TRANSITION
SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this
“Agreement”) is entered into this 29 day of December,
2005, by and between Games, Inc., a Delaware corporation
(“Games”), and Lottery Corporation, a Delaware
corporation (“Lottery,” and, together with Games, each
a “Party” and collectively, the
“Parties”).
RECITALS:
WHEREAS, the Board of Directors of Games
has determined that it is in the best interests of Games to
separate the Lottery Business (as defined below) and the Games
Business (as defined below) into two independent public companies,
on the terms and subject to the conditions set forth in the
Separation Agreement (as defined below), in order to resolve issues
related to the allocation of capital and management resources
between the Lottery Business and the Games Business, and to give
Lottery greater flexibility to manage, invest in, and expand the
Lottery Business while ensuring that Games can focus its time and
resources on the development of the Games Business;
WHEREAS, in order to effectuate the
foregoing, Games and Lottery have entered into a Separation and
Distribution Agreement of even date herewith (the “Separation
Agreement”), pursuant to which and subject to the terms and
conditions set forth therein, the Lottery Business shall be
separated from the Games Business and the Lottery Common Stock (as
defined below) shall be distributed on a pro rata basis to Games
shareholders; and
WHEREAS, in connection therewith and in
order to ensure an orderly transition under the Separation
Agreement, Games desires to provide, through the Games Service
Providers (as defined below), to Lottery and its relevant
Affiliates, as applicable, with certain transition services (the
“Games Services”) with respect to the operation of
Lottery and its relevant Affiliates following the Distribution Date
(as defined below), and Lottery desires to provide, through the
Lottery Service Providers (as defined below), to Games and its
Affiliates, as applicable, with certain transition services (the
“Lottery Services”) with respect to the operation of
Games and its relevant Affiliates following the Distribution Date,
as such Games Services and Lottery Services are more fully
described in separate schedules (all such schedules, including any
appendices, exhibits or other attachments thereto, the
“Schedules,” and each, a “Schedule”) to
this Agreement.
NOW, THEREFORE, in consideration of the
promises and covenants set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Games and Lottery hereby agree as
follows:
ARTICLE
I
DEFINITIONS
1.1
Capitalized terms used herein, but not
defined herein shall have the meanings assigned to such terms in
the Separation Agreement, as it may be amended from time to time
in
accordance with the terms thereof, and
the following terms shall have the meanings set forth
below:
“Additional Required Games
Service” shall have the meaning assigned to it in
Section 2.5.
“Additional Required Lottery
Service” shall have the meaning assigned to it in
Section 2.6.
“Lottery” shall have the
meaning assigned to it in the preamble.
“Lottery Service Providers”
means Lottery, its Affiliates and any third party, in each case, to
the extent such entity is providing the Lottery Services on behalf
of Lottery pursuant to any Schedule.
“Lottery Services” shall have
the meaning assigned to it in the recitals.
“Lottery Transition Plan”
shall have the meaning assigned to it in
Section 2.9(b).
“Games” shall have the
meaning assigned to it in the preamble.
“Games Service Providers”
means Games, its Affiliates and any third party, in each case, to
the extent such entity is providing the Games Services on behalf of
Games pursuant to any Schedule.
“Games Services” shall have
the meaning assigned to it in the recitals.
“Games Transition Plan” shall
have the meaning assigned to it in Section 2.9(c).
“Best Efforts” means with
respect to either Party, the efforts that such Party would use on
behalf of itself to enforce its rights against a third party or
cause such third party to honor its obligations to such Party,
under any agreement with such third party.
“Force Majeure Event” means
any act of God, fire, flood, storm or explosion; any strike,
lockout or other labor disturbance; any material shortage of
facilities, labor, materials or equipment; any delay in
transportation, breakdown or accident; any Law; any riot, war, act
of terror, rebellion or insurrection; any embargo or fuel or energy
shortage; any interruption in telecommunications or utilities
services; or any other event, in each case beyond the control of a
Party and that actually prevents, hinders or delays such Party from
performing its obligations under this Agreement.
“Loss” shall have the meaning
assigned to it in Section 5.8.
“Party” or
“Parties” shall have the meaning assigned to such terms
in the preamble.
“Prime Rate” means the
“prime rate” published in the “Money Rates”
section of The Wall Street Journal. If The Wall Street Journal
ceases to publish the “prime rate,” then the Parties
shall mutually agree to an equivalent publication that publishes
such “prime rate,” and if
2
such “prime rate” is no
longer generally published or is limited, regulated or administered
by a Governmental Authority, then a comparable interest rate index
mutually agreed to by the Parties.
“Schedules” shall have the
meaning assigned to it in the recitals.
“Separation Agreement” shall
have the meaning assigned to it in the recitals.
“Service Provider” means the
Games Service Providers and/or the Lottery Service Providers, as
the context requires.
“Service Recipient” means
either Games, to the extent Games is receiving a service from an
Lottery Service Provider, or Lottery, to the extent Lottery is
receiving a service from an Games Service Provider, each as the
context requires.
“Services” means the Games
Services and/or the Lottery Services, as the context
requires.
“SOX” means the
Sarbanes-Oxley Act of 2002, as amended from time to
time.
“Taxing Authority” shall have
the meaning assigned to it in Section 3.5(a)(ii).
“Transaction Tax” shall have
the meaning assigned to it in Section 3.5(a)(i).
“Withheld Tax” shall have the
meaning assigned to it in Section 3.5(e).
1.2
General Interpretive Principles.
Words in the singular
shall include the plural and vice versa, and words of one gender
shall include the other gender, in each case, as the context
requires. The term “hereof,”
“herein,” “hereunder” and
“herewith” and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement and not
to any particular provision of this Agreement, and references to
Article, Section, paragraph, exhibit and Schedule are references to
the Articles, Sections, paragraphs, exhibits and Schedules to this
Agreement unless otherwise specified. The word
“including” and words of similar import when used in
this Agreement shall mean “including, without
limitation,” unless otherwise specified. Any reference
to any federal, state, local or non-U.S. statute or Law shall be
deemed to also refer to all rules and regulations promulgated
thereunder, unless the context otherwise requires.
ARTICLE
II
TRANSITION SERVICES
2.1
Games Services.
During the term of this
Agreement, Games shall provide, or shall cause one or more Games
Service Providers to provide, to Lottery and its applicable
Affiliates (such Affiliates as determined by Lottery in its sole
discretion), the Games Services, as such Games Services are more
particularly described in Schedule A attached hereto.
2.2
Lottery Services.
During the term of this
Agreement, Lottery shall provide, or shall cause one or more
Lottery Service Providers to provide, to Games and its applicable
Affiliates (such Affiliates as determined by Games in its sole
discretion), the Lottery Services, as such Lottery Services are
more particularly described in Schedule B attached
hereto.
3
2.3
Standard of Performance for Games
Services.
(a)
Games shall provide, or shall cause to be
provided, the Games Services in a manner and at a level that is
substantially similar in all material respects to the typical
manner and average level at which such Games Services were provided
to Lottery or its Affiliate during the three-month period prior to
the Distribution Date, except to the extent that (i) a
different manner or level of an Games Service is set forth in a
Schedule, in which case such Games Service shall be provided in the
manner and level as set forth in each such applicable Schedule or
(ii) such Games Service has not been provided during the
three-month period prior to the Distribution Date and the
applicable Schedule does not set forth a manner or level at which
such Games Service is to be provided, in which case, such Games
Service shall be provided in the same manner and at the same level
at which such Games Service was provided to Lottery or its
Affiliate on the last occasion (or during the three-month period
prior to the last occasion) such Games Service was provided to
Lottery or its Affiliate.
(b)
Notwithstanding Section 2.3(a),
Games may change from time to time the manner and level at which
any Games Service is provided to Lottery, to the extent that Games
is making a similar change in performing a substantially similar
service for itself or its Affiliates and if Games provides Lottery
substantially the same notice (in content and timing) as Games
provides itself and its Affiliates with respect to such change;
provided, that, Games may not make any change to the manner and
level at which any Games Service is provided to Lottery if such
change would result in a violation, or cause Lottery to be in
violation, of applicable Law; provided, further, if Lottery can
demonstrate, in accordance with the terms of this Agreement, that
such change is not commercially reasonable and Lottery has suffered
a material financial harm as a result of such change, Games shall
be required to restore the manner and level at which such Games
Service is provided to Lottery to the manner and level required by
Section 2.3(a). No such change shall affect the fees and
expenses for the applicable Games Service.
(c)
Subject to Section 5.5, in no event
shall Games be liable or accountable, in damages or otherwise, for
any error of judgment or any mistake of fact or Law or for any
action or omission in connection with the provision of the Games
Services by Games or any Games Service Provider that Games or such
Games Service Provider took or refrained from taking in good faith
hereunder, except in the case of Games or such Games Service
Provider’s intentional breach, fraud, gross negligence or
willful misconduct.
2.4
Standard of Performance for Lottery
Services.
(a)
Lottery shall provide, or shall cause to
be provided, the Lottery Services in a manner and at a level that
is substantially similar in all material respects to the typical
manner and average level at which such Lottery Services were
provided to Games or its Affiliate during the three-month period
prior to the Distribution Date, except to the extent that
(i) a different manner or level of an Lottery Service is set
forth in a Schedule, in which case such Lottery Service shall be
provided in the manner and level as set forth in each such
applicable Schedule or (ii) such Lottery Service has not been
provided during the three-month period prior to the Distribution
Date and the applicable Schedule does not set forth a manner or
level at which such Lottery Service is to be provided, in which
case, such Lottery Service shall be provided in the
4
same manner and at the same level at
which such Lottery Service was provided to Games or its Affiliate
on the last occasion (or during the three-month period prior to the
last occasion) such Lottery Service was provided to Games or its
Affiliate.
(b)
Notwithstanding Section 2.4(a),
Lottery may change from time to time the manner and level at which
any Lottery Service is provided to Games, to the extent that
Lottery is making a similar change in performing a substantially
similar service for itself and its Affiliates or if Lottery
provides Games substantially the same notice (in content and
timing) as Lottery provides itself and its Affiliates with respect
to such change; provided, that, Lottery may not make any change to
the manner and level at which any Lottery Service is provided to
Games if such change would result in a violation, or cause Games to
be in violation, of applicable Law; provided, further, if Games can
demonstrate, in accordance with the terms of this Agreement, that
such change is not commercially reasonable and Games has suffered a
material financial harm as a result of such change, Lottery shall
be required to restore the manner and level at which such Lottery
Service is provided to Games to the manner and level required by
Section 2.4(a). No such change shall affect the fees and
expenses for the applicable Lottery Service.
(c)
Subject to Section 5.6, in no event
shall Lottery be liable or accountable, in damages or otherwise,
for any error of judgment or any mistake of fact or Law or for any
action or omission in connection with the provision of the Lottery
Services by Lottery or any Lottery Service Provider that Lottery or
such Lottery Service Provider took or refrained from taking in good
faith hereunder, except in the case of Lottery’s or such
Lottery Service Provider’s intentional breach, fraud, gross
negligence or willful misconduct.
2.5
Omitted Games Services.
If, from time to time during
the term of this Agreement, Lottery determines that the provision
of an additional service is reasonably necessary to enable Lottery
and its Affiliates to operate on a stand-alone basis, and such
service (whether or not then currently being provided) is not
included in a Schedule (such service, including without limitation
the right to use, or the use of, any Asset in connection with such
service, hereinafter referred to as an “Additional Required
Games Service”), then Lottery may give written notice thereof
to Games in accordance with Section
7.1 hereof. Upon receipt of such notice by Games, if Games is
willing to provide such Additional Required Games Service, the
Parties will negotiate in good faith a schedule setting forth the
Additional Required Games Service, the terms and conditions
(including any service level requirements) for the provision of
such Additional Required Games Service and the fees payable by
Lottery for such Additional Required Games Service, such fees to be
determined on an arms’-length basis.
2.6
Omitted Lottery Services.
If, from time to time during
the term of this Agreement, Games determines that the provision of
an additional service is reasonably necessary to enable Games and
its Affiliates to operate on a stand-alone basis, and such service
(whether or not then currently being provided) is not included in a
Schedule (such service, including without limitation the right to
use, or the use of, any Asset in connection with such service,
herein after referred to as an “Additional Required Lottery
Service”), then Games may give written notice thereof to
Lottery in accordance with Section 7.1 hereof. Upon receipt of
such notice by Lottery, if Lottery is willing to provide the
Additional Required Lottery Service, the Parties will negotiate in
good faith a schedule setting forth the Additional Required Lottery
Service, the terms and
5
conditions (including any service level
requirements) for the provision of such Additional Required Lottery
Service and the fees payable by Games for such Additional Required
Lottery Service, such fees to be determined on an
arms’-length basis.
2.7
Interruption of
Services.
(a)
If, due to a Force Majeure Event, Games
or an Games Service Provider is unable, wholly or partially, to
perform its obligations hereunder, then Games shall be relieved of
liability and shall suffer no prejudice for failing to perform or
comply during the continuance and to the extent of such whole or
partial inability to perform its obligations hereunder so caused by
such Force Majeure Event; provided, that, (i) Games gives
Lottery prompt notice, written or oral (but if oral, promptly
confirmed in writing) of such whole or partial inability to perform
its obligations hereunder and a reasonably detailed description of
the cause thereof and (ii) in the event such whole or partial
inability to perform its obligations hereunder is a result of Games
or such Games Service Provider’s capacity or similar
limitations, with respect to the allocation of such limited
resources, Lottery and its Affiliates shall be treated no less
favorably by Games or such Games Service Provider than Games or any
Affiliate of Games. If Games fails to promptly give notice of such
Force Majeure Event, then Games shall only be relieved from such
performance or compliance from and after the giving of such notice.
Games shall or shall cause the applicable Games Service Provider(s)
to use its reasonable best efforts to remedy the situation caused
by such Force Majeure Event and remove, so far as possible and with
reasonable timeliness, the cause of its inability to perform or
comply. Games shall give Lottery prompt notice of the cessation of
the Force Majeure Event.
(b)
If, due to a Force Majeure Event, Lottery
or an Lottery Service Provider is unable, wholly or partially, to
perform its obligations hereunder, then Lottery shall be relieved
of liability and shall suffer no prejudice for failing to perform
or comply during the continuance and to the extent of such whole or
partial inability to perform its obligations hereunder so caused by
such Force Majeure Event; provided, that, (i) Lottery gives
Games prompt notice, written or oral (but if oral, promptly
confirmed in writing) of such whole or partial inability to perform
its obligations hereunder and a reasonably detailed description of
the cause thereof and (ii) in the event such whole or partial
inability to perform its obligations hereunder is a result of
Lottery’s or such Lottery Service Provider’s capacity
or similar limitations, with respect to the allocation of such
limited resources, Games and its Affiliates shall be treated no
less favorably by Lottery or such Lottery Service Provider than
Lottery or any Affiliate of Lottery. If Lottery fails to promptly
give notice of such Force Majeure Event, then Lottery shall only be
relieved from such performance or compliance from and after the
giving of such notice. Lottery shall or shall cause the applicable
Lottery Service Provider(s) to use its reasonable best efforts to
remedy the situation caused by such Force Majeure Event and remove,
so far as possible and with reasonable timeliness, the cause of its
inability to perform or comply. Lottery shall give Games prompt
notice of the cessation of the Force Majeure Event.
2.8
Access.
(a)
Lottery shall, and shall cause its
applicable Affiliates to, make available on a timely basis to each
Games Service Provider such Information reasonably requested by
such Games Service Provider to enable such Games Service Provider
to provide the Games Services.
6
Lottery shall, and shall cause its
applicable Affiliates to, provide to the Games Service Providers
reasonable access to the premises of Lottery and such Affiliates
and the systems, software and networks located therein, to the
extent necessary for the purpose of providing the Games Services.
Games shall ensure that it and the other Games Service Providers
comply with applicable Law and Lottery’s security and other
policies and procedures, as may be provided to Games by Lottery in
writing from time to time.
(b)
Games shall, and shall cause its
applicable Affiliates to, make available on a timely basis to each
Lottery Service Provider such Information reasonably requested by
such Lottery Service Provider to enable such Lottery Service
Provider to provide the Lottery Services. Games shall, and shall
cause its applicable Affiliates to, provide to the Lottery Service
Providers reasonable access to the premises of Games and such
Affiliates and the systems, software and networks located therein,
to the extent necessary for the purpose of providing the Lottery
Services. Lottery shall ensure that it and the other Lottery
Service Providers comply with applicable Law and Games security and
other policies and procedures, as may be provided to Lottery by
Games in writing from time to time.
2.9
Transition of
Responsibilities.
(a)
Each Party agrees to use its good faith
efforts to reduce or eliminate its and its Affiliates’
dependency on each Service as soon as is reasonably practicable.
Games agrees to cooperate with Lottery to facilitate the smooth
transition of responsibility for the Games Services to Lottery or
any third party. Lottery agrees to cooperate with Games to
facilitate the smooth transition of responsibility for the Lottery
Services to Games or any third party.
(b)
As promptly as practicable, Games and
Lottery will agree in good faith to a plan for Lottery to assume
responsibility or eliminate the need for the provision of each
Games Service (the “Lottery Transition Plan”). The
Lottery Transition Plan will contain a schedule of transition
events, including the expected date by which the Lottery Transition
Plan will be completed, any training that will be needed by Lottery
and the estimated costs and expenses, if any, to be paid by Lottery
to Games with respect to such training and other services that
Games agrees to provide to Lottery in order to facilitate the
completion of the Lottery Transition Plan.
(c)
As promptly as practicable, Games and
Lottery will agree in good faith to a plan for Games to assume
responsibility or eliminate the need for the provision of each
Lottery Service (the “Games Transition Plan”). The
Games Transition Plan will contain a schedule of transition events,
including the expected date by which the Games Transition Plan will
be completed, any training that will be needed by Games and the
estimated costs and expenses, if any, to be paid by Games to
Lottery with respect to such training and other services that
Lottery agrees to provide to Games in order to facilitate the
completion of the Games Transition Plan.
ARTICLE
III
FEES AND EXPENSES
3.1
Fees and Expenses.
The fees and expenses for
each of the Services to be provided hereunder are set forth in each
Schedule.
7
3.2
Billing and Payment.
Amounts payable in respect of
Services under this Agreement shall be invoiced to the Party
receiving such Services monthly in arrears and paid to the Party
providing such Services, as directed by such providing Party, which
amounts shall be due within 30 days after the date of
invoice.
3.3
Additional Costs.
(a)
Lottery shall reimburse Games for the
costs
