EXHIBIT 10.57
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Settlement"), dated August 11, 2003, is
a full settlement of certain claims described below under that certain Tax
Sharing Agreement dated July 1, 1996 and that certain Tax Separation Agreement
dated April 6, 1998, as amended (together, the "Agreements"), between WMS
Industries Inc., a Delaware corporation with offices located at ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and its subsidiaries, as
applicable (collectively "WMS") and Midway Games Inc., a Delaware corporation
with offices located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and
its subsidiaries, as applicable (collectively "Midway"). Except as otherwise set
forth herein, capitalized and defined terms used herein shall have the meanings
set forth in the Agreements.
WHEREAS, the parties to the Agreements desire to settle certain of their
respective claims and obligations and exchange mutual releases with respect
thereto:
THEREFORE, in consideration of the terms and conditions and the mutual
covenants herein, the sufficiency of which are acknowledged by the parties
hereto, and intending to be legally bound hereby, the parties hereto agree to
settle any and all claims under the Agreements based upon (1) WMS' fiscal 1998
and 1999 net operating loss carrybacks on its federal income tax returns for
those years, and (2) Midway's fiscal year ended June 30, 2001 net operating loss
carryback into WMS' fiscal 1997 federal income tax return (collectively, the
"Disputed Items"), as follows:
1. Immediately upon execution of this Settlement by the parties hereto, WMS
shall pay to Midway by wire transfer of immediately available funds to an
account specified by Midway the sum of Four Million Dollars ($4,000,000)
(of which $3,686,182 shall be deemed to represent $10,531,949 of "Midway
Net Operating Losses" recoverable by WMS as described below in
subsections 1(a) and 1(b), $109,070 shall be deemed unrecoverable
interest paid by WMS to Midway, and $204,748 shall be deemed
unrecoverable consideration paid by WMS to Midway to settle claims under
the Agreements relating to the Disputed Items).
a. At any time after (i) WMS has paid to Midway the sum set forth in
Section 1 above; (ii) all matters related to the letter agreement
between WMS and Midway dated September 24, 2001 have been resolved;
and, (iii) Midway has utilized all net operating losses (including
net operating losses generated after entering into this Settlement)
other than the Midway Net Operating Losses ($10,531,949) to reduce
Midway's federal income tax liability; if Midway has earnings that
enable Midway to utilize all or any portion of the Midway Net
Operating Losses to reduce its federal income tax liability, then
Midway will pay to WMS, within thirty (30) days after the end of
any fiscal quarter in which such utilization of the Midway Net
Operating Losses is made, the federal income tax benefit received
by Midway from such utilization. Should it later be determined that
the fiscal quarter's benefit paid to WMS is not received in that
fiscal year, WMS shall pay
Midway within thirty (30) days after Midway's fiscal year end, the
funds previously paid to WMS; provided, however the Midway Net
Operating Losses related to such benefit paid to WMS and then
subsequently repaid to Midway shall remain subject to this
Settlement.
b. In addition, in the event of a change in control of Midway at any
time after WMS has paid to Midway the sum set forth in Section 1
above, Midway shall repay to WMS Three Million Six Hundred Eighty
Six Thousand One Hundred Eighty Two Dollars ($3,686,182), or
portion thereof, not theretofore repaid to WMS by Midway under
Section 1(a) above. For purposes of the previous sentence, a change
of control of Midway shall mean any of the following events: (i)
any person or group becomes the beneficial owner directly or
indirectly of more than 50% of Midway's outstanding voting stock;
(ii) the current members of Midway's Board of Directors cease to
constitute the majority of the Board, other than by voluntary
retirement or voluntary resignation; (iii) Midway consolidates with
or merges with or into another person or entity such that former
Midway stockholders own less than 50% of the surviving entity; or
(iv) Midway conveys, transfers, leases or otherwise disposes of all
or substantially all of Midway's assets to any person or entity.
c. Notwithstanding anything to the contrary in this Settlement, in no
event shall the total amount payable by Midway under Sections 1(a)
and 1(b) above together exceed Three Million Six Hundred Eighty Six
Thousand One Hundred Eighty Two Dollars ($3,686,182).
2. Confidentiality.
a. The existence and terms and conditions of this Settlement and the
basis for any claims, demands, or negotiations giving rise to this
Settlement are confidential. The parties shall not communicate this
confidential information to any entity or person, other than to the
directors, officers, employees, agents and representatives of the
respective parties hereto who need to know such information for the
purposes set forth in this Settlement or except as required by law,
rule or regulation or expressly permitted in this Section 2.
b. Neither party shall, without the prior written approval of the
other party, make any press release or other public announcement
concerning the existence or terms and conditions of this
Settlement, the negotiations preceding this Settlement or details
of the basis of this Settlement, or the transactions being
contemplated by this Settlement, except to the extent that any such
party shall be so obligated by the rules and regulations of the
Securities and Exchange Commission or other government laws, rules,
or regulations, or by any other government authority (e.g., a
gaming authority) having jurisdiction over either of the parties
hereto.
3. This Settlement has been freely and voluntarily entered into and no oral
or written representations or promises of any kind, unless specifically
contained in this Settlement,
have been made or relied upon by either party. Each of the parties
represents that the performance of any obligation imposed on it by this
Settlement does not conflict with any other agreement to which it is a
party.
4. Release.
a. Each of the parties hereto irrevocably and unconditionally releases
and forever discharges and acquits the other party (and its agents,
officers, employees, directors, shareholders, attorneys and any
affiliated or related companies, including parent companies,
subsidiaries, divisions, successors, and assigns), from any and all
claims, charges, liabilities, debts, demands, obligations, damages,
grievances and causes of action of whatsoever kind, at law or in
equity, whether accrued, contingent, inchoate, known or unknown,
suspected or unsuspected, based upon facts, whether known or
unknown, existing as of the date of this Settlement, which such
party has, had or may have in the future against the other party
under the Agreements based upon the Disputed Items. This release
shall not preclude or otherwise limit either party from exercising
its rights, in law and in equity, arising out of its obligations
under this Settlement.
b. The parties hereto covenant and agree not to ▇▇▇, to file a charge,
to make a claim or demand, to commence or maintain, or assist or
otherwise participate (except, as required by law, to give
testimony), in any action or proceeding of any kind in any court,
before any government agency or in any other forum or to accept any
money, benefit, or other relief from any proceeding, which would be
precluded by this release, whether brought directly by either party
or brought by any other person, agency or entity which would
provide relief or benefit to that party, and agree to indemnify the
other party against all liability, costs and expenses and
attorney's fees in the event it breaches this release and covenant
not to ▇▇▇.
5. This Settlement embodies the full, complete and entire understanding of
the parties of all of the terms and conditions with respect to the
matters related thereto, and may not be altered, superseded, or otherwise
modified except in writing signed by the party to be charged. This
Settlement is binding on the parties hereto and their respective
representatives, successors, agents and assigns.
6. Each of the parties hereto represents and warrants to the other party
that such party has full power and authority to enter into this
Settlement, intending to be fully bound hereby.
7. This Settlement shall be governed by and construed in accordance with,
the laws of the State of Illinois, without giving effect to the conflict
of laws principles thereof.
8. This Settlement may be executed in counterparts, including counterparts
transmitted by facsimile, each of which is deemed to be an executed
original even if all signatures do not appear on the same counterpart.
9. This Settlement does not modify that certain letter agreement between WMS
and Midway dated September 24, 2001. Except with respect to claims
released under the Agreements through this Settlement, the Agreements
remain in full force and effect.
IN WITNESS HEREOF, the undersigned execute this Settlement as of the date first
written above.
MIDWAY GAMES INC. WMS INDUSTRIES INC.
a Delaware corporation a Delaware corporation
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Executive Vice President- Finance, Executive Vice President,
Treasurer and Chief Financial Officer Chief Financial Officer and Treasurer
