Exhibit 10.4
SERVICE CONTRACT
In Guatemala City, on the twelfth day of February of 2002; We, on the ONE PART
mister XXXX XXXXXX XXXXXXX XXXXXXX, forty eight years of age, married, doctor
and surgeon, Guatemalan, herein domiciled, identify myself with Personal
Identification Card Number A dash one and register four hundred forty eight
thousand forty eight, Granted by the Municipal Mayor of this city, I act in my
capacity of President of the Board of Directors and legal representative of the
Guatemalan Pediatric Foundation (" Fundacion Pediatrica Guatemalteca"); in
conformity with my appointment conferred in a Notary Act. authorized in this
city on the 19th day of February 2001 by Notary Public Xxxxxxxx Caz Tzub, and
inscribed in the civil registry of this city, under Article No. one hundred
forty two, of Folio one hundred two Book six of Auxiliaries of Juridical
Persons; is therefore authorized to subscribe the present act; henceforth named
"Contractor"; and, on the OTHER PART mister XXXXX X. XXXXXXXX, foreigner, of
legal age, Puerto Rico, transient in this city, I am identified with passport
issued by the Secretary of State of the United States of America with number one
hundred eleven million thirty thousand one hundred sixty seven, I act in
representation of ALLIANCE SYSTEMS, INC., company duly organized under the laws
of the Commonwealth of Puerto Rico, with address at Condado Avenue number eight
hundred four San Xxxx, Puerto Rico USA (henceforth called "AS", and, NET LOTTERY
SERVICES LTD., corporation duly organized under the laws of the Republic of
Ireland, with its address at Fumbally Court, Dublin, Ireland, and also under the
laws of the State of New Jersey USA, at its address at eleven Meadow Lane,
Pennington, New Jersey zero eight five three four (HENCEFORTH NAMED "NLS" OR THE
OPERATOR). The parties with the intention of offering to the general public
lottery games
through the Internet as a direct communication system and/or by wireless
communication Systems and/or through connections at fixed points of sale, this
Service Contract is established for the Administration, Operation and
development of lottery games through the internet. The Contractor is authorized
by Legislative Decree No. Thirteen dash eighty six Law for the Creation of the
Children's Lottery and its By-Laws for the development and operation of
different types of lottery games. In acceptance of our respective circumstances,
we have agreed to celebrate the present covenant in order to offer
administrative services and make available to the public, by Internet or
wireless Systems, lottery games and at an opportune moment to equip fixed points
of sale to offer the public games in this manner, in conformity with the
following terms:
FIRST: DEFINITIONS. In this Agreement the following terms will have the
following meanings: 1) Agreement means this covenant or contract, and all of its
parts or amendments. 2) Games mean any scheme, plan, game, operation or
arrangement whereby prizes in the form of money, property or benefit is given to
persons that submit themselves to the rules of the games accessed through the
Internet or wireless networks, where the winners will be determined by incidence
of luck amongst the ticket holders (tangible or cybernetic). The games may
include games of all types, among others, instant win tickets of any kind, and
also traditional lotteries, raffles, numbers, Lotto, Bingo, Keno or cards,
telephone bets, or through E-Mail or others. 3) OPERATOR means the operator of
the system. AS and NLS. 4) Network of Internet Lotteries means the network of
dozens of State Lotteries and Institutions for charitable purposes that have
joined the Operator's system to create opportunities of winning large prizes and
provide economies of operations and promotions. 5) Income means the gross sale
collected by the
Operator, of the sale of any product related with this Agreement and its
Internet games less automatic discounts and other credits issued due to voided
tickets, and discounts for bank charges. 6) Fixed Network Expenses mean all the
costs related to the maintenance and operation of the system including software
license costs, commissions to re-sellers or operators at points of sale, legal
expenses or of consultants, advertising and promotions, and the costs of
administration and maintenance; and others specified mutually by the Contractor
and the Operator. 7) Net Profit means those of Income less paid out Prizes, less
Fixed Network Expenses in accordance with reasonable procedures of accounting,
the fifth point and the formula agreed upon mutually between the Contractor and
the Operators. 8) Just Cause mean reasons based on laws, rules, agreements and
covenants which a reasonable person can understand and justify actions based on
the reasoning provided.
SECOND: APPOINTMENT OF THE OPERATOR. 1) The Contractor agrees to grant to the
Operator the administration, operation and handling of all aspects of the
administration of Internet Lottery games or by wireless networks, in the
territory of the Republic of Guatemala. 2) The term of this Contract is seven
years, renewable automatically for a second seven-year term, which begins at the
official start of sales. The Contractor is obliged to prohibit the licensing to
any other company, firm, seller or person to direct, operate, or commercialize
any part or parts of the activities of lottery games through the Internet or
wireless networks, in his territory. Likewise the Operator may not offer
services to another person in the Republic of Guatemala for similar projects.
The conditions for the extension or renovation of this Contract will be
determined by mutual accord between the parts at an opportune moment. 3) The
Operator: a) will be the
exclusive operator and provider of the activities that are a result of the
Lottery by Internet or wireless access, including without limitation, equipment,
programming, support Systems, design and marketing; back-up Systems, all on his
own account; b) responsible for the contracting, payment and training of the
necessary personnel for the activities, as well as the acquisition by his own
account and risk of Systems, goods and means necessary for the development of
operations and including Internet Systems and other wireless networks and will
provide working capital inherent to the business; c) provide Systems for
validation, distribution, payment Systems and accounting; d) registration of
patents, brands, propaganda symbols, and required programming for the handling
of games, whose licenses will be active until the end of the term of the
agreement; e) provide statements of accounts and other necessary monthly reports
and a yearly statement audited by an accredited firm of certified public
accountants. At any time the Contractor may verify accounts related to sales.
THIRD: OBLIGATIONS OF THE OPERATOR. 1) From the date of start-up of operations,
the Operator will be responsible for the operation of all aspects of Internet or
wireless lottery games and determine: a) the types, characteristics, game
structure and its programming including the structure of games, which will
previously be approved by the Contractor. The games may include any which do not
conflict with other contracts previously approved by the Contractor; b) The
Operator will determine the form, style and configuration of bet receipts
issued, tangible or cybernetic, and the coupons and other documents to be used
in connection with Internet or wireless lottery; and c) The Operator will
establish the procedure and rules in relation to the method of claims and
payment of prizes which are the result of Games played on the Internet, and will
insure that players
understand and accept these rules before participating in the games, whose
aspects must be previously approved by the Contractor. 2) The operations of the
sale of products through the Internet will commence within six months after the
signing of this Contract. 3) At that opportune moment the Operator will provide
the Contractor the necessary requirements to established fixed points of sale,
including a viability study or profit of the project. 4) The Operator will
create an Internet page for the contractor through which the Contractor's
players may access the different games offered by him and other State Lotteries
and Charity Institutions that form part of the group. 5) The Operator will
create lottery games to be played through the Internet page of the Contractor
complying with his preferences and requirements. These games will be installed
in the computer center of the Contractor also established by the Operator in an
adequate location where all Internet game activities will take place. This
center will be operated by personnel selected by the Operator and its activities
regimented by the strictest security procedures and the highest technology. 6)
The Operator will provide to the Contractor the procedures to follow so that the
Contractor's clients may open an account and participate in the games that will
be offered through his Internet page, as well as the general conditions that a
player must comply with in order to connect to the Internet through providers of
this service already in existence in the Republic of Guatemala. 7) The Operator
and Contractor will establish procedures for the payment of Prizes to the
winners in conformity to the rules approved by both in conformity with the law
with respect to the withheld taxes on prizes. The contractor will exclusively
assume the responsibility of the payment of the taxes on prizes once the
Operator remits it to him. 8) The Operator will assume only the payment of local
as well as external taxes of importation, and any costs of transactions he
handles, as well as the costs of the permits and licenses processes necessary
for their legal operation. 9) The Contractor and the Operator together will
prepare the required manuals for the Operation Procedures of the different
games.
FOURTH: OBLIGATIONS OF THE CONTRACTOR. 1) The Contractor declares that within
its legal norms there are no legal impediments, regulations, laws or orders that
annul the implementation of this agreement, except the approval that for each
game is established by the Regulation of the Children's Lottery. The Contractor
agrees to participate in those games it understands will benefit in the network
of State Lotteries and Charitable Institutions of the group and or other
programs created by the Operator in order to attain big prize levels in shared
games. 2) The Operator will not be responsible for the expenses or activities
that the Contractor alone initiates or any other advertising expense or effort
related to the commercialization that the Contractor may decide to initiate,
create or put in place on his own. 3) The Contractor agrees to offer his games
inside and outside the Republic of Guatemala.
FIFTH: DISTRIBUTION OF PROFITS. 1) All Income collected will be deposited in a
bank account established by the Operator and in agreement with the Contract, in
a Depository Bank, with written instructions addressed to the Bank, mutually
approved previously by both parts, on the distribution of funds. The
Contractor's benefits will be calculated on the basis of Net Profit. The Net
Profit is the sum in money that results from the subtraction from the Income,
the Prizes and the Fixed Network Expenses, as defined in point One. 2) The
benefits of the Contractor shall be an economic participation equivalent to
forty percent (40%) of the Net Profit defined above in point One. All expenses
shall be examined by an external accounting firm internationally recognized and
based on
reasonable and normal accounting procedures. 3) The benefits shall be paid to
the Operator thirty days after the end of the month to which the benefits derive
in accordance with normal accounting standards. 4) The percentage of benefits of
the Contractor may be renegotiated at the end of the final year of the present
agreement and or during any renewal period that is agreed to between the Parts.
5) The parts agree that the expenses and deductions that are paid from the gross
sales of the games, must be mutually and previously agreed to, and on the
contrary will not be considered valid, excluding those expenses indicated in
Point One, paragraph 5 of this document.
SIXTH: SPECIAL CONDITIONS a) The Operator and Contractor recognize that the
signing Parts of this agreement are independent contractors and are not agents
of one another or are in business together. B) In conformity con with
Regulations of the Children's lottery the unclaimed prizes will form part of the
Contractor's patrimony automatically. c) The withheld taxes from the prizes, in
the quickest time possible, will be deposited in a bank account in the name of
the Contractor to be opportunely entered in the treasury boxes. The Operator
will be freed of responsibility before the government in relation the payment of
withheld taxes for paid prizes. The Contractor holds himself responsible
unilaterally. d) The Contractor is not responsible for the investments made by
the Operators, for this Contract, and in consequence is not obligated at any
time to return to the Operators, any amount for this concept, during the term of
this contract or at the termination of the same, for any cause.
SEVENTH: TERMS AND TERMINATION. 1) The Operator is contemplating making an
investment in capital of over twelve million dollars in order on start up this
project.
Therefore, the term of this Contract will be for seven (7) years, renewable
automatically for a second seven year term, from the date of the signing of the
present Contract. This term may be extended by mutual agreement of the parts by
means of a written notification. Furthermore, the original term may be extended
or renewed at any time by mutual consent and confirmed in writing between the
Parts. 2) The present agreement may be rescinded by any of the signing parts for
just cause or incompliance of the other part of its obligations or conditions of
this Agreement, if the part that is notified does not comply with one of the
indispensable clauses of this contract or refuses or cannot remedy the failure
within one hundred and eighty (180) days after having been notified in writing
of this incompliance, In that case, this Agreement will terminate at the end of
the one hundred and eighty (180) days from the date of notification and if the
notified part of the other part's intention is not in agreement, then the matter
may be submitted to arbitration procedures with the Guatemalan legislature. At
the termination of this contract, both parts will be relieved of their
obligations under this Contract with the exception of obligations that were
incurred previous to termination. Just Cause for both parts would be, any new
law that prohibits or limits the activity, the incompliance with the contractual
terms, that the activities are not economically viable for both parts or that
the activities cause damage to any of the parts. 3) Termination of this Contract
by mutual agreement or for any reason will no affect the rights, obligations and
responsibilities that may arise until the effective date of termination. 4) The
Contractor may not rescind or cancel the present Contract without justifiable
cause. The cancellation without cause will obligate the Contractor to pay an
indemnity to the Operator equivalent to the sum of the net monthly sales of the
last six
months of sale prior to the proposed cancellation, notifying the Operator in
writing with one hundred eighty (180) days of advance notification of its
intention of terminating the Contract upon the payment of indemnification or one
million dollars of the United States of America, whichever is larger. 5) At the
effective date of the termination of this Agreement for any reason the permits
to use the equipment, software, goods or other properties of the Operator, will
terminate, and the Operator will have the right to repossess immediately all
goods, property and equipment supplied by the Operator. The Internet lottery
operations will cease immediately. 6) Notwithstanding the termination or
expiration of this Agreement for any reason, the provisions contained in point
eight will continue and remain in effect in accordance with their conditions,
without a time limit.
EIGHTH: CONFIDENTIALITY. The parts accept the during the term of this Agreement
no confidential information of the other part will be revealed, such as
information concerning the software used to create the games, the intellectual
property, or sales strategies of the Operator. Both parts recognize that the
publication or the divulging of this confidential information will cause
irreparable and grave damage to the parties and their businesses.
NINTH: FORCE MAJEURE. 1) The present Agreement may be suspended in the event
that the following situations exist and are defined as fortuitous or of Force
Majeure: a) Act of God, fire, flooding, earthquake, hurricanes, explosions,
epidemics, or quarantine; b) Acts of war, blockades, martial law, sabotage,
insurrections, or a national emergency, c) closing due to strikes or other labor
disputes, governmental or judicial law. Regulation, order, decree, instructions
or Government decision, or governmental subdivision to act; d) an interruption
of the stock market or irreconcilable inflation; e) Any other event, cost.
or circumstance, similar or not to the aforementioned out of the reasonable
control of the Parts.
TENTH: GENERAL PROVISIONS. 1) This Agreement will be ruled and interpreted in
accordance with the Laws of the Republic of Guatemala. 2) In the event of
disputes or differences related to this Agreement, the Parts might mutually
agree to refer any disputes that arise from this Agreement for resolution
through arbitration. The arbitration will be in accordance to the laws of
Guatemala and the International pacts of which it has participated. 3) Any
notification will be considered as effectively made or having been sufficiently
delivered if it was sent by registered airmail or by facsimile registered as
follows:
The Operator: Attention: Xxxxx X. Xxxxxxxx, Condado Avenue eight hundred four,
San Xxxx, Puerto Rico zero zero nine zero eight and Xxxx Xxxxxx eleven Meadow
Lane, Pennington, New Jersey U.S.A. zero eight five three four.
To the Contractor: Attention: Dr. Luis Xxxxxx Xxxxxxx Xxxxxxx, Fourth Avenue one
dash forty seven, zone one, Guatemala, Guatemala, C.A. zero one thousand one; 4)
All the notifications will be assumed to have been received and effective: a) at
the delivery date, if delivered personally, by facsimile transmission or by
express mail or courier or b) in the case of a telex or cable by the date of
receipt of confirmation by the answerback. Any Part may change their addresses
for the purpose of this clause with notification to the other part. 5) Each Part
will indemnify and relieve of responsibility the other Part and its respective
officials, directors, partners, employees or operators from either Part, of any
obligation or responsibility, costs, damage, or loss that arise from any
infraction of any of the provisions of this Contract by the Part that causes the
infraction. 6) This Agreement
may be modified, amended, or extended only by written agreement between the
Parts and the formalities of this contract. 7) The Operator may not cede,
transfer or subcontract the concession to others without previous authorization
of the Board of Directors of the Contractor. 8) Each Part guarantees that the
individuals who execute this Agreement have all the necessary rights, power and
authority to affect it. 9) The present Contract is Law between the parts and as
such its strict compliance is obligated.
ELEVENTH: The parts that in their respective positions act upon, manifest having
read the integral contents of this document, and being perfectly informed of the
same, we accept, ratify and sign, in the same place and date mentioned in the
beginning, in two originals, one for each of the subscribing parts.
DR. LUIS XXXXXX XXXXXXX XXXXXXX
FUNDACION PEDIATRICA GUATEMALTECA
XXXXX X. XXXXXXXX
ALLIANCE SYSTEMS, INC.
NET LOTTERY SYSTEMS LTD.
