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Exhibit 10.1
SOFTWARE DISTRIBUTION LICENSE AGREEMENT
This Software Distribution License Agreement (this “Agreement”) is made this 26th day of September, 2007 (the “Effective Date”) by and between Progressive Gaming International Corporation, a Nevada corporation, with a primary business address of 920 Pilot Road, Las Vegas, Nevada 89119, and its Affiliates (jointly and severally “PGIC” or “Licensor”), on the one hand, and Shuffle Master, Inc., a Minnesota corporation, with a primary business address 1106 Palms Airport Drive, Las Vegas, Nevada 89119, and its Affiliates (jointly and severally “SMI” or “Licensee”), on the other hand, for the purpose of granting Licensee a limited license to use and distribute the Licensed Software.
WHEREAS, PGIC and SMI are parties (collectively the “Parties” and individually a “Party”) to that certain Purchase Agreement dated the same day hereof (as amended, restated, modified or supplemented from time to time, the “Purchase Agreement”), pursuant to which PGIC agreed to sell certain assets relating to the Table Games Division (“TGD”) (such sold assets shall be referred to herein as the “PGIC Transferred Products” as defined below) to SMI and an Amended and Restated License Agreement (the “Progressive License”), pursuant to which PGIC agreed to license certain patents related to the TGD to SMI;
WHEREAS, under the terms of the Purchase Agreement, it is contemplated that PGIC and SMI execute this Agreement, and deliver an executed version to the other concurrently with the execution of the Purchase Agreement; and
WHEREAS, this Agreement states the entire agreement by which SMI obtains from PGIC a license to use and distribute the Licensed Software and PGIC Non-CJS System.
NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. DEFINITIONS. Any capitalized terms not expressly otherwise defined in this Agreement shall have the same meaning as set forth in the Purchase Agreement. As used in this Agreement:
“Affiliate” of any particular Party means any current or future Person controlling, controlled by or under common control with such Party. For purposes of this definition, “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and such “control” will be presumed if any Person owns 50% or more of the voting capital stock, assets or other ownership interests, directly or indirectly, of any other Person.
“Casinolink®” means PGIC’s central server system which may be configured with different modules to, among other things, do the following on slot machines and/or Table Games: control progressives and perform player tracking, accounting and/or reporting.
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“Change of Control” means, with respect to a party, the occurrence of any of the following events: (a) any consolidation or merger of such party with or into any other entity in which the holders of such party’s outstanding shares immediately before such consolidation or merger do not, immediately after such consolidation or merger, retain stock representing a majority of the voting power of the surviving entity or stock representing a majority of the voting power of an entity that wholly owns, directly or indirectly, the surviving entity; (b) the sale, transfer or assignment of securities of such party representing a majority of the voting power of all of such party’s outstanding voting securities to an acquiring party or group; or (c) the sale of all or substantially all of such party’s assets. Notwithstanding the foregoing, any financing of a party by one or more venture capital firms, lenders or similar institutions will not be considered a “Change of Control” of such party.
“CJS” means PGIC’s Casinolink® Jackpot System and/or Casinolink® Jackpot module of Casinolink® for Table Games, and as developed in the future by PGIC. CJS is software on a central server which utilizes Casinolink®. CJS includes the device known as the watchman which connects CJS to the Aquarius Controller. Some of the computer code for CJS may be presently installed in some of the PGIC Transferred Products.
“Cross Over Code” means Licensor’s computer code that is both a part of the Licensed Software and a part of the PGIC Transferred Products. For the avoidance of doubt, Licensor is transferring ownership to Licensee of certain Intellectual Property Rights pursuant to the terms provided in the Purchase Agreement, some of which is contained in the Licensed Software. To the extent there is any such cross over, Licensor shall receive the non-exclusive license rights to such Cross Over Code from Licensee as provided in Section 2.6. Examples of such Cross Over Code contained within the Licensed Software include, but are not limited to, part of the code on: the item commonly referred to as the “Aquarius Controller,” the item commonly referred to as the “Game Manager,” and the items commonly referred to as the “Dealer Key Pad.”
“Customizations” means the modifications to the PGIC Non-CJS Systems developed by either party for SMI or modifications to the PGIC CJS Systems developed by PGIC pursuant to this Agreement, and all subsequent Updates to such modifications and all systems, programming and user documentation related to any of the foregoing.
“Design” means as to Table Hardware the documentation which refers to any of the following: physical dimensions, circuit board layout, materials used, electronic components, and bill of materials.
“Excluded Table Games” means one or more of the following: (i) any Purchased Table Games (as defined in the Purchase Agreement), (ii) any SMI Game Play (including, without limitation, any versions, updates, improvements or additional orders of such SMI Game Play) as of the Effective Date in existence, on order and/or in inventory, unless a PGIC System is later incorporated into such SMI Game Play, in which case, PGIC shall earn the royalty for use of the PGIC System as provided in Section 5.2(h); and (iii) SMI Game Play using a third party Progressive System not using the Licensed Software (as otherwise permitted in this Agreement).
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“End User” means any customer that is a legal casino gaming venue or other lawful gaming establishment to whom either party or its authorized agents lease, distribute or place the Licensee Products and/or PGIC Systems, as applicable.
“Escrow Agreement” means the Three Party Escrow Service Agreement attached hereto as Exhibit E.
“Executable Code” means the fully compiled version of a software program that can be executed by a computer and used by an end user without further compilation.
“Field of Use” means Game Play for Table Games.
“GAAP Recurring Revenue” means, for any applicable period and in accordance with GAAP, (a) the difference between amounts earned by either Party on a Table Game before the PGIC System is added, as compared to the revenue earned by such Party on such Table Game after the addition of such PGIC System, and which is demonstrably and directly attributable to such PGIC System (“Incremental Recurring Revenue”), less (b) System Costs. Attached hereto as Exhibit “D” are examples of Incremental Recurring Revenue. Any service or maintenance fees attributable to an End User by either Party after the installation of a PGIC System or Game Manager onto Table Games are not a part of GAAP Recurring Revenue and no royalties shall be paid from one Party to the other for such amounts received from End Users. Such service and maintenance fees shall be the actual labor and materials cost to the contracting Party.
“Game Manager” means the Licensor product commonly referred to in the marketplace as Game Manager that will be acquired by SMI under the Purchase Agreement, and which constitutes a part of the PGIC Transferred Products. Game Manager is licensed back to PGIC pursuant to the terms of this Agreement as well as the Cross Over Code, all subject to the rights granted to PGIC under section 2.6 and section 2.7.
“Game Play” means any pay tables and methods of play for any Table Game; provided that Game Play shall not include any pay tables or methods of play that are in the public domain or on any Table Games that otherwise may be used freely without infringing Intellectual Property Rights (collectively, “Public Domain Games”), including, blackjack, craps, pai gow, roulette, baccarat, sic bo, and poker. Game Play shall, however, include such Public Domain Games if a pay table or additional wager is added to such Public Domain Games, without which a table game supplier (e.g. SMI) would not otherwise receive royalty amounts from End Users.
“Infringe IP” means copyright infringement, patent infringement (contributory, direct, inducement or otherwise), trademark infringement, breach of contract related to ownership and/or licensing of the Licensed Software and/or misappropriation of trade secrets.
“Improvements” means all improvements, advances, developments, modifications, enhancements, variations, revisions, adaptations or extensions of or to any of the Licensed Software, whether patentable or not, hereafter created or acquired during the Term by either party.
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“Intellectual Property Rights” means all present and future worldwide copyrights (registered and unregistered), trademarks (registered and unregistered), trade secrets, patents, patent applications, moral rights, trade dress, contract rights, and other proprietary rights.
“Lab Ready” means that in PGIC’s reasonable discretion, a piece of software or hardware has been sufficiently tested and/or sufficiently completed to be ready for submission to the Technology Division of the Nevada State Gaming Control Board and Gaming Laboratories International.
“Licensee Products” means the Table Games and/or Table Hardware manufactured by (or on behalf of) Licensee or its suppliers with which the Licensed Software and/or PGIC Systems may be integrated/bundled and distributed. Licensee Products shall include Table Games incorporating SMI Game Play used within the Field of Use. Nothing contained herein grants or licenses to PGIC any rights to Licensee Products.
“Licensed Software” means the software program or programs that are embodied in and used with the PGIC CJS Systems, and any modified, updated, or enhanced versions of such programs.
“Licensor Marks” means the trademarks and trade names of Licensor used to describe the goods or services that relate to a PGIC CJS System and/or PGIC Non-CJS System except for the following: (a) Game Manager; or (b) Aquarius Controller.
“Non-SMI Game Play” means any Table Game (whether Game Play or Public Domain Game) that is, in the present or the future, neither owned, patented, trade dressed, copyrighted (registered or unregistered), trademarked (registered or unregistered), leased, sold, distributed or licensed, in the present or in the future by SMI.
“Parts” means any of the following components of a Progressive System: the electronic components, hardware, integrated circuits, circuit boards, microchips, sensors, cables, harnesses and light emitting diodes.
“Person” means the same as in the Purchase Agreement.
“PGIC CJS Systems” means any current or future Progressive Systems owned by PGIC for use within the Field of Use that are licensed, and/or leased for use by End Users by PGIC (or SMI pursuant to this Agreement), that incorporate and/or make use of the Licensed Software, CasinoLink and/or CJS; and which may also incorporate and/or make use of Table Hardware (pursuant to the license grant in section 2.10) and/or Cross Over Code, subject to the rights granted to PGIC in Section 2.6.
“PGIC Non-CJS Systems” means any current or future Progressive Systems owned by PGIC for use within the Field of Use that are licensed and/or leased for use by End Users by PGIC (or SMI pursuant to this Agreement), which may also incorporate or make use of: (1) Only pursuant to the license grant to PGIC in Section 2.7 and 2.10, Game Manager, Table Hardware; and/or (2) The Cross Over Code, subject to the rights granted to PGIC in Section 2.6.
“PGIC Systems” means the PGIC CJS Systems and the PGIC Non-CJS Systems.
“PGIC Transferred Products” means all assets acquired by and/or transferred to SMI pursuant to the Purchase Agreement and as further defined in the appropriate schedule to the
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Purchase Agreement, and all PGIC assets licensed by SMI pursuant to the Progressive License and as further defined in the appropriate schedule to the Progressive License Patents.
“Progressive Systems” means the computer system and/or hardware used to control and/or network progressive Table Games, which includes but is not limited to the following functionality: the calculating of current progressive amounts and/or the receipt of wager amounts or information from progressive Table Games in any form including without limitation coin, chips and cards; provided, however, that the term “Progressive Systems” does not include any elements that embody Game Play methods or pay tables in such a computer system, or Table Hardware. PGIC Systems are an example of Progressive Systems.
“Public Domain Games” has the meaning ascribed in the definition of Game Play.
“SMI Game Play” means Game Play that was or is, in the past, present or the future, either owned, patented, trade dressed, copyrighted (registered or unregistered), trademarked (registered or unregistered), leased, sold, distributed, licensed or otherwise placed, in the past, present or in the future by SMI, or for which SMI has at least exclusive commercialization rights for legal casino gaming venues or other lawful gaming establishments in any form in at least one country in the world or in at least one State in the United States (“Exclusive Commercialization Rights”); provided that (i) any Game Play, which in the future, becomes either owned, patented, copyrighted (registered or unregistered), trademarked (registered or unregistered), leased, sold or licensed by SMI, or for which SMI obtains Exclusive Commercialization Rights shall become an SMI Game Play (it being understood however, that SMI has no obligation (x) to remove any Progressive Systems from a third party provider on such Game Play, (y) to terminate any agreement regarding a Progressive System from a third party provider on such Game Play, or (z) to make royalty payments to PGIC regarding a Progressive System from a third party provider on such Game Play); and (ii) any SMI Game Play which SMI subsequently either no longer owns, leases, distributes, licenses or has Exclusive Commercialization Rights, and to which SMI has lost all of its Intellectua1 Property rights to throughout the world (whether by transfer, expiration or invalidation) shall, as of such time, no longer be considered a SMI Game Play (it being understood however, that any PGIC System already installed or otherwise in use on any such SMI Game Play that ceases to be an SMI Game Play and which is generating revenue shall continue as if it is still an SMI Game Play until such PGIC System is removed). SMI Game Play does not include any Game Play of any of the Purchased Table Games.
“Software Assistance” means: the programming of Source Code and the creation of Executable Code in a Lab Ready form; and the changing of hardware designs and/or components in a Lab Ready form.
“Software Warrant Period” has the meaning ascribed in Section 9.2(a).
“Source Code” means the human-readable version of a software program that can be compiled into Executable Code.
“Specifications” means the State of the Art and the capabilities of a PGIC System as advertised and/or marketed by PGIC to End Users. In the case of Game Play which SMI requests PGIC to implement a PGIC System (“Game Specifications”), the Game
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Specifications shall include the dealing procedures, pay tables and the following with respect to any progressive award: the increment rate, the seed amount, and any other requested distribution of the wager used to fund a progressive award.
“State of the Art” means all of the following in regards to a PGIC System:
(a) Capable of networking at least 100 Licensee Products, including the ability to have multi-property linkage otherwise known as a wide area progressive;
(b) Generate reports of a PGIC System, including user and Licensee Product information;
(c) Generate tax reports for each player who wins from the progressive pool;
(d) A reasonably skilled technician following a published manual would be able to manually configure progressive pay tables; and
(e) PGIC Systems speeds and/or capabilities existing in the most current version in End User casinos as of August 31, 2007, and not slowed and/or restricted as a result of Updates, Improvements, Customizations and/or the connection of more than one Table Game to a PGIC System.
“Successful Install Date” means the successful implementation of a Lab Ready Game Manager version of the applicable Game Specification pursuant to Section 5.1 of this Agreement.
“System Costs” means, in accordance with GAAP, actual non-recurring and recurring Table Hardware, shipping, labor, travel, overhead, compliance/laboratory fees, parts and service costs necessary to implement the PGIC Systems or Game Manager onto Table Games; provided, however, that such costs shall not include PGIC System or Game Manager installation costs or service, which are allocated in good faith by SMI or PGIC relating to the license, distribution or placement of the PGIC System, Game Manager and Table Hardware. The System Costs is further described in Exhibit A with examples, which certain System Costs shall be subject to the Consumer Price Index (as published by the United States Department of Labor, Bureau of Labor Statistics) and adjusted on the anniversary of the Effective Date.
“Table Game” means any table game, including table games that are live and/or table games that are a multi-seat electronic methods of playing or simulating any table game (such as those electronic tables that are similar to SMI’s Table Master product), but which excludes for the sake of clarity any Progressive Systems. Provided, however that, the term Table Game shall be limited to live table games during the Term until PGIC terminates PGIC’s previous agreements with Table Max (attached in Exhibit F), including with a release to SMI to SMI’s reasonable satisfaction, which must occur within 150 days of the Effective Date.
“Table Hardware” means functionality located on or within the Table Game including but not limited to the following:
(a) Non-RFID wagering accepting devices or methods, including but not limited to slots and spots;
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(b) Aquarius Controller and/or any similar table controller; but shall not include: any such controller developed by PGIC as part of the PGIC CJS System that is not an Aquarius Controller;
(c) dealer controls;
(d) keypad assemblies;
(e) coin return shoots or chutes
(f) meters and/or other methods of displaying progressive amounts; and/or
(g) wiring and/or harnesses to connect (a) through (f)
“Term” has the meaning ascribed in Section 12.1.
“Territory” means the world.
“Updates” means any and all bug fixes, patches, error corrections, work-arounds, upgrades, updates, enhancements, compliance upgrades, major or minor or maintenance versions or releases, improvements, revisions or other modifications of or to the Licensed Software and/or SMI Game Play.
“User Documentation” means the user documentation furnished to Licensee by Licensor for distribution along with the Licensed Software to End Users or the user documentation for Game Manager and/or Table Hardware furnished to Licensor by Licensee for distribution along with the Game Manager and Table Hardware to End Users.
2. LICENSES
2.1 Licensed Software and User Documentation. Licensor grants to Licensee an exclusive (within the Field of Use; provided, however, that except as otherwise provided herein, such exclusivity in no way limits PGIC’s rights to develop, make, have made, use, sell, distribute, offer for sale, lease, import, export, or otherwise dispose of the PGIC Systems, nor shall it limit PGIC’s ability to deal directly with End Users for the placement, lease, license, sale, installation, maintenance, etc. of the PGIC CJS System), non-transferable (except as permitted under Section 14.2), terminable (but only in accordance with Section 12.2(a)), royalty-bearing license to reproduce, use, configure, install, perform, lease, display and/or distribute by all means now known or hereafter discovered tangible copies of the Licensed Software, the software associated with PGIC Non-CJS Systems and User Documentation, in Executable Code only, on a stand-alone basis or as integrated/bundled with the Licensee Products and Public Domain Games, directly to End Users in the Territory pursuant to an End User License Agreement that satisfies the requirements of Section 2.5 and solely within the Field of Use.
2.2 License Restrictions. Licensee acknowledges that the Licensed Software and its structure, organization, and Source Code constitute valuable trade secrets of Licensor and its suppliers. Accordingly, except as expressly allowed under Section 2.1 (if at all), Licensee and except in regards to the PGIC Transferred Products (including but
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not limited to Game Manager and the Table Hardware so transferred) agrees not to (a) modify, adapt, alter, translate, or create derivative works from the Licensed Software; (b) merge the Licensed Software with other software; (c) distribute, sublicense, lease, rent, loan, or otherwise transfer the Licensed Software (except to assign its rights in accordance with Section 13.1) to any third party; or (d) reverse engineer, decompile, disassemble, or otherwise attempt to derive the Source Code for the Licensed Software. Licensee must reproduce, on all copies made by or for Licensee, and must not remove, alter, or obscure in any way all proprietary rights notices (including copyright notices) of Licensor or its suppliers on or within the copies of the Licensed Software and the User Documentation furnished by Licensor to Licensee. If a Release Condition occurs under the Escrow Agreement, then Licensee may modify the Licensed Software to the extent necessary to maintain existing installations with End Users.
2.3 Trademark License. Subject to the terms and conditions of this Agreement, Licensor grants to Licensee a non-exclusive, non-transferable (except as permitted under Section 13.1), terminable (but only in accordance with Section 11.3), royalty-free license (without the right to grant sublicenses) to use and reproduce the Licensor Marks solely in connection with marketing the Licensed Software in the Territory. Licensee agrees to state in appropriate places on all materials using the Licensor Marks that the Licensor Marks are trademarks of Licensor and to include the symbol ™ or ® as appropriate. Licensor grants no rights in the Licensor Marks other than those expressly granted in this Section 2.3. Licensee acknowledges Licensor’s exclusive ownership of the Licensor Marks. Licensee agrees not to take any action inconsistent with such ownership and to cooperate, at Licensor’s request and expense, in any action (including the conduct of legal proceedings) which Licensor deems necessary or desirable to establish or preserve Licensor’s exclusive rights in and to the Licensor Marks. Except for any trademarks or trade names currently being used by or are registered to Licensee, Licensee will not adopt, use, or attempt to register any trademarks or trade names that are confusingly similar to the Licensor Marks or in such a way as to create combination marks with the Licensor Marks. Licensee will provide Licensor with samples of all products and marketing materials that contain the Licensor Marks prior to their public use, distribution, or display for Licensor’s quality assurance purposes and Licensor shall approve or disapprove of such samples within fifteen (15) business days of Licensee’s submission. In the event Licensor fails to disapprove of such samples within said time period, such use, distribution, or display of Licensor Marks shall be deemed approved. Licensee agrees to make reasonable efforts to submit such samples as far in advance as possible. At Licensor’s request, Licensee will modify or discontinue any use of the Licensor Marks if Licensor determines that such use does not comply with Licensor’s then-current trademark usage policies and guidelines.
2.4 Ownership of Licensed Software. Nothing in this Section 2.4 shall limit and/or detract from SMI’s ownership rights in the PGIC Transferred Products including but not limited to: Game Manager and the Table Hardware which is a part of the PGIC Transferred Products. The Licensed Software, the software associated with PGIC Non CJS-Systems, and User Documentation, and all worldwide Intellectual Property
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Rights therein, are the exclusive property of Licensor and its suppliers. All rights in and to the Licensed Software and the software associated with the PGIC Non CJS-Systems not expressly granted to Licensee in this Agreement are reserved by Licensor and its suppliers. Except as may otherwise be provided in the Progressive License nothing in this Agreement will be deemed to grant, by implication, estoppel, or otherwise, a license under any of Licensor’s existing or future patents; Licensor agrees that it will not assert any of its rights under such patents against Licensee based upon the use, distribution, and sublicensing by Licensee or its licensees of the Licensed Software and/or the software associated with the PGIC Non-CJS Systems as permitted by this Agreement.
2.5 End User Agreements. Before distributing the Licensed Software and User Documentation to any End User, Licensee must enter into a binding written agreement with such End User containing at least the items as provided in Exhibit B (Form of End User Agreement). Licensee will enforce each such agreement with at least the same degree of diligence that Licensee uses to enforce similar agreements for its own products or other software products that it distributes, but in no event less than reasonable efforts. Licensee will immediately notify Licensor if Licensee becomes aware of any breach of any such agreement relating to the Licensed Software. Upon the termination of any such agreement, Licensee will use reasonable efforts to obtain from the End User all copies of the Licensed Software and User Documentation in such End User’s possession or control.
2.6 Cross Over Code License. SMI hereby grants PGIC a worldwide irrevocable, perpetual, assignable, sub-licensable limited license to the Cross Over Code only for the limited use in connection with PGIC Systems. Additionally, PGIC shall own the derivative works that PGIC creates from the Cross Over Code whether created in the past and/or in the future using the Cross Over Code; provided that such derivative work of the Cross Over Code is not a part of or related to the PGIC Transferred Products acquired by SMI, in which event such derivative work will be exclusive property of SMI, with a license to Licensor as provided above.
2.7 Game Manager License. During the Term of this Agreement, SMI hereby grants PGIC a worldwide, terminable (but only in accordance with Section 12.2(b), non-assignable, and non-transferrable (other than to an Acquirer of PGIC during the Term) sub-licensable (only to an End User) limited license to Game Manager transferred as part of PGIC Transferred Products (including the Aquarius Controller) for the limited use in connection with the PGIC Systems Field of Use.
2.8 Before distributing Game Manager and/or Table Hardware and User Documentation to any End User, PGIC must enter into a binding written agreement with such End User containing at least the items as provided in Exhibit B (Form of End User Agreement). PGIC will enforce each such agreement with at least the same degree of diligence that PGIC uses to enforce similar agreements for its own products or other software products that it distributes, but in no event less than reasonable efforts. PGIC will immediately notify SMI if PGIC becomes aware of any breach of any such agreement relating to Game Manager and/or Table Hardware. Upon the termination
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of any such agreement, PGIC will use reasonable efforts to obtain from the End User all copies of the and User Documentation in such End User’s possession or control.
2.9 Derivative Works for Game Manager and Table Hardware:
Any derivative works and/or Design created by PGIC pursuant to the licenses granted in 2.7:
(a) Shall be owned by SMI;
(b) Shall be delivered to SMI within 30 days after the Source Code, Design and/or Executable Code is approved by any United States or Canadian regulatory agency and/or GLI as a result of a regulatory submission by PGIC;
(c) For which regulatory approval is not required shall be delivered to SMI within 90 days of the installation at an End User.
2.10 SMI hereby grants PGIC a worldwide irrevocable, perpetual, assignable, sub-licensable limited license to the Table Hardware transferred to SMI as a part of the PGIC Transferred Products only for the limited use in connection with PGIC CJS Systems. During the Term, PGIC has a license to Table Hardware for use on PGIC Non CJS Systems.
3. DELIVERY
3.1 GENERALLY. PGIC shall deliver the Licensed Software to Licensee within five (5) days after the execution of this Agreement and the Closing of the Purchase Agreement, and pursuant to Article 5 below, shall work with SMI to have the PGIC Systems operational with SMI Game Play as provided herein.
3.2 SMI’S DELIVERY OBLIGATIONS. SMI shall provide PGIC with such information and materials (“SMI Materials”), and at such times, as reasonably requested by PGIC to enable PGIC to integrate the SMI Game Play with the PGIC Systems. The Game Specifications for several SMI Game Plays have already been provided. Any failure by SMI to provide such information or materials shall toll any delivery obligations of PGIC. In any such case, PGIC shall not be responsible for any reasonable delay in delivering items described in this Article 3 to the extent that such delay is directly attributable to SMI’s failure to provide SMI Materials. In the event any such failure to deliver SMI Materials would otherwise result in the payment obligations to PGIC hereunder to be delayed due to PGIC’s inability to meet its obligations hereunder, any such delay for twenty (20) days shall trigger SMI’s payment obligations hereunder and such amount shall be immediately due and payable.
4. SUPPORT
4.1 By Licensee. Licensee will be solely responsible for performing, in a manner consistent with good industry practice, all installation, training, support, and other services requested or required by End Users who obtain Game Manager and/or Table Hardware from Licensee. During the Term and thereafter for Game Manager and/or
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Table Hardware connected to Game Manager under lease to End Users until such Game Manager and/or such Table Hardware is removed, SMI shall provide maintenance and service of, and End User training and liaison services with respect to such Game Manager and/or such Table Hardware to End Users has been distributed hereunder.
4.2 By Licensor. In consideration for the royalty payments provided for herein, Licensor will be solely responsible for performing, in a manner consistent with good industry practice, all installation, training, support, and other services requested or required by End Users who obtain the PGIC Systems and Table Hardware from Licensor. During the Term and thereafter for PGIC Systems under lease to End Users until such PGIC Systems are removed, PGIC shall provide, maintenance and service of and End User training and liaison services with respect to a PGIC System to End Users to whom a PGIC System has been distributed hereunder by PGIC or SMI.
(a) During the Term, PGIC shall (at no charge during the Software Warranty Period, and at PGIC’s then-current rates after the Software Warranty Period), promptly provide all assistance reasonably requested by SMI to permit SMI to fully utilize its rights under this Agreement. Such assistance shall include, without limitation, the following: (i) ongoing telephone and email access to knowledgeable PGIC personnel who shall provide consultation and advice, as requested from time to time; (ii) onsite training of SMI personnel and/or End Users by qualified PGIC personnel, as the need requires; (iii) access to manufacturing equipment and processes at PGIC locations for observation and testing purposes; (iv) supervision of equipment installation at SMI’s or End Users’ locations; (v) initial and troubleshooting inspections by PGIC of equipment and manufacturing processes at SMI’s locations; and (vi) lists of present and potential suppliers.
(b) During the Term and thereafter for PGIC Systems under lease to End Users until such Licensed Products are removed, PGIC shall provide (at no charge during the Software Warranty Period, and at PGIC’s then-current rates after the Software Warranty Period), with respect to the PGIC Systems: (i) Updates and Improvements; (ii) any application development that enables the PGIC Systems to operate as intended (including without limitation the integration and mobilization of the PGIC Systems to operate the Licensee Products, and the installation of the infrastructure to enable End Users to utilize the PGIC Systems with the Licensee Products); (iii) Tier 2 Support Services to SMI telephonically; (iv) Tier 3 Support Services to SMI and/or any End User for onsite PGIC Systems; and (v) maintenance and support as reasonably requested by SMI from time to time. For purposes of this Section 4.2, “Tier 2 Support Services” shall mean a Tier 1 Support Service that SMI is unable to resolve with the training provided by PGIC, and “Tier 3 Support Services” shall mean technical support, including but not limited to source code changes, provided by PGIC with respect to any PGIC Systems deficiencies, documentation deficiencies or training deficiencies.
(c) Initial Training. At no additional cost (except for payment of expenses as provided below in subsection (d)), PGIC shall provide training on the use of the
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PGIC Systems, including without limitation, any Updates, Customizations and Improvements, to SMI’s sales representatives, programmers and technical support personnel at SMI’s location in Las Vegas, Nevada (or as otherwise agreed by the parties), covering sales, product and technical support topics. Such training shall be of sufficient quality and quantity to enable such personnel (i) to use all functions and to understand all features of the PGIC Systems for each Licensee Product and Public Domain Game, (ii) to copy, promote, market and distribute the PGIC Systems for each Licensee Product and Public Domain Game, and (iii) for technical support employees, to provide support to SMI’s distributors, resellers and End Users.
(d) Expenses. In connection with training provided by PGIC hereunder, SMI shall pay for all reasonable and documented travel and lodging expenses, of PGIC personnel.
5. FEES, ROYALTIES, AND PAYMENT
5.1 Advance. SMI shall pay PGIC a $3 million, fully recoupable advance (the “Advance”) credited against royalties that are earned and received by SMI and that are otherwise due to PGIC from SMI. Such Advance shall be due and payable by SMI within ten (10) business days after the Effective Date.
5.2 Royalties.
(a) SMI Game Play. For SMI Game Play using the PGIC Systems or Game Manager, during the Term, provided that PGIC has not materially breached any of its obligations under this Agreement and subject to Sections 5.1, 5.2(d) and 5.3(a), SMI shall pay to PGIC a royalty, calculated on a monthly basis, the greater of: (i) fifteen percent (15%) of the GAAP Recurring Revenue, or (ii) $100 per month per such SMI Game Play (i.e. per Table Game) leased or licensed for use by an End User. Examples of the SMI Game Play royalty calculations are set forth in Exhibit C.
(b) Non-SMI Game Play. For Non-SMI Game Play using the PGIC Systems or Game Manager during the Term, and provided that neither Party has materially breached any of its obligations under this Agreement and subject to Sections 5.1, 5.2(d) and 5.3(a), each Party shall pay to the other Party a royalty for such Party’s lease or license of such Non-SMI Game Play using the PGIC Systems or Game Manager. Such royalty shall be, calculated on a monthly basis, fifty percent (50%) of the GAAP Recurring Revenue.
(c) Payments of Royalties. Each Party shall pay to the other Party the royalties under Sections 5.2(a) and 5.2(b), as applicable, within sixty (60) days following the end of each calendar quarter (i.e., sixty (60) days after March 30th, June 30th, September 30th and December 31st).
(d) Purchased Table Games. Notwithstanding the foregoing or anything to the contrary in this Agreement, no royalties shall be paid for any use of any PGIC
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System and/or Game Manager on any Purchased Table Games. Any payments for Purchased Table Games shall be addressed in the Purchase Agreement. This exclusion from the payment of royalties includes additional placement of such Purchased Table Games by SMI. For example, if SMI places a new Progressive Texas Hold ‘em® game using PGIC Systems or Game Manager, no ro
