LETTER AGREEMENT
Gentlemen:
Letter Agreement (“Letter”) dated July 20, 2009, by and among Xxxxxx
Xxxxxxx, Xxxxxx Xxxxxxx ("Beneficiaries"), New Media Lottery Services, Inc., a
Delaware corporation (the "Company"), New Media Lottery Services plc, an Irish
corporation (“NM-PLC”), New Media Lottery (International) Services Ltd., an
Irish corporation (“NMLS-LTD” and collectively, with NM-US and NM-PLC, the
"Group") and Trafalgar Capital Specialized Investment
Fund-FIS, on behalf if itself and its affiliates
("Trafalgar").
Whereas,
the Group is
indebted to the Beneficiaries in the amount of (a) US$6,122,303 of principal,
which includes (i) the amounts due to them under a series of promissory
notes made by the Group, as identified on Schedule A, which Notes represent the
only debt owed by the Company to the Beneficiaries (the "Notes"), (ii)
the amount of principal paid by them on behalf of the Group to Comerica Bank
under certain promissory notes dated June 1, 2008 in the aggregate amount of
$2.1 million (the "Comerica Loans") and (iii) the amount of principal assumed by
them under a promissory note made by the Group in favor of Comerica Bank in the
amount of $1.9 million dated February 20, 2009 (the "Comerica Note")(together, the “Xxxxxxx
Debt”), and
(b) US$233,697 of accrued interest on all such debt
("Interest");
Whereas, the Beneficiaries are
willing to (i) convert the principal amount of the Xxxxxxx Debt and the Comerica
Loans into shares of the Company's common stock, (ii) forgive all Interest and
(iii) are willing to assume sole and primary liability for the amounts due under
the Comerica Note and relieve the Company from any liability
thereunder.
NOW,
THEREFORE, in consideration of the foregoing and in consideration of the mutual
promises set forth herein, the sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
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1.
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The
Beneficiaries hereby cancel and forever forgive, discharge and release the
Group from any and all obligations of the Group to pay Interest
.
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2.
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The
Beneficiaries will use all commercially reasonable efforts to cause
Comerica Bank to discharge and release the Group from any liability under
the Comerica Note and to assume personal liability for all of the Group's
repayment and other obligations thereunder. In the event that
within thirty days from the date hereof, Comerica Bank does not agree to
relieve the members of the Group from liability under the debt
instruments, the Beneficiaries will repay all amounts due
thereunder.
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3.
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Upon
the execution hereof, the Beneficiaries shall (a) authorize the Group to
convert the Xxxxxxx Debt into shares of the Company's common stock
("Common Stock") and (b) assume all liability under the Comerica Note and
convert the principal amount thereof into shares of Common
Stock. In consideration of the benefits conferred upon the
Company as a result of the actions taken by the Beneficiaries in (a) and
(b), above, the Company shall issue the Beneficiaries an aggregate of
9,005,700 shares of Common Stock. Specifically, Xxxxxx Xxxxxxx shall
convert $3,230,133 of debt into 4,502,850 shares of Common Stock, at a
price of $0.71735 per share, and Xxxxxx Xxxxxxx shall convert $2,882,500
of debt into 4,502,850 shares of Common Stock at a price of $0.64015 per
share.
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4.
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No
member of the Group will issue any shares of common stock, other than in
connection with a capital raising transaction, without first obtaining the
written approval of the Beneficiaries. To the extent that any
member of the Group issues any additional shares of common stock, other
than in connection with a capital raising transaction, the Beneficiaries
shall be entitled to customary anti-dilution protection as to such
issuances for a period of 1 year. The group agrees that issuance of
additional shares to management requires written approval of the
Beneficiaries.
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5.
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The
Beneficiaries shall resign from the Board of Directors of the Group upon
the execution hereof.
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6.
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Trafalgar
hereby agrees to make available to the Company a US$1,000,000 credit
facility for a period of one year from the date hereof. The first draw
down to be in the amount of $300,000, which along with this
side Letter by the Beneficiaries and Xxxxxx Dresners board resignation
shall remain in escrow and close simultaneously. Subsequent
draw downs against the credit facility shall be made at the approval of
Trafalgar, in its sole discretion, upon receipt of written request for
funds by the Company.
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7.
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During
the one-year period after the date hereof, Trafalgar shall not (i) issue
any shares of the common stock to itself for any purposes, (ii) convert
any outstanding debt owed to it into securities of any member of the Group
or exercise any securities or (iii) convert any convertible securities
into any shares of the common stock of the
Group.
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8.
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The
Beneficiaries will also receive a total of 1.5 million warrants for common
shares in NMLS Inc. with a strike piece of .05 cents and expire 3 years
from the signing of this document.
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IN
WITNESS WHEREOF, the parties have executed this Letter as of the Date first set
forth above.
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| Xxxxxx Xxxxxxx |
Xxxxxx
Xxxxxxx
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| New Media Lottery Services, Inc. | New Media Lottery Services plc | |||||
| By: | By: | |||||
| New Media Lottery (International) Services Ltd. |
Trafalgar
Capital Specialized
Investment
Fund-FIS
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| By: | By: | |||||
