DEQ Terminates DEK Exclusive Distribution License and Renegotiates DEK Royalty Agreement
July 31 2008 - 5:19PM
Marketwired
LEVIS, QUEBEC , a leading provider of table game bonusing,
jackpot and loyalty solutions, announces today it has entered into
an agreement to terminate the exclusive distribution license for
the territories of Asia, Europe, South America and Africa granted
previously to DEK International ("DEK"), an arm's length party, and
has renegotiated the DEQ Royalty agreement to align the royalty
amounts with the current market economics for DEQ's patents and
products for the remaining seven (7) years of its agreement with
DEK.
The exclusive distribution license was repurchased for a total
amount of USD$12,000,000. The payment of this amount was divided
into three (3) parts. An amount of USD$3,850,000 was paid in cash
at closing, USD$5,500,000 was paid by the transfer to DEK of the
balance owed from advances due to DEQ by Severn as previously
disclosed in the Severn Loan Agreements of 2005 and 2006. A final
amount of $2,650,000 will be paid over three (3) years in three (3)
yearly payments subject to a ratchet clause that will
proportionally reduce the balance of payment if the number of
tables used for the calculation of the royalty amounts is less than
450 tables at anytime during the first three (3) years of the
agreement.
The transfer of the Severn Agreement loan balance to DEK does
not affect in any way the 10 year Royalty Agreement between DEQ and
Severn and DEQ will continue to collect the previously disclosed
royalty amounts for the next nine (9) years.
As part of its agreement with DEQ, DEK will pay royalties at
rates comparable to other existing DEQ distribution agreements.
Currently, DEK pays an average of $960 per year per table in
royalties to DEQ for 450 tables. These amounts were negotiated at a
time when the respective markets such as Asia markets were less
regulated and patent defence was more difficult. DEK will now pay
readjusted royalties of $4200 per year per table for the first
three years, $3600 per table for the fourth year and the standard
LTE (Leased Table Equivalent) amount of $3000 per year per table
for the remaining three (3) years of the agreement.
Based on the 450 tables that are currently being operated by
DEK, The total projected royalty increase would be approximately of
$8,316,000 from the current royalty amounts for the next seven (7)
years of $3,024,000 for the new projected total of $11,340,000. DEK
will retain non exclusive distribution rights in their respective
markets on the similar terms and conditions as all other DEQ
distributors.
"We are very excited about this opportunity to open up these
markets including Asia, Europe and Africa to all of our current and
potential distributors," stated Earle G. Hall, President and CEO of
DEQ. "We have been working with numerous distribution opportunities
in Asia and this agreement will give us the flexibility and freedom
to choose the best partner for the right project. The significant
increase in the royalty streams from DEK will, in our opinion, have
a positive effect on our financial position and reinforce the value
for our products and patents in these emerging markets."
In 2000, DEQ Systems Corp. signed an exclusive distribution
license with DEK through its exporting agent, Amusements Extra for
territories that were outside the United States, Canada and
Australia. DEQ's business plan at the time was focused on North
America given these markets represented the majority of regulated
gaming operations. Since then, the American expansion into Asia and
Europe as well as the legalization of gaming operations has
resulted in DEQ re-evaluating this strategy and entering into this
agreement with DEK because of the increased interest of USA casinos
in Asian and European markets.
ABOUT DEQ
Founded in 1998, DEQ Systems Corp. (TSX VENTURE: DEQ) is a
leader in the table game bonusing technology field. DEQ's patents,
products and features include side bet bonusing games with
progressive and random jackpot prizes, slot machine style mystery
bonusing, multiple credit and denomination betting flexibility,
dealer hand betting, electronic credit bank, electronic rake,
baccarat hand tracking, multimedia animation and sound effects. DEQ
has an extensive patent portfolio that is recognized in more than
50 countries such as the USA, Macau, Australia and Canada. DEQ's
bonusing solutions and products are present in more than 200
casinos in over 30 countries. For further information, please visit
www.deq.com
Forward-looking statements contained in this Press Release
involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance and achievements of the
Company to be materially different from any future results,
performance or achievements expressed or implied by the said
forward-looking statements. DEQ Systems Corp. has been selected in
the TSX Venture 50 in 2008. "2008 Venture 50" is a trademark of TSX
inc. and is used under license. TSX Venture does not accept any
responsibility regarding the accuracy of the information contained
in this press release.
Contacts: DEQ Systems Corp. Earle G. Hall President & CEO
418-839-3012 earle.hall@deq.com DEQ Systems Corp. Francois Proulx
Chief Financial Officer 418-839-3012 francois.proulx@deq.com