SETTLEMENT AGREEMENT
This
SETTLEMENT AGREEMENT (“Agreement”) is entered into and made effective on July
__, 2005, (the “Effective Date”) by and between Shuffle Master, Inc. (“Shuffle
Master”), a Minnesota corporation having a principal place of business at 0000
Xxxxx Xxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000, on the one hand, and VendingData
Corporation, a Nevada corporation having a principal place of business at 0000
Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxx 00000, Casinovations, Inc., a Nevada
corporation having a principal place of business at 0000 Xxxxxxx Xxxxxx, Xxx
Xxxxx, Xxxxxx 00000, and Casinovations
Sales Inc., a Nevada corporation having a principal place of business at
0000
Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxx 00000, on the other hand (collectively
“VendingData”).
RECITALS
WHEREAS,
on May 30, 2000, the United States Patent and Trademark Office issued U.S.
Patent No. 6,068,258 (“the ‘258 patent”) entitled “Method and Apparatus For
Automatically Cutting and Shuffling Playing Cards”;
WHEREAS,
on December 4, 2001, the United States Patent and Trademark Office issued U.S.
Patent No. 6,325,373 (“the ‘373 patent”) entitled “Method and Apparatus For
Automatically Cutting and Shuffling Playing Cards”;
WHEREAS,
Shuffle Masters owns all rights, title and interest in and to the ‘258 and ‘373
patents;
WHEREAS, VendingData
manufactures, sells, and offers for sale card shuffling devices now known as
the
Random Ejection Shuffler, Continuous Random Ejection Shuffler, and the “digital”
version of either of these shufflers, model numbers XXX-0, XXX-0 XX, XXX-0
X,
XXX-0, CVI-C, CVI-CP, CVI-C (C1, B, OR C2) as made, used and sold in the United
States prior to the Effective Date (collectively referred to herein as the
“RES
Shufflers”), and consistent with this, the RES Shufflers do not include products
not accused of infringement of the ‘258 and ‘373 patents in the Action such as
the shuffler now known as the Poker-1 or the PokerOne or future VendingData
shuffler products that use VendingData’s random ejection technology;
WHEREAS,
on or about March 27, 2002, Shuffle Master filed suit in the United States
District Court, District of Nevada (the “Court”) against VendingData (Case No.
CV-S-02-0438-JCM-PAL) (“Action”) alleging causes of action for patent
infringement of the ‘373 patent under 35 U.S.C. § 271, et seq. based on
VendingData’s manufacture, sale, and offer for sale of its RES
Shufflers;
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WHEREAS,
on or about July 25, 2002, Shuffle Master amended its Complaint in the Action
to
allege against VendingData causes of action for patent infringement of the
‘258
patent under 35 U.S.C. § 271, et seq. based on VendingData’s manufacture,
sale, and offer for sale of its RES Shufflers;
WHEREAS,
on or about August 8, 2002, VendingData filed its Answer to Shuffle Master’s
Amended Complaint and Counterclaims in the Action seeking a declaration that
the
patents in suit were not infringed, invalid and/or unenforceable and alleging
certain causes of action including claims for breach of contract and
misappropriation of trade secrets;
WHEREAS,
VendingData represents and warrants that it has removed or disabled any counter
or alphanumeric display in its RES Shufflers; and
WHEREAS,
Shuffle Master and VendingData wish to fully resolve and settle all issues
and
disputes arising out of and related to the Action.
AGREEMENT
In
consideration of the mutual understandings and covenants set forth herein,
the
receipt and sufficiency of which are hereby agreed, the parties agree as
follows:
1. CONSIDERATION
1.1 Covenant
Not to Xxx.
As
provided below, and subject to the terms and conditions set forth herein,
Shuffle Master conditionally agrees not to xxx VendingData for infringement
of,
or allege that any its products infringe, the ‘258 and ‘373 patents. This
covenant not to xxx (the “Covenant”) shall extend to all claims of the ‘258
patent and all claims, except claims 6 and 7, of the ‘373 patent, as well as any
patent claim covering displays, counters or registering use issuing from any
reissue, continuation or continuation in part patent application related to
the
‘258 and ‘373 patents. Unless sooner ended pursuant to the terms hereof, the
Covenant shall last for the life of the ‘258 and ‘373 patents or any such
related patent. The Covenant shall not extend to any claims of the 6,139,014
patent or the 5,695,189 patent. The Covenant is personal to VendingData and
can
be transferred, sublicensed and/or assigned by VendingData, subject to the
balance of this paragraph 1.1, only in connection with the transfer or sale
of
all or substantially all of the assets of VendingData’s business, which transfer
or sale occurs after the full Second Payment has been made to Shuffle Master;
provided, however, that the Covenant cannot and shall not be transferred,
sublicensed or assigned in any manner until Shuffle Master receives the full
Second Payment, and further provided that any purported transfer, sublicense
or
assignment, or any sale or transfer of 50% or more of the assets or stock of
VendingData, which purported transfer, sublicense or assignment or sale or
transfer occurs prior to the date that Shuffle Master receives the full Second
Payment, shall serve to immediately terminate the Covenant, which termination
shall be retroactive to the Effective Date. If, for any reason, the full Second
Payment is not paid to Shuffle Master on the Due Date, then the Covenant shall
immediately terminate on the first day after the Due Date, which termination
shall be retroactive to the Effective Date. Any termination of the Covenant
shall not affect any other provision or term of this Agreement, unless otherwise
expressly stated herein, nor shall any termination of the Covenant limit or
preclude Shuffle Master from pursuing any other rights or remedies legally
available to it, whether at law or in equity, including without limitation:
x)
to execute and otherwise collect on the Judgment; or y) to file suit for
infringement of either the ‘373 or ‘258 patents (or both) or any other patents
previously covered by the Covenant against any VendingData product relating
to
any acts or omissions after the Effective Date. Further, VendingData agrees
that
it shall not allow, cause, effectuate or institute any change of control of
its
ownership or any sale or transfer of a majority of its stock or assets until
the
full Second Payment is made to Shuffle Master. Shuffle Master shall have the
right to obtain injunctive relief to enforce the provisions of this Paragraph
1.1, in addition to any other rights and remedies available to it, and to
recover its attorney’s fees in the event of any breach by VendingData of any
provision of this Paragraph 1.1.
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1.2 Settlement
Sum. VendingData
shall pay Shuffle Master the sum of eight hundred thousand dollars ($800,000)
as
set forth in this paragraph. VendingData
shall pay four hundred thousand dollars ($400,000) by wire transfer to Citibank
Account No. 500228226, ABA Routing 000000000; Swift # XXXXXX00; Account name
Shuffle Master, Inc. Concentration Account; Xxxx Xxxxxxx 0000 Xxxxxxx, Xxx
Xxxxx, Xxxxxx 00000 within two (2) days of the Effective Date, after which,
within two (2) days, the parties shall file the order of dismissal set forth
in
Section 1.4. No later than ten (10) months after the Effective Date (the “Due
Date”), VendingData shall pay the remaining four hundred thousand dollars
($400,000) of the settlement sum (the “Second Payment”). On the Effective Date,
VendingData shall also provide Shuffle Master with an original executed
confession of judgment (the “Judgment”) on this Agreement (in the form of
Exhibit A attached hereto) in the amount of $400,000, which Shuffle Master
shall
have the right to immediately file. Subject to the foregoing, Shuffle Master
shall execute on the Judgment only in the event VendingData fails to make timely
payment of the Second Payment. Further, if the Second Payment is not timely
made, then all applicable provisions of Paragraph 1.1 hereof shall apply and
be
available to Shuffle Master. Upon payment of the Second Payment, Shuffle Master
shall immediately take any and all action necessary to nullify, cancel and
expunge the Judgment.
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1.3
No
Validity or Enforceability Challenges. VendingData
hereby agrees not to challenge, cause to be challenged, or cooperate with others
in challenging, directly or indirectly, the
validity or enforceability of any of the patent claims encompassed by the
Covenant in
any
court or tribunal, or before the U.S. Patent and Trademark Office (PTO), or
in
any arbitration proceeding, or in any other manner or proceeding.
1.4 Dismissal.
As of
the Effective Date all
claims and counterclaims in the Action are hereby dismissed with prejudice,
each
party to bear its own costs and attorneys’ fees. Concurrently herewith, the
parties shall have executed a joint stipulation of dismissal pursuant to Federal
Rule of Civil Procedure 41 in the form attached hereto as Exhibit B. Shuffle
Master shall file said stipulation of dismissal as provided in Paragraph 1.2
herein.
2. MUTUAL
RELEASES
2.1 VendingData
Release For Past Acts.
Upon the
execution of this Agreement, VendingData, on its behalf and on behalf of its
predecessors, officers, directors, heirs, assigns, successors and attorneys,
hereby generally and specifically releases and discharges Shuffle Master, and
its predecessors, successors, divisions, parents, subsidiaries and each of
their
shareholders and assigns, successors, agents, directors, officers, employees,
representatives, attorneys, and all persons acting by, through, under, or in
concert with any of them, (the "SMI Releasees") from any and all claims,
liabilities, actions, causes of action, obligations, costs, damages, attorneys'
fees, losses, and demands, known or unknown, arising out of or relating to:
i)
VendingData's requests for a declaratory judgment on the '258 and '373 patents;
ii) the claims and counterclaims asserted or which could have been asserted
in
the Action, including but not limited to any alleged theft, by any of the SMI
Releasees, prior to the Effective Date, of any trade secrets, or confidential
information, or any alleged breach of any non-disclosure agreements or other
contracts entered into, prior to the Effective Date, by any of the Shuffle
Master Releasees; and/or iii) any acts or omissions of any of the SMI Releasees
prior to the Effective Date. The above release shall not preclude
VendingData from pursuing any x) legally available affirmative defenses in
Civil
Action No. CV-S-04-1373-JCM; or y) the declaratory relief counterclaim already
pled in Civil Action No. CV-S-04-1373-JCM; nor does this release preclude
VendingData from pursuing any other legally available affirmative defenses,
but
VendingData shall not be able to pursue or raise any counterclaims or causes
of
action related to any acts or omissions released in this paragraph 2.1 (other
than the declaratory relief counterclaim already pled), since any such
counterclaims and causes of action related to any acts or omissions of any
of
the SMI Releases prior to the Effective Date have been and are hereby released
in this paragraph 2.1.
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2.2 Shuffle
Master Release For Past Acts.
Upon the
execution of this Agreement, Shuffle Master, on its behalf and on behalf of
its
predecessors, officers, directors, heirs, assigns, successors and attorneys,
hereby generally and specifically releases and discharges VendingData and its
predecessors, successors, divisions, parents, subsidiaries and each of their
shareholders and assigns, successors, agents, directors, officers, employees,
representatives, attorneys, and all persons acting by, through, under, or in
concert with any of them, (the "VendingData Releasees") from any and all claims,
liabilities, actions, causes of action, obligations, costs, damages, attorneys'
fees, losses, and demands, known or unknown, arising out of or relating to:
i)
any claim that any RES Shuffler infringes the claims of the '258 and '373
patents which were actually asserted in the Action; ii) the claims and
counterclaims asserted or which could have been asserted against the RES
Shuffler in the Action; and/or iii) any acts or omissions of any of the
VendingData Releasees prior to the Effective Date, provided however, that none
of the above releases shall release any claims of Shuffle Master that
VendingData's PokerOne shuffler infringes U.S. Patent No. 6,655,684.
3. REPRESENTATIONS
AND WARRANTIES.
3.1
VendingData
Representations and Warranty. VendingData
represents and warrants that it has removed or disabled any counter or
alphanumeric display in RES Shufflers within its custody or control as of the
Effective Date of this Agreement.
3.2 Shuffle
Master Representations and Warranty.
Shuffle
Master represents and warrants that it has ownership of the ‘258 and ‘373
patents, and has all necessary authority to convey the Covenant.
3.3 Common
Representations and Warranties. Each
party represents and warrants that:
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(a) The
terms
of this Agreement are contractual and are the result of negotiations by the
parties. Each party has cooperated in the drafting and preparation of this
Agreement. Each party has had the opportunity to draft, review and edit the
language of this Agreement with the assistance or advice of counsel, of its
choosing, thus no presumption for or against any party arising out of drafting
all or any part of this Agreement will be applied in any action relating to,
connected to, or involving this Agreement. Accordingly, each party hereby waives
the benefit of any federal, state or local law providing that in cases of
uncertainty, language of a contract should be interpreted against the party
who
caused the uncertainty to exist; and
(b) It
has
carefully read this Agreement, it knows and understands the contents of this
Agreement, and it is signing this Agreement freely and without
duress.
(c) It
has
the full right, power and authority to enter this Agreement and perform all
of
its obligations set forth herein.
(d) The
consent of no other person or entity is required in order for each party to
enter into this Agreement and to perform each of its obligations, duties or
acts
required of it as set forth herein.
4. MISCELLANEOUS
4.1 No
license. No
part
of this Agreement is intended to be, or shall be construed in any way to be,
or
shall be a license or right of any kind, express or implied, to VendingData
under either the ‘258 or ‘373 patents, or under any other patent owned by or
licensed to Shuffle Master.
4.2 Agreement
Binding on Successors.
Subject
to the provisions of paragraph 1.1, this Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, personal
representatives, officers, agents, successors in interest and assigns of the
respective parties hereto.
4.3 Entire
Agreement. This
Agreement sets forth the entire agreement between the parties as it relates
to
the subject matter of this Agreement, and it replaces, supersedes any and all
prior agreements, promises, proposals, representations, understandings,
negotiations, written or not relating to the same.
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4.4 Consideration.
The
parties hereby expressly acknowledge and agree that each and every term and
condition of this Agreement is of the essence and constitutes a material part
of
the bargained for consideration, without which this Agreement would not have
been executed.
4.5 No
Tolling.
Nothing
contained herein shall toll or extend any statute of limitations respecting
any
claim or counterclaim (actual or potential) of either party, or toll or extend
the limitations period for any claim or counterclaim (actual or potential)
of
either party.
4.6 Modifications.
This
Agreement may only be changed or modified by a writing signed by the other
party
against whom enforcement of any change or modification is sought. This Agreement
may only be amended in writing by mutual consent of the parties. A failure
of
either party to exercise any right provided for herein shall not be deemed
to be
waiver of any right hereunder.
4.7
Governing
Law.
This
Agreement shall be construed in accordance with and be governed by the internal
laws of the State of Nevada, without regard to choice of laws principles. The
parties agree that United States District Court for the District of Nevada,
Judge Xxxxx, shall retain exclusive jurisdiction over the enforcement of the
terms and conditions of this Agreement. All disputes arising under or relating
to this Agreement shall not be filed or otherwise brought other than before
this
same United States District Court for the District of Nevada. The parties
consent to the referral of any such action to Magistrate Xxxxx X. Xxxx pursuant
to Federal Rule for Civil Procedure 73(b).
4.8
Confidentiality.
The
parties hereto acknowledge that this Agreement and the terms of this Agreement
are confidential. Neither the parties nor their counsel may convey to third
parties the terms of this Agreement, except that the terms of the Agreement
may
be disclosed to accountants, tax preparers and insurers as reasonably necessary,
or as may be ordered by a court, or pursuant to a legal process, SEC or
regulatory requirement, or to enforce the terms of this Agreement or otherwise
required by contract, regulation or law.
4.9 Agreement
Not an Admission of Liability.
The
parties hereto agree and acknowledge that this Agreement is a compromise
settlement of each party's disputed claims, and that the sums and covenants
given in consideration of this Agreement, as well as the execution of this
Agreement, shall not be construed to be an admission of liability on the part
of
any party with respect to the disputed matters set forth above.
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4.10 Rescission.
In the
event of any breach of this Agreement, either party shall have the right to
seek
and recover all of its actual damages for the breach, including without
limitation its attorneys' fees, as well as the applicable rights and remedies
set forth in Paragraphs 1.1 and 1.2 hereof, relating to any failure by
VendingData to timely make the Second Payment, but shall not have the right
to
rescind the Covenant, the dismissals or the releases granted
herein.
4.11 Execution
of Documents.
Each
party shall execute such instruments and documents and do or cause to be done
such other acts, if any, as are reasonably necessary or appropriate to effect
the transactions contemplated by this Agreement.
4.12
Counterparts.
This
Agreement may be executed in any number of counterparts, each such counterpart
shall be deemed an original instrument, and all such counterparts together
shall
constitute but one agreement.
4.13 Warranty
of Authority.
Each
person whose signature appears below represents and warrants that he or she
is
authorized to execute this Agreement on behalf of the respective party and
to
bind that party to the terms of this Agreement.
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| Shuffle Master, Inc. | VendingData Corporation | |
| By: _____________________ | By: _____________________ | |
| Name:___________________ | Name:___________________ | |
| Title:____________________ | Title:____________________ | |
| Date:____________________ | Date:____________________ |
| Casinovations, Inc. | ||
| By: _____________________ | ||
| Name:___________________ | ||
| Title:____________________ | ||
| Date:____________________ |
| Casinovations Sales, Inc. | ||
| By: _____________________ | ||
| Name:___________________ | ||
| Title:____________________ | ||
| Date:____________________ |
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