1
Exhibit 2
STRATEGIC COOPERATION AGREEMENT
THIS STRATEGIC COOPERATION AGREEMENT (the "Agreement"), dated
as of this 8th day of June 2000, is made and entered into by and among eLOT,
Inc., a Virginia corporation ("Parent"), eLOTTONET Inc., a Delaware corporation
("Buyer"), and Plasmanet, Inc. a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller owns and operates Internet website entitled
"xxxxxxxxx.xxx" (together with any other websites owned, sponsored or controlled
by Seller during the term of this Agreement relating to the Free Lottery
Business (as defined below), the "Seller Websites") and has developed a business
in connection therewith of providing users with free sweepstakes in lottery
format using advertising banners and email (the "Free Lottery Business");
WHEREAS, Parent, Buyer and Seller are parties to an Asset
Purchase Agreement, dated as of May 31, 2000 (the "Asset Purchase Agreement"),
pursuant to which Buyer has agreed to purchase, and Seller has agreed to sell,
the Internet website entitled "xxxxxxxx.xxx", including the URL "xxxxxxxxxx.xxx"
(hereinafter referred to as the "Buyer Websites"), and substantially all of the
other assets of Seller related to the business conducted in connection with the
Buyer Websites, including without limitation, providing pay-to-play lottery
information and email results notification services with respect thereto (the
"Pay-to-Play Lottery Business"); and
WHEREAS, the parties desire to cooperate for the purpose of
obtaining Unique Users for Buyer and otherwise generating revenues for Buyer
from advertising and user fees.
NOW, THEREFORE, in consideration of the foregoing premises,
and the agreements and representations contained herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have
the following meanings:
2
-2-
"Agreement" has the meaning specified in the first paragraph
of this Agreement.
"Asset Purchase Agreement" has the meaning specified in the
Recitals to this Agreement.
"Average Parent Stock Price" means the average (rounded to the
nearest cent) of the volume weighted averages (rounded to the nearest cent) of
the trading prices of the Parent Common Stock on the principal exchange or
trading market of the Parent Common Stock, as reported by Bloomberg Financial
Markets (or such other source as Parent and Seller shall agree) for the thirty
(30) trading days ending on the trading day immediately preceding the applicable
Measurement Date with respect to which the calculation in Section 2.2(c)(ii)(y)
or Section 2.2(d)(ii)(y), as the case may be, is made.
"Buyer" has the meaning specified in the first paragraph of
this Agreement.
"Buyer Websites" has the meaning specified in the Recitals to
this Agreement.
"Competing Companies" means: The Lottery Channel, Inc.
(Xxxxxxx.Xxx, Inc. if potential merger is successful); GTECH Holding
Corporation; Autotote Corporation, Xxxxxx Digital, Inc.
"Confidential Information" has the meaning specified in
Section 5.1.
"Disclosing Party" has the meaning specified in Section 5.1.
"Dispose" means to offer, pledge, sell, contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer or
dispose.
"Event" has the meaning specified in Section 6.1(c).
"Free Lottery Business" has the meaning specified in the
Recitals to this Agreement.
"Indemnified Party" has the meaning specified in Section 7.2.
"Indemnifying Party" has the meaning specified in Section 7.2.
"Initial Shares" has the meaning specified in Section 2.1.
"Maximum Quarterly Unique User Amount" has the meaning set
forth in Section 2.2(e).
3
-3-
"Measurement Date" means each March 31, June 30, September 30
and December 31, commencing on the first such date occurring after the date
hereof.
"Net Advertising Revenues" for any period means the gross
advertising revenues of Buyer for such period attributable to Unique Users
delivered by Seller to, and retained by, Buyer, less commission expense of Buyer
for such period attributable to such revenues, in each case determined
reasonably and in good faith by Parent.
"Opt-in Program" has the meaning specified in Section 3.1.
"Parent" has the meaning specified in the first paragraph of
this Agreement.
"Parent Common Stock" means the common stock, par value $0.01
per share, of Parent.
"Pay-to-Play Lottery Business" has the meaning specified in
the Recitals to this Agreement.
"Previous High Number of Unique Users" means, with respect to
each Measurement Date after the Measurement Date with respect to which
Subsequent Shares were first issued, subject to Section 2.2(e), the greatest
number of Unique Users provided by Seller and retained by Buyer as of any
Measurement Date prior to the Measurement Date in question.
"Promissory Note" means a non-interest bearing unsecured
promissory note of Buyer maturing three (3) years from the date of issuance (and
which may be repaid in whole or in part prior to maturity at any time); provided
that Buyer shall be obligated to redeem the Promissory Note on the fifth (5th)
business day following any day (the "Trigger Date") on which the Average Parent
Stock Price is equal to or greater than two dollars and fifty cents ($2.50) per
share, at a redemption price payable in that number of shares of Parent Common
Stock equal to the principal amount of such Promissory Note divided by Average
Parent Stock Price on the Trigger Date.
"Receiving Party" has the meaning specified in Section 5.1.
"Representatives" has the meaning specified in Section 5.1.
"Seller" has the meaning specified in the first paragraph of
this Agreement.
"Seller Websites" has the meaning specified in the Recitals to
this Agreement.
"Subsequent Shares" has the meaning specified in Section
2.2(a).
4
-4-
"Unique User" means, as of any date, a Verified name, email
address and postal address provided to Buyer by Seller who has opted into the
outbound email pay-to-play lottery results notification service to be provided
by Buyer and who remains a User as of such date.
"User" means a subscriber to the outbound email pay-to-play
lottery results notification service to be provided by Buyer.
"Verified" means, with respect to determining whether a person
is a Unique User as of any date, that (a) an email message has been sent by
Buyer to such person promptly following Seller providing such person's name,
email address and postal address to Buyer, and such email message is not
returned as undeliverable or is otherwise not received by such person and (b)
such person did not become a User prior to Seller providing such person's name,
email address and postal address to Buyer.
ARTICLE II
CONSIDERATION FOR UNIQUE USERS
2.1 Prepayment for First 500,000 Unique Users. As a prepayment
for the first five hundred thousand (500,000) Unique Users provided to Buyer by
Seller pursuant to Article III hereof, Parent shall issue to Seller on the date
hereof one million five hundred thousand (1,500,000) fully paid and
non-assessable shares of Parent Common Stock (the "Initial Shares"). All
conditions precedent set forth in Article VI and Article VII of the Asset
Purchase Agreement shall be applicable, mutatis mutandis, to the issuance of the
Initial Shares. Upon issuance of the Initial Shares and as additional
consideration therefor, the two hundred and fifty thousand dollar ($250,000)
limit on liability set forth in the last sentence of Section 9.3(b) of the Asset
Purchase Agreement shall be deemed amended and increased to two million seven
hundred and fifty thousand dollars ($2,750,000).
2.2 Additional Unique Users.
(a) As consideration for Unique Users in excess of
five hundred thousand (500,000) provided by Seller to, and retained by, Buyer
pursuant to Article III hereof, Parent shall, on the terms set forth in this
Section 2.2, pay or cause to be paid to Seller either cash, shares of Parent
Common Stock or, if applicable, Promissory Notes as hereinafter provided in this
Section 2.2; provided that the maximum number of Unique Users with respect to
which Parent is obligated to pay consideration to Seller pursuant to this
Section 2.2 is four million five hundred thousand (4,500,000) Unique Users. Any
shares of Parent Common Stock issued pursuant to this Section 2.2 are referred
to herein as "Subsequent Shares".
5
-5-
(b) Within three (3) business days after each
Measurement Date, Buyer shall give written notice to Seller of the number of
Unique Users provided by Seller to, and retained by, Buyer as of such
Measurement Date. At Seller's request, Buyer shall provide Seller access to its
books and records during normal business hours to enable Seller to verify
Buyer's calculation of such Unique Users.
(c) Within ten (10) business days after the first
Measurement Date as of which the number of Unique Users provided by Seller to,
and retained by, Buyer exceeds five hundred thousand (500,000), Parent shall pay
to Seller as consideration for such Unique Users in excess of five hundred
thousand (500,000) any combination of cash, Parent Common Stock or, if
applicable, a Promissory Note as provided in clauses (i), (ii) and (iii) below;
provided, however, that, subject to Section 2.2(e), Parent shall not be
obligated to pay consideration to Seller pursuant to this Section 2.2(c) for
more than three hundred and seventy five thousand (375,000) Unique Users:
(i) to the extent Parent elects to pay cash as
consideration for all or a portion of such Unique Users, the
amount payable shall equal the product of (x) three dollars
($3.00) and (y) the number of such Unique Users with respect
to which Parent has elected to pay cash consideration;
(ii) to the extent Parent elects to pay Parent Common
Stock as consideration for all or a portion of such Unique
Users, the number of shares of Parent Common Stock to be
issued shall equal (x) the product of (A) three dollars
($3.00) and (B) the number of such Unique Users with respect
to which Parent has elected to issue Parent Common Stick as
consideration, divided by (y) the Average Parent Stock Price;
or
(iii) if on such Measurement Date the Average Parent
Stock Price is less than two dollars and fifty cents ($2.50)
per share, Parent at its election may (x) pay cash
consideration to Seller for Unique Users as provided in clause
(i) of this Section 2.2(c) in aggregate amount equal to the
Net Advertising Revenues for the quarter ending on such
Measurement Date and (y) cause Buyer to issue to Seller a
Promissory Note with a principal amount equal to the product
of (A) three dollars ($3.00) and (B) the number of Unique
Users for which Parent is obligated to pay consideration
pursuant to this Section 2.2(c), less the number of Unique
Users for which cash consideration is paid pursuant to clause
(x) of this subsection (iii).
(d) Within ten (10) business days after each
Measurement Date (after the Measurement Date referred to in Section 2.2(c)) as
of which the number of Unique Users provided by Seller to, and retained by,
Buyer exceeds the Previous High Number of Unique Users, Parent shall pay to
Seller as consideration for such Unique Users in excess of
6
-6-
the Previous High Number of Unique Users any combination of cash, Parent Common
Stock or, if applicable, Promissory Notes as provided in clauses (i), (ii) and
(iii) below; provided, however, that, subject to Section 2.2(e), Parent shall
not be obligated to pay consideration to Seller pursuant to this Section 2.2(d)
for more than three hundred and seventy five thousand (375,000) Unique Users
with respect to any Measurement Date:
(i) to the extent Parent elects to pay cash as
consideration for all or a portion of such Unique Users, the
amount payable shall equal the product of (x) three dollars
($3.00) and (y) the number of such Unique Users with respect
to which Parent has elected to pay cash consideration;
(ii) to the extent Parent elects to pay Parent Common
Stock as consideration for all or a portion of such Unique
Users, the number of shares of Parent Common Stock to be
issued shall equal (x) the product of (A) three dollars
($3.00) and (B) the number of such Unique Users with respect
to which Parent has elected to issue Parent Common Stock as
consideration, divided by (y) the Average Parent Stock Price;
or
(iii) if on such Measurement Date the Average Parent
Stock Price is less than two dollars and fifty cents ($2.50)
per share, Parent at its election may (x) pay cash
consideration to Seller for Unique Users as provided in clause
(i) of this Section 2.2(d) in aggregate amount equal to the
Net Advertising Revenues for the quarter ending on such
Measurement Date and (y) cause Buyer to issue to Seller a
Promissory Note with a principal amount equal to the product
of (A) three dollars ($3.00) and (B) the number of Unique
Users for which Parent is obligated to pay consideration
pursuant to this Section 2.2(d) with respect to such
Measurement Date, less the number of Unique Users for which
cash consideration is paid pursuant to clause (x) of this
subsection (iii) with respect to such Measurement Date.
(e) If the number of Unique Users delivered by Seller
to, and retained by, Buyer as of the applicable Measurement Date is such that
Parent would be obligated to pay consideration with respect to more than three
hundred and seventy five thousand (375,000) Unique Users with respect to such
Measurement Date (the "Maximum Quarterly Unique User Amount"), Parent may elect
not to pay consideration with respect to Unique Users in excess of the Maximum
Quarterly Unique User Amount, in which event the "Previous High Number of Unique
Users" for the succeeding Measurement Date shall be deemed to exclude that
number of Unique Users in excess of the Maximum Quarterly Unique User Amount;
provided that the number of Unique Users in excess of the Maximum Quarterly
Unique User Amount shall be credited to the next Measurement Date.
7
-7-
(f) For purposes of this Section 2.2, in the event of
any change in the Parent Common Stock by reason of any stock dividend, stock
split, combination or recapitalization with respect to the Parent Common Stock,
the number of shares of Parent Common Stock thereafter issuable pursuant to this
Section 2.2 (and the two dollar and fifty cent ($2.50) share price referred to
in Section 2.2(c)(iii), Section 2.2(d)(iii) and the definition of "Promissory
Note") shall be appropriately and equitably adjusted. In the event that Parent
shall be a party to any merger, consolidation or other similar transaction
pursuant to which the outstanding Parent Common Stock is converted into cash,
securities or other property, thereafter, in lieu of issuing shares of Parent
Common Stock which may be issued to Seller pursuant to this Section 2.2, Parent
shall pay to Seller the cash, securities and other property that Seller would
have received had it held at the effective time of such merger, consolidation or
other similar transaction the number of shares of Parent Common Stock that would
have been issuable pursuant to this Section 2.2.
2.3 Representations and Warranties of Parent and Buyer. Parent
and Buyer hereby represent and warrant to Seller as follows:
(a) The shares of Parent Common Stock to be issued to
Seller hereunder have been duly authorized and, when issued in compliance with
the provisions of this Agreement, will be validly issued, fully paid and
non-assessable and will be free of any liens, subject to restrictions on
transfer under state and/or federal securities laws.
(b) The authorized capital Parent consists of (i)
1,000,000 shares of Preferred Stock, par value 0.01 per share, of which no
shares were issued and outstanding as of the date hereof; and (ii) 130,000,000
shares of Parent Common Stock, of which 63,996,177 shares were issued and
outstanding as of March 31, 2000. As of March 31, 2000, Parent had reserved (A)
4,979,261 shares of Parent Common Stock for issuance pursuant to Parent's option
plans, (B) 1,350,002 shares of Parent Common Stock for issuance pursuant to
outstanding warrants and (C) 1,537,882 shares of Parent Common Stock for
issuance upon conversion of convertible subordinated debentures.
(c) The issued and outstanding shares of Parent
Common Stock have been duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of Parent Common Stock was issued
in violation of the preemptive and other similar rights of any securityholder of
the Company.
(d) Assuming the accuracy of Seller's representations
and warranties set forth herein, the issuance by the Parent of the Initial
Shares and the Subsequent Shares does not constitute an offer or a sale of such
securities by means of any general solicitation or general advertising within
the meaning of Rule 502(e) of the Securities Act of 1933, as amended.
8
-8-
(e) Assuming the accuracy of Seller's representations
and warranties set forth herein, it is not necessary in connection with the
issuance and delivery of the Initial Shares and the Subsequent Shares in the
manner contemplated by this Agreement to register any of such securities under
the Securities Act of 1933, as amended, other than pursuant to the Registration
Rights Agreement.
2.4 Representations and Warranties of Seller. Seller hereby
represents and warrants to Parent and Buyer as follows:
(a) Seller is capable of evaluating the merits and
risks of its investment in Parent as a result hereof, and has the capacity to
protect its own interests in making its investment in Parent. Seller (i)
understands that the Parent Common Stock to be issued to it hereunder has not
been registered under the Securities Act (except in accordance with the
provisions of the Registration Rights Agreement), or under any state securities
laws, and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (ii) is acquiring
the Parent Common Stock to be issued to it hereunder solely for its own account
for investment purposes, and not with a view to the distribution thereof, (iii)
is a sophisticated investor with knowledge and experience in business and
financial matters, (iv) has received certain information concerning Parent and
has had the opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding the Parent Common Stock,
and (v) is able to bear the economic risk and lack of liquidity inherent in
holding the Parent Common Stock.
(b) Each of the users to be provided to Buyer by
Seller will be a bona fide active name obtained from Seller's customer base.
(c) Seller shall deliver to Buyer at least three
hundred thousand (300,000) Unique Users within thirty (30) calendar days after
the date hereof.
2.5 Lock-up Agreements.
(a) Seller agrees that it will not, directly or
indirectly, Dispose of more than five hundred thousand (500,000) Subsequent
Shares during any three (3) month period; provided that Dispositions pursuant to
"piggy-back registrations" pursuant to the Registration Rights Agreement of even
date herewith between Parent and Seller shall not count towards such five
hundred thousand (500,000) share limitation.
(b) Notwithstanding clause (a) of this Section 2.5,
if any officer or director of Parent who is subject to Section 16 of the
Securities and Exchange Act of 1934, as amended, files a Form 4 or Form 5 that
reveals such officer or director to be a net seller of shares of Parent Common
Stock as shown on the appropriate form (excluding as "sales", however, the
Disposition by Twelve Oaks Liquidating Trust of up to two hundred and fifty-five
9
-9-
thousand ($255,000) shares of Parent Common Stock), Seller shall be permitted to
sell the aggregate number of net shares sold pursuant to all such Forms for such
persons for the applicable period.
ARTICLE III
COOPERATION AND PROMOTION
3.1 Opt-In Program. Parent, Buyer and Seller will cooperate
with each other to introduce as promptly as reasonably practicable the program
described on Annex A hereto (the "Opt-in Program"), whereby the user-base of
Seller can opt-in to Buyer's Pay-to-Play Lottery Business.
3.2 Marketing and Promotions. Seller agrees to cooperate with
and assist Buyer in pursuing marketing and sales opportunities in the
Pay-to-Play Lottery Business. This cooperation and assistance shall include:
(a) Seller permitting Buyer and Parent to create
Buyer-branded and Parent-branded animated
hyperlinks to the Buyer Websites and
Parent's "xxxxxxxxxxxxxxx.xxx" Website on
the Seller Websites without charge;
(b) Seller making prominently displayed banner
advertising available to Buyer without
charge for the marketing of Buyer's
Pay-to-Play Lottery Business on the Seller
Websites;
(c) Seller periodically conducting out-bound
email campaigns promoting Buyer's
Pay-to-Play Lottery Business;
(d) Seller adding a line to the registration
page of each of the Seller Websites giving
all visitors the opportunity to opt-in to
becoming a member of the Buyer Websites;
(e) Seller cooperating with Buyer to optimize
durability and retention of Unique Users and
minimize attrition of the Unique User base;
and
(f) Seller actively assisting Buyer in obtaining
and maintaining business relationships with
Phase II, White Hat and Direct Media.
3.3 Additional Seller Consideration. Promptly following the
issuance to Seller of the maximum number of Subsequent Shares , Parent, Buyer
and Seller will negotiate
10
-10-
in good faith to determine additional consideration to be paid to Seller for
providing Unique Users to Buyer.
3.4 Lottery Results Information. Seller agrees to provide
Buyer with the lottery results information that Seller currently receives from
its third-party provider for a fee of one thousand dollars ($1,000) per month;
provided that Buyer may elect to terminate this arrangement at any time without
cost or penalty to Buyer.
ARTICLE IV
EXCLUSIVITY AND NON-COMPETITION
4.1 Exclusivity. Buyer shall have the exclusive right to
market products and services relating to the Pay-to-Play Lottery Business to
visitors and customers of the Seller Websites, and Seller agrees not to use,
maintain links to or otherwise reference on any of the Seller Websites any
services or firms (other than Buyer) providing products or services relating to
the Pay-to-Play Lottery Business or introduce or encourage any use of or links
or references to such services or firms on sites maintained or operated for or
by its clients.
4.2 Seller's Agreement Not to Compete. Seller recognizes the
highly competitive nature of the Internet industry and agrees that the value and
goodwill of Parent and Buyer and their current and future subsidiaries would be
substantially impaired if Seller failed to comply with its obligations under
this Article III. Accordingly, Seller hereby agrees that for the term of this
Agreement, Seller shall not, directly or indirectly, on its own behalf, or on
behalf of any other person (i) compete with Parent or Buyer in the Pay-to-Play
Lottery Business, (ii) assist others in engaging in the Pay-to-Play Lottery
Business (including, without limitation, by permitting advertisements to be
displayed on any Seller Websites for any person (other than Buyer) engaged in
the Pay-to-Play Lottery Business) or (iii) solicit, entice or induce any
employee or customer of Parent or Buyer to terminate or diminish its
relationship with Parent or Buyer.
4.3 Parent's and Buyer's Agreement Not to Compete. Parent and
Buyer recognize the highly competitive nature of the Internet industry and agree
that the value and goodwill of Seller and its current and future subsidiaries
would be substantially impaired if they failed to comply with their obligations
under this Article III. Accordingly, Parent and Buyer hereby agree that for the
term of this Agreement, Parent and Buyer shall not, directly or indirectly, on
their own behalf, or on behalf of any other person (i) engage in, promote, or
feature, or assist others to engage in, promote or feature, any links to any
websites (other than Seller Websites) which contain a sweepstakes in lottery
format; provided, however, Buyer shall be permitted to continue the promotion of
the "Pick Three Game" as currently presented on Buyer Websites and to have a
"649 Game" so long as selections are not made by clicking
11
-11-
on an ad banner or (ii) solicit, entice or induce any employee or customer of
Seller to terminate or diminish its relationship with Seller.
4.4 License to Parent and Buyer. Seller shall grant a limited,
non-exclusive license to Parent and Buyer without charge during the term of this
Agreement pursuant to which Parent and Buyer shall be permitted to present
Seller's FreeLotto games on their websites. Seller shall assist Parent and Buyer
in placing the FreeLotto games on their websites, and shall pay to Parent or
Buyer, as the case may be, a fee of $.0125 (one and one-quarter cents) for each
bet made by a player of a FreeLotto game on Parent's or Buyer's websites.
ARTICLE V
CONFIDENTIALITY
5.1 Confidentiality. A party receiving information hereunder
is hereinafter referred to as the "Receiving Party"; the party disclosing
information is hereinafter referred to as the "Disclosing Party"; and a party's
officers, directors, employees, agents, professional advisors and consultants
are collectively referred to as "Representatives". Each party understands that
each other party may provide another party with certain proprietary and
confidential information during the term of this Agreement. All such proprietary
and confidential information furnished by the Disclosing Party or its
Representatives to or on behalf of the Receiving Party (irrespective of the form
of communication and whether such information is so furnished before, on or
after the date hereof) and all analyses, compilations, data, studies, notes,
interpretations, memoranda or other documents prepared by the Disclosing Party
or its Representatives containing or based in whole or in part on any such
furnished information is collectively referred to herein as the "Confidential
Information". In addition, all such Confidential Information furnished by the
Disclosing Party to the Receiving Party (irrespective of the form of
communication and whether such information is so furnished before, on or after
the date hereof) and all analyses, complications, data, studies, notes,
interpretations, memoranda or other documents prepared by the Disclosing Party
or its Representatives containing or based in whole or in part on any such
furnished information are also collectively referred to as "Confidential
Information." The term "Confidential Information" shall not include any
documents, data or other information which: (i) at the time of disclosure or
thereafter is publicly available (other than as a result of a disclosure by the
Receiving Party or Receiving Party's Representatives in violation hereof); (ii)
was, is or becomes available to the Receiving Party on a non-confidential basis
from a source other than the Disclosing Party or its Representatives, provided
that such source was not known by Receiving Party to be prohibited from
disclosing such information to the Receiving Party by a legal, contractual or
fiduciary obligation owed to the Disclosing Party; (iii) was or is already in
the Receiving Party's possession (other than Confidential Information furnished
by or on behalf of the Disclosing Party); or (iv) is independently developed by
the Receiving Party or on the Receiving Party's behalf without
12
-12-
violating the Receiving Party's obligations of confidentiality hereunder. All
Confidential Information provided by any party shall not be disclosed or
referred to publicly, or to any third party, except as permitted below. The
Receiving Party will disclose the Confidential Information only to its
Representatives directly concerned with the transactions contemplated by this
Agreement. In the event that a Receiving Party or any of its Representatives
become legally compelled (by subpoena, civil investigative demand or similar
process) to disclose any of the Confidential Information of the Disclosing
Party, the Receiving Party or other such person from whom such Confidential
Information is being sought shall provide the Disclosing Party with prompt prior
written notice of such requirement so that the Disclosing Party may seek a
protective order or other appropriate remedy and/or waive compliance with the
terms of this Agreement. In the event that such protective order or other remedy
is not obtained, or the Disclosing Party waives compliance with the provisions
hereof, the person required to provide such information agrees to furnish only
such portion of the Confidential Information that is legally required to be
furnished.
5.2 Public Announcements. Except as may be required by law, no
party shall issue a press release or make any public announcement regarding or
relating to the transactions contemplated by this Agreement without review by,
and the prior consent of, the other parties. Each party shall consult with each
other parties prior to any conference with the press or other news media
relating to the transactions contemplated by this Agreement, including
consultation with regard to appropriate responses to questions from the press or
other media.
5.3 Survival. The provisions of this Article V shall survive
the termination of this Agreement.
ARTICLE VI
TERMINATION
6.1 Term; Termination.
(a) The term of this Agreement shall commence on the
date hereof and continue for five (5) years thereafter, unless sooner terminated
in accordance with this Agreement.
(b) Parent and Buyer, on the one hand, or Seller, on
the other hand, may terminate this Agreement in the event of a default by the
other in the performance of any of its respective material obligations under
this Agreement which is not cured within thirty (30) days after notice of such
default has been given to the party alleged to be in default by the other party.
13
-13-
(c) Parent and Buyer, on the one hand, or Seller, on
the other hand, may terminate this Agreement upon notice to the other if an
"Event" occurs with respect to the other. For purposes of this paragraph, an
"Event" shall mean:
(i) a party liquidates, winds up its
business, dissolves or terminates it existence; or
(ii) any voluntary proceeding by a party is
commenced under any chapter of the Federal Bankruptcy Code or
other law relating to bankruptcy, bankruptcy reorganization,
insolvency or relief of debtors, or any such proceeding is
commenced against a party and such proceeding is not dismissed
within sixty (60) days from the date on which it is filed or
instituted; or a party shall make an assignment for the
benefit of creditors or admit in writing its inability to pay
its debts as they mature or that it is otherwise insolvent.
(d) Notwithstanding anything herein above to the
contrary, Seller shall have the right to terminate this Agreement without any
further obligations to Parent or Buyer upon ten (10) days prior notice in the
event Seller determines in its sole and absolute discretion that the
continuation of this Agreement would be adverse to the pursuance or consummation
of a merger, acquisition, or change of control transaction, provided, however,
that should Seller terminate this Agreement pursuant to this Section 6.1(d),
Seller will not compete for a period of eighteen (18) months in the Pay-to-Play
Lottery Business and specifically not to engage in a cooperation agreement with
the any Competing Companies or their subsidiaries or affiliates.
ARTICLE VII
INDEMNIFICATION
7.1 Mutual Indemnification. Each party hereby agrees to
indemnify and hold harmless each other party, its parent and subsidiary
companies and their respective officers, agents, directors, employees and
authorized representatives from and against any costs, losses, liabilities and
expenses, including court cost, reasonable expenses and reasonable attorney's
fees, that any of them may suffer, incur or be subjected to by reason of any
legal action, arbitration or other claim by a third party arising out or as a
result of the operations of the indemnifying party's website, any allegations
that the use of the indemnifying party's marks, links and/or content on its
websites violates any intellectual property rights of any third party or any
allegation that any content on its website is defamatory or violates any privacy
or publicity rights of any third party.
7.2 Indemnification Procedures. If any party entitled to
indemnification hereunder (an "Indemnified Party") makes an indemnification
request to the other, the Indem-
14
-14-
nified Party shall permit the other party (the "Indemnifying Party") to control
the defense, disposition or settlement of the matter at its own expense;
provided that the Indemnifying Party shall not, without the consent of the
Indemnified Party, enter into any settlement or agree to any disposition that
imposes an obligation on the Indemnified Party that is not wholly discharged or
dischargeable by the Indemnifying Party, or imposes any conditions or
obligations on the Indemnified Party other than the payment of monies that are
readily measurable for purposes of determining the monetary indemnification or
reimbursement obligations of Indemnifying Party. The Indemnified Party shall
notify Indemnifying Party promptly of any claim for which Indemnifying Party is
responsible and shall cooperate with Indemnifying Party in every commercially
reasonable way to facilitate defense of any such claim; provided that the
Indemnified Party's failure to notify Indemnifying Party shall not diminish the
Indemnifying Party's obligations under this Section except to the extent that
Indemnifying Party is materially prejudiced as a result of such failure. An
Indemnified Party shall at all times have the option to participate in any
matter or litigation through counsel of its own selection and at its own
expense.
ARTICLE VIII
MISCELLANEOUS
8.1 No Partnership of Agency. This Agreement does not
constitute a joint venture or partnership by the parties, and each party is
entering into this Agreement as a principal and not as an agent of any other
party.
8.2 Entire Agreement; Waivers.
(a) This Agreement and the annex hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by all the parties. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
(b) The annex attached to this Agreement is
incorporated herein by reference as if set forth in full herein.
8.3 Successors and Assigns. This Agreement shall be binding
on, and shall inure to the benefit of, the parties to it and their respective
permitted successors and assigns.
15
-15-
12.4 Effect of Headings. The subject headings of the
paragraphs and subparagraphs of this Agreement are included for purposes of
convenience only, and shall not affect the construction of any of its
provisions.
12.5 Notices.
(a) A notice required or permitted to be given by one
party to another under this Agreement must be in writing and is treated as being
duly given if it is: (i) sent by air courier to that other party's address; (ii)
delivered personally or by commercial delivery service to that other party's
address; (iii) mailed by registered or certified mail (return receipt requested)
to that other party's address; or (iv) sent by facsimile to the other party
(with printed acknowledgment of completed transmission).
(b) A notice given to a party in accordance with
Section 8.5(a) is treated as having been duty given and received: (i) when
delivered (if left at that party's address or delivered personality or by
commercial delivery service to that other party's address); (ii) two (2)
business days after delivery to the courier (if sent by air courier); or (iii)
on the business day of receipt of the transmission (if given by facsimile and
sent to the facsimile receiver number of that party with printed acknowledgment
of completed transmission).
To Parent or Buyer: eLOT, Inc.
000 Xxxxxxx 0 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxx
Xxxxxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
With copies to: Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
To Seller: Plasmanet, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx
Xxxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
16
-16-
Any party may change its address for purposes of this paragraph by giving notice
of the new address to each of the other parties in the manner set forth above.
8.6 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York applicable to
agreements made and to be performed wholly within such jurisdiction without
regard to the conflicts of laws provisions thereof. Each of the parties agrees
to personal jurisdiction in any action brought in any court, Federal or State,
within the State of New York having subject matter jurisdiction over matters
arising under this Agreement. Any suit, action or proceeding arising out of or
relating to this Agreement shall only be instituted in a Federal or State court
located in the State of New York. Each party waives any objection which it may
have now or hereafter to the laying of the venue of such suit, action or
proceeding, and irrevocably submits to the jurisdiction of any such court in any
such suit, action or proceeding.
8.7 Waiver of Jury Trial. Each party hereby irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to
this Agreement or the actions of the parties in the negotiations,
administration, performance and enforcement thereof.
8.8 Parties in Interest. Nothing in this Agreement, express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their respective
and permitted successors and assigns, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action against any party to this Agreement.
8.9 Severability. Should any provision of this Agreement be
determined to be invalid, it shall be severed from this Agreement and the
remaining provisions shall remain in full force and effect.
8.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
8.11 Attorneys' Fees. Should it become necessary for any
party to this Agreement to employ an attorney (i) to assert any right or enforce
any obligation under this Agreement or (ii) to defend against any action brought
by another party which action arises out of this Agreement, then the prevailing
party shall be entitled to recover reasonable attorneys' fees from the
nonprevailing party.
17
-17-
8.12 Assignment. Seller shall not assign this Agreement
without first obtaining the written consent of Parent and Buyer. Neither Parent
nor Buyer may assign its rights hereunder without the consent of Seller.
18
-18-
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date written above by their duly authorized
representatives.
eLOT, INC.
By: /s/ Xxxxxx Xxxx
------------------------------------
Name: Xxxxxx Xxxx
Title: Executive Vice President
eLOTTONET INC.
By: /s/ Xxxxxx Xxxx
------------------------------------
Name: Xxxxxx Xxxx
Title: Executive Vice President
PLASMANET, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Sr. Vice President and
General Counsel
19
ANNEX A
Within thirty (30) calendar days after Closing, LottoNet to
have an established Internet based email lottery notification service (LENS),
which will provide email notification of official state lottery results to
"opt-in" subscribers.
Seller agrees to provide assistance to Buyer so that Buyer may
establish a functional LENS system and database.
Seller agrees to offer at its Xxxxxxxxx.xxx site, a link that
for XxxxXxxxx.xxx subscribers to access to Buyers free lottery notification
services.
Seller also agrees to include in its XxxxXxxxx.xxx
registration, an option whereby the FreeLotto registrant would have the
opportunity to receive official lottery results from the Buyer by checking (or
un-checking) an option box on the FreeLotto registration page.
Seller will assist in establishing a business relationship
with email Internet campaign manager and distributor, White Hat.
