Exhibit 2.2
MUTUAL WAIVER TO AGREEMENT AND PLAN OF MERGER
This Mutual Waiver dated as of April 17, 1996, by and among ALLIANCE
GAMING CORPORATION ("Alliance"), BGII ACQUISITION CORP. ("BAC") AND BALLY GAMING
INTERNATIONAL, INC. (the "Company").
Alliance, BAC and the Company are parties to an Agreement and Plan of
Merger dated as of October 18, 1995, as amended by Amendment No. 1 thereto,
dated January 23, 1996 (as so amended, the "Agreement"), providing, subject to
the terms and conditions thereof, for the merger of BAC into the Company. The
parties wish to waive specific provisions of such Agreement in certain respects,
and accordingly, for good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this Waiver,
terms defined in the Agreement are used herein as defined therein.
Section 2. MUTUAL WAIVER. In consideration of the representations and
warranties as well as agreements set forth below, each of Alliance, BAC and the
Company hereby waives its right, pursuant to Section 8.1.2 of the Agreement, to
unilaterally terminate the Agreement on May 3, 1996 and agrees that it will not
exercise such right until June 18, 1996, at which time it will be free to so
exercise such right.
Section 3. REPRESENTATIONS AND COVENANTS OF ALLIANCE AND BAC. Each of
Alliance and BAC represent that its failure to obtain the financing necessary to
satisfy the provisions of Section 7.1.6 of the Agreement prior to the date
hereof and its need for additional time to obtain such financing is not
attributable to BGII and that as of the date hereof BGII has not breached any of
its representations and warranties or covenants under the Agreement, and any
such breach is hereby waived. Alliance acknowledges that it has had adequate
access to the Company's books and records and is therefore sufficiently familiar
with the Company's operations and condition to make the foregoing representation
and waiver on a fully informed basis. In the event that the Agreement is
terminated prior to the Effective Time, other than as a result of the Company's
willful or continuous material failure after the date of this Waiver to
cooperate to secure the consummation of the Merger which failure persists
following written notice of such failure from Alliance (unless such failure is
concealed), Alliance agrees to pay the Company its reasonable out-of-pocket
expenses (not in excess of $500,000) actually incurred in connection with
granting Alliance additional time to obtain financing and effect the Merger.
Alliance hereby acknowledges receipt of copies of the current employment
agreements between each of the employees listed on Schedule 1 hereto, on the one
hand, and the Company or one of its subsidiaries or divisions, on the other
hand, and Alliance consents to the execution and delivery of each such
agreement. Alliance acknowledges that no failure of the Company to fulfill any
of its obligations under the Agreement exists as of April 17, 1996.
Section 4. ADDITIONAL AGREEMENTS. The parties hereto agree that the
following provisions supersede any conflicting provisions of the Agreement:
1. The parties hereto agree that as additional Merger Consideration,
Alliance will pay to Company stockholders interest on the Cash Consideration of
5.5% per annum accruing from May 3, 1996 to the Effective Time.
2. In the event that the Agreement is terminated by any of the
parties hereto prior to the Effective Time, then for a period of one year
following the date of such termination, Alliance and BAC will not, directly or
indirectly, and will cause each of its Affiliates and Associates (as such terms
are defined in Rule 12b-2 under the Exchange Act) not to, directly or
indirectly, (a) acquire or agree, offer, seek or propose to acquire beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of the Company or
any of its assets or businesses, any securities issued by it or any options or
rights to acquire such ownership, (b) seek or propose by statements or otherwise
to influence or control the management or policies of the Company or enter into
any discussions, negotiations, arrangements or understandings with any person
with respect to any of the foregoing, (c)(A) make or in any way participate,
directly or indirectly, in any material respect in any "solicitation" of
"proxies" (as such terms are used in Section 14a-1 of the proxy rules of the
SEC), whether before or after the formal commencement of any such
solicitation, or any solicitation of shareholder written consents to vote or
the nomination of any directors or take action by consent or (B) become a
"participant" (as defined in Instruction 3 of Item 4 of Schedule 14A of the
SEC) in any "solicitation" of "proxies" (as such terms are used in Section
14a-1 of the proxy rules of the SEC), (d) become a member of a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) with respect to
any voting securities of the Company, (e) deposit any voting securities to
any arrangement or agreement with respect to the voting of such voting
securities, (f) execute any written consent or initiate any shareholder
proposal for action by shareholders, (g) make any proposal, whether written
or oral, to the Company or any of its affiliates or their respective Boards
of Directors, or otherwise make any public announcement (other than as a
witness before a court or other tribunal or otherwise subject to subpoena or
legal process) or proposal whatsoever with respect to a merger or other
business combination, sale or transfer of assets, liquidation or other
extraordinary corporate transaction with, or tender or exchange offer for
securities of, the Company or any of its affiliates, (h) furnish to any
person other than as required by law any material or confidential information
regarding the Company or any of its affiliates obtained from the Company or
affiliates which is not publicly available, or (i) assist, participate in,
encourage or solicit in any material respect any effort or attempt by any
other person or group to do or seek to do any of the foregoing. The term
"beneficial ownership" shall have the meaning ascribed to such term in Rule
13d-3 under the Exchange Act. None of the foregoing provisions in this Section
2 shall restrict the ability of Alliance to company with its obligations
under Section 3. The foregoing provisions of this Section 2 shall be binding
upon Alliance and BAC notwithstanding and independent of any claim that the
Company has breached its representations and warranties or failed to comply
with its covenants under the Agreement other than the failure of the Company
to effect the Merger in the event all of the conditions set forth in Sections
7.1 and 7.3 of the Agreement are satisfied on or
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prior to June 18, 1996. The parties hereto acknowledge and agree that money
damages would not be a sufficient remedy for any breach of this Section 2 by
Alliance and that the Company shall be entitled to specific performance or other
equitable relief as a remedy for any such breach. In addition, in the event of
a breach of this Section 2, Section 3 or Section 4, Alliance agrees to pay the
Company the stipulated reimbursement of expenses of $250,000 per week for each
week (or part thereof in the case of only part of a week) that such breach
continues, provided that in the event of a breach under clauses (b) or (c)(A)
above or a breach under clause (i) which relates to clauses (b) or (c)(A) above,
the Company shall have given Alliance written notice of such breach (unless such
breach is concealed) and Alliance shall nonetheless have persisted in such
breach after a week has passed since such notice.
3. In the event that the Agreement is terminated by any of the
parties hereto prior to the Effective Time, then for a period of one year
following the date of such termination, Alliance and BAC will, and will cause
each of its Affiliates and Associates to, (a) be present, in person or
represented by proxy, at all shareholder meetings of the Company so that all
shares of Company Common, beneficially owned by Alliance, BAC or any of their
Affiliates or Associates be counted for the purpose of determining the presence
of a quorum a such meetings, and (b) vote (whether in person, by proxy or by
written consent), and cause any record holder of shares of Company Common
beneficially owned by Alliance, BAC or any of their Affiliates or Associates to
vote (whether in person, by proxy or by written consent), all shares of Company
Common, (i) with respect to the election of directors, in accordance with
recommendations of the Board of Directors of the Company, and (ii) with respect
to any other action proposed for a vote of shareholders, in accordance with the
vote of a majority of the other shares of Company Common voted for and against
such action.
4. In the event the Agreement is terminated by any of the parties
hereto prior to the Effective Time, then for a period of one year following the
date of such termination, neither Alliance nor BAC shall, directly or
indirectly, sell, transfer, pledge (other than in a margin account), assign or
otherwise dispose of shares of the Company Common unless the transferee has
previously provided Alliance and the Company with a written representation
reasonably satisfactory to the Company that such transferee is qualified by
virtue of its identity and its intent to file reports of beneficial ownership of
the Company's securities on Schedule 13G pursuant to the Exchange Act and it is
such transferee's good faith intention to retain such status during the period
in which this Section 4 is in effect or has previously provided Alliance and the
Company with a written representation reasonably satisfactory to the Company
that upon receipt of such shares such transferee would own less than 5% of the
outstanding shares of Company Common; provided however, that the foregoing
provisions of this Section 4 shall not apply to transactions consummated in
accordance with the manner of sale requirements of sections (f) and (g) of Rule
144 under the Securities Act or to sales in a tender offer recommended by the
Company.
5. Alliance agrees to promptly retain underwriters, including
Jefferies & Company, Inc. and Ladenburg, Thalmann & Co. Inc., and Donaldson
Lufkin & Jenrette Securities Corporation or another nationally recognized
investment firm acceptable to the
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Company, for the purpose of the following financing transactions: (a) a "flush-
out" (the "Flush-Out") in which Alliance will exchange Alliance Common and/or
such other securities as the Company approves in its sole discretion for some or
all of its 7.5% Convertible Subordinated Debentures due 2003; (b) the sale in a
registered public offering of $140 million of Senior Secured Notes due 2003 (the
"Notes") of Alliance and (c) the sale for cash in a registered public offering
of Series B Special Stock (which shall not be sold as part of a unit with any
other security) in which Alliance receives gross proceeds, prior to the payment
of underwriter spreads and expenses, of at least $15,000,000 (the "Financing").
Nothing in this Section 5 shall prohibit Alliance from selling additional Series
B Special Stock in lieu of a like amount of Senior Secured Notes. Alliance
agrees to file with the SEC on or prior to April 24, 1996, the registration
statements or amendments thereto with respect to the Notes and the Flush-Out. If
Alliance does not file such registration statements on or prior to April 24th,
the waiver granted by the Company in Section 2 hereof shall terminate and any
party will be free to exercise its right to unilaterally terminate the Agreement
on May 3, 1996 and all other provisions of this Waiver shall remain in full
force and effect.
6. Section 9.6.4 of the Agreement is amended by deleting from the
first sentence of such section "and such non-occurrence is not attributable
primarily to the Company" and substituting "(provided the Company shall not have
willfully or continuously failed to comply with clause (iv) of Section 5.1.5
after notice from Alliance unless such non-compliance is concealed)".
7. Alliance shall indemnify the Company against any amount (not in
excess of $4,800,000) paid by the Company pursuant to Sections 9.6.2, 9.6.3 or
9.6.4 of the WMS Agreement. In the event any claim or demand in respect of which
the Company might seek indemnity under this Section 7 is asserted against or
sought to be collected from the Company (a "Claim"), the Company shall promptly
notify Alliance. Alliance shall defend, at its sole cost and expense, such Claim
by all appropriate proceedings, which proceedings will be vigorously and
diligently prosecuted by Alliance to a final conclusion or will be settled at
the discretion of Alliance with the consent of the Company (not to be
unreasonably withheld) provided that any such settlement shall contain an
unconditional release of the Company and its affiliates from all liability in
respect of such Claim. If Alliance fails to so defend, then the Company will
have the right to defend at the sole cost and expense of Alliance, by all
appropriate proceedings which will vigorously and diligently be prosecuted by
the Company to a final conclusion or will be settled at the Company's discretion
with the consent of Alliance (not to be unreasonably withheld). If it elects to
defend, Alliance will have full control of such defense and proceedings except
that Alliance may settle any Claim only with the consent of the Company (not to
be unreasonably withheld), provided that any such settlement shall contain an
unconditional release of the Company and its affiliates from all liability in
respect of such Claim, and further provided, that if requested by Alliance, the
Company will, at the sole cost and expense of Alliance, cooperate with Alliance
and its counsel in contesting any Claim that Alliance elects to contest, or, if
appropriate and related to the Claim in question, in making any counterclaim
against the person asserting the Claim, or any cross-complaint against any
person. If the Agreement is terminated pursuant to
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clauses (iii), (iv) or (v) of Section 8.1.4 thereof and (in the case of
termination pursuant to clauses (iii) or (iv) of Section 8.1.4) any of the
events referred to in clauses (i), (ii) or (iii) of Section 9.6.3 of the
Agreement occurs during the six-month period specified therein, Alliance's
obligations under the Agreement shall cease and the Company shall promptly
reimburse all payments previously made by Alliance under this Section 7.
8. The parties hereto agree that as additional Merger Consideration,
Alliance will pay to the Company's stockholders dividends on the Series B
Special Stock accruing from May 3, 1996 and that holders of the Series B Stock
shall be entitled to quarterly dividends of $3.75 per share, with the first
Dividend Payment Date occurring on the first day of the fifth month following
the Initial Issuance Date.
Section 4. MISCELLANEOUS. Except as herein provided, the agreements
herein shall remain unchanged and in full force and effect. This Waiver may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties hereto may execute
this Waiver by signing any such counterpart. This Waiver shall be governed by,
and construed in accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
signed on the date and year first above written.
ALLIANCE GAMING CORPORATION
By: /s/ Steve Greathouse
--------------------------------
Steve Greathouse, Chairman,
President and Chief
Executive Officer
BGII ACQUISITION CORP.
By: /s/ Steve Greathouse
--------------------------------
Steve Greathouse, President
BALLY GAMING INTERNATIONAL, INC.
By: /s/ Richard Gillman
--------------------------------
Richard Gillman, Chairman
of the Board and Chief
Executive Officer
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