated, and Licensor shall accede to all of Licensee's
rights in and under the applicable sublicenses.
46. TERMINATION BY LICENSEE
46.1 Licensee shall have the right to terminate this Agreement for
material breaches by Licensor.
46.2 Termination shall be effected in a manner consistent with the
procedure set out in part 44. The cure period shall be ninety (90)
days.
47. EFFECT OF TERMINATION BY LICENSEE
47.1 Termination by Licensee shall require all materials embodying
Licensed Technology to be returned to Licensor by the Licensee and
any sublicensees. Licensee's obligation to make payments under
this Agreement shall end after termination except with respect to
future sales or other events for which payments are still owed at
or after the time of termination,
47.2 Following termination by Licensee, Licensor shall have no
obligation to repay to Licensee any advances paid by Licensee under
this Agreement.
48. modification OF AGREEMENT
No modification of this Agreement shall be valid or binding unless
the modification is executed in writing signed by all parties to
this Agreement.
49. NO WAIVER
No waiver by either party of a breach or a default hereunder shall
be deemed a waiver by such party of a subsequent breach or default
of a like or similar nature.
50, SEVERABILITY
In the event that any term or provision of this Agreement shall for
any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not
affect any other term or provision of this Agreement and shall be
interpreted and construed as if such term or provision, to the
extent the same shall have been held to be invalid. Illegal. or
unenforceable, had never been contained herein.
51. APPLICABLE LAW
This Agreement shall be construed and governed in accordance with
tile laws of the State of Washington,
52. JURISDICTION AND VENUE
The parties hereto agree that jurisdiction and venue shall be
proper as provided for under law.
53, HEADINGS
The headings, titles and subtitles in this Agreement are inserted
for convenience of reference only, and do not limit the terms and
provisions of this Agreement.
54. notices
54.1 All notices required to be sent to either party shall be in
writing and sent by registered or certified mail. postage prepaid,
return receipt requested, or by telex or telegram, charges prepaid
to the parties at the addresses given hereinabove, or such future
addresses as the parties shall designate in writing. Notices ran
also be communicated by fax but are not
considered effective unless the party being notified confirms
receipt of the fax in writing or by a return fax indicating receipt
of the notice previously sent by fax. Payments can be sent by first
class mail.
55. Relationship OF THE PARTIES
This Agreement does not create a partnership or joint venture
between the parties and the Licensee shall have no power to
obligate or bind the Licensor in any manner whatsoever, except as
specifically expressed in this Agreement.
112
56. Attorney's Fees
If either of the parties to this Agreement institute arbitration or
legal proceedings to enforce the terms of this Agreement, the
parties agree that the unsuccessful party to such arbitration or
legal proceedings shall pay the reasonable attorney's fees and
legal Costs Of both parties, as the same may be approved by the
arbitrator or court having jurisdiction over such
proceedings.
57. INTEGRATION, ENTIRE AGREEMENT
This instrument constitutes the entire agreement between the
parties. Neither party shall be bound by any terms, conditions,
understandings, warranties, statements or representations, oral or
written, not contained in this Agreement. Both parties hereby
acknowledge that the execution of this Agreement was not induced or
motivated by any promise or representation
made by any other party, other thin the promises and
representations expressly set forth in this Agreement. All previous
negotiations, statements, and preliminary instruments by the
parties or their representatives are merged into this Agreement.
except as expressly provided herein.
58. COUNTERPART ORIGINAL AGREEMENTS
This Agreement shall be executed in multiple original counterparts
with each party retaining one copy thereof.
59, EFFECTIVE DATE OF AGREEMENT AND TERM OF AGREEMENT
59.1 The effective date of this Agreement is the date as of which
this Agreement has been executed by all parties hereto.
59.2 This Agreement shall terminate when terminated by Licensor or
Licensee as provided in this Agreement. If neither party
terminates this Agreement as provided herein. then appropriate
provisions of this Agreement shall be applied until complete
cessation of all use of the Licensed Trademarks. Licensed
Copyrights, and Licensed Technology by Licensee or any Sublicensee,
or until no further payments are due hereunder. whichever is
longer.
60, - ARBITRATION
60.1 Any controversy or claim arising out of or relating to this
Agreement or tile breach of any representation, warranty, covenant
Or agreement contained herein, shall be decided by arbitration in
accordance with the Commercial Arbitration Rules (C.A.R.') of the
American Arbitration Association (A.A.A.) then obtaining, unless
the parties otherwise mutually agree in writing, The dispute shall
be decided by a panel of three arbitrators (each an Arbitrator' and
collectively, the 'Arbitrators) one arbitrator chosen by each of
the Licensor and Licensee, and the third by the two selected
arbitrators in accordance with C.A.R. and A.A.A. The decision and
the award of damages rendered by a majority of the Arbitrators
shall be final and in binding and judgment may be entered upon it
in any court having jurisdiction thereof.
60.2 The arbitration shall be held as promptly as practicable
after actual receipt of notice that the other party has filed a
notice for arbitration with the A.A.A. (the "Notice') on such dare,
and at such a place and time convenient to the parties and to the
Arbitrators, except that if the parties cannot agree, the
Arbitrators shall decide such date, place and time. The
Arbitrators shall make their decision promptly and any award of
damages shall be made, unless otherwise mutually agreed by the
parties in writing, no later than fifteen (15) days from the date
of closing of the hearings or if oral hearings have been waived.
from the date of transmitting the final statements and proofs to
the Arbitrators.
61. EXECUTION BY LICENSOR - CASINOVATIONS INCORPORATED
Date: By:
State of
Ss
County of
I certify that I know or have satisfactory evidence that
signed this instrument, and upon oath acknowledged that he had
authority to act in behalf of Casinovations, Incorporated and
further acknowledged this instrument to be the free and voluntary
act of such party for the uses and purposes mentioned in this
instrument.
Dated:
Notary Public
Residing it
[SEAL] My appointment expires:
114
62. execution By LICENSEE- SHUFFLE MASTER, INC.
Date: By:
State of
) Ss
County of
I certify that I know or have satisfactory evidence that
signed this
J9 instrument, and upon oath acknowledged that he had authority to
act in behalf of Shuffle Master, Inc. and further acknowledged this
instrument to be the free and voluntary act of such party for the
uses and purposes mentioned in this instrument.
Dated:
Notary Public
Residing at
[SEAL) My appointment expires:
63. APPENDIX A - LICENSED TRADEMARKS
The Licensed Trademarks at the time of execution include.
CASINOVATIONS
RANDOMIZER
RANDOM EJECTION ▇▇▇▇▇▇▇▇
▇▇ 19 OF, 19
115
EXHIBIT C
PROMISSORY NOTE
S300,000.00
Spokane, Washington
January 15, 1996
1. Promise to Pay. FOR VALUE RECEIVED, the undersigned, SHARPS
INTERNATIONAL LIMITED PARTNERSHIP, a Nevada limited partnership
("Borrower"), does hereby promise to pay to the order of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ ("Lender"), at ▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as Lender may from time to
time designate in writing, the principal sum of Three Hundred
Thousand and No/100 Dollars ($300,000.00), together with all
interest thereon and other sums herein referred to.
2. Interest and Payment Terms. The unpaid principal hereof shall
bear
interest from the date of this Note until default at the rate of
nine and one-half percent (9.5%) per annum. This Note shall be due
and payable, without demand, on July 15, 1996.
3. Calculation of Interest and Application of Payments. Interest
shall
be calculated on a 365 or 366-day year, as applicable, based on
actual days elapsed. Each installment hereunder shall be first
applied to the payment of costs and expenses for which Borrower is
liable hereunder, next to the payment of accrued interest, and
lastly to the reduction of principal. This Note shall continue to
bear interest at the Note rate (or at the Default Rate, as
hereinafter defined, if and so long as any default exists
hereunder) until and including the date of collection, and all
payments hereunder shall be calculated by and shall be payable in
the lawful money of the United States which shall be legal tender
for public and private debts at the time of payment.
4. Prepayment. Borrower shall have the right at any time to
prepay the whole or any part of this Note without prepayment
premium or fee.
5. Default Rate. If and so long as any default exists under this
Note or any of the security granted to secure this Note, the
interest rate on this Note, and on any judgment obtained for the
collection of this Note, shall be increased from the date the
default is declared to a rate (the "Default Rate") equal to five
percent (5%) per annum in excess of the Note rate. Borrower
acknowledges that the imposition of the Default Rate will result in
the then effective interest rate in this Note being increased from
9.5 % per annum to 14.5 % per annum.
6. Costs of Collection. Borrower promises to pay all costs,
expenses and attorneys' fees incurred by Lender in the exercise of
any remedy (with or without litigation), in any proceeding for the
collection of the debt, in any foreclosure of the Partnership
Pledge and Security Agreement or the realization upon any other
security securing this Note, in protecting or sustaining the lien
or priority of said Partnership Pledge and Security Agreement 'd
other security, or in any litigation or controversy arising from or
connected with this Note or the Partnership Pledge and Security
Agreement, including any bankruptcy, receivership, injunction or
other proceeding, or any appeal from or petition for review of any
of the foregoing, in which Lender prevails. If a judgment is
obtained thereon which includes an award of attorneys' fees, such
attorneys' fees, costs and expenses shall be in such amount as the
court shall deem reasonable. All collection costs, expenses and
attorneys' fees are payable on demand, shall bear interest at the
Default Rate from the date of demand to and including the date of
payment to Lender, and shall be fully secured by the Partnership
Pledge and Security Agreement and other security granted in
connection with this Note.
7. Collateral. This Note is secured by a Partnership Pledge and
Security Agreement relating to certain partnership units owned by
▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Grantors") in Borrower. The
Partnership Pledge and Security Agreement, the Funding Agreement
among Grantors, Borrower, Lender and ▇▇▇▇▇ Forte Partnership
pursuant to which this Note is executed, and all other documents
executed in connection with this Note are collectively referred to
hereinafter as the "Related Documents."
S. Defaults, Acceleration. Time is of the essence of this Note.
The occurrence of any of the following shall, without notice,
demand or opportunity to cure, constitute an event of default under
this Note and each of the Related Documents:
(a) Failure of Borrower to make any payment required to be paid by
Borrower under this Note or the Related Documents in strict
accordance with the terms thereof;
116
(b) Failure of Borrower to perform any other covenant, agreement
or other obligation contained in this Note or the Related
Documents;
(c) Any warranty, representation, or statement made or furnished
to Lender by or on behalf of Borrower proving to be or having been
false in any material respect when made or furnished;
(d) The occurrence of any event of default under the Related
Documents;
(e) If any assignment by Borrower or any partner of Borrower, or
any of them, for the benefit of creditors shall be made; or
(f) If Borrower or any partners of Borrower shall voluntarily file
a
petition under the Federal Bankruptcy Act, as such Act may from
time to time be amended, or under any similar or successor Federal
statute relating to bankruptcy, insolvency arrangements or
reorganizations, or under any state bankruptcy or insolvency act,
or file an answer in an involuntary proceeding admitting insolvency
or inability to pay debts, or if Borrower or any partners of
Borrower shall fail to obtain a vacation or stay of involuntary
proceedings brought for the reorganization, dissolution or
liquidation of Borrower or any partners of Borrower, or if Borrower
or any partners of Borrower shall be adjudged a bankrupt, or upon
dissolution, business failure or discontinuance of Borrower or any
partners of Borrower as a going business (except for labor
disputes), or if a trustee or receiver shall be appointed for
Borrower or any partners of Borrower, or Borrower's or any partners
of Borrower's property, or if the partnership interests of Borrower
shall become subject to the jurisdiction of a Federal bankruptcy
court, or similar state court, or if Borrower or any partners of
Borrower shall make an assignment for the benefit of creditors, or
if there is an attachment, execution or other judicial seizure of
any portion of Borrower's or any partners of Borrower's assets and
such seizure is not discharged within ten (10) days;
then, upon the occurrence of any such event of default, after
expiration of any applicable notice and cure period, the entire
principal sum, with accrued interest thereon due under this Note,
shall, at the option of Lender, become due and payable forthwith,
without further notice. No failure to exercise such option shall
be deemed a waiver on the part of Lender of any right accruing
thereafter.
9. Borrower's Right to- Cure. Upon an event of default, except as
otherwise provided below, Lender shall not accelerate this debt,
make any payments for which Borrower is primarily liable, or
foreclose upon or attach any assets of Borrower unless it first
gives Borrower written notice of such default at Borrower's address
and in the manner described for notices described in Section 16
below and unless such default is not fully cured within the
following periods:
(a) three (3) days after such notice is given in the event of any
failure to make a monetary payment,
(b) fifteen (15) days after such notice is given in the event of
nonmonetary defaults not subject to other provisions of this
Section, provided (i) within five (5) days after such notice is
given, Borrower commences its cure and submits to Lender in writing
its plan to cure; and (ii) the cure is continuously pursued by
Borrower with due diligence. If in Lender's sole judgment such
default is not reasonably capable of being cured
within fifteen (15) days, Borrower shall have such additional time
as is reasonably necessary to complete the cure, but in no event
more than thirty (30) days after the notice of default is given; or
(c) sixty (60) days after the filing of any involuntary petition
in bankruptcy against or for the appointment of a receiver for
Borrower (except for petitions filed by Lender), with the dismissal
of such petitions by the court within such period being deemed to
cure such default.
Notwithstanding the above provisions, the notice and cure periods
provided for in this Section shall not apply in the following
circumstances:
(a) any default of the type described in subsection 8(c), if but
only if, as a result of such default, Lender reasonably determines
that the value of all or a substantial portion of the Pledged
Collateral (as described in the Partnership Pledge and Security
Agreement), or Lender's security interest in that Pledged
Collateral, is materially impaired; or
(b) if Grantors transfer or encumber all or any portion of their
interest in the Pledged Collateral (as defined in the Partnership
Pledge and Security Agreement) without obtaining any required
consent of Lender or as expressly permitted by this Note or the
Partnership Pledge and Security Agreement; or
117
(c) in any circumstance when a delay in effecting a cure is, in
the reasonable judgment of Lender, likely to result in any Pledged
Collateral being damaged, becoming uninsured or rendered
unavailable to Lender or the value thereof being materially and
adversely affected, or Lender's ability to recover its outstanding
balance from Borrower being materially affected; or
(d) any default of the same type or nature which occurs more than
twice; or
(e) any filing of a voluntary petition in bankruptcy by Borrower
or any partner in Borrower, or for the appointment of a receiver or
trustee of all or a portion of Borrower's property; or
(f) any assignment for the benefit of creditors, fraudulent
conveyance, or other plan or action instituted by Borrower or any
partner in Borrower in an attempt to avoid the satisfaction of any
lawful indebtedness.
The Provisions of this Section shall apply to defaults under all
documents executed as security for this Note, and unless expressly
stated to the contrary in such documents any notice or cure period
referred to therein shall be deemed to incorporate said provisions.
If any of said documents are inconsistent with this Section, this
section shall be controlling, unless said other document expressly
provides otherwise. that additional notice or cure periods are
provided in this or any other such documents or are required by any
other contract or by law, said periods and those contained in this
section shall run concurrently. Nothing in this section shall be
construed as extending the term of this Note or the date upon which
a default occurs, and no decision to forego any remedy for any
given default shall be deemed a waiver on the part of Lender of any
right relating to any other default. No failure to give any notice
of any default shall constitute a waiver of such default or any
remedy which may be available in connection therewith. This
section shall be strictly construed, and shall not impair the
exercise of any remedy not referred to above immediately upon
default, including , without limitation, the seeking of any
mandatory or prohibitive injunction or 9
restraining order or appointment of receiver.
10. Usury . Borrower hereby represents that this loan is for
commercial use
and not for personal, family or household purposes. It is the
specific intent of the Borrower and Lender that this Note bear a
lawful rate of interest, and if any court of competent jurisdiction
should determine that the rate herein provided for exceeds that
which is statutorily permitted for the type of transaction
evidenced hereby, the interest rate shall be reduced to the highest
rate permitted by applicable law, with any excess interest
theretofore collected being applied against principal or, if such
principal has been fully repaid, returned to Borrower on demand.
11. Renewals. Borrower, and all others who may become liable for
all or
any part of this obligation, consent to any number of renewals or
extensions of the time of payment hereof and to the release of all
or any part of the security for the payment hereof.
Any such renewals, extensions or releases may be made without
notice to any of said parties and without affecting their
liability.
12. Multiple P If Borrower is composed of more than one
person
or entity, each of such persons shall be jointly and severally
liable for the indebtedness evidenced hereby. A default on the
part of any one person or entity comprising Borrower or any
guarantor of this Note shall be deemed a default on the part of
Borrower hereunder.
Any married person comprising Borrower pledges his or her marital
community properties in satisfaction hereof.
13. Waivers. Borrower hereby waives presentment, demand of
payment,
notice of dishonor, protest, and notice of nonpayment, and any and
all other notices and demands whatsoever. No covenant, condition,
right or remedy in this Note may be waived or modified orally, by
course I of conduct or previous acceptance or otherwise unless such
waiver or modification is specifically agreed to in writing
executed by the Lender.
14. Construction. This Note shall be governed by and construed
in accordance with the laws of the State of Oregon, and all sums
referred to herein shall be calculated by reference to and payable
in the lawful currency of the United States. This Note and all
Related Documents executed in connection with this Note have been
reviewed and negotiated by Borrower, Lender and any guarantors at
118
arms' length with the benefit of or opportunity to seek the
assistance of legal counsel and shall not be construed against
either party. The titles and captions in this Note are inserted
for convenience only and in no way define, limit, extend, or modify
the scope or intent of this Note. In any case where Lender is
permitted to act in its "sole discretion," "sole option" or the
like, Lender shall be entitled to exercise unfettered discretion
and may act without application of principles of law, if any,
requiring good faith or fair dealing or reasonableness in
exercising Lender's options .
15. Partial Invalidity If any section or provision of this
Note is declared invalid or unenforceable by any court of competent
Jurisdiction, said determination shall not affect the validity or
enforceability of the remaining terms hereof. No such
determination in one jurisdiction shall affect any provision of
this Note to the extent it is otherwise enforceable under the laws
of any other applicable jurisdiction.
16. Addresses . All notices, requests, demands, directions
and other communications required under this Note shall be in
writing (including telegraphic communication) and mailed by United
States mail or facsimiled or delivered by overnight courier or by
hand to the applicable party at the addresses indicated below:
if to Borrower:
Sharps International Limited Partnership
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
if to Lender:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
121 ▇.▇. ▇▇▇▇▇▇▇▇, Suite 1400
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
or, as to any party, at such other address as shall be designated
by such party in a written notice to each other party complying as
to delivery with the terms of this Section 16. All such notices,
requests, demands, directions and other communications so mailed or
telecopied or delivered shall be effective when received if sent by
mail, when delivered if delivered by courier or by hand, or when
transmitted if sent by facsimile.
17. COUNTERPARTS - This Note, may be executed in one or more
counterparts, all Of which shall together constitute one
instrument.
BORROWER:
SHARPS INTERNATIONAL LIMITED
PARTNERSHIP, a Nevada limited partnership
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇
Managing General Partner
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Managing General Partner
119
EXHIBIT D
PARTNERSHIP PLEDGE AND SECURITY AGREEMENT
THIS PARTNERSHIP PLEDGE AND SECURITY AGREEMENT ("Partnership Pledge
Agreement") is made and entered into as of January 15, 1996, by @Y
▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Grantors"), in favor of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ ("▇▇▇▇▇").
RECITALS
▇. ▇▇▇▇▇ has agreed to provide a loan to SHARPS INTERNATIONAL
LIMITED PARTNERSHIP, a Nevada limited partnership ("Borrower") in
the principal amount of $300,000.00 (the "Loan") as set forth in
the Funding Agreement dated as of January 15, 1996 (the "Funding
Agreement") among Grantors, Borrower and ▇▇▇▇▇. Grantors own
partnership units in Borrower and have agreed to pledge some of
their limited partnership units to secure the repayment of the
Loan. Funding of the Loan is conditioned, among other things, upon
▇▇▇▇▇'▇ receipt of this Partnership Pledge Agreement.
B. Each Grantor owns the partnership units and percentage
interest (exclusive of options) designated next to such Grantor's
name as follows:
General Limited %
Partnership Partnership Ownership
Name Units Units Interest
▇▇▇▇▇ ▇. ▇▇▇▇▇ 4 139 29.36
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 4 139 29.36
("Partnership Units"). Grantors deem it in Grantors' best interest
to enter into this Partnership Pledge Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Grant of Security Interest. To secure the prompt and complete
payment and performance of all of the Secured Obligations (as
defined in Section 2 below), Grantors hereby pledge, assign and
grant to ▇▇▇▇▇ a continuing first priority lien upon and security
interest in:
(a) all of their right, title and interest in 55.5 limited
Partnership Units each, or a combined pledge of 111 limited
Partnership Units (the "Pledged Partnership Units), but none of the
obligations with respect thereto; and
(b) all Proceeds of the foregoing.
Subparagraphs (a) and (b) above are hereinafter collectively
called the "Pledged Collateral."
The Pledged Collateral includes, to the extent of the Pledged
Partnership Units, (1) any and all interest of each Grantor based
upon or arising out of the partnership agreements associated with
the specified partnership; (2) any and all right of each Grantor to
receive a share of the profits or other compensation of such
partnership and the right to a return of each Grantor's
contribution to the partnership; and (3) any and all interest each
Grantor has in the property of such partnership.
As used herein, the term "Proceeds" means all cash and non-cash
proceeds of the Pledged Partnership Units, including all revenues,
issues and profits arising from the sale or other disposition of
the Pledged Partnership Units, and all cash or non-cash proceeds of
any proceeds.
2. Secured Obligations. As used in this Partnership Pledge
Agreement, the teem "Secured Obligations" includes (a) each
agreement and liability of Grantors herein and in the Funding
Agreement and; (b) Borrower's indebtedness to ▇▇▇▇▇ evidenced by a
Promissory Note dated January 15, 1996 in the amount of the Loan
(the "Note"). Grantors agree that this is a continuing security
interest and shall remain in full force and effect unless
terminated by a written agreement executed by ▇▇▇▇▇, or so long as
there may be Secured Obligations from time to time outstanding
pursuant to the Note or the Funding Agreement.
3. Representations, Warranties and Covenants. Grantors jointly
and severally represent, warrant and covenant to ▇▇▇▇▇ that:
120
(a) Attached hereto as Exhibit A is a true, correct and complete
copy of the partnership agreement establishing Borrower, including
all modifications and supplements thereto and restatements thereof,
current as of the date of this Partnership Pledge Agreement (the
"Partnership Agreement");
(b) To the best of Grantors' knowledge the Partnership Agreement
is valid, binding and in full force and effect. Except as
otherwise permitted or contemplated in the Funding Agreement,
Grantors agree, so long as any portion of the Loan shall remain
outstanding not to terminate, rescind, cancel or modify in any
material respect the Partnership Agreement without ▇▇▇▇▇'▇
permission except as necessary as Managing General Partners to
effectuate the transactions contemplated by this Pledge Agreement
and the Funding Agreement;
(c) This Partnership Pledge Agreement has been duly authorized,
executed and delivered by Grantors and, to the best of Grantors'
knowledge, constitutes a legal, valid and binding obligation of
Grantors enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency
or other similar laws affecting the rights of creditors generally
or by the application of general principles of equity;
(d) Except as contained in the Partnership Agreement, no
consent, approval, authorization or other order of any person and,
to the best of Grantors' knowledge, no consent, authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required to be made or
obtained by Grantors either (i) for the pledge of the Pledged
Collateral pursuant to this Partnership Pledge Agreement or for the
execution, delivery or performance of this Partnership Pledge
Agreement by Grantors, or (ii) for the exercise by ▇▇▇▇▇ of the
voting or other rights provided for in this Partnership Pledge
Agreement or the remedies in respect of the Pledged Collateral
pursuant to this Partnership Pledge Agreement, except as may be
required in connection with any disposition of the Pledged
Collateral by laws relating to the offering and sale of securities
generally;
(e) Except for the security interest granted to ▇▇▇▇▇ pursuant to
this Partnership Pledge Agreement, Grantors are, on the date
hereof, the sole record and beneficial owners of the Pledged
Collateral, having good title thereto, free and clear of any lien,
pledge, mortgage, claim, charge, security interest or other
encumbrance ("Liens");
(f) Grantors have the right and requisite authority to pledge,
assign, transfer and deliver the Pledged Collateral to ▇▇▇▇▇ as
provided herein except that the acquisition of the title to the
Pledged Partnership Units by ▇▇▇▇▇ could be contrary to certain
provisions of the Partnership Agreement, such as provisions
restricting the transfer of more than 50% of all Units within the
Partnership during any 12-month period; and
(g) This Partnership Pledge Agreement will create a valid,
perfected and enforceable first priority lien on and security
interest in the Pledged Collateral and the Proceeds thereof
securing the Secured Obligations.
The representations and warranties set forth in this Section 3
shall survive the execution and delivery of this Partnership Pledge
Agreement.
4. Covenants. Grantors covenant and agree with ▇▇▇▇▇ that from
and after the date of this Partnership Pledge Agreement and until
the Termination Date (as defined in Section 10):
(a) Further Assurances and Documentation. Grantors will
reasonably cooperate with ▇▇▇▇▇ and, at any time and from time to
time, upon the written request of ▇▇▇▇▇, and will promptly and duly
execute and deliver any and all such further instruments and
documents and take such further action as ▇▇▇▇▇ may reasonably deem
desirable to obtain the full benefits of this Partnership Pledge
Agreement, of the rights and powers herein granted and of the liens
granted to ▇▇▇▇▇ hereunder.
(b) Limitation on Disposition of Pledged Collateral. Grantors may
not sell, transfer, lease, license or other-wise dispose of any of
the Pledged Collateral unless
(1) such sale or other disposition is to an independent third
party for cash and for fair value, and (ii) the net cash proceeds
to Grantors are simultaneously delivered to ▇▇▇▇▇ for application
to the repayment of the Secured Obligations.
(c) Notices. Grantors will advise ▇▇▇▇▇ promptly, in reasonable
detail, (i) of any Lien asserted or claim made against any of the
Pledged Collateral or the assets or properties of Borrower, (ii) of
any material change in the composition of the assets and properties
of Borrower, and (iii) of the occurrence of any other event that
121
would have a material adverse effect on the aggregate value,
enforceability-, priority or collectibility of the assets and
properties of Borrower or on the security interests created
hereunder.
(d) Right of Inspection. ▇▇▇▇▇ shall at all times have full and
free access during normal business hours to all the books,
correspondence and records of Borrower, and ▇▇▇▇▇ or its
representatives may examine the same, take extracts therefrom and
make photocopies thereof, and Grantors agree to render to ▇▇▇▇▇,
such clerical and other assistance as may be reasonably requested
with regard thereto. ▇▇▇▇▇ agrees to maintain the confidentiality
of any information of a proprietary nature made available to it.
5. ▇▇▇▇▇'▇ Appointment as Attorney-in-Fact.
(a) Effective in the event a Default shall have occurred and be
continuing, Grantors hereby irrevocably constitute and appoint
▇▇▇▇▇ and any officer or agent thereof, with full power of
substitution, as their true and lawful attorney-in-fact with full,
irrevocable power and authority in the place and stead of Grantors
and in the name of Grantors or in their own names, from time to
time in ▇▇▇▇▇'▇ reasonable discretion after Default shall have
occurred and be continuing, for the purpose of carrying out the
terms of this Partnership Pledge Agreement. Without limiting the
generality of foregoing, if any Default shall have occurred and be
continuing, ▇▇▇▇▇ shall have the right and power to receive,
endorse and collect all checks made payable to the order of
Grantors representing any distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the
same.
Grantors hereby ratify all that said attorney-in-fact shall
lawfully do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and shall be
irrevocable until the Secured Obligations have been fully and
indefeasibly paid.
(b) The powers conferred on ▇▇▇▇▇ in this Partnership Pledge
Agreement are solely to protect its interest in the Pledged
Collateral and shall not impose any duty upon ▇▇▇▇▇ to exercise any
such powers. ▇▇▇▇▇ shall be accountable only for amounts that he
actually receives as a result of the exercise of such powers and
neither ▇▇▇▇▇ nor any of his employees or agents shall be
responsible to Grantors for any act or failure to act, except for
▇▇▇▇▇'▇ own negligence or willful misconduct and except for the
negligence or willful misconduct of ▇▇▇▇▇'▇ employees and agents.
(c) In the event a Default shall have occurred and be continuing,
Grantors also authorize ▇▇▇▇▇, at any time and from time to time,
to execute, in connection with the sale of the Pledged Collateral
provided for in Section 7 hereof, any endorsements, assignments or
other instruments of conveyance or transfer with respect to the
Pledged Collateral.
6. Certain Rights of Grantors and ▇▇▇▇▇.
(a) So long as a Default shall not have occurred and be
continuing, Grantors shall be entitled, to the extent not
inconsistent with this Partnership Pledge Agreement, (i) to
exercise the voting power with respect to the Pledged Collateral,
and for that purpose ▇▇▇▇▇ shall execute or cause to be executed
from time to time, at the expense of Grantors, such proxies or
other instruments in favor of Grantors, or their nominees, in such
form and for such purposes shall be reasonably required by Grantors
and as shall be specified in a written request therefor, to enable
Grantors to exercise such voting power with respect to the Pledged
Collateral, and (ii) to receive and retain for its own account any
and all cash dividends at any time from time to time declared or
paid upon any of the Pledged Collateral.
(b) If a Default shall have occurred and be continuing, (i) ▇▇▇▇▇
shall have the right to receive any and all cash dividends or cash
dividends or other Proceeds in respect of the Pledged Collateral
and, upon notice to Grantors, to apply such payments.
Proceeds to the payment of the Secured Obligations, and (ii) ▇▇▇▇▇
or its nominee may exercise all voting, corporate and other rights
pertaining to the Pledged Collateral at any meeting of the
shareholders of Borrower or otherwise.
7. Default and Remedies.
(a) Default. Grantors agree that time is of the essence and the
occurrence of any of the following shall constitute a default
("Default"):
I) If Borrower fails to pay (a) any installment of interest on
the Note when due, or (b) any payment of Note principal precisely
when due.
122
ii) If any representation or warranty contained in this
Partnership Pledge Agreement or in the Funding Agreement, or made
in writing in connection with the transactions contemplated by this
Partnership Pledge Agreement or in the Purchase Agreement shall be
knowingly false in any material respect on the date made, or
iii) If Grantors fail to perform any covenant or observe any
condition contained in this Partnership Pledge Agreement or the
Purchase Agreement;
or
iv) If Borrower admits in writing its inability to pay its debts
generally as they come due, or at any time is generally not paying
its debts as such debts become due, or has filed any petition or
action for relief under any bankruptcy, reorganization, insolvency
or moratorium law, or any other law or laws for the relief of, or
relating to, debtors; or
v) If an involuntary petition has been filed under any bankruptcy
or insolvency statute against Grantors or Borrower, or a custodian,
receiver or trustee has been appointed to take possession of other
assets of Grantors or Borrower, unless such petition or appointment
is or has been set aside or withdrawn or ceases or has ceased to be
in effect within 60 days from the date of said filing or
appointment; or
vi) If there is filed in good faith by or against Borrower a
petition seeking the liquidation or dissolution of Borrower or the
commencement of any other procedure to liquidate or dissolve
Borrower, or there occurs any event, condition or circumstance
which causes the liquidation or dissolution of Borrower; or
vii) If Grantors or Borrower conceal, remove, or permit to be
concealed or removed, any part of their property, with intent to
hinder, delay or defraud their creditors or any of them, or make or
suffer a transfer of any of their property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or
makes any transfer of their property to or for the benefit of a
creditor at a time when other creditors similarly situated have not
been paid; or suffer or pen-nit while insolvent, any creditor to
obtain a lien upon any of their property through legal proceedings
which is not vacated within 60 days from the date thereof; or
viii) If Grantors or Borrower make a general assignment of the
assets of Grantors or Borrower for the benefit of Grantors' or
Borrower's creditors; or
ix) If there is any sequestration or attachment of, or any levy or
execution upon any Pledged Collateral provided by Grantors under
this Partnership Pledge Agreement or the Purchase Agreement; any
Loan proceeds; or a substantial portion of the other assets of
Grantors, which is not released, expunged or dismissed prior to the
earlier of ten (10) days after such sequestration. attachment or
execution, or the sale of such assets; or
x) If any governmental authority has taken or instituted legal
action against Borrower which is reasonably likely to materially
adversely affect Borrower's financial condition, operations or
ability to repay the Loan, and Borrower has not remedied or
provided for such situation to ▇▇▇▇▇'▇ reasonable satisfaction
within 30 days of ▇▇▇▇▇'▇ written notice to Borrower of ▇▇▇▇▇'▇
opinion; or
(b) Acceleration. Upon the occurrence of a Default and subject to
subsection (c) and any other right expressly granted by ▇▇▇▇▇ in
writing to cure any Default to the extent applicable, (I) the
entire principal balance of the Loan, together with all accrued.
unpaid interest and other amounts owing in connection with the Loan
shall, at the option of ▇▇▇▇▇, become immediately due and payable,
and (ii) ▇▇▇▇▇ shall be immediately entitled to enforce the
collection of all outstanding secured obligations under the Note
and Purchase Agreement and to pursue any other remedy or remedies
herein or in the Note or Purchase Agreement.
(c) Notice and Cure Periods. Except as otherwise stated below in
subsection (d), upon the occurrence of a Default, ▇▇▇▇▇ shall not
accelerate the Loan or pursue its other rights and remedies unless
it first gives Grantors written notice of such Default in the
manner prescribed for notices in this Partnership Pledge Agreement
and such Default is not fully cured within the following periods:
I) three (3) days after such notice is given in the event of any
failure to make a monetary payment;
ii) fifteen (15) days after such notice is given in the event of
nonmonetary Defaults not subject to other provisions of this
Section, provided (a) within five (5) days after such notice is
given, Grantors commence their cure and submit to ▇▇▇▇▇ in writing
their plan to cure; and (b) the cure is continuously pursued by
Grantors with due diligence. If such Default is not reasonably
123
capable of being cured within fifteen (15) days, Grantors shall
have such additional time as is reasonably necessary to complete
the cure, but in no event more than thirty (30) days after the
notice of Default is given; or
iii) sixty (60) days after the filing of any involuntary petition
in bankruptcy against or for the appointment of a receiver for
Grantors (except for petitions filed by ▇▇▇▇▇), with the dismissal
of such petitions by the court within such period being deemed to
cure such Default.
(d) Exception to Notice and Cure Periods, Notwithstanding the
above provisions, the notice and cure periods provided for in this
Section shall not apply in the following circumstances
I) any Default of the type described in subsection (a)(ii), if but
only if, as a result of such Default, the value of all or a
substantial portion of the Pledged Collateral, or ▇▇▇▇▇'▇ security
interest in that Pledged Collateral, is materially impaired; or
ii) if Grantors transfer or encumber all or any portion of their
interest in the Pledged Collateral without obtaining any required
consent of ▇▇▇▇▇ or as expressly permitted by this Partnership
Pledge Agreement; or
iii) in any circumstance when a delay in effecting a cure is, in
the reasonable judgment of ▇▇▇▇▇, likely to result in any Pledged
Collateral being damaged, becoming uninsured or rendered
unavailable to ▇▇▇▇▇ or the value thereof being materially and
adversely affected, or ▇▇▇▇▇'▇ ability to recover its outstanding
balance from Borrower being materially affected; or
iv) more than twice or
v)any Default of the same type or nature which occurs
any filing of a voluntary petition in bankruptcy by
Grantors, or for the appointment of a receiver or trustee of all or
a portion of Grantors' property; or
vi) any assignment for the benefit of creditors, fraudulent
conveyance, or other plan or action instituted by Grantors in an
attempt to avoid the satisfaction of any lawful indebtedness.
Nothing in this Section is to be construed as extending the term of
the Loan or the date upon which a Default occurs, and no decision
to forego any remedy for any given Default shall be deemed a waiver
on the part of ▇▇▇▇▇ of any right relating to any other Default.
No failure to give any notice of any Default shall constitute a
waiver of such Default or any remedy which may be available in
connection therewith. The cure periods set forth in this Section
shall be narrowly construed, and shall not impair the exercise of
any remedy not referred to above immediately upon Default,
including, without limitation, the seeking of any mandatory or
prohibitive injunction or restraining order.
(e) Retention of Collateral. If any Default has occurred and is
continuing then ▇▇▇▇▇, after any applicable cure period provided
for in subsection (c) above has lapsed. but other-wise immediately,
shall retain the Pledged Collateral in accordance with ORS 79 '
5050(2) (the "Retention Remedy") to the extent Grantors or any
third par-ties do not object to his exercise of the Retention
Remedy. Grantors hereby waive, to the fullest extent permitted by
applicable law, their rights to object to ▇▇▇▇▇'▇ exercise of the
Retention Remedy.
(f) General Remedies Provision. If, notwithstanding Section
7(e), ▇▇▇▇▇ is required to foreclose or exercise remedies other
than the Retention Remedy, then ▇▇▇▇▇ may proceed to enforce his
rights under Sections 7(g)-(I), 8 and 9 of this Partnership Pledge
Agreement and the Note and Funding Agreement by exercising such
other remedies as are available under applicable law, either by
nonjudicial self-help, or by suit in equity or action at law,
including specific performance of any covenant contained in this
Partnership Pledge Agreement. Among other such remedies, or prior
to or in conjunction with his exercise of the Retention Remedy, if
Grantors fail to pay any sum that they are required to pay to third
party, fail to perform the other covenants and agreements contained
in this Partnership Pledge Agreement or the Note and Purchase
Agreement, or if any action or proceeding is commenced which
affects the Pledged Collateral or title thereto or the interest of
▇▇▇▇▇ therein, including, but not limited to, eminent domain,
insolvency, or arrangements or proceedings involving a bankrupt or
decedent, then ▇▇▇▇▇, at ▇▇▇▇▇'▇ option may pay such sums, per-form
such acts, make such appearances, and take such action as is
reasonably necessary to protect ▇▇▇▇▇'▇ interest, including, but
not limited to, disbursement of attorneys' fees.
124
(g) Sale of Collateral-, Exercise of Voting- Rights, etc. If a
Default shall have occurred and be continuing, in addition to the
rights and remedies provided in Section 7(f), if applicable, ▇▇▇▇▇
may, at its option, immediately do any or all of the following,
except as otherwise provided in the Partnership Agreement, and
subject to the provisions of Section 20 below:
(I) Cause the Pledged Partnership Units to be registered in its
name or in the name of its nominee;
(ii) Exercise all voting powers pertaining to such securities and
otherwise act with respect thereto as though ▇▇▇▇▇ were the
outright owner thereof (Grantors hereby irrevocably constituting
and appointing ▇▇▇▇▇ their proxy and attorney-in-fact with full
power of substitution so to do);
(iii) Receive all distributions of any kind whatsoever on all or
any of such securities;
(iv) Exercise any and all rights of collection, conversion or
exchange, and any and all other rights. privileges, options or
powers of Grantors pertaining or relating to such securities
(Grantors hereby irrevocably constituting and appointing ▇▇▇▇▇
their proxy and attorney-in-fact with fall power of substitution so
to do),
(v) Sell, assign and deliver the whole, or from time to time, any
part of such securities at any broker's board or at any private
sale or at public auction provided such sale is conducted in a
commercially reasonable manner; and
(vi) Exercise any other remedy specifically granted under this
Partnership Pledge Agreement or now or hereafter existing in
equity, at law, by virtue of statute or otherwise.
(h) For the purposes of Section 7(g), an agreement to sell all or
any part of the Pledged Collateral shall be treated as a sale
thereof and ▇▇▇▇▇ shall be free to carry out such sale pursuant to
such agreement, and except as otherwise provided herein including
in Section 20 below, Grantors shall not be entitled to the return
of any of the same subject thereto, notwithstanding that after
▇▇▇▇▇ shall have entered into such an agreement, all Defaults may
have been remedied or all obligations under the Note may have been
paid and performed in full.
(I) At any sale made pursuant to this Section 7(g), ▇▇▇▇▇ may bid
for and purchase (free from any right or equity of redemption on
the part of Grantors, and except as other-wise provided in Section
20 below), any part of or all securities included in the Pledged
Collateral that are offered for sale and may make payment on
account thereof by using any claim then due and payable to ▇▇▇▇▇ or
Grantors as a credit against the purchase price, and ▇▇▇▇▇ may,
upon compliance with the terms of sale, hold, return and dispose of
such securities without further accountability therefor except as
otherwise provided in the Partnership Agreement and this Agreement.
▇▇▇▇▇ shall not have any duty to exercise any of the rights,
privileges, options or powers or to sell or otherwise realize upon
any of such securities, as herein authorized, and ▇▇▇▇▇ shall not
be responsible for any failure to do so or delay in so doing.
0) Except as otherwise provided herein, including in Section 20
below, any sale of, or the grant of options to purchase, or any
other realization upon, all or any portion of such securities,
under Section 7(f) shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of Grantor
in and to such securities so sold, optioned or realized upon, or
any part thereof, from, through and under Grantors.
(k) Grantors recognize that ▇▇▇▇▇ may be unable to effect a
public sale of all or a part of the Pledged Collateral by reason of
certain prohibitions contained in the Securities Act of 1933 as
amended (the "Act"), or that ▇▇▇▇▇ may be able to do so only after
delay which might adversely affect the value that might be realized
upon the sale of the Pledged Collateral. Accordingly, except as
otherwise provided in the Partnership Agreement, Grantors agree
that ▇▇▇▇▇ may, without the necessity of attempting to cause any
registration of the Pledged Collateral to be effected under the
Act, sell the Pledged Collateral or any part thereof in one or more
private sales to a restricted group of purchasers who may be
required to agree, among other things, that they are acquiring the
Pledged Collateral for their own account for investment and not
with a view to the distribution or resale thereof. Grantors agree
that any such private sale may be at prices or on terms less
favorable to the owner of the Pledged Collateral than would be the
case if they were sold at public sale, but that any such private
sale shall otherwise be conducted in a commercially reasonable
manner.
(1) If Section 7(f)-(k) are applicable, then each and every
right, remedy and power granted to ▇▇▇▇▇ thereunder shall be
cumulative and in addition to any other right, remedy or power
specifically granted
125
herein or in any other related document, or now or hereafter
existing in equity, at law, by virtue of statute or otherwise and
may be exercised by ▇▇▇▇▇, from time to time, concurrently or
independently and as often and in such order as ▇▇▇▇▇ may deem
expedient.
8. Non-Interference with Remedies; Specific Performance.
(a) Grantors agree that they will not unreasonably interfere with
any right, power and remedy of ▇▇▇▇▇ provided for in this
Partnership Pledge Agreement or now or hereafter existing at law or
in equity or by statute or otherwise, or the exercise by ▇▇▇▇▇ of
any one or more of such rights, powers or remedies. The preceding
sentence shall not constitute a waiver of Grantors' rights herein,
including under Section 20 below.
(b) Grantors agree that a breach of any of the agreements or
covenants contained in this Partnership Pledge Agreement may cause
irreparable injury to ▇▇▇▇▇, that ▇▇▇▇▇ has no adequate remedy at
law in respect of such breach and, as a consequence. agree that
each and every agreement and covenant contained in this Partnership
Pledge Agreement shall be specifically enforceable against
Grantors.
9. Application of Proceeds. If the Retention Remedy cannot be
exercised
and Sections 7(g)-(i) are applicable, Grantors agree that all cash
proceeds received by ▇▇▇▇▇ in respect of any sale of, liquidation
of, or other realization upon all or any part of the Pledged
Collateral shall be applied by ▇▇▇▇▇ as follows:
(a) First, to the payment of all reasonable costs and expenses
(including the reasonable fees, disbursements and other charges of
attorneys) paid or incurred by ▇▇▇▇▇ in enforcing ▇▇▇▇▇'▇ security
interest in the Pledged Collateral, whether by sale or otherwise,
or otherwise enforcing ▇▇▇▇▇'▇ rights hereunder;
(b) Next, to the payment in full of the Secured Obligations then
due and owing-, and (c) Finally, after payment in full of all
Secured Obligations then due and owing, to the payment to Grantors,
or their successors or assigns, or to whomsoever may be lawfully
entitled to receive the same, or as a court of competent
jurisdiction may direct. of any surplus then remaining.
10. Termination of Agreement. Upon payment and performance in
full of all Secured Obligations (the "Termination Date"), this
Partnership Pledge Agreement shall terminate and ▇▇▇▇▇ shall
promptly release all of his right, title and interest in and to the
Pledged Collateral.
11. Unconditional Obligations. The obligations of Grantors under
this Partnership Pledge Agreement shall be absolute and
unconditional, and shall remain in full force and effect without
regard to, and shall not be released or discharged or in any way
affected by:
(a) Any exercise or non-exercise of any right, remedy or
privilege under or in respect of this Partnership Pledge Agreement
or the Note or Funding Agreement, or the granting of any
postponements or extensions for time of payment or other
indulgences to Grantors, Borrower, or any other person, or the
settlement or adjustment of any claim or the release or discharge
or substitution of Grantors or any person which may be or become
primarily or secondarily liable with respect to the Note; and
(b) Any assumption by any person of the obligations of Borrower
under the Note or Funding Agreement, or any assignment by ▇▇▇▇▇
referred to in Section 12(b).
12. Successors, Assignments. This Partnership Pledge Agreement
shall be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, legal
representatives, successors and assigns.
13. Amendments. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of
this Partnership Pledge Agreement, nor consent to any departure
therefrom, shall in any event be effective unless the same shall be
in writing and signed by the parties. Any such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which it is given.
14. Perfection of Security Interest. Upon execution of this
Partnership Pledge Agreement Grantors agree to execute and deliver
to ▇▇▇▇▇ UCC financing statements describing the Pledged
Partnership Units and all certificates, if any, evidencing the
Pledged Partnership Units. Grantors further agree that in the
future they will, at any time upon the reasonable request of ▇▇▇▇▇,
execute and
126
deliver such further documents within ten (10) days and do such
further acts and things as ▇▇▇▇▇ may reasonably request in order to
fully effect the purpose of this Partnership Pledge Agreement.
15. Notices. All notices, requests, demands, directions and
other communications required under this Note shall be in writing
(including telegraphic communication) and mailed by United States
mail or facsimile or delivered by overnight courier or by hand to
the applicable party at the addresses indicated below:
if to Grantors:
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
if to ▇▇▇▇▇:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or, as to any party, at such other address as shall be designated
by such party in a written notice to each other party complying as
to delivery with the terms of this Section 16. All such notices,
requests, demands, directions and other communications so mailed or
telecopied or delivered shall be effective when received if sent by
mail, when delivered if delivered by courier or by hand, or when
transmitted if sent by facsimile.
16. Severability of Provisions. Any provision of this Partnership
Pledge Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.
17. Attorneys' Fees; Costs. In the event litigation is initiated
to enforce any remedy contained in this Partnership Pledge
Agreement, then the prevailing party in that litigation shall be
entitled to recover its reasonable costs, charges, expenses and
attorneys' fees incurred in that litigation from the nonprevailing
party.
Litigation shall include any action at law or in equity, the appeal
of any trial court decision, any arbitration proceeding, any action
contesting or seeking to restrain, enjoin, stay or postpone the
exercise of any remedy and any bankruptcy, probate or other
proceeding involving Grantor including but not limited to the
following actions and proceedings in bankruptcy: (a) filing an
involuntary bankruptcy petition; (b) seeking dismissal, abstention
or conversion of a bankruptcy proceeding; (c) challenging venue of
a bankruptcy proceeding; (d) filing and defending a proof of claim;
(e) opposing or conditioning the debtor's right to operate its
business; (f) serving on a creditors' committee; (g) seeking
appointment of a trustee, examiner or disbursing agent; (h)
proposing, challenging or seeking modification of a plan of
reorganization; (i) seeking relief from stay and/or adequate
protection; 0) opposing the debtor's use of cash collateral or
obtaining credit; and (k) opposing discharge.
For the purpose of this Partnership Pledge Agreement, the terms
"attorney fees" and "costs" shall include the reasonable fees and
expenses of counsel, which may include reporting (for depositions),
printing, copying, duplicating and other expenses, air freight and
facsimile transmission charges, and fees billed for law clerks,
paralegals, production assistants, expert witnesses and others not
admitted to the bar but performing services under the supervision
of any attorney. Such costs, expenses and fees shall be due and
payable upon demand and shall bear interest from the date of such
demand to and including the date of collection at the highest rate
of interest stated in the Loan Agreement (including any Default
Rate).
18. Governing Law. This Partnership Pledge Agreement shall be
governed by. and construed in accordance with, the laws of the
State of Oregon (excluding the laws applicable to conflicts or
choice of law).
19. Legal Representation. Each party to this Agreement has been
advised to obtain independent legal counsel prior to executing this
Agreement and has had a full and fair opportunity to do so and
either obtained such representation or voluntarily declined to do
127
so. Each party acknowledges that ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, P.C. is the
attorney only for ▇▇▇▇▇ ▇. ▇▇▇▇▇ individually and that Ater ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ are the attorneys only for ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇.
20. Option to Repurchase Partnership Units. Notwithstanding any
other provision of this Partnership Pledge Agreement to the
contrary, if any person or entity should at any time acquire
ownership of any of the Pledged Partnership Units, then Grantors
shall have an option to purchase up to 50% of the Pledged
Partnership Units acquired by ▇▇▇▇▇ ("Eligible Re-Purchase Units")
on the following terms and conditions (the "repurchase Option"):
(a) The Re-Purchase Option cannot be exercised until the second
anniversary of the date on which ▇▇▇▇▇ becomes the owner of any or
all of the Pledged Partnership Units and can only be exercised
until the fifth anniversary of such date.
(b) The purchase price payable by Grantors shall be $5,357 per
Eligible Re-Purchase Unit, for a maximum purchase price of
approximately $300,000 if ▇▇▇▇▇ acquires ownership of all of the
Pledged Partnership Units and Grantors elect to repurchase 50% of
such Units.
(c) To exercise the Re-Purchase Option, Grantors shall give
written notice to ▇▇▇▇▇ of their election to exercise the Re-
Purchase Option. The notice shall specify the number of Eligible
Re-Purchase Units which Grantors elect to purchase. The sale and
purchase of the Eligible Re-Purchase Units which Grantors elect to
purchase shall be closed within 30 days after Grantors' notice of
exercise. On the closing date for such purchase. Grantors shall
deliver the entire purchase price for the Eligible Re-Purchase
Units to ▇▇▇▇▇ in cash.
21. Assignment of Loan and Note. Notwithstanding any other
provisions of this Agreement, pursuant to Section 2 of the Funding
Agreement, if ▇▇▇▇▇ should at any time acquire any of the Pledged
Partnership Units then ▇▇▇▇▇ shall immediately assign and endorse
the Loan and Note to Grantors, who shall have unconditional right,
title and interest in the Loan and Note in the principal amount of
$300,000, without recourse to ▇▇▇▇▇. The foregoing shall be in
addition to any rights of subrogation which Grantors may have under
applicable law.
22. Substitution of Shares. Pursuant to Section 5 of the Funding
Agreement, the parties intend that, as part of the Reorganization,
shares of Casinovations, Inc. common stock shall be substituted for
the Pledged Partnership Units, at which time this Partnership
Pledge Agreement shall be appropriately amended and restated as a
Stock Pledge Agreement.
23. Securities Laws. The Partnership Units pledged herein have
been issued pursuant to the Partnership Agreement and have not been
registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or under the securities acts of
Washington, Oregon, Nevada, or under any other state securities
laws. The sale or other disposition of the Units is restricted, as
stated in the Partnership Agreement. By acquiring any Unit
represented by the Partnership Agreement, the acquiring party
represents that such party has acquired the Units for investment
and that such party will not sell or otherwise dispose of the Units
without registration or other compliance with the aforesaid acts
and the rules and regulations thereunder. ▇▇▇▇▇ acknowledges he
has read the Partnership Agreement and agrees to remain bound by
its terms and conditions.
24. Counterparts. This Agreement may be executed in two or more
fully
or partially executed counterparts, each of which will be deemed an
original binding the signer thereof against the other signing
parties, but all counterparts together will constitute one and the
same instrument.
IN WITNESS WHEREOF, Grantors have caused this Partnership Pledge
Agreement to be executed as of the date first above written.
Grantors:
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
ACKNOWLEDGED By ▇▇▇▇▇:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
128
EXHIBIT E-1
CONSENT OF SPOUSE
I, ▇▇▇▇▇ ▇. ▇▇▇▇▇, spouse of ▇▇▇▇▇ ▇. ▇▇▇▇▇, acknowledge that I
have read the Partnership Pledge and Security Agreement and the
Funding Agreement, each dated as of January 15, 1996, (the "Pledge
Agreement" and the "Funding Agreement") and that I know their
contents. I am aware that by the provisions of the Pledge
Agreement, my spouse has pledged a portion of his partnership
interests in SHARPS INTERNATIONAL LIMITED PARTNERSHIP, a Nevada
limited partnership (the "Partnership"), to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to
guarantee repayment of a loan by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to the
Partnership. Under the terms of the Funding Agreement, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ is purchasing certain Partnership Units owned by my spouse
and has the option to purchase certain additional Partnership Units
owned by my spouse.
I hereby consent to all of the transactions described in the
Funding Agreement and the Pledge Agreement and agree that my
interest, if any, in the Partnership Units subject to the Pledge
Agreement and Funding Agreement, shall be irrevocably bound by such
Agreements and further understand and agree that any community
property interest I may have in the Partnership Units shall be
similarly bound by such Agreements. I further consent to the
reorganization of the Partnership as described in the Funding
Agreement and agree that any interest I may hereafter acquire in
shares of stock of a company to be known as Casinovations, Inc.
shall be subject to the terms of the Funding Agreement and the
Pledge Agreement.
I am aware that the legal, financial and related matters contained
in such Agreements are complex and that I am free to seek
independent professional guidance or counsel with respect to this
Consent. I have either sought such guidance or counsel or
determined after reviewing such Agreements carefully that I will
waive such right.
DATED the _ day of February, 1996.
▇▇▇▇▇ ▇. ▇▇▇▇▇
SPOUSE OF ▇▇▇▇▇ ▇. ▇▇▇▇▇
129
EXHIBIT E-2
CONSENT OF SPOUSE
I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, spouse of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, acknowledge that I
have read the Partnership Pledge and Security Agreement and the
Funding Agreement, each dated as of January 15, 1996, (the "Pledge
Agreement" and the "Funding Agreement") and that I know their
contents. I am aware that by the provisions of the Pledge
Agreement, my spouse has pledged a portion of her partnership
interests in SHARPS INTERNATIONAL Limited PARTNERSHIP, a Nevada
limited partnership (the "Partnership"), to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to
guarantee repayment of a loan by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to the
Partnership. Under the terms of the Funding Agreement, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ is purchasing certain Partnership Units owned by my spouse
and has the option to purchase certain additional Partnership Units
owned by my spouse.
I hereby consent to all of the transactions described in the
Funding Agreement and the Pledge Agreement and agree that my
interest, if any, in the Partnership Units subject to the Pledge
Agreement and Funding Agreement, shall be irrevocably bound by such
Agreements and further understand and agree that any community
property interest I may have in the Partnership Units shall be
similarly bound by such Agreements. I further consent to the
reorganization of the Partnership as described in the Funding
Agreement and agree that any interest I may hereafter acquire in
shares of stock of a company to be known as Casinovations, Inc.
shall be subject to the terms of the Funding Agreement and the
Pledge Agreement.
I am aware that the legal, financial and related matters contained
in such Agreements are complex and that I am free to seek
independent professional guidance or counsel with respect to this
Consent. I have either sought such guidance or counsel or
determined after reviewing such Agreements carefully that I will
waive such right.
DATED the day of February, 1996.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
SPOUSE OF ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
130
EXHIBIT F
PROMISSORY NOTE
$202,500.00
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇
-------------
1. Promise to Pay. FOR VALUE RECEIVED, the undersigned, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ ("Maker"), does hereby promise to pay to the order of
▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Holders"), at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as
Holders may from time to time designate in writing, the principal
sum of Two HUNDRED Two THOUSAND FIVE HUNDRED AND No/100 DOLLARS
($202,500-00), together with all interest thereon and other sums
herein referred to.
2. Interest and Payment Terms. The unpaid principal hereof shall
bear interest from the date of this Note until default at the rate
of nine and one-half percent (9.5%) per annum.
This Note shall be paid in four (4) equal quarterly installments of
principal, together with all accrued interest on the date of each
such payment. The first quarterly payment shall be due
, 19-, and subsequent quarterly payments shall be due on the same
day every three months thereafter until - 19-, when the
remaining principal balance and all accrued unpaid interest shall
be due and payable.
3 Calculation of Interest and Application of Payments. Interest
shall be calculated on a 365 or 366-day year, as applicable, based
on actual days elapsed. Each installment hereunder shall be first
applied to the payment of costs and expenses for which Maker is
liable hereunder, next to the payment of accrued interest, and
lastly to the reduction of principal. This Note shall continue to
bear interest at the Note rate (or at the Default Rate. as
hereinafter defined, if and so long as any default exists
hereunder) until and including the date of collection, and all
payments hereunder shall be calculated by and shall be payable in
the lawful money of the United States which shall be legal tender
for public and private debts at the time of payment.
4. Prepayment. Maker shall have the right at any time to prepay
the whole or any part of this Note without prepayment premium or
fee.
5. Default Rate. If and so long as any default exists under this
Note, the interest rate on this Note, and on any judgment obtained
for the collection of this Note, shall be increased from the date
the default is declared to a rate (the "Default Rate") equal to
five percent (5 %) per annum in excess of the Note rate. Maker
acknowledges that the imposition of the Default Rate will result in
the then effective interest rate in this Note being increased from
9.5 % per annum to 14.5 % per annum.
6. Costs of Collection. Maker promises to pay all costs,
expenses and attorneys' fees incurred by Holders in the exercise of
any remedy (with or without litigation), in any proceeding for the
collection of the debt, or the realization upon any security
securing this Note, in protecting or sustaining the lien or
priority of said security, or in any litigation or controversy
arising from or connected with this Note, including any bankruptcy,
receivership, injunction or other proceeding, or any appeal from or
petition for review of any of the foregoing, in which Holders
prevail. If a judgment is obtained thereon which includes an award
of attorneys' fees, such attorneys' fees, costs and expenses shall
be in such amount as the court shall deem reasonable. All
collection costs, expenses and attorneys' fees are payable on
demand, shall bear interest at the Default Rate from the date of
demand to and including the date of payment to Holders.
7. Defaults; Acceleration Time is of the essence of this Note.
The occurrence of any of the following shall, without notice,
demand or opportunity to cure, constitute an event of default under
this Note:
(a) Failure of Maker to make any payment required to be paid by
Maker under this Note in strict accordance with the terms thereof;
(b) Failure of Maker to perform any other covenant, agreement or
other obligation contained in this Note;
(c) Any warranty, representation, or statement made or furnished
to Holders by or on behalf of Maker proving to be or having been
false in any material respect when made or furnished;
(d) If any assignment by Maker for the benefit of creditors shall
be made; or
131
(e) If Maker shall voluntarily file a petition under the Federal
Bankruptcy Act, as such Act may from time to time be amended, or
under any similar or successor Federal statute relating to
bankruptcy, insolvency arrangements or reorganizations,
or under any state bankruptcy or insolvency act, or file an answer
in an involuntary proceeding admitting insolvency or inability to
pay debts, or if Maker shall fail to obtain a vacation or stay of
involuntary proceedings brought for the reorganization, dissolution
or liquidation of Maker or if Maker shall be adjudged a bankrupt,
or upon dissolution, business failure or discontinuance of Maker as
a going business (except for labor disputes), or if a trustee or
receiver shall be appointed for Maker, or Maker's property, or if
the partnership interests of Maker shall become subject to the
Jurisdiction of a Federal bankruptcy court, or similar state court,
or if Maker shall make an assignment for the benefit of creditors,
or if there is an attachment, execution or other judicial seizure
of any portion of Maker's assets and such seizure is not discharged
within ten (10) days;
then, upon the occurrence of any such event of default, after
expiration of any applicable notice and cure period, the entire
principal sum, with accrued interest thereon due under this Note,
shall, at the option of Holders, become due and payable forthwith,
without further notice. No failure to exercise such option shall
be deemed a waiver on the part of Holders of any right accruing
thereafter.
8. Maker's Right to Cure. Upon an event of default, except as
otherwise provided below, Holders shall not accelerate this debt,
make any payments for which Maker is primarily liable, or foreclose
upon or attach any assets of Maker unless it first gives Maker
written notice of such default at Maker's address and in the manner
described for notices described in Section 14 below and unless such
default is not fully cured within the following periods:
(a) three (3) days after such notice is given in the event of any
failure to make a monetary payment to any person-,
(b) fifteen (15) days after such notice is given in the event of
non-monetary defaults not subject to other provisions of this
Section, provided (a) within five (5) days after such notice is
given, Maker commences its cure and submits to Holders in writing
its plan to cure; and (ii) the cure is continuously pursued by
Maker with due diligence. If in Holders' sole judgment such
default is not reasonably capable of being cured within fifteen
(15) days, Maker shall have such additional time as is reasonably
necessary to complete the cure, but in no event more than thirty
(30) days after the notice of default is given; or
(c) sixty (60) days after the filing of any involuntary petition
in bankruptcy against or for the appointment of a receiver for
Maker (except for petitions filed by Holders), with the dismissal
of such petitions by the court within such period being deemed to
cure such default.
Notwithstanding the above provisions, the notice and cure period
provided for in this Section shall not apply:
if a petition shall be filed by Maker under the Federal
Bankruptcy Act, or Acts amendatory thereof or supplemental thereto,
or under any statute either of the United States or any state in
connection with insolvency or reorganization, or for the
appointment of a receiver or trustee of all or a portion of Maker's
property; or
(ii) if any assignment by Maker for the benefit of creditors shall
be made.
The provisions of this Section shall apply to defaults under all
documents executed as security for this Note, and unless expressly
stated to the contrary in such documents any notice or cure period
referred to therein shall be deemed to incorporate said provisions.
If any of said documents are inconsistent with this Section, this
section shall be controlling, unless said other document expressly
provides otherwise. Where additional notice or cure periods are
provided in this or any other such documents or are required by any
other contract or by law, said periods and those contained in this
section shall run concurrently. Nothing in this section shall be
construed as extending the term of this Note or the date upon which
a default occurs, and no decision to forego any remedy for any
given default shall be deemed a waiver on the part of Holders of
any right relating to any other default. No failure to give any
notice of any default shall constitute a waiver of such default or
any remedy which may be available in connection therewith. This
section shall be strictly construed, and shall not impair the
exercise of any remedy not referred to above immediately upon
default, including, without limitation, the seeking of any
mandatory or prohibitive injunction or restraining order or
appointment of receiver.
132
9. Usury. Maker hereby represents that this loan is for
commercial use and not for personal, family or household purposes.
It is the specific intent of the Maker and Holders that this Note
bear a lawful rate of interest, and if any court of competent
jurisdiction should determine that the rate herein provided for
exceeds that which is statutorily permitted for the type of
transaction evidenced hereby, the interest rate shall be reduced to
the highest rate permitted by applicable law, with any excess
interest theretofore collected being applied against principal or,
if such principal has been fully repaid, returned to Maker on
demand.
10. Renewals. Maker, and all others who may become liable for all
or any part of this obligation, consent to any number of renewals
or extensions of the time of payment hereof and to the release of
all or any part of the security for the payment hereof. Any such
renewals, extensions or releases may be made without notice to any
of said parties and without affecting their liability.
11. Waivers. Maker hereby waives presentment, demand of payment,
notice of dishonor, protest, and notice of nonpayment, and any and
all other notices and demands whatsoever. No covenant, condition,
right or remedy in this Note may be waived or modified orally, by
course of conduct or previous acceptance or otherwise unless such
waiver or modification is specifically agreed to in writing
executed by the Holders.
12. Construction. This Note shall be governed by and construed in
accordance with the laws of the State of Oregon, and all sums
referred to herein shall be calculated by reference to and payable
in the lawful currency of the United States. This Note has been
reviewed and negotiated by Maker and Holders at arms' length with
the benefit of or opportunity to seek the assistance of legal
counsel and shall not be construed against either party. The
titles and captions in this Note are inserted for convenience only
and in no way define, limit, extend, or modify the scope or intent
of this Note. In any case where Holders is permitted to act in its
"sole discretion," "sole options' or the like, Holders shall be
entitled to exercise unfettered discretion and may act without
application of principles of law, if any, requiring good faith or
fair dealing or reasonableness in exercising Holder's options.
13. Partial Invalidity. If any section or provision of this Note
is declared invalid or unenforceable by any court of competent
jurisdiction, said determination shall not affect the validity or
enforceability of the remaining terms hereof. No such
determination in one Jurisdiction shall affect any provision of
this Note to the extent it is otherwise enforceable under the laws
of any other applicable Jurisdiction.
14. Addresses for Notices: Etc. All notices, requests, demands,
directions and other communications required under this Note shall
be in writing (including telegraphic communication) and mailed by
United States mail or facsimile or delivered by overnight courier
or by hand to the applicable party at the addresses indicated
below:
if to Maker:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
121 ▇.▇. ▇▇▇▇▇▇▇▇, Suite 1400
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
if to Holders:
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
or, as to any party, at such other address as shall be designated
by such party in a written notice to each other party complying as
to delivery with the terms of this Section 14. All such notices,
requests, demands, directions and other communications so mailed or
telecopied or delivered shall be effective when received if sent by
mail, when delivered if delivered by courier or by hand, or when
transmitted if sent by facsimile.
Maker:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
133
EXHIBIT G
General Limited
Partnership Partnership
Units Units %
1. ▇▇▇▇ ▇▇▇▇▇ 147 30.18
2. ▇▇▇▇▇▇ ▇▇▇▇▇ 4 139 29.36
3. ▇▇▇▇▇ ▇▇▇▇▇ 4 139 29.36
4. ▇▇▇▇▇▇ ▇▇▇▇▇ 22 4.52
5. ▇▇▇▇ ▇▇▇▇▇ 12 2.46
6. ▇▇▇▇ ▇▇▇▇▇▇▇ 6 1.23
7. ▇▇▇▇▇ ▇▇▇▇▇▇▇ 3 .62
8. ▇▇▇▇▇▇▇ ▇▇▇▇ 3 .62
9. ▇▇▇▇▇ ▇▇▇▇▇ 3 .62
10. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 3 .62
11. ▇▇▇▇ ▇▇▇▇▇▇ 2 .41
4 479 %100.00
134
EXHIBIT H
The following persons have, or under certain circumstances, may
have, options to purchase or otherwise acquire Units in Sharps or
shares of Casinovations:
Name
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇▇ Partnership
135
AMENDMENT
TO
EMPLOYMENT AGREEMENT
(Personal Service Agreement)
AND
COVENANT NOT TO COMPETE
This is an Amendment to the Employment Agreement and Covenant Not To
Compete
dated March 1, 1996 by and between CASINOVATIONS INCORPORATED, a
Washington
Corporation and ▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Employee").
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is
hereby acknowledged, the parties amend the Agreement as follows:
1. The Employment Agreement and Covenant not to Compete dated
March 31, 1996 remains in full force and effect as originally agreed to
except as provided below. The attached pages 1, 4, 5, 6, 8, 9, 10, 11, 14,
15 and Exhibit "A" are changes and replacements to the respective pages of
the Employment Agreement and are incorporated into the original Agreement as
part of the Agreement.
DATED this day of June, 1996.
"CORPORATION"
CASINOVATIONS INCORPORATED
a Washington Corporation
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
"EMPLOYEE"
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
