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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[x] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14A-12
ACRES GAMING INCORPORATED
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the tiling fee is calculated and state how it
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2)and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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On June 29, 2003, Acres Gaming Incorporated ("Acres"), International Game
Technology ("IGT") and NWAC Corp. ("NWAC") entered into a definitive Agreement
and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement
and subject to the terms and conditions set forth therein, NWAC will be merged
with and into Acres, and Acres, as the surviving corporation in the merger, will
become a wholly-owned subsidiary of IGT. At the effective time of the merger,
all outstanding shares of Acres common stock will be converted into the right to
receive $11.50 per share in cash (without interest and net of any required tax
withholding).
In connection with the execution of the Merger Agreement, Floyd W.
Glisson, Acres' Chairman of the Board and Chief Executive Officer, entered into
a voting agreement pursuant to which he has agreed to vote in favor of the
merger so long as the Merger Agreement is not terminated in accordance with its
terms.
A copy of the Merger Agreement and a copy of the voting agreement of Mr.
Glisson are attached as Appendix A and Appendix B, respectively. The foregoing
description is qualified in its entirety by reference to the full text of such
attachments. The merger is subject to a number of conditions, including approval
by a majority of Acres's stockholders.
ADDITIONAL INFORMATION
IN CONNECTION WITH THE MERGER, ACRES WILL FILE A PROXY STATEMENT AND OTHER
RELEVANT DOCUMENTS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE "SEC").
STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT CAREFULLY AND IN ITS ENTIRETY
WHEN IT BECOMES AVAILABLE, TOGETHER WITH ALL OTHER RELEVANT DOCUMENTS FILED BY
ACRES WITH THE SEC, BECAUSE SUCH DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION.
YOU WILL BE ABLE TO OBTAIN THESE DOCUMENTS FREE OF CHARGE AT THE WEB SITE
MAINTAINED BY THE SEC AT WWW.SEC.GOV. IN ADDITION, YOU CAN OBTAIN DOCUMENTS
FILED BY ACRES WITH THE SEC FREE OF CHARGE BY
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REQUESTING THEM IN WRITING FROM ACRES GAMING INCORPORATED, INVESTOR RELATIONS,
7115 AMIGO STREET, SUITE 150, LAS VEGAS, NEVADA 89119, PHONE: (702) 263-7588 ,
FAX: (702) 263-7595.
ACRES AND ITS RESPECTIVE DIRECTORS AND EXECUTIVE OFFICERS MAY BE DEEMED TO
BE PARTICIPANTS IN THE SOLICITATION OF PROXIES FROM ACRES STOCKHOLDERS IN
CONNECTION WITH THE MERGER. INFORMATION ABOUT THE DIRECTORS AND EXECUTIVE
OFFICERS OF ACRES AND THEIR OWNERSHIP OF ACRES' SHARES IS SET FORTH IN ACRES'
PROXY STATEMENT FOR ITS 2002 ANNUAL MEETING OF STOCKHOLDERS. COPIES OF ACRES'
2002 PROXY STATEMENT ARE AVAILABLE AT THE ADDRESSES PROVIDED ABOVE. INVESTORS
MAY OBTAIN ADDITIONAL INFORMATION REGARDING THE INTERESTS OF SUCH PARTICIPANTS
BY READING THE PROXY STATEMENT REGARDING THE MERGER WHEN IT BECOMES AVAILABLE.
INVESTORS ARE URGED TO READ THE MERGER PROXY STATEMENT CAREFULLY AND IN
ITS ENTIRETY WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY VOTING DECISION.
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Appendix A
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 29, 2003
AMONG
INTERNATIONAL GAME TECHNOLOGY,
NWAC CORP.
AND
ACRES GAMING INCORPORATED
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1 The Merger................................................................................ 1
SECTION 1.2 Closing................................................................................... 2
SECTION 1.3 Effective Time............................................................................ 2
SECTION 1.4 Effects of the Merger..................................................................... 2
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
SECTION 2.3 No Liability.............................................................................. 5
SECTION 2.4 Dissenters' Rights........................................................................ 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company............................................. 6
SECTION 3.2 Representations and Warranties of Parent and Sub.......................................... 19
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business....................................................................... 21
SECTION 4.2 No Inconsistent Activities................................................................ 24
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Proxy Statement; Stockholders' Meeting................................. 25
SECTION 5.2 Access to Information; Confidentiality.................................................... 26
SECTION 5.3 Reasonable Efforts; Notification.......................................................... 27
SECTION 5.4 Gaming Approvals.......................................................................... 28
SECTION 5.5 Stock Options and Warrants................................................................ 29
SECTION 5.6 Takeover Statutes; Inconsistent Actions................................................... 30
SECTION 5.8 Fees and Expenses......................................................................... 32
SECTION 5.9 Public Announcements...................................................................... 32
SECTION 5.10 Resignation of Directors.................................................................. 32
SECTION 5.11 Employee Benefit Plans.................................................................... 32
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligations to Effect the Merger............................... 32
SECTION 6.2 Additional Conditions to Obligations of Parent and Sub.................................... 33
SECTION 6.3 Additional Conditions to Obligations of the Company....................................... 34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination............................................................................... 35
SECTION 7.2 Effect of Termination..................................................................... 36
SECTION 7.3 Amendment................................................................................. 36
SECTION 7.4 Extension; Waiver......................................................................... 36
SECTION 7.5 Termination Fees.......................................................................... 37
SECTION 7.6 Procedure for Termination, Amendment, Extension or Waiver................................. 38
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties............................................. 38
SECTION 8.2 Notices................................................................................... 38
SECTION 8.3 Definitions............................................................................... 39
SECTION 8.4 Interpretation............................................................................ 40
SECTION 8.5 Counterparts.............................................................................. 40
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries............................................ 40
SECTION 8.7 Governing Law............................................................................. 40
SECTION 8.8 Assignment................................................................................ 40
SECTION 8.9 Enforcement............................................................................... 40
EXHIBITS
EXHIBIT A ............................................................. Form of Voting Agreement
SCHEDULES
Company Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 29, 2003, among
International Game Technology, a Nevada corporation ("PARENT"), NWAC Corp., a
Nevada corporation and a direct wholly owned subsidiary of Parent ("SUB"), and
Acres Gaming Incorporated, a Nevada corporation (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, $.01 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 the Merger
Consideration (as defined below).
B. The Merger requires the approval of the holders of a majority of the
outstanding shares of the Company Common Stock (the "STOCKHOLDER APPROVAL").
C. 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.
D. Concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of Parent's and Sub's willingness to enter
into this Agreement, Floyd W. Glisson, a stockholder of the Company (the
"SELECTED STOCKHOLDER"), has entered into a Voting Agreement (the "VOTING
AGREEMENT") with Parent dated as of the date of this Agreement substantially in
the form of Exhibit A attached hereto, pursuant to which the Selected
Stockholder has agreed, among other things, to vote all voting securities of the
Company beneficially owned by the Selected Stockholder or for which the Selected
Stockholder exercises voting power pursuant to an irrevocable proxy in favor of
approval and adoption of the Agreement and the Merger.
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 & Myers LLP, 275
Battery Street, 26th Floor, San Francisco, California, unless another time, date
or place is agreed to 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 effectiveness,
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, 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), until thereafter changed or amended as provided therein
or by applicable law.
SECTION 1.6 Directors. At the Effective Time, each of the directors of
the Company shall resign from the Board of Directors of the Company. 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.
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SECTION 1.8 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
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) At the Effective Time, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock (A) owned by the Company or any subsidiary of the Company,
or Parent, Sub or any other subsidiary of Parent or (B) held by stockholders
("DISSENTING STOCKHOLDERS") duly exercising appraisal rights pursuant to Section
92A.380 of the NRS ("DISSENTING SHARES" and, collectively with the shares of
Company Common Stock owned by the Company or any subsidiary of the Company or
Parent, Sub or any other subsidiary of Parent, (the "EXCLUDED SHARES") shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive, without interest, $11.50 in cash (the
"MERGER CONSIDERATION").
(ii) As of the Effective Time, all shares of Company Common Stock shall
no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each certificate previously representing any such
shares shall thereafter represent the
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right to receive the Merger Consideration upon surrender of such certificates in
accordance with Section 2.2 or the right, if any, to require the Surviving
Corporation to purchase such shares of Company Common Stock for their "fair
value" as determined in accordance with Section 92A.380 of the NRS. 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.
SECTION 2.2 Exchange of Certificates.
(a) Promptly after the Effective Time, the Exchange Agent (as defined
below) shall mail to each holder of record of Company Common Stock immediately
prior to the Effective Time (other than Excluded Shares) (i) a letter of
transmittal (the "COMPANY LETTER OF TRANSMITTAL") (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
certificates representing shares of the Company Common Stock (the
"CERTIFICATES") shall pass, only upon delivery of such Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent shall specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration with respect to the
shares of Company Common Stock formerly represented thereby.
(b) At the Effective Time, Parent shall deposit with, or cause to be
deposited with, the party specified by Parent and reasonably acceptable to the
Company as the exchange agent (the "EXCHANGE AGENT"), for the benefit of the
holders of the Company Common Stock, amounts sufficient in the aggregate to
provide all funds necessary for the Exchange Agent to make payments pursuant to
Section 2.1(c)(i) hereof to holders of Company Common Stock issued and
outstanding immediately prior to the Effective Time who are to receive the
Merger Consideration. Any interest, dividends, or other income earned on the
investment of cash deposited by Parent with the Exchange Agent in accordance
with this Section 2.2(b) shall be for the account of and payable to Parent.
(c) Upon surrender to the Exchange Agent of Certificates, together with
the Company Letter of Transmittal, duly executed and completed in accordance
with the instructions thereto, and, and only upon such surrender, the holder of
such Certificate shall be entitled to receive, in exchange therefor, and Parent
shall promptly cause to be delivered to such holder a check in the amount to
which such holder is entitled, after giving effect to any required tax
withholdings. The Certificates surrendered pursuant to this Section 2.2(c) shall
forthwith be cancelled. If any Certificate shall have been lost, stolen, mislaid
or destroyed, then upon receipt of an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed and a lost
certificate indemnity, the Exchange Agent shall issue to such holder the Merger
Consideration into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted.
(d) No interest will be paid or will accrue on the amount payable upon
the surrender of any Certificate. If payment is to be made to a person other
than the registered holder of the Certificate surrendered, it shall be a
condition of such payment that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer, as
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determined by the Exchange Agent or Parent, and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Parent or the Exchange Agent that such tax
has been paid or is not payable. One year following the Effective Time, Parent
shall be entitled to cause the Exchange Agent to deliver to it any funds
(including any interest received with respect thereto) made available to the
Exchange Agent which have not been disbursed to holders of certificates formerly
representing shares of Company Common Stock outstanding on the Effective Time,
and thereafter such holders shall be entitled to look to the Parent only as
general creditors thereof with respect to cash payable upon due surrender of
their Certificates.
(e) In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company, Merger
Consideration may be paid or 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 guarantees 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 payment of the Merger Consideration 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.
(f) The Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to
have been paid and issued 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.
SECTION 2.3 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 cash otherwise payable to such holder of shares of Company Common Stock
or paid to a public official pursuant to any applicable abandoned property,
escheat or similar law.
SECTION 2.4 Dissenters' Rights. If any Dissenting Stockholder shall be
entitled to require the Company to purchase such stockholder's shares for their
"fair value", as provided in Section 92A.380 of the NRS, the Company shall give
Parent notice thereof and Parent shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the shares held by such stockholder shall
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thereupon be entitled to be surrendered in exchange for cash as provided by
Sections 2.1 and 2.2 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. 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 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. The Company 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 (as defined in Section 8.3) on the Company. The
Company has made available 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
disclosure schedule delivered by the Company to Parent prior to execution of
this Agreement (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 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 20,000,000 shares of preferred stock, $.01
par value per share (the "COMPANY PREFERRED STOCK"), of which 1,038,961 shares
have been designated as "Series A Convertible Preferred Stock." The rights,
privileges and preferences of the Company Common Stock and Company Preferred
Stock, including the Series A Preferred Stock, are as stated in the Company's
Articles of Incorporation, as amended to date, including for such purposes the
Certificate of Designation relating to the Series A Preferred Stock. As of the
close of business on June 27, 2003, (i) 10,411,851 shares of the Company Common
Stock and no shares of the Company's Series A Preferred Stock were issued and
outstanding, (ii) no shares of Company Common Stock were held by the Company in
its treasury, (iii) 1,138,600 shares of Company Common Stock were reserved for
issuance upon exercise of the Stock Options (as defined in Section 5.5) and (iv)
253,051 shares of Company Common Stock were reserved for issuance upon the
exercise of the Warrants (as defined in
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Section 5.5). All issued and outstanding shares of Company Common Stock are, and
all shares which may be issued upon the exercise of Stock Options or the
Warrants 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. To the Knowledge of the Company, there are no voting trusts, voting
agreements, irrevocable proxies or other agreements with respect to any voting
shares of capital stock of the Company, other than the Voting Agreement. 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. Except as set forth in
SECTION 3.1(C) of the Company Disclosure Schedule, 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. Except as set forth
in SECTION 3.1(C) of the Company Disclosure Schedule, there are no agreements,
arrangements or commitments of any character (contingent or otherwise) (x)
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 (y) 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. All of the Company's outstanding Convertible
Subordinated Debentures dated December 21, 2001 have been converted into Company
Common Stock.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
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 Stockholder Approval of this Agreement. Assuming the due
authorization, execution and delivery of this Agreement by Parent and Sub, 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.
The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this
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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 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 contract for the
provision of any form of gaming services or products between the Company or any
of its subsidiaries and any third party, any loan or credit agreement, note,
bond, mortgage, indenture, lease, joint venture or other agreement, instrument,
permit, concession, franchise or license applicable to the Company or any of its
subsidiaries or their respective properties or assets, except as set forth in
SECTION 3.1(D) of the Company Disclosure Schedule or (iii) subject to the
governmental filings, approvals and other matters referred to in the following
paragraph, any judgment, order, decree, statute, law, ordinance, rule or
regulation (including, without limitation, those of the National Indian Gaming
Commission, or any other tribal or governmental authority regulating any form of
gaming) 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 (A) have a Material Adverse Effect on the Company, (B) impair in any
material respect the ability of the Company to perform its obligations under
this Agreement or (C) 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, including, without limitation, the
National Indian Gaming Commission, or any other tribal or governmental authority
regulating any form of gaming (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 Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
ACT"), (ii) 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
8
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 approval by (A) the Nevada State Gaming Control Board and the Nevada
Gaming Commission under the Nevada Gaming Control Act and the rules and
regulations promulgated thereunder and (B) other gaming 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, to the Knowledge of the Company, any director or officer of the
Company or of 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 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.
(e) SEC Documents; Financial Statements. Since July 1, 2001, the
Company has timely filed with the SEC all required reports and forms and other
documents (the "COMPANY SEC DOCUMENTS"). As of their respective effective dates
or dates of filing, as the case may be, for Company SEC Documents filed under
the Securities Act or the Exchange Act, 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. 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 financial position of the Company as of the dates thereof and the
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 set forth 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 the Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company 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.
9
(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 or disclosed in SECTION 3.1(G) of the Company Disclosure Schedule,
since July 1, 2002, 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 employee of the Company or
any of its subsidiaries of (A) any increase in compensation or (B) any right to
participate in (by way of bonus or otherwise) the profits of the Company or any
of its subsidiaries, except, in each case, in the ordinary course of business
consistent with prior practice or as was required under employment agreements or
salary or wage policies 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 or salary or
wage policies being set forth in SECTION 3.1(G) of the Company Disclosure
Schedule), (v) any granting by the Company or any of its subsidiaries to any
such officer or employee of any increase in severance or termination pay, except
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, (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 employee of the Company or any of its
subsidiaries, (vii) any damage, destruction or loss, whether or not covered by
insurance, that has or could have a Material Adverse Effect on the Company,
(viii) any change in accounting methods, principles or practices by the Company
materially affecting its assets, liabilities or business, or (ix) since March
31, 2003, any other action taken by the Company or any of its subsidiaries
which, if Section 4.1 had then been in effect, would have been prohibited by
such Article 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 or in SECTION 3.1(H)
of the Company Disclosure Schedule, 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
10
financial advisory fees paid to The Seidler Companies, Incorporated
("SEIDLER")), 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. A true, correct and complete copy of the
Company's definitive engagement letter with Seidler has been delivered to
Parent.
(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 (including, without limitation, for purposes of Section 78.438 of the
NRS); (iii) amended the by-laws of the Company to provide that the provisions of
Sections 78.378 to 78.3793 of the NRS do not apply to an acquisition of a
controlling interest in the Company by Parent and Sub pursuant to the terms of
this Agreement; and (iv) recommended approval of this Agreement and the Merger
by the holders of the Company's Common Stock and directed that the Merger be
submitted for consideration by the Company's stockholders. The affirmative
approval of the holders of a majority of the outstanding shares of Company
Common Stock entitled to vote is the only approval 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. SECTION 3.1(K) of the Company Disclosure Schedule
sets forth a list of each real property lease to which the Company or any of its
subsidiaries is a party as of the date of this Agreement setting forth the
location of the leased premises, the term of the lease, the approximate square
footage of the leased premises and the current monthly lease payments. The
Company does not own any real property. The Company and its subsidiaries have
good and marketable 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 pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (sometimes referred to herein as "PENSION PLANS"),
"employee welfare benefit plans" (as defined in Section 3(1) of 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 material employee benefit plans,
arrangements or understandings (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 employees, officers
or directors of the Company or any of its subsidiaries. The Company has
delivered to, or made available for review by, Parent true, complete and correct
copies of (A) 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), (B) the most recently prepared actuarial report, if any,
for each such
11
Benefit Plan, (C) the most recent summary plan description for each such Benefit
Plan for which such summary plan description is required, (D) the most recently
received IRS determination letter, if any, for each such Benefit Plan that is
intended to be qualified under Section 401(a) of the Code and (E) each trust
agreement and group annuity contract relating to any such Benefit Plan.
(ii) Each of the Company's and its subsidiaries' Benefit Plans has
been administered in all material respects in accordance with its terms. The
Company, each of its subsidiaries and all such Benefit Plans are in compliance
in all material respects with applicable provisions of ERISA and the Code.
(iii) Each of the Company's and its subsidiaries' Pension Plans that
is intended to be qualified under Section 401(a) of the Code has been the
subject of a determination letter from the IRS to the effect that such Pension
Plans are qualified and exempt from federal income taxes under Section 401(a)
and 501(a), respectively, of the Code or has remaining a period of time under
applicable law in which to apply such a letter and no such determination letter
has been revoked nor, to the Knowledge of the Company, has revocation been
threatened, nor has any such Pension Plan been amended in any respect that would
adversely affect its qualification or materially increase the cost to the
Company and its subsidiaries of maintaining such Pension Plan over the costs
incurred by the Company and its subsidiaries with respect thereto for their most
recent fiscal year. .
(iv) No Pension Plan maintained by the Company or any of its
subsidiaries at any time during the last five years is subject to Title IV of
ERISA. No Pension Plan to which the Company or any of its subsidiaries
contributes or is required to contribute is a multiemployer plan (within the
meaning of Section 3(37) of ERISA).
(v) None of the Company, any of its subsidiaries, any officer of the
Company or any of its subsidiaries or, to the Knowledge of the Company, any
trustee or administrator or any of the Company's or its subsidiaries Benefit
Plans which are subject to ERISA, including, without limitation, its Pension
Plans, 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 will 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.
(vi) Except as expressly set forth in this Agreement or 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.
(vii) With respect to any of the Company's or any of its
subsidiaries' Benefit Plans that is an employee welfare benefit plan, (A) no
such Benefit Plan is funded
12
through a "welfare benefit fund," as such term is defined in Section 419(e) of
the Code, (B) 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 (C) each
such Benefit Plan (including any such Benefit Plan covering retirees or 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
(subject to customary advance notice requirements).
(viii) No Commonly Controlled Entity has incurred any material
liability to a Pension Plan of the Company or any of its subsidiaries (other
than for contributions not yet due).
(m) Taxes.
(i) Each of the Company and its subsidiaries has timely filed all
material federal, state, local and foreign tax returns, declarations, estimates,
information returns, statements and reports ("RETURNS") required to be filed by
it through the date hereof and shall timely file all such Returns required to be
filed on or before the Effective Time. All such Returns 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
SEC Documents filed prior to the date of this Agreement and publicly available.
No liability for taxes has been incurred by the Company and its subsidiaries
subsequent to such date other than in the ordinary course of business, except
for such liability, which when taken together with the events or circumstances
giving rise to such liability, would not have a Material Adverse Effect.
(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, if resolved
against the Company or any of its subsidiaries, would have a Material Adverse
Effect upon the Company. No requests for waivers of the time to assess any taxes
have been granted or 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. None of the federal income tax returns of the Company and each of its
subsidiaries consolidated in such returns have been examined by and settled with
the IRS. Except as set forth in SECTION 3.1(M) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has made any election
under Section 341(f) of the Code.
(iii) Neither the Company nor any of its subsidiaries is liable for
the taxes of any person (other than another current member of the Company's
consolidated group), including, without limitation, as a result of the
application of Treasury Regulations Section 1.1502-6, any analogous provision of
state, local or foreign law, or as a result of any contractual arrangement with
any third party or with any taxing authority.
13
(iv) Neither the Company nor any of its subsidiaries constitutes
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) with respect to a distribution of
shares qualifying for tax-free treatment under Section 355 of the Code (i) in
the two years prior to the date of this Agreement or (ii) that could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.
(v) As used in this Agreement, unless the context requires
otherwise, "taxes" includes all federal, state, local and foreign income,
franchise, property, sales, use, excise or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
including obligations for withholding taxes from payments due or made to any
other person, and any interest, penalties or additions to taxes. 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.
(n) No Excess Parachute Payments. Except as set forth in SECTION 3.1(N) of
the Company Disclosure Schedule, no amount required to be paid (whether in cash
or property or the vesting of property) in connection with any of the
transactions contemplated by this Agreement to 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 is
reasonably expected to 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
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 the lack of Permits and for defaults under
Permits, which lack or default would not have a Material Adverse Effect on the
Company. To the Company's Knowledge, 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. The
Company is not presently subject to any order of the National Labor Relations
Board and nor is it the subject of any National Labor Relations Board charge.
(ii) The Company and each of its subsidiaries are, and each of their
respective directors, officers, and persons performing management functions
similar to officers
14
are, in material compliance with all Gaming Laws applicable to the Company and
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, state, local or foreign statute,
code, ordinance, rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, injunction or other authorization,
including the 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; (C)
protection of the environment; or (D) employee health and safety.
(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 or will be 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 or listed in SECTION 3.1(Q)
of the Company Disclosure Schedule, there is no contract or agreement that is
material to the business, financial
15
condition or results of operations of the Company and its subsidiaries taken as
a whole. For purposes of this Section 3.1(q), "material" means each contract (i)
reasonably anticipated to involve aggregate annual payments of $100,000 or more
and which has an unexpired term in excess of one year; (ii) which would be
required to be listed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended June 30, 2002, or included as a material contract in any
subsequent filing by the Company under the Exchange Act, in each case, under the
rules of the SEC; (iii) relating to indebtedness for borrowed money, excluding
trade credit or payables in the ordinary course of business; (iv) creating any
guarantee or keepwell arrangement or other agreement to be liable for the
obligations of another person other than the Company and its wholly owned
subsidiaries; (v) any joint venture or partnership agreement; (vi) which is an
interest rate, equity or other swap or derivative instrument; (vii) which
contains any provision or covenant limiting or restricting the ability of the
Company or any of its subsidiaries, or any of their respective affiliates, to
sell any products or services of or to any person, engage in any line of
business or compete with or to obtain products or services from any person or
limiting the ability of any person to provide products or services to the
Company or any of it subsidiaries or affiliates; (viii) relating to the
ownership or use by the Company or any of its subsidiaries or affiliates of
intellectual property owned by, or used in the business of the Company or any of
its subsidiaries or affiliates (other than with respect to off-the-shelf
software); (ix) granting or creating any security interest in, or lien on, any
property or assets of the Company or any of its subsidiaries; or (x) which
contains any provision changing (including, for such purposes, an acceleration
of payments or benefits, or the triggering of severance obligations) the
benefits under, or terms of, such contract based on a "change of control,"
"change of ownership," "sale of the company" or similar type of event. 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. Neither the Company nor
any of its subsidiaries has any outstanding commitments, whether written or
oral, to deliver or provide to any customer a product containing or requiring
any functionality or technology which the Company has not fully developed for
production, excluding customer-requested modifications to existing technologies
already in production by the Company which the Company has the current
capabilities to make, as of the date hereof.
(r) Intellectual Property.
(i) SECTION 3.1(R) of the Company Disclosure Schedule lists (A) all
patents held by the Company and its subsidiaries and all pending patent
applications by the Company or any subsidiary, including for each such patent
the serial or patent number, country, filing and expiration date and title; (B)
all registered trademarks of the Company or any of its subsidiaries, and all
pending applications for registration by the Company or any of its subsidiaries
of trademarks, including for each such trademark, the registration or
application number, country, filing and expiration date; (C) all registered
copyrights of the Company or any of its subsidiaries and all applications by the
Company or any of its subsidiaries for registration
16
of copyrights, including the registration number, country and filing and
expiration date of each such copyright; (D) all covenants not to sue and
licenses by the Company or any of its subsidiaries to any person or entity of
any of the rights identified in subparagraphs (A) through (C) above; and (E) all
covenants not to sue and licenses by any other person or entity to the Company
or any of its subsidiaries of any patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses, information, proprietary rights or
processes of any other person or entity (except with respect to off-the-shelf
software).
(ii) Each covenant or license identified in SECTION 3.1(R) of the
Company Disclosure Schedule (each a "License") is a valid and binding obligation
of the Company or the subsidiary thereto, enforceable in accordance with its
terms. With respect to each License, there is no material default (or event that
with the giving of notice or passage of time would constitute a material
default) by the Company or subsidiary thereto or, to the Knowledge of the
Company, the other party thereto. Except as disclosed in SECTION 3.1(R) of the
Company Disclosure Schedule, the Company has not received any notice (and the
Company does not have Knowledge) of claims asserted by any person to use any
patents, trademarks, service marks, trade names, copyrights, technology,
know-how or processes licensed by or to the Company or challenging or
questioning the validity or effectiveness of any License, except to the extent
such claims, challenges or questions would not have a Material Adverse Effect on
the Company.
(iii) The Company and its subsidiaries have good and valid title to,
or otherwise possess adequate rights to use, all patents, trademarks, trade
names, copyrights, inventions, trade secrets, software licenses and other
proprietary information necessary to permit the Company and its subsidiaries to
conduct the business and operations of the Company and its subsidiaries in
substantially the same manner as it had been conducted prior to the date hereof.
(iv) Except as disclosed in SECTION 3.1(R) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has, nor, to the
Company's Knowledge has it been alleged to have, infringed upon any patent,
trademark, trade name or copyright or misappropriated or misused any invention,
trade secret or other proprietary information entitled to legal protection,
except to the extent such infringement would not have a Material Adverse Effect
on the Company.
(v) All current or former officers, directors and employees of the
Company have assigned all of their rights in and to, including any inventorship
rights, all patents (including pending patents), trademarks, copyrights,
inventions and other intellectual property material to the conduct of the
business and operations of the Company or if any such assignments have not been
made, the Company has the valid and enforceable right to execute and file such
assignments on behalf of such current or former officers, employees or
directors.
(s) Compliance with Sarbanes-Oxley Act. The Company maintains a system of
internal accounting controls that management reasonably believes is sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
17
asset accountability; (iii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Chief Executive Officer and Chief Financial Officer of the Company have made all
certifications required by the Sarbanes-Oxley Act of 2002 (the "SOX ACT") and
any related rules and regulations promulgated by the SEC, and the statements
contained in any such certification are complete and correct. The Company
maintains "disclosure controls and procedures" (as defined in Rule 13a-14(c)
under the Exchange Act). The Company is otherwise in compliance with all
applicable effective provisions of the SOX Act.
(t) Insider Interests. No officer, director, employee, agent or, to the
Knowledge of the Company, stockholder 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), (i) has any material 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), or (ii) is indebted or otherwise obligated to the
Company in an amount in excess of $60,000. The Company is not indebted or
otherwise obligated to any such person, except for amounts not in excess of
$60,000 or amounts due under normal arrangements applicable to directors,
officers or employees generally as to salary or fees or reimbursement of
ordinary business expenses not unusual in amount or significance. The Company
has not (i) since July 1, 2002, entered into any relationship or transaction of
a sort that would be required to be disclosed by the Company in a proxy
statement for a meeting relating to the election of directors pursuant to Item
404 of Regulation S-K, except for those matters that have been disclosed in the
Company SEC Reports filed prior to the date of this Agreement, or (ii) since the
effective date of the SOX Act, taken any action prohibited by Section 402 of the
SOX Act. As of the date hereof, 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.
(u) Noncompetition. Except as listed and identified as containing a
non-competition or similar restriction in SECTION 3.1(U) of the Company
Disclosure Schedule, 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) Fairness Opinion. The Company has received a written opinion from
Seidler to the effect that the Merger Consideration is, as of the date of this
Agreement, fair from a financial point of view to stockholders of the Company.
(w) Other Matters. Floyd W. Glisson has entered into an Amendment, dated
of even date herewith, to that certain Employment Agreement dated January 1,
2001 (as amended to the date of this Agreement, the "CEO EMPLOYMENT AGREEMENT")
between CEO and the Company (the "CEO AMENDMENT"). Richard J. Schneider has
entered into an
18
employment agreement, of even date herewith, with the Company (the
"PRESIDENT/COO AGREEMENT"). Copies of the executed CEO Amendment and
President/COO Agreement have been provided to Parent.
SECTION 3.2 Representations and Warranties of Parent and Sub. 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.
(b) Authority; Noncontravention. Parent and Sub have the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub. Assuming the due authorization, execution and delivery
of this Agreement by the Company, 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.
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
the comparable charter or organizational documents of any of its subsidiaries,
(ii) any contract for the provision of any form of gaming services or products
between Parent or any of its subsidiaries and any third party, any loan or
credit agreement, note, bond, mortgage, indenture, lease, joint venture 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, approvals and other matters referred
to in the following paragraph, any judgment, order, decree, statute, law,
ordinance, rule or regulation (including, without limitation, those of the
National Indian Gaming Commission, or any other tribal or governmental authority
regulating any form of gaming) 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 (A) have a Material Adverse Effect on
Parent, (B) impair in any material respect the ability of Parent to perform its
obligations under this Agreement or (C) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
19
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 such reports under Sections 13(a), 13(d),
13(e) and 16(a) of 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
Parent is qualified to do business, (iv) the approval by (A) the Nevada State
Gaming Control Board and the Nevada Gaming Commission under the Nevada Gaming
Control Act and the rules and regulations promulgated thereunder and (B) other
gaming regulatory bodies in jurisdiction where Parent 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 Parent, impair
in any respect the ability of Parent 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, to the Knowledge of Parent, any director or officer of Parent or
of 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 is being or may be revoked or suspended which would
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement or which would have a Material Adverse Effect on
Parent.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement will, at the date the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Company 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.
(d) Voting Requirements. The Boards of Directors of Parent and Sub
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; and (ii)
approved the Merger and this Agreement and the transactions contemplated by this
Agreement. No vote of the holders of any class or series of the Parent's or
Sub's capital stock is necessary to approve the Merger, this Agreement or the
transactions contemplated by this Agreement, except for the approval by Parent
as the sole stockholder of Sub, which approval has been obtained. Neither
Parent, Sub nor any of their affiliates owns beneficially or of record any
capital stock, or securities convertible into capital stock, of the Company,
except as a result of the execution by Parent or Sub of the Voting Agreement.
(e) 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
20
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.
(f) 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 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.
(g) Financing. Parent has and will have as of the Closing Date
sufficient funds to pay the aggregate Merger Consideration and to pay all fees
and expenses of Parent and Sub related to the Merger.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business.
(a) Conduct of Business by the Company. Except as expressly set
forth in this Agreement or as consented to in writing by Parent during the
period from the date of this Agreement to the Effective Time or until the
earlier termination of this Agreement pursuant to its terms, the Company shall,
and shall cause its subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course consistent with the manner as heretofore
conducted 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 expressly set forth in this Agreement or as consented to in writing by Parent
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
21
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 or Warrants 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 or
Warrants;
(iii) amend its articles of incorporation, by-laws or other
comparable charter or organizational documents, or alter through merger,
liquidation, reorganization, restructuring or in 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
with a fair market value in excess of $100,000 except purchases of inventory,
fixtures, furniture, supplies and equipment in the ordinary course of business
consistent with past practice or any capital expenditures to the extent
permitted by Section 4.1(a)(viii);
(v) commence or undertake or agree to commence the operation
or development of a casino or other gaming operations of any nature (excluding
the existing gaming operations of the Company);
(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
consistent with past practice;
(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) make any loans, advances or capital contributions
to, or investments in, any other person, other than (1) to the Company or any
direct or indirect wholly owned subsidiary of the Company or (2) loans or
advances to employees of the Company or any of its subsidiaries for travel or
business expenses in the ordinary course of business;
22
(viii) make or agree to make any new capital expenditures
which individually exceed $500,000 per fiscal quarter;
(ix) make or rescind any express or deemed election relating
to material taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
material 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, 2002, except as
may be required by applicable law;
(x) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice 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 consistent with past practice or the settlement of
litigation involving net payments by the Company and its subsidiaries of amounts
not in excess of $250,000 in the aggregate;
(xi) (A) increase the rate 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 usual and customary increases to
employees who are not officers, (B) pay or agree to pay any pension, retirement
allowance, severance, continuation or termination benefit or other material
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 as otherwise provided to Parent
in writing prior to the date hereof, (C) establish, adopt or commit itself to
any additional pension, profit sharing, bonus, incentive, deferred compensation,
stock purchase, stock option, stock appreciation right, group insurance,
severance pay, continuation pay, termination pay, retirement or other material
employee benefit plan, agreement or arrangement, or amend or modify or increase
the 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 Plans or other Benefit Plan, except to
the extent necessary to comply with applicable law, (D) enter into any severance
or employment agreement with or for the benefit of any person, or (E) increase
the rate of compensation under or otherwise change the terms of any existing
employment agreement;
(xii) except in the ordinary course of business consistent
with past practice or to the extent necessary to comply with applicable law,
modify, or amend in any material respect, or 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;
(xiii) change fiscal years;
23
(xiv) authorize, recommend, propose or announce an intention
to adopt a plan of complete or partial liquidation or dissolution of the
Company;
(xv) enter into any collective bargaining agreement;
(xvi) engage in any transaction with, or enter into any
agreement, arrangement or understanding with, directly or indirectly, any of the
Company's affiliates other than pursuant to such agreements existing on the date
hereof and disclosed on the Company Disclosure Schedule;
(xvii) enter into any agreement which contains any provision
or covenant limiting or restricting the ability of the Company or any of its
subsidiaries, or any of their respective affiliates, to sell any products or
services of or to any person, engage in any line of business or compete with or
to obtain products or services from any person or limiting the ability of any
person to provide products or services to the Company or any of it subsidiaries
or their respective affiliates; or
(xviii) authorize any of, or commit or agree to take any of,
the foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall not
permit any of their respective subsidiaries to, take any action that would
reasonably be expected to result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue or (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect.
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 Sections 3.1(j) and 3.1(v), 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 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 (i) taking any
non-appealable, final action ordered to be taken by the Company or its
subsidiaries by any court of competent jurisdiction or (ii) furnishing
information to, or entering into discussions or negotiations with, another
person in connection with an unsolicited bona fide Takeover Proposal by such
person, if and only to the extent that, in the case of clause (ii), (i) the
Board of Directors of the Company determines in good faith, after consultation
with legal counsel and a financial advisor of nationally recognized reputation,
that such action would reasonably likely lead to a transaction that would
provide greater value to the
24
holders of Company Common Stock than the Merger (a "SUPERIOR PROPOSAL") and that
the party making the proposal has demonstrated that the funds necessary for its
proposal are reasonably likely to be available, (ii) the Board of Directors of
the Company determines in good faith, after consultation with its legal counsel,
that the failure to take such action would be inconsistent with its fiduciary
duties to the holders of Company Common Stock under applicable law, and (iii)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity, the Board of Directors receives from
such person an executed confidentiality agreement in form and substance similar
to the Confidentiality Agreement dated June 6, 2003 between the Company and
Parent (the "CONFIDENTIALITY AGREEMENT"). For purposes of this Agreement,
Seidler shall be considered a financial advisor of nationally recognized
reputation.
(b) The Company shall notify Parent orally and in writing of any
offers or proposals with respect to a Takeover Proposal (including 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 24 hours of the
receipt thereof by an officer or director of the Company or any financial
advisor to the Company, shall keep Parent informed of the status and material
details of any such 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 (other
than a purchase of inventory in the ordinary course of business), 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, a
substantial equity interest in, any voting securities of, or a substantial
portion of the assets of, the Company or any of its subsidiaries whose assets
constitute more than 15% of the combined assets of the Company and 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 relating to a
Takeover Proposal. Nothing contained in this Agreement 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 or from making any disclosure to its stockholders if, in the good
faith judgment of the Board of Directors of the Company, after consultation with
legal counsel, failure to so disclose would be a violation of its obligations
under applicable law.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Proxy Statement; Stockholders'
Meeting.
(a) As promptly as reasonably practicable after the execution of
this Agreement, the Company shall prepare and file with the SEC a proxy
statement relating to the meeting of the Company's stockholders to be held to
obtain the Stockholder Approval (together with any amendments thereof or
supplements thereto, the "PROXY STATEMENT"). In connection with the notice of
the Company's stockholders meeting at which the Merger is to be approved by the
Company's stockholders, the Company shall have complied with NRS Sections
92A.410, and thereafter, shall comply with all other applicable provisions of
NRS Sections 92A.300 to 92A.500,
25
inclusive, regarding dissenters' rights under Nevada law. The Company shall
obtain and furnish the information required to be included in the Proxy
Statement and shall respond promptly to any comments made by the SEC with
respect to the Proxy Statement and cause the Proxy Statement and form of proxy
to be mailed to the Company's stockholders at the earliest practicable date.
Parent shall cooperate in the preparation of the Proxy Statement and shall as
soon as reasonably practicable after the date hereof furnish the Company with
all information for inclusion in the Proxy Statement as the Company may
reasonably request. The Company agrees, as to information with respect to the
Company, its officers, directors, stockholders and subsidiaries contained in the
Proxy Statement, and Parent agrees, as to information with respect to Parent and
its officers, directors, stockholders and subsidiaries contained in the Proxy
Statement, that such information, at the date the Proxy Statement is mailed and
(as amended or supplemented) at the time of the Company Stockholders Meeting,
will not be false or misleading with respect to any 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 in which they are made, not
misleading. Parent and its counsel shall be given the opportunity to review and
comment on the Proxy Statement and all amendments or supplements thereof prior
to their being filed with the SEC. The Company will advise Parent, promptly
after it receives notice thereof, of the time when the Proxy Statement has been
cleared by the SEC or any request by the SEC for an amendment of the Proxy
Statement or comments from the SEC thereon and proposed responses thereto or
requests by the SEC for additional information. The Company, on the one hand,
and Parent, on the other hand, agree to promptly correct any information
provided by either of them for use in the Proxy Statement, if any, if and to the
extent that it shall have become false or misleading, and the Company further
agrees to take all steps reasonably necessary to cause the Proxy Statement as so
corrected to be filed with the SEC and to use its reasonable best efforts to
cause the Proxy Statement to be disseminated to the Company's stockholders, in
each case, as and to the extent required by applicable laws.
(b) Parent agrees promptly to advise the Company if at any time
prior to the Company Stockholders' Meeting (as defined below) 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 the Company.
(c) The Company agrees promptly to advise Parent if at any time
prior to the Company Stockholders' Meeting (as defined below) any information
provided by it in the Proxy Statement is or becomes incorrect or incomplete in
any material respect.
(d) As soon as reasonably practicable following the date of this
Agreement, the Company shall call and hold a meeting of its stockholders (the
"COMPANY STOCKHOLDERS' MEETING"), for the purpose of obtaining the Stockholder
Approval. Subject to the fiduciary duties of its Board of Directors, applicable
law and the Company's Articles of Incorporation and Bylaws, the Company shall
use its best efforts to solicit from its stockholders proxies, and shall take
all other action necessary or advisable to secure the approval of stockholders
required by
26
applicable law or otherwise to obtain the Stockholder Approval, and through its
Board of Directors, shall recommend to its stockholders the obtaining of the
Stockholder Approval.
SECTION 5.2 Access to Information; Confidentiality. The Company
shall, and shall cause its subsidiaries to, afford Parent, and the officers,
employees, accountants, counsel, financial advisors and other representatives of
Parent, reasonable access 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, (a) the Company
shall, and shall cause each of its subsidiaries to, furnish promptly to Parent,
(i) 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 (ii) all other information concerning its business,
properties and personnel as Parent may reasonably request, and (b) the Company
shall permit Parent's officers and representatives to meet with the officers of
the Company responsible for the financial statements, internal controls and
disclosure controls and procedures of the Company to discuss such matters as
Parent may deem reasonably necessary or appropriate for Parent to satisfy its
obligations under Sections 302 and 906 of SOX any rules and regulations relating
thereto. 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 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 the transactions
contemplated by this Agreement, including (i) the making of all necessary
filings with the Specified Agencies under the HSR Act and the taking of such
further commercially reasonable actions as may required to obtain termination or
expiration of the waiting period (and any extension thereof) under the HSR Act,
(ii) the making of all necessary applications, registrations and filings
(including all filings with Governmental Entities other than the Specified
Agencies, if any), (iii) the obtaining of all necessary actions or nonactions,
licenses, consents, approvals or waivers from Governmental Entities and other
third parties, (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 and (v) the defending of any lawsuits or other
legal proceedings, judicial or administrative, 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. For purposes of this Agreement, "commercially
reasonable efforts" shall not require Parent or Sub to take any actions in
connection with any competition laws (including the HSR Act) pursuant to this
Section 5.3(a) which would require Parent or Sub to agree to, or proffer to,
divest or hold separate any assets or any portion of any business of Parent,
Sub, the Company or any of their respective Subsidiaries.
27
(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 the Company or Parent, as the case may be;
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.
(i) 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 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 thirty days after the date hereof, and
in all events shall file within sixty 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 the Company shall have
the right to review in advance, 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 appear in any filing made with, or written
materials submitted to, any Governmental Entity in connection with Gaming
Approvals. The Company and Parent agree promptly to 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 Approval
required from such Governmental Entity will not be obtained or that the receipt
of any such approval will be materially delayed.
(ii) Nothing in this Agreement 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.
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(b) Denial of License; Individuals. If any person shall become an
Ineligible Person prior to the Closing, then (i) the Company shall use its best
efforts to cause each Ineligible Person to, immediately and permanently, resign
from any position, including as director or officer, in the Company and each
Ineligible Person shall have no further management role in the Company, (ii) if
required to do so by any Governmental Entity as a condition to receipt of any
Gaming Approval, the Company shall use its best efforts to cause each Ineligible
Person to dispose of all of its securities or other ownership interests in the
Company, and (iii) the Company shall use its best efforts to 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 who owns any capital stock or other
interest in the Company (i) 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 the
Company as an employee, director, officer or otherwise, may, in Parent's
reasonable opinion after consultation with counsel, 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 Options and Warrants.
(a) Options. 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 Plans (as defined below)) shall adopt
such resolutions, obtain such consent, and 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 1993 Stock Option and Incentive Plan and 2002 Stock Incentive Plan
(the "STOCK OPTION PLANS") as is necessary to provide: (i) that the holder of
each Stock Option outstanding immediately prior to the Effective Time, which is
then exercisable or would, by the express terms of the applicable Stock Option
Plan or the individual agreement evidencing such option, become exercisable upon
the occurrence of the Merger (the "VESTED OPTIONS"), shall receive in settlement
thereof, for each share of Company Common Stock subject to such Vested Option,
an amount in cash equal to the Merger Consideration minus the per share exercise
or purchase price of such Vested Option as of the date hereof; (ii) that the
holder of each Stock Option outstanding immediately prior to the Effective Time,
which is not then exercisable and would not, by the express terms of the
applicable Stock Option Plan or the individual agreement evidencing such option,
become exercisable upon the occurrence of the Merger (the "UNVESTED OPTIONS"),
shall receive in settlement thereof, for each share of Company Common Stock
subject to such Unvested Option, the conditional right, subject to the continued
employment requirement described below in this Section 5.5(a), to receive an
amount in cash equal to the Merger Consideration minus the per share exercise or
purchase price of such Unvested Option as of the date hereof; (iii) that, except
as expressly provided below in this Section 5.5(a), no payment, pursuant to
Section 5.5(a)(ii) or
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otherwise, shall be made with respect to an Unvested Option if the person who
holds such Unvested Option immediately prior to the Effective Time is not
continuously employed by the Parent, the Surviving Corporation or one of their
subsidiaries (a "PARENT ENTITY") through each applicable date that such Unvested
Option was otherwise scheduled to become exercisable had the Merger not
occurred; and (iv) that, at the Effective Time, all outstanding Stock Options,
including Vested Options and Unvested Options, shall immediately terminate, and
there shall be substituted therefor the right to receive cash in accordance with
the terms of this Section 5.5(a), and neither the Surviving Corporation nor
Parent shall have any further obligation with respect thereto other than as
expressly provided in this Section 5.5(a); provided, however, that all amounts
payable pursuant to this Section 5.5(a) shall be subject to any required tax
withholding. Payment of the amount determined pursuant to Section 5.5(a)(i) with
respect to a Vested Option shall be made as soon as reasonably practicable after
the Effective Time. Payment of the amount determined pursuant to Section
5.5(a)(ii) with respect to an Unvested Option shall be made (without interest)
not more than thirty (30) days following each applicable date that such Unvested
Option would have otherwise become exercisable assuming that the Merger had not
occurred or, in the case of a Parent Termination (as defined below), as soon as
reasonably practicable after the Parent Termination Date (as defined below).
Notwithstanding the foregoing, if the employment of a holder of Unvested Options
is terminated other than for Cause (as defined below) by the Surviving
Corporation prior to the eighteenth month anniversary of the Effective Date and
such holder is not employed by any other Parent Entity (a "PARENT TERMINATION"
and the date of such termination being the "PARENT TERMINATION DATE")), then,
for purposes of this Section 5.5(a), (i) if the option holder is subject to a
Parent Termination on or prior to the twelve month anniversary of the Effective
Date, all of the Unvested Options of such holder shall be deemed vested as of
the Parent Termination Date and (ii) if the option holder is subject to a Parent
Termination after the twelve month anniversary of the Effective Date but on or
prior to the eighteenth month anniversary of the Effective Date, all of the
Unvested Options of such holder that would have vested on April 1, 2005 had the
Merger not occurred shall be deemed vested as of the Parent Termination Date.
For purposes of this Section 5.5(a), "CAUSE" means a determination by the
applicable Parent Entity that the holder has been dishonest, committed an act of
fraud or misconduct, engaged in an unauthorized use or disclosure of
confidential information or trade secrets, been convicted of or confessed to
committing a crime punishable by law (other than minor traffic violations) or
has continued to fail or refuse to carry out the duties assigned to such holder,
and such failure or refusal has continued for 30 days after written notice
thereof to the holder.
(b) Warrants. As soon as practicable following the date of this
Agreement, the Company shall mail a notice concerning the transactions
contemplated hereby to all holders of outstanding warrants to purchase shares of
Company Common Stock ("WARRANTS") as required pursuant to the terms of such
holders' individual warrant agreements. In addition, between the date hereof and
the Effective Time the Company shall comply with all other notice requirements
of the Warrants. At 5:00 p.m. Eastern time on the day immediately prior to the
Effective Time, all outstanding Warrants shall immediately terminate, and
neither the Surviving Corporation nor Parent shall have any further obligations
with respect thereto.
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SECTION 5.6 Takeover Statutes; Inconsistent Actions. If any "fair price,"
"moratorium," "control share," "business combination," "shareholder protection"
or similar or other anti-takeover statute or regulation enacted under any state
or Federal law shall become applicable to the Merger or any of the other
transactions contemplated hereby, the Company and the Board of Directors of the
Company shall grant such approvals and take all such actions as are within its
authority so that the Merger and the other transactions contemplated hereby and
thereby may be consummated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise use all commercially reasonable efforts to
eliminate the effects of such statute or regulation on the Merger and the
transactions contemplated hereby and thereby. The Company has not and, during
the term of this Agreement shall not, adopt, effect or implement any
"shareholders' rights plan," "poison pill" or similar arrangement.
SECTION 5.7 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 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, 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 made available to Parent) on terms
no less favorable to such indemnified parties 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 six-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 year
during such six-year period shall exceed 150% of the premium cost for such
policy in effect during the year ended December 31, 2003 (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 $335,000.
(c) In addition to the other rights provided for in this Section 5.7, for
six years after the Effective Time, Parent hereby, to the fullest extent
permitted by applicable law, guaranties for the benefit of the directors and
officers of the Company the indemnification obligations of the Surviving
Corporation after the Effective Time under its articles of incorporation and
by-laws. Parent unconditionally and irrevocably waives any provision under
applicable law that may limit the enforceability of such guaranty. The directors
and officers of the Company shall be deemed third party beneficiaries of this
Section 5.7(c) and may seek to enforce Parent's obligations under this Section
5.7(c) in the event the Surviving Corporation fails to pay when due any
indemnification obligations to such directors and officers.
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(d) The obligations of the Company, the Surviving Corporation and Parent
contained in this Section 5.7 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 and 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 5.7.
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.
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 Resignation of Directors. The Company shall use commercially
reasonable efforts to cause each of the directors of the Company and its
subsidiaries to resign their positions as such as of the Effective Time.
SECTION 5.11 Employee Benefit Plans. From and after the Effective Date,
Parent shall, or shall cause the Surviving Corporation to, provide the employees
of the Surviving Corporation and its subsidiary with all employee benefit plans
as are provided by Parent and its subsidiaries to their own employees who are
similarly situated. The foregoing shall not constitute any commitment, contract,
understanding, undertaking, guarantee (express or implied) on the part of the
Surviving Corporation or Parent to continue the employment of any employee of
the Company for any period of time or on any terms except as determined by the
Surviving Corporation.
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 Approval. The Stockholder Approval shall have been
obtained.
(b) 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
32
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.
(c) HSR Act. The applicable waiting period (and any extension thereof)
under the HSR Act shall have expired or been terminated.
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 that is qualified by
materiality shall be true and correct at and as of the Closing Date as though
made on and as of the Closing Date, and each of such representations and
warranties that is not so qualified shall be true and correct in all material
respects at and as of the Closing Date as if made at 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 at and 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) 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 and of comparable authority in other
jurisdictions in which the Company and its subsidiaries are incorporated or
qualified to do business stating that each 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.
(d) No Material Adverse Change. From and including the date hereof, there
shall not have occurred a Material Adverse Change with respect to the Company.
(e) 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
33
and filings (including, without limitation, all Gaming Approvals) (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, and are
in full force and effect, other than those Consents and Filings (excluding
Gaming Approvals) which, if not obtained or made, would not, or such
limitations, prohibitions or requirements which would not have or cause (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,
or (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.
(f) Employment Matters. Each of the CEO Amendment and the President/COO
Agreement shall be in full force and effect as of the Effective Time (except to
the extent such agreements shall have been terminated as a result of the death
or disability of the employees), and none of the CEO Employment Agreement, the
CEO Amendment or the President/COO Agreement shall have been amended after the
date of this Agreement other than as approved in writing by Parent.
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 and
warranties of Parent and Sub contained in this Agreement that is qualified by
materiality shall be true and correct at and as of the Closing Date as though
made on and as of the Closing Date, and each of such representations and
warranties that is not so qualified shall be true and correct in all material
respects at and as of the Closing Date as if made at 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 at and 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
34
approving the execution, delivery and performance of this Agreement and the
instruments contemplated hereby, and of the stockholders of Sub approving the
Merger, each certified by the Secretary or the Assistant Secretary of the
relevant party; 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) Consents and Approvals. The Company shall have received evidence, in
form and substance reasonably satisfactory to it, that all Consents and Filings
required to be obtained by the Company from all Governmental Entities, as are
required in connection with the Merger and the consummation of the transactions
contemplated hereby, have been obtained by the Company, and are in full force
and effect.
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:
(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 December 31, 2003;
(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 or Sub set forth in this Agreement, or if any
representation or warranty of Parent or Sub 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 December 31, 2003;
(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 December 31, 2003, unless the failure to consummate the Merger is the result
of a breach of
35
covenant set forth in this Agreement or a material breach of any representation
or warranty set forth in this Agreement by the party seeking to terminate this
Agreement;
(f) by either Parent or the Company, if any approval of the stockholders
of the Company 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 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 by
reason of the receipt by the Company of a Takeover Proposal; or
(h) by the Company if, after receipt of a Superior Proposal and prior to
the Effective Time, the Board of Directors of the Company determines, in its
good faith judgment and in the exercise of its fiduciary duties, after
consultation with legal counsel and, as to financial matters, after consultation
with an investment banking firm of national reputation, that the failure to
terminate this Agreement and accept such Superior Proposal would be inconsistent
with the proper exercise of such fiduciary duties; provided, however, that
before the Company may terminate this Agreement pursuant to this subsection
7.1(h), the Company shall give notice to Parent of the proposed termination
under subsection 7.1(h) 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 or superior 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 ten (10) days after such good faith
negotiations have commenced, the Company may terminate this Agreement pursuant
to this subsection 7.1(h).
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 the last sentence of Section 5.2,
Section 5.8, Section 5.9, Section 7.5 and Article VIII which shall survive
termination and except that such termination shall not relieve a party from
liability as a result of the willful breach by such party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
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;
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 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.
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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 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 Fees.
(a) In the event (i) Company terminates this Agreement pursuant to Section
7.1(h) or (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 $3,900,000 (the "COMPANY TERMINATION FEE"), by wire transfer of
immediately available funds upon the occurrence of such event.
(b) In the event (i) 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 nine (9) months from the termination of the Agreement, the Company shall
have entered into an agreement for, and within twelve (12) months from such
termination shall have consummated, a transaction substantially in the form
proposed in such Takeover Proposal with the party that made such Takeover
Proposal, then the Company shall pay Parent an amount equal to the Company
Termination Fee by wire transfer of immediately available funds, payable upon
consummation of such transaction.
(c) In the event (i) Company terminates this Agreement pursuant to Section
7.1(c) or (ii) Parent terminates this Agreement and is at the time of such
termination in material breach of any representation, warranty, covenant or
agreement of Parent or Sub set forth in this Agreement, then Parent shall pay to
the Company the amount of $3,900,000 (the "PARENT TERMINATION FEE") by wire
transfer of immediately available funds upon the occurrence of such event. The
parties hereto acknowledge and agree in advance that the amount of the Parent
Termination Fee is a fair and equitable amount to reimburse the Company for any
damages which the parties estimate may be sustained by the Company due to the
termination of this Agreement in the circumstances herein described, and that
this Section 7.5(c) shall constitute a liquidated damages provision. The Parent
Termination Fee shall be the Company's sole remedy under this Agreement in the
event of the termination of this Agreement in the circumstances herein
described.
(d) The parties agree that the agreements contained in Section 7.5 are an
integral part of the transactions contemplated by this Agreement. If any party
fails to promptly pay to another party any fee due under this Section 7.5, the
first party shall pay the costs and expenses (including legal fees and expenses)
in connection with any action, including the filing
37
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.
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. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
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
9295 Prototype Drive
Reno, Nevada 89510-0580
Facsimile: 775-448-0120
Attention: Sara Beth Brown, Esq.
with a copy to:
O'Melveny & Myers LLP
114 Pacifica, Suite 100
Irvine, California 92618-3318
Facsimile: 949-737-2300
Attention: J. Jay Herron, Esq.
38
(b) if to the Company, to:
Acres Gaming Incorporated
7115 Amigo, Suite 150
Las Vegas, Nevada 89119
Facsimile: 702-263-7595
Attention: Floyd W. Glisson
with a copy to:
Perkins Coie LLP
1211 S.W. Fifth Avenue
Portland, Oregon 92704
Facsimile: 503-727-2222
Attention: Patrick J. Simpson, Esq.
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) "Gaming Laws" means any Federal, state, local, tribal 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 Parent, as the case may be,
or any of their respective subsidiaries.
(c) "Knowledge" means a fact, event, circumstance or occurrence actually
known by any of the Chief Executive Officer, President, Chief Operating Officer
or Chief Financial Officer of the Company or Parent, as the case may be.
(d) "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; excluding any
such adverse change that is due to events, occurrences, facts, conditions,
changes, developments or effects which (i) affect the economy, capital markets
or the gaming industry generally, (ii) result primarily from entering into this
Agreement or the consummation of the Merger or announcement thereof or (iii)
result from facts or conditions that are disclosed in the SEC Documents or the
Company Disclosure Schedule.
(e) "person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity; and
39
(f) 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 5.7 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 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.
SECTION 8.9 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Nevada or in Nevada state court, this being in addition
to any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Nevada or any Nevada
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c)
40
agrees that it will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court other than a
federal or state court sitting in the State of Nevada.
[The remainder of this page intentionally left blank]
41
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/ T.J. Matthews
---------------------
Name: T.J. Matthews
---------------------
Its: C.O.O.
---------------------
SUB:
NWAC CORP.,
a Nevada corporation
By: /s/ T.J. Matthews
---------------------
Name: T.J. Matthews
---------------------
Its: President
---------------------
THE COMPANY:
ACRES GAMING INCORPORATED,
a Nevada corporation
By: /s/ Floyd W. Glisson
---------------------
Name: Floyd W. Glisson
---------------------
Its: C.E.O.
---------------------
S-1
EXHIBIT A
FORM OF VOTING AGREEMENT
VOTING AGREEMENT
June 29, 2003
International Game Technology
9295 Prototype Drive
Reno, Nevada 89510-0580
Re: Agreement of Selected Stockholder Concerning Transfer and Voting of
Shares of Acres Gaming Incorporated
I understand that you and Acres Gaming Incorporated (the "Company"), of
which the undersigned is a significant stockholder, are prepared to enter into
an agreement for the merger of a wholly-owned subsidiary ("Sub") of you with and
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; Irrevocable Proxy. I will vote or cause to be voted all shares
of capital stock of the Company owned of record or beneficially owned or held in
any capacity by me or under my control, by proxy or otherwise (collectively, the
"Shares"), 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 irrevocably
appoint you 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 stead for the matters and in the manner contemplated by this
Section 1. This proxy is coupled with an interest and is irrevocable for the
maximum period permitted under applicable law.
2. 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 prior to the Merger, without your
express written consent. Any transferee of the Shares must, as a condition to
receipt of such Shares, agree to bound by the terms hereof, in a form
satisfactory to you.
3. 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. I 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 (a) December 31, 2003 and (b)
termination of the Agreement by the Company pursuant to Section 7.1(h) of the
Agreement.
4. 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.
A-2
SELECTED STOCKHOLDER:
--------------------------------------
Floyd W. Glisson, individually and
as Trustee of the Glisson Family Trust
AGREED:
INTERNATIONAL GAME TECHNOLOGY,
a Nevada corporation
By: _______________________________
Name: _____________________________
Its: _____________________________
A-3
Appendix B
VOTING AGREEMENT
June 29, 2003
International Game Technology
9295 Prototype Drive
Reno, Nevada 89510-0580
Re: Agreement of Selected Stockholder Concerning Transfer and
Voting of Shares of Acres Gaming Incorporated
I understand that you and Acres Gaming Incorporated (the "Company"), of
which the undersigned is a significant stockholder, are prepared to enter into
an agreement for the merger of a wholly-owned subsidiary ("Sub") of you with and
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; Irrevocable Proxy. I will vote or cause to be voted all
shares of capital stock of the Company owned of record or beneficially owned or
held in any capacity by me or under my control, by proxy or otherwise
(collectively, the "Shares"), 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
irrevocably appoint you 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 stead for the matters and in the manner contemplated
by this Section 1. This proxy is coupled with an interest and is irrevocable for
the maximum period permitted under applicable law.
2. 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 prior to the
Merger, without your express written consent. Any transferee of the Shares must,
as a condition to receipt of such Shares, agree to bound by the terms hereof, in
a form satisfactory to you.
3. Effective Date; Succession; Remedies; Termination. Upon your
acceptance and execution of the Agreement, this letter agreement shall mutually
bind and benefit you and me,
1
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. I 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 (a) December 31, 2003 and (b)
termination of the Agreement by the Company pursuant to Section 7.1(h) of the
Agreement.
4. 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.
2
SELECTED STOCKHOLDER:
/s/ Floyd W. Glisson
Floyd W. Glisson, individually and
as Trustee of the Glisson Family Trust
AGREED:
INTERNATIONAL GAME TECHNOLOGY,
a Nevada corporation
By: /s/ T.J. Matthews
Name: T.J. Matthews
Its: C.O.O.
S-1