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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 25, 1996
AMERICAN WAGERING, INC.
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(Exact name of registrant as specified in its charter).
Nevada 000-20685 880344658
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
675 Grier Drive, Las Vegas, Nevada 89119
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (702) 735-0101
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 25, 1996, the Registrant, American Wagering, Inc.,
a Nevada corporation (the "Company"), acquired from Autotote Corporation, a
Delaware corporation ("AC"), and Autotote Systems, Inc. a Delaware corporation
("ASI"), all of the outstanding shares of capital stock ("Shares") of Autotote
CBS, Inc., a Nevada corporation ("CBS"), pursuant to a Stock Transfer Agreement
between the Company and AC, and the right to use certain software owned by AC
and ASI useful in CBS's business ("License") pursuant to a Technology Cross
License Agreement, as amended, among CBS, AC and ASI. CBS designs, installs and
provides sports and race book equipment, software, including the MEGASPORTS(R)
product for pari-mutuel sports wagering, and computer systems to the sports
betting industry and owns the real estate and building in Las Vegas, Nevada
where the Company currently maintains its corporate offices.
As consideration for the Shares and License the Company paid
$3 million in cash from its working capital to AC and agreed to guarantee
pursuant to a Guaranty Agreement CBS's obligation under its current mortgage of
approximately $2 million on the real estate and building.
Simultaneously with the execution of the Stock Transfer
Agreement, (i) ASI appointed CBS as its distributor in Nevada of ASI products,
including Probe terminals, MKII terminals, videocards, communication devices and
pari-mutuel race systems ("Distribution Products") pursuant to an Authorized
Exclusive Distributor Agreement between them ("Distributor Agreement"); (ii) ASI
granted CBS the right under certain conditions, to manufacture, exclusively for
sale or lease by CBS within Nevada video gaming machines, Distribution Products
pursuant to a Manufacturing Agreement between them ("Manufacturing Agreement")
and (iii) CBS and ASI agreed to cooperate in pursuing business relating to
international sports and pari-mutuel wagering pursuant to an International
Cooperation Agreement between them ("International Agreement.")
The terms of the Stock Transfer Agreement, including the
agreement with respect to consideration, were arrived at pursuant to arms-length
negotiations between representatives of the
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Company, on the one hand, and representatives of AC, on the other hand. The
transaction was approved by the Company's Board of Directors on October 25,
1996.
A copy of the Stock Transfer Agreement, the Technology Cross
License Agreement, as amended, the Distributor Agreement, the Manufacturing
Agreement, the International Agreement and the Guaranty Agreement (collectively,
the "Agreements") is each attached hereto as Exhibit 2.1, 2.2, 2.3, 2.4, 2.5 and
2.6, respectively, and is each incorporated in this Form 8-K Report by
reference. The summaries of the terms of the Agreements contained in this Form
8-K Report are qualified in their entirety by references to such Exhibits.
The Company agrees to furnish promptly to the Securities and
Exchange Commission at its request a copy of any of the exhibits or schedules to
the Stock Transfer Agreement since certain exhibits and schedules have not been
appended to the copy of the Stock Transfer Agreement that is attached to this
Form 8-K Report.
A copy of the Company's press release dated October 30, 1996
relating to the transaction covered by this Report is attached hereto as Exhibit
99 and is incorporated in this Form 8-K Report by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired;
(b) ProForma Financial Information
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The financial statements of the business acquired and the pro
forma financial information required to be filed are not attached to this Form
8-K Report, and will be filed by amendment not later than 60 days after the date
that this Form 8-K Report is required to be filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN WAGERING, INC.
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(Registrant)
Date: November 8, 1996 By: /s/ Robert D. Ciunci
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Robert D. Ciunci
Executive Vice President and
Chief Financial Officer
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EXHIBITS
2.1 Stock Transfer Agreement dated October 25, 1996
2.2 Technology Cross License Agreement dated October 25, 1996
2.3 Distributor Agreement dated October 25, 1996
2.4 Manufacturing Agreement dated October 25, 1996
2.5 International Agreement dated October 25, 1996
2.6 Guaranty Agreement dated October 25, 1996
99.1 The Company's press release dated October 30, 1996
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STOCK TRANSFER AGREEMENT
AGREEMENT dated October 25, 1996 by and between American Wagering, Inc.
a Nevada corporation ("Buyer"), and Autotote Corporation, a Delaware corporation
("Seller").
WHEREAS, Seller is the beneficial and record owner of all of the issued
and outstanding shares of capital stock ("Shares") of Autotote CBS, Inc.
("Company"); and
WHEREAS, Buyer desires to purchase all of the Shares, and Seller desires
to sell the Shares, to Buyer;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
SECTION 1. SALE, TRANSFER AND PURCHASE OF SHARES.
1.1 Sale and Purchase of Shares.
For the consideration provided for in Section 2 hereof
and subject to the terms and conditions of this Agreement, Buyer hereby agrees
to purchase from Seller at the Closing (defined herein) and Seller hereby agrees
to sell, transfer, convey, assign and deliver to Buyer at the Closing the Shares
and Buyer will accept delivery and assume ownership of the Shares at the
Closing.
SECTION 2. CONSIDERATION FOR THE SHARES.
2.1 Purchase Price.
(a) In payment for the sale, transfer and delivery to it
of the Shares and rights under the Technology License (defined herein) in full
consideration therefor, Buyer shall pay to Seller at the Closing the aggregate
sum of U.S. $3,000,000.00 ("Purchase Price") which shall be allocated as
described in Exhibit A.
(b) The Purchase Price shall be payable by Buyer to
Seller on the Closing Date, by delivery to Seller of a certified or bank
cashier's check payable to the order of Seller or, at Seller's option, by bank
wire transfer in immediately available funds to Bankers Trust Company for
account of Seller, Account No. 00-311-714, ABA # 021 001 033, Chips #103, Swift
Code Bk TR US 33.
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SECTION 3. CLOSING DATE.
The consummation of the purchase and sale contemplated herein
("Closing Date" or "Closing") shall be held at the office of Buyer at 675 Grier
Drive, Las Vegas, NV 89119 at 10:00 a.m. on October 24, 1996 or at such other
place, time or date as shall be provided herein or mutually agreed by the
parties hereto; provided, however, that either party may terminate this
Agreement if the Closing has not occurred on or before October 30, 1996.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as follows:
4.1 Organization and Standing of Seller; Right to Sell and
Corporate Authority of Seller.
Seller is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. Seller has full corporate power and
authority to own the Shares. Seller has full corporate authority to enter into
this Agreement and perform and consummate the transactions contemplated hereby.
This Agreement is a valid and binding obligation of Seller enforceable in
accordance with its terms. There are no provisions of the certificate of
incorporation or of the by-laws of Seller or of any agreements to which Seller
is a party or bound which prohibit, limit or otherwise affect the right, power
and authority of Seller to execute this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Seller and the consummation of the transactions contemplated
hereby have been duly authorized and approved by the Board of Directors of
Seller. Except as disclosed in Schedule 1, no consents or approvals of any
stockholder of any class or of any other party, person, governmental agency or
authority or courts to which Seller is subject is necessary for the execution of
this Agreement or consummation of the transactions contemplated by this
Agreement.
4.2 Organization and Standing of Company.
Company is a corporation duly organized, validly existing and in
good standing under the laws of Nevada and in all jurisdictions as to which its
failure to be in good standing would adversely affect the validity of the
transaction contemplated by this Agreement. Company has the power to carry on
its business as it is now being conducted. Copies of Company's certificate of
incorporation, as amended to date (certified by an officer of Company), and of
its by-laws, as amended to date (certified by an officer of Company), will be
certified and delivered to Buyer and will be complete and correct as at the
Closing Date. The Company has no subsidiaries other than MegaSports, Inc., a
Nevada corporation, of which the authorized, issued and outstanding shares are
held 50% by Company and 50% by International Games Technology.
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4.3 Capitalization.
Schedule 2 sets forth the authorized, issued and outstanding
capital Shares of Company. All of such Shares are duly authorized, validly
issued and are fully paid and non-assessable. Company has no other classes of
stock authorized or outstanding and the Company does not have any outstanding
warrants, options, calls, convertible instruments, subscriptions or other rights
which will give any party the right to acquire Shares in the Company.
4.4 Ownership of Shares.
Seller is the record and beneficial owner of the Shares, which
Shares constitute all of the issued and outstanding shares of capital stock of
Company. Except for any pledge interest(s) held by Seller's senior lenders
(which shall be removed prior to Closing), all of the Shares are free and clear
of all liens, encumbrances or restrictions, and by the sale and transfer of said
Shares to Buyer pursuant to this Agreement, Buyer will acquire good title to all
of the issued and outstanding shares of capital stock of Company free of all
liens, debts, pledges, security interests, encumbrances and restrictions.
4.5 Financial Condition and Liabilities.
(a) Seller will certify and deliver to Buyer, at the
Closing, financial statements for Company consisting of an unaudited balance
sheet as of September 28, 1996 ("Latest Balance Sheet") and an unaudited income
statement for the period November 1, 1995 through September 28, 1996; all of
which financial statements ("Company Financial Statements") will be certified by
Kim Lighthart, Controller of Company. The Company Financial Statements will be
correct and complete in all material respects and will present fairly the
financial position of Company on the dates indicated, and shall be prepared
consistently with prior financial statements, if any. The Company Financial
Statements will be prepared in accordance with generally accepted accounting
principles consistently applied except as described in Schedule 3.
(b) (i) Except as disclosed in Schedule 4, all tax
returns and reports of Company, Seller, or any member of Seller's Consolidated
Group required by law to be filed by Closing, have been duly filed, and all
taxes, assessments, fees and other governmental charges upon Company or Seller
Group (other than those payable for current periods without interest or
penalties) upon, or measured by, any of the properties, franchises, income or
receipts of Company, which are due and payable, have been paid or accrued.
Except as provided in Schedule 4, items described in Schedule 4 shall be the
responsibility of Seller. None of the Tax Returns contain, or are required to
contain, a disclosure statement under Section 6662 of the Code, or any similar
provision of state, local or foreign law, with respect to any items that relate
to the Company in order to avoid a penalty for any taxable year. Except for
non-material events, no extension of time within which to file any Tax Return
with respect to the Company, or any member of the Seller's Group has been
requested, which Tax Return has not since been filed. All Tax Returns of Company
are true, correct and complete in all material respects.
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(ii) There are no pending or threatened actions or
proceedings for the assessment or collection of Taxes for which the Company may
become liable in its own right or as a member of the Seller's Group, or as a
transferee of the assets of, or successor to, any entity. There are no
deficiencies in Taxes against any member of the Seller's Group. There are no Tax
liens on any assets of the Company, except with respect to Taxes which are not
yet due and payable.
(iii) No consent under Section 341(f) of the Code
has been filed with respect to the Company.
(iv) The Company does not owe any amounts pursuant
to any tax sharing agreement or arrangement, nor will it have any liability
after the date hereof in respect to any tax sharing agreement or arrangement
executed or agreed to prior to the date hereof, whether any such agreement or
arrangement is written or unwritten.
(v) All Taxes required to be withheld, collected or
deposited in connection with the operations and activities of the Company, or
any member of the Seller's Group have been timely withheld, collected or
deposited and, to the extent required, have been paid to the relevant taxing
authority.
(vi) The Company properly accrued all current or
contested Taxes on its books and records, and its books and records reflect
reserves that are adequate for the payment of all Taxes not yet due and payable
that are properly accruable thereon through the close of business on the Closing
Date except for any Federal income tax liabilities, which liabilities, if any,
are recorded at the parent company level (including Taxes being contested). The
Company has no liability for any Taxes in excess of amounts accrued or the
reserves established including any liability for Taxes resulting from being a
member of or leaving the Seller's Group. There are no outstanding waivers or
agreements extending the statute of limitations for any period with respect to
any Tax to which the Company may be liable either directly or as a member of the
Seller's Group.
(vii) Seller and Company have made available to
Buyer correct and complete copies of all Tax Returns of the Company, for all
periods which are not closed by the statute of limitations.
(viii) Seller and Company have delivered to Buyer a
true and complete copy of any tax sharing or allocation agreement or arrangement
involving the Company and a true and complete description of any such agreement
or arrangement that is unwritten or informal.
(ix) Seller shall furnish Buyer on or before the
Closing Date an affidavit stating, under penalties of perjury, Seller's U.S.
taxpayer identification number and address, and the fact that Seller is not a
foreign person pursuant to Section 1445(b)(2) of the Code ("Tax Affidavit").
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(x) For purposes of this Agreement, the following
definitions shall apply:
(x) The term "Seller Group"
shall mean, individually and collectively, (i) The Company,
(ii) Seller, and (iii) any corporation, partnership or any
other entity as to which Company is liable for Taxes incurred
by such entity either as a transferee, or pursuant to Treasury
Regulations Section 1.1502-6, or pursuant to any other
provision of federal, territorial, state, local or foreign law
or regulations.
(y) The term "Taxes" shall
mean all taxes, however denominated, including any interest ,
penalties or other additions to tax that may become payable in
respect thereof, imposed by any federal, state, local or
foreign government or any agency or political subdivision of
any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or
profits taxes (including, but not limited to, federal income
taxes and state income taxes), payroll and employee
withholding taxes, unemployment insurance taxes, social
security taxes, sales and use taxes, ad valorem taxes, excise
taxes, franchise taxes, gross receipts taxes, business license
taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums
and other governmental charges, and other obligations of the
same or of a similar nature to any of the foregoing, which the
Group is required to pay, withhold or collect.
(z) The term "Returns" shall
mean all reports, estimates, declarations of estimated tax,
information statements and returns relating to, or required to
be filed in connection with, any Taxes, including information
returns or reports with respect to backup withholding and
other payments to third parties.
(c) Except as set forth in Schedule 3 or to the extent
reflected or reserved against in the Company Financial Statements, Company, as
of September 28, 1996, had no material liabilities of any nature, whether
accrued, absolute or contingent, including, without limitation, liabilities for
Taxes, which were required to be disclosed or provided for under generally
accepted accounting principles or which would have a Material Adverse Effect.
For purposes of this Agreement, Material Adverse Effect shall mean a material
adverse effect on the Business, assets, operations or financial condition of the
Company. Except as set forth in Schedule 3, since the date of the balance sheet
contained in the Company Financial Statements, Company has not incurred or
become subject to any material obligations or liabilities of any nature, whether
accrued, absolute, contingent or otherwise, other than obligations and
liabilities incurred in the normal and ordinary course of business consistent
with past practices.
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(d) Seller will render all reasonable assistance which may
be requested by Buyer or its accountants in connection with Buyer's filing as a
result of this transaction of audited financial statements meeting the
requirements of the Securities and Exchange Commission. Seller and Buyer will
allocate responsibility for the furnishing of Buyer's accountants with a
management representation letter as described in Annex A.
4.6 Patents, Trademarks, Trade Secrets and Tradenames;
Intellectual Property.
(a) Except as provided in Schedule 5 or as described
herein, there is no infringement of any patent, formula, process, know-how,
trade secret, trade-name, trademark, copyright or any other rights of any person
in connection with, or related to, Company. Seller will execute all further
documents, papers, forms and authorizations which may be necessary for
receiving, completing or absolutely vesting full right, title and interest to
the intellectual property in favor of Company.
(b) (i) Ownership and Title. Except for any interests that
may be owned by IGT, Seller, ASI and Company collectively own the entire right,
title and interest in and to the Transferred Software and CBS Software (as
defined herein), including all intellectual property rights therein under
copyright, patent, trademark, trade secret and other applicable law, free and
clear of all title defects, liens, restrictions, claims, charges, security
interests, or other encumbrances of any nature whatsoever.
(ii) Procedures for Copyright Protection. In no
instance has the eligibility of the Transferred Software or the CBS Software for
protection under U.S. copyright law been forfeited to the public domain by
omission of any required notice or any other action.
(iii) Trade Secret Protection. The source code for
the Transferred Software and CBS Software have at all times been maintained in
confidence; however, copies of said source code have been furnished to LVDC
(defined herein) and to customers and consultants in connection with ASI's
normal business activities and in accordance with appropriate confidentiality
contractual protections.
(iv) Noninfringement. The use of the Transferred
Software and CBS Software does not infringe on or otherwise violate any patent,
copyright, or trade secret rights of any third party anywhere in the world.
Neither Seller, ASI nor Company has received a claim that the Transferred
Software or the CBS Software or the use thereof infringes any intellectual
property right of any third party anywhere in the world or that any third party
has any proprietary interest in or to the Transferred Software or the CBS
Software. Seller shall execute all further documents, papers, forms and
authorizations which may be necessary for receiving, completing and absolutely
vesting full right, title and interest to the Transferred Software or the CBS
Software in favor of Company.
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(c) The representations herein are subject to the
following: ASI transferred to Las Vegas Dissemination Company ("LVDC") ownership
of computer programs used in the operation of the Las Vegas Hub. The scope of
said transfer of ownership is presently unclear. Seller believes that, at most,
LVDC acquired title to a copy of Seller's or ASI's Totalisator software. Such
title of LVDC will not affect Seller's representations herein. To the extent
LVDC asserts a stronger title, Seller's liability will be limited as provided in
Section 12.19 (d).
4.7 Litigation; Claims.
(a) Except as specified in Schedule 6, there is no action, suit,
investigation or proceeding pending or, to the knowledge of the Seller or
Company, threatened against Company or MegaSports, Inc. before any court,
arbitrator or administrative or governmental body as to which there is a
reasonable possibility that it might result in any material adverse change in
the business of the Company.
(b) Seller hereby agrees to assume all responsibility with
respect to the case of Autotote CBS v. Ralph Overman, Las Vegas Dissemination
Company and John Gaughan, (Civil Action No. 8343844) ("Overman Case"). Buyer
shall, and shall assure that Company shall, cooperate in all reasonable ways to
assist in Seller's conduct of the case. In particular, as soon as reasonably
practical, Vic Salerno will furnish Seller with a deposition as to his knowledge
of the case.
4.8 Title to Properties.
Company has good and marketable title to and owns outright and
absolutely all of its properties and assets, real and personal, described in the
Latest Balance Sheet as being owned by it, free and clear of all liens,
mortgages, pledges, leases, easements, conditional sales agreements, security
interests or other encumbrances, charges, liabilities or claims of any nature or
kind whatsoever, except as noted in such Latest Balance Sheet or disclosed in
Schedule 7 hereto. Schedule 7 also lists any real property leases. Company is in
compliance with the material terms and provisions of said leases and neither
Seller nor Company has received any notice of default under any lease.
4.9 Performance of Contracts.
(a) Except as disclosed in Schedule 8 hereto, Company has
performed all material obligations required to be performed by it, and Company
is not in material default under any contract, lease, license or other agreement
to which it is party or to which any of its assets are subject, and the Seller
does not know of any event which, with the passage of time or the giving of
notice, or both, would constitute a material default under any thereof. Except
as disclosed in Schedule 8, all such contracts, leases, licenses and other
documents are in full force and effect and constitute legal, valid and binding
obligations of the respective parties thereto.
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(b) Except as set forth in Schedule 8, Company is not a
party to or bound by any written or oral (i) employment agreement or arrangement
relating to continued employment (including, without limitation, any collective
bargaining contract or union agreement), or consulting agreement or other
contract for personal services that may not be terminated within 30 days without
penalty, other than customary severance and employee benefit arrangements (or
any relating augmentation or acceleration of benefits) and other than the
Callaghan Letter Agreement; (ii) provider work agreements, pension or retirement
plan or arrangement; (iii) real property lease or license, or personal property
lease or license requiring annual payments by Company in excess of $5,000; or
(iv) any other contract which relates to its business or to the assets of
Company and the breach of which would have a Material Adverse Effect.
(c) Except as disclosed in Schedule 8 or as expressly
provided for by this Agreement, neither Seller nor any affiliate of Seller
(other than Company and MegaSports, Inc.), officer or director of Seller, of any
affiliate of Seller or of Company has entered into any contract or agreement
with Company or any of its subsidiaries in excess of $10,000, which will be
binding on Company or MegaSports, Inc. following the Closing, except for
contracts or agreements that are cancelable at will by Company or MegaSports,
Inc. without penalty.
4.10 Directors and Officers, Banks.
Schedule 9 hereto sets forth (i) the names of all directors and
officers of Company, as of the date hereof; and (ii) the name and address of
each bank in which Company has one or more accounts or safe deposit boxes and
the names of all persons authorized to draw thereon or to have access thereto
and the nature of such authorization.
4.11 Insurance.
Schedule 10 hereto sets forth all material insurance policies of
Seller applicable to Company. After the Closing Date hereof, Buyer shall be
required to secure all insurance with respect to Company.
4.12 Certain Transactions.
(a) From October 31, 1995 to the date hereof, Company has
not (a) issued or agreed to issue any stock, bonds, or other corporate
securities, including securities convertible into stock; (b) declared or made
any payment, dividend or distribution to stockholders or purchased or redeemed
any shares of its capital stock except for the dividend described herein in
subsection (iii) and except for treatment of intercompany accounts described in
subsection (i) below; (c) mortgaged, pledged or subjected to lien, charge or any
other encumbrance any of its assets, tangible or intangible, except as described
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in this Agreement or in the Schedules; (d) suffered any damage or loss, whether
or not covered by insurance, materially affecting its property or business; (e)
sold or transferred any of its assets except in the ordinary and usual course of
its business, or except as required by this Agreement or described in this
Agreement or in the Schedules; (f) paid to any officer, employee or any other
person any extra compensation or bonus (except as disclosed by Seller), or made
any arrangement or commitment therefor, or increased the salary or other
compensation of any officer or other executive employee except in the ordinary
course of business; (g) sold, assigned or transferred any patent, trademark,
trade name, copyright or other intangible asset except as described in the
Technology License Agreement; or (h) incurred any obligation or liabilities,
absolute or contingent, except in the ordinary and usual course of business or
pursuant to existing contracts and agreements described in this Agreement or in
the Schedules; provided, however, that Seller will cause prior to the Closing
Date:
(i) Subject to subsection (b) hereof, the
difference between the amount of Company's intercompany accounts payable and
intercompany accounts receivable to be eliminated solely by recording an
increase or decrease in stockholders' equity, as appropriate;
(ii) removal of all cash from the Company (except
for cash representing deposits by customers for orders to be completed after
Closing, as described on Annex B). In the alternative, Buyer shall increase the
Purchase Price by the amount of retained cash;
(iii) Buyer acknowledges and agrees that Company
shall, in the form of a dividend from Company to Seller paid on or before
Closing, irrevocably transfer, grant, convey, assign and quitclaim to Seller the
entire right, title and interest of Company in and to the Pari-mutuel Tote
Software (defined herein), including both tangible and intangible property
constituting the Pari-mutuel Tote Software as follows:
(a) all copyright and patent interest
throughout the world owned or claimed by Company in the Pari-mutuel Tote
Software, together with the right to sue for, settle, or release any past,
present or future infringements;
(b) title to and possession of two (2)
copies of the media and documentation that constitute the component parts and
copies of the Pari-mutuel Tote Software; and
(c) all right, title and interest owned or
claimed by Company in and to the inventions, discoveries, improvements, ideas,
trade secrets, know-how, confidential information, and all other intellectual
property owned or claimed by Company pertaining to the Pari-mutuel Tote
Software, but not to the CBS Software (defined herein).
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(b) Nothing in this Agreement shall negate the obligation
of Company or any successor to make payments to Seller or any affiliate or the
obligation of Seller or any affiliate to make payment to the Company for goods
delivered or services performed or for reimbursement for payments made on its
behalf.
4.13 IGT Sports Wagering Software.
Company is the assignee of Autotote Systems, Inc. ("ASI")
which entered into an agreement with International Games Technology with respect
to the joint development of Pari-Mutuel Sports Wagering Software ("MegaSports
Software")("IGT Agreement"). All rights and obligations of ASI under the IGT
agreement were assigned to Company on April 27, 1994. To the extent that said
agreement did not transfer Intellectual Property rights to Company, Seller will
or will cause ASI to assign, transfer and convey such rights to Company at the
Closing.
4.14 Callaghan Situation.
Brian Callaghan is not eligible for any employment bonus.
Any stock options of Seller have previously been delivered.
4.15 Employment Benefit Plans.
Company has no obligation to contribute to any
multi-employer plans within the meaning of Section 3(37) of ERISA. Each of the
Company Plans has been operated in all material respects in accordance with
ERISA and other applicable law, and has not engaged in any prohibited
transaction (as such term is defined in Section 406 of ERISA) for which an
exemption is not available. No Company Plan provides employees with medical or
life insurance coverage after termination of employment, except as required by
Section 4980B of the Code, and Company has made no promises or representations
to current or former employees concerning such coverage. Each Company Plan that
is intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service. There is no
trade or business that is aggregated with Company under Section 414(b), (c), (m)
or (o) of the Code that has any liability for an accumulated funding deficiency
under Section 302 of ERISA, withdrawal liability under Section 4201 or ERISA, or
excise tax liability under Section 4980B of the Code. For purposes of this
Section 4.15, a "Company Plan" is any employee benefit plan within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")
and any dependent care, tuition reimbursement, cafeteria, bonus, stock option,
stock purchase or other incentive compensation plan that covers employees or
former employees of Company. All contributions to Company plans with respect to
Company employees have been paid for all prior plan years and no employer
contributions will be payable to the Autotote Systems 401(k) Retirement Plan for
non-union employees for the calendar year 1996 if the Company ceases to be a
subsidiary of Seller prior to December 31, 1996.
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4.16 Environmental.
To the best knowledge of Seller, there does not exist any
violation by Company of any material Environmental Law (which shall be defined
as any Federal, state, local or statutory or common law, and any regulation,
code, plan, order, decree, judgment, permit, grant , franchise, concession,
restriction, agreement, requirement, and injunction issued, entered,
promulgated, or approved thereunder, relating to the environment, or human
health or safety relating to occupational or environmental matters, including,
without limitation, any law relating to emissions, discharges, releases or
threatened releases of hazardous materials into the environment (including,
without limitation, air, surface water, groundwater and land), or relating to
the presence, manufacture, generation, refining, processing, distribution, use,
sale, treatment, recycling, receipt, storage, disposal, transport, arranging for
transportation, treatment or disposal, or handling of hazardous materials,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time ("CERCLA"),
the Resource Conservation and Recovery Act of 1976, as amended from time to time
("RCRA"), the Federal Insecticide, Fungicide and Rodenticide Act, as amended
from time to time ("FIFRA"), the Toxic Substances Control Act, as amended from
time to time, and the Occupational Safety and Health Act of 1970, as amended
from time to time).
4.17 IGT - North America.
Upon consummation of the transactions contemplated hereby,
neither Seller nor any of its affiliates will be under common ownership with, or
will own any business jointly with, (i) IGT-North America ("IGT") or any of its
affiliates or (ii) Buyer or Company or any of their affiliates.
4.18 Permits, Licenses and Franchises; Regulatory authorities.
(a) Except with respect to matters described below,
Company has all permits, licenses, franchises and other authorizations necessary
to, and has complied in all material respect with all laws applicable to, the
conduct of its respective businesses and operations in the manner and in the
area in which such businesses and operations are presently being conducted, and
all such permits, licenses, franchises and authorizations are in full force and
effect and, to the knowledge of the Seller or Company, valid. The Nevada Gaming
authorities have the discretion to require licensing with respect to current
operations. Based on various applications filed by Seller, said authorities have
commenced a background investigation of Seller and affiliates. Seller and
affiliates intend to seek to withdraw a previously submitted application for
license filed with the Nevada Gaming authorities. MegaSports has not commenced
operations.
(b) Seller acknowledges that it and certain officers of
Seller are currently applicants before the Nevada State Gaming Control Board and
Nevada Gaming Commission ("Nevada Regulators"). To Seller's knowledge and belief
the Seller has cooperated in each respective application investigation.
Furthermore, the Seller understands that it is within the sole discretion of the
State Gaming Control Board to allow a withdrawal of the pending applications
related to the Seller.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller as follows:
5.1 Organization and Standing of Buyer; Right to Buy and
Corporate Authority of Buyer.
Buyer is duly organized and validly existing corporation under
the laws of the State of Nevada. There are no provisions of the certificate of
incorporation or By-Laws of Buyer or of any agreements to which Buyer is a party
which prohibit Buyer from executing this Agreement or consummating the
transactions contemplated hereby and no approvals or consents of any persons
other than Buyer are necessary in connection therewith. The execution and
delivery of this Agreement and other documents by Buyer and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate actions and are valid and binding obligations of the
Buyer enforceable in accordance with their terms. The consummation of the
transactions contemplated in this Agreement will not result in or constitute a
breach or default of any agreement or certificate to which Buyer is a party or
is otherwise subject.
SECTION 6. CONDITIONS PRECEDENT.
6.1 Conditions of Buyer's Purchase.
The obligations of Buyer to purchase and pay for the Shares
pursuant to this Agreement are subject to the fulfillment at the Closing Date of
the following conditions, any one or more of which may be waived in writing in
whole or in part by the Buyer:
(a) Representations, Warranties and Covenants of the
Seller. The representations and warranties of the Seller herein and in any
Schedule, Exhibit or Annex shall be true and complete in all material respects
as of the Closing with the same effect as though made at such time, except to
the extent that a different earlier time is specifically stated in any such
representation or warranty; the Seller shall have performed and complied in all
material respects and with all covenants and conditions required by this
Agreement to be performed or complied with by the Seller at or prior to the
Closing Date; and the Seller shall deliver to Buyer at the Closing an officer's
certificate dated the Closing Date certifying to the foregoing effects.
(b) No Material Adverse Change. Since August 24, 1996,
whether or not in the ordinary course of business, there shall not have occurred
or arisen any event, condition or state of facts which materially and adversely
effects the business or financial condition of the Company taken as a whole.
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(c) Release of Existing Pledge. The pledge to Banker's
Trust of the Shares shall have been released by Banker's Trust and the Shares
shall be free and clear of all liens and encumbrances.
(d) Due Diligence. Buyer shall have completed its due
diligence of Company and shall have found no condition or conditions as to
Company constituting a Material Adverse Effect as to which Buyer shall have
given notice to Company and Seller prior to closing and which Company and/or
Seller shall not have cured as of the Closing Date.
(e) Required Approvals. The Nevada Regulators shall have
approved this transaction or Buyer shall have received an opinion of its legal
counsel (a copy of which shall be forwarded to Seller) that no approval of the
Nevada Regulators is required for the completion of the transaction contemplated
herein. In any event, notice shall be given to the Nevada Regulators.
6.2 Conditions of Sale.
The obligations of Seller to sell the Shares pursuant to this
Agreement are subject to the fulfillment at the Closing Date of the following
conditions which may be waived in writing in whole or in part by the Seller:
(a) All representation and warranties of Buyer shall be
true and correct as at the Closing Date as though made on and as of such date.
(b) Buyer shall have executed or secured the execution of
all necessary documentation to effect the following transactions ("Special
Transaction Documentation").
(i) All contracts, agreements and accounts
receivable relating to Company's business operations in Tijuana and Juarez,
Mexico shall be assigned by Company to Seller or an affiliate (with Seller or
its affiliates undertaking all negotiations with respect thereto);
(ii) Except for the Overman Case, Buyer or Company
will specifically assume all responsibility for the cases described in Schedule
6;
(iii) Buyer or Company will grant a power of
attorney or other document to Seller with respect to the Overman Case;
(iv) Buyer or Company will have secured the release
of Seller from the guaranty by Seller of the mortgage on the Building described
in Section 12.9; provided, however, that in order to effect the Closing, Seller
may elect to temporarily waive this condition if a suitable back-up guarantee
for Seller is secured with respect to Seller's obligation as guarantor of the
mortgage, with Buyer agreeing to use all reasonable efforts to secure both such
back-up guarantor and the release of Seller as guarantor.
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(v) Buyer by appropriate documentation ("Callaghan
Transfer") will have specifically assumed all responsibility for the employment
agreement of Seller with Mr. Brian Callaghan other than for the payment of any
bonus or stock options which shall remain the obligation of Seller.
6.3 Condition of Purchase and Sale.
(a) If required, the Nevada Gaming Commission shall have
approved this transaction ("Nevada Approval"). In any event, notice will be
given to said governmental agency. Each party shall cooperate with the other
parties as reasonably necessary to permit compliance with any amendments to this
Agreement requested by the Nevada gaming authorities related to compliance with
laws and administrative regulations that may be applicable to this Agreement.
(b) The Dividend Transaction shall have been completed.
(c) The Agreements attached as Exhibit B shall have been
executed by the parties thereto ("Exhibit B Agreements").
(d) Documents required to be delivered by each party at
Closing will be deemed a condition of Closing.
SECTION 7. CONDUCT PENDING CLOSING.
7.1 Seller's Conduct.
(a) Up to the time of the Closing Date, and as a condition
to the obligations of Buyer hereunder, Seller, except for activities in the
ordinary course of business and except for activities outside the ordinary
course of business when so notified to Buyer and approved by Buyer shall or
shall cause Company to:
(i) operate and maintain the Company's business in
the regular and ordinary course and in accordance with all applicable laws,
rules and regulations;
(ii) maintain and keep the properties and
facilities used in the conduct of the Company's business in as good condition
and working order as at present, except for ordinary wear and tear;
(iii) perform obligations under contracts relating
to or affecting the assets of Company;
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(iv) not make any material change in the Company's
business or method of operations except as provided in this Agreement;
(v) use all reasonable efforts to maintain
Company's relationships with its employees, licensors, suppliers, customers and
others having business relationships with it; and
(vi) continue to pay its bills in due course and in
the ordinary course of its business.
(b) Seller will give to Buyer and its representatives full
access at reasonable times throughout the period prior to the Closing Date to
the assets of Company, and to its books and records and will furnish to Buyer
during such period all requested information ("Information") concerning the
affairs of Company as Buyer may reasonably request. Buyer agrees:
(i) to use such Information only for the purposes
previously stated, i.e., for the evaluation of the Company business;
(ii) to hold in the strictest confidence any and
all Information and refrain from disclosing in any manner, directly or
indirectly, such Information to any entity, person, partnership, corporation or
business organization;
(iii) to return such Information received in any
tangible form or representation to Seller in the event that the transaction is
not completed, and to retain no copies or reproductions thereof.
Buyer's duty of nondisclosure shall not extend to Information which is already
known to Buyer prior to disclosure by Seller, or is rightfully received from a
third party by Buyer or is in the public domain.
(c) Until the Closing Date, without prior written consent
of Buyer in each instance, Seller will not except for activities in the ordinary
course of business and except for activities outside the ordinary course of
business when so notified to Buyer in writing and approved by Buyer or as
otherwise provided in this Agreement:
(i) enter into any new transaction or agreement
with respect to the business or assets of Company;
(ii) sell or otherwise dispose of any of the assets
of Company except for inventory held for sale in the ordinary course of business
and items which may be discarded or disposed of in connection with the normal
replacement thereof; and
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(iii) subject or suffer or permit any of the assets
of Company to become subject to any lien, charge or encumbrance or take any
action or by inaction permit any event to occur which would result in any
representations or warranties of Seller hereunder not being true and correct
immediately after the occurrences of such transaction or event.
SECTION 8. CLOSING.
8.1 Delivery by Seller to Buyer.
At the Closing, Seller will deliver to Buyer:
(a) a certificate representing the Shares, duly
endorsed for transfer to Buyer;
(b) a certificate of the Secretary or an Assistant
Secretary of Seller certifying to resolutions adopted by the Board of Directors
(or Executive Committee thereof) of Seller authorizing this Agreement and the
consummation of the transactions contemplated thereby;
(c) a Certificate of Incumbency for Seller, Company and
Autotote Systems, Inc.;
(d) Latest Balance Sheet and Latest Income Statements
(certified by a representative of Company);
(e) The minute books, corporate seal, stock record books
and copies of all other corporate records of Company;
(f) Any required consents;
(g) Certified copies of certificate of incorporation and
by-laws of Seller and Company;
(h) Officers Certificate relating to Section 6.1(a);
(i) Resignation of Officers and Directors of Company;
(j) Certified copy of resolutions, certificate of
incorporation and by-laws of Autotote Systems, Inc;
(k) Special Transaction Documentation;
(l) Certified copy of IGT Agreement;
(m) Release of any pledge in Shares held by senior bank
lenders;
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(n) Tax Affidavit;
(o) Copies of real estate leases;
(p) Technology License (defined herein);
(q) Exhibit B Agreements; and
(r) UCC-3 with respect to release of security interests in
software of Seller or assets of Company, or other satisfactory arrangement.
8.2 Delivery by Buyer to Seller.
At the Closing, Buyer will deliver to Seller:
(a) Certified or bank cashier's check to the order of
Seller or bank wire transfer in immediately available funds as Seller may
require in the aggregate sum of $3,000,000.00 plus retained cash, if any;
(b) a certificate of the Secretary or Assistant Secretary
of Buyer certifying to resolutions adopted by the Board of Directors (or
Executive Committee thereof) of Buyer authorizing this Agreement and the
consummation of the transactions contemplated thereby;
(c) a Certificate of Incumbency;
(d) Officers Certificate relating to Section 6.2(a);
(e) Certified Certificate of Incorporation and By-Laws of
Buyer;
(f) Confirmation of Purchase Order for 101 Probe
terminals;
(g) Special Transaction Documentation; and
(h) Health Plan Implementation.
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SECTION 9. POST CLOSING ADJUSTMENTS.
9.1 Certain Accounts Receivable.
Payments of accounts receivable in transit (based on postmark) as
of the Closing Date hereof and received by Buyer after the Closing Date hereof
shall be the property of Seller and the amount of such items shall be paid by
Buyer to Seller. Seller shall pay income taxes with respect to amounts received
hereunder.
SECTION 10. EMPLOYEE RELATIONS.
10.1 Benefits. Schedule 11 sets forth the name, position and
compensation of all officers of Company currently in the employ of Company,
excluding those employees continuing in the employ of Seller. Buyer shall be
responsible for all severance obligations owing with respect to any employee
terminated after the Closing Date. Seller and Company shall not be required to
terminate the services of any employee.
10.2 Employee Benefit Plans. Buyer acknowledges that Company will
terminate the participation of Company's employees in Seller's benefit plans as
of Closing. As of the Closing, Buyer shall cause Company to provide a group
health plan for all employees of Company covered by Seller's group health plans
and shall not impose any waiting period or pre-existing condition limitations.
Such group health plan shall provide equivalent benefits to the benefits
provided to employees of the Company under Seller's group health plan
immediately prior to Closing ("Health Plan Implementation)". Company has the
right to amend or terminate any such plan following Closing.
SECTION 11. CERTAIN SELLER EMPLOYEES.
11.1 Limited Contact.
Buyer agrees, for a period of one (1) year from the Closing Date,
not to offer employment to any persons who are employees of Seller or its
affiliates other than those employees of Seller described in Schedule 12. Seller
and its affiliate shall similarly be restricted from offering employment to
employees of Buyer or Company.
SECTION 12. GENERAL PROVISIONS.
12.1 Benefit of Agreement.
The provisions of this Agreement are for the benefit of Buyer and
Seller and their respective permitted assigns. They are not intended to and do
not give rise to any benefit to any third party not a party of this Agreement.
No such third party shall have any right to sue hereunder nor have any rights of
any kind or nature.
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12.2 Expenses.
Except as otherwise provided, Seller and Buyer, respectively,
will each pay their own costs and expenses of performance of and compliance with
all agreements and conditions contained in this Agreement.
12.3 Brokerage.
Each of the Parties represents that all negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on by
the officers or employees of such party or its counsel directly with the
officers and employees or counsel of the other party without the intervention of
any other person and that no broker or other person is entitled to any
commission, finder's fee, or like payment in connection with this Agreement or
any of the transactions contemplated by this Agreement.
12.4 Transfer Taxes.
Buyer and Seller shall share equally all state or local, sales,
documentary transfer, use, excise, personal property, value added or foreign
registry taxes which may be assessed, levied, imposed or based upon the transfer
of the Shares by Seller to Buyer or upon this Agreement or the performance
thereof.
12.5 Use of Names.
(a) After fifteen (15) days following the Closing Date,
except as provided in Section (b) below, Buyer shall not use the corporate name
of Autotote Corporation or Autotote CBS, Inc. or any of their respective
affiliates or any derivatives or abbreviations thereof, except for "CBS". As
soon as reasonably possible following the Closing Date, Buyer shall cause to be
placed upon letterheads, catalogs, brochures, sales literature, promotional and
other selling material relating to the products which bear such name a
conspicuous legend indicating that the Buyer is the seller of the products or
services referred to therein, and Buyer will cause to be placed upon all
Seller's quotation, purchase order, acknowledgment, invoice and similar forms a
conspicuous legend indicating that Buyer is the real party in interest and that
no agency relationship exists between Seller and Buyer.
(b) Seller hereby grants to Buyer and Company a
non-exclusive, non-transferable, limited license to use Seller's trademarks,
copyrights and name (collectively, the "Trademarks") used in connection with the
marketing of Seller's products. Buyer and Company shall not use, or permit
others to use, the Trademarks in any way other than the manner permitted here.
Buyer and Company recognize the value of the goodwill associated with the
Trademarks, and that they have acquired a secondary meaning in the mind of the
public. Buyer and Company will not disparage or attack the title or any rights
of Seller in and to the Trademarks and shall assist Seller in the protection
and/or defense thereof as Seller may reasonably request. Finally, Buyer and
Company understand that nothing herein shall be construed to prevent Seller from
granting any other licenses for use of the Trademarks or from using the
Trademarks in any manner whatsoever. Buyer shall ensure the compliance herewith
by Company.
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12.6 Counterparts.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
12.7 Cooperation.
Buyer and Seller will jointly prepare a letter or other
appropriate communication to persons and entities dealing with Seller in order
to advise Seller's customers, suppliers and the like of this transaction and to
effectuate this Agreement and Seller, with Buyer's consent, which consent will
not be unreasonably withheld, will prepare and issue a press release describing
the transactions contemplated by this Agreement.
12.8 Non-Competition.
(a) For a period of five (5) years after the Closing Date
and thereafter during the continuation of the Authorized Exclusive
Distributorship Agreement, neither Seller nor any Subsidiary or Affiliate of
Seller shall, directly or indirectly compete with Buyer or Company in the
operation of its pari-mutuel racing businesses which have been and will be
conducted in Nevada:
(b) Except for the Seller's and ASI's operations in
Mexico, neither Seller nor any Subsidiary or Affiliate of Seller shall, directly
or indirectly, compete with the Buyer or the Company anywhere in the world using
any software provided to the Seller or ASI pursuant to the Technology License
unless permitted under the International Cooperation Agreement:
(c) For a period of five (5) years after the Closing Date,
and thereafter during the continuation of the Authorized Exclusive
Distributorship Agreement, neither Seller nor any Subsidiary or Affiliate of
Seller shall directly or indirectly:
(i) Compete with Buyer or Company in the operation
of its Race and Sports Book or MegaSports businesses ("Business"), anywhere in
the world; or
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(ii) Engage, whether as a principle, agent,
investor, distributor, representative, stockholder, employee, consultant,
volunteer or otherwise with or without pay in any business venture which is
competitive with the Businesses anywhere in the world; or
(iii) Solicit or entice or endeavor to solicit or
entice away any of the clients or customers of the Buyer or the Company; or
(iv) Employ any person who is a director, officer
or employee of the Buyer or the Company or any person who is likely to be in
possession of any confidential information or trade secrets relating to the
business of the Buyer or the Company; or
(v) At any time during such period take any action
or make any statement the effect of which would be, directly or indirectly, to
materially impair the goodwill of the Company or the Buyer or otherwise be
materially detrimental to the Company or the Buyer.
(d) Notwithstanding the provisions of paragraph (a) and
(b) above, nothing herein shall prevent the Seller from:
(i) Outside the State of Nevada, manufacturing and selling
devices that perform functions similar to the functions performed by Seller's
current products, provided, however, that such devices or products cannot use or
incorporate Transferred Software or CBS Software unless permitted under the
International Cooperation Agreement; or
(ii) Utilizing the Totip software or any similar
lottery-type software in its business wherever conducted; or
(iii) Owning less than 20 percent of any publicly owned
company; or
(iv) Continuing to engage after the Closing in any
business activity in Tijuana and Juarez, Mexico being conducted by the Company
at the time of the Closing in order to fulfill Seller's or its affiliate's
obligations under all contracts and agreements relating to the Company's
business operations in Tijuana and Juarez, Mexico, which agreements have been
assigned by the Company to Seller prior to the Closing Date; or
(v) As provided in the International Cooperation
Agreement.
(e) Except for Company's planned operation of the Nevada
Hub, its performance under the Authorized Exclusive Distributorship Agreement,
and the Manufacturing Agreement, Buyer shall ensure that Company will not, and
it (and any affiliate) will not, compete with Seller or its affiliates in the
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pari-mutuel racing (totalisator, simulcasting), and video games and lottery
business using any software provided to Company pursuant to the Technology
License and will not compete in said business in any manner for five (5) years
from the date hereof or the expiration of the Exclusive Authorized
Distributorship Agreement. Aqua Caliente, SA de C.V. ("Caliente") will be
considered an exclusive account in Mexico for the benefit of Seller and
Affiliates and Buyer and its Affiliates will not, and Buyer will insure that
Company will not, compete with Seller or its Affiliates with respect to that
account in Mexico. Buyer, the Company and their affiliates shall have the right
to compete with Seller and its Affiliates in Mexico for accounts other than
Caliente.
(f) For purposes hereof "Race and Sports Book" (and
derivations thereof) shall mean: a system of wagering (including sports parlay
card wagers) where the "house" books a bet and may sustain a gain or loss; and
"Pari-mutuel Race Wagering" (and derivations thereof) shall mean: a system of
wagering on horse races where the odds and payouts are determined by the size of
the betting pool. For purposes of this agreement and ancillary documentation,
MegaSports (although based on Pari-mutuel sports wagering) will be considered as
part of the Race and Sports Book business.
12.9 No Waiver.
A waiver to be effective must be in writing and signed
by an Officer of the party granting the waiver. The waiver by Seller or Buyer of
any breach of or failure to comply with any provision of this Agreement by the
other party shall not be construed as, or constitute, a continuing waiver of
such provision, or a waiver of any other breach of, or failure to comply with,
any provision of this Agreement.
12.10 Entire Agreement; Modification.
This Agreement and the other documents contemplated
hereby embody the entire agreement between the parties and there have been and
are no agreements, representations or warranties between the parties other than
those set forth herein or provided for herein. It may not be modified except by
a writing signed by an officer of each of the parties thereto.
12.11 Notices.
All notices, requests, demands and other communications
herein shall be in writing unless otherwise specified and shall be deemed to
have been duly given if delivered or mailed by registered or certified mail,
postage prepaid, return receipt requested or by telefax with receipt
confirmation, addressed:
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(a) if to Seller, to:
Autotote Corporation
750 Lexington Avenue
New York, NY 10022
Attn: Chairman and Chief Executive
with a copy to:
Office of the General Counsel
Autotote Corporation
750 Lexington Avenue
New York, NY 10022
(b) if to Buyer, to:
President
American Wagering, Inc.
675 Grier Drive
Las Vegas, NV 89119
Attn: Vic Salerno
with a copy to:
Gordon & Silver
3800 Howard Hughes Parkway
14th Floor
Las Vegas, NV 89105
Attn: Lisa Miller-Roche, Esq.
and:
Schnader Harrison Segal & Lewis
1600 Market Street
Philadelphia, PA 19103
Attn: Edward Baxter, Esq.
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12.12 Successors and Assigns.
This Agreement shall inure to the benefit of the
parties and their respective authorized legal representatives, successors,
assigns and shall be binding upon Buyer and Seller and their authorized
successors and assigns.
12.13 Governing Law.
This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Nevada without regard to
conflict of laws principles. Any dispute that may arise hereunder shall be
determined by a court of competent jurisdiction located in Clark County, Nevada.
12.14 Headings.
The Section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning and interpretation of this Agreement.
12.15 Severability.
In the event that any one or more provisions
contained in this Agreement should for any reason be held to be unenforceable in
any respect under the laws of or by any governmental agency or any government,
such unenforceability shall not affect any other provisions of this Agreement,
but this Agreement shall be construed as if such unenforceable provisions had
not been contained herein.
12.16 Termination.
(a) Notwithstanding anything herein or
elsewhere to the contrary, this Agreement may be terminated
and the transactions contemplated hereby abandoned at any time
prior to the Closing Date:
(i) by written consent of all the
parties hereto;
(ii) by Seller, if events shall
occur that render impossible of satisfaction one (1) or more
of the conditions set forth in Section 6.2 and such
condition(s) shall not be waived by Seller;
(iii) by Buyer, if events shall
occur that render impossible of satisfaction one (1) or more
of the conditions set forth in Section 7.2 and such
condition(s) shall not be waived by Buyer;
(iv) by either party if the Closing
does not occur on or before October 30, 1996.
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(b) In the event of the termination
of this Agreement and the abandonment of the transactions
contemplated hereby, this Agreement shall become void and have
no effect and the parties hereto shall have no obligation or
liability hereunder, except that nothing herein will relieve
any party from liability for any willful breach of this
Agreement.
12.17 Cooperation.
Each party will execute appropriate documentation to
effect the purposes of this Agreement.
12.18 Tax Matters.
(a) Tax Returns. The applicable income, deductions
and credits of the period beginning November 1, 1995 up to and including the
Closing Date (the "Short Period") will be included in the consolidated Federal
income tax returns of Seller for the fiscal year ending October 31, and Seller
shall pay all Federal and State income Taxes (excluding any deferred Taxes), if
any, attributable to such period. The income, deductions and credits of the
Company for the Short Period will be determined on the basis of the appropriate
permanent books and records (including a closing of the books), or if the
portion of any item of income or deduction cannot be determined from the
permanent records, in accordance with Treasury Regulations 1.1502-76(b)(2)(ii).
Seller agrees that, subject to extensions duly obtained, it shall make timely
payment of the Company's Taxes for all taxable periods ending on or before the
Closing Date (a "Pre-Closing Period"). The Buyer and the Company shall be
responsible for filing all Tax Returns for periods ending after the Closing Date
(a "Post Closing Period").
(b) Seller's Indemnification. (a) From and after the
Closing Date, Seller shall indemnify and hold harmless Buyer and Company from
any and all Taxes (1) for any taxable period ending on or prior to the Closing
Date, (2) resulting by reason of the several liability of Company pursuant to
Treasury Regulations Section 1.1502-6 or any analogous state, local or foreign
law or regulation or by reason of Company having been a member of, or ceasing to
be a member of, the Seller Group, (3) where under any applicable law the tax
year of the Company does not close on the Closing Date, any state or local taxes
for any period beginning before the Closing Date and ending after the Closing
Date but only with respect to the portion of such period up to an including the
Closing Date, and (4) resulting from the breach of Seller's Representation and
Warranties set forth in Section 4.5(b).
(c) Tax Proceedings. In the event the Buyer or the
Company receives notice, whether orally or otherwise, of any pending Tax
examination, claim, settlement, proposed adjustment or related matter that may
affect the Seller, or in the event the Seller receives any such notice which may
affect the Buyer or the Company, the party receiving such notice shall notify
the other party in writing as soon as reasonably practicable. Seller shall be
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entitled, at its expense, to contest, control, compromise, settle or appeal all
proceedings with respect to the Company's Taxes for periods ending on or before
the Closing Date, provided that Buyer shall have the right to participate any
such proceeding at its expense, that the Buyer reasonably believes may cause the
Company or Buyer to incur any liability for payment of Taxes and Seller shall
consult in good faith with the Buyer with regard to any such proceeding. The
buyer agrees that it will cooperate fully and will cause the Company to
cooperate fully with Seller in the defense against or compromise of any claim
asserted in any such proceeding.
(d) Tax-Sharing Agreement. Effective on the Closing
Date, all Tax Sharing Agreements (as defined below), whether or not written, to
which the Company and the Seller are parties, shall be terminated with respect
to the Company for all periods ending after the Closing Date.
(e) No Adverse Action. The Seller shall not (i)
exercise its authority as agent of the Company under Treasury Regulation Section
1.1503-77 (or any comparable provision of state, local or foreign Tax law), or
(ii) file any election or take any other similar action, including without
limitation, amending any Tax Return or agreeing to any determination or audit,
for any period ending after the Closing Date without first received the consent
of the Buyer, which consent shall not be unreasonably withheld.
(f) Loss Carrybacks. If subsequent to the Closing,
the Company incurs a net operating loss or capital loss that is available to be
carried back to the consolidated Tax Return of Seller, Seller shall cooperate
with the Buyer and the Company, at the Buyer's expense, in effecting such
carryback and shall pay to the Company all tax refunds (including interest)
within five days of the receipt thereof.
(g) Timing Differences. As used in this Section
12.19, the term "Seller Tax Period" shall mean any tax period ending on or prior
to the Closing Date, and the term "Buyer Tax Period" shall mean a taxable period
ending after the Closing Date. If as a result of an audit or other proceeding
concerning the liability of the Company for Taxes, there is an adjustment as a
result of which there should be both a net tax benefit for the Seller Tax
Periods and a net tax detriment for Buyer's Tax Periods or both a net tax
detriment for Seller's Tax Periods and a net tax benefit for Buyer's Tax
Periods, then Seller shall pay to the Buyer or the Buyer shall pay to Seller, as
the case may be, the amount of net tax benefits actually derived as a result of
such adjustments up to an amount equal to the net tax detriment actually
incurred by Seller or the Buyer, as the case may be. A net tax benefit shall be
deemed actually derived when the party entitled to such net tax benefit receives
an actual refund of tax or a reduction of tax otherwise due and payable. A net
tax detriment shall be deemed actually incurred when the party liable for such
net tax detriment makes an additional or increased tax payment or suffers a
reduction in an actual tax refund payment. Payments under this section shall be
made without interest within 30 days after the later of the date the net tax
benefit is actually derived or the date the net tax detriment is actually
incurred.
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<PAGE>
12.20 Indemnification.
(a) Indemnity of Seller. Subject to the provisions of
this Section, Seller shall indemnify and hold harmless Buyer and Company from
and against any and all damages, losses, liabilities, obligations, penalties,
claims, litigation, demands, defenses, judgments, amounts paid in settlement,
suits, proceedings, costs, disbursements or expenses (including, without
limitation, reasonable attorneys' fees and experts' fees and disbursements) of
any kind or nature whatsoever ("Damages") suffered or incurred directly or
indirectly by them as a result of or arising out of:
(i) any misrepresentation or breach of
warranty made by Seller or ASI in this Agreement or any document referred to
herein ("Transaction Document"); or
(ii) any failure of Seller to completely and
timely perform any covenant or obligation to be performed by it under this
Agreement or any Transaction Document; or
(iii) any failure of Seller to timely and
completely satisfy any obligation or liability of Seller or ASI; or
(iv) Taxes provided in Section 12.19(b); or
(v) any Damages incurred by Company or Buyer
on or after Closing with respect to the Company Plans; or
(vi) Overman Case.
(b) Indemnity of Buyer. Subject to the provisions of
this Section, Buyer shall indemnify and hold harmless Seller from and against
any and all Damages suffered or incurred directly or indirectly by it as a
result of or arising out of:
(i) any misrepresentation or breach of
warranty made by Buyer in this Agreement or any Transaction Document;
(ii) any failure of Buyer to completely and
timely perform any covenant or obligation to be performed by it under this
Agreement or any Transaction Document; or
(iii) any failure of Buyer to timely and
completely satisfy any obligation or liability of Buyer.
(c) Procedure for Indemnification. In the event that
any party hereto shall incur any Damages in respect of which indemnity may be
sought by such party pursuant to this Section, the party from whom such
indemnity may
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<PAGE>
be sought (the "Indemnifying Party") shall be given written notice thereof by
the party seeking such indemnity (the "Indemnified Party"), which notice shall
specify the amount and nature of such Damages and include the request of the
Indemnified Party for indemnification of such amount. No claim for
indemnification shall be made by any of the parties hereto unless and until
aggregate Damages for all claims for indemnification then or previously made by
such party shall have exceeded $10,000, at which time such party shall be
entitled to indemnification for all Damages, without regard to such $10,000
threshold. The Indemnifying Party shall within 30 days pay to the Indemnified
Party the amount of the Damages so specified. Upon receipt of such notice from
the Indemnified Party of any claim made by a third party, the Indemnifying Party
shall be entitled to participate in the defense of such claim at its own
expense.
(d) EXCEPT AS PROVIDED HEREIN, SELLER'S MAXIMUM
LIABILITY UNDER THIS AGREEMENT SHALL NOT EXCEED $3 MILLION; PROVIDED, HOWEVER,
SELLER'S MAXIMUM LIABILITY HEREUNDER SHALL NOT EXCEED $1.5 MILLION IF:
(i) SELLER UNKNOWINGLY BREACHES ANY REPRESENTATION,
WARRANTY OR OBLIGATION OF SELLER UNDER THIS AGREEMENT;
(ii) THE SELLER OR ITS AFFILIATES DO NOT HAVE GOOD
TITLE FREE AND CLEAR OF ANY CLAIMS OF LVDC, TO THE SOFTWARE BEING LICENSED TO
THE COMPANY PURSUANT TO THE TECHNOLOGY LICENSE; OR
(iii) LIABILITY FOR MONETARY DAMAGES IS IMPOSED
UPON THE COMPANY IN CONNECTION WITH THE OVERMAN CASE.
For purposes of this Agreement, a "knowing breach" shall mean a breach with
"knowledge" of Seller and without knowledge of Buyer. "Knowledge" of Seller
shall mean the actual knowledge (without investigation) of officers of Seller,
ASI and Company, and Fred Sylvanus (only with respect to software
representations), and knowledge of Buyer shall mean the actual knowledge
(without investigation) of the officers of Buyer and Victor Salerno and Robert
Ciunci as of the date hereof and shall not refer to any knowledge of the facts
of the Overman Case or any imputed knowledge, as for example, knowledge arising
from past use of consultants.
12.20 Survival. Except as otherwise expressly provided in this
Agreement, the liabilities and obligations of each party with respect to any and
all of its representations, warranties, covenants, indemnifications and
agreements set forth in this Agreement and/or in any document incorporated into
it shall not be merged into, affected or impaired by the Closing under this
Agreement; provided, however, that, except as set forth in the next succeeding
sentence, the representations and warranties contained in this Agreement shall
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<PAGE>
survive the Closing for one (1) year, so that an action for breach of a
representation or warranty set forth herein may not be commenced after the first
anniversary of the Closing Date unless, prior to such time, a claim shall have
been made against and given in writing to the party against whom such claim is
made. Notwithstanding the foregoing, and without limiting the generality
thereof, representations and warranties with respect to Taxes shall remain in
full force and effect until such time as the applicable statute of limitations
expires.
12.21 Regulatory Jurisdiction.
(a) By virtue of this Agreement and ancillary
agreements herein described, Seller, for itself and affiliates, hereby
acknowledges and agrees that it and any and all said entities may be subjected
to the jurisdiction of the Nevada State Gaming Control Board and the Nevada
Gaming Commission, and that it and its affiliates will cooperate with any
requests for information made by the same or any requirement to file any gaming
applications in Nevada. Seller will have the right for a reasonable period to
attempt to cure any problems with such gaming authorities with respect to this
Agreement or ancillary agreements.
(b) Seller acknowledges that following Closing, and
irrespective of any allowed withdrawal of its current Nevada gaming
applications, by virtue of a continuing business relationship with the Buyer as
evidenced by the Exhibit B Agreements, and the Technology License Agreement,
Seller will continue to be subject to the jurisdiction of the Nevada Regulators.
Until such time as the current Nevada gaming applications have been formally
acted upon by the Nevada Regulators, including consideration of withdrawal of
same by the State Gaming Control Board, Seller shall cooperate with the Nevada
Regulators including, but not limited to, responding to all reasonable requests
for information from the Board, continued disclosure of material information,
and final payment of investigatory fees.
12.22 Caliente. At the expense of Seller or any Affiliate,
after Closing, Buyer will cause Company to perform requested services relating
to the operation of Seller or its Affiliates in Mexico.
SECTION 13. ASSIGNMENT OF CERTAIN SOFTWARE; INTENT;
TECHNOLOGY LICENSE AGREEMENT.
13.1 Assignment of Transferred Software. Seller, for itself
and its subsidiary, Autotote Systems, Inc., as of Closing, irrevocably
transfers, grants, conveys, assigns and quitclaims to Company its entire right,
title and interest in and to the Transferred Software, including both tangible
and intangible property constituting the Transferred Software as follows:
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<PAGE>
(a) all copyright and patent interests throughout the
word owned or claimed by Seller in the Transferred Software, together with the
right to sue for, settle, or release any past, present or future infringements;
(b) title to and possession of two (2) copies of the
media documentation that constitute the component parts and copies of the
Transferred Software; and
(c) all right, title and interest owned or claimed by
Seller in and to the inventions, discoveries, improvements, ideas, trade
secrets, know-how, confidential information, and all other intellectual property
owned or claimed by Seller pertaining to the Transferred Software, but not the
Pari-mutuel Tote Software (defined herein).
13.2 Intent to Parties. The parties intend that the
Pari-mutuel Tote Software shall be capable of performing all of the features
(defined herein) and functions that were performed by the version of the
pari-mutuel tote software package operated by Seller as of the date hereof.
Accordingly, the parties have used their best efforts to itemize in Attachments
B and C to the Autotote Software Directory a complete list of the directories,
modules and subroutines required to implement such functions, whether in Pascal,
DCL, or assembly language, and build files therefor. It is the parties' intent
that the directories, modules and subroutines listed in Attachment B are those
that are directed in whole to the implementation of such features and functions,
and those listed in Attachment C are those that are directed in part to the
implementation of such features and functions. It is also the parties' intent
that the directories, modules and subroutines set forth in Attachment A are
those directed exclusively to the implementation of the race, sports book and
MegaSports features and functions, whether in Pascal, DCL, or assembly language,
and build files therefor. The directories, modules and subroutines set forth in
Attachments A, B and C are intended to be mutually exclusive.
13.3 Technology License Agreement. Seller shall, as a
condition to Closing, have executed and have caused ASI and Company to execute a
Technology License Agreement ("Technology License") in the form of Attachment D
hereto.
SECTION 14. CERTAIN DEFINITIONS.
14.1 "Affiliate" shall have the meaning contained in Rule
12b-2 of the Securities Exchange Act of 1934, as amended, and the Rules and
Regulations promulgated thereunder.
14.2 "Autotote Software Directory" means the document executed
by the parties as of even date herein that lists the directories, modules and
subroutines comprising the Pari-mutuel Tote Software and the CBS Software.
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<PAGE>
14.3 "CBS Modules" means, for each of the Probe Terminal
Software, the Mark II Terminal Software, the Dual Port Terminal Software, and
the Central System Software, all of the applications software directories,
modules and subroutines set forth in Attachment A to the Autotote Software
Directory, executed by the parties as of even date herewith, in both source code
and object code form, whether released or work in process, and all documentation
and written materials therefor, together with all corrections, upgrades,
updates, modifications, additions, improvements, and substitutions thereto.
14.4 "CBS Software" means, collectively, the CBS Modules
contained in the:
(a) Probe Terminal Software;
(b) Mark II Terminal Software;
(c) Dual Port Terminal Software; and
(d) Central System Software.
For purposes of this Agreement, the term "CBS Software" shall
exclude the Pari-mutuel Tote Software and all inventions, discoveries,
improvements, ideas, trade secrets, know-how, confidential information, and all
other intellectual property pertaining to the Pari-mutuel Tote Software.
14.5 "Central System Software" means the following VAX-based
applications software packages:
(a) the software package known as the "Race and
Sports Book Software" that is operated by Company as of the date of Closing, and
(b) the software package known as the "Pari-mutuel
Sports Betting Software" (also referred to as "MegaSports"),
collectively comprised of the directories, modules and subroutines listed in
each of the Attachments to the Autotote Software Directory under the category
labeled "Central System Software."
14.6 "Dual Port Terminal Software" means the software
installed in Dual Port terminals manufactured by ASI as of the date of the
Closing, collectively comprised of the directories, modules and subroutines
listed in each of the Attachments to the Autotote Software Directory under the
category labeled "Dual Port Terminal Software".
14.7 "Mark II Terminal Software" means the software installed
in Mark II terminals manufactured by ASI as of the date of the Closing,
collectively comprised of the directories, modules and subroutines listed in
each of the Attachments to the Autotote Software Directory under the category
labeled "Mark II Terminal Software."
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<PAGE>
14.8 "Pari-mutuel Tote Modules" means, for each of the Probe
Terminal Software, the Mark II Terminal Software, the Dual Port Terminal
Software, and the Central System Software, all of the applications software
directories, modules and subroutines set forth in Attachments B and C to the
Autotote Software Directory, executed by the parties as of even date herewith,
in both source code and object code form, whether released or work in process,
and all documentation and written materials therefor, together with all
directions, upgrades, updates, modifications, additions, improvements, and
substitutions thereto.
14.9 "Pari-mutuel Tote Software" means, collectively, the
Pari-mutuel Tote Modules contained in the
(a) Probe Terminal Software;
(b) Mark II Terminal Software;
(c) Dual Port Terminal Software; and
(d) Central System Software.
For purposes of this Agreement, the term "Pari-mutuel Tote
Software shall exclude the CBS Software and the Transferred Software and all
inventions, discoveries, improvements, ideas, trade secrets, know-how,
confidential information, and all other intellectual property pertaining to the
CBS Software or the Transferred Software.
14.10 "Probe Terminal Software" means the software installed
in Probe terminals manufactured by ASI as of the date of the Closing,
collectively comprised of the directories, modules and subroutines listed in
each of the Attachments to the Autotote Software Directory under the category
labeled "Probe Terminal" Software.
14.11 "Transferred Software" means all software, together with
corrections, upgrades, updates, modifications, additions, improvements, and
substitutions thereto, in both source code and object code form, as may have
been developed by Seller or ASI for any of the CBS Modules, but not for the
Pari-mutuel Tote Modules. For purposes of this Agreement, the term "Transferred
Software" shall exclude the Pari-mutuel Tote Software and all inventions,
discoveries, improvements, ideas, trade secrets, know-how, confidential
information, and all other intellectual property pertaining to the Pari-mutuel
Tote Software.
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<PAGE>
IN WITNESS WHEREOF, the undersigned parties have duly executed
this Agreement as of the day and year first above written.
AUTOTOTE CORPORATION
By: /s/ William Luke
-------------------------------
Name: William Luke
Title: VP Finance & CFO
AMERICAN WAGERING, INC.
By: /s/ Victor Salerno
-------------------------------
Name: Victor Salerno
Title: President
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<PAGE>
SALES AGREEMENT
AGREEMENT made as of _______________ , 1996, by and between AUTOTOTE
CBS, INC. ("Buyer") and AUTOTOTE SYSTEMS, INC. ("Seller").
In consideration of the mutual covenants set forth herein, the parties
agree as follows:
1. QUOTATION REQUESTS
Buyer will solicit quotations for the acquisition of the
Products listed on Exhibit A, and Seller will be invited to participate in same.
Buyer will have the right to purchase from a competing supplier if Seller is
unable to offer a product on terms which, when taken as a whole, are at least
equal to or better then such terms as may be offered by a competing supplier.
This right will apply only to the product in question and only until the next
quotation procurement. Similarly, Buyer will have the same right if Seller is
unable to deliver within 30 days of the scheduled delivery date. Additional
products may be added to this Agreement by adding additional pages to Exhibit A
by mutual agreement.
2. TERM
The term of this Agreement shall commence as of the date
hereof and shall extend for a period ending on the fifth anniversary thereof, or
the date of termination of the Authorized Exclusive Distributorship Agreement,
whichever is later.
3. PRICES
Prices are in U.S. dollars and are F.O.B. Newark, Delaware.
Prices do not include any taxes or duties, now or hereafter enacted, applicable
to the Products or to this transaction, all of which taxes and duties shall be
the responsibility of Buyer except for Seller's franchise taxes and Seller's
income taxes.
4. PAYMENT TERMS
Terms of payment shall be net 30 days after date of invoice or
date of delivery, whichever is later. If Seller's receivables from Buyer at any
time exceed 40 days, Seller reserves the right to withhold shipment until
payment is made and/or terminate this Agreement with 30 day's written notice to
the Buyer. Each shipment location will be considered independently with respect
to meeting payment terms.
<PAGE>
5. RISK OF LOSS AND DELIVERY; TITLE
(a) Liability for loss or damage shall pass to Buyer when
Seller shall put the Products into possession of a carrier for shipment to
Buyer, the carrier being deemed to be an agent for Buyer.
(b) Shipping and delivery dates agreed to by the parties shall
be approximate only. Seller agrees to use all reasonable efforts to deliver
Products ordered on or about scheduled delivery dates.
(c) Seller retains and reserves a purchase money security
interest in the Products until the full price thereof is paid by Buyer to
Seller. Said security interest shall include an interest in the proceeds,
products and accessions of or to such collateral.
6. INSPECTION AND ACCEPTANCE
Buyer shall perform inspection and final acceptance testing
within 30 days after receipt of shipment. If, within 30 days after receipt of a
shipment, Seller does not receive notification of non-conformity, then said
shipment shall be deemed to have been accepted.
7. CONTINGENCIES
Seller shall not be liable for any delay in performance or for
non-performance, in whole or in part, caused by the occurrence of any
contingency beyond the control either of Seller or of suppliers of Seller,
including, but not limited to, acts of God.
8. WARRANTIES AND REMEDIES
Seller warrants all Products against defects in material and
workmanship under normal use and service for a period equal to that provided in
the Authorized Exclusive Distributorship Agreement; provided, however, that
Seller's liability under said warranty shall be limited to replacing or
repairing, at Seller's option, products or parts thereof which Seller's
inspection shall have disclosed to its satisfaction to have been defective in
the form in which it was shipped by Seller, prior to its use in further
manufacture or assembly. This warranty is applicable only if Seller receives
written notice of such defect mailed to its office within said one year period
and is given adequate opportunity to verify the existence of a claimed defect.
This warranty shall not apply to Products or parts thereof that have been (a)
subjected to misuse, neglect, accident, damage in transit, abuse or unusual
hazard; (b) repaired, altered or modified by anyone other than Seller unless
Buyer is authorized by Seller to make repair of (c) used in violation of
instructions furnished by Seller. WHERE SELLER FAILS TO MAKE DELIVERY OR
REPUDIATES OR BREACHES ANY OTHER MATERIAL PROVISIONS OF THIS CONTRACT (OTHER
THAN THE WARRANTY AGAINST PATENT INFRINGEMENT), INCLUDING, WITHOUT LIMITATION,
<PAGE>
SELLER'S OBLIGATIONS WITH RESPECT TO NONCONFORMING ITEMS, SELLER'S LIABILITY
SHALL NOT EXCEED THE PRICE OF THE PRODUCTS COVERED BY THE SPECIFIC ORDER(S)
INVOLVED. THE FOREGOING ARE IN LIEU OF ALL WARRANTIES, EXPRESS, IMPLIES OR
STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER WARRANTY
OBLIGATION ON THE PART OF SELLER. SELLER'S WARRANTIES EXTEND TO BUYER AND TO NO
OTHER PERSON OR ENTITY. IN NO EVENT WILL SELLER BE LIABLE TO ANYONE FOR
INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR BREACH OF ANY OF THE PROVISIONS OF THIS
AGREEMENT, SUCH EXCLUDED DAMAGES TO INCLUDE, WITHOUT LIMITATION, COST OF REMOVAL
AND REINSTALLATION OF PRODUCTS, LOSS OF GOODWILL, LOSS OR PROFITS OR LOSS OF
USE.
9. PROPRIETARY RIGHTS AND CONFIDENTIALITY
(a) Subject to the Technology License Agreement of even date
herewith and the Stock Transfer Agreement, all information, know-how,
programming, software, trademarks, trade secrets, plans, drawings,
specifications, designs and patterns furnished or created by Seller of by agents
or contractors of Seller (other than Buyer) and any and all property rights
embodied therein are and shall remain the sole property of Seller and neither
Buyer nor any other party shall have or acquire any interest therein.
(b) Buyer shall at all times, whether during the term of this
Agreement or subsequent thereto, honor, maintain and protect the confidentiality
and secrecy on any confidential information as Seller may disclose to Buyer or
its agents in writing. However, Buyer may disclose confidential information to
any regulatory agency with jurisdiction or as otherwise required by law or court
order.
(c) The above clauses shall apply to Buyer's confidential
information designated to Seller in writing at the time of disclosure as
confidential.
(d) Obligations of confidentiality shall not apply to
information in the public domain, rightfully acquired from a third party,
already known or internally developed without breach of this Agreement.
10. PATENT INDEMNITY
(a) Seller shall indemnify, hold harmless and defend against
any suit or proceeding brought against Buyer to the extent that such suit or
proceeding is based on a claim that Products manufactured and sold by Seller to
Buyer constitute infringement on any valid United States patent, either directly
or under the doctrine of equivalence or contribution, copyright or other
<PAGE>
intellectual property rights of any third party anywhere in the world and Seller
shall pay all damages and costs awarded by final judgment (from which no appeal
may be taken) against Buyer, on condition that Seller (i) shall be promptly
informed and furnished a copy of each communication, notice or other action
relating to the alleged infringement, (ii) shall be given authority, information
and assistance necessary to defend or settle such suit or proceeding in control
of the defense (including the right to select counsel), and the sole right to
compromise and settle such suit or proceeding. Except as approved by Seller,
Seller shall not be obligated to defend or be liable for costs and damages if
the infringement arises out of compliance with the specifications of Buyer or
from a combination with, an addition to, or modification of, the Products after
delivery by Seller, or from use of the Products, or any part thereof, in the
practice of a process. Any settlement will not impose any obligation upon Buyer.
(b) If any Products manufactured and supplied by Seller to
Buyer shall be held to infringe any valid United States patent and Buyer in
enjoined from using the same, or if Seller believes such infringement is likely,
Seller shall, at its option and at its expense, have the right: (i) to procure
for Buyer the right to use such goods free of liability for patent infringement,
or (ii) to replace (or modify) such Products with a non-infringing substitute
otherwise complying substantially with all the requirements of the contract, or
(iii) upon return of the goods, refund the purchase price and the transportation
costs of such products.
(c) The patent indemnity set forth above shall be deemed to be
extended to Seller by Buyer if any suit or proceeding is brought against seller
based on a claim that the Products manufactured by Seller in compliance with the
specifications of Buyer infringe any valid United States patent.
(d) THE FOREGOING STATES THE SOLE AND EXCLUSIVE LIABILITY OF
THE PARTIES HERETO FOR INFRINGEMENT OR THE LIKE OF PATENTS, WHETHER DIRECT OF
CONTRIBUTORY, AND IS IN LIEU OF ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY IN
REGARD THERETO, INCLUDING, WITHOUT LIMITATION, THE WARRANTY AGAINST INFRINGEMENT
SPECIFIED IN THE UNIFORM COMMERCIAL CODE.
(e) The indemnification provisions of the Technology
Cross-License Agreement shall govern claims of infringement directed to the use
or distribution of the Autotote Licensed Materials (as defined therein) or any
portion thereof installed by Buyer in a System, and the indemnification
provisions of the Stock Transfer Agreement shall govern claims of infringement
directed to the use of the CBS Software and the Transferred Software (as defined
herein) or any portion thereof installed by Buyer in a System.
<PAGE>
11. TERMINATION
(a) Except as specifically provided in this Section 11, this
Agreement and /or orders placed thereunder shall not be terminated by Buyer
without the prior written consent of Seller.
(b) Buyer may, by written notice to the Seller, terminate this
Agreement in whole or, from time to time, in part if:
(i) The Seller repeatedly fails to meet delivery
dates stated in the Buyer's purchase orders which are in
accordance with the maximum lead time stated in this
Agreement.
(ii) Product or materials do not conform to the
material requirements specified in the Buyer's purchase
orders.
(iii) The Seller fails to comply with any material
obligations contained in this agreement.
(iv) The Seller becomes insolvent or commits an act
of bankruptcy.
Seller shall have 30 days to cure any default hereunder.
(c) Seller may, by written notice to the Buyer, terminate or
modify this Agreement if the Buyer does not conform to the payment terms
hereunder. Buyer shall have 30 days to cure any default hereunder.
(d) Any termination of this Agreement shall have no effect on
the Buyer's purchase orders issued prior to such notice being received.
(e) Buyer may terminate the Agreement or the relevant
portion(s) of this Agreement if Seller or Buyer is prevented from performing
hereunder due to any decisions by any gaming authority in Nevada. Should any
gaming regulatory authority in Nevada require this Agreement to be terminated,
this Agreement shall be terminated upon such terms and conditions required by
law, regulation or conditions imposed by the gaming regulatory authority in
Nevada.
<PAGE>
12. ASSIGNMENT
Neither party may assign its rights, nor secure the assumption
of its obligations, under this Agreement without the prior written consent of
the other party, which consent shall not be unreasonably withheld.
13. NOTICES
All notices or communications required by the provisions of
this Agreement or desired to be given thereunder shall be in writing and given
by registered mail, return receipt requested to the address stated above or such
other duly notified address.
14. GOVERNING LAW AND REGULATORY REQUIREMENTS
(a) This Agreement shall be construed in accordance with the
internal laws of the State of Nevada, and any dispute hereunder shall be
resolved in a court of competent jurisdiction in Clark County, Nevada.
(b) By virtue of this Agreement, ASI hereby acknowledges that
for purposes of Nevada gaming law, ASI is a manufacturer or distributor of
associated gaming equipment, and as such, is subject to the jurisdiction of
Nevada gaming authorities including the Nevada State Gaming Control Board and
Nevada Gaming Commission. As such, failure to cooperate with said gaming
authorities, including the filing of requested gaming license applications, may
result in the denial of a gaming license to ASI or affiliated companies.
15. MERGER
THIS AGREEMENT CONSTITUTES THE FINAL WRITTEN EXPRESSION OF ALL
TERMS OF THE AGREEMENT RELATING TO THE TRANSACTIONS DESCRIBED HEREIN AND A
COMPLETE AND EXCLUSIVE STATEMENT OF THOSE TERMS. THIS AGREEMENT SUPERSEDES ALL
PREVIOUS COMMUNICATIONS, REPRESENTATIONS, AGREEMENTS, PROMISES OR STATEMENTS,
EITHER ORAL OR WRITTEN, WITH RESPECT TO SUCH TRANSACTIONS AND NO COMMUNICATIONS,
REPRESENTATIONS, AGREEMENTS, PROMISES OR STATEMENTS OF ANY KIND MADE BY ANY
REPRESENTATIVE OF SELLER, WHICH ARE NOT STATED HEREIN, SHALL BE BINDING ON
SELLER. NO ADDITION TO OR MODIFICATION OF ANY PROVISION OF THIS AGREEMENT WILL
BE BINDING UPON SELLER UNLESS MADE IN WRITING (REFERRING SPECIFICALLY TO BUYER'S
ORDER) AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF SELLER. NO COURSE OF
DEALING OR USAGE OF TRADE OR COURSE OF PERFORMANCE WILL BE DEEMED RELEVANT TO
EXPLAIN OR SUPPLEMENT ANY TERM EXPRESSED IN THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
AUTOTOTE CBS, INC.
By ____________________________________
Name:
Title:
AUTOTOTE SYSTEMS, INC.
By ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
ITEM
Ribs
Power Supplies
Dyna-5
System Cabinets
Keyboards
LSN Cards
Spare Parts
Ticket Paper
Display Terminals
Monitors
Modems
Printers
Logging Terminals
TINY TIM - On Track
TINY TIM - Modem
MARK II
TAT (Telephone Acct. Terminal)
<PAGE>
TECHNOLOGY CROSS-LICENSE AGREEMENT
THIS TECHNOLOGY CROSS-LICENSE AGREEMENT (this "Agreement") is entered
into this 25th day of October, 1996, by and among AUTOTOTE CBS, INC., a Nevada
corporation with its principal office and place of business at 675 Grier Drive,
Las Vegas, Nevada 89119, AUTOTOTE CORPORATION, a Delaware corporation with its
principal office and place of business at 750 Lexington Avenue, New York, New
York 10022, and AUTOTOTE SYSTEMS, INC., a Delaware corporation with its
principal office and place of business at 100 Bellevue Road, Newark, Delaware
19714.
W I T N E S S E T H:
WHEREAS, Autotote and AWI are parties to a Stock Transfer
Agreement dated October 25, 1996 (the "Stock Agreement"), pursuant to which AWI
shall purchase from Autotote all of the issued and outstanding shares of capital
stock of CBS;
WHEREAS, Autotote and ASI, a wholly-owned subsidiary of
Autotote, collectively own the rights to software and related technology which
shall be incorporated in other software and products owned and used by CBS in
the operation of the Race and Sports Book Business and the MegaSports Business.
WHEREAS, CBS owns the rights to software and related
technology currently used by Autotote to operate the Mexican Business;
WHEREAS, Autotote and AWI desire that, as a condition to the
Closing of the Stock Agreement, the parties enter into a cross-license of the
foregoing software and technology to permit CBS to continue the operation of the
Race and Sports Book Business and to permit Autotote to continue operation of
the Mexican Business;
NOW, THEREFORE, in consideration of the mutual covenants set
forth below, and intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
The following words, terms and phrases shall, in this
Agreement, have the following meanings, which shall apply equally to both the
singular and plural forms of the terms defined:
1.01 "Affiliate" shall have the same meaning set forth in the Stock
Agreement.
1.02 "ASI" means Autotote Systems, Inc., its successors and permitted
assigns.
1.03 "Autotote" means Autotote Corporation, its successors and
permitted assigns.
1.04 "Autotote Enhancements" means:
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(a) all corrections, modifications, improvements, additions,
or substitutions to the Autotote Licensed Materials,
(b) Successor Software to the Autotote Licensed Software, and
(c) Autotote Permitted Derivative Works
prepared by or for Autotote or ASI after the date hereof, and used commercially.
1.05 "Autotote Intellectual Property" means inventions, discoveries,
improvements, ideas, trade secrets, confidential information, and all other
intellectual property owned or claimed by Autotote and ASI as of the date
hereof.
1.06 "Autotote Licensed Materials" means:
(a) the Autotote Licensed Software in executable Object Code
form;
(b) the Autotote Enhancements;
(c) the Source Code for the Autotote Licensed Software and
Autotote Enhancements;
(d) the Know-How for the Autotote Licensed Software and
Autotote Enhancements; and
(e) the Program Documentation for the Autotote Licensed
Software and Autotote Enhancements.
1.07 "Autotote Licensed Software" means:
(a) the Parimutuel Tote Software;
(b) the On Track Software
(c) the Player Tracking Software;
(d) the ETIP Software;
(e) the ECOM Software;
(f) the VGM Software;
(g) the Tiny Tim Software; and
(h) the Telephone Account Terminal Software.
1.08 "Autotote Permitted Derivative Work" means a Derivative Work of
the CBS Licensed Software (including the CBS Enhancements) or Program
Documentation therefor, provided that a significant portion of such Derivative
Work incorporates or integrates software developed by or for Autotote or ASI,
including without limitation the Parimutuel Tote Software or other software.
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1.09 "Autotote Software Directory" shall have the meaning set forth in
the Stock Agreement.
1.10 "AWI" means American Wagering, Inc., a Nevada corporation.
1.11 "CBS" means Autotote CBS, Inc., and its successors and assigns.
1.12 "CBS Enhancements" means:
(a) all corrections, modifications, improvements, additions,
or substitutions to the CBS Licensed Materials,
(b) Successor Software to the CBS Licensed Software, and
(c) CBS Permitted Derivative Works
prepared by or for CBS after the date hereof, and used commercially.
1.13 "CBS Intellectual Property" means inventions, discoveries,
improvements, ideas, trade secrets, confidential information, and all other
intellectual property owned or claimed by CBS as of the date hereof.
1.14 "CBS Licensed Materials" means:
(a) the CBS Licensed Software in executable Object Code form;
(b) the CBS Enhancements;
(c) the Source Code for the CBS Licensed Software and CBS
Enhancements;
(d) the Know-How for the CBS Licensed Software and CBS
Enhancements; and
(e) the Program Documentation for the CBS Licensed Software
and CBS Enhancements.
1.15 "CBS Licensed Software" means the CBS Software and the Transferred
Software, as defined in the Stock Agreement, but excluding from the foregoing
(a) the CBS Modules listed in the Autotote Software Directory under the
MegaSports category of the Central System Software, and (b) such other software
contained in the CBS Modules listed in the Autotote Software Directory as are
directed exclusively to the implementation of MegaSports Functionality.
1.16 "CBS Modules" shall have the meaning set forth in the Stock
Agreement.
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1.17 "CBS Permitted Derivative Work" means a Derivative Work of the
Autotote Licensed Software (including the Autotote Enhancements) or Program
Documentation therefor, provided that, with respect to a Derivative Work of the
Central System Software (as defined in the Stock Agreement) component of the
Parimutuel Tote Software or of the On Track Software used in the Race and Sports
Book business or MegaSports Business, a significant portion of such Derivative
Work incorporates or integrates software developed by or for CBS, including
without limitation the CBS Software or other software.
1.18 "Closing" shall have the meaning set forth in the Stock Agreement.
1.19 "Confidential Information" means any business and technical
information of a party hereto that is treated as confidential by such party, and
furnished to the other party, and which includes but is not limited to computer
programs, Source Code, Object Code, algorithms, customer lists, price lists, and
business plans, where such information, if in writing, is identified in writing
to the other party as confidential prior to or concurrently with the
transmission of such information, and, if conveyed orally, is identified orally
as confidential prior to or concurrently with the transmission of such
information and confirmed in writing within seven (7) days thereafter. All
Source Code is hereby designated as Confidential Information.
1.20 "Customer" means Aqua Caliente SA de C.V., its successors and
assigns, and shall exclude all other persons.
1.21 "Derivative Work" means (a) any product, service, new version,
sequel, adaptation, design, plot, concept, audiovisual display, or translation,
in any medium, format or form whatsoever, that is derived in any manner,
directly or indirectly, from a copyrighted work or that utilizes or incorporates
a copyrighted work or any part or aspect thereof; and (b) all materials and
documentation related to each of the foregoing.
1.22 "Distribute" or "distribute" means to distribute or transmit by
any means now known or hereafter developed.
1.23 "ECOM Software" means the most recent version of the software
installed in the ECOM terminal servers manufactured by Autotote or ASI as of the
date hereof.
1.24 "ETIP Software" means the most recent version of the software
installed in the Efficient Terminal Interface Processors manufactured by
Autotote or ASI as of the date hereof.
1.25 "International Agreement" means the International Cooperation
Agreement of even date herewith between ASI and CBS.
1.26 "Know-How" means, with respect to software, ideas, procedures,
processes, systems, methods of operation, concepts and principles used in the
design, preparation, implementation, programming and operation of such software.
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1.27 "Knowledge" shall have the meaning set forth in Section 12.19(d)
of the Stock Agreement.
1.28 "MegaSports Business" means operation of a system of wagering on
sporting events where the odds and payouts are determined by the size of the
betting pool, including use and distribution of the "Parimutuel Sports Betting
Software".
1.29 "MegaSports Functionality" means those features and functions of
the CBS Software necessary for operation of a system of wagering on sporting
events where the odds and payouts are determined by the size of the betting
pool.
1.30 "Mexican Business" means the business conducted by Autotote or ASI
of operating, pursuant to agreement with Customer, wagering facilities in
Tijuana and Juarez, Mexico, and such other locations solely in Mexico at which
Customer elects to open such facilities.
1.31 "Object Code" means software in a machine readable form that is
not convenient to human understanding of the program logic, and that can be
executed by a computer using the appropriate operating system without
compilation or interpretation. Object Code specifically excludes Source Code.
1.32 "On Track Software" means the software used by Autotote and ASI as
of the date hereof to operate the Parimutuel Race Wagering business in the
United States.
1.33 "Parimutuel Race Wagering" shall have the meaning set forth in
Section 12.8(f) of the Stock Agreement.
1.34 "Parimutuel Tote Software" shall have the meaning set forth in the
Stock Agreement.
1.35 "Player Tracking Software" means the most recent version of the
software used in or in connection with the On Track Software to track the number
of players in a parimutuel wagering pool.
1.36 "Program Documentation" means specifications and other written
descriptions of software, and which may include the following: flow charts,
circuit diagrams, file structures, descriptions of variables, logic designs,
processes, and algorithms, where said documentation is sufficiently detailed to
enable a skilled programmer to have reasonable facility in understanding, using,
updating and modifying such software, and in incorporating such software in
other software.
1.37 "Race and Sports Book" shall have the meaning set forth in Section
12.8(f) of the Stock Agreement, and shall include the distribution and licensing
by CBS of the software package entitled "Race and Sports Book Software".
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1.38 "Source Code" means software written in a form or language
understandable to humans, generally in a higher level computer language and
further including embedded comments in the English language, where such source
code contains sufficient information to permit a skilled programmer to update
and modify such software.
1.39 "Subsidiary" means in relation to any legal entity, a corporation
in which such legal entity directly or indirectly owns more than fifty percent
(50%) of the issued and outstanding shares.
1.40 "Successor Software" means software prepared by a party hereto
that replaces software developed by it, but expressly excludes (a) software that
incorporates an insubstantial amount of software licensed to it by another party
hereto, and (b) software incorporated in a product that does not replace (or is
otherwise directly competitive with) a pre-existing product or software.
1.41 "Telephone Account Terminal Software" means the most recent
version of the software installed in the "Telephone Account" terminals
manufactured by Autotote or ASI as of the date hereof.
1.42 "Tiny Tim Software" means the most recent version of the software
installed in the "Tiny Tim" terminals manufactured by Autotote or ASI as of the
date hereof.
1.43 "Transferred Software" shall have meaning set forth in the Stock
Agreement.
1.44 "VGM Software" means the most recent version of the software
installed in the "Video Game Machines" manufactured by Autotote or ASI as of the
date hereof.
ARTICLE II
DELIVERY OF LICENSED MATERIALS AND ENHANCEMENTS
2.01 Deliverables by CBS. CBS shall, on or before ten (10) business
days after the Closing, deliver to ASI and transfer title to and ownership of
the following copies (the "CBS Deliverables"):
(a) two (2) sets of diskettes (or, with the written consent of
ASI, an alternate electronic medium) containing two (2) copies of the CBS
Licensed Software in Object Code form, together with two (2) copies of the
Source Code and Program Documentation for the CBS Licensed Software;
(b) two (2) copies on paper media of the Source Code and
Program Documentation for the CBS Licensed Software;
(c) two (2) copies on paper media of the Know-How for the CBS
Licensed Software; and
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(d) a list of open bugs or problems, if any, in the CBS
Licensed Software.
2.02 Deliverables by ASI. ASI shall, on or before ten (10) business
days after the Closing, deliver to CBS and transfer title to and ownership of
the following copies (the "Autotote Deliverables"):
(a) two (2) sets of diskettes (or, with the written consent of
CBS, an alternate electronic medium) containing two (2) copies of the Autotote
Licensed Software in Object Code form, together with Source Code and Program
Documentation for the Autotote Licensed Software;
(b) two (2) copies on paper media of the Source Code and
Program Documentation for the Autotote Licensed Software;
(c) two (2) copies on paper media of the Know-How for the
Autotote Licensed Software; and
(d) a list of open bugs or problems, if any, in the Autotote
Licensed Software.
2.03 Delivery of Enhancements.
(a) By CBS. CBS shall inform ASI in writing of such CBS
Enhancements as CBS may develop or have developed from time to time within
fourteen (14) days after commercial implementation (expressly excluding beta
tests) of such CBS Enhancement. Upon request from ASI, CBS shall promptly
deliver such CBS Enhancement to ASI, and the deliverables therefor shall be the
same media and documentation as set forth in Paragraph 2.01 for the CBS Licensed
Software. Nothing herein shall be construed to impose upon CBS an obligation to
develop CBS Enhancements.
(b) By Autotote and ASI. Autotote and ASI shall inform CBS in
writing of such Autotote Enhancements as Autotote or ASI may develop or have
developed from time to time within fourteen (14) days after commercial
implementation (expressly excluding beta tests) of such Autotote Enhancement.
Upon request from CBS, Autotote or ASI shall promptly deliver such Autotote
Enhancement to CBS, and the deliverables therefor shall be the same media and
documentation as set forth in Paragraph 2.02 for the Autotote Licensed Software.
Nothing herein shall be construed to impose upon Autotote or ASI an obligation
to develop Autotote Enhancements.
(c) Beta Tests. CBS shall provide Autotote and ASI with the
opportunity to participate in beta tests of CBS Enhancements, and Autotote and
ASI shall provide CBS with the opportunity to participate in beta tests of
Autotote Enhancements.
2.04 No Transfer of Ownership of Software.
(a) The parties acknowledge and agree that Paragraphs 2.01
through 2.03 provide only for the transfer of ownership of the copies of the
media and documentation delivered
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thereunder, and that there shall be no transfer of ownership of the CBS Licensed
Materials, the Autotote Licensed Materials, the CBS Enhancements or the Autotote
Enhancements.
(b) The use by Autotote and ASI of the CBS Licensed Materials
and the use by CBS of the Autotote Licensed Materials shall be governed by the
limitations of Paragraphs 3.01 and 3.02 respectively, and by Paragraph 3.04.
2.05 Technical Support.
(a) By CBS. CBS shall provide to ASI a reasonable level of
support by telephone and facsimile during its regular business hours by
personnel familiar with the CBS Licensed Materials to answer questions, furnish
information and render assistance to ASI in the use of the CBS Licensed
Materials and to assist ASI to resolve problems in the CBS Licensed Materials.
(b) By ASI. ASI shall provide to CBS a reasonable level of
support by telephone and facsimile during its regular business hours by
personnel familiar with the Autotote Licensed Materials to answer questions,
furnish information and render assistance to CBS in the use of the Autotote
Licensed Materials and to assist CBS to resolve problems in the Autotote
Licensed Materials.
ARTICLE III
LICENSE GRANTS
3.01 License to Autotote and ASI.
(a) CBS hereby grants to Autotote and ASI a perpetual,
irrevocable, nonexclusive, nontransferable, paid-up, royalty-free right and
license, solely for the purpose of operating the Mexican Business, to:
(i) use internally, reproduce, privately display,
privately perform and distribute internally the CBS Licensed Software and CBS
Enhancements, and the Know-How, Program Documentation, Source Code and Object
Code therefor, and distribute copies thereof to third-party consultants retained
by Autotote or ASI under terms of confidentiality at least as restrictive as
this Agreement;
(ii) prepare and have prepared Autotote Permitted
Derivative Works and Program Documentation therefor;
(iii) use and permit Customer to use the CBS
Licensed Software and the CBS Enhancements, but only in the form of Autotote
Permitted Derivative Works, in equipment located at the facilities used now or
in the future in the operation of the Mexican Business; and
(iv) develop, manufacture and use (but not publicly
distribute) products and software that use, practice and incorporate the CBS
Intellectual Property and the Know-How for the CBS Licensed Software and CBS
Enhancements.
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(b) CBS does not grant to Autotote or ASI in this Agreement
any right to use or permit the use of the CBS Licensed Materials or the CBS
Intellectual Property in any country other than Mexico. The parties acknowledge
and agree that, pursuant to the terms of the International Agreement, ASI may,
in the future, request that CBS consent to grant to ASI a license to the CBS
Licensed Materials for use in a country or countries other than Mexico, which
consent shall not be unreasonably withheld. In the event CBS grants such
consent, the parties shall enter into a separate written license agreement, upon
commercially reasonable terms and conditions, for the grant of a license to ASI
to use the CBS Licensed Materials in such other country or countries.
3.02 License to CBS.
(a) Autotote and ASI hereby grant to CBS and its
Affiliates, solely for the purpose of operating the Race and Sports Book
business and the MegaSports Business, a perpetual, irrevocable, paid-up,
transferable, royalty-free right and license as follows:
(i) a sole and exclusive license in the
State of Nevada, and a nonexclusive license throughout the remainder of the
United States, to use internally, reproduce, privately display, privately
perform and distribute internally the Autotote Licensed Software and Autotote
Enhancements, and the Know-How, Program Documentation, Source Code and Object
Code therefor, and distribute copies thereof to third-party consultants retained
by CBS under terms of confidentiality at least as restrictive as this Agreement;
(ii) a sole and exclusive license in the
State of Nevada, and a nonexclusive license throughout the remainder of the
United States, to prepare and have prepared CBS Permitted Derivative Works and
Program Documentation therefor;
(iii) a sole and exclusive license in the
State of Nevada to use, reproduce, publicly display, publicly perform, and
publicly distribute by license, lease or lending solely in Object Code form the
Autotote Licensed Software and the Autotote Enhancements, but only in the form
of CBS Permitted Derivative Works developed or distributed by or for CBS; and
(iv) a sole and exclusive license in the
State of Nevada to develop, manufacture and distribute (privately and publicly)
products and software that use, practice and incorporate the Autotote
Intellectual Property and the Know-How for the Autotote Licensed Software.
(b) Autotote and ASI hereby grant to CBS and its
Affiliates, solely for the purpose of operating the Parimutuel Race Wagering
business, a perpetual, irrevocable, paid-up, transferable, royalty-free right
and license as follows:
(i) a sole and exclusive license in the
State of Nevada, and a nonexclusive license throughout the remainder of the
United States, to use internally, reproduce, privately display, privately
perform and distribute internally the Autotote Licensed Software and the
Autotote Enhancements, and the Know-How, Program Documentation, Source Code and
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Object Code therefor, and distribute copies thereof to third-party consultants
retained by CBS under terms of confidentiality at least as restrictive as this
Agreement;
(ii) a sole and exclusive license in the
State of Nevada, and a nonexclusive license throughout the remainder of the
United States, to prepare and have prepared Derivative Works of the Autotote
Licensed Materials and Program Documentation therefor;
(iii) a sole and exclusive license in the
State of Nevada to use, reproduce, publicly display, publicly perform, and
publicly distribute by license, lease or lending solely in Object Code form the
Autotote Licensed Software and the Autotote Enhancements, and Derivative Works
thereof developed or distributed by or for CBS; and
(iv) a sole and exclusive license in the
State of Nevada to develop, manufacture and distribute (privately and publicly)
products and software that use, practice and incorporate the Autotote
Intellectual Property and the Know-How for the Autotote Licensed Software.
(c) CBS shall have the right to sublicense the
rights set forth in subparagraphs (a)(iii) and (iv) and (b)(iii) and (iv) to
distributors, resellers and end users of equipment and software developed or
distributed by CBS.
(d) Autotote and ASI also grant to CBS a perpetual,
irrevocable, transferable non-exclusive right and license to exercise the rights
set forth in Paragraph 3.02(a) throughout the world, but the exercise of such
rights by CBS is expressly subject to the terms of the International Agreement,
including the royalty terms therein.
3.03 Derivative Works.
(a) Subject to the rights granted herein, CBS shall own the
entire right, title and interest throughout the world in and to all Derivative
Works of the Autotote Licensed Materials prepared by it (or third parties
retained by it), except that Autotote and ASI shall retain ownership of any
portions of the Autotote Licensed Materials contained within such Derivative
Works.
(b) Subject to the rights granted herein, Autotote or ASI
shall own the entire right, title and interest throughout the world in and to
all Derivative Works of the CBS Licensed Materials prepared by it (or third
parties retained by it), except that CBS shall retain ownership of any portions
of the CBS Licensed Materials contained within such Derivative Works.
3.04 Distribution of Source Code.
(a) CBS shall not distribute to third parties, except
bona-fide consultants (pursuant to a written non-disclosure agreement containing
provisions at least as restrictive as this Agreement), copies of the Source Code
for the Autotote Licensed Software or the Autotote Enhancements delivered by ASI
or Autotote to CBS hereunder, or copies of such Source Code
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as modified, changed, revised, or altered by CBS, without the prior express
written consent of ASI or Autotote.
(b) Neither Autotote nor ASI shall distribute to third
parties, except bona-fide consultants (pursuant to a written non-disclosure
agreement containing provisions at least as restrictive as this Agreement),
copies of the Source Code for the CBS Licensed Software or the CBS Enhancements
delivered by CBS to ASI or Autotote hereunder, or copies of such Source Code as
modified, changed, revised, or altered by ASI or Autotote, without the prior
express written consent of CBS.
3.05 Ancillary Rights. The rights and licenses granted to the parties
hereunder shall include the right and license to copy and display all pictorial,
graphic or audiovisual works created as a result of the execution of the CBS
Licensed Software or the Autotote Licensed Software.
3.06 Retained Rights.
(a) Autotote and ASI acknowledge and agree that:
(i) the CBS Licensed Materials are proprietary to
CBS, and CBS claims protection for them under United States copyright laws,
other applicable copyright laws, and international treaty provisions;
(ii) the entire right, title and interest in and to
the CBS Licensed Materials, the CBS Deliverables and all associated intellectual
property rights, including those portions of the CBS Licensed Software and CBS
Enhancements incorporated in Autotote Permitted Derivative Works by or for
Autotote or ASI, shall remain with CBS;
(iii) the CBS Licensed Materials are licensed, not
sold, and title to each copy of the CBS Licensed Materials created by Autotote
or ASI shall remain with CBS, and shall not pass to Autotote, ASI, their
customers or end users; and
(iv) CBS retains all rights not expressly granted.
(b) CBS acknowledges and agrees that:
(i) the Autotote Licensed Materials are proprietary
to Autotote and ASI, and they claims protection for them under United States
copyright laws, other applicable copyright laws, and international treaty
provisions;
(ii) the entire right, title and interest in and to
the Autotote Licensed Materials, the Autotote Deliverables and all associated
intellectual property rights, including those portions of the Autotote Licensed
Software and Autotote Enhancements incorporated in CBS Permitted Derivative
Works by or for CBS, shall remain with Autotote and ASI;
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(iii) the Autotote Licensed Materials are licensed,
not sold, and title to each copy of the Autotote Licensed Materials created by
CBS shall remain with Autotote and ASI, and shall not pass to CBS or to its
customers or end users; and
(iv) Autotote and ASI retain all rights not
expressly granted.
3.07 Copyright Notices. Upon request from Autotote or ASI, CBS shall
affix to all copies of the Autotote Licensed Software or Autotote Enhancements
all copyright notices and proprietary legends of Autotote or ASI as they appear
in or on the original media and documentation containing the Autotote
Deliverables supplied by Autotote or ASI. Upon request from CBS, Autotote and
ASI shall affix to all copies of the CBS Licensed Software or CBS Enhancements
all copyright notices and proprietary legends of CBS as they appear in or on the
original media and documentation containing the CBS Deliverables supplied by
CBS.
3.08 End User Licenses. Each party hereby covenants to the other
parties that it shall license the use of all software containing software
licensed to it by another party hereto pursuant to a written license agreement
containing such disclaimers of warranties and limitations of liability as are
customary in the distribution of software, and shall make no representations or
warranties on behalf of another party.
3.09 No Amendment. Nothing in this Agreement shall be construed to
amend or modify in any way the provisions of the Stock Agreement or the
International Agreement, which provisions shall remain in full force and effect.
The parties shall not use the software and technology licensed to them in this
Agreement in violation of such provisions, including the noncompetition
obligations therein. In addition, nothing in this Agreement shall be construed
to amend the royalty provisions of the Distribution Agreement of even date
herewith between Autotote and CBS.
ARTICLE IV
CONFIDENTIALITY
4.01 Confidentiality.
(a) Each party may disclose to another party hereto
Confidential Information as may be necessary to further the performance of this
Agreement. CBS agrees to treat the Confidential Information of Autotote and ASI,
and Autotote and ASI agree to treat the Confidential Information of CBS, in the
manner prescribed herein.
(b) Each party shall protect the Confidential Information of
another party hereto as follows:
(i) Except as specifically provided herein or
otherwise permitted by the other parties in writing, each party may disclose
Confidential Information of another party hereto only to those employees and
agents required to have knowledge of same to perform their duties pursuant to
this Agreement. Each party shall require each such employee or agent with access
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to Confidential Information to agree to hold such Confidential Information in
confidence in a manner no less restrictive than the terms hereof prior to
disclosing such Confidential Information to such employee or agent. Each party
shall treat the Confidential Information of another party hereto with the same
degree of care as it protects its own Confidential Information, and in no event
less than a reasonable degree of care.
(ii) Except as may specifically be permitted herein,
upon the termination of this Agreement, each party shall return to the
originating party or, if so requested, destroy, all Confidential Information of
the originating party in its possession or control, except such Confidential
Information as may be reasonably necessary to exercise the rights that survive
the termination of this Agreement.
(c) The foregoing obligations of confidentiality shall not
apply with respect to any party's Confidential Information to the extent that it
is within or later falls within the public domain through no fault of the party
receiving the Confidential Information.
(d) In the event any party receives a request to disclose any
Confidential Information under the terms of a valid and effective subpoena or
order issued by a court of competent jurisdiction or a governmental body, such
party shall (i) immediately notify the party that furnished such Confidential
Information of the existence, terms and circumstances surrounding such request,
(ii) consult with such party on the advisability of taking legally available
steps to resist or narrow such request, and (iii) exercise reasonable best
efforts, at the expense of the party producing such Confidential Information, to
obtain an order or other reliable assurance that confidential treatment will be
accorded to such portion of the Confidential Information as may be disclosed.
ARTICLE V
WARRANTIES; INDEMNIFICATION
5.01 Warranty Regarding Licensed Materials. EXCEPT AS SET FORTH IN
PARAGRAPHS 5.02 AND 5.03, THE CBS LICENSED MATERIALS AND THE AUTOTOTE LICENSED
MATERIALS ARE LICENSED BY THE PARTIES ON AN "AS IS" BASIS. THERE ARE NO OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE.
5.02 Warranty and Covenant of Original Development.
(a) By Autotote and ASI. Autotote and ASI represent, warrant
and covenant, to their Knowledge, that: (i) they collectively own and shall own
the Autotote Licensed Materials, including all intellectual property rights
therein under copyright, patent, trademark, trade secret, and other applicable
law; (ii) the Autotote Licensed Materials (except to the extent such
infringement or violation is due to modifications or enhancements made by CBS
subsequent to the delivery thereof or due to combination, operation or use of
the Autotote Licensed Materials with other software) do not and shall not
infringe or otherwise violate any patent, copyright or trade
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secret of any third party anywhere in the world; and (iii) except as disclosed
in the Stock Agreement, it has not received as of the date of Closing, actual
notice of any claim that the Autotote Licensed Materials or the use thereof
infringes any intellectual property right of any third party anywhere in the
world or that any third party has any proprietary interest in or to the Autotote
Licensed Materials or the Autotote Intellectual Property.
(b) By CBS. CBS covenants, to its Knowledge, that: (i) it
shall own the CBS Enhancements, if any, delivered to Autotote and ASI hereunder,
including all intellectual property rights therein under copyright, patent,
trademark, trade secret, and other applicable law; and (ii) the CBS Enhancements
(except to the extent such infringement or violation is due to modifications or
enhancements made by Autotote or ASI subsequent to the delivery thereof or due
to combination, operation or use of the CBS Enhancements with other software)
shall not infringe or otherwise violate any patent, copyright or trade secret of
any third party anywhere in the world.
5.03 Power to Grant Rights.
(a) Autotote and ASI represent and warrant that: (i) they
collectively have the right, power and authority to grant the rights and
licenses granted in this Agreement and fully perform their obligations
hereunder, (ii) except as set forth in Schedule 5.03, they have not pledged,
assigned or granted a lien or security interest in or otherwise encumbered the
Autotote Licensed Materials in favor of any third party; and (iii) the making
and performance of this Agreement does not and shall not violate any separate
agreement with, right of, or obligation to any third party.
(b) CBS represents and warrants that, from Closing to the date
hereof, (i) it has taken no action that affects adversely its right, power and
authority to grant the rights and licenses granted in this Agreement and fully
perform its obligations hereunder, (ii) it has not pledged, assigned or granted
a lien or security interest in or otherwise encumbered the CBS Licensed
Materials in favor of any third party; and (iii) it has taken no action that
would render the making and performance of this Agreement in violation of any
separate agreement with, right of, or obligation to any third party.
5.04 No Grant of Lien or Security Interest. The parties respectively
shall not, pledge, hypothecate, assign or grant a lien or security interest in,
otherwise encumber in favor of a third party or take any other action after the
date hereof with respect to the CBS Licensed Materials or the Autotote Licensed
Materials, as the case may be, that interferes with, is inconsistent with, or
gives a third party the ability to affect, the rights and licenses granted to
the other parties herein.
5.05 Execution of Documents. Upon request, each party shall perform
acts and execute documents at the expense of the requesting party that are
reasonably necessary to transfer or perfect the rights and licenses granted
herein.
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<PAGE>
5.06 Indemnification.
(a) By Autotote and ASI. Autotote and ASI shall, for ten (10)
years from the date of Closing, jointly and severally indemnify and hold CBS
harmless from and against all claims, suits, demands, actions, judgments,
penalties, damages, costs and expenses (including reasonable attorney's fees and
costs), losses or liabilities of any kind arising from (i) a claim that the
Autotote Licensed Materials infringe a patent, copyright or other intellectual
property right of any other person anywhere in the world (except to the extent
such infringement or violation is due to modifications or enhancements by CBS
subsequent to the delivery thereof or due to combination, operation or use of
the Autotote Licensed Materials with other software) or (ii) a breach by
Autotote or ASI of the representations or warranties set forth in Paragraphs
5.02(a) or 5.03(a) of this Agreement; provided that CBS shall (i) promptly
notify Autotote in writing of and keep Autotote advised with respect to any such
claim of infringement; (ii) provide to Autotote all available information,
assistance and authority to defend; and (iii) shall be given sole control of the
defense (including the right to select counsel) and the sole right to compromise
and settle such suit or proceeding, except that CBS shall have the right to
approve any settlement offer made by or to Autotote or ASI that would impose
substantial hardship on CBS hereunder.
(b) By CBS. CBS shall, for ten (10) years from the date of
Closing, jointly and severally indemnify and hold Autotote and ASI harmless from
and against all claims, suits, demands, actions, judgments, penalties, damages,
costs and expenses (including reasonable attorney's fees and costs), losses or
liabilities of any kind arising from (i) a claim that the CBS Enhancements (but
not the CBS Licensed Software or any other part of the CBS Licensed Materials)
infringe a patent, copyright or other intellectual property right of any other
person anywhere in the world (except to the extent such infringement or
violation is due to modifications or enhancements by Autotote or ASI subsequent
to the delivery thereof or due to combination, operation or use of the CBS
Enhancements with other software) or (ii) a breach by CBS of the representations
or warranties set forth in Paragraphs 5.02(b) or 5.03(b) of this Agreement;
provided that Autotote and ASI shall (i) promptly notify CBS in writing of and
keep CBS advised with respect to any such claim of infringement; (ii) provide to
CBS all available information, assistance and authority to defend; and (iii)
shall be given sole control of the defense (including the right to select
counsel) and the sole right to compromise and settle such suit or proceeding,
except that Autotote shall have the right to approve any settlement offer made
by or to CBS that would impose substantial hardship on Autotote and ASI
hereunder.
(c) Exclusive Provision. THIS PARAGRAPH 5.06 STATES THE SOLE
AND EXCLUSIVE LIABILITY OF THE PARTIES FOR INDEMNIFICATION OF THE OTHER PARTIES
FOR CLAIMS OF INFRINGEMENT, WHETHER DIRECT OR CONTRIBUTORY.
(d) Disputes. Any dispute between or among the parties arising
under this Paragraph 5.06 shall be governed by Paragraphs 8.12 and 8.13 hereof.
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<PAGE>
5.07 Notice of Adverse Claims. Each party shall inform the other
parties immediately of any actions brought or claims asserted against whose
outcome may affect the rights granted pur suant to this Agreement.
5.08 LVDC. Autotote and ASI extend the warranties and indemnification
made to CBS in this Agreement notwithstanding the potential for a claim by the
Las Vegas Dissemination Corporation ("LVDC") of an ownership interest to, inter
alia, certain portions of the Autotote Licensed Materials. CBS shall receive the
benefit of such warranties and indemnification, notwithstanding its knowledge of
such potential claim, subject to the limitations of liability set forth in
Paragraph 7.01.
ARTICLE VI
TERM; TERMINATION
6.01 Term. This Agreement shall continue indefinitely, unless sooner
terminated as provided herein.
6.02 Termination for Material Breach. In the event of a material breach
hereof by Autotote or ASI, CBS may, at its option, terminate this Agreement or
terminate the rights and licenses granted to Autotote and ASI. In the event of a
material breach hereof by CBS, Autotote or ASI, at its option, may terminate
this Agreement or terminate the rights and licenses granted to CBS. Any such
termination may be effected only through a written notice to the other parties,
specifically identifying the breach or breaches on which termination is based.
Following receipt of such notice, the party in breach shall have ninety (90)
days to cure such breach or breaches, said cure period to proceed simultaneously
with the dispute resolution procedure, if any, conducted pursuant to Paragraph
8.12 hereof, and this Agreement or the rights and licenses sought to be
terminated, as the case may be, shall terminate in the event that such cure is
not made by the end of such period. In the event that the parties dispute either
the existence of a material breach or the adequacy of attempted cure, and a
party submits such dispute to arbitration under Paragraph 8.13 hereof, the
termination shall not be deemed effective until the arbitrator renders a final
decision finding an uncured material breach, provided, however, that the
termination shall be deemed effective if arbitration pursuant to Paragraph 8.13
hereof is not initiated within fifteen (15) days after the progressive dispute
negotiation procedures under Paragraph 8.12 hereof are complete.
6.03 Survival. Paragraphs 3.04, 3.07, 5.06, 6.03, and 6.04, and
Articles IV, VII and VIII, and such other provisions as are necessary to
effectuate the rights set forth in Paragraph 6.04 shall survive the termination
of this Agreement.
6.04 Rights Not Affected by Termination. The termination of this
Agreement for any reason shall not affect any licenses granted by either party
to any customers or end users prior to the effective date of such termination.
Following termination of this Agreement for any reason, each party may retain
ownership of and use two (2) copies of the Autotote Licensed Materials or the
CBS Licensed Materials, as the case may be, for the sole purpose of providing
technical support services to such end users and customers.
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<PAGE>
ARTICLE VII
LIMITATION OF LIABILITY
7.01 Exclusion of Damages; Limitation of Liability. IN NO EVENT SHALL A
PARTY BE LIABLE TO ANOTHER PARTY FOR ANY INCIDENTAL, INDIRECT, SPECIAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES, REGARDLESS OF THE NATURE OF THE CLAIM,
INCLUDING WITHOUT LIMITATION LOST PROFITS, COSTS OF DELAY, ANY FAILURE OF
DELIVERY, COSTS OF LOST OR DAMAGED DATA OR DOCUMENTATION OR LIABILITIES TO THIRD
PARTIES ARISING FROM ANY SOURCE, EVEN IF THE PARTY FROM WHICH SUCH DAMAGES ARE
SOUGHT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR THE
OBLIGATIONS OF INDEMNITY SET FORTH IN PARAGRAPH 5.06(a) HEREOF AND A BREACH OF
THE WARRANTIES SET FORTH IN PARAGRAPHS 5.02(a) AND 5.03, IN NO EVENT SHALL A
PARTY BE LIABLE TO ANOTHER PARTY (INCLUDING BY WAY OF INDEMNIFICATION FOR CLAIMS
AGAINST SUCH OTHER PARTY BY ITS DISTRIBUTORS, CUSTOMERS OR END USERS) FOR
DAMAGES IN EXCESS OF TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000), REGARDLESS
OF THE NATURE OF THE CLAIM. THE MAXIMUM LIABILITY OF AUTOTOTE AND ASI
COLLECTIVELY FOR A KNOWING BREACH OF A WARRANTY SET FORTH IN PARAGRAPHS 5.02 OR
5.03 OR FOR INDEMNIFICATION THEREFOR UNDER PARAGRAPH 5.06(a) HEREOF SHALL BE
THREE MILLION DOLLARS (U.S.) ($3,000,000). THE MAXIMUM LIABILITY OF AUTOTOTE AND
ASI COLLECTIVELY FOR AN UNKNOWING BREACH OF A WARRANTY SET FORTH IN PARAGRAPHS
5.02 OR 5.03 OR FOR INDEMNIFICATION THEREFOR UNDER PARAGRAPH 5.06(a) SHALL BE
ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000). NOTWITHSTANDING THE
FOREGOING, THE MAXIMUM LIABILITY OF AUTOTOTE AND ASI COLLECTIVELY ARISING FROM A
CLAIM BY LVDC (INCLUDING A CLAIM OF OWNERSHIP OF OR INFRINGEMENT OF ALL OR PART
OF THE AUTOTOTE LICENSED MATERIALS) SHALL BE ONE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($1,500,000).
ARTICLE VIII
MISCELLANEOUS
8.01 Entire Agreement. This Agreement sets forth the entire agreement
and understanding among the parties hereto with respect to the subject matter
hereof and, except as specifically provided herein, supersedes and merges all
prior oral and written agreements, discussions and understandings among the
parties with respect to the subject matter hereof, and neither of the parties
shall be bound by any conditions, inducements or representations other than as
expressly provided for herein.
8.02 Independent Contractors. In making and performing this Agreement,
the parties act and shall act at all times as independent contractors and
nothing contained in this Agreement shall be construed or implied to create an
agency, partnership or employer and employee relationship between or among them.
At no time shall a party make commitments or incur any charges or expenses for
or in the name of another party.
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<PAGE>
8.03 Notices. Any notice required or permitted to be given hereunder
shall be sufficient if given in writing to the person listed below by registered
mail or overnight delivery service, and the date upon which any such notice is
received at the designated address shall be deemed to be the date of such
notice. Any notice shall be delivered as follows:
If to CBS: AUTOTOTE CBS, INC.
675 Grier Drive
Las Vegas, Nevada 89119
Attention: President
With a copy to: SCHNADER HARRISON SEGAL & LEWIS
Suite 3600
1600 Market Street
Philadelphia, Pennsylvania 19103
Attention: Edward L. Baxter, Esq.
and
GORDON & SILVER
3800 Howard Hughes Parkway
14th Floor
Las Vegas, Nevada 89105
Attention: Lisa Miller-Roche, Esq.
If to Autotote: AUTOTOTE CORPORATION
750 Lexington Avenue
New York, New York 10022
Attention: Chairman and Chief Executive
With a copy to: OFFICE OF THE GENERAL COUNSEL
Autotote Corporation
750 Lexington Avenue
New York, New York 10022
If to ASI: AUTOTOTE SYSTEMS, INC.
100 Bellevue Road
Newark, Delaware 19714
Attention: President
or addressed to such other address as that party may have given by written
notice in accordance with this provision.
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<PAGE>
8.04 Amendments; Modifications. This Agreement may not be amended or
modified except in a writing duly executed by the parties hereto.
8.05 Assignment. CBS shall have the right to assign this Agreement
without the consent of the other parties. Autotote and ASI shall have the right
to assign this Agreement to a successor or to a purchaser of substantially all
of its assets. Neither Autotote nor ASI shall have the right to assign this
Agreement to any other person without the prior written consent of CBS, which
shall not be unreasonably withheld.
8.06 Severability. The provisions of this Agreement shall be severable,
and if any of them are held invalid or unenforceable for any reason, such
provision shall be adjusted to the minimum extent necessary to cure such
invalidity. The invalidity or unenforceability of one or more of the provisions
contained in this Agreement shall not affect any other provisions of this
Agreement.
8.07 Waivers. Any delay or forbearance by a party in exercising any
right hereunder shall not be deemed a waiver of that right.
8.08 Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Nevada, without regard to conflicts
of law provisions.
8.09 Disclaimer of UN Convention on Sale of Goods. PURSUANT TO ARTICLE
6 OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF
GOODS ("UN CONVENTION"), THE UN CONVENTION SHALL NOT APPLY TO THIS AGREEMENT.
8.10 Export Controls.
(a) Each party shall cooperate with the other parties as
reasonably necessary to permit compliance with the laws and administrative
regulations of the United States relating to the control of exports of
commodities and technical data ("Export Laws").
(b) CBS hereby assures Autotote and ASI, and ASI and Autotote
hereby assure CBS, that they will not export or re-export any software or
Know-How licensed to it or them hereunder to any country for which a validated
license is required for such export or re-export under the Export Laws without
first obtaining such a validated license.
8.11 Archival Copies. CBS shall have the right to store two (2)
archival copies of the Autotote Licensed Materials, including Program
Documentation and Source Code therefor, at a secure off-site storage facility,
even if such materials contain Confidential Information of Autotote or ASI. ASI
or Autotote shall have the right to store two (2) archival copies of the CBS
Licensed Materials, including Program Documentation and Source Code therefor, at
a secure off-site storage facility, even if such materials contain Confidential
Information of CBS.
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<PAGE>
8.12 Progressive Dispute Negotiation Procedure.
(a) This paragraph will govern any dispute between or among
the parties arising from or related to the subject matter of this Agreement that
is not resolved by agreement between their respective personnel responsible for
day-to-day administration and performance of this Agreement.
(b) Prior to the filing of any suit with respect to such a
dispute (other than a suit seeking injunctive relief with respect to
intellectual property rights), the party believing itself aggrieved (the
"Invoking Party") will call for progressive management involvement in the
dispute negotiation by notice to the other party. Such a notice will be without
prejudice to the Invoking Party's right to any other remedy permitted by this
Agreement.
(c) The parties shall use their best efforts to arrange
personal meetings and/or telephone conferences as needed, at mutually convenient
times and places, between their negotiators at the following successive
management levels, each of which will have a period of allotted time as
specified below in which to attempt to resolve the dispute:
AUTOTOTE/ASI CBS ALLOTTED TIME
------------ --- -------------
First Level Manager Manager 5 bus. days
Second Level VP VP 5 bus. days
Third Level CEO CEO 14 days
(d) The allotted time for the first-level negotiators will
begin on the date of the Invoking Party's notice.
(e) If a resolution is not achieved by the negotiators at any
given management level at the end of their allotted time, then the allotted time
for the negotiators at the next management level, if any, will begin
immediately.
(f) If a resolution is not achieved by negotiators at the
final management level within their allotted time, then either party may within
ten (10) days thereafter request mediation to resolve the dispute.
(g) The Mediation Rules of the American Arbitration
Association shall be used unless the parties agree otherwise.
(h) The mediation shall take place in the city located nearest
to the principal office of the party that did not initiate the mediation.
(i) The allotted period for completion of the mediation shall
be thirty (30) days.
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<PAGE>
(j) If a resolution is not achieved by mediation within the
allotted time or if mediation is not requested within the permitted ten-day
period, then a party may file an arbitration demand or other permitted action to
resolve the dispute.
8.13 Arbitration. In the event a dispute between or among the parties
arising under this Agreement is not resolved using the procedures of Paragraph
8.12, the parties shall submit to binding arbitration before a panel of three
(3) arbitrators knowledgeable of the computer software industry in Las Vegas,
Nevada, under the Commercial Arbitration Rules of the American Arbitration
Association, except that temporary restraining orders or preliminary
injunctions, or their equivalent, may be obtained from any court of competent
jurisdiction. The decision of the arbitrators shall be final and binding with
respect to the dispute subject to the arbitration and shall be enforceable in
any court of competent jurisdiction. The arbitrators shall not have the power to
award any damages of the type excluded by Paragraph 7.01, regardless of the
nature of the claim. Each party shall bear its own expenses, attorneys' fees and
costs incurred in such arbitration.
8.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one Agreement.
8.15 Construction. This Agreement is the product of joint draftsmanship
and shall not be construed against one party more strictly than against the
others.
8.16 Confidentiality of Agreement. The terms of this Agreement shall
remain confidential. In no event shall any party disclose the terms of this
Agreement without the prior written consent of the other parties.
8.17 Effect. This Agreement shall be binding upon and inure to the
benefit of each party hereto, and its successors and assigns. There are no
third-party beneficiaries, and this Agreement shall not confer upon any person
other than the parties hereto any rights or remedies.
8.18 Bankruptcy Code. The parties acknowledge that this Agreement is
governed by Section 365(n) of Title 11, United States Code (the "Bankruptcy
Code"), and that if any party as a debtor in possession or a trustee in
Bankruptcy in a case under the Bankruptcy Code rejects this Agreement, the other
parties may elect to retain their rights hereunder as provided in Section 365(n)
of the Bankruptcy Code.
8.19 Headings. The headings in this Agreement are inserted merely for
the purpose of convenience and shall not affect the meaning or interpretation of
this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Technology Cross- License Agreement to be executed as of the date first written
above.
ATTEST: AUTOTOTE CBS, INC.
/s/ Illegible By: /s/ Victor Salerno
- --------------------------- -----------------------------------
PRINTED NAME:
------------------------
TITLE:
-------------------------------
ATTEST: AUTOTOTE CORPORATION
/s/ Lawrence J. By: /s/ William Luke
- --------------------------- -----------------------------------
PRINTED NAME: William Luke
------------------------
TITLE: VP Finance & CFO
-------------------------------
ATTEST: AUTOTOTE SYSTEMS, INC.
/s/ Lawrence J. By: /s/ William Luke
- --------------------------- -----------------------------------
PRINTED NAME: William Luke
------------------------
TITLE: Vice President
-------------------------------
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<PAGE>
AMENDMENT TO TECHNOLOGY CROSS-LICENSE AGREEMENT
THIS AMENDMENT TO TECHNOLOGY CROSS-LICENSE AGREEMENT (this "Amendment")
is entered into this 25th day of October, 1996, by and among AUTOTOTE CBS, INC.,
a Nevada corporation with its principal office and place of business at 675
Grier Drive, Las Vegas, Nevada 89119, AUTOTOTE CORPORATION, a Delaware
corporation with its principal office and place of business at 750 Lexington
Avenue, New York, New York 10022, and AUTOTOTE SYSTEMS, INC., a Delaware
corporation with its principal office and place of business at 100 Bellevue
Road, Newark, Delaware 19714.
WITNESSETH:
WHEREAS, the parties desire to amend the Technology Cross-License
Agreement (the "Agreement") to provide for the grant to CBS of an exclusive
license in the State of Nevada to exercise all rights under the Copyright Act of
the VGM Software for the videogame business.
NOW, THEREFORE, in consideration of the mutual covenants set forth
below, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Amended Definition. As used in the Agreement and in this Amendment,
"VGM Software" means the most recent version of the software installed in the
"Video Game Machines" manufactured by Autotote or ASI as of the date hereof, and
the most recent version of such other administrative software that operates on a
mainframe computer for the purpose of supporting the Video Game Machines.
2. Grant of License. Autotote and AST hereby grant to CBS and its
Affiliates, solely for the purpose of engaging in the videogame business, a sole
and exclusive right and license in the State of Nevada to exercise all of the
rights under the Copyright Act for the VGM Software. Such license shall be
irrevocable, paid-up, transferable, and royalty-free.
3. Term. The license granted in Paragraph 2 shall commence upon the
date hereof and continue until the termination of the Authorized Exclusive
Distributorship Agreement or 5 years, whichever is greater.
4. Transfer of Licenses. Notwithstanding the right granted to CBS in
Paragraph 3 of the Agreement and Paragraph 3 of this Amendment to transfer the
licenses granted therein, CBS shall not transfer any such licenses to a direct
competitor of Autotote, except that CBS shall have the right to transfer such
licenses to a successor or to a purchaser of substantially all of its assets;
provided, however, that CBS shall obtain the written consent of Autotote, which
shall not be unreasonably withheld, to any such transfer if such successor or
purchaser is Las Vegas Dissemination Corporation.
<PAGE>
5. Effect. The license granted in this Amendment shall be in addition
to the rights and licenses granted in the Agreement, and shall not be construed
to reduce or derogate in any way the rights and licenses granted in the
Agreement. Other than as expressly set forth herein, the terms of the Agreement
shall remain the same.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to the Technology Cross-License Agreement to be executed as of the
date first written above.
ATTEST: AUTOTOTE CBS, INC.
/s/ Illegible By: /s/ Victor Salerno
- --------------------------- -----------------------------------
PRINTED NAME: Victor Salerno
------------------------
TITLE: President
-------------------------------
ATTEST: AUTOTOTE CORPORATION
/s/ Lawrence J. By: /s/ William Luke
- --------------------------- -----------------------------------
PRINTED NAME: William Luke
------------------------
TITLE: VP Finance & CFO
-------------------------------
ATTEST: AUTOTOTE SYSTEMS, INC.
/s/ Lawrence J. By: /s/ William Luke
- --------------------------- -----------------------------------
PRINTED NAME: William Luke
------------------------
TITLE: Vice President
-------------------------------
<PAGE>
AUTHORIZED EXCLUSIVE DISTRIBUTORSHIP AGREEMENT
AGREEMENT dated as of the 25th day of October 1996, by and between
Autotote Systems, Inc. ("Autotote") and Autotote CBS, Inc. ("Distributor").
In consideration of the mutual covenants herein contained, the parties hereto
agree as follows:
1. Distributor Appointment
Upon the following terms and conditions, Autotote hereby appoints
Distributor as its exclusive distributor in the "Territory" described in Exhibit
A for the equipment ("Product(s)") offered for sale by the Autotote and listed
in Exhibit B. Also, Distributor shall act as a distributor for Products in the
Race and Sports Book Wagering business (including MegaSports) anywhere in the
world in the event Autotote elects not to participate in an Opportunity pursuant
to the International Cooperation Agreement. Except as provided in the
Manufacturing Agreement of even date herewith, and except for products listed in
the Sales Agreement, at no time during the term of this Agreement or any
extension thereof shall Distributor or any person, corporation or other entity
Affiliated with Distributor (other than Leroy's Horse and Sports Place) sell or
service any products whose function is similar to, or which are competitive
with, the Products unless agreed in writing by Autotote. Except as provided in
the Manufacturing Agreement, and except for products listed in the Sales
Agreement, Distributor shall purchase all its requirements of Products from
Autotote and Autotote shall sell to Distributor all Products ordered from
Autotote
2. Distributor Responsibilities
Distributor shall:
A. Use its reasonable efforts to actively promote the sale of Products,
to maintain an inventory of Products (as agreed to by Autotote and Distributor)
and further to serve the interests of Autotote in any and all matters to the
best of its ability.
B. Hold in the strictest confidence during the term of this Agreement
and at all times thereafter any and all information of a confidential nature
obtained regarding Autotote's business or affairs, including, but not limited
to, customer lists and data regarding the design and/or methods of manufacture
of Autotote's Products, and not to disclose in any manner directly or indirectly
such information to any entity, person, partnership or corporation (which
obligation shall survive termination of this Agreement)to except as required by
law or court order.
<PAGE>
C. Use its reasonable efforts to maintain an adequate sales
organization and to provide for adequate assistance to acquirers of the
Products.
D. Use its reasonable efforts to assist Autotote's representatives in
every reasonable manner, including obtaining all information which will assist
in expanding Product usage.
E. Maintain at all times adequate service and repair facilities for the
Products, including spare parts, all as agreed to by Autotote and Distributor.
3. Price of Products and Program License; Delivery and Risk of Loss;
Purchase of Inventory; License of Programs; Second Source
A. Autotote agrees to sell Products and has licensed the Pari-mutuel
Tote Software ("Programs") to Distributor at the prices listed in Exhibit C and
Exhibit C-1. All shipments of Products and Programs shall be F.O.B. Autotote's
designated factory. Autotote will use reasonable efforts to meet the scheduled
delivery date; however, Distributor acknowledges that any delivery schedule
agreed to by Autotote represents only Autotote 's best estimate of the time
required to fill the order. If Autotote is not able to meet the delivery date
requested by Distributor, Autotote shall so advise Distributor by Telex within
seven (7) days after receipt of a purchase order. Distributor may then accept a
new delivery date or withdraw the order. All duty, insurance, freight, sales
taxes, use taxes, personal property taxes, local privilege or excise taxes, or
any other related charges imposed with respect to the purchase of Products
furnished hereunder shall be borne by Distributor. The terms of payment are
described in Exhibit C. Interest shall accrue on all overdue amounts at the
lesser of the highest rate permitted by law or eighteen (18) percent per annum.
Risk of loss from any cause whatsoever shall be borne by Distributor from time
of delivery of Products and Programs to a carrier by Autotote at Autotote's
factory or warehouse. Products together with Programs shall be referred to as a
"System".
B. Distributor may determine its own resale prices, but Autotote, in
accordance with applicable law, reserves the right, at any time, to set
suggested resale prices for the resale of the Products.
C. Distributor shall have the right to manufacture Products and
subcontract said manufacture, as described in the Manufacturing Agreement of
even date herewith. All Products manufactured under said agreement shall be paid
for as described therein but shall entitle Autotote to receive the fees
described in Exhibit C-1. Royalty payments for software under Exhibit C-1 will
apply to software used with equipment acquired from another party as described
in Section 23.
4. Acceptance of Orders and Products
All orders of Products and Programs received from Distributor by
Autotote are subject to acceptance by Autotote ("Acceptance Date"). Any
acceptance of any Distributor order by any of the Autotote's acknowledgment
<PAGE>
forms shall be deemed to be an acceptance of only those terms relating to
quantity, price and delivery method appearing on the face of Distributor's order
and printed terms and conditions contained in any such orders shall have no
application to purchases under this Agreement. Unless written notice of defect
is received by Autotote from Distributor within thirty (30) days of delivery of
Products and Programs , such Products and Programs shall be deemed accepted.
Autotote will not accept any Products or Programs returned for credit or
exchange unless Distributor has notified Autotote in advance and obtained a
Return Material Authorization number which will not be unreasonably withheld or
delayed by Autotote.
5. Term.
A. This Agreement shall continue in force and govern all transactions
and relations between the parties hereto for five (5) years from the date hereof
and thereafter on a yearly basis until canceled or terminated prior to the
expiration of each such period by either party upon thirty (30) days' prior
written notice to the other party. Any such notice by Distributor shall not
affect orders already placed with Autotote. If either party fails to perform or
observe any provision of this Agreement for a period of thirty (30) days after
the other party shall have demanded in writing performance thereof, then the
other party may declare this Agreement to be in default and seek any available
remedies at law or in equity.
B. In the event Distributor becomes insolvent or bankrupt or admits in
writing its inability to pay its debts as they mature, or makes an assignment
for the benefit of its creditors, or bankruptcy, reorganization, arrangement or
insolvency proceedings or other relief of debtors are instituted by or against
Distributor(and not dismissed within 60 days), then in any such event, Autotote
may (i) immediately terminate this Agreement without any court order or further
process of law; (ii) sue for and recover with respect to any or all Products all
charges and other payments then accrued, or thereafter accruing during the
balance of the term of this Agreement; and(iii) pursue and exercise any other
remedy available at law or in equity.
C. Distributor may terminate this Agreement or any portion(s) of this
Agreement if Autotote or Distributor is prevented from performing hereunder due
to any decision by any gaming regulatory authority in Nevada. Should any gaming
regulatory authority in Nevada require this Agreement to be terminated, this
Agreement shall be terminated upon such terms and conditions required by law or
regulation or conditions imposed by the gaming regulatory authority in Nevada.
Notwithstanding the above, Autotote will have the right for a reasonable period
to cure any problem raised by such regulatory authorities.
D. Upon the termination of this Agreement for any reason:
(i) All amounts owing by Distributor to Autotote,
notwithstanding prior terms of sale, shall become immediately due and payable on
or before the effective date of termination.
(ii) Distributor shall not engage in any activity which might
imply or represent that it is an authorized Autotote Distributor, and shall, at
its sole expense, take all steps necessary to remove any listing in any
telephone directory or other publication that it is an authorized Autotote
Distributor.
<PAGE>
(iii) Except as provided in the Technology License Agreement
Distributor shall, at its sole expense, discontinue the use of Autotote's
trademarks, trade names, labels, materials and signs bearing the Autotote name
or any other trademark, service mark, or trade name of Autotote and will remove
such names and trademarks from letterheads, stationery and other forms used by
Distributor.
(iv) Distributor shall, at its sole expense, except if
Distributor shall have paid for them, immediately return to Autotote all parts,
books, or other technical documentation, sales brochures and signs or
advertising materials illustrating Products or bearing the name of Autotote and
all similar materials supplied by Autotote.
(v) Distributor shall discontinue all reference to Autotote in
all of its marketing activities, except as may be reasonably necessary to
dispose of Products not repurchased by Autotote.
E. If this Agreement shall terminate for any reason whatsoever, other
than a breach or default of Distributor, Distributor shall have the right to
manufacture or purchase any product whose function is similar to, or which are
competitive with the Products, or act as a distributor for any other
manufacturer or supplier.
6. Independent Contractor Status
It is agreed that this Agreement does not constitute Distributor as the
agent or legal representative of Autotote for any purpose whatsoever.
Distributor is not granted any right or authority to assume or to create any
obligation or responsibility, express or implied, on behalf of or in the name of
Autotote or to bind Autotote in any manner or thing whatsoever.
7. Proprietary Rights and Confidentiality
Except as provided in the Technology License Agreement of even date
herewith and the Stock Transfer Agreement, all information, know-how,
programming, software, trademarks, trade secrets, plans, drawings,
specifications, designs and patterns furnished or created by Autotote or by
agents or contractors of Autotote (other than Distributor) and any and all
property rights embodied therein are and shall remain the sole property of
Autotote and neither Distributor nor any other party shall have or acquire any
interest therein except as required by law or court order. Distributor shall
at all times, whether during the term of this Agreement or subsequent thereto,
honor, maintain and protect the confidentiality and secrecy of any
confidential information as Autotote may disclose to Distributor or its agents
in writing. The above clauses shall apply to Distributor's confidential
information designated to Autotote in writing at the time of disclosure as
confidential. Obligations of confidentiality shall not apply to information in
the public domain, rightfully acquired from a third party, already known or
internally developed without breach of this Agreement.
<PAGE>
8. Warranty
Autotote warrants all Products against defects in material and
workmanship under normal use and service for a period of one (1) year from the
date of (a) installation at the premises of Distributor's Customer provided such
installation occurs within three months of delivery or (b) otherwise for fifteen
(15) months from receipt by Distributor if installation occurs after said three
month period; provided, however, that Autotote's liability under said warranty
shall be limited to replacing or repairing, at Autotote 's option, products or
parts thereof which Autotote's inspection shall have disclosed to its
satisfaction to have been defective in the form in which it was shipped by
Autotote, prior to its use in further manufacture or assembly. This warranty is
applicable only if Autotote receives written notice of such defect mailed to its
office within said warranty period and is given adequate opportunity to verify
the existence of a claimed defect. This warranty shall not apply to Products or
parts thereof that have been (i) subjected to misuse, neglect, accident, damage
in transit, abuse or unusual hazard; (ii) repaired, altered or modified by
anyone other than Autotote unless Distributor is authorized by Autotote to make
repair or (iii) used in violation of instructions furnished by Autotote. WHERE
AUTOTOTE FAILS TO MAKE DELIVERY OR REPUDIATES OR BREACHES ANY OTHER MATERIAL
PROVISIONS OF THIS CONTRACT (OTHER THAN THE WARRANTY AGAINST PATENT
INFRINGEMENT), INCLUDING, WITHOUT LIMITATION, AUTOTOTE'S OBLIGATIONS WITH
RESPECT TO NONCONFORMING ITEMS, AUTOTOTE 'S LIABILITY SHALL NOT EXCEED THE
ACTUAL PRICE RECEIVED FOR THE PRODUCTS COVERED BY THE SPECIFIC ORDER(S)
INVOLVED. THE FOREGOING ARE IN LIEU OF ALL WARRANTEES, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER WARRANTY
OBLIGATION ON THE PART OF AUTOTOTE. AUTOTOTE'S WARRANTIES EXTEND TO DISTRIBUTOR
AND TO NO OTHER PERSON OR ENTITY. IN NO EVENT WILL AUTOTOTE BE LIABLE TO ANYONE
FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR BREACH OF ANY OF THE PROVISIONS OF
THIS AGREEMENT, SUCH EXCLUDED DAMAGES TO INCLUDE, WITHOUT LIMITATION, COST OF
REMOVAL AND REINSTALLATION OF PRODUCTS, LOSS OF GOODWILL, LOSS OF PROFITS, LOSS
OF USE OR FOR LOSS, DAMAGE OR EXPENSE DIRECTLY OR INDIRECTLY ARISING FROM THE
INABILITY OF DISTRIBUTOR OR ANY END USER TO USE THE PRODUCT EITHER SEPARATELY OR
IN COMBINATION WITH ANY OTHER EQUIPMENT.
9. Retention of Security Interest
Autotote retains and reserves a purchase money security interest in any
Product until the full price is paid by Distributor to Autotote. Said security
interest shall include an interest in the proceeds, products and accessions of
or to such collateral.
<PAGE>
10. Defense of Patent Violation Claim
A. Autotote shall indemnify, hold harmless and defend against any suit
or proceeding brought against Distributor to the extent that such suit or
proceeding is based on a claim that any System supplied by Autotote to
Distributor constitutes an infringement of any valid patent, either directly or
under the doctrine of equivalence or contribution, copyright or other
intellectual property right of any third party anywhere in the world and
Autotote shall pay all damages and costs awarded by final judgment (from which
no appeal may be taken) against Distributor, on condition that Autotote (i)
shall be promptly informed and furnished a copy of each communication, notice or
other action relating to the alleged infringement, (ii) shall be given
authority, information and assistance necessary to defend or settle such suit or
proceeding in such manner as Autotote shall determine, and (iii) shall be given
sole control of the defense (including the right to select counsel) and the sole
right to compromise and settle such suit or proceeding. Except as approved by
Autotote, Autotote shall not be obligated to defend or be liable for costs and
damages if the infringement arises out of compliance with the drawings, designs
and specifications of Distributor or from a combination with, or addition to, or
modification of System, after delivery by Autotote, or from use of System, or
any part thereof, in the practice of a process.
Any settlement shall not impose any obligations upon Distributor.
B. If any System supplied by Autotote to Distributor shall be held to
infringe any valid patent and the use of same is enjoined, or if Autotote
believes such a holding is likely, Autotote shall, at its option and at its
expense, have the right: (i) to procure for Distributor the right to use such
goods free of liability for patent infringement, or (ii) to replace (or modify)
the System with a non-infringing substitute otherwise complying substantially
with all the requirements of this Agreement, or (iii) upon return of the System,
refund the price and the transportation costs of the System. If the infringement
shall be alleged prior to completion of delivery of the System, Autotote shall
have the right to decline to make further shipments of any part thereof without
being in breach of this Agreement.
C. The patent indemnity set forth above shall be deemed to be extended
to Autotote by Distributor if any suit or proceeding shall be brought against
Distributor based on a claim that any System supplied by Autotote in compliance
with the drawings, designs and specifications of Distributor infringes any valid
patent.
D. In the event that during the term of this Agreement Distributor
becomes aware that any patent covering the System is being infringed by a third
party, Distributor shall promptly notify Autotote in writing setting forth the
facts in reasonable detail.
E. THE FOREGOING STATES THE SOLE AND EXCLUSIVE LIABILITY OF THE PARTIES
HERETO FOR INFRINGEMENT OR THE LIKE OF PATENTS, WHETHER DIRECT OR CONTRIBUTORY,
AND IS IN LIEU OF ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY IN REGARD
THERETO.
<PAGE>
F. The indemnification provisions of the Technology License shall
govern claims of infringement relating to the use or distribution of Autotote
Licensed Materials (as defined therein) or any portion thereof installed by
Distributor in a System, and the indemnification provisions of the Stock
Transfer Agreement shall govern claims of infringement directed to the use of
the CBS Software and the Transferred Software (as defined therein) or any
portion thereof installed by Distributor in a System.
11. Design of Products
Autotote reserves the right to make changes and modifications in
specifications, construction, or design of its System at any time and from time
to time in such manner as it may consider necessary or advisable.
12. Compliance
A. Distributor represents that it has been and warrants that it shall
be in compliance for the term of this Agreement with all applicable present and
future laws and regulations which in any manner affect the Distributor as the
representative of the Company hereunder. In particular, it shall be a breach of
this Agreement if any gratuities shall be offered or given by Distributor for
the purposes of unlawfully influencing (a) a foreign government official or
political party official or a candidate for foreign political office to assist
Autotote in obtaining or retaining business (as is illegal under the Prohibited
Foreign Trade Practices Act or its successor), or (b) any person in a manner
that would violate the laws of any relevant jurisdiction including, without
limitation, any Native American Tribal Authority. In addition to any other
remedies which Autotote may have against the Distributor for such a breach,
Autotote may terminate this Agreement forthwith.
B. Distributor shall give prompt written notice to Autotote of any
state of facts which would render the foregoing representation and warranty to
be false or misleading during the term hereof.
13. Use and Licensing of Trademarks
Autotote hereby grants to Distributor a non-exclusive,
non-transferable, limited license to use Autotote's trademarks, copyrights and
name (collectively, the "Trademarks") used in connection with Distributor's
representation of Autotote solely for the purpose of this Agreement as is
customary and necessary in the trade. All use Distributor makes of the
Trademarks shall inure to Autotote's benefit. Distributor shall not use, or
permit others to use, the Trademarks in any way other than the manner permitted
herein. Distributor recognizes the value of the goodwill associated with the
Trademarks, and that they have acquired a secondary meaning in the mind of the
public. Distributor will not, during this Agreement, disparage or attack the
title or any rights of Autotote in and to the Trademarks and shall assist
Autotote in the protection and/or defense thereof as Autotote may reasonably
request and at Autotote's sole cost and expense. Finally, Distributor
understands that nothing herein shall be construed to prevent Autotote from
granting any other licenses for use of the Trademarks or from using the
Trademarks in any manner whatsoever.
<PAGE>
14. Force Majeure
Neither party shall be liable for any delay or failure to perform its
obligations under this Agreement arising out of causes beyond its reasonable
control, including, but not limited to acts of God. In the event of Product
shortage, Autotote shall have the right to allocate its available Products in
such a manner as Autotote may reasonably consider to be equitable.
15. Indemnification
To the extent permitted by applicable law, Distributor agrees to
indemnity and save Autotote harmless from and against any and all liability,
damage and expenses (including reasonable attorney fees), occasioned solely by
any acts of Distributor in breach or violation of this Agreement.
16. Assignment
Distributor shall not assign its rights, or delegate the performance of
its duties, under this Agreement without the prior written consent of Autotote.
17. Notice
All notices or communications hereunder shall be given to the
respective parties hereto in writing and shall be sent by Registered or
Certified Mail, Return Receipt Requested, or its international equivalent, as
follows:
If to Distributor: CBS, Inc.
675 Grier Drive
Las Vegas, Nevada 89119
Attention: Vic Salerno
If to Autotote: Autotote Systems, Inc.
100 Bellevue Road
Newark, DE 19714
Attention: Gerald Lawrence
<PAGE>
18. Governing Law
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of Nevada. Any dispute hereunder shall be
resolved in a Court of Competent Jurisdiction in Clark County, Nevada.
19. Successors and Assigns
This Agreement shall inure to the benefit of the parties and their
respective authorized legal representatives, successors and assigns and shall be
binding upon Autotote and Distributor and their authorized successors and
assigns.
20. Amendments and Waivers
This Agreement may not be amended or modified, except by an instrument
in writing duly executed on behalf of the parties hereto. Any waiver of any
breach of this Agreement shall be limited to the particular instance and shall
not operate to be deemed to waive any future breach nor shall any delay on the
part of either party to act upon any breach be deemed a waiver thereof.
21. Entire Agreement
This Agreement embodies the entire agreement between the parties, and
there have been and are no Agreements, representations or warranties between the
parties other than those set forth herein or herein provided for.
22. Headings
The headings used in this Agreement are for the convenience of the
parties only and shall not be considered in interpreting or applying the
provisions of this Agreement.
23. Another Supplier
If Distributor has the right to manufacture pursuant to the
Manufacturing Agreement of even date herewith, then Distributor may elect to
purchase Products from another supplier.
<PAGE>
24. Enforceability of Certain Provisions
In the event any provision of this Agreement shall be held invalid or
unenforceable for any reason, including the geographic or business scope or the
duration thereof, such invalidity or unenforceability shall attach only to such
provision and shall not affect or render invalid or unenforceable any other
provisions of this Agreement and this Agreement shall be construed as if such
provision had been more narrowly drawn so as not to be invalid or unenforceable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AUTOTOTE SYSTEMS, INC.
By: /s/ William Luke
----------------------------------
Name: William Luke
Title: Vice President
AUTOTOTE CBS, INC.
By: /s/ Victor Salerno
----------------------------------
Name:
Title:
<PAGE>
Exhibit A ("Territory")
Nevada
<PAGE>
Exhibit B ("Products")
ITEM
(a) COMPONENTS
Color video cards
ETIP
Card Cage w/conn
ECOM Chassis, P.S., Processor, 16 Slots ECOM Ethernet Board (1 Slot)
ECOM GPComm Board (3 Slots) ECOM V.35 Board (1 Slot) ECOM PC Adapter
Board ECOM Video Board - 1 Slot)
(b) TERMINALS
SMART PROBE
PROBE/TAT
DUMB PROBE
PROBE SAM
PROBE VOUCHER (Mars)
PROBE VOUCHER (CBV)
PROBE XL TERMINAL 19"
PROBE XL TERMINAL 19" (SAM in a CAN)
PROBE XL TERMINAL 14"
MARK II
MARK II SAM
MARK II VOUCHER
<PAGE>
EXHIBIT C - Prices
For all items described as components in Exhibit B ("Products") the
Price(s) to the Buyer will be the Cost to the Seller plus a 25%
mark-up.
Cost is defined as the most current vendor quotation if item is to be
sold from the Sellers inventory, or the actual vendor invoice price if
the item is to be purchased to fulfill the Buyer's order. Internal
material, labor, and overhead costs, if any, incurred by the Seller to
produce the product will be charged at the hourly rate in effect at the
time Buyer places an order.
All costs shall be F.O.B. Autotote's designated factory or
subcontractor.
The cost price shall be determined by a certified statement from an
Officer of Autotote Systems, Inc.
"Terminals"
Mark II's at $750 above wholesale price.
Wholesale Price of Mark II's to be defined as $500 plus refurbishment
costs. Refurbishment costs are defined as the cost of Material, Labor
and Overhead, if any, required to bring the terminal to a state of
repair acceptable to Buyer.
Smart Probes, Dumb Probes, Probe Voucher Heads, Probe Sam Heads, Sports
Book Probes, will be priced at $1,000 above manufactured cost.
Manufactured cost to be defined as the latest unit cost to complete the
specific quantity of Terminals ordered. The unit cost to be inclusive
of all material, labor and overhead cost.
All costs shall be F.O.B. Autotote's designated factory or
subcontractor.
The manufactured price shall be determined by a certified statement
from an Officer of Autotote Systems, Inc.
Terms of payment are 30 days after invoice.
In addition to the payment for Products, Distributor shall make Site
License Fees and Royalty Payments as described in Exhibit C-1.
Notwithstanding the above, installations at Leroy's sites are not
subject to the fees described herein.
<PAGE>
Exhibit C-1
<TABLE>
<CAPTION>
Product Site License Fee Royalty Payment
------- ---------------- ---------------
<S> <C> <C>
Race and Sports Book Systems Sales $3,000 per site 10% of Race & Sports Book
(excluding Terminals and VGMs) (one time) Systems sale/year
(Sales to customers not under (excluding terminals)
existing contracts)
Race and Sports Book System Leases
(including Terminals and VGMs) $1,000 per site* If leased - $1.50 per day per
(one time) machine
</TABLE>
<TABLE>
<CAPTION>
Industry-side Handle Cumulative
Software Site Handle Fee in Nevada Royalty**
-------- ----------- --- -------------------- ---------------------
<S> <C> <C> <C> <C>
Pari-Mutuel Race
Hub +$1.5M $500/site/year* ^$100M $10,000
^$1.5M $1,000/site/year* $101M-$150M $20,000
$151M-$200M $45,000
$201M-$250M $70,000
$251M-$300M $100,000
$301M-$350M $140,000
$351M-$400M $180,000
$401M-$450M $225,000
$451M-$500M $275,000
+$501M $325,000
Less Than = ^
Grearter Than = +
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Industry-side Handle Cumulative
Software Site Handle Fee in Nevada Royalty**
-------- ----------- --- -------------------- ---------------------
<S> <C> <C> <C> <C>
Pari-Mutuel ^ $1M $500/site/year* ^ $100M $50,000
Sports Hub + $1M $1,000/site/year* $101M-$150M $100,000
$151M-$200M $200,000
$201M-$250M $300,000
$251M-$300M $400,000
$301M-$350M $500,000
$351M-$400M $600,000
$401M-$450M $725,000
$451M-$500M $850,000
$501M-$550M $975,000
$551M-$600M $1,100,000
$601M-$650M $1,225,000
$651M-$700M $1,375,000
$701M-$750M $1,525,000
$751M-$800M $1,675,000
$801M-$850M $1,825,000
$851M-$900M $1,975,000
$901M-$950M $2,125,000
$951M- $1B $2,300,000
+$1B $2,500,000
Less Than = ^
Grearter Than = +
</TABLE>
* Maximum of $1,000 site fee per site if multiple products at one location.
** Notwithstanding this schedule, in no event shall the cumulative royalty
payments for daily VGM rentals, pari-mutuel race or pari-mutuel sports exceed
10% of the revenues received by Buyer for these operations.
Site license fees and royalty payments are cumulative
<PAGE>
MANUFACTURING AGREEMENT
Agreement made October 25, 1996 between Autotote CBS, Inc., a Nevada
corporation, with its principal office in Las Vegas, Nevada ("CBS"), and
Autotote Systems, Inc., a Delaware corporation, with a principal office in
Newark, Delaware ("ASI").
1. SCOPE
1.1 Scope. This Agreement covers a right for CBS to manufacture,
exclusively for sale or lease by CBS within Nevada, ASI's models as defined in
Exhibit A and any other products later designated by both ASI and CBS
(hereinafter referred to as the "Products"). CBS may also manufacture or acquire
Products as set forth in Sections 1.2 and 1.3 hereunder for sale or lease
anywhere in the world for use in the Race and Sports Book Wagering business
(including MegaSports) in the event ASI elects not to participate in an
Opportunity pursuant to the International Cooperation Agreement. The right to
manufacture or acquire shall apply only if ASI is unable or unwilling to deliver
Products under the Authorized Exclusive Distribution Agreement or the
International Cooperation Agreement of even date herewith within forty-five (45)
days of the scheduled delivery date and said right shall only apply with respect
to the Product not delivered. Once manufacturing has commenced under this
agreement, ASI cannot terminate such manufacturing arrangement.
1.2 Right to Manufacture.
(a) ASI hereby grants to CBS, and CBS hereby accepts from ASI,
the non-exclusive and non-transferable (except as provided herein) right to
manufacture the Products as set forth in Section 3 below. CBS, upon written
notice of the subcontractor to ASI, may subcontract the manufacturing of
Products for later acquisition by CBS. Said subcontractor must execute a
confidentiality agreement.
(b) Unless and until ASI receives a license from the
appropriate Nevada Gaming Authorities, CBS shall have the right to manufacture
video gaming machines ("VGM's) without being required to order such VGM from ASI
pursuant to the Distribution Agreement. ASI will supply all the schematics and
other information to allow such manufacture.
1.3 Right to Acquire. If manufacturing rights are available hereunder,
CBS shall have the right to purchase any product whose function is similar to,
or which are competitive with, the Products from a supplier or manufacturer
anywhere in the world.
<PAGE>
2. TERM
2.1 Term This Agreement commences as of the date first written above
and shall continue in effect until the expiration of the Authorized Exclusive
Distributorship Agreement or the International Cooperation Agreement, whichever
is later.
3. MANUFACTURING RIGHTS
3.1 Right to Manufacture. For the term hereof, and subject to Section
1.1, ASI hereby grants to CBS, and CBS hereby accepts from ASI, a non-exclusive,
nontransferable (except as provided herein), right under ASI's patents,
copyrights and know-how to manufacture Products and sell such Products as
described herein.
3.2 Manufacturing Information. ASI agrees to furnish to CBS
manufacturing drawings, parts lists, vendors lists, tooling descriptions and
other information necessary or helpful to enable CBS to manufacture or have
manufactured the Products. These shall be deemed to be confidential information
hereunder. However, such information may be provided to any regulatory agency
having jurisdiction or otherwise as required by law or court order.
3.3 Escrow of Manufacturing Information: Release of Deposit
(a) Concurrently with the execution of this Agreement, the
parties shall execute an Escrow Agreement in the form of Exhibit "B" hereto.
(b) Upon the occurrence of a "Default" (as defined below), CBS
shall, subject to the terms and conditions of the Escrow Agreement and in
addition to the rights granted elsewhere in this Agreement, also have the right
to obtain from the escrow agent the Deposit Materials (as defined in the Escrow
Agreement) deposited in escrow by ASI and use them to exercise the rights
granted to CBS in this Agreement. CBS shall treat such Deposit Materials as
confidential information hereunder.
(c) ASI shall be deemed to be in default upon the occurrence
of any one of the following events (each of which shall be deemed a "Default"):
(i) if ASI is unable or unwilling to deliver Products
under the Authorized Exclusive Distribution Agreement of even date herewith
within forty-five (45) days of the scheduled delivery date; or
(ii) if ASI becomes insolvent, makes a general
assignment for the benefit of creditors, files a voluntary petition of
bankruptcy for liquidation, or has wound up or liquidated its business
voluntarily or otherwise.
<PAGE>
(d) In the event that the parties dispute the existence of a
Default, then the parties shall submit such dispute to a single arbitration
proceeding pursuant to the Escrow Agreement.
3.4 Certain Ownership Rights. All right, title and ownership interests
in any Product design specifications and any change, addition or modification
(by whomsoever made) to the Products shall immediately vest in ASI.
3.5 Tooling. Any tooling which ASI makes available to CBS shall remain
in the possession of CBS during the term hereof. CBS shall use such tooling only
for the purpose of manufacturing Products.
3.6 Quality Control. CBS shall provide and maintain a
mutually-agreeable quality control system for all Products which shall at least
be consistent with presently existing industry quality control practices for the
type of Products covered hereunder or any required system of internal control or
compliance.
4. FEES
4.1 Fees. CBS shall pay ASI for all Products sold to domestic
customers, except to ASI, a per terminal/machine manufacturing fee of $350,
$500, and $600 for each Mark II Terminal, Probe Terminal, and Video Game Machine
("VGM") sold, respectively. In the cases of rentals or leases of Mark II or
Probe equipment, not to ASI, CBS shall pay ASI 10% of any lease or rental
revenues. VGM lease royalties will be limited to the lesser of 10% of per
machine lease revenues or $1.50 per day per machine, for the term of the lease
agreement.
5. CONFIDENTIALITY AND PROPRIETARY RIGHTS
5.1 Proprietary Rights. Except as provided in the Technology License
Agreement of even date herewith and the Stock Transfer Agreement, all
information, know-how, programming, software, trademarks, trade secrets, plans,
drawings, specifications, designs and patterns (whether or not in writing)
furnished or created by ASI or by ASI's agents or contractors, and any and all
property rights embodies therein, is and shall remain the sole property of ASI
and neither CBS nor any other party shall have or acquire any interest therein;
and the same shall not be used, disclosed or reproduced for any purpose
whatsoever, except in performance of this Agreement or to a regulatory agency
having jurisdiction or as otherwise required by law or court order.
5.2 Non-Competition. The know-how supplied to, CBS hereunder (except as
otherwise agreed upon) shall be used only in the performance of this Agreement.
5.3 Restricted Access. During the term of this Agreement, CBS or its
subcontractor shall not allow access to the final assembly and testing areas for
Products to any persons other than its employees who have a need to know,
vendors of products used in such areas and persons approved in advance by ASI,
<PAGE>
which approval shall not be unreasonably withheld. Access to such areas may be
given to representatives of regulatory agencies with jurisdiction without the
prior approval of ASI; however, CBS will give notice thereof to ASI.
6. TERMINATION
6.1 Termination for Default. Either party may terminate this Agreement
upon thirty (30) days' prior written notice if a material breach or default of
the other remains uncured at the expiration or said thirty (30) days after
written notice of such breach or default.
6.2 Regulatory Termination. Both parties acknowledge that termination
of this Agreement may be required by regulatory authorities in Nevada or by
Nevada law or administrative regulation related to gaming control in Nevada. If
such termination is required, the parties agree that such termination will occur
in accordance with such law, regulation or condition imposed by the Nevada
gaming authorities.
7. MISCELLANEOUS
7.1 Entire Agreement, Amendment. This Amendment constitutes the entire
agreement between CBS and ASI with respect to the subject hereof and supersedes
all previous understandings, negotiations and proposals as to such subject
matter. This Agreement may not be altered, amended or modified except by an
instrument in writing signed by a duly authorized representative of both
parties. In the vent that any one or more provisions contained in this Agreement
should for any reason be held to be unenforceable in any respect, such
unenforceability shall not affect any other provisions hereof, and this
Agreement shall be construed as if such unenforceable provision had not been
contained herein. No course of dealing or usage of trade or course of
performance will be deemed relevant to explain or supplement any term expressed
in this Agreement.
7.2 Force Majeure. Neither party shall be liable to the other for
delays or failure to perform and obligation to the other hereunder if such delay
or failure to perform is due to any act of God, acts of civil or military
authority, labor disputes, fire riots, civil commotions, sabotage, war, embargo,
blockade, floods, or when due to governmental restrictions. In the event of any
such delay or failure, the parties shall have an additional period of time in
which to perform hereunder as may be equal to the time lost by reason or the
foregoing.
7.3 Governing Law and Regulatory Requirements.
(a) This Agreement shall be governed by the substantive laws
of the State of Nevada without regards to conflict of laws principles and any
dispute hereunder shall be resolved in a court of competent jurisdiction in
Clark County, Nevada.
<PAGE>
(b) By virtue of this Agreement, ASI hereby acknowledges that
for purposes of Nevada gaming law, ASI is a manufacturer or distributor of
associated gaming equipment, and as such, is subject to the jurisdiction of
Nevada gaming authorities including the Nevada State Gaming Control Board and
Nevada Gaming Commission. As such, failure to cooperate with said gaming
authorities, including the filing of requested gaming license applications, may
result in the denial of a gaming license to ASI or affiliated companies.
7.4 Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR ITS ACTS OR FAILURE TO ACT
UNDER THIS AGREEMENT
7.5 Assignment. Neither party may assign this Agreement or any rights
hereunder or delegate any duties hereunder without the written consent of the
other, except to a corporation to which such party assigns, transfers and
conveys substantially all of its assets, into which it is merged, or with which
it is consolidated.
7.6 Notices. Notices and other communications hereunder shall be in
writing or by telex, subsequently confirmed in writing, and shall be deemed
given when transmitted or deposited in the United States mail, postage prepaid,
addressed as follows:
TO: CBS CBS, Inc.
675 Grier Drive
Las Vegas, Nevada 89119
ATT: Vic Salerno
TO: ASI Autotote Systems, Inc.
100 Bellevue Road
Newark, DE 19014
ATT: Gerald Lawrence
or to such other address as either party shall designate by written notice to
the other party hereto.
7.7 Counterparts This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
7.8 Non-disclosure Neither party shall provide or otherwise make
available this Agreement or any copy or summary thereof to any third party
except to the extent require by law or to the extent requested by either party's
independent auditors or counsel.
<PAGE>
7.9 Expenses Except as otherwise provided, ASI and CBS, respectively,
will pay all costs and expenses of their performance or and compliance with all
agreements and conditions contained in this Agreement.
7.10 Successors and Assigns This Agreement shall inure to the benefit
of the parties and their respective authorized legal representatives, successors
and assigns and shall be binding upon ASI and CBS and their authorized
successors and assigns. Nothing contained in this Agreement shall inure to the
benefit of or be deemed to give rise to any right in any third party, whether by
operation of law or otherwise.
7.11 Headings The Section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning and interpretation of this Agreement.
7.12 Negation of Certain Relationships Nothing contained herein shall
in any way constitute the relationship between the parties hereto as one of
employer/employee, principal/agent, partnership, joint venture, or be construed
to evidence the intention of the parties to constitute such relationship. Each
party shall not hold itself out contrary to the terms of this paragraph and each
party shall not become liable or be bound by any representation, act or omission
whatsoever of the other party contrary to the provisions or this Agreement.
7.13 Bankruptcy Code The parties acknowledge that this Agreement is
governed by Section 365(n) of Title 11, United States Code (the "Bankruptcy
Code"), and that if any party as a debtor in possession or a trustee in
Bankruptcy in a case under the Bankruptcy Code rejects this Agreement, the other
parties may elect to retain their rights hereunder as provided in Section 365(n)
of the Bankruptcy Code.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
AUTOTOTE CBS, INC. AUTOTOTE SYSTEMS, INC.
BY: /s/ Victor Salerno BY: /s/ William Luke
------------------------------ ----------------------------
Name: Name: William Luke
Title: Title: Vice President
<PAGE>
EXHIBIT A
ITEM
Color video cards
ETIP
Card Cage w/conn
ECOM Chassis, P.S., Processor, 16 Slots
ECOM Ethernet Board (1 Slot)
ECOM GPComm Board (3 Slots)
ECOM V.35 Board (1 Slot)
ECOM PC Adapter Board
ECOMN Video Board - 1 Slot)
SMART PROBE
PROBE/TAT
DUMB PROBE
PROBE SAM
PROBE VOUCHER (Mars)
PROBE VOUCHER (CBV)
PROBE XL TERMINAL 19"
PROBE XL TERMINAL 19" (SAM in a CAN)
PROBE XL TERMINAL 14"
MARK II
MARK II SAM
MARK II VOUCHER
<PAGE>
INTERNATIONAL COOPERATION AGREEMENT
THIS AGREEMENT is entered into this 25th day of October, 1996, by
and between AUTOTOTE CBS, INC. ("CBS"), a corporation duly organized and
existing under the laws of Nevada, having and office at 675 Grier Drive, Las
Vegas, Nevada 89119, and AUTOTOTE SYSTEMS, INC. ("ASI"), a corporation organized
and existing under the laws of the State of Delaware, having an office at 100
Bellevue Road, Newark, DE 19714.
The parties desire to cooperate in pursuing business relating to
international sports and pari-mutuel wagering.
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. JOINT COOPERATION
(a) ASI and CBS, in the context of pursuing their normal
activities outside of the United States, will each inform the other party of
business opportunities for the supply of Race and Sports Book wagering systems
(which shall not include the pari-mutuel race wagering business)
("Opportunity"). In connection with an Opportunity (introduced by either party),
ASI will be the exclusive supplier of the necessary equipment and software it
owns. CBS will operate the central hub system and enter into any necessary local
joint venture arrangements. Each party shall bear its own costs and supply its
products and services on an arms' length basis for the Opportunity. The
relationship provided by this Agreement shall be an exclusive relationship.
Opportunities include business outside Nevada in the United States.
(b) With respect to any Opportunity, each party shall grant
the other party a right of first refusal which must be exercised within thirty
(30) days of written notice.
(c) CBS, without ASI's participation, may enter into a
transaction with a customer for a sports wagering operation using IBM software.
(d) Opportunity shall not apply to the TOTIP Lottery and any
lottery similar to the TOTIP Lottery where numbers are chosen from horse racing
or other sporting (e.g., soccer) events. Such activities are the exclusive
province of ASI.
<PAGE>
2. PERFORMANCE OF CONTRACTS
(a) If, within the term hereof, an Opportunity is available,
the parties will negotiate an agreement ("Agreement") which shall contain
mutually acceptable prices, terms and conditions, under which the Opportunity
will be exploited. The parties will not propose commercially unreasonable terms.
Any such arrangement will result in ASI having a participation equal to fifteen
percent (15%) of the net profit derived by CBS, whether derived by virtue of the
equity interest of CBS or the operating margin of CBS for the provision of
services. An example of such arrangement is attached as Exhibit A.
(b) To the extent that any party decides not to participate in
an Opportunity, they, respectively, will make available their respective
software rights at commercially reasonable rates (to the extent not already
subject to a right to use) so that the other party may proceed with such
Opportunity.
(c) In the event ASI decides not to participate in an
Opportunity or is unable or unwilling to deliver Products within forty-five (45)
days of the scheduled delivery date, CBS shall have the right to manufacture,
acquire or have manufactured Products pursuant to Section 1 of the Manufacturing
Agreement.
3. COMMITMENTS
Nothing in this Agreement shall grant to either party the
right to make commitments of any kind for or on behalf of the other party
without the prior written consent of the other party.
4. COMPENSATION
Except for the compensation which may be paid to the parties
in accordance with any such Agreement, each party shall bear all of its own
expenses and liabilities incurred in connection with this Agreement.
5. COOPERATION AND ASSISTANCE
Each party shall furnish to the other party such cooperation
and assistance as may be reasonably required hereunder; provided, however, that
the parties, as between themselves, shall be deemed to be independent
contractors, and the employees of one shall not be deemed to be the employees of
the other.
6. EXCHANGE OF TECHNICAL INFORMATION
(a) During the term of this Agreement, each party, to the
extent of their right to do so, shall exchange such technical information and
data ("Data"), whether heretofore or hereafter created or acquired, as is
reasonably required for each to perform its obligations hereunder. Each party
covenants and agrees that it will, notwithstanding that this Agreement shall
have terminated or expired, keep in confidence and prevent the disclosure to any
person or persons outside their organizations or to any unauthorized person or
persons of all Data which is designated by the disclosing party to be of a
proprietary or confidential nature, and is received from the other under this
Agreement, and which pertains to proprietary or confidential Data regarding its
marketing strategies, technological techniques, processes, inventions and
research and development except as required by law or court order. Each party
shall use the same procedures to protect the other party's confidential
information as it uses to protect its own confidential information.
<PAGE>
(b) Any proprietary information exchanged by the parties and
entitled to protection hereunder shall be identified as such by (i) appropriate
stamp or markings on the document exchanged, or (ii) written notice, with
attached listings of all material, copies of all documents, and complete
summaries of all oral disclosures (under prior assertion of proprietorship) to
which each notice relates, delivered within two weeks of the disclosure.
(c) Unless authorized in writing by the party originally
transmitting such proprietary information hereunder, the receiving party will
not otherwise use or disclose such proprietary information during the
above-mentioned period except that it may be disclosed to a government, provided
any such disclosure bears an appropriate restrictive legend.
(d) Information shall not be afforded the protection of this
Agreement if, on the effective date hereof, such information has been, or
thereafter is:
(i) Developed by the receiving party independently of
the furnishing party;
(ii) Rightly obtained without restriction by the
receiving party from a third party;
(iii) Publicly available other than through the fault
or negligence of the receiving party;
(iv) Internally developed without breach of this
Agreement;
(v) Already known prior to the disclosure.
(e) Should the receiving party be faced with legal action or a
requirement under government regulations to disclose proprietary information
received hereunder, the receiving party shall promptly notify the furnishing
party and, upon the request of the latter, shall cooperate with the furnishing
party in contesting such disclosure.
(f) All proprietary information furnished hereunder shall
remain the property of the furnishing party and shall be returned to it or
destroyed promptly at its request, together with all copies made thereof by the
receiving party. Upon request, the receiving party shall send the furnishing
party a destruction certificate.
<PAGE>
(g) No license under any patents is granted or conveyed by one
party's transmitting proprietary information or other information to the other
party hereunder, nor shall such a transmission constitute any representation,
warranty, assurance, guaranty or an inducement by the transmitting party to the
other party with respect to infringement of patent or other rights of others.
7. INVENTIONS AND PATENTS
The originating party shall retain all right, title and
interest in and to any invention, discovery, technique, improvement or
modification (collectively, "Invention"), whether or not patentable or
copyrightable, conceived or made in whole or in part by such party during the
term of this Agreement or any extension thereof. In the event of an Invention in
which both parties hereto shall be active participants, the Invention shall be
owned jointly and the parties shall establish through good faith negotiation
their respective rights therein.
8. TERMINATION
This Agreement shall terminate eight (8) years from the date
hereof or the termination of the authorized exclusive Distributorship Agreement,
whichever is later, unless earlier terminated as hereinafter provided, or upon
the requirement of any regulatory agency law or regulation in Nevada and in
accordance with any condition contained therein.
9. OTHER ARTICLES AND SERVICES
Nothing in this Agreement shall be interpreted to prevent
either party from selling standard articles and other items and services not
uniquely identified with the Opportunity which it regularly offers for sale or
license to private or governmental customers.
10. GOVERNING LAW
This Agreement shall be deemed to be a Nevada contract and
governed by the laws of the State of Nevada. Any disputes shall be resolved in a
court of competent jurisdiction in Clark County, Nevada.
11. DUPLICATE ORIGINALS
This Agreement may be executed in duplicate and each shall be
deemed to be an original.
<PAGE>
12. PUBLICITY
No publicity or advertising regarding any Opportunity or
relating to this Agreement shall be released by a party without the prior
written approval of the other party (which consent shall not be unreasonably
withheld). This provision shall not apply to any disclosure required by law or
by regulation of any federal, state or local governmental agency.
13. SUCCESSORS AND ASSIGNS
(a) This Agreement shall not be assigned without the written
permission of the non-assigning party, such permission not to be unreasonably
withheld.
(b) This Agreement shall be binding upon and inure to the
benefit of the heirs, legal representatives, successors, and assigns of the
parties hereto.
14. ENTIRE AGREEMENT
(a) This Agreement constitutes the entire agreement between
the parties hereto relating to the specific subject matter hereof.
(b) There are no terms, obligations, covenants,
representations, statements, or conditions other than those contained herein.
(c) No variations or modification of this Agreement or waiver
of any terms or provisions hereof shall be deemed valid unless in writing and
signed by both parties hereto.
15. VALIDITY
The invalidity in whole or in part of any term or condition of
this Agreement shall not affect the validity of the rest of this Agreement or
any other term or conditions herein.
16. WAIVER
The failure by either party to enforce at any time or for any
period of time any of the provisions of this Agreement shall not constitute a
waiver of such provision or the right of such party to then or thereafter
enforce each and every provision hereof.
17. LIABILITY
NEITHER PARTY SHALL BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL
DAMAGES HEREUNDER.
<PAGE>
18. NOTICES
All notices of communications (other than normal business
communications) required by this Agreement or desired to be given hereunder,
shall be in writing addressed as stated above and given by certified or
registered mail, return receipt requested, or by telex and shall be deemed to be
given when received.
19. HEADINGS
The paragraph headings appearing in this Agreement have been
inserted for the purpose of convenience and ready reference. They do not purport
to, and shall not be deemed to, define, limit or extend the scope or intent of
the paragraphs to which they appertain.
20. GAMING REGULATION
Distributor may terminate this Agreement or the relevant
portion(s) of this Agreement if Autotote or CBS is prevented from performing
hereunder due to any decision by any gaming authority in Nevada. Should any
gaming regulatory authority in Nevada require this Agreement to be terminated,
this Agreement shall be terminated upon such conditions required by law,
regulation or conditions imposed by the gaming regulatory authority in Nevada.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
AUTOTOTE CBS, INC.
By: /s/ Victor Salerno
---------------------------------
Name:
Title:
AUTOTOTE SYSTEMS, INC.
By: /s/ William Luke
----------------------------------
Name: William Luke
Title: Vice President
<PAGE>
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated October 25, 1996, of American
Wagering, Inc., a Nevada corporation (the "Guarantor'), in favor of Autotote
Corporation, a Delaware corporation ("Obligee") (the "Guaranty Agreement").
Background
Background. Obligee is the guarantor of a mortgage on certain
property owned by its wholly-owned subsidiary, Autotote CBS, Inc., a Nevada
corporation ("CBS"), pursuant to that certain Guaranty Agreement of Obligee in
favor of Standard Life and Accident Insurance Company, dated August 31, 1995 and
attached hereto as Exhibit A ("Autotote Guaranty"). Obligee and Guarantor are to
execute and deliver a certain Stock Transfer Agreement, dated of even date
herewith (the "Stock Transfer Agreement"), pursuant to which Guarantor is to,
inter alia, acquire all of the issued and outstanding stock of CBS. Pursuant to
Section 6.2(b)(iv) of the Stock Transfer Agreement, it is a condition precedent
to the obligations of Obligee under the Stock Transfer Agreement, including its
obligation to sell to Guarantor the stock of CBS, that the release of Obligee
from the Autotote Guaranty shall have been secured or, provided that Obligee so
elects, that a suitable back-up guarantee of the Autotote Guaranty shall have
been secured.
NOW, THEREFORE, in consideration of the foregoing, and
intending to be legally bound hereby, the Guarantor hereby agrees as follows:
1. In order to comply with the condition precedent set forth
in Section 6.2(b)(iv) of the Stock Transfer Agreement, the Guarantor hereby
guarantees as surety to Obligee the Prompt satisfaction when due, whether by
acceleration or otherwise, of all of the obligations, liabilities and
indebtedness of Obligee (the "Obligations") under the Autotote Guaranty.
2. The Guarantor agrees that, if any of the Obligations are
not satisfied when due, the Guarantor will, upon demand by the Obligee,
immediately satisfy such Obligations.
3. The liability of the Guarantor under this Agreement is
absolute and unconditional, without regard to the liability of any other person,
and shall not in any manner be affected by reason of any action taken or not
taken by the Obligee, nor by the partial or complete unenforceability or
invalidity of any other guaranty or surety agreement, pledge, assignment or
other security for any of the Obligations. No delay in making demand on the
Guarantor for satisfaction of their liability hereunder shall prejudice the
Obligee's right to enforce such satisfaction. All of the Obligee's rights and
remedies shall be cumulative and any failure of the Obligee to exercise any
right hereunder shall not be construed as a waiver of the right to exercise the
same or any other right at any time, and from time to time, thereafter.
4. The Guarantor agrees that this Agreement shall be governed
by the substantive law of the State of Nevada, without regard to principles of
conflicts of laws.
<PAGE>
5. Any notice or consent required or permitted by this
Agreement shall be in writing and shall be deemed delivered if delivered in
person or if sent by registered or certified mail, postage prepaid, return
receipt requested, as follows, unless such address is changed by written notice
hereunder:
a. If to the Obligee, to:
Autotote Corporation
750 Lexington Avenue
New York, NY 10022
Attn: Chair and Chief Executive
b. If to the Guarantor, to:
President
American Wagering, Inc.
675 Grier Drive
Las Vegas, NV 89119
Attn: Vic Salerno
6. This Agreement shall inure to the benefit of the Obligee
and its successors and assigns, and shall be binding upon the Guarantor and its
successors and assigns.
7. Guarantor will use its best efforts to secure the release
of obligee as guarantor.
IN WITNESS WHEREOF, the Guarantor, intending to be legally bound
hereby, has duly executed this Guaranty Agreement as of the date and year first
above written.
GUARANTOR:
ATTEST: AMERICAN WAGERING, INC.
By: /s/ Illegible By: /s/ Victor Salerno
----------------------------- ---------------------------------
(Assistant) Secretary Title: ____________________________
<PAGE>
EXHIBIT 99.1
(BW)(AMERICAN-WAGERING)(BETM) American Wagering, Inc. announces
acquisition of Nevada-based Autotote CBS Inc.
LAS VEGAS--(BUSINESS WIRE)--OCTOBER 30, 1996--
- - Strong Compliment To Company's Sports and Race Book Business -
- - Significantly Enhances International Expansion Opportunities -
AMERICAN WAGERING, INC. (Nasdaq NM: BETM) today announced the
acquisition of Autotote CBS, Inc. (CBS), a subsidiary of Autotote Corporation
(AMEX: TTE). The purchase price was $3 million in addition to assumption of
certain liabilities. CBS is the dominant provider of sports and race book
equipment and software in the state of Nevada including all the major casinos
along the Las Vegas strip. CBS revenues for fiscal 1995 were $5.9 million. The
purchase also included Las Vegas real estate valued at $2.6 million and the
assumption of the mortgage of approximately $2 million.
Commenting on the acquisition, Victor Salerno, president and chief
executive officer of AMERICAN WAGERING, INC. and original founder of CBS,
stated, "CBS sports betting systems and Autotote Corporation's wagering products
will enable us to move forward with our strategic plan to enhance and further
develop our pari-mutuel and sports betting business with new and innovative
products for both. Additionally, the acquisition allows us to offer our existing
clients a broader range of products and services. Also, we believe the
acquisition considerably strengthens AMERICAN WAGERING's ability to take
advantage of international opportunities in the sports and race book industry."
Mr. Salerno continued, "CBS will continue to market and distribute
Autotote Corporation's products in Nevada and is the perfect complement to our
domestic business."
American Wagering, Inc. owns and operates Leroy's Horse and Sports
Place, the licensed bookmaker with the largest number of sports book locations
in the state of Nevada. American Wagering, Inc. is the leading provider of
sports and race book systems in Nevada and also owns and operates a 150-room
hotel/casino complex in Las Vegas. The information contained herein was obtained
from the management of AMERICAN WAGERING, INC. and other sources deemed to be
reliable. This does not constitute the solicitation of the purchase or sale of
securities. Lippert/Heilshorn & Associates, Inc. is employed by the Company as
its investor relations firm.
CONTACT: American Wagering, Inc.
Robert Ciunci, 702/735-0101
or
Lippert/Heilshorn & Associates, Inc.
Jeffrey Volk/John Heilshorn, 212/838-3777
