EXHIBIT 10.9
DRAFT OF SEPTEMBER 29, 1997
SMART CARD SYSTEM AGREEMENT
THIS SMART CARD SYSTEM AGREEMENT is made and entered into as of the 1st
day of September, 1997, by and between PRECIS SMART CARD SYSTEMS, INC., an
Oklahoma corporation ("Precis") and CHICAGO WHITE SOX, LTD., an Illinois
limited partnership (the "White Sox").
In consideration of the mutual terms and provisions of this Agreement
and other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Precis and the White Sox agree as follows:
1. RECITALS. Precis is an integrated circuit card, or "smart card,"
application development firm which has developed applications for smart cards
using a proprietary closed-area stored-value system called PRECISCACHE-TM-. The
White Sox is the owner of a Major League Baseball team which plays its home
games at ▇▇▇▇▇▇▇▇ Park in Chicago, Illinois, which is owned by the Illinois
Sports Facilities Authority, a political subdivision body politic and
municipal corporation ("ISFA"). The White Sox desires to have Precis design
and implement a closed-area stored-value system utilizing the PRECISCACHE-TM-
system and smart cards for the White Sox at ▇▇▇▇▇▇▇▇ Park. The smart cards
(the "Cards") will be designed as a form of payment for food and merchandise
at ▇▇▇▇▇▇▇▇ Park but may be sold to collectors. The parties acknowledge and
agree that Exhibit A, as amended from time to time by the parties, shall
constitute the description of the intended operation and performance (the
"Application") of the System (as defined in Paragraph 4(b)). In the event of
any inconsistency between the express terms of this Agreement and the
description set forth in Exhibit A, the terms of this Agreement will control.
The parties further acknowledge that while this Agreement is dated as of
September 1, 1997, the parties have, in fact, been working together on the
matters herein described for several months and accordingly this Agreement
sets forth the relative rights and obligations of the parties with respect to
such matters without regard to whether they in fact incurred prior to the
effective date of this Agreement or subsequent thereto.
2. ENGAGEMENT OF PRECIS. The White Sox hereby engages Precis to design,
develop, install, implement, and maintain the System so as to operate and
perform as described in the Application, subject to the terms and conditions
contained in this Agreement. Precis hereby accepts such engagement.
3. TERM. The term of this Agreement shall commence on the date first
above written and shall end on November 30, 2001, unless sooner terminated as
provided herein. The date on which this Agreement terminates is sometimes
referred to as the "Termination Date."
4. DUTIES OF PRECIS. During the term of this Agreement, Precis shall
perform the following duties:
(a) PROCESS AND SYSTEMS ANALYSIS. Precis is currently performing a
process and systems analysis of ▇▇▇▇▇▇▇▇ Park and the point-of-sale computer
system previously installed by Tangent Associates, Inc. ("Tangent") and
currently utilized by Illinois Sportservice ("Sportservice") in its
operations at ▇▇▇▇▇▇▇▇ Park. In order to perform the process and systems
analysis, representatives of Precis are (i) meeting with representatives of
Tangent in order to determine the appropriate upgrades, enhancements,
additions, and replacements to the existing point-of-sale computer system,
and the possible placement of point-of-sale computer hardware at additional
locations in ▇▇▇▇▇▇▇▇ Park; (ii) meeting with representatives of Sportservice
to determine purchase flow, purchase points and other requirements of
Sportservice, and (iii) meeting with representatives of the White Sox to
determine the requirements for the Application, including requirements for
use of the System infrastructure and sales of the smart cards, determination
of smart card vending sites, outside usage locations, if any, smart card
production requirements and other requirements. Precis shall share all of the
results thereof with White Sox. Precis is performing the process and systems
analysis at its sole expense.
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(b) INSTALLATION OF THE SYSTEM. Upon completion of the process and
systems analysis, Precis shall design, develop, and install a System (as
hereinafter defined) at ▇▇▇▇▇▇▇▇ Park in accordance with and as necessary to
accomplish the Application, and shall in connection therewith perform such
testing of the System from time to time as the White Sox shall request.
Installation, testing, and start-up of the System shall be substantially in
accordance with the timetable set by the parties. All hardware and
communications equipment necessary or appropriate to implement the
Application, including Card dispenser equipment, is referred to in this
Agreement as the "Hardware," and the software, including the programs,
materials and documentation, to be provided by Precis in order to implement
the Application is referred to herein as the "Software." The parties
acknowledge that while all of the Card dispenser equipment will accept cash,
some of the dispensers now being installed will not accept credit cards.
Precis agrees, at its expense, to use its reasonable best efforts to retrofit
all of the Card dispenser equipment to accept credit cards by no later than
two (2) weeks prior to the start of the 1998 Major League Baseball season.
The "Hardware" and "Software" shall also include all hardware and software
(including necessary reconciliation software interface and software interface
between the point-of-sale system and the balance of the System, the
development, installation and testing of the communication protocol and link
of the point-of-sale system to the balance of the System and the installation
of readers and mounts to the point-of-sale system), necessary or appropriate
to upgrade, enhance, add to and/or replace the point-of-sale system so that
such point-of-sale system will function in conjunction with the balance of
the System as described in the Application. Without limiting the generality
of the foregoing, the Hardware will include the equipment described on
Exhibit B hereto. The "Hardware" and "Software" shall collectively be
referred to as the "System," and the point-of-sale system, as so upgraded,
added to, enhanced, and/or replaced, when separately referred to from the
balance of the System, shall be referred to as the "New Tangent System." In
installing the System and otherwise implementing the Application, Precis'
duties shall include coordination with Sportservice to ensure appropriate
access for installation of the New Tangent System. Prior to the acquisition
of any equipment and/or service from third-party vendors, Precis will provide
a list of such vendors to White Sox and Precis will not deal with any vendors
to whom White Sox object. All of Precis' duties pursuant to this subparagraph
4(b), including, without limitation, the design, development, providing and
installation of the System, shall be at Precis' sole cost, and Precis shall
also be responsible for all sales and use taxes applicable to the purchase
and installation of the System. In connection with the installation of the
System or any part thereof, Precis covenants that it will not disrupt the
current concession and merchandise operations of the White Sox and
Sportservice. Precis shall also provide White Sox with user manuals provided
by manufacturers of the Hardware.
(c) TRAINING. Precis shall at its expense provide training to
employees of the White Sox and Sportservice so that such employees may
operate the System by such time in the 1997 Season as may be acceptable to
White Sox. Thereafter, during the term of this Agreement, Precis shall at its
expense regularly provide training to employees of the White Sox and
Sportservice (or its successor) as necessary to ensure the continuous
operations of the System in accordance with the Application.
(d) MAINTENANCE, SUPPORT AND UPGRADES FOR THE SYSTEM. Until such time
as the System is installed and performing as described in the Application
with accuracy, reliability, timeliness, and stability acceptable to White
Sox, Precis shall at its sole cost provide such personnel and other support,
on location in ▇▇▇▇▇▇▇▇ Park and elsewhere, as the White Sox may request.
Thereafter, during the term of this Agreement, Precis shall perform the
following duties (the "Subparagraph 4(d) Duties"): (i) Precis shall provide
help desk services via telephone to the White Sox from 8:00 a.m. to 5:00 p.m.
every day during the period from March 15 to November 1, with response times
of less than one hour per call; (ii) on days when ▇▇▇▇▇▇▇▇ Park is open to
the public, Precis shall have at least one employee onsite at ▇▇▇▇▇▇▇▇ Park
from three hours before the game or other public event until two hours after
the game or other event for support and maintenance services, provided,
however, that after 1997 other arrangements may be made with the consent of
both parties; (iii) subject to subparagraphs (e) and (f) below, Precis shall
serve as a consultant to and shall assist the White Sox in connection with
the selection and purchase of all hardware to upgrade, add to, or replace the
Hardware including Hardware damaged or destroyed by fans or on account of the
negligence or intentional action of White Sox employees; (iv) Precis shall
replace all Hardware that wears out or otherwise becomes unusable on account
of ordinary usage, including weather-related wear and tear or damages, and if
such replacement Hardware requires additional Software, Precis shall also
develop and supply such additional Software; (v) not less than annually,
Precis shall upgrade the System to insure that the Application's security and
integrity is at the level
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acceptable to White Sox, including reprogramming the Software as it deems
necessary to minimize the possibility of fraudulent use of Cards; (vi) Precis
shall at its cost check and replace batteries (replacement batteries, as
needed, to be at White Sox' cost) and other consumable supplies for the
System as needed; (vii) in advance of the opening of each Major League
Baseball season during the term of this Agreement, Precis shall provide such
personnel and other support as shall be requested by White Sox or
Sportservice (or its successor) in order to get the System up and running and
ready for operation during the upcoming season; (viii) subject to
subparagraph (e) below, Precis shall offer to provide White Sox, free of
charge, all enhancements to the Software developed from time to time; and
(ix) Precis shall provide reasonable additional support and maintenance
services in the ordinary course of business upon request by the White Sox.
During the term of this Agreement, Precis' Subparagraph 4(d) Duties shall be
performed at its sole cost, provided that White Sox shall make Cards
available for purchase by Precis as provided in Paragraphs 7 and 8. The
commissions, if any, earned by Precis on Cards purchased by Precis shall be
its sole compensation for the performance of its Subparagraph 4(d) Duties. If
in respect of any year during the term hereof after 1997, White Sox fails to
make Cards available for purchase by Precis as aforesaid, (and continuing
after the term of this Agreement so long as the License described in
Paragraph 11 is in effect) then the White Sox agrees to pay Precis its
then-current fees for the performance of its Subparagraph 4(d) Duties
provided that such fees are commercially reasonable.
(e) UPGRADES, ADDITIONS, ETC. TO HARDWARE; PURCHASE TERMS. Separate
and apart from its obligation to provide replacement Hardware pursuant to
clause (iv) of subparagraph 4(d), Precis shall offer to White Sox the
opportunity to acquire upgrades, additions, etc. to the Hardware developed
from time to time, including upgrades, additions, etc. necessary to utilize
enhancements to the Software. The cost of acquiring any such upgrades,
additions, etc. shall be borne by White Sox so long as (i) with respect to
upgrades, additions, etc. to the Hardware necessary to utilize enhanced
Software, White Sox have the option of continuing to utilize the old Software
and Precis shall be prepared to provide full support services for the old
Software, and (ii) the System is otherwise operating and performing as
described in the Application to the White Sox' satisfaction without such
upgrades, additions, etc. to the Hardware. If and to the extent the
conditions described in clauses (i) and (ii) are not fulfilled, any such
upgrades, additions, etc. shall be at Precis' cost. When and as any Hardware
is replaced by Precis pursuant to this Agreement, (whether at its cost or
White Sox' cost), Precis shall be entitled to the Hardware being replaced
without any payment to White Sox. Precis shall be responsible for the cost of
removing and shipping such Hardware.
(f) PURCHASE OF HARDWARE. Any Hardware purchased and paid for by
White Sox, whether to replace Hardware damaged or destroyed by fans or White
Sox employees, or as upgrades and/or additions pursuant to Subparagraph 4(e),
shall be acquired directly from the manufacturer(s) thereof, without ▇▇▇▇-up
or similar charges by Precis. If and to the extent such manufacturer(s) allow
discounts, allowances, and/or rebates to Precis' customers, Precis shall
require such manufacturer(s) to make such discounts, allowances, and/or
rebates available to White Sox.
(g) PRODUCTION AND INITIALIZATION OF CARDS. Precis shall be
responsible for the production and initialization of all Cards, with value
denominations as determined by the White Sox (except as otherwise
specifically provided herein) and appropriate identifier information. The
general format and specifications of the Cards shall be as described in the
Application and as the parties shall otherwise agree. Precis shall select
such party or parties to produce the Cards as Precis in good faith determines
will assure the best product for each series. The Cards and the packaging
thereof shall contain such terms and conditions regarding the use of the
Cards, as the White Sox shall specify, including the terms of any maintenance
or other fees charged in request of the Cards. Precis shall provide all Cards
to the White Sox fully programmed, packaged and ready for sale to the public.
All Cards shall be identified and programmed in such a manner as to identify
their original distribution source. The cost of producing and initializing
Cards shall be borne as follows:
(i) All costs of production and delivery of the First 90,000 Cards
(as defined in Paragraph 7) shall be paid by Precis.
(ii) Throughout the term of this Agreement and continuing thereafter
so long as the License described in Paragraph 11 is in effect,
the White Sox shall pay for the actual direct costs for the
production and delivery of Additional Cards (as defined in
Paragraph 7) but not including Precis' overhead, staff or other
costs and not including design costs which shall
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be governed by Paragraph 6 hereof. Precis shall select such
unaffiliated party or parties to produce the Additional Cards
as Precis in good faith determines will assure the best
product. Precis will provide White Sox with copies of invoices
from such third-party producers and White Sox may, if it
chooses, pay such producers directly. Precis shall pass along
to the White Sox all discounts, allowances, rebates, and the
like, obtained by Precis from the party(ies) producing the
Additional Cards. The White Sox shall have no obligation to
pay for Additional Cards, and no Additional Cards shall be
ordered by Precis, which are not produced in accordance with
the White Sox' specifications and advance approval.
(iii) The First 90,000 Cards will be initialized by Precis at its
expense.
(iv) White Sox will pay Precis 3 CENTS a Card for initializing the
Additional Cards.
(v) Following the term of this Agreement, and for so long as the
License described in Paragraph 11 is in effect, Precis shall
initialize the Cards and charge White Sox Precis' then-current
fees for such service, provided that such fees shall be
commercially reasonable.
(h) REPLACEMENT CARDS. If directed by White Sox, the
terms and conditions applicable to Cards shall provide that
upon the expiration of a Card, such Card shall no longer be
usable but may be exchanged for a new Card (a "Replacement
Card") with a value equal to the Unused Value (as defined in
Paragraph 8A) of the expired Card. Unless the context clearly
otherwise requires, all references herein to "Cards" shall
include Replacement Cards. Replacement Cards shall be produced
and initialized in this same manner as other Cards, but shall
not have any design features unless White Sox so direct. The
cost of producing, initializing, and delivering Replacement
Cards shall be borne as follows:
(i) Replacement Cards issued in exchange for any of
the First 90,000 Cards which have expired shall be
paid for by Precis.
(ii) Replacement Cards issued in exchange for any
Additional Cards which have expired shall be paid for
50% by Precis and 50% by Chicago White Sox.
The party bearing the cost of producing and initializing
Replacement Cards shall be reimbursed to the extent any amount
is collected from Cardholders as a charge for such Replacement
Cards.
(i) SECURITY MATTERS. The parties recognize that when
initialized, the Cards will be functionally equivalent to
cash. In addition, it is possible that Cards may be subject to
alteration in some manner so as to misstate the amount of
unused credit available or that Cards even may be
counterfeited. The parties agree to cooperate in responding to
these various security concerns including taking those steps
outlined in the Application. Specifically with respect to
security matters, the parties agree as follows:
(i) Until such time as Cards are delivered and
accepted by the White Sox at ▇▇▇▇▇▇▇▇ Park, all risk
of loss, alteration and misuse of such Cards shall be
borne by Precis. Once Cards are delivered to and
accepted by White Sox at ▇▇▇▇▇▇▇▇ Park, all risk of
loss, alteration and/or misuse shall shift to and be
borne by White Sox. The risk of loss, alteration or
misuse of any Cards delivered by White Sox to Precis
pursuant hereto, including without limitation the
Precis Cards shall be borne by Precis.
(ii) Precis shall be solely responsible for any Usage
accomplished through counterfeit Cards, i.e., Cards
produced and initialized by any party without
authorization from the White Sox.
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(j) REPORTS. Precis shall produce reports relating to the Cards as
necessary which reflect (i) sales and commission data, (ii) purchases at
Sportservice paid for by customers using Cards, with the distribution source
of such Cards identified, and (iii) such other accounting data as the White
Sox and/or Sportservice shall reasonably request, or as are called for in the
Application, and (iv) such other reports as are required by law. Precis shall
maintain records of accounting data at Precis' corporate headquarters for not
less than five years after applicable expiration dates or as otherwise may be
required by law.
(k) SIGN COSTS. Precis shall pay to White Sox, upon request, up to a
total of $500 to reimburse White Sox in part for the costs of signs placed in
▇▇▇▇▇▇▇▇ Park advertising and promoting the Cards.
(l) INSPECTION RIGHTS. At any time during the term of this Agreement,
and for a period of five years after the latest expiration date of any Cards
produced pursuant to this Agreement (or such longer period as may be
necessary in connection with an audit or investigation of White Sox by any
governmental authority), White Sox and its designated representatives shall
have the opportunity, upon prior written notice to Precis and during
reasonable business hours at Precis' home office (if such books and records
are available there, and if not at such other location at which they may be
available), to inspect the books and records of Precis to verify the Card
sales figures, Card production quantities and Card production and
initialization costs passed along to the White Sox and any other financial or
operational matters pertaining to this Agreement.
5. DUTIES OF THE WHITE SOX. During the term of this Agreement, the White
Sox shall perform the following duties:
(a) MARKETING THE CARDS. The White Sox shall actively and in good
faith market the Cards via message boards, public announcements and similar
methods, provided that this paragraph shall not obligate the White Sox to
incur any out-of-pocket expenses in connection with such marketing efforts.
(b) PARKING AND GAME PASSES. The White Sox shall provide to Precis
personnel all parking and game passes necessary to enable Precis to perform
its obligations under this Agreement.
(c) ASSISTANCE AND AFFILIATION. The White Sox shall provide Precis
with reasonable assistance and access to ▇▇▇▇▇▇▇▇ Park in connection with
arranging site visits for potential Precis clients. Precis may use the White
Sox name and logo in connection with Precis' marketing and promotional
materials, provided that in each instance Precis must secure the prior
approval of the White Sox (which approval may be withheld by White Sox at its
sole discretion) and, if necessary, Major League Baseball.
(d) SCHEDULING. White Sox shall use its reasonable best efforts to
provide Precis with schedules for all games or other public events to be held
at ▇▇▇▇▇▇▇▇ Park as soon as such schedules are available to White Sox
6. DESIGN OF CARDS. Precis shall arrange for the designer or designers
of the Card. Precis and the White Sox shall be jointly responsible for the
design of the Cards, subject to final approval by the White Sox which
approval may be withheld by White Sox at its sole discretion. All of the
costs of designing the Cards will be borne by Precis, PROVIDED that White Sox
shall reimburse Precis for any additional Card production costs incurred to
third parties (i.e., not done by Precis "in-house") solely because of
specific design requests made by White Sox.
7. FIRST 90,000 CARDS. Precis shall arrange for the production and
initialization of a total of 90,000 Cards having a value denomination of
Twenty Dollars ($20), each unless otherwise agreed by the White Sox, (the
"First 90,000 Cards").
(a) PRECIS CARDS. The First 90,000 Cards shall be issued in such
number of series, as the parties shall determine. Precis shall receive 35,000
of the First 90,000 Cards in each series (the "Precis Cards") for sale by
Precis other than at ▇▇▇▇▇▇▇▇ Park. The Precis Cards shall include numbers
500 through 2000 of each series,
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if requested by Precis. Precis shall have the right to sell the Precis Cards,
subject to subparagraph 8A(h) below, and Precis shall be entitled to retain
the entire proceeds from such sales; provided, however, that Precis shall pay
to the White Sox an amount equal to the Usage (as defined in subparagraph
8A(i)) from time to time attributable to the Precis Cards as provided in
Paragraph 8A.
(b) REMAINING CARDS. The White Sox (and Precis, if it so desires)
shall sell the remaining 55,000 of the First 90,000 Cards (the "Remaining
First 90,000 Cards"). Remaining Cards to be sold by Precis shall be purchased
and paid for as provided in Paragraph 8A.
8. ADDITIONAL CARD ISSUES. If White Sox decides (in its sole discretion)
to issue any Cards in addition to the First 90,000 Cards ("Additional
Cards"), then Precis shall arrange for the production and initialization of
such Additional Cards, in such series as the parties shall determine. In such
event, Precis shall use its reasonable efforts to sell at least $250,000 in
face value of Additional Cards during each year of the Term. Such Additional
Cards shall be purchased and paid for by Precis, and Precis shall be liable
for any Usage thereof, all as provided in Paragraph 8A. Additional Cards sold
by Precis shall include a representative portion of each year's series of
Additional Cards, as the parties shall determine.
8A. ACCOUNTING AND PAYMENT. The amounts due and owing from the parties
set forth below shall be accounted for and paid as provided in this Paragraph
8A.
(a) PRECIS CARDS. Precis shall not be obligated to make any payment
to White Sox in consideration of receiving the Precis Cards, except that
Precis shall pay to White Sox 50% of Card License Fees (as defined in
subparagraph 8A(g)), if any, attributable to the Precis Cards. If and to the
extent any Usage of the Precis Cards shall occur, White Sox shall invoice
Precis no more frequently than on a monthly basis for 100% of such Usage and
all such invoices shall be payable within 90 days.
(b) REMAINING CARDS.
(i) With respect to any Remaining Cards sold
by the White Sox, White Sox shall pay to
Precis 50% of all "Earned Amounts" collected
by White Sox on such Cards, less 50% of any
Card License Fees, if any, paid by White Sox
attributable to such Cards. Earned Amounts
shall equal any account maintenance or other
administrative fees of any kind charged by
White Sox against such Cards. Precis' share
of Earned Amounts shall be paid to it within
90 days of the date on which White Sox earn
such Amounts.
(ii) If and to the extent Precis wishes to
purchase any of the Remaining Cards, Precis
shall pay to White Sox in cash, concurrently
with the issuance of such Remaining Cards,
100% of the first $25,000 in face amount
thereof (to reimburse Sox for fees relating
to the Chicago Cubs games), and 50% of the
face amount of Remaining Cards in excess of
$25,000, such 50% discount representing
Precis' commission. In addition, Precis
shall pay to White Sox 50% of the Card
License Fees (as defined in subparagraph (g)
below) attributable to such Remaining Cards.
(iii) In the event of any Usage of the
Remaining Cards purchased by Precis as
provided in subparagraph (ii), White Sox
shall invoice Precis for 50% of such Usage
not more frequently than on a monthly basis.
Such invoices will be payable by Precis
within 90 days.
(c) ADDITIONAL CARDS.
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(i) If and to the extent Precis wishes to
purchase any Additional Cards, Precis shall
pay to White Sox in cash 80% of the face
amount thereof concurrently with the
issuance of such Cards, the 20% discount
representing Precis' commission. Any Card
License Fees attributable to such Additional
Cards shall be borne by White Sox.
(ii) In the event of any Usage of the
Additional Cards purchased by Precis as
provided in subparagraph (i), White Sox
shall invoice Precis for 20% of such Usage
not more frequently than on a monthly basis.
Such invoices will be payable by Precis
within 90 days.
(e) PURCHASE ON CONSIGNMENT. Notwithstanding the payment provisions
in Paragraph 8A, Precis may in any year during the term of this Agreement
from time to time purchase up to a maximum amount outstanding of $5,000 in
face amount of Cards on consignment. If such Cards are not sold by Precis,
Precis shall return same to White Sox in their original package not less than
30 days after the end of the applicable season. If such Cards purchased on
consignment are sold by Precis, Precis shall promptly remit to White Sox the
applicable portion of the face amount of such Cards, (I.E., 50% with respect
to Remaining Cards and 20% with respect to Additional Cards) together with
Precis' share of any Card License Fees attributable thereto, and Precis shall
be liable for any Usage thereof as set forth above in subparagraphs (b) and
(c), as applicable.
(f) [This subparagraph intentionally left blank.]
(g) CARD LICENSE FEES. The White Sox shall use reasonable efforts to
negotiate and obtain licenses or approvals for the Cards from Major League
Baseball or others if and to the extent such licenses or approvals may be
required. As referred to in Paragraph 8A, Precis may be required to reimburse
White Sox for a portion of any license fees or expenses ("Card License Fees")
paid to Major League Baseball ("MLB"), or any other party, whose logo,
trademark, trade name or the like appears on any of the First 90,000 Cards.
Card License Fees shall not include royalties and license fees paid to MLB
pursuant to subparagraph 9(b) hereof nor shall Card License Fees include fees
paid to the Chicago Cubs relating to the Cubs/White Sox games, the latter
being reimbursable to White Sox as provided in subparagraph 8A(b)(ii) above.
(h) MANNER OF SALES. Precis shall advise White Sox in advance of
Precis' proposed manner of selling any Cards (including the Precis Cards),
which shall be subject to White Sox' approval. Precis shall sell all Cards at
face value and shall not sell any Cards at ▇▇▇▇▇▇▇▇ Park.
(i) DEFINITIONS. "Usage" means the aggregate purchases of food,
beverages, and merchandise at any time for which an applicable Card has been
used for payment and any amounts paid over to any governmental entity
pursuant to escheat, unclaimed property, or similar laws in respect of an
applicable Card. The "Unused Value" of any Card at any time shall be its face
amount less its Usage, less any Earned Amounts charged against such Cards.
(j) RESALE NUMBER. Unless Precis shall present to White Sox a resale
number acceptable to the Illinois Department of Revenue, White Sox shall
charge Precis Illinois Retailers Occupation Tax on all Cards purchased by
Precis.
9. SPONSORSHIP OF CARDS.
(a) SPONSORSHIP FEES. In the event that Precis successfully engages a
sponsor or advertiser who purchases advertising on Cards, the packaging
thereof, or the Hardware, which sponsor or advertiser is not (nor is any
affiliate thereof) then advertising any products or services in conjunction
with the White Sox ("New Advertiser"), the Net Sponsorship Fees (as
hereinafter defined), paid by the New Advertiser shall be apportioned among
the parties as follows: (i) Net Sponsorship Fees attributable to the First
90,000 Cards shall be allocated 75% to Precis and 25% to the White Sox; and
(ii) Net Sponsorship Fees attributable to Additional Cards shall be allocated
40% to Precis and
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60% to the White Sox. Precis shall not be entitled to any sponsorship fees
paid by advertisers generated by the White Sox. The White Sox shall approve
any New Advertiser generated or secured by Precis prior to its acceptance, as
well as the advertising copy to appear on the Cards, which approval may be
withheld by White Sox in its absolute discretion.
(b) NET SPONSORSHIP FEES. All fees from New Advertisers, net of
agency commission, shall either be paid directly to White Sox or remitted to
White Sox by Precis promptly upon receipt. All royalties or license fees
payable to Major League Baseball shall be deducted from such fees, and the
balance remaining shall constitute "Net Sponsorship Fees." Precis' share of
Net Sponsorship Fees, determined in accordance with subparagraph 9(a), shall
be paid by White Sox on a monthly basis.
10. TITLE TO THE SYSTEM. Upon delivery and installation of the System
(and any upgrades, enhancements, and additions thereto), the White Sox will
own the Hardware (and such upgrades and additions), free and clear of any
liens, claims, charges, or other rights of third parties therein or relating
thereto, subject only to Precis' rights pursuant to the last sentence of
subparagraph 4(e). Precis shall provide such lien waivers from suppliers
and/or installers of the System as White Sox may request. The White Sox shall
assume all risk of loss and damage to the System (and such upgrades,
enhancements, and additions), subject to Precis' obligation to provide
maintenance and support as provided herein and to replace Hardware pursuant
to clause (iv) of Subparagraph 4(d).
11. LICENSE TO THE SOFTWARE.
(a) Precis hereby grants to the White Sox a nonexclusive and
nontransferable (except as provided in Paragraph 22 hereof) right and license
to use the Software, including any enhancements provided pursuant to this
Agreement (the "License") during the term of this Agreement and subject to
the payment of fees as provided in subparagraph (b) below in perpetuity
thereafter. The White Sox shall not use or transfer the Software to another
location without prior written consent of Precis. The White Sox shall not
copy or reproduce any part of the Software, except for one back-up copy for
the White Sox' and Sportservice's (or its successor's) use. Subject to
subparagraph (c) below, and the letter agreement therein referred to, this
License includes only binary and/or object code version; the source code is
not included. The White Sox acknowledges that the Software constitutes
proprietary, confidential information of Precis. The White Sox acknowledges
that Precis wishes to protect, by this provision, the confidentiality of the
Software.
(b) During the term of this Agreement, there shall not be any
license fee owed by the White Sox with respect to the License. After
expiration of the term of this Agreement, Precis shall provide upgrades,
enhancements, and/or services to maintain the Software at its then-current
fees for license of the PRECISCACHE-TM- system and upgrades and enhancements,
which fees shall be commercially reasonable.
(c) Concurrently herewith, the parties are entering into a letter
agreement (the "Letter Agreement") setting forth the rights of the parties
with respect to the source code and other documentation and data covered
thereby, in the event Precis fails to perform its obligations under the
Agreement or fails to continue to do business in the ordinary course for any
reason, including bankruptcy.
12. CONSULTATION SERVICES. During the term of this Agreement, Precis
shall consult with the White Sox with respect to smart cards and smart card
applications. In the event that the White Sox desires to enable the smart
cards of another smart card vendor to be accessed via the System, Precis
shall cooperate with such vendor in order to upgrade the System so that they
are compatible with such vendor's application. The White Sox shall reimburse
Precis for all actual out-of-pocket expenses (including travel and direct
incremental personnel costs), but not for overhead expenses, incurred in
connection with the acquisition by White Sox and installation of any hardware
or software necessitated as a result of such services.
13. PAYMENTS TO SPORTSERVICE. Precis is not a party to any agreement
with Sportservice. The White Sox shall be solely responsible for any and all
payments owed to Sportservice in connection with use of the Cards, provided
that if the reports provided by Precis relating to Usage are inaccurate or
incomplete, then without limiting
8
White Sox' other remedies hereunder, Precis shall be liable to White Sox for
any damages (including underpayment or overpayment to Sportservice) incurred
by White Sox as a result thereof.
14. INDEMNIFICATION.
(a) BY PRECIS. Precis shall defend, indemnify and hold harmless the
White Sox, ISFA, Sportservice, and their respective employees, officers,
directors, partners, agents, contractors, subcontractors, and affiliates from
and against and promptly reimburse said indemnified parties for all
liabilities, including reasonable attorneys' fees, which may arise in
connection with (i) a failure by Precis to perform any of its obligations in
accordance with this Agreement or (ii) negligent or intentional acts or
omissions of Precis or any officer, director, employee or agent of Precis so
long as such liabilities do not arise because of a breach of this Agreement
by the White Sox or willful misconduct, bad faith or gross negligence of the
said indemnified parties, or (iii) allegations that the System or any part
thereof infringes on the proprietary rights of any third party; provided, in
no event shall Precis or its assigns be liable for any incidental,
consequential or special damages including, without limitation, the White
Sox' lost profits.
(b) BY THE WHITE SOX. The White Sox shall defend, indemnify and
hold harmless Precis and its employees, officers, directors, agents,
contractors, subcontractors, and affiliates from and against and promptly
reimburse Precis for any and all liabilities, including reasonable attorneys'
fees, which may arise in connection with (i) a failure by the White Sox to
perform its obligations in accordance with this Agreement or (ii) negligent
or intentional acts or omissions of the White Sox or any officer, director,
employee or agent of White Sox, so long as such liabilities do not arise
because of a breach of this Agreement by Precis or willful misconduct, bad
faith or gross negligence of Precis; provided, in no event shall the White
Sox or its assigns be liable for any incidental, consequential or special
damages including, without limitation, Precis' lost profits.
(c) INDEMNIFICATION PROCEDURES. Whenever any party entitled to
indemnification (the "Indemnified Party") pursuant to the previous paragraphs
receives notice of any potential claim which may be subject to indemnity,
such party shall promptly notify the other party (the "Indemnifying Party").
The Indemnifying Party shall have the obligation to assume the defense of
such claim by counsel designated by it and acceptable to the Indemnified
Party, provided that the Indemnifying Party shall not settle or compromise
any such claim, or consent to the entry of any judgment, without the written
consent of the Indemnified Party. The Indemnified Party, its affiliates,
employees and representatives, shall fully cooperate with and timely assist
the Indemnifying Party with the defense of such claim. If the Indemnifying
Party fails to assume the defense of such claim as soon as reasonably
possible, in any event prior to the earlier of twenty (20) days after receipt
of notice of the claim or five (5) days before the date an answer to a
complaint or similar initiation of legal proceeding shall be due, the
Indemnified Party shall have the right to undertake, at the Indemnifying
Party's expense, the defense, compromise or settlement of any such claim on
behalf of and at the risk and expense of the Indemnifying Party.
15. TERMINATION.
(a) IN GENERAL. This Agreement may be terminated prior to the
scheduled expiration hereof in any of the following events:
i. By mutual agreement of the parties; or
ii. By reason of material breach, as provided in subparagraph (b)
hereof.
(b) TERMINATION FOR MATERIAL BREACH.
i. If Precis defaults by the failure to
comply in all material respects with the
terms of this Agreement or to substantially
perform in good faith the obligations
required herein, the White Sox, in addition
to all of its other rights in law and in
9
equity, may terminate this Agreement upon 90
days prior written notice to Precis, unless
Precis cures such default within the 90-day
period, or, if such cure cannot reasonably
be accomplished within such 90-day period,
unless Precis shall have in good faith
commenced such cure and shall thereafter
diligently proceed to completion.
ii. If the White Sox defaults by the failure
to comply in all material respects with the
terms of this Agreement or to substantially
perform in good faith the obligations
required herein, Precis, in addition to all
of its other rights in law and in equity,
may terminate this Agreement upon 90 days
prior written notice to the White Sox,
unless the White Sox cures such default
within the 90-day period, or, if such cure
cannot reasonably be accomplished within
such 90-day period, unless White Sox shall
have in good faith commenced such cure and
thereafter diligently proceed to completion.
(c) EFFECT OF TERMINATION. In the event of termination of this
Agreement by reason of Paragraph 15(a) above or on account of the expiration
of the term hereof, then, unless the parties shall otherwise agree, and
subject to such further legal and equitable rights which a party may have if
termination results from a material breach by the other party, all rights and
obligations of the parties hereunder shall terminate as of the Termination
Date except as follows:
(i) Each party shall remain obligated to pay
to the other any amounts owing hereunder
attributable to the period prior to the
Termination Date, including, without
limitation, any amounts owing pursuant to
Paragraph 8A on account of Usage or Earned
Amounts in respect of any Cards subsequent
to such Date.
(ii) The obligations of the parties pursuant
to Paragraphs 14 and 17 hereof, shall
continue in effect.
(iii) The License to the Software (as
provided in Paragraph 11) hereof shall (so
long as White Sox make the license payments
required in subparagraph 11(b)) continue in
full force and effect in perpetuity, and the
White Sox shall continue to have such rights
as are set forth in the Letter Agreement.
(iv) Precis shall immediately return to
White Sox all unsold Cards held by it, and
White Sox shall pay to Precis an amount
equal to the amount paid for such Cards by
Precis (as provided in Paragraph 8A), less a
reasonable reserve for Precis' potential
liability for Usage on outstanding Cards,
PROVIDED THAT White Sox shall not be
obligated to pay any amount in respect of
any returned Precis Cards, and PROVIDED
FURTHER that to the extent Precis' potential
liability for Usage is extinguished, any
unused reserve applicable thereto shall be
paid over to Precis.
16. INSURANCE. Precis shall purchase and maintain insurance written in
the occurrence format, at its own expense, as outlined below from the date
hereof until at least two (2) years after the termination of this Agreement.
(a) MINIMUM SCOPE OF INSURANCE.
Coverage shall be at least as broad as:
(i) COMMERCIAL GENERAL LIABILITY. Commercial General
Liability Insurance, including coverage for premises
and operations, products/completed operations,
10
contractual liability, independent contractors, broad form
property damage liability, and personal/advertising injury
liability.
(ii) AUTOMOBILE LIABILITY. Automobile liability insurance for
bodily injury and property damage covering any automobile used
in connection with this agreement.
(iii) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY. Workers
Compensation as required by the State of Illinois and
Employer's Liability insurance.
(iv) EMPLOYEE DISHONESTY. Employee Dishonesty Coverage for
employees performing services under this agreement.
(b) MINIMUM LIMITS OF INSURANCE.
(i) COMMERCIAL GENERAL LIABILITY INSURANCE. For bodily injury
including death, personal injury, advertising injury and
property damage. Such blanket contractual liability shall
cover the indemnification and hold harmless provision of this
Agreement. Precis shall maintain limits no less than:
a) General Aggregate Limit $ 1,000,000
b) Products-Completed Operations Aggregate $ 1,000,000
c) Personal Advertising Injury Limit $ 1,000,000
d) Each Occurrence Limit $ 1,000,000
e) Fire Damage Limit (any one fire) $ 50,000
f) Medical Expense Limit (any one person) $ 5,000
(ii) AUTOMOBILE LIABILITY. $1,000,000 combined single limit per
accident for bodily injury and property damage for any owned,
non-owned or hired automobile or any vehicle used in
connection with this Agreement.
(iii) WORKERS COMPENSATION AND EMPLOYER'S LIABILITY. Workers
Compensation insurance in compliance with the Workers
Compensation Act of the State of Illinois. Employer's
liability insurance for occupational accidents or disease, for
limits of not less than $1,000,000 for any one occurrence.
(iv) EMPLOYEE DISHONESTY. Employee dishonesty coverage in such
reasonable amounts as White Sox determine.
(c) ACCEPTABILITY OF INSURERS. Insurance is to be placed with
insurers who have a BESTS INSURANCE REPORTS rating of no less than A- and a
financial size of no less than Class VIII, who are authorized as an admitted
insurance company in the State of Illinois.
(d) ADDITIONAL INSUREDS. The Chicago White Sox, Ltd., Chisox
Corporation, Illinois Sports Facilities Authority, At Your Service LLC, CWS
Maintenance, Chicago White Sox Charities, Inc., and Illinois Sportservice
Inc. and their subsidiaries and affiliates, their directors, officers,
employees and agents shall be named as additional insureds on all Commercial
General Liability, Umbrella, and Excess Liability policies for all liability
arising out of services provided by this Agreement. Such insurance shall be
primary and shall not contribute with any insurance maintained by the
additional insureds.
(e) CERTIFICATE OF INSURANCE. Certificates of Insurance acceptable to
the Chicago White Sox, Ltd. shall be submitted prior to the commencement of
services provided under this Agreement, and annually
11
thereafter. These certificates shall contain a provision that coverage afforded
under the insurance policies will not be canceled, non-renewed, or materially
reduced until at least thirty (30) days prior written notice has been provided
to Chicago White Sox, Ltd.
17. CONFIDENTIALITY.
(a) BY PRECIS. Precis shall keep and shall require its employees to
keep confidential all, and shall not divulge to any other party, other than a
Permitted Party (as hereinafter defined), any of the Confidential Information
(as hereinafter defined) of the White Sox and Sportservice, unless such
information (a) is or becomes generally available to the public other than as
a result of a disclosure by Precis or (b) is required to be disclosed by law
or by a judicial, administrative or regulatory authority.
(b) BY THE WHITE SOX. The White Sox shall keep and shall require its
employees to keep confidential all, and shall not divulge to any other party
other than to Sportservice or a Permitted Party (as hereinafter defined) any
of the Confidential Information (as hereinafter defined) of Precis, unless
such information (a) is or becomes generally available to the public other
than as a result of a disclosure by the White Sox, or (b) is required to be
disclosed by law, by League Rules (as hereinafter defined) or by a judicial,
administrative or regulatory authority.
(c) CERTAIN DEFINITIONS. "Permitted Parties" shall mean with respect
to Precis or the White Sox, as the case may be, its attorneys, accountants,
and lenders. "Confidential Information" shall mean all proprietary
information and trade secrets which White Sox, Sportservice or Precis
specifically identifies as such in writing.
(d) EXPIRATION. The obligations set forth in this Paragraph 17 shall
expire three years after the termination of this Agreement.
18. DISCLAIMER OF INTENT TO BECOME PARTNERS. Precis and the White Sox
shall not by virtue of this Agreement be deemed partners or joint venturers.
Precis is retained by the White Sox to provide services under this Agreement
as an independent contractor. Neither party shall pay or withhold any federal
or state income or payroll taxes with respect to compensation payable to the
other under this Agreement. None of the employees of one party shall be
treated as employees of the other party with respect to any services provided
by them under this Agreement. No workers' compensation insurance shall be
obtained by the White Sox concerning any of the employees of Precis. Neither
Precis nor the White Sox shall incur any financial obligation on behalf of
the other party without prior written approval of the other party.
19. NOTICES. Any and all notices, consents or other communications by
one party intended for the other shall be sent either by facsimile
transmission or by bonded air courier, addressed as follows:
If to Precis: Precis Smart Card Systems, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the White Sox: Chicago White Sox
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Fax:(▇▇▇) ▇▇▇-▇▇▇▇
unless a party shall have designated a different address or number by sending
written notice of the change to the other party. All notices shall be deemed
given when actually received or when receipt is refused.
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20. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement will not affect the validity or enforceability of any other
provision.
21. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
22. NO ASSIGNMENT. Neither party may assign its rights or delegate its
duties under this Agreement without the prior written consent of the other
party, PROVIDED, HOWEVER, that White Sox shall have the right to transfer all
of its rights and obligations under this Agreement, including, without
limitation, its rights under Paragraph 11 hereof, to any party which shall
acquire the Major League Baseball franchise now owned by the White Sox so
long as such transferee shall continue to play at ▇▇▇▇▇▇▇▇ Park.
23. BINDING EFFECT. Subject to Paragraph 22, this Agreement shall be
binding upon, and shall inure to the benefit of, the parties and their
respective legal representatives, successors and assigns.
24. CAPTIONS. The paragraph captions used in this Agreement are for
convenience only and shall not affect the interpretation of this Agreement.
25. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, express or
implied, is intended to confer upon any person, firm or corporation other
than the parties any right, remedy or claim under or by reason of this
Agreement, as third party beneficiaries or otherwise.
26. LATE PAYMENT PROVISION. Any amounts due hereunder which are not paid
on or before the applicable payment date shall bear interest until paid at a
rate equal to four hundred (400) basis points over the "prime rate" as
reported in the "Money Rates" column (or its successor) in THE WALL STREET
JOURNAL on the payment date.
27. APPROVALS, ETC. Whenever a party's approval, permission,
concurrence, consent, satisfaction, or the like is required or provided for
under this Agreement, such approval, permission, concurrence, satisfaction,
or the like shall not be unreasonably withheld, delayed, or conditioned
except as and to the extent it is expressly provided that such party may act
in its sole discretion; provided, however, that neither party shall be
required to waive a material breach hereunder.
28. LEAGUE RULES. This Agreement is subject in all respects to "League
Rules," as they presently exist or as they may from time to time be amended,
whether or not specific reference is made thereto in any paragraph of this
Agreement. "League Rules" shall mean (i) any present or future agreement to
which the American League of Professional Baseball Clubs (the "League") or
the Commissioner of Major League Baseball or any committee thereunder, on
behalf of all of the members of the League or of Major League Baseball, is a
party, or by or among all of the members of the League or of Major League
Baseball, or by Major League Baseball Properties, Inc. or any other entity
owned by all of the members of Major League Baseball; and (ii) all rules and
relations promulgated pursuant to any of the foregoing, including, without
limitation, royalty obligations and licensing requirements; provided,
however, that "League Rules" shall not include any of the foregoing that
violates any present or future judicial decree to which the League, Major
League Baseball, its Commissioner, or its members are subject.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
PRECIS: PRECIS SMART CARD SYSTEMS, INC.
By:_____________________________
▇▇▇▇▇ ▇. ▇▇▇▇, President
WHITE SOX: CHICAGO WHITE SOX, LTD.
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By: CHISOX CORPORATION, its General Partner
By:____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇,
Executive Vice President
14