JOINT VENTURE AGREEMENT
THIS
AGREEMENT is entered into effective the 28th
of
October 2004 by and between New
Media Lottery Services Inc.
(“NMLS”), a Virginia corporation, with its offices at 0000 Xxxxxxxxxx Xxxxx,
Xxxxxxxxxxxx, Xxxxxxxx 00000, XXX, contact: Xx. Xxxxxxxx X. Xxxxxxxx III,
voice
(0) 000-000-0000, fax (0) 000-000-0000, e-mail xxxxxxxxx@xxxxxxx.xxx,
and
Cybercyte
Sistemas e Serviços Ltda.
(“CYBERCYTE”), a Brazilian corporation with its offices at Rua Barão do Triunfo,
550 - sala 92, São Paulo, SP, CEP 00000-000, Xxxxxx, contact: Xx. Xxx Xxxxx,
voice (5511) 0000-0000, fax (5511) 0000-0000, e-mail xxx.xxxxx@xxxxxxxxx.xxx.xx.
WHEREAS
NMLS
possesses extensive experience in the establishment, operation and management
of
lotteries and has developed and operated a number of Internet lottery
programs;
WHEREAS
CYBERCYTE and its associated companies possess extensive expertise in the
Brazilian lottery marketplace, operate a number of lottery/gaming websites,
hold
two state lottery licenses awarded by the Brazilian States of Pará and Santa
Catarina and are actively involved in bingo hall ownership and operation;
and
WHEREAS
NMLS and
CYBERCYTE desire to enter into a business relationship to establish a joint
venture in accordance with the terms and conditions set out in this agreement
to
combine their expertise and to jointly pursue a number of lottery projects
in
Brazil.
NOW
THEREFORE,
the
parties agree as follows:
| 1. |
Establishment
of a joint venture company. The parties shall form a new company
that
shall be called New Media Digital Services Ltda. (“NMD”). NMD will be a
limited liability company established as a ‘sociedade empresária limitada’
in the Brazilian State of São Paulo, with ownership shared between the
parties below (the “Members”) as
follows:
|
| CyberCyte |
50.00
|
%
|
||
| NMLS |
50.00
|
%
|
||
| Total |
100.00
|
%
|
| 2. |
Purpose
of NMD. The purpose of NMD is to launch an Internet lottery program
in
Brazil under the existent lottery license issued by the Brazilian
State of
Pará to WJM Entretenimentos e Participações Ltda. Cybercyte,
who owns 50% of WJM confirms that the holder of the license agrees
to the
terms and conditions of the Joint Venture Agreement. It is also
agreed
that the parties will pursue additional state and federal Internet
lottery
programs.
|
NMD
will
subsequently put in place a business and financial plan to be agreed upon
by the
Parties (such agreement not to be unreasonably withheld) to:
|
(i)
|
develop
opportunities to utilize its Internet lottery on video lottery
machines
(“VLMs”) currently situated at Bingo Tijuca in Rio de
Janeiro;
|
Page
1 of
7
|
(ii)
|
develop
opportunities to utilize its Internet lottery on VLMs in bingo
halls
throughout Brazil;
|
|
(iii)
|
seek
its own state lottery licenses from any and all Brazilian State
lottery
programs;
|
|
(iv)
|
develop
its Internet lottery website into an Internet lottery portal for
Brazil.
|
| 3. |
Obligations
of NMLS to NMD. NMLS shall, among other
obligations:
|
|
(i)
|
design
the lottery games, design the web interface API that allows NMD
to operate
these games from a website and assist in the integration of the
NMD
website and the lottery games;
|
|
(ii)
|
provide
to NMD free of charge limited rights to its Internet lottery/gaming
systems;
|
|
(iii)
|
ensure
any third party licenses required to operate its Internet lottery/gaming
systems are maintained operational and in good
order;
|
|
(iv)
|
provide
to NMD free of charge the management of its Internet lottery/gaming
systems;
|
|
(v)
|
provide
to NMD free of charge access to existing
computer systems (software and hardware) on which to operate the
lottery
games intended for Brazil, however if and when a decision is made
to set
up full Brazilian operation all of these costs will become part
of NMD
;
|
|
(vi)
|
validate
winners and maintain appropriate accounting records through its
Internet
lottery/gaming systems;
|
|
(vii)
|
provide
free of charge to NMD lottery expertise and some general operational
management;
|
|
(viii)
|
provide
free of charge to NMD personnel of sufficient caliber and experience
to
deliver the obligations set out
above.
|
| 4. |
Obligations
of CYBERCYTE to NMD. CYBERCYTE shall, among other
obligations:
|
|
(i)
|
using
NMLS templates, assist NMLS in the design of the lottery games
and the
website intended for Brazil and provide free of charge to NMD all
requisite local language translation
services;
|
|
(ii)
|
provide
to NMD free of charge the rights to its registration and financial
transaction systems;
|
|
(iii)
|
ensure
any third party licenses required to operate its registration and
financial transaction systems are maintained operational and in
good order
without cost to NMD;
|
|
(iv)
|
ensure
the extant lottery license issued by the Brazilian State of Pará to WJM
Entretenimentos e Participações Ltda. is maintained operational and in
good order;
|
Page
2 of
7
|
(v)
|
provide
to NMD free of charge the management of its registration and financial
transaction systems;
|
|
(vi)
|
establish
on behalf of NMD bank accounts with appropriate banks in order
to
facilitate player deposits and
payouts;
|
|
(vii)
|
provide
customer support to NMD’s Internet lottery
players;
|
|
(viii)
|
provide
free of charge to NMLS advice and guidance on Brazilian business
procedures, funds repatriation and taxation
issues;
|
|
(ix)
|
provide
free of charge to NMD local lottery
expertise;
|
|
(x)
|
provide
the management of one NMD employee manager, reporting to Xxx Xxxxx,
and
general operational management;
|
|
(xi)
|
provide
serviced office accommodation to house one NMD employee
manager;
|
|
(xii)
|
provide
access to its database of non current Internet users for the purpose
of
marketing the lottery games and the website intended for Brazil.
For these
purposes, non current Internet users are defined as users which
have not
visited the websites of CYBERCYTE and its associated companies
for 2
months; and
|
|
(xiii)
|
provide
free of charge to NMD personnel of sufficient caliber and experience
to
deliver the obligations set out
above.
|
| 5. |
Lottery
Customer Data. NMLS and CYBERCYTE each acknowledge and agree that
all data
relating to a customer of NMD’s Internet lotteries, including names,
addresses and any other personal information (“Lottery Customer Data”) is
the property of NMD.
|
| 6. |
Representations
and Warranties of NMLS and CYBERCYTE. NMLS and CYBERCYTE each represents
and warrants that:
|
|
(i)
|
it
has the right and corporate authority to enter into this agreement
and has
all the necessary rights to perform its obligations under this
agreement;
|
|
(ii)
|
it
has sufficient rights to the technology and the systems covered
by this
agreement and the right to transfer such rights for transactions
as
contemplated under this agreement;
|
|
(iii)
|
it
will use and process Lottery Customer Data only in accordance with
this
agreement; and
|
|
(iv)
|
its
entry into this agreement does not breach any other agreement to
which it
is a party.
|
CYBERCYTE
represents and warrants that:
|
(i)
|
two
State lottery licences have been awarded by the Brazilian States
of Pará
and Santa Catarina respectively to its associated company, WJM
Entretenimentos e Participações Ltda.;
|
Page
3 of
7
|
(ii)
|
it
legally and validly manages and maintains one bingo hall in Rio
de Janeiro
through its associated company, Hunter Representação e Locação de
Equipamentos Ltda.;
|
|
(iii)
|
it
legally and validly manages and maintains the following lottery/gaming
websites within Brazil, through its associated company, WJM
Entretenimentos e Participações Ltda: xxx.xxxxxxxxx.xxx.xx,
xxx.xxxxxxxxxx.xxx.xx,
xxx.xxxxxxxxxxxxx.xxx.xx,
xxx.xxxxxxxxxxxx.xxx.xx,
xxx.x00.xxx.xx,
xxx.xxxxxxxxxxxxx.xxx.xx,
xxx.xxxxxxxxxxx.xxx.xx,
|
This
clause 6 shall survive the expiry or earlier termination of this
agreement.
| 7. |
Revenue.
|
|
(i)
|
It
is contemplated that NMD’s revenue will derive from the sale of lottery
games via the Internet in accordance with the assumptions and projections
to be set out in the near future.
|
|
(ii)
|
NMLS
will provide to NMD the management of its Brazilian Internet
lottery/gaming systems at its own
cost.
|
|
(iii)
|
CYBERCYTE
will provide to NMD the management of its registration and financial
transaction systems at its own
cost.
|
|
(iv)
|
The
expenses shall be deducted from NMD’s revenue prior to any profit
distribution to Members, and
includes:
|
a. an
amount
to cover overheads related to costs incurred in relation to the operation
and
promotion of NMD. For the sake of clarity, this overhead does not include
the
cost to NMLS or CYBERCYTE of managing, respectively, the Internet lottery/gaming
systems or the registration and financial transaction systems; the parties
also
agree that a detailed financial plan (#2) will be prepared in order properly
determine overheads and
b. Funding
for advertising and promotion will be repaid to the funding Member with a
10%
premium plus 2% interest per month (ie. $100,000 funding would be $112,200
at
the end of the first month, $114,444 at the end of the second month, etc.),
with
each Member being entitled to participate in the funding round where NMD
has
insufficient cash flow to cover the agreed marketing expenses. If each member
funds the advertising equally than the return on the marketing dollars invested
will be mutually determined at that time.
This
amount is payable at a rate of no more that 10% of Win. The intent is to
just
have an initial funding and then roll over the advertising out of net
win
c. Third
Party System fees ie. Alladdin (if any) and Chartwell (live bingo). Full
details
and descriptions will be provided. Other third party software will be decided
on
a needs be basis.
|
(v)
|
The
balance after the payment of the expenses detailed in clause 7(iv)
above
will be distributed monthly as follows:
|
| CyberCyte |
50.00%
|
| Alladdin | 05.00% |
| NMLS | 45.00% |
| total | 100.00% |
Page
4 of
7
Only
80%
of the balance will be distributed during the first year in order to build
up a
reserve.
|
(vi)
|
The
Members will jointly determine the best Brazilian tax solution
in order to
maximize after tax profits.
|
| (8) |
This
Agreement may be terminated by either party upon the default in
the
performance by the other Party of its obligations arising under
the terms
of this Agreement. In such event, the Party desiring to terminate
this
Agreement will provide written notice to the other party of its
intent to
terminate and will set forth the reasons for termination. If the
reasons
for termination are not resolved to the satisfaction of the notifying
Party within one hundred eighty (180) days of the date of such
notice,
this Agreement will terminate effective as of the end of such one
hundred
eighty (180) day period, provided that if the Party notified of
the others
intent to terminate does not concur that it has defaulted in its
obligations under this Agreement or that it has failed to cure
any actual
default in its obligations under this Agreement or that it has
failed to
cure any actual default on its part, then the matter will be submitted
to
binding arbitration in accordance with the rules of the American
Arbitration Association and the Agreement will not terminate, pending
the
resolution of the matter in arbitration. Upon termination of this
Agreement, both parties shall be released of all obligations under
this
Agreement save and except for obligations incurred prior to
termination.
|
In
the
event of a termination, the parties must cease to use the assets/systems
of the
other party immediately and return these assets to the original
provider.
Termination
of this Agreement for any reason whatsoever shall not affect any rights,
duties
and liabilities which arose to or accrued up to the effective day of this
termination.
Termination
by either party will be granted if either party is found to have materially
affected the integrity of the Lottery program through its actions and
activities, which for whatever reason have brought discredit or harm to the
reputation of the individual parties and or it’s lottery programs
Consequences
of termination. The parties agree to jointly share in any costs associated
with
the termination of NMD. The parties will prepare and evaluate the costs
associated with the dissolution of business and will fund these costs on
a
timely basis.
Upon the
effective date of any termination of this Agreement for any reason whatsoever
(a) the license to use the equipment, goods or other property provided for
shall
be terminated, (b) Both parties shall be entitled to repossess forthwith
and the
JV shall deliver to both Parties forthwith, all equipment, goods and other
property supplied by the parties pursuant to this Agreement (c) the license
to
use the NMLS Software provided for shall be terminated (d) the NMD shall
immediately cease using the NMLS Software, and (e) the NMD shall
immediately cease using WJM Entretenimentos e Participações Ltda.’s gaming
license.
| 9. |
Term.
This Agreement shall commence on the day and year first written
above,
shall have a term of 2 years from the date of the launch of the
Internet
lottery in Brazil (the “Initial Term”), and shall continue automatically
from year to year after the Initial Term unless or until terminated
by
either party upon at least 90 days’ prior Notice.
|
Page
5 of
7
| 10. |
Notification
details:
|
Notices
given under this Agreement must be in writing and may be delivered by first
class recorded post or fax to the following addresses:
| (i) |
New
Media Lottery Services,
Inc.
copy
to: Xxxx Xxxxxx
|
| 0000 Xxxxxxxxxx Xxxxx 00 Xxxxxx Xxxx |
| Xxxxxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000 |
| FAX:(000) 000-0000 FAX:(000)000-0000 |
| (ii) | Cybercyte Sistemas e Serviços Ltda. |
|
Rua
Barao do Triunfo, 550 - sala 92
|
| 04602-002 - Sao Paulo - SP - Brazil |
| FAX (00) 00 0000 0000 |
| 11. |
The
parties shall each respectively use their best efforts to do or
procure to
be done all such further acts and things and execute or procure
the
execution of all such other documents as a party may from time
to time
require for the purpose of carrying the provisions of this Agreement
into
full effect, and giving the full benefit of the provisions of this
Agreement to the parties.
|
| 12. |
Indemnity.
Each party hereto shall indemnify and hold harmless the other party
from
or rising out of, any negligence, misconduct, or illegal act on
its part
in the course of performing this Agreement and without prejudice
to any
other rights or remedies available to the party, and notwithstanding
any
other provision in this Agreement, irrevocably and unconditionally
agree
to indemnify the other party in full and on demand and keep the
other
party so indemnified from and against all claims, actions, damages,
proceedings, demands, losses, liabilities, costs and expenses (including
without limitation reasonable legal expenses and other professional
advisers’ fees) which are made or brought against or suffered or incurred
by that party, directly or indirectly and whether or not foreseeable
at
the date of this Agreement, arising wholly or in part as a result
of or in
relation to a breach by the party of any of their respective
representations and warranties as set out in clause 6
above.
|
| 13. |
Confidentiality.
NMLS and CYBERCYTE will keep the existence and contents of this
Agreement,
all discussions and documents relating to its subject matter (either
before or after the signing of this Agreement) and all confidential
business, financial, technical or other information of the other
party and
of NMD in confidence and shall only disclose such information to
its
directors, employees and professional advisors who “need to know” for the
purposes of this Agreement. This obligation of confidentiality
does not
apply to information required of public US
companies:
|
| – |
has
come into the public domain other than by breach of this Agreement
or any
other duty of confidence;
|
| – | is obtained from a third party having a lawful right to disclose such information; |
| – |
at the time of disclosure was
already
known by the party to whom such information was disclosed without
breach
of this Agreement or any other duty of confidence;
or
|
| – | is required to be disclosed by law, stock exchange regulations, judicial decree or other regulatory authorities. |
NMLS
and
CYBERCYTE shall ensure that each of their directors, employees and professional
advisors to whom confidential information is disclosed is made aware of and
complies with the provisions of this clause 13 and the disclosing party shall
have primary responsibility for the actions of such persons.
This
clause 13 shall survive the expiry or earlier termination of this Agreement
for
a further period of 2 years.
Page
6 of
7
| 14. |
Waiver.
Any express or implied waiver by one party of any failure by another
party
to perform its obligations under this Agreement will not prevent
the
subsequent enforcement of those obligations. Similarly, any waiver
will
not be taken to be a waiver of any subsequent failure to perform
that or
any other obligation.
|
| 15. |
Assignment.
Neither party may assign or transfer any right or obligation under
this
Agreement without the prior written consent of the other party
(such
consent not to be unreasonably withheld or
delayed).
|
| 16. |
Entire
Agreement. This Agreement contains the entire Agreement between
the
parties relating to its subject matter, and supersedes all prior
representations (other than fraudulent misrepresentations) and
agreements
relating to its subject matter. All implied terms, conditions and
warranties (whether implied by statute, common law, a course of
dealings,
or otherwise) are excluded to the maximum extent permitted by
law.
|
| 17. |
Variation.
Amendments to this Agreement shall not be effective unless in writing
and
signed by authorized signatories on behalf of all the
parties.
|
| 18. |
Severability.
If any provision of this Agreement is held invalid, illegal or
unenforceable for any reason by any court of competent jurisdiction,
such
provision shall be severed and the remainder of its provisions
will
continue in full force and effect.
|
| 19. |
This
Agreement shall be governed by and construed in accordance with
Brazilian
law.
|
IN
WITNESS HEREOF, the parties hereto have entered into this agreement on the
day
and year first written above.
|
Cybercyte
Sistemas e Serviços Ltda.
|
||
|
By:
|
By:
|
|
|
Xxxxxxxx
X. Xxxxxxxx III
|
Xxx
Xxxxx
|
|
|
COO
|
Director
|
|
|
Date:
|
Date:
|
Page
7 of
7
