Exhibit 10.13
SODAK GAMING, INC.
EXCLUSIVE DISTRIBUTORSHIP AGREEMENT AMONG THE COMPANY
AND INTERNATIONAL GAME TECHNOLOGY
EXCLUSIVE DISTRIBUTORSHIP AGREEMENT
THIS AGREEMENT is made and entered into in Reno, Nevada, this 12 day
of March 1998, between Sodak Gaming, Inc., a South Dakota corporation ("SG"),
and IGT, a Nevada corporation ("IGT").
IT IS AGREED AS FOLLOWS:
1. EXCLUSIVE REPRESENTATION FOR SPECIFIC TERRITORY:
A. Grant of Territory and Marketing Privileges: IGT, subject to the
Operating Requirements set forth below and the other limitations, terms and
conditions set forth herein, grants to SG the sole and exclusive,
non-transferable license to purchase for resale, sell, promote the sale, and
distribute IGT Products lawfully approved for sale in North Dakota, South
Dakota, Wyoming, and for Native American Reservations located in the United
States (except and excluding Nevada, New Jersey and Hawaii provided, however,
this grant does not include any operations by IGT or operations or sales, leases
or other distribution that involves a bid to a governmental request (excluding
any such request by a Native American Tribal government entity) for the supply
of a central system or machines, in which case IGT may bid, sell, lease, operate
or participate, independently or with others, without any legal obligation or
liability to SG ("Territory").
"IGT Products" shall mean IGT manufactured or assembled gaming
devices, slot machines and IGT-distributed gaming machines designed or
manufactured by others. It is acknowledged and agreed that the license granted
herein does not include, and no rights accrue to SG hereunder, as to: IGT linked
progressive system products (except as set forth in the Indian
Telecommunications Accounting System Agreement dated September 30, 1993, and the
Quartermania in South Dakota Agreement dated June 18, 1990, and any agreements,
revisions or amendments thereto), Special Products, or system management or
other gaming or lottery operations conducted, financed, or participated in whole
or part by IGT or sales by IGT to such management or other operations conducted,
financed, or participated in whole or part by IGT (except as hereafter set forth
in paragraph 1.C. (i)); nor to non-gaming applications of IGT Products or
Special Products. By way of one example as to the above exclusion, IGT, without
obligation to SG or accrual of any rights hereunder to SG, may offer, solicit,
contract for, supply, lease and/or engage in the operation of, in whole or part,
alone or in conjunction with a third party(s), the central system and/or
machines for government conducted or government contracted gaming or lottery.
The prior Exclusive Distributorship Agreements between the parties
dated August 10, 1989, October 28, 1989, February 5, 1990, January 21, 1991,
April 28, 1992, May 5, 1993, and September 26, 1994, and all amendments or
modifications, oral and written, to said agreements and all agreements as to
sale and/or service of Special Products (excluding the existing written
agreements dated September 20, 1996 (Linked Gaming System Sales and Operation
Agreement) and the existing written progressive system agreements dated
September 30, 1993 (Indian Telecommunications Accounting System Agreement) and
June 18, 1990 (Quartermania Letter Agreement, Deadwood, SD), as amended, between
IGT and SG, which existing agreements shall continue in full force and effect
unless otherwise modified or terminated separate and apart from this Agreement)
are herewith terminated, it being the intention of the parties that this
Agreement shall be the sole Exclusive Distributorship Agreement between the
parties.
B. Acceptance: SG hereby accepts the above exclusive non-transferable
license to sell, distribute, and promote IGT Products, as limited, and agrees to
use its best efforts in selling and distributing IGT Products in the Territory.
Further, so long as this Agreement is in force and effect, SG and all affiliates
of SG agree that they, and each of them, shall not anywhere in the world,
directly or indirectly, solicit orders for, sell, lease,
promote the sale of or otherwise distribute products which compete with or are
similar to IGT Products or IGT Special Products, except pursuant to prior
written authorization by IGT. Any authorization given by IGT pursuant to this
provision shall be limited to the product and specified terms and conditions set
forth in the writing evidencing such authorization, and no such authorization
shall be deemed a waiver of the foregoing prohibition as to manufacture or
distribution of any other non-IGT gaming or lottery product. Notwithstanding the
foregoing, SG may: (a) manufacture, promote the sale of, and distribute
specialty gaming equipment or supplies only as specified in Exhibit A, attached
hereto and incorporated herein, as amended from time to time by written
agreement between IGT and SG. As used herein, "affiliate" shall be any company
or business entity of which SG directly or through a subsidiary owns ten percent
(10%) or more of the outstanding equity interest, or officer or director of SG
who owns ten percent (10%) or more equity interest of any such company or
business entity. It is understood and agreed that no provision of this Agreement
shall be construed as granting any license or rights of Distribution to any
person or entity other than SG. Notwithstanding the noncompete provisions
herein, and subject to Paragraphs 9A and 9C, SG may own and operate or
participate in the operation, management or financing of lawful gaming
establishments or route operations utilizing gaming products, linked
progressive, or lottery systems that compete with or are similar to IGT
Products, IGT Linked Progressive Systems, or IGT Special Products if SG is not
an owner, affiliate, or distributor for any non-IGT machine manufacturer of
gaming or lottery equipment, and SG does not act as an agent, partner,
distributor, representative, or seller, in any manner, for any such other
manufacturer for the placement of any other manufacturer's equipment and:
i. The equipment is not placed for the purpose of resale and
the location involves greater than 30% ownership by non-SG related third parties
who insist in a signed statement addressed to IGT upon the use of gaming
products or systems not manufactured by IGT; or
ii. The use of IGT equipment is illegal due to a change of
law, lack of a required license by IGT, lack of required approval of IGT
Products, IGT Linked Progressive Systems, or Special Products, or any other
legal qualification not satisfied by IGT; or
iii. IGT agrees by prior written waiver to any such use in
such operation that SG may utilize a competitor's equipment after prior full
disclosure in writing from SG to IGT as to all material facts of the proposed
operation and the terms of acquisition of, and usage of, the competitive
equipment; or
iv. IGT will not sell, lease, or otherwise provide IGT
Products, IGT Linked Progressive Systems, or Special Products to SG for SG's use
in operations outside the Territory at a price equal to or less than the lowest
price IGT offers to sell, sells, leases, or otherwise provides such products or
systems to other retail customers (excluding any sales to any entity in which
IGT has an equity or revenue sharing interest or any governmental customers)
through the applicable IGT sales office or other IGT distributor for the
location in question, taking into account cash discount, the size of the order,
and other factors IGT typically utilizes in pricing the equipment to a retail
customer; or
v. In such operation SG utilizes the greater of: (a) a
percentage of IGT gaming machines that is equal to or greater than the gaming
machine market share maintained by IGT in the operations market; or (b) a
majority of IGT gaming machines in the operation.
C. Specific Reservations:
i. Special Products: SG may, within the guidelines provided in
writing by IGT from time to time, solicit offers only within the Territory for
Special Products. As set forth in Exhibit B, pursuant to which SG may offer to
its customers within the Territory, "Special Products" means IGT linked
progressive systems, machine accounting systems, player tracking systems,
electronic funds transfer-related systems, keno systems, live game systems,
video and non-video lottery machines and systems software or firmware, including
any upgrades, utilized in a gaming device, and products only offered on a
recurring fee, revenue sharing or lease basis by IGT. All such offers shall be
subject to acceptance by IGT in its sole discretion. The parties specifically
reserve for future separate negotiations each such transaction within the
Territory that presents itself; it being specifically understood and agreed that
IGT is under no obligation to accept any such proposal from SG and may pursue
such business independently of SG provided such business opportunity was
previously known to IGT or IGT independently learns of such business
opportunity. Understandings reached between the parties pursuant to this
provision shall be evidenced by separate written agreements(s) and governed
solely by the terms and conditions thereof.
ii. Special Circumstances: In the event of special
circumstances which render the SG distribution of IGT Products and Special
Products within SG's designated Territory impractical or illegal (such as a
change of law, or required license or other legal qualification not satisfied by
SG), no commission will be due to SG. For every other circumstance in which the
Territory would otherwise apply, but the customer is a "Special Customer" and
insist in a written statement to SG upon dealing directly with IGT, IGT will pay
SG a commission of *** for each sale to a Special Customer as IGT is paid on the
actual invoice sales price, less shipping, taxes, duty and other direct costs
attendant to delivery of equipment. SG shall have no obligation or liability to
IGT or its Special Customers except for any work or products provided by or
through SG. Should SG employees assist in installation or repair service for IGT
Special Customers, IGT shall pay SG the then applicable SG rate for such
installation or service less a discount of *** plus expenses. IGT shall have no
other obligation or liability to SG with respect to Special Customers.
The term "Special Customer" means any retail customer that (a) has
operations or proposed operations inside and outside the Territory and (b)
insists in writing to SG upon dealing directly with IGT.
iii. IGT and SG agree to use their best efforts to assist the
other in preserving the territorial structure set forth in this Agreement and to
further the marketing efforts of the other to ensure the orderly distribution of
IGT Products.
iv. Used Trade-Ins: Should SG receive used equipment as
trade-ins on new sales of IGT Products, it may sell such used equipment even if
it is not an IGT Product. If such used equipment is sold, or leased by SG for
use outside the Territory, SG agrees to pay *** commission on the sales price,
or in the case of leased equipment on the list price of the equipment, less
shipping, taxes, duty and all other direct costs attendant to delivery of said
used equipment. The payment shall be made to IGT or its distributor(s) for the
location where the equipment is to be used. Notwithstanding the foregoing, SG
may sell used trade-ins only to non-affiliated, used equipment brokers operating
within the Territory without the obligation to pay IGT a commission; provided,
however, that IGT in each such sale shall be granted a First Right of Refusal to
purchase the machines under the same terms offered to such broker(s). In the
event SG fails to purchase used machines from its customers, IGT is, without
obligation to SG, free to purchase used machines from SG's customers. SG shall
provide IGT within fifteen (15) days from the end of each calendar quarter,
commencing March 1, 1998, with a list, by customer and location, of used machine
sales outside the Territory in North America.
In the event that sales of used machines cannot be fulfilled from SG's
used machine inventory, IGT shall be the preferred provider of used IGT machines
either sold within the Territory or placed in any of SG's operations. IGT's
price would be the published list price for the location the machines are
destined, less *** , unless otherwise agreed upon in writing.
D. Term: Except as provided in Paragraph 9, this Agreement shall
commence on the date set forth above and continue until May 31, 2001 ("Initial
Term"). At the end of said Initial Term, this Agreement shall continue for
consecutive two year renewal periods, upon the terms and conditions set forth
herein, unless canceled by either party by written notice delivered during the
time period between one hundred eighty (180) days and ninety (90) days prior to
a proposed termination at the end of said Initial Term or any 2 year continuance
thereafter. IGT may sell IGT Products in the Territory during the interim period
between the date Sodak receives such notice and the date the Agreement
terminates. In the event IGT sells IGT products in the Territory during the
interim period (a firm accepted order which is not thereafter materially
modified prior to actual shipment), IGT shall pay SG a commission of *** for
each sale as IGT is paid on the actual invoice sales price, less shipping,
taxes, duty and other direct costs attendant to delivery of equipment.
E. Models/Display Machines: IGT may, from time to time, change the
design or specifications for IGT Products and shall designate the specific
machine models and games to be offered in the Territory from the entire range of
IGT Products and Special Products. No machines, games or products of IGT may be
sold by SG, and no obligations shall accrue to SG hereunder, except for those
IGT machines, models, games and
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*** Pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities Exchange Act of 1934, as amended, confidential
portions of this exhibit have been redacted.
products included within this Agreement that are licensed by the applicable
licensing body for the specific jurisdiction involved, during the term of this
Agreement.
F. Standard Machine Specifications: IGT agrees that all IGT machines
provided to SG shall conform with the specifications for machines licensed by
the appropriate governmental licensing agency for the shipment of machines
within the Territory as designated by SG. Any change of or addition to said
specifications by SG shall be made only with prior approval by IGT and must be
authorized by said appropriate governmental licensing agency. Any change
required by governmental authority having responsibility for the licensure or
approval of gaming machines shall be deemed approved by the parties and shall be
a standard specification to be implemented by SG and IGT. Any change thus
required shall be deemed to require a change, as specifically designated by IGT
in its sole discretion, to the list price otherwise applicable. Any retrofit
shall be at SG's cost.
G. Manufacturer's Limited Warranty: IGT warrants all equipment, parts,
supplies and accessories manufactured by IGT to be in satisfactory operating
condition at the time of shipment from Reno, Nevada. Any minor repairs,
exchanges of parts and adjustments necessary to maintain the equipment in
satisfactory operating condition after delivery to SG shall be the
responsibility of SG, except that, in consideration of the distances within the
Territory, IGT will replace or repair any defective IGT part or component due to
the fault of IGT, PROVIDED these defective elements are returned to IGT by SG,
shipment at SG's expense, within ninety (90) days of shipment from Reno. IGT
WARRANTS THAT EQUIPMENT PURCHASED HEREUNDER WILL BE FREE FROM DEFECTS AND IN
GOOD WORKING ORDER. SG'S SOLE AND EXCLUSIVE REMEDY IN THE EVENT O F DEFECT IS
EXPRESSLY LIMITED TO THE RESTORATION OF THE EQUIPMENT TO GOOD WORKING CONDITION
BY ADJUSTMENT, REPAIR OR REPLACEMENT OF DEFECTIVE PARTS, AT IGT'S ELECTION.
VIDEO MONITORS (COVERED UNDER SEPARATE MANUFACTURER WARRANTY), MACHINES,
EQUIPMENT, AND OTHER PRODUCTS NOT MANUFACTURED BY IGT, ARE EXCLUDED FROM THIS
WARRANTY. HOWEVER, IGT AGREES TO TRANSFER TO SG WHATEVER TRANSFERABLE WARRANTIES
AND INDEMNITIES IGT RECEIVES FROM MANUFACTURERS OF NON-IGT MANUFACTURED
EQUIPMENT. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NO AFFIRMATION OF ACT,
INCLUDING BUT NOT LIMITED TO STATEMENTS REGARDING SUITABILITY FOR USE,
PERFORMANCE, PERCENTAGE HOLD, OR PAR VALUE OF THE EQUIPMENT SHALL BE DEEMED TO
BE A WARRANTY OR GUARANTY OF IGT FOR ANY PURPOSE. EXCEPT FOR ACTS CAUSED SOLELY
BY IGT's NEGLIGENCE OR WILLFUL MISCONDUCT, IN NO EVENT SHALL IGT OR ANY OF ITS
AFFILIATES, SUBSIDIARIES, REPRESENTATIVES, OR AGENTS BE LIABLE FOR DIRECT,
INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS, ARISING
OUT OF THE SALE OR DELIVERY OF IGT PRODUCTS PURSUANT TO THIS AGREEMENT.
THE LIABILITY OF IGT AND THE MANUFACTURER OF THE NOTE ACCEPTOR WITH
WHICH IGT MACHINES ARE EQUIPPED, WHETHER IN CONTRACT, IN TORT, UNDER WARRANTY,
IN NEGLIGENCE OR OTHERWISE, SHALL NOT EXCEED THE FAIR MARKET VALUE OF THE NOTE
ACCEPTOR AND UNDER NO CIRCUMSTANCES SHALL IGT OR THE MANUFACTURER OF THE NOTE
ACCEPTOR BE LIABLE FOR SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES. NEITHER IGT
NOR THE MANUFACTURER OF THE NOTE ACCEPTOR SHALL BE LIABLE IN ANY RESPECT FOR THE
ACCEPTANCE OF COUNTERFEITS AND/OR FRAUDULENT MATERIALS. ANY UNAUTHORIZED
MODIFICATION, ALTERATION, OR REVISION OF ALL OR ANY PORTION OF THE IGT EQUIPMENT
WHICH IS THE SUBJECT OF THIS AGREEMENT SHALL CAUSE THE WARRANTY DESCRIBED IN
THIS PARAGRAPH TO BE NULL AND VOID. IGT, ITS AFFILIATES, SUBSIDIARIES,
REPRESENTATIVES, AND AGENTS MAKE NO OTHER WARRANTY, EXPRESS OR IMPLIED.
IGT shall defend, indemnify and hold harmless SG from and against
any and all claims, demands, suits, and/or causes of action which arise or have
arisen either directly or indirectly as a result of, or in connection with, any
patent or copyright matters as to IGT Products or Special Products, save and
except for machines and devices manufactured by others.
H. Price/Payment for IGT Products: Subject to Paragraph 5, IGT shall
sell to SG standard IGT Products (except neuter IGT Products, custom
alterations, parts and Special Products) at IGT's then current
retail list price, as established by IGT in its sole discretion and provided to
SG from time to time in writing by IGT, F.O.B. Reno, Nevada, minus *** . A
standard IGT Product is that item which has, prior to the time of an SG order,
been designed and released to production by IGT and designated by IGT as
available for sale in the Territory. Subject to Paragraph 5, IGT shall sell to
SG neuter IGT Products at the then current retail list price for a standard IGT
Product minus *** and then minus *** (except an 80960 and vision-series standard
IGT Product, in which case *** shall be deducted from the retail list price).
All components necessary to complete a neuter IGT Product shall be purchased
from IGT pursuant to Paragraph 2 below. It shall be the sole responsibility of
SG to complete assembly in accordance with IGT standards before delivery to any
SG customer. Anything different from or in addition to a standard or neuter IGT
Product is a custom alteration. All custom alterations to IGT Products shall be
sold to SG at IGT's then quoted hourly rate plus materials minus *** . All
prices provided in this paragraph are F.O.B. Reno, Nevada, to which shall be
added applicable sales tax, shipping and all other direct costs attendant to
delivery to SG. SG and IGT shall coordinate to identify and provide specific
requirements for custom alteration work, and IGT shall provide to SG a written
estimate of the custom charges. IGT must accept the request for doing custom
alterations before IGT shall be bound to perform the custom alteration work. SG
must accept the estimate price in writing before SG shall be bound to purchase
the custom alteration. SG, for each 12 month period commencing October 1, 1997,
shall be entitled to, without charge, a credit of IGT engineering time equal to
*** of the IGT Product purchases hereunder for the 12 month period immediately
preceding the applicable October 1; up to a maximum such entitlement each such
12 month period of *** (determined by IGT's retail rate of custom engineering
work). Said engineering credit shall not, if unused in whole or part, be carried
over from one period to the next, but shall be extinguished. The *** engineering
time credit shall increase or decrease each year in the same percentage as any
increase or decrease in the IGT retail rate for custom engineering work.
i. Written Orders for IGT Products: All orders for IGT
Products and/or custom alterations shall be in writing on forms provided by IGT,
signed by an authorized employee of SG. No order by SG or any of its employees
shall be binding upon IGT until the same is formally accepted in writing by an
authorized employee of IGT at IGT's office in Reno. Once accepted by IGT, an
order may be canceled or modified only by mutual consent, subject to payment to
IGT by SG of expenditures incurred by IGT in connection with the order which are
not reasonably recoverable.
ii. Payment by SG for IGT Products: Unless otherwise specified
in writing at the time of order, payment in full by SG shall be made to IGT as
follows: (a) payment for orders for direct shipment (from IGT to SG's customer)
of IGT Products and for custom alterations shall be made within ninety (90) days
from the date of delivery to the carrier for shipment; (b) payment for stock
orders, except custom alterations, shall be made within one hundred thirty-five
(135) days from the date of delivery to the carrier for shipment ("stock orders"
are defined as orders by SG for IGT products that are shipped to an SG warehouse
and inventoried by SG to enable SG to meet future SG customer needs); and (c)
payment for IGT products for use in wide area progressive systems shall be made
within one hundred eighty (180) days from the date of delivery to the carrier
for shipment. If any of the above payments are made in full and received by IGT
at its Reno office within the respective times established above no interest
charge shall be applied. Payment for IGT orders shall be in U.S. dollars to
IGT's Reno office. As to sales on other than the above terms, payment in full
shall be made in not more than thirty-six (36) equal monthly installments of
principal, pursuant to such terms as is specified by SG in the sales order,
together with interest at the rate of *** over the prime lending rate as quoted
from time to time by the Wall Street Journal "Money Rate", prepayment may be
made at anytime without penalty; payment and interest to commence from the date
of delivery to the carrier for shipment. Any and all amounts not timely paid
shall accrue interest at a default interest rate of *** per month on the unpaid
balance of principal and/or accrued interest due. Additional discount of ***
from that provided in the pricing to SG set forth in this Paragraph 1.H. shall
be included for any order paid by SG and received by IGT at its Reno office
within twenty (20) days of delivery to the shipper.
I. Manufacture and Delivery: In addition to Paragraph 5 below, to
enable IGT to establish production schedules and place orders with its suppliers
with adequate lead time, SG will furnish to IGT, unless otherwise specified by
IGT, monthly written estimates of SG's requirements for IGT Products and parts
for the next three (3) calendar months. A mutually agreed upon delivery schedule
shall be established for each order. In no event shall SG or any SG employee or
SG agent represent to any customer a delivery date for IGT Products or parts
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*** Pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities Exchange Act of 1934, as amended, confidential
portions of this exhibit have been redacted.
which are to be shipped from other than SG existing inventory unless IGT has, in
writing, agreed to and accepted such delivery date and no amendment to the order
is made after such IGT acceptance. SG will select the mode of transportation
provided for all deliveries of IGT Products and parts hereunder and shall be
responsible to carriers for all charges and costs in effectuating delivery of
the IGT Products to SG at such places as may be mutually agreed to from
time-to-time. Each and every shipment shall be deemed delivered as of the date
of receipt of delivery at IGT's warehouse docks, at either Reno, Nevada, by an
authorized agent of SG or the SG-designated carrier.
J. Risk of Loss or Damage: Whenever IGT shall cause to be manufactured
and shipped any machines, parts, components or materials for delivery to SG, the
risk of loss or damage shall be on IGT until actual delivery of said machines to
SG in Reno, Nevada, or its designated shipper, in Reno, Nevada, at which time
the risk of loss or damage shall pass to SG; provided, however, that, if a
machine, part, component, or material is returned to IGT pursuant to warranty or
return to stock as provided herein, the risk of loss or damage shall pass to IGT
upon delivery to IGT at its Reno, Nevada, warehouse, or if IGT so requests, in
writing, to an authorized agent of IGT.
K. Return of Machines or Parts: Other than a return by SG of defective
parts within the warranty provisions of this Agreement, SG shall pay *** of the
purchase price of all unused IGT Products and Special Products returned to IGT
and *** of all parts returned to IGT as a restocking charge. No returns shall be
made of used, obsolete, customized or special order machines or parts or of
parts then out of IGT revision control. Shipping and all costs of return shall
be the sole responsibility of SG.
L. Independent Status: All persons hired or employed by SG in the
discharge of this Agreement shall be considered employees of SG and not of IGT
and shall be solely and exclusively under SG's direction and control. SG agrees
to obtain and maintain all business licenses necessary to its business, pay all
applicable taxes and fees, and to employ all salesmen, servicemen or other
persons only under terms by which IGT shall be released in writing from all
indebtedness from SG to such persons. SG further agrees to have all persons
employed by it properly covered by Workmen's Compensation or Employer's
Liability Insurance, as required by law; and to assume and pay at its own cost
all taxes and contributions required by an employer under any and all
unemployment insurance, old age pensions and other applicable so-called social
security acts. SG specifically agrees that it shall be solely responsible for,
and shall indemnify and save IGT harmless from, any and all loss, damage, and
costs (including attorney's fees) that IGT may sustain, or become liable for, by
reason of claims against IGT, on account of the acts of any employee or agent of
SG.
M. Dealer Operating Requirements: To provide appropriate
representation, and facilitate proper sale and servicing of IGT Products, Dealer
shall establish and maintain places of business, inventory levels and/or
agencies satisfactory to IGT, in its reasonable judgment, as to facilities,
appearance, sales and service operations, parts inventory, and trained personnel
and capital equipment. Such facilities shall be sufficiently established within
the Territory set forth above to adequately meet, within IGT's reasonable
judgment and commercially reasonable and consistent with industry standards, the
needs of customers within each jurisdiction for which IGT Products are located
within the said Territory.
N. Trade Name: The names IGT, and International Game Technology, the
IGT logo, and the names of IGT Products and IGT Special Products are registered
and/or are the exclusive property of IGT; and nothing herein contained shall
give to SG any interest in such IGT property, except the right to use them
within the Territory during the term of this Agreement in the Territory in
connection with the sale, lease, service or repair of the machines as provided
herein or applications for necessary permits. Except to the extent SG continues
to distribute IGT products, upon partial termination of this Agreement, SG shall
abandon at once the use as contemplated herein of the names IGT, or
International Game Technology or such IGT property or any similar name or logo
or colorable imitation, or misleading name, in the particular terminated
Territory.
O. Advertising: In the event IGT shall supply SG advertising material
relative to any of its products, SG shall display such advertising material as
directed by IGT, and in the absence of instructions, SG upon receipt of such
materials, shall promptly display them in a conspicuous and prominent manner.
IGT hereby grants to SG the non-exclusive and non-transferable license to use
the trademarks of IGT within the Territory for the sale
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*** Pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities Exchange Act of 1934, as amended, confidential
portions of this exhibit have been redacted.
or promotion of IGT Products in the Territory and as contemplated by this
Agreement. Prior to the use of the trademarks of IGT within the Territory, SG
shall provide IGT written notice of the proposed use and if IGT does not object
in writing within thirty (30) days of receipt of such notice, the proposed use
shall be deemed approved by IGT. The Trademarks, Trade name or Logos of IGT
shall not be used for any commercial purpose by SG in connection with
solicitation of customers or prospective customers outside the Territory. IGT
shall not unreasonably object to SG's proposed use as contemplated herein of the
trademarks of IGT within the Territory. Except to the extent SG continues to
distribute IGT Products upon partial termination of this Agreement, SG shall
immediately abandon the use of all IGT trademarks, or the use of such trademark
in the particular terminated Territory.
2. INSTALLATION, MAINTENANCE, PARTS AND SERVICE:
A. Purchase of Inventory: SG shall maintain, at its cost, a stock of
parts adequate to timely meet the needs of its customers and its obligations
under this Agreement.
B. Provision for Service: SG shall make available and offer to SG
customers within the Territory set forth above through its own employees or
agents, parts and repair service for IGT Products and parts at no cost to said
customers during the first ninety (90) days following installation for all IGT
Products sold or leased in the said Territory for a one-time flat fee of *** per
machine the first year of this Agreement and plus an increase of *** per machine
every 24 months thereafter, payable by IGT in cash or credit by IGT against
outstanding balances owed by SG. SG shall provide installation, parts, and
repair service not covered by the ninety (90) day parts and service warranty,
for all IGT Products within the Territory, at such rates and charges as are
competitive in the industry and shall make a good faith effort with such service
to maintain the reputation of IGT, subject to all, Federal, State and Local
laws, statutes, ordinances, regulations and lawful requirements of the gaming
authorities regarding the engagement in such services. Should IGT employees
assist in installation or repair service not covered by warranty, SG shall pay
IGT the then applicable IGT rate for such installation or service less a
discount of *** plus expenses.
C. Price of Parts: Except as provided by warranty herein and except as
to parts specified in writing from time to time by IGT to SG for which a
designated price to SG is made, and except as provided in Paragraph 5, the price
of standard IGT manufactured parts and components, and parts obtained by IGT
from other suppliers, provided to SG shall for each SG parts order be at the
then IGT retail price, as determined solely by IGT and provided in writing to SG
from time to time, minus the following: for a parts order equaling *** or more
as measured by IGT's list price, a discount of *** ; for a parts order less than
*** as measured by IGT's list price, a discount of *** . A standard IGT part is
that item which has, prior to the time of the order, been designed and released
to production by IGT and is a then current production component; anything
different from or in addition to a standard part, including without limitation
an obsolete part, is a custom alteration; all custom alterations to IGT's
standard parts shall be sold to SG at IGT's then quoted hourly rate or list
price minus the applicable dollar volume discount set forth in this paragraph
with a maximum discount, however, of *** . All prices for IGT parts are F.O.B.
Reno, Nevada, to which shall be added applicable sales tax, shipping and all
other direct costs attendant to delivery to SG. An additional discount of ***
shall be included for any parts order paid by SG and received by IGT at its Reno
office within twenty (20) days of delivery to shipper.
D. Method of Order and Payment: An order for parts or components shall
be in writing specifying the SG ordering agent, order number, and sufficiently
detailed specifications for identification of the kind and quantity of the items
ordered. Payment in full shall be made in full within ninety (90) days of the
date of delivery to SG of each part sold to SG. If said payment is not timely
made, interest at *** per month shall accrue on the outstanding balance of
principal and accrued interest until paid in full. Payment for IGT orders shall
be in U.S. Dollars to IGT's Reno, Nevada office.
E. Delivery: Delivery of parts, components and materials shall be
pursuant to the same terms and conditions as set forth above for delivery of IGT
Products pursuant to Paragraph 1.I above (including, without limitation,
estimates, time frames, representations and actual delivery).
3. FACILITATION OF SALES AND SERVICE, IGT PROPRIETARY INTERESTS:
- --------
*** Pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities Exchange Act of 1934, as amended, confidential
portions of this exhibit have been redacted.
To facilitate said sales service by SG, IGT agrees to provide SG with
schematics, wiring diagrams, maintenance and service manuals, and any other
technical material as determined solely by IGT for appropriate IGT Products,
Special Products as provided by IGT to SG under separate agreement as
contemplated by Paragraph 1.C(i) above, and parts as ordered by SG pursuant to
this Agreement. IGT also agrees to train SG technicians, provided SG pays all
expenses and travel costs incurred in such training. SG agrees that the
technical data not available in the normal course of business which is provided
pursuant to this Paragraph and any and all modifications thereto from whatever
party or source constitutes IGT proprietary information, and SG, its employees
and agents shall not disclose said information to any third party without the
prior written consent of IGT and shall not use such information to the detriment
of IGT or its products. SG specifically agrees that all software, designs and/or
processes, which are created, developed or originated by IGT and any and all
modifications thereto from whatever source are and shall remain the sole
property of IGT. This Paragraph shall survive termination of this Agreement for
any reason and the parties agree damages are inadequate to remedy any breach
hereof, and that injunctive relief is appropriate and may be granted by a court
of competent jurisdiction to halt any such breach.
4. ADDRESSES:
Any written notice, waiver, agreement, or offer and reply required by this
Agreement shall only be effective by letter, telegram and/or telex signed by the
person identified below and the same correspondingly addressed to the applicable
identified counter-party identified below:
SG IGT
---------------- -------------------
Sodak Gaming, Inc. IGT
c/o Michael G. Wordeman c/o G. Thomas Baker
301 S. Highway 16 9295 Prototype Drive
Rapid City, South Dakota 57701 Reno, Nevada 89511
5. BUSINESS PLANNING AND COORDINATION:
SG will use its best efforts to promote and market IGT Products hereunder. IGT
and SG agree to initiate communication procedures, including, but not limited to
business planning meetings; written, monthly operating plans which shall include
a forecast for the ensuing 6 months unit sales; coordination of trade-in
strategies and resale of used trade-ins; customer relations, and sales and
service; reviewing and determining the appropriate levels of staff for
marketing, sales, customer service, production coordination; designating
employees of IGT and SG in each area named above and for accounting and legal
who are responsible for maintaining communications between IGT and SG on
significant issues or matters arising under this Agreement; and monitoring
customer service and satisfaction, including direct IGT contact with customers
in the Territory. SG shall facilitate customer service satisfaction surveys in
the Territory and shall not unreasonably withhold such customer information as
requested by IGT in writing. SG shall provide, at the time of the annual
forecast provided for below, and every 6 months thereafter, a complete customer
list and a summary of developments within each jurisdiction within the
Territory.
In addition to the estimates provided pursuant to Paragraph 1.I above, SG shall
annually, by a date designated by IGT (not less than 30 days from the written
notification of such date), provide IGT with a written forecast of the ensuing
12 month orders hereunder by SG for IGT Products and Special Products. SG shall
provide to IGT a written forecast of its Product requirements by Product line
for the ensuing 6 months. Said forecasts may be adjusted at the next meeting
between the Parties, or as the Parties may otherwise agree in writing. Product
demand, as set forth in SG's forecasts, requiring delivery by IGT within ninety
(90) days of a forecast shall not be altered or modified by SG. Should SG's
actual orders for IGT Products pursuant to Paragraph 1H above to IGT be, at the
end of the annual forecast period, *** or less than forecast, for the next IGT
fiscal year the discount to SG under Paragraph 1.H above shall be reduced by ***
; provided, however, that no such discount reduction shall occur if SG has,
during the forecast period, maintained the lower of: (a) market share of sales
of IGT Products in the Territory of at least *** of the total number of similar
gaming equipment in the Territory, or (b) market share of sales by IGT of its
Products in Nevada of at least *** of the total number of similar gaming
equipment in Nevada. "Market Share"
- --------
*** Pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities Exchange Act of 1934, as amended, confidential
portions of this exhibit have been redacted.
shall mean the number of installed sales during the period of time corresponding
with the forecast period. Further, should SG's actual orders for parts, pursuant
to Section 2 above, to IGT be, at the end of the annual forecast period (two
applicable 6 month forecasts), *** or less than forecast for the next fiscal
year the discount to SG under Paragraph 2C above shall be reduced by *** .
6. REPORTS:
SG agrees that, to facilitate monitoring by IGT to assure satisfactory sales and
service results, it will:
A. Keep and provide IGT with access at all reasonable times to accurate
accounts, books and records, and reports as to sales and service, including, but
not limited to, warranty work, in such manner and form as IGT shall, from time
to time, require; and
B. Forward immediately to IGT every material customer complaint and
governmental order, advice, and communication relating to IGT Products, Special
Products, or IGT.
7. WAIVER OF BREACH:
The failure of either party to require the performance of any term of this
Agreement shall not be deemed a waiver unless so designated in writing by the
party against whom the breach occurred, and such waiver of any breach under this
Agreement shall not prevent a subsequent enforcement of such term, nor be deemed
a waiver of any subsequent breach.
8. BENEFIT AND MODIFICATIONS:
A. This Agreement supersedes and cancels all prior Exclusive
Distributorship Agreements including but not limited to the agreements between
the parties dated August 10, 1989, October 28, 1989, February 5, 1990, January
21, 1991, April 28, 1992, May 5, 1993, and September 26, 1994, and all
amendments or modifications, written and oral, to said Agreements; and shall be
binding upon and inure to the benefit of the legal representatives, successors,
and assigns of SG and IGT; provided, however, that SG shall not assign any
interest in this Agreement without the prior written approval of IGT, which
approval shall not be unreasonably withheld.
B. This Agreement may not be amended, altered, or modified except by a
writing signed by the President or Chairman of each Party.
9. EARLY TERMINATION:
Other than as provided in Paragraph 1.D. of this Agreement, the Agreement may be
terminated as follows:
A. By IGT. IGT may terminate this Agreement as to all or any part of
the Territory if:
i. Upon ninety (90) days' written notice delivered by IGT to
SG, if any ownership in SG or control or control influence over SG or its
successors is held by or passed to any single person or single business entity
which, in the reasonable belief of IGT, materially jeopardizes any license or
approval or application for such of IGT and/or its products and such ownership
or control influence is not forthwith removed; or
ii. a. SG is licensed in Nevada as a gaming manufacturer or
distributor of gaming equipment, excluding, if applicable, gaming or casino
signage, or as the Parties may otherwise agree on a case-by-case basis in
writing.
b. SG has failed to use its best efforts to attain a
reasonable level of sales performance and market share or to adequately or
timely provide parts or service within any specific jurisdiction within the
Territory, and such failure is not corrected within ninety (90) days of receipt
from IGT of written notice to SG of the specific nature of said failure and the
action necessary to correct said failure; or
- --------
*** Pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities Exchange Act of 1934, as amended, confidential
portions of this exhibit have been redacted.
c. If SG has directly or indirectly through an agent,
representative, partner, affiliate or entity or person under its control offered
any non-IGT Products which directly compete with IGT Products or IGT Special
Products, to the extent such activity is prohibited by Paragraph 1.B of this
Agreement, and if such activity is not corrected by SG within ninety (90) days
of receipt from IGT of written notice by SG of the nature of the activity and
the action necessary to correct said failure; or
d. If SG has failed to comply with written IGT policies or
procedures delivered to SG which shall be reasonable and consistent with
industry norms if such failure has materially affected the ability of SG to
perform its obligations imposed pursuant to this Agreement and if such failure
is not corrected by SG within ninety (90) days of receipt by SG of written
notice from IGT of the nature of said failure and the action necessary to
correct said failure; or
e. If SG has failed to establish and maintain sufficient
facilities as to any specific jurisdiction within the Territory, and such
failure has materially affected the ability of SG to perform its obligations
imposed pursuant to this Agreement, and such failure is not corrected to the
satisfaction of IGT within a reasonable time following receipt of written notice
to SG of the specific nature of said failure and the action necessary to correct
said failure; or
f. In its operations anywhere in the world, SG fails to
utilize a majority of IGT Products, unless: (x) IGT will not sell, lease or
otherwise provide IGT Products, Special Products, or Linked Progressive Systems
to SG for such operations; or (y) SG operation, management or financing of
lawful gaming establishments or route operations are conducted pursuant to
Paragraph 1.B of this Agreement.
B. By SG: Upon written notice delivered to IGT, SG may terminate this
Agreement as to all or any part of the Territory if:
i. In the reasonable belief of SG, a material defect or
condition is contained within a significant number of IGT Products which render
those products noncompetitive in the marketplace, or not fit for the use
intended, and which defect or condition is not corrected within a reasonable
time giving due regard to the nature of the defect.
ii. IGT's pricing and product availability adversely
materially affects SG's ability to be competitive as to any specific
jurisdiction within the Territory and such pricing or product availability
problem is not corrected by IGT within ninety (90) days' receipt of SG's written
notice of the specific nature of such problem, SG may terminate this Agreement
for that specific jurisdiction; or
iii. IGT has failed to use its best efforts to assist SG to
attain a reasonable level of sales performance and service of IGT Products or
Special Products as to any specific jurisdiction within the Territory (sales to
IGT or an IGT joint venture or affiliate are excluded from such determination),
and such failure is not corrected within ninety (90) days of receipt by IGT of
written notice from SG of the specific nature of said failure and the action
necessary to correct said failure.
C. By Either Party: Upon written notice delivered to the other party,
if:
i. The other party has failed to observe all applicable laws
or obtain any necessary license or approval from each gaming licensing
regulatory authority in each applicable jurisdiction within the Territory; and
such failure materially affects the performance of such other party or could
materially affect the complaining party in its business elsewhere. In the event
SG is unable to obtain a license or approval in a jurisdiction within the
Territory which does not materially affect IGT's business elsewhere and if the
failure is not corrected by SG within sixty (60) days of receipt of notice by SG
of the nature of the failure, IGT may terminate the right of SG to distribute
only in that jurisdiction within the Territory;
ii. If in the reasonable belief of either Party, the other
Party (the "Offending Party") has , directly, or because of the Offending
Party's associations, employees or operations, or conduct of the Offending
Party's agents or partners under the control of the Offending Party, failed to
maintain ethics, reputation, image, or customer relations in accordance with
gaming industry standards (including without limitation, standards applicable to
distributors and manufacturers licensed by the States of Nevada, New Jersey, and
South Dakota), and such failure is not corrected within ninety (90) days of
receipt from the complaining Party of written notice to the
Offending Party of that specific nature of said failure and the action necessary
to correct said failure or such other period as specified by a gaming regulatory
authority.
iii. The other party becomes insolvent, or files a petition
for adjudication as bankrupt or insolvent, or executes an assignment for the
benefit of creditors, or has a receiver appointed for it for any reason;
iv. Any employee, representative or authorized agent under
direct or indirect control of either Party or its affiliates disparages the
Products, companies, or the subsidiaries of the other Party, if such
disparagement is not corrected by the offending party within sixty (60) days of
the receipt of notice of the specific conduct from the non-offending party.
v. The other party materially breaches this Agreement.
10. EFFECT OF TERMINATION: OBLIGATION OF THE PARTIES:
Upon the termination of this Agreement for any reason, the rights of each Party
to payment on account of the sale of equipment or services already performed
when this Agreement was in effect shall not be impaired. Upon such termination,
each party shall cooperate with the other to effect a smooth termination, with
minimum economic harm to each party and with regard to the best interests of all
customers, and to reimburse the other in a commercially reasonable fashion for
any expenses incurred by it at the request of the first party. Upon the
termination of this Agreement, each party will turn over to the other copies of
all records relating to proprietary information of the other and confidential
information of the other. Further, upon termination, either party, subject to
the proprietary rights set forth above, shall have the right to develop,
manufacture and sell, lease or otherwise distribute or operate any and all
products in the Territory.
The Parties further agree to coordinate their efforts in terminating and
unwinding this Agreement so as to minimize any disruption to sales of IGT
Products.
In the event this Agreement is terminated by either Party for any reason, IGT
agrees to sell for a period of 3 years thereafter to SG parts, software, and
other parts or components SG may require which are then not obsolete and
necessary to service IGT Products and Special Products purchased by SG during
the term hereof. Such sales by IGT to SG shall be in accordance with IGT
standard retail commercial terms and conditions.
11. GAMING LAWS:
This Agreement is intended to only authorize and facilitate the sale, service,
and/or distribution of IGT Products and related products in a lawful manner, and
is subject to and conditioned upon all applicable federal, state, and local laws
relating to the activities contemplated by this Agreement. This Agreement shall
not be deemed to require or authorize any act or transaction except as may be in
full compliance with all such legal requirements. It is specifically agreed by
SG and IGT that each shall scrupulously observe all applicable federal, state,
and local laws relating to the activities contemplated by this Agreement. This
Agreement and the rights of the parties shall be construed in accordance with
the laws of the State of Nevada. Each party hereto agrees to take all lawful
actions necessary and make every lawful effort to procure and maintain all
required foreign, federal, state, and local licenses and approvals for
compliance with such legal requirements. Each Party specifically agrees to
comply with the provisions of the Foreign Corrupt Practices Act (15 U.S.C.
Sections 78dd-1, et seq.).
A. IGT agrees that it shall pay all costs of licensing proceedings,
governmental investigation and approval required by federal, state, and local
laws, regulations, ordinances or statutes as to IGT, its stockholders, agents,
employees or assigns and as to IGT-offered slot and/or any modifications,
components, parts or materials of IGT-offered slot machines.
B. SG agrees that it shall, at no cost to IGT, take all necessary
actions as liaison between IGT and governmental authorities to coordinate and
facilitate governmental investigations of IGT-offered machines, including
facilitation of locations testing of such machines, if such is required.
C. SG agrees that it shall pay all costs of licensing proceedings,
governmental investigations, and approval required by Foreign, Federal, State,
or local laws, regulations, ordinances or statutes as to SG, its stockholders,
agents, employees or assigns.
12. FORCE MAJEURE:
IGT shall not be liable for any commissions or damages resulting from failure to
accept or fill any order or orders for IGT Products, Special Products, or parts
thereunder, either in whole or in part, when any such failure shall be due to
any one or more of the following causes: orders or instructions issued by
representatives of the governments of the United States or Australia, or of any
state, Territory or district of the United States or Australia, or of any
municipality, or other political or governmental division of any such state,
Territory or district, or on account of IGT's inability to make complete
deliveries of all of its contracts because of the scarcity of labor or materials
used in manufacturing its products, or on account of fires, strikes, lockouts,
differences with workmen, accidents to machinery, or orders, decrees or
judgments of any court, or any cause not within the direct control of IGT after
a good faith effort. Neither Party shall be deemed to be in breach of this
Agreement due to its inability to perform caused by Force Majeure as defined in
this paragraph 12.
DATED as first set forth above.
IGT SG
BY: /s/ G. Thomas Baker BY: /s/ Michael G. Wordeman
G. Thomas Baker Michael G. Wordeman
President
Exhibit A
(as referenced in Section 1.B. of the Exclusive Distributorship
Agreement between Sodak Gaming, Inc. and IGT.)
Specialty Equipment and Supplies
Signage products
Horse Race games
Multi-Station, big screen, "21", poker, craps and roulette video games
Mini Bertha
Exhibit B
(As Referenced in Section 1.C.i)
1. IGS/Acres Bonusing System* *** of the List Price, excluding
maintenance and upgrades, of the
IGS Application Software plus
*** per Bonus Board Installed
by IGT
* In addition to the IGS/Acres Bonusing System, IGT may offer to
SG such other systems (a) developed by IGT; (b) licensed by
IGT; or (c) ( offered by IGT as a distributor for another
manufacturer of such systems, as agreed upon in writing by IGT
and SG.
Except as otherwise agreed to by IGT and SG in writing, SG shall not
sell, promote the sale of or distribute any IGT Special Products
that IGT no longer services or supports beyond those systems
previously installed.
Except as otherwise agreed to by IGT and SG in writing, SG may not
sell, promote the sale of or distribute any non-IGT machine
accounting or player tracking systems without the prior written
approval of IGT, such approval not to be unreasonably withheld.
2. Software/Firmware List Price, less ***
(Including Upgrades) **
** SG shall not, without prior written approval from IGT and
execution of a Software Distribution and Licensing Agreement,
including payment of a then agreed upon licensing fee, copy,
resell or redistribute any computer chips provided by IGT to
SG, but shall only purchase from IGT and then resell such
chips embodying IGT software programs.