A. On-Point manufactures and sells and/or leases vending machines for dispensing instant lottery tickets, commonly known as "ITVMs."

B. On-Point previously sold over 3,800 of its ITR (TM)-7500 ITVMs to the California State Lottery ("CSL") and GTECH currently provides preventive and remedial maintenance service to the CSL for such ITVMs.

C. The CSL has issued an Invitation For Bid, IFB#7-001-B ("IFB") requesting bids to provide future preventive and remedial maintenance for the CSL-owned ITR (TM)-7500 ITVMs, to install and relocate ITVMs, and to lease to the CSL and service a minimum of five hundred (500) new 12-bin ITVMs, with an option to lease up to an additional one thousand (1,000) 12-bin ITVMs during the term of the Contract.

D. On-Point and GTECH desire to enter into this Agreement pursuant to which On-Point agrees to manufacture its ITR (TM) ITVMs for use by the CSL ("Machines") and GTECH agrees to lease such Machines and purchase any proprietary spare parts for the CSL-owned ITVMs in accordance with the terms and provisions of this Agreement.

IT IS AGREED, THEREFORE, as follows:

1. Manufacture and Lease of Machines.

(a) GTECH hereby agrees to lease from On-Point and On-Point agrees to lease to GTECH the Machines ordered by the CSL pursuant to the contract resulting from the IFB ("CSL Contract") in the event GTECH is awarded the CSL Contract, for the monthly Lease Payment per Machine as shown on Exhibit A, which is attached hereto and incorporated herein by this reference, or pro rata portion thereof for part of a month (determined on the basis of a thirty (30) day month), plus shipping costs and applicable local and state taxes. It is agreed and acknowledged by the parties that GTECH will sublease the Machines to the CSL in accordance with the CSL Contract.

(b) The Lease Term for each Machine shall commence on the earlier of the date of installation or fifteen (15) days after delivery of the Machine to GTECH and shall end on the third anniversary of the date of the CSL Contract, unless sooner terminated or extended. The Lease Term shall be extended for an additional period up to two (2) years in the event and to the extent the CSL exercises its right to extend the lease term with GTECH in accordance with the CSL Contract. GTECH shall provide On-Point with written notice of any such extension. GTECH, by providing written notice to On-Point, shall have the right to terminate the lease of any Machine in the event the CSL terminates its lease of such Machine from GTECH in accordance with the CSL Contract. In the event GTECH terminates its lease of any Machine before the end of the initial Lease Term, GTECH shall thereafter for the balance of the initial Lease Term and any extension use its reasonable efforts, in coordination with On-Point and the CSL, to locate a replacement site for installation of such Machine. The re-leasing of any Machine shall be on the same terms as agreed in this Agreement for originally leased Machines.

(c) GTECH shall submit written orders for Machines to On-Point. On-Point will fill all orders in compliance with the IFB, the CSL Contract and the requests of the CSL. On-Point agrees that for purposes of this Agreement, it is not commercially unreasonable to expect delivery of the first five hundred (500) Machines within six (6) weeks of receipt of the written order and it is not commercially unreasonable to expect delivery of the next one thousand (1000) Machines within eight weeks receipt of the written order. On-Point shall pay GTECH liquidated damages of $255, as increased corresponding to any increase by the CSL in the CSL Contract in the daily rate of liquidated damages, for each day On-Point's delivery is delayed beyond the requirements of the CSL Contract, subject, however, to the CSL assessing GTECH liquidated damages for failure to install such Machine on a timely basis in accordance with the CSL Contract. On-Point shall not be liable for any delay in or failure of performance under this Agreement due to a "Force Majeure" occurrence provided that On-Point shall use reasonably diligent efforts to avoid or otherwise minimize the impact of an event of Force Majeure on On-Point's performance. Any such delay in or failure of performance shall not constitute a default or give rise to any liability for damages. A Force Majeure occurrence shall be as defined in Article III, Section A, 7 of the IFB. On-Point will use its best efforts to advice GTECH in advance of any inability to make full and timely delivery of any Machines which GTECH has previously ordered. Should GTECH order any Machine from On-Point when twelve (12) months or less remains on the initial Lease Term, GTECH shall thereafter use its reasonable efforts, in coordination with On-Point and the CSL, to seek an extension of the Lease Term for such Machine for the full twenty-four (24) month extension period.

(d) On-Point shall send invoices to GTECH on a monthly basis, dated as of the last day of each month during the Lease Term. GTECH agrees to send invoices to the CSL on a monthly basis in accordance with the CSL Contract. Monthly Lease Payments to On-Point shall be due on the earlier of (i) four (4) business days after GTECH's receipt of payment from the CSL for such month, or (ii) fifty (50) days after the invoice date. On all amounts not properly paid by GTECH when due under this Agreement, interest shall accrue at the rate specified in Article III, Section D, 2 of the IFB.

(e) Within the earlier of three (3) days of installation or thirty (30) days of the date of delivery of each Machine, GTECH will provide On-Point with a Certificate of Acceptance in the form agreed to by the parties. Such Certificate of Acceptance shall confirm the delivery and operation of the Machine and shall be sufficient to deem the Machine accepted by GTECH. In the event of dispute as to the date of delivery, the Bill of Lading shall be deemed controlling as to date. Each Machine shall be deemed accepted by GTECH unless written notice of rejection of the Machines for nonconformance with this Agreement or for being nonoperational is given to On-Point prior to the due date of the Certificate of Acceptance. Such notice of rejection shall specify the reasons therefor and On-Point shall have a reasonable opportunity to cure any defect.

(f) GTECH shall install Machines at sites designated by the CSL. On-Point shall provide to GTECH and GTECH shall include within the response to the IFB parameters and instructions for effective use and operation of the Machines, including requirements for the proper operating environment. The response to the IFB shall provide that any warranty shall not extend to Machines which fail or are damaged due to operation or use in a manner or environment not conforming to any published instructions or specifications issued by On-Point.

(g) GTECH shall use its reasonable efforts to ensure the CSL will not use or permit the use of the Machines for any purpose which, according to the specifications of On-Point, the Machines are not designed or reasonably suited. GTECH shall use its reasonable efforts to ensure the CSL will use the Machines in a careful and proper manner and comply with all of On-Point's instructions, governmental rules, regulations, requirements and laws, if any, with regard to the use, operation or maintenance of the Machines.

(h) GTECH, at its expense, shall be solely responsible for the delivery. installation, maintenance, repair and relocation of the Machines. Except as provided in Paragraph 6, during the Lease Term, GTECH, at its expense, shall keep the Machines in good repair, condition and working order, and shall furnish any and all parts, mechanisms and devices required to keep the Machines in good mechanical and working order. Shipping point shall be FOB San Diego County to location (s) specified by GTECH within California. All costs of shipping and insurance shall be borne by GTECH and paid within thirty (30) days of invoice.

(i) Whenever On-Point shall deliver or cause to be delivered to a common carrier any Machines ordered by GT, whether the particular carrier shall have been designated in the shipping or routing instructions of GTECH or not, On-Point shall not be responsible for any delays or damages in shipment. On-Point shall be responsible for the proper packaging for shipment of all Machines delivered under this Agreement.

(j) GTECH shall perform monthly Preventive Maintenance (PM) on the installed Machines in accordance with the IFB.

(k) GTECH acknowledges and agrees that its obligation to pay Lease Payments and other sums payable under this Agreement, and the rights of On-Point, shall be absolute and unconditional in all events, and shall not be subject to any abatement, reduction, set-off, defense, counterclaim or recoupment due or alleged to be due by reason of any past, present at future claims GTECH may have against On-Point. Notwithstanding the foregoing, GTECH shall have the right to withhold any monthly payment from On-Point in the event and to the extent the CSL does not pay GTECH pursuant to its right to off-set payments owed to GTECH under the liquidated damages clauses of the CSL Contract if such off-set relates to matters within the control of On-Point as manufacturer of the Machines and not to matters within the control of GTECH as the service provider under the CSL Contract.

(l) The Machines leased under this Agreement shall at all times be and remain the sole and exclusive property of On-Point. GTECH shall have no right, title or interest therein or thereto except as expressly set forth in this Agreement. GTECH agrees to execute and deliver financing statements and any other such instruments as On-Point may believe to be reasonably necessary to grant to On-Point or its assigns a first priority security interest in, and to perfect such security interests in, this Agreement, any amounts due hereunder, or the Machines.

(m) On-Point and GTECH intend and agree, and GTECH hereby covenants, that the Machines shall at all times be and remain personal property and shall not be so affixed to realty as to become a fixture or otherwise to lose its identity as the separate property of On-Point.

(n) GTECH shall, at its expense, keep the Machines free and clear of all levies, liens, and encumbrances, except those in favor of On-Point or its assigns or which arise as a result of actions by On-Point or its assigns.

(o) GTECH shall pay any sales tax, property tax, and other applicable taxes resulting from leasing of Machines hereunder, other than income taxes of On-Point. These taxes shall be shown as separate line items on Exhibit A.

(p) On-Point shall maintain all insurance required by the IFB and the CSL Contract on the Machines throughout the Lease Term. GTECH shall maintain the automobile insurance and all bonds required by the IFB and the CSL Contract.

(q) Within the period described below after the Termination Date, GTECH shall return the Machines to On-Point in good repair, condition and working order, ordinary wear and tear resulting from the proper use thereof alone excepting, by delivering the Machines at GTECH's cost and expense to the destination designated by On-Point in San Diego County. The Termination Date shall mean the date on which the Lease Term ends for the Machines or, where there is an earlier termination, the date on which all of GTECH's obligations under this Agreement relating to the lease of Machines have been fully discharqed. If the lease is terminating for twenty (20) or fewer Machines, the Machines shall be returned to On-Point within five (5) days of the Termination Date. If the lease is terminating for all Machines, the Machines shall be returned to On-Point within forty-five (45) days of the Termination Date. If the lease is terminating for more than twenty (20) Machines and less than all Machines, the parties will agree, in good faith, on a reasonable time period for return of the Machines, using the foregoing time periods as guidelines. If GTECH shall without cause fail to deliver the Machines to On-Point in accordance with this paragraph, GTECH shall be treated as a holdover tenant for the Machines for a month to month renewal Lease Term and shall continue to pay Lease Payments for the Machines as required by this Agreement. This paragraph shall not derogate from On-Point's right, to be exercised in its sole discretion, to obtain return of any Machine within the applicable periods described above, or to declare a default for any failure of GTECH to so return the Machine.