EXHIBIT 4
AGREEMENT
THIS AGREEMENT is made as of October 24, 2006 by and among the following
parties (collectively, the "Parties"):
(1) Multimedia Games, Inc., a Texas corporation (the "Company");
(2) the following parties (individually a "Liberation Investments Party"
and collectively "Liberation Investments," which latter term also
includes each of the Liberation Investments Parties individually):
Liberation Investments, L.P., a Delaware limited partnership
("LILP"); Liberation Investments, Ltd., a private offshore
investment corporation ("LILtd"); Liberation Investment Group, LLC,
a Delaware limited liability company and general partner of LILP and
discretionary investment adviser to LILtd ("LIGLLC"); and Xxxxxxx X.
Xxxxxxxx, as Chief Executive Officer and majority member of LIGLLC
("Xx. Xxxxxxxx"); and
(3) each of Xx. Xxxxxxx X. Xxxxxxxx ("Xx. Xxxxxxxx") and Xx. Xxxx X.
Xxxxxxx ("Xx. Xxxxxxx") severally (each of Xx. Xxxxxxxx and Xx.
Xxxxxxx being sometimes referred to herein individually as a "New
Director" and collectively as the "New Directors," both of which
terms include, unless the context otherwise requires, a Successor
Director (as hereinafter defined)).
RECITALS
A. As of the date of this Agreement, Liberation Investments Beneficially
owns, and has the right to vote, 2,311,327 shares of the Company's common stock,
par value $0.01 ("Company Common Stock"), representing approximately 8.4% of the
outstanding Company Common Stock;
B. Liberation Investments has filed with the Securities and Exchange
Commission (the "SEC") a definitive Solicitation Statement To Call A Special
Meeting Of Shareholders Of the Company and a related Form Of Request Of
Shareholders (together, the "Solicitation Materials") seeking requests from
holders of a significant number of outstanding shares of Company Common Stock to
enable Liberation Investments to call a special meeting of shareholders of the
Company (the "Special Meeting").
C. In the Solicitation Materials, Liberation Investments has indicated
that, in the event it is successful in soliciting sufficient requests to enable
it to exercise, and it decides to exercise, the right to call the Special
Meeting (which it has no obligation to do and may decide, in its discretion, not
do to), it intends to solicit proxies from all shareholders of record of the
Company in favor of specified proposals (the "Liberation Investments Proposals")
that would, among other things, reconstitute the membership of the Company's
Board of Directors (the "Board") so that a majority of its members would consist
of three nominees to be identified by Liberation Investments;
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D. For the purpose of avoiding a proxy contest (the "Proxy Contest") over
both the call of the Special Meeting and the Liberation Investments Proposals in
the event the Special Meeting is called, and to provide for certain matters in
relation to the governance of the Company on the basis of the mutual consent of
the Parties in lieu of the Proxy Contest, the Parties are entering into this
Agreement.
1. BOARD COMPOSITION AND RELATED MATTERS
1.1 The Company represents and warrants to the other Parties that the
Board, in connection with its approval of this Agreement and subject to the
execution and delivery of this Agreement by all Parties ("Full Execution"), has:
(a) received the written resignation of Xxxxxx X. Xxxxxxx from the Board and all
committees thereof on which he serves, such resignation being conditioned, and
automatically effective without further action by Xx. Xxxxxxx or the Board, upon
Full Execution; (b) resolved (a certified true and complete copy of which
resolutions have been furnished to the other Parties) that, effective
automatically upon Full Execution and without the need for further action by the
Board, (1) the size of the Board shall be expanded from five to six, (2) each of
the New Directors shall be added to the Board, and (3) a standing resolution of
the Board (the "Resolution") shall take effect (A) requiring that, prior to the
expiration of the Standstill Period (as hereinafter defined), the size of the
Board shall not be increased, nor shall any vacancy in any existing directorship
be filled by any Person (other than a Successor Director), nor shall any Person
(other than a Successor Director) be nominated by the Board for election to the
Board by the Company's shareholders, without (in each case) the unanimous
approval of all members of the Board, and (B) prohibiting any amendment or
repeal of, or adoption of any Board resolution or Bylaw inconsistent with, the
Resolution without (in each case) the unanimous approval of all members of the
Board. During his respective term of office on the Board, including (if
applicable) the term that commences with his election to the Board as a member
of the 2007 Slate (as hereinafter defined) pursuant to Section 1.3 hereof, each
of the members of the Board shall have the same rights, powers, privileges,
access to information and compensation, and the same duties and responsibilities
to the Company and all of its shareholders, as all other members of the Board
and of any committees thereof on which such member serves.
1.2 Each of Xx. Xxxxxxxx and Xx. Xxxxxxx, severally with respect to
himself, hereby confirms: (a) his consent to serve on the Board immediately upon
Full Execution pursuant to Section 1.1(b)(2) hereof; (b) his agreement that, in
addition to the information he has provided to the Company in connection with
the review of his candidacy by the Board and its Nominating and Corporate
Governance Committee (the "Governance Committee"), he shall provide to the
Company such additional information as it may from time to time reasonably
request in order for the Company to be able to fulfill its disclosure
obligations under applicable law and stock exchange requirements (collectively,
"Applicable Legal Requirements").
1.3 The Company represents and warrants to the other Parties that the
Board, in connection with its approval of this Agreement and subject to Full
Execution, has resolved (a certified true and complete copy of which resolution
has been furnished to the other Parties) to approve the inclusion of each of the
New Directors on the slate of candidates to be proposed by the Board as a
nominee for election to the Board by the Company's shareholders (the "2007
Slate") at the 2007 Annual Meeting of Shareholders of the Company (the "2007
Annual
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Meeting") and to recommend (and not to withdraw such recommendation) to the
shareholders of the Company that they vote for the election of the New Directors
at the 2007 Annual Meeting, provided, as to each of the New Directors severally,
(a) he is still serving as a member of the Board pursuant to Section 1.1(b)(2)
hereof when the vote is held for the election of directors at the 2007 Annual
Meeting, (b) the Board has not received a written opinion of its general outside
counsel to the effect that Applicable Legal Requirements raise a serious issue
as to the legality of his inclusion on the 2007 Slate by reason of facts or
circumstances not known on the date hereof and identified in such opinion, and
(c) in the case of Xx. Xxxxxxxx, that Liberation Investments has continuously
Beneficially owned at least 3% of the outstanding Company Common Stock since
Full Execution. The Company shall hold the 2007 Annual Meeting by April 30, 2007
or, if the Company is unable to hold the 2007 Annual Meeting by such date as a
result of a legal impediment under Applicable Legal Requirements that arises and
first becomes known to the Company after the date hereof, as soon as reasonably
practicable following the resolution of such impediment, which the Company shall
take all commercially reasonable efforts to resolve.
1.4 The Company represents and warrants to the other parties that the
Board, in connection with its approval of this Agreement and subject to Full
Execution, has resolved (a certified true and complete copy of which resolution
has been furnished to the other Parties) to approve the prompt retention of an
executive search firm, the identity of which has been heretofore agreed among
the Parties, to initiate on behalf of the Governance Committee a search for an
additional qualified independent director (the "Additional Director") to be
added to the Board as a seventh member (filling a vacancy to be created at that
time) as soon as such a candidate has been identified and has been offered, and
has accepted, such appointment consistent with the Resolution (it being
understood, for the avoidance of doubt, that such appointment shall be subject
to unanimous approval of all members of the Board, including the New Directors,
pursuant to the Resolution). If the Additional Director is appointed prior to
the holding of the vote on the election of directors at the 2007 Annual Meeting,
then, subject to the same qualifications as are set forth with respect to the
New Directors in Section 1.3 hereof, the Additional Director shall be included
on the 2007 Slate.
1.5 If, at any time prior to the expiration of the Standstill Period,
either or both (whether or not at the same time as the other) of the New
Directors, having become a member of the Board pursuant to Section 1.1(b)(2)
hereof, ceases to be a member of the Board or declines to be included in the
2007 Slate by reason of death, disability or resignation other than where such
New Director has resigned or refused to stand for reelection because of either
(1) a disagreement with the Company that is known to an executive officer of the
Company and requires the Company to file a Current Report on Form 8-K with the
SEC under Item 5.02(a)(1) of Form 8-K or (2) in the case of Xx. Xxxxxxxx,
Liberation Investments having ceased to Beneficially own at least 3% of the
outstanding Company Common Stock, then a "Succession Event" shall have occurred,
in which case: (a) Liberation Investments shall have the right to submit to the
Governance Committee in good faith one or more names of suggested independent
qualified replacements (other than Affiliates or Associates of Liberation
Investments) to replace such New Director or New Directors (as the case may be)
(each, a "Successor Director") and the Governance Committee shall promptly
evaluate such suggestions in good faith in accordance with its published
criteria for Board membership with a view to determining whether the suggested
candidates (or at least one of them if more than one is suggested for each
vacant directorship) satisfy the same criteria of independence and qualification
that were applied to the
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review of the candidacies of the predecessor New Director and, if it so
determines, recommending to the Board the appointment and/or addition to the
2007 Slate (as the case may be) of the suggested candidate (or one of them if
more than one is suggested), as the Successor Director, which appointment and/or
addition (as the case may be) shall be subject to the Resolution; and (b)
unless, within 35 days of the Company's first receipt from Liberation
Investments, following the applicable Succession Event, of the names of
suggested Successor Directors, a Successor Director has been appointed for each
directorship vacated by the applicable New Director or New Directors (as the
case may be) and/or added to the 2007 Slate (as the case may be), then at 12
Midnight, Central Time, on such 35th day, a "Section 1.5 Event" shall have
occurred. In the event that, prior to the expiration of such 35-day period,
either the Governance Committee votes against recommending to the Board the
appointment and/or addition (as the case may be) of a Successor Director
suggested by Liberation Investments, or the Board votes on a resolution
regarding such appointment and/or addition and fails to approve such resolution
unanimously, then the Company shall so advise Liberation Investments promptly,
it being understood that neither such notice nor the matters referred to therein
shall constitute a Section 1.5 Event.
1.6 If, as a result of the consummation of a change in control of the
Company that is, to the extent required by Applicable Legal Requirements,
approved by the Board and/or the shareholders of the Company (a "Change of
Control"), the directors who comprised the Board immediately prior to the
consummation of the Change of Control cease to have the legal ability to
determine (dispositively or at all) the composition of the Board or the 2007
Slate (as the case may be), then, to the extent any of the Company's obligations
under this Section 1 remain executory, such obligations shall cease to apply, it
being understood, for the avoidance of doubt, that (a) nothing in this Agreement
shall prohibit a Change of Control, and (b) the consummation of a Change of
Control shall not affect any action taken by, or impair any other agreement
made, by any of the Parties pursuant hereto.
2. STRATEGIC REVIEW
2.1 In connection with the Board's ongoing review of prospective
opportunities to enhance shareholder value with the advice of Bear, Xxxxxxx &
Co. Inc ("Bear Xxxxxxx," which term shall include any successor financial
advisor) as exclusive financial advisor to the Company and the input of the
Company's Chief Executive Officer and other members of the Company's senior
management (the "Strategic Review"), the Company represents and warrants to the
other Parties that the Board, in connection with its approval of this Agreement
and subject to Full Execution, has resolved (a certified true and complete copy
of which resolution has been furnished to the other Parties): (a) to create a
special committee of the Board to be called the Strategic Review Committee, for
the purpose, through the Standstill Period, of (1) overseeing the Strategic
Review on behalf of the Board, (2) interacting with Bear Xxxxxxx, the Company's
Chief Executive Officer and Chief Financial Officer, the Company's legal
advisers and such other parties as it determines appropriate, for the purpose of
advancing the Strategic Review, and (3) reporting to, and receiving direction
from, the Board at such times as the Board determines appropriate, or the
Strategic Review Committee requests, regarding the progress of the Strategic
Review and any recommendations resulting therefrom; (b) to designate as members
of the Strategic Review Committee, for so long as they are willing to serve
during the Standstill Period, the current Chairman of the Board and Xx.
Xxxxxxxx; and (c) to provide that (1) subject to the
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Strategic Review Committee's rights to determine its own internal procedures, to
meet in executive session and to communicate telephonically (in the course of a
meeting) without notice to any other person), all other members of the Board
shall be given notice (to the extent reasonably practicable) of, and the right
to attend, meetings of the Strategic Review Committee, and (2) the participation
(in person or telephonically) of both members of the Strategic Review Committee
shall be required to constitute a meeting of the Strategic Review Committee.
2.2 Consistent with the Company's existing commitment to update investors
quarterly regarding the Strategic Review, the Company shall, to the full extent
consistent with Applicable Legal Requirements and except to the extent (if any)
determined by the Board, after consulting with the Strategic Review Committee,
to be unnecessary by reason of any intervening events occurring after the date
hereof or to be required by Applicable Legal Requirements to be publicly
disclosed earlier, present an update of the status of the Strategic Review at
the investor call to be convened by the Company in conjunction with the public
release of the Company's financial results for the fiscal year ending September
30, 2006, which call (the "Investor Call") shall be publicly noticed and held as
soon as such financial results are available on or before December 15, 2006. The
content of such update shall be determined by the Board after consultation with
the Strategic Review Committee.
3. ACTIONS BY LIBERATION INVESTMENTS
3.1 Liberation Investments hereby agrees to discontinue immediately all
actions seeking to call the Special Meeting and pursue the Proposals.
3.2 So long as the Company is not in breach of this Agreement, during the
Standstill Period neither Liberation Investments nor any Affiliate or Associate
thereof whose actions Liberation Investments is in a position to direct shall
take any actions (directly or indirectly) to solicit proxies for, or otherwise
promote, the Proposals (whether by press release, SEC filings, communications
with individual stockholders of the Company, contacts with the media or
otherwise). For the purposes of this Agreement, the "Standstill Period" shall be
the period commencing on Full Execution and ending at 12 Midnight, Central time,
on the earliest of: (a) October 31, 2007; (b) the date of occurrence of a
Section 1.5 Event; or (c) if both of the New Directors (including for this
purpose any Successor Director theretofore appointed to the Board and/or named
to the 2007 Slate), whether or not at the same time as the other, either (1)
decline to be included in the 2007 Slate or (2) resign from the Board for any
reason prior to the holding of the vote on the election of directors at the 2007
Annual Meeting, the date of the holding of such vote or, if earlier, April 30,
2007; provided, however, that if, after both New Directors (including for this
purpose any Successor Director theretofore appointed to the Board and/or named
to the 2007 Slate), so decline under subclause (1) or so resign under subclause
(2) and, Liberation Investments chooses to suggest Successor Directors under the
procedure specified in Section 1.5 hereof, then (A) during the 35-day period
specified in said Section 1.5, measured from the Company's first receipt from
Liberation Investments of suggested Successor Directors following such
Succession Event, the Standstill Period shall continue in effect, and (B) if,
prior to the expiration of such 35-day period, the Board has, consistent with
the Resolution, appointed two Successor Directors to fill the vacancies created
and/or named two Successor Directors to the 2007 Sale then the Standstill Period
shall continue in effect, in each of cases (A) and (B) until the earlier of the
dates and times set forth in clauses (a) or (b) of this Section 3.4, as
applicable.
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3.3 So long as the Company is not in breach of this Agreement, if either
of the New Directors (including for this purpose any Successor Director
theretofore appointed to the Board) agrees to be included in the 2007 Slate,
Liberation Investments shall not make any public announcement (whether by press
release, SEC filings, contacts with the media or otherwise) regarding its
intention as to how it will vote, or cause to be voted, any Company Voting
Securities Beneficially owned by it with respect to the election of the members
of the 2007 Slate to the Board at the 2007 Annual Meeting; provided, however,
that it may disclose such intention in an amendment to its Schedule 13D filing
(the "Liberation Investments Schedule 13D") if (a) it determines after
consulting with its counsel, that it is required to do so under Applicable Legal
Requirements, (b) such disclosure expressly disclaims any intention to influence
the voting decision of any other shareholder of the Company with respect to such
election, and (c) such disclosure does not violate any other provision of this
Agreement; and further provided, that Liberation Investments shall be free to
vote, or cause to be voted, all Company Voting Securities Beneficially owned by
it in any manner it chooses, or any matter submitted to stockholders for their
vote.
3.4 So long as the Company is not in breach of this Agreement, during the
Standstill Period neither Liberation Investments nor any Affiliate, Associate,
authorized employee or authorized professional advisor thereof whose actions
Liberation investments is in a position to direct shall, unless specifically
invited in writing by the Company: (a) publicly effect or seek, or publicly
offer or propose to effect, (1) any acquisition, issuance or disposition of any
securities (or beneficial ownership thereof) or assets of the Company or any of
its subsidiaries, (2) any tender or exchange offer, merger or other business
combination involving the Company or any of its subsidiaries, (3) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or any of its subsidiaries, (4) any
acquisition of the securities or assets of any other business enterprise by the
Company or any of its subsidiaries, or (5) any "solicitation" of "proxies" (as
such terms are used in the proxy rules of the SEC); (b) form, join or in any way
participate in a "group" (as defined under the 0000 Xxx) with respect to the
Company (other than solely among the Liberation Investments Parties); (c)
otherwise act, alone or in concert with others, to seek to control the
management, the Board or the policies of the Company, including, without
limitation, by (i) initiating or instituting a stockholder solicitation for any
such purpose, or (ii) except as permitted by this Agreement, nominating or
causing others to nominate or otherwise seeking to elect directors of the
Company other than those nominated by the Board; (d) enter into any discussions
or arrangements with any third party with respect to any of the foregoing (it
being understood that this clause (d) shall not prohibit private discussions
with any third party with respect to any of the foregoing nor the referral to
Bear Xxxxxxx by Liberation Investments of third parties that might pursue any of
the matters referred to this Section 3.4); (e) request the Company to amend,
waive or terminate any provision of this Agreement (including this sentence); or
(f) knowingly seek to influence the decisions or actions of any
non-executive-officer employees, customers, suppliers or regulators of the
Company, in their capacities as such, in relation to their respective
relationships with the Company. Notwithstanding anything to the contrary in this
Section 3.4: (i) in the event that a third party publicly takes any action of
the kind that, if taken by Liberation Investments, would be a violation of
subclauses (a)(1), (a)(2), (a)(3) or (a)(4) of the immediately preceding
sentence, and neither Liberation Investments nor any of such Affiliates,
Associates, authorized employees or authorized professional advisors has
theretofore breached its obligations under this Agreement, none of such
subclauses nor clauses (b) and (d) of this Section 3.4 shall restrict any
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actions that Liberation Investments or its applicable Affiliates, Associates,
authorized employees or authorized professional advisors might wish to take in
response to, or in connection with, such third party's public actions provided
such actions do not violate subclause (a)(5) of this Section 3.4; (ii) the
exercise by either New Director of his rights, or fulfillment of his
obligations, as a member of the Board or any committee thereof while he is
serving thereon shall not be a violation of this Section 3.4; and (iii) nothing
in this Section 3.4 shall prohibit (A) a proposal that would otherwise be
prohibited provided it is made confidentially to the Board, or any individual
director or executive officer of the Company, (B) Liberation Investments, or any
Affiliate, Associate, authorized employee or authorized professional advisor
thereof whose actions Liberation Investments is in a position to direct, from
entering into any open market or privately negotiated acquisition or disposition
of any securities of the Company, (C) public disclosure contained in any
amendment to the Liberation Investments Schedule 13D that Liberation determines,
after consulting with its counsel, is required to be filed with the SEC under
Applicable Legal Requirements (and the matters disclosed thereby shall not be a
breach of this Section 3.4) provided the contents of said amendment do not
themselves constitute the taking of any action which is otherwise prohibited by
clauses (a) through (f) of this Section 3.4, or (D) Liberation Investment or any
Affiliate, Associate, authorized employee or authorized professional advisor
thereof whose actions Liberation Investments is in a position to direct from
advocating (publicly or otherwise), following the conclusion of the Investor
Call, that the Company pursue and evaluate specific alternatives to maximize
shareholder value, including the types of transactions referred to this Section
3.4.
4. SPECIAL RELEASES, COVENANTS NOT TO XXX, AND INDEMNIFICATION
4.1 The Company: (a) fully releases, remises, exonerates and forever and
unconditionally discharges the Liberation Investments Parties and each of their
Affiliates, Associates, representatives, employees, agents and advisors (each, a
"Stockholder Releasee") from any and all liability and responsibility for any
and all Company Claims (as hereinafter defined); and (b) covenants and agrees
not to participate in, commence or permit (to the extent within its control) the
assertion or commencement of any demand, allegation, litigation, proceeding or
action relating to any Company Claim, and not to encourage, assist or cooperate
with any other Person in pursuing or asserting any Company Claim, against any
Stockholder Releasee. As used in this Agreement, "Company Claim" means any
actual or alleged liability, claim, action, suit, cause of action, obligation,
debt, controversy, promise, contract, lien, judgment, account, reckoning, xxxx,
xxxx, covenant, agreement, demand of any kind or nature, loss, cost, damage,
penalty or expense (including, without limitation, reasonable attorneys' fees
and expenses, and the costs of investigation and litigation), whether in law or
in equity, whether known or unknown, whether matured or unmatured and whether
foreseen or unforeseen, that the Company may or could have had or now or
hereafter may have, for, upon, or by reason of, any matter, cause or thing
whatsoever resulting from, arising out of, relating to, connected in any way
with, or alleged, suggested or mentioned in connection with (in each case, other
than this Agreement) (i) the Proxy Contest, or (ii) any action taken, or
statement made, in connection with the Proxy Contest.
4.2 Each of the Liberation Investments Parties: (a) fully releases,
remises, exonerates and forever and unconditionally discharges the Company and
each of its Affiliates, Associates, representatives, employees, agents and
advisors (each, a "Company Releasee") from any and all
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liability and responsibility for any and all Stockholder Claims (as hereinafter
defined); and (b) covenants and agrees not to participate in, commence or permit
(to the extent within its respective control) the assertion or commencement of
any demand, allegation, litigation, proceeding or action relating to any
Stockholder Claim, and not to encourage, assist or cooperate with any other
Person in pursuing or asserting any Stockholder Claim against any Company
Releasee. As used in this Agreement, "Stockholder Claim" means any actual or
alleged liability, claim, action, suit, cause of action, obligation, debt,
controversy, promise, contract, lien, judgment, account, reckoning, xxxx, xxxx,
covenant, agreement, demand of any kind or nature, loss, cost, damage, penalty
or expense (including, without limitation, reasonable attorneys' fees and
expenses, and the costs of investigation and litigation), whether in law or in
equity, whether known or unknown, whether matured or unmatured and whether
foreseen or unforeseen, that any Liberation Investments Party may or could have
had or now or hereafter may have, for, upon, or by reason of, any matter, cause
or thing whatsoever resulting from, arising out of, relating to, connected in
any way with, or alleged, suggested or mentioned in connection with (in each
case, other than this Agreement) (i) the Proxy Contest, or (ii) any action
taken, or statement made, in connection with the Proxy Contest.
4.3 The Company expressly acknowledges that each Stockholder Releasee
other than Liberation Investments is an intended third party beneficiary of its
release and covenant contained in Section 4.1. Liberation Investments
acknowledges that each Company Releasee other than the Company is an intended
third party beneficiary of its release and covenant contained in Section 4.2.
Each Party acknowledges that any claim determined, in a final nonappealable
judgment or order of a court of competent jurisdiction, to have been based
primarily on intentional fraud shall not be released under this Section 4.
5. CERTAIN REPRESENTATIONS AND WARRANTIES
5.1 The Company represents and warrants to each of the other Parties that:
(a) the Company's execution, delivery and performance of this Agreement have
been approved by the Board and do not violate its Amended and Restated Articles
of Incorporation, its Amended and Restated Bylaws, the Texas Business
Corporation Act or any agreement to which it is a party; and (b) this Agreement
constitutes the Company's valid and binding obligation, enforceable against it
in accordance with the terms thereof.
5.2 Each of the Liberation Investments Parties represents and warrants to
the Company that: (a) if the Liberation Investments Party making such
representation and warranty is not a natural person, its execution, delivery and
performance of this Agreement has been approved by its respective general
partner, managing member, board of directors, trustee or other governing body or
authority, as the case may be, and does not violate its respective
organizational or constituent documents nor the laws pursuant to which it has
been incorporated or organized (b) its execution, delivery and performance of
this Agreement does not violate any agreement to which it is a party; (c) this
Agreement constitutes its valid and binding obligation, enforceable against it
in accordance with the terms thereof; (d) it has consulted with counsel of its
choice in connection with its decision to enter into and be bound by this
Agreement; and (e) Recital A to this Agreement is a true statement of the
aggregate number of Company Voting Securities Beneficially owned by Liberation
Investments and, to its best knowledge, after due
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inquiry, none of its respective Affiliates Beneficially owns any other Company
Voting Securities.
6. CERTAIN ANNOUNCEMENTS AND OTHER DISCLOSURES
6.1 As soon as reasonably practicable on, or on the business day
following, Full Execution: (a) the Company shall issue a press release in the
form of Exhibit A to this Agreement (the "Press Release"); (b) the Company shall
file with the SEC a Current Report on Form 8-K to disclose this Agreement in a
manner consistent, in all material respects, with the Press Release and this
Agreement, the contents of which Current Report shall be subject to the approval
of each of the other Parties (not to be unreasonably withheld); and (c)
Liberation Investments shall file with the SEC an amendment to the Liberation
Investments Schedule 13D to disclose this Agreement in a manner consistent, in
all material respects, with the Press Release and this Agreement, the contents
of which Schedule 13D amendment shall be subject to the approval of the Company
(not to be unreasonably withheld).
6.2 During the Standstill Period, no Party shall make any public statement
(including any statement in a filing with the SEC or any other governmental
agency) disparaging any other Party or this Agreement.
6.3 Any public statement (including any statement in any filing with the
SEC or any other governmental agency) by any Party regarding this Agreement or
any event occurring prior to the date of this Agreement that is not otherwise
prohibited by this Section 6 shall be made in compliance with applicable
securities laws and consistently with any fiduciary duties such Party owes to
the Company.
7. CERTAIN DEFINITIONS
In addition to the other definitions contained elsewhere in this
Agreement, the following terms shall have the meanings specified below for the
purposes hereof:
"Affiliate" and "Associate" have the respective meanings set forth in the
rules promulgated by the SEC under the 1934 Act, it being agreed that neither of
the New Directors, solely by reason of his status as a Party or as a New
Director, shall be deemed an Affiliate or Associate of Liberation Investments.
"Beneficially own" has the meaning set forth in Rule 13d 3 promulgated
under the 1934 Act; provided, however, that for purposes of this Agreement, any
option, warrant, right, conversion privilege or arrangement to purchase, acquire
or vote Company Voting Securities, regardless of the time period during, or the
time at which, it may be exercised, and regardless of the consideration paid,
shall be deemed to give the holder thereof beneficial ownership of the Company
Voting Securities to which it relates.
"Company Voting Securities" means all classes of capital stock of the
Company which are then entitled to vote generally in the election of directors
and any securities exchanged for
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such classes of capital stock and any securities convertible into or
exchangeable or exercisable for such classes of capital stock.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
regulations promulgated by the SEC under such statute.
"Person" means a natural person or any legal, commercial or governmental
entity, including, but not limited to, a corporation, partnership, joint
venture, trust, limited liability company, group acting in concert or any person
acting in a representative capacity.
8. MISCELLANEOUS
8.1 This Agreement constitutes the entire agreement of the Parties with
respect to its subject matter and supersedes any and all prior representations,
agreements or understandings, whether written or oral, between or among any of
them with respect to such subject matter. This Agreement may be amended only by
a written agreement duly executed by the Parties.
8.2 This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Texas without regard to its conflict of law principles.
Exclusive jurisdiction to resolve any dispute arising under or in connection
with this Agreement is hereby conferred on the courts of the State of Texas for
Xxxxxx County or, if the dispute involves issues of federal law or over which
the Courts of the State of Texas for lack or decline jurisdiction, on the United
States Federal District Court for the Western District of Texas. The Parties
hereby submit to the exclusive jurisdiction of each of such courts for the
resolution of any such dispute.
8.3 This Agreement may not be assigned by any Party without the prior
written consent of the other Parties. This Agreement shall be binding upon, and
inure to the benefit of, the respective successors and permitted assigns of the
Parties. Except as expressly set forth in Section 4, this Agreement shall confer
no rights or benefits upon any Person other than the Parties.
8.4 Any waiver by any Party of a breach of any provision of this Agreement
shall not be deemed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Agreement.
8.5 This Agreement may be executed in counterparts, each of which shall
constitute an original but all of which shall together constitute a single
instrument.
8.6 Liberation Investments shall use its commercially reasonable efforts
to cause those of its Affiliates whose actions it is in a position to direct to
comply with Sections 3 and 4 of this Agreement.
8.7 Each of the other Liberation Investments Parties hereby appoints Xx.
Xxxxxxxx as the authorized representative of such Liberation Investments Party
for all purposes of this Agreement (including, without limitation, the giving of
binding approvals and waivers) and the Company shall be entitled to deal with
Xx. Xxxxxxxx accordingly.
10
8.8 The Parties agree that irreparable damage would occur and the Parties
would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Parties shall be entitled to (i) an injunction or injunctions to prevent
breaches of this Agreement and to (ii) specific performance of the terms hereof,
this being in addition to any other remedy to which they are entitled at law or
in equity.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
11
IN WITNESS WHEREOF, this Agreement has been executed by each of the
Parties, through their respective duly authorized representative, as of the date
first above written.
MULTIMEDIA GAMES, INC. LIBERATION INVESTMENTS, L.P.
By: /s/ Xxxxxxx X. Xxxx By: Liberation Investment Group LLC,
Xxxxxxx X. Xxxx General Partner
President and
Chief Executive Officer By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Chief Executive Officer
LIBERATION INVESTMENTS LTD.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Director
LIBERATION INVESTMENTS GROUP LLC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
/s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
12
EXHIBIT A
FORM OF PRESS RELEASE
(SECTION 6.1)
MULTIMEDIA GAMES, INC. PRESS RELEASE
For more information contact:
Xxxxxxxx Xxxx [MULTIMEDIA GAMES Xxxxxx X. Xxxxxxx
President and CEO Logo] Xxxxxxx Xxxx
Xxxxx Xxxxxxxxxx Xxxxxxx & Xxxxxxx
Interim CFO Incorporated
Multimedia Games, Inc. 212-835-8500 or
512-334-7500 xxxx@xxx.xxx
MULTIMEDIA GAMES AND LIBERATION INVESTMENTS
RESOLVE PROXY CONTEST; SPECIAL SHAREHOLDERS'
MEETING WILL NOT BE HELD
Two New Independent Directors Added to the Multimedia Board
and Search to be Initiated for an Additional Independent Director
Board Forms Special Committee to Oversee Ongoing Strategic Review
AUSTIN, Texas -- October ___, 2006 -- Multimedia Games, Inc (NASDAQ: MGAM) and
Liberation Investments, an 8.4% stockholder of Multimedia, announced today that
the companies have entered into an agreement to add two new independent
directors to Multimedia's Board of Directors - Xxxxxxx X. Xxxxxxxx and Xxxx X.
Xxxxxxx. In addition, Xx. Xxxxxxxx will be added to a newly formed two-person
Strategic Review Committee.
Liberation Investments previously announced it would solicit requests to call a
special meeting of Multimedia's shareholders to replace a majority of the
current directors with its designees and adopt related proposals relating to the
size and composition of the Board. Under the agreement, the proxy contest has
been withdrawn and the special meeting will not be held.
Under the agreement, which Multimedia will file with the SEC in the near future,
Multimedia's Board has been expanded from five to six directors, and Xx.
Xxxxxxxx and Xx. Xxxxxxx have been added. These new directors will, if they
choose, be included on the Board's slate of nominees for the 2007 Annual Meeting
of Shareholders, to be held by April 30, 2007 or as soon thereafter as legally
practicable. The two new directors were recommended to Multimedia by Liberation
Investments.
To facilitate the addition of Messrs. Xxxxxxxx and Xxxxxxx to a board of six,
Xxxxxx X. Xxxxxxx, Multimedia's longest-serving current director and its former
Chairman, has resigned from the Board. Multimedia has entered into an agreement
that provides for Xx. Xxxxxxx'x services as a consultant for eighteen months at
a fee commensurate with the annual fees currently paid to Multimedia's
directors.
A-1
"The current directors want to take this opportunity to express their
sincere appreciation to Xxx for his years of valuable service, as well
as his graciousness in making way for the new directors as part of this
contractual resolution. We are pleased we will have continued access to
his valuable advice and assistance," said Xxxxxxx X. Xxxxxx, Xx., the
Board's Chairman, and Xxxxxxx X. Xxxx, President and CEO.
"We look forward to working with Messrs. Xxxxxxxx and Xxxxxxx in
continuing to build shareholder value and we are confident their
backgrounds and experience will complement the skills of our continuing
directors," Messrs Xxxxxx and Xxxx added.
Xx. Xxxxxxxx is the founder and Chief Executive Officer of Liberation Investment
Group, a New York-based investment management firm. Previously, Xx. Xxxxxxxx
served as Chief Operating Officer of Vornado Operating Corporation. Prior to
that, Xx. Xxxxxxxx served as a consultant and advisor to the executive
management of several publicly-traded gaming companies.
Xx. Xxxxxxx is currently Executive Vice President, Secretary and General Counsel
of Xxxxxx Products, Inc., a NASDAQ company headquartered in Des Plaines,
Illinois. He is a 22 year veteran of the gaming machine, casino and lottery
businesses, having served as Executive Vice President and General Counsel of the
former Bally Manufacturing Corporation and Bally Gaming International, Inc. Xx.
Xxxxxxx was a member of the board of trustees of the International Association
of Gaming Attorneys for 9 years and has been a director of two public companies.
The agreement also provides for Multimedia's Nominating and Corporate Governance
Committee to engage an executive search firm to identify an additional qualified
independent director. All shareholders are welcome to submit suggestions for
candidates to the Corporate Secretary, consistent with the communication policy
described in the Company's March 2, 2006 proxy statement on file with the SEC.
In connection with the agreement, the Board has adopted a standing resolution
that requires a unanimous board decision to increase the number of directors or
fill any vacancy (other than to appoint a successor to Xx. Xxxxxxxx or Xx.
Xxxxxxx suggested by Liberation Investments under the circumstances specified in
the agreement) so long as certain restrictions governing the actions of
Liberation Investments remain in effect. These restrictions will apply until
October 31, 2007. However, the restrictions will terminate on the date of the
holding of the vote on the election of directors at the 2007 annual meeting of
stockholders or, if earlier, April 30, 2007, if both of Messrs. Xxxxxxxx and
Xxxxxxx (or any successor suggested by Liberation Investments who replaces
either of them under the circumstances specified in the agreement) decline to be
included in the 2007 slate of nominees or resign from the Board for any reason
prior to the holding of that vote. In addition, the restrictions will terminate
if Xx. Xxxxxxxx or Xx. Xxxxxxx ceases to be a member of the Board or declines to
be included in the 2007 slate for reasons specified in the agreement and an
independent qualified independent replacement suggested in good faith by
Liberation Investments to the Multimedia Nominating and Governance Committee has
not been appointed to the Board and/or added to the 2007 slate within 35 days of
the suggestion being made.
A-2
Under the agreement, the Board has also formed a special Strategic Review
Committee to oversee the Board's ongoing review of prospective opportunities to
enhance shareholder value, which was initiated earlier this year partly in
response to a suggestion from Liberation Investments. Bear Xxxxxxx & Co., Inc.,
as previously announced, is serving as Multimedia's exclusive financial advisor
for that review. The Strategic Review Committee will be comprised of Xx. Xxxxxx
and Xx. Xxxxxxxx. The Committee will oversee the strategic review process on
behalf of the Board and will interact with Bear Xxxxxxx, Xx. Xxxx and
Multimedia's chief financial officer for the purpose of advancing the review.
The Committee will report to, and receive direction from, the Board, all of
whose members will be invited to its meetings except where the Committee chooses
to meet in executive session.
In connection with its investor call in conjunction with the release of
financial results for the fiscal year ending September 30, 2006, Multimedia
will, as previously committed, provide an update on the status of the strategic
review on or before December 15, 2006, unless intervening events make that
update unnecessary. There is no assurance as to any outcome from the strategic
review process.
About the Company
Multimedia Games is a leading developer and supplier of comprehensive systems,
content, electronic games and player terminals for the Native American gaming
market, as well as the casino, charity and international bingo, video lottery,
and sweepstakes markets. The Company's ongoing development and marketing efforts
focus on gaming systems and products for use by Native American tribes
throughout the United States, the commercial casino market, video lottery
systems and other products for domestic and international lotteries, and
products for charity and international bingo and emerging markets, including
sweepstakes, promotional, amusement with prize, and coupon gaming opportunities.
Additional information may be found at xxx.xxxxxxxxxxxxxxx.xxx.
Cautionary Language
This press release contains forward-looking statements regarding the role of
Multimedia's Board of Directors, as reconstituted, in building shareholder value
and the ongoing strategic review process that has been undertaken by the Board
and will be overseen by its Strategic Review Committee. These forward-looking
statements are subject to various risks and uncertainties that could materially
affect these matters. A number of risks and uncertainties relating to
Multimedia's business, operations and financial results were set forth in its
press release dated August 8, 2006, which was filed with the Securities and
Exchange Commission as an Exhibit to its Current Report on Form 8-K dated August
14, 2006. Other important risks and uncertainties that may affect the Company's
business, as well as the outcome of its Board's strategic review process, are
detailed from time to time in the "Certain Risks" and "Risk Factors" sections
and elsewhere in its Securities and Exchange Commission filings. Multimedia
disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
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