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Exhibit 10.1

 

 
U.S. Department of Justice
image 2 [image2.jpg]  
United States Attorney
Southern District of New York
               
The Silvio J. Mollo Building
 
One Saint Andrew's Plaza
 
New York, New York 10007
         
October 29, 2009

 
Via Federal Express
Melinda Sarafa, Esq.
Sarafa Law LLC
80 Pine Street, Floor 33
New York, NY 10005

 
Behnam Dayanim, Esq.
Paul, Hastings, Janofsky & Walker LLP
875 15th Street, NW
Washington, DC 20005
 
 
 
Re:
Optimal Group Non-Prosecution Agreement

 
Dear Madam and Sir:
 
On the understandings specified below, the Office of the United States Attorney
for the Southern District of New York (the "Office") will not criminally
prosecute Optimal Group Inc. or its subsidiaries (collectively, "Optimal") for
any crimes (except for criminal tax violations, as to which this Office cannot
and does not make any agreement) related to processing by Optimal, its
predecessors, or acquired companies of internet gambling related transactions
originating from customers in the United States through and including 2006. This
conduct is described more fully in the Statement of Facts, attached hereto as
Exhibit A, which is incorporated by reference herein. This Agreement is entered
into by Optimal pursuant to authority conveyed by resolution of the Board of
Directors of Optimal. A copy of this resolution is attached hereto as Exhibit B.
 
Moreover, if Optimal fully complies with the understandings specified in this
Agreement, no information provided to the Office or at its request by or on
behalf of Optimal (or any other information directly or indirectly derived
therefrom) will be used against Optimal in any criminal tax prosecution. This
Agreement does not provide any protection against prosecution for any crimes
except as set forth above, and applies only to Optimal and not to any other
entities or any individuals. Optimal expressly understands that the protections
provided to Optimal by this Agreement shall not apply to any successor entities,
whether the successor's interest arises through a merger or plan of
reorganization or otherwise, unless and until such successor formally adopts and
executes this Agreement. The protections arising from this Agreement will not
apply to any purchaser of all or substantially all of the assets of Optimal,
unless such purchaser enters into a written agreement, on terms acceptable to
this Office, agreeing in substance to undertake all of the obligations set forth
in the "Continuing Obligation to Cooperate" section of this Agreement, set forth
below.

 
 

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Melinda Sarafa, Esq
Behnam Dayanim, Esq.
October 29, 2009
Page 2

 
Continuing Obligation To Cooperate
 
Optimal acknowledges and understands that the cooperation it has provided to
date in connection with a criminal investigation by this Office, and its pledge
of continuing cooperation, are important and material factors underlying this
Office's decision to enter into this Agreement. Accordingly, Optimal agrees to
cooperate fully and actively with the Office, the Federal Bureau of
Investigation (the "FBI"), and any other agency of the government designated by
the Office (including the FBI, the "Designated Agencies") regarding any matter
relating to the Office's investigation about which Optimal has knowledge or
information.
 
In this regard, it is understood that, in connection with any matter relating to
Optimal's business and operations Optimal: (a) shall truthfully and completely
disclose all information with respect to the activities of Optimal, its officers
and employees, and others concerning all such matters about which this Office
inquires, which information can be used for any purpose, except as limited by
the second paragraph of this Agreement; (b) shall cooperate fully with this
Office and the Designated Agencies; (c) shall, at the Office's request, use its
best efforts to assist this Office in any prosecution or investigation by
providing logistical and technical support for any meeting, interview, grand
jury proceeding, or any trial or other court proceeding; (d) shall at the
Office's request, use its best efforts promptly to secure the attendance and
truthful statements or testimony of any officer, agent, employee, or former
officer, agent or employee, at any meeting or interview or before the grand jury
or at any trial or other court proceeding; (e) shall use its best efforts
promptly to provide to this Office, upon request, any document, record, or other
tangible evidence relating to this Office's continuing investigation in this and
related internet gambling-related matters about which this Office or one or more
of the Designated Agencies may inquire, and will assemble and organize
documents, records, information, and other evidence in Optimal's possession,
custody, or control as may be requested by the Office or the Designated
Agencies; and (f) shall bring to this Office's attention all criminal conduct by
and criminal investigations of Optimal or its employees that come to the
attention of Optimal's board of directors or senior management, as well as any
administrative proceeding, civil action or other proceeding brought by any
governmental authority in which Optimal is a party, related to the operation or
management of Optimal's business. It is further understood that Optimal shall
commit no crimes whatsoever. Moreover, any assistance that Optimal may provide
to federal criminal investigators shall be pursuant to the specific instructions
and control of this Office and designated investigators. Optimal's obligations
under this paragraph shall continue until the later of (1) a period of three
years from the date of the signing of this Agreement or (2) the date on which
all prosecutions arising out of the conduct described in the opening paragraph
of this Agreement are final.

 
 

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Melinda Sarafa, Esq
Behnam Dayanim, Esq.
October 29, 2009
Page 3

 
Forfeiture/Disgorgement Obligations
 
Optimal agrees that it will pay a total of $ 19,182,418.18 (the "Property") to
the United States as part of this Agreement, as property involved in or proceeds
received from the activities described in the Statement of Admitted Facts, all
of which will be forfeited to the United States. The Property will be subject of
a civil forfeiture complaint to be filed against Optimal in the United States
District Court for the Southern District of New York. Optimal and this Office
agree that the $19,182,418.18 seized to date by this Office shall be applied to
satisfy Optimal's forfeiture obligation under this paragraph. Optimal agrees
that it will not file a claim with the Court or otherwise contest any civil
forfeiture action and will not assist a third party in asserting any claim
against the Property. It is further understood that Optimal will not file or
assist anyone in filing a petition for remission or mitigation with the
Department of Justice concerning the Property.
 
Additional Obligations
 
It is understood that, should Optimal commit any crimes subsequent to the date
of the signing of this Agreement or fail to comply with its
forfeiture/disgorgement obligations as described above, or should it be
determined that Optimal or any of its representatives have given false,
incomplete, or misleading testimony or information, or has otherwise violated
any provision of this Agreement, (a) Optimal shall thereafter be subject to
prosecution for any federal offense of which this Office has knowledge,
including perjury and obstruction of justice; (b) all statements made by
Optimal's representatives to this Office, or one or more of the Designated
Agencies, including but not limited to the appended Statement of Facts, and any
testimony given by Optimal's representatives before a grand jury subsequent to
the signing of this Agreement, and any leads from such statements or testimony,
shall be admissible in evidence in any criminal proceeding brought against
Optimal and relied upon as evidence to support any penalty imposed on Optimal;
and (c) Optimal shall assert no claim under the United States Constitution, any
statute, Rule 410 of the Federal Rules of Evidence, or any other federal rule
that such statements or any leads therefrom should be suppressed. In addition,
any such prosecution that is not time-barred by the applicable statute of
limitations on the date of the execution of this Agreement may be commenced
against Optimal, notwithstanding the expiration of the statute of limitations
between the signing of this Agreement and the commencement of such prosecution.
It is the intent of this Agreement to waive all defenses based on the statute of
limitations with respect to any prosecution that is not time-barred on the date
that this Agreement is signed.

 
 

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Melinda Sarafa, Esq
Behnam Dayanim, Esq.
October 29, 2009
Page 4
 
 
It is understood that Optimal acknowledges and accepts as accurate the facts set
forth in the Statement of Facts attached as Exhibit A, which is incorporated by
reference herein. Optimal hereby agrees to maintain, with respect to its
operations, a permanent restriction on providing payment processing services for
gambling merchants in connection with customers in the United States in
violation of the law of the United States or the law of any jurisdiction within
the United States.
 
It is understood that this Agreement does not bind any federal, state, or local
agencies, any licensing authorities, or any regulatory authorities. If requested
by Optimal, this Office will, however, bring the cooperation and remedial
actions of Optimal to the attention of other prosecuting and other investigative
offices or other licensing or regulatory authorities.

 
 

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Melinda Sarafa, Esq
Behnam Dayanim, Esq.
October 29, 2009
Page 5

 
With respect to this matter, this Agreement supersedes all prior understandings,
promises and/or conditions between this Office and Optimal. No additional
promises, agreements, and conditions have been entered into other than those set
forth in this letter and none will be entered into unless in writing and signed
by all parties.
 
 

     
Very truly yours,
                 
PREET BHARARA
       
United States Attorney
       
Southern District of New York
               
By:
/s/ Arlo Devlin-Brown
       
Arlo Devlin-Brown
       
Jonathan New
       
Assistant United States Attorneys
                 
/s/ Richard Zabel
       
Richard Zabel
       
Chief, Criminal Division
           
AGREED AND CONSENTED TO:
                 
/s/ Neil Wechsler
   
October 30, 2009
 
Pursuant to Authority Conveyed By Resolution of the Board of Directors of
Optimal
   
Date
                     
APPROVED:
                 
/s/ Melinda Sarafa, Esq.
   
October 30, 2009
 
Melinda Sarafa, Esq.
   
Date
 
Behnam Dayanim, Esq.
       

 
 

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Exhibit A

 
STATEMENT OF FACTS
 
Corporate History and Structure
 
 
1.
Optimal Group Inc. ("Optimal") is a Canadian corporation established in 1984.
Under its previous name of Optimal Robotics Corp., Optimal was a provider of
self-checkout systems to retailers and, through wholly-owned subsidiaries, of
repair and field services to retail, financial services and other third-party
accounts.

 
 
2.
In 2004, following the sale of its self-checkout business and to reposition its
business activities, Optimal acquired Terra Payments Inc. (formerly SureFire
Commerce Inc.), a provider of payment processing and electronic commerce
services. In conjunction with this acquisition, Optimal changed its name from
Optimal Robotics Corp. to Optimal Group Inc.

 
 
3.
Following its acquisition by Optimal, Terra Payments became a wholly-owned
subsidiary of Optimal known as Optimal Payments Inc. The Optimal Payments group
of companies provided payment processing services to a variety of merchants,
including Internet gambling merchant websites. In May 2005, the Optimal Payments
group assets relating to the processing of transactions involving Internet
gambling merchant websites were transferred to FireOne Group plc, a
newly-established, Ireland-based affiliate of Optimal Payments. In June 2005, in
conjunction with the public placement of 20% of FireOne Group's issued and
outstanding share capital, the shares of FireOne Group began trading on the
Alternative Investment Market ("AIM") of the London Stock Exchange.

 
Payment Processing Business (Optimal Payments/FireOne Group)
 
 
4.
Optimal's payment processing subsidiaries provided technology and services
required by businesses to accept credit card, electronic check and direct debit
payments. Such technology and services were provided for Internet businesses,
including Internet gambling merchant websites, mail-order/telephone-order and
retail point-of-sale merchants.

 
 
5.
Through its subsidiaries, Optimal processed payment transactions in connection
with Internet gambling merchant websites through the use of credit and debit
cards, electronic debit and a stored-value, electronic wallet known as FirePay.
The Internet gambling websites were located outside of the United States. A
substantial majority of the transactions in connection with Internet gambling
merchant websites originated from customers located in the United States,
including in the Southern District of New York.

 
 
6.
Optimal continued to process transactions originating from U.S. customers in
connection with Internet gambling merchant websites until October 13, 2006, the
day the Unlawful Internet Gambling Enforcement Act ("UIGEA") was signed into
law. On that date, Optimal stopped all transfers of U.S. customer funds to
Internet gambling merchant websites. Shortly thereafter, Optimal voluntarily
agreed to cooperate with the United States Attorney's Office for the Southern
District of New York in its investigation of unlawful Internet gambling.

 
 

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7.
From April 2004, when Optimal acquired Terra Payments, through December 2004,
Optimal's subsidiaries processed a total of approximately $1.4 billion in
payment transactions. Of this amount, $610 million consisted of transactions
involving Internet gambling merchant websites, generating revenue of $32.8
million. Of the transactions involving Internet gambling merchant websites,
approximately 80% originated from U.S. customers.

 
 
8.
During the year 2005, Optimal's subsidiaries processed a total of approximately
$5.5 billion in payment transactions. Of this amount, $1.2 billion consisted of
transactions involving Internet gambling merchant websites, generating revenue
of $76.3 million. Of the transactions involving Internet gambling merchant
websites, approximately 83% originated from U.S. customers.

 
 
9.
During the year 2006, Optimal's subsidiaries processed a total of approximately
$7.4 billion in payment transactions. Of this amount, $1.3 billion consisted of
transactions involving Internet gambling merchant websites, generating revenue
of $84.2 million. Of the transactions involving Internet gambling merchant
websites, approximately 82% originated from U.S. customers.

 
 
10.
After Optimal ceased processing U.S. customer transactions involving Internet
gambling merchant websites, Optimal disposed of substantially all of the assets
of its payment processing business, including the entirety of the business
formerly operated by Terra Payments. Today, through its subsidiaries (WowWee
Group Limited and related companies), Optimal is principally a toy and consumer
electronics business.

 
 
11.
Optimal knew that its payment processing services were being provided to U.S.
customers in connection with Internet gambling merchant websites. Optimal
recognizes that the services provided by the Internet gambling merchant
websites, for which Optimal's subsidiaries provided payment processing services,
violated certain United States laws, including 18 U.S.C. § 1084 and 18 U.S.C. §
1955.

 
 

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Exhibit B
 
 
OPTIMAL GROUP INC.
 
CERTIFIED RESOLUTION

 
I do herby certify that the following is a true and complete copy of a
resolution of the Board of Directors of Optimal Group Inc. (the "Corporation")
adopted at a meeting of the Directors duly convened and held on October 30,
2009:
 
"WHEREAS the Board deems it to be in the best interest of the Corporation to
enter into a non-prosecution agreement with the Office of the United States
Attorney for the Southern District of New York, substantially in the form
reviewed by the Directors, including the Statement of Facts to be annexed
thereto.
 
NOW, THEREFORE, BE IT RESOLVED:
 
THAT the entering into of a non-prosecution agreement with the Office of the
United States Attorney for the Southern District of New York, substantially in
the form reviewed by the Directors, including the Statement of Facts to be
annexed thereto, be and it is hereby approved; and
 
THAT either of the Co-Chairmen of the Corporation, acting alone, be and is
hereby authorized and empowered, for and on behalf of the Corporation, to
execute and deliver the non-prosecution agreement with such additions, deletions
or other changes as such Co-Chairman may approve, such approval to be evidenced
by his execution and delivery of the non-prosecution agreement.

 
CERTIFIED at Montreal, this 30th day of October 2009.
 

/s/ Leon Garfinkle
 
Leon Garfinkle
 
Senior Vice-President,
 
General Counsel and Secretary

 
 

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