EXHIBIT 10.1
Privileged and
Confidential:
For
Settlement Purposes Only
Execution Copy
SETTLEMENT
AGREEMENT
THIS Settlement Agreement (hereafter referred to
as the “AGREEMENT”) is made effective the 1st day of
May, 2009 (“EFFECTIVE DATE”) by and among: (1) Diamond
Game Enterprises, Inc. (hereafter referred to as
“DIAMOND”); (2) Multimedia Games, Inc. (hereinafter
referred to as “MULTIMEDIA”); (3) Robert F. (Skip)
Lannert
(hereinafter referred to as “LANNERT”); (4) Gordon
Graves
(hereinafter referred to as “GRAVES”); (5) Clifton Lind
(hereinafter referred to as “LIND” and together with
LANNERT and GRAVES, the “INDIVIDUAL
OFFICERS”); and (6) The Kaw Nation of Oklahoma, acting on its
own behalf and on behalf of the Kaw Enterprise Development
Authority (hereinafter referred to collectively as “THE KAW
NATION”).
RECITALS
WHEREAS, DIAMOND is claiming that MULTIMEDIA and
the INDIVIDUAL OFFICERS, among other things, unfairly competed with
DIAMOND and as a result DIAMOND suffered damages including lost
profits and lost goodwill as more fully set forth in the Third
Amended Petition filed in the District Court of Oklahoma County,
Case No. CJ-2004-9366, in an action entitled “ Diamond
Game Enterprises, Inc. v. Multimedia Games, Inc., et al.
” (hereafter referred to as the
“LAWSUIT”);
WHEREAS, MULTIMEDIA and the INDIVIDUAL OFFICERS
deny any liability to DIAMOND and any wrongdoing alleged in the
LAWSUIT;
WHEREAS, THE KAW NATION, MULTIMEDIA and the
INDIVIDUAL OFFICERS filed a complaint in the United States District Court for the
Western District of Oklahoma seeking to enjoin the pending LAWSUIT,
which complaint was dismissed on January 16, 2009, and thereafter a
timely appeal was filed in the U.S. Court of Appeals for the Tenth
Circuit captioned Kaw Nation of Oklahoma, et al. v. Diamond Game
Enter., Inc., et. al , Case No. 09-6014 (hereafter referred to
as the “INJUNCTION PROCEEDING”);
WHEREAS, in order to avoid further litigation
and the incurrence of unnecessary fees and expenses which would
otherwise be incurred if these matters are not otherwise settled,
DIAMOND, MULTIMEDIA, the INDIVIDUAL OFFICERS and THE KAW NATION
(sometimes hereafter collectively referred to as the
“PARTIES”) have reached an agreement to settle any and
all disputes and alleged CLAIMS (as defined below) involving the
LAWSUIT and the INJUNCTION PROCEEDING; and
WHEREAS, the PARTIES have agreed to mutually
release each other from any and all alleged, potential and/or
possible liability and CLAIMS arising out of the LAWSUIT and
INJUNCTION PROCEEDING as further provided herein; provided,
however, that nothing herein is intended to release any claims of
the INDIVIDUAL OFFICERS against MULTIMEDIA, including but not
limited to claims for indemnity as officers and/or directors of
MULTIMEDIA.
NOW, THEREFORE, in consideration of
MULTIMEDIA’s payment to DIAMOND of the amounts set forth
hereafter, and in further consideration of the recitals, covenants,
releases, agreements and provisions contained herein, and for other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by all PARTIES, the PARTIES hereby
agree as follows:
AGREEMENT
(a) On
or before June 8, 2009 (the “PAYMENT DATE”), MULTIMEDIA
agrees to pay to DIAMOND the aggregate amount of SIXTEEN MILLION
DOLLARS AND NO/100 CENTS ($16,000,000.00) (the “SETTLEMENT
FUNDS”) in full and final settlement of all of
DIAMOND’S CLAIMS in the LAWSUIT and in the INJUNCTION
PROCEEDING. MULTIMEDIA shall, in the next business day
following the EFFECTIVE DATE, deliver by wire transfer the sum of
THREE MILLION DOLLARS AND NO/100 CENTS ($3,000,000.00)
(“ESCROWED FUNDS”) to McAfee & Taft’s account
listed below and such funds shall be held by McAfee & Taft in
trust in a segregated trust account and released to DIAMOND, with
any accrued interest and without withholding, deduction or setoff
of any kind, on the PAYMENT DATE. The remaining THIRTEEN
MILLION DOLLARS AND NO/100 CENTS ($13,000,000.00) of the SETTLEMENT
FUNDS shall be paid on the PAYMENT DATE by wire transfer to the
McAfee & Taft account listed below. After
receipt of the ESCROWED FUNDS by McAfee & Taft at the account
listed above (x) the ESCROWED FUNDS shall be deemed received by
DIAMOND as of the date the funds are received by McAfee & Taft,
(y) MULTIMEDIA shall be deemed to have discharged its payments
obligations relating to the ESCROWED FUNDS as of such date, and (z)
the entire risk of loss and/or non-payment of the ESCROWED FUNDS by
McAfee & Taft to DIAMOND shall be borne exclusively by DIAMOND,
which risk of loss shall include, without limitation, any risk that
the ESCROWED FUNDS will be subject to a lien or otherwise attached
or encumbered following the transfer to McAfee &
Taft.
Privileged and
Confidential:
For
Settlement Purposes Only
McAfee &
Taft Escrow Account
(b) The
PARTIES acknowledge and agree that the SETTLEMENT FUNDS are
intended to be allocated in the following manner:
(1) the portion attributable to DIAMOND’s
lost profits (past and future): $8 million; and
(2) the portion attributable to DIAMOND’s
loss of goodwill and business reputation: $8
million.
The PARTIES
further agree to each report for tax purposes the total SETTLEMENT
FUNDS amount consistent with the aforementioned
allocation.
(c) Within
two (2) business days of receipt of the SETTLEMENT FUNDS set forth
in Section 1(a) above, DIAMOND shall file a Dismissal With
Prejudice in the form attached hereto as Exhibit A thereby
dismissing with prejudice the entire LAWSUIT as against all
defendants. Thereafter, MULTIMEDIA, the INDIVIDUAL
OFFICERS and THE KAW NATION shall file a stipulation of dismissal
dismissing with prejudice all CLAIMS against DIAMOND in the
INJUNCTION PROCEEDING. In the event that the SETTLEMENT
FUNDS are not paid (or deemed paid) in full in accordance with
Section 1(a) above, DIAMOND may elect, following notice to
MULTIMEDIA and a 3-day opportunity to cure, to (i) bring an action
against MULTIMEDIA to enforce this provision of the AGREEMENT and
recover the balance of the SETTLEMENT FUNDS, or (ii) retain the
ESCROWED FUNDS and proceed with its claims against the defendants
in the LAWSUIT, and in the event DIAMOND receives a money judgment
against any or all of the defendants therein, it shall credit the
ESCROWED FUNDS against any such judgment so as to reduce any such
judgment by the full amount of the ESCROWED FUNDS.
(d) Upon
receipt of the SETTLEMENT FUNDS, DIAMOND agrees (i) to return to
any disclosing party all documents or electronic information
designated as CONFIDENTIAL or CONFIDENTIAL – ATTORNEY’S
AND EXPERTS ONLY under the PROTECTIVE ORDER during discovery in the
LAWSUIT and the INJUNCTION PROCEEDING; (ii) that it shall not,
directly or indirectly, aid or fund in any way the CORY CASE; (iii)
that it shall not, directly or indirectly commence, aid or fund in
any way, prosecute or cause to be commenced, aided, funded or
prosecuted any suit, action or other proceeding against MULTIMEDIA,
any of the INDIVIDUAL OFFICERS or THE KAW NATION anywhere in
CURRENT MULTIMEDIA TERRITORY related to manufacture, promotion,
transportation, sale, lease, deployment, play or use of the CURRENT
MULTIMEDIA GAMES (hereinafter referred to as the “MGAM
DISPUTED SUBJECT MATTER”); (iv) that it shall not appear
voluntarily, testify voluntarily or attempt to obtain or produce
voluntarily discovery in any proceeding involving the MGAM DISPUTED
SUBJECT MATTER; (v) that it shall not purchase or take assignment
of any CLAIM that is related to the MGAM DISPUTED SUBJECT MATTER;
(vi) that it shall not make or assert against any customers,
lessees, licensees or other transferees of MULTIMEDIA any CLAIMS
which are related to MGAM DISPUTED SUBJECT MATTER; and (vii) that
it shall not make or assert against any manufacturers, distributors
or suppliers to MULTIMEDIA any CLAIMS which are related to MGAM
DISPUTED SUBJECT MATTER if MULTIMEDIA has a pre-existing
contractual, statutory or legal obligation to defend, indemnify,
hold harmless or otherwise reimburse any such manufacturer,
distributor or supplier in connection with the CLAIMS made by
DIAMOND.
Privileged and
Confidential:
For
Settlement Purposes Only
(e) Following
the filing of the Dismissal With Prejudice by DIAMOND as provided
in Section 1(c), MULTIMEDIA agrees (i) to return to DIAMOND all
documents or electronic information designated as CONFIDENTIAL or
CONFIDENTIAL – ATTORNEY’S AND EXPERTS ONLY under the
PROTECTIVE ORDER during discovery in the LAWSUIT and the INJUNCTION
PROCEEDING; (ii) that it shall not, directly or indirectly
commence, aid or fund in any way, prosecute or cause to be
commenced, aided, funded or prosecuted any suit, action or other
proceeding against DIAMOND anywhere in CURRENT DIAMOND TERRITORY
related to manufacture, promotion, transportation, sale, lease,
deployment, play or use of the CURRENT DIAMOND GAMES (hereinafter
referred to as the “DIAMOND DISPUTED SUBJECT MATTER”);
(iii) that it shall not appear voluntarily, testify voluntarily or
attempt to obtain or produce voluntarily discovery in any
proceeding involving the DIAMOND DISPUTED SUBJECT MATTER; (iv) that
it shall not purchase or take assignment of any CLAIM that is
related to the DIAMOND DISPUTED SUBJECT MATTER; (vi) that it shall
not make or assert against any customers, lessees, licensees or
other transferees of DIAMOND any CLAIMS which are related to
DIAMOND DISPUTED SUBJECT MATTER; (vi) that it shall not make or
assert against any manufacturers, distributors or suppliers to
DIAMOND any CLAIMS which are related to DIAMOND DISPUTED SUBJECT
MATTER if DIAMOND has a pre-existing contractual, statutory or
legal obligation to defend, indemnify, hold harmless or otherwise
reimburse any such manufacturer, distributor or supplier in
connection with the CLAIMS made by MULTIMEDIA.
(f) Except
as necessary to enforce any of its rights pursuant to this
AGREEMENT against another party in court or otherwise or as
required by law, no party shall disclose to any person or entity
any information relating to the negotiation or terms of this
AGREEMENT. Notwithstanding the foregoing and subject to
Section 1(g) below, (i) MULTIMEDIA may make disclosure it believes
in good faith is required or advisable under applicable law, rule
or regulation (including but not limited to any state or federal
securities laws, rules and regulations and local, state and federal
gaming laws, rules and regulations); (ii) any party may make
otherwise prohibited disclosure to its legal, financial, accounting
or other similar advisors, to its insurers and to bona fide
prospective acquirers and investors in each case who agree to abide
by the terms of this Section 1(f); (iii) if MULTIMEDIA makes public
disclosure of any fact pursuant to Section 1(f)(i) above, then
DIAMOND may disclose the same fact to the public.
(g) MULTIMEDIA,
THE KAW NATION and the INDIVIDUAL OFFICERS will at all times
refrain from making any disparaging or negative comments about
DIAMOND or any of its past or present directors, officers, agents
or employees to any other person or entity. DIAMOND will
at all times refrain from making any disparaging or negative
comments about THE KAW NATION, MULTIMEDIA or any of their
respective past or present directors, officers (including, with
respect to MULTIMEDIA, the INDIVIDUAL OFFICERS), agents or
employees to any other person or entity. The PARTIES
acknowledge that this Section 1(g) shall not be construed to
prevent DIAMOND, MULTIMEDIA or the INDIVIDUAL OFFICERS, or any
company with which they may be affiliated, from competing with the
others on a good faith basis and, when making business
presentations, from making good faith comparative claims between
the products of DIAMOND, MULTIMEDIA, the INDIVIDUAL OFFICERS or any
company with which they may be affiliated.
(h) Each
of the PARTIES hereto understands and agrees that neither the
payment of any sum of money nor the execution of this AGREEMENT
shall constitute, be construed as, or be offered or received into
evidence as, an admission of any wrongdoing by, or lia
