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Annual Report & Accounts 2012 - NOTES
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GVC HOLDINGS PLC NOTES TO THE FINANCIAL STATEMENTS 23. CONTINGENT LIABILITIES The Group, through its trading websites, offers progressive jackpots on slot machines. 23.1 CasinoClub Progressive Jackpots Unlike Betaland, CasinoClub does not participate in the network progressive jackpot scheme; instead, it offers an equivalent system in which only its own customers participate. This means that CasinoClub make no contributions to the central fund as it builds up (since they are the only operator in the scheme, this would serve no purpose) and, should a CasinoClub customer win the progressive jackpot, there is no central fund to cover the payout so the cost of this would be taken directly to the Income Statement in the period in which it would be won. Across 37 games, the total of the available jackpots at 31 December 2012 was €6.6 million (2011: 33 games and total available jackpot of €5.9 million). The single largest jackpot available amounted to €2.9 million from the slots game "Aladdin's Lamp" (2011: €2.7 million). The Group had no winners of a significant jackpot. In accordance with the Group's policy. 23.2 East Pioneer Corporation Guarantee On 21 November 2011 the Group entered into a service agreement and guarantee relating to the acquisition by East Pioneer Corporation B.V. ("EPC") from Sportingbet plc of Superbahis, a Turkish language website. The maximum contingent liability under this agreement at inception was €171 million. The Directors consider this has a fair value of €nil. GVC is providing back office and support services to EPC, and hence entered into the agreement with Sportingbet. Additionally GVC entered into the agreement for the purpose of guaranteeing to a subsidiary of Sportingbet the payment and performance by EPC of all amounts and obligations under the Business Purchase Agreement and certain other Transaction Documents. The full detail of the arrangements is contained in the circular to shareholders dated 31 October 2011 which is available on the Group's website. The consideration due from EPC to Sportingbet under the terms of the Business Purchase Agreement will be payable in monthly installments in arrears. The amounts payable are dependent on whether the software being used remains on the Sportingbet platform, and are calculated as follows: (a) for each month of the first three years following 21 November 2011 until the software platform being used ceases to be that of Sportingbet, an amount equal to 75 per cent. and, following the software platform ceasing to be that of Sportingbet, 67.5 per cent., of a definition of Adjusted Combined Net Revenue (close to GVC's definition of gross profit, but before marketing expenditure but after affiliate commissions, and subject to certain allowances and thresholds). The calculation is a combination of the revenue from Superbahis and similar sites operated by GVC. This is known as the Initial Profit Share. (b) for each calendar month during the fourth year following 21 November 2011, if the Initial Profit Share is less than €142.5 million ("Minimum Consideration"), the profit share will continue as outlined in (a) above capped at an amount equal to the sum of €28.5 million and the amount by which the Initial Profit Share is less than the Minimum Consideration. If the Initial Profit Share is greater than the Minimum Consideration, the profit share will continue as outlined in (a) above capped at €28.5 million (the "Second Profit Share"); and (c) for each calendar month during the fifth and sixth years following Completion, if the aggregate of the Initial Profit Share and the Second Profit Share is less than the Minimum Consideration, the profit share will continue as outlined in (a) above capped at an amount equal to the amount by which the Initial Profit Share, together with the Second Profit Share, is less than the Minimum Consideration. If the aggregate of the Initial Profit Share and the Second Profit Share is more than or equal to the Minimum Consideration, no further Consideration is payable. 53