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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ______________
COMMISSION FILE NUMBER 000-23401
GAMETECH INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0612983
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2209 W. 1ST STREET, SUITE 113, TEMPE, ARIZONA
85281
(Address of principal executive offices)
(Zip code)
Registrant's telephone number, including area code: (480) 804-1101
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [|X|] No [ ]
On March 7, 2000 the registrant had 11,370,373 outstanding shares of its
Common Stock, par value $.001 per share.
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GAMETECH INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
<S> <C>
Part I. Financial Information: Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
January 31, 2000 and October 31, 1999.........................................................................3
Condensed Consolidated Statements of Income
Three Months Ended January 31, 2000 and 1999..................................................................4
Condensed Consolidated Statements of Cash Flows
Three Months Ended January 31, 2000 and 1999.................................................................5
Notes to Condensed Consolidated Financial Statements..............................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................................................6
Item 3. Market Risk Disclosure........................................................................................8
Part II. Other Information
Item 1. Legal Proceedings............................................................................................10
Item 2. Changes in Securities and Use of Proceeds....................................................................11
Item 6. Exhibits and Reports on Form 8 - K...........................................................................11
Signatures ...............................................................................................................12
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GAMETECH INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
2000 1999
----------------------------
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and equivalents $ 8,600 $ 4,554
Short-term investments 4,001 6,835
Accounts receivable net 4,361 3,652
Other current assets 2,115 1,922
----------------------------
Total current assets 19,077 16,963
Bingo units, furniture and equipment, net 21,514 21,506
Intangible and other assets, net 20,979 20,334
----------------------------
Total assets $61,570 $58,803
============================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 759 $ 550
Other accrued liabilities 1,948 2,098
Income taxes payable 1,405 107
Current portion of long-term debt 1,105 1,245
----------------------------
Total current liabilities 5,217 4,000
Long-term debt 3,152 3,314
Deferred income taxes 65 65
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value: 40,000,000 shares
authorized; 12,284,323 shares issued and outstanding
in 2000 and 1999 12 12
Capital in excess of par value 43,418 43,418
Retained earnings 12,831 10,863
Less: treasury stock, 828,400 shares in 2000 and 774,500
shares in 1999, at cost (3,125) (2,869)
----------------------------
Total stockholders' equity 53,136 51,424
----------------------------
Total liabilities and stockholders' equity $61,570 $58,803
============================
</TABLE>
See notes to financial statements.
3
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GAMETECH INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
2000 1999
--------------------------------
(unaudited)
<S> <C> <C>
Revenues $ 13,177 $ 4,534
Operating expenses:
Cost of revenue 3,579 1,656
General and administrative 2,275 874
Sales and marketing 3,475 838
Research and development 404 211
--------------------------------
9,733 3,579
--------------------------------
Income from operations 3,444 955
Interest income and other, net 67 308
--------------------------------
Income before provision for income taxes 3,511 1,263
Provision for income taxes 1,542 493
--------------------------------
Net income $ 1,969 $ 770
================================
Basic net income per share $ 0.17 $ 0.08
================================
Diluted net income per share $ 0.16 $ 0.08
================================
Shares used in the calculation of net income per share:
Basic 11,434,836 9,371,886
================================
Diluted 12,233,723 10,135,683
================================
</TABLE>
See notes to financial statements.
4
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GAMETECH INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
----------------------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,969 $ 770
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,028 827
Changes in operating assets and liabilities:
Accounts receivable, net (709) (28)
Other current assets (193) (71)
Accounts payable 209 75
Other accrued liabilities (150) 137
Income taxes payable 1,298 245
----------------------------
Net cash provided by operating activities 4,452 1,955
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments 2,834 (8,912)
Capital expenditures for bingo units, furniture and equipment (1,392) (1,268)
Payment on restructuring of distributor agreement $(1,275) 0
Capitalized software development costs (15) (45)
Copyright costs 0 (225)
----------------------------
Net cash provided by (used in) investing activities 1,152 $(10,450)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (211) 0
Payments for buy out of distributorship agreement (91) (85)
Payments for repurchase of common stock for treasury (256) (15)
----------------------------
Net cash (used in) financing activities (558) (100)
----------------------------
Net increase (decrease) in cash and equivalents 4,046 (8,595)
Cash and equivalents at beginning of period 4,554 21,485
----------------------------
Cash and equivalents at end of period $ 8,600 $ 12,890
============================
</TABLE>
See notes to financial statements.
5
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GAMETECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000
(UNAUDITED)
1. NOTES TO FINANCIAL STATEMENTS
NOTE A. BASIS OF PRESENTATION
The balance sheet as of October 31, 1999 has been derived from the audited
financial statements at that date. The accompanying financial statements as of
January 31, 2000 and for the three months ended January 31, 2000 and 1999 have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments considered necessary for a fair
presentation of the Company's financial condition, results of operations and
cash flows have been included. The results of operations for the three months
ended January 31, 2000 should not be considered indicative of results for the
fiscal year ending October 31, 2000. These financial statements should be read
in conjunction with the financial statements, and notes thereto, included in the
Company's Annual Report on Form 10-K for the year ended October 31, 1999.
NOTE B. NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is computed in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share". The calculations of basic and diluted earnings per share are the same
except for the dilutive effect of outstanding stock options. The dilution is
798,887 shares and 763,797 shares for the three months ended January 31, 2000
and 1999, respectively.
NOTE C. COMMITMENTS AND CONTINGENCIES
LITIGATION -
Please see Item 1, Legal Proceedings, of Part II, Other Information.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto included elsewhere in this
Form 10-Q.
OVERVIEW
GameTech installs electronic bingo systems in bingo halls under revenue
sharing agreements or at fixed rates per bingo session. The Company recognizes
revenue as its bingo units are utilized by players. Revenue growth is affected
by player acceptance of electronic bingo as an alternative to paper bingo and
the Company's ability to expand operations into new markets. Fixed-base bingo
units generate greater revenue per unit than hand-held bingo units, but also
require greater initial capital investment.
The Company installs its electronic bingo systems at no charge to its
customers and capitalizes the costs. During the three month periods ended
January 31, 2000 and 1999, the Company's capital expenditures were approximately
$1.4 million and $1.3, respectively, almost all of which represented investments
in bingo equipment. The Company's cost of revenues consists primarily of the
expenses of providing customer service, including labor, service related
overhead and depreciation of the bingo systems installed in customer locations.
6
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The Company records depreciation of bingo equipment over a five-year estimated
useful life using the straight-line method of depreciation.
RECENT DEVELOPMENTS
There were no recent developments during the quarter ended January 31,
2000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2000 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1999
REVENUES. Revenues increased $8.6 million, or 191%, to $13.2 million for
the three months ended January 31, 2000 from $4.5 million for the three months
ended January 31, 1999. This increase is due in part to GameTech's February 8,
1999 acquisition of Bingo Technologies Corporation (BTC). Excluding the revenues
resulting from the acquisition of BTC, the revenue increase was $1.5 million or
33.3%. The number of units installed at January 31, 2000 was approximately
48,700, 19,500 excluding units resulting from the acquisition of BTC, compared
to approximately 14,500 at January 31, 1999.
COST OF REVENUES. Cost of revenues increased $1.9 million, or 112%, to
$3.6 million for the three months ended January 31, 2000 from $1.7 million for
the three months ended July 31, 1999. The increase in cost of revenues was
primarily due to the greater average number of units installed. As a percentage
of revenues, cost of revenues decreased to 27.3% from 37.8% in the prior period.
Depreciation expense as a percent of revenue decreased 5.7% due primarily to the
mix of units acquired in the BTC acquisition, as those units have a lower cost.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$1.4 million, or 156%, to $2.3 million for the three months ended January 31,
2000 from $874,000 for the three months ended January 31, 1999. As a percentage
of revenues, general and administrative expenses decreased to 17.4% from 20.0%
in the prior period.
SALES AND MARKETING. Sales and marketing expenses increased $2.6 million,
or 310%, to $3.5 million for the three months ended January 31, 2000 from
$838,000 for the three months ended January 31, 1999. The increase was primarily
due to larger distributor commissions of $2.1 million. This increase in
distributor commissions is due primarily to the distributor network acquired
from BTC.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
$193,000, or 91.5%, to $404,000 for the three months ended January 31, 2000 from
$211,000 for the three months ended January 31, 1999. As a percent of revenue,
research and development expenses were 3.1% and 4.7% in the 2000 and 1999
periods, respectively.
INTEREST INCOME. Interest and other income, net decreased $241,000 to
$67,000 for the three months ended January 31, 2000 from $308,000 for the three
months ended January 31, 1999. The decrease in interest income was due primarily
to the use of approximately $10.0 million of cash in the acquisition of BTC and
$5.9 million of cash to retire debt from BTC. Additionally, $59,000 of interest
expense was incurred as a result of acquisition related debt of $4.0 million.
PROVISION FOR INCOME TAXES. The provision for income taxes increased $1.0
million to $1.5 million for the three months ended January 31, 2000 from
$493,000 for the three months ended January 31, 1999. The Company's effective
income tax rate was approximately 44% in 2000 and approximately 39% in 1999. The
rate change is due to the non-deductibility of goodwill from the acquisition of
BTC.
NET INCOME. As a result of the factors discussed above, net income
increased $1.2 million to $2.0 million for the three months ended January 31,
2000 from $770,000 for the three months ended January 31, 1999.
7
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LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $4.5 million of cash in the quarter ended
January 31, 2000 compared to $2.0 million in the quarter ended January 31, 1999.
The $4.5 million consists of $2.0 million of net income, $2.0 million of
depreciation and amortization and $455,000 in changes to operating assets and
liabilities. In 1999, the $2.0 million provided by operating activities
consisted primarily of $770,000 of net income, $827,000 of depreciation and
amortization and $358,000 in changes to operating assets and liabilities.
Investing activities provided $152,000 of cash in the quarter ended
January 31, 2000, compared to using $10.5 million of cash in the quarter ended
January 31, 1999. The $152,000 consists of a $2.8 million decrease in short-term
investments offset by capital expenditures of $1.4 million and the restructuring
of a distributor agreement of $1.3 million. In 1999, the $10.5 million used in
investing activities consisted primarily of an increase in short-term
investments of $8.9 million and capital expenditures of $1.3 million.
Financing activities used cash of $558,000 in the quarter ended January
31, 2000, compared to $100,000 in the quarter ended January 31, 1999. The
$558,000 consists primarily of $211,000 in long-term debt repayment and $256,000
to repurchase treasury stock.
At January 31, 2000, the Company had cash and equivalents and short-term
investments totaling $12.6 million. GameTech also has a $10.0 million line of
credit (the "Revolving Credit Facility") with Wells Fargo Bank, N.A. ("Wells
Fargo"), which has an interest rate based on the prime rate or LIBOR plus 2.0%,
at the Company's option, on which there was no outstanding balance at January
31, 2000. The Revolving Credit Facility expires on March 31, 2000. The Company
expects to renew the Revolving Credit Facility with similar terms. The Company
believes that cash flow from operations and the $12.6 million in cash, cash
equivalents and short-term investments at January 31, 2000, together with funds
available under the Revolving Credit Facility, will be sufficient to support its
operations and provide for budgeted capital expenditures of approximately $10.0
million and liquidity requirements through fiscal 2000. However, the Company's
long term liquidity requirements will depend on many factors, including, but not
limited to, the rate at which the Company expands its business, whether
internally or through acquisitions and strategic alliances. In addition,
strategic opportunities the Company may pursue will require it to fund its
portion of operating expenses of such ventures, and may further require it to
advance additional amounts should any partners in such ventures be unable to
meet unanticipated capital calls or similar funding events. To the extent that
the funds generated from the sources described above are insufficient to fund
the Company's activities in the long term, the Company will be required to raise
additional funds through public or private financing. No assurance can be given
that additional financing will be available or that, if it is available, it will
be on terms acceptable to the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's Revolving Credit Facility with Wells Fargo is a $10.0
million line of credit with an interest rate based on the prime rate or LIBOR
plus 2.0%, at the Company's option. The line of credit will expire on March 31,
2000.
Because the interest rate on the Revolving Credit Facility is variable,
the Company's cash flow may be affected by increases in interest rates, in that
the Company would be required to pay more interest in the event that both the
prime and LIBOR interest rates increase. Management does not, however, believe
that any risk inherent in the variable-rate nature of the loan is likely to have
a material effect on the Company's interest or available cash. The Company
currently maintains a zero balance on the Revolving Credit Facility. Even if the
Company were to draw down on the line prior to its expiration and an unpredicted
increase in both alternate rates occurred, it would not be likely to have a
material effect on the Company's interest expense or available cash.
SENSITIVITY ANALYSIS. Assuming the Company had a $2 million balance
outstanding as of January 31, 2000, the rate of interest calculated using the
prime rate option would be 8.75%. The Company's monthly interest payment, if the
rate stayed constant would be $14,693. If the prime rate rose to 13%, which
assumes a very large increase, the Company's monthly payment would be $21,667. A
more likely increase of 1 or 2% would give the Company a monthly payment of
$16,250 or $17,917, respectively. The Company does not believe the risk
resulting from such fluctuations is material nor that the payment required would
have a material effect on cash flow.
8
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CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document includes various "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Sections
21E of the Securities Exchange Act of 1934, as amended, which represent the
Company's expectations or beliefs concerning future events. Statements
containing expressions such as "believes," "anticipates" or "expects" used in
the Company's press releases and periodic reports on Forms 10-K and 10-Q filed
with the Commission are intended to identify forward-looking statements. All
forward-looking statements involve risks and uncertainties. Although the Company
believes its expectations are based upon reasonable assumptions within the
bounds of its knowledge of its business and operations, there can be no
assurances that actual results will not materially differ from expected results.
The Company cautions that these and similar statements included in this report
are further qualified by important factors that could cause actual results to
differ materially from those in the forward-looking statements. Such factors
could include, without limitation, the following: increased competition in
existing markets; a decline in the public participation in bingo; the
limitation, conditioning or suspension of any of the Company's bingo permits or
licenses; increases in or new taxes imposed on bingo revenues or bingo devices;
a finding of unsuitability by regulatory officers with respect to the Company's
officers, directors or key employees; loss or retirement of key executives;
adverse economic or regulatory conditions in the Company's key markets; adverse
results of significant litigation matters. Readers are cautioned not to place
undue reliance on forward-looking statements, which speak only as of the date
thereof. The Company undertakes no obligation to publicly release any revisions
to such forward-looking statements to reflect events or circumstances after the
date hereof.
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Please see GameTech's Form 10K filed January 31, 2000 for a complete
description of GameTech's on-going material legal proceedings. Unless stated
herein, there have been no material changes to said legal proceedings.
The Company has been named as a third-party defendant in Cause No.
DV-99-3012H, TREND GAMING SYSTEMS, LLC V. HIGHLANDS PTA, ET. AL., pending in the
44th District Court of Dallas County, Texas. The lawsuit involves a claim for
breach of contract filed by Trend Gaming Systems, LLC ("Trend") against several
bingo conductors, and a claim for tortious interference with contract against
K&B Sales, Inc. d/b/a Goodtime Bingo ("K&B") and Daniel Hennessy. K&B added the
Company as a third party defendant on January 6, 2000, alleging breach of
contract, interference with contract, illegal restraint of trade and conspiracy
to commit tortious interference, and has requested actual and exemplary damages.
The bingo conductors also added a third party claim against the Company,
alleging that the Company conspired with Trend to defraud the conductors.
The Company has moved to sever the claims against it into a separate
lawsuit, on the basis that claims involving the Company are unrelated to Trend's
claim against the conductors. The underlying dispute between the Company and K&B
involves termination of K&B's distributor relationship with the Company. The
Company has denied all claims asserted by K&B and has counterclaimed for
damages, alleging multiple breaches by K&B of its distribution agreements. K&B
has also requested punitive damages. The Company denies all of these claims and
intends to vigorously contest the lawsuit. The case is presently set for trial
on May 15, 2000, however, the parties anticipate that the claims involving the
Company will be continued, either as a result of the claims being severed or the
entire case being reset on a joint motion for continuance.
On February 8, 1999, the Company acquired BTC by entering into a series of
agreements incuding a Stock Purchase Agreement and Escrow Agreement
(collectively the "Acquisition Agreements") with BTC and its stockholders. In
connection with the acquisition, BTC's stockholders made certain representations
and warranties and a portion of the purchase price was put into escrow to
provide for indemnification to the Company in the event of any breaches of these
representations and warranties.
On February 4, 2000, the Company delivered notice that it has certain
claims for indemnification against BTC's stockholders for breaches of
representations and warranties arising from the acquisition. The Company
estimates that its claims exceed the escrow fund and it has requested that no
escrow funds be released pending a final determination of its claims. The escrow
fund consists of 373,387 shares of the Company's common stock and cash totaling
$1,952,211. BTC's stockholders delivered their objections to the escrow on
February 24, 2000, objecting to all of the Company's indemnification claims. The
parties must make a good faith effort to reach agreements upon the rights of the
parties with respect to each claim. If the parties cannot reach agreement, the
dispute is ultimately subject to arbitration.
The Company is involved in various other legal proceedings arising out of
its operations in the ordinary course of its business. The Company does not
believe that any of their proceedings will have a material adverse effect on its
business, financial condition, or result of operations.
10
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Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
10.1 Manufacturing Agreement between GameTech International, Inc.
and Senior Systems Technologies, Inc.
On January 10, 2000, the Company entered into a manufacturing
agreement with Senior Systems Technologies, Inc. ("SST") in
which SST, subject to certain conditions, is to manufacture a
minimum of 24,000 of the Company's handheld and TED electronic
bingo devices. SST, an ISO-9002 certified company, is a world
class contract manufacturer providing services to a variety of
high technology clients.
27.1 Financial Data Schedule
b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended
January 31, 2000.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ John J. Paulson 3/13/00
- --------------------- -----------
John J. Paulson Chief Financial Officer / Treasurer
(Authorized Officer and Principal Financial Officer)
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EXHIBIT 10.1
MANUFACTURING AGREEMENT
By and Between:
Senior Systems Technology, Inc. GameTech International, Inc.
600 Technology Drive 4070 Silver Sage Drive
Palmdale, California 93551-3748 Carson City, Nevada 89701
{Referred to herein as "SST"} {Referred to herein as "Customer"}
This Manufacturing Agreement provides the basis for consistent contractual
practices relating to the release by Customer of Purchase Orders, and the
acceptance and fulfillment of those Purchase Orders by SST. Each request by
Customer for the manufacture of products by SST shall be by a written Purchase
Order issued by Customer and which, subject to acceptance by SST, shall specify
the order quantity, price, delivery schedule and any special provisions or
requirements. This manufacturing agreement shall be deemed to be a part of the
terms and conditions of each Purchase Order released by Customer and accepted by
SST to the same extent as if more fully set forth therein at length, unless
otherwise agreed to in advance and in writing by the parties hereto. This
Manufacturing Agreement shall be in place of and shall supercede any standard or
pre-printed terms and conditions which may be contained on the Customers
Purchase Order form, unless otherwise agreed to in advance and in writing by the
parties hereto. If additional terms and/or conditions are specified in any bid
or proposal issued by SST in response to Customer's request for Bid/Proposal or
otherwise, each Purchase Order released by Customer (and accepted by SST) in
response to the bid or proposal shall be deemed to include those terms and/or
conditions which were contained in the SST bid or proposal to the same extent as
if more fully set forth therein at length, unless otherwise agreed to in advance
and in writing by the parties hereto.
SECTION (1) - INITIAL TERM: The initial term of this Agreement shall commence on
the date specified below, and shall terminate two years later unless this
Agreement is extended, or terminated earlier pursuant to the terms of this
Agreement.
SECTION (2) - ACCEPTANCE OF PURCHASE ORDERS: All Purchase Orders issued by
Customer to SST shall be either accepted or rejected in writing by SST. If
rejected, SST shall set forth the reasons for the rejection and shall
immediately commence discussions with Customer in an effort to resolve the
points in question and arrive at an acceptable Purchase Order. Upon SST's
acceptance of the Purchase Order, subject to the terms and conditions of this
Agreement, SST's bid or proposal, and the Customer's Purchase Order, and SST's
written acceptance of the Purchase Order, the Customer shall be firmly and
irrevocably obligated to buy from SST, and SST subject to the same terms and
conditions shall be similarly obligated to sell and deliver the products
identified on the Purchase Order.
SECTION (3) - ENGINEERING CHANGE ORDERS: Customer may request that changes be
made to the specifications identified in the original Purchase Order. All such
requests shall be by way of a written Engineering Change Order {ECO} or
reasonable facsimile thereof as may be used by Customers internal documentation
system, and are subject to written acceptance by SST. The proposed effective
date of the ECO as well as all other issues which are created by the ECO {for
example, price changes, delivery schedule changes, disposition of materials and
components already purchased by SST but made obsolete by the ECO, changes in
testing requirements, etc.} shall be jointly agreed to by SST and Customer in
writing and shall be set forth in SST's written acceptance of the ECO. As the
timing of any requested ECO is of critical importance to the Customer, SST shall
endeavor to engage in the needed conversations regarding issues created by the
requested ECO, and to issue its acceptance as soon as is reasonably practicable
after receipt of the written ECO from Customer. SST shall not be responsible for
requests for ECO's which are not in writing or which are not delivered to SST.
SECTION (4) - ACCEPTANCE AND INSPECTION: (a) The basic acceptance criteria shall
be conformance to the Purchase Order, and/or the drawings, specifications and
test criteria specified in the bid or proposal submitted by SST, and
satisfaction of SST quality standards. (b) Customer shall inspect all Products
promptly upon receipt thereof at the receiving destination and may reject any
goods, which fail to meet the acceptance criteria as set forth above. Units of
product not rejected by written notification to SST within thirty (30) days of
receipt at the receiving destination, shall be deemed to have been accepted. The
inspection period shall have no impact upon Customers obligation to pay invoices
submitted by SST, all of which are due and payable on a thirty 30 day net
1
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basis. (c) If an entire shipment is rejected at the receiving destination
inspection, based upon AQL level criteria or other similar sampling techniques
the following procedures shall apply: (1) Customer shall provide SST with a
Rejection Notice advising SST of the rejection in writing no later than five (5)
days after rejection, but in no event later than the thirty (30) day time period
specified above. (2) SST shall have the option, to be exercised in good faith,
of performing, or requesting Customer to perform, an additional complete or
partial inspection of the rejected Products. This decision must be made by SST
not later than five (5) days after receipt by SST of Customers Rejection Notice.
Such additional inspection must be performed no later than ten (10) days after
SST communicates its decision to Customer. The cost of such additional
inspection will be borne by SST, unless such additional inspection shows that
the original rejection of the entire shipment should, in good faith, not have
been made. If said material is deemed defective with the additional inspection a
Corrective Action Request will be issued to SST and Customer reimbursed for any
and all additional inspection expenses actually incurred by Customer. SST has
(10) days to respond to the Corrective Action Request. The response to the
Corrective Action Request shall include an estimated time frame {to be agreed
upon by the parties} for the remedy of the defect. In the event of unremedied
defects, Customer shall have the option, to be exercised in good faith given the
circumstances, to terminate this agreement and any purchase order(s)/release(s)
issued pursuant to this agreement, in accordance with the termination provisions
of this agreement. (d) Customer may, at its option, elect to inspect and accept
Products at SST's location. If such an election is included in the Purchase
Order, SST will provide sufficient space for such inspection activities. Should
Customer elect to inspect at SST's location, SST will not be obligated to hold
complete products for Customer inspection beyond the scheduled delivery date
except where a Corrective Action Request has been made by Customer. (e)
Defective units detected by inspection will promptly be returned to SST, using
SST's Returned Material Authorization ("RMA") system; and will be repaired or
replaced by SST no later than thirty (30) calendar days after SST's receipt
thereof. Customer will be charged SST's standard handling charge {50% of the
"turnkey" unit price of the unit} for units determined to be in a "no fault
found" condition. SST will provide the warranty analysis and inspection data to
Customer for review and approval.
SECTION (5) - SHIPMENT: Shipments will be made in SST's standards shipping
package or special packaging as set forth in the Purchase Order. All shipments
by common carrier shall be F.O.B. SST's plant. Risk of loss to or destruction of
the goods from and after their delivery to the common carrier shall be with SST
unless expressly provided to the contrary in the Purchase Order. Any shipments
made utilizing SST's own vehicles shall be F.O.B. destination.
SECTION (6) - TAXES: Customer shall pay all applicable U.S. federal, state,
municipal and other governmental taxes, duties, and charges (such as sales, use,
customs, duty and similar charges) and all personal property taxes assessable on
the Products. Customer shall in no event be liable for taxes levied on SST based
upon its income. SST will allow Customer or its agent to minimize any taxes or
duties as allowed by law and will verify, certify or otherwise sign any
applicable documents that allows a reduction or elimination of taxes or duties.
SECTION (7) -WARRANTY, LIMITATION OF LIABILITY: (a) GENERAL: SST warrants that
each unit of Product will meet Customer's specifications for assembly type and
revision and will be free from defects in workmanship, under normal use and
prescribed maintenance, for a period of 12 months and defects in SST supplied
components and/or material for a period of 90 days. This warranty does not
extend to Customer supplied components and or material (CFM). This warranty
shall not apply to any goods delivered pursuant to this agreement which have
been damaged, or subjected to any post-manufacture alterations or modifications
made by any party other than SST, or which have been subject to negligent
treatment after delivery or to any defects which are due to drawings or
deviations furnished by Customer. Upon the failure of any unit of Product to
comply with the above warranty, SST shall, at its option, promptly repair or
replace such unit. Should the cause of the failure or defect be mutually
determined to be design related and unrepairable, Customer will promptly pay SST
the full selling price of the assembly. The cost of any repairs made by SST to
any unit of Product no longer covered by this warranty shall be borne by
Customer, however in no event shall any said cost of repairs to Customer exceed
50% of the original unit cost. Customer acknowledges that SST has not been
informed or notified of the intended use of the Product and that SST has not
consulted or conferred with Customer as to the suitability or fitness of the
design or specifications to the intended use of the Product.
THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES EITHER
EXPRESSED OR IMPLIED INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
(b) LIMITATION OF LIABILITY/DUTY TO DEFEND AND INDEMNIFY: Notwithstanding any
provision herein to the contrary, in no event shall SST be liable for indirect,
incidental or consequential damages, and in no event shall
2
<PAGE>
the liability of SST arising in connection with any Products sold hereunder
(whether such liability arises from a claim based on contract, warranty, tort or
otherwise) exceed the actual amount paid by Customer to SST for Products
delivered hereunder. Customer further agrees to defend, indemnify and hold SST,
and/or its parent, subsidiaries, and affiliates, past and present, and each of
them, as well as its and their trustees, directors, officers, agents, attorneys,
insurers, employees, stockholders, representatives, assigns, and successors,
past and present, and each of them, harmless from and against all suits, claims,
demands, actions, liens, covenants, causes of action, obligations, debts, costs,
expenses, attorneys' fees, damages, judgments, orders and liabilities of
whatever kind or nature in law, equity or otherwise, filed or claimed by any
third parties which directly or indirectly name SST and/or its parent,
subsidiaries, and affiliates, past and present, and each of them, as well as its
and their trustees, directors, officers, agents, attorneys, insurers, employees,
stockholders, representatives, assigns, and successors, past and present, and
each of them as a Defendant or other party, and which arise from or are in any
way connected or related to the third party's use, ownership, possession or
control of, or in any other way related to the Product sold to Customer pursuant
to this agreement.
SECTION (8) - TERMINATION: (a) DEFAULT: Either Customer, or SST (the
"Terminating Party"), may, by ten (10) days prior written notice to the other
party (the "Other Party"), terminate this Agreement and all or any of the
privileges, permissions and rights granted hereunder or in connection herewith
in whole or in part, in the event (1) the other party defaults in any payment to
the terminating party called for in this Agreement, the Purchase Order, the bid
or proposal, and such default continues unremedied for a period of fifteen (15)
days after the date of delivery of a written notice thereof by the terminating
party to the other party, or (2) if the other party defaults in the performance
by it of any other material term or condition of this Agreement, or of any
Purchase Order issued pursuant to this Agreement, and such default continues
unremedied for a period of thirty (30) days after the date of delivery of
written notice thereof by the terminating party to the other party. (b)
BANKRUPTCY: Either party may immediately terminate this Agreement if the other
party is adjudicated bankrupt, or if a receiver is appointed for the other party
or for a substantial portion of its assets, or if an assignment for the benefit
of creditors is made or if the other party is dissolved or liquidated or has a
petition for dissolution or liquidation filed which is not dismissed within
forty-five (45) calendar days with respect to it. (c) OBLIGATIONS UPON
TERMINATION OR EXPIRATION: Upon the expiration or termination of this Agreement
as set forth above, SST will complete units or Product as scheduled at the date
of termination; provided, however, that if Customer requests on the basis of a
lack of requirement by Customer for such units, SST will negotiate in good faith
to agree with Customer on a price for the partially completed units and any
inventory of components and/or materials purchased by SST pursuant to the
Purchase order, net of any amounts paid by or on behalf of Customer to SST's
supplier. SST will make reasonable attempts to restock, resell or otherwise
utilize the inventory of common components and/or material (i.e., that which is
not specific to Products manufactured for Customer hereunder) and to otherwise
promptly and in good faith attempt to mitigate Customer's liability hereunder.
Where mitigation is not feasible or to the extent that SST is unsuccessful in
such attempts, such common components and/or material may be sent to Customer,
and SST may bill Customer therefore (and if so billed, Customer will pay) at
110% of SST's documented cost therefor. Once Customer pays the charge of 110% of
SST's documented cost therefor, Customer may elect to not accept delivery of the
material by providing SST with a written indication that it will not accept such
delivery prior to SST's shipment thereof. All other inventory of components
and/or materials either in stock or on an order which is not cancelable by SST
without penalty, as determined by SST purchase documentation therefore, also may
be delivered to Customer as it is received by SST and SST may bill Customer
therefore (and if so billed, Customer will pay) at 110% of SST's documented cost
therefore.
SECTION (9) - PROPRIETARY RIGHTS/INDEMNIFICATION: (a) NO EXPRESS OR IMPLIED
LICENSE: Nothing in this Agreement shall be construed as granting to SST or
conferring on SST any rights by license or otherwise to Customer's patent,
trademarks, copyrights or other proprietary or confidential rights except as
specifically set forth in this Agreement or other written Agreements between the
parties hereto. (b) INDEMNIFICATION: Customer further agrees to defend,
indemnify and hold SST, and/or its parent, subsidiaries, and affiliates, past
and present, and each of them, as well as its and their trustees, directors,
officers, agents, attorneys, insurers, employees, stockholders, representatives,
assigns, and successors, past and present, and each of them, harmless from and
against all suits, claims, demands, actions, liens, covenants, causes of action,
obligations, debts, costs, expenses, attorneys' fees, damages, judgments, orders
and liabilities of whatever kind or nature in law, equity or otherwise, filed or
claimed by any third parties which directly or indirectly name(s) SST and/or its
parent, subsidiaries, and affiliates, past and present, and each of them, as
well as its and their trustees, directors, officers, agents, attorneys,
insurers, employees, stockholders, representatives, assigns, and successors,
past and present, and each of them as a Defendant or other party, and which
arise from or are in any way connected or related to any alleged
3
<PAGE>
and/or actual infringement or other violation of any patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights, trade
secrets, proprietary rights or processes or other such rights in connection with
the performance by SST of its obligations under this Agreement.
SECTION (10) - MISCELLANEOUS: (a) RELATIONSHIP OF PARTIES: The parties'
relationship during the term of this Agreement and under Purchase Orders placed
pursuant hereto will be that of independent contractors. Neither party has, and
will not represent that it has, any power, right or authority to bind or to
incur any charges or expenses on behalf of the other party or in the other
party's name without the prior written consent of the other party. (b) FORCE
MAJEURE: Neither party hereto will be liable for any failure to perform any
obligation under this Agreement, or for delay in such performance, to the extent
such failure to perform or delay is caused by circumstances beyond its
reasonable control or which makes such performance commercially impractical,
including without limitation fire, storm, flood, earthquake, explosion,
accident, war, acts of public enemy or rebellion, disputes, labor shortages,
transportation embargoes, delays in transportation, shortages of material fuel
or power, acts of God, acts of any government or any agency thereof, and
judicial action. {The language "acts of any government or agency thereof and
judicial action" contained in the preceding sentence is not intended to include
actions by the gaming commissions which regulate the Customers business, and SST
agrees to assist and use its best efforts to cooperate with Customer in
Customers efforts to comply with the gaming regulations and gaming regulating
agencies which have jurisdiction over Customers gaming product industry.} Any
suspension of performance by reason of this Section will be limited to the
period during which the cause of suspension exits. Any delay or non-performance
to be excused pursuant to this paragraph must be communicated to the other party
as soon as is practicable after the circumstances causing the delay or
non-performance are known to the delaying or non-performing party. (c)
SEVERABILITY: If any of the provisions of this Agreement are found by any Court
of competent jurisdiction to be wholly or partially unenforceable to any extent,
then such provisions will be enforced to the maximum extent permissible, and the
remaining provisions of this Agreement will be unaffected thereby and will
remain in full force and effect. (d) WHOLE AGREEMENT/MODIFICATION: This
Agreement, including all documents to be delivered by the parties hereto and
described herein, represents the entire understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior representations,
understandings and agreements, whether oral or written, with respect to such
subject matter. This Agreement may be modified only in writing executed by both
parties hereto. (e) ASSIGNMENT: This Agreement will be binding upon and inure to
the benefit of the successors and assigns of the parties, but neither party may
assign any rights or delegate any duties under this Agreement, voluntarily or
involuntarily, without the prior written consent of the other party, which
consent will not be unreasonably withheld. Any attempts by either party to
assign any rights or delegate any duties under this Agreement without such
consent will be void and of no effect. (f) WAIVER: No waiver of any provision of
this Agreement shall be effective except by written agreement signed by both
parties. The failure by any party at any time to require performance of the
other party of any provision of this Agreement will in no way affect the right
of such party thereafter to enforce the same provision, nor will the waiver by
any party of any breach of any provision hereof be taken or held to be a waiver
of any other or subsequent breach, or as a waiver of the provision itself. (g)
GOVERNING LAW AND JURISDICTION: This Agreement and any Purchase Orders issued
pursuant hereto, shall be governed by and construed in accordance with the laws
of the State of Nevada without reference to such state's laws regarding choice
of law. (h) NOTICES AND CONSENTS: All notices and other communications required
or permitted under this Agreement will be in writing, and will be deemed given
(1) when delivered personally, (2) when sent by confirmed telex or facsimile
transmission, (3) one (1) day after having been sent by commercial overnight
courier with written verification of receipt, or (4) five {5} days after having
been sent by registered or certified airmail, return receipt requested, postage
prepaid, or upon actual receipt thereof, whichever occurs first. All
communications will be sent to the receiving party's address as contained herein
or to such other address as may be designated by either party in writing, sent
in compliance with this provision. (i) ARBITRATION: All disputes between the
parties shall be determined solely and exclusively by arbitration in accordance
with the rules of the American Arbitration Association ["AAA"]. The arbitration
shall be decided by a single arbitrator selected mutually by the parties, or
failing mutual agreement within ten [10] days of demand, as selected by AAA upon
application of either party. Unless otherwise agreed by SST and Customer, the
arbitration shall take place in Los Angeles, California. Judgment upon award of
the arbitrator shall be final and binding and may be entered in any Court of
competent jurisdiction. (j) HEADINGS AND REFERENCES: The headings and caption
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. (k) RELEASE OF
INFORMATION: SST shall not make or authorize any news release, advertisement or
other disclosure which shall confirm or deny the existence of this agreement or
any Purchase Orders issued pursuant hereto, without prior written consent of
Customer, except as may be required to perform under this agreement or any
Purchase Order issued pursuant hereto, or except as a result of an Order of a
Court of competent jurisdiction or in response to a
4
<PAGE>
subpoena issued by any Governmental Official or Agency. (l) CUSTOMER SUPPLIED
MATERIALS: If the parties hereto have agreed that the products to be
manufactured by SST for Customer include components or materials to be supplied
by Customer: (a) Customer shall deliver to SST's Palmdale Manufacturing
Facility, the components/materials needed, in sufficient quantity {including
provision for failed components/materials} to allow for the manufacture the
products identified in firm Purchase Orders issued by Customer and accepted by
SST, not later than five (5) weeks prior to the scheduled delivery date. (b) SST
shall not be responsible for the quality or inspection of any
components/materials furnished by Customer to SST. (c) If Customer is unable to
meet the delivery requirements of the components/materials, Customer shall
notify SST of this in writing prior to the date Customer was to have delivered
the components/materials to SST, and may request SST: to ship the products
without the components/materials; or to hold the products pending receipt of the
Customer supplied components/materials {in which event SST shall invoice
Customer for the product(s) on the originally scheduled delivery date}. In the
event, because of a delay in the delivery of Customer supplied
components/materials, SST is asked to manufacture the products with the intent
to have SST add the Customer supplied components/materials at a later date, a
special lot handling charge will be invoiced to Customer. (m) PAYMENT: Terms of
payment are net 30 days on each shipment. Notwithstanding any specified payment
terms, SST may require payment in advance before making any shipment if the
Customer's credit shall at any time, in the sole judgement of SST become
impaired. The total contract price shall become immediately due and payable, and
SST may cancel any unperformed portion of the contract upon Customer's failure
to make any payment when due. In the event SST elects to cancel as specified in
the preceding sentence, any increase in SST's per unit cost of the goods already
delivered or then enroute to Customer shall be payable by Customer. (n)
COMPONENT PRICING: If the cost for components/materials required by customer
increases as a result of either: (a) price fluctuations caused by market
conditions, or; (b) a discontinuance of the component/material by its
manufacturer, or the vendor approved by the customer, coupled with an increased
price for the replacement component/material, then in either event, SST shall
invoice customer for the increased price with prior approval from Customer. SST
in good faith will provide Customer with reasonable notice of price changes,
obsolescence, or availability of product wherever possible. SST shall source
comparable materials with the final approval of Customer on any new pricing,
configurations, delivery dates and quality. All such increases as invoiced by
SST and approved prior by Customer shall be binding upon customer to the same
extent as if originally included in the SST quote documents and/or the customers
Purchase Order. (o) Non-Competition: During the term of this agreement and for a
period of six (6) months thereafter, as consideration for the terms contained
herein, SST will not manufacture, sell, distribute any Electronic Video Bingo
products which compete directly or indirectly in any way with the Customers
Electronic Video Bingo Products.
SECTION 11 - LICENSING REQUIREMENTS: Customer has made SST aware that its
industry is regulated by the Gaming {or like} Commission(s) of the various
jurisdictions in which it sells its products. Currently in some of the
jurisdictions in which Customer sells its products, and potentially in other
jurisdictions in which Customer sells its products or intends to sell its
products, the regulation of Customers business includes the regulation of the
work which SST shall undertake pursuant to this agreement.
(a) As a result of the foregoing, and as stated herein in Section (10) (b)
"SST agrees to assist and use its best efforts to cooperate with Customer in
Customers efforts to comply with the gaming regulations and gaming regulating
agencies which have jurisdiction over Customers gaming product industry."
Additionally, SST agrees to use its best efforts to submit, where required,
applications to Gaming Regulating Agencies in an effort to obtain a license to
manufacture the products anticipated by this agreement. As a result of this
commitment by SST, Customer shall, upon signing this agreement, submit the
Purchase Orders and Releases set forth on the annexed Exhibit "A".
(b) In the event SST completes and submits applications for a license
where required, and is permitted {pursuant to the regulations of that particular
jurisdiction} to manufacture the products anticipated by this agreement while
the license application is pending {or if by virtue of the regulations of the
particular jurisdiction SST can not actually manufacture products until such
time as a license actually issues, SST is successful in its attempts to obtain
the license required by the regulating agency of the particular jurisdiction}
then SST shall be in compliance with the requirements of this provision of this
agreement, and shall produce the products anticipated by this agreement as
identified on the attached Exhibit "A" or identified in other additional
Purchase Orders. During the term of this agreement, while in compliance with the
applicable gaming regulations of the jurisdictions in which Customer sells its
products, SST shall be the primary contract manufacturer of all product(s)
anticipated by this agreement which are required by Customer.
(c) In the event SST shall be unsuccessful in obtaining a required
license in a particular jurisdiction, or subsequently {during the term of this
agreement} looses its license in a particular jurisdiction, or is faced with
5
<PAGE>
official action that otherwise would impair the ability of SST to manufacture
the product anticipated by this agreement, the following shall occur:
(1) SST and Customer shall jointly use their best efforts to appeal,
contest or otherwise challenge, administratively, the denial or revocation of
the license or its application or any other official action which attempts to
impair the ability of SST to manufacture the products anticipated by this
agreement for a particular jurisdiction. In which event, SST shall continue to
manufacture or not manufacture product for use in that particular jurisdiction
as the regulations of that particular jurisdiction allow. If SST is officially
not allowed to manufacture during the pendency of the administrative appeal, and
Customer has a need for product in that jurisdiction, then Customer shall be
free to approach other licensed contract manufacturers for the purpose of
obtaining product from them for the time period SST is not allowed to
manufacture the products to fill that need, and only for the product needed
during the pendency of the administrative appeal and while SST is officially so
prohibited from manufacturing the required product.
(2) SST may, if it desires, seek to obtain a Judicial stay of
the denial or revocation of an application or license or other official action
seeking to impair the ability of SST to manufacture the products anticipated by
this agreement. In that event, this agreement, and the ability of SST to
manufacture product for use by customer in that jurisdiction shall be enforced
to the extent allowed by the judicial stay.
(3) A final determination denying or revoking SST's
application or license or affirming other official action impairing the ability
of SST to manufacture the products anticipated by this agreement in one
jurisdiction, shall not impact the ability of SST to manufacture the products
anticipated by this agreement for use in the other jurisdictions in which
Customer sells its products.1
(4) In the event of a final determination by a particular
jurisdiction denying or revoking SST's application or license or affirming other
official action impairing the ability of SST to manufacture the products
anticipated by this agreement, Customer shall be free to approach other licensed
contract manufacturers for the purpose of obtaining the product it requires in
that jurisdiction.
(5) In the event SST can not manufacture 50% or more of the
total national/international amount of the product(s) anticipated by this
agreement and required by Customer, due to official denials or revocations of
licenses or applications or other official action impairing the ability of SST
to so manufacture, then Customer shall have the option, to be exercised in good
faith given the circumstances, to terminate this agreement and any Purchase
Orders/Releases issued pursuant to this agreement, in accordance with the
termination provisions of this agreement.
(6) In the event Customer is officially informed that criminal
charges will be brought against Customer as a result of SST's actions/inactions,
or in the event criminal charges are officially brought against Customer as a
reult of SST's actions/inactions, which charges or the threat thereof can not
be stayed or otherwise avoided, then in that event Customer shall have the
option to terminate this agreement and any purchase orders/releases issued
pursuant to this agreement, in accordance with the termination provisions of
this agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
through the signatures of their duly authorized representatives as set forth
below, on this _____ day of _________________, 2000.
Senior Systems Technology, Inc. GameTech International, Inc:
- -------------------------------- -----------------------------
By: By:
-------------------------- -----------------------
Title: Title:
-------------------------- -----------------------
- ------------------------
1 It is noted by the parties hereto, that on a prior occasion, the gaming
commission of one jurisdiction ordered Customer not to allow their then contract
manufacturer to manufacture any product for Customer for use either inside or
outside that particular jurisdiction. In the event a similar order was issued to
Customer or SST during the term of this agreement, which order pertains to SST,
it is agreed to by the parties hereto that the provisions of subparagraphs (1)
and (2) of paragraph (c) of this Section 11 will apply in determining whether
SST shall be able to continue to manufacture product for Customer in the
jurisdictions outside the "ordering" jurisdiction.
6
<PAGE>
EXHIBIT "A"
Upon the execution of the agreement to which this Exhibit is annexed and
made a part of, Customer shall issue, pursuant to the terms of this Agreement,
Purchase Orders and Releases whereby Customer orders a approximately 6000
"units" {as hereafter defined} during the first six months of the term of this
agreement and a minimum of 18,000 "units" during the next and remaining eighteen
months of the term of this agreement from SST, for manufacture and delivery to
Customer during the term of this agreement as follows:
"Units" as used in this Exhibit is defined as being either the "TED" unit
or the GTI Hand Held unit or any other form of Electronic Bingo unit designed by
Customer. However, the definition of "units" shall not include the "Charging
Crates" such that while any Purchase Order(s) for Charging Crates will be
governed by the terms and conditions embodied in this Agreement, the quantity of
Charging Crates ordered by Customer and manufactured and delivered by SST shall
not be included in the number of units needed to establish the minimum unit
commitment of Customer. In order to achieve the minimum "unit" order and
purchase requirement set forth in the preceding and the next paragraphs, any
combination of product {other than Charging Crates} can be used. The Purchase
Order(s) shall set forth the quantity of each product by part number.
Customer shall issue a firm release covering the first six months of the
term of this Agreement and requiring the manufacture of approximately 1000 units
per month during the first six months of the term of this agreement and in an
amount of not less than 1000 per month during the following and final eighteen
months of the term of this agreement. Thereafter {and commencing in the second
month of the term of this agreement} Customer shall establish a 4-month rolling
forecast, based upon its best projection. The 4-month rolling forecast shall set
forth the unit requirements for the coming four months. At the conclusion of
every month, Customer shall issue a firm release for the fourth month, based
upon the 4-month rolling forecast. The intention of this paragraph is that
Customer shall endeavor to ensure that SST always has releases covering the
coming 4-month period. While SST understands that the Customer's need for units
may vary from month to month, the intention is that at the conclusion of the
term of this agreement, Purchase Orders and releases will have been issued
whereby SST has manufactured and delivered to Customer at least the minimum
number of units referred to above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
through the signatures of their duly authorized representatives as set forth
below, on this _____ day of _________________, 2000.
Senior Systems Technology, Inc. GameTech International, Inc:
- ------------------------------- ----------------------------
By: By:
------------------------- ----------------------
Title: Title:
------------------------- ----------------------
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF GAME TECH INTERNATIONAL, INC. ("THE COMPANY") AS OF JANUARY 31, 2000
AND THE STATEMENTS OF OPERATIONS OF THE COMPANY FOR THE THREE MONTHS ENDED
JANUARY 31, 2000.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 8,600
<SECURITIES> 4,100
<RECEIVABLES> 5,063
<ALLOWANCES> 702
<INVENTORY> 0
<CURRENT-ASSETS> 19,077
<PP&E> 33,522
<DEPRECIATION> 12,008
<TOTAL-ASSETS> 61,570
<CURRENT-LIABILITIES> 5,217
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 53,124
<TOTAL-LIABILITY-AND-EQUITY> 61,570
<SALES> 0
<TOTAL-REVENUES> 13,177
<CGS> 0
<TOTAL-COSTS> 3,579
<OTHER-EXPENSES> 404
<LOSS-PROVISION> 199
<INTEREST-EXPENSE> 59
<INCOME-PRETAX> 3,511
<INCOME-TAX> 1,542
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,969
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.16
</TABLE>
