EXHIBIT 10.12
RCT = Requested Confidential Treatment
SETTLEMENT AGREEMENT made as of the 18 day of November, 1999 among
Cardivan Company, a Nevada corporation, Corral United, Inc. a Nevada
corporation, Jackpot Enterprises Inc., a Nevada corporation, and Xxxxxxxxx'x
Inc., a Delaware corporation.
WITNESSETH
WHEREAS, Cardivan Company ("Cardivan") and Corral United Inc.
("Corral") are each fully owned subsidiaries of Jackpot Enterprises Inc.
("Jackpot") and both Cardivan and Corral are licensees under certain license
agreements with Lucky Stores Inc., a Nevada corporation, and American Drug
Stores Inc., an Illinois corporation, both of which are wholly owned
subsidiaries of American Stores Company, a Delaware corporation;
WHEREAS, Xxxxxxxxx'x Inc. ("Albertson's") and American Stores
Company merged on June 23, 1999, and Albertson's is now the successor to the
license agreements to which American Drug Stores Inc. and Lucky Stores Inc.
are a party with Cardivan and Corral;
WHEREAS, the license agreements which are affected by this
settlement agreement are as follows:
(1) License agreement made as of September 16, 1998 between
Albertson's and Cardivan (the "Albertson's Agreement");
(2) License agreement entered into as of April 24, 1997 between
Lucky Stores Inc. and Cardivan (the "Lucky Agreement");
(3)(i) License agreement entered as of April 24, 1997 between
American Drug Stores Inc. and Corral, and (ii) license agreement entered
into as of April 24, 1997 between American Drug Stores Inc. and Cardivan
(collectively, the "Sav-On Agreement");
WHEREAS, Albertsons and Raley's, a California corporation
("Raley's"), entered into an Asset Purchase Agreement dated as of May 17,
1999, by which Albertson's divested itself of 15 supermarkets that had
been covered by the Albertson's Agreement;
WHEREAS, Cardivan commenced a lawsuit against Albertson's and
Raley's, Case No. CV-S-99-1100-DWH-RJJ, in which Cardivan seeks declaratory
relief, injunctive relief, and damages and which action is pending in the
United States District Court, District of Nevada ("the Action");
WHEREAS, Cardivan and Albertson's wish to settle the dispute and
lawsuit as between them upon the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein and after set forth, the parties agree as follows:
1. Albertson's hereby represents and warrants that it has full
authority and ability to enter into this agreement, on behalf
of itself and on behalf of Lucky Stores Inc. and American Drug
Stores Inc.
2. The Lucky and Sav-On Agreements are hereby terminated except as
provided in Items 5 and 18 hereof, and the Albertson's Agreement
is hereby amended to grant Cardivan an exclusive for the operation
of gaming devices in all supermarkets, drug stores and convenience
stores (as hereinafter defined) operated in the State of Nevada
by Albertson's or any of its affiliates subject to the terms of
this agreement. The term of the Albertson's Agreement is revised
to end RCT; provided, however, that in the event Albertson's and/or
its affiliates, between RCT and RCT, have not opened at least RCT
new or replacement supermarkets in that area consisting
of the cities of Las Vegas, North Las Vegas, and Xxxxxxxxx, Nevada,
and the unincorporated area immediately adjacent thereto ("Las
Vegas metropolitan area") (net of any supermarkets which have been
permanently closed for business with no replacement in which
gaming is permitted, but without any deduction or adjustment for
stores sold to an unrelated third party or closed for reasons
beyond Albertson's reasonable control [e.g., condemnation and
change of law]), which calculation shall be made as of RCT
the date of expiration of such term shall be extended from
RCT to RCT. Cardivan shall have the right, in its sole and
absolute discretion, upon written notice to Albertson's
received at least RCT prior to expiration of the initial term
(which notice may be conditioned on (i) Albertson's and/or its
affiliates opening the RCT supermarkets on the terms set forth
above, or (ii) the absence of any material event beyond Cardivan's
reasonable control occurring prior to the date of expiration of
the initial term that could adversely affect the financial
benefits of Albertson's Agreement to Cardivan) to extend the
agreement through RCT.
3. RCT and limit Jackpot's guaranty in Albertson's Agreement to
Cardivan's obligations relating to the combo stores.
4. Delete Albertson's and Cardivan's options to terminate the
Albertson's Agreement effective RCT as set forth in Paragraph 2(c)
of the agreement.
5. License fees:
A. License fees will be based on store format. Fees in Lucky
Agreement will apply to all existing and future food stores
(excluding drug and convenience stores), operated under
any trade name by Albertson's or any of its affiliates
which do not have an in-store pharmacist ("traditional
stores"). Fees in Albertson's Agreement will apply to all
existing and future food stores, operated under any name
by Albertson's or any of its affiliates, which includes a
pharmacist ("combo stores"; the traditional stores and
combo stores being herein collectively referred to as
"supermarkets"). Fees in Sav-On Agreement will apply to
all drug stores operated under any trade name by Albertson's
or any of its affiliates. The term "drug store" shall not
include a drug or pharmacy department located within a combo
store.
Note: The fees for combo store #6046 Rainbow & Charleston (Lucky
#121-787) shall be determined by the Albertson's agreement
RCT.
B. License fees for the option term will be the same as
currently set forth in the agreements.
C. License fees for the period commencing RCT and ending
RCT will be adjusted as follows:
Northern Nevada: The fees for Albertson's #149, #151 and
#175 will be based on actual number of machines (15) in
each supermarket.
Fees for all supermarkets (with or without a pharmacy)
located or to be opened in Reno/Sparks/Xxxxxx City will be
reduced to RCT from the fee schedule set forth in the
Albertson's Agreement.
Fees for the supermarkets located or to be opened in Elko
and Winnemucca will be reduced RCT from the fee schedule set
forth in the Albertson's Agreement.
Southern Nevada: Fees for traditional stores located or to
be opened in Las Vegas metropolitan area will be based on
the fee schedule set forth in the Lucky's Agreement
subject to a RCT reduction in monthly fees for each store.
For all combo stores opened in the Las Vegas metropolitan
area on or after RCT, the license fee per machine per month
will be reduced RCT from the fees set forth in the
Albertson's Agreement for the balance of the initial term.
In the event Cardivan exercises its option to extend the
agreement for the option term, all amounts associated with
the RCT reduction in fees attributable to the new combo
stores (and without any reduction whatsoever for the RCT
adjustment in fees set forth in Items 1 and 2 of the
"Additional Provisions" described in Exhibit "C" to
Albertson's Agreement) will be repaid to Albertson's with
interest at an annual rate of RCT either (i) in a lump sum
on the first day of the option term, or (ii) over the
duration of the option term in accordance with terms
mutually agreed by the parties. In the event Cardivan fails
to exercise the option term, no repayment will be required.
Note: The RCT adjustment set forth above will not
affect the provision in Albertson's Agreement providing
for license fees during the RCT year of operation of
any combo store to be reduced to RCT of the stipulated
rate (as adjusted herein).
Sav-On: Fees for all drug stores located or to be opened
in the state of Nevada will be reduced to RCT per
machine per month. If the initial term is extended through
RCT, the license fee per machine per month for the
period RCT through RCT will be RCT.
D. Notwithstanding anything to the contrary in Items 5.A. -
5.C. above, in the event Cardivan or any of its affiliates
is party to any agreement with RCT which provides for the
payment of rent or license fees for combo stores located in
the Las Vegas metropolitan area greater than the license
fees set forth in this agreement for Albertson's combo
stores located in Las Vegas metropolitan area, the license
fees set forth in this agreement for such stores without
regard to temporary adjustment, reductions, or abatements
otherwise provided in either the Albertson's Agreement or
this agreement (e.g., the RCT reduction or RCT adjustment
in fees described in Item 5.C. above) shall be automatically
adjusted from time to time to equal the greater of (i)
the license fees set forth in this agreement for such
stores, and (ii) the rent or license fees paid to RCT.
6. Cardivan will have the right to reduce the number of machines in
each Sav-On drug store (new or existing) from RCT to a minimum of
RCT machines. Once a reduction is made, Cardivan will have no
right to increase the number of machines without Albertson's
consent and all excess space will be relinquished to Albertson's
for use in Albertson's operations.
7. Cardivan will have the right to close gaming operations in the
Sav-On drug stores during the "graveyard" shift (approximately
11:00 p.m. to 7:00 a.m.) with RCT adjustment in license fees.
8. In the event Albertson's in any RCT period during the period
starting RCT and ending RCT sells to an unrelated third party a
minimum of either RCT supermarkets or RCT drug stores in which
gaming is permitted and which are located in the state of Nevada
(net of any stores which are sold to an unrelated third party who
either [i] assumes Albertson's agreement with Cardivan for such
stores, [ii] enters into a new agreement with Cardivan for the
operation of gaming devices in such stores, or [iii] is party to an
agreement granting Cardivan or any of its affiliates the right to
operate gaming devices in such stores), Albertson's agrees to RCT
that would otherwise have been paid by Cardivan for such stores
had the stores remained open calculated from the date of
closing/sale to RCT.
9. In the event Albertson's elects to operate gaming devices in any
convenience stores associated with its fuel center facilities
located in the state of Nevada ("convenience stores"), Cardivan
shall have the exclusive right to such gaming operations during
the term of the Albertson's Agreement (as revised herein).
Cardivan will have the option to put a maximum of RCT machines in
each convenience store. The minimum number of machines permitted
in convenience stores located in the Reno/Sparks/Xxxxxx City area
will be RCT; for convenience stores located in the Las Vegas
metropolitan area, the minimum will be RCT; and for all other
areas, the minimum will be mutually determined by the parties.
Once a decision is made, Cardivan will have no right to increase
the number of machines without Albertson's consent and all excess
space will be relinquished to Albertson's for use in Albertson's
operations. The license fees for convenience stores will be
RCT per machine per month during the initial term and RCT
per machine per month during the option term. Albertson's will
provide all change people required for the operation of gaming
devices in such stores.
10. Effective RCT, the balance of the security deposits under both the
Lucky and Albertson's Agreements in the aggregate amount of
RCT will be applied to Albertson's/Lucky's/Sav-On's license fees.
11. The nonrefundable fee in the amount of RCT under the Albertson's
Agreement will be prorated from RCT, and the prorata amount for the
period attributable to the period after Cardivan vacates all of the
15 stores sold to Raley's shall be applied to
Albertson's/Lucky's/Sav-On's license fees effective as of the
vacating date. For the purpose of this Item 11, Cardivan shall not
be deemed to have vacated the stores during such period of time as
Cardivan or any of its affiliates have the right to operate gaming
devices in such stores pursuant to a separate agreement with
Raley's or any of its affiliates.
12. Effective RCT, Albertson's will credit to the
Albertson's/Lucky's/Sav-On license fees an amount equal to the
store closure allowance (approximately RCT) currently
allowed under Albertson's Agreement and attributable to the
period of closure for the 15 stores sold to Raley's subject to
Cardivan's agreement to repay, and indemnify Albertson's against,
any portion of such amount which the court orders be paid to
Raley's or any other party.
13. Albertson's agrees to give Cardivan a credit against the
Albertson's/Lucky/Sav-On license fees for any portion of the
license fees already paid to Albertson's (and not otherwise
paid or reimbursed to Cardivan) for the period after the date of
the sale to Raley's which the court orders (or absent an order
by the court, Cardivan, Raley's and Albertson's agree) are not
required to be paid to Raley's or to any other person on Raley's
behalf.
14. Effective as of the date Cardivan vacates the 15 stores sold to
Raley's, Albertson's agrees to credit Cardivan's license fees for
the Albertson's/Lucky/Sav-On stores with an amount, not to
exceed RCT, equal to the unamortized portion of the
license taxes/permit fees paid by Cardivan to local and/or state
governmental authorities prior to February 1, 2000 for the 15
stores sold to Raley's.
15. Cardivan shall vacate the 15 stores sold to Raley's by February 1,
2000 unless otherwise agreed in writing by Raley's on terms which
will not subject Albertson's to liability for any such extension
beyond February 1, 2000 (including any claim by United Coin against
Raley's which could be pursued against Albertson's under the terms
of the Asset Purchase Agreement or otherwise or any claim by
Raley's for amounts described in Items 10, 11, 13 or 14 which have
been credited to license fees due under Albertson's Agreement as
revised herein).
16. Cardivan agrees to dismiss the Action against Albertson's with
prejudice, with both parties to pay their respective costs and
attorneys' fees. Because both parties shared confidential
information with the other party's outside counsel in negotiating
the settlement of the Action, Cardivan will ensure that RCT, will
represent Anchor Coin against Albertson's regarding any claim made
or that could have been made in the Action or in United Coin
Machine Co. v. Cardivan Co., et al., Case #A408506, pending in
District Court, Xxxxx County, Nevada; and Albertson's will ensure
that neither RCT will represent Raley's against Cardivan regarding
any claim made or that could have been made in the Action or in
United Coin Machine Co. v. Cardivan Co., Case #408506, pending in
District Court, Xxxxx County, Nevada ("the United Action"). Upon
the execution of this Settlement Agreement by all parties, Cardivan
will prepare and execute a stipulation and order of dismissal of
its claims against Albertson's which will be held in escrow by
Albertson's counsel pending negotiations with Raley's, Anchor Coin
and United Coin. The stipulation may be filed under seal by
Albertson's counsel on 24 hours written notice to Cardivan's
counsel.
17. Albertson's and Cardivan will use reasonable efforts to encourage
Raley's to permit Cardivan to operate in Raley's stores in Xxxxx
County, Nevada, and to encourage United Coin, Anchor Coin and
Raley's to settle all claims made or that could have been made in
the pending federal or state lawsuits.
18. Albertson's agrees not to assert, and hereby waives, any claims
against Cardivan arising out of the transactions or occurrences
stated in the Action or the United Action. Cardivan agrees not
to assert, and hereby waives, any claims against Albertson's
arising out of the transactions or occurrences stated in the
Action or the United Action. Neither Cardivan nor Albertson's
waive, release or settle any claims arising (a) out of this
Settlement Agreement; or (b) under the Albertson's Agreement,
the Lucky Agreement, or the Sav-On Agreement which do not arise
out of the transactions or occurrences stated in the Action or the
United Action.
19. The parties hereto agree to keep the terms of this agreement
confidential and not to disclose same except by reason of court
order or as required by statute or regulation after prior notice
to the other party. The parties further agree to keep the fact
of this settlement confidential to allow negotiations with
Raley's and United Coin and that before any party hereto discloses
the existence of this agreement they will give prior notice of
at least twenty-four hours to the other party.
XXXXXXXXX'X INC. JACKPOT ENTERPRISES INC.
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxx X. Xxxxxxxxx
________________________ __________________________________
Name: Xxxxxxx X. Xxxxxx Name: Xxx X. Xxxxxxxxx
Title: Vice President Title: President & Chief Executive
Officer
AMERICAN DRUG STORES CARDIVAN COMPANY
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxx Xxxxxxx
________________________ _________________________________
Name: Xxxxxxx X. Xxxxxx Name: Xxxxxx Xxxxxxx
Title: Vice President Title: President
LUCKY STORES INC. CARDIVAN COMPANY
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxx Xxxxxxx
________________________ _________________________________
Name: Xxxxxxx X. Xxxxxx Name: Xxxxxx Xxxxxxx
Title: Vice President Title: President
XXXXXXXX & XXXXXXXX
As to paragraph 16 only:
By: /s/ Xxxxxx Xxxxxxxx
________________________
Xxxxxx Xxxxxxxx
Partner