EXHIBIT 10(t)
AGREEMENT AND PLAN OF MERGER
BETWEEN
WMS INDUSTRIES INC.,
AND
BALLY GAMING INTERNATIONAL, INC.
DATED AS OF JUNE 21, 1995
TABLE OF CONTENTS
1.The Merger.............................................................. 1
1.1 The Merger.................................................... 1
1.2 Consummation of the Merger.................................... 2
1.3 Effective Time................................................ 2
1.4 Effect of the Merger.......................................... 2
1.5 Certificate of Incorporation; By-Laws......................... 2
1.6 Directors and Officers........................................ 2
1.7 Further Actions............................................... 2
2.Conversion and Exchange of Shares....................................... 2
2.1 Exchange Ratio................................................ 2
2.2 Exchange Procedures........................................... 3
2.3 Dividends and Distributions................................... 5
2.4 No Fractional Shares.......................................... 5
2.5 Adjustment of Exchange Ratio.................................. 5
2.6 Transfers Following the Effective Time........................ 6
3.Representations and Warranties of WMS................................... 6
4.Representations and Warranties of the Company........................... 11
5.Conduct of Business Pending the Merger.................................. 15
5.1 Conduct of Business by the Company Pending the Merger......... 15
5.2 Conduct of Business by WMS Pending the Merger................. 17
5.3 Notice of Breach.............................................. 18
6.Additional Agreements................................................... 18
Registration Statement; Proxy Statement; Auditors' Letters;
6.1 Other Matters................................................. 18
6.2 Alternative Proposals......................................... 19
6.3 Indemnification of Directors and Officers..................... 19
6.4 Regulatory Compliance......................................... 20
6.5 Reorganization................................................ 20
6.6 Environmental Audit........................................... 20
6.7 Arrangements with Certain Officers of the Company............. 20
7.Closing Conditions...................................................... 20
7.1 Conditions to Obligations of Each Party to Effect the Merger.. 20
7.1.1Effectiveness of the Registration Statement............... 21
7.1.2Stockholder Approval...................................... 21
7.1.3No Order.................................................. 21
7.1.4HSR Act................................................... 21
7.1.5Governmental Approvals.................................... 21
7.2 Additional Conditions to Obligations of WMS............... 21
7.2.1Representations and Warranties............................ 21
7.2.2Agreement and Covenants................................... 21
7.2.3Tax Opinion............................................... 21
7.2.4Fairness Opinion.......................................... 22
7.2.5Disposition of Bally ▇▇▇▇▇................................ 22
7.2.6Arrangements with Certain Officers of the Company......... 22
7.2.7Debt Limitations.......................................... 22
7.2.8Environmental Conditions.................................. 23
7.2.9No Material Adverse Change to the Company................. 23
7.2.10Third Party Consents..................................... 23
7.2.11Gaming Regulatory Approval............................... 23
(i)
7.3 Additional Conditions to Obligations of the Company........... 23
7.3.1Representations and Warranties............................ 23
7.3.2Agreements and Covenants.................................. 23
7.3.3Tax Opinion............................................... 23
7.3.4Fairness Opinion.......................................... 24
7.3.5No Material Adverse Change to WMS......................... 24
7.3.6Third Party Consents...................................... 24
7.3.7Gaming Regulatory Approval................................ 24
8.Termination; Effect of Termination...................................... 24
8.1 Right to Terminate............................................ 24
8.2 Certain Effects of Termination................................ 25
9.Miscellaneous........................................................... 25
9.1 Effectiveness of Representations, Warranties and Agreements... 25
9.2 Entire Agreement.............................................. 26
9.3 Notices....................................................... 26
9.4 No Waiver..................................................... 26
9.5 Governing Law................................................. 27
9.6 Expenses, Transfer Taxes; Certain Payments.................... 27
9.7 Assignment.................................................... 28
9.8 Binding Agreement............................................. 28
9.9 Headings...................................................... 28
9.10 Counterparts.................................................. 28
(ii)
DEFINED TERMS
TERM SECTION
---- -----------------------------
"Agreement"....................................... Page 1, first paragraph
"Alternative Proposal"............................ 6.2
"Bally ▇▇▇▇▇"..................................... 7.2.5
"CERCLA".......................................... 3.15.2
"Certificate of Merger"........................... 1.3
"Certificates".................................... 2.2.2
"Code"............................................ Page 2, first Whereas clause
"Company"......................................... Page 1, first paragraph
"Company Common".................................. 2.1
"Company Disclosure Schedule"..................... 4
"Company ERISA Affiliate"......................... 4.12.3
"Company Option".................................. 2.1.3
"Company Options"................................. 2.1.3
"Company Plans"................................... 4.12.1
"Company Preferred"............................... 4.6
"Company's SEC Documents"......................... 4.8
"Company Stock Option Plans"...................... 2.1.3
"Company Stockholders"............................ Page 1, second Whereas clause
"Company Subsidiaries"............................ 4.1
"Company Subsidiary".............................. 4.1
"Company Warrant"................................. 2.1.3
"Company Warrants"................................ 2.1.3
"Delaware Law".................................... Page 1, first Whereas clause
"Effective Time".................................. 1.3
"Environmental Laws".............................. 3.15.2
"Environmental Permits"........................... 3.15.2
"ERISA"........................................... 3.11.1
"Exchange Act".................................... 3.4
"Exchange Agent".................................. 2.2.1
"Exchange Fund"................................... 2.2.1
"Exchange Ratio".................................. 2.1.2
"FTC"............................................. 6.4
"GAAP"............................................ 3.7
"Gaming Regulatory Authorities"................... 3.4
"Governmental Entity"............................. 3.4
"Hazardous Materials"............................. 3.15.2
"HSR Act"......................................... 3.4
"Indebtedness".................................... 5.1.3
"Material Adverse Effect"......................... 3.2, 4.2
"Material Contracts".............................. 3.17, 4.18
"Meeting"......................................... 6.1.1
"Merger Consideration"............................ 2.1.2
"Merger".......................................... Page 1, first Whereas clause
"Merger Subsidiary"............................... 1.1
"Minimum Proceeds"................................ 7.2.5
"NYSE"............................................ 2.4
"Proxy Statement--Prospectus"..................... 6.1.1
"Registration Statement".......................... 3.4
"Release"......................................... 3.15.2
(iii)
TERM SECTION
---- ----------------------------
"Return"........................................... 3.10.1
"Returns".......................................... 3.10.1
"SEC".............................................. 3.4
"Securities Act"................................... 3.4
"Subsidiary Merger"................................ 1.1
"Surviving Corporation"............................ 1.1
"Tax".............................................. 3.10.1
"Taxes"............................................ 3.10.1
"Warrant Agreements"............................... 2.1.3
"WMS".............................................. Page 1, first paragraph
"WMS Common"....................................... 2.1.2
"WMS Disclosure Schedule".......................... 3
"WMS ERISA Affiliate".............................. 3.11.3
"WMS Plans"........................................ 3.11.1
"WMS Preferred".................................... 3.6
"WMS Stockholders"................................. Page 1, third Whereas clause
"WMS Subsidiaries"................................. 3.1
"WMS Subsidiary"................................... 3.1
"WMS' SEC Documents"............................... 3.7
(iv)
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger dated as of June 21, 1995 (this "Agreement"), as
amended July 27, 1995, by and between WMS Industries Inc., a Delaware
corporation ("WMS"), and Bally Gaming International, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H:
Whereas, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
("Delaware Law"), the Company will be merged with and into WMS (the "Merger");
and
Whereas, Bally Gaming, Inc., a Nevada corporation and wholly-owned subsidiary
of the Company, will, as a result of the Merger, become a wholly-owned
subsidiary of the surviving corporation of the Merger; and
Whereas, the Board of Directors of the Company has determined that the Merger
is consistent with and in furtherance of the long-term business strategies of
the Company and is fair to, and in the best interest of, the Company and its
stockholders (the "Company Stockholders") and has approved and adopted this
Agreement and has approved the Merger and the other transactions contemplated
hereby and recommended approval and adoption of this Agreement and approval of
the Merger by the Company Stockholders; and
Whereas, the Board of Directors of WMS has determined that the Merger is
consistent with and in furtherance of the long-term business strategies of WMS
and is fair to, and in the best interest of, WMS and its stockholders (the "WMS
Stockholders") and has approved and adopted this Agreement and has approved the
Merger and the other transactions contemplated hereby and recommended approval
and adoption of this Agreement and approval of the Merger by the WMS
Stockholders; and
Whereas, for federal income tax purposes, it is intended that the Merger
qualify as a tax-free reorganization under the provisions of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code");
Now, Therefore, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
1. THE MERGER.
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with Delaware Law, at the Effective Time (as
herein defined), the Company shall be merged with and into WMS, the separate
existence of the Company shall cease and WMS shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"); provided that
immediately after the Effective Time the Company's wholly-owned subsidiary,
Bally Gaming, Inc., shall continue in existence as a wholly-owned subsidiary of
the Surviving Corporation. Notwithstanding the foregoing, if (i) the condition
set forth in Section 7.2.5 is waived by WMS or is satisfied by the Company by
means of a sale of all of the outstanding capital stock of the entities
comprising Bally ▇▇▇▇▇ (as herein defined) or (ii) the condition set forth in
Section 7.2.5 is satisfied by the Company by means of a distribution of Bally
▇▇▇▇▇ to the Company Stockholders and the opinions required by Sections 7.2.3
and 7.3.3 can be rendered on the basis of a Subsidiary Merger (as herein
defined), then at the sole discretion of WMS the Merger may be effected by the
merger of a newly-formed wholly-owned subsidiary of WMS (the "Merger
Subsidiary") with and into the Company (the "Subsidiary Merger") which shall
continue as the Surviving Corporation. In such event, the Certificate of
Incorporation and By-Laws of the Company, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation and the directors and officers of the Merger Subsidiary,
holding office immediately prior to the Effective Time, shall be the directors
and officers of the Surviving Corporation.
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1.2 CONSUMMATION OF THE MERGER. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Article 8 and subject to the satisfaction or waiver of the
conditions set forth in Article 7, the consummation of the Merger will take
place as promptly as practicable after the later of (i) the satisfaction or
waiver of the conditions set forth in Article 7 or (ii) January 31, 1996
(unless the restrictions set forth in Paragraph 7(a)(i) of the Agreement dated
January 8, 1993 by and between Bally Entertainment Corporation (formerly Bally
Manufacturing Corporation) and the Company shall not be applicable) at the
offices of Shack & ▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, unless
another date, time and place is agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Article 7, the parties hereto shall cause
the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware
in such form as required by, and executed in accordance with the relevant
provisions of, Delaware Law (the date and time of such filing, or such later
date or time as set forth therein, being the "Effective Time").
1.4 EFFECT OF THE MERGER. At and after the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of the Company and WMS (or the Merger
Subsidiary, if applicable) shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and WMS (or the Merger Subsidiary,
if applicable) shall become the debts, liabilities and duties of the Surviving
Corporation.
1.5 CERTIFICATE OF INCORPORATION; BY-LAWS. At and after the Effective Time
except as otherwise provided in Section 1.1 hereof, the Certificate of
Incorporation and By-Laws of WMS, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation.
1.6 DIRECTORS AND OFFICERS. At and after the Effective Time except as
otherwise provided in Section 1.1 hereof, the directors and officers of WMS
holding office immediately prior to the Effective Time shall be the directors
and officers of the Surviving Corporation, until their respective successors
shall have been duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation.
1.7 FURTHER ACTIONS. At and after the Effective Time, the Surviving
Corporation shall take all action as shall be required in connection with the
Merger, including, but not limited to, the execution and delivery of any
further deeds, assignments, instruments or documentation as are necessary or
desirable to carry out the provisions of this Agreement.
2. CONVERSION AND EXCHANGE OF SHARES.
2.1 EXCHANGE RATIO. As of the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any shares of common stock,
par value $.01 per share, of the Company (the "Company Common"):
2.1.1 All shares of Company Common which are held by the Company or any
subsidiary of the Company, and any shares of Company Common owned by WMS or
any subsidiary of WMS, shall be cancelled and retired and shall cease to
exist and no stock of WMS or other consideration shall be delivered in
exchange therefor.
2.1.2 Subject to the provisions of Sections 2.4, 2.5 and 7.2.5 hereof,
each share of Company Common issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive (together
with any dividends, and other distributions payable as provided in Section
2.3
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hereof) fifty-five one hundredths (0.55) of one share (the "Exchange
Ratio") of fully paid and nonassessable shares of common stock, par value
$.50 per share, of WMS (the "WMS Common") (the "Merger Consideration"). All
such shares of Company Common, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the
right to receive the shares of WMS Common and any cash in lieu of
fractional shares as provided in Section 2.4 hereof, together with any
dividends and other distributions payable as provided in Section 2.3
hereof, all to be issued or paid in consideration for such certificate upon
the surrender thereof in accordance with Section 2.2 hereof.
2.1.3 All (i) options (individually, a "Company Option" and collectively,
the "Company Options") outstanding at the Effective Time under the Company
1991 Incentive Plan, the Company 1991 Non-Employee Directors' Option Plan,
the Company 1992 Restricted Stock Performance Plan and the Company 1994
Stock Option Plan for Non-Employee Directors (all as amended through the
Effective Time and collectively, the "Company Stock Option Plans") and (ii)
warrants (individually, a "Company Warrant" and collectively, the "Company
Warrants") to purchase Company Common listed on the Company Disclosure
Schedule (as herein defined) hereto issued pursuant to warrant agreements
(the "Warrant Agreements") shall remain outstanding following the Effective
Time for the remainder of their terms and in accordance with the terms of
the respective Company Stock Option Plans and Warrant Agreements; provided,
however, that (i) all Company Options subject to the provisions of Company
Stock Option Plans which shorten the exercise period by reason of the
Merger and (ii) all Company Options held by directors of the Company
regardless of any provision in any Company Option held by such director or
the Company Stock Option Plan pursuant to which such Company Option was
granted which may shorten the exercisability thereof as a result of such
person ceasing to be a director, officer or employee of the Company shall
be amended (which amendment shall be submitted for approval of the Company
Stockholders, if necessary) to the extent necessary to permit such Company
Options to remain exercisable for the lesser of (A) the original full
option period, or (B) three years from the Effective Time of the Merger. At
the Effective Time, such Company Options and Company Warrants (as amended
or adjusted as a result of the Merger in accordance with the applicable
Company Stock Option Plan or Warrant Agreement) shall, by virtue of the
Merger and without any further action on the part of Company or the holder
of any such Company Options and Company Warrants, become fully vested and
exercisable (to the extent not already fully vested and exercisable)
pursuant to (and only pursuant to) their terms and in accordance with the
terms of the respective Company Stock Option Plans and Warrant Agreements
and shall be assumed by WMS. From and after the Effective Time, each
Company Option and Company Warrant and any other options or warrants to
acquire Company Common listed on the Company Disclosure Schedule assumed by
WMS shall be exercisable (i) for that whole number of shares of WMS Common
(rounded up to the nearest whole share) into which the number of shares of
Company Common subject to such Company Option or Company Warrant
immediately prior to the Effective Time would be converted under this
Section 2.1 and (ii) at an option price or exercise price per share of WMS
Common equal to the option price or exercise price per share of the Company
Common subject to such Company Option or Company Warrant in effect
immediately prior to the Effective Time divided by the Exchange Ratio (the
option price or exercise price per share, as so determined, being rounded
upward to the nearest full cent). From and after the date of this
Agreement, no additional options shall be granted and no additional
warrants shall be issued by the Company or the Company Subsidiaries (as
herein defined) under the Company Stock Option Plans, Warrant Agreements or
otherwise.
2.2 EXCHANGE PROCEDURES.
2.2.1 Immediately prior to the Effective Time, WMS shall deposit with an
exchange agent (the "Exchange Agent") designated by WMS, which shall be
reasonably satisfactory to the Company, in trust for the Company Stockholders
of record, immediately prior to the Effective Time, certificates representing
the aggregate number of shares of WMS Common issuable pursuant to Section 2.1.2
hereof in exchange for the
I-3
total outstanding shares of Company Common immediately prior to the Effective
Time. From time to time WMS shall make available to the Exchange Agent
sufficient cash to make all cash payments in lieu of fractional shares pursuant
to Section 2.4 hereof. All deposits with the Exchange Agent pursuant to this
Section 2.2 together with any dividends or distributions with respect to shares
of WMS Common as contemplated by Section 2.3 hereof are referred to as the
"Exchange Fund". The Exchange Fund shall not be used for any purpose except as
provided in this Agreement.
2.2.2 As soon as practicable after the Effective Time, WMS shall cause the
Exchange Agent to mail to each Company Stockholder a letter of transmittal and
instructions for use in effecting the surrender of certificates representing
shares of Company Common outstanding immediately prior to the Effective Time
(the "Certificates") in appropriate and customary form with such provisions as
the Company (prior to the Merger) and WMS may reasonably specify. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal, duly and properly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of WMS Common which such holder has a
right to receive pursuant to the provisions of this Article 2, together with
any dividends and other distributions payable as provided in Section 2.3
hereof, but subject to the payment of cash in lieu of fractional shares as
provided in Section 2.4 hereof, and the Certificate so surrendered shall be
cancelled. Until surrendered as contemplated by this Section 2.2, each
certificate shall, at and after the Effective Time, be deemed to represent only
the right to receive, upon surrender of such Certificate, the Merger
Consideration with respect to the shares of Company Common represented thereby,
together with any dividends and other distributions payable as provided in
Section 2.3 hereof, but subject to the payment of cash in lieu of fractional
shares as provided in Section 2.4 hereof. Shares of WMS Common issued in the
Merger shall be issued as of and be deemed to be outstanding as of the
Effective Time. WMS shall cause all such shares of WMS Common issued pursuant
to the Merger to be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
2.2.3 If any certificate representing shares of WMS Common is to be issued in
a name other than that in which the Certificate surrendered in exchange
therefor is registered or any payment in lieu of fractional shares pursuant to
Section 2.4 hereof is to be paid other than to the registered holder of the
Certificate so surrendered, it shall be a condition of such exchange and/or
payment, as the case may be, that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange and/or payment, as the case may be, shall pay any
transfer or other taxes required by reason of the issuance of certificates for
such shares of WMS Common, in a name other than that of, and/or payment to a
person other than, as the case may be, the registered holder of the Certificate
so surrendered.
2.2.4 In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and upon the posting by such person
of a bond in such amount as WMS may reasonably direct as indemnity against any
claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in respect of such lost, stolen or destroyed
Certificate the Merger Consideration with respect to the shares of Company
Common represented thereof (subject to the payment of cash in lieu of
fractional shares in accordance with Section 2.4 hereof) and such person shall
be entitled to the dividend and other distribution rights provided in Section
2.3 hereof.
2.2.5 Any portion of the Exchange Fund which remains unclaimed by the Company
Stockholders for two years after the Effective Time shall be delivered to WMS,
upon demand of WMS, and the Company Stockholders shall thereafter look only to
WMS for payment of their claims for the Merger Consideration in respect of
their shares of Company Common and cash in lieu of fractional shares (and
dividends or distributions with respect to WMS Common as contemplated by
Section 2.3 hereof). If any Certificates shall not have been surrendered prior
to two years after the Effective Time (or immediately prior to such earlier
date on which any payment in respect hereof would otherwise escheat or become
the property of any governmental unit or agency), the payment in respect of
such Certificates shall, to the extent permitted by
I-4
applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interest of any person previously entitled thereto.
Neither the Company nor WMS shall be liable to any Company Stockholder for any
such Merger Consideration or cash properly delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.2.6 WMS or the Exchange Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
a Certificate surrendered for the Merger Consideration (and dividends or
distributions with respect to WMS Common as contemplated by Section 2.3 hereof
and cash in lieu of fractional shares in accordance with Section 2.4 hereof)
such amount as WMS or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
any state, local or foreign tax law. To the extent that amounts are so deducted
and withheld, such amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of such Certificate.
2.3 DIVIDENDS AND DISTRIBUTIONS. No dividends or other distributions declared
or made with respect to WMS Common with a record date on or after the date of
the Effective Time will be paid to the holder of a Certificate entitled by
reason of the Merger to receive certificates representing WMS Common until such
holder surrenders such Certificate as provided in Section 2.2 hereof, provided
that there shall be paid forthwith by WMS to the person in whose name
certificates representing shares of WMS Common shall be issued pursuant to the
terms of this Article 2 (i) at the time of the surrender of such Certificate,
the amount of any dividends and other distributions theretofore paid with
respect to that number of whole shares of such WMS Common represented by such
surrendered Certificate pursuant to the terms of this Article 2, which
dividends or other distributions had a record date on or after the date of
Effective Time and a payment date prior to such surrender and (ii) at the
appropriate payment date, the amount of dividends and other distributions
payable with respect to that number of whole shares of WMS Common represented
by such surrendered Certificate pursuant to the terms of Article 2, which
dividends or other distributions have a record date on or after the date of
Effective Time and a payment date subsequent to such surrender.
2.4 NO FRACTIONAL SHARES.
2.4.1 Notwithstanding anything herein to the contrary, no certificates or
scrip evidencing fractional shares of WMS Common shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights as a stockholder of
WMS. In lieu of any such fractional shares, each holder of Company Common upon
surrender of a Certificate for exchange pursuant to Section 2.2 hereof shall be
paid an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (i) the per share closing price on the New York Stock
Exchange (the "NYSE") of WMS Common on the date of the Effective Time (or, if
shares of WMS Common do not trade on the NYSE on such date, the first date of
trading of WMS Common on the NYSE after the Effective Time) by (ii) the
fractional interest of WMS Common to which such holder would otherwise be
entitled (after taking into account all shares of Company Common held of record
by such holder at the Effective Time), subject to the provisions of Section 2.2
hereof.
2.4.2 As soon as practicable after the determination of the amount of cash,
if any, to be paid to former holders of Company Common with respect to any
fractional share interests of WMS Common, the Exchange Agent shall promptly pay
such amounts to such former holders of Company Common subject to and in
accordance with the terms of this Section 2.4. WMS will make available to the
Exchange Agent the cash necessary for this purpose.
2.5 ADJUSTMENT OF EXCHANGE RATIO. In the event of any reclassification, stock
split (including reverse stock split), stock dividend or other general
distribution of securities, cash or other property with respect to WMS Common
(or if a record date with respect to any of the foregoing should occur) on or
after the date of this Agreement and on or prior to the date of the Effective
Time, appropriate and equitable adjustments, if any, shall be made to the
Exchange Ratio.
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2.6 TRANSFERS FOLLOWING THE EFFECTIVE TIME. The stock transfer books of the
Company shall be closed as of the Effective Time, and thereafter there shall be
no further registration of transfers of shares of Company Common that were
outstanding prior to the Effective Time.
3. REPRESENTATIONS AND WARRANTIES OF WMS. WMS represents and warrants to the
Company that, except as set forth in the schedule delivered to the Company
concurrently with the execution of this Agreement, which schedule shall
identify exceptions and other information by specific Section references and
shall be initialed by the Company and WMS for identification purposes (the "WMS
Disclosure Schedule"):
3.1 WMS is a corporation duly organized, validly existing and in good
standing under Delaware Law. The WMS Disclosure Schedule contains a list of the
name and jurisdiction of organization of each subsidiary of WMS (each such
corporation, partnership or other entity being referred to herein individually
as a "WMS Subsidiary" and collectively, as the "WMS Subsidiaries") and WMS'
ownership interest with respect thereto. Each WMS Subsidiary is a corporation
or partnership duly organized, validly existing and in good standing under the
laws of its place of incorporation.
3.2 WMS and each WMS Subsidiary (i) has all requisite corporate power and
authority to own, lease and operate its properties and carry on its business as
now being conducted and (ii) is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the nature
or location of its assets require such qualification and where the failure to
be so qualified and in good standing would have a Material Adverse Effect on
WMS. For purposes of this Agreement, "Material Adverse Effect" means, with
respect to WMS, a materially adverse effect on the business, results of
operation, financial condition, properties or assets of WMS and the WMS
Subsidiaries, taken as a whole.
3.3 WMS has all necessary corporate power and authority to enter into this
Agreement and, subject to approval and adoption of this Agreement by the
holders of a majority of the outstanding shares of WMS Common, to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by WMS and the performance by WMS, subject to approval and adoption
of this Agreement by the WMS Stockholders, of its obligations hereunder have
been duly authorized and approved by all requisite corporate action and no
other corporate proceedings on the part of WMS are necessary to authorize this
Agreement or for WMS to consummate the Merger. This Agreement has been duly
executed and delivered by duly authorized officers of WMS and constitutes a
valid and binding obligation of WMS, enforceable against WMS in accordance with
its terms.
3.4 No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality (each of the foregoing being a
"Governmental Entity"), is required by or with respect to WMS or any WMS
Subsidiary in connection with the execution and delivery of this Agreement by
WMS or the consummation by WMS of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware and appropriate documents with the relevant authorities
of other states in which the Company is qualified to do business, (ii) notices
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the expiration (or earlier termination) of all applicable
waiting periods thereunder, (iii) consents of foreign governments having
jurisdiction (which consents are listed on the WMS Disclosure Schedule), (iv)
the filing with the Securities and Exchange Commission (the "SEC") of a
registration statement on Form S-4 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), covering all shares
of WMS Common to be issued pursuant to this Agreement, and the Proxy
Statement--Prospectus (as herein defined) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (v) the filings necessary to obtain all
state securities law or "Blue Sky" permits or approvals required to carry out
the transactions contemplated by this Agreement, and (vi) the licensing,
permitting, registration or other approval of, or a written consent or no
action letter from, each governmental authority or agency with regulatory
control or jurisdiction over the conduct of lawful gaming or gambling (the
"Gaming Regulatory Authorities") within each municipality, state, commonwealth,
Indian land, or foreign nation or subdivision thereof, wherein WMS or any WMS
Subsidiary conducts business on the date hereof (as set forth on the WMS
Disclosure Schedule) and as of the Effective Time.
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3.5 Neither the execution and delivery of this Agreement by WMS, nor the
consummation by WMS of the transactions contemplated hereby, will (i) conflict
with or result in a breach of any of the terms or provisions of WMS'
Certificate of Incorporation or By-Laws, (ii) violate any statute or
administrative regulation, or any order, writ, injunction, judgment or decree
of any court or governmental authority or any arbitration award to which WMS is
a party or by which WMS is bound, (iii) violate any terms or conditions imposed
on any license, permit, registration or other approval of any Gaming Regulatory
Authority, or (iv) violate, conflict with, breach, constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in the creation of any lien or other encumbrance upon any of the
properties or assets of WMS or any WMS Subsidiary under, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which WMS or any WMS Subsidiary is a party or to
which they or any of their respective properties or assets are subject, except
in the case of clauses (ii), (iii) or (iv) for which violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens or other
encumbrances that do not and will not, individually or in the aggregate, (x)
have a Material Adverse Effect on WMS or (y) materially impair the ability of
WMS to perform its obligations under this Agreement.
3.6 As of the date hereof, the authorized capital stock of WMS consists of
WMS Common and preferred stock, par value $.50 per share (the "WMS Preferred").
As of March 31, 1995, 60,000,000 shares of WMS Common were authorized,
24,104,800 shares of WMS Common were issued and outstanding and 60,812 shares
of WMS Common were issued but not outstanding and held in WMS' treasury. As of
March 31, 1995, 5,000,000 shares of WMS Preferred were authorized, none of
which were issued and outstanding. There are no other shares of capital stock
of WMS authorized, issued or outstanding. All of the issued and outstanding
shares of WMS Common have been duly authorized, validly issued and are fully
paid and nonassessable. Except as set forth on the WMS Disclosure Schedule,
there are no subscriptions, options, warrants, rights (including preemptive
rights), calls, convertible securities or other agreements or commitments of
any character relating to the issued or unissued capital stock or other
securities of WMS obligating WMS to issue any securities of any kind.
3.7 WMS has timely filed (and has delivered to the Company a true and
complete copy of) each report, schedule, registration statement and definitive
proxy statement required to be filed by WMS with the SEC since June 30, 1994
(such documents are referred to herein as "WMS' SEC Documents"). As of their
respective dates, WMS' SEC Documents comply in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder, and none of WMS'
SEC Documents, as of their respective dates, 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 therein, in light of the circumstances under
which they were made, not misleading. The financial statements of WMS included
in WMS' SEC Documents comply, as of their respective dates, in all material
respects with all applicable accounting requirements and the published rules
and regulations of the SEC with respect thereof, have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
in all material respects the consolidated financial position of WMS as at the
dates thereof and the consolidated results of its operations, cash flows and
changes in financial position for the periods indicated therein.
3.8 Except as disclosed in WMS' SEC Documents filed prior to the date of this
Agreement and furnished to the Company, WMS and the WMS Subsidiaries do not
have any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) other than liabilities or obligations (i) which were
incurred after March 31, 1995 in the ordinary course of business or (ii) which
would not, individually or in the aggregate, have a Material Adverse Effect on
WMS.
3.9 Except as disclosed in WMS' SEC Documents filed prior to the date of this
Agreement and furnished to the Company, since March 31, 1995: (i) WMS has not
suffered or, to WMS' knowledge, been
I-7
threatened with any change (other than changes generally affecting the
industries in which WMS or any WMS Subsidiary operates or changes relating to
the transactions contemplated by this Agreement) which could have a Material
Adverse Effect on WMS; and (ii) WMS and the WMS Subsidiaries have operated only
in the ordinary course of business consistent with past practice.
3.10
3.10.1 As used in this Agreement, the term (i) "Taxes" means all federal,
state, local, foreign and other income, sales, use, ad valorem, transfer,
franchise, withholding, payroll, employment, gross receipts, property,
severance, duties, net worth, excise or other taxes, charges, levies or like
assessments of any kind, together with any interest, penalties and additions
with respect thereto, and the term "Tax" means any one of the foregoing Taxes,
and (ii) "Returns" means all returns, declarations, reports, statements and
other documents required to be filed in respect of Taxes, and the term "Return"
means any one of the foregoing Returns.
3.10.2 There have been properly completed and filed on a timely basis all
Returns required to be filed by WMS or any WMS Subsidiary in each case where
the failure to properly complete or file any Return would have a Material
Adverse Effect on WMS. As of the time of filing, the foregoing Returns
correctly reflected the facts regarding the income, business, assets,
operations, activities, status or other matters of WMS or, as applicable, a WMS
Subsidiary or any other information required to be shown thereon, in each case
where the failure to do so would have a Material Adverse Effect on WMS.
3.10.3 With respect to all amounts in respect of Taxes imposed upon WMS or
any WMS Subsidiary, or for which WMS or any WMS Subsidiary is liable to taxing
authorities, with respect to all taxable periods or portions of periods ending
on or before the date hereof, all applicable Tax laws have been complied with
where the failure to comply with such laws would have a Material Adverse Effect
on WMS, and all amounts that are required to have been paid where the failure
to pay such amounts would have a Material Adverse Effect on WMS.
3.10.4 No issues have been raised or are currently pending by any tax
authority in connection with any of the Returns which, if resolved adversely to
WMS and the WMS Subsidiaries, would have a Material Adverse Effect on WMS.
There are no material outstanding waivers of the applicable statutes of
limitation with respect to Tax liabilities of WMS or any WMS Subsidiary.
3.10.5 WMS has not agreed to make, nor is it required to make, any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
3.10.6 The unpaid Taxes of WMS and the WMS Subsidiaries do not exceed the
reserve for tax liability (excluding any reserve for deferred Taxes) included
in the financial statements included in the Form 10-Q of WMS for the fiscal
quarter ended March 31, 1995 by an amount which would have a Material Adverse
Effect on WMS.
3.11
3.11.1 WMS and the WMS Subsidiaries maintain, administer or contribute to
only those employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
excluded from coverage under specific Titles or Subtitles of ERISA), or
deferred compensation, severance, vacation, sick leave, fringe benefit, stock
purchase, stock option, stock-related plan, incentive, insurance or similar
contract, policy, arrangement or commitment, for the benefit of employees or
former employees of WMS and the WMS Subsidiaries which are described in the WMS
Disclosure Schedule (the "WMS Plans").
3.11.2 All WMS Plans comply with and are and have been operated in accordance
with each applicable provision of ERISA, the Code (including, without
limitation, the requirements of Code Section 401(a) to the extent any WMS Plan
is intended to conform to that Section, subject to any pending application to
the
I-8
Internal Revenue Service for a "determination letter" to such effect), other
federal statutes, state law (including, without limitation, state insurance
law) and the regulations and rules promulgated pursuant thereto or in
connection therewith, except in any case where the failure to so comply or so
be operated would not have a Material Adverse Effect on WMS.
3.11.3 Neither WMS nor any trade or business, whether or not incorporated,
that together with WMS would be deemed a "single employer" within the meaning
of Section 4001 of ERISA (a "WMS ERISA Affiliate") has failed to make any
contributions or to pay any amounts due as required by the terms of any WMS
Plan or ERISA or any other applicable law other than such failures which would
not have a Material Adverse Effect on WMS. All contributions and payments with
respect to WMS Plans that are required to be made by WMS or any WMS ERISA
Affiliate have been made or will be accrued on the financial statements filed
with, or incorporated by reference in, WMS' SEC Documents with respect to the
periods covered therein.
3.11.4 Neither WMS nor any WMS ERISA Affiliate has incurred any liability to
the Pension Benefit Guaranty Corporation as a result of the voluntary or
involuntary termination of any pension plan subject to Title IV of ERISA (other
than liabilities paid in full); and neither WMS nor any WMS ERISA Affiliate has
made a complete or partial withdrawal from a multiemployer plan, as such term
is defined in Section 3(37) of ERISA, resulting in withdrawal liability, as
such term is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208 of
ERISA) (other than liabilities paid in full).
3.12 Except as set forth on the WMS Disclosure Schedule, there is no
litigation or proceeding, in law or in equity, and there are no proceedings or
governmental investigations before any commission, authority, agency, Gaming
Regulatory Authority or other administrative authority, pending or, to WMS'
knowledge, threatened against WMS or any WMS Subsidiary with respect to or
affecting WMS' or any WMS Subsidiary's operations, business or financial
condition, including, but not limited to, any affecting its licenses, permits,
registration or other gaming approvals which have a reasonable probability of
being decided adversely to WMS or any WMS Subsidiary and which, if so decided
adversely, would have a Material Adverse Effect on WMS.
3.13 Neither WMS nor any WMS Subsidiary is a party to, or bound by, any
judgment, writ, injunction, decree, order or arbitration award (or agreement
entered into in any administrative, judicial or arbitration proceeding with any
Governmental Entity) with respect to or affecting the properties, assets,
personnel or business activities of WMS or any WMS Subsidiary, the enforcement
or operation of which or compliance with which would have a Material Adverse
Effect on WMS.
3.14 Except with respect to Environmental Laws (as defined and which are
addressed in Section 3.15 hereof), neither WMS nor any WMS Subsidiary is in
violation of, noncompliance with, or delinquent in respect to, any judgment,
writ, injunction, decree, order or arbitration award or law, statute, or
regulation of or agreement with, or any permit from, any Governmental Entity to
which the property, assets, personnel or business activities of WMS or any WMS
Subsidiary are subject, which violation, noncompliance or delinquency would
have a Material Adverse Effect on WMS.
3.15
3.15.1 Except for noncompliance or liabilities that would not have a Material
Adverse Effect on WMS, WMS, the WMS Subsidiaries and their respective assets
and business are in compliance with, and not otherwise subject to liability
under, any Environmental Laws (as herein defined) or any Environmental Permits
(as herein defined). Every written notice, citation, or complaint which WMS or
any WMS Subsidiary has received in the past five years of any alleged violation
of, or liability under, any Environmental Law or Environmental Permit has been
corrected where the failure to do so would have a Material Adverse Effect on
WMS. WMS and the WMS Subsidiaries possess all Environmental Permits which are
required by them for the operation of their business where the failure to do so
would have a Material Adverse Effect on WMS.
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3.15.2 For purposes of this Agreement (i) "Environmental Laws" means all
applicable federal, state, local and foreign statutes, regulations, ordinances,
rules, regulations, and all applicable court orders and decrees and arbitration
awards, which pertain to environmental matters or contamination of any type
whatsoever. "Environmental Laws" include, without limitation, those relating
to: manufacture, processing, use, distribution, treatment, storage, disposal,
generation or transportation of Hazardous Materials (as herein defined); air,
soil, surface or ground water or noise pollution; Releases (as herein defined);
protection of wildlife, endangered species, wetlands or natural resources;
above-ground and underground storage tanks, vessels and related equipment and
containers; health and safety of employees and other persons; the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et
seq., as amended and reauthorized ("CERCLA"); and notification requirements
relating to the foregoing; (ii) "Environmental Permits" means licenses,
permits, registrations, governmental approvals, agreements and consents which
are required under or are issued pursuant to Environmental Laws; (iii)
"Hazardous Materials" means pollutants, contaminants, pesticides, petroleum and
petroleum products, radioactive substances, solid wastes or hazardous or
extremely hazardous, special, dangerous or toxic wastes, substances, chemicals
or materials within the meaning of any Environmental Law, including, without
limitation, any (x) "hazardous substance" as defined in CERCLA, and (y) any
"hazardous waste" as defined in the Resource Conservation and Recovery Act, 42
U.S.C., 6902, et seq., as amended and reauthorized; and (iv) "Release" means
any spill, discharge, leak, emission, escape, injection, dumping, or other
release or threatened release of any Hazardous Materials into the environment,
whether or not notification or reporting to any governmental agency was or is,
required, including, without limitation, any release which is subject to
CERCLA.
3.16 Each of WMS and the WMS Subsidiaries owns, licenses or otherwise has the
right to use all patents, copyrights, trademarks, trade names and rights in
respect of the foregoing, adequate for the conduct of its business
substantially as now conducted without any known conflict with any rights of
others.
3.17 WMS has filed with the SEC, or disclosed on the WMS Disclosure Schedule
a list of and made available to the Company, true and complete copies of all
written contracts, agreements, commitments, arrangements, leases (including
with respect to personal property), and other instruments to which it or any
WMS Subsidiary is a party or by which it or any WMS Subsidiary is bound the
loss, default, breach or violation of which would have a Material Adverse
Effect on WMS ("Material Contracts") except for any contract, agreement,
commitment, arrangement, lease and other instrument which, subject to its terms
or otherwise, is required to be kept confidential. Except as set forth on the
WMS Disclosure Schedule, neither WMS nor any WMS Subsidiary is, or has received
any notice or has any knowledge that any other party is, in default in any
material respect under any such Material Contract and to WMS' knowledge there
has not occurred any event that with the lapse of time or the giving of notice
or both would constitute such a material default.
3.18 To the knowledge of WMS, neither WMS nor any WMS Subsidiary has taken
any action which would violate any requirement, including the continuity-of-
business-enterprise requirement of 26 C.F.R. 1.368-1(d), for tax-free
reorganization status under Section 368(a) of the Code with respect to the
Merger.
3.19 No broker, finder or investment banker (other than ▇▇▇▇▇▇▇▇▇▇▇ & Co.,
Inc., whose financial advisory fee will be paid by WMS) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transaction contemplated hereby based upon any arrangements made by or on
behalf of WMS.
3.20 Neither WMS nor any "affiliate" or "associate" (as defined in Section
203 of the Delaware Law) of WMS is an "interested stockholder" (as defined in
Section 203 of the Delaware Law) of the Company.
3.21 As of the date hereof, in those jurisdictions where a license, permit,
registration or other approval is required, WMS and each WMS Subsidiary is
authorized to conduct its gaming business by virtue of either (i) a valid
license, permit, registration or other approval, in good standing, or a written
consent or no action
I-10
letter, issued by the Gaming Regulatory Authority within such jurisdiction; or
(ii) a valid temporary license, permit, registration or other approval granted
by the Gaming Regulatory Authority within such jurisdiction.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to WMS that, except as set forth in the schedule delivered to WMS
concurrently with the execution of this Agreement, which schedule shall
identify exceptions and other information by specific Section references and
shall be initialed by the Company and WMS for identification purposes (the
"Company Disclosure Schedule"):
4.1 The Company is a corporation duly organized, validly existing and in good
standing under Delaware Law. The Company Disclosure Schedule contains a list of
the name and jurisdiction of organization of each subsidiary of the Company
(each such corporation, partnership or other entity being referred to herein
individually as a "Company Subsidiary" and collectively, as the "Company
Subsidiaries") and the Company's ownership interest with respect thereto. Each
Company Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its place of incorporation.
4.2 The Company and each Company Subsidiary (i) has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted and (ii) is duly qualified and in good
standing in each jurisdiction in which the nature of its business or the nature
or location of its assets require such qualification and where the failure to
be so qualified and in good standing would have a Material Adverse Effect on
the Company. For purposes of this Agreement, "Material Adverse Effect" means,
with respect to the Company, a materially adverse effect on the business,
results of operation, financial condition, properties or assets of the Company
and the Company Subsidiaries, taken as a whole.
4.3 The Company has all necessary corporate power and authority to enter into
this Agreement and, subject to approval and adoption of this Agreement by the
holders of a majority of the outstanding shares of Company Common, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and, subject to approval and adoption of this
Agreement by the Company Stockholders, the performance by the Company of its
obligations hereunder have been duly authorized by all requisite corporate
action and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or for the Company to consummate the
Merger. This Agreement has been duly executed and delivered by duly authorized
officers of the Company and constitutes a valid and binding obligation of the
Company enforceable against it in accordance with its terms.
4.4 No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to the Company or any Company Subsidiary in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except for (i) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware and the filing of appropriate documents with the relevant authorities
of other states in which the Company is qualified to do business, (ii) notices
under the HSR Act and the expiration (or earlier termination) of all applicable
waiting periods thereunder, (iii) consents of foreign governments having
jurisdiction (which consents are listed on the Company Disclosure Schedule),
(iv) the filing with the SEC of the Proxy Statement--Prospectus, (v) the
filings necessary to obtain all state securities law or "Blue Sky" permits or
approvals required to carry out the transactions contemplated by this
Agreement, (vi) the licensing, permitting, registration or other approval of,
or a written consent or no action letter from any Gaming Regulatory Authorities
within each municipality, state, commonwealth, Indian land, or foreign nation
or subdivision thereof, wherein the Company or any Company Subsidiary conducts
business on the date hereof (as set forth on the Company Disclosure Schedule)
and as of the Effective Time.
4.5 Neither the execution and delivery of this Agreement by the Company, nor
the consummation by the Company of the transactions contemplated hereby, will
(i) conflict with or result in a breach of any of the terms or provisions of
the Company's Certificate of Incorporation or By-Laws, (ii) violate any statute
or administrative regulation, or any order, writ, injunction, judgment or
decree of any court or governmental authority or any arbitration award to which
the Company or any Company Subsidiary is a party or by which
I-11
the Company or any Company Subsidiary is bound, (iii) violate the terms or
conditions imposed on any license, permit, registration or other approval of
any Gaming Regulatory Authority, or (iv) violate, conflict with, breach,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any lien
or other encumbrance upon any of the properties or assets of the Company or any
Company Subsidiary under, any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the
Company or any Company Subsidiary is a party or to which they or any of their
respective properties or assets are subject, except in the case of clauses
(ii), (iii) or (iv) for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens or other encumbrances that do
not and will not, individually or in the aggregate, (x) have a Material Adverse
Effect on the Company or (y) materially impair the Company's ability to perform
its obligations under this Agreement.
4.6 As of the date hereof, the authorized capital stock of the Company
consists of Company Common and preferred stock, par value $.01 per share (the
"Company Preferred"). As of June 21, 1995, 30,000,000 shares of Company Common
were authorized, 10,749,501 shares of Company Common were issued and
outstanding and no shares of Company Common were issued but not outstanding and
held in the treasury of the Company. As of June 21, 1995, 5,000,000 shares of
Company Preferred were authorized, none of which were issued and outstanding.
There are no other shares of capital stock of the Company authorized, issued or
outstanding. All of the issued and outstanding shares of Company Common have
been validly issued and are fully paid and nonassessable. Except as set forth
on the Company Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, rights (including preemptive rights), calls, convertible
securities or other agreements or commitments of any character relating to the
issued or unissued capital stock or other securities of the Company obligating
the Company to issue any securities of any kind.
4.7 All of the outstanding shares of capital stock of, and all other
ownership interests in, each Company Subsidiary (i) are validly issued, fully
paid and nonassessable and free of any preemptive rights and (ii) other than as
set forth on the Company Disclosure Schedule, are owned of record and
beneficially by the Company, a Company Subsidiary or a nominee of the Company,
free and clear of all liens, claims, pledges, agreements, voting or other
restrictions, charges or other encumbrances. There are no outstanding
subscriptions, options, warrants, rights (including preemptive rights), calls,
convertible securities or other agreements or commitments of any character
relating to the issued or unissued capital stock or other securities (other
than investment securities) of any Company Subsidiary obligating such Company
Subsidiary to issue any securities of any kind.
4.8 The Company has timely filed (and has delivered to WMS a true and
complete copy of) each report, schedule, registration statement and definitive
proxy statement required to be filed by the Company with the SEC since March
31, 1995 (such documents are referred to herein as the "Company's SEC
Documents"). As of their respective dates, the Company's SEC Documents comply
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the applicable rules and regulations of
the SEC thereunder, and none of the Company's SEC Documents, as of their
respective dates, 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 therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Company's SEC Documents comply, as of their respective dates, in all material
respects with all applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-
Q of the SEC) and fairly present in all material respects the consolidated
financial position of the Company as at the dates thereof and the consolidated
results of its operations, cash flows and changes in financial position for the
periods indicated therein.
4.9 Except as disclosed in the Company's SEC Documents filed prior to the
date of this Agreement and furnished to WMS, the Company and the Company
Subsidiaries do not have any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) other than liabilities or
obligations (i)
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which were incurred after March 31, 1995 in the ordinary course of business or
(ii) which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
4.10 Except as disclosed in the Company's SEC Documents filed prior to the
date of this Agreement and furnished to WMS, since March 31, 1995: (i) the
Company has not suffered or, to the Company's knowledge, been threatened with
any change (other than changes generally affecting the industries in which the
Company or any Company Subsidiary operates or changes relating to the
transactions contemplated by this Agreement) which could have a Material
Adverse Effect on the Company; and (ii) the Company and the Company
Subsidiaries have operated only in the ordinary course of business consistent
with past practice.
4.11
4.11.1 There have been properly completed and filed on a timely basis all
Returns required to be filed by the Company or any Company Subsidiary in each
case where the failure to properly complete or file any Return would have a
Material Adverse Effect on the Company. As of the time of filing, the foregoing
Returns correctly reflected the facts regarding the income, business, assets,
operations, activities, status or other matters of the Company or, as
applicable, a Company Subsidiary or any other information required to be shown
thereon, in each case where the failure to do so would have a Material Adverse
Effect on the Company.
4.11.2 With respect to all amounts in respect of Taxes imposed upon the
Company or any Company Subsidiary, or for which the Company or any Company
Subsidiary is liable to taxing authorities, with respect to all taxable periods
or portions of periods ending on or before the date hereof, all applicable Tax
laws have been complied with where the failure to comply with such laws would
have a Material Adverse Effect on the Company, and all amounts that are
required to have been paid by the Company to taxing authorities on or before
the date hereof have been paid where the failure to pay such amounts would have
a Material Adverse Effect on the Company.
4.11.3 No issues have been raised or are currently pending by any tax
authority in connection with any of the Returns which, if decided adversely to
the Company or any Company Subsidiary would have a Material Adverse Effect on
the Company. There are no material outstanding waivers of the applicable
statutes of limitation with respect to Tax liabilities of the Company or any
Company Subsidiary.
4.11.4 The Company has not agreed to make, nor is it required to make, any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
4.11.5 Neither the Company nor any Company Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
4.11.6 The unpaid Taxes of the Company and the Company Subsidiaries do not
exceed the reserve for tax liability (excluding any reserve for deferred Taxes)
included in the financial statements included in the Form 10-Q of the Company
for the fiscal quarter ended March 31, 1995 by an amount that would have a
Material Adverse Effect on the Company.
4.12
4.12.1 The Company and the Company Subsidiaries maintain, administer or
contribute to only those employee benefit plans (as defined in Section 3(3) of
ERISA, whether or not excluded from coverage under specific Titles or Subtitles
of ERISA), or deferred compensation, severance, vacation, sick leave, fringe
benefit, stock purchase, stock option, stock-related plan, incentive, insurance
or similar contract, policy, arrangement
I-13
or commitment, for the benefit of employees or former employees of the Company
and the Company Subsidiaries which are described in the Company Disclosure
Schedule (the "Company Plans").
4.12.2 All Company Plans comply with and are and have been operated in
accordance with each applicable provision of ERISA, the Code (including,
without limitation, the requirements of Code Section 401(a) to the extent any
Company Plan is intended to conform to that Section, subject to any pending
application to the Internal Revenue Service for a "determination letter" to
such effect), other federal statutes, state law (including, without limitation,
state insurance law) and the regulations and rules promulgated pursuant thereto
or in connection therewith, except in any case where the failure to so comply
or so be operated would not have a Material Adverse Effect on the Company.
4.12.3 Neither the Company nor any trade or business, whether or not
incorporated, that together with the Company would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (a "Company ERISA
Affiliate") has failed to make any contributions or to pay any amounts due as
required by the terms of any Company Plan or ERISA or any other applicable law
other than such failures which would not have a Material Adverse Effect on the
Company. All contributions and payments with respect to Company Plans that are
required to be made by the Company or any Company ERISA Affiliate have been
made or will be accrued on the financial statements filed with, or incorporated
by reference in, the Company's SEC Documents with respect to the periods
covered therein.
4.12.4 Neither the Company nor any Company ERISA Affiliate has incurred any
liability to the Pension Benefit Guaranty Corporation as a result of the
voluntary or involuntary termination of any pension plan subject to Title IV of
ERISA (other than liabilities paid in full); and neither the Company nor any
Company ERISA Affiliate has made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA,
resulting in withdrawal liability, as such term is defined in Section 4201 of
ERISA (without regard to subsequent reduction or waiver of such liability under
either Section 4207 or 4208 of ERISA) (other than liabilities paid in full).
4.13 Except as set forth on the Company Disclosure Schedule, there is no
litigation or proceeding, in law or in equity, and there are no proceedings or
governmental investigations before any commission, authority, agency, Gaming
Regulatory Authority or other administrative authority, pending or, to the
Company's knowledge, threatened against the Company or any Company Subsidiary
with respect to or affecting the Company's or any Company Subsidiary's
operations, business or financial condition, including, but not limited to, any
affecting its licenses, permits, registration or other gaming approvals which
have a reasonable probability of being decided adversely to the Company or any
Company Subsidiary and which, if so decided adversely, would have a Material
Adverse Effect on the Company.
4.14 Neither the Company nor any Company Subsidiary is a party to, or bound
by, any judgment, writ, injunction, decree, order or arbitration award (or
agreement entered into in any administrative, judicial or arbitration
proceeding with any Governmental Entity) with respect to or affecting the
properties, assets, personnel or business activities of the Company or any
Company Subsidiary, the enforcement or operation of which or compliance with
which would have a Material Adverse Effect on the Company.
4.15 Except with respect to Environmental Laws (which are addressed in
Section 416 hereof), neither the Company nor any Company Subsidiary is in
violation of, noncompliance with, or delinquent in respect to, any judgment,
writ, injunction, decree, order or arbitration award or law, statute, or
regulation of or agreement with, or any permit from, any Governmental Entity,
to which the property, assets, personnel or business activities of the Company
or any Company Subsidiary are subject, which violation, noncompliance or
delinquency would have a Material Adverse Effect on the Company.
4.16 The Company, the Company Subsidiaries and their respective assets and
business are in compliance in all material respects with, and not otherwise
subject to liability under, any Environmental Laws or any Environmental
Permits. Every written notice, citation or complaint which the Company or any
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Company Subsidiary has received in the past five years of any alleged violation
of, or liability under, any Environmental Law or Environmental Permit has been
corrected in all material respects. The Company and the Company Subsidiaries
possess all Environmental Permits which are required by them for the operation
of their business where the failure to do so would have a Material Adverse
Effect on the Company.
4.17 Each of the Company and the Company Subsidiaries owns, licenses or
otherwise has the right to use all patents, copyrights, trademarks, trade names
and rights in respect of the foregoing, adequate for the conduct of its
business substantially as now conducted without any known conflict with any
rights of others.
4.18 The Company has filed with the SEC, or disclosed on the Company
Disclosure Schedule a list of and made available to WMS, (i) true and complete
copies of all written contracts, agreements, commitments, arrangements, leases
(including with respect to personal property), and other instruments to which
it or any Company Subsidiary is a party or by which it or any Company
Subsidiary is bound the loss, default, breach or violation of which would have
a Material Adverse Effect on the Company ("Material Contracts"). Except as set
forth on the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary is, or has received any notice or has any knowledge that any other
party is, in default in any material respect under any such Material Contract
and to the Company's knowledge there has not occurred any event that with the
lapse of time or the giving of notice or both would constitute such a material
default.
4.19 To the knowledge of the Company, neither the Company nor any Company
Subsidiary has taken any action which would violate any requirement, including
the continuity-of-business-enterprise requirement of 26 C.F.R. 1.368-1(d), for
tax-free reorganization status under Section 368(a) of the Code with respect to
the Merger.
4.20 No broker, finder or investment banker (other than Ladenburg, ▇▇▇▇▇▇▇▇ &
Co. Inc., whose brokerage, finder's or other fee will be paid by the Company)
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company. The Company has provided a true and correct copy of its
agreement with Ladenburg, ▇▇▇▇▇▇▇▇ & Co. Inc. to WMS.
4.21 The Company has received the written opinion of Ladenburg, ▇▇▇▇▇▇▇▇ &
Co. Inc. on the date of this Agreement, that the consideration to be received
in the Merger by the Company Stockholders is fair, from a financial point of
view, to the Company Stockholders. The Company has provided a true and correct
copy of such opinion to WMS.
4.22 Assuming the representation in Section 3.20 is accurate, as of the date
hereof and at all times on or prior to the Effective Time, Section 203 of the
Delaware Law is, and shall be, inapplicable to the Merger and the transactions
contemplated by this Agreement.
4.23 As of the date hereof, in those jurisdictions where a license, permit,
registration or other approval is required, the Company and each Company
Subsidiary is authorized to conduct its gaming business by virtue of either (i)
a valid license, permit, registration or other approval, in good standing, or a
written consent or no action letter, issued by the Gaming Regulatory Authority
within such jurisdiction; or (ii) a valid temporary license, permit,
registration or other approval granted by the Gaming Regulatory Authority
within such jurisdiction.
5. CONDUCT OF BUSINESS PENDING THE MERGER.
5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Prior to the
Effective Time, unless WMS shall otherwise agree in writing:
5.1.1 The Company shall, and shall cause the Company Subsidiaries to, use
their reasonable best efforts to carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, and shall, and shall cause the Company Subsidiaries to
use their reasonable best efforts to preserve intact their present business
organizations, maintain their current licenses and permits, keep available the
services of their present officers and key employees and preserve their
relationships with
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customers, suppliers and others having business dealings with them to the end
that their goodwill and on-going businesses shall be unimpaired at the
Effective Time, except such impairment as would not have a Material Adverse
Effect on the Company. The Company shall, and shall cause the Company
Subsidiaries to use their reasonable best efforts to, (i) maintain insurance
coverages and its books, accounts and records in the usual manner consistent
with prior practices; (ii) comply in all material respects with all laws,
ordinances and regulations of Governmental Entities applicable to the Company
and the Company Subsidiaries; (iii) maintain and keep its properties and
equipment in good repair, working order and condition, ordinary wear and tear
excepted; and (iv) perform in all material respects its obligations under all
contracts and commitments to which it is a party or by which it is bound;
5.1.2 Except as required or permitted by this Agreement, the Company shall
not and shall not propose to (i) sell or pledge or agree to sell or pledge any
capital stock owned by it in any Company Subsidiary, (ii) amend its Certificate
of Incorporation or By-Laws, (iii) split, combine or reclassify its outstanding
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of capital
stock of the Company, or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property or (iv) directly or indirectly
redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise
acquire any shares of Company capital stock;
5.1.3 The Company shall not, nor shall it permit any Company Subsidiary to,
(i) except as required or permitted by this Agreement, issue, deliver or sell
or agree to issue, deliver or sell any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class or incur any
liability in respect of (a) borrowed money, (b) capitalized lease obligations,
(c) deferred purchase price of property or services (other than trade payables
in the ordinary course) and (d) guarantees of any of the foregoing
("Indebtedness") (other than pursuant to existing lines of credit for use in
the ordinary course of business and consistent with past practices) or any
option, rights or warrants to acquire, or securities convertible into, shares
of capital stock other than issuances of Company Common disclosed in the
Company Disclosure Schedule; (ii) except as required or permitted by this
Agreement, acquire, lease or dispose or agree to acquire, lease or dispose of
any capital assets or any other assets other than in the ordinary course of
business; (iii) incur additional Indebtedness or encumber or grant a security
interest in any asset or enter into any other transaction other than in each
case in the ordinary course of business; (iv) acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity interest
in, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, except that the
Company may create new wholly-owned Subsidiaries in the ordinary course of
business; or (v) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
5.1.4 Except as disclosed in the Company Disclosure Schedule, the Company
shall not, nor shall it permit, any Company Subsidiary to, except as permitted
by this Agreement or required to comply with applicable law or this Agreement
or pursuant to the terms of existing agreements that were not required to be
included in the Company Disclosure Schedule, (i) adopt, enter into, terminate
or amend any bonus, profit sharing, compensation, severance, termination, stock
option, pension, retirement, deferred compensation, employment or other Company
Plan, agreement, trust, fund or other arrangement for the benefit or welfare of
any director, officer or current or former employee, (ii) increase in any
manner the compensation or fringe benefit of any director or officer or of any
employee (except, with respect to employees, for normal increases in the
ordinary course of business that are consistent with past practice and that, in
the aggregate, do not result in a material increase in benefits or compensation
expense to the Company and any Company Subsidiary relative to the level in
effect prior to such amendment), (iii) pay any benefit not provided under any
existing plan or arrangement, (iv) grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Company Plan
(including, without limitation, the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance units or restricted
stock, or the removal of existing restrictions in any benefit plans or
agreements or awards made thereunder), (v) take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Company Plan other than in the
ordinary course of
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business consistent with past practice or (vi) adopt, enter into, amend or
terminate any contract, agreement, commitment or arrangement to do any of the
foregoing, provided, however, that nothing contained herein shall prevent the
Company or any Company Subsidiary from paying any bonus to or increasing the
compensation of any employee in accordance with the terms of any employment
agreement for such employee that was provided to WMS prior to the date hereof;
and
5.1.5 Between the date hereof and the Effective Time, (i) the Company shall
provide to WMS within 25 days after the end of each month, such financial
statements as are customarily prepared by the Company on a monthly basis; (ii)
the Company and each Company Subsidiary shall consult with WMS on a regular
basis with respect to all operating decisions which could be expected to result
in a material change in the business of the Company or any Company Subsidiary
as presently operated or which are not in the ordinary course of business;
(iii) the Company and each Company Subsidiary shall permit representatives of
WMS to have full and unrestricted access to such information, documents,
facilities and personnel as WMS may from time to time request; (iv) the Company
shall use its reasonable efforts to sell all of the outstanding capital stock
of the entities comprising Bally ▇▇▇▇▇ and, if the net proceeds of any
transaction proposed by a prospective purchaser would satisfy the condition set
forth in Section 7.2.5, the Company shall complete such sale rather than
effecting the distribution of Bally ▇▇▇▇▇ to the Company Stockholders; and (v)
the Company shall keep WMS informed of the status of negotiations with respect
to the sale of Bally ▇▇▇▇▇ and provide WMS with copies of all documents and
drafts of documents in connection therewith and a reasonable opportunity to
participate in the negotiations.
5.2 CONDUCT OF BUSINESS BY WMS PENDING THE MERGER. Prior to the Effective
Time, unless the Company shall otherwise agree in writing except as otherwise
required by this Agreement:
5.2.1 WMS shall, and shall cause the WMS Subsidiaries to, use their
reasonable best efforts to preserve their relationships with customers,
suppliers and others having business dealings with them and maintain their
current licenses and permits to the end that their goodwill and on-going
businesses shall be unimpaired at the Effective Time, except such impairment as
would not have a Material Adverse Effect on WMS. WMS shall, and shall cause the
WMS Subsidiaries to use their reasonable best efforts to (i) maintain insurance
coverage and its books, accounts and records in the usual manner consistent
with prior practices; (ii) comply in all material respects with all laws,
ordinances and regulations of Governmental Entities applicable to WMS and the
WMS Subsidiaries; (iii) maintain and keep its properties and equipment in good
repair, working order and condition, ordinary wear and tear expected; and (iv)
perform in all material respects its obligations under all contracts and
commitments to which it is a party or by which it is bound, in each case other
than where the failure to so maintain, comply or perform, either individually
or in the aggregate, would result in a Material Adverse Effect on WMS;
5.2.2 WMS shall not amend any of the material terms or provisions of the WMS
Common;
5.2.3 WMS shall not take any action that would result in the failure to
maintain the trading of WMS Common on the NYSE; and
5.2.4 WMS shall not declare or pay any dividend or distribution on any
outstanding shares of its capital stock.
5.2.5 Between the date hereof and the Effective Time, (i) WMS shall provide
to the Company within 25 days after the end of each month (other than June
which need not be provided until completion of review by WMS' auditors and
audit committee), such financial statements as are customarily prepared by WMS
on a monthly basis; (ii) WMS and each WMS Subsidiary shall promptly advise the
Company of developments which could be expected to result in a material change
in the business of WMS or any WMS Subsidiary as presently operated; and (iii)
subject to WMS' contractual obligations to maintain confidentiality of certain
agreements to which WMS or any WMS Subsidiary is a party, WMS and each WMS
Subsidiary shall permit representatives of the Company to have access to such
information, documents, facilities and personnel as the Company may from time
to time request.
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5.3 NOTICE OF BREACH. Each party shall promptly give written notice to the
other party upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event which would cause or
constitute a breach of any of its representations, warranties or covenants
contained or referenced in this Agreement and will use all reasonable efforts
to prevent or promptly remedy the same. Any such notification shall not be
deemed an amendment of the Company Disclosure Schedule or the WMS Disclosure
Schedule.
6. ADDITIONAL AGREEMENTS.
6.1 REGISTRATION STATEMENT; PROXY STATEMENT; AUDITORS' LETTERS; OTHER
MATTERS.
6.1.1 As promptly as practicable after the execution of this Agreement, WMS
and the Company shall cooperate and promptly prepare and file with the SEC a
joint proxy statement (the "Proxy Statement--Prospectus") with respect to the
joint special meeting (the "Meeting") in connection with the Merger. At an
appropriate time mutually determined by WMS and the Company prior to the
clearance of the Proxy Statement--Prospectus, WMS and the Company shall
cooperate and promptly prepare and WMS shall file with the SEC the Registration
Statement, with respect to the WMS Common issuable in the Merger (and with
respect to the outstanding Company Options or Company Warrants or any similar
executive compensation awards, following the Merger), in which Registration
Statement the Proxy Statement--Prospectus shall be included as a prospectus
with respect to such shares of WMS Common. The respective parties shall cause
the Proxy Statement--Prospectus and the Registration Statement to comply as to
form in all material respects with the applicable provisions of the Securities
Act, the Exchange Act and the rules and regulations thereunder. WMS shall use
all reasonable efforts, and the Company will reasonably cooperate with WMS, to
have the Registration Statement declared effective by the SEC as promptly as
practicable. WMS shall use its best efforts to obtain, prior to the effective
date of the Registration Statement, all necessary state securities law or "Blue
Sky" permits or approvals required to carry out the transactions contemplated
by this Agreement and will pay all expenses incident thereto. WMS and the
Company each agree that the Proxy Statement--Prospectus and each amendment or
supplement thereto at the time of mailing thereof and at the time of the
Meeting, or, in the case of the Registration Statement and each amendment or
supplement thereto, at the time it is filed or becomes effective, shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company agrees that the written information concerning the Company provided by
it for inclusion in the Proxy Statement--Prospectus and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
Meeting, or, in the case of written information concerning the Company provided
by the Company for inclusion in the Registration Statement or any amendment or
supplement thereto, at the time it is filed or becomes effective, shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. WMS
agrees that the written information concerning WMS provided by it for inclusion
in the Proxy Statement--Prospectus and each amendment or supplement thereto, at
the time of mailing thereof and at the time of the Meeting, shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except
as otherwise required by law, no amendment or supplement to the Proxy
Statement--Prospectus shall be made by WMS or the Company without the approval
of the other party. WMS shall advise the Company and the Company shall advise
WMS, as applicable, promptly after it receives notice thereof, of the time when
the Registration Statement shall become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the WMS Common issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the SEC for amendment
of the Proxy Statement--Prospectus or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional
information.
6.1.2 The Company shall use its reasonable best efforts to cause to be
delivered to WMS a letter of Coopers & ▇▇▇▇▇▇▇ L.L.P., the Company's
independent auditors, dated a date within two business days
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before the date on which the Registration Statement shall become effective and
addressed to the Company, customary in form, scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
6.1.3 WMS shall use its reasonable best efforts to cause to be delivered to
the Company a letter of Ernst & Young LLP, WMS' independent auditors, dated a
date within two business days before the date on which the Registration
Statement shall become effective and addressed to WMS, customary in form, scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
6.1.4 WMS shall use its best efforts to have authorized, as soon as
practicable, for listing on the NYSE, upon official notice of issuance, the
shares of WMS Common to be issued in the Merger (or with respect to the
outstanding Company Options or Company Warrants or any similar executive
compensation awards, following the Merger).
6.2 ALTERNATIVE PROPOSALS. Subject to the proviso of this Section 6.2, prior
to the Effective Time, the Company agrees that (i) neither it nor any of the
Company Subsidiaries shall, and it shall use reasonable efforts to cause its
officers, directors, employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or any
of the Company Subsidiaries) not to, initiate, solicit or encourage, directly
or indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, acquisition, consolidation or similar
transaction (other than a transaction contemplated and permitted pursuant to
Section 7.2.5 hereof) involving, or any purchase of all or any significant
portion of the assets or any equity securities of, the Company or any Company
Subsidiary (any such proposal or offer being hereinafter referred to as an
"Alternative Proposal") or engage in any negotiations or enter into any
agreement concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Alternative Proposal, or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal, (ii) it shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and it shall take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 6.2 and (iii) it shall notify WMS as
promptly as practicable if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 6.2 shall prohibit the Board of Directors of the
Company from (a) after notice to WMS, furnishing information to, or entering
into negotiations or discussions with, any person or entity that makes an
unsolicited bona fide Alternative Proposal if the Board of Directors of the
Company determines in good faith, after consultation with counsel, that the
failure to do so could reasonably be deemed a breach of its fiduciary duties
under applicable law, (b) failing to make, withdrawing, modifying or changing
the recommendation referred to the Company Stockholders, the approval and
adoption of this Agreement if the Board of Directors of the Company determines
in good faith, after consultation with counsel, that making such
recommendation, or the failure to withdraw, modify or change such
recommendation, could reasonably be deemed a breach of its fiduciary duties
under applicable law, (c) recommending to the Company Stockholders an
Alternative Proposal that the Board of Directors of the Company determines in
good faith, after consultation with its financial advisor, is likely to be more
favorable, from a financial point of view, to the Company Stockholders, than
the Merger or (d) to the extent applicable, complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Alternative Proposal.
6.3 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The provisions of the
Certificate of Incorporation of the Surviving Corporation with respect to
indemnification on the date of this Agreement, shall not be amended, repealed
or otherwise modified for a period six years after the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors or officers of the Company in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required
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by law. Without limiting the obligations under the previous sentence, for a
period of six years after the Effective Time, the Surviving Corporation will
maintain in effect insurance policies, covering the directors and officers of
the Company immediately prior to the Effective Time, for claims made within
such six year period with respect to directors' and officers' liability for
activities taken or not taken on or prior to the Effective Time, such policies
to be comparable in all material respects (including dollar amount and scope of
coverage) to the policies presently maintained by the Company for such purpose.
6.4 REGULATORY COMPLIANCE. The Company and WMS will use their respective best
efforts to comply promptly with all requirements which federal or state law may
impose on them with respect to the Merger. The Company and WMS shall, as soon
as practicable, file Notification and Report Forms under the HSR Act with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and shall use their best
efforts to respond as promptly as practicable to all inquiries received from
the FTC or the Antitrust Division for additional information or documentation.
The Company and WMS will take all such action as may be necessary under the
federal securities laws applicable to or necessary for, and will file and, if
appropriate, use their best efforts to have declared effective or approved, all
documents and notifications with the SEC and other governmental or regulatory
bodies which they deem necessary or appropriate for the consummation of the
Merger and the transactions contemplated hereby, and each party shall give the
other information reasonably requested by such other party pertaining to it and
its subsidiaries and affiliates to enable such other party to take such
actions. The Company and WMS will take all such action as may be necessary
under gaming laws and regulations applicable to or necessary for the
consummation of the Merger and the transactions contemplated hereby and will,
as soon as practicable, file or cause to be filed with all Governmental
Entities having jurisdiction over the gaming activities of the Company, Company
Subsidiaries, WMS and WMS Subsidiaries, on behalf of such entities or
individuals as required, such applications, disclosure statements, documents
and other submissions for approval, qualification or consent as may be required
in connection therewith. No party hereto will intentionally take, or omit to
take, any action, which action or omission will have the effect of delaying,
impairing or impeding the receipt of any required consent, authorization, order
or approval or the making of any required filing or registration. The Company
and WMS shall file in a timely manner all reports and documents required to be
so filed by or under the Exchange Act.
6.5 REORGANIZATION. From and after the date hereof and until the Effective
Time, neither WMS nor the Company shall knowingly take any action, or knowingly
fail to take any action, that would be reasonably likely to jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
6.6 ENVIRONMENTAL AUDIT. Unless WMS shall have waived the condition set forth
in Section 7.2.8 hereof, within 30 days after the date hereof, WMS shall at its
expense cause an environmental audit firm of recognized standing to commence a
Phase I assessment of all the real property owned or occupied by the Company or
any Company Subsidiary as set forth on the Company Disclosure Schedule and to
conclude the same within 60 days of the date hereof. No sampling of soil or
ground water shall be undertaken as part of any audit unless the same is
consented to, in writing, by the Company, such consent not to be unreasonably
withheld. WMS shall promptly provide the Company with a copy of such report.
6.7 ARRANGEMENTS WITH CERTAIN OFFICERS OF THE COMPANY. WMS shall be bound by
all employment agreements and related plans currently in effect for officers,
directors and employees of the Company, including provisions of those
agreements and plans relating to stock options, performance units, stock
payment rights, restricted stock and/or change of control. Prior to the
Effective Time, the Company may enter into amendments to such agreements and
plans with each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ in form and
content reasonably satisfactory to WMS and such individuals.
7. CLOSING CONDITIONS.
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction
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at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part, to the extent permitted by applicable
law:
7.1.1 EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC under the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the knowledge of WMS or the Company, threatened by the SEC.
7.1.2 STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the Company Stockholders, and
shall have been approved and adopted by the requisite vote of the WMS
Stockholders.
7.1.3 NO ORDER. No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Merger or any
transaction contemplated by this Agreement; provided, however, that the parties
shall use their reasonable best efforts to cause any such decree, judgment,
injunction or other order to be vacated or lifted.
7.1.4 HSR ACT. The applicable waiting period under the HSR Act shall have
expired or been terminated.
7.1.5 GOVERNMENTAL APPROVALS. Other than the filing of Certificate of Merger
in accordance with Delaware Law, all licenses, permits, registrations,
authorizations, consents, waivers, orders or other approvals required to be
obtained, and all filings, notices or declarations required to be made, by WMS
or any WMS Subsidiary, and the Company or any Company Subsidiary, in order to
consummate the Merger and the transactions contemplated hereunder shall have
been obtained from, and made with, all required Governmental Entities, without
any material condition thereto.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF WMS. The obligations of WMS to
effect the Merger and the transactions contemplated herein are also subject to
the following conditions:
7.2.1 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
as of the Effective Time as though made on and as of the Effective Time, except
(i) for changes specifically permitted by this Agreement and (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date. WMS shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of the
Company to the foregoing effect.
7.2.2 AGREEMENT AND COVENANTS. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time. WMS shall have received a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company to the foregoing effect.
7.2.3 TAX OPINION. WMS shall have received the opinion of Squadron, Ellenoff,
Plesent, ▇▇▇▇▇▇▇▇▇ & Sorkin LLP, to be delivered at the Effective Time, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the Code,
which opinion shall not have been withdrawn or modified in any material
respect. The issuance of such opinion shall be conditioned on the receipt of
representation letters from each of WMS and the Company. The specific
provisions of each such representation letter shall be in form and substance
satisfactory to Squadron, Ellenoff, Plesent, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP and
Shereff, Friedman, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, and each such representation letter
shall be dated on or before the date of such opinion and shall not have been
withdrawn or modified in any material respect.
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7.2.4 FAIRNESS OPINION. ▇▇▇▇▇▇▇▇▇▇▇ & Co. Inc. shall have provided to the
Board of Directors of WMS (i) as of a date not more than five days before the
date on the Proxy Statement--Prospectus is first mailed to stockholders of WMS
and (ii) as of a date not more than five days prior to the Effective Time,
their written opinion that the Merger is fair to the stockholders of WMS from a
financial point of view.
7.2.5 DISPOSITION OF BALLY ▇▇▇▇▇. Prior to or contemporaneously with the
Effective Time, the Company shall have completed the sale or other disposition
of Bally ▇▇▇▇▇ Automaten GmbH and Bally ▇▇▇▇▇ Vertriebs GmbH and all other
entities relating to the Company's operations in Germany, but not including
Bally Gaming International GmbH Hannover (collectively "Bally ▇▇▇▇▇"), either
by means of a sale of all of the outstanding capital stock of the entities
comprising Bally ▇▇▇▇▇ or a distribution of Bally ▇▇▇▇▇ to the Company
Stockholders. A sale of Bally ▇▇▇▇▇ shall be deemed to satisfy the condition
set forth in this Section 7.2.5 only if it results in the Company receiving net
proceeds, after taxes and transaction expenses, of at least Fifty Five Million
($55,000,000) Dollars (the "Minimum Proceeds") and if the Company has no
liabilities, contingent or otherwise, resulting from such sale, by reason of
representations and warranties or otherwise, except to the extent of the net
proceeds of the sale of Bally ▇▇▇▇▇ in excess of the Minimum Proceeds and
except that the Company may make representations with respect to ownership, due
organization and authority to enter into such transaction. If the Company at or
prior to the Effective Time completes a sale of Bally ▇▇▇▇▇ that satisfies the
condition set forth in this Section 7.2.5, the Company may declare a
distribution payable to holders of Company Common at the Effective Time in an
aggregate amount equal to all or a portion of the net proceeds of the sale of
Bally ▇▇▇▇▇ in excess of the Minimum Proceeds payable at such time as the
purchaser of Bally ▇▇▇▇▇ shall no longer have recourse to such net proceeds in
excess of the Minimum Proceeds; provided that such distribution does not
adversely effect the tax opinions provided for in Sections 7.2.3 and 7.3.3
hereof; and, provided further that to the extent such distribution would
adversely affect the tax opinions provided for in Sections 7.2.3 and 7.3.3
hereof, such excess cash shall be retained by the Company and the Exchange
Ratio set forth in Sections 2.1 hereof shall be adjusted to increase the total
number of shares of WMS Common to be received by the Company Stockholders, by a
number of shares of WMS Common equal to the amount of such excess cash divided
by the market price of WMS Common on the NYSE at the Effective Time; provided
that WMS shall in no event be required to issue fractional shares of WMS Common
and in lieu thereof Section 2.4 hereof shall apply. To the extent such excess
cash is subject to reduction by reason of contingent claims or otherwise, the
amount of such excess cash shall be reduced accordingly, and the additional
shares of WMS Common to be issued shall be adjusted appropriately, promptly
after the amount of such excess cash remaining after any such reduction is
finally determined. A distribution of Bally ▇▇▇▇▇ shall be deemed to satisfy
the condition set forth in this Section 7.2.5 only if (i) the Company and all
Company Subsidiaries are released from obligations with respect to the
Company's Forty Million ($40,000,000) Dollars 10 3/8% Senior Secured Notes due
July 15, 1998; (ii) the sum of Fifteen Million ($15,000,000) Dollars is paid to
the Company by Bally ▇▇▇▇▇ as a dividend; (iii) the Company shall not have any
liabilities, contingent or otherwise, resulting from such distribution except
for liabilities arising as a matter of law by reason of such distribution; and
(iv) all costs and expenses of such distribution are borne by Bally ▇▇▇▇▇.
7.2.6 ARRANGEMENTS WITH CERTAIN OFFICERS OF THE COMPANY. WMS intends to honor
all employment agreements and related plans currently in effect for officers,
directors and employees of the Company, including provisions of those
agreements and plans relating to change of control. Prior to the Effective
Time, the Company shall have entered into amendments to the employment
agreements with each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ in form
and content satisfactory to WMS and such individuals.
7.2.7 DEBT LIMITATIONS. At the Effective Time, after giving effect to the
transactions referred to in Section 7.2.5 hereof, and the discharge of the
Company's indebtedness in respect of its 10 3/8% Senior Secured Notes due July
15, 1998 and all indebtedness of the Company and the Company Subsidiaries to
Marine Midland Business Loans, Inc., the Company, and the Company's
Subsidiaries (excluding Bally ▇▇▇▇▇), shall have no indebtedness and shall not
be liable for indebtedness of any other person or entity, contingent or
otherwise, other than (i) accounts payable to trade creditors incurred in the
ordinary course of business; (ii)
I-22
accrued liabilities for compensation and benefit related liabilities and other
liabilities incurred in the ordinary course of business, all of such
liabilities referred to in this clause (ii) not to exceed $10,000,000 plus any
accrued interest with respect to the Company's 10 3/8% Senior Secured Notes due
July 15, 1998; (iii) contingent liabilities for guarantees provided in
connection with financing product sales not to exceed $25,000,000; and (iv)
notes payable relating to Global Gaming Technology, Inc. and other receivable
financings, not to exceed $4,000,000 in the aggregate. WMS shall have received
a certificate of the Chief Executive Officer and Chief Financial Officer of the
Company to the foregoing effect.
7.2.8 ENVIRONMENTAL CONDITIONS. Prior to the Effective Time, WMS shall have
received, from an environmental audit firm of recognized standing a
certification substantially to the effect that no environmental conditions
exist affecting properties owned or occupied by the Company or any Company
Subsidiary which would require remediation or cleanup costs in excess of
$100,000 for any particular property.
7.2.9 NO MATERIAL ADVERSE CHANGE TO THE COMPANY. From the date hereof through
and including the Effective Time, no event shall have occurred which would have
a Material Adverse Effect on the Company. WMS shall have received a certificate
of the Chief Executive Officer and Chief Financial Officer of the Company to
the foregoing effect.
7.2.10 THIRD PARTY CONSENTS. All third party consents shall have been
received which may be required to avoid the breach of any material agreements
to which the Company or any Company Subsidiary is a party, including consents
of lessors, in order to consummate the Merger and the transactions contemplated
hereby.
7.2.11 A GAMING REGULATORY APPROVAL. All licenses, permits, registrations,
authorizations, consents, waivers, orders or other approvals required to be
obtained from, and all filings, notices or declarations required to be made
with, the Gaming Regulatory Authorities set forth on the Company Disclosure
Schedule in order to permit the Company and any Company Subsidiary to conduct
its business in the jurisdictions regulated by such Gaming Regulatory
Authorities after the Effective Time in the same manner as conducted by it
prior to the Effective Time shall have been obtained or made. Any license,
permit, registration, authorization, consent, waiver, order, other approval,
filing, notice or declaration which, in accordance with laws administered or
regulations promulgated by any such Gaming Regulatory Authority, that may be
obtained or made after consummation of the Merger shall not be deemed obtained
or made, and the condition set forth in this Section 7.2.11 shall not be deemed
satisfied, unless such license, registration, authorization, consent, waiver,
order, other approval, filing, notice or declaration is obtained or made prior
to the consummation of the Merger.
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the Merger and the other transactions contemplated in
this Agreement are also subject to the following conditions:
7.3.1 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of WMS contained in this Agreement shall be true and correct as of
the Effective Time, as though made on and as of the Effective Time, except (i)
for changes specifically permitted by this Agreement and (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date. The Company shall have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of WMS to the foregoing effect.
7.3.2 AGREEMENTS AND COVENANTS. WMS shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Effective Time. The
Company shall have received a certificate of the Chief Executive Officer and
Chief Financial Officer of WMS to the foregoing effect.
7.3.3 TAX OPINION. The Company shall have received the opinion of Shereff,
Friedman, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP to be delivered at the Effective Time, to the
effect that the Merger will be treated for federal
I-23
income tax purposes as a reorganization qualifying under the provisions of
Section 368(a) of the Code, which opinion shall not have been withdrawn or
modified in any material respect. The issuance of such opinion shall be
conditioned on the receipt of representation letters from each of WMS and the
Company. The specific provisions of each such representation letter shall be in
form and substance satisfactory to each of Squadron, Ellenoff, Plesent,
▇▇▇▇▇▇▇▇▇ & Sorkin LLP and Shereff, Friedman, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP and each
such representation letter shall be dated on or before the date of such opinion
and shall not have been withdrawn or modified in any material respect.
7.3.4 FAIRNESS OPINION. Ladenburg, ▇▇▇▇▇▇▇▇ & Co. Inc. shall have provided to
the Board of Directors of the Company (i) as of a date not more than five days
before the date on the Proxy Statement--Prospectus is first mailed to
stockholders of the Company and (ii) as of a date not more than five days prior
to the Effective Time, their written opinion that the Merger is fair to the
stockholders of the Company from a financial point of view.
7.3.5 NO MATERIAL ADVERSE CHANGE TO WMS. From the date hereof through and
including the Effective Time, no event shall have occurred which would have a
Material Adverse Effect on WMS. The Company shall have received a certificate
of the Chief Executive Officer and Chief Financial Officer of WMS to the
foregoing effect.
7.3.6 THIRD PARTY CONSENTS. All third party consents shall have been received
which may be required to avoid the breach of any material agreements to which
WMS or any WMS Subsidiary is a party, including consents of lessors, in order
to consummate the Merger and the transactions contemplated hereby.
7.3.7 GAMING REGULATORY APPROVAL. All licenses, permits, registrations,
authorizations, consents, waivers, orders or other approvals required to be
obtained from, and all filings, notices or declarations required to be made
with, the Gaming Regulatory Authorities set forth on the WMS Disclosure
Schedule in order to permit WMS or any WMS Subsidiary to conduct its business
in the jurisdictions regulated by such Gaming Regulatory Authorities after the
Effective Time in the same manner as conducted by it prior to the Effective
Time shall have been obtained or made. Any license, permit, registration,
authorization, consent, waiver, order, other approval, filing, notice or
declaration which, in accordance with laws administered or regulations
promulgated by any such Gaming Regulatory Authority, that may be obtained or
made after consummation of the Merger shall not be deemed obtained or made, and
the condition set forth in this Section 7.3.7 shall not be deemed satisfied,
unless such license, registration, authorization, consent, waiver, order, other
approval, filing, notice or declaration is obtained or made prior to the
consummation of the Merger.
8. TERMINATION; EFFECT OF TERMINATION.
8.1 RIGHT TO TERMINATE. ANYTHING TO THE CONTRARY HEREIN NOTWITHSTANDING, THIS
AGREEMENT AND THE TRANSACTION CONTEMPLATED HEREBY MAY BE TERMINATED AT ANY TIME
PRIOR TO THE EFFECTIVE TIME BY PROMPT NOTICE GIVEN IN ACCORDANCE WITH SECTION
9.2:
8.1.1 by the mutual written consent of WMS and the Company (with the approval
of their respective Boards of Directors);
8.1.2 by WMS (with the approval of its Board of Directors) or the Company
(with the approval of its Board of Directors) if: (i) any Governmental Entity
whose approval is required for consummation of the Merger has denied approval
of the Merger and such denial has become final and nonappealable; or (ii) the
Effective Time shall not have occurred at or before 11:59 pm New York time on
February 7, 1996; provided, however, that the right to terminate this Agreement
under this Section 8.1.2 shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause of or
resulted in the occurrence of any of the events in clauses (i) or (ii) above;
8.1.3 by WMS (with the approval of its Board of Directors), by giving written
notice of such termination to the Company, if (i) there has been a material
breach of any material agreement of the Company herein, such that in the
reasonable opinion of WMS, the condition to closing in Section 7.2,2 could not
be
I-24
expected to be satisfied by the termination date contemplated by Section 8.1.2
hereof, (ii) there has been a material breach of any material representation or
warranty of the Company herein such that, in the reasonable opinion of WMS, the
condition to closing in Section 7.2.1 could not be expected to be satisfied by
the termination date contemplated by Section 8.1.2 hereof; or (iii) the WMS
Stockholders do not approve and adopt this Agreement at the Meeting; or
8.1.4 by the Company (with the approval of its Board of Directors), by giving
written notice of such termination to WMS, if (i) there has been a material
breach of any agreement of WMS herein, such that in the reasonable opinion of
the Company, the condition to closing in Section 7.3.2 could not be expected to
be satisfied by the termination date contemplated by Section 8.1.2 hereof, (ii)
there has been a material breach of any material representation or warranty of
WMS herein, such that in the reasonable opinion of the Company, the condition
to closing in Section 7.3.1 could not be expected to be satisfied by the
termination date contemplated by Section 8.1.2 hereof, (iii) the Company's
Stockholders do not approve and adopt this Agreement at the Meeting, (iv) the
Board of Directors of the Company fails to make, withdraws, or modifies or
changes the recommendation referred to in Section 6.2 based on its good faith
determination, after consultation with counsel, that making such
recommendation, or the failure to withdraw, modify or change such
recommendation, could reasonably be deemed a breach of its fiduciary duties
under applicable law, (v) the Board of Directors of the Company recommends to
the Company Stockholders an Alternative Proposal that the Board of Directors of
the Company determines in good faith, after consultation with its financial
advisor, is likely to be more favorable, from a financial point of view, to the
Company Stockholders than the Merger or (vi) prior to the Effective Time, WMS
engages in any merger, acquisition, disposition or similar transaction with a
third party which transaction requires the approval of WMS Stockholders.
8.2 CERTAIN EFFECTS OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1 hereof:
8.2.1 Except as provided in Sections 8.2.2, 8.2.3 and 9.6 hereof, this
Agreement shall forthwith become void, there shall be no liability on the part
of WMS or the Company or any of their respective affiliates, officers or
directors and all rights and obligations of any party hereto shall cease;
provide, however, that nothing herein shall relieve any party from liability
for the willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement, prior to such termination;
8.2.2 Each party, if so requested by the other party, will return promptly
every document furnished to it by or on behalf of the other party in connection
with the transaction contemplated hereby, whether so obtained before or after
the execution of this Agreement, and any copies thereof (except for copies of
documents publicly available) which may have been made, and will use reasonable
efforts to cause its representatives and any representatives of financial
institutions and investors and others to whom such documents were furnished
promptly to return such documents and any copies thereof any of them may have
made; and
8.2.3 Each party hereto shall continue to abide by the terms of the Letter
Agreement between WMS and the Company dated April 17, 1995 notwithstanding any
termination of this Agreement.
This Section 8.2 shall survive any termination of this Agreement.
9. MISCELLANEOUS.
9.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
9.1.1 Except as set forth in Section 9.1,2, the representations, warranties
and agreements of each party hereto shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any other
party hereto, any person controlling any such party or any of their officers or
directors, whether prior to or after the execution of this Agreement.
9.1.2 The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article 8 hereof; except that the agreements set forth in Articles
1, 2 and 9 and Section 6.3 hereof shall survive the Effective Time and those
set forth in Section 8.2 and Article 9 hereof shall survive termination.
I-25
9.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof. The representations,
warranties, covenants and agreements set forth in this Agreement and in any
financial statements, schedules or exhibits delivered pursuant hereto
constitute all the representations, warranties, covenants and agreements of the
parties hereto and upon which the parties have relied and except as may be
specifically provided herein, no change, modification, amendment, addition or
termination of this Agreement or any part thereof shall be valid unless in
writing and signed by or on behalf of the party to be charged therewith.
9.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be given or made pursuant to any of the provisions of
this Agreement shall be deemed to have been duly given or made for all purposes
if sent by certified or registered mail, return receipt requested and postage
prepaid, hand delivered, overnight delivery service, or sent by telephone
facsimile as follows:
If to WMS, at:
WMS Industries Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
With a copy to:
Shack & Siegel, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to Company, at:
Bally Gaming International, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
With a copy to:
Shereff, Friedman, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
or at such other address as any party may specify by notice given to other
party in accordance with this Section. The date of giving of any such notice
shall be three days following the posting of the mail, the date of hand
delivery, the business day following delivery to an overnight delivery service
or the date sent by telephone facsimile.
9.4 NO WAIVER. No waiver of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver in respect of any subsequent breach or
default, either of similar or different nature, unless expressly so stated in
writing.
I-26
9.5 GOVERNING LAW. Except to the extent that Delaware Law is mandatorily
applicable to the Merger and the rights of the Company Stockholders and WMS
Stockholders, this Agreement shall be governed, interpreted and construed in
accordance with the laws of the State of New York applicable to contracts to be
performed entirely within that State. Should any clause, section or part of
this Agreement be held or declared to be void or illegal for any reason, all
other clauses, sections or parts of this Agreement which can be effected
without such illegal clause, section or part shall nevertheless continue in
full force and effect.
9.6 EXPENSES, TRANSFER TAXES; CERTAIN PAYMENTS.
9.6.1 Each party hereto shall bear all fees and expenses incurred by such
party in connection with, relating to or arising out of the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, financial advisors', attorneys', accountants' and other
professional fees and expenses, except that (i) the filing fee in
connection with the filing of the Registration Statement or the Proxy
Statement--Prospectus with the SEC, (ii) the expenses incurred in
connection with the printing and mailing of the Registration Statement and
the Proxy Statement--Prospectus and (iii) the HSR filing fee, shall be
shared equally by the Company and WMS.
9.6.2 So long as WMS shall have not breached its obligations hereunder,
if this Agreement is terminated by the Company pursuant to clause (v) of
Section 8.1.4, within two business days after such termination, the Company
shall pay WMS a fee of Four Million Eight Hundred Thousand ($4,800,000)
Dollars, which amount shall be payable by wire transfer of same day funds.
9.6.3 So long as WMS shall not have breached its obligations hereunder,
if this Agreement is terminated by the Company pursuant to clauses (iii)
and (iv) of Section 8.1.4 hereof and if any of the following shall have
occurred or occur within six months after such termination:
(i) any person (other than WMS or any WMS Subsidiary) shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), a tender offer or exchange offer to purchase any shares of
Company Common such that, upon consummation of such offer, such person
would own or control 35% or more of the then outstanding Company Common
and the Board of Directors of the Company, within ten business days
after such tender offer or exchange offer is so commenced, either fails
to recommend against acceptance of such tender offer or exchange offer
by the Company Stockholders or takes no position with respect to the
acceptance of such tender offer or exchange offer by the Company
Stockholders; provided, however, that with respect to a tender offer or
exchange offer first commenced within six months after termination of
this Agreement by the Company the fee provided for in this Section
9.6.3 shall not be payable unless such tender offer or exchange offer
is consummated, whether or not such consummation is within such six
month period.
(ii) the Company or any Company Subsidiary shall have authorized,
recommend, proposed or publicly announced an intention to authorize,
recommend or propose, or entered into, an agreement with any person
(other than WMS or any WMS Subsidiary) to (A) effect a merger,
consolidation or similar transaction involving the Company or any
Company Subsidiary, (B) sell, lease or otherwise dispose of assets of
the Company or any Company Subsidiary representing 35% or more of the
consolidated assets of the Company and the Company Subsidiaries or (C)
issue, sell or otherwise dispose of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
(or options, rights or warrants to purchase, or securities convertible
into, such securities) representing 35% or more of the voting power of
the Company or any Company Subsidiary; or
(iii) any person (other than WMS, any WMS Subsidiary, the Company or
any Company Subsidiary in a fiduciary capacity) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act) or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire
beneficial ownership of, 35% or more of the then outstanding Company
Common;
I-27
then, within two business days after such occurrence, the Company shall pay WMS
a fee of Four Million Eight Hundred Thousand ($4,800,000) Dollars, which amount
shall be payable by wire transfer of same day funds.
9.6.4 So long as WMS shall not have breached its obligations hereunder, if
this Agreement is terminated by the Company pursuant to clause (iii) of Section
8.1.4 hereof and Section 9.6.3 is not applicable thereto, within two business
days after such termination, the Company shall reimburse WMS for its out-of-
pocket costs and expenses incurred in connection with the transactions
contemplated by this Agreement, including without limitation fees and
disbursements of counsel, financial advisors and accountants, up to but not in
excess of the sum of One Million Two Hundred Fifty Thousand ($1,250,000)
Dollars. If the Company fails to promptly pay any amount due pursuant to
Sections 9.6.2, 9.6.3 or9.6.4 and, in order to obtain such payment, WMS
commences a suit which results in a judgment against the Company for all or a
substantial portion of the amounts due thereunder, the Company shall pay to WMS
its costs and expenses (including reasonable attorneys' fees) in connection
with such suit.
9.6.5 So long as the Company shall not have breached its obligations
hereunder, if this Agreement is terminated by WMS pursuant to clause (iii) of
Section 8.1.3 hereof and prior to such termination any person shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act) or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, more
than 35% of the then outstanding WMS Common, within two business days after
such termination, WMS shall pay the Company a fee of Four Million Eight Hundred
Thousand ($4,800,000) Dollars, which amount shall be payable by wire transfer
of same day funds.
9.6.6 So long as the Company shall not have breached its obligations
hereunder, if this Agreement is terminated by WMS pursuant to clause (iii) of
Section 8.1.3 hereof and Section 9.6.5 is not applicable thereto, within two
business days after such termination, WMS shall reimburse the Company for its
out-of-pocket costs and expenses incurred in connection with the transactions
contemplated by this Agreement, including without limitation fees and
disbursements of counsel, financial advisors and accountants, up to but not in
excess of the sum of One Million Two Hundred Fifty Thousand ($1,250,000)
Dollars. If WMS fails to promptly pay any amount due pursuant to Sections 9.6.5
or 9.6.6 and, in order to obtain such payment, the Company commences suit which
results in a judgment against WMS for all or a substantial portion of the
amounts due thereunder, WMS shall pay to the Company its costs and expenses
(including reasonable attorneys' fees) in connection with such suit.
9.7 ASSIGNMENT. This Agreement shall not be assigned by operation of law or
otherwise.
9.8 BINDING AGREEMENT. This Agreement shall be binding upon and inure solely
to the benefit of the parties hereto, and nothing in this Agreement, express or
implied (other than the provisions of Section 6.3), is intended to or shall
confer upon any person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
9.9 HEADINGS. The headings or captions under sections of this Agreement are
for convenience and reference only and do not in any way modify, interpret or
construe the intent of the parties or effect any of the provisions of this
Agreement.
9.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts
each of which when taken together shall constitute one agreement.
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In Witness Whereof, the parties hereto have caused this agreement to be
signed on the date and year first above written.
WMS Industries Inc.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By: _________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
Bally Gaming International, Inc.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
By: _________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chairman
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