Sample Business Contracts

Executive Employment Agreement - Shuffle Master Inc. and Joseph J. Lahti

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                                 JOSEPH J. LAHTI

         THIS AGREEMENT is made and entered into as of the 1st day of November,
1999, by and between SHUFFLE MASTER, INC., a Minnesota corporation (the
"Company"), and Joseph J. Lahti (the "Employee").


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

         B.       Company and Employee want to create an at-will employment
                  relationship that protects the Company and potential
                  successors with appropriate confidentiality and non-compete
                  covenants and rewards the Employee with appropriate
                  consideration therefore, including a severance package, and
                  incentivizes him to remain in the employment of the Company.

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


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

         1. EMPLOYMENT. The Company hereby employs Employee as its Chief
Executive Officer. This employment relationship is "at will" and may be
terminated by either party at any time, with termination provisions in certain
circumstances as hereinafter set forth.

         2. SALARY AND BENEFITS. Employee shall be paid an annual base salary of
Two Hundred Forty-six Thousand and No/100 Dollars ($246,000.00), paid in the
same intervals as other employees of the Company. If the Employee is employed
with the Company through October 31, 2000, Employee will be eligible to receive
an executive bonus in accordance with


the terms and conditions of the executive bonus program authorized by the Board
of Directors of the Company, as set forth on Exhibit A attached hereto.
Employee's salary is set on the expectation (except for vacation days and
holidays) that on average at least 40 hours per week of Employee's time will be
devoted to Employees duties hereunder. The Company agrees to provide Employee
with the benefits it provides its executive team. Employee will not, however, be
eligible to participate in the Company's non-executive bonus program.

         3. OUTSIDE CONSULTING. Employee may render consulting services to other
businesses from time to time if Employee meets all of the following

         (a)      the consulting services do not interfere with the Employee's
                  ability to fulfill his duties and obligations to the Company;

         (b)      the consulting services are not rendered to any business which
                  may compete with the Company in any area of the Business;

         (c)      the consulting services do not relate to any products or
                  services which form part of the Business.

         4. NON-COMPETITION. Employee shall not, for a period of five (5) years
following the date of this Agreement, either while employed by the Company or
its successor, and during any of the five (5) year period remaining thereafter:

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

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

                  The foregoing covenants shall benefit as well any successor to
         the Company.

         In consideration of the foregoing covenants, the Company agrees to
compensate Employee as follows:


         (a)      On the date this Agreement is executed, the Company shall pay
                  to Employee the sum of One Hundred Thirty-five Thousand
                  Dollars ($135,000.00);

         (b)      On January 5th, 2001 (provided Employee is employed by the
                  Company on such date) and on each January 5th, thereafter,
                  that Employee is employed by the Company through January 5th,
                  2004, the Company shall pay to Employee the sum of

         (c)      Upon the termination of the employment of Employee, the
                  Company shall pay to Employee a sum equal to $600,000.00 on or
                  before the date of termination as compensation for the
                  five-year covenant set forth above, less a credit, if any, for
                  each $150,000.00 payment previously made to Employee under
                  Section 4(b).

         All such payments shall be subject to applicable withholding.


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

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

         (c)      Employee understands that all copyrightable work that Employee
                  may create while employed by the Company is a "work made for
                  hire," and that


                  the Company is the owner of the copyright therein. Employee
                  hereby assigns all right, title and interest to the copyright
                  therein to the Company.

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

         (e)      Employee will not publish or otherwise disclose, either during
                  or after Employee's employment with the Company, any
                  unpublished or proprietary or confidential information or
                  secret relating to the Company, the Business, the Company's
                  operations or the Company's products or services. Employee
                  will not publish or otherwise disclose proprietary or
                  confidential information of others to which Employee has had
                  access or obtained knowledge in the course of Employee's
                  employment with the Company. Upon termination of Employee's
                  employment with the Company, Employee will not, without the
                  prior written consent of the Company, retain or take with
                  Employee any drawing, writing or other record in any form or
                  nature which relates to any of the foregoing.

         (f)      Employee understands that Employee's employment with the
                  Company creates a relationship of trust and confidence between
                  Employee and the Company. Employee understands that Employee
                  may encounter information in the performance of Employee's
                  duties that is confidential to the Company or its customers.
                  Employee agrees to maintain in confidence all information
                  pertaining to the Business or the Company to which Employee
                  has access including, but not limited to, information relating
                  to the Company's products, inventions, trade secrets, know
                  how, systems, formulas, processes, compositions, customer
                  information and lists, research projects, data processing and
                  computer software techniques, programs and systems, costs,
                  sales volume or strategy, pricing, profitability, plans,
                  marketing strategy, expansion or acquisition or divestiture
                  plans or strategy and information of similar nature received
                  from others with whom the Company does business. Employee
                  agrees not to use, communicate or disclose or authorize any
                  other person to use, communicate or disclose such information
                  orally, in writing, or by publication, either during
                  employee's employment with the Company or thereafter except as
                  expressly authorized in writing by the Company unless and
                  until such information becomes generally known in the relevant
                  trade to which it relates without fault on employee's part, or
                  as required by law.

         6. SEVERANCE BENEFITS. In the event of the termination of Employee's
employment by the Company prior to November 1, 2000 without just cause, as
defined in Section 7, the Employee will receive the following benefits:


         (a)      Within three (3) days following Employee's last day of
                  employment, Employee will be paid a lump sum equal to twice
                  the sum of (i) Employee's then prevailing annual base salary
                  (but not less than the annual base salary set forth in Section
                  2 hereof); plus (ii) twenty-four (24) times the average
                  "deemed monthly bonus" received over the thirty-six (36)
                  months preceding termination. The deemed monthly bonus amounts
                  to be included in the average shall equal one twelfth (1/12)
                  of the annual bonus received by the Employee (or which would
                  have been received if the Employee worked the full fiscal year
                  in which he was terminated pursuant to Section 7) in each
                  fiscal year in which each such month in the thirty-six (36)
                  month period falls. To the extent that the above calculation
                  includes bonus amounts for a fiscal year not ended at time of
                  Employee's termination, the average deemed monthly bonus will
                  be determined as of the end of the month following the
                  Employee's last day of employment and the deemed monthly bonus
                  for the then current fiscal year will be based on the
                  Company's actual year-to-date EBT as of the end of such month
                  compared to the budgeted year-to-date EBT as of the end of
                  such month. If actual EBT equals or exceeds budgeted EBT, the
                  Employee's deemed monthly bonus amount for that fiscal year
                  shall equal 1/12 of the Employee's bonus target (50% of

         (b)      In addition, during the two year period immediately following
                  Employee's last day of employment, Employee shall continue to
                  receive all of the Company's employee benefits, if eligible,
                  and if not eligible for health benefits, the Company shall pay
                  the COBRA premiums for continuation coverage during the
                  two-year period.

         (c)      Any stock option previously granted to the Employee (not
                  already exercisable and vested) will become exercisable and
                  all stock options will become fully vested on the first day
                  immediately following Employee's last day of employment.
                  Employee will be entitled to exercise said options during the
                  twenty-four (24) month period following Employee's last day of
                  employment, in accordance with the terms of the Company's
                  stock option plan as amended from time to time (including
                  limitations on exercise not inconsistent with this paragraph),
                  unless during such twenty-four (24) month period there is a
                  sale or merger of the Company that constitutes a change in
                  control as defined in the Company's stock option plan. In the
                  event of such a change in control Employee will reasonably
                  cooperate with the Company, and exercise his stock options in
                  a way as to not hinder the progress or closing of the sale or
                  merger transaction, and in no event later than three (3)
                  months following the closing.

         7. TERMINATION BY COMPANY WITHOUT JUST CAUSE. Employee's employment by
the Company is "at will"; the Company may terminate Employee's employment at any
time either


with or without just cause. Further, in the event the Company is sold or merged
with another company or in the event of a Change in Control, Employee shall be
considered to have been terminated without just cause on the date of the merger
or sale or Change in Control. Notwithstanding any such termination without just
cause, Employee will remain bound under the covenants not to compete and
confidentiality obligations of Sections 4 and 5 of this Agreement and the
Severance Benefits provided under Section 6 will remain in full force and

         8. TERMINATION BY COMPANY FOR JUST CAUSE. The Company may terminate
Employee for just cause. In the event the Company terminates the Employee for
just cause, the Employee will remain bound under the covenant not to compete and
confidentiality obligations contained in Sections 4 and 5 and will not be
entitled to any of the severance benefits provided under Section 6. Termination
for "just cause" shall include, but not be limited to:

         (a)      chronic inattention to duty;

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

         (c)      the commission of a willful act or omission intended to
                  materially injure the business of the Company;

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

         (e)      a determination in good faith by the vote of a majority of the
                  Company's board of directors that the Employee has failed to
                  make a good faith effort to perform his duties as assigned by
                  the Company's Board of Directors;

provided, that if the Company desires to terminate Employee for the reasons
stated in subsection 8(f), it shall first give Employee written notice of such
intention, stating the specific reasons for the termination, and Employee shall
have 30 days from the date of receipt of such notice to cure the alleged
wrongdoing to the reasonable satisfaction of the Company; provided


further, that the provisions of subsection (f) shall be inapplicable following a
sale or merger of the Company or a Change in Control.

         9. TERMINATION BY EMPLOYEE. In the event Employee voluntarily
terminates his employment with the Company (or its successor) prior to November
1, 2000, Employee will remain bound under the confidentiality and non-compete
obligations of Sections 4 and 5 and will not be entitled to receive the full
benefits provided under Section 6. Voluntary termination means any termination
by the Employee without just cause. "Just cause" is defined for the purposes of
this paragraph as a material breach of a substantial provision of this Agreement
by the Employer. Voluntary termination includes a termination caused by the
death of Employee or by the disability of Employee for more than six (6) months.
In the event a voluntary termination occurs due to the death or disability of
Employee, in addition to any other benefits to which Employee is entitled under
this Agreement, Employee will receive the full benefits under Section 6(c) of
this Agreement.

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

         11. COMPANY POLICIES. During the period of Employee's employment,
Employee shall engage in no activity or employment which may conflict with the
interest of the Company, and Employee shall comply with all policies and
procedures of the Company including, without limitation, all policies and
procedures pertaining to ethics.

         12. INDEPENDENT COVENANTS. The covenants on the part of the Employee
contained in Sections 4 and 5 hereof shall be construed as agreements
independent of any other provision in


this Agreement; it is agreed that the relief for any claim or cause of action of
the Employee against the Company, whether predicated on this Agreement or
otherwise, shall be measured in damages and shall not constitute a defense to
enforcement by the Company of those covenants.

         13. INJUNCTIVE RELIEF; ATTORNEYS' FEES. In recognition of the
irreparable harm that a violation by Employee of any of the covenants contained
in Sections 4 and 5 hereof would cause the Company, the Employee agrees that, in
addition to any other relief afforded by law, an injunction (both temporary and
permanent) against such violation or violations may be issued against him or her
and every other person and entity concerned thereby, it being the understanding
of the parties that both damages and an injunction shall be proper modes of
relief and are not to be considered alternative remedies. Employee consents to
the issuance of such injunction relief without the posting of a bond or other
security. In the event of any such violation, THE EMPLOYEE AGREES TO PAY THE

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

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


         16. SEVERABILITY. It is further agreed and understood by the parties
hereto that if any provision of this Agreement should be determined by a court
to be unenforceable in whole or in part, it shall be deemed modified to the
minimum extent necessary to make it reasonable and enforceable under the

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

         18. HEIRS, SUCCESSORS AND ASSIGNS. The terms, conditions, and covenants
hereof shall extend to, be binding upon, and inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and


         (a)      In the event that any payment or benefit (within the meaning
                  of Section 28OG(b)(2) of the Internal Revenue Code of 1986, as
                  amended (the "Code")), paid or payable to the Employee or for
                  his benefit or distributed or distributable pursuant to the
                  terms of this Agreement or otherwise in connection with, or
                  arising out of, his employment with the Company or a Change in
                  Control of the Company (a "Payment" or "Payments"), would be
                  subject to the excise tax imposed by Section 4999 of the Code
                  or any interest or penalties are incurred by the Employee with
                  respect to such excise tax (such excise tax, together with any
                  such interest and penalties, are hereinafter collectively
                  referred to as the "Excise Tax"), then the Employee will be
                  entitled to receive an additional payment (a "Gross-Up
                  Payment") in an amount such that after payment by the Employee
                  of all taxes (including any interest or penalties, other than
                  interest and penalties imposed by reason of the Employee's
                  failure to file timely a tax return or pay taxes shown as due
                  on his return, imposed with respect to such taxes and the
                  Excise Tax), including any Excise Tax imposed upon the
                  Gross-Up Payment, the Employee retains an amount of the
                  Gross-Up Payment equal to the Excise Tax imposed upon the

         (b)      An initial determination as to whether a Gross-Up Payment is
                  required pursuant to this Agreement and the amount of such
                  Gross-Up Payment shall be made at the Company's expense by an
                  accounting firm selected by the Employee and reasonably
                  acceptable to the Company which is


                  designated as one of the ten (10) largest accounting firms in
                  the United States (the "Accounting Firm"). The Accounting Firm
                  shall provide its determination (the "Determination"),
                  together with detailed supporting calculations and
                  documentation, to the Company and the Employee promptly
                  following the date of termination of the Employee's
                  employment, if applicable, or such other time as requested by
                  the Company or the Employee. The Gross-Up Payment, if any, as
                  determined pursuant to this Section 19(b) shall be paid by the
                  Company to the Employee within five days of the receipt of the
                  Determination. In the event that the tax returns of either
                  Employee or the Company are audited with respect to this
                  issue, the same accounting firm shall be retained in
                  connection with the audit and any appeal, and the amount of
                  the Gross-Up Payment shall be subject to revision, depending
                  upon the final outcome of the audit.

         (c)      Notwithstanding anything contained in this Agreement to the
                  contrary, in the event that, according to the Determination,
                  an Excise Tax will be imposed on any Payment or Payments, the
                  Company shall pay to the applicable government taxing
                  authorities as Excise Tax withholding, the amount of the
                  Excise Tax that the Company has actually withheld from the
                  Payment or Payments.

         20. WAIVER OF CONFLICT OF INTEREST. Employee has been represented in
this matter by Moss & Barnett; the Company has been represented by Thomas G.
Barry, Jr., General Counsel. The parties acknowledge that Moss & Barnett has
previously represented both the Employee and the Company on other matters, both
unrelated and related. Both parties nonetheless waive any potential or actual
conflict of interest relating to Moss & Barnett's representation of Employee in
this matter. The Company further waives any objections to Moss & Barnett's
continued representations of Employee in this matter, and Employee waives any
objections to Moss & Barnett's continued representation of the Company in other

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

EMPLOYER:                                   EMPLOYEE:


By /s/ Gary W. Griffin                      /s/ Joseph J. Lahti
   -----------------------------------      -----------------------------------
    Its  Chief Financial Officer            Joseph J. Lahti


                                    EXHIBIT A

         Employee may earn a percentage of Employee's base salary as a bonus
during fiscal year 2000, which will vary depending on the percentage of targeted
income before taxes (REDACTED; CONFIDENTIAL TREATMENT REQUESTED) earned by the

BEFORE TAXES                 BONUS
------------                 -----

a.       Less than 90%       0

b.       90%                 $98,400.00 (40% of base salary)

c.       90% - 100%          $98,400.00 + $2,460.00 for each increase of one
                             percent (1%) over ninety percent (90%)

d.       100%                $123,000.00 (50% of base salary)

e.       100% - 120%         $123,000.00 + $1,230.00 for each increase of one
                             percent over 100%

f.       120%                $147,600.00 (60% of base salary)

g.       over 120%           60% of base salary plus an additional 1% of base
                             salary for each increase of one percent over 120%.

         For example, if the Company earns 100% of its targeted income before
taxes during fiscal 2000, Employee would be paid a performance bonus of
$123,000.00 ($246,000.00 x 50%). If the Company earns 90% of its targeted income
before taxes during fiscal 2000, Employee would be paid a performance bonus of
$98,400.00 ($246,000.00 x 40%). If the Company earns 120% of its targeted income
before taxes, then Employee's performance bonus would be $147,600.00
($246,000.00 x 60%). If the Company earns more than 120% of its targeted income
before taxes, Employee's performance bonus would further increase by an amount
equal to one percent ( 1% ) of his base salary for each percent by which the
percentage increase in income before taxes exceeds the target. In no event shall
the amount of the bonus exceed twice Employee's annual base salary.