EXHIBIT 2
================================================================================
PREFERRED STOCK
PURCHASE AGREEMENT
by and among
CIRMATICA GAMING, S.A.
a Spanish corporation
THE OAK FUND,
a Cayman Islands exempted company
PECONIC FUND LTD.,
a Cayman Islands exempted company
RAMIUS SECURITIES, LLC,
a Delaware limited liability company
OLIVETTI INTERNATIONAL S.A.,
a Luxembourg corporation
and
AUTOTOTE CORPORATION,
a Delaware corporation
Dated: September 6, 2000
================================================================================
PREFERRED STOCK PURCHASE AGREEMENT
This Preferred Stock Purchase Agreement (this "AGREEMENT"), dated as
of September 6, 2000, is by and among Autotote Corporation, a Delaware
corporation (the "COMPANY"), Cirmatica Gaming, S.A., a Spanish corporation
("CIRMATICA"), Olivetti International S.A., a Luxembourg corporation
("OLIVETTI"), The Oak Fund, a Cayman Islands exempted company ("OAK"), Peconic
Fund Ltd., a Cayman Islands exempted company ("PECONIC") and Ramius Securities,
LLC, a Delaware limited liability company ("RAMIUS" and, together with
Cirmatica, Olivetti, Oak and Peconic, the "PURCHASERS").
RECITALS
A. This Agreement provides that on the Closing Date, (i) Cirmatica
will purchase from the Company, and the Company will issue and sell to
Cirmatica, 1,000,000 shares (the "CIRMATICA SHARES") of the Company's Series A
Convertible Preferred Stock, par value $1.00 per share (the "PREFERRED STOCK"),
(ii) Olivetti will purchase from the Company, and the Company will issue and
sell to Olivetti, 20,000 shares (the "OLIVETTI SHARES") of Preferred Stock,
(iii) Oak will purchase from the Company, and the Company will issue and sell to
Oak, 40,000 shares (the "OAK SHARES") of Preferred Stock, (iv) Peconic will
purchase from the Company, and the Company will issue and sell to Peconic,
40,000 shares (the "PECONIC SHARES") of Preferred Stock and (v) Ramius will
receive from the Company as partial payment of a placement agent fee relating to
the sale of the Preferred Stock hereunder, and the Company will issue to Ramius,
27,500 shares (the "RAMIUS SHARES" and, together with the Cirmatica Shares, the
Olivetti Shares, the Oak Shares and the Peconic Shares, the "SHARES") of
Preferred Stock, in each case, having the rights, preferences, privileges and
restrictions set forth in the form of Certificate of Designations (the
"CERTIFICATE OF DESIGNATIONS") attached hereto as Exhibit A (the "EQUITY
INVESTMENT").
B. The Purchasers are unwilling to enter into this Agreement unless,
contemporaneously with the Closing under this Agreement, the Company and the
Purchasers enter into an agreement in the form attached hereto as Exhibit B (the
"STOCKHOLDERS' AGREEMENT") providing for certain actions relating to the shares
of Preferred Stock and shares of Common Stock into which such Preferred Stock is
convertible; and the Board of Directors of the Company has approved the
execution, delivery and performance by the Company of the Stockholders'
Agreement.
C. The parties desire to make certain representations, warranties,
covenants and agreements in connection with the Equity Investment and also to
prescribe various conditions to the Equity Investment.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS.......................................................2
1.1 Defined Terms........................................................2
1.2 Other Defined Terms..................................................9
ARTICLE II. PURCHASE AND SALE OF THE SHARES.................................10
2.1 Closing.............................................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................12
3.1 Organization and Capitalization.....................................12
3.2 Authorization.......................................................13
3.3 Subsidiaries........................................................14
3.4 Absence of Certain Changes or Events................................15
3.5 Title to Assets; Absence of Liens and Encumbrances, etc.............15
3.6 Contracts and Commitments...........................................17
3.7 Permits.............................................................19
3.8 No Conflict or Violation............................................19
3.9 Consents and Approvals..............................................20
3.10 SEC Documents; Financial Statements, etc............................20
3.11 Undisclosed Liabilities.............................................21
3.12 Exemption from Registration.........................................21
3.13 Litigation..........................................................21
3.14 Labor Matters.......................................................21
3.15 Compliance with Law.................................................22
3.16 No Brokers..........................................................22
3.17 Proprietary Rights..................................................22
3.18 Employee Plans......................................................23
3.19 Tax Matters.........................................................26
3.20 Insurance...........................................................27
3.21 Customers and Suppliers.............................................28
3.22 Compliance with Environmental Laws..................................28
3.23 No Other Agreements to Sell the Assets or Shares of the Company
or its Subsidiaries.................................................30
3.24 Prohibited Payments.................................................30
3.25 Board Recommendation................................................30
3.26 Change of Control Exemptions........................................31
3.27 Accuracy of Information Furnished...................................31
3.28 Stockholder Approval................................................32
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS................32
4.1 Organization........................................................32
4.2 Authorization.......................................................32
4.3 Consents and Approvals..............................................32
i
4.4 No Conflict or Violation............................................32
4.5 Investment Representation...........................................33
4.6 No Brokers..........................................................33
4.7 No Investment Company...............................................33
ARTICLE V. COVENANTS OF THE COMPANY AND THE PURCHASERS......................33
5.1 Maintenance of Business Prior to Closing............................33
5.2 Investigation by the Purchasers.....................................34
5.3 Consents and Efforts; Further Assurances............................35
5.4 Notification of Certain Matters.....................................35
5.5 Exclusivity; Fees and Expenses......................................36
5.6 Change of Control Exemptions........................................37
5.7 Compliance with Laws................................................38
ARTICLE VI. CONDITIONS TO THE INVESTMENT....................................38
6.1 Conditions to the Obligations of Each Party.........................38
6.2 Conditions to the Obligations of the Company........................39
6.3 Conditions to the Obligations of the Purchasers.....................39
ARTICLE VII. INDEMNIFICATION................................................42
7.1 Indemnification by the Company......................................42
7.2 Defense of Claims...................................................43
7.3 Insurance Proceeds; Tax Effect......................................44
ARTICLE VIII. MISCELLANEOUS.................................................45
8.1 Termination.........................................................45
8.2 Assignment; Parties in Interest.....................................46
8.3 Notices.............................................................46
8.4 Entire Agreement; Waivers...........................................49
8.5 Multiple Counterparts...............................................49
8.6 Invalidity..........................................................49
8.7 Titles..............................................................49
8.8 Fees and Expenses...................................................49
8.9 Cumulative Remedies.................................................49
8.10 Governing Law; Jurisdiction.........................................49
8.11 Amendment...........................................................50
8.12 Public Announcements................................................50
8.13 Enforcement of Agreement............................................50
8.14 Interpretive Provisions.............................................50
ii
EXHIBITS
EXHIBIT A Certificate of Designations
EXHIBIT B Stockholders' Agreement
EXHIBIT C Opinion of Counsel to Company
iii
ARTICLE I.
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings:
"ACTION" shall mean any action, suit, proceeding, claim,
arbitration, mediation, alternative dispute resolution procedure, inquiry or
investigation by or before any arbitrator, mediator, court or other governmental
authority.
"AFFILIATE" shall mean, with respect to any Person or entity (the
"REFERENT PERSON"), any Person or entity which controls the referent Person, any
Person or entity which the referent Person controls, or any Person or entity
which is under common control with the referent Person. For purposes of the
preceding sentence, the term "control" shall mean the power, direct or indirect,
to direct or cause the direction of the management and policies of a Person or
entity through voting securities, by contract or otherwise. For purposes of this
Agreement, Target shall be deemed an Affiliate of the Company.
"AMEX" shall mean the American Stock Exchange, or any successor
thereto.
"ASSETS" shall mean all of the Company's and its Subsidiaries'
right, title and interest in and to all properties, assets and rights of any
kind, whether tangible or intangible, real or personal, owned by the Company or
any of its Subsidiaries.
"BENEFIT ARRANGEMENT" shall mean any employment, consulting,
severance or other similar contract, arrangement or policy (written or oral) and
each plan, arrangement, program, agreement or commitment (written or oral)
providing for insurance coverage (including, without limitation, any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including, without limitation, any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the Code
providing for the same or other benefits) or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement insurance,
compensation or benefits which (a) is not a Welfare Plan, Pension Plan or
Multiemployer Plan, (b) is entered into, maintained, contributed to or required
to be contributed to, as the case may be, by the Company, its Subsidiaries or
any ERISA Affiliate or under which the Company, its Subsidiaries or any ERISA
Affiliate may incur any liability, and (c) covers any current or former
employee, officer, director or consultant of the Company, its Subsidiaries or
any ERISA Affiliate (with respect to their relationship with such any entity).
"BONA FIDE THIRD PARTY" shall mean a third party unrelated to the
Purchasers, Lottomatica S.p.A., Olivetti S.p.A., Cirsa or their respective
Affiliates.
"BOOKS AND RECORDS" shall mean all books, records, lists, ledgers,
files, reports, plans, drawings and operating records of every kind relating to
the Company and its Subsidiaries, the Assets, business operations, customers,
suppliers and Personnel, including, without
2
limitation, (a) all corporate books and records of the Company and its
Subsidiaries, disk or tape files, printouts, runs or other computer-based
information and the Company's and its Subsidiaries' interest in all computer
programs required to access, and the equipment containing, all such
computer-based information, (b) all product, business and marketing plans, (c)
all environmental control records and (d) all sales, maintenance and production
records.
"CHANGE OF CONTROL" shall mean one or more of the following events:
(i) less than a majority of the members of the Board (excluding any directors
nominated or elected by Purchasers) shall be persons who either (A) were serving
as directors on the date hereof or (B) were nominated as directors and approved
by the vote of the majority of the directors who are directors referred to in
clause (A) above or this clause (B); (ii) the stockholders of the Company shall
approve any plan or proposal for the liquidation or dissolution of the Company;
(iii) an announcement by any Bona Fide Third Party or group of Bona Fide Third
Parties acting in concert, of a merger with the Company or an acquisition of the
Company's securities or other transaction which will require the filing with the
Securities and Exchange Commission of a Schedule 13D under the Exchange Act,
with respect to beneficial ownership of the Company (other than by a financial
entity or other similar institutional investor holding securities of the Company
for investment purposes that is eligible to file a Schedule 13G under the
Exchange Act with respect to such merger or acquisition in accordance with Rule
13d-1(b)(1) of the Exchange Act) in which Item 4 thereof will indicate a plan or
proposal under subsections (a)-(j) thereof with respect to either (x) the merger
with a Bona Fide Third Party or acquisition of at least twenty percent (20%) of
the Company's voting securities by a Bona Fide Third Party or (y) the merger or
consolidation of the Company with a Bona Fide Third Party where the stockholders
of the Company would not, immediately after the merger or consolidation, own at
least fifty percent (50%) of the voting securities of the entity (unrelated to
the Purchasers, Lottomatica S.p.A., Olivetti S.p.A., Cirsa and their respective
Affiliates) issuing the cash or securities in the merger or consolidation, or
the sale of substantially all of the assets of the Company; or (iv) the Company
enters into negotiations that might reasonably be expected to cause any of the
events specified in clauses (i), (ii) or (iii) above to occur.
"CIRSA" shall mean Cirsa Business Corporation S.A.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute.
"COMMON STOCK" shall mean the Class A Common Stock having a par
value of $0.01 per share of the Company.
"CONTRACT" shall mean any agreement, contract, lease, note, loan,
evidence of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license, instrument,
obligation, commitment, purchase and sales order, quotation and other executory
commitment to which the Company or its Subsidiaries is a party or which
specifically relates to the Company's or its Subsidiaries' businesses or any of
the Assets, whether oral or written, express or implied, and which pursuant to
its terms has not expired, terminated or been fully performed by the parties
thereto.
3
"DEBT COMMITMENT LETTERS" shall mean that certain Commitment Letter
and that certain Optional Note Purchase Letter, each dated as of May 18, 2000,
by and among DLJ Capital Funding, Inc., DLJ Bridge Finance, Inc. and the
Company, and by and between the Company and DLJ Capital Funding, Inc.,
respectively.
"DGCL" shall mean the General Corporations Law of the State of
Delaware.
"EMPLOYEE PLANS" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, encumbrance or other right of third
parties, whether voluntarily incurred or arising by operation of law, and
includes, without limitation, any agreement to give any of the foregoing in the
future, and any contingent or conditional sale agreement or other title
retention agreement or lease in the nature thereof.
"ENVIRONMENTAL CLAIMS" shall mean all accusations, allegations,
notices of violation, liens, claims, demands, suits, or causes of action for any
damage, including, without limitation, personal injury, property damage
(including, without limitation, any depreciation or diminution of property
values), lost use of property or consequential damages, arising directly or
indirectly out of Environmental Conditions or Environmental Laws. By way of
example only (and not by way of limitation), Environmental Claims include (i)
violations of or obligations under any contract related to Environmental Laws or
Environmental Conditions between the Company or its Subsidiaries and any other
Person, (ii) actual or threatened damages to natural resources, (iii) claims for
nuisance or its statutory equivalent, (iv) claims for the recovery of response
costs, or administrative or judicial orders directing the performance of
investigations, responses or remedial actions under any Environmental Laws, (v)
requirements to implement "corrective action" pursuant to any order or permit
issued pursuant to the Resource Conservation and Recovery Act, as amended, or
similar provisions of applicable Environmental Law, (vi) claims related to
Environmental Laws or Environmental Conditions for restitution, contribution, or
indemnity, (vii) fines, penalties or liens of any kind against property related
to Environmental Laws or Environmental Conditions, (viii) claims related to
Environmental Laws or Environmental Conditions for injunctive relief or other
orders or notices of violation from federal, state or local agencies or courts,
and (ix) with regard to any present or former employees, claims relating to
exposure to or injury from Environmental Conditions.
"ENVIRONMENTAL CONDITIONS" shall mean the state of the environment,
including natural resources (E.G., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air.
"ENVIRONMENTAL LAWS" shall mean all applicable foreign, federal,
state, district and local laws, all rules or regulations promulgated thereunder,
and all orders, consent orders, judgments, notices, permits or demand letters
issued, promulgated or entered pursuant thereto, relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, ground water, land surface, or subsurface strata), including,
without limitation, (i)
4
laws relating to emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment and (ii) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport or other handling of Hazardous
Substances. Environmental Laws shall include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe Drinking
Water Act, as amended, the Clean Air Act, as amended, the Occupational Safety
and Health Act, as amended, and all analogous laws promulgated or issued by any
state or other governmental authority.
"ENVIRONMENTAL REPORTS" shall mean any and all written analyses,
summaries or explanations, in the possession or control of the Company or its
Subsidiaries, of (a) any Environmental Conditions in, on or about the properties
currently or formerly owned, leased, or otherwise occupied or operated by the
Company or its Subsidiaries or (b) the Company's or its Subsidiaries' compliance
with Environmental Laws.
"EQUITY SECURITIES" shall mean (i) shares of capital stock or other
equity securities, (ii) subscriptions, calls, warrants, options or commitments
of any kind or character relating to, or entitling any Person or entity to
purchase or otherwise acquire, any capital stock or other equity securities and
(iii) securities convertible into or exercisable or exchangeable for shares of
capital stock or other equity securities.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, or otherwise
required to be aggregated with, the Company or its Subsidiaries as set forth in
Section 414(b), (c), (m) or (o) of the Code.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FACILITIES" shall mean all plants, offices, manufacturing
facilities, stores, warehouses, administration buildings and all real property
and related facilities owned or leased by the Company or its Subsidiaries.
"FINANCING DOCUMENTS" shall mean (i) the Indenture relating to the
Company's 12 1/2% Senior Subordinated Notes due 2010 (the "INDENTURE"), (ii) the
Credit Agreement (the "CREDIT AGREEMENT") by and among the Company, the lenders
listed as signatories thereto, DLJ Capital Funding, Inc., as administrative
agent and syndication agent for such lenders, ▇▇▇▇▇▇ Commercial Paper Inc., as
documentation agent for such lenders, and ▇▇▇▇▇▇ Brothers Inc., as co-arranger,
and (iii) and all such other agreements, instruments and documents delivered in
connection with the transactions contemplated by the Indenture, the Credit
Agreement and Debt Commitment Letters.
5
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery, equipment, spare parts, appliances and vehicles owned by
the Company or its Subsidiaries, wherever located, including all warranty rights
with respect thereto.
"GAAP" shall mean, with respect to any Person, generally accepted
accounting principles in the United States of America, as in effect from time to
time, consistently applied.
"HAZARDOUS SUBSTANCES" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials (whether solids, liquids or
gases) subject to regulation, control or remediation under Environmental Laws.
By way of example only, the term Hazardous Substances includes petroleum,
petroleum-derived substances urea formaldehyde, flammable, explosive and
radioactive materials, PCBs, pesticides, herbicides, asbestos, solvents and
waste waters.
"HSR ACT" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"LEASES" shall mean all of the leases or subleases for personal or
real property to which the Company or any of its Subsidiaries is a party or by
which the Company or its Subsidiaries is bound.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" or a similar
phrase shall mean, with respect to any Person, (a) any material adverse effect
on or change with respect to (i) the business, operations, assets (taken as a
whole), liabilities (taken as a whole), condition (financial or otherwise),
results of operations or prospects of such Person and its Subsidiaries, taken as
a whole, (ii) the relations with customers, suppliers, distributors or employees
of such Person and its Subsidiaries, taken as a whole, or (iii) the right or
ability of such Person or its Subsidiaries to consummate any of the transactions
contemplated by this Agreement and the other Transaction Documents or (b) any
event, condition or circumstance or set of facts which would, with the passage
of time, the giving or receipt of notice or the occurrence or nonoccurrence of
any other circumstance, action or event, constitute a "Material Adverse Effect"
or "Material Adverse Change" described in the foregoing clause (a).
"MERGER" shall mean the merger of a wholly owned Subsidiary of the
Company with and into Target in accordance with the Merger Agreement.
"MERGER AGREEMENT" shall mean that certain Agreement and Plan of
Merger dated as of May 18, 2000, by and among the Company, a wholly owned
Subsidiary of the Company and Target.
"MULTIEMPLOYER PLAN" shall mean any "multiemployer plan," as defined
in Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company, its Subsidiaries
or any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the past six years, maintained, administered,
contributed to or was required to contribute to, or under which the Company, its
Subsidiaries or any ERISA Affiliate may incur any liability and (b)
6
covers any current or former employee, director, officer or consultant of the
Company, its Subsidiaries or any ERISA Affiliate (with respect to their
relationship with any such entity).
"OPTIONS" shall mean the options to purchase shares of Common Stock
issued to certain executive employees and non-employee directors of the Company
pursuant to the Stock Option Plans.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (a) which the
Company, its Subsidiaries or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or, within the six years prior
to the Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which the Company, its Subsidiaries or any ERISA
Affiliate may incur any liability (including, without limitation, any contingent
liability) and (b) which covers any current or former employee, director,
officer or consultant of the Company, its Subsidiaries or any ERISA Affiliate
(with respect to their relationship with any such entity).
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, or notifications to, any
governmental authority, whether foreign, federal, state or local, or any other
Person, necessary for the past, present or currently anticipated conduct of, or
relating to the operation of the business of, the Company or its Subsidiaries.
"PERMITTED ENCUMBRANCES" shall mean (a) liens for Taxes or
governmental charges or claims (i) not yet due and payable or (ii) being
contested in good faith, if a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor, (b) statutory liens of
landlords, liens of carriers, warehouse persons, mechanics and material persons
and other liens imposed by law incurred in the ordinary course of business for
sums (i) not yet due and payable or (ii) being contested in good faith, if a
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor, (c) liens incurred or deposits made in connection
with workers' compensation, unemployment insurance and other similar types of
social security programs or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return of money bonds and similar obligations, in each case in
the ordinary course of business, consistent with past practice, (d) purchase
money liens incurred in the ordinary course of business, consistent with past
practice, and (e) easements, rights-of-way, restrictions and other similar
charges or encumbrances, in each case, which do not interfere with the ordinary
conduct of business of the Company or its Subsidiaries and do not materially
detract from the value of the property to which such encumbrance relates.
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, association, trust and any other entity or
organization.
7
"PERSONNEL" shall mean all directors, officers and employees of the
Company and its Subsidiaries.
"RETURNS" shall mean any and all returns, reports, declarations and
information statements with respect to Taxes required to be filed by or on
behalf of the Company or its Subsidiaries with any governmental authority or Tax
authority or agency, whether domestic or foreign, including, without limitation,
consolidated, combined and unitary returns and all amendments thereto or
thereof.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SEVERANCE AGREEMENT" means any agreement between a Person and such
Person's officers, directors, employees, consultants or agents providing for any
payment or benefit, whether contingent or otherwise, upon the occurrence of any
event, development or transaction or any change in circumstances, relating to
the parties to any such agreement.
"STOCK OPTION PLANS" shall mean the 1984 Stock Option Plan, the 1992
and 1995 Equity Incentive Plans, and the 1997 Compensation Plan.
"STOCKHOLDERS" shall mean the holders of Common Stock.
"STOCKHOLDERS' AGREEMENT" shall mean that certain Stockholders'
Agreement, dated as of the Closing Date, by and among the Company, Cirmatica,
Olivetti, Oak, Peconic and Ramius.
"SUBSIDIARY" shall mean, with respect to any of the parties to this
Agreement, any corporation or other business entity, whether or not
incorporated, of which at least 50% of the securities or interests having, by
their terms, ordinary voting power to elect members of the board of directors,
or other persons performing similar functions with respect to such entity, are
held, directly or indirectly, by such party. For purposes of this Agreement,
Target shall be deemed a Subsidiary of the Company.
"TARGET" shall mean Scientific Games Holding Corp., a Delaware
corporation.
"TAX(ES)" shall mean all taxes, estimated taxes, withholding taxes,
assessments, levies, imposts, fees and other charges, including, without
limitation, any interest, penalties, additions to tax or additional amounts that
may become payable in respect thereof, imposed by any foreign, federal, state or
local government or taxing authority, which taxes shall include, without
limitation, all income taxes, payroll and employee withholding taxes,
unemployment insurance, social security, sales and use taxes, value-added taxes,
excise taxes, franchise taxes, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, transfer taxes, workers' compensation and
other obligations of the same or of a similar nature.
8
"TRANSACTION DOCUMENTS" shall mean this Agreement, the Stockholders'
Agreement, the Certificate of Designations and all other instruments,
certificates and documents delivered or required to be delivered by the parties
pursuant to this Agreement.
"WELFARE PLAN" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, (a) which the Company, its Subsidiaries or any
ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or under which the Company, its Subsidiaries or any ERISA
Affiliate may incur any liability and (b) which covers any current or former
employee, director, officer or consultant of the Company, its Subsidiaries or
any ERISA Affiliate (with respect to their relationship with any such entity).
1.2 OTHER DEFINED TERMS. In addition to the terms defined in the
Preamble and the Recitals to this Agreement and Section 1.1, the following terms
are defined in the Sections set forth below:
TERM SECTION
"Accounts Receivable"..........................................3.10
"Agreement"....................................................Preamble
"Certificate of Designations"..................................Recitals
"Change of Control Agreements".................................3.26(b)
"Cirmatica"....................................................Preamble
"Cirmatica Purchase Price".....................................2.1(c)
"Cirmatica Shares".............................................Recitals
"Claim Notice".................................................7.3
"Claim"........................................................7.3
"Closing Date".................................................2.1(a)
"Closing"......................................................2.1(a)
"Company Claim"................................................7.2
"Company Party"................................................7.2
"Company Reports"..............................................3.10
"Company"......................................................Preamble
"Disclosure Schedule" .........................................Article III
"Equity Investment"............................................Recitals
"Exclusivity Period"...........................................5.5
"Financial Statements".........................................3.10
"Laws".........................................................3.15
"Leased Property"..............................................3.5(b)(ii)
"Losses".......................................................7.1
"Oak"..........................................................Preamble
"Oak Purchase Price"...........................................2.1(c)
"Oak Shares"...................................................Recitals
"Olivetti".....................................................Preamble
"Olivetti Purchase Price"......................................2.1(c)
"Olivetti Shares"..............................................Recitals
"Peconic"......................................................Preamble
9
"Peconic Purchase Price".......................................2.1(c)
"Peconic Shares"...............................................Recitals
"Preferred Stock"..............................................Recitals
"Proprietary Rights"...........................................3.17
"Purchase Price"...............................................2.1(c)
"Purchaser Claim"..............................................7.1
"Purchaser Party"..............................................7.1
"Purchasers"...................................................Preamble
"Ramius".......................................................Preamble
"Ramius Shares"................................................Recitals
"Regulatory Approvals".........................................6.1(c)
"Regulatory Filings"...........................................3.9
"Shares".......................................................Recitals
"Stockholders' Agreement"......................................Recitals
"Third Party Claim"............................................7.3
ARTICLE II.
PURCHASE AND SALE OF THE SHARES
2.1. CLOSING.
(a) Upon the terms and conditions set forth herein, and
subject to Section 8.1, the closing of the Equity Investment (the "CLOSING")
shall be held at 10:00 a.m. on September 6, 2000 (the "CLOSING DATE"), or such
other date as mutually agreed to by the parties hereto, at the offices of
O'Melveny & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such
other location as mutually agreed to by the parties hereto.
(b) TRANSFER OF THE SHARES. Upon the terms and conditions
contained herein, at the Closing, the Company shall issue and sell to Cirmatica,
Olivetti, Oak and Peconic, and Cirmatica, Olivetti, Oak and Peconic shall
purchase and accept from the Company, all of the Cirmatica Shares, the Olivetti
Shares, the Oak Shares and the Peconic Shares, respectively, free and clear of
any and all Encumbrances. Upon the terms and conditions contained herein, at the
Closing, the Company shall issue to Ramius, and Ramius shall accept from the
Company, all of the Ramius Shares, free and clear of any and all Encumbrances.
(c) CONSIDERATION FOR THE SHARES. Upon the terms and
conditions contained herein: as consideration for the purchase of the Cirmatica
Shares, at the Closing, Cirmatica shall pay to the Company $100,000,000 (the
"CIRMATICA PURCHASE PRICE"); as consideration for the purchase of the Olivetti
Shares, at the Closing, Olivetti shall pay to the Company $1,350,000 (the
"OLIVETTI PURCHASE PRICE"); as consideration for the purchase of the Oak Shares,
at the Closing, Oak shall pay to the Company $4,000,000 (the "OAK PURCHASE
PRICE"); and as consideration for the purchase of the Peconic Shares, at the
Closing, Peconic shall pay to the Company $4,000,000 (the "PECONIC PURCHASE
PRICE" and, together with the Cirmatica Purchase Price, the Olivetti Purchase
Price and the Oak Purchase Price, the "PURCHASE PRICE"). Ramius shall receive
the Ramius Shares pursuant to the terms hereunder as partial payment of a
10
placement agent fee payable by the Company to Ramius. The obligations under this
Agreement of Cirmatica to purchase the Cirmatica Shares, of Olivetti to purchase
the Olivetti Shares, of Oak to purchase the Oak Shares and of Peconic to
purchase the Peconic Shares are several, and none of Cirmatica, Olivetti, Oak or
Peconic shall have any liabilities or obligations with respect to the agreements
of the other parties; PROVIDED, HOWEVER, that the obligation of Cirmatica to pay
the Cirmatica Purchase Price hereunder shall be the joint and several obligation
of Cirmatica and Olivetti.
(d) DELIVERIES AT THE CLOSING. To effect the sale and purchase
of the Shares and the delivery of the Purchase Price referred to in Section
2.1(c), the Company and the Purchasers shall, on the Closing Date, cause the
following to occur:
(i) SHARE CERTIFICATES. The Company shall deliver to
Cirmatica stock certificates evidencing the Cirmatica Shares, to Olivetti
stock certificates evidencing the Olivetti Shares, to Oak stock
certificates evidencing the Oak Shares, to Peconic stock certificates
evidencing the Peconic Shares, and to Ramius stock certificates evidencing
the Ramius Shares, in each case, free and clear of any and all
Encumbrances of any and every nature whatsoever.
(ii) PURCHASE PRICE.
(A) Cirmatica shall, against delivery of such
certificates evidencing the Cirmatica Shares, deliver to the
Company the Cirmatica Purchase Price by transferring by wire
transfer immediately available funds in the aggregate amount
of the Cirmatica Purchase Price to the Company's bank account
designated in writing at least two business days prior to the
Closing.
(B) Olivetti shall, against delivery of such
certificates evidencing the Olivetti Shares, deliver to the
Company the Olivetti Purchase Price by transferring by wire
transfer immediately available funds in the aggregate amount
of the Olivetti Purchase Price to the Company's bank account
designated in writing at least two business days prior to the
Closing.
(C) Oak shall, against delivery of such certificates
evidencing the Oak Shares, deliver to the Company the Oak
Purchase Price by transferring by wire transfer immediately
available funds in the aggregate amount of the Oak Purchase
Price to the Company's bank account designated in writing at
least two business days prior to the Closing.
(D) Peconic shall, against delivery of such
certificates evidencing the Peconic Shares, deliver to the
Company the Peconic Purchase Price by transferring by wire
transfer immediately
11
available funds in the aggregate amount of the Peconic
Purchase Price to the Company's bank account designated in
writing at least two business days prior to the Closing.
(iii) OTHER DOCUMENTS. Each of the Company and the
Purchasers shall take all such other actions required hereby to be
performed, and deliver all other documents, certificates, opinions of
counsel and other items required to be delivered on its part, prior to
or on the Closing Date, including, without limitation, delivering the
documents and satisfying the conditions set forth in Article VI. All
such documents and instruments delivered to any party pursuant hereto
shall be in form and substance, and shall be executed in a manner,
reasonably satisfactory to such party and its counsel.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to the Purchasers to enter into this Agreement, the
Company hereby makes, as of the date hereof and as of the Closing Date, the
following representations and warranties to the Purchasers, except as otherwise
set forth in a written disclosure schedule (the "DISCLOSURE SCHEDULE") delivered
by the Company to the Purchasers prior to the date hereof, a copy of which is
attached hereto. The Disclosure Schedule shall contain sections numbered to
correspond to the various sections of this Article III setting forth certain
exceptions to the representations and warranties contained in this Article III
and certain other information called for by this Agreement. Unless otherwise
specified, no disclosure made in any particular numbered section of the
Disclosure Schedule shall be deemed made in any other numbered section of the
Disclosure Schedule unless expressly made therein (by cross-reference or
otherwise) or unless, and only to the extent that, it is apparent on the face of
such disclosure that such disclosure contains information which also applies to
such other numbered section in the Disclosure Schedule or modifies another
representation and warranty herein.
3.1 ORGANIZATION AND CAPITALIZATION.
(a) ORGANIZATION. The Company is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to conduct its business as it is presently
being conducted and to own and lease its Assets. The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is necessary under applicable Law,
except where the failure to be so qualified and in good standing would not
reasonably be expected to have a Material Adverse Effect on the Company. The
Company has delivered to the Purchasers true, correct and complete copies of its
certificate of incorporation and by-laws (in each case, as amended to date). The
Company is not in default under or in violation of any provision of its
certificate of incorporation or by-laws.
(b) CERTIFICATE OF DESIGNATIONS. The Certificate of
Designations has been duly adopted by the Company and has been filed with the
Secretary of State of the State of Delaware in accordance with the laws of the
State of Delaware on or prior to the Closing Date. The Preferred Stock, when
issued, will have the designations, preferences and relative,
12
participating, optional and other special rights and qualifications, limitations
and restrictions set forth in the Certificate of Designations.
(c) CAPITALIZATION. The total authorized capital stock of the
Company consists of 99,300,000 shares of Common Stock, 700,000 shares of Class B
nonvoting common stock, par value $.01 per share, and 2,000,000 shares, par
value $1.00 per share, of blank check preferred stock. As of August 31, 2000,
there were 36,909,292 shares of Common Stock issued and outstanding and no
shares of Class B nonvoting common stock or shares of preferred stock of the
Company issued and outstanding. Since such date, no additional shares of capital
stock of the Company have been issued, except shares of Common Stock issued upon
the exercise of Options outstanding under any Stock Option Plan. As of August
31, 2000, options to acquire 7,670,303 shares of Common Stock, and warrants to
acquire 2,487,416 shares of Common Stock, and 324,140 shares of performance
accelerated restricted stock (PARS), subject to future vesting, were
outstanding. The Company has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter. All issued and outstanding shares
of Common Stock are duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. The Shares to be issued, sold and delivered to
the Purchasers hereunder, and all shares of Common Stock issuable upon the
conversion of the Shares shall, upon such issuance, sale, conversion and
delivery in accordance with this Agreement and the Certificate of Designations,
be duly authorized, validly issued, fully paid and non-assessable, and free and
clear of any and all Encumbrances and preemptive and other similar rights
(except as set forth in the Stockholders' Agreement). Section 3.1(c) of the
Disclosure Schedule sets forth the total amount of indebtedness for borrowed
money and the total amount of cash on hand of the Company and its Subsidiaries
on a consolidated basis as of August 31, 2000. Section 3.1(c) of the Disclosure
schedule sets forth the capitalization of the Company on a fully diluted basis
(assuming conversion of all the Preferred Stock) in a form similar to the form
of the capitalization table attached as Exhibit A to the commitment letter dated
May 18, 2000 by and among the Company, Olivetti S.p.A. and Tote Holdings, L.P.
Except as set forth in Section 3.1(c) of the Disclosure Schedule, there are no
(i) outstanding Equity Securities of the Company or (ii) commitments or
obligations of any kind or character for (A) the issuance of Equity Securities
of the Company or (B) the repurchase, redemption or other acquisition of any
Equity Securities of the Company.
(d) VOTING TRUSTS, PROXIES, ETC. There are no stockholder
agreements, voting trusts, proxies or other agreements or understandings with
respect to or concerning the purchase, sale or voting of the Equity Securities
of the Company to which the Company is a party.
3.2 AUTHORIZATION. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and the other Transaction
Documents and to perform all its obligations hereunder and thereunder. The
execution and delivery by the Company of each Transaction Document delivered or
to be delivered by it and the consummation by the Company of the transactions
contemplated by this Agreement and the other Transaction Documents has been duly
authorized by all requisite corporate action on the part of the
13
Company. This Agreement and each of the other Transaction Documents delivered or
to be delivered by the Company have been duly authorized, executed and delivered
by the Company and, when so executed and delivered, will be the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be limited by (a)
applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect which affect the enforcement of creditors'
rights generally or (b) general principles of equity, whether considered in a
proceeding at law or in equity.
3.3 SUBSIDIARIES.
(a) OWNERSHIP; CAPITALIZATION. The Company owns, directly or
indirectly, each of the outstanding capital stock (or other ownership interests)
of each of the Company's Subsidiaries as set forth in Section 3.3(a) of the
Disclosure Schedule, and, except as set forth in Section 3.3(a) of the
Disclosure Schedule, the Company has no equity or similar interest in any other
Person or entity excluding securities in any publicly traded company held for
investment. The Company, directly or indirectly, is the beneficial owner of all
of the outstanding shares of capital stock of each Subsidiary shown to be owned
by it, free and clear of any and all Encumbrances. The authorized, issued and
outstanding capital stock, and the record ownership of all such shares of
capital stock, of each Subsidiary is as set forth on part (a) of Section 3.3 of
the Disclosure Schedule. All of the shares of capital stock of each Subsidiary
have been duly authorized and validly issued and are fully paid and
non-assessable, were issued and sold in accordance with federal and applicable
state securities laws and were not issued in violation of any preemptive or
other similar rights. Except as set forth in Section 3.3(a) of the Disclosure
Schedule, there are no (i) outstanding Equity Securities of its Subsidiaries or
(ii) commitments or obligations of any kind or character for (A) the issuance of
Equity Securities of its Subsidiaries or (B) the repurchase, redemption or other
acquisition of any Equity Securities of its Subsidiaries. Except as set forth in
Section 3.3(a) of the Disclosure Schedule, there are no stockholder agreements,
voting trusts, proxies or other agreements or understandings with respect to or
concerning the purchase, sale or voting of the Equity Securities of the
Company's Subsidiaries.
(b) ORGANIZATION. Each of the Company's Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has full corporate power
and authority (Corporate or otherwise) to conduct its business as it is
presently being conducted and to own and lease its Assets. Each of the Company's
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which such qualification is necessary
under applicable law, except where the failure to be so qualified and in good
standing would not reasonably be expected to have a Material Adverse Effect on
the Company. None of the Company's Subsidiaries is in default under or in
violation of any provision of its certificate of incorporation or by-laws,
except, in the case of Subsidiaries of Target, for any possible violations which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
14
3.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since October 31, 1999, or
December 31, 1999 in the case of Target and its Subsidiaries, (i) the Company
and its Subsidiaries have been operated in the ordinary course of business,
consistent with past practice, (ii) there has been no Material Adverse Change in
or with respect to the Company or its Subsidiaries, and (iii) no events or
developments have occurred, and no conditions, sets of facts or circumstances
have existed or exist, that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Change with respect to the Company
and its Subsidiaries, individually or in the aggregate. Without limiting the
generality of the foregoing, since October 31, 1999, or December 31, 1999 in the
case of Target and its Subsidiaries, neither the Company nor any of its
Subsidiaries has:
(a) sold, assigned, leased or transferred any of the Assets,
which are material to the Company or its Subsidiaries singly or in the
aggregate, other than Assets sold or disposed of in the ordinary course of
business, consistent with past practice, to Persons who are not Affiliates of
the Company or its Subsidiaries for fair consideration;
(b) canceled, terminated, amended, modified or waived any
material term of any Contract to which it is a party or by which it or any of
the Assets is bound providing for aggregate annual revenues to it in excess of
$1,000,000;
(c) lost any employee who earned more than $200,000 in the
most recent fiscal year (in salary, bonus and other cash compensation);
(d) taken any action of the type contemplated by Section
5.1(b), (d) and (f); or
(e) failed to take any action of the type contemplated by
Section 5.1(a) hereof.
3.5 TITLE TO ASSETS; ABSENCE OF LIENS AND ENCUMBRANCES, ETC.
(a) GENERAL. Each of the Company and its Subsidiaries owns or
leases all Assets necessary for the conduct of the business of the Company and
its Subsidiaries as presently conducted, and the Assets in the aggregate are in
such operating condition and repair (subject to normal wear and tear) as is
necessary for the conduct of its business as presently conducted.
(b) REAL PROPERTY
(i) OWNED REAL PROPERTY. Section 3.5(b)(i) of the Disclosure
Schedule sets forth all material Facilities owned by the Company and
its Subsidiaries. With respect to each such parcel of owned real
property (A) the Company or its Subsidiaries has good and marketable
fee simple title to such parcel of real property, free and clear of any
and all Encumbrances other than Permitted Encumbrances, (B) there are
no leases, subleases, licenses, options, rights, concessions or other
agreements, written or oral, granting to any party or parties the right
of use or occupancy of any portion of such parcel of real
15
property, (C) there are no outstanding options or rights of first
refusal in favor of any other party to purchase any such parcel of real
property or any portion thereof or interest therein, (D) there are no
parties (other than the Company and its Subsidiaries) who are in
possession of or who are using any such parcel of real property and (E)
there is no (1) pending or, to the best knowledge of the Company,
threatened condemnation proceeding relating to such parcel of real
property, (2) pending or, to the best knowledge of the Company,
threatened Action relating to such parcel of real property, or (3)
other matter affecting the current or currently proposed use, occupancy
or value of such parcel of real property in any material respect.
(ii) LEASED REAL PROPERTY. Section 3.5(b)(ii) of the
Disclosure Schedule sets forth all leases pursuant to which material
Facilities are leased by the Company or its Subsidiaries (as lessee). Such
Leases constitute all material leases, subleases or other occupancy
agreements pursuant to which the Company or its Subsidiaries occupies or
uses Facilities. The Company and its Subsidiaries have good and valid
leasehold interests in, and enjoy peaceful and undisturbed possession of,
all leased property described in such leases (the "LEASED PROPERTY"), free
and clear of any and all Encumbrances other than any Permitted
Encumbrances which would not permit the termination of the Lease therefor
by the lessor. With respect to each such parcel of Leased Property (A)
there are no pending or, to the best knowledge of the Company, threatened
condemnation proceedings relating to, or any pending or, to the best
knowledge of the Company, threatened Actions relating to, such Leased
Property or any portion thereof, (B) none of the Company or its
Subsidiaries or, to the best knowledge of the Company, any third party has
entered into any sublease, license, option, right, concession or other
agreement or arrangement, written or oral, granting to any Person the
right to use or occupy such Leased Property or any portion thereof or
interest therein and (C) neither the Company nor its Subsidiaries have
received notice of any pending or threatened special assessment relating
to such Leased Property or otherwise have any knowledge of any pending or
threatened special assessment relating thereto. Each such leased Facility
is supplied with utilities necessary for the operation of such Facility.
(c) PERSONAL PROPERTY.
(i) OWNED PERSONAL PROPERTY. Each of the Company and its
Subsidiaries has good and marketable title to all personal property owned
by it that is material to the business of the Company or its Subsidiaries,
free and clear of any and all Encumbrances other than Permitted
Encumbrances. With respect to each such item of personal property (A)
there are no leases, subleases, licenses, options, rights, concessions or
other agreements, written or oral, granting to any party or parties the
right of use of any portion of such item of personal property, (B) there
are no outstanding options or rights of first refusal in favor of any
other party to purchase any such item of personal property or any portion
thereof or interest therein and (C) there are no parties (other than the
Company and its Subsidiaries) who are in possession of or who are using
any such item of personal property.
16
(ii) LEASED PERSONAL PROPERTY. Each of the Company and its
Subsidiaries has good and valid leasehold title to all of the Fixtures and
Equipment, vehicles and other tangible personal property Assets leased by
it from third parties that is material to the business of the Company or
its Subsidiaries, free and clear of any and all Encumbrances other than
Permitted Encumbrances which would not permit the termination of the lease
therefor by the lessor.
(d) With respect to each Lease listed in Section 3.5(b)(ii)
and the material Leases described in Section 3.5(c), (A) there has been no
default under any such Lease by the Company or its Subsidiaries, or to the best
knowledge of the Company, by any other party, (B) such Lease is a valid and
binding obligation of the Company and/or its Subsidiaries, is in full force and
effect with respect to the Company and/or its Subsidiaries and is enforceable
against the Company and/or its Subsidiaries in accordance with its terms, except
as the enforceability thereof may be limited by (1) applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in
effect which affect the enforcement of creditors' rights generally or (2)
general principles of equity, whether considered in a proceeding at law or in
equity, and (C) no action has been taken by the Company and no event has
occurred which, with notice or lapse of time or both, would permit termination,
modification or acceleration by a party thereto other than the Company and/or
its Subsidiaries, without the consent of the Company and/or its Subsidiaries,
under any such Lease, except in each case, as could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
3.6 CONTRACTS AND COMMITMENTS.
(a) Section 3.6 of the Disclosure Schedule sets forth a
complete and accurate list of all Contracts in the following categories as of
the date hereof (except to the extent that any such category specifies a
different date, in which case such corresponding list is made as of such
specified date):
(i) each Contract (or group of related Contracts) for the
furnishing of services by the Company and/or its Subsidiaries involving
annual revenues of more than $1,000,000 to the Company and its
Subsidiaries;
(ii) each Contract (or group of related Contracts) concerning
a partnership or joint venture with, or any other equity or similar
investment in any other Person;
(iii) each Contract (or group of related Contracts) (A) under
which the Company or its Subsidiaries has created, incurred, assumed or
guaranteed (or may create, incur, assume or guarantee) indebtedness for
borrowed money, (B) constituting capital lease obligations, (C) under
which the Company or its Subsidiaries has granted (or may grant) a
security interest or lien on any of the Assets or (D) under which the
Company or its Subsidiaries has incurred any obligations for any
performance bonds, payment bonds, bid bonds, surety bonds, letters of
credit, guarantees or similar instruments in each case in
17
an amount exceeding individually or in the aggregate as to any related
items due to the same party or relating to the same transactions,
$1,000,000;
(iv) each Contract (or group of related Contracts) with any
of the Personnel, any Affiliate of the Company or any member of any such
person's immediate family, including, without limitation, Contracts (A) to
employ or terminate executive officers or other Personnel and other
Contracts with present or former officers, directors or stockholders or
other corporate Personnel or (B) that will result in the payment by, or
the creation of any commitment or obligation (absolute or contingent,
matured or unmatured) to pay on behalf of the Company or its Subsidiaries
or any Affiliate of the Company or its Subsidiaries, any severance,
termination, "golden parachute" or other similar payments to any present
or former Personnel following termination of employment or otherwise as a
result of the consummation of the transactions contemplated by the
Transaction Documents or as a result of a change of control of the
Company;
(v) each Contract (or group of related Contracts), other
than Contracts covered by clause (vii) of this Section 3.6, providing for
payments in excess of $1,000,000 over the life of such Contract (or group
of related Contracts), except for such Contracts that are cancelable on
not more than 30 days' notice by the Company or its Subsidiaries without
penalty or increased cost;
(vi) each distribution, franchise, license, sales,
commission, consulting agency or advertising Contract related to the
Assets or the business providing for payments in excess of $1,000,000,
except for such Contracts that are cancelable on not more than 30 days'
notice by the Company or its Subsidiaries without penalty or increased
cost;
(vii) each Contract (or group of related Contracts) containing
covenants restraining or limiting the freedom of the Company or its
Subsidiaries to engage in any line of business or compete with any Person
including, without limitation, by restraining or limiting the right to
solicit customers;
(viii)each material Contract (or group of related Contracts)
with the United States, any state or local government or any agency or
department thereof;
(ix) each material Contract (or group of related Contracts)
pursuant to which the Company or its Subsidiaries have sold any Assets and
have created any obligation to indemnify anyone with respect thereto;
(x) any other material Contract.
The Company and its Subsidiaries have delivered to the Purchasers a
true and correct copy of those written Contracts listed in Section 3.6 of the
Disclosure Schedule and marked with an asterisk (except for those Contracts
relating to Target and its Subsidiaries, copies of which have not been
delivered).
18
(b) ABSENCE OF BREACHES OR DEFAULTS IN GENERAL. With respect
to each Contract set forth on or described in Section 3.6 of the Disclosure
Schedule, (i) there is no default by the Company or its Subsidiaries or, to the
knowledge of the Company, any other party to any Contract, (ii) the execution,
delivery and performance of this Agreement or the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby will
not cause a default hereunder or thereunder; (iii) such Contract is a legal,
valid and binding obligation of the Company or its Subsidiaries that is a party
thereto, is in full force and effect and is enforceable against the Company or
its Subsidiaries and, to the knowledge of the Company, against each other party
thereto in accordance with its terms, except as the enforceability thereof may
be limited by (A) applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance or similar laws in effect which affect the enforcement of
creditors' rights generally or (B) general principles of equity, whether
considered in a proceeding at law or in equity; and (iv) no action has been
taken by the Company or its Subsidiaries and no event has occurred which, with
notice or lapse of time or both and/or the occurrence, nonoccurrence, or
existence or nonexistence of any other event or condition would permit
termination, modification or acceleration by a party thereto other than the
Company or its Subsidiaries under any such Contract, except, in each case, as
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
3.7 PERMITS. The Company and its Subsidiaries have all material
Permits required to own and lease their properties, the Assets and the
Facilities and to conduct their business as currently being conducted. All such
Permits are valid and in full force and effect and are listed in Section 3.7 of
the Disclosure Schedule. The Company and its Subsidiaries have not violated any
such Permits in any material respect, and each is in compliance with all such
Permits in all material respects. Neither the Company nor its Subsidiaries has
received any notice to the effect that, or otherwise has any knowledge that, (a)
the Company and its Subsidiaries are not currently in compliance with, or are in
violation of, any such Permits in any material respect or (b) any currently
existing circumstances are likely to result in a failure of the Company and its
Subsidiaries to comply with, or in a violation by the Company and its
Subsidiaries of, any such Permits in any material respect. No representation or
warranty is made in this Section 3.7 with respect to the matters covered in
Section 3.22 (Compliance with Environmental Laws).
3.8 NO CONFLICT OR VIOLATION. None of the execution, delivery and
performance of any Transaction Document, or the consummation of the transactions
contemplated hereby or thereby, by the Company or its Subsidiaries will result
in (a) a violation of or a conflict with any provision of the certificate of
incorporation or by-laws of the Company or its Subsidiaries, (b) with or without
the giving of notice of the lapse of time or both, a breach of, or a default
under, or the creation of any right of any party to accelerate, terminate or
cancel pursuant to, or give rise to a loss of a benefit under, any term or
provision of, or trigger any "change of control" right under, any Contract,
indebtedness, Lease, Encumbrance, Permit, authorization or concession
(including, without limitation, by reason of the failure to obtain a consent or
approval thereunder) to which the Company or its Subsidiaries is a party or by
which any of the Assets are bound, (c) a violation by the Company or its
Subsidiaries of any statute, rule, regulation, ordinance, code, order, judgment,
writ, injunction, decree or award applicable to
19
the Company or its Subsidiaries, (d) an impairment of any right of the Company
or its Subsidiaries under any Contract to which it is a party or by which its
Assets are bound or under any Permit relating to the operation of its business,
(e) the Company or its Subsidiaries being required to obtain any consent, waiver
or approval or authorization of, or deliver any notice to, any Person or entity
(other than any governmental or regulatory authority) or (f) an imposition of
any Encumbrance (other than Permitted Encumbrances), restriction or charge on
the business of the Company or its Subsidiaries or on any of the Assets, except
in the case of clauses (b), (d), (e) and (f), where such event would not
reasonably be expected to have a Material Adverse Effect on the Company or its
Subsidiaries, individually or in the aggregate.
3.9 CONSENTS AND APPROVALS. Assuming the Purchasers' representations
and warranties set forth herein or made in connection with any Regulatory
Approvals are true and correct in all respects, no consent, waiver, agreement,
approval, Permit or authorization of, or declaration, filing, notice or
registration to or with, any federal, state, local or foreign governmental or
regulatory authority or body or other Person or entity is required to be made or
obtained by the Company or its Subsidiaries in connection with the execution,
delivery and performance of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby other
than (a) filings required in connection with or in compliance with the
provisions of the HSR Act, the Exchange Act or applicable state securities and
"Blue Sky" laws (collectively, the "REGULATORY FILINGS"), (b) Regulatory
Approvals or (c) those consents, waivers, agreements, approvals, authorizations,
declarations, filings, notices or registrations, that have been, or will be
prior to the Closing Date, obtained or made, as set forth in Section 3.9 of the
Disclosure Schedule. Section 3.9 of the Disclosure Schedule sets forth a
complete and accurate list of all the jurisdictions and related governmental
authorities from which the Company and the Purchasers are required to seek
Regulatory Approvals.
3.10 SEC DOCUMENTS; FINANCIAL STATEMENTS, ETC. The Company has filed
all forms, reports and documents required to be filed by it with the SEC since
October 31, 1997 (collectively, the "COMPANY REPORTS"). As of their respective
dates, the Company Reports (i) complied as to form in all material respects with
the applicable requirements of the Securities Act, or the Exchange Act, as the
case may be, and the rules and regulations thereunder and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The consolidated financial statements of the Company included in or incorporated
by reference in the Company Reports (the "FINANCIAL STATEMENTS") (i) comply as
to form in all material respects with the published rules and regulations of the
SEC with respect thereto; (ii) are in accordance in all material respects with
the Books and Records of the Company and its Subsidiaries, (iii) have been
prepared in accordance with GAAP, consistently applied throughout the periods
covered thereby except as described therein and (iv) present fairly in
accordance with GAAP, consistently applied throughout the periods covered,
except as disclosed therein, the financial condition of the Company and its
Subsidiaries as of the respective dates thereof and the results of operations,
stockholders' equity and cash flows for the periods covered thereby, except that
interim statements were or are subject to normal recurring year-end adjustments.
The accounting and
20
financial records of the Company and its Subsidiaries have been prepared and
maintained in accordance with GAAP, consistently applied throughout the periods
indicated, and sound bookkeeping practices.
3.11 UNDISCLOSED LIABILITIES. Neither the Company nor its
Subsidiaries has any liabilities, obligations or commitments of any nature
(whether direct or indirect, known or unknown, absolute or contingent,
liquidated or unliquidated, due or to become due, accrued or unaccrued, matured
or unmatured) and, to the knowledge of the Company, there is no basis for any
present or future charge, complaint, Action, hearing, investigation, claim or
demand against the Company or its Subsidiaries giving rise to any such
liability, other than (a) liabilities which are reflected and reserved against
on the Financial Statements (in each case including, without limitation, in the
notes thereto) which have not been paid or discharged since the date thereof,
(b) liabilities incurred since October 31, 1999 (or December 31, 1999 in the
case of Target and its Subsidiaries) in the ordinary course of business,
consistent with past practice and (c) liabilities which, individually or in the
aggregate, are not material to the Company and its Subsidiaries taken as a
whole. None of the liabilities described in clause (b) of the preceding sentence
has or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company and its Subsidiaries, individually or in
the aggregate.
3.12 EXEMPTION FROM REGISTRATION. Assuming the representations and
warranties of the Purchasers set forth in Section 4.6 hereof are true and
correct in all material respects, the offer and sale of the Shares made pursuant
to this Agreement and the acquisition of the Common Stock by the Purchasers upon
the conversion of the Preferred Stock will be exempt from the registration
requirements of the Securities Act and applicable state securities laws.
3.13 LITIGATION. Except as set forth in Section 3.13 of the
Disclosure Schedule, there are no outstanding orders, writs, injunctions,
judgments or decrees or Actions pending or, to the knowledge of the Company and
its Subsidiaries, threatened or anticipated, (a) against, related to or
affecting (i) the Company and its Subsidiaries, their business or operations or
the Assets, (ii) any officers or directors of the Company and its Subsidiaries,
as such, (iii) any stockholder of the Company and its Subsidiaries, as such, or
(iv) other than routine claims for benefits, any Employee Plan of the Company
and its Subsidiaries or any trust or funding instrument, fiduciary or
administrator thereof, (b) relating to the transactions contemplated by the
Transaction Documents, or (c) in which Company or its Subsidiaries is a
plaintiff, including, without limitation, any derivative suits brought by or on
behalf of the Company or its Subsidiaries, that would in the case of clause (a)
and (b), if adversely determined, have a Material Adverse Effect on the Company
and its Subsidiaries, individually or in the aggregate.
3.14 LABOR MATTERS. Except as set forth in Section 3.14 of the
Disclosure Schedule, neither the Company nor its Subsidiaries is a party to, or
a participant in any negotiation of, any labor agreement with respect to any of
their employees with any labor organization, union, group or association and
there are no employee unions (nor any other similar labor or employee
organizations) under local statutes, custom or practice. In the past two years,
neither the Company nor its Subsidiaries has been approached by organized labor
or its representatives making an effort to cause the Company or its Subsidiaries
to enter into a binding
21
agreement with organized labor that would cover any of their employees. There is
no labor strike, slow-down or other work stoppage or labor disturbance pending
or, to the knowledge of the Company, threatened against the Company or its
Subsidiaries nor is any grievance currently being asserted, and in the past two
years the Company and its Subsidiaries have not experienced a strike, slow-down
or other work stoppage or other material labor disturbance or difficulty. The
Company and its Subsidiaries are in compliance in all material respects with all
applicable laws respecting employment practices, employee documentation, terms
and conditions of employment and wages and hours and are not engaged in any
unfair labor practice. There is no unfair labor practice charge or complaint
against the Company and its Subsidiaries pending before or, to the knowledge of
the Company, threatened by the National Labor Relations Board or any other
domestic or foreign governmental agency arising out of the conduct of their
businesses, and, to the knowledge of the Company, there are no facts or
information which would give rise thereto, and in the past two years there have
not been any unfair labor practice charges or complaints against the Company or
its Subsidiaries which could have a Material Adverse Effect on the Company and
its Subsidiaries, individually or in the aggregate.
3.15 COMPLIANCE WITH LAW. The Company and its Subsidiaries have not
violated and are in compliance with (a) all applicable laws, statutes,
ordinances, regulations, rules and orders of every federal, state, local or
foreign government and every federal, state, local or foreign court or other
governmental or regulatory agency, department, authority, body or
instrumentality and (b) any judgment, decision, decree, writ, injunction or
order of any court or governmental or regulatory agency, department, authority,
body or instrumentality (collectively, "LAWS"), relating to the Assets, business
or operations of the Company or its Subsidiaries, except to the extent that any
such violation or failure to comply is not reasonably likely, individually or in
the aggregate, to result in a Material Adverse Effect on the Company and its
Subsidiaries. Neither the Company nor its Subsidiaries has received any written
notice to the effect that, or otherwise has any knowledge that, (i) the Company
is not currently in compliance with, or is in violation of, any applicable Laws
or (ii) any currently existing circumstances are reasonably likely to result in
a failure of the Company to comply with, or a violation by the Company of, any
Laws, in either case which such failure to comply or violation would be
reasonably likely, individually or in the aggregate, to result in a Material
Adverse Effect on the Company and its Subsidiaries. No representation or
warranty is made in this Section 3.15 with respect to compliance with Laws
relating to the matters covered in Sections 3.14 (Labor Matters), 3.18 (Employee
Plans), 3.19 (Tax Matters) and 3.22 (Compliance with Environmental Laws).
3.16 NO BROKERS. Other than Ramius Securies, Inc., whose fees (which
may include newly issued shares of Preferred Stock) shall be paid exclusively by
the Company, none of the Company, its Subsidiaries or any of their officers,
directors, employees, stockholders or other Affiliates has employed or made any
agreement with any broker, finder or similar agent or any Person or firm to pay
any finder's fee, brokerage fee or commission or similar payment in connection
with the transactions contemplated by the Transaction Documents.
3.17 PROPRIETARY RIGHTS. Section 3.17 of the Disclosure Schedule
lists all material federal, state and foreign registrations of patents,
trademarks, trade names, servicemarks or other trade rights and copyrights and
all pending applications for any such material
22
registrations that are owned by the Company or its Subsidiaries, or that are
being used in connection with, or relate to, the Assets, the business or
operations, products or processes of the Company or its Subsidiaries or in which
the Company or its Subsidiaries have any material interest (collectively, the
"PROPRIETARY RIGHTS"). No Person has a right to receive a material royalty or
similar payment in respect of any Proprietary Rights pursuant to any contractual
arrangements entered into by the Company or its Subsidiaries or otherwise to the
Company's knowledge. Neither the Company nor its Subsidiaries has any material
licenses granted, sold or otherwise transferred by or to it or other material
agreements to which it is a party, relating in whole or in part to any of the
Proprietary Rights. Each of the Company and its Subsidiaries owns, or possesses
valid and enforceable licenses or other rights to use, all Proprietary Rights
used in or necessary for its business as it is currently conducted, and such
ownership and licenses will not cease to be valid and in full force and effect
by reason of the execution, delivery and performance of the Transaction
Documents or the consummation of the transactions contemplated by the
Transaction Documents, except where the failure to own or possess such licenses
or rights would not be reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on the Company and its Subsidiaries. Except as
set forth in Section 3.17 of the Disclosure Schedule, no other firm,
corporation, association or Person (a) has notified the Company or its
Subsidiaries that it is claiming any ownership of or right to use such
Proprietary Rights or (b) to the best of the Company's and its Subsidiaries'
knowledge, has interfered with, infringed upon or otherwise come into conflict
with any such Proprietary Rights in any material respect.
3.18 EMPLOYEE PLANS.
(a) Section 3.18(a) of the Disclosure Schedule contains a
complete list of Employee Plans. With respect to each such Employee Plan (other
than those relating to Target and its Subsidiaries), the Company has provided to
the Purchasers true and complete copies of (i) all plan documents and related
trust agreements, annuity contracts or other funding instruments, (ii) all
summary plan descriptions, summaries of material modifications, all material
employee communications and a complete description of any Employee Plan which is
not in writing, (iii) the most recent determination letter issued by the
Internal Revenue Service and any opinion letter issued by the Department of
Labor with respect to each Pension Plan and each voluntary employees'
beneficiary association as defined under Section 501(c)(9) of the Code (other
than a Multiemployer Plan), (iv) for the three most recent plan years, the
Internal Revenue Service Form 5500 including all schedules and attachments
thereto for each Pension Plan and Welfare Plan, and (v) a description setting
forth the amount of any liability of the Company and its Subsidiaries as of the
Closing Date for payments more than thirty (30) calendar days past due with
respect to any Welfare Plan.
(b) (i) Each Employee Plan including any related trust
agreement, annuity contract or other funding instrument is legally valid and
binding and in full force and effect. (ii) Each Pension Plan and each related
trust agreement, annuity contract or other funding instrument which is intended
to be a qualified plan under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service stating that such Pension
Plan and each related trust is qualified and tax-exempt under the provisions of
Code Sections 401(a)
23
and 501(a) and has been so qualified during the period from its adoption to
date. Each Employee Plan has been maintained in compliance in all material
respects with its terms, both as to form and operation, and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Employee Plan, including, without limitation, ERISA
and the Code. Except as provided by law or in any employment agreement set forth
on Schedule 3.18, the employment of all persons presently employed or retained
by the Company or its Subsidiaries is terminable at will.
(c) Except as set forth in Section 3.18(c) of the Disclosure
Schedule (i) none of the Employee Plans (other than any Multiemployer Plan) is a
plan that is or has ever been subject to Title IV of ERISA, Section 302 of ERISA
or Section 412 of the Code and (ii) none of the Employee Plans is a plan or
arrangement described under Section 4(b)(5) or 401(a)(1) of ERISA, or a plan
maintained in connection with a trust described in Section 501(c)(9) of the
Code.
(d) Multiemployer Plans
(i) Neither the Company nor any ERISA Affiliate has, at any
time, withdrawn from a Multiemployer Plan in a "complete withdrawal" or a
"partial withdrawal" as defined in Sections 4203 and 4205 of ERISA,
respectively, so as to result in a liability, contingent or otherwise
(including without limitation the obligations pursuant to an agreement
entered into in accordance with Section 4204 of ERISA), of the Company or
any ERISA Affiliate. Neither the Company nor any ERISA Affiliate has
engaged in, or is a successor or parent corporation to an entity that has
engaged in, a transaction described in Section 4212(c) of ERISA.
(ii) All contributions required to be made by the Company or
any ERISA Affiliate to each Multiemployer Plan have been made when due.
(iii) If, as of the Closing Date, the Company (and all ERISA
Affiliates) were to withdraw from all Multiemployer Plans to which it (or
any of them) has contributed or been obligated to contribute, it (and
they) would incur no liabilities to such plans under Title IV of ERISA.
(iv) To the best of the Company's knowledge, with respect to
each Multiemployer Plan: (A) no such Multiemployer Plan has been
terminated or has been in reorganization under ERISA so as to result,
directly or indirectly, in any liability, contingent or otherwise, of the
Company or any ERISA Affiliate under Title IV of ERISA; (B) no proceeding
has been initiated by any Person (including the PBGC) to terminate such
Multiemployer Plan; (C) a "mass withdrawal", as defined in PBGC Reg.
Section 2640.7, with respect to such Multiemployer Plan has not occurred;
(D) the Company and the ERISA Affiliates have no reason to believe that
such Multiemployer Plan will be terminated or will be reorganized under
ERISA or that a "mass withdrawal", as defined in PBGC Reg. Section 2640.7,
will occur with respect to such Multiemployer Plan; and (E) the Company
and the ERISA Affiliates do not expect to withdraw in a "complete
withdrawal" or "partial withdrawal" from such Multiemployer Plan.
24
(e) (i) None of the Company, or its Subsidiaries or any plan
fiduciary of any Employee Plan has engaged in, or has any material liability in
respect of, any transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code, or has otherwise materially violated or participated in a
violation of the provisions of Part 4 of Title I, Subtitle B of ERISA. (ii) The
Company and its Subsidiaries have not been assessed any civil penalty under
Section 502(l) of ERISA.
(f) No Employee Plan (or trust or other funding vehicle
pursuant thereto) has incurred any liability under Code Section 511.
(g) Except as required by Section 4980B of the Code or Part 6
of Title 1, Subtitle B of ERISA, neither the Company nor any ERISA Affiliate nor
any Welfare Plan has any present or future obligation to make any payment to, or
with respect to any present or former employee, officer, director or consultant
of the Company or any ERISA Affiliate pursuant to any retiree medical benefit
plan, or other retiree Welfare Plan, and no condition exists which would prevent
the Company or an ERISA Affiliate from amending or terminating any such benefit
plan or such Welfare Plan.
(h) Except as set forth in Section 3.18(h) of the Disclosure
Schedule, there is no contract, agreement, plan or arrangement covering any
current or former employee, officer, director or consultant of the Company or
its Subsidiaries that, individually or collectively, requires the payment by the
Company or its Subsidiaries of any amount (i) that is not deductible under
Section 162(a)(1) or 404 of the Code or (ii) that is an "excess parachute
payment" pursuant to Section 280G of the Code.
(i) Except as set forth in Section 3.18(i) of the Disclosure
Schedule, neither the Company nor any ERISA Affiliate has announced to current
or former employees, officers, directors or consultants an intention to create,
or has otherwise created, a legally binding commitment to adopt any additional
Employee Plans which are intended to cover current or former employees,
officers, directors or consultants of the Company or any Subsidiary or to amend
or modify any existing Employee Plan which covers or has covered current or
former employees, officers, directors or consultants of the Company or any
Subsidiary, that, in any case, would materially increase the benefits under any
Employee Plan, or materially increase the cost of maintaining any Employee Plan.
(j) Neither the Company nor any Employee Plan holds as an
asset any interest in any annuity contract, guaranteed investment contract or
any other investment or insurance contract issued by an insurance company that
is the subject of bankruptcy, conservatorship or rehabilitation proceedings. The
insurance policies or other funding instruments, if any, for each Welfare Plan
provide coverage for each current or former employee, director, officer or
consultant of the Company or its Subsidiaries (and, if applicable, their
respective dependents) who has been advised by the Company or its Subsidiaries,
whether through an Employee Plan or otherwise, that he or she is covered by such
Welfare Plan.
25
(k) Except as set forth in Section 3.18(k) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or the other
Transaction Documents by the Company nor the consummation of the transactions
contemplated hereby and thereby will result in the acceleration or creation of
any rights of any Person to benefits under any Employee Plan (including, without
limitation, the acceleration of the vesting or exercisability of any share
options, the acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any severance, parachute or
change in control agreement).
(l) To the knowledge of the Company, no event has occurred in
connection with which the Company or any Employee Plan, directly or indirectly,
could reasonably be subject to any material liability (A) under any statute,
regulation or governmental order relating to any Employee Plan or (B) pursuant
to any obligation of the Company to indemnify any Person against liability
incurred under any such statute, regulation or order as they relate to the
Employee Plans.
(m) Except as set forth in Section 3.18(m) of the Disclosure
Schedule, the Company is not a party to any severance or similar arrangement in
respect of any of the Personnel that will result in any obligation (absolute or
contingent) of the Company or the Purchasers after the Closing to make any
payment to any of such Personnel following termination of employment.
(n) Each Welfare Plan which is a "group health plan," as
defined in Section 607(1) of ERISA, has been operated in compliance with
provisions of Part 6 of Title I, Subtitle B of ERISA and Section 4980B of the
Code at all times.
(o) There is no action, order, writ, injunction, judgment or
decree outstanding or claim, suit, litigation, proceeding, arbitral action,
governmental audit or investigation relating to or seeking benefits under any
Employee Plan that is pending, or to the Company's knowledge, threatened or
anticipated under which the Company or any Subsidiary thereof or any Employee
Plan could have any material liability other than routine claims for benefits in
the ordinary course of the operation of an Employee Plan.
(p) The Company has no liability, whether absolute or
contingent, including any obligations under the Employee Plans, with respect to
any misclassification of a Person performing services for the Company as an
independent contractor rather than as an employee.
3.19 TAX MATTERS.
(a) FILING OF TAX RETURNS. The Company and its Subsidiaries
have timely filed with the appropriate taxing authorities all Returns
(including, without limitation, information returns) in respect of Taxes
required to be filed through the date hereof and will timely file any such
Returns required to be filed on or prior to the Closing Date. All such Returns
and other information filed are complete and accurate in all material respects.
The Company and its Subsidiaries have not requested any extension of time within
which to file
26
Returns (including, without limitation, information Returns) in respect of any
Taxes. The Company and its Subsidiaries have delivered to the Purchasers
complete and accurate copies of the federal, state and local income tax Returns
for the years 1997, 1998 and 1999.
(b) PAYMENT OF TAXES. All material Taxes for which the Company
and its Subsidiaries are liable, in respect of periods (or portions thereof)
ending on or before the Closing Date, have been timely paid, or an adequate
reserve (in conformity with GAAP) has been established therefor, as set forth in
the Financial Statements. There are no material Taxes for which the Company and
its Subsidiaries are or, to the Company's knowledge, may become liable that will
apply in a period or a portion thereof beginning on or after the Closing Date
and that are attributable to income earned or activities of the Company and its
Subsidiaries occurring before the Closing Date for which adequate reserves have
not been established in conformity with GAAP.
(c) AUDITS, INVESTIGATIONS OR CLAIMS. No material deficiencies
for Taxes have been claimed, proposed or assessed in writing by any taxing or
other governmental authority against the Company or its Subsidiaries which have
not been paid or reserved on the Financial Statements. There are no pending or,
to the Company's knowledge, threatened audits, or known investigations or claims
for or relating to any liability in respect of Taxes that in the reasonable
judgment of the Company or its counsel are likely to result in an additional
material amount of Taxes, and there is no matter under discussion with any
taxing or other governmental authority with respect to Taxes that in the
reasonable judgment of the Company or its counsel is likely to result in an
additional material liability for Taxes with respect to the Company or its
Subsidiaries. Audits of federal, state, and local returns for Taxes by the
relevant taxing or other governmental authorities have been completed for the
periods set forth in Section 3.19(c) of the Disclosure Schedule and none of the
Company or its Subsidiaries has been notified that any taxing or other
governmental authority intends to audit any other Return for any period. No
extension of any statute of limitations relating to Taxes is in effect with
respect to the Company or its Subsidiaries. No power of attorney has been
executed by the Company or its Subsidiaries with respect to any matters relating
to Taxes which is currently in force.
(d) LIENS. There are no liens for Taxes (other than for
current Taxes not yet due and payable) on the Assets.
3.20 INSURANCE. Section 3.20 of the Disclosure Schedule contains a
complete and accurate list of all material policies or binders for business
interruption, fire, liability, title, worker's compensation, product liability,
errors and omissions and other forms of insurance (showing as to each policy or
binder the carrier, policy number, coverage limits, expiration date, annual
premium and a general description of the type of coverage provided) maintained
by the Company and its Subsidiaries. Such insurance provides, and during its
term has provided, in all material respects coverage to the extent and in the
manner (a) adequate for the Company and its Subsidiaries and their Assets,
businesses and operations and the risks insured against in connection therewith
and (b) as may be or may have been required by law and by any and all Contracts
to which the Company and/or its Subsidiaries are or have been a party. The
Company and its Subsidiaries are not in any material default under any of such
policies or binders, and the
27
Company and its Subsidiaries have not failed to give any notice or to present
any material claim under any such policy or binder in a due and timely fashion.
No insurer has refused, denied or disputed coverage of any material claim made
thereunder. No insurer has advised the Company and/or its Subsidiaries that it
intends to materially reduce coverage, materially increase any premium or fail
to renew any existing policy or binder in all material respects. All such
policies and binders are in full force and effect on the date hereof and shall
be kept in full force and effect through the Closing Date.
3.21 CUSTOMERS AND SUPPLIERS. Section 3.21 of the Disclosure
Schedule sets forth a true and correct list of (a) the 25 largest customers of
the Company and its Subsidiaries, on a consolidated basis, in terms of sales
during the fiscal year ended October 31, 1999 (or December 31, 1999 in the case
of Target and its Subsidiaries), setting forth the total sales to each such
customer during such period and (b) the 10 largest suppliers of the Company and
its Subsidiaries, on a consolidated basis, in terms of purchases during the
fiscal year ended October 31, 1999. To the Company's knowledge, there has not
been any Material Adverse Change to the Company and its Subsidiaries,
individually or in the aggregate, in the business relationship of the Company or
its Subsidiaries with any customer or supplier named in Section 3.21 of the
Disclosure Schedule.
3.22 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) The Company and its Subsidiaries are in material
compliance with all Environmental Laws, including, without limitation, all
Permits required thereunder to conduct their business as currently being
conducted or proposed to be conducted. Neither the Company nor its Subsidiaries
has received any notice to the effect that, or otherwise has knowledge that, (i)
the Company and its Subsidiaries are not currently in compliance in any material
respect with, or are in violation of, any Environmental Laws or Permits required
thereunder or (ii) any currently existing circumstances are likely to result in
a failure of the Company or its Subsidiaries to comply with, or a violation by
the Company or its Subsidiaries of, any Environmental Laws or Permits required
thereunder. The Company and its Subsidiaries at all times during the previous
five years have been in material compliance with all Environmental Laws.
(i) All material Permits that the Company and its
Subsidiaries are required to have obtained pursuant to Environmental Laws
have been obtained and are maintained by the Company or, where
appropriate, its Subsidiaries, were duly issued by the appropriate
governmental authority, are in full force and effect and are not subject
to appeal. Neither the Company nor any of its Subsidiaries has received
notice, or otherwise has knowledge, that any Permit has been, or is
subject to being, rescinded, terminated, limited or amended in such a way
as could result in a Material Adverse Effect on the Company and its
Subsidiaries.
(ii) The Company or, where appropriate, its Subsidiaries,
have submitted timely applications for renewal of any Permits currently
held by the Company or its Subsidiaries. To the best knowledge of the
Company or its Subsidiaries, there are
28
no facts or circumstances upon which a governmental authority could refuse
to renew any such Permit.
(iii) To the best knowledge of the Company and its
Subsidiaries, no additional capital expenditures will be required by
either the Company or its Subsidiaries for purposes of compliance with the
terms and conditions of any Permits or Permit renewals.
(iv) The execution, delivery and performance of the
Transaction Documents and the consummation of the transactions
contemplated thereby will not require the assignment or transfer of any
Permit except for those Permits that may be assigned or transferred on or
prior to the Closing Date without the consent of any Person (other than
ministerial approvals by relevant governmental authorities) and without
causing any such Permit to be rescinded, terminated or limited.
(b) There are no existing or, to the best knowledge of the
Company, potential Environmental Claims against the Company or its Subsidiaries,
nor have any of them received any written notification or otherwise have any
knowledge, of any allegation of any actual, or potential responsibility for, or
any inquiry or investigation regarding: (i) any disposal, release or threatened
release at any location of any Hazardous Substance generated or transported by
the Company or its Subsidiaries or (ii) any disposal, release or threatened
release of any Hazardous Substance at any property owned or operated by the
Company or its Subsidiaries.
(c) (i) No underground tank or other underground storage
receptacle for Hazardous Substances is currently located on the Facilities and
there have been no releases of any Hazardous Substances from any such
underground tank or related piping and (ii) there have been no releases (I.E.,
any past or present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing, or dumping) of
Hazardous Substances on, upon or into the Facilities other than those authorized
by Environmental Laws including, without limitation, the Permits required
thereunder. In addition, to the best knowledge of the Company, there have been
no such releases by the Company's or its Subsidiaries' corporate predecessors
and no releases on, upon, or into any real property in the vicinity of any of
the real properties of the Company or its Subsidiaries other than those
authorized by Environmental Laws which, through soil or ground water
contamination, may have come to be located on the properties of the Company or
its Subsidiaries.
(d) There are no PCBs or asbestos-containing materials located
at or on the Facilities.
(e) The Company and its Subsidiaries are not a party, whether
as a direct signatory or as successor, assign or third-party beneficiary, or
otherwise bound, to any Lease or other Contract (excluding insurance policies
disclosed on the Disclosure Schedule) under which the Company or its
Subsidiaries are obligated by or entitled to the benefits of, directly or
indirectly, any representation, warranty, indemnification, covenant, restriction
or other undertaking concerning Environmental Conditions, Environmental Claims
or compliance with Environmental Laws.
29
(f) The Company and its Subsidiaries have neither released any
other Person from any claim under any Environmental Law nor waived any rights
concerning any Environmental Condition or Environmental Claim.
(g) There are no consent decrees, consent orders, judgments,
judicial or administrative orders or liens issued by, or agreements (other than
Permits) with, any governmental authority or quasi-governmental entity relating
to any Environmental Law which regulate, obligate or bind the Company or its
Subsidiaries.
(h) True and correct copies of the Environmental Reports, as
well as all other written environmental reports, audits or assessments that have
been conducted, either by the Company or its Subsidiaries or by any Person
engaged by the Company or its Subsidiaries for such purpose, at any facility
presently or formerly owned by the Company or its Subsidiaries have been made
available to the Purchasers and a list of all such reports, audits and
assessments is set forth in Section 3.22 of the Disclosure Schedule.
3.23 NO OTHER AGREEMENTS TO SELL THE ASSETS OR SHARES OF THE COMPANY
OR ITS SUBSIDIARIES. Other than sales of inventory or product in the ordinary
course of business, the transactions contemplated by the Transaction Documents
and the agreements among the Company and its lenders in connection with the
financing of the Merger, neither the Company nor its Subsidiaries has any legal
obligation, absolute or contingent, to any other Person or firm to (a) sell or
effect a sale of any material portion or all of the Assets, (b) sell or effect a
sale of any Equity Securities of the Company or its Subsidiaries, (c) effect any
merger, consolidation or other reorganization of the Company or its Subsidiaries
(except the Merger) or (d) enter into any Contract or cause the entering into a
Contract with respect to any of the foregoing (except the Merger).
3.24 PROHIBITED PAYMENTS. The Company and its Subsidiaries have not,
directly or indirectly, (a) made or agreed to make any contribution, payment or
gift to any government official, employee or agent where either the
contribution, payment or gift or the purpose thereof was illegal under the laws
of any federal, state, local or foreign jurisdiction, (b) established or
maintained any unrecorded fund or asset for any such purpose or made any false
entries on the Books and Records for any reason, (c) made or agreed to make any
contribution, or reimbursed any political gift or contribution made by any other
Person, to any candidate for federal, state, local or foreign public office or
(d) paid or delivered any fee, commission or any other sum of money or item of
property, however characterized, to any finder, agent, government official or
other party, in the United States or any other country, which in any manner
relates to the Assets, business or operations of the Company or its
Subsidiaries, which in any such case the Company or its Subsidiaries knows or
has reason to believe to have been illegal under any federal, state or local
laws (or any rules or regulations thereunder) of the United States or any other
country having jurisdiction.
3.25 BOARD RECOMMENDATION. The Board of Directors of the Company, at
a meeting duly called and held, has by unanimous vote of those directors
present, determined that this Agreement, the other Transaction Documents and the
transactions contemplated hereby and
30
thereby, including, without limitation, the Equity Investment and the
Purchasers' acquisition of Common Stock pursuant to the conversion of Preferred
Stock, taken together are fair to and in the best interests of the stockholders
of the Company and has taken all actions necessary on the part of the Company to
approve this Agreement, the Equity Investment and the other Transaction
Documents, such that the restrictions on business combinations or other actions
contained in Section 203 of the DGCL will be inapplicable to any business
combination (as defined in Section 203 of the DGCL) or other action engaged in
by the Company with any of the Purchasers or their respective Affiliates or
associates. Other than Section 203 of the DGCL, no state takeover statute is
applicable to the transactions contemplated by the Transaction Documents.
3.26 CHANGE OF CONTROL EXEMPTIONS.
(a) All change of control provisions contained in the
Financing Documents are as set forth in Section 3.26 of the Disclosure Schedule.
Such change in control provisions set forth in, or required to be set forth in,
Section 3.26 of the Disclosure Schedule do not and will not apply to, or
otherwise have an effect on, the Company, Olivetti S.p.A. or their respective
Affiliates in the event Olivetti S.p.A or its Affiliates take any action that
would otherwise cause, or be deemed, a change of control under any such
Financing Documents. None of the change of control provisions contained in the
Severance Agreements of the Company and its Subsidiaries apply to or will apply
to, or otherwise have an effect on, the Company, Olivetti S.p.A., Cirmatica,
Lottomatica S.p.A. or their respective Affiliates in the event Olivetti S.p.A.,
Cirmatica, Lottomatica S.p.A. or their Affiliates take any action that would
otherwise cause, or be deemed, a change of control under the Severance
Agreements of the Company or its Subsidiaries, unless termination of employment
by the Company or its Subsidiaries as a result of a change of control, and not
the mere occurrence of a change of control, triggers payment to be made by the
Company or its Subsidiaries.
(b) The Company has used its best efforts to (i) amend all
existing agreements of the Company or its Subsidiaries (other than Severance
Agreements) so that no change of control provisions contained in any such
agreements (collectively, and together with the Severance Agreements, the
"CHANGE OF CONTROL Agreements") apply to or will apply to, or otherwise have an
effect on, the Company, Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their
respective Affiliates in the event Olivetti S.p.A., Cirmatica, Lottomatica
S.p.A. or their Affiliates take any action that would otherwise cause, or be
deemed, a change of control under such Change of Control Agreements of the
Company or its Subsidiaries. Section 3.26 of the Disclosure Schedule sets forth
a complete and accurate list of all Change of Control Agreements.
3.27 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by the Company contained in this Agreement or the other Transaction
Documents (including, without limitation, the Disclosure Schedule) delivered by
the Company in connection with the transactions contemplated by the Transaction
Documents, and no statement contained in any certificate furnished or to be
furnished by or on behalf of the Company pursuant hereto or in connection with
the transactions contemplated by the Transaction Documents, contains or will
contain as of the date such representation or warranty is made or such
certificate is delivered, any untrue statement of a material fact or omits, or
will omit, to state a material fact as of the date
31
such representation or warranty is made or such certificate is delivered,
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
3.28 STOCKHOLDER APPROVAL. The transactions contemplated by the
Transaction Documents do not require the approval of the Company's stockholders
under any AMEX rules or regulations, including the rules promulgated under
AMEX's company guide.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
As an inducement to the Company to enter into this Agreement, each
of the Purchasers hereby makes, severally and not jointly, the following
representations and warranties to the Company with respect to itself as of the
date hereof and as of the Closing Date:
4.1 ORGANIZATION. Such Purchaser is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
4.2 AUTHORIZATION. Such Purchaser has all necessary corporate power
and authority to, and has taken all corporate action necessary on its part to,
execute and deliver this Agreement and the other Transaction Documents and to
consummate the transactions contemplated hereby and thereby. This Agreement and
each of the other Transaction Documents have been duly executed and delivered by
such Purchaser and are the legal, valid and binding obligations of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
except as the enforceability thereof may be limited by (a) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
similar laws in effect which affect the enforcement of creditors' rights
generally or (b) general principles of equity, whether considered in a
proceeding at law or in equity.
4.3 CONSENTS AND APPROVALS. Assuming that the Company's
representations and warranties set forth in Section 3.9 are true and correct in
all respects, no consent, waiver, agreement, approval, Permit or authorization
of, or declaration, filing, notice or registration to or with, any federal,
state, local or foreign governmental or regulatory authority or body is required
to be made or obtained by such Purchaser in connection with the execution,
delivery and performance of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby other than any
Regulatory Filings, any Regulatory Approvals and pursuant to the DGCL (it being
understood that, with respect to the Regulatory Approvals, the Purchasers have
relied on (i) the Company's representations as to which jurisdictions and
related governmental authorities the Purchasers are required to seek Regulatory
Approvals from by reason of the business and operations of the Company and its
Subsidiaries and (ii) the accuracy and completeness of the Company's disclosure
set forth in Section 3.9 of the Disclosure Schedule).
4.4 NO CONFLICT OR VIOLATION. None of the execution, delivery and
performance of this Agreement or the other Transaction Documents or the
consummation of the transactions contemplated hereby or thereby by such
Purchaser will result in (a) a violation of or
32
a conflict with any provision of the certificate of incorporation or by-laws (or
other applicable governing documents) of such Purchaser, (b) with or without the
giving of notice of the lapse of time or both, a breach of, or a default under,
or the creation of any right of any party to accelerate, terminate or cancel
pursuant to, or give rise to a loss of a benefit under, any term or provision
of, or trigger any "change of control" right under, any Contract, indebtedness,
Lease, Encumbrance, Permit, authorization or concession (including, without
limitation, by reason of the failure to obtain a consent or approval thereunder)
to which such Purchaser or its Subsidiaries is a party or by which any of their
Assets are bound, (c) a violation by such Purchaser or its Subsidiaries of any
statute, rule, regulation, ordinance, code, order, judgment, writ, injunction,
decree or award applicable to such Purchaser or its Subsidiaries, (d) such
Purchaser or its Subsidiaries being required to obtain any consent, waiver or
approval or authorization of, or deliver any notice to, any Person or entity
(other than any governmental or regulatory authority), except in the case of
clauses (b) and (d), where such event would not reasonably be expected to have a
Material Adverse Effect on such Purchaser.
4.5 INVESTMENT REPRESENTATION. Such Purchaser is acquiring its
Shares for its own account for investment purposes and with no present intention
of distributing or reselling such shares or any part thereof in any transaction
which would constitute a public "distribution" within the meaning of the
Securities Act (it being understood that a Purchaser's sale of Shares pursuant
to a private placement that is exempt from the registration requirements of the
Securities Act shall not be deemed a public "distribution").
4.6 NO BROKERS. Neither such Purchaser nor its Subsidiaries or any
of its officers, directors, employees, stockholders or other Affiliates has
employed or made any agreement with any broker, finder or similar agent or any
Person or firm to pay any finder's fee, brokerage fee or commission or similar
payment in connection with the transactions contemplated by the Transaction
Documents.
4.7 NO INVESTMENT COMPANY. Such Purchaser (other than Oak, Peconic
and Ramius) is not an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
ARTICLE V.
COVENANTS OF THE COMPANY AND THE PURCHASERS
5.1 MAINTENANCE OF BUSINESS PRIOR TO CLOSING. Prior to the Closing,
except as set forth in the Disclosure Schedule or as contemplated by any other
provision of this Agreement, unless the Purchasers have consented in writing
thereto, the Company:
(a) shall, and shall cause each of its Subsidiaries to,
conduct its operations and business according to their usual, regular and
ordinary course consistent with past practice;
(b) shall not, and shall cause its Subsidiaries not to, amend
their respective certificates of incorporation or by-laws or comparable
governing instruments;
33
(c) shall promptly deliver to the Purchasers correct and
complete copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement;
(d) shall not, and shall not permit any of its Subsidiaries
to, authorize, propose or announce an intention to authorize or propose, or
enter into an agreement with respect to, any merger, consolidation or business
combination, release or relinquishment of any material contract rights, or any
acquisition or disposition of Assets or securities in excess of $1,000,000 in
the aggregate other than in the ordinary course of business consistent with past
practice;
(e) other than the Equity Investment, shall not, and shall not
permit any of its Subsidiaries to, (i) grant, confer or award any options,
warrants, conversion rights or other rights or Equity Securities, not existing
on the date hereof, to acquire any shares of its capital stock or other
securities of the Company or its Subsidiaries or (ii) accelerate, amend or
change the period of exercisability of options or restricted stock granted under
any employee stock plan or authorize cash payments in exchange for any options
granted under any of such plans;
(f) shall not, and shall not permit any of its Subsidiaries
to, (i) declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock or other ownership
interests (except, in the case of any of its wholly owned Subsidiaries, to the
Company or another wholly owned Subsidiary of the Company), or (ii) directly or
indirectly redeem, purchase or otherwise acquire any shares of its capital stock
or capital stock of any of its Subsidiaries, or make any commitment for any such
action or (iii) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for share of its capital stock;
(g) shall not, and shall not permit any of its Subsidiaries
to, issue, deliver, sell, pledge or otherwise encumber any shares of its capital
stock, any other securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, securities or convertible
securities (other than the issuance or shares of Common Stock upon the exercise
of options, warrants or other rights outstanding on the date hereof in
accordance with their present terms); or
(h) shall not, and shall not permit any of its Subsidiaries to
take, or agree (in writing or otherwise) or resolve to take, any of the
foregoing actions.
5.2 INVESTIGATION BY THE PURCHASERS. Prior to the Closing, the
Company shall allow the Purchasers, their respective counsel, accountants and
other representatives during regular business hours upon reasonable notice, to
make such reasonable inspection of the Assets, Facilities, business and
operations of the Company and its Subsidiaries and to inspect and make copies of
Contracts, Books and Records and all other documents and information reasonably
requested by the Purchasers and related to the operations and business of the
Company and its Subsidiaries including, without limitation, historical financial
information concerning the business of the Company and its Subsidiaries and to
meet with designated Personnel of the Company or its Subsidiaries and/or their
representatives. The Company and its Subsidiaries
34
shall furnish to the Purchasers promptly upon request (a) all additional
documents and information with respect to the affairs of the Company and its
Subsidiaries relating to their businesses and (b) access to the Personnel and to
the Company's and its Subsidiaries' accountants and counsel as the Purchasers,
or their respective counsel or accountants, may from time to time reasonably
request and the Company and its Subsidiaries shall instruct their Personnel,
accountants and counsel to cooperate with the Purchasers, and to provide such
documents and information as the Purchasers and their respective representatives
may request.
5.3 CONSENTS AND EFFORTS; FURTHER ASSURANCES. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable under
applicable Laws and regulations to consummate and make effective, in the most
expeditious manner as reasonably practicable, the Equity Investment and the
other transactions contemplated by the Transaction Documents. The Purchasers and
the Company will use their reasonable best efforts and cooperate with one
another (i) in promptly determining whether any filings are required to be made
or consents, approvals, waivers, licenses, permits or authorizations are
required to be obtained (or, which if not obtained, would result in an event of
default, termination or acceleration of any agreement or any put right under any
agreement) under any applicable Law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by the Transaction
Documents, including the Equity Investment, and (ii) in promptly making any such
filings, in furnishing information required in connection therewith and in
timely seeking to obtain any such consents, approvals, permits or
authorizations. Notwithstanding the foregoing, the parties hereto acknowledge
and agree that with respect to Regulatory Approvals, in order to satisfy this
Section 5.3, each Purchaser shall only be required to cause its officers,
directors and key employees in their capacity as such and any of its Affiliates
that it controls to provide all required information in connection with such
Regulatory Approvals and to use its reasonable efforts to obtain the cooperation
of its substantial shareholders and any other third party in providing all
required information in connection with such Regulatory Approvals.
5.4 NOTIFICATION OF CERTAIN MATTERS. The Company and its
Subsidiaries shall give prompt notice to the Purchasers and the Purchasers shall
give prompt notice to the Company, as applicable, of:
(a) (i) the occurrence, or failure to occur, of any event,
which occurrence or failure would be likely to cause any representation or
warranty made by such party contained in this Agreement or in any exhibit or
schedule hereto or in any other Transaction Document to be untrue or inaccurate,
(ii) any Material Adverse Change with respect to such party, individually or in
the aggregate, and (iii) any failure of such party and its Subsidiaries or any
of their respective Affiliates, stockholders or representatives to comply with,
perform or satisfy any covenant, condition or agreement to be complied with,
performed by or satisfied by it under this Agreement or any exhibit or schedule
hereto or under any Transaction Document; PROVIDED that such disclosure shall
not be deemed to cure, or to relieve such party of any liability
35
or obligation with respect to, any breach of or failure to satisfy any
representation, warranty, covenant, condition or agreement under any of the
Transaction Documents.
(b) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by the Transaction Documents;
(c) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by the Transaction Documents; and
(d) any Actions commenced or, to the best of its knowledge
threatened against, relating to or involving or otherwise affecting such party
or any of its Subsidiaries which, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 3.13 (with
respect to the Company and its Subsidiaries) or which relate to the consummation
of the transactions contemplated by the Transaction Documents.
5.5 EXCLUSIVITY; FEES AND EXPENSES.
(a) From the date of this Agreement until this Agreement
terminates in accordance with its terms, (the "EXCLUSIVITY PERIOD"), the Company
shall not, and shall cause its officers, board of directors, advisors and
representatives not to, directly or indirectly, (i) solicit or initiate, or
encourage the submission of, proposals or offers relating to, (ii) respond to
any submissions, proposals or offers relating to, (iii) engage in any
negotiations or discussions with any Person relating to, or (iv) otherwise
cooperate in any way with any Person in connection with the issuance of any
Equity Securities of the Company in connection with the Merger (except for the
shares of Common Stock and warrants issued in respect of the financing
contemplated by the Financing Documents), without first obtaining the written
approval of the Purchasers. The Company will immediately notify the Purchasers
of any submissions, proposals, offers or inquiries made during the Exclusivity
Period. In the event of the Company's breach of the terms this Section 5.5(a),
the Company shall reimburse the Purchasers for their damages, including, without
limitation, their reasonable attorney's fees and expenses and other out of
pocket expenses, incurred in connection with the evaluation and negotiation of
the Equity Investment.
(b) The Company shall reimburse the Purchasers (i) for any and
all of their reasonable documented costs relating to the Equity Investment,
whether or not the transactions contemplated by the Transaction Documents are
ultimately consummated, in an amount not to exceed $150,000 and (ii) in addition
to the costs set forth in clause (i) hereof, for any and all of their documented
costs relating to regulatory authorization and filings related to the Equity
Investment, including, without limitation, any and all costs of any regulatory
body investigating the Purchasers and any of their Affiliates, officers,
directors and key employees and fees and expenses of legal counsel, whether or
not the transactions contemplated by the Transaction Documents are ultimately
consummated, in an amount not to exceed $500,000.
(c) If a Payment Event (as hereinafter defined) occurs, the
Company shall pay to the Purchasers, within one business day following such
event, a fee of $3,000,000
36
(90.9% of which shall be paid to Cirmatica, 1.8% of which shall be paid to
Olivetti, 3.635% of which shall be paid to Oak and 3.635% of which shall be paid
to Peconic). "PAYMENT EVENT" means (i) the failure by the Company to consummate
the Equity Investment in accordance with the terms of this Agreement; (ii) the
termination of this Agreement by the Purchasers pursuant to Section 8.1(a)(iii);
(iii) the failure by the Company or Target to consummate the Merger as a result
of a breach or alleged breach by the Company of its representations, warranties
or covenants contained in the Merger Agreement or any of the other agreements
related thereto, unless such breach or alleged breach is approved by each
Purchaser in its sole discretion; or (iv) if this Agreement shall have been
terminated in accordance with its terms and on or prior to the sixth month
anniversary of the date of such termination, the Company enters into an
agreement with respect to the sale of a material amount of Equity Securities of
the Company. In addition, if the Company receives a fee or any expense
reimbursement in connection with the termination of the Merger from Target, the
Company shall pay to the Purchasers the lesser of (x) $1.0 million or (y) an
amount equal to one-third of such fee plus expense reimbursement received by the
Company (net of the payment of fees and expenses owed to the banks in connection
with the debt financing and legal, accounting and other expenses incurred in
connection with the Merger).
(d) The Company acknowledges that the agreements contained in
this Section 5.5 are an integral part of the transactions contemplated by the
Transaction Documents, and that, without these agreements, the Purchasers would
not enter into this Agreement; accordingly, if the Company fails to promptly pay
any amount due pursuant to this Section 5.5, and, in order to obtain such
payment, the other party commences a suit which results in a judgment against
the Company for the fee or fees and expenses set forth in this Section 5.5, the
Company shall also pay to the Purchasers their costs and expenses incurred in
connection with such litigation.
(e) This Section 5.5 shall survive any termination of this
Agreement, however caused.
5.6 CHANGE OF CONTROL EXEMPTIONS.
(a) The Company covenants and agrees that none of the change
of control provisions contained in any Severance Agreements of the Company and
its Subsidiaries entered into after the date of this Agreement will apply to, or
otherwise have an effect on, the Company, Olivetti S.p.A., Cirmatica,
Lottomatica S.p.A. or their respective Affiliates in the event Olivetti S.p.A.,
Cirmatica, Lottomatica S.p.A. or their Affiliates take any action that would
otherwise cause, or be deemed, a change of control under the Severance
Agreements of the Company or its Subsidiaries, except to the extent that a
termination of employment by the Company or its Subsidiaries as a result of a
change of control, and not the mere occurrence of a change of control, triggers
payment to be made by the Company or its Subsidiaries.
(b) The Company covenants and agrees to (i) use its best
efforts to amend all Change of Control Agreements of the Company or its
Subsidiaries (other than Severance Agreements) so that no change of control
provisions contained in any such agreements apply to or will apply to, or
otherwise have an effect on, the Company, Olivetti S.p.A.,
37
Cirmatica, Lottomatica, S.p.A. or their respective Affiliates in the event
Olivetti, Cirmatica, Lottomatica, S.p.A. or their Affiliates take any action
that would otherwise cause, or be deemed, a change of control under such
agreements of the Company or its Subsidiaries, and (ii) not enter into, or
permit its Subsidiaries to enter into, any agreements of the Company or its
Subsidiaries (other than Severance Agreements) which contains any change of
control provisions that apply to or will apply to, or will otherwise have an
effect on, the Company, Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their
respective Affiliates in the event Olivetti S.p.A., Cirmatica, Lottomatica
S.p.A. or their Affiliates take any action that would otherwise cause, or be
deemed, a change of control under such agreements of the Company or its
Subsidiaries.
(c) The Company covenants and agrees that it will not amend
any of the change of control provisions contained in the Financing Documents in
any manner that will cause any such change in control provisions to apply to, or
otherwise have an effect on, the Company, Olivetti S.p.A. or their respective
Affiliates in the event Olivetti S.p.A. or its Affiliates take any action that
would otherwise cause, or be deemed, a change of control under any such
Financing Documents.
5.7 COMPLIANCE WITH LAWS. The Purchasers shall comply with all
applicable federal securities laws in their transactions in the Company's
securities.
ARTICLE VI.
CONDITIONS TO THE INVESTMENT
6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
the Company and the Purchasers to consummate the transactions contemplated
hereby on the Closing Date are subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions:
(a) CONSENTS. All consents, approvals and licenses of any
governmental or other regulatory body required in connection with the execution,
delivery and performance of this Agreement and the other Transaction Documents
and for the Company to conduct the business of the Company in substantially the
manner now conducted, including approval by the Federal Trade Commission and the
Department of Justice under the HSR Act or expiration of the waiting period
thereunder, shall have been obtained, unless the failure to obtain such
consents, authorizations, orders or approvals would not have a Material Adverse
Effect on the Company and its Subsidiaries, individually or in the aggregate,
after giving effect to the transactions contemplated by this Agreement and the
other Transaction Documents.
(b) NO LEGAL PROHIBITIONS. No provision of any applicable Law
shall prohibit or restrain the consummation of the transactions contemplated by
the Transaction Documents, including the Equity Investment; PROVIDED, HOWEVER,
that the Company and the Purchasers shall each use its reasonable best efforts
to have any judgment, order, decree or injunction prohibiting or restraining the
consummation of the transactions contemplated by the Transaction Documents
vacated.
38
(c) REGULATORY APPROVALS. The Company and the Purchasers shall
have received all regulatory approvals, and findings of suitability or
qualification, including any approvals by state governing commissions and gaming
regulators, or temporary permits or authorizations, or, if applicable, the
expiration of any notice periods with respect thereto ("REGULATORY APPROVALS"),
reasonably satisfactory to the Company and the Purchasers, that are necessary
for the Purchasers to own and continue to hold the Preferred Stock and shares of
Common Stock, vote the Preferred Stock and appoint or elect at least four (or
seven, if applicable) directors to the Board of Directors of the Company.
(d) MERGER CLOSING. On or prior to the Closing, the Merger
shall have been consummated in accordance with the terms of the Merger
Agreement.
6.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company to consummate the transactions contemplated hereby on the Closing
Date are subject, in sole discretion of the Company, to the satisfaction, on or
prior to the Closing Date of the following conditions, which may be waived by
the Company in accordance with Section 8.4:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
(i) All representations and warranties of the Purchasers
contained in this Agreement that are qualified by materiality shall be
true and correct in all respects and all representations and warranties of
the Purchasers contained in this Agreement not so qualified by materiality
shall be true and correct in all material respects, in each case at and as
of the date of this Agreement and the Closing Date as if such
representations and warranties were made at and as of the date of this
Agreement and the Closing Date (except to the extent that any such
representations and warranties were made as of a specified date, which
representations and warranties shall continue on the Closing Date to be
true in all respects or all material respects, as required, as of such
specified date).
(ii) Each of the Purchasers shall have performed in all
material respects all obligations arising under the agreements and
covenants required hereby to be performed by it prior to or on the Closing
Date.
(b) STOCKHOLDERS' AGREEMENT. Each of the Purchasers shall have
executed and delivered to the Company the Stockholders' Agreement, in the form
attached hereto as EXHIBIT B.
(c) NO PROCEEDINGS OR LITIGATION. No Actions by any
governmental authority or any other entity or Person shall have been instituted
or threatened for the purpose of enjoining or preventing, or which question the
validity or legality of, the transactions contemplated by the Transaction
Documents and which could reasonably be expected to damage the Company or
materially adversely affect the ability of the Purchasers to consummate the
transactions contemplated by the Transaction Agreement.
6.3 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS. The obligations
of the Purchasers to consummate the transactions contemplated hereby on the
Closing Date are subject,
39
in the sole discretion of the Purchasers, to the satisfaction, on or prior to
the Closing Date, of each of the following conditions, any of which may be
waived by the Purchasers in accordance with Section 8.4:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
(i) All representations and warranties of the Company
contained in this Agreement that are qualified by materiality shall be
true and correct in all respects and all representations and warranties of
the Company contained in this Agreement not so qualified by materiality
shall be true and correct in all material respects, in each case at and as
of the date of this Agreement and the Closing Date as if such
representations and warranties were made at and as of the date of this
Agreement and the Closing Date (except to the extent that any such
representations and warranties were made as of a specified date, such
representations and warranties shall continue on the Closing Date to have
been true in all respects or all material respects, as required, as of
such specified date).
(ii) The Company shall have performed in all material
respects all obligations arising under the agreements and covenants
required hereby to be performed by it prior to or on the Closing Date.
(iii) The Purchasers shall have received, at or prior to the
Closing, a certificate executed by the President and the Chief Financial
Officer of the Company certifying that, as of the Closing Date, the
conditions set forth in Sections 6.3(a)(i), (a)(ii), (d), (e) and (i) have
been satisfied.
(b) NO PROCEEDINGS OR LITIGATION. No Actions by any
governmental authority or any other entity or Person shall have been instituted
or threatened for the purpose of enjoining or preventing, or which question the
validity or legality of, the transactions contemplated by the Transaction
Documents and which could reasonably be expected to damage the Purchasers or
materially adversely affect the value of the Shares or the Assets, business or
operations of the Company and its Subsidiaries or each Purchaser's ability to
own its Shares, if the transactions contemplated by the Transaction Documents
are consummated.
(c) STOCKHOLDERS' AGREEMENT. The Company shall have executed
and delivered to the Purchasers the Stockholders' Agreement, in the form
attached hereto as EXHIBIT B.
(d) MATERIAL CHANGES. There shall not exist any condition,
circumstance or state of facts, and there shall not have been (or reasonably
expected to occur) any event, occurrence, change, development or circumstance,
which has had or could reasonably be expected to have a Material Adverse Effect
on the Company or its Subsidiaries, individually or in the aggregate and, to the
best knowledge of the Company, there shall have been no potential or threatened
Material Adverse Change with respect to the Company or its Subsidiaries,
individually or in the aggregate.
40
(e) BOARD APPROVAL. The Company's Board of Directors shall
have approved the transactions contemplated by the Transaction Documents,
including the Equity Investment, for purposes of Section 203 of the DGCL as
specified in Section 3.25.
(f) MERGER FINANCING. The Company shall have received all
funds required to consummate the Merger and refinance the debt of the Company
substantially in accordance with that certain Sources and Uses Table attached
hereto as Schedule 6.3(f) on (i) the terms and conditions of the Debt Commitment
Letters and the Financing Documents; PROVIDED, HOWEVER, that such Debt
Commitment Letters and Financing Documents will not be materially amended or
modified nor will any of the conditions to such Debt Commitment Letters and
Financing Documents be waived, in each case, without the prior written consent
of the Purchasers (not to be unreasonably withheld) or (ii) other terms and
conditions no less favorable, in the aggregate, to the Company and reasonably
satisfactory to the Purchasers.
(g) MERGER AGREEMENT. The Purchasers shall have received, at
or prior to the Closing, a certificate executed by the President and the Chief
Financial Officer of the Company certifying that, as of the Closing Date, all of
the material conditions to the consummation of the Merger set forth in the
Merger Agreement shall have been satisfied; or if any such condition has not
been satisfied, such condition shall have been waived only with the prior
written consent of the Purchasers (not to be unreasonably withheld), after
written disclosure to the Purchasers of the conditions proposed to be waived.
(h) BOARD OF DIRECTORS. As of the effective time of the
Merger, at least four directors designated by the holders of Preferred Stock as
set forth in the Stockholders' Agreement shall have been appointed to the Board
of Directors of the Company and the Company shall have delivered evidence
reasonably satisfactory to the Purchasers of such designation.
(i) CHANGE OF CONTROL EXEMPTIONS. All change of control
provisions contained in the Financing Documents shall not apply to, or otherwise
have an effect on, the Company, Olivetti S.p.A. or their respective Affiliates
in the event Olivetti S.p.A. or its Affiliates take any action that would
otherwise cause, or be deemed, a change of control under any such Financing
Documents. All change of control provisions contained in the Severance
Agreements of the Company and its Subsidiaries shall not apply to, or otherwise
have an effect on, the Company, Olivetti S.p.A., Cirmatica, Lottomatica S.p.A.
or their respective Affiliates in the event Olivetti S.p.A., Cirmatica,
Lottomatica S.p.A. or their Affiliates take any action that would otherwise
cause, or be deemed, a change of control under the Severance Agreements of the
Company or its Subsidiaries, unless termination of employment by the Company or
its Subsidiaries as a result of a change of control, and not the mere occurrence
of the change of control, triggers payment to be made by the Company or its
Subsidiaries.
(j) OPINION OF COUNSEL. The Company shall have delivered to
the Purchasers an opinion of counsel for the Company, dated as of the Closing
Date, substantially in the form of EXHIBIT C attached hereto.
41
(k) CERTIFICATE OF DESIGNATIONS. The Company shall have
adopted the Certificate of Designations and the Certificate of Designations
shall have been filed with, and accepted by, the Secretary of State of the State
of Delaware in accordance with the laws of the State of Delaware.
(l) SECRETARY'S CERTIFICATE. The Secretary or an Assistant
Secretary of the Company shall have delivered to the Purchasers at the Closing
Date a certificate dated as of the Closing Date, certifying: (a) that attached
thereto is a true and complete copy of the By-Laws of the Company as in effect
on the date of such certification; (b) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors of the
Company authorizing the execution, delivery and performance of the Agreement and
the other Transaction Documents, the issuance, sale and delivery of the Shares
and that all such resolutions are in full force in effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement and the other Transaction Documents; (c) that attached thereto is a
true and complete copy of the Certificate of Designations that has been filed
with and declared effective by the Secretary of State of the State of Delaware
on the date of such certification, (d) that attached thereto is a true and
complete copy of the Certificate of Incorporation as in effect on the date of
such certification; and (e) to the incumbency and specimen signature of certain
officers of the Company.
ARTICLE VII.
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY.
(a) The Company shall indemnify, save and hold the Purchasers
and their respective Affiliates, directors, shareholders, officers, employees,
and their respective agents (each, a "PURCHASER PARTY"), harmless from and
against any and all costs, losses (including, without limitation, diminutions in
value), charges, liabilities, obligations, damages (whether actual or
consequential), punitive damages (but only to the extent that they are actually
awarded in Third-Party Claims), lawsuits, actions, judgments, deficiencies,
demands, fees, claims, settlements and expenses (whether arising out of
Third-Party Claims or otherwise), including, without limitation, interest,
penalties, costs of litigation, reasonable attorneys' fees and expenses, all
amounts paid in the investigation, defense or settlement of any of the foregoing
consistent with the indemnified party's past business practices and costs of
enforcing this indemnity (collectively, "LOSSES") incurred in connection with,
arising out of, resulting from or relating or incident to: (i) any untruth,
inaccuracy or incorrectness of, or any other breach of, any representation or
warranty of or by the Company in or pursuant to this Agreement or the other
Transaction Documents that survives the Closing as set forth in Section 7.1(b),
or (ii) the nonfulfillment, nonperformance, nonobservance or other breach of any
covenant or agreement made by the Company in or pursuant to this Agreement or
the other Transaction Documents. The claims for indemnity by Purchaser Parties
pursuant to this Section 7.1 are referred to as "PURCHASER CLAIMS"). The
indemnity provided for in this Section 7.1 is not limited to matters asserted by
third parties against any Purchaser Party, but includes Purchaser Claims
incurred or sustained by any Purchaser Party in the absence of third party
claims. The indemnification
42
obligations of the Company pursuant to clause (i) of this Section 7.1 shall be
limited to claims for Losses as to which written notice is delivered to the
Company prior to the last date of survival of the applicable representation and
warranty as provided in Section 7.1(b).
(b) All statements contained in Articles III and IV herein or
the other Transaction Documents or in the Disclosure Schedule, certificates
specifically referred to herein or delivered by or on behalf of the parties
pursuant to this Agreement shall be deemed to be representations and warranties
by the parties hereunder. For purposes of this Article VII, the representations
and warranties of the Company contained herein and as provided in the preceding
sentence shall survive until the Closing, without regard to any investigation
made by the Purchasers, except that (i) the representations and warranties
contained in Sections 3.1 (Organization and Capitalization) and 3.2
(Authorization) shall survive the Closing indefinitely, (ii) the representations
and warranties contained in Section 3.26 (Change of Control Exemptions) shall
survive the Closing until all applicable statutes of limitation have expired,
and (iii) the representations and warranties contained in Section 3.27 (Accuracy
of Information Furnished) shall survive the Closing for a period of 18 months
after the date of this Agreement. The covenants and agreements of the parties
contained herein shall survive the Closing until all applicable statutes of
limitation have expired. Notwithstanding the foregoing, the representations,
warranties and covenants of the Company contained in this Agreement will not
expire with respect to any written claims delivered to the Company prior to the
applicable expiration period of any such representations, warranties or
covenants as provided above.
7.2 DEFENSE OF CLAIMS. If a claim for Losses (a "CLAIM") is to be
made by a Person entitled to indemnification hereunder, the Person claiming such
indemnification shall give written notice (a "CLAIM NOTICE") to the indemnifying
Person as soon as practicable after the Person entitled to indemnification
becomes aware of any fact, condition or event which may give rise to Losses for
which indemnification may be sought under this Article VII. The failure of any
indemnified Person to give timely notice hereunder shall not affect rights to
indemnification hereunder, except and only to the extent that, the indemnifying
Person is prejudiced by such failure. In the case of a Claim involving the
assertion of a claim by a third party (whether pursuant to a lawsuit or other
legal action or otherwise, a "THIRD-PARTY CLAIM"), if the indemnifying Person
shall acknowledge in writing to the indemnified Person that the indemnifying
Person shall be obligated to indemnify the indemnified Person under the terms of
its indemnity hereunder in connection with such Third-Party Claim, then (A) the
indemnifying Person shall be entitled and, if it so elects, shall be obligated
at its own cost, risk and expense, (1) to take control of the defense and
investigation of such Third-Party Claim and (2) to pursue the defense thereof in
good faith by appropriate actions or proceedings promptly taken or instituted
and diligently pursued, including, without limitation, to employ and engage
attorneys of its own choice reasonably acceptable to the indemnified Person to
handle and defend the same, and (B) the indemnifying Person shall be entitled
(but not obligated), if it so elects, to compromise or settle such claim, which
compromise or settlement shall be made only with the written consent of the
indemnified Person, such consent not to be unreasonably withheld. In the event
the indemnifying Person elects to assume control of the defense and
investigation of such lawsuit or other legal action in accordance with this
Section 7.2, the indemnified Person may, at its own cost and expense,
participate in the investigation, trial and defense of such Third-Party Claim;
43
PROVIDED that, if the named Persons to a lawsuit or other legal action include
both the indemnifying Person and the indemnified Person and the indemnified
Person has been advised in writing by counsel that a conflict of interest exists
which makes representation by the same counsel of both such indemnified Person
and such indemnifying Person inappropriate under applicable provisions of the
code of professional responsibility, the indemnified Person shall be entitled,
at the indemnifying Person's cost, risk and expense, to separate counsel of its
own choosing reasonably acceptable to the indemnifying Person. If the
indemnifying Person fails to assume the defense of such Third-Party Claim in
accordance with this Section 7.2 within 20 calendar days after receipt of the
Claim Notice, the indemnified Person against which such Third-Party Claim has
been asserted shall (upon delivering notice to such effect to the indemnifying
Person) have the right to undertake, at the indemnifying Person's cost, risk and
expense, the defense, compromise and settlement of such Third-Party Claim on
behalf of and for the account of the indemnifying Person; PROVIDED that such
Third-Party Claim shall not be compromised or settled without the written
consent of the indemnifying Person, which consent shall not be unreasonably
withheld. In the event the indemnifying Person assumes the defense of the claim,
the indemnifying Person shall keep the indemnified Person reasonably informed of
the progress of any such defense, compromise or settlement, and in the event the
indemnified Person assumes the defense of the claim, the indemnified Person
shall keep the indemnifying Person reasonably informed of the progress of any
such defense, compromise or settlement. The indemnifying Person shall be liable
for any settlement of any Third-Party Claim effected pursuant to and in
accordance with this Section 7.2 and for any final judgment (subject to any
right of appeal), and the indemnifying Person agrees to indemnify and hold
harmless each indemnified Person from and against any and all Losses by reason
of such settlement or judgment.
7.3 INSURANCE PROCEEDS; TAX EFFECT. To the extent that any Purchaser
Claim is covered by insurance held by or results in any Tax savings to such
indemnified Purchaser Party, such indemnified Person shall be entitled to
indemnification pursuant to Section 7.1, only with respect to the amount of the
Losses that are in excess of the cash proceeds received by such indemnified
Person pursuant to such insurance or the value of the Tax benefits resulting
from such Purchaser Claim. If such indemnified Person receives such cash
insurance proceeds or such Tax benefit can reasonably be determined prior to the
time such claim is paid, then the amount payable by the indemnifying Person
pursuant to such claim shall be reduced by the amount of such proceeds or the
value of such Tax benefits. If such indemnified Person receives such cash
insurance proceeds or the amount of such Tax Benefit is reasonably determined
after such claim has been paid, then upon the receipt by the indemnified Person
of any cash proceeds pursuant to such insurance or reasonable determination of
Tax benefits in excess of the amount of any unreimbursed Purchaser Claim
incurred by such indemnified Person with respect to such claim, such indemnified
Person must repay any portion of such excess amount which was previously paid by
the indemnifying Person to such indemnified party in satisfaction of such claim.
44
ARTICLE VIII.
MISCELLANEOUS
8.1 TERMINATION.
(a) TERMINATION. This Agreement may be terminated as follows:
(i) by mutual written consent of the Purchasers and the
Company at any time;
(ii) by either the Company or the Purchasers, if the Closing
shall not have occurred on or before November 18, 2000, provided that the
party seeking to exercise such right is not then in breach in any material
respect of any of its obligations under this Agreement;
(iii) by either the Company or the Purchasers, if the
Purchasers (in the case of termination by the Company) or the Company (in
the case of termination by the Purchasers) shall have breached in any
material respect any of its obligations under this Agreement or any
representation and warranty of the Purchasers (in the case of termination
by the Company) or the Company (in the case of termination by the
Purchasers) which would result in a condition set forth in Section 6.2 or
6.3 of this Agreement, as the case may be, not being satisfied; or
(iv) by either the Company or the Purchasers, if there shall
be any Law or regulation that makes consummation of the Equity Investment
or the transactions contemplated by the Transaction Documents illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining the Purchasers or the Company from consummating the Equity
Investment or the transactions contemplated by the Transaction Documents
is entered and such judgment, injunction, order or decree shall become
final and non-appealable.
The party desiring to terminate this Agreement pursuant to Sections
8.1(a)(ii)-(iv) shall give written notice of such termination to the other party
in accordance with Section 8.3.
(b) EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 8.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that the agreements
contained in Sections 5.5, 8.3, 8.8, 8.10, 8.12 and 8.13 hereof shall survive
the termination hereof.
(c) PROCEDURE UPON TERMINATION. In the event of termination of
this Agreement pursuant to Section 8.1:
(i) Each party shall redeliver all documents, work papers
and other material of any other party and any and all copies thereof
relating to the transactions contemplated hereby, whether obtained before
or after the execution hereof, to the party furnishing the same; and
45
(ii) Each party will hold and will cause its Affiliates,
consultants, agents and advisors to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of Law, all documents and
information concerning the other parties that were furnished to such party
by such other parties or their representatives in connection with the
transactions contemplated by the Transaction Documents (except to the
extent that such information can be shown to have been (a) previously
known by the party to which it was furnished, (b) in the public domain
through no fault of such party or (c) later lawfully acquired from other
sources by the party to which it was furnished), and each party will not
release or disclose such information to any other Person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors.
8.2 ASSIGNMENT; PARTIES IN INTEREST. Neither this Agreement nor any
of the rights or obligations hereunder may be assigned, in whole or in part, by
operation of law or otherwise by any party without the prior written consent of
all other parties to this Agreement prior to the Closing. After the Closing,
subject to the terms of the Stockholders' Agreement, Regulatory Approvals and
applicable Law, each of the Purchasers may transfer or assign, in whole or in
part, any of its rights and obligations hereunder to any Person; PROVIDED that
such transferee executes and delivers a counterpart copy of this Agreement and
the Stockholders' Agreement to the Company and each of the Purchasers thereby
agreeing to be bound by the terms and provisions set forth herein and in the
Stockholders' Agreement. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, and no other Person shall have any right, benefit or
obligation hereunder, except for each Purchaser Party pursuant to Article VII
hereof, each such Purchaser Party being an intended third party beneficiary of
this Agreement.
8.3 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received, if personally delivered;
when transmitted, if transmitted by telecopy, upon receipt of telephonic or
electronic confirmation; the day after it is sent, if sent for next day delivery
to a domestic address by recognized overnight delivery service (E.G., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. In each case notice shall be sent to:
If to the Company, addressed to:
Autotote Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Secretary and General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
46
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Cirmatica, addressed to:
Cirmatica Gaming, S.A.
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇, ▇(▇), ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Guillem
Telecopy: (▇▇▇▇▇) ▇▇ ▇▇▇ ▇▇▇▇
With a copy to:
Lottomatica S.p.A.
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Olivetti, addressed to
Olivetti International S.A.
125 Avenue du X Septembre
Luxemborg
Attention: ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
47
With a copy to:
Olivetti S.p.A.
▇.▇▇▇ ▇▇▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇ ▇▇▇▇
Telecopy: (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Oak, addressed to
The Oak Fund
PO Box 31106 SMB, Corporate Center
West Bay Road
Grand Cayman, Cayman Islands
Attention: ▇▇▇▇▇ ▇▇▇▇
Telecopy: (▇▇▇▇) ▇▇▇-▇▇▇▇
If to Peconic, addressed to
Peconic Fund Ltd.
c/o Ramius Capital Group, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Ramius, addressed to
Ramius Securities, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
48
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
8.4 ENTIRE AGREEMENT; WAIVERS. This Agreement, together with all
exhibits and schedules hereto (including, without limitation, the Disclosure
Schedule), and the other the Transaction Documents, constitute the entire
agreement among the parties pertaining to the subject matter hereof and thereof
and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
8.5 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.6 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by Law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
8.7 TITLES. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
8.8 FEES AND EXPENSES. Except as provided in Section 5.5 hereof, all
costs and expenses incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense.
8.9 CUMULATIVE REMEDIES. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
8.10 GOVERNING LAW; JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
(b) THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK (OR, IF SUBJECT MATTER JURISDICTION IN THAT COURT IS NOT AVAILABLE, IN
THE SUPREME COURT OF THE STATE OF
49
NEW YORK, NEW YORK COUNTY) OVER ANY DISPUTE ARISING OUT OF OR RELATING TO THE
TRANSACTION DOCUMENTS. EACH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH DISPUTE OR PROCEEDING WILL BE HEARD AND DETERMINED IN SUCH
COURTS. THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH DISPUTE BROUGHT IN SUCH COURT OR ANY DEFENSE OF
INCONVENIENT FORUM IN CONNECTION THEREWITH.
8.11 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.12 PUBLIC ANNOUNCEMENTS. Neither the Purchasers, on the one hand,
nor the Company, on the other hand, will issue any press release or public
statement with respect to the transactions contemplated by this Agreement and
the other Transaction Documents, including the Equity Investment, without the
other party's prior consent (such consent not to be unreasonably withheld),
except as may be required by applicable Law, court process or the listing
requirements of AMEX. In addition to the foregoing, the Purchasers and the
Company will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any such press release or other public
statements with respect to such transactions. The parties agree that the initial
press release or releases to be issued with respect to the transactions
contemplated by the Transaction Documents shall be mutually agreed upon prior to
the issuance thereof.
8.13 ENFORCEMENT OF AGREEMENT. The parties hereby acknowledge and
agree that money damages would not be adequate compensation for the damages that
a party would suffer by reason of a breach of this Agreement or a failure of any
other party to perform any of its obligations under this Agreement. Therefore,
each party hereto agrees that in addition to and without limiting any other
remedy or right it may have, the non-breaching part will have the right to an
injunction, temporary restraining order or other equitable relief in any court
of competent jurisdiction enjoining any such breach and enforcing specifically
the terms and provisions hereof.
8.14 INTERPRETIVE PROVISIONS.
(a) The words "hereof," "herein," "hereby" and "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision hereof.
(b) Accounting terms used but not otherwise defined herein
shall have the meanings given to such terms under GAAP.
(c) The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation."
50
(d) Any reference to any supranational, national, federal,
state, local or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context otherwise
requires.
[Signature Page Follows]
51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
AUTOTOTE CORPORATION OLIVETTI INTERNATIONAL S.A.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
--------------------------- ----------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
Title: Vice President Title: Director
CIRMATICA GAMING S.A.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Director
THE OAK FUND
By: /s/ ▇▇▇▇▇ ▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Director
PECONIC FUND LTD.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Principal
RAMIUS SECURITIES, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Principal
52
DISCLOSURE SCHEDULE
EXHIBIT A
Certificate of Designations
EXHIBIT B
Stockholders' Agreement
EXHIBIT C
Opinion of Counsel to the Company
1. The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Delaware. The Company has
full corporate power and authority to conduct its business as it is presently
being conducted and to own and lease its Assets. The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is necessary under applicable Law,
except where the failure to be so qualified and in good standing would not
reasonably be expected to have a Material Adverse Effect on the Company.
2. The Company has all necessary corporate power and authority to
execute and deliver the Agreement and the other Transaction Documents and to
perform all its obligations thereunder. The execution and delivery by the
Company of each Transaction Document delivered by it and the consummation by the
Company of the transactions contemplated by the Agreement and the other
Transaction Documents has been duly authorized by all requisite corporate action
on the part of the Company.
3. The Agreement and the other Transaction Documents delivered by
the Company have been duly authorized, executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with its terms, except as the enforceability
thereof may be limited by (a) applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance or similar laws in effect which affect the
enforcement of creditors' rights generally or (b) general principles of equity,
whether considered in a proceeding at law or in equity.
4. The Certificate of Designations has been duly authorized by
the Company, and has been filed with and declared effective by the Secretary of
State of the State of Delaware in accordance with the General Corporation Law of
the State of Delaware.
5. As of the date hereof, the authorized capital stock of the
Company consists of 102,000,000 shares of capital stock comprised of: (a)
2,000,000 shares, par value $1.00 per share, of blank check preferred stock, of
which 1,600,000 are designated as Series A Convertible Preferred Stock, par
value $1.00 per share; (b) 99,3000,000 shares of Class A Common Stock, par value
$.01 per share, of which ____________ shares are duly and validly issued, fully
paid, non-assessable and outstanding; and (c) 700,000 shares of Class B
Nonvoting Common Stock, par value $.01 per share, of which no shares are issued
and outstanding. Of the authorized but unissued shares of Common Stock (i)
30,000,000 shares are reserved for issuance upon the conversion of the Preferred
Stock and (ii) _____________ shares are reserved for issuance upon the exercised
of options granted under the Company's stock option plan.
6. Upon delivery of the Series A Convertible Preferred Stock to
the Purchasers against payment by the Purchasers of the consideration therefor
in accordance with the terms of the Agreement, such shares of Series A
Convertible Preferred Stock will be duly
authorized, validly issued, fully paid and non-assessable and will have the
rights, preferences and privileges specified therefor in the Certificate of
Designations.
7. Upon conversion of shares of Series A Preferred Stock in
accordance with the Certificate of Designations, the shares of Common Stock
delivered therefor will be duly authorized, validly issued, fully paid and
non-assessable.
8. Except for the conversion privileges of the Series A
Convertible Preferred Stock, the rights of the Purchasers pursuant to the
Transaction Documents, currently outstanding options to purchase shares of
Common Stock granted to employees of the Company under the Company's stock
option plan, and as disclosed in the Disclosure Schedule to the Agreement, there
are no statutory preemptive rights or, to the best of counsel's knowledge,
non-statutory preemptive rights, options, warrants, conversion privileges, or
other rights (or agreements for any such rights) outstanding to purchase other
otherwise obtain from the Company any of the Company's Equity Securities.
9. None of the execution, delivery and performance of any
Transaction Document, or the consummation of the transactions contemplated
thereby, by the Company or its Subsidiaries will result in a violation of or a
conflict with any provision of the certificate of incorporation or by-laws of
the Company or its Subsidiaries.
10. No consent, waiver, agreement, approval, Permit or
authorization of, or declaration, filing, notice or registration to or with, any
federal, state, local or foreign governmental or regulatory authority or body is
required to be made or obtained by the Company or its Subsidiaries in connection
with the execution, delivery and performance of the Transaction Documents and
the consummation of the transactions contemplated thereby other than (a)
Regulatory Filings, (b) Regulatory Approvals or (c) any notices of sale required
to be filed with the SEC under Regulation D of the Securities Act or such
post-closing filings as may be required under applicable state securities laws.
11. Based in part on the representations and warranties of the
Purchasers contained in the Agreement, the offer and sale of the shares of
Series A Convertible Preferred Stock made pursuant to the Agreement is, and the
acquisition of the Common Stock upon the conversion of such Preferred Stock will
be, in compliance with the Securities Act and any applicable state securities
laws and exempt from the registration requirements of the Securities Act and
such state securities laws.
12. To the best of counsel's knowledge, except as set forth in the
Disclosure Schedule to the Agreement, there are no outstanding orders, writs,
injunctions, judgments or decrees or Actions pending or threatened or
anticipated, (a) against, related to or affecting (i) the Company and its
Subsidiaries, their business or operations or the Assets, (ii) any officers or
directors of the Company and its Subsidiaries, as such, (iii) any stockholder of
the Company and its Subsidiaries, as such, or (iv) other than routine claims for
benefits, any Employee Plan of the Company and its Subsidiaries or any trust or
funding instrument, fiduciary or administrator thereof, (b) relating to the
transactions contemplated by the Transaction Documents, or (c) in which Company
or its Subsidiaries is a plaintiff, including, without limitation, any
derivative
suits brought by or on behalf of the Company or its Subsidiaries that would, if
adversely determined, have a Material Adverse Effect on the Company and its
Subsidiaries, individually or in the aggregate.