EXHIBIT 10.2
MASTER CONTRACT
by and between the
Rhode Island Lottery
and
GTECH Corporation
Dated May 12, 2003
TABLE OF CONTENTS
Section Page
- ------- ----
1. Definitions and Contract Document Order of Preference.................. 4
2. Effective Date and Term................................................ 7
3. Construction of and Relocation to a New Corporate Headquarters......... 8
4. Expansion of Manufacturing Facility.................................... 10
5. Intentionally Deleted.................................................. 10
6. Investment and Employment within the State............................. 10
7. Acquisition and Implementation of Intangible Asset..................... 11
8. On-Line Lottery Products and Services to be Provided by GTECH.......... 12
9. Replacement of the VLCC System......................................... 14
10. Video Lottery Terminals and Other Gaming Machines...................... 14
11. Amendments to the On-Line Lottery Agreement............................ 17
12. Amendments to the Video Lottery Agreement.............................. 20
13. Amendments to the VLT Agreement........................................ 22
14. Use of Lottery System Infrastructure; Other State Services............. 24
15. Breach by the RIL; Termination......................................... 25
16. Breach by GTECH; Termination........................................... 26
17. Effect of Termination.................................................. 27
18. Property Rights........................................................ 27
19. Confidentiality........................................................ 28
20. General................................................................ 29
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MASTER CONTRACT
This Master Contract (this "Agreement") is made as of May 12, 2003, by
and between the Rhode Island Lottery (the "RIL"), an agency of the State of
Rhode Island, with its principal address at 1425 Pontiac Avenue, Cranston, Rhode
Island 02920, and GTECH Corporation ("GTECH"), a Delaware corporation with its
corporate headquarters at 55 Technology Way, West Greenwich, Rhode Island 02817.
Among other things, this Agreement amends the "Video Lottery Agreement," the
"On-Line Lottery Agreement" and the "VLT Agreement," as those terms are defined
below.
WITNESSETH
WHEREAS, the RIL is established to conduct a lottery in the State of
Rhode Island for the benefit of the State and its residents;
WHEREAS, GTECH is a world leading provider of lottery-related goods and
services, serving over one-half the state lotteries in the United States and
lotteries in six continents;
WHEREAS, GTECH currently maintains its corporate headquarters and its
primary manufacturing facilities in the State, and is one of the State's major
employers;
WHEREAS, GTECH has determined to expand its manufacturing operations in
its West Greenwich, Rhode Island facility, and must therefore decide upon a
location for a new corporate headquarters;
WHEREAS, after discussions with the RIL and the State, GTECH has
decided not to pursue attractive expressions of interest from lottery
authorities in other states and those states, and has determined to keep its
corporate headquarters and primary manufacturing facility in Rhode Island, in
consideration of the benefits to be realized by GTECH under this Agreement;
WHEREAS, after discussions with GTECH, the RIL has reached this
Agreement with GTECH in consideration of the benefits to be realized by the RIL
and the State under this Agreement, among them, an expected increase in lottery
revenues, thereby increasing the funds available to the State and its residents,
and the retention of jobs in the State by reason of GTECH's keeping its
corporate headquarters and primary manufacturing facility in Rhode Island;
WHEREAS, as more specifically set forth below, in consideration of the
RIL's performance of its obligations as set forth in detail hereinbelow, and
pursuant to the terms and conditions set forth hereinbelow, GTECH will:
A. Cause a new office building of at least 210,000
square feet to be constructed in the capital center district in the
City of Providence, relocate its corporate headquarters to that
facility, and maintain its corporate headquarters in the City of
Providence throughout the Term of this Agreement;
B. Expand its manufacturing operations in the Town of
West Greenwich, Rhode Island;
C. By the end of calendar year 2005, and continuing
thereafter during each year of the Term, employ within the State on
average during the applicable year at least one thousand (1,000) full
time active employees at wage rate levels not less than those defined
in Rhode Island General Laws Section 42-64.5-2(7);
D. Purchase from the RIL, for Twelve and one-half
Million Dollars ($12,500,000), the right: (i) to be the RIL's exclusive
provider of information technology hardware, software and related
services pertaining to (a) the design, development, implementation
and/or operation of Video Lottery Central Communications Systems, (b)
the design, development, implementation, operation and/or sales of
On-Line Games (expressly excluding instant ticket printing), and (c)
the processing of On-Line Game wagers and Video Lottery wagers; and
(ii) to supply Video Lottery Terminals and other gaming machines,
pursuant to Section 10.
E. Provide the following products and services:
(i) By January 1, 2007, replacement of the RIL's
existing on-line lottery gaming system with a new,
state-of-the-art on-line lottery gaming system utilizing
GTECH's Enterprise Series central computer system and
satellite (or other state-of-the-art technology) based
Internet Protocol ("IP") network;
(ii) By January 1, 2015, replacement of (a) RIL's
then-existing on-line lottery central-system hardware
(excluding the central system communications hardware to the
extent it can continue to be used without impairing the
functionality of the replacement system) with new,
state-of-the-art on-line lottery central system hardware, and
(b) the then-existing on-line lottery terminals and other
on-line lottery sales devices (to the extent their failure
rates are more than thirty percent (30%) higher than their
failure rates were with respect to the first full Agreement
Year after their installation) with new, state-of-the-art
on-line lottery terminals and other on-line lottery sales
devices;
(iii) By January 1, 2010, replacement of the RIL's
existing video lottery central communications system;
(iv) Within six months of the Effective Date,
replacement of at least one-half of the eight hundred sixty
(860) Video Lottery Terminals previously provided by GTECH to
the RIL (and installed at the Newport jai alai fronton and at
the Lincoln racing track) with new Video Lottery Terminals,
and replacement of the remainder of such eight hundred sixty
(860) Video Lottery Terminals within one year of the Effective
Date. In each case, the existing Video Lottery Terminals shall
be replaced with Video Lottery Terminals provided by GTECH
from a new source obtained by GTECH through acquisition,
contract or otherwise;
(v) By January 1, 2005, and again by January 1,
2015, replacement of one hundred twenty-five (125) of the
RIL's existing instant ticket vending
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machines, with new, on-line enabled devices, including full
services route operation;
(vi) Subject to RIL approval in a manner
consistent with current RIL policies and procedures, after or
in connection with the system replacement described in (i)
above, providing an unlimited number of licenses to GTECH's
"Lottery Inside(TM)" product and the necessary related
printers, to accommodate distribution and expansion of the
RIL's lottery products, including expansion into various
retail locations not presently selling RIL lottery products;
(vii) Subject to RIL approval in a manner
consistent with current RIL policies and procedures, products,
licenses and services necessary to Deploy within twelve (12)
months after the Effective Date hereof, up to twenty-five (25)
GTECH EIL machines, and, pursuant to the parties' discussions
and agreement to occur within six (6) months after any such
Deployment (and again subject to RIL approval in a manner
consistent with current RIL policies and procedures), the
Deployment of an agreed number of additional EIL machines, if
any, throughout the State;
(viii) Subject to RIL approval in a manner
consistent with current RIL policies and procedures, products,
licenses and services necessary to implement GTECH's
"E-scratch(TM)" game and other agreed-upon new games, to the
extent permissible under applicable law; and
(ix) Licenses and services necessary to maintain
an optimal mix of monitor games on the RIL's Keno Terminals,
including presentation of a new monitor game for possible
implementation every twenty-four months after the Effective
Date;
WHEREAS, as part of this Agreement, the RIL will permit GTECH to use,
and assist and cooperate with GTECH in its use of the RIL's on-line lottery
system infrastructure - i.e., the communications network, the retailer points of
sale and terminals located therein and the on-line lottery central system - for
the processing of commercial services transactions such as telephone airtime
cards and mobile telephone airtime replenishments, such use to be pursuant to
mutually agreed upon terms and conditions as described more fully herein;
WHEREAS, GTECH has been the RIL's primary provider of on-line lottery
goods and services since the lottery's inception, and currently provides on-line
lottery and video lottery goods and services under the following agreements:
A. Video Lottery Central Computer System Agreement
between GTECH and the RIL dated as of December 20, 2001 (the "Video
Lottery Agreement");
B. Video Lottery Terminal Technology Provider License
Agreement between GTECH and the RIL dated as of September 28, 2000 (the
""VLT Agreement"); and
C. The On-Line Gaming Agreement between GTECH and the
RIL dated January 29, 1997 as amended by a First Amendment dated March
16, 1998, a Second
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Amendment dated July 19, 1999, a Third Amendment dated January 29,
1997, and a Fourth Amendment dated May 14, 2001 (as so amended, the
"On-Line Lottery Agreement"); and
WHEREAS, GTECH and the RIL have agreed to amend the Video Lottery
Agreement, the VLT Agreement and the On-Line Lottery Agreement so as to conform
them to the overall agreement they have reached.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth herein below, the parties hereby agree as follows.
1. DEFINITIONS AND CONTRACT DOCUMENT ORDER OF PREFERENCE
1.1. Definitions. The capitalized terms set forth below have the
corresponding meanings when used in this Agreement. Other capitalized terms are
defined in this Agreement when they are first used.
"Agreement Year" means any twelve-month period beginning on (and including) the
Effective Date (or an annual anniversary of the Effective Date) and ending on
(and including) the date that is the day prior to the next annual anniversary of
the Effective Date.
"Business Day" means a day on which banks in Providence, Rhode Island are open
to the general public for regular business, provided such day is not a Saturday
or Sunday.
"Deploy" means to install and make operational and available for public use, and
"Deployed" means installed and made operational and available for public use.
"Derivative Work" means a work of Intellectual Property based upon one or more
preexisting works of Intellectual Property, such as a translation, modification,
condensation or enhancement, or any other form in which a preexisting work of
Intellectual Property may be recast, transformed, or adapted. In addition, a
work consisting of revisions, elaborations or other modifications which, as a
whole, represent an original work of Intellectual Property, is a "Derivative
Work."
"Documentation" means the user's manual, technical data, diagrams, training
materials and other printed instructions pertaining to Software provided by
GTECH to the RIL, in the standard form used by GTECH in its business, and any
amendments, modifications, corrections and/or updates thereto provided by GTECH
to the RIL from time to time.
"Effective Date" has the meaning set forth in Section 2.2, below.
"Efficiency Rating" means, in relation to a supplier of Video Lottery Terminals,
during the Evaluation Period, such supplier's Net Terminal Income percentage in
relation to its percentage of the total number of Video Lottery Terminals
Deployed. A supplier's Efficiency Rating is calculated by determining the
percent that the Net Terminal Income generated by the Deployed Video Lottery
Terminals provided by such supplier during the Evaluation Period makes up of the
total Net Terminal Income generated by all Deployed Video Lottery Terminals
during the
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Evaluation Period, and dividing such percent by the percent that the number of
Deployed Video Lottery Terminals provided by such supplier during the Evaluation
Period makes up of the total number of Deployed Video Lottery Terminals during
such Evaluation Period. For example, if, with respect to an Evaluation Period,
Net Terminal Income generated by Video Lottery Terminals provided by a certain
supplier was $1,769,645, Net Terminal Income generated by all Video Lottery
Terminals was $4,819,234, the number of Deployed Video Lottery Terminals
provided by such supplier was 858 and the total number of Deployed Video Lottery
Terminals was 2,213, then the supplier's "Efficiency Rating" would be 94.71%, as
follows:
($1,769,645/$4,819,234) / (858/2,213) = 94.71%
"EIL" means GTECH's Electronic Instant Lottery product as currently deployed by
GTECH (i.e., as of the Effective Date of this Agreement).
"Evaluation Period" in regard to calculating an Efficiency Rating, means the
first thirteen (13) weeks of the calendar year.
"GTECH" means GTECH Corporation.
"GTECH Business Affiliate" shall mean any corporation, trust, partnership, joint
venture or any other form of business entity that (acting jointly with GTECH or
at the direction of GTECH) owns, leases or finances Investment Requirement
Assets (as defined in Section 6.1) which are used by GTECH in GTECH's business
operations in the State.
"Intangible Asset" has the meaning given that term in Section 7.1.
"Intangible Asset Purchase Price" has the meaning given that term in Section
7.2.
"Intellectual Property" of GTECH or the RIL, respectively, means the IPR,
"Know-how" and the "Technical Information" of such party.
"IPR" means any intellectual property rights of any nature whatsoever existing
in any part of the world whether registered or unregistered including, without
limitation, patents, trade marks, service marks, registered designs,
applications for any of the foregoing, copyright, rights in designs, inventions,
confidential information and know how.
"Keno Terminal" means GTECH's Isys(TM) on-line lottery terminal (as such
terminal may be upgraded by GTECH and/or replaced by GTECH from time to time),
configured so as to accommodate sales of the RIL's "Keno" lottery game - e.g.,
configured so as to include a monitor depicting the play of the game.
"Know-how" means the various techniques, skills, data, experience, processes,
procedures, and all other knowledge of a secret, proprietary or confidential
nature including, without limitation, that relating to lottery technology,
and/or to the design, development, implementation, operation and maintenance of
lottery systems, and/or to any Derivative Works thereof.
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"Licensed Product" means (i) the Software, or any module, component or any part
thereof provided by GTECH to the RIL hereunder, and (ii) any Derivative Works
thereof provided by GTECH to the RIL or otherwise obtained by the RIL from time
to time, and (iii) Documentation related to the foregoing.
"Net Terminal Income" means, in relation to a Video Lottery Terminal, the total
of all currency placed into a Video Lottery Terminal less credits redeemed for
cash by players.
"Object Code" means computer software programs assembled or compiled in magnetic
or electronic binary form on software media, which are readable and usable by
machines, but not generally readable by humans without reverse assembly, reverse
compiling or reverse engineering.
"On-Line Game" means a lottery game offered for sale by the RIL that involves
on-line computer processing of the sale transaction, including but not limited
to Keno, EIL, "E-scratch(TM)," and lottery games in which players choose their
own, or use automatic computerized selection of, numbers, letters or other
symbols for the ticket (or other evidence, tangible or intangible) constituting
their entry into the game; but specifically excluding Video Lottery Games.
"Software" means software or an item of software, including without limitation
Object Code and all printed or magnetically encoded materials, but not including
the Source Code related thereto.
"Source Code" means computer software programs written in programming languages
which are intelligible to trained programmers and may be used by a compiler to
create Object Code, including but not limited to any special tools, such as
linkers and libraries that may be used in producing Object Code in executable
form.
"State" means the State of Rhode Island.
"Technical Information" means all Software, Documentation and other technical
and/or commercial information of a party (whether in human or machine readable
form and whether stored electronically and/or otherwise) and any Derivative
Works thereof.
"Term" has the meaning set forth in Section 2.5, below.
"Video Lottery Games" has the meaning given the term in Rhode General Laws
Section 42-61.2-1(6).
"Video Lottery Terminal" and "VLT" have the meaning given the term "Video
Lottery Terminal" in Rhode General Laws Section 42-61.2-1(7) as may be hereafter
amended from time, and shall also include any electronic computerized device
used to play Video Lottery Games authorized by the Rhode Island Lottery
Commission or other governing body.
1.2. Contract Document Order of Preference. Any conflict, inconsistency
or ambiguity between or among this (i) Agreement, (ii) the Video Lottery Central
Computer System Agreement between GTECH and the RIL dated as of December 20,
2001, (iii) the Video Lottery Terminal Technology Provider License Agreement
dated as of September 28, 2000, (iv) the On-Line Gaming Agreement between GTECH
and the RIL dated January 29, 1997, (v) the First Amendment to the document
described in (iv) dated March 16, 1998, (vi) the Second
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Amendment to the document described in (iv) dated July 19, 1999, (vii) the Third
Amendment to the document described in (iv) dated January 29, 1997, and (viii)
the Fourth Amendment to the document described in (iv) dated May 14, 2001, shall
be resolved by giving precedence to the document having the most recent
effective date.
2. EFFECTIVE DATE AND TERM
2.1. Subject to Sections 2.3. and 2.4, this Agreement shall not come
into effect unless all of the following are satisfied (or, as to 2.1.B, is
waived by GTECH in writing), by 5:00 p.m. (local time in Rhode Island) on June
30, 2003 (the "Satisfaction Date"):
A. the Rhode Island State Legislature has passed and the
Governor of the State has signed into law, an act having the effect of
exempting this Agreement and the subject hereof from the provisions of
Rhode Island General Laws Section 37-2(1) and Rhode Island General
Laws Section 42-61.2-4(3)(2);
B. the Rhode Island State Legislature has passed and the
Governor of the State has signed into law, an act amending Rhode Island
General Laws Section 42-61.2-1(1)(3) by deleting the last sentence of
that section;
C. this Agreement and the Rhode Island Lottery
Director's execution of this Agreement have been approved by the Rhode
Island Lottery Commission, which has evidenced such approval by
executing this Agreement; and
D. this Agreement has been signed by the Director of the
Rhode Island Lottery, having obtained the prior approval of the Rhode
Island Lottery Commission.
2.2. The RIL shall notify GTECH telephonically, and in writing by
facsimile and regular mail, on the date that all of the conditions in Sections
2.1.A through D have been satisfied (or, as to 2.1.B, waived by GTECH in
writing). Upon the giving of such notice, a copy of such notice shall be
attached to this Agreement as Exhibit A. Provided all of the conditions in
Sections 2.1.A through D have been satisfied (or, as to 2.1.B, waived by GTECH
in writing) by the Satisfaction Date, then this Agreement shall come into effect
at the start of the RIL's business day on July 1, 2003, and July 1, 2003 shall
be the "Effective Date." If, however, any of the conditions in Sections 2.1.A
through D has not been satisfied (and, as to 2.1.B, also has not been waived by
GTECH in writing) by June 30, 2003, but such date for satisfaction (or waiver)
of the conditions in Section 2.1.A through D has been extended by GTECH pursuant
to Section 2.3
- -----------------------
(1) Rhode Island State Purchases Act, R.I. Gen. Laws Section 37-2-7(16)
(application of the State Purchases Act - dealing with State procurements of
goods and services - to the Rhode Island Lottery Commission).
(2) Rhode Island Video Lottery Terminal Act, R.I. Gen. Laws Section 42-61.2-4(3)
(application of the State Purchases Act - dealing with State procurements of
goods and services - to the Video Lottery Terminal Act).
(3) R.I. Gen. Laws Section 42-61.2-1(1) (The last sentence of the definition of
"Central communication system" limits the number of Video Lottery Terminals that
may be provided by the provider of the video lottery central communications
system to a maximum of fifty percent (50%) of the total number of Video Lottery
Terminals.
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below, then the date that the RIL notifies GTECH (as set forth in this Section
above) that all of the conditions in Sections 2.1A through D have been satisfied
(or, as to Section 2.1.B, waived by GTECH in writing) shall be the "Effective
Date."
2.3. Notwithstanding the provisions of Section 2.1 and 2.2, GTECH shall
be entitled, by giving written notice to the RIL, to extend the date of
fulfillment of the conditions set forth in Section 2.1 - i.e., GTECH shall be
entitled to specify a later Satisfaction Date.
2.4. If any of the conditions set forth in Section 2.1 is not fulfilled
(or, as to 2.1.B, waived by GTECH in writing) by the Satisfaction Date (as such
date may be extended), this Agreement shall not come into effect. Neither party
shall have any claim against the other as a result of the non-fulfillment of any
of the conditions set forth in Section 2.1.
2.5. The term of the Agreement (the "Term") shall be from the Effective
Date through and including the twentieth (20th) annual anniversary of the
Effective Date.
3. CONSTRUCTION OF AND RELOCATION TO A NEW CORPORATE HEADQUARTERS
3.1. On the terms and subject to the conditions set forth in this
Section 3, (i) GTECH (or a GTECH Business Affiliate) will develop and construct
not later than December 31, 2006, a new office building of at least 210,000
square feet to be constructed on Parcel 9 in the capital center district in the
City of Providence (the "New Headquarters Building"), (ii) upon completion,
GTECH will relocate its corporate headquarters as soon as is reasonably possible
to that facility from its present location in West Greenwich, Rhode Island, and
(iii) thereafter, GTECH will maintain its corporate headquarters in the City of
Providence throughout the Term of this Agreement.
3.2. Subject to Sections 3.6 and 3.7, GTECH will file (and/or GTECH
will assure that the applicable GTECH Business Affiliates file) applications for
all the necessary permits and approvals in connection with the development and
construction of the New Headquarters Building, and included among such
applications GTECH will file (and/or GTECH will assure that the applicable GTECH
Business Affiliates file):
A. By October 31, 2003, an application for a Certificate
of Approval with respect to the New Headquarters Building with the
Providence Capitol City Commission;
B. By March 15, 2004, an application for a foundation
and pile permit with respect to the New Headquarters Building (provided
the Certificate of Approval referred to in Section 3.2.A has been
received by such date, and if not, as soon as possible after such
Certificate of Approval has been received); and
C. By May 15, 2004, an application for a building permit
with respect to the New Headquarters Building (provided the foundation
and pile permit referred to in Section 3.2.B has been received by such
date, and if not, as soon as possible after such foundation and pile
permit has been received).
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3.3. After filing the applications referred to in Section 3.2, GTECH
will use its best efforts to pursue and obtain (and/or to cause the applicable
GTECH Business Affiliates to pursue and obtain) the permits and approvals so
applied for as soon as is reasonably possible.
3.4. GTECH will (and/or GTECH will cause the applicable GTECH Business
Affiliates to): (i) begin work on the foundation of the New Headquarters
Building within forty-five (45) days of the receipt of the foundation and pile
permit referred to in Section 3.2.B; and (ii) begin construction of the New
Headquarters Building within forty-five (45) days of the receipt of the building
permit referred to in Section 3.2.C.
3.5. GTECH will (and/or GTECH will cause any involved GTECH Business
Affiliate to) use its best efforts to cause the New Headquarters Building to be
ready for occupancy, and GTECH will take occupancy, within twenty-four (24)
months after all necessary permits and approvals from all applicable authorities
have been received, and in any event, by December 31, 2006, subject however, to
Sections 3.6 and 3.7.
3.6. If GTECH agrees, pursuant to Section 2.3, to extend the
Satisfaction Date beyond June 30, 2003, then for each day after June 30, 2003
until the Satisfaction Date, GTECH shall have automatically a one-day extension
of the dates set forth above in Sections 3.1, 3.2 and 3.5.
3.7. Conditions Applicable to this Section 3
A. If GTECH and the City of Providence do not enter into
a mutually agreeable tax stabilization agreement by the end of the day
on June 20, 2003, then GTECH shall notify the Governor of the State of
such delay (and the reasons therefor) in writing. If GTECH and the City
of Providence do not enter into a mutually agreeable tax stabilization
agreement by the end of the day on September 18, 2003 (such date being
90 days after June 20, 2003), then, for each day after September 18,
2003 until the day GTECH and the City of Providence enter into a
mutually agreeable tax stabilization agreement, GTECH shall have
automatically a one-day extension of the dates set forth above in
Sections 3.1, 3.2 and 3.5, provided that, in any event, GTECH shall
build and occupy its New Corporate Headquarters by September 30, 2007.
B. Notwithstanding anything to the contrary contained in
this Section 3 (including but not limited to Section 3.6), GTECH shall
not allow a delay in building and occupying the New Headquarters
Building to extend beyond December 31, 2006, except pursuant to Section
3.7.A and as follows: If any action or inaction on the part of the City
of Providence Capitol Center Commission (other than that addressed in
Section 3.7.A) or other State or City agency, commission or other body
(i) responsible for the issuance of permits and/or approvals relating
to planning, building and/or occupancy of the New Headquarters
Building, and/or (ii) with oversight over the planning, building and/or
occupancy of the New Headquarters Building, results in a material delay
in the planning, building and/or occupancy of the New Headquarters
Building, then GTECH shall notify the Governor of the State of such
delay (and the reasons therefor) in writing. In such event, provided
that GTECH was not the cause of the action or inaction on the part of
the City of Providence Capitol Center Commission or other State or City
agency,
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commission or other body, GTECH shall have automatically an extension
beyond December 31, 2006 in which to build and occupy the New
Headquarters Building, such extension to be equal to the number of days
delay caused by the action or inaction on the part of the City of
Providence Capitol Center Commission or other State or City agency,
commission or other body, provided that, in any event, GTECH shall
build and occupy its New Corporate Headquarters by September 30, 2007.
4. EXPANSION OF MANUFACTURING FACILITY
GTECH will expand its manufacturing operations in the Town of West Greenwich,
Rhode Island, in the facility presently containing GTECH's corporate
headquarters.
5. INTENTIONALLY DELETED
[This Section has been intentionally deleted by the parties.]
6. INVESTMENT AND EMPLOYMENT WITHIN THE STATE
6.1. GTECH (or a GTECH Business Affiliate) will invest in the aggregate
on or before December 31, 2008, at least $100,000,000 in the State (the
"Investment Requirement"), in connection with acquiring interests in land,
building development projects and/or improvements to real property or
facilities, performing GTECH's obligations under this Agreement, the On-Line
Lottery Agreement, the Video Lottery Agreement and the VLT Agreement, and
otherwise in connection with GTECH's business operations in Rhode Island
("Investment Requirement Assets").
6.2. On or before April 1 of each year 2004 through and including 2009,
GTECH shall submit to the RIL certifications by GTECH and (if applicable)
GTECH's Business Affiliates, setting forth the amount of expenditures made by
GTECH and (if applicable) GTECH's Business Affiliates within the scope of
Section 6.1, so as to enable the RIL, after April 1, 2009, to confirm GTECH's
compliance with its obligation under Section 6.1.
6.3. By the end of calendar year 2005, and continuing thereafter during
each year of the Term, GTECH will employ within the State on average during the
applicable year at least one thousand (1,000) full time active employees at wage
rate levels not less than those defined in Rhode Island General Laws
Section 42-64.5-2(7).
6.4. On or before February 1, 2006, and on or before February 1 of each
year thereafter during the Term, GTECH shall submit to the RIL a signed
certification certifying that GTECH has complied with its obligation under
Section 6.3 with respect to the immediately preceding calendar year.
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7. ACQUISITION AND IMPLEMENTATION OF INTANGIBLE ASSET
7.1. The "Intangible Asset" consists of the right and license, for the
twenty-year period after the Effective Date:
A. to be the RIL's exclusive provider of information
technology hardware, software and related services pertaining to (a)
the design, development, implementation and/or operation of Video
Lottery Central Communications Systems, (b) the design, development,
implementation, operation and/or sale of On-Line Games, and (c) the
processing of On-Line Game wagers and Video Lottery wagers (such
information technology hardware, software and related services, but
expressly excluding instant ticket printing, are hereinafter
collectively referred to as the "Lottery Products and/or Services");
and
B. to have the rights with respect to the supply of
Video Lottery Terminals and other gaming machines, pursuant to Section
10.
7.2. The RIL hereby sells to GTECH, and GTECH hereby purchases, the
Intangible Asset for Twelve and one-half Million Dollars ($12,500,000) (the
"Intangible Asset Purchase Price"). The RIL shall invoice GTECH for the
Intangible Asset Purchase Price at the time it gives GTECH the notice described
in Section 2.2, and GTECH shall pay such invoice within two (2) Business Days of
the date of GTECH's receipt thereof. Payment shall be made by electronic funds
transfer to the bank and RIL bank account of which GTECH is notified by the RIL
in writing.
7.3. The purchase and sale of the Intangible Asset shall be effective
as of the Effective Date.
7.4. The RIL agrees that, during the Term of this Agreement, it shall
not, without the prior written consent of GTECH, directly or indirectly,
purchase, lease, license or otherwise procure any Lottery Products and/or
Services from any entity other than GTECH, unless, subject to the provisions of
Section 10, the RIL first presents to GTECH the opportunity to provide such
Lottery Products and/or Services and GTECH declines to exercise its right of
first refusal with respect thereto. For the avoidance of doubt, Section 10 shall
take precedence over this Section 7.4.
7.5. Notwithstanding any provision in this Agreement to the contrary,
in the event of the occurrence of any one or more of the following circumstances
after the Effective Date and prior to the twentieth (20th) annual anniversary of
the Effective Date, then no further payments shall be due to the RIL pursuant to
Section 7.2, and, in addition, the RIL (or its successor in interest) shall,
immediately upon such occurrence and without need for notice or demand, refund
to GTECH that portion of the Intangible Asset Purchase Price equal to the
product of (x) the Intangible Asset Purchase Price multiplied by (y) a fraction,
the numerator of which is 7,300 minus the number of calendar days in the Term
after the Effective Date that passed prior to the date of the occurrence, and
the denominator of which is 7,300:
11
A. This Agreement expires or is terminated by either
party pursuant to the terms of this Agreement (except only a
termination by the RIL pursuant to Section 16.2) prior to the twentieth
(20th) annual anniversary of the Effective Date;
B. This Agreement is suspended, terminated, annulled,
rescinded and/or declared void pursuant to any law, rule, executive
order, court order or other order, decree, finding or decision of any
governmental authority having jurisdiction over the parties and the
subject matter of this Agreement;
C. The RIL's authority and/or ability to offer On-Line
Games and/or Video Lottery Games is terminated, revoked, suspended for
two (2) consecutive months (or such longer period as may be agreed to
by GTECH) and/or there is a "Significant Decline in Sales." A
"Significant Decline in Sales" means the occurrence of either of the
following: (i) Total Lottery Sales for any two-month period are less
than $41,666,667 (i.e., $250 Million /12 months x 2 months) and also
are more than ten percent (10%) less than Total Lottery Sales over the
corresponding two-month period one year prior; or (ii) Total Net
Terminal Income for any two-month period is less than $75,000,000
(i.e., $450 Million /12 months x 2 months) and also is more than ten
percent (10%) less than Total Net Terminal Income over the
corresponding two-month period one year prior;
D. the authority to offer within and throughout the
State Video Lottery Games and/or lottery games that involve on-line
computer processing of the sale transaction, is granted to another
department, commission, agency or other body of the State, whether or
not the RIL retains its authority to offer such lottery games, unless
such other department, commission, agency or other body of the State is
a successor to the RIL, and maintains an exclusive right to operate
On-Line Games and Video Lottery Games for the State, and assumes in
writing all of the RIL's obligations hereunder at the time such
authority is granted to such other department, commission, agency or
other body; and/or
E. if any department, commission, agency or other body
of the State other than the RIL is given the authority to procure
"Other Gaming Machines" (as defined in Section 10.6 below) and, as a
result of the competition to Video Lottery Games from the games offered
via such Other Gaming Machines, the sum of the Net Terminal Incomes of
all Video Lottery Machines Deployed by the RIL over any twelve-month
period is (i) ninety percent (90%) or less of the Net Terminal Income
of all Video Lottery Machines Deployed by the RIL over the
corresponding twelve-month period one year prior, and (ii) less than
Four Hundred Fifty Million Dollars ($450,000,000).
8. ON-LINE LOTTERY PRODUCTS AND SERVICES TO BE PROVIDED BY GTECH
8.1. By January 1, 2007, GTECH shall replace the on-line lottery gaming
system provided by GTECH pursuant to the On-Line Lottery Agreement, with a new,
state-of-the-art on-line lottery gaming system utilizing GTECH's Enterprise
Series central computer system and satellite (or other state-of-the-art
technology) based IP network. Such replacement will include replacement of the
following provided to RIL pursuant to the On-Line Lottery Agreement: (i) the
central system hardware (excluding the central system communications hardware to
the
12
extent it can continue to be used without impairing the functionality of the
replacement system), (ii) the central system operating system software, (iii)
the central system application software, (iv) the communications software
(excluding central system communications software that can continue to be used
without impairing the functionality of the replacement system), (v) the lottery
terminals and other sales devices. Thereafter, and by January 1, 2015, GTECH
shall replace (a) the then-existing on-line lottery central-system hardware
(excluding the on-line central system communications hardware to the extent it
can continue to be used without impairing the functionality of the replacement
system), with new, state-of-the-art on-line lottery central system hardware, and
(b) the then-existing on-line lottery terminals and other on-line lottery sales
devices (to the extent their failure rates are more than thirty percent (30%)
higher than their failure rates were with respect to the first full Agreement
Year after their installation) with new, state-of-the-art on-line lottery
terminals and other on-line lottery sales devices. The RIL shall take all
actions as are necessary on the part of the RIL to enable GTECH to fulfill its
obligations hereunder.
8.2. Subject to GTECH's acquisition of Interlott Technologies, Inc.
("Interlott") closing by August 31, 2003, GTECH shall: (i) enter into an
amendment with the RIL (a) extending the term of the RIL's existing contract
with Interlott (as such may have been amended) through December 31, 2004, (b)
removing the RIL's obligation to pay lease payments to Interlott thereunder, (c)
removing Interlott's obligations (if any) to pay the RIL liquidated damages,
penalties, fees, and/or indirect, special, consequential and/or punitive damages
thereunder (whether with respect to events before or after the Effective Date
hereof), and (d) make such other amendments as are mutually agreed by the
parties; and (ii) replace by January 1, 2005, and again by January 1, 2015, one
hundred twenty-five (125) of the RIL's existing instant ticket vending machines,
with new, on-line enabled devices, including full services route operation. In
the event GTECH's acquisition of Interlott does not close by August 31, 2003,
GTECH shall: (x) at no cost to the RIL, provide maintenance with respect to the
RIL's existing instant ticket vending machines during calendar year 2004; and
(y) replace by January 1, 2005, and again by January 1, 2015, one hundred
twenty-five (125) of the RIL's existing instant ticket vending machines, with
new, on-line enabled devices, including full services route operation. The RIL
agrees to consider increasing the Deployment of instant ticket vending machines
to optimize sales of instant tickets as business conditions permit.
8.3. Subject to RIL approval in a manner consistent with current RIL
policies and procedures, after or in connection with the system replacement
described in Section 8.1, and throughout the Term, GTECH shall provide the RIL
with an unlimited number of licenses to GTECH's "Lottery Inside(TM)" product and
necessary related printers, to accommodate distribution and expansion of the
RIL's lottery products, including into various retail locations not presently
selling RIL lottery products. In this regard, the parties agree that no on-line
lottery agent as of the commencement of the system replacement described in
Section 8.1, shall have its on-line lottery terminal removed and replaced with
GTECH's "Lottery Inside(TM)" product (and necessary related printer) absent
GTECH's and the RIL's prior mutual written agreement.
8.4. Subject to RIL approval in a manner consistent with current RIL
policies and procedures, GTECH shall provide EIL products and services, as
follows:
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A. GTECH shall provide products, licenses and services
necessary to Deploy throughout the State, within twelve (12) months
after the Effective Date, up to twenty-five (25) GTECH EIL machines.
Such EIL machines will be implemented pursuant to a schedule agreed
upon by the parties in writing within sixty (60) days after the
Effective Date.
B. Within six (6) months after the Deployment of the EIL
machines referred to in Section 8.4.A, and the parties will discuss and
agree upon the Deployment of additional EIL machines. The number and
schedule for Deployment of such additional EIL machines shall be
mutually agreed upon by the parties.
8.5. Subject to RIL approval in a manner consistent with current RIL
policies and procedures, GTECH shall provide products, licenses and services
necessary to implement GTECH's "E-scratch(TM)" game and other mutually
agreed-upon new games, to the extent permissible under applicable law.
8.6. GTECH shall provide licenses and services necessary to maintain an
optimal mix of monitor games on the RIL's Keno Terminals, including presentation
of a new monitor game for possible implementation every twenty-four months after
the Effective Date, or more frequently if mutually agreed by the RIL and GTECH.
9. REPLACEMENT OF THE VLCC SYSTEM
By January 1, 2010, GTECH shall replace the "VLCC System" (as that term is
defined in the Video Lottery Agreement) provided by GTECH pursuant to the Video
Lottery Agreement in a manner consistent with the then-operating VLCC System.
10. VIDEO LOTTERY TERMINALS AND OTHER GAMING MACHINES
10.1. The parties acknowledge that, of the approximately two
thousand nine hundred forty-eight (2,948) Video Lottery Terminals currently
Deployed by the RIL, GTECH has provided approximately eight hundred sixty (860)
of such Video Lottery Terminals. Within six months of the Effective Date, GTECH
shall replace at least one-half of such Video Lottery Terminals with new Video
Lottery Terminals, and the remainder of such eight hundred sixty (860) Video
Lottery Terminals shall be replaced within one year of the Effective Date, and
in each case, the Video Lottery Terminals shall be replaced with Video Lottery
Terminals provided by GTECH from a new source obtained by GTECH through
acquisition, contract or otherwise.
10.2. The Rhode Island Lottery Commission has recently approved the
Deployment of one thousand eight hundred twenty-five (1,825) additional Video
Lottery Terminals, eight hundred fourteen (814) of which have been allocated
among suppliers, and four hundred seventy (470) of the eight hundred fourteen
(814) of which have already been Deployed (and thus are included in the two
thousand nine hundred forty-eight (2,948) described as Deployed in Section
10.1). GTECH shall provide, and the RIL shall obtain from GTECH and Deploy, at
least one thousand (1,000) of the aforementioned one thousand eight hundred
twenty-five Video Lottery Terminals recently approved for Deployment. GTECH
shall always have the right to provide
14
and, upon the Deployment of the one thousand (1,000) Video Lottery Terminals
provided by GTECH as described in the prior sentence, the RIL shall continue to
Deploy, at least one thousand eight hundred sixty (1,860) Video Lottery
Terminals provided by GTECH, subject only to Sections 10.4 and 10.8.
10.3. During the Evaluation Period in each calendar year of the
Term, the RIL shall evaluate the Deployed Video Lottery Terminals provided by
GTECH and determine GTECH's Efficiency Rating. The RIL shall inform GTECH of its
Efficiency Rating in writing, and shall provide to GTECH all information used to
calculate such Efficiency Rating. If market conditions change such that there
are fewer than four suppliers of Video Lottery Terminals supplying Video Lottery
Terminals to the RIL, then, notwithstanding any provisions of Sections 10.4
and/or 10.5.A to the contrary, the current Efficiency Rating threshold (i.e.,
97%) below which a suppliers allocation of Video Lottery Terminals may be
changed by the RIL will not apply, and such threshold will be negotiated to a
mutually agreeable rating based upon then-existing market conditions.
10.4. Beginning with the calendar year 2008, and for each calendar
year of the Term thereafter, if GTECH's Efficiency Rating calculated over the
Evaluation Period in such calendar year is less than ninety-seven percent (97%),
then the RIL may, in April of such calendar year, reallocate Video Lottery
Terminals among suppliers such that the number of Video Lottery Terminals
provided by GTECH at that time is reduced by up to fifteen percent (15%) of such
number. For the avoidance of doubt, no reduction in the number of Video Lottery
Terminals provided by GTECH shall be made prior to April of 2008, and no
reduction thereafter shall be greater than fifteen percent (15%) in any one
calendar year. Nothing contained in this Section 10.4 shall limit the RIL's
ability to increase the number of Video Lottery Terminals pursuant to its annual
determination of Supplier Efficiency Ratings and reallocation of Video Lottery
Terminals based thereon.
10.5. Subsequently-Approved VLTs and Tests of VLTs from New
Suppliers
A. Subject to Sections 10.2 and 10.8, with respect to Video
Lottery Terminals approved for Deployment by the Rhode Island Lottery
Commission after the Effective Date (i.e., that are in addition to the
four thousand three hundred three (4,303) Video Lottery Terminals
approved for Deployment as of the Effective Date
("Subsequently-Approved VLTs"), after the Effective Date and throughout
the Term, the RIL shall obtain from GTECH at least fifty-percent (50%)
of such Subsequently-Approved VLTs, and the RIL shall thereupon Deploy
such Subsequently-Approved VLTs obtained from GTECH; provided however,
that, after the RIL has continuously Deployed at least one thousand
eight hundred sixty (1,860) Video Lottery Terminals provided by GTECH
for thirty (30) months (counting all Video Lottery Terminals provided
by GTECH), subject to Sections 10.2 and 10.8, if GTECH's most recent
Efficiency Rating is then or in any period thereafter less than
ninety-seven percent (97%), then, during such period (and only during
such period), the RIL shall not be bound to allocate to GTECH a certain
minimum percentage of Subsequently-Approved VLTs from among those that
the RIL obtains and Deploys, but may determine in its absolute
discretion the percentage of Subsequently-Approved VLTs (if any) that
the RIL shall obtain from GTECH and Deploy. For the
15
avoidance of doubt, and subject to Sections 10.2 and 10.8, during all
periods within the Term that GTECH's most recent Efficiency Rating is
ninety-seven percent (97%) or greater, the RIL shall obtain from GTECH
at least fifty-percent (50%) of all Subsequently-Approved VLTs, and the
RIL shall thereupon Deploy such Subsequently-approved VLTs obtained
from GTECH.
B. The RIL shall be entitled to test Video Lottery Terminals
provided by suppliers other than suppliers that supply Video Lottery
Terminals to the RIL as of the Effective Date ("New Suppliers"),
notwithstanding any provision in this Section 10 that would preclude
such testing, provided:
i. No more than one hundred (100) of such Video Lottery
Terminals to be tested ("Test VLTs") are tested at any one time;
ii. No more than one hundred (100) Test VLTs, in the
aggregate (regardless of the number of New Suppliers providing Test
VLTs), are tested over the course of each year after the Effective
Date;
iii. The Deployment of each New Supplier's Test VLTs ends
within six (6) months of the Deployment for testing of the first of
such New Supplier's Test VLTs; and
iv. Such Test VLTs do not diminish the number of Video
Lottery Terminals that the RIL is obligated to obtain and Deploy from
GTECH pursuant to this Section 10 (it being understood that Test VLTs
shall not be counted when determining a percentage of VLTs to be
obtained from GTECH pursuant to this Section 10).
10.6. To the extent the RIL (which, pursuant to Section 20.6
includes any successor in interest to the RIL) obtains or agrees to obtain any
"Other Gaming Machines" (as that term is defined hereinbelow), the RIL shall
obtain from GTECH and thereafter Deploy, and GTECH shall provide, at least fifty
percent (50%) of such Other Gaming Machines. For purposes of this Agreement,
"Other Gaming Machine" is defined as an electronic computerized game machine
other than a Video Lottery Terminal that, upon the insertion of coins, cash,
tokens or other item constituting consideration, is available to play a game in
which the player may receive (i) free games or credits that can be redeemed for
cash, (ii) coins or tokens (directly dispensed from the machine) that can be
redeemed for cash, and/or (iii) cash directly dispensed from the machine.
10.7. If any department, commission, agency or other body of the
State other than the RIL, or any other governmental entity, is given the
authority to procure, authorize or license the procurement of Other Gaming
Machines and, as a result of the competition to Video Lottery Games from the
games offered via such Other Gaming Machines, the sum of the Net Terminal
Incomes of all Video Lottery Machines Deployed by the RIL over any twelve-month
period is (i) ninety percent (90%) or less of the Net Terminal Income of all
Video Lottery Machines Deployed by the RIL over the corresponding twelve-month
period one year prior (such prior twelve month period referred to as the "Base
Period"), and (ii) less than Five Hundred Million
16
Dollars ($500,000,000), then, until such time (if ever) that Net Terminal Income
of all Video Lottery Machines Deployed by the RIL over a subsequent
corresponding twelve-month period is (x) more than ninety percent (90%) of the
Net Terminal Income of all Video Lottery Machines Deployed by the RIL during the
Base Period, or (y) Five Hundred Million Dollars ($500,000,000) or more, GTECH
shall be released from its obligations (to the extent then unperformed and/or
performance has not become due) under Sections 6, 8 and 9 of this Agreement and
pursuant to the amendment to the Online Lottery Agreement effected by Section
11.3 of this Agreement.
10.8. The RIL shall give GTECH written notice(s) of the date(s)
GTECH is to deliver to the RIL Video Lottery Terminals to be Deployed (a "VLT
Notice"). Such VLT Notice(s) shall be given at least one hundred eighty (180)
days prior to the date the RIL requires the Video Lottery Terminal(s) to be
delivered by GTECH; provided however, that the RIL shall not give GTECH any such
VLT Notice(s) until the RIL has identified the location(s) at which such Video
Lottery Terminal(s) will be Deployed and has ascertained that such location(s)
will be ready to accommodate the Deployment of Video Lottery Terminal(s) within
the one hundred eighty (180) days after the giving of the VLT Notice. With
respect to each VLT Notice, if GTECH notifies the RIL in writing that it cannot
deliver the Video Lottery Terminals required by the RIL as set forth in the VLT
Notice, or if GTECH fails to deliver the Video Lottery Terminals required by the
RIL within the time set forth in the VLT Notice (i.e., at least 180 days after
the date the VLT Notice is given), or such later date as the RIL may, in its
discretion, thereafter specify in writing, then the RIL may, in its discretion
and notwithstanding the provisions of Sections 10.2 and 10.5.A, obtain the Video
Lottery Terminals specified in the VLT Notice from a supplier other than GTECH.
The RIL's right to procure Video Lottery Terminals specified in a VLT Notice
from a supplier other than GTECH pursuant to the preceding sentence shall be
effective only with respect to the Video Lottery Terminals that were specified
in such VLT Notice, and shall not otherwise operate to relieve the RIL from its
obligations under Sections 10.2 and 10.5.A, all of which shall remain in effect.
11. AMENDMENTS TO THE ON-LINE LOTTERY AGREEMENT
11.1. Section 2(a)(i) of the On-Line Lottery Agreement is hereby
amended such that (i) its "Term" (as that term is used in the On-Line Lottery
Agreement) expires on the last day of the "Term" (as that term is defined in
this Agreement), and (ii) the last two sentences of Section 2(a)(i) -- which
provided for extension options -- are deleted.
11.2. Sections 2(a)(ii) and 2(a)(iii) of the On-Line Lottery
Agreement are hereby deleted in their entirety and replaced with the following
as new Section 2(a)(ii):
During each year of the Term hereof, to the extent cumulative "Total
Lottery Sales" (as hereinbelow defined) during the year fall within one
or more of the traunches set forth in the matrix below, the Total
Lottery Sales within each traunch shall be multiplied by the
corresponding percentage and the resulting products shall be summed.
The Lottery shall pay GTECH such sum as compensation for the goods and
services provided by GTECH hereunder. "Total Lottery Sales" means
"Gross Sales" plus "Total Instant Ticket Sales," where "Gross Sales"
means the value in dollars of all on-line lottery tickets (including
17
Keno and EIL, but not including Video Lottery Games) sold or otherwise
issued by the Lottery, less the value in dollars of cancelled on-line
lottery sale transactions, and "Total Instant Ticket Sales" means the
value in dollars of all instant lottery tickets sold or otherwise
issued by the Lottery (regardless of the means of distribution), less
the value in dollars of all canceled sale transactions. Thus, and for
the avoidance of doubt, "Total Lottery Sales" shall be the value in
dollars of all sales of all wagering products by the RIL other than
sales of Video Lottery Games, less the value in dollars of
cancellations of sales by the RIL of wagering products (other than
cancellations of sales of Video Lottery Games). For purposes of this
Agreement, a "year" shall mean an "Agreement Year" as that term is
defined in the Master Contract executed by the parties in 2003 that
(among other things) effected various amendments to this Agreement.
- ------------------------------------------------------------------------
TOTAL LOTTERY SALES IN THE YEAR PERCENT THEREOF
- ------------------------------------------------------------------------
0 - $275 Million 5.00%
- ------------------------------------------------------------------------
Over $275 Million - $400 Million 1.00%
- ------------------------------------------------------------------------
Over $400 Million 5.00%
- ------------------------------------------------------------------------
GTECH shall be paid on a monthly basis. The RIL shall pay GTECH the
amounts due hereunder on a calendar month basis with respect to each
month (or partial month of the Term), and within fifteen (15) days of
the end of each calendar month (or partial calendar month).
For example, if during a certain month of the year, Total Lottery Sales
are $25 Million, and such $25 Million in Total Lottery Sales results in
cumulative Total Lottery Sales for the applicable year increasing from
$270 Million to $295 Million, the compensation due to GTECH for such
month would be $450,000, calculated as follows:
$5,000,000 x 5.00% = $250,000; plus
$20,000,000 x 1.00% = $200,000;
Equals: $450,000
All payments made shall be paid by electronic funds transfer to the
bank and GTECH bank account of which the RIL is notified in writing by
GTECH.
11.3. Pursuant to Section 2(b) of the On-Line Lottery Agreement,
GTECH agreed to provide Four Hundred (400) Player ExpressTM units (the "Player
Express Units") to the RIL, which the parties agree have a contract value of One
Million Three Hundred Thousand Dollars ($1,300,000). The Lottery hereby releases
GTECH from its obligation to provide the Player Express Units to the Lottery and
GTECH hereby agrees to provide the following goods and services to the RIL in
consideration of such release:
A. GTECH shall deliver Six Hundred (600) Express Point
Ticket Checkers, which the parties agree have a contract value of Six
Hundred Thirty-nine Thousand Dollars ($639,000), to the RIL on or
before November 30, 2003; and
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B. The RIL and GTECH shall mutually agree on additional
substitute goods and services having a contract value of Six Hundred
Sixty-one Thousand Dollars ($661,000) that GTECH shall deliver to the
RIL.
11.4. Section 2.3.2 ("Contract Term") of the "RFP" (as that term is
defined in the On-Line Lottery Agreement), and any addenda and answers by the
RIL to bidders' questions pertaining to such Section of the RFP, and any
responses of GTECH to such Section of the RFP contained in GTECH's "Proposal"
(as defined in the On-Line Lottery Agreement), to the extent they are
incorporated by reference in the On-Line Lottery Agreement, are hereby deleted
and of no force or effect.
11.5. Section 2.3.3 of the RFP ("Contract Termination,
Cancellation"), incorporated by reference in the On-Line Lottery Agreement is
hereby deleted and replaced with the following:
The Lottery may terminate this Contract only in the event of:
(i) intentional fraud on the part of the Contractor, or
(ii) intentional and serious misconduct on the part of the
Contractor that causes Total Lottery Sales over any
three-month period of the Term to be less than twenty-five
percent (25%) of Total Lottery Sales over the corresponding
three-month period in the prior calendar year.
For purposes of this Section 2.3.3, intentional and serious misconduct
on the part of the Contractor shall not be presumed solely because
Total Lottery Sales over any three-month period of the Term is less
than twenty-five percent (25%) of Total Lottery Sales over the
corresponding three-month period in the prior calendar year.
11.6. Any addenda and answers by the RIL to bidders' questions
pertaining to Section 2.3.3 of the RFP, and any responses of GTECH to such
Section of the RFP contained in GTECH's "Proposal" (as defined in the On-Line
Lottery Agreement"), to the extent they are incorporated by reference in the
On-Line Lottery Agreement, are hereby deleted and of no force or effect.
11.7. The parties agree that, effective as of the later of May 1,
2003 and the Effective Date, the limit of the errors and omissions insurance
policy that GTECH is required to maintain pursuant to Section 2.3.7.3 of the RFP
shall be amended to be not less than Fifteen Million Dollars ($15,000,000).
11.8. Except as amended pursuant to this Agreement, the On-Line
Lottery Agreement shall remain in full force and effect, enforceable by the
parties in accordance with its terms.
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12. AMENDMENTS TO THE VIDEO LOTTERY AGREEMENT
The Video Lottery Agreement is hereby amended as follows:
12.1. The definition of "CCSP Fee" set forth in Section 1.2 of the
Video Lottery Agreement is deleted in its entirety and replaced with the
following:
"CCSP Fee" shall mean the amount calculated as follows:
During each year of the Term hereof, to the extent cumulative "Total
Net Terminal Income" (as hereinbelow defined) during the year falls
within one or more of the traunches set forth in the matrix below, the
Total Net Terminal Income within each traunch shall be multiplied by
the corresponding percentage and the resulting products shall be
summed. Such sum shall be the CCSP Fee. For purposes of this Agreement,
a "year" shall mean an "Agreement Year," as that term is defined in the
Master Contract executed by the parties in 2003 that (among other
things) effected various amendments to this Agreement. "Total Net
Terminal Income" means the sum of the "Net Terminal Income," as that
term is defined in the Master Contract described in the prior sentence)
of all Video Lottery Terminals Deployed, whether or not provided by
GTECH.
- --------------------------------------------------------------------------
TOTAL NET TERMINAL INCOME FOR THE YEAR PERCENT THEREOF
- --------------------------------------------------------------------------
0 - $500 Million 2.50%
- --------------------------------------------------------------------------
Over $500 Million - $1 Billion 1.00%
- --------------------------------------------------------------------------
Over $1 Billion 2.50%
- --------------------------------------------------------------------------
During the Term, the RIL shall pay GTECH the CCSP Fee as soon as
practicable but no less frequently than once a week.
For example, if during a certain week of the year, Total Net Terminal
Income for such week is $25 Million, and such $25 Million in Total Net
Terminal Income results in cumulative Total Net Terminal income for the
applicable year increasing from $490 Million to $515 Million, the
compensation due to GTECH for such week would be $650,000, calculated
as follows:
$10,000,000 x 5.00% = $500,000; plus
$15,000,000 x 1.00% = $150,000;
Equals: $650,000
All payments made shall be paid by electronic funds transfer to the
bank and GTECH bank account of which the RIL is notified in writing by
GTECH.
12.2. The definition of "Expiration Date" set forth in Section 1.2
of the Video Lottery Agreement shall mean the last day of the "Term," as that
term is defined in this Agreement;
12.3. The definition of "Term" set forth in Section 1.2 of the Video
Lottery Agreement is deleted in its entirety and replaced with the following:
"Term" shall mean the period
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commencing on the Startup Date and ending on the Expiration Date.
12.4. Section 5 of the Video Lottery Agreement is deleted in its
entirety.
12.5. Section 6.2 of the Video Lottery Agreement (that provided for
certain options to extend the term of the Video Lottery Agreement) is deleted in
its entirety.
12.6. Section 7.1 of the Video Lottery Agreement is deleted in its
entirety and replaced with the following:.
The RIL may terminate this Agreement only in the event of:
(i) intentional fraud on the part of GTECH, or
(ii) intentional and serious misconduct on the part of GTECH
that causes Total Net Terminal Income over any three-month
period of the Term to be less than twenty-five percent (25%)
of Total Net Terminal Income over the corresponding
three-month period in the prior calendar year.
For purposes of this Section 7.1, intentional and serious misconduct on
the part of GTECH shall not be presumed solely because Total Net
Terminal Income over any three-month period of the Term is less than
twenty-five percent (25%) of Total Net Terminal Income over the
corresponding three-month period in the prior calendar year.
12.7. Section 4.A of the "RFP&Q" (as that term is defined in the
Video Lottery Agreement), and any addenda and answers by the RIL to bidders'
questions pertaining to such Section in the RFP, and any responses of GTECH to
such Section of the RFP contained in GTECH's "Proposal" (as that term is defined
in the Video Lottery Agreement), to the extent they are incorporated by
reference in the Video Lottery Agreement, are hereby deleted in their entirety
and replaced with the following:
The CCSP shall be responsible for payment of all costs incurred by the
CCSP during the term of this Contract that are associated with the
CCSP's performance hereunder, including costs associated with CCSP's
obligations under this Contract: (i) with respect to start-up, (ii) to
provide improvements and/or additions to hardware, software and/or
other equipment, (iii) resulting from the CCSP's obligations hereunder
with respect to the expansion of the current VLT program, (iv) as
otherwise defined in the RFP; (v) as otherwise defined in any Rhode
Island Statute in force as of April 1, 2003; (vi) as otherwise defined
in the Rhode Island Lottery Rules and Regulations relating to the
operation and maintenance of the VLCC system in force as of April 1,
2003.
12.8. Sections 4.D and E of the "RFP&Q" (as that term is defined in
the Video Lottery Agreement), and any addenda and answers by the RIL to bidders'
questions pertaining to such Sections of the RFP, and any responses of GTECH to
such Sections of the RFP contained in GTECH's "Proposal" (as that term is
defined in the Video Lottery Agreement), to the extent they are incorporated by
reference in the Video Lottery Agreement, are hereby deleted and of no force
21
or effect.
12.9. Except as amended pursuant to this Agreement, the Video
Lottery Agreement shall remain in full force and effect, enforceable by the
parties in accordance with its terms.
13. AMENDMENTS TO THE VLT AGREEMENT
The VLT Agreement is hereby amended as follows:
13.1. The following words and numbers appearing at the top of the
first page are hereby deleted in their entirety: "EFFECTIVE DATES: 9/28/00 -
12/31/03."
13.2. The last two sentences of Section 1 are deleted in their
entirety and replaced with the following single sentence: "The Lottery shall
evaluate the Technology Provider over the first thirteen (13) weeks of the
calendar year of each year during the term of this Agreement."
13.3. Section 2 is deleted in its entirety and replace with the
following:
As compensation hereunder, the Technology Provider shall receive
compensation determined by reference to the average Net Terminal Income
per day of "GTECH VLTs" (as hereinafter defined), as set forth in this
section. "GTECH VLTs" means the Video Lottery Terminals provided to the
Lottery by the Technology Provider, whether or not manufactured by the
Technology Provider.
During the Term hereof, to the extent cumulative "Total Average Daily
Net GTECH-VLT Income" (as hereinbelow defined) for a day falls within
one or more of the traunches set forth in the matrix below, the Total
Average Daily Net GTECH-VLT Income within each traunch shall be
multiplied by the corresponding percentage, and that product shall be
multiplied by the number of GTECH VLTs, and the resulting products
shall be summed. Such sum shall be the amount due GTECH hereunder (the
"GTECH VLT Fee") with respect to such day. "Total Average Daily Net
GTECH-VLT Income" for a day, means the sum of the "Net Terminal Income"
(as that term is defined in the Master Contract executed by the parties
in 2003) of all GTECH VLTs for all days of the week containing the
applicable day, divided by the number of GTECH VLTs, and with the
resulting quotient divided by seven (7). Accordingly, Total Average
Daily Net GTECH-VLT Income shall be calculated at the end of each week,
and (because of the above formula) shall be the same for each day of
the week.
- ------------------------------------------------------------------------------
TOTAL AVERAGE DAILY NET GTECH-VLT INCOME
(CALCULATED ON AN AVERAGE WEEKLY BASIS) PERCENT THEREOF
- ------------------------------------------------------------------------------
0 - $325 per day 7.00%
- ------------------------------------------------------------------------------
Over $325 per day - $500 per day 1.00%
- ------------------------------------------------------------------------------
Over $500 per day 7.00%
- ------------------------------------------------------------------------------
During the Term, the Lottery shall pay the Technology Provider the
GTECH VLT Fee with respect to each day of the week. Payments shall be
made on a weekly basis.
22
For example, if there were 2,000 GTECH VLTs deployed, and over a
one-week period Net Terminal Income for all such GTECH VLTs totaled
$7,700,000, then Total Average Daily Net GTECH-VLT Income for each day
of such week would be $550, calculated as follows:
$7,700,000 / 2,000 / 7 = $550
Accordingly, and continuing the foregoing example, the GTECH VLT Fee
for each day of such week would be $56,000, calculated as follows:
$325 x 7.00% x 2,000 = $45,500; plus
$175 x 1.00% x 2,000 = $3,500; plus
$50 x 7.00% x 2,000 = $7,000;
Equals: $56,000.
Accordingly, the GTECH VLT Fee for the entire week would be $56,000 x 7
= $392,000.
All payments made shall be paid by electronic funds transfer to the
bank and the Technology Provider's bank account of which the Lottery is
notified in writing by the Technology Provider.
13.4. Section 3 is deleted in its entirety and replaced with the
following:
The Lottery may terminate this Agreement only (subject to Section 19)
in the event of:
(i) intentional fraud on the part of the Technology Provider,
or
(ii) intentional and serious misconduct on the part of the
Technology Provider that causes a "Twenty-Five Percent Drop in
NTI for GTECH VLTs" (as hereinbelow defined).
For purposes of this Section 3, (i) intentional and serious misconduct
on the part of the Technology Provider shall not be presumed solely
because there is a Twenty-Five Percent Drop in NTI for GTECH VLTs, and
(ii) intentional and serious misconduct on the part of the Technology
Provider shall be deemed not to have occurred if, notwithstanding the
occurrence of a Twenty-Five Percent Drop in NTI for GTECH VLTs, there
is at least a twenty percent (20%) drop in Net Terminal Income of Video
Lottery Terminals provided to the Lottery by suppliers other than the
Technology Provider over the same three-month period used to determine
the occurrence of a Twenty-Five Percent Drop in NTI for GTECH VLTs
compared to the corresponding three-month period in the prior calendar
year.
A "Twenty-Five Percent Drop in NTI for GTECH VLTs" has occurred if the
total of the Net Terminal Incomes of all GTECH VLTs over any
three-month period of the term of this Agreement is less than
twenty-five percent (25%) of the total of the Net Terminal
23
Income of all GTECH VLTs over the corresponding three-month period in
the prior calendar year.
13.5. Unless earlier terminated in accordance with Section 3 of the
VLT Agreement (as replaced pursuant to this Agreement), the term of the VLT
Agreement shall continue until the expiration or termination of the Term of this
Agreement.
13.6. The amounts in Section 16 pertaining to player promotions to
be developed and executed by the Technology Provider (i.e., GTECH), which
presently are $50,000, $6,000 and $24,000, are modified to read, respectively,
$58,000, $9,000 and $33,000. Within sixty (60) days after each annual
anniversary of the Effective Date, the RIL and GTECH will mutually agree upon
increases to these amounts, such increases to be not less than three percent
(3%) per year.
13.7. Sections 4 and 5, and Exhibit A to the VLT Agreement, are
deleted in their entirety. Video Lottery Terminals will be reallocated, if at
all, in accordance with the provisions of Section 10 of this Agreement.
13.8. Section 19 is deleted in its entirety and replaced with the
following:
Any violation of law or of the Rules and Regulations of the Lottery
Commission by the Technology Provider shall be grounds for limitation,
restriction, suspension or revocation of its license and termination of
this Agreement, provided the Lottery first has given the Technology
Provider written notice of such violation and, within forty-five (45)
days after receipt of such notice, the Technology Provider has not (i)
cured such failure, in the case of failures susceptible to cure within
such forty-five day period, or (ii) in the case of failures not
susceptible to cure within such forty-five day period, commenced cure
within such forty-five day period, "diligently worked to effect the
cure" thereafter, and effected cure within one year after receipt of
such notice. For purposes of this Section 19, "diligently worked to
effect the cure" means expended all commercially reasonable efforts to
effect and complete the cure at the earliest possible time.
13.9. Except as amended pursuant to this Agreement, the VLT
Agreement shall remain in full force and effect, enforceable by the parties in
accordance with its terms.
14. USE OF LOTTERY SYSTEM INFRASTRUCTURE; OTHER STATE SERVICES.
During the Term, the RIL will permit GTECH to use, and assist and cooperate with
GTECH in its use of the RIL's on-line lottery system infrastructure - i.e., the
communications network, the retailer points of sale and terminals located
therein and the on-line lottery central system - for the processing of
commercial services transactions such as, but not limited to, telephone airtime
cards, mobile telephone airtime replenishments and the distribution of other
government services beneficial to the State, such use to be pursuant to mutually
agreed upon terms and conditions, including the manner in which GTECH and the
State will share in the profits of any such endeavor.
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15. BREACH BY THE RIL; TERMINATION
15.1. The occurrence of any of the following shall be a breach of
this Agreement on the part of RIL (hereinafter, an "RIL Breach"):
A. the breach by the RIL of any provision of this
Agreement other than a failure to pay amounts due to GTECH;
B. the failure on the part of the RIL to pay when due
any amount due GTECH under this Agreement;
C. the termination, revocation, suspension for sixty
(60) consecutive days (or such longer period as may be agreed to by
GTECH) of the RIL's authority and/or ability to offer On-Line Games
and/or Video Lottery Games;
D. the RIL's ability and/or authority to offer On-Line
Games and/or Video Lottery Games is materially adversely affected for
sixty (60) consecutive days (or such longer period as may be agreed to
by GTECH); and/or
E. the authority to offer within and throughout the
State lottery games that involve on-line computer processing of the
sale transaction is granted to another department, commission, agency
or other body of the State, whether or not the RIL retains its
authority to offer such lottery games, unless such other department,
commission, agency or other body of the State is a successor to the
RIL, and maintains an exclusive right to operate On-Line Games and
Video Lottery Games for the State, and assumes in writing all of the
RIL's obligations hereunder at the time such authority is granted to
such other department, commission, agency or other body.
15.2. GTECH may (but shall not be obligated to) terminate this
Agreement immediately by written notice to the RIL, in the event of an RIL
Breach of the sort described in Section 15.1.C, D and/or E, and/or in the event
of any of the following:
A. the breach by the RIL of any provision of this
Agreement other than a failure to pay amounts due to GTECH and the
subsequent failure on the part of the RIL to cure such breach within
thirty (30) days after written notice from GTECH specifying such
breach; and
B. the failure on the part of the RIL to pay when due
any amount due GTECH under this Agreement and the subsequent failure to
pay such amount within ten (10) days after written notice from GTECH
specifying such failure to pay.
15.3. In the event of a material breach by the RIL, GTECH shall be
entitled to recover its damages, including indirect and consequential damages,
and lost profits, but, except as otherwise specifically provided in this
Agreement, shall not be entitled to terminate this Agreement.
25
16. BREACH BY GTECH; TERMINATION
16.1. The occurrence of any of the following shall be a breach of
this Agreement on the part of GTECH (hereinafter a "GTECH Breach"):
A. the breach by GTECH of any provision of this
Agreement other than a failure to pay amounts due to the RIL;
B. the failure on the part of GTECH to pay when due any
amount due the RIL under this Agreement;
C. intentional fraud on the part of GTECH, and/or
D. intentional and serious misconduct on the part of
GTECH that causes "Net Terminal Income" (as defined in the Video
Lottery Agreement) and "Gross Sales" (as defined in the On-Line Lottery
Agreement) over any three-month period of the Term to be less than
twenty-five percent (25%) of Net Terminal Income and Gross Sales,
respectively, over the corresponding three-month period in the prior
calendar year.
16.2. The RIL may (but shall not be obligated to) terminate this
Agreement immediately by written notice to GTECH, in the event of any of the
following:
A. Intentional fraud on the part of GTECH,
B. Intentional and serious misconduct on the part of
GTECH that causes "Net Terminal Income" (as defined in the Video
Lottery Agreement) and "Gross Sales" (as defined in the On-Line Lottery
Agreement) over any three-month period of the Term to be less than
twenty-five percent (25%) of Net Terminal Income and Gross Sales,
respectively, over the corresponding three-month period in the prior
calendar year;
C. GTECH fails to comply with its obligations under
Section 3 and, within thirty (30) days after written notice from the
RIL specifying such failure, GTECH fails to bring itself into
compliance with Section 3;
D. GTECH is required to under the terms of this
Agreement and fails to comply with its obligations under Section 6.1,
as evidenced by the certifications (or lack thereof) provided to the
RIL pursuant to Section 6.2 and, within thirty (30) days after written
notice from the RIL specifying such failure, GTECH fails to bring
itself into compliance with Sections 6.1 and 6.2; and/or
E. GTECH is required to under the terms of this
Agreement and fails to comply with its obligations under Section 6.3,
as evidenced by the certifications (or lack thereof) provided to the
RIL pursuant to Section 6.4 and, within thirty (30) days after written
notice from the RIL specifying such failure, GTECH fails to bring
itself into compliance with Sections 6.3 and 6.4.
26
16.3. In the event the RIL terminates this Agreement pursuant to
this Section 16.2, then, notwithstanding anything to the contrary in the On-Line
Lottery Agreement, the Video Lottery Agreement and/or the VLT Agreement, the RIL
may, by written notice to GTECH, terminate the On-Line Lottery Agreement, the
Video Lottery Agreement and/or the VLT Agreement.
16.4. In the event of a material breach by the GTECH, the RIL shall
be entitled to recover its damages, including indirect and consequential
damages, and lost profits, but, except as otherwise specifically provided in
this Agreement, shall not be entitled to terminate this Agreement.
17. EFFECT OF TERMINATION.
Any termination of this Agreement shall not affect any liability of any of the
parties that has accrued prior to the date of termination, including, without
limitation, the liability of any party for any default by such party in the
performance of its obligations under this Agreement, nor shall it affect the
coming into force or continuance in force of any provision of this Agreement
which is expressly intended to continue in force on or after such termination.
18. PROPERTY RIGHTS.
18.1. Property Owned by the RIL; Usufruct. Ownership of all data,
materials, and operating reports originating and prepared for the RIL pursuant
to any contract resulting from this Agreement shall belong exclusively to the
RIL. If for any reason, other than the breach of contract by the RIL, GTECH
should lose its ability or refuse to service the contract with the RIL, the RIL
shall acquire a usufruct of the source and object programs, the documentation
for those programs owned by GTECH in conjunction with the contract and which are
necessary to provide such service, the central facility, equipment and all
terminals. Said usufruct shall be limited to the right of the RIL to possess and
make use of such source programs and documentation solely for the use and
benefit of the RIL in maintaining, altering, and improving the operation
characteristics of the programs and systems being used by the RIL under the
contract. Such usufruct shall be limited in time for the duration of the
contract and in scope for programs system, central facility, equipment and all
terminals being used by the RIL under the contract. All programs, documentation,
instructions, and the like, including modifications or alterations thereof,
shall be kept in confidence and shall be returned together with all copies to
GTECH when their usufruct purposes have been fulfilled. Except as otherwise
provided, the RIL shall acquire no other right or title in and to said source
programs, documentation, central facility, equipment or terminals whatsoever.
18.2. Property owned by GTECH.
Except as specifically provided in Section 18.1 above:
A. All Intellectual Property related to Licensed Product
and equipment and other products, services or technology directly or
indirectly provided under or in connection with this Agreement at any
time during the Term, belong and shall continue to belong exclusively
to GTECH. The RIL shall immediately notify GTECH if the RIL ever
27
becomes aware of any impairment or infringement, or imminent threat of
impairment or infringement, of GTECH's rights. The RIL shall not take
any steps against any alleged infringer unless and until requested to
do so in writing by GTECH. The RIL shall, at GTECH's expense, join with
GTECH in taking such steps as GTECH may reasonably request to protect
GTECH's rights. This Section 18.2 shall without time limitation survive
the termination or expiration of this Agreement.
B. Title to the Licensed Product and hardware provided
hereunder shall not pass to the RIL but shall remain in GTECH. The RIL
does not hereunder obtain any license or other interest therein, except
as provided in the On-Line Lottery Agreement and/or the Video Lottery
Agreement.
18.3. Indemnification. GTECH shall hold and save harmless the State
of Rhode Island, the RIL, their officers, agents and employees from liability of
any nature or kind arising out of a claim or suit for or on account of the use
of any copyrighted or uncopyrighted composition, trademark, service mark, secure
process, patented invention, article or appliance furnished or used in the
performance of this Agreement. GTECH agrees to assume the defense of any and all
such suits and pay the costs and expenses incidental thereto, subject to the
right of the State to provide additional legal counsel at the state's own
expense.
19. CONFIDENTIALITY.
19.1. Confidentiality.
A. As used herein, "Property" means all Confidential
Information, formulae, processes, tools, developments, inventions,
products and components thereof, and all other commercially valuable
things (including without limitation hardware and software) directly or
indirectly provided under or in connection with this Agreement. All IPR
in or to Property shall remain the exclusive and valuable property of
GTECH. The RIL does not hereby or hereunder obtain any license or other
proprietary interest in or to Property except as may be specifically
granted by GTECH in its sole discretion in writing.
B. As used herein, "Confidential Information" means all
information (including, without limiting the foregoing, all
engineering, programming and other technical and commercial information
and know-how) directly or indirectly disclosed by GTECH to the RIL
pursuant to or in connection with this Agreement (including, without
limiting the foregoing, the Proposal submitted by GTECH to the RIL and
any negotiations preceding this Agreement), provided that said
information is descriptive of or used or useful in connection with the
creation, development, modification, production, testing, maintenance,
marketing or other use of Property. "Confidential Information" as
defined herein shall not include information which is:
(i) widely known to the public or within the
computer and/or gaming industries, without any fault of the
RIL;
28
(ii) already known to the RIL at the time that
said information is disclosed by GTECH to the RIL, provided
that said knowledge is documented by records in the RIL's
possession predating such disclosure; or
(iii) subsequently received by the RIL in good
faith from a non-party to this Agreement who has the prior
right to make such subsequent disclosure.
C. The RIL hereby acknowledges that all Confidential
Information is vital to GTECH's business and success. Therefore, the
RIL agrees that it shall at all times keep all Confidential Information
in the strictest of confidence. The RIL further agrees that it shall
never disclose, directly or indirectly, in whole or in part, alone or
in conjunction with others, any Confidential Information to anyone,
other than to RIL employees with a need to know such Confidential
Information for purposes contemplated by this Agreement. The RIL shall
at least annually provide said employees with written notices advising
them of their obligation to keep such information confidential.
D. The RIL further agrees that neither the RIL nor any
RIL employee shall in any way (directly or indirectly, in whole or in
part, alone or in conjunction with others) disclose, use or copy in any
medium any Confidential Information without GTECH's prior specific
written authorization. Any authorized reproduction, in whole or in
part, in any medium, of documents or other media containing
Confidential Information made by the RIL shall bear all copyright,
trademark, patent and other proprietary notices appearing on the
original.
E. The RIL agrees that Confidential Information might be
learned through examination of the interior or disassembly of Property,
and therefore the RIL agrees that without the prior specific written
authorization from GTECH, the RIL shall neither permit the display of
the interior of any Property to others nor permit the transfer of
possession of any Property to others.
F. The RIL shall take all reasonable measures to protect
the confidentiality of Confidential Information. Without limiting the
foregoing, and in addition to any requirements set forth in this
Section 19, the RIL shall employ security measures and a degree of care
regarding Confidential Information which are at least as protective as
those employed by the RIL regarding its own proprietary property and
confidential information.
G. This Section 19 shall survive the termination or
expiration of this Agreement for a ten (10) year period.
20. GENERAL
20.1. Force Majeure Neither party shall be liable for any delay in
performing any obligation hereunder for any cause beyond its reasonable control,
including but not limited to strike and labor disputes, accidents, war,
invasion, riot, rebellion, civil commotion, insurrection, any act or judgment of
any court granted in any legal proceeding, Acts of God such as fire, wind
29
or lightning, explosion, act of government or faults or delays by subcontractors
to provide service due to circumstances such as those cited above ("Force
Majeure"). This Section 20.1 shall not excuse the failure to pay money.
20.2. Relationship of Parties. The parties to this Agreement are and
will be acting in their individual capacities and not as agents, employees,
partners, joint venturers or associates of one another. The employees or agents
of one party shall not be deemed or construed to be the employees or agents of
the other party for any purpose whatsoever.
20.3. Scope of the Agreement. This writing, shall constitute the
entire agreement between the parties and shall supersede all other prior
agreements, oral or written, and all other communications between the parties
relating to the subject matter hereof. For the avoidance of doubt, except as
specifically amended pursuant to this Agreement, the On-Line Lottery Agreement
and the Video Lottery Agreement shall continue in full force and effect,
enforceable by the parties in accordance with its terms.
20.4. Amendment. This Agreement shall not be amended except by a
writing of subsequent date hereto, executed by duly authorized representatives
of the parties hereto.
20.5. Assignment.
A. This Agreement shall not be assigned by either party
without the prior written consent of the other party.
B. For purposes of Section 20.5.A, except for a merger
of GTECH into its parent company, GTECH Holdings Corporation, (i) a
sale or transfer of a direct or indirect equity interest in GTECH
constituting a transfer of "control" (as defined below) of GTECH, or
(ii) a sale of substantially all of the assets of, GTECH, will be
deemed an assignment for which the RIL's consent is required; provided
however, that in the event of such a transaction requiring the RIL's
consent, the RIL shall not withhold its consent unless the acquirer or
any of its officers or directors:
i. Is then debarred from participating in a
procurement by any U.S. Federal department or agency or by any
U.S. State;
ii. Has, within the three-year period preceding
the transaction, been convicted of or had a civil judgment
rendered against them for commission of fraud or a criminal
offense in connection with obtaining, attempting to obtain, or
performing a public (Federal, State, or local) contract;
iii. Has, within a three-year period preceding
the transaction, had one or more public (Federal, State, or
local) contracts terminated for cause or default; and/or
iv. Has, at the time of the transaction, a bond
rating by Moody's Investors Services or Standard and Poor's
Rating Service below "B".
30
For purposes of this Section 20.5, "control" means direct or indirect
ownership of more than fifty percent (50%) or more of the shares or
other interest entitling the owner to vote for election of the board of
directors or similar governing body of the legal entity.
20.6. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of each of the parties hereto, and each of their respective
successors and permitted assigns.
20.7. Waiver. The failure of either party to enforce at any time any
of the provisions of this Agreement shall in no way be construed to be a waiver
of such provisions, nor in any way affect the validity of this Agreement or any
part thereof, or the right of the other party thereafter to enforce each and
every provision.
20.8. Severability. The parties acknowledge that the provisions
contained herein (including without limitation any relating to Confidential
Information) are required for the reasonable protection of the business
interests of the parties. The illegality, invalidity or unenforceability of any
provision of this Agreement under any applicable law shall not affect its
legality, validity or enforceability under the law of any other jurisdiction nor
the legality, validity or enforceability of any other provision, and to this end
the provisions hereof are declared to be severable.
20.9. Authorization to Execute Agreement. Both parties warrant that
they are authorized to execute and deliver this Agreement and to perform the
obligations set forth herein, and the persons executing this Agreement on behalf
of such party are authorized to do so.
20.10. Headings. Section headings of this Agreement are for
convenience only and shall neither form a part nor affect the interpretation
hereof.
20.11. Recitals Not Controlling. In the case of any inconsistency
between any provision in the recitals of this Agreement set forth before Section
1 and any provision of this Agreement set forth in Section 1 through and
including Section 20, the provision set forth in Section 1 through and including
Section 20 shall govern.
[Remainder of page intentionally blank. Signature page follows.]
31
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the day and year first above written.
Rhode Island Lottery Rhode Island Lottery Commission
By:_________________________________ By:________________________________
Title:______________________________ Title:_____________________________
GTECH Corporation
By:_________________________________
Title:______________________________
32