1
Exhibit 2
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 8, 2001
AMONG
INTERNATIONAL GAME TECHNOLOGY
NAC CORPORATION
AND
ANCHOR GAMING
2
TABLE OF CONTENTS
PAGE
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger...................................................... 2
SECTION 1.2 Closing......................................................... 2
SECTION 1.3 Effective Time.................................................. 2
SECTION 1.4 Effects of the Merger........................................... 2
SECTION 1.5 Articles of Incorporation and By-laws........................... 2
SECTION 1.6 Directors....................................................... 2
SECTION 1.7 Officers........................................................ 2
SECTION 1.8 Alternative Structure........................................... 2
SECTION 1.9 Additional Actions.............................................. 3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock......................................... 3
SECTION 2.2 Exchange of Certificates........................................ 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company................... 7
SECTION 3.2 Representations and Warranties of Parent and Sub................ 18
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business............................................. 24
SECTION 4.2 No Inconsistent Activities...................................... 27
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of Form S-4 and the Proxy Statement; Stockholders'
Meetings........................................................ 28
SECTION 5.2 Access to Information; Confidentiality.......................... 29
SECTION 5.3 Reasonable Efforts; Notification................................ 30
SECTION 5.4 Gaming Approvals................................................ ▇▇
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SECTION 5.5 Stock Option Plan; Stock........................................ 32
SECTION 5.6 Indemnification, Exculpation and Insurance...................... 33
SECTION 5.7 Letters of Accountants.......................................... 34
SECTION 5.8 Fees and Expenses............................................... 34
SECTION 5.9 Public Announcements............................................ 35
SECTION 5.10 Affiliate Letters............................................... 35
SECTION 5.11 Resignation of Directors and Officers........................... 35
SECTION 5.12 Rights Agreement................................................ 35
SECTION 5.13 Board of Directors of Parent.................................... 35
SECTION 5.14 Officer's Certificates for Tax Opinions......................... 35
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligations to Effect the Merger..... 35
SECTION 6.2 Additional Conditions to Obligations of Parent and Sub.......... 36
SECTION 6.3 Additional Conditions to Obligations of the Company............. 38
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination..................................................... 38
SECTION 7.2 Effect of Termination........................................... 40
SECTION 7.3 Amendment....................................................... 40
SECTION 7.4 Extension; Waiver............................................... 40
SECTION 7.5 Termination Fee................................................. 41
SECTION 7.6 Procedure for Termination, Amendment, Extension or Waiver....... 41
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties; Construction..... 41
SECTION 8.2 Notices......................................................... 42
SECTION 8.3 Definitions..................................................... 43
SECTION 8.4 Interpretation.................................................. 43
SECTION 8.5 Counterparts.................................................... 43
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.................. 43
SECTION 8.7 Governing Law................................................... 43
SECTION 8.8 Assignment...................................................... 43
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EXHIBITS
Exhibit A Form of Voting Agreement
Exhibit B Form of Affiliate Letter
Exhibit C Form of Tax Certificates
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 8, 2001, among
INTERNATIONAL GAME TECHNOLOGY, a Nevada corporation, whose address is ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ("PARENT"), NAC Corporation, a Nevada
corporation, and a direct wholly owned subsidiary of Parent, whose address is
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ("SUB"), and ANCHOR GAMING, a Nevada
corporation, whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
(the "COMPANY").
BACKGROUND
A. The respective Boards of Directors of Parent, Sub and the Company
have approved the merger of Sub with and into the Company (the "MERGER"), upon
the terms and subject to the conditions set forth in this Agreement and in
accordance with the Nevada Revised Statutes (the "NRS"), whereby each issued and
outstanding share of common stock of the Company, $.005 par value per share (the
"COMPANY COMMON STOCK"), other than shares to be cancelled in accordance with
Section 2.1(b), will be converted into the right to receive a certain number of
shares of common stock, $.000625 par value per share, of Parent ("PARENT COMMON
STOCK").
B. The Merger requires the approval of the holders of a majority of the
outstanding shares of the Company Common Stock (the "COMPANY STOCKHOLDER
APPROVAL").
C. The issuance of shares of Parent Common Stock in the Merger may
require the approval of the holders of a majority of the votes cast at a meeting
of the holders of Parent Common Stock (the "PARENT STOCKHOLDER APPROVAL" and
together with the Company Stockholder Approval, the "STOCKHOLDER APPROVALS").
D. Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
E. For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization with the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "CODE").
F. Concurrently with the execution and delivery of this Agreement and as
a condition and inducement to Parent's willingness to enter into this Agreement,
the Company's Chief Executive Officer and Chief Operating Officer -- Gaming
Operations shall have each entered into a Voting Agreement (the "COMPANY VOTING
AGREEMENTS") with Parent in the form of Exhibit A attached hereto.
AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the NRS, Sub shall be merged
with and into the Company at the Effective Time (as defined in Section 1.3).
Following the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION") and shall succeed to and assume all the rights and obligations of
the Company and of Sub in accordance with the NRS.
SECTION 1.2 Closing. The closing of the Merger will take place at 10:00
a.m. on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article VI (the "CLOSING DATE"), at the offices of O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another time, date or place is
agreed to in writing by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall prepare,
execute and acknowledge and thereafter file articles of merger in such form as
is required by Section 92A.200 of the NRS and shall make all other filings or
recordings required under the NRS. The Merger shall become effective at such
time as such filing or filings are made with the Secretary of State of the State
of Nevada, or at such other time as Sub and the Company shall agree should be
specified in such filings (the date and time of such filing, or such later date
or time as may be set forth therein, being the "EFFECTIVE TIME").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 92A.250 of the NRS and all other effects specified in the
applicable provisions of the NRS.
SECTION 1.5 Articles of Incorporation and By-laws. At the Effective Time
and subject to the provisions of Section 5.6(a), the articles of incorporation
and by-laws of Surviving Corporation shall be amended to be identical to the
articles of incorporation and by-laws, respectively, of Sub as in effect
immediately prior to the Effective Time (except that the name of the Surviving
Corporation shall be changed to a name designated by Parent and the bylaw
amendment referenced in Section 3.1(j)(v) shall remain in effect in accordance
with such section).
SECTION 1.6 Directors. The directors of Sub at the Effective Time shall
continue as the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.7 Officers. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until the earlier of their death, resignation or removal.
SECTION 1.8 Alternative Structure. Notwithstanding anything to the
contrary herein, the parties to this Agreement may, by mutual consent, elect, in
lieu of merging Sub into the Company as hereinabove provided, to merge the
Company into Sub. In such event, the parties
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agree to execute an appropriate amendment to this Agreement in order to reflect
the foregoing change.
SECTION 1.9 Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Sub or the Company or otherwise to carry out
this Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Sub or the
Company, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of Sub or the Company, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Sub, the Company or the
holders of any shares of Company Common Stock or any shares of capital stock of
Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one fully paid and nonassessable share of common stock of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each share of
Company Common Stock that is owned by the Company or by any subsidiary of the
Company and each share of Company Common Stock that is owned by Parent, Sub or
any other subsidiary of Parent immediately prior to the Effective Time shall
automatically be cancelled and retired without any conversion thereof and no
consideration shall be delivered with respect thereto.
(c) Conversion of Common Stock.
(i) Each share of the Company Common Stock issued and outstanding as
of the Effective Time, other than shares to be cancelled in accordance with
Section 2.1(b), shall be converted, subject to Section 2.2(d), into one share of
Parent Common Stock (the "EXCHANGE RATIO"), subject to adjustment as provided
for in this Section 2.1(c)(i). The Exchange Ratio shall not be adjusted if the
Share Value (as defined below) is equal to or greater than $50.00, but not
greater than $75.00. If the Share Value is greater than $75.00, and Parent
notifies the Company in writing of its election to terminate this Agreement
pursuant to Section 7.1(j), the Company shall have the option in its sole and
absolute discretion, but not the obligation, to adjust the Exchange Ratio to be
equal to the quotient of (a) $75.00 divided by (b) the Share Value. If the Share
Value is greater than $75.00, and if Parent does not elect to terminate this
Agreement pursuant to Section 7.1(j), the Exchange Ratio shall remain unchanged.
If the Share Value is less than $50.00, and the Company notifies Parent in
writing its election to terminate this Agreement
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pursuant to Section 7.1(h) hereof, Parent shall have the option in its sole and
absolute discretion, but not the obligation, to adjust the Exchange Ratio to be
equal to the quotient of (c) $50.00, divided by (d) the Share Value, and the
Company shall be obligated to accept such adjustment. If the Share Value is less
than $50.00, and if the Company does not elect to terminate this Agreement
pursuant to Section 7.1(h), the Exchange Ratio shall be unchanged.
For purposes hereof, the "Share Value" shall be an amount equal to the average
closing price for the Parent Common Stock as reported on the New York Stock
Exchange for the twenty (20) consecutive trading days ending on the third
business day preceding the date of the Company Stockholders' Meeting (as defined
in Section 5.1(d)), so long as the Closing Date occurs within five business days
of the Company Stockholders' Meeting or, if the Closing Date is more than five
business days after the Company Stockholders' Meeting, the date that is the
third business day preceding the Closing Date. For example, if the Company's
Stockholders' Meeting is on a Wednesday and the Closing Date is less than five
business days after that date, the last date of the measurement period would be
the preceding Friday, assuming that each of the interim days and the Friday were
business days.
(ii) If, prior to the Effective Time, Parent should split or combine
the Parent Common Stock, or pay a stock dividend or other stock distribution in
Parent Common Stock, or if the Parent Common Stock is altered or adjusted in any
reclassification, recapitalization or similar transaction, then the Exchange
Ratio will be appropriately adjusted to reflect such split, combination,
dividend or other distribution or reclassification, recapitalization or similar
transaction.
(iii) As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be converted and
retired and shall cease to exist, and each certificate previously representing
any such shares shall thereafter represent the right to receive a certificate
representing the shares of Parent Common Stock into which such Company Common
Stock was converted in the Merger. The holders of such certificates previously
evidencing such shares of Company Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock as of the Effective Time except as otherwise provided
herein or by law. Such certificates previously representing shares of Company
Common Stock shall be exchanged for certificates representing whole shares of
Parent Common Stock issued in consideration therefor upon the surrender of such
certificates in accordance with the provisions of Section 2.2, without interest.
No fractional shares of Parent Common Stock shall be issued and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.2(d).
(iv) The Company represents and warrants that the holders of the
Company Common Stock are not entitled to "dissenters" rights under applicable
law or under the articles of incorporation of the Company.
SECTION 2.2 Exchange of Certificates.
(a) Exchange Procedure. At or prior to the Effective Time, Parent shall
deposit with a bank or trust company designated by Parent and reasonably
acceptable to Company (the "EXCHANGE AGENT") for the benefit of the holders of
Company Common Stock outstanding
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immediately prior to the Effective Time, for exchange in accordance with this
Section 2.2, through the Exchange Agent, (i) certificates evidencing the shares
of Parent Common Stock issuable pursuant to Section 2.1(c) in exchange for
outstanding shares of Company Common Stock and (ii) cash in an aggregate amount
sufficient to pay for fractional shares pursuant to Section 2.2(d). Any
interest, dividends, or other income earned on the investment of cash or other
property deposited by Parent with the Exchange Agent in accordance with this
Section 2.2 shall be for the account of and payable to Parent. As soon as
reasonably practicable after the Effective Time but in any event no later than
10 days after the Effective Time, Parent shall cause to be mailed to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"CERTIFICATES"), (i) a letter of transmittal (which shall be in customary form
and shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent), and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Parent
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
evidencing that number of whole shares of Parent Common Stock which such holder
has the right to receive in respect of the shares of Company Common Stock
formerly evidenced by such Certificate (after taking into account all shares of
Company Common Stock then held of record by such holder), cash in lieu of
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.2(d) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.2(b), and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, a certificate representing the proper number of shares
of Parent Common Stock may be issued to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate,
accompanied by all documents required to evidence and effect such transfer,
shall be properly endorsed with signature guarantee or otherwise be in proper
form for transfer, and the person requesting such payment shall pay any transfer
or other taxes required by reason of the issuance of shares of Parent Common
Stock to a person other than the registered holder of such Certificate or
establish to the satisfaction of Parent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate evidencing whole
shares of Parent Common Stock, cash in lieu of any fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.2(d) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(b). No interest will be paid or will accrue on any cash payable
pursuant to Section 2.2(b) or 2.2(d).
(b) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.2(d), in each case
until the surrender of such Certificate in accordance with this Article II.
Subject to the effect of applicable escheat laws, following surrender of such
Certificate, there shall be paid to
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the holder of the certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any such cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(d)
and the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
(c) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid pursuant
to Section 2.2(b) or 2.2(d)) shall be deemed to have been issued (and paid) in
full satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by the Company on such shares of Company Common Stock in accordance with
the terms of this Agreement or prior to the date of this Agreement and which
remain unpaid at the Effective Time and have not been paid prior to surrender.
At the Effective Time, the stock transfer books of the Company shall be closed,
and there shall be no further registrations of transfers of shares of Company
Common Stock thereafter on the records of the Company. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, Parent or the
Exchange Agent for any reason, they shall be cancelled and exchanged as provided
in this Article II.
(d) No Fractional Shares.
(i) No Certificates or scrip representing fractional shares of
Parent Common Stock 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 of a stockholder of Parent.
(ii) Each holder of shares of Company Common Stock issued and
outstanding at the Effective Time who would otherwise be entitled to receive a
fractional share of Parent Common Stock upon surrender of stock certificates for
exchange pursuant to this Article II (after taking into account all shares of
Company Common Stock then held by such holder) shall receive, in lieu thereof,
cash in an amount equal to the value of such fractional shares, which shall be
equal to the fraction of a share of Parent Common Stock that would otherwise be
issued multiplied by the closing price of Parent's Common Stock on the Closing
Date as reported in The Wall Street Journal.
(iii) As soon as practicable after the determination of the amount
of cash, if any, to be paid to the holders of Certificates with respect to any
fractional share interests, Parent shall promptly pay such amounts to such
holders of Certificates subject to and in accordance with the terms of Section
2.2(b).
(e) No Liability. None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any holder of shares of Company Common Stock for any shares
of Parent Common
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Stock (or dividends or distributions with respect thereto) or cash otherwise
deliverable or payable to any holder of shares of Company Common Stock that is
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. Except as set
forth on the Disclosure Schedule (provided that an item on such Disclosure
Schedule shall be deemed to qualify only the particular subsection or
subsections of this Section 3.1 specified for such item) delivered by the
Company to Parent prior to the execution of this Agreement (the "COMPANY
DISCLOSURE SCHEDULE"), the Company represents and warrants to Parent and Sub as
follows:
(a) Organization, Standing and Corporate Power. The Company is and each
of its subsidiaries is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority (or, in the case of limited liability company subsidiaries, limited
liability company power and authority) to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified or
licensed to do business as a foreign corporation (or, in the case of limited
liability company subsidiaries, as a foreign limited liability company) and is
in good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed would not have a Material Adverse Effect on the Company. The Company
has delivered to Parent complete and correct copies of its articles of
incorporation and by-laws and the articles of incorporation and by-laws or other
organizational documents of its subsidiaries, in each case as amended to the
date of this Agreement.
(b) Subsidiaries and Other Equity Interests. Section 3.1(b) of the
Company Disclosure Schedule contains a list of each subsidiary of the Company
and its jurisdiction of incorporation or organization. All the outstanding
shares of capital stock of each such subsidiary (or, in the case of limited
liability company subsidiaries, the member interests) have been validly issued
and are fully paid and nonassessable and are owned as set forth in Section
3.1(b) of the Company Disclosure Schedule, free and clear of all pledges,
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever (collectively, "LIENS"). Except as set forth in Section 3.1(b)
of the Company Disclosure Schedule, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, limited partnership, limited liability company, joint venture or
other entity.
(c) Capital Structure. The authorized capital stock of the Company
consists of as of the date hereof, and will consist of as of the Effective Time,
50,000,000 shares of Company Common Stock and 1,000,000 shares of preferred
stock, $.01 par value per share (the "COMPANY PREFERRED STOCK"), of which 50,000
shares are designated Series A Junior Participating Preferred Stock ("JUNIOR
PREFERRED STOCK"). The rights, privileges and preferences of the Company Common
Stock and Company Preferred Stock are as stated in the Company's Restated
Articles of Incorporation. As of the close of business on July 6, 2001, (i)
14,859,642 shares of the Company Common Stock and no shares of the Company
Preferred
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Stock were issued and outstanding, (ii) 14,380,681 shares of Company Common
Stock were held by the Company in its treasury, (iii) 2,399,966 shares of
Company Common Stock were reserved for issuance upon exercise of currently
outstanding Stock Options (as defined in Section 5.5), and (iv) 50,000 shares of
Junior Preferred Stock were reserved for issuance upon exercise of preferred
share purchase rights (the "RIGHTS") issued pursuant to the Rights Agreement,
dated as of October 17, 1997, as amended, between the Company and The Chase
Manhattan Bank, as Rights Agent (the "RIGHTS AGREEMENT"). All issued and
outstanding shares of Company Common Stock are, and all shares which may be
issued upon the exercise of Stock Options will be, duly authorized, validly
issued, fully paid and nonassessable, and are not subject to and were not issued
in violation of any preemptive rights. Except as set forth in Section 3.1(c) of
the Company Disclosure Schedule and to the knowledge of the Company, as of the
date hereof, there are no voting trusts, voting agreements, irrevocable proxies
or other agreements with respect to any voting shares of capital stock of the
Company. There are no bonds, debentures, notes or other indebtedness of the
Company or any of its subsidiaries having the right to vote (or convertible into
or exchangeable for other securities having the right to vote) on any matters on
which the stockholders of the Company may vote. Except as set forth above, as of
the date of this Agreement, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its subsidiaries is a party or by
which any of them is bound obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or of any of
its subsidiaries or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock (or options to acquire
any such shares) of the Company or any of its subsidiaries. There are no
agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any person is or may be entitled to receive any
payment based on the revenues, earnings or financial performance of the Company
or any of its subsidiaries or assets or calculated in accordance therewith
(other than ordinary course payments or commissions to sales representatives of
the Company based upon revenues generated by them without augmentation as a
result of the transactions contemplated hereby) or to cause the Company or any
of its subsidiaries to file a registration statement under the Securities Act of
1933, as amended (the "SECURITIES ACT"), or which otherwise relate to the
registration of any securities of the Company.
(d) Authority; Noncontravention. The Company has the requisite corporate
power and authority to enter into this Agreement and, subject to the Company
Stockholder Approval, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of the
Company, subject to the Company Stockholder Approval of this Agreement. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally.
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The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, except as set forth in Section
3.1(d) of the Company Disclosure Schedule, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of the Company or any of its
subsidiaries under, (i) the articles of incorporation or by-laws of the Company
or the comparable charter or organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) or (iii), any such conflicts, violations, defaults or
rights that individually or in the aggregate would not (x) have a Material
Adverse Effect on the Company, (y) impair in any material respect the ability of
the Company to perform its obligations under this Agreement or (z) prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "GOVERNMENTAL ENTITY"), is required
by the Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated by this Agreement, except for (i) the filing with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice (the "SPECIFIED AGENCIES") of a premerger notification and report form
by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇
(▇▇▇ "▇▇▇ ▇▇▇"), (▇▇) the filing with the Securities and Exchange Commission
(the "SEC") of (x) the Proxy Statement (as defined in Section 5.1) and (y) such
reports under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), as may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (iii) the filing of the articles of merger with
the Secretary of State of the State of Nevada and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (iv) the filing with and the approval by all applicable gaming
regulatory bodies and all applicable lottery regulatory bodies in jurisdictions
where the Company or its subsidiaries are engaged in business and (v) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made would not have a Material
Adverse Effect on the Company, impair in any material respect the ability of the
Company to perform its obligations under this Agreement or prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement. Neither the Company nor any subsidiary of the Company nor any
director or officer of the Company or any subsidiary of the Company has received
any written claim, demand, notice, complaint, court order or administrative
order from any Governmental Entity in the past three years, asserting that a
license of it or them, as applicable, under any Gaming Laws (as defined in
Section 3.1(o)) or under any Lottery Laws (as defined in Section 3.1(o)) is
being or may be revoked or suspended other than such claims, demands, notices,
complaints, court orders or administrative orders which would not have a
Material Adverse Effect on the Company.
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14
(e) Company SEC Documents; Financial Statements. Since January 1, 1998,
the Company has timely filed with the SEC all required reports and forms and
other documents (the "COMPANY SEC DOCUMENTS"). As of their respective dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents and none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any Company SEC Document has been revised or
superseded by a later-filed Company SEC Document filed and publicly available
prior to the date of this Agreement, none of the Company SEC Documents contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order 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 SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended. Except as set forth in the Company SEC
Documents filed prior to the date of this Agreement and publicly available and
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the most recent balance
sheet included in the Company SEC Documents, neither the Company nor any of its
subsidiaries has any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting principles to be recognized or disclosed on a balance sheet of the
Company and its consolidated subsidiaries or in the notes thereto.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the Form S-4 (as defined in Section 5.1) will, at the time the Form S-4
is filed with the SEC, at any time it is amended or supplemented or at the time
it becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading or (ii) the Proxy Statement will, at the
date it is first mailed to the Company's stockholders or the Parent's
stockholders or at the time of the Company Stockholders' Meeting or the Parent
Stockholders' Meeting (as defined in Section 5.1(d)), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder, except that
no representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Sub specifically for inclusion or incorporation by reference therein.
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15
(g) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed prior to the date of this Agreement and publicly
available, since June 30, 2000, the Company has conducted its business only in
the ordinary course consistent with prior practice, and there has not been (i)
any Material Adverse Change in the Company, (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock, (iii) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iv) any granting by the
Company or any of its subsidiaries to any officer or management employee of the
Company or any of its subsidiaries of (x) any increase in compensation, except
in the ordinary course of business or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the Company SEC Documents filed prior to the date of this
Agreement (a list of all such employment agreements with officers or management
employees being set forth in Section 3.1(g) of the Company Disclosure Schedule)
or (y) any right to participate in (by way of bonus or otherwise) the revenues
or profits of the Company or any of its subsidiaries, (v) any granting by the
Company or any of its subsidiaries to any such officer or management employee of
any increase in severance or termination pay, except with respect to executive
officers of the Company as was required under employment, severance or
termination agreements in effect as of the date of the most recent audited
financial statements included in the Company SEC Documents filed prior to the
date of this Agreement and publicly available and with respect to other
management employees of the Company in the ordinary course of business, (vi) any
entry into, or renewal or modification, by the Company or any of its
subsidiaries, of any employment, consulting, severance or termination agreement
with any officer, director or management employee of the Company or any of its
subsidiaries, (vii) any damage, destruction or loss, whether or not covered by
insurance, that has had or would reasonably be expected to have a Material
Adverse Effect on the Company or (viii) any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities or business. Since March 31, 2001, there has not been any other
action taken by the Company or any of its subsidiaries which, if Section 4.1(a)
had then been in effect, would have been prohibited by such section if taken
without Parent's consent (and no agreement, understanding, obligation or
commitment to take any such action exists).
(h) Litigation. Except as disclosed in the Company SEC Documents filed
prior to the date of this Agreement and publicly available, there is no suit,
action, investigation, audit or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries that would
(i) have a Material Adverse Effect on the Company, (ii) impair in any material
respect the ability of the Company to perform its obligations under this
Agreement or (iii) prevent or delay in any material respect the consummation of
any of the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its subsidiaries having, or
which is reasonably likely to have, any effect referred to in the foregoing
clauses (i), (ii) or (iii).
(i) Brokers. Neither the Company nor any of its subsidiaries nor any of
their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees (other than financial advisory fees payable
to Dresdner Kleinwort ▇▇▇▇▇▇▇▇▇▇▇, Inc., as provided in the letter
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agreement, dated August 29, 2000, as amended by the letter agreements provided
to Parent and no broker or finder has acted directly or indirectly for the
Company or any of its subsidiaries in connection with this Agreement or the
transactions contemplated hereby.
(j) Voting Requirements. The Board of Directors of the Company at a
meeting duly called and held: (i) determined that the Merger is advisable and
fair and in the best interests of the Company and its stockholders; (ii)
approved the Merger and this Agreement and the transactions contemplated by this
Agreement; (iii) recommended approval of this Agreement and the Merger by the
holders of Company's Common Stock and directed that the Merger be submitted for
consideration by the Company's stockholders, (iv) adopted a resolution having
the effect of causing the Merger not to be subject to the Rights Agreement or
Sections 78.411 through 78.444, inclusive, of the NRS and (v) adopted a
resolution amending the bylaws of the Company to provide that Sections 78.378
through 78.3793, inclusive, of the NRS do not apply to any acquisition of a
controlling interest (as defined in Section 78.3875 of the NRS) in the Company
in connection with the Merger, this Agreement and the transactions contemplated
by this Agreement which amendment Parent shall cause to remain in effect for at
least ten days following the Effective Time. The affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock entitled to vote
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve the Merger, this Agreement and the transactions
contemplated by this Agreement.
(k) Title to Properties. The Company and its subsidiaries have good and
indefeasible title to, or valid leasehold interests in, all their properties and
assets except where such failure would not have a Material Adverse Effect on the
Company.
(l) ERISA Compliance.
(i) The Company has delivered to, or made available for review by,
Parent true, complete and correct copies of all "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and all other collective bargaining agreements or bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other plans,
arrangements or understandings (whether or not legally binding) (collectively,
"BENEFIT PLANS") currently maintained, or contributed to, or required to be
maintained or contributed to, by the Company or any other person or entity that,
together with the Company, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (each a "COMMONLY CONTROLLED ENTITY"), including all
employment, termination, severance or other contracts for the benefit of any
current or former employees, officers or directors of the Company or any of its
subsidiaries that require any material future performance by the Company. The
Company has delivered to, or made available for review by, Parent true, complete
and correct copies of (1) the most recent annual report on Form 5500 filed with
the Internal Revenue Service ("IRS") with respect to each of its Benefit Plans
(if any such report was required), (2) the most recently prepared actuarial
report for each such Benefit Plan, (3) the most recent summary plan description
for each such Benefit Plan for which such summary plan description is required,
(4) the most recently received IRS determination letter for each such Benefit
Plan and (5) each trust agreement and group annuity contract relating to any
such Benefit Plan. Neither the Company nor any Commonly
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17
Controlled Entity presently sponsors, maintains, contributes to, is required to
contribute to, nor has the Company or any Commonly Controlled Entity ever
sponsored, maintained, contributed to, or been required to contribute to, any
employee pension benefit plan subject to Title IV or Section 302 of ERISA (a
"PENSION PLAN"), including, without limitation, any multiemployer plan within
the meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 412 of the Code.
(ii) Each of the Company's and its subsidiaries' Benefit Plans has
been administered in accordance with its terms except for failures that would
not have a Material Adverse Effect. The Company, each of its subsidiaries and
all such Benefit Plans are in compliance with applicable provisions of ERISA and
the Code except for failures that would not have a Material Adverse Effect.
(iii) Except for cases that would not have a Material Adverse
Effect, all of the Company's and its subsidiaries' Pension Plans intended to be
qualified under Section 401(a) of the Code have been the subject of
determination letters from the IRS to the effect that such Pension Plans are
qualified and exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code and no such determination letter has been revoked nor,
to the knowledge of the Company, has revocation been threatened. No Pension Plan
has been operated in any respect that would adversely affect its qualification
or been amended since the date of its most recent determination letter or
application therefor in any respect that would adversely affect its
qualification or materially increase its costs.
(iv) Except for cases that would not have a Material Adverse Effect,
none of the Company, any of its subsidiaries, any officer of the Company or any
of its subsidiaries or any of the Company's or its subsidiaries' Benefit Plans
which are subject to ERISA, including, without limitation, its Pension Plans,
any trusts created thereunder or any trustee or administrator thereof, has
engaged in a non-exempt "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject the Company, or any of its
subsidiaries or any officer of the Company or any of its subsidiaries, to tax or
penalty under ERISA, the Code or other applicable law that is material to the
business of the Company and that has not been corrected. Except for cases that
would not have a Material Adverse Effect, neither any of such Benefit Plans nor
any of such trusts has been terminated.
(v) Except as set forth in Section 3.1(l) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits payable to or in
respect of any employee or former employee of the Company or any subsidiary of
the Company or the beneficiary or dependent of any such employee or former
employee.
(vi) With respect to any of the Company's or any of its
subsidiaries' Benefit Plans that is an employee welfare benefit plan, (x) no
such Benefit Plan is funded through a "welfare benefit fund," as such term is
defined in Section 419(e) of the Code, (y) each such Benefit Plan that is a
"group health plan," as such term is defined in Section 5000(b)(1) of the Code,
complies in all material respects with the applicable requirements of Section
4980B(f) of the Code and (z) each such Benefit Plan (including any such Benefit
Plan covering retirees or
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18
other former employees) may be amended or terminated without material liability
to the Company or any of its subsidiaries on or at any time after the Effective
Time.
(vii) No Commonly Controlled Entity has incurred any material
liability to a Pension Plan (other than for contributions not yet due).
(viii) Except as disclosed in Section 3.1(l) of the Company
Disclosure Schedule, neither the Company nor any subsidiary has any unfunded
liabilities pursuant to any Company Benefit Plan that is not intended to be
qualified under Section 401(a) of the Code and is an employee pension benefit
plan within the meaning of Section 3(2) of ERISA, a nonqualified deferred
compensation plan or an excess benefit plan.
(m) Taxes.
(i) Each of the Company and its subsidiaries has timely filed all
material federal, state, local and foreign tax returns and reports required to
be filed by it through the date hereof and shall timely file all such returns
and reports required to be filed on or before the Effective Time. All such
returns and reports are and will be true, complete and correct in all material
respects. The Company and each of its subsidiaries has paid and discharged (or
the Company has paid and discharged on such subsidiary's behalf) all material
taxes due from them, other than such taxes as are being contested in good faith
by appropriate proceedings and are adequately reserved for on the most recent
financial statements contained in the Company SEC Documents filed prior to the
date of this Agreement and publicly available.
(ii) No claim or deficiency for any taxes has been proposed,
threatened, asserted or assessed by the IRS or any other taxing authority or
agency against the Company, or any of its subsidiaries which would reasonably be
expected to have a Material Adverse Effect upon the Company. No requests for
waivers of the time to assess any taxes are pending. No power of attorney has
been granted by the Company or any of its subsidiaries with respect to taxes
which is currently in force. The federal income tax returns of the Company have
not been examined by the IRS in the last six years. Neither the Company nor any
of its subsidiaries has made any election under Section 341(f) of the Code.
(iii) To the Company's knowledge, neither the Company nor any of its
subsidiaries has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would prevent the Merger from qualifying as a
reorganization within the meaning of Sections 368 of the Code.
(iv) As used in this Agreement, "taxes" shall include all federal,
state, local and foreign income, property, sales, excise and other taxes, of any
nature whatsoever (whether payable directly or by withholding), together with
any interest and penalties, additions to tax or additional amounts imposed with
respect thereto. Notwithstanding the definition of "subsidiary" set forth in
Section 8.3 of this Agreement, for the purposes of this Section 3.1(m),
references to the Company and each of its subsidiaries shall include former
subsidiaries of the Company for the periods during which any such corporations
were included in the consolidated federal income tax return of the Company.
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19
(n) No Excess Parachute Payments. Except as set forth in Section 3.1(n)
of the Company Disclosure Schedule, any amount that could be received (whether
in cash or property or the vesting of property) in connection with any of the
transactions contemplated by this Agreement by any employee, officer or director
of the Company or any of its affiliates who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or Benefit Plan currently in effect or in effect as of the Closing Date would
not be characterized as an "excess parachute payment" (as such term is defined
in Section 280G(b)(1) of the Code).
(o) Compliance with Applicable Laws.
(i) Each of the Company and its subsidiaries has in effect all
material federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights ("PERMITS") necessary for it to own, lease or operate its properties
and assets and to carry on its business as now conducted, and there has occurred
no default under any such Permit, except for such defaults as would not
individually or in the aggregate have a Material Adverse Effect on the Company.
To the Company's knowledge as of the date hereof, no Governmental Entity is
considering limiting, suspending or revoking any of the Company's or its
subsidiaries' material Permits. Except as disclosed in the Company SEC Documents
filed prior to the date of this Agreement and publicly available, the Company
and its subsidiaries are in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity, except for
noncompliance which would not have a Material Adverse Effect on the Company.
(ii) The Company and each of its subsidiaries are, and each of their
respective directors, officers, and persons performing management functions
similar to officers are, in compliance with all applicable Gaming Laws and
Lottery Laws, except for noncompliance which would not have a Material Adverse
Effect on the Company. The term "GAMING LAWS" means any Federal, state, local or
foreign statute, ordinance, rule, regulation, permit, consent, registration,
qualification, finding of suitability, approval, license, judgment, order,
decree, injunction or other authorization, including any condition of limitation
placed thereon, governing or relating to the current or contemplated casino and
gaming activities and operations of the Company or any of its subsidiaries. The
term "LOTTERY LAWS" means any Federal, state, local or foreign statute,
ordinance, rule, regulation, permit, consent, registration, qualification,
finding of suitability, approval, license, judgment, order, decree, injunction
or other authorization, including any condition of limitation placed thereon,
governing or relating to the current or contemplated lottery activities and
operations of the Company or any of its subsidiaries.
(p) Environmental.
(i) The Company and each of its subsidiaries is, and has been, and
each of the Company's former subsidiaries, while subsidiaries of the Company,
was, in compliance with all applicable Environmental Laws, except for
noncompliance which would not have a Material Adverse Effect on the Company. The
term "ENVIRONMENTAL LAWS" means any federal, local or foreign statute, code,
ordinance, rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, injunction or other authorization,
including the
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requirement to register underground storage tanks, relating to: (A) emissions,
discharges, releases or threatened releases of Hazardous Material (as defined
below) into the environment, including, without limitation, into ambient air,
soil, sediments, land surface or subsurface, buildings or facilities, surface
water, groundwater, publicly owned treatment works, septic systems or land; (B)
the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Material; or (C) protection of the
environment.
(ii) During the period of ownership or operation by the Company and
its subsidiaries of any of their respective current or previously owned or
leased properties, there have been no releases of Hazardous Material in, on,
under or affecting such properties or, to the knowledge of the Company, any
surrounding site, except in each case for those which would not have a Material
Adverse Effect on the Company. The Company has not shipped any Hazardous
Material to any disposal site for which it is subject to any liability, except
for such liabilities which would not have a Material Adverse Effect on the
Company. Prior to the period of ownership or operation by the Company and its
subsidiaries of any of their respective current or previously owned or leased
properties, no Hazardous Material was generated, treated, stored, disposed of,
used, handled, released or manufactured at, or transported, shipped or disposed
of from, such current or previously owned or leased properties, and there were
no releases of Hazardous Material in, on, under or affecting any such property
or any surrounding site, except in each case for those which would not have a
Material Adverse Effect on the Company. The term "HAZARDOUS MATERIAL" means (A)
hazardous materials, contaminants, constituents, medical wastes, hazardous or
infectious wastes and hazardous substances as those terms are defined in the
following statutes and their implementing regulations: the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. Section 9601 et seq.,
the Clean Water Act, 33 U.S.C. Section 1251 et seq. and the Clean Air Act, 42
U.S.C. Section 7401 et seq., (B) petroleum, including crude oil and any
fractions thereof, (C) natural gas, synthetic gas and any mixtures thereof, (D)
asbestos and/or asbestos-containing material and (E) polychlorinated biphenyls
("PCBS") or materials or fluids containing PCBs in excess of 50 ppm.
(q) Contracts; Debt Instruments. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement and on Schedule 3.1(q) of
the Company Disclosure Schedule, there is no contract or agreement that is
material to the business, financial condition or results of operations of the
Company and its subsidiaries taken as a whole. Each material contract disclosed
in the Company SEC Documents and on Schedule 3.1(q) of the Company Disclosure
Schedule is a valid and legally binding obligation of the Company or its
subsidiaries, whichever is applicable, and is in full force and effect. Neither
the Company nor any of its subsidiaries is in violation of or in default under
(nor does there exist any condition which upon the passage of time or the giving
of notice, or both, would cause such a violation or default under) any loan or
credit agreement, note, bond, mortgage, indenture, lease or any other contract,
agreement, arrangement or understanding to which it is a party or by which it or
any of its properties or assets is bound, except for violations or defaults that
would not have a Material Adverse Effect on the Company.
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(r) Intellectual Property.
(i) Except as would not have a Material Adverse Effect on the
Company, (i) the Company and each of its subsidiaries owns, has the right to
acquire or is licensed or otherwise has the right to use (in each case, free and
clear of any Liens), all Intellectual Property (as defined below) used in or
necessary for the conduct of its business as currently conducted, (ii) no claims
are pending or, to the knowledge of the Company, threatened, that the Company or
any of its subsidiaries is infringing on or otherwise violating the rights of
any person with regard to any Intellectual Property, and (iii) to the knowledge
of the Company, no person is infringing on or otherwise violating any right of
the Company or any of its subsidiaries with respect to any Intellectual Property
owned by and/or licensed to the Company or its subsidiaries.
(ii) For purposes of this Agreement, "INTELLECTUAL PROPERTY" shall
mean patents, copyrights, trademarks (registered or unregistered), service
marks, brand names, trade dress, trade names, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing; and trade secrets and rights in any
jurisdiction to limit the use or disclosure thereof by any person.
(s) Insider Interests. Except as set forth in Section 3.1(s) of the
Company Disclosure Schedule or as described in the Company SEC Documents, no
officer or director of the Company or any of its subsidiaries or any affiliate
of any officer or director of the Company or any of its subsidiaries (as the
term "affiliate" is defined in Rule 12b-2 under the Exchange Act) nor any person
identified on Schedule 3.1(s) attached hereto (i) has any interest in any assets
or property (whether real or personal, tangible or intangible) of or used in the
business of the Company or any subsidiary of the Company (other than as an owner
of outstanding securities of the Company), (ii) has any direct or indirect
interest of any nature whatever (other than ownership of one percent or less of
any class of securities listed on a national securities exchange or traded
publicly in the over-the-counter market) in any person or business which
competes with, conducts any business similar to, has any arrangement or
agreement (including arrangements regarding the shared use of personnel or
facilities) with (whether as a customer or supplier or otherwise), or is
involved in any way with, the Company or any subsidiary of the Company, or (iii)
is indebted or otherwise obligated to the Company. The Company is not indebted
or otherwise obligated to any such person, except for amounts due under normal
arrangements applicable to all employees generally as to salary or reimbursement
of ordinary business expenses not unusual in amount or significance. As of the
date hereof, except for claims and proceedings listed in Section 3.1(s) of the
Company Disclosure Schedule, to the knowledge of the Company there are no
losses, claims, damages, costs, expenses, liabilities or judgments which would
entitle any director, officer or employee of the Company or any of its
subsidiaries to indemnification by the Company or its subsidiaries under
applicable law, the articles of incorporation or bylaws of the Company or any of
its subsidiaries or any insurance policy maintained by the Company or any of its
subsidiaries.
(t) Fairness Opinion. The Company has received a written opinion from
Dresdner Kleinwort ▇▇▇▇▇▇▇▇▇▇▇, Inc. to the effect that the Exchange Ratio was,
as of the date of this Agreement, fair from a financial point of view to the
stockholders of the Company.
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(u) Noncompetition. The Company and its subsidiaries are not, and after
the Effective Time neither the Surviving Corporation nor Parent will be (by
reason of any agreement to which the Company is a party), subject to any
non-competition or similar restriction on their respective businesses.
(v) Nevada Takeover Statutes. As of the date hereof, the restrictions of
Sections 78.378 through 78.3793 and 78.411 through 78.444 of the NRS are, and
shall be, inapplicable to the Merger, this Agreement or any of the transactions
contemplated by this Agreement.
(w) Employment Agreements. Each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇
has entered into an employment agreement dated the date hereof with the Company
(collectively, the "EMPLOYMENT AGREEMENTS"), which become effective at the
Effective Time, and copies of such executed employment agreements have been
delivered to Parent.
SECTION 3.2 Representations and Warranties of Parent and Sub. Except as
set forth on the Disclosure Schedule (provided that an item on such Disclosure
Schedule shall be deemed to qualify only the particular subsection or
subsections of this Section 3.2 specified for such item) delivered by Parent to
the Company prior to the execution of this Agreement (the "PARENT DISCLOSURE
SCHEDULE"), Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Parent is and each of
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate power and authority to carry on its business as now being
conducted. Parent is and each of its subsidiaries is duly qualified or licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed would not
have a Material Adverse Effect on Parent. Parent has delivered to the Company
complete and correct copies of its articles of incorporation and by-laws.
(b) Capital Structure. The authorized capital stock of Parent consists
of 320,000,000 shares of Parent Common Stock. At the close of business on June
30, 2001, (i) 156,074,952 shares of Parent Common Stock were issued and
outstanding, (ii) 81,175,767 shares of Parent Common Stock were held by Parent
in its treasury, and (iii) 5,233,644 shares of Parent Common Stock were reserved
for issuance upon exercise of outstanding employee stock options to purchase
shares of Parent Common Stock. Except as set forth above, at the close of
business on June 30, 2001, no shares of capital stock or other voting securities
of the Parent were issued, reserved for issuance or outstanding. All issued and
outstanding shares of capital stock of Parent are, and all shares which may be
issued pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and are not subject to and were not issued
in violation of any preemptive rights. To the knowledge of Parent, there are no
voting trusts, voting agreements, irrevocable proxies or other agreements with
respect to any voting shares of capital stock of Parent. There are no bonds,
debentures, notes or other indebtedness of Parent having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of Parent may vote. Except as set forth
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above, as of the date of this Agreement, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Parent or any of its subsidiaries is a party
or by which any of them is bound obligating Parent or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of Parent or of any of its
subsidiaries or obligating Parent or any of its subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of Parent or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of Parent or its
subsidiaries. There are no agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any person is or may be
entitled to receive any payment based on the revenues, earnings or financial
performance of Parent or any of its subsidiaries or assets or calculated in
accordance therewith (other than ordinary course payments or commissions to
sales representatives of Parent based upon revenues generated by them without
augmentation as a result of the transactions contemplated hereby) or to cause
Parent or any of its subsidiaries to file a registration statement under the
Securities Act, or which otherwise relate to the registration of any securities
of Parent. As of the date of this Agreement, the authorized capital stock of Sub
consists of 25,000 shares of common stock, no par value of which 100 shares have
been validly issued, are fully paid and nonassessable and are owned by Parent
free and clear of any Liens.
(c) Authority; Noncontravention. Parent and Sub have the requisite
corporate power and authority to enter into this Agreement and, subject to the
Parent Stockholder Approval, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Parent and Sub and
the consummation by Parent and Sub of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub, subject to the Parent Stockholder Approval of this
Agreement. This Agreement has been duly executed and delivered by Parent and Sub
and constitutes a valid and binding obligation of each such party, enforceable
against each such party in accordance with its terms subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally.
The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of Parent or any of its
subsidiaries under, (i) the articles of incorporation or by-laws of Parent or
Sub or the comparable charter or organizational documents of any other
subsidiary of Parent, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of its
subsidiaries or their respective properties or assets, other than, in the case
of clauses (ii) or (iii), any such conflicts violations, defaults or rights that
individually or in the aggregate would not (x) have a Material Adverse Effect on
Parent, (y) impair in any material respect the ability of Parent and Sub to
perform their respective obligations under this Agreement
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or (z) prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by Parent or any
of its subsidiaries in connection with the execution and delivery of this
Agreement or the consummation by Parent or Sub, as the case may be, of any of
the transactions contemplated by this Agreement, except for (i) the filing with
the Specified Agencies of a premerger notification and report form under the HSR
Act, (ii) the filing with the SEC of (x) the Form S-4 and (y) such reports under
the Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (iii) the filing of the articles of
merger with the Secretary of State of the State of Nevada and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, (iv) the filing with and the approval by all
applicable gaming regulatory bodies in jurisdictions where Parent or its
subsidiaries are engaged in business and (v) such other consents, approvals,
orders, authorizations, registrations, declarations and filings, including under
(x) the laws of any foreign country in which the Company or any of its
subsidiaries conducts any business or owns any property or assets or (y) the
"takeover" or "blue sky" laws of various states, the failure of which to be
obtained or made would not have a Material Adverse Effect on Parent, impair in
any material respect the ability of Parent or Sub to perform its obligations
under this Agreement or prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement. Neither Parent nor any
subsidiary of Parent nor any director or officer of Parent or any subsidiary of
Parent has received any written claim, demand, notice, complaint, court order or
administrative order from any Governmental Entity in the past three years,
asserting that a license of it or them, as applicable, under any Gaming Laws (as
defined in Section 3.1(o)) is being or may be revoked or suspended other than
such claims, demands, notices, complaints, court orders or administrative orders
which would not have a Material Adverse Effect on Parent.
(d) SEC Documents; Financial Statements. Since January 1, 1998, Parent
has filed with the SEC all required reports and forms and other documents (the
"PARENT SEC DOCUMENTS"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents and none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except to the extent that information contained
in any Parent SEC Document has been revised or superseded by a later-filed
Parent SEC Document filed and publicly available prior to the date of this
Agreement, none of the Parent SEC Documents contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the
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consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. Except as set forth in the Parent SEC
Documents filed prior to the date of this Agreement and publicly available, and
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the most recent
consolidated balance sheet included in the Parent SEC Documents, neither Parent
nor any of its subsidiaries has any material liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be recognized or disclosed on a
consolidated balance sheet of Parent and its consolidated subsidiaries or in the
notes thereto.
(e) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading or (ii) the Proxy Statement will, at the
date the Proxy Statement is first mailed to the Company's stockholders or the
Parent's stockholders or at the time of the Company Stockholders' Meeting or the
Parent Stockholders' Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Form S-4 and the Proxy Statement will comply
as to form in all material respects with the requirements of the Exchange Act
and the Securities Act and the rules and regulations promulgated thereunder,
except that no representation or warranty is made by Parent or Sub with respect
to statements made or incorporated by reference therein based on information
supplied by the Company specifically for inclusion or incorporation by reference
therein.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Documents filed prior to the date of this Agreement and publicly
available, since September 30, 2000, Parent has conducted its business only in
the ordinary course consistent with prior practice and there has not been (i)
any Material Adverse Change in Parent, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of Parent's capital stock, (iii) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iv) any damage,
destruction or loss, whether or not covered by insurance, that has or would have
a Material Adverse Effect on Parent, (v) any change in accounting methods,
principles or practices by Parent materially affecting its assets, liabilities
or business, or (vi) any other action taken by Parent or any of its subsidiaries
which, if Section 4.1(b) had then been in effect, would have been prohibited by
such section if taken without Company's consent (and no agreement,
understanding, obligation or commitment to take any such action exists).
(g) Litigation. Except as disclosed in the Parent SEC Documents filed
prior to the date of this Agreement and publicly available, there is no suit,
action, investigation, audit or proceeding pending or, to the knowledge of
Parent, threatened against Parent or any of its subsidiaries that would (i) have
a Material Adverse Effect on Parent, (ii) impair in any material respect the
ability of Parent to perform its obligations under this Agreement or (iii)
prevent the
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consummation of any of the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against the Company or any of its subsidiaries having,
or which is reasonably likely to have, any effect referred to in the foregoing
clauses (i), (ii) or (iii).
(h) Brokers. Neither Parent nor any of its subsidiaries nor any of their
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees and no broker or finder has acted directly or
indirectly for Parent or any of its subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
(i) Voting Requirements. The Board of Directors of Parent at a meeting
duly called and held: (i) determined that the Merger is advisable and fair and
in the best interests of Parent and its stockholders; (ii) approved the Merger
and this Agreement and the transactions contemplated by this Agreement; (iii)
recommended approval of the issuance of Parent Common Stock as contemplated by
this Agreement by the holders of Parent's Common Stock and directed that such
issuance be submitted for consideration by Parent's stockholders. The
affirmative vote of the holders of a majority of the outstanding shares of
Parent Common Stock entitled to vote is the only vote of the holders of any
class or series of the Parent's capital stock necessary to approve the Merger,
this Agreement and the transactions contemplated by this Agreement.
(j) Tax Matters. To Parent's knowledge, neither Parent nor any of its
subsidiaries has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would prevent the Merger from qualifying as a
reorganization within the meaning of Sections 368 of the Code.
(k) Compliance with Applicable Laws.
(i) Each of Parent and its subsidiaries has in effect all material
Permits necessary for it to own, lease or operate its properties and assets and
to carry on its business as now conducted, and there has occurred no default
under any such Permit. To Parent's knowledge, no Governmental Entity is
considering limiting, suspending or revoking any of Parent's or its
subsidiaries' Permits. Except as disclosed in the Parent SEC Documents filed
prior to the date of this Agreement and publicly available, Parent and its
subsidiaries are in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity, except for
noncompliance which would not have a Material Adverse Effect on Parent.
(ii) Parent and each of its subsidiaries are, and each of their
respective directors, officers, and persons performing management functions
similar to officers are, in compliance with all applicable Gaming Laws, except
for noncompliance which would not have a Material Adverse Effect on Parent.
(l) Environmental.
(i) Parent and each of its subsidiaries is, and has been, and each
of Parent's former subsidiaries, while subsidiaries of Parent, was, in
compliance with all applicable
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Environmental Laws, except for noncompliance which would not have a Material
Adverse Effect on Parent.
(ii) During the period of ownership or operation by Parent and its
subsidiaries of any of their respective current or previously owned or leased
properties, there have been no releases of Hazardous Material in, on, under or
affecting such properties or, to the knowledge of Parent, any surrounding site,
except in each case for those which would not have a Material Adverse Effect on
Parent. Parent has not shipped any Hazardous Material to any disposal site for
which it is subject to any liability, except for such liabilities which would
not have a Material Adverse Effect on Parent. Prior to the period of ownership
or operation Parent and its subsidiaries of any of their respective current or
previously owned or leased properties, no Hazardous Material was generated,
treated, stored, disposed of, used, handled, released or manufactured at, or
transported, shipped or disposed of from, such current or previously owned or
leased properties, and there were no releases of Hazardous Material in, on,
under or affecting any such property or any surrounding site, except in each
case for those which would not have a Material Adverse Effect on Parent.
(m) Contracts; Debt Instruments. Except as disclosed in the Parent SEC
Documents filed prior to the date of this Agreement, there is no contract or
agreement that is material to the business, financial condition or results of
operations of Parent and its subsidiaries taken as a whole. Each material
contract disclosed in the Parent SEC Documents is a valid and legally binding
obligation of Parent or its subsidiaries, whichever is applicable, and is in
full force and effect. Neither Parent nor any of its subsidiaries is in
violation of or in default under (nor does there exist any condition which upon
the passage of time or the giving of notice, or both, would cause such a
violation or default under) any loan or credit agreement, note, bond, mortgage,
indenture, lease or any other contract, agreement, arrangement or understanding
to which it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that would not have a Material Adverse
Effect on Parent.
(n) Intellectual Property. Except as would not have a Material Adverse
Effect on Parent, (i) Parent and each of its subsidiaries owns, has the right to
acquire or is licensed or otherwise has the right to use (in each case, free and
clear of any Liens), all Intellectual Property (as defined below) used in or
necessary for the conduct of its business as currently conducted, (ii) no claims
are pending or, to the knowledge of Parent, threatened, that Parent or any of
its subsidiaries is infringing on or otherwise violating the rights of any
person with regard to any Intellectual Property, and (iii) to the knowledge of
Parent, no person is infringing on or otherwise violating any right of Parent or
any of its subsidiaries with respect to any Intellectual Property owned by
and/or licensed to Parent or its subsidiaries.
(o) Interim Operations of Sub.
(i) Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
(ii) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions
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contemplated by this Agreement, Sub has not and will not have incurred, directly
or indirectly, through any subsidiary, any obligations or liabilities or engaged
in any business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business.
(a) Conduct of Business by the Company. Except (i) to the extent
prohibited by any Gaming Authority or a prior approval of a Gaming Authority is
required to agree to the undertaking, (ii) as set forth on Schedule 4.1 or (iii)
as consented to by Parent in writing, during the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course and in compliance in all material respects with all applicable
laws and regulations and, to the extent consistent therewith, use all
commercially reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with them. Without limiting the generality of the
foregoing and except as set forth on Section 4.1(a) of the Company Disclosure
Schedule, between the date of this Agreement and the Effective Time or until the
earlier termination of this Agreement pursuant to its terms, the Company shall
not, and shall not permit any of its subsidiaries to:
(i) (A) declare, set aside or pay (whether in cash, stock, property
or otherwise) any dividends on, or make any other distributions in respect of,
any of its capital stock, other than dividends and distributions by any direct
or indirect wholly owned subsidiary of the Company to its parent, (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities;
(ii) other than the issuance of Company Common Stock upon the
exercise of Stock Options outstanding on the date of this Agreement in
accordance with their present terms or in accordance with the present terms of
any employment agreements existing on the date of this Agreement, (A) issue,
deliver, sell, award, pledge, dispose of or otherwise encumber or authorize or
propose the issuance, delivery, grant, sale, award, pledge or other encumbrance
(including limitations in voting rights) or authorization of, any shares of its
capital stock any other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible securities, (B) amend, waive or otherwise modify the terms of any
such rights, warrants or options (except as expressly contemplated by this
Agreement) or (C) accelerate the vesting of any of the Stock Options (other than
acceleration which occurs automatically in connection with the Merger in
accordance with the written existing terms of Stock Options outstanding on the
date hereof);
(iii) amend its articles of incorporation, bylaws or other
comparable charter or organizational documents, or alter through merger,
liquidation, reorganization, restructuring or in
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any other fashion the corporate structure or ownership of any material
subsidiary of the Company;
(iv) acquire or agree to acquire (for cash or shares of stock or
otherwise) (A) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, joint venture, association
or other business organization or division thereof or (B) any assets except
purchases of inventory, fixtures, furniture, supplies and equipment in the
ordinary course of business;
(v) commence or undertake to commence the operation or management of
a casino other than the existing casinos and the existing casino management
contract of the Company or enter into any agreement or license pertaining to the
Company's intellectual property used in Spin for Cash Joint Venture;
(vi) mortgage or otherwise encumber or subject to any Lien, or sell,
lease, exchange or otherwise dispose of any of, its properties or assets, except
for sales of its properties or assets in the ordinary course of business and
incurrence of immaterial Liens that do not materially interfere with the
operation of the business of the Company or materially detract from the value of
its properties and assets;
(vii) (A) incur any indebtedness for borrowed money except in the
ordinary course of business consistent with past practices or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, or (B) except as required under the terms of written
agreements existing on the date hereof, make any loans, advances or capital
contributions to, or investments in, any other person, other than to the Company
or any direct or indirect wholly owned subsidiary of the Company;
(viii) (A) settle the pending lawsuit with Acres Gaming Incorporated
or (B) pay, discharge or satisfy any other claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business or in
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the Company SEC Documents or incurred in the
ordinary course of business;
(ix) (A) increase the rate or terms of compensation payable or to
become payable generally to any of the Company's or any of its subsidiaries'
directors, officers or employees other than reasonable increases to
non-executive management employees, (B) pay or agree to pay any pension,
retirement allowance, severance, continuation or termination benefit or other
employee benefit not provided for by any existing Pension Plan, Benefit Plan or
employment agreement described in the Company SEC Documents filed prior to the
date of this Agreement and publicly available or set forth on the Company
Disclosure Schedule, other than in the ordinary course of business, (C)
establish, adopt or commit itself to any additional pension,
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profit sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, retirement or other employee
benefit plan, agreement or arrangement, or increase the rate or terms of any
employee plan or benefit arrangement, or amend or modify or increase the rate or
benefits under or take any action to accelerate the rights or benefits under any
collective bargaining agreement or any employee benefit plan, agreement or
arrangement, including the Stock Option Plan or other Benefit Plan, (D) enter
into any severance or employment agreement with or for the benefit of any person
or agree to any severance pay, continuation pay or termination pay other than in
the ordinary course of business with respect to non-executive management, or (E)
increase the rate of compensation under or otherwise change the terms of any
existing employment agreement with any executive officers or directors; provided
that the aggregate amount of all payments or increases in payments or benefits
permitted under this Section 4.1(a)(ix) shall not in the aggregate be material;
(x) except in the ordinary course of business, modify, amend, renew,
fail to renew or terminate any material contract or agreement to which the
Company or any subsidiary is a party or waive, release or assign any material
rights or claims;
(xi) change fiscal years;
(xii) authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the Company;
(xiii) enter into any collective bargaining agreement;
(xiv) engage in any transaction with, or enter into any agreement,
arrangement or understanding with, directly or indirectly, any of the Company's
directors or executive officers other than pursuant to such agreements existing
on the date hereof and disclosed on the Company Disclosure Schedule;
(xv) make or agree to make any new capital expenditures in amounts
in excess of the amounts reflected in the capital expenditure budgets provided
to Parent;
(xvi) make or rescind any express or rescind any deemed election
relating to taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to taxes,
or change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of its federal income
tax return for the taxable year ending June 30, 2000, except as may be required
by applicable law;
(xvii) amend, modify or waive any of the provisions of the
Employment Agreements; or
(xviii)authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Conduct of Business by Parent. During the period from the date of
this Agreement to the Effective Time, Parent shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course and in compliance in all material respects with all applicable
laws and regulations and, to the extent consistent therewith, use all
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commercially reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with them. Without limiting the generality of the
foregoing and except as set forth on Section 4.1(b) of the Parent Disclosure
Schedule, between the date of this Agreement and the Effective Time or until the
earlier termination of this Agreement pursuant to its terms, Parent shall not:
(i) (A) declare, set aside or pay (whether in cash, stock, property
or otherwise) any dividends on, or make any other distributions in respect of,
any of its capital stock, or (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu or in substitution for shares of its common stock, except for such
actions taken in the ordinary course of business consistent with past practice
or under any stock option plans of Parent, as such plans may hereafter be
amended;
(ii) amend its articles of incorporation or bylaws; or
(iii) authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of Parent.
SECTION 4.2 No Inconsistent Activities.
(a) In light of the consideration given by the Board of Directors of the
Company prior to the execution of this Agreement to, among other things, the
transactions contemplated hereby, and in light of the Company's representations
contained in Section 3.1(j), the Company agrees that it shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, solicit or initiate, or encourage the submission of, any Takeover
Proposal (as defined below), or participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal, provided, however, that nothing in this Section 4.2 shall
prevent the Company or its Board of Directors from furnishing nonpublic
information to, or entering into discussions or negotiations with, another
person in connection with an unsolicited bona fide written proposal for a
Takeover Proposal by such person, if and only to the extent that (i) such person
has made a written proposal to the Board of Directors of the Company to
consummate a Takeover Proposal, which proposal identifies a price or range of
values to be paid for the outstanding securities or all or substantially all of
the assets of the Company, (ii) the Board of Directors of the Company determines
in good faith, after consultation with a financial advisor of nationally
recognized reputation, that such Takeover Proposal is reasonably capable of
being completed on substantially the terms proposed (which determination shall
include confirmation that the party making the Takeover Proposal will have any
funds necessary to complete the Takeover Proposal) and such Takeover Proposal
would, if so completed, result in at transaction that would provide greater
value to the holders of Company Common Stock than the Merger (a "SUPERIOR
PROPOSAL"), (iii) the Board of Directors of the Company determines in good
faith, based on the advice of its outside legal counsel, that such action is
necessary in order to comply with its fiduciary duties to the holders of Company
Common Stock under applicable law, and (iv) before
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furnishing such nonpublic information to, or entering into discussions or
negotiations with, such person, the Board of Directors receives from such person
an executed confidentiality agreement in form and substance substantially
similar to the confidentiality agreement dated June 21, 2001 between the Company
and Parent (the "Confidentiality Agreement").
(b) The Company shall notify Parent orally and in writing of any
inquiries, offers or proposals with respect to a Takeover Proposal (including
without limitation the terms and conditions of such proposal, the identity of
the person or entity making it and all other information reasonably requested by
Parent), within 48 hours of the receipt thereof, shall keep Parent informed of
the status and details of any such inquiry, offer or proposal and answer
Parent's questions with respect thereto. For purposes of this Agreement,
"TAKEOVER PROPOSAL" means any proposal (whether or not in writing and whether or
not delivered to the Company's stockholders generally) for a merger,
consolidation, purchase of assets, tender offer or other business combination
involving the Company or any of its subsidiaries or any proposal or offer to
acquire in any manner, directly or indirectly, an equity interest in, 10% or
more of the voting securities of, or a substantial portion of the assets of, the
Company or any of its subsidiaries, other than the transactions contemplated by
this Agreement. Neither the Company nor any of its subsidiaries shall directly
or indirectly, release any third party from any confidentiality agreement.
Nothing contained herein shall prohibit the Company from disclosing to its
stockholders the statement required by Rule 14e-2(a) under the Exchange Act with
respect to a Takeover Proposal by means of a tender offer.
(c) Parent agrees that prior to the Closing Date it shall not (i)
consolidate with or merge into any other person whereby Parent is not or would
not be the continuing or surviving corporation or entity and ultimate parent
entity (as that term is used under the HSR Act and related rules) of such
consolidation or merger, or (ii) transfer all or substantially all of its
properties and assets to any person, unless, in each such case, such person
acknowledges that the surviving entity shall continue to be bound by all
obligations of Parent under this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of Form S-4 and the Proxy Statement;
Stockholders' Meetings.
(a) As promptly as reasonably practicable after the execution of this
Agreement, (i) the Company and Parent shall prepare and file with the SEC a
joint proxy statement/registration statement relating to the meetings of the
Company's stockholders to be held to obtain the Company Stockholder Approval and
of the Parent's stockholders to obtain the Parent Stockholder Approval (together
with any amendments thereof or supplements thereto, the "PROXY STATEMENT") and
(ii) Parent shall prepare and file with the SEC a registration statement on Form
S-4 (together with all amendments thereto, the "FORM S-4") in which the Proxy
Statement shall be included as a prospectus, in connection with the registration
under the Securities Act of the shares of Parent Common Stock to be issued to
the stockholders of the Company pursuant to the Merger. Each of Parent and the
Company shall use its commercially reasonable efforts to cause the Form S-4 to
become effective as promptly as practicable, and shall take all or any action
required under any applicable federal or state securities laws in
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connection with the issuance of shares of Parent Common Stock pursuant to the
Merger. Each of Parent and the Company shall furnish all information concerning
itself to the other as the other may reasonably request in connection with such
actions and the preparation of the Form S-4 and Proxy Statement. The Company
authorizes Parent to utilize in the Form S-4 and in all such state filed
materials, the information concerning the Company and its subsidiaries provided
to Parent in connection with, or contained in, the Proxy Statement. Parent
promptly will advise the Company when the Form S-4 has become effective and of
any supplements or amendments thereto, and the Company shall not distribute any
written material that would constitute, as advised by counsel to the Company, a
"PROSPECTUS" relating to the Merger or the Parent Common Stock within the
meaning of the Securities Act or any applicable state securities law without the
prior written consent of Parent. As promptly as practicable after the Form S-4
shall have become effective, each of the Company and Parent shall mail the Proxy
Statement to its respective stockholders.
(b) Parent agrees promptly to advise the Company if at any time prior to
the respective meetings of stockholders of Parent or the Company any information
provided by it in the Proxy Statement is or becomes incorrect or incomplete in
any material respect and to provide the Company with the information needed to
correct such inaccuracy or omission. Parent will furnish the Company with such
supplemental information as may be necessary in order to cause the Proxy
Statement, insofar as it relates to Parent and its subsidiaries, to comply with
applicable law after the mailing thereof to the stockholders of Parent or the
Company.
(c) The Company agrees promptly to advise Parent if at any time prior to
the respective meetings of stockholders of Parent or the Company any information
provided by it in the Proxy Statement is or becomes incorrect or incomplete in
any material respect and to provide Parent with the information needed to
correct such inaccuracy or omission. The Company will furnish Parent with such
supplemental information as may be necessary in order to cause the Proxy
Statement, insofar as it relates to the Company and its subsidiaries, to comply
with applicable law after the mailing thereof to stockholders of Parent or the
Company.
(d) As soon as reasonably practicable following the date of this
Agreement but taking into account the likely timing of obtaining regulatory
approvals to complete the transactions contemplated herein, each of the Company
and Parent shall call and hold a meeting of its respective stockholders (the
"COMPANY STOCKHOLDERS' MEETING" and the "PARENT STOCKHOLDERS' MEETING,"
respectively), for the purpose of obtaining the Company Stockholder Approval and
the Parent Stockholder Approval, respectively. Each of the Company and Parent
shall use its commercially reasonably efforts to solicit from its stockholders
proxies, and shall take all other action necessary or advisable to secure the
vote or consent of stockholders required by applicable law or otherwise to
obtain the Company Stockholder Approval and the Parent Stockholder Approval,
respectively, and through its respective Board of Directors, shall recommend to
its respective stockholders the obtaining of the Company Stockholder Approval
and the Parent Stockholder Approval, respectively.
SECTION 5.2 Access to Information; Confidentiality.
(a) Subject to any restrictions under applicable law, the Company shall,
and shall cause its subsidiaries to, afford Parent, and the officers, employees,
accountants, counsel,
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financial advisors and other representatives of Parent, reasonable access upon
reasonable notice, during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause each of its subsidiaries to, furnish promptly to Parent, (a) a
copy of each report, schedule, registration statement and other document filed
by it during such period pursuant to the requirements of federal or state
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request.
(b) Subject to any restrictions under applicable law, Parent shall, and
shall cause its subsidiaries to, afford the Company, and the officers,
employees, accountants, counsel, financial advisors and other representatives of
the Company, reasonable access upon reasonable notice, during normal business
hours during the period prior to the Effective Time to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, Parent shall, and shall cause each of its subsidiaries to, furnish
promptly to the Company, (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities or gaming laws and (b) all other
information concerning its business, properties and personnel as the Company may
reasonably request.
(c) Except as required by law, each of the Company and Parent will hold,
and will cause its respective officers, employees, accountants, counsel,
financial advisers and other representatives and affiliates to hold, any
confidential information in accordance with the Confidentiality Agreement.
SECTION 5.3 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the Company, Parent and Sub agrees to use commercially
reasonable good faith efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (i) the making of all
necessary applications, registrations and filings (including filings with
Governmental Entities, if any), (ii) the obtaining of all necessary actions or
non-actions, licenses, consents, approvals or waivers from Governmental Entities
and other third parties, (iii) taking of all commercially reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement, (v) the defending of any
lawsuits or other legal proceedings, by persons other than Governmental
Entities, challenging this Agreement or the consummation of the transactions
contemplated hereby or thereby, including the using of all commercially
reasonable efforts necessary to lift, rescind or mitigate the effect of any
injunction or restraining order or other order adversely affecting the ability
of any party hereto to consummate the transactions contemplated hereby, (vi) the
using of all commercially reasonable efforts to fulfill all conditions to the
obligations of Parent, Sub or the Company pursuant to this Agreement, (vii) the
Company taking all commercially reasonable actions requested by Parent in
connection with obtaining any consents, waivers or amendments requested by
Parent under any outstanding debt instruments of
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the Company and (viii) the using of all commercially reasonable efforts to
prevent, with respect to a threatened or pending temporary, preliminary or
permanent injunction or other order, decree or ruling or statute, rule,
regulation or executive order, the entry, enactment or promulgation thereof, as
the case may be; provided, however, that Parent shall not be obligated to take
any action pursuant to the foregoing if the taking of such action or the
obtaining of any waiver, license, consent, approval or exemption is reasonably
likely to be materially burdensome to Parent and its subsidiaries taken as a
whole or to impact (x) in a materially adverse manner the operations of Parent
or (y) the economic or business benefits of the transactions contemplated by
this Agreement so as to render to Parent, in the good faith judgment of Parent,
inadvisable the consummation of the Merger.
(b) The Company shall give prompt written notice to Parent, and Parent
shall give prompt written notice to the Company, of (i) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or (iii) the occurrence of
any change or event having, or which insofar as can reasonably be foreseen to
have, a Material Adverse Effect on it; provided, however, that no such
notification shall (A) affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement or (B) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 5.4 Gaming Approvals.
(a) Gaming Approvals. Upon the terms and subject to the conditions set
forth in this Agreement, each of the Company and Parent agrees to promptly
prepare and file all necessary documentation, to effect all applications,
notices, petitions and filings, to obtain as promptly as practicable all
permits, registrations, licenses, findings of suitability, qualifications,
consents, waivers, variances, exemptions, orders, approvals and authorizations
of all Governmental Entities under all Gaming Laws which are necessary in
connection with the consummation of the transactions contemplated by this
Agreement (whether required to be made or obtained prior to or after the
Effective Time) (all of the foregoing, collectively "GAMING APPROVALS") and to
comply with the terms and conditions of all such Gaming Approvals. Each of the
Company and Parent shall use all commercially reasonable efforts to, and to
cause their respective officers, directors and affiliates to file within 45 days
after the date hereof, and in all events shall file within 75 days after the
date hereof, all required initial applications and documents in connection with
obtaining the Gaming Approvals and shall act reasonably and promptly thereafter
in responding to additional requests in connection therewith. Parent and Company
shall have the right to review in advance, subject to the Confidentiality
Agreement, and to the extent practicable, each will consult with the other on,
in each case subject to applicable laws relating to the exchange of information,
all the information relating to the Company or Parent, as the case may be, and
any of their respective subsidiaries, directors, officers and stockholders,
which appears in any filing made with, or written materials submitted to, any
Governmental Entity in connection with the transactions contemplated by this
Agreement. The Company and Parent agree to promptly advise each other upon
receiving any communication from any Governmental Entity which causes such party
to believe that there is a reasonable likelihood that any Gaming
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Approval required from such Governmental Entity will not be obtained or that the
receipt of any such approval will be materially delayed.
Nothing in this Section 5.4(a) shall obligate Parent to take any action
which would require the voluntary surrender, forfeiture or other termination by
Parent of a Gaming Approval then held by Parent or any of its subsidiaries if
Parent determines in good faith that it is inadvisable to do so.
(b) Denial of License; Individuals. If any person shall become an
Ineligible Person prior to the Closing, then (i) each Ineligible Person shall,
and Parent or the Company shall cause each Ineligible Person to, immediately and
permanently, resign from any position, including as director or officer, in the
Company, Parent or Sub and each Ineligible Person shall have no further
management role in Parent, Sub or the Company, (ii) if required to do so by any
Governmental Entity as a condition to receipt of any Gaming Approval, each
Ineligible Person shall, and Parent or the Company shall cause each Ineligible
Person to, dispose of all of its securities or other ownership interests in
Parent or the Company, and (iii) each Ineligible Person shall, and Parent or the
Company shall cause each Ineligible Person to, cooperate with the Company,
Parent and Sub in their efforts to obtain and retain in full force and effect
the Gaming Approval. "INELIGIBLE PERSON" shall mean any person (i) who owns any
capital stock or other interest in Parent or the Company and who is denied a
Gaming Approval, disqualified from eligibility for a Gaming Approval or found
unsuitable by any Governmental Entity before the Closing Date (ii) whose
continued involvement in the business of Parent or the Company as an employee,
director, officer or otherwise is reasonably likely to have a material adverse
effect on] the likelihood that any Governmental Entity will issue a Gaming
Approval to the Company, the Surviving Corporation, Sub or Parent or (iii) is
expressly precluded from having any continuing interest in the Company, the
Surviving Corporation, Sub or Parent in any Gaming Approval granted by a
Governmental Entity as a condition to the issuance or continued validity of any
Gaming Approval by any Governmental Entity.
SECTION 5.5 Stock Option Plan; Stock.
(a) As soon as practicable following the date of this Agreement, the
Board of Directors of the Company (or, if appropriate, any committee
administering the Stock Option Plan (as defined below)) shall adopt such
resolutions or take such other actions as are required to adjust the terms of
all outstanding stock options to purchase shares of Company Common Stock ("STOCK
OPTIONS") heretofore granted under any stock option or stock appreciation rights
plan, program or arrangement of the Company or under any stock option award
agreement, including, without limitation, the Company's 1995 Employee Stock
Option Plan and the Company's 2000 Stock Incentive Plan (collectively, the
"STOCK OPTION PLAN") as is necessary to provide that each Stock Option
outstanding immediately prior to the Effective Time, whether or not then
exercisable, shall be immediately converted as of the Effective Time into the
right to purchase from Parent the Option Conversion Number (as defined below) of
shares of Parent Common Stock (each an "ADJUSTED OPTION").
Each Adjusted Option will have the same terms as the Stock Option to
which it is related, which Stock Option shall remain exercisable following the
Effective Time in accordance with its terms and the provisions of the Stock
Option Plan or agreement under which granted, except for
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its exercise price and the number and kind of shares subject thereto. The
exercise price of any Adjusted Option (the "ADJUSTED EXERCISE PRICE") shall be
an amount equal to the exercise price of the Stock Option related to such
Adjusted Option as of the date of this Agreement divided by the Exchange Ratio.
The "OPTION CONVERSION NUMBER" for any Adjusted Option shall be equal to the
number of shares purchasable pursuant to the Stock Option related to such
Adjusted Option as of the date of this Agreement multiplied by the Exchange
Ratio, rounded to the nearest whole.
(b) As an inducement to cause the Company to enter into this Agreement,
Parent agrees to take such actions as are necessary, for the conversion of the
Stock Options of the Company pursuant to Section 5.5(a) into Adjusted Options,
including the reservation, issuance and listing of Parent Common Stock as is
necessary to effectuate the transactions contemplated by Section 5.5(a). At or
prior to the Effective Time, Parent agrees to file a registration statement on
Form S-8 (or any successor form) or a post-effective amendment to the Form S-4
covering the shares of Parent Common Stock to be issued under the Adjusted
Options described above.
(c) Parent covenants and agrees: (i) it will take all reasonably
necessary board action so that all securities (including derivative securities)
of Parent issuable pursuant to the Merger or this Agreement to any executive
officer or director of the Company subject to Section 16 of the Exchange Act is
issued in a transaction exempted under Rule 16b-3 of the Exchange Act; and (ii)
for a period of one year from the Effective Time, Parent will cause to be
available adequate current public information with respect to the Parent within
the meaning of Rule 144(c) under the Securities Act. Parent hereby represents,
warrants and agrees that purchases or sales of securities of Parent made
pursuant to a contract, instruction or plan entered into in good faith pursuant
to and in accordance with Rule 10b5-1 under the Exchange Act are exempt from any
policy of, or restriction imposed by, Parent regulating the purchase or sale of
its securities.
SECTION 5.6 Indemnification, Exculpation and Insurance.
(a) The articles of incorporation and the by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability no less favorable than the provisions set forth in
the Company's articles of incorporation and by-laws on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who on or prior to the
Effective Time were directors, officers, employees or agents of the Company or
its Subsidiaries and were entitled to indemnification under the Company's
articles of incorporation and bylaws, unless such modification is required by
law.
(b) For six years from the Effective Time, Parent shall maintain in
effect directors' and officers' liability insurance covering those persons who
are currently covered by the Company's directors' and officers' liability
insurance policy (a copy of which has been heretofore delivered to Parent) on
terms no less favorable than the terms of such current insurance coverage;
provided, however, that (i) in lieu of the purchase of such insurance by the
Surviving Corporation or Parent, the Company, with Parent's written consent, may
purchase a five-year extended reporting period endorsement ("reporting tail
coverage") under its existing directors' and officers' liability insurance
coverage and (ii) if the cost of such insurance in any
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year during such six-year period shall exceed 150% of the premium cost for such
policy during the year ended June 30, 2000 (the "MAXIMUM PREMIUM"), then Parent
shall cause the Surviving Corporation to, and the Surviving Corporation shall,
provide coverage affording the same protection as maintained by Parent as of
such date for its officers and directors. The Company represents to Parent that
the Maximum Premium is $280,000.
(c) In addition to the other rights provided for in this Section 5.6,
for six years after the Effective Time, Parent hereby, to the fullest extent
permitted by applicable law, guaranties the obligations of the Company under
Section 5.6 (a) for the directors and executive officers which are identified in
Section 5.6(c) of the Company Disclosure Schedule. Parent unconditionally and
irrevocably waives any provision under applicable law that may limit the
enforceability of such guaranty.
(d) The obligations of the Company, the Surviving Corporation and Parent
contained in this Section 5.6 shall be binding on the successors and assigns of
Parent and the Surviving Corporation. If Parent, the Surviving Corporation or
any of their successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties or assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.6.
SECTION 5.7 Letters of Accountants.
(a) The Company shall use its commercially reasonable efforts to cause
to be delivered to Parent "comfort" letters of Deloitte & Touche, the Company's
independent public accountants, dated and delivered on the date on which the
Form S-4 shall become effective and dated the Closing Date, each addressed to
Parent, in form and substance reasonably satisfactory to Parent and reasonably
customary in scope and substance for letters delivered by independent public
accountants in connection with transactions such as those contemplated by this
Agreement.
(b) Parent shall use its commercially reasonable efforts to cause to be
delivered to the Company "comfort" letters of Deloitte & Touche, Parent's
independent public accountants, dated and delivered on the date on which a Form
S-4 shall become effective and dated the Closing Date, each addressed to the
Company, in form and substance reasonably satisfactory to the Company and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Agreement.
SECTION 5.8 Fees and Expenses. Except as provided in Section 7.5,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses; provided, however, that those
expenses incurred in connection with the printing of the Proxy Statement and
Form S-4, including the filing fee paid to the SEC, and the HSR Act filing fee
will be shared equally by Parent and the Company.
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SECTION 5.9 Public Announcements. Parent and Sub, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement, including the Merger, including without limitation those press
releases that may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange.
SECTION 5.10 Affiliate Letters. The Company has or shall within 10 days
hereof, deliver to Parent Affiliate Agreements in the form of Exhibit B attached
hereto executed by each person who may reasonably be deemed an "affiliate" of
the Company.
SECTION 5.11 Resignation of Directors and Officers. The Company shall
use commercially reasonable efforts to cause the officers and directors of the
Company and its subsidiaries as Parent may request to resign their positions as
such as of the Effective Time.
SECTION 5.12 Rights Agreement. The Board of Directors of the Company
shall take all further action reasonably requested in writing by Parent in order
to render the Rights Agreement or any similar instrument inapplicable to the
Merger and the other transactions contemplated by this Agreement. Except as
requested in writing by Parent, during the term of this Agreement, the Board of
Directors of the Company shall not (i) amend the Rights Agreement or (ii) take
any action with respect to, or make any determination under, the Rights
Agreement (including a redemption of the Rights), including any action to
facilitate a Takeover Proposal.
SECTION 5.13 Board of Directors of Parent. As of the Effective Time (i)
the by-laws of Parent shall be amended to increase the size of the Board of
Directors of Parent by two and (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and a person mutually
agreed upon by the Company and Parent shall be appointed as Directors of Parent.
SECTION 5.14 Officer's Certificates for Tax Opinions. Each of the
Company and Parent shall deliver an Officer's Certificate substantially in the
forms of Exhibit C-1 and C-2, respectively, pursuant to which each of the
Company and Parent shall make reasonable and customary representations for
reliance by counsel to the Company and Parent for the purpose of rendering the
tax opinions referenced in Section 6.1(f).
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligations to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. The Company Stockholder Approval and the
Parent Stockholder Approval shall have been obtained.
(b) NYSE Listing. The shares of Parent Common Stock issuable to the
Company's stockholders pursuant to this Agreement and under the Stock Option
Plan shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance.
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(c) No Injunctions or Restraints. No litigation brought by a
Governmental Entity shall be pending, and no litigation shall be threatened by
any Governmental Entity, which seeks to enjoin or prohibit the consummation of
the Merger, and no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect.
(d) Form S-4. The Form S-4 shall have been declared effective by the SEC
under the Securities Act. No stop order suspending the effectiveness of the Form
S-4 shall have been issued by the SEC, and no proceedings for that purpose shall
have been initiated or, to the knowledge of Parent or the Company, threatened by
the SEC.
(e) HSR Act. The applicable waiting period (and any extension thereof)
under the HSR Act shall have expired or been terminated.
(f) Tax Opinions. Each of Parent and the Company shall have received a
written opinion from their respective counsel to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986. In preparing the Company and Parent tax opinions, counsel
may rely on reasonable assumptions and may also rely on (and to the extent
reasonably required, the parties and the stockholders of the Company shall make)
reasonable representations related thereto, including the representations set
forth in the officer certificates attached as Exhibits C-1 and C-2 hereto.
SECTION 6.2 Additional Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects giving effect to such standard) as of the
Closing Date as though made on and as of the Closing Date, provided that those
representations and warranties which address matters only as of a particular
date shall remain true and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects giving
effect to such standard) as of such date. Parent shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of the
Company to such effect.
(b) Agreements 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 Closing
Date. Parent shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company to that effect.
(c) Affiliate Agreements. Parent shall have received from each person
who may reasonably be deemed to be an "affiliate" of the Company a signed
agreement substantially in the form of Exhibit B attached hereto.
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(d) Certificates and Other Deliveries. The Company shall have delivered,
or caused to be delivered, to Parent (i) a certificate of good standing from the
Secretary of State of the State of Nevada stating that it is a validly existing
corporation in good standing; (ii) duly adopted resolutions of the Board of
Directors and stockholders of the Company approving the execution, delivery and
performance of this Agreement and the instruments contemplated hereby, certified
by the Secretary of the Company; and (iii) a true and complete copy of the
articles of incorporation or comparable governing instruments, as amended, of
the Company and its subsidiaries certified by the Secretary of State of the
state of incorporation or comparable authority in other jurisdictions, and a
true and complete copy of the by-laws or comparable governing instruments, as
amended, of the Company and its subsidiaries certified by the Secretary of the
Company and its subsidiaries, as applicable.
(e) Comfort Letters. Parent shall have received "comfort letters" from
Deloitte & Touche LLP on the date of the Proxy Statement and on the Effective
Time.
(f) Employment. Each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have
continued in the employment of the Company through, and be employed by the
Company on, the Effective Time and their respective new Employment Agreements
shall be in full force and effect, except to the extent such employment or
Employment Agreement has terminated as a result of the death or disability of
the employee.
(g) No Material Adverse Change. From and including the date hereof,
there shall not have occurred a Material Adverse Change with respect to the
Company.
(h) Consents and Approvals. Parent shall have received evidence, in form
and substance reasonably satisfactory to it, that such licenses, permits,
consents, approvals, waivers, findings of suitability, authorizations,
qualifications and orders of, and declarations, registrations and filings
(including without limitation all Gaming Approvals and approvals under all
Lottery Laws) (collectively, "CONSENTS AND FILINGS") required to be made or
obtained by the Company or Parent from all Governmental Entities and parties to
loan or credit agreements, notes, mortgages, indentures, leases or other
contracts, agreements or instruments to which the Company, Parent or any of
their respective subsidiaries is a party or by which the Company, Parent or any
of their respective subsidiaries or their respective assets are bound or
affected, as are required in connection with the Merger and the consummation of
the transactions contemplated hereby, have been obtained or made, as applicable,
by the Company or Parent, as the case may be, without the imposition of any
limitations, prohibitions or requirements which in the good faith judgment of
Parent render inadvisable the consummation of the Merger, and are in full force
and effect, other than those Consents and Filings (excluding Gaming Approvals
and approvals under all Lottery Laws) which, if not obtained or made, would not,
either have (i) a material adverse effect on the transactions contemplated
hereby, (ii) a Material Adverse Effect on the Surviving Corporation or Parent
after the Effective Time, (iii) a Material Adverse Effect on the continuation of
the operations and business of the Company and its subsidiaries by the Surviving
Corporation after the consummation of the transactions contemplated hereby or
(iv) cause any officer or director of the Company to be in violation of
applicable law in any material respect.
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(i) Indenture Compliance. The Company shall be in compliance with
Section 5.1 of the Indenture, dated October 17, 2000, between the Company and
U.S. Trust Company, National Association after giving "Pro Forma" (as defined in
such Indenture) effect to the Merger.
SECTION 6.3 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations of
Parent and Sub contained in this Agreement shall be true and correct in all
material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects giving effect to such standard) as of the
Closing Date as though made on and as of the Closing Date, provided that those
representations and warranties which address matters only as of a particular
date shall remain true and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects giving
effect to such standard) as of such date. The Company shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of Parent
to such effect.
(b) Agreements and Covenants. Parent 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 Closing
Date. The Company shall have received a certificate of the Chief Executive
Officer and Chief Financial Officer of Parent to such effect.
(c) Certificates and Other Deliveries. Parent shall have delivered to
the Company (i) a certificate of existence from the Secretary of State of the
State of Nevada stating that Parent is a validly existing corporation together
with a certificate of good standing from the Secretary of State of the State of
Nevada stating that Sub is a validly existing corporation in good standing; (ii)
duly adopted resolutions of the Board of Directors of each of Parent and Sub
approving the execution, delivery and performance of this Agreement and the
instruments contemplated hereby, and of the stockholders of Parent approving the
issuance of the Parent Common Stock pursuant to the Merger, each certified by
the Secretary or the Assistant Secretary of the Company; and (iii) a true and
complete copy of the articles of incorporation, as amended, of Parent and Sub
certified by the Secretary of State of the state of each of their incorporation,
and a true and complete copy of the by-laws, as amended, of Parent and Sub
certified by the Secretary or Assistant Secretary of Parent and Sub, as
applicable.
(d) Comfort Letters. The Company shall have received "comfort letters"
from Deloitte & Touche LLP on the date of the Proxy Statement and on the
Effective Time.
(e) No Material Adverse Change. From and including the date hereof,
there shall not have occurred a Material Adverse Change with respect to Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company or of Parent:
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(a) by mutual written consent of Parent and the Company, if the Board of
Directors of each so determines by the affirmative vote of a majority of the
members of its entire Board of Directors;
(b) by Parent (provided that Parent is not then in material breach of
any representation, warranty, covenant or other agreement contained herein),
upon a material breach of any representation, warranty, covenant or agreement on
the part of the Company set forth in this Agreement, or if any representation or
warranty of the Company shall have become untrue, in either case such that the
conditions set forth in Section 6.2(a) or Section 6.2(b), as the case may be,
would be incapable of being satisfied by January 30, 2002 or, if capable of
being cured or satisfied, is not cured or satisfied within 45 days after written
notice of such breach;
(c) by the Company (provided that the Company is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein), upon a material breach of any representation, warranty, covenant or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a) or Section 6.3(b), as the
case may be, would be incapable of being satisfied by January 30, 2002 or, if
capable of being cured or satisfied, is not cured or satisfied within 45 days
after written notice of such breach;
(d) by either Parent or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the Merger
and such order, decree or ruling or other action shall have become final and
nonappealable;
(e) by either Parent or the Company, if the Merger shall not have
occurred by January 30, 2002, unless the failure to consummate the Merger is the
result of a breach of covenant set forth in this Agreement or a willful and
material breach of any representation or warranty set forth in this Agreement by
the party seeking to terminate this Agreement and provided that if the Merger
has not been consummated because of a failure to obtain approval from a
Governmental Entity and such approval is still being pursued, then Parent or
Company may extend such date to April 31, 2002 by providing written notice
thereof to the Company on or before January 30, 2002;
(f) by either Parent or the Company (provided that the terminating party
is not in material breach of any of its obligations hereunder), if any approval
of the stockholders of the Company or Parent required for the consummation of
the Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of the Company's or Parent's stockholders
or at any adjournment or postponement thereof;
(g) by Parent, if the Board of Directors of the Company (i) withdraws or
modifies adversely its recommendation of the Merger following the receipt by the
Company of a Takeover Proposal, (ii) recommends a Takeover Proposal to Company
stockholders or (iii) fails to call or hold the Company Stockholders' Meeting
following the receipt by the Company of a Takeover Proposal;
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(h) by the Company, if the Share Value would be less than $50.00 per
share unless Parent, within five business days after receipt of written notice
by the Company of its intention to so terminate, shall have elected to adjust
the Exchange Ratio pursuant to the fifth sentence of Section 2.1(c)(i) hereof;
or
(i) by the Company, if prior to the Company Stockholder Approval and as
a result of a Superior Proposal, the Board of Directors of the Company
determines in good faith, after consultation with outside legal counsel, that
the termination of this Agreement and acceptance of such Superior Proposal is
necessary in order to comply with its fiduciary duties; provided, however, that
before the Company may terminate this Agreement pursuant to this subsection
7.1(i), the Company shall give notice to Parent of the proposed termination
under this subsection 7.1(i) and Parent, within five (5) business days of
receipt of such notice, shall have the right, in its sole discretion, to offer
to amend this Agreement to provide for terms substantially similar to those of
the Superior Proposal and the Company shall negotiate in good faith with Parent
with respect to such proposed amendment; provided, further, that if Parent and
the Company are unable to reach an agreement with respect to the Parent's
proposed amendment within the five (5) business day period described above, the
Company may terminate this Agreement pursuant to this subsection 7.1(i); or
(j) by Parent, if the Share Value would be greater than $75.00 per Share
unless within five business days after receipt of written notice by Parent of
its intention to so terminate, shall have elected to adjust the Exchange Ratio
pursuant to the third sentence of Section 2.1(c)(i) hereof; or
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except as set forth in Section 5.2(c), Section 5.8 and
Section 7.5 which shall survive termination and except to the extent that such
termination results from the willful and material breach by a party of any of
its representations, warranties, covenants or agreements set forth in this
Agreement in which event if the other party so terminates this Agreement, then
the terminating party may take any action or pursue any remedy available to it
under applicable law.
SECTION 7.3 Amendment. This Agreement may be amended by the parties at
any time before or after approval hereof by the stockholders of the Company and
Parent; provided, however, that after such stockholder approval there shall not
be made any amendment that by law requires further approval by the stockholders
of the Company or Parent without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 7.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid
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only if set forth in an instrument in writing, signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
SECTION 7.5 Termination Fee.
(a) In the event (i) Company terminates this Agreement pursuant to
Section 7.1(i), (ii) Parent terminates this Agreement pursuant to Section 7.1
(g) or Parent terminates this Agreement as a result of the Company's willful and
material breach of Section 4.2, then the Company shall pay Parent an amount
equal to $30,000,000 (the "TERMINATION FEE") by wire transfer of immediately
available funds upon the occurrence of such event.
(b) In the event (i) Company Stockholder Approval is not received, (ii)
prior to the Company Stockholders' Meeting there shall have been a Takeover
Proposal made (whether or not such Takeover Proposal shall have been rejected or
shall have been withdrawn prior to the time of the Company Stockholders'
Meeting) and (iii) within twelve (12) months from the termination of this
Agreement, the Company shall have entered into an agreement for, and within
twenty-four (24) months from such termination shall have consummated, a
transaction that would constitute a Takeover Proposal (whether or not with the
party that made the initial Takeover Proposal) then the Company shall pay Parent
an amount equal to the Termination Fee by wire transfer of immediately available
funds, payable upon consummation of such transaction.
(c) The parties agree that the agreements contained in this Section 7.5
are an integral part of the transactions contemplated by this Agreement. If the
Company fails to promptly pay to Parent any fee due under this Section 7.5, the
Company shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Bank of America from the date
such fee was first due.
(d) The payment by the Company of the Termination Fee pursuant to this
Section 7.5 shall be Parent's and Sub's exclusive remedy against the Company for
termination under Section 7.1 (g) other than for a willful breach by the Company
of Section 4.2.
SECTION 7.6 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver of this Agreement
pursuant to Section 7.4 shall, in order to be effective, require in the case of
Parent, Sub or the Company, action by its Board of Directors, acting by the
affirmative vote of a majority of the members of the entire Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties; Construction.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.1 shall not limit any covenant or
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agreement of the parties which by its terms contemplates performance after the
Effective Time of the Merger (including without limitation the provisions of
Section 5.4 hereof). Nothing in this Agreement will be construed in any manner
to affect, amend, waive or modify any of the rights, privileges, duties,
obligations or liabilities of either party under any agreement, arrangement, or
understanding with the other party or its affiliates that relates to matters not
expressly within the subject matter of this Agreement.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
International Game Technology
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Esq.
with a copy to:
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
(b) if to the Company, to:
Anchor Gaming
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇, LLP.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇: 214-939-5849
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
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SECTION 8.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Material Adverse Change" or "Material Adverse Effect" means, when
used in connection with the Company, the Surviving Corporation or Parent, any
change or effect (or any development that is likely to result in any change or
effect) that is or is likely to be, individually or in the aggregate, materially
adverse to the business, assets, properties, financial condition or results of
operations of such party and its subsidiaries taken as a whole, provided that
Material Adverse Effect shall not be deemed to include the impact of
circumstances affecting the gaming industry, the economy or capital markets
generally.
(c) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity; and
(d) a "subsidiary" with respect to any person means ownership directly
or indirectly of an amount of the voting securities, other voting ownership or
voting partnership interests of another person which is sufficient to elect at
least a majority of its board of directors or other governing body or, if there
are no such voting interests, more than 50% of the equity interests.
SECTION 8.4 Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" and "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the Confidentiality Agreement constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement and except for
the provisions of Article II and Sections 5.5 and 5.6, are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Nevada,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to
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the preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
[The remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PARENT:
INTERNATIONAL GAME TECHNOLOGY,
a Nevada corporation
By: /s/ G. ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: G. ▇▇▇▇▇▇ ▇▇▇▇▇
Its: President
SUB:
NAC CORPORATION, a Nevada corporation
By: /s/ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Its: President
THE COMPANY:
ANCHOR GAMING, a Nevada corporation
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇
Its: Chief Executive Officer
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EXHIBIT A
FORM OF COMPANY VOTING AGREEMENT
VOTING AGREEMENT
__________, 2001
International Game Technology
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Agreement of Certain Stockholders Concerning Transfer and Voting
of Shares of Anchor Gaming
I understand that you and Anchor Gaming (the "Company"), of which the
undersigned is the [Chief Executive Officer][Chief Operating Officer -- Gaming
Operations], are prepared to enter into an agreement for the merger of a
wholly-owned subsidiary ("Sub") of Parent into the Company, but that you have
conditioned your willingness to proceed with such agreement (the "Agreement")
upon your receipt from me of assurances satisfactory to you of my support of and
commitment to the Merger. I am familiar with the Agreement and the terms and
conditions of the Merger. Terms used but not otherwise defined herein shall have
the same meanings as are given them in the Agreement. In order to evidence such
commitment and to induce you to enter into the Agreement, I hereby represent and
warrant to you and agree with you as follows:
1. Voting. I will cause to be voted by proxy all shares of capital stock
of Company owned of record or beneficially owned or held in any capacity by me
or under my control, by proxy or otherwise, in favor of the Merger and other
transactions provided for in or contemplated by the Agreement and against any
inconsistent proposals or transactions. I hereby revoke any other proxy granted
by me and appoint you, during the term of this letter agreement, as proxy for
and on behalf of me to vote (including, without limitation, the taking of action
by written consent) such shares, for me and in my name, place and ▇▇▇▇▇ for the
matters and in the manner contemplated by this Section 1.
2. Ownership. As of the date hereof, my only ownership of, or interest
in, equity securities of the Company, including proxies granted to me, consists
solely of the interests described in Schedule 1 attached hereto (collectively,
the "Shares").
3. Restriction on Transfer. I will not sell, transfer, pledge or
otherwise dispose of any of the Shares or any interest therein (including the
granting of a proxy to any person) or agree to sell, transfer, pledge or
otherwise dispose of any of the Shares or any interest therein unless, prior
thereto, any such transferee agrees in writing in a form satisfactory to you to
be bound by the terms hereof.
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51
4. Share Legend. You shall have received, upon your request and allowing
for adequate time to respond to such request, evidence satisfactory to you that
the following legend has been placed on the certificate for the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A VOTING AGREEMENT DATED JULY 8, 2001
BETWEEN THE REGISTERED HOLDER HEREOF AND INTERNATIONAL GAME
TECHNOLOGY, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF ANCHOR GAMING.
5. Effective Date; Succession; Remedies; Termination. Upon your
acceptance and execution of the Agreement, this letter agreement shall mutually
bind and benefit you and me, any of our heirs, successors and assigns and any of
your successors. You will not assign the benefit of this letter agreement other
than to a wholly owned subsidiary. We agree that in light of the inadequacy of
damages as a remedy, specific performance shall be available to you, in addition
to any other remedies you may have for the violation of this letter agreement.
This letter agreement shall terminate on the earlier of (i) termination of the
Agreement and (ii) consummation of the Merger.
6. Nature of Holdings; Shares.
All references herein to our holdings of the Shares shall be deemed to
include Shares held or controlled by the undersigned, individually, jointly, or
in any other capacity, and shall extend to any securities issued to the
undersigned in respect of the Shares.
[COMPANY CEO; COMPANY COO -- GAMING
OPERATIONS]:
-----------------------------------
Name:
-----------------------------
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SCHEDULE 1
--------------------- -------------------- ------------------ --------------------- ------------------
Class Number of Shares Record Owner Beneficial Owner Proxy Holder
--------------------- -------------------- ------------------ --------------------- ------------------
--------------------- -------------------- ------------------ --------------------- ------------------
--------------------- -------------------- ------------------ --------------------- ------------------
A-3
53
EXHIBIT B
FORM OF AFFILIATE LETTER
International Game Technology
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "AFFILIATE" of Anchor Gaming, a Nevada corporation (the "COMPANY"), as
the term "AFFILIATE" is (i) defined within the meaning of Rule 145 of the rules
and regulations (the "RULES AND REGULATIONS") of the Securities and Exchange
Commission (the "COMMISSION") under the Securities Act of 1933, as amended (the
"ACT"), and/or (ii) used in and for purposes of Accounting Series Releases 130
and 135, as amended, of the Commission. Pursuant to the terms of the Agreement
and Plan of Merger dated as of July 8, 2001 (the "AGREEMENT"), among
International Game Technology, a Nevada corporation ("PARENT"), NAC Corporation,
a Nevada corporation ("SUB"), and the Company, Sub will be merged with and into
the Company (the "MERGER").
In connection with the Merger, I am entitled to receive shares of common
stock, par value $.000625 per share, of Parent (the "PARENT SHARES") in exchange
for shares (or options for shares) owned by me of capital stock of the Company
(the "COMPANY SHARES").
I represent, warrant and covenant to Parent that in the event I receive
any Parent Shares as a result of the Merger, I:
(a) shall not make any sale, transfer or other disposition of the Parent
Shares in violation of the Act or the Rules and Regulations;
(b) have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of Parent Shares, to the extent I felt
necessary, with my counsel or counsel for the Company;
(c) have been advised that the issuance of Parent Shares to me pursuant
to the Merger has been registered with the Commission under the Act on a
Registration Statement on Form S-4. However, because I have been advised that,
at the time the Merger is submitted for a vote of the stockholders of the
Company, (a) I may be deemed to be an affiliate of the Company and (b) other
than as set forth in the Agreement, because the distribution by me of the Parent
Shares has not been registered under the Act, I will not sell, transfer or
otherwise dispose of Parent Shares issued to me in the Merger unless (i) such
sale, transfer or other disposition is effected in compliance with the
applicable requirements of Rule 145 promulgated by the Commission under the Act,
(ii) such sale, transfer or other disposition has been made pursuant to an
effective registration statement under the Act or (iii) in the opinion of
counsel reasonably acceptable to Parent or as described in a "no-action" or
interpretive letter from the staff of the
B-1
54
Commission, such sale, transfer or other disposition is otherwise exempt from
registration under the Act;
(d) understand that Parent is under no obligation, other than as set
forth in the Agreement, to register the sale, transfer or other disposition of
the Parent Shares by me or on my behalf under the Act or to take any other
action necessary in order to make compliance with an exemption from such
registration available solely as a result of the Merger;
(e) also understand that there will be placed on the certificates for
the Parent Shares issued to me, or any substitutions therefor, a legend stating
in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED JULY 8,
2001 BETWEEN THE REGISTERED HOLDER HEREOF AND INTERNATIONAL GAME
TECHNOLOGY, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF ANCHOR GAMING.
(f) also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement, Parent
reserves the right to put the following legend on the certificates issued to my
transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE
BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933.
It is understood and agreed that the legends set forth in paragraphs (e)
and (f) above shall be removed by delivery of substitute certificates without
such legend if the undersigned shall have delivered to Parent a copy of a letter
from the staff of the Commission, or an opinion of counsel reasonably
satisfactory to Parent in form and substance reasonably satisfactory to Parent,
to the effect that such legend is not required for purposes of the Act.
In connection with the proposed Merger, I wish to inform you that I do
not have any present intention to sell or otherwise dispose of any of my the
Company Shares or any of the Parent Shares I will receive in the Merger in
violation of the Act.
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Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter, or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
____________________________________________
Name: _____________________________________
Accepted this _____ day of _______, 2001, by
INTERNATIONAL GAME TECHNOLOGY
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
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EXHIBIT C
FORM OF TAX CERTIFICATES
CERTIFICATE OF ANCHOR GAMING
Reorganization Involving International Game Technology, NAC Corporation
and Anchor Gaming
Ladies and Gentlemen:
In accordance with the proposed reorganization pursuant to the Agreement
and Plan of Merger, dated as of July 8, 2001, among International Game
Technology, a Nevada corporation ("Parent"), NAC Corporation, a Nevada
corporation ("Sub") and Anchor Gaming, a Nevada corporation (the "Company") (the
"Merger Agreement"), Sub will be merged with and into the Company, with the
Company to be the surviving corporation and a wholly-owned subsidiary of Parent
(the "Merger"). Unless otherwise defined herein, capitalized terms shall have
the meanings ascribed to them in the Merger Agreement.
The undersigned officer of the Company, on behalf of the Company, after
consulting with legal counsel and financial auditors of the Company regarding
the meaning of and the factual support for the following representations, hereby
states that, in connection with the Merger, and as of the Effective Time
thereof:
1. The facts relating to the contemplated Merger of Sub with and into
the Company pursuant to the Merger Agreement, as described therein, and the
documents described in the Merger Agreement relating to the Merger are, insofar
as such facts pertain to the Company, true, correct and complete in all material
respects. Other than those described or referenced in the Merger Agreement,
there are no agreements, arrangements or understandings, either written or oral,
between or among (a) any of Parent, its subsidiaries, affiliates or
stockholders, on the one hand, and (b) any of the Company, its subsidiaries,
affiliates or stockholders on the other hand, concerning the Merger. In
rendering a tax opinion in connection with the transactions described in the
Merger Agreement, we understand that tax counsel will be relying upon the
accuracy of the factual information contained in the Joint Proxy
Statement/Prospectus or Registration Statement filed in connection with the
Merger and upon the representations, warranties and covenants set forth in this
certificate.
2. The Merger will be effected in accordance with the Merger Agreement.
3. The fair market value of the voting common stock of Parent ("Parent
Common Stock") to be received by each shareholder of the Company in the Merger
will be approximately equal to the fair market value of the common stock of the
Company ("Company Common Stock") exchanged therefore, and the aggregate
consideration received by the stockholders of the Company in exchange for their
Company Common Stock will be approximately equal to the fair market value of all
of the outstanding shares of Company Common Stock immediately prior to the
Merger.
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4. To the best knowledge of management of the Company, the stockholders
of the Company will not sell, exchange or otherwise dispose of, to Parent, the
Company or to persons related to Parent or Company, within the meaning of
Treasury Regulation Section 1.368-1(e)(3), any shares of Parent Common Stock
received in the Merger.
5. No distribution with respect to shares of Company Common Stock or
redemption of such shares has been or will be made prior to and in connection
with the Merger. In addition, To the best knowledge of management of the
Company, no person related to the Company within the meaning of Treasury
Regulation Section 1.368-1(e)(3) has acquired or will acquire Company Common
Stock prior to and in connection with the Merger.
6. At the Effective Time, the Company will hold at least 90% of the fair
market value of its net assets and at least 70% of the fair market value of its
gross assets held immediately prior to the Merger and at least 90% of the fair
market value of Sub's net assets and at least 70% of the fair market value of
Sub's gross assets held immediately prior to the Merger. For purposes of this
representation, (i) assets disposed of by the Company or Sub prior to or
subsequent to the Merger, and in contemplation thereof (including without
limitation any asset disposed of by the Company, other than in the ordinary
course of business, pursuant to a plan or intent existing during the period
ending at the Effective Time and beginning with the commencement of negotiations
or transactions (whether formal or informal) with Parent in contemplation of the
Merger (the "Pre-Merger Period"), (ii) amounts paid by the Company or Sub to
shareholders who receive cash or other property, (iii) amounts paid by the
Company or Sub to pay reorganization expenses, and (iv) all redemptions and
distributions (except for regular, normal dividends) made prior to or after the
Merger by the Company or Sub in connection with the Merger, will be included as
assets of the Company or Sub, respectively, held immediately prior to the
Merger.
7. The Company has no obligation, understanding, agreement, plan or
intention to issue additional shares of Company Common Stock that would result
in Parent losing control of the Company within the meaning of Section 368(c) of
the Internal Revenue Code of 1986, as amended (the "Code"). Control will
generally exist within the meaning of Section 368(c) of the Code if Parent
directly owns stock possessing at least 80% of the total combined voting power
of all classes of stock entitled to vote and at least 80% of the total number of
shares of each other class of stock of the Company.
8. In the Merger, shares of Company Common Stock representing control of
Company within the meaning of Section 368(c) of the Code will be exchanged
solely for shares of voting stock of Parent.
9. The Company will not have outstanding any warrants, options,
convertible securities, or any other type of right pursuant to which any person
could acquire stock in the Company that, if exercised or converted, would affect
the acquisition or retention by Parent of control of the Company within the
meaning of Section 368(c) of the Code.
10. Parent will acquire 100% of the Company Common Stock outstanding
immediately prior to the Merger solely in exchange for voting shares of Parent
Common Stock. For purposes of this representation, Company Common Stock redeemed
for cash or other
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58
property furnished by Parent will be considered as acquired by Parent. Further,
no liabilities of the Company or the shareholders of the Company will be assumed
by Parent, nor will any of the Company Common Stock be subject to any
liabilities.
11. The Company has not transferred any of its assets (including any
distribution of assets with respect to, or in redemption of, stock) in
contemplation of the Merger or during the Pre-Merger Period other than (i) in
the ordinary course of business, and (ii) payments for expenses incurred in
connection with the Merger, and has no plan or intention to sell or otherwise
dispose of any of its assets or of any of the assets acquired from Sub in the
Merger, except for dispositions made in the ordinary course of business or the
payment of expenses incurred by the Company pursuant to the Merger (including
payments made with respect to fractional shares, if any).
12. Prior to the Merger, the Company has been conducting business, such
business is its historic business for tax purposes, and the Company will
continue to operate its historic business through the Effective Time. The
Company anticipates that, following the Merger, Parent will continue the
Company's historic business or use a significant portion of its historic
business assets in a business.
13. Other than shares of Company Common Stock or options to acquire
Company Common Stock issued as compensation to present or former service
providers (including, without limitation, employees and directors) of the
Company in the ordinary course of business, no issuances of Company Common Stock
or rights to acquire Company Common Stock have occurred or will occur during the
Pre-Merger Period other than pursuant to options, warrants or agreements
outstanding prior to the Pre-Merger Period.
14. The Company and the stockholders of the Company will pay their
respective expenses, if any, incurred in connection with the Merger.
15. There is no intercorporate indebtedness between Parent and the
Company, or between Sub and the Company, that was issued, acquired, or will be
settled at a discount.
16. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
17. On the date of the Merger, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which those assets are subject.
18. The Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
19. None of the compensation received (or to be received) by any
shareholder of the Company will be separate consideration for, or allocable to,
any of its shares of Company Common Stock; none of the shares of Parent Common
Stock received by any shareholder of the Company pursuant to the Merger will be
separate consideration for, or allocable to, any employment agreement or service
arrangement; and the compensation paid to any shareholder of the Company who
also provides services to the Company, or will provide services to Sub, will be
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59
for services actually rendered (or to be rendered) and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar services.
20. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience of
issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in the Merger to
the stockholders of the Company instead of issuing fractional shares of Parent
Common Stock will not exceed one percent of the total consideration that will be
issued in the Merger to such stockholders in exchange for their shares of
Company Common Stock. The fractional share interests of each shareholder of the
Company will be aggregated, and no shareholder of the Company will receive cash
in an amount greater than the value of one full share of Parent Common Stock.
21. The liabilities of the Company and the liabilities to which the
transferred assets are subject were incurred by the Company in the ordinary
course of business. Further, no liabilities of the Company or the stockholders
of the Company will be assumed by Parent, nor will any of the Company Common
Stock be subject to any liabilities.
22. There will be no dissenters to the Merger.
23. To the best knowledge of management of the Company, Parent does not
own, nor has it owned at any time during the past five years, any shares of
Company Common Stock.
24. Prior to the Effective Time of the Merger, neither the Company nor
any subsidiary of the Company has distributed the stock of any corporation in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code.
25. The Company will not take any position on any Federal, state, or
local income or franchise tax return, or take any other tax reporting position,
that is inconsistent with the treatment of the Merger as a reorganization within
the meaning of Section 368(a) of the Code or any of the foregoing
representations, unless otherwise required by a "determination" (as defined in
Section 1313(a)(1) of the Code) or by applicable state or local income or
franchise tax law.
The representations contained above are believed to be true and accurate
in all material respects.
ANCHOR GAMING
By _________________________________
Title ______________________________
Date _______________________________
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60
CERTIFICATE OF INTERNATIONAL GAME TECHNOLOGY
Reorganization Involving International Game Technology, NAC Corporation
and Anchor Gaming
Ladies and Gentlemen:
In accordance with the proposed reorganization pursuant to the Agreement
and Plan of Merger, dated as of July 8, 2001, among International Game
Technology, a Nevada corporation ("Parent"), NAC Corporation, a Nevada
corporation ("Sub") and Anchor Gaming, a Nevada corporation (the "Company") (the
"Merger Agreement"), Sub will be merged with and into the Company, with the
Company to be the surviving corporation and a wholly-owned subsidiary of Parent
(the "Merger"). Unless otherwise defined herein, capitalized terms shall have
the meanings ascribed to them in the Merger Agreement.
The undersigned officer of Parent, on behalf of Parent, after consulting
with legal counsel and financial auditors of Parent regarding the meaning of and
the factual support for the following representations, hereby states that, in
connection with the Merger, and as of the Effective Time thereof:
1. The facts relating to the contemplated Merger of Sub with and into
the Company pursuant to the Merger Agreement, as described therein, and the
documents described in the Merger Agreement relating to the Merger are, insofar
as such facts pertain to Parent and Sub, true, correct and complete in all
material respects. Other than those described or referenced in the Merger
Agreement, there are no agreements, arrangements or understandings, either
written or oral, between or among (a) any of Parent, its subsidiaries,
affiliates or stockholders, on the one hand, and (b) any of the Company, its
subsidiaries, affiliates or stockholders on the other hand, concerning the
Merger. In rendering a tax opinion in connection with the transactions described
in the Merger Agreement, we understand that tax counsel will be relying upon the
accuracy of the factual information contained in the Joint Proxy
Statement/Prospectus or Registration Statement filed in connection with the
Merger and upon the representations, warranties and covenants set forth in this
certificate.
2. The Merger will be effected in accordance with the Merger Agreement.
3. Prior to and at the Effective Time of the Merger, Parent will be in
control of Sub within the meaning of Section 368(c) of the Internal Revenue Code
of 1986, as amended (the "Code"). Control will generally exist within the
meaning of Section 368(c) of the Code if Parent directly owns stock possessing
at least 80% of the total combined voting power of all classes of stock entitled
to vote and at least 80% of the total number of shares of each other class of
stock of Sub.
4. Sub is a newly formed corporation directly owned by Parent that was
created for the sole purpose of facilitating the Merger. Sub has not conducted
and is not conducting any business activities.
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61
5. No stock of Sub will be issued in the transaction.
6. The fair market value of the voting common stock of Parent ("Parent
Common Stock") to be received by each shareholder of the Company in the Merger
will be approximately equal to the fair market value of the common stock of the
Company ("Company Common Stock") exchanged therefore, and the aggregate
consideration received by the stockholders of the Company in exchange for their
Company Common Stock will be approximately equal to the fair market value of all
of the outstanding shares of Company Common Stock immediately prior to the
Merger.
7. Following the Merger, the Company will hold at least 90% of the fair
market value of its net assets and at least 70% of the fair market value of its
gross assets held immediately prior to the Merger and at least 90% of the fair
market value of Sub's net assets and at least 70% of the fair market value of
Sub's gross assets held immediately prior to the Merger. For purposes of this
representation, (i) amounts paid by the Company or Sub to stockholders who
receive cash or other property; (ii) amounts paid by the Company or Sub to pay
reorganization expenses; and (iii) all redemptions and distributions (except for
regular, normal dividends) made prior to or after the Merger by the Company or
Sub in connection with the Merger, will be included as assets of the Company or
Sub, respectively, held immediately prior to the Merger.
8. Parent will acquire 100% of the Company Common Stock outstanding
immediately prior to the Merger solely in exchange for voting shares of Parent
Common Stock. For purposes of this representation, Company Common Stock redeemed
for cash or other property furnished by Parent will be considered as acquired by
Parent. Further, no liabilities of the Company or the shareholders of the
Company will be assumed by Parent, nor will any of the Company Common Stock be
subject to any liabilities.
9. No liabilities of the Company or the stockholders of the Company will
be assumed by Parent, nor will any of the Company Common Stock be subject to any
liabilities.
10. Following the merger, the Company will continue its historic
business or use a significant portion of its historic business assets in a
business.
11. Parent and Sub will pay their respective expenses, if any, incurred
in connection with the Merger.
12. There will be no intercorporate indebtedness between Parent and the
Company, or between Sub and the Company, that was issued, acquired, or will be
settled at a discount.
13. Parent has no current plan or intention to redeem or reacquire any
shares of the Parent Common Stock issued in the Merger, except that Parent may
from time to time repurchase its common stock if any such repurchases are made
on the open market through a broker for the prevailing market price pursuant to
an open-market repurchase program as described in Rev. ▇▇▇. ▇▇-▇▇, ▇▇▇▇-▇ ▇.▇.▇.
701. To the best knowledge of the management of Parent, no person related to
Parent (within the meaning of Treasury Regulation Section 1.368-1(e)(3)) and no
person acting as an intermediary for Parent or such a related person has a plan
or intention to acquire any of the Parent Common Stock issued in the Merger.
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14. Parent has no obligation, understanding, agreement, plan or
intention to liquidate Sub, to merge Sub with or into another corporation, to
cause Sub to issue additional shares of the stock of Sub that could result in
Parent losing control of Sub within the meaning of Section 368(c) of the Code,
to sell or otherwise dispose of the stock of Sub. Parent has no obligation,
understanding, agreement, plan or intention to cause Sub to sell or otherwise
dispose of any of its assets, except for dispositions made in the ordinary
course of business.
15. Parent does not own, nor has it owned at any time during the past
five years, any shares of Company common stock. In addition, no related person
of Parent (as defined in Treasury Regulation Section 1.368-1(e)(3)) owns any
shares of Company Common Stock or will acquire shares of Company Common Stock in
connection with the Merger.
16. Neither Parent nor Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
17. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience of
issuing fractional shares and does not represent separately bargained for
consideration.
18. None of the compensation received (or to be received) by any
shareholder of the Company will be separate consideration for, or allocable to,
any of its shares of Company Common Stock; none of the shares of Parent Common
Stock received by any shareholder of the Company pursuant to the Merger will be
separate consideration for, or allocable to, any employment agreement or service
arrangement; and the compensation paid to any shareholder of the Company who
also provides services to the Company will be for services actually rendered (or
to be rendered) and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services.
19. Neither Parent nor Sub will take any position on any Federal, state,
or local income or franchise tax return, or take any other tax reporting
position, that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of section 368(a) of the Code or any of the
foregoing representations, unless otherwise required by a "determination" (as
defined in section 1313(a)(1) of the Code) or by applicable state or local
income or franchise tax law.
The representations contained above are believed to be true and accurate
in all material respects.
INTERNATIONAL GAME TECHNOLOGY
By _________________________________
Title ______________________________
Date _______________________________
C-7