DEQ Systems Corp.

DEQ Systems Corp.

July 31, 2008 17:19 ET

DEQ Terminates DEK Exclusive Distribution License and Renegotiates DEK Royalty Agreement

LEVIS, QUEBEC--(Marketwire - July 31, 2008) - DEQ Systems Corp. (TSX VENTURE:DEQ), 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.


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

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.

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