AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2003
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
GTECH HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
<Table>
DELAWARE 7370 05-0451021
(Primary Standard (I.R.S. Employer
(State or other jurisdiction of Industrial Classification Code Identification No.)
incorporation or organization) Number)
</Table>
---------------------
55 TECHNOLOGY WAY
WEST GREENWICH, RHODE ISLAND 02817
(410) 392-1000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------
MARC A. CRISAFULLI, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
GTECH HOLDINGS CORPORATION
55 TECHNOLOGY WAY
WEST GREENWICH, RHODE ISLAND 02817
(401) 392-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<Table>
WALTER G.D. REED, ESQ. JOHN J. MCCOY, ESQ.
EDWARDS & ANGELL, LLP TAFT, STETTINIUS & HOLLISTER LLP
2800 FINANCIAL PLAZA 425 WALNUT STREET, SUITE 1800
PROVIDENCE, RHODE ISLAND 02903 CINCINNATI, OHIO 45202
(401) 274-9200 (513) 381-2838
</Table>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
UPON COMPLETION OF THE MERGER REFERRED TO HEREIN
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED PER UNIT PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.01 per
share................................ 1,088,668(2) N/A $35,995,860(3) $2,886.49(4)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(1) This Registration Statement relates to securities of the registrant issuable
to holders of common stock, par value $0.01 per share ("Interlott common
stock"), of Interlott Technologies, Inc., a Delaware corporation
("Interlott"), pursuant to the proposed merger of Interlott with and into a
wholly-owned subsidiary of the registrant.
(2) Based on the maximum number of shares to be issued in connection with the
merger, calculated as the product of (a) 7,902,494, the aggregate number of
shares of Interlott common stock outstanding on April 22, 2003 (other than
shares owned by Interlott, the registrant or the registrant's subsidiaries)
or issuable pursuant to the exercise of outstanding options prior to the
date the merger is expected to be completed, (b) 0.515, representing the cap
on the number of shares of Interlott common stock to be converted into GTECH
common stock, and (c) an assumed exchange ratio of 0.2675 shares of the
registrant's common stock for each share of Interlott common stock
(representing $9.00 divided by $33.65, the closing sale price of the
registrant's common stock on April 22, 2003).
(3) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rules 457(f)(1) and
457(f)(3) under the Securities Act, the proposed maximum aggregate offering
price of the registrant's common stock was calculated based upon (a) the
market value of shares of Interlott common stock (the securities to be
cancelled in the merger) in accordance with Rule 457(c) under the Securities
Act, determined as the product of (i) $8.88, the average of the high and low
prices per share of Interlott common stock on April 24, 2003, as reported on
the American Stock Exchange, and (ii) 7,902,494, the maximum number of
shares of Interlott common stock to be cancelled, less (b) the cash to be
paid by the registrant in connection with the exchange of such aggregate
number of shares of Interlott common stock (which equals $9.00 multiplied by
48.5% of the total number of Interlott shares to be cancelled).
(4) Calculated by multiplying the proposed maximum offering price for all
securities by 0.00008090.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This proxy statement/prospectus and the information contained herein is subject
to completion or amendment. A registration statement relating to these
securities has been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This proxy statement/prospectus
shall not constitute an offer to sell or the solicitation of any offer to buy
nor shall there be any sales of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
PRELIMINARY PROXY STATEMENT/PROSPECTUS -- SUBJECT TO COMPLETION
[INTERLOTT LOGO]
[ -- ], 2003
Dear Stockholder:
You are cordially invited to attend the special meeting of stockholders of
Interlott Technologies, Inc. to be held on [ -- ], 2003, at 9:00 a.m., local
time, at [ADDRESS].
At the special meeting, we will ask you to consider and vote on the
proposed merger of Interlott into GTECH Corporation, a subsidiary of GTECH
Holdings Corporation, and to approve Interlott's amended and restated 1994 Stock
Incentive Plan. In the merger, in exchange for each of your shares of Interlott
common stock, you may elect to receive, subject to proration as described below,
(1) $9.00 in cash or (2) a number of GTECH common shares having a value of $9.00
based on average closing prices over a specified period prior to the meeting.
GTECH common shares trade on the New York Stock Exchange under the symbol "GTK"
and closed at $[ -- ] per share on [ -- ], 2003.
In connection with the merger, you may not receive all of your merger
consideration in the form that you elect. The merger agreement provides that the
percentage of shares of Interlott common stock that will be converted into the
right to receive GTECH common shares is fixed at 51.5% and the percentage of
shares of Interlott common stock that will be converted into the right to
receive cash is fixed at 48.5%. Therefore, the Interlott stockholders'
elections, including yours, may be adjusted on a pro rata basis so that, in the
aggregate, 51.5% of the Interlott common stock is converted into the right to
receive GTECH common shares and 48.5% of the Interlott common stock is converted
into the right to receive cash. The tax consequences of the transaction to you
will depend on which form of consideration you actually receive.
PLEASE DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.
Following the recommendations of a special committee of Interlott's Board
of Directors appointed to evaluate the fairness of the proposed merger from the
point of view of Interlott's unaffiliated public stockholders, the Interlott
Board of Directors has unanimously approved the merger agreement and recommends
that you vote for the adoption of the merger agreement. Information about the
proposed merger is contained in the enclosed proxy statement/prospectus. WE URGE
YOU TO READ THIS DOCUMENT, INCLUDING THE SECTION DESCRIBING RISK FACTORS THAT
BEGINS ON PAGE .
Interlott is a Delaware corporation. Under Delaware law, the affirmative
vote of the holders of a majority of the outstanding shares of Interlott common
stock entitled to vote at the special meeting is required to adopt the merger
agreement. I have agreed to vote all of my shares in favor of the proposal to
adopt the merger agreement. Because I own more than 50% of Interlott's
outstanding common stock, adoption of the merger agreement at the special
meeting is assured.
Your vote is important, regardless of the number of shares you own. To vote
your shares, you may use the enclosed proxy card, or attend the special meeting
of stockholders. Whether or not you plan to attend the special meeting, please
complete, sign and promptly return the enclosed proxy card to assure that your
shares will be voted. IF YOU DO NOT VOTE, IT WILL HAVE THE SAME EFFECT AS VOTING
AGAINST THE ADOPTION OF THE MERGER AGREEMENT.
Sincerely,
L. Rogers Wells, Jr.
Chairman
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE MERGER DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OR THE GTECH COMMON STOCK TO BE ISSUED IN CONNECTION WITH
THE MERGER, OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated [ -- ], 2003, and is first being
mailed to stockholders on or about [ -- ], 2003.
INTERLOTT TECHNOLOGIES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ -- ], 2003
To the Stockholders of INTERLOTT TECHNOLOGIES, INC.:
We will hold a special meeting of the stockholders of Interlott
Technologies, Inc. on [ -- ], [ -- ], 2003, at 9:00 a.m., local time, at
[ADDRESS] for the following purposes:
1. To consider and vote upon a proposal to adopt the Amended and
Restated Agreement and Plan of Merger, dated as of March 17, 2003, among
Interlott Technologies, Inc., GTECH Holdings Corporation and certain wholly
owned subsidiaries of GTECH. In the merger, Interlott will become a wholly
owned subsidiary of GTECH, and each outstanding share of Interlott common
stock, other than any shares held by parties to the merger agreement or by
stockholders who perfect their statutory appraisal rights under Delaware
law, will be converted into the right to receive, subject to proration as
described below, (a) $9.00 in cash or (b) a number of GTECH common shares
having a value of $9.00, based on average closing prices over a period
prior to the meeting.
2. To consider and vote upon a proposal to approve the Interlott
Technologies, Inc. 1994 Stock Incentive Plan, as amended and restated
effective January 15, 2003.
3. To transact such other business as may properly come before the
special meeting or any adjournment or postponement of the special meeting.
These items of business are described in this proxy statement/prospectus. A
copy of the merger agreement is attached as Annex A to this proxy
statement/prospectus. Only holders of record of shares of Interlott common stock
at the close of business on [ -- ], 2003, the record date for the special
meeting, are entitled to notice of, and to vote at, the special meeting and any
adjournments or postponements of it. A list of stockholders of Interlott as of
the close of business on [ -- ], 2003, will be available for inspection during
normal business hours from [ -- ], 2003 through [ -- ], 2003, at the
headquarters of Interlott, 7697 Innovation Way, Mason, Ohio.
Your vote is very important, regardless of the number of shares you own.
Please submit your proxy as soon as possible to make sure that your shares are
represented at the meeting. To vote your shares, you may complete and return the
enclosed proxy card. If you are a holder of record, you may also cast your vote
in person at the special meeting. If your shares are held in an account at a
brokerage firm or bank, you must instruct them on how to vote your shares. If
you do not vote or do not instruct your broker or bank on how to vote, it will
have the same effect as voting against the adoption of the merger agreement.
PLEASE DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.
Interlott stockholders who do not vote in favor of adoption of the merger
agreement and comply with other requirements have the right to demand appraisal
of their shares of Interlott common stock and to receive payment in cash for the
fair value of their shares as determined by the Delaware Chancery Court. A copy
of the provisions of Delaware law that grant appraisal rights and specify the
required procedures for demanding appraisal is attached to the accompanying
proxy statement/prospectus as Annex D.
Cincinnati, Ohio
[ -- ], 2003
By Order of the Board of Directors,
[signature]
Gary S. Bell
Secretary
ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about GTECH and Interlott from other documents that are
not included in or delivered with this proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain the documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses and telephone numbers:
<Table>
GTECH Holdings Corporation Interlott Technologies, Inc.
55 Technology Way 7697 Innovation Way
West Greenwich, RI 02817 Mason, OH 45040
Attn: Investor Relations Attn: Dennis Blazer, CFO
Tel: (401) 392-6980 Tel: (513) 701-7000
</Table>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY [ -- ], 2003, IN ORDER
TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
See "Where You Can Find More Information" on page .
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 5
The Companies............................................... 5
The Special Meeting......................................... 7
The Merger.................................................. 8
Stock Price and Dividend Information........................ 13
Comparative Per Share Information........................... 14
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GTECH.... 17
SELECTED HISTORICAL FINANCIAL DATA OF INTERLOTT............. 18
RISK FACTORS................................................ 19
THE SPECIAL MEETING......................................... 24
Proxy Statement/Prospectus.................................. 24
Date, Time and Place........................................ 24
Purpose of Special Meeting.................................. 24
Record Date; Stock Entitled to Vote; Quorum................. 24
Proxies; Revocation; Solicitation........................... 24
Required Vote............................................... 25
Adjournments or Postponements............................... 25
THE MERGER.................................................. 26
Background of the Merger.................................... 26
GTECH's Reasons for the Merger.............................. 30
Interlott's Reasons for the Merger.......................... 30
Recommendation of the Interlott Board of Directors.......... 31
Opinion of Interlott's Financial Advisor.................... 32
Interests of Certain Persons in the Merger.................. 36
Accounting Treatment........................................ 38
Form of the Merger.......................................... 38
Effective Time of the Merger................................ 38
Consideration to be Received in the Merger.................. 39
Election Procedure; Proration............................... 39
Exchange Procedures......................................... 40
Stock Exchange Listing of GTECH Common Stock................ 41
Delisting and Deregistration of Interlott Common Stock...... 41
Material United States Federal Income Tax Consequences of
the Merger................................................ 41
Regulatory Matters.......................................... 43
Employee Benefits Matters................................... 43
Treatment of Interlott Stock Options........................ 44
Resale of GTECH Common Stock................................ 44
Appraisal Rights............................................ 44
THE MERGER AGREEMENT........................................ 47
</Table>
i
<Table>
<Caption>
PAGE
----
THE STOCKHOLDER AGREEMENT................................... 53
DESCRIPTION OF GTECH CAPITAL STOCK.......................... 54
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF GTECH AND
INTERLOTT................................................. 55
APPROVAL OF AMENDED AND RESTATED 1994 STOCK INCENTIVE
PLAN...................................................... 60
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS........... 63
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..... 64
EQUITY COMPENSATION PLAN INFORMATION........................ 65
STOCK PERFORMANCE GRAPH..................................... 66
LEGAL MATTERS............................................... 67
EXPERTS..................................................... 67
STOCKHOLDER PROPOSALS....................................... 67
OTHER MATTERS............................................... 67
WHERE YOU CAN FIND MORE INFORMATION......................... 67
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 69
Annexes
Annex A--Amended and Restated Agreement and Plan of
Merger.................................................... A-1
Annex B--Amended and Restated Stockholder Voting and Option
Agreement B-1
Annex C--Opinion of Houlihan Lokey Howard & Zukin Financial
Advisors, Inc. C-1
Annex D--Section 262 of the General Corporation Law of the
State of Delaware (Appraisal Rights) D-1
Annex E--Interlott Technologies, Inc. 1994 Stock Incentive
Plan, as amended and restated effective January 15, 2003 E-1
</Table>
ii
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following are some questions that you, as a stockholder of Interlott,
may have and answers to those questions. There may be other questions that are
important to you as a holder of Interlott common stock. Please read carefully
the remainder of this proxy statement/prospectus, its annexes and the documents
referred to or incorporated by reference for additional information.
Q: WHY AM I RECEIVING THIS DOCUMENT AND PROXY CARD?
A: You are receiving this document and proxy card because you own shares of
Interlott common stock. Interlott has entered into a merger agreement with
GTECH Holdings Corporation pursuant to which GTECH will acquire Interlott.
This document describes a proposal to adopt the merger agreement and a
proposal to approve Interlott's amended and restated 1994 Stock Incentive
Plan. This document also gives you information about Interlott and GTECH and
other background information so that you can make an informed investment
decision, as GTECH is offering its common shares as part of the merger
consideration.
Q: WHAT WILL HAPPEN TO INTERLOTT AS A RESULT OF THE MERGER?
A: If the merger is completed, Interlott will merge with and into GTECH
Corporation, a wholly owned subsidiary of GTECH Holdings Corporation.
Promptly following the merger, the assets and liabilities of the Interlott
business will be transferred to a new, wholly owned subsidiary of GTECH
Corporation, and the Interlott business will be continued as an indirect
wholly owned subsidiary of GTECH Holdings.
Q: WHAT STOCKHOLDER APPROVAL IS NEEDED?
A: The affirmative vote of the holders of a majority of the outstanding shares
of Interlott common stock is required to adopt the merger agreement. The
affirmative vote of the holders of a majority of the shares of Interlott
common stock represented at the special meeting is required to approve the
amended and restated 1994 Stock Incentive Plan. Mr. L. Rogers Wells, Jr., the
holder of more than 50% of Interlott's common stock as of [ -- ], 2003, has
agreed to vote in favor of the adoption of the merger agreement and indicated
that he will vote in favor of approval of the Stock Incentive Plan. As a
result, adoption of the merger agreement and approval of the Stock Incentive
Plan by the Interlott stockholders at the special meeting is assured. No vote
of GTECH stockholders is required in connection with the merger.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You may elect the form of payment you prefer to receive in the merger. For
each share of Interlott common stock you own, you have the right to elect to
receive either:
- $9.00 in cash; or
- a number of GTECH common shares having a value of $9.00, based on the
average trading price of GTECH common shares during a period of 20
trading days immediately preceding the third business day before the
special meeting of stockholders.
The form of consideration that you receive will have important tax
consequences for you, as described in this proxy statement/prospectus under
"The Merger--Material United States Federal Income Tax Consequences of the
Merger." You are not, however, assured of receiving either all GTECH common
shares or all cash, notwithstanding your choice, as explained below.
Q: WILL I RECEIVE THE FORM OF PAYMENT THAT I CHOOSE?
A: Not necessarily. The merger agreement provides that the percentage of shares
of Interlott common stock that will be converted into the right to receive
GTECH common shares is fixed at 51.5% and the percentage of shares of
Interlott common stock that will be converted into the right to receive cash
is fixed at 48.5%. Therefore, the Interlott stockholders' elections,
including yours, may be adjusted on a pro rata basis so that, in the
aggregate, 51.5% of the Interlott common stock is converted into the right to
receive GTECH common shares and 48.5% of the Interlott common stock is
converted into the right to receive cash.
1
For example, if holders of 75% of the shares of Interlott common stock
choose to receive GTECH common shares and holders of 25% of the shares of
Interlott common stock choose to receive cash, then:
- if you choose to receive GTECH common shares, you will receive GTECH
common shares in exchange for 68 2/3% of your shares of Interlott common
stock and cash in exchange for 31 1/3% your shares of Interlott common
stock; and
- if you choose to receive cash, you will receive cash in exchange for all
of your shares of Interlott common stock.
On the other hand, if holders of 75% of the shares of Interlott common stock
choose to receive cash and holders of 25% of the shares of Interlott common
stock choose to receive GTECH common shares, then:
- if you choose to receive GTECH common shares, you will receive GTECH
common shares in exchange for all of your shares of Interlott common
stock; and
- if you choose to receive cash, you will receive cash in exchange for
64 2/3% of your shares of Interlott common stock and GTECH common shares
in exchange for 35 1/3% of your shares of Interlott common stock.
If holders of 100% of the shares of Interlott common stock choose to receive
all cash, then each holder will receive cash in exchange for 48.5% of that
holder's shares of Interlott common stock and GTECH common shares in
exchange for 51.5% of that holder's shares of Interlott common stock. The
result will be the same if holders of 100% of the shares of Interlott common
stock choose to receive all GTECH common shares.
Q: HOW DO I ELECT THE FORM OF PAYMENT I PREFER?
A: If your shares of Interlott common stock are held in registered form, you
will receive in a separate mailing an election form which you should read
carefully. You must return your completed and executed election form,
together with your stock certificate, as described in the instructions
contained in the election form, to elect the form of merger consideration
that you prefer to receive.
IN ORDER TO BE CONSIDERED VALID, YOUR ELECTION FORM MUST BE RECEIVED BY THE
EXCHANGE AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON [ -- ], 2003, WHICH IS
THE FIFTH BUSINESS DAY IMMEDIATELY PRECEDING THE SPECIAL MEETING.
If your shares of Interlott common stock are held in a brokerage or other
custodial account, you will receive instructions from the entity that holds
your shares advising you of the procedures for making your election and
delivering your shares.
Q: CAN I MAKE ONE ELECTION FOR SOME OF MY SHARES AND ANOTHER ELECTION FOR THE
REST?
A: Yes. You may elect to receive a combination of cash and GTECH common shares.
Q: WHAT IF I FAIL TO MAKE AN ELECTION?
A: If you make no election, your shares will be allocated between the two forms
of merger consideration after allocation of those shares for which an
election is made. For example, if holders of more than 51.5% of Interlott's
shares elect to receive stock, then you will receive cash. If holders of more
than 48.5% of Interlott's shares elect to receive cash, you will receive
stock. Under some circumstances, depending on the elections made by others,
you could receive a combination of cash and stock.
Q: HOW SHOULD I SEND IN MY STOCK CERTIFICATES?
A: If your shares of Interlott common stock are held in registered form and you
make an election of consideration by returning a completed election form, you
must send in your Interlott common stock certificates with your completed
election form. If you do not make an election, then you must keep your stock
certificates until after the merger is completed, at which time you will
receive a letter of transmittal describing how you may exchange your
certificates for merger consideration. DO NOT SEND YOUR STOCK CERTIFICATES OR
ELECTION FORM WITH YOUR PROXY CARD. If your shares are held in a brokerage or
other custodial
2
account, you will receive instructions from the entity that holds your shares
advising you of the procedures for making your election and delivering your
shares. ONCE YOU SEND IN YOUR STOCK CERTIFICATES, YOU WILL NOT BE ABLE TO
SELL YOUR SHARES UNLESS YOU REVOKE YOUR ELECTION AND HAVE THE CERTIFICATES
RETURNED TO YOU.
Q: WHEN DO INTERLOTT AND GTECH EXPECT THE MERGER TO BE COMPLETED?
A: Interlott and GTECH are working to complete the merger as quickly as
possible. The companies expect to complete the merger in the third calendar
quarter of 2003. Because the merger is subject to Interlott stockholder and
governmental approvals, as well as other conditions, we cannot predict the
exact timing of its completion.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please respond by completing, signing and dating
your proxy card and returning it in the enclosed postage paid envelope as
soon as possible, so that your shares may be represented at the special
meeting.
Q: WHAT IF I DO NOT VOTE?
A. If you fail to respond, it will have the same effect as a vote AGAINST the
adoption of the merger agreement. If you respond and do not indicate how you
want to vote, your proxy will be counted as a vote FOR the adoption of the
merger agreement and FOR approval of the amended and restated 1994 Stock
Incentive Plan. If you respond and abstain from voting, your proxy will have
the same effect as a vote AGAINST the adoption of the merger agreement and
AGAINST approval of the Stock Incentive Plan.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you
can complete and submit a new proxy. If you choose either of these two
methods, you must submit your notice of revocation or your new proxy to the
Secretary of Interlott at 7679 Innovation Way, Mason, Ohio 45040-9695, before
the special meeting. If your shares are held in an account at a brokerage
firm or a bank, you should contact your brokerage firm or bank to change your
vote. Third, if you are a holder of record, you can attend the special
meeting and vote in person. However, merely attending the special meeting,
without voting in person, will not revoke any proxy previously delivered by
you.
Q: IF MY INTERLOTT SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your Interlott shares on adoption of the merger
agreement only if you provide instructions on how to vote. You should follow
the directions provided by your broker regarding how to instruct your broker
to vote your shares. Without instructions, your shares will not be voted on
that matter, which will have the same effect as a vote AGAINST the adoption
of the merger agreement.
3
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger, or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy, you should contact:
GTECH Holdings Corporation
55 Technology Way
West Greenwich, RI 02817
Attn: Investor Relations
Tel: (401) 392-6980
or
Interlott Technologies, Inc.
7697 Innovation Way
Mason, OH 45040
Attn: Dennis Blazer, CFO
Tel: (513) 701-7000
4
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE
PROXY STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE HAVE REFERRED
YOU, INCLUDING IN PARTICULAR THE COPY OF THE MERGER AGREEMENT AND THE OPINION OF
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC. THAT ARE ATTACHED TO THIS
PROXY STATEMENT/PROSPECTUS AS ANNEXES A AND C, RESPECTIVELY. IN ADDITION, WE
INCORPORATE BY REFERENCE IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT
GTECH AND INTERLOTT INTO THIS PROXY STATEMENT/PROSPECTUS. YOU MAY OBTAIN THE
INFORMATION INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT/PROSPECTUS
WITHOUT CHARGE BY FOLLOWING THE INSTRUCTIONS IN THE SECTION ENTITLED "WHERE YOU
CAN FIND MORE INFORMATION" ON PAGE .
THE COMPANIES
INTERLOTT TECHNOLOGIES, INC.
7697 Innovation Way
Mason, Ohio 45040-9695
Interlott Technologies, Inc. is engaged primarily in the design,
manufacture, sale, lease and service of instant-winner lottery ticket vending
machines ("ITVMs"). ITVMs are used by public lotteries operated by state and
international public entities to dispense instant-winner lottery tickets
primarily in retail locations such as supermarkets and convenience stores. An
instant lottery commonly is played by players scratching off a latex coating
from a pre-printed ticket or tearing pull-tabs from a pre-printed ticket to
determine the outcome of the game. Interlott's ITVMs dispense instant lottery
tickets directly to players, thereby permitting the retailer or agent to sell
tickets without disrupting the normal duties of its employees.
Interlott's ITVMs dispense scratch-off instant lottery tickets using a
dispensing process that incorporates Interlott's patented "burster technology."
Interlott believes that this burster technology is superior to any other ITVM
scratch-off dispensing technology on the market and considers it to be a key to
its marketing efforts and the ITVM procurement decisions of the various
lotteries. Interlott is unaware of any competitor that incorporates a
substantially equivalent or superior scratch-off dispensing mechanism in its
ITVMs. To dispense pull-tab instant lottery tickets, Interlott has developed an
ITVM that incorporates a patented dispensing technology which is different than
the burster technology but that is also believed by Interlott to be superior to
any other currently available pull-tab dispensing technology. ITVMs that
dispense pull-tab tickets are sometimes referred to herein as "pull tab vending
machines" or "PTVMs." The term "ITVM" includes both scratch-off vending machines
and PTVMs unless the context indicates otherwise.
As of December 31, 2002, Interlott had sold or leased over 30,000 ITVMs
through agreements with 29 different state lotteries, the District of Columbia
and 14 international jurisdictions, or their licensees or contractors.
Taking advantage of its expertise in dispensing technology, Interlott
introduced a prepaid phone card dispensing machine ("PCDM") in 1995 that enables
providers of long distance telephone service to dispense prepaid telephone
calling cards in retail locations without the assistance of an employee of the
retailer. The dispensing process used in Interlott's PCDM incorporates the same
patented technology used in Interlott's PTVM, and Interlott believes that this
dispensing technology is superior to any other PCDM dispensing technology on the
market. Although PCDM revenues in 2002 represented less than 1% of total
revenues, Interlott continues to believe that PCDMs may be a source of future
sales growth.
Interlott's internet address is www.interlott.com.
5
GTECH HOLDINGS CORPORATION
55 Technology Way
West Greenwich, Rhode Island 02817
GTECH Corporation, a global information technology company providing
software, networks and professional services that power high-performance,
transaction processing solutions, is the world's leading operator of
highly-secure online lottery transaction processing systems. As a wholly owned
subsidiary of GTECH, GTECH Corporation currently operates online lottery systems
for, or supplies equipment and services to, 25 of the 39 online lottery
authorities in the United States, and currently operates, provides equipment and
services to, or has entered into contracts to operate or provide equipment and
services in the future to, online lottery systems for 59 of the 105
international online lottery authorities.
GTECH provides integrated online lottery solutions, services and products
to governmental lottery authorities and governmental licensees worldwide. GTECH
offers its customers a full range of lottery technology services, including the
design, assembly, installation, operation, maintenance and marketing of online
lottery systems and instant ticket support systems. GTECH's lottery systems
consist of numerous lottery terminals located in retail outlets, central
computer systems, systems software and game software, and communications
equipment which connects the terminals and the central computer systems.
Historically, the majority of GTECH's lottery customers in the United
States have entered into long-term service contracts (typically at least five
years in duration) pursuant to which GTECH provides, operates and maintains the
customers' online lottery systems in return for a percentage of the gross
lottery sales. Many of GTECH's international lottery customers have purchased
their online lottery systems, although some, especially lottery authorities in
Eastern Europe and Latin America, have entered into long-term service contracts
with GTECH. In recent years there has been, in general, an industry movement
away from product sales in favor of long-term service contracts. In fiscal 1993,
approximately 70% of GTECH's lottery revenues were derived from its portfolio of
long-term online lottery service contracts with substantially all of the
remainder being derived from lottery product sales. In fiscal 2003 (which ended
on February 22, 2003) approximately 88% of GTECH's lottery revenues were derived
from online lottery service contracts.
In recent years, lottery authorities have recognized that by offering new
games or products, they often are able to generate significant additional
revenues. An important part of GTECH's strategy is to develop new products and
services for its customers in order to increase their lottery revenues.
Indicative online products and services introduced recently to increase lottery
revenues for GTECH's customers include Aladdin(TM), the Extra-Online(TM)game,
and e-scratch(TM). Aladdin(TM) is a credit-card sized lottery ticket that,
through the use of magnetic strip and thermal printing technology, can be reused
up to 500 times, and which also can be employed in various non-lottery
commercial contexts. The Extra-Online(TM) game is an online lottery game that
permits players to purchase an additional game with instant-ticket features,
thus enhancing wagering interest. GTECH's e-scratch(TM) product is a web-based
interactive suite of scratch and reveal games that combines the security and
convenience of online play with the entertainment, branded content and immediate
gratification of instant-tickets. In recent years, GTECH has also introduced
various instant-ticket support services, products and systems to assist its
lottery customers in increasing revenue. GTECH currently provides instant-
ticket support services, products and systems in 24 domestic jurisdictions and
26 jurisdictions outside of the United States.
In recent years, GTECH has taken steps to broaden its offerings of
high-volume transaction processing services outside of its core market of
providing online lottery services. In February 2003 (since the close of fiscal
2003), GTECH entered into an agreement to purchase a controlling equity position
in PolCard S.A., a leading debit and credit card merchant transaction acquirer
and processor in Poland. This agreement provides for the purchase of
approximately 99.7% of the outstanding share capital of PolCard from its present
shareholders, a group of Polish banks and a travel services company, Orbis S.A.
The acquisition of PolCard will be effected through a Polish company created for
purposes of the acquisition. After completion of the acquisition, GTECH will own
62.8% of PolCard's outstanding equity, two funds managed by Innova Capital Sp.
zo.o, a Warsaw-based private equity investment advisor, will own 36.9% of
PolCard's outstanding equity, and the Polish Bank Association, one of PolCard's
current owners, will continue to own 0.3% of the
6
outstanding equity of PolCard. The aggregate purchase price to be paid by GTECH
and Innova for the PolCard equity to be acquired, together with approximately $2
million in debt assumed as part of the transaction, is expected to be
approximately $62 million. Consummation of the PolCard acquisition is contingent
upon the approval of the Polish Competition and Consumer Protection Office and
the Polish Bank Association, and is subject to certain other closing conditions.
GTECH has the option to purchase Innova's interest in PolCard, and Innova has
the reciprocal right to sell its interest in PolCard to GTECH, during the period
commencing approximately four, and ending approximately six, years after the
closing. GTECH expects the closing of the PolCard acquisition to occur in June
2003. GTECH believes that the acquisition of PolCard will permit it to leverage
its existing infrastructure in Poland in the development of its commercial
services product offerings.
GTECH's internet address is www.gtech.com.
THE SPECIAL MEETING (PAGE )
GENERAL (PAGE )
Interlott will hold a special meeting of stockholders on [ -- ], 2003, at
9:00 a.m. local time, at which you will be asked to adopt the merger agreement
and to approve the amended and restated Interlott 1994 Stock Incentive Plan.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM (PAGE )
Each share of Interlott common stock outstanding as of [ -- ], 2003,
entitles its holder to one vote on any matter to be considered at the special
meeting. The presence, in person or by proxy, of a majority of the outstanding
shares of Interlott common stock is required for a quorum for the transaction of
business at the special meeting.
PROXIES; REVOCATION; SOLICITATION (PAGE )
If you vote your shares of Interlott common stock by signing and dating
your proxy card, your shares will be voted at the special meeting as you
indicate on your proxy card. If no instructions are indicated on your signed
proxy card, your shares of Interlott common stock will be voted "FOR" adoption
of the merger agreement and "FOR" approval of the amended and restated Interlott
1994 Stock Incentive Plan. If your shares are held in street name, you should
follow the directions provided by your broker regarding how to instruct your
broker to vote your shares. If you mark your proxy card "ABSTAIN" or do not
return your proxy card or instruct your broker how to vote, it will have the
same effect as a vote "AGAINST" adoption of the merger agreement. Abstentions
also will have the same effect as votes "AGAINST" approval of the amended and
restated Interlott 1994 Stock Incentive Plan. Broker non-votes will have no
effect on approval of the Stock Incentive Plan, as these are treated as absent
shares.
You may revoke your proxy at any time before the vote at the special
meeting by submitting a written revocation to the Secretary of Interlott at 7679
Innovation Way, Mason, Ohio 45040-9695, or by submitting a new proxy, in either
case, dated after the date of the proxy that is being revoked. In addition, a
proxy may be revoked by voting in person at the special meeting. Simply
attending the special meeting without voting will not revoke your proxy.
REQUIRED VOTE (PAGE )
The affirmative vote of the holders of a majority of the outstanding shares
of Interlott common stock entitled to vote at the special meeting is necessary
for the adoption of the merger agreement. GTECH has entered into a stockholder
voting and option agreement with L. Rogers Wells, Jr., the Chairman of
Interlott, who beneficially owns and has voting control of more than 50% of the
shares of Interlott common stock outstanding as of the record date for the
special meeting. Under the stockholder voting and option agreement, Mr. Wells
has agreed to vote all of his shares of Interlott common stock in favor of
adoption of the merger
7
agreement. As a result, adoption of the merger agreement by the Interlott
stockholders at the special meeting is assured.
The affirmative vote of the holders of a majority of the shares of
Interlott common stock represented in person or proxy at the special meeting is
required to approve Interlott's 1994 Stock Incentive Plan, as amended and
restated. Mr. Wells has advised Interlott that he intends to vote all his shares
in favor of this proposal. Accordingly, adoption of this proposal is also
assured.
On the record date, the directors and executive officers of Interlott
beneficially owned, in the aggregate, [ -- ] shares of Interlott common stock,
or approximately [ -- ]% of the shares of Interlott common stock outstanding on
that date.
THE MERGER (PAGE )
A copy of the merger agreement is attached as Annex A to this proxy
statement/prospectus. We encourage you to read the merger agreement because it
is the principal document governing the merger.
FORM OF MERGER AND CONSIDERATION TO BE RECEIVED IN THE MERGER (PAGES AND )
In the merger, Interlott will merge with and into GTECH Corporation, a
wholly owned subsidiary of GTECH. Promptly following the merger, the assets and
liabilities of the Interlott business will be transferred to a new, wholly owned
subsidiary of GTECH Corporation. Under the merger agreement, Interlott
stockholders will have the right to elect to receive either $9.00 in cash or a
number of GTECH common shares having a value of $9.00 (based upon average
trading prices over a twenty trading day period immediately prior to the third
trading day before the special meeting) for each share of Interlott common stock
that they hold. The overall percentage of shares of Interlott common stock that
will be converted into the right to receive GTECH common shares is fixed at
51.5% and the percentage of shares of Interlott common stock that will be
converted into the right to receive cash is fixed at 48.5%. Therefore, the
elections of all the holders of Interlott common stock, including yours, may be
adjusted on a pro rata basis so that, in the aggregate, 51.5% of the shares are
converted into the right to receive GTECH common shares and 48.5% of the shares
are converted into the right to receive cash. The form of consideration that you
receive will have important tax consequences for you, as described in this proxy
statement/prospectus under "The Merger--Material United States Federal Income
Tax Consequences of the Merger."
APPRAISAL RIGHTS (PAGE )
Under Section 262 of the Delaware General Corporation Law, if you notify
Interlott before the special meeting of your intent to seek appraisal, and you
do not vote your outstanding shares of Interlott common stock in favor of
adoption of the merger agreement and follow other specified procedures, you will
be entitled to dissent and elect to have the "fair value" of your shares,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, judicially
determined by the Delaware Court of Chancery and paid to you in cash. The
complete text of Section 262 is attached as Annex D.
If you consider seeking appraisal, you should be aware that the fair value
of your shares as determined under Section 262 could be more than, the same as
or less than the $9.00 per share payment (in cash or GTECH common shares) you
would be entitled to elect to receive under the merger agreement if you did not
seek appraisal of your shares.
RECOMMENDATIONS OF THE INTERLOTT BOARD OF DIRECTORS (PAGE )
Following the recommendations of a special committee of the board of
directors appointed to evaluate the fairness of the merger from the point of
view of Interlott's unaffiliated public stockholders, the Interlott Board of
Directors has unanimously approved the merger agreement and the merger and
determined that the merger agreement and the merger are advisable, fair to and
in the best interests of, Interlott and its stockholders.
8
Interlott's Board of Directors unanimously recommends that Interlott
stockholders vote "FOR" the proposal to adopt the merger agreement at the
special meeting.
The Board of Directors also recommends that Interlott stockholders vote
"FOR" approval of the amended and restated 1994 Stock Incentive Plan.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE )
GTECH and Interlott are obligated to complete the merger only if several
conditions are satisfied or waived. These conditions include:
- obtaining the approval of the stockholders of Interlott for the adoption
of the merger agreement;
- the waiting period applicable to the merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 having expired or terminated;
- no court of competent jurisdiction issuing any restraining order,
injunction or other order which prevents or delays the consummation of
the merger;
- the registration statement on Form S-4, of which this document is a part,
becoming effective and remaining effective;
- the New York Stock Exchange having approved the listing of the GTECH
common shares to be issued in connection with the merger;
- the representations and warranties of GTECH and Interlott in the merger
agreement being true and correct as of the date of the merger agreement
and as of the date of closing;
- GTECH and Interlott performing in all material respects all of their
respective obligations required by the merger agreement at or prior to
the closing date;
- no event having occurred which is, or is reasonably likely to be,
material and adverse to the financial or other condition of Interlott or
GTECH, respectively; and
- GTECH and Interlott having received tax opinions from their respective
U.S. tax advisors.
In addition, GTECH will complete the merger only if the following
additional conditions are satisfied or waived:
- there must not be pending any suit, action or proceeding by any
governmental entity seeking to restrain or prohibit the completion of the
merger, or to materially limit the ownership, operation or control by
GTECH of Interlott;
- there must not be pending any suit, action or proceeding brought by any
third party other than a governmental entity seeking to restrain or
prohibit the completion of the merger, or to limit the ownership,
operation or control by GTECH of Interlott, that could reasonably be
expected to succeed;
- GTECH must receive evidence that certain consents and approvals required
in connection with the merger agreement have been obtained by Interlott;
- the audited financial statements for Interlott for the fiscal year ended
December 31, 2002, must be consistent in all material respects with the
financial information included in preliminary financial statements
previously delivered to GTECH; and
- the number of shares as to which dissenters' rights under Delaware law
have been demanded and perfected must not exceed 10% of Interlott's total
shares outstanding.
9
TERMINATION (PAGE )
The merger agreement may be terminated and the merger may be abandoned at
any time before the effective time of the merger:
- by the mutual consent of GTECH and Interlott;
- by GTECH or by Interlott, in the event of an uncured breach by the other
party of any representation, warranty, covenant or agreement contained in
the merger agreement if the breach would cause the specified conditions
to the merger not to be satisfied;
- by GTECH or by Interlott, if they do not complete the merger on or before
September 17, 2003 (unless the delay has been caused by the party seeking
to terminate the agreement);
- by GTECH or by Interlott, if any legal restraint to the merger is in
effect and has become final and unappealable;
- by GTECH or by Interlott, if Interlott's stockholders fail to approve the
merger at the special meeting;
- by GTECH, if the Interlott Board of Directors:
- withdraws, or modifies in a manner adverse to GTECH, its
recommendation of the merger agreement or the merger, or
- approves or recommends an alternative acquisition proposal;
- by GTECH, if Interlott enters into an agreement with respect to an
alternative acquisition proposal;
- by Interlott at any time prior to obtaining Interlott stockholder
approval:
- in response to an unsolicited bona fide offer by a third party to
acquire more than 80% of Interlott common stock or all or
substantially all the assets of Interlott for consideration that the
Interlott Board determines in its good faith judgment, after
consultation with a financial advisor, to be more favorable from a
financial point of view to Interlott stockholders than the merger,
taking into account any changes to the terms of the merger agreement
offered by GTECH, and either:
- the Interlott Board withdraws or modifies its approval of the
merger agreement and the merger, or
- Interlott enters into a definitive agreement with respect to such a
proposal, and
- provided that Interlott may not so terminate until:
- at least one business day after Interlott notified GTECH that it or
its Board is taking such action as described above, and
- Interlott has paid to GTECH the termination fee described below;
- by GTECH, if three business days before the date of the special meeting
of Interlott stockholders, the average closing price of GTECH common
stock for the previous 20 trading days is less than $25.12; or
- by GTECH or Interlott if the special committee of Interlott's Board has
requested but has not received an opinion from its financial advisor
dated as of the date of this proxy statement/prospectus to the effect
described in "The Merger-Opinion of Interlott's Financial Advisor."
If GTECH decides to terminate the merger agreement under the next to last
bullet above, however, Interlott will have the option to proceed with the merger
on an all-cash basis. If that happens, the parties will amend the merger
agreement to reflect this, and you will receive a new proxy statement describing
the changes.
10
TERMINATION FEE (PAGE )
The merger agreement provides that Interlott will pay GTECH a termination
fee of $2.75 million, plus GTECH's out of pocket expenses up to $750,000, if:
- GTECH or Interlott terminates the merger agreement as a result of
Interlott's stockholders failing to approve the merger at the special
meeting,
- GTECH terminates the merger agreement as a result of the Interlott Board
withdrawing, modifying or changing its approval or recommendation of the
merger and the adoption of the merger agreement, or recommending an
alternative acquisition proposal, or Interlott entering into an agreement
with respect to an alternative acquisition proposal, or
- Interlott terminates the merger agreement as a result of its Board of
Directors withdrawing or modifying its approval or recommendation, or its
entering into an agreement with respect to an alternative acquisition
proposal.
In addition, if the merger agreement is terminated for any other reason
except a breach by GTECH, then Interlott will pay GTECH's out-of-pocket expenses
(up to $750,000) if Interlott consummates a transaction concerning a superior
acquisition proposal within 12 months of the date of termination.
THE STOCKHOLDER AGREEMENT (PAGE )
GTECH has entered into an amended and restated stockholder voting and
option agreement with L. Rogers Wells, Jr., the Chairman of Interlott. Pursuant
to this agreement, Mr. Wells has agreed to vote his shares, which represent more
than 50% of the outstanding Interlott common stock as of the record date for the
special meeting, in favor of the merger and against any action that could impede
the merger. As a result, adoption of the merger agreement by the Interlott
stockholders at the special meeting is assured. A copy of the stockholder
agreement is attached to this proxy statement/prospectus as Annex B.
This stockholder agreement also gives GTECH the right to buy Mr. Wells'
shares, under some circumstances, if the merger is not completed and the merger
agreement is terminated. If GTECH exercises that option, it has agreed with
Interlott and with Mr. Wells that, to the extent permitted by law, it will make
a tender offer for the remaining outstanding shares of Interlott at the same
price. There is no guarantee, however, that GTECH will exercise the right to buy
Mr. Wells' shares even if the merger agreement is terminated under the
conditions that would give it that right.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE )
When you consider the recommendation of the Interlott Board of Directors
that you vote in favor of adoption of the merger agreement, you should keep in
mind that a number of executive officers and directors of Interlott have
interests in the merger that are different from, or in addition to, your
interests as a stockholder. The executive officers' additional interests arise
primarily in connection with their continued employment following the
consummation of the merger and the compensation they will receive in connection
with that employment. These interests also include:
- the continuance of directors' and officers' liability insurance, rights
of indemnification and advancement of expenses, in each case, for the
benefit of current and former Interlott directors and officers, and
- the accelerated vesting of all stock options of Interlott, including
stock options held by Interlott directors and executive officers.
When it signed the merger agreement, GTECH also entered into a
noncompetition agreement with Mr. Wells under which, in exchange for Mr. Wells'
agreement not to compete in any fashion with GTECH by engaging or proposing to
engage in any lottery business for a period of five years, GTECH has agreed to
pay Mr. Wells $250,000 per year for each of those five years.
11
REGULATORY MATTERS (PAGE )
Transactions such as the merger are reviewed by the United States
Department of Justice and the United States Federal Trade Commission to
determine whether they comply with applicable antitrust laws. Under the
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
related rules and regulations, the merger may not be completed until applicable
waiting period requirements have been satisfied. GTECH and Interlott each filed
notification reports with the Department of Justice and Federal Trade Commission
under the Hart-Scott-Rodino Act on April 1, 2003, and have requested an early
termination of the required waiting period. If early termination of the required
waiting period is not granted and a request for additional information by the
relevant antitrust authorities is not made, the waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 will expire at midnight on May
1, 2003.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE
)
The merger is intended to qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, so that holders of Interlott
common stock will not recognize gain or loss for United States federal income
tax purposes as a result of the merger, except to the extent of any cash
received as part of the merger consideration and any cash received instead of
fractional shares of GTECH common stock or because of the exercise of appraisal
rights. The merger is conditioned on the receipt of legal opinions that the
merger will qualify as a reorganization for United States federal income tax
purposes. Under certain circumstances, the GTECH common stock portion of the
merger consideration may be increased and the cash portion of the merger
consideration may be decreased in order to enable these legal opinions to be
delivered and the merger to qualify as a reorganization for federal income tax
purposes.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN
TAX ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO
YOU.
ACCOUNTING TREATMENT (PAGE )
The merger will be treated as a "purchase" for accounting purposes.
EXPENSES (PAGE )
Each of GTECH and Interlott will bear all expenses it incurs in connection
with the merger, except under the circumstances described above under
"--Termination Fee" and except that Interlott will pay all expenses relating to
the printing and mailing of this proxy statement/prospectus.
COMPARISON OF SHAREHOLDER RIGHTS (PAGE )
Interlott stockholders, whose rights are currently governed by Interlott's
amended certificate of incorporation and amended by-laws, may, upon completion
of the merger, become stockholders of GTECH, at which time their rights will be
governed by GTECH's amended and restated articles of incorporation and amended
by-laws. Both GTECH and Interlott are Delaware corporations, so Interlott
stockholders' rights will continue to be governed by Delaware law after they
become stockholders of GTECH.
OWNERSHIP OF GTECH FOLLOWING THE MERGER
Based on the number of outstanding shares of Interlott common stock on the
record date and the closing price of GTECH common stock on [ -- ], 2003,
Interlott stockholders will be entitled to receive, in the aggregate,
approximately [ -- ] shares of GTECH common stock pursuant to the merger. Based
on that number and on the number of outstanding shares of GTECH common stock on
[ -- ], 2003, Interlott stockholders will own, in the aggregate, approximately
[ -- ]% of the outstanding shares of GTECH common stock following the merger.
12
FAIRNESS OPINION OF INTERLOTT'S FINANCIAL ADVISOR (PAGE )
Interlott's financial advisor, Houlihan Lokey Howard & Zukin Financial
Advisors, Inc. ("Houlihan Lokey"), has delivered a written opinion to the
special committee of the Interlott Board of Directors as to the fairness, from a
financial point of view, of the merger consideration to Interlott's unaffiliated
public stockholders. A copy of the full text of Houlihan Lokey's written
opinion, dated March 16, 2003, is attached to this document as Annex C. We
encourage you to read this opinion carefully in its entirety for a description
of the procedures followed, assumptions made, matters considered and limitations
on the review undertaken. HOULIHAN LOKEY'S OPINION IS ADDRESSED TO THE SPECIAL
COMMITTEE OF THE INTERLOTT BOARD OF DIRECTORS AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO ANY MATTER RELATING TO THE MERGER.
STOCK PRICE AND DIVIDEND INFORMATION
COMPARATIVE STOCK PRICES
The table below presents the New York Stock Exchange closing market price
for GTECH common shares, as reported on the New York Stock Exchange Composite
Transaction Tape under the symbol "GTK," and the last reported sale price of the
Interlott common stock, as reported on the American Stock Exchange under the
symbol "ILI," and equivalent per share date. These prices are presented on two
dates:
- March 14, 2003, the last trading day before the public announcement of
the signing of the merger agreement; and
- [ -- ], 2003, the latest practicable date before the printing of this
document.
The exchange ratio, meaning the number of GTECH common shares you will
receive for each share of Interlott common stock, will be the quotient of $9.00
divided by the average per share closing price of GTECH common stock for the 20
trading days immediately preceding the third trading day before the special
meeting. The $9.00 per share merger consideration (in cash or GTECH common
shares) represents a premium of approximately 14.6% over the closing price per
share of Interlott common stock on March 14, 2003.
<Table>
<Caption>
GTECH INTERLOTT EQUIVALENT
COMMON STOCK COMMON STOCK PER SHARE
SHARE PRICE SHARE PRICE DATA(1)
------------ ------------ ----------
March 14, 2003....................... $30.63 $7.85 $0.2938
[ -- ] , 2003........................ $[ -- ] $[ --] $[ -- ]
------ ----- -------
</Table>
- ---------------
(1) Assuming, for purposes of calculating the exchange ratio, that the average
per share closing price of GTECH common shares for the 20 trading days
immediately preceding the third trading day before the special meeting
equals the per share price of GTECH common shares set forth in the column
headed "GTECH Common Stock Share Price."
MARKET PRICES AND DIVIDEND INFORMATION
GTECH common stock is listed for trading on the New York Stock Exchange
under the symbol "GTK." Interlott common stock is quoted on the American Stock
Exchange under the symbol "ILI." The following table sets forth, for the periods
indicated, the high and low sale prices per share of GTECH common stock and
Interlott common stock on the New York Stock Exchange Composite Transaction Tape
and the American Stock Exchange, respectively. For current price information,
Interlott stockholders are urged to consult publicly available sources.
13
GTECH Common Stock:
<Table>
<Caption>
GTECH FISCAL 2002 HIGH LOW
- ----------------- ------ ------
First Quarter (February 25 - May 26, 2001).................. $19.09 $12.51
Second Quarter (May 27 - August 25, 2001)................... $19.45 $14.80
Third Quarter (August 26 - November 24, 2001)............... $22.81 $14.88
Fourth Quarter (November 25, 2001 - February 23, 2002)...... $25.74 $20.60
</Table>
<Table>
<Caption>
GTECH FISCAL 2003 HIGH LOW
- ----------------- ------ ------
First Quarter (February 24 - May 25, 2002).................. $30.69 $23.00
Second Quarter (May 26 - August 24, 2002)................... $30.08 $17.62
Third Quarter (August 25 - November 23, 2002)............... $26.49 $18.38
Fourth Quarter (November 24, 2002 - February 22, 2003)...... $29.35 $22.60
</Table>
<Table>
<Caption>
GTECH FISCAL 2004 HIGH LOW
- ----------------- ------- -------
First Quarter to Date (through [ -- ], 2003)................ $[ -- ] $[ -- ]
</Table>
Interlott Common Stock:
<Table>
<Caption>
INTERLOTT FISCAL 2001 HIGH LOW
- --------------------- ----- -----
First Quarter (January 1 - March 31, 2001).................. $6.38 $3.82
Second Quarter (April 1 - June 30, 2001).................... $5.24 $4.00
Third Quarter (July 1 - September 30, 2001)................. $6.40 $4.50
Fourth Quarter (October 1 - December 31, 2001).............. $4.90 $4.02
</Table>
<Table>
<Caption>
INTERLOTT FISCAL 2002 HIGH LOW
- --------------------- ----- -----
First Quarter (January 1 - March 31, 2002).................. $5.75 $4.45
Second Quarter (April 1 - June 30, 2002).................... $6.95 $5.40
Third Quarter (July 1 - September 30, 2002)................. $7.25 $5.20
Fourth Quarter (October 1 - December 31, 2002).............. $6.10 $5.15
</Table>
<Table>
<Caption>
INTERLOTT FISCAL 2003 HIGH LOW
- --------------------- ------- -------
First Quarter (January 1 - March 31, 2003).................. $ 8.81 $ 5.75
Second Quarter to Date (through [ -- ], 2003)............... $[ -- ] $[ -- ]
</Table>
Neither GTECH nor Interlott has paid cash dividends on its common stock to
date and neither has plans to do so. Interlott currently intends to retain all
future earnings for use in the development of its business. The current policy
of GTECH's Board of Directors is to reinvest earnings in the operation and
expansion of the company's business and, from time to time, to execute
repurchases of shares of GTECH common stock under the company's share repurchase
programs. Further, GTECH is a holding company and its operations are conducted
through its operating subsidiary, GTECH Corporation, and its subsidiaries.
Accordingly, the ability of GTECH to pay dividends on its common stock would be
dependent on the earnings and cash flow of its subsidiaries and the availability
of such cash flow to GTECH.
COMPARATIVE PER SHARE INFORMATION
The following tables show per share data regarding the earnings and book
value of GTECH and Interlott. All per share data of GTECH have been restated to
account for GTECH's two-for-one stock split in May 2002. GTECH's fiscal year
ends on the last Saturday of every February, and Interlott's fiscal year ends on
December 31 of each year.
In addition to financial results actually achieved by each of GTECH and
Interlott (the "historical" figures), the tables show results on an unaudited,
pro forma basis reflecting the merger accounted for as a
14
purchase, as if it had been consummated as of February 22, 2003 for the purposes
of presenting pro forma book value per share and as of February 23, 2002 for the
purposes of presenting pro forma earnings per share (the "pro forma combined"
figures). Because GTECH and Interlott have different fiscal year ends, pro forma
book value and earnings per share have been calculated by combining the balance
sheets and income statements, respectively, of GTECH and Interlott as of and for
the years ended February 22, 2003 and December 31, 2002, respectively. The pro
forma combined figures in the table are presented for comparative purposes only
and are not necessarily indicative of the combined financial position or results
of operations in the future or what the combined financial position or results
of operations would have been had the merger been completed and the applicable
purchase accounting adjustments been reflected during the period or as of the
date for which this pro forma data are presented.
The pro forma combined per share information does not include any
adjustments related to any restructuring charges, profit improvements, potential
costs savings, or one-time charges which may result from the merger or the final
result of valuations of receivables, inventories, property, plant and equipment,
intangible assets, debt, and other obligations. GTECH and Interlott are
currently developing plans to integrate the operations of the companies, which
could involve actions including, among others, severance and settlement of
operating and capital commitments, which are material. The merger has not been
consummated as of the date of the preparation of this pro forma per share
information and there can be no assurance that the merger will be consummated in
the future. The pro forma per share information is based on estimates and
assumptions that might be different had this pro forma per share information
been prepared after the consummation of the merger.
The GTECH pro forma combined share amounts were calculated assuming $9.00
per share in cash was paid for 48.5% of the Interlott common stock outstanding
as of April 22, 2003 and GTECH common shares were issued for the remaining 51.5%
of the Interlott common stock outstanding as of April 22, 2003 as discussed
under "The Merger--Consideration to be Received in the Merger." These
calculations also assume that all outstanding options to purchase Interlott
common stock as of April 22, 2003, including those held by executive officers
and directors of Interlott, will vest in connection with the merger and the
holders will receive cash payments in an amount per share subject to those
options equal to the excess, if any, of $9.00 over the exercise price as
discussed under "Treatment of Interlott Stock Options."
The Interlott pro forma equivalent amounts were calculated by multiplying
the GTECH pro forma combined share amounts by an assumed exchange ratio of
0.2673. This assumed exchange ratio represents the fraction of a share of GTECH
common stock an Interlott stockholder who elects to and is entitled to receive
only GTECH common shares would receive for each share of Interlott common stock
in the merger. This assumed exchange ratio was calculated by dividing $9.00
(total consideration for each share of Interlott common stock) by $33.67, the
average closing price for GTECH common stock for the 20 trading days ending on
April 22, 2003, assuming there is no proration requiring the Interlott common
stockholder to receive cash. The final exchange ratio may be different from the
ratio used in calculating the pro forma equivalent amounts because the final
ratio will be based on the 20 day average closing price of GTECH common shares
immediately preceding the third business day before the special meeting of
Interlott stockholders to be held on [ ], 2003. Should the final
average closing price of GTECH common shares decrease or increase by 15%, the
ratio will increase or decrease to 0.3145 or 0.2324, respectively. However, as
discussed under "The Merger Agreement--Termination," GTECH may terminate the
merger agreement if the 20 day average closing price of GTECH common stock
immediately preceding the third business day before the special meeting is less
than $25.12 (subject to Interlott's option to elect to proceed with the merger
on an all-cash basis).
YOU SHOULD READ THE INFORMATION IN THIS SECTION IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND ACCOMPANYING NOTES OF GTECH AND INTERLOTT THAT ARE
INCORPORATED BY REFERENCE IN OR FURNISHED WITH THIS PROXY STATEMENT/PROSPECTUS.
SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE .
15
<Table>
<Caption>
AT OR FOR THE YEAR ENDED
FEBRUARY 22, 2003
------------------------
GTECH
Basic earnings per share
Historical......................................... $2.49
Pro forma combined................................. 2.48
Diluted earnings per share
Historical......................................... 2.43
Pro forma combined................................. 2.43
Book value per share
Historical......................................... 5.57
Pro forma combined................................. 5.97
</Table>
<Table>
<Caption>
AT OR FOR THE YEAR ENDED
DECEMBER 31, 2002
------------------------
INTERLOTT
Basic earnings per share
Historical......................................... $0.48
Pro forma equivalent............................... 0.66
Diluted earnings per share
Historical......................................... 0.46
Pro forma equivalent............................... 0.65
Book value per share
Historical......................................... 3.59
Pro forma equivalent............................... 1.60
</Table>
16
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GTECH
The table below provides summary historical financial data of GTECH. GTECH
has prepared this information using the consolidated financial statements of
GTECH as of and for each of the five years ended February 22, 2003.
When you read this summary historical financial data, it is important that
you read along with it the historical financial statements and related notes in
GTECH's annual and quarterly reports filed with the SEC, as well as the section
of GTECH's annual and quarterly reports entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations." See "Where You Can
Find More Information" on page .
<Table>
<Caption>
FISCAL YEAR ENDED
--------------------------------------------------------------------------------
FEBRUARY 22, FEBRUARY 23, FEBRUARY 24, FEBRUARY 26, FEBRUARY 27,
2003 2002 2001 2000 1999
------------ ------------- ------------------ ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Revenues:
Services.................... $ 868,896 $ 831,787 $ 856,475 $ 860,419 $887,395
Sales of products........... 109,894 177,914 80,068 150,379 85,528
--------- ---------- --------- ---------- --------
Total.................... 978,790 1,009,701 936,543 1,010,798 972,923
Gross Profit:
Services.................... 333,855 245,479 292,380 305,110 297,630
Sales of products........... 30,951 41,462 5,224 48,426 25,703
--------- ---------- --------- ---------- --------
Total.................... 364,806 286,941 297,604 353,536 323,333
Special charges (credit)
(a)......................... (1,121) -- 42,270 (1,104) 15,000
Operating income.............. 226,945 134,350 81,905 180,000 141,720
Net income.................... 142,021 68,026 43,148 93,585 89,063
PER SHARE DATA:
Basic......................... $ 2.49 $ 1.15 $ 0.62 $ 1.29 $ 1.09
Diluted....................... 2.43 1.13 0.62 1.29 1.09
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents..... $ 116,174 $ 35,095 $ 46,948 $ 11,115 $ 7,733
Total assets.................. 949,929 853,829 938,160 891,023 874,215
Long-term debt, less current
portion..................... 287,088 329,715 316,961 349,400 319,078
Shareholders' equity.......... 315,566 202,955 314,362 296,576 283,906
CASH FLOW DATA:
Net cash provided by operating
activities.................. $ 332,256 $ 345,230 $ 251,970 $ 230,782 $286,282
Net cash used for investing
activities.................. (158,608) (164,726) (162,566) (164,343) (77,231)
--------- ---------- --------- ---------- --------
Free cash flow................ $ 173,648 $ 180,504 $ 89,404 $ 66,439 $209,051
========= ========== ========= ========== ========
</Table>
- ---------------
(a) The impact of the special charges (credit) on earnings per share on a
diluted basis was ($0.01), $0.37, ($0.01) and $0.11 in fiscal 2003, 2001,
2000 and 1999, respectively.
17
SELECTED HISTORICAL FINANCIAL DATA OF INTERLOTT
The table below provides summary historical financial data of Interlott.
Interlott has prepared this information using the financial statements of
Interlott as of and for each of the five years ended December 31, 2002.
When you read this summary historical financial data, it is important that
you read along with it the historical financial statements and related notes in
Interlott's annual and quarterly reports filed with the SEC, as well as the
section of Interlott's annual and quarterly reports entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations." See
"Where You Can Find More Information" on page .
<Table>
<Caption>
YEAR ENDED DECEMBER 31
--------------------------------------------------
2002 2001 2000 1999 1998
------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Revenues:
Machine sales........................... $27,209 $ 19,359 $ 21,959 $ 3,312 $ 8,230
Machine leases.......................... 18,698 18,337 17,966 16,902 14,165
Other................................... 6,097 5,021 2,664 2,120 2,079
------- -------- -------- -------- -------
Total................................ 52,003 42,716 42,589 22,334 24,474
Gross profit.............................. 15,680 11,822 13,486 8,287 8,354
Operating income.......................... 7,510 4,893 7,425 3,502 3,687
Net income................................ 3,091 1,949 3,610 2,070 1,622
PER SHARE DATA:
Basic..................................... $ 0.48 $ 0.30 $ 0.56 $ 0.32 $ 0.25
Diluted................................... 0.46 0.30 0.56 0.32 0.25
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets.............................. $51,722 $ 54,917 $ 40,004 $ 36,204 $28,774
Total debt................................ 21,335 29,743 16,000 16,292 11,645
Total equity.............................. 23,200 19,970 18,348 14,687 12,617
Redeemable preferred stock................ -- -- -- 1,335 1,335
CASH FLOW DATA:
Net cash provided by operating
activities.............................. $13,751 $ 8,843 $ 11,556 $ 7,520 $ 7,435
Net cash used for investing activities.... (5,492) (21,664) (10,297) (12,063) (9,736)
------- -------- -------- -------- -------
Free cash flow............................ $ 8,260 $(12,821) $ 1,258 $ (4,544) $(2,300)
======= ======== ======== ======== =======
</Table>
18
RISK FACTORS
AN INVESTMENT IN GTECH COMMON STOCK INVOLVES A NUMBER OF RISKS, SOME OF
WHICH ARE RELATED TO THE MERGER AND SOME OF WHICH ARE INHERENT IN AN INVESTMENT
IN GTECH. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING INFORMATION ABOUT THESE
RISKS, TOGETHER WITH THE OTHER INFORMATION IN THIS PROXY STATEMENT / PROSPECTUS,
IN CONSIDERING THE PROPOSED MERGER BETWEEN GTECH AND INTERLOTT AND YOUR ELECTION
TO RECEIVE CASH AND/OR GTECH COMMON SHARES IN THE PROPOSED MERGER.
RISKS RELATED TO THE MERGER
THE SUCCESSFUL INTEGRATION OF GTECH AND INTERLOTT FOLLOWING THE MERGER WILL
PRESENT SIGNIFICANT CHALLENGES. The merger will present challenges to GTECH's
management, including the integration of Interlott's operations and personnel.
In addition, it may present special risks, including possible unanticipated
liabilities, unanticipated costs and diversion of management attention. GTECH
may not be able to integrate successfully or manage profitably the operations it
will acquire in the merger. Following the merger, GTECH may not achieve the
revenue or profitability increases or cost savings currently anticipated to
arise from the merger. If GTECH's management is not able to implement a business
plan that effectively integrates Interlott's operations, the anticipated
benefits of the merger may not be realized.
YOU MAY NOT RECEIVE THE FORM OF MERGER CONSIDERATION THAT YOU ELECT. In
connection with the merger, you may not receive all of your merger consideration
in the form that you elect. The merger agreement provides that the percentage of
shares of Interlott common stock that will be converted into the right to
receive GTECH common shares is fixed at 51.5% and the percentage of shares of
Interlott common stock that will be converted into the right to receive cash is
fixed at 48.5%. Therefore, the Interlott stockholders' elections, including
yours, may be adjusted on a pro rata basis so that, in the aggregate, 51.5% of
the Interlott common stock is converted into the right to receive GTECH common
shares and 48.5% of the Interlott common stock is converted into the right to
receive cash.
THE PRICE OF GTECH COMMON STOCK AT THE CLOSING OF AND FOLLOWING THE MERGER
MAY VARY FROM THE TWENTY-DAY AVERAGE PRICE USED TO DETERMINE THE EXCHANGE RATIO
FOR THE MERGER. The price of GTECH common stock may vary as a result of changes
in the business, operations or prospects of GTECH, general market and economic
conditions and other factors. The number of shares of GTECH common stock issued
in the merger will be calculated based on an exchange ratio equal to $9.00
divided by the average per share closing price of GTECH common stock on the New
York Stock Exchange for the 20 consecutive trading days prior to the third
trading day before the date of the special meeting. The market value of the
GTECH common stock on the date on which the merger is completed and following
the merger may be different than the 20-day average price of GTECH common stock
used in determining the exchange ratio. As a result, the market value of the
GTECH shares you may receive pursuant to the merger and hold following the
merger may be more or less than the $9.00 value assumed in calculating the
exchange ratio.
THE PRICE OF GTECH COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT FROM
THOSE AFFECTING THE PRICE OF INTERLOTT COMMON STOCK. Upon completion of the
merger, and depending on the form of merger consideration elected by holders of
Interlott common stock in the aggregate, many or all holders of Interlott common
stock will become holders of GTECH common stock. GTECH's business differs from
that of Interlott, and GTECH's results of operations, as well as the price of
GTECH common stock, may be affected by factors different from those affecting
Interlott's results of operations and the price of Interlott common stock. For a
discussion of GTECH's and Interlott's businesses and certain factors to consider
in connection with such businesses, we refer you to the quarterly reports on
Form 10-Q and the annual reports on Form 10-K that GTECH and Interlott have
filed with the Securities and Exchange Commission. See "Where You Can Find More
Information."
OFFICERS AND DIRECTORS OF INTERLOTT MAY HAVE INTERESTS IN THE MERGER THAT
ARE DIFFERENT FROM THOSE OF INTERLOTT'S STOCKHOLDERS. A number of officers and
directors of Interlott who recommend that you vote in favor of the merger
agreement have employment or severance agreements or benefit arrangements that
provide them with interests in the merger that may be different from yours. The
receipt of compensation or
19
other benefits in connection with the merger (including the acceleration of
vesting of stock options), or the continuation of indemnification arrangements
for current directors following completion of the merger, may influence these
persons in making their recommendation that you vote in favor of adoption of the
merger agreement. See "The Merger--Interests of Certain Persons in the Merger."
RISKS RELATING TO AN INVESTMENT IN GTECH COMMON STOCK
GOVERNMENT REGULATIONS AND OTHER ACTIONS AFFECTING THE ONLINE LOTTERY
INDUSTRY COULD HAVE A NEGATIVE EFFECT ON GTECH'S BUSINESS. In the United States
and in many international jurisdictions where GTECH currently operates or seeks
to do business, online lotteries are not permitted unless expressly authorized
by law. GTECH may not be able successfully to implement its growth strategy and
its business could be materially adversely affected if jurisdictions that do not
currently authorize lotteries do not approve online lotteries or if those
jurisdictions that currently authorize lotteries do not continue to permit such
activities.
Once authorized, the ongoing operations of lotteries and lottery operators
are typically subject to extensive and evolving regulation. Lottery authorities
generally conduct an intensive investigation of the winning vendor and its
employees prior to and after the award of a lottery contract. Lottery
authorities with which GTECH does business may require the removal of any of its
employees deemed to be unsuitable and are generally empowered to disqualify it
from receiving a lottery contract or operating a lottery system as a result of
any such investigation. Some jurisdictions also require extensive personal and
financial disclosure and background checks from persons and entities
beneficially owning a specified percentage (typically five percent or more) of
GTECH's securities. The failure of these beneficial owners to submit to these
background checks and provide required disclosure could jeopardize the award of
a lottery contract to GTECH or provide grounds for termination of an existing
lottery contract. Additional restrictions are often imposed by international
jurisdictions in which GTECH markets its lottery systems upon foreign
corporations, such as GTECH, seeking to do business there.
Further, there have been and may continue to be investigations of various
types, including grand jury investigations, conducted by governmental
authorities into possible improprieties and wrong-doing in connection with
efforts to obtain and/or the awarding of lottery contracts and related matters.
In light of the fact that these investigations frequently are conducted in
secret, GTECH may not necessarily know of the existence of an investigation
which might involve it. Because GTECH's reputation for integrity is an important
factor in its business dealings with lottery and other governmental agencies, a
governmental allegation or a finding of improper conduct on the part of GTECH or
attributable to it in any manner could have a material adverse effect on its
business, including its ability to retain and renew existing contracts or to
obtain new contracts. In addition, continuing adverse publicity resulting from
these investigations and related matters could have a material adverse effect on
GTECH's reputation and business.
Finally, sales generated by online lottery games are dependent upon
decisions over which GTECH has no control made by lottery authorities with
respect to the operation of these games, such as matters relating to the
marketing and prize payout features of online lottery games. Because GTECH is
typically compensated in whole or in part based on a jurisdiction's gross online
lottery sales, lower than anticipated sales due to these factors could have a
material adverse effect on GTECH's revenues.
GTECH'S LOTTERY OPERATIONS ARE DEPENDENT UPON ITS CONTINUED ABILITY TO
RETAIN AND EXTEND ITS EXISTING CONTRACTS AND WIN NEW CONTRACTS. GTECH derives
the majority of its revenues and cash flow from its portfolio of long-term
facilities management contracts and operating contracts (or collectively, its
online lottery service contracts). Upon the expiration of a contract, lottery
authorities may award new contracts through a competitive procurement process.
In addition, GTECH's lottery contracts typically permit a lottery authority to
terminate the contract at any time for failure to perform and other specified
reasons. Many of GTECH's contracts permit the lottery authority to terminate the
contract at will with limited notice and do not specify the compensation, if
any, to which GTECH would be entitled were such termination to occur.
In addition, some of GTECH's lottery contracts permit the lottery authority
to acquire title to its system-related equipment and software during the term of
the contract or upon the expiration or earlier termination of
20
the contract, in some cases without paying GTECH any compensation related to the
transfer of that equipment and software to the lottery authority.
The termination of or failure to renew or extend one or more lottery
contracts, the renewal or extension of one or more lottery contracts on
materially altered terms or the loss of GTECH's assets without compensation
could, depending upon the circumstances, have a material adverse effect on
GTECH's business, financial condition, results and prospects.
SLOW GROWTH OR DECLINES IN SALES OF ONLINE LOTTERY GOODS AND SERVICES COULD
ADVERSELY AFFECT GTECH'S FUTURE REVENUES AND PROFITABILITY. In recent years, as
the United States lottery industry has matured, the rate of lottery sales growth
has slowed and certain of GTECH's customers have from time to time experienced a
downward trend in sales. These developments may in part reflect increased
competition that the lottery industry has experienced in recent years for the
consumers' entertainment dollar, including by virtue of a proliferation of
destination gaming venues, and an increased availability of Internet gaming
opportunities. GTECH's future success will depend, in part, on the success of
the lottery industry, as a whole, in attracting and retaining players in the
face of such increased competition for the consumers' entertainment dollar
(which competition may well increase further in the future), as well as its own
success in developing innovative products and systems to achieve this goal.
GTECH's future success also will depend, in part, on its ability to develop
innovative products and services to permit it to successfully market transaction
processing goods and services outside of the lottery industry. GTECH's failure
to achieve these goals could have a material adverse effect on its business,
financial condition, results and prospects.
GTECH HAS SIGNIFICANT FOREIGN CURRENCY EXPOSURE. GTECH's consolidated
financial results are significantly affected by foreign currency exchange rate
fluctuations. Foreign currency exchange rate exposures arise from current
transactions and anticipated transactions denominated in currencies other than
United States dollars and from the translation of foreign currency balance sheet
accounts into United States dollar balance sheet accounts. GTECH is exposed to
currency exchange rate fluctuations because a significant portion of its
revenues is denominated in currencies other than the United States dollar. These
exchange rate fluctuations have in the past adversely affected GTECH's operating
results and may continue to adversely affect its results of operations and the
value of its assets outside the United States.
GTECH IS SUBJECT TO THE ECONOMIC, POLITICAL AND SOCIAL INSTABILITY RISKS OF
DOING BUSINESS IN FOREIGN JURISDICTIONS. GTECH is a global business and derives
a substantial portion of its revenue from its operations outside the United
States. In particular, in fiscal 2003, GTECH derived approximately 49% of its
revenues from its international operations and approximately 10.3% of its
revenues from its Brazilian operations alone (including 9.8% of its revenues
from the National Lottery of Brazil, GTECH's largest customer in fiscal 2003
based on annual revenues). In addition, a substantial portion of GTECH's assets
are held outside of the United States. GTECH is also exposed to more general
risks of international operations, including:
- increased governmental regulation of the online lottery industry in the
markets where it operates;
- exchange controls or other currency restrictions; and
- significant political instability.
The occurrence of any of these events in the markets where GTECH operates
could jeopardize or limit its ability to transact business in those markets in
the manner it expects and could have a material adverse effect on its business,
financial condition, results and prospects.
GTECH HAS A CONCENTRATED CUSTOMER BASE AND THE LOSS OF ANY OF THESE
CUSTOMERS COULD HARM ITS RESULTS. Revenue from GTECH's top ten customers
accounted for approximately 48.6% of its total revenue for the fiscal year ended
February 22, 2003. If GTECH were to lose any of these larger customers, or if
these larger customers experience slow lottery ticket sales and consequently
reduced lottery revenue, GTECH's business, financial condition, results and
prospects could suffer.
GTECH'S QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY. GTECH has
experienced and may continue to experience significant fluctuations in its
operating results from quarter to quarter due to such factors as the amount and
timing of product sales, the occurrence of large jackpots in lotteries (which
increase
21
the amount wagered and GTECH's revenue) and expenses incurred in connection with
lottery start-ups. Fluctuations in GTECH's operating results from quarter to
quarter may cause its operating results to be below the expectations of
securities analysts and investors. If this occurs, the trading price of GTECH's
common stock could fluctuate significantly.
GTECH OPERATES IN A HIGHLY COMPETITIVE ENVIRONMENT. The online lottery
industry is becoming increasingly competitive in the United States and
internationally, which could adversely affect GTECH's ability to win renewals of
contracts from its existing customers or to win contract awards from other
lottery authorities. In addition, awards of contracts to GTECH are, from time to
time, challenged by its competitors. Increased competition also may have a
material adverse effect on the profitability of contracts which GTECH does
obtain.
GTECH CAN BE SUBJECT TO SUBSTANTIAL PENALTIES FOR FAILURE TO PERFORM UNDER
ITS LOTTERY CONTRACTS. GTECH's lottery contracts typically permit termination of
the contract at any time for failure of GTECH to perform and for other specified
reasons and generally contain demanding implementation and performance
schedules. In addition to contract termination, failure to perform under these
contracts may result in substantial monetary liquidated damages. These
provisions in GTECH's lottery contracts present an ongoing potential for
substantial expense.
Lottery contracts also generally require GTECH to post a performance bond,
which in some cases may be substantial, to secure its performance under such
contracts. GTECH paid or incurred liquidated damages with respect to its
contracts equaling 0.47%, 0.14%, 0.47%, 0.56% and 0.35% of its annual revenues
in fiscal 2003, 2002, 2001, 2000 and 1999, respectively. If GTECH incurs
substantial liquidated damages in the future, it could significantly reduce the
amount of funds that GTECH has available for other uses in its business and may
delay or prevent GTECH from pursuing and achieving its growth strategy, which
could have a material adverse effect on its business, financial condition,
results and prospects.
GTECH MAY NOT BE ABLE TO RESPOND TO TECHNOLOGICAL CHANGES OR TO SATISFY
FUTURE TECHNOLOGY DEMANDS OF ITS CUSTOMERS. Most of GTECH's software and
hardware products are based on proprietary technologies. Although GTECH believes
that certain of its technologies, such as its Enterprise Series(TM)
open-architecture software platform, provides an industry standard, if it were
to fail to develop its product and service offerings to take advantage of
technological developments, it may fall behind its competitors and its business,
financial condition, results and prospects could suffer.
EXPANSION OF THE GAMING INDUSTRY FACES OPPOSITION. Gaming opponents
continue to persist in efforts to curtail the expansion of legalized gaming.
GTECH can give no assurance that this opposition will not succeed in preventing
the legalization of online gaming in jurisdictions where these activities are
presently prohibited or prohibiting or limiting the expansion of online gaming
where it is currently permitted, in either case to the detriment of GTECH's
business, financial condition, results and prospects.
GTECH'S BUSINESS PROSPECTS AND FUTURE SUCCESS DEPEND UPON ITS ABILITY TO
ATTRACT AND RETAIN QUALIFIED EMPLOYEES. GTECH's business prospects and future
success depend, in part, upon its ability to attract and to retain qualified
managerial, marketing and technical employees. Competition for such employees is
sometimes intense, and GTECH may not succeed in hiring and retaining the
executives and other employees that it needs. GTECH's loss of or inability to
hire key employees could have a material adverse effect on its business,
financial condition, results and prospects.
GTECH'S BUSINESS PROSPECTS AND FUTURE SUCCESS RELY HEAVILY UPON THE
INTEGRITY OF ITS EMPLOYEES AND THE SECURITY OF ITS SYSTEMS. The real and
perceived integrity and security of a lottery is critical to its ability to
attract players. GTECH strives to set exacting standards of personal integrity
for its employees and system security for the system that it provides to its
customers, and its reputation in this regard is an important factor in its
business dealings with lottery and other governmental agencies. For this reason,
an allegation or a finding of improper conduct on GTECH's part, or on the part
of one or more of its employees that is attributable to GTECH, or an actual or
alleged system security defect or failure attributable to GTECH, could have a
material adverse effect upon its business, financial condition, results and
prospects, including its ability to retain existing contracts or obtain new or
renewal contracts.
22
GTECH'S NON-LOTTERY VENTURES MAY FAIL. GTECH's business prospects and
future success depend, in part, on its ability to expand its transaction
processing services into complementary and parallel markets outside its core
lottery market. Because GTECH has less experience in non-lottery markets than it
has in its core lottery market, GTECH's non-lottery ventures present an enhanced
element of risk for it. The failure of one or more of its non-lottery ventures
could have a material adverse effect on its business, financial condition,
results and prospects.
GTECH MAY BE SUBJECT TO ADVERSE DETERMINATIONS IN PENDING LEGAL
PROCEEDINGS. At present GTECH is a party to a securities class action lawsuit
filed against it and some of its current and former officers and directors and
to other legal proceedings which are described more fully in the SEC filings
incorporated by reference in this proxy statement/prospectus. GTECH may not
prevail in any of those legal proceedings. If GTECH is not successful in
defending these legal proceedings, it could incur substantial monetary judgments
or penalties or damage to its reputation, and whether or not GTECH is
successful, the proceedings may occupy the time and attention of its senior
management.
23
THE SPECIAL MEETING
PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus is being furnished to you in connection
with the solicitation of proxies by the Interlott Board of Directors in
connection with the proposed merger and the amended and restated Interlott 1994
Stock Incentive Plan.
This proxy statement/prospectus is first being furnished to Interlott
stockholders on or about [ -- ], 2003.
DATE, TIME AND PLACE
Interlott will hold the special meeting on [ -- ], [ -- ], 2003, at 9:00
a.m., local time, at [ADDRESS].
PURPOSE OF SPECIAL MEETING
At the special meeting you will be asked to vote upon a proposal to adopt
the merger agreement, to vote upon a proposal to approve the Interlott 1994
Stock Incentive Plan, as amended and restated effective January 15, 2003, and to
transact any other business that properly comes before the special meeting or
any adjournment or postponement of the special meeting. Following the
recommendation of a special committee of the Board of Directors appointed to
evaluate the fairness of the proposed merger from the point of view of
Interlott's unaffiliated public stockholders, the Interlott Board of Directors
has unanimously determined that the merger agreement and the merger are
advisable and in the best interests of Interlott stockholders. The Interlott
Board of Directors has unanimously approved the merger agreement and unanimously
recommends that Interlott stockholders vote "FOR" the adoption of the merger
agreement and "FOR" approval of the amended and restated Interlott 1994 Stock
Incentive Plan.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of record of Interlott common stock at the close of business
on [--], 2003, the record date, are entitled to notice of and to vote at the
special meeting. On the record date, [--] shares of Interlott common stock were
issued and outstanding and held by approximately [--] holders of record. A
quorum will be present at the special meeting if a majority of the shares of
Interlott common stock issued and outstanding and entitled to vote at the
special meeting are represented at the special meeting in person or by a
properly executed proxy. Interlott expects a quorum to be present because of the
agreement of Mr. Wells to vote his shares at the meeting. However, if a quorum
is not present at the special meeting, Interlott expects that the meeting will
be adjourned or postponed to solicit additional proxies. Holders of record of
Interlott common stock on the record date are entitled to one vote per share on
both proposals that will be presented at the special meeting.
PROXIES; REVOCATION; SOLICITATION
If you vote your shares of Interlott common stock by signing and dating a
proxy, your shares, unless your proxy is revoked, will be voted at the special
meeting as you indicate on your proxy card. If no instructions are indicated on
your signed and returned proxy card, your shares of Interlott common stock will
be voted "FOR" adoption of the merger agreement and "FOR" approval of the
amended and restated Interlott 1994 Stock Incentive Plan. If your shares are
held in street name, you should follow the directions provided by your broker or
bank regarding how to instruct your broker or bank to vote your shares. If an
executed proxy card is returned by a broker or bank holding shares which
indicates that the broker or bank does not have discretionary authority to vote
on the adoption of the merger agreement or approval of the amended and restated
Interlott 1994 Stock Incentive Plan, known as a broker non-vote, the shares will
be considered present at the special meeting for determining the presence of a
quorum, but will not be considered to have been voted in favor of adoption of
the merger agreement or approval of the amended and restated Interlott 1994
Stock Incentive Plan. The inspector of election appointed for the special
meeting will tabulate all votes and will
24
separately tabulate affirmative and negative votes, abstentions and broker
non-votes. Abstentions and broker non-votes will have the same effect as votes
"AGAINST" adoption of the merger agreement.
Abstentions will have the same effect as votes "AGAINST" the amended and
restated Interlott 1994 Stock Incentive Plan; broker non-votes will have no
effect on the vote to approve that plan.
You may revoke your proxy at any time before the vote at the special
meeting by submitting a written revocation to the Secretary of Interlott at 7697
Innovation Way, Mason, Ohio 45040, or by submitting a new proxy to such address,
in either case, dated after the date of the proxy that is being revoked. In
addition, a proxy may also be revoked by voting in person at the special
meeting. Simply attending the special meeting without voting will not revoke
your proxy.
The Interlott Board of Directors is not currently aware of any other
business to be brought before the special meeting. If, however, other matters
are properly brought before the special meeting (including a proposal for an
adjournment or postponement of the special meeting), the individuals appointed
as proxies will have discretionary authority to vote the shares represented by
duly executed proxies in accordance with their discretion and judgment.
The solicitation of proxies will occur primarily by mail but may include
telephone or oral communications by regular employees of Interlott, acting
without special compensation. Interlott also will request that persons and
entities holding shares that are registered in their own names or in the names
of their nominees but that are beneficially owned by others send proxy materials
to, and obtain proxies from, those beneficial owners. All expenses involved in
the solicitation of proxies will be paid by Interlott and will include
reimbursement of brokerage firms and others for expenses in forwarding proxy
solicitation material to the beneficial owners of shares of Interlott common
stock.
YOU SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.
REQUIRED VOTE
The affirmative vote of the holders of a majority of outstanding shares of
Interlott common stock entitled to vote at the special meeting is necessary for
the adoption of the merger agreement.
As of the record date, the directors and executive officers of Interlott
beneficially owned, in the aggregate, [--] shares of Interlott common stock, or
approximately [--]% of the shares of Interlott common stock outstanding on that
date. L. Rogers Wells, Jr., the Chairman and majority stockholder of Interlott,
has entered into a stockholder voting and option agreement with GTECH, described
under "The Stockholder Agreement," obligating himself, among other things, to
vote "FOR" adoption of the merger agreement. Because Mr. Wells beneficially owns
more than 50% of the shares of Interlott common stock outstanding as of the
record date, if Mr. Wells votes to adopt the merger agreement, as required by
the stockholder voting and option agreement, adoption of the merger agreement by
the Interlott stockholders at the special meeting is assured.
The affirmative vote of the holders of a majority of the shares of
Interlott common stock represented in person or proxy at the special meeting is
required to approve the amended and restated Interlott 1994 Stock Incentive
Plan. As a result, an abstention on this proposal will have the same effect as a
vote "AGAINST" the proposal. Mr. Wells has advised Interlott that he intends to
vote all of his shares "FOR" this proposal. Accordingly, adoption of this
proposal at the special meeting is assured.
ADJOURNMENTS OR POSTPONEMENTS
Although it is not expected, the special meeting may be adjourned or
postponed for the purpose of soliciting additional proxies. The special meeting
may be adjourned either by the chairman of the meeting or by the vote of a
majority of the shares casting votes. Any signed proxies received by Interlott
will be voted in favor of an adjournment or postponement in these circumstances
unless the shares represented by the proxy are to be voted against the proposal
to adopt the merger agreement. Any adjournment or postponement of the special
meeting for the purpose of soliciting additional proxies will allow Interlott
stockholders who have already sent in their proxies to revoke them at any time
before they are used.
25
THE MERGER
THE DISCUSSION IN THIS PROXY STATEMENT/PROSPECTUS OF THE MERGER AND THE
MATERIAL TERMS OF THE MERGER AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS ANNEX A AND IS INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS.
BACKGROUND OF THE MERGER
In August 2000, W. Bruce Turner, at the time GTECH's Chairman and Acting
Chief Executive Officer, and Donald R. Sweitzer, GTECH's Senior Vice President,
met in Rhode Island with L. Rogers Wells, Interlott's majority shareholder and
the Chairman of its Board of Directors, and with Laurance W. Gay, Interlott's
consultant, and discussed a potential transaction between GTECH and Interlott.
Messrs. Turner and Sweitzer determined that, although a transaction might be
worthy of future discussion, GTECH would not pursue any agreement with Interlott
at that time and discussions were broken off.
On March 28, 2002, David J. Calabro, then GTECH's Executive Vice President
for Global Operations (and since October 2002, GTECH's Chief Operating Officer),
and Mr. Sweitzer traveled to Interlott's headquarters in Mason, Ohio. There they
met with Mr. Wells and David Nichols, Interlott's President and Chief Executive
Officer. A general discussion was held to identify and explore areas in which
the companies might work or fit well together, including product development,
marketing and manufacturing matters, and to discuss the possibility of strategic
alliances, relationships or transactions between the companies generally.
Messrs. Calabro and Sweitzer were given a tour of Interlott's assembly facility
in Mason.
On June 3, 2002, GTECH and Interlott executed a Mutual Confidentiality
Agreement in anticipation of further general explorations of these matters.
On June 5, 2002, Mr. Calabro traveled with Mr. Sweitzer to Washington,
D.C., where they met with Messrs. Wells and Nichols at a local restaurant. There
they continued their general discussion concerning possible strategic
transactions between Interlott and GTECH.
On July 24, 2002, Mr. Calabro met with Messrs. Nichols, Thomas Stokes,
Interlott's Chief Operating Officer, and Dennis Blazer, Interlott's Chief
Financial Officer, in the Red Carpet Club at the Washington Dulles Airport. The
parties generally discussed Interlott's products, its business prospects and
matters relating to its valuation, but no agreements were reached.
Other than informal discussions at trade conferences where potential for a
relationship was generally mentioned, no further contacts were made until
September 6, 2002, when Mr. Turner had a phone conversation with Mr. Wells in
which Mr. Wells indicated that he would like to discuss further the concept of a
strategic transaction between the companies. Mr. Wells invited Mr. Turner to
visit the factory in Mason and to meet with Interlott's management team. The two
scheduled a visit for November 3 and 4, 2002.
On September 18, 2002, Mr. Calabro met again with Mr. Nichols at Washington
Dulles airport. During this meeting, they continued their earlier general
dialogue on the possibilities of a strategic transaction.
On November 3, 2002, Messrs. Turner and Sweitzer traveled to Cincinnati and
had a dinner meeting with Messrs. Wells and Nichols, which included, among other
things, a general discussion of merger possibilities. The next day, November 4,
Messrs. Turner and Sweitzer toured the Interlott manufacturing facility and met
with Interlott's senior management team. A broad discussion was held regarding
the two companies' philosophies and the potential fit between GTECH and
Interlott. The Interlott senior management team presented an enterprise
valuation for Interlott, which the GTECH participants considered to be too high.
The parties did agree, however, that Mr. Blazer would visit Rhode Island to
continue the general valuation discussion with Jaymin B. Patel, GTECH's Chief
Financial Officer. Meetings were scheduled for November 14, 2002.
On November 14, 2002, Messrs. Blazer and Patel, together with William
Pieri, GTECH's Treasurer, and Keith Bousquet, GTECH's Director of Corporate
Finance, met at GTECH. Discussions focused primarily on cost synergies that
might be possible if the two companies combined.
26
On December 3, 2002, Mr. Turner provided GTECH's Board of Directors with
verbal highlights of the ongoing discussions with Interlott at a meeting of the
Board. Thereafter, the Board was mailed a package containing background
financials and SEC reports on Interlott.
On December 19, 2002, Mr. Turner wrote Mr. Wells a letter outlining a range
of possibilities focusing primarily on the possibility of GTECH purchasing
Interlott, and proposing that the parties enter into a confidentiality and
"no-shop" agreement before proceeding further with any discussions or due
diligence concerning the structure of or valuation associated with any potential
purchase of Interlott.
On January 6, 2003, Mr. Wells responded with a letter to Mr. Turner, which
included a counterproposal that the parties enter into a strategic alliance
agreement that would advance their mutual business interests in the marketplace,
instead of an acquisition by GTECH at the present time. This proposal also
contemplated a minority equity investment by GTECH in Interlott.
On January 7, 2003, Mr. Turner called Mr. Wells and rejected his
counterproposal, and indicated that the discussions between the parties should
end because the parties did not appear to have common ground. After further
discussion, in a subsequent conversation Mr. Wells agreed generally that
Interlott would proceed with preliminary due diligence under the process
proposed by GTECH in its December 19, 2002 letter in order to determine whether
a merger transaction was feasible and whether an agreeable valuation for
Interlott could be reached.
The parties entered into a letter agreement dated January 8, 2003
concerning the formal exploration of the possibility of an acquisition
transaction. Pursuant to this letter agreement, among other things, Interlott
and GTECH each agreed for a limited negotiating period not to discuss a similar
transaction with any third parties and not to acquire or propose to acquire any
stock or assets of the other without such party's prior consent. In addition,
Interlott agreed to provide certain due diligence materials to GTECH and its
representatives, and GTECH agreed to treat such materials as confidential, and
not to communicate with any of Interlott's directors, officers, employees,
vendors or customers without Interlott's express consent.
On January 14, 2003, GTECH retained Fleet M&A Advisors, a division of Fleet
Securities, Inc., to provide investment banking advisory services including
assisting in the valuation process and providing the GTECH Board of Directors
with an opinion relating to the fairness of any transaction that might be
proposed.
On January 15, 2003, Interlott's Board of Directors met and was advised
that there had been recent discussions and arrangements made for a due diligence
review of Interlott's records and other information by GTECH, and that GTECH was
exploring the potential for proposing an acquisition transaction involving
Interlott. It was explained to the Board that the structure of any potential
transaction had not yet been determined and that the discussions, as well as the
due diligence process, were confidential. The Board was fully briefed on the
status of discussions and the due diligence process by Mr. Wells and others
present.
From January 15 to 18, 2003, teams from GTECH, Edwards & Angell, LLP,
GTECH's legal advisor, and Ernst & Young, GTECH's independent auditor, traveled
to Cincinnati and reviewed various Interlott materials at off-site locations as
part of the due diligence process.
On January 22, 2003, GTECH requested that Edwards & Angell, LLP prepare
agreements, including a merger agreement, pursuant to which GTECH would acquire
Interlott through a merger with a subsidiary of GTECH.
On January 30, 2003, a patent attorney from Edwards & Angell, LLP traveled
to Cincinnati to conduct due diligence on Interlott's intellectual property. He
met with Mr. Stokes and Edward Turek, Interlott's founder and a member of its
Board of Directors, as well as Interlott's outside counsel and patent counsel,
and discussed Interlott's intellectual property, focusing on its patents.
On February 5, 2003, Messrs. Turner and Patel traveled to Ohio to visit Mr.
Wells. During a lunch meeting, the group discussed the potential pricing of any
acquisition. GTECH indicated that its offer would be in the range of $8.00 to
$8.50 for an all-cash transaction. Mr. Wells indicated that he was disappointed
in this offer and that he felt that Interlott was worth more. He agreed to
consider the offer.
27
On February 17, 2003, Mr. Wells visited Messrs. Turner and Patel at GTECH's
Rhode Island headquarters. The three discussed GTECH's proposal of February 5,
2003 and the possible structure of any acquisition proposal. Mr. Wells proposed
that the transaction be structured so that payment for the Interlott shares
would be made 100% in GTECH stock. During the course of the meeting, Mr. Turner
consulted with Bob Dewey, a member of GTECH's Board of Directors. During the
meeting, Messrs. Turner and Patel agreed that GTECH would increase its
preliminary offer to a range of $8.50 to $9.00 per share in a transaction in
which 50% of the consideration would be paid in cash and 50% would be paid in
GTECH stock. The parties also discussed GTECH's request that Mr. Wells enter
into a five-year non-competition agreement with GTECH. Mr. Wells indicated he
would consider supporting such a transaction subject to the approval of a
special committee and the Interlott Board of Directors.
From February 17 through March 16, 2003, GTECH's due diligence teams
continued their due diligence, and GTECH's legal and business teams negotiated
terms and conditions of the proposed merger with Interlott's attorneys and
representatives. On February 25, 2003, Edwards & Angell, LLP forwarded a draft
merger agreement to Interlott's counsel, Taft, Stettinius & Hollister LLP. The
parties negotiated the merger agreement, exchanging numerous drafts.
On February 20, 2003, the Interlott Board of Directors met. The primary
purpose of the meeting was to bring the Interlott Board up to date concerning
the due diligence process and inform the Interlott Board of the GTECH
acquisition proposal. Mr. Wells explained that Interlott had received an
unwritten informal proposal from GTECH to acquire it by merger with a valuation
of $8.50 to $9.00 per share, and that discussions with GTECH had progressed to
the point where it would be appropriate for the Interlott Board to appoint a
special committee to review and advise the Interlott Board concerning the
acquisition proposal. The Interlott Board unanimously adopted resolutions
appointing a special committee of directors consisting of John Wingfield
(chairman), Gary Bell and Jean McEntire in order to (i) examine and evaluate the
terms of the proposal, (ii) consider and decide whether to engage an investment
banking firm and special legal counsel (or other advisors), (iii) advise as
appropriate in connection with the negotiations, (iv) determine whether the
proposal was fair to Interlott's public stockholders, and (v) make a
recommendation to the full Interlott Board and Interlott's public shareholders
regarding the proposal.
On February 27, 2003, GTECH's Board of Directors held a telephonic meeting
during which GTECH management made a presentation to the GTECH Board regarding
the potential acquisition of Interlott and the status of discussions to date.
The special committee of the Interlott Board met on February 28, 2003. The
special committee selected Keating, Muething & Klekamp, P.L.L. to act as its
special counsel. At that meeting, the committee's special counsel reviewed with
the committee its assigned tasks and the legal context for the committee's
activities. The committee then began interviewing candidates to act as its
financial advisor. After four candidates made presentations to the committee and
the committee evaluated the presentations, it determined to engage, at the
appropriate time, Houlihan Lokey as its financial advisor.
The special committee met again on March 7, 2003, and discussed the status
of negotiations with GTECH, the then current draft of the merger agreement and
legal considerations presented by its special counsel. The special committee
confirmed the selection of Houlihan Lokey as its financial advisor and
determined to complete the formal engagement of Houlihan Lokey after agreement
had been reached with GTECH on certain issues in the merger agreement.
On March 10, 2003, Mr. Wells called Mr. Turner to discuss how Interlott's
debt levels at closing will be considered in relation to the determination of
the price being paid for Interlott's stock. They agreed generally that
Interlott's line of credit could only be drawn for budgeted or agreed upon
amounts and that no adjustment would be made to the purchase price based on the
debt level at closing. The agreed price was fixed at $9.00 per share, subject to
execution of a definitive merger agreement. Also on March 10, 2003,
representatives from Ernst & Young returned to Cincinnati to conduct final
accounting due diligence at an off-site facility. They completed this due
diligence on March 13, 2003.
28
On March 11, 2003, Mr. Calabro and Kathy McKeough, GTECH's Senior Vice
President for Human Resources met with Mr. Nichols at the Westin Hotel in
Providence, Rhode Island and discussed entering into a retention agreement with
Mr. Nichols should the merger move forward.
On March 14, 2003, GTECH's Board of Directors held a telephonic meeting
during which GTECH management made a presentation to the Board regarding the
potential acquisition of Interlott and the status of discussions to date.
Representatives of Edwards & Angell, LLP and Fleet M&A Advisors were present and
made presentations. At the meeting, the GTECH Board of Directors discussed and
approved the final offer for the purchase of Interlott and related matters.
The special committee of Interlott's Board also met on March 14, 2003. Its
special counsel reviewed conversations with Houlihan Lokey on the status of its
work. The committee then discussed various factors relating to the valuation of
Interlott and counsel reminded and reviewed for the committee factors it was
required to consider under Interlott's certificate of incorporation. The special
committee had a lengthy conversation with representatives of Houlihan Lokey.
Counsel then reviewed with the committee the then current draft of the merger
agreement.
The special committee met again on March 16, 2003. Representatives of
Houlihan Lokey presented its opinion and report described below. Counsel and the
committee asked Houlihan Lokey for its views as to the termination and break-up
fee and expense reimbursement provisions of the merger agreement. The committee
reviewed in detail the terms of the merger agreement, the voting and option
agreement and the noncompetition agreement. The special committee discussed in
particular the merger consideration allocation provisions, the possible
synergistic affects of the merger on GTECH's stock price, the provisions
entitling Interlott to terminate the merger agreement to accept an unsolicited
superior proposal, the opinion of Houlihan Lokey, the premium represented by the
merger consideration over Interlott's recent stock price, and, in relation to
other considerations, Interlott's strategic alternatives to the merger,
including the desirability of maintaining independence from any other entity,
and the social and economic effects of the merger on Interlott's employees,
customers and suppliers and the communities in which Interlott has a physical
presence.
After discussion, the special committee unanimously determined that the
terms of the merger documents, including the merger consideration, are fair to,
and in the best interests of, the unaffiliated public stockholders of Interlott
and to recommend that the Interlott Board and stockholders approve and adopt the
merger agreement.
Later on March 16, 2003, the Interlott Board of Directors met. All
directors were present. The special committee reported on its activities and
presented its recommendations described above. Representatives of Houlihan Lokey
presented its opinion and report described below. Counsel to Interlott reviewed
in detail the provisions of the merger documents. Senior management of Interlott
presented their views on the proposed merger and strategic alternatives. After
discussion, the Interlott Board unanimously determined that the merger was fair
to, and in the best interests of, the stockholders of Interlott, to approve the
merger agreement and related transactions and to recommend to the stockholders
of Interlott that they adopt the merger agreement.
Interlott, GTECH and Bengal Acquisition Co., an indirectly wholly owned
subsidiary of GTECH, then executed the merger agreement. In addition, Mr. Wells,
GTECH and Bengal Acquisition Co. executed the stockholder voting and option
agreement and Mr. Wells and GTECH executed the noncompetition agreement.
Prior to the commencement of trading on the New York Stock Exchange and the
American Stock Exchange on March 17, 2003, GTECH and Interlott each issued press
releases announcing the execution of the merger agreement and related documents.
29
GTECH'S REASONS FOR THE MERGER
In reaching its decision to approve the merger agreement, the merger and
the related transactions, the GTECH Board of Directors consulted with senior
management and its legal and financial advisors and considered a number of
factors, including the following:
- the GTECH Board of Directors' familiarity with and review of Interlott's
business, financial condition and prospects;
- that the proposed merger is expected to result in significant
efficiencies from the realignment and integration of certain Interlott
functions;
- how the acquisition fits within GTECH's strategy of growing its core
lottery business;
- the opportunity to expand GTECH's presence in the instant ticket
distribution segment;
- business conditions in the industries in which GTECH and Interlott
operate;
- the ability of GTECH to leverage its core competencies in lottery
automation, logistics optimization, sales and marketing and other
operational areas, as well as its worldwide sales and government
relations infrastructure;
- the expertise of Interlott's current management; and
- the terms and conditions of the merger agreement.
The above discussion of information and factors considered by GTECH's Board
of Directors is not intended to be exhaustive but is believed to include all
material factors considered by the Board. In view of the wide variety of factors
considered by GTECH's Board, the Board did not find it practicable to quantify
or otherwise assign relative weight or rank to any one or more of the specific
factors considered. In addition, the GTECH Board did not reach any specific
conclusion on each factor considered, or any aspect of any particular factor,
but conducted an overall analysis of these factors. Individual members of the
Board of Directors may have given different weight to different factors.
INTERLOTT'S REASONS FOR THE MERGER
In reaching their decision to approve the merger and unanimously recommend
that Interlott stockholders vote to adopt the merger agreement, the Interlott
Board of Directors and its special committee consulted with their financial and
legal advisors and with senior management and considered a number of factors,
including without limitation, the following material factors:
- the $9.00 merger price as compared to the historic performance of the
Interlott common stock;
- historical financial information of Interlott, as well as the information
presented with respect to Interlott's prospects if it remained
independent;
- business conditions in the industries in which Interlott and GTECH
operate;
- the reasons for the merger developed and presented by Interlott's
management;
- the financial analyses presented by Houlihan Lokey;
- the terms and conditions of the proposed merger agreement, including the
fact that Interlott is permitted to provide information to and negotiate
with prospective unsolicited purchasers after the execution of the merger
agreement and the fact that the Interlott Board may terminate the merger
agreement if it receives a superior proposal;
- alternatives to the merger, including continuing to operate Interlott as
an independent company;
- the possibility that if the merger were not completed, in view of the
consolidation currently taking place in Interlott's industry, Interlott
could receive an unsolicited acquisition proposal from another party on
terms that are not as favorable as those of the merger;
30
- the fact that Interlott stockholders may elect (in amounts up to 51.5% of
the aggregate merger consideration) to receive equity interests in GTECH,
the combined company after the merger, and in so doing would be able to
share in the combined companies' growth;
- their belief that the merger price is greater than the amount that an
Interlott stockholder would be able to obtain in the open market in the
immediate future if the merger were rejected;
- in the case of Interlott's Board, the recommendations and considerations
of the special committee;
- the opinion of Houlihan Lokey, described below, as to the fairness, from
a financial point of view, of the merger consideration to Interlott's
unaffiliated public stockholders; and
- the tax deferred nature of the merger to Interlott stockholders who
receive GTECH common shares.
The Board and special committee also noted that, under Article Tenth of
Interlott's Certificate of Incorporation, in the exercise of their business
judgment in evaluating the merger, they were required to give due consideration
to the social and economic effects of the merger on Interlott's employees,
customers and suppliers and other communities in which Interlott operates, as
well as the economic terms of the merger and the desirability of maintaining
Interlott as an independent entity. In that connection, they noted that GTECH
had indicated that it intended to continue the lease of Interlott's facilities
and that, under the merger agreement, GTECH had agreed to continue Interlott's
current employee benefit plans (or plans no less favorable) for at least one
year.
Interlott's Board also identified and considered some potentially negative
factors in its deliberations concerning the merger, including the termination
fee and expenses payable to GTECH if Interlott terminates the merger agreement
under certain circumstances.
This discussion of the information and factors considered by the Interlott
Board and special committee in making their decision to approve the merger and
the merger agreement and to recommend that Interlott stockholders vote to adopt
the merger agreement is not intended to be exhaustive, but it is believed to
include all material factors considered by the Interlott Board and special
committee. In view of the variety of material factors considered in connection
with its evaluation of the merger, both positive and negative, the Interlott
Board and special committee did not find it practicable to, and did not,
quantify or otherwise assign relative weights to, the specific factors
considered in reaching its determination. In addition, individual members of the
Interlott Board and special committee may have given different weight to
different factors. The Interlott Board and special committee considered all
these factors as a whole and believed the factors supported its determination to
approve the merger agreement and the merger and to recommend to the stockholders
of Interlott that they adopt the merger agreement.
In reaching their determination that the merger is advisable and in the
best interests of Interlott's stockholders, the Interlott Board and special
committee were aware that the members of the Board and certain executive
officers of Interlott have personal interests in the merger that are or may be
different from, or in addition to, the interests of the other Interlott
stockholders. These interests are described below under "Interests of Certain
Persons in the Merger." The decisions of the Interlott Board and special
committee, however, were based upon the factors identified above and not the
interests of those individuals.
RECOMMENDATION OF THE INTERLOTT BOARD OF DIRECTORS
At the special meeting, the holders of Interlott common stock will be asked
to vote upon a proposal to adopt the merger agreement, to approve the amended
and restated Interlott 1994 Stock Incentive Plan and to transact any other
business that properly comes before the special meeting or any adjournment or
postponement of the special meeting. The Interlott Board of Directors has
unanimously determined that the terms of the merger agreement and the merger are
advisable and fair to Interlott stockholders, and that it is in the best
interests of Interlott stockholders that Interlott completes the merger. The
Interlott Board of Directors unanimously recommends that Interlott stockholders
vote "FOR" the adoption of the merger agreement and "FOR" approval of the
amended and restated Interlott 1994 Stock Incentive Plan.
31
OPINION OF INTERLOTT'S FINANCIAL ADVISOR
The special committee of the Interlott Board retained Houlihan Lokey to act
as its financial advisor in connection with the merger. In connection with its
engagement, the special committee requested that Houlihan Lokey render an
opinion to the special committee as to the fairness of the merger, from a
financial point of view, to the unaffiliated public stockholders of Interlott.
At the March 16, 2003 meetings of the special committee and the Interlott Board,
Houlihan Lokey presented its analysis described below and delivered its oral
opinion that, as of that date and based on and subject to the matters described
in its opinion, the merger was fair, from a financial point of view, to the
unaffiliated public stockholders of Interlott. Houlihan Lokey confirmed its oral
opinion by delivery of a written opinion to the special committee dated March
16, 2003. In addition, the special committee requested and received a
"bring-down" opinion as of the date of this proxy statement/prospectus.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The
following is a brief summary and general description of the valuation
methodologies utilized by Houlihan Lokey in preparing its fairness opinion. The
summary does not purport to be a complete statement of the analyses and
procedures applied, the judgments made or the conclusion reached by Houlihan
Lokey or a complete description of its presentation. Houlihan Lokey believes,
and so advised the special committee, that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors considered
by it, without considering all factors and analyses, could create an incomplete
view of the process underlying its analyses and opinions.
THE COMPLETE TEXT OF HOULIHAN LOKEY'S OPINION IS ATTACHED HERETO AS ANNEX
C. THE SUMMARY OF THE OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE OPINION. THE COMMON STOCKHOLDERS ARE URGED TO READ THE OPINION
CAREFULLY IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE
FACTORS CONSIDERED AND THE ASSUMPTIONS MADE BY HOULIHAN LOKEY.
Houlihan Lokey's opinion to the special committee addresses only fairness,
from a financial point of view, of the merger consideration to Interlott's
unaffiliated public stockholders, and does not constitute a recommendation to
Interlott's common stockholders as to whether they should vote for or against
the merger. Additionally, the opinion does not address the tax consequences to
stockholders. Furthermore, Houlihan Lokey's opinion does not address Interlott's
underlying business decision to effect the merger. Houlihan Lokey has not been
requested to, and did not, solicit third party indications of interest in
acquiring all or any part of Interlott. The consideration in the merger was
arrived at by negotiation between Interlott and GTECH.
In connection with the preparation of its opinion, Houlihan Lokey made such
reviews, analyses and inquiries as it deemed necessary and appropriate under the
circumstances. Among other things, Houlihan Lokey:
- reviewed Interlott's annual reports to stockholders on Form 10-K for the
fiscal years ended 1998 through 2001; its quarterly reports on Form 10-Q
for the three quarters ended September 30, 2002; and a preliminary draft
of its annual report on Form 10-K for the fiscal year ended 2002;
- reviewed Interlott's forecasted income statements for the fiscal years
2003 and 2004 as prepared by Interlott's management;
- reviewed GTECH's annual reports to shareholders and on Form 10-K for the
fiscal years ended 1998 through 2001 and quarterly reports on Form l0-Q
for the three quarters ended October 31, 2002;
- reviewed copies of the following agreements: Draft Agreement and Plan of
Merger among GTECH, Bengal Acquisition Co. and Interlott dated March 12,
2003; Draft Stockholder Voting and Option Agreement dated March 12, 2003;
and Draft Noncompetition Agreement dated March 12, 2003;
- met with certain members of senior management of Interlott to discuss
Interlott's operations and financial condition;
- met with certain members of senior management of GTECH, via
teleconference, to discuss its operations, strategy, expectations and
acquisition rationale;
32
- visited the business offices of Interlott;
- reviewed a presentation by the CEO and CFO of GTECH dated March 2003;
- reviewed the historical market prices and trading volume for Interlott's
and GTECH's publicly traded securities;
- reviewed certain other publicly available financial data for certain
companies that Houlihan Lokey deemed comparable to Interlott, including
prices and premiums paid in other mergers that Houlihan Lokey considered
similar to the merger; and
- conducted such other studies, analyses and inquiries as Houlihan Lokey
deemed appropriate.
In preparing its opinion, Houlihan Lokey relied upon and assumed, without
independent verification, that the financial forecasts and projections provided
to it had been reasonably prepared and reflected the best currently available
estimates of the future financial results and condition of Interlott and GTECH,
and that there had been no material change in the assets, financial condition,
business or prospects of Interlott and GTECH since the date of the most recent
financial statements made available to it. Houlihan Lokey also noted that the
agreement and plan of merger includes a fiduciary out provision for the
Interlott Board of Directors, and that the stock consideration received will be
registered under the Securities Act of 1933 and thus will be unrestricted,
except for those shares subject to resale restrictions imposed on affiliates
under Rule 145 of the Securities Act.
In assessing the financial fairness of the merger, Houlihan Lokey:
- used widely accepted valuation methodologies to perform an independent
analysis of the enterprise value and equity value of Interlott;
- analyzed the terms of the merger; and
- examined the potential post-merger value to public equity holders.
VALUATION OF INTERLOTT
Houlihan Lokey used several methodologies to assess the fairness of the
consideration per share to be received in the proposed merger. The following is
a summary of the material financial analyses used by Houlihan Lokey in
connection with providing its opinion. Houlihan Lokey performed the following
analyses in order to assess the fairness of the consideration to be received by
the unaffiliated public stockholders.
Market Multiple Method: Houlihan Lokey reviewed certain financial
information for a number of publicly traded companies that were similar to
Interlott in terms of operations, product mix, and dependence on the gaming
industry for a substantial portion of revenues. Houlihan Lokey selected the
following as comparable companies to Interlott:
Tier I
- GTECH Holdings Corporation;
- Scientific Games Corporation;
Tier II
- Alliance Gaming Corporation;
- International Game Technology;
- Multimedia Games, Inc.;
- Shuffle Master, Inc.; and
- WMS Industries, Inc.
33
Houlihan Lokey considered the Tier I companies to be the most comparable to
Interlott. Interlott provides lottery vending machines to states and
international public entities to dispense instant winner lottery tickets. These
companies have customer contracts similar to those of Interlott, which typically
allow the state or other public entity to terminate the contract for any reason
upon 30 days written notice, resulting in significant risk to Interlott. In
contrast, the Tier II comparable companies primarily provide supplies and
services to casinos on customary commercial terms.
Houlihan Lokey calculated certain financial ratios of the comparable
companies based on the most recent publicly available information and
Interlott's forecasted financial information, including the multiples of: (1)
enterprise value ("EV") to latest twelve months ("LTM") and next fiscal year
("NFY") earnings before interest, taxes, depreciation and amortization
("EBITDA"), and (2) market value of equity ("Price") to LTM and NFY net income
("NI") of the comparable companies based on the most recent publicly available
information.
The analysis showed that the multiples exhibited by the Tier I comparable
companies were as follows:
<Table>
<Caption>
MULTIPLE MEDIAN HIGH LOW
- -------- ------ ----- ----
EV to LTM EBITDA............................................ 5.9x 6.3x 5.4x
Price to LTM NI............................................. 10.5x 13.0x 7.9x
EV to NFY EBITDA............................................ 5.3x 5.3x 5.3x
Price to NFY NI............................................. 9.3x 12.lx 6.4x
</Table>
Houlihan Lokey derived indications of Interlott's enterprise value by
applying selected EBITDA and NI multiples to certain adjusted operating results
of Interlott for the year ended December 31, 2002 and the projected operating
results for the year ending December 31, 2003. Based on the above, and applying
a control premium of 20.0%, the resulting indications of Interlott's EV ranged
from approximately $77.7 million to $87.3 million.
Comparable Merger Method: Houlihan Lokey reviewed the consideration paid
in five acquisitions of controlling interests that occurred between January 1,
1998 and March 13, 2003, for companies in the gambling equipment sector.
Houlihan Lokey also reviewed several mergers in the gaming supplies and services
sector, which it did not consider sufficiently comparable to utilize in
connection with its analysis. The five mergers it did consider consisted of the
following:
<Table>
<Caption>
SELLER BUYER
- ------ -----
Anchor Gaming................................... International Game Technology
Silicon Gaming, Inc. ........................... International Game Technology
Scientific Games Holdings Corporation........... Autotote Corporation
Powerhouse Technologies, Inc. .................. Anchor Gaming
Progressive Games, Inc. ........................ Mikohn Gaming Corporation
</Table>
Houlihan Lokey's analysis showed that the multiples exhibited in these
change of control mergers were as follows:
<Table>
<Caption>
MULTIPLE MEDIAN HIGH LOW
- -------- ------ ---- ----
EV to LTM EBITDA............................................ 7.2x 8.7x 6.3x
</Table>
In performing its analysis, Houlihan Lokey considered that the merger and
acquisition environment varies over time because of, among other things,
interest rates and equity market fluctuations, industry results and growth
expectations.
Houlihan Lokey derived enterprise value indications for Interlott by
applying a selected EBITDA multiple range to Interlott's adjusted EBITDA results
for the year ended December 31, 2002. Based on the above, the resulting
indications of Interlott's EV ranged from approximately $81.2 million to $88.6
million.
After determining our EV from these two methods, Houlihan Lokey made
certain adjustments to determine equity value, including adjustments to reflect
(1) current holdings of cash and cash equivalents,
34
(2) non-operating assets, and (3) debt obligations. After consideration of such
adjustments, Houlihan Lokey estimated Interlott's equity value, using the two
approaches, to be in the range of $58.7 million to $67.3 million, or $8.78 per
share to $10.05 per share, respectively, on a fully-diluted basis.
ASSESSMENT OF GTECH'S PUBLIC STOCK PRICE
In assessing the financial fairness of the merger to the unaffiliated
public stockholders, Houlihan Lokey considered the trading history of GTECH's
public securities and evaluated the trading multiples of GTECH relative to
comparable companies in the market.
As part of its analysis, Houlihan Lokey analyzed the trading value and
volume of GTECH's common stock on the New York Stock Exchange. During the
previous month, GTECH's common stock traded between a low of $26.53 and a high
of $30.63.
As part of this analysis, Houlihan Lokey observed that:
- GTECH generally has reasonable trading volume with an average daily
volume of 700,000 shares, which is similar to comparable companies; and
- GTECH's common equity securities trade within the range of comparable
companies' earnings multiples.
Given this information, Houlihan Lokey concluded that the current stock
price appears reasonable.
Houlihan Lokey did not independently verify the accuracy and completeness
of the information supplied to it with respect to Interlott and GTECH and does
not assume any responsibility with respect to it. Houlihan Lokey did not make
any independent appraisal of any of the properties or assets of Interlott or
GTECH. Houlihan Lokey's opinion was necessarily based on business, economic,
market and other conditions as they existed and could be evaluated by them at
the date of the opinion letter.
Houlihan Lokey's opinion was furnished solely for the use and benefit of
the special committee in its evaluation of the merger and may not be relied upon
by any other person without the prior written consent of Houlihan Lokey.
Houlihan Lokey is a nationally recognized investment banking firm with
special expertise in, among other things, valuing businesses and securities and
rendering fairness opinions. Houlihan Lokey is continually engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, private placements of debt and equity,
corporate reorganizations, employee stock ownership plans, corporate and other
purposes. The special committee selected Houlihan Lokey because of its gaming
industry experience and expertise in mergers and acquisitions and in performing
valuation and fairness analyses. Houlihan Lokey does not beneficially own nor
has it ever beneficially owned any interest in Interlott or GTECH.
FEES AND EXPENSES
Pursuant to an agreement dated March 11, 2003, Houlihan Lokey was retained
by the special committee and Interlott has agreed to pay Houlihan Lokey a fee of
$225,000 plus its reasonable out-of-pocket expenses incurred in connection with
the rendering of the fairness opinion. Additionally, if at the request of the
special committee Houlihan Lokey renders a "bring-down" opinion within 45 days
of the opinion, Interlott will pay Houlihan Lokey an additional fee of $30,000.
If at the request of the special committee Houlihan Lokey renders a "bring-down"
opinion between 46 days and 90 days of the opinion, Interlott will pay Houlihan
Lokey an additional fee of $45,000. Interlott has further agreed to indemnify
Houlihan Lokey against certain liabilities and expenses in connection with the
rendering of its services. No portion of the fee is contingent upon the
consummation of the merger or the conclusions reached in Houlihan Lokey's
opinion.
35
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Interlott Board that Interlott
stockholders adopt the merger agreement, Interlott stockholders should be aware
that several directors and executive officers of Interlott have interests in the
merger that are different from, or in addition to, the interests of Interlott
stockholders generally. The Interlott Board was aware of and considered these
interests when it considered and approved the merger agreement.
STOCK OPTIONS
The members of Interlott's Board and Interlott's executive officers are
participants in Interlott's stock option plans under which vesting is
accelerated upon the occurrence of certain events, including the merger.
Under the Interlott stock option plans, all outstanding options to purchase
Interlott common stock, including those held by executive officers and directors
of Interlott, will vest in connection with the merger. Under the terms of the
merger agreement, all such options will be cancelled at the effective time of
the merger and the holders will receive cash payments in an amount per share
subject to those options equal to the excess of $9.00 over the exercise price.
The following table sets forth, as of April 23, 2003, the number of shares
of Interlott common stock subject to options (both vested and unvested) held by
Interlott's directors and executive officers, the weighted average exercise
prices of those options and the amount of the cash payments to be received by
them on cancellation of their options (calculated on the basis of such weighted
average, which may differ immaterially from actual payments under individual
options):
<Table>
<Caption>
NUMBER OF
SHARES
SUBJECT TO WEIGHTED NUMBER OF SHARES WEIGHTED
UNVESTED AVERAGE EXERCISE SUBJECT TO AVERAGE EXERCISE
NAME OPTIONS PRICE PER SHARE VESTED OPTIONS PRICE PER SHARE CASH PAYMENTS
- ---- ---------------- ---------------- ---------------- ---------------- -------------
L. Rogers Wells,
Jr. ............... 326,500 $5.76 210,500 $4.42 $2,021,290
David F. Nichols..... 167,700 5.33 219,000 4.58 1,583,439
Dennis W. Blazer..... 40,750 5.62 21,250 4.36 236,335
Thomas W. Stokes..... 46,350 5.59 26,250 4.04 288,254
Gary S. Bell......... 20,500 5.54 32,500 4.42 219,780
Kazmier J. Kasper.... 20,500 5.54 32,500 4.42 219,780
H. Jean McEntire..... 20,500 5.54 21,750 4.51 168,587
Edmund F. Turek...... 20,500 5.54 54,500 4.96 291,110
John J. Wingfield.... 20,500 5.54 32,500 4.23 225,955
</Table>
Note: The foregoing information assumes approval at the special meeting of
the amended and restated Interlott 1994 Stock Incentive Plan. Included in the
table above are the following options that were granted to
36
directors and executive officers of Interlott in January 2003 under the amended
and restated 1994 Stock Incentive Plan:
<Table>
<Caption>
PER SHARE
NAME NUMBER OF SHARES EXERCISE PRICE CASH PAYMENTS
- ---- ---------------- -------------- -------------
L. Rogers Wells, Jr. .............................. 211,000 $6.00 $633,000
David F. Nichols................................... 55,200 6.00 165,600
Dennis W. Blazer................................... 22,500 6.00 67,500
Thomas W. Stokes................................... 24,600 6.00 73,800
Gary S. Bell....................................... 10,500 6.00 31,500
Kazmier J. Kasper.................................. 10,500 6.00 31,500
H. Jean McEntire................................... 10,500 6.00 31,500
Edmund F. Turek.................................... 10,500 6.00 31,500
John J. Wingfield.................................. 10,500 6.00 31,500
</Table>
EXECUTIVE AGREEMENTS
- L. Rogers Wells, Jr. Noncompetition Agreement. When it signed the merger
agreement, GTECH also entered into a noncompetition agreement with Mr.
Wells. In exchange for Mr. Wells' agreement not to compete in any fashion
with GTECH by engaging or proposing to engage in any lottery business for
a period of five years, GTECH has agreed to pay Mr. Wells $250,000 per
year for each of those five years.
- David Nichols -- Effective January 1, 2001, Interlott entered into an
employment agreement with Mr. Nichols for an initial five-year term.
Beginning on the fourth anniversary of the agreement and on each
subsequent anniversary, the term of the agreement will be extended for an
additional year if neither party gives written notice to the contrary.
The agreement provides for a minimum annual base salary of $220,000, for
cost-of-living increases and for annual consideration for performance
increases. Under the agreement, Mr. Nichols is entitled to a bonus of
2 1/2% of Interlott's net after tax income plus 5% of any year-over-year
after tax net income growth. If Interlott terminates the agreement for
any reason other than "cause" (as defined in the agreement), disability
or death, it will pay Mr. Nichols the greater of (1) two times the sum of
his then-current base salary plus the amount of his immediately preceding
bonus or (2) his then-current base salary plus the immediately preceding
bonus for each year remaining in the then-current term of the agreement.
Interlott also will provide Mr. Nichols with continued health and life
insurance benefits through the end of the then-current term of the
agreement and will pay him the value of any forfeited or lost pension,
profit sharing and similar benefits which would have accrued and vested
had he remained employed until that time. Similar benefits are payable if
Mr. Nichols resigns within 90 days after a change of control of Interlott
or if his employment is actually or constructively terminated within two
years after a change of control; in such an event, Mr. Nichols also is
entitled to a gross-up for any taxes imposed as a result of the "excess
parachute payments" provisions of the Internal Revenue Code. The merger
will be a change of control for purposes of Mr. Nichol's employment
agreement.
Mr. Nichols and GTECH Corporation have entered into a letter agreement
dated March 21, 2003, pursuant to which, upon the closing of the merger,
Mr. Nichol's employment agreement with Interlott described above will
terminate without further payment and Mr. Nichols will become president
and chief executive officer of the Interlott subsidiary of GTECH and a
vice president of GTECH Corporation. The letter agreement provides for a
starting annual salary of $250,000, a sign on bonus of $500,000, payable
$200,000 on the first anniversary of the closing of the merger and
$300,000 on the second anniversary, participation in GTECH Corporation's
Management Incentive Plan, Merit Increase Program and other employee
benefit plans, and initial grants of options for 25,000 GTECH common
shares (vesting in four equal annual installments) and 5,000 units of
restricted stock (vesting in four equal annual installments). The letter
agreement provides that Mr. Nichols will be an "at-will"
37
employee and his employment may be terminated at any time by him or GTECH
Corporation without liability.
- Retention Bonuses. The Interlott Board of Directors authorized Mr.
Nichols, as chief executive officer, to pay retention bonuses to each of
the executive officers of Interlott listed below in an amount up to the
amount shown opposite his name if the officer remains employed by
Interlott through the closing of the merger and if an employment
arrangement with the officer that is satisfactory to Mr. Nichols
addressing employment with GTECH after the merger has not been entered
into on or before the closing of the merger.
<Table>
<Caption>
NAME AMOUNT
- ---- -------
Thomas W. Stokes..................................... $80,000
Dennis W. Blazer..................................... $65,000
</Table>
INDEMNIFICATION AND INSURANCE
The merger agreement provides that the certificate of incorporation and
bylaws of the surviving corporation must contain provisions with respect to
indemnification similar in all material respects to those in Interlott's
certificate of incorporation and bylaws and that these provisions may not be
amended for six years.
The merger agreement also provides that for six years after the merger,
GTECH will cause the surviving corporation to maintain directors' and officers'
liability insurance on terms no less favorable than those in effect as of the
date of the merger agreement. GTECH's obligation to provide this insurance
coverage is subject to a cap of 250% of the premiums paid by Interlott for its
existing insurance coverage in its current fiscal year. If GTECH cannot maintain
the existing or equivalent coverage without exceeding the 250% cap, GTECH is
required to maintain only that amount of insurance coverage that can be obtained
by paying an annual premium equal to the 250% cap.
ACCOUNTING TREATMENT
GTECH intends to treat the merger as a purchase for accounting and
financial reporting purposes, which means that Interlott will be treated as a
separate entity for periods prior to the completion of the merger and,
thereafter, as a wholly owned subsidiary of GTECH. The purchase price will be
allocated to Interlott's assets, including intangible assets, and liabilities
based on their estimated fair market values at the completion of the merger. Any
excess of the purchase price over these fair market values will be accounted for
as goodwill.
FORM OF THE MERGER
Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, upon completion of the merger, Interlott will be
merged with and into GTECH Corporation, a wholly owned subsidiary of GTECH
Holdings Corporation. GTECH Corporation will be the surviving corporation in the
merger and will continue its corporate existence under Delaware law. Promptly
following the merger, the assets and liabilities of the Interlott business will
be transferred to a new, wholly owned subsidiary of GTECH Corporation, so that
the Interlott business thereafter will be conducted by an indirect wholly owned
subsidiary of GTECH.
EFFECTIVE TIME OF THE MERGER
The merger will become effective upon the filing of the certificate of
merger by GTECH and Interlott with the Secretary of State of the State of
Delaware or such later time agreed upon by GTECH and Interlott and specified in
the certificate of merger. The filing of the certificate of merger will occur as
soon as practicable following the closing of the merger.
38
CONSIDERATION TO BE RECEIVED IN THE MERGER
Upon completion of the merger, each share of Interlott common stock, except
for treasury stock and stock held by GTECH or its subsidiaries or Interlott
stockholders who perfect their appraisal rights, will be converted into the
right to receive, at the election of the stockholder (but subject to the
adjustment mechanism described below), one of the following:
- $9.00 in cash; or
- a number of GTECH common shares equal to the "exchange ratio."
The GTECH common shares received by stockholders of Interlott in the merger
will be issued out of its treasury stock, and will not be newly issued shares.
The "exchange ratio" will be equal to $9.00 divided by the average per share
closing price of GTECH common stock on the New York Stock Exchange for the 20
consecutive trading days immediately prior to the third trading day before the
date of the special meeting. The market value of the GTECH common stock on the
date on which the merger is completed and following the merger may be different
than the 20 trading-day average price of GTECH common stock used in determining
the exchange ratio. As a result, the market value of the GTECH common stock you
receive pursuant to the merger, or hold following the merger, may be more or
less than the $9.00 value assumed in calculating the exchange ratio.
The merger has been structured, and adjustments to Interlott stockholder
elections will be made, so that at the effective time of the merger, 51.5% of
the outstanding shares of Interlott common stock will be converted into the
right to receive GTECH common shares and 48.5% of the outstanding shares of
Interlott common stock will be converted into the right to receive cash. The
proration mechanism is discussed below under "-- Election Procedure; Proration."
The conversion of each share of Interlott common stock (other than treasury
stock and stock held by GTECH or its subsidiaries or those held by stockholders
who perfect their appraisal rights) into the right to receive $9.00 in cash or
GTECH common shares will occur automatically upon completion of the merger. No
fractional GTECH common shares will be issued. Each Interlott stockholder who
would otherwise have been entitled to receive a fraction of a GTECH common share
will be entitled to receive an amount in cash equal to the product of the
fractional share interest times the average of the closing price of GTECH common
stock on the New York Stock Exchange for the twenty consecutive trading days
immediately before the third the trading day preceding the special meeting. No
voting, distribution or other stockholder rights will attach to any fractional
share interests.
After the merger, each certificate that previously represented shares of
Interlott common stock will represent only the right to receive the merger
consideration (or, in the case of shares subject to appraisal rights, the right
to receive the amount in cash determined under Delaware law), including cash for
any fractional shares of GTECH common stock. All shares of Interlott common
stock will cease to be outstanding and be canceled by virtue of the merger and
without any action on the part of the holders.
The form of consideration that you receive will have important tax
consequences for you, as described in this proxy statement/prospectus under
"-- Material United States Federal Income Tax Consequences of the Merger."
ELECTION PROCEDURE; PRORATION
The Bank of New York, as exchange agent for GTECH, is mailing you a form of
election in a separate mailing. You should use the form of election to elect
whether to receive cash or GTECH common shares as consideration in connection
with the merger. For an election to be properly made, the form of election must
be received by the exchange agent by 5:00 p.m., New York City time, on [ -- ],
2003, which is the fifth business day immediately preceding the special meeting,
and it must be accompanied by the stock certificates for your shares of
Interlott common stock to which your election relates. If your election form is
not received by the deadline, you will be deemed to have elected to receive
whichever form of consideration would permit 51.5% of the aggregate merger
consideration to be paid in GTECH common shares while accommodating as much as
possible the desires of those who submit valid election forms.
39
You may revoke a form of election by written notice to the exchange agent
prior to the due date of the election form or after such time if the exchange
agent is legally required to permit revocations and the merger is not yet
effective. If you revoke an election form, the stock certificates to which such
election form relates will be returned promptly. The determination of the
exchange agent is binding as to whether an election has been properly made or
revoked.
If holders of more than 51.5% of the outstanding shares of Interlott common
stock elect to receive GTECH common shares, the exchange agent will designate,
pro rata among the holders making this election in accordance with the number of
shares of Interlott common stock that they hold, a sufficient number of shares
of Interlott common stock to be converted into $9.00 per share in cash instead
of GTECH common shares so that the number of shares of Interlott common stock
that the holders initially elected to convert into GTECH common shares, less the
number of shares of Interlott common stock so designated to be converted instead
into cash, equals 51.5% of the outstanding shares of Interlott common stock. In
this case, stockholders electing to receive cash and stockholders not making any
election will receive the cash consideration only.
If holders of less than 51.5% of the outstanding shares of Interlott common
stock elect to receive GTECH common shares, the exchange agent will designate,
first pro rata among the holders who have not made any election, and second, if
necessary, pro rata among the holders making cash elections, in each case in
accordance with the number of shares of Interlott common stock that they hold, a
sufficient number of shares of Interlott common stock to be converted into GTECH
common shares instead of cash so that the number of shares of Interlott common
stock that the holders elected to convert into GTECH common shares plus the
number of shares of Interlott common stock so designated to be converted instead
into GTECH common shares equals 51.5% of the outstanding shares of Interlott
common stock. In this case, stockholders electing to receive shares will receive
the share consideration only.
EXCHANGE PROCEDURES
If your shares are held in registered form and you make an election of
consideration by returning a completed election form, you must send in your
Interlott common stock certificates with your completed election form. If you do
not make an election, then you must keep your stock certificates until after the
closing, when you will receive a letter of transmittal describing how you may
exchange your certificates for merger consideration. Upon surrender to the
exchange agent of a stock certificate for cancellation, together with a letter
of transmittal, duly completed and validly executed, and such other documents
reasonably required by the exchange agent, you will receive, following the
effective time of the merger, that number of GTECH common shares and/or cash
that you are entitled to receive in connection with the merger.
YOU SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
You will not be paid the merger consideration or any dividends or
distributions on the GTECH common shares which you are entitled to receive
pursuant to the merger with a record date after the merger, and will not be paid
cash for any fractional GTECH common shares, until your certificates for
Interlott common stock are surrendered to the exchange agent for exchange. When
your certificates are surrendered, any unpaid dividends and any cash instead of
fractional shares will be paid without interest.
In the event of a transfer of ownership of Interlott common stock that is
not registered in the transfer records of Interlott, the cash portion of the
merger consideration, including any cash payable instead of fractional shares,
may be paid, and a certificate representing the proper number of GTECH common
shares may be issued, to a person other than the person in whose name the
surrendered certificate is registered if:
- the surrendered certificate is properly endorsed or otherwise is in
proper form for transfer; and
- the person requesting such payment and issuance pays any transfer or
other taxes required by reason of the payment of cash and the issuance of
GTECH common shares to a person other than the registered holder of the
surrendered certificate, or establishes to the satisfaction of GTECH that
such taxes have been paid or are not applicable.
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STOCK EXCHANGE LISTING OF GTECH COMMON STOCK
It is a condition to the completion of the merger that GTECH common stock
issuable to Interlott stockholders pursuant to the merger be approved for
listing on the New York Stock Exchange, subject to official notice of issuance.
DELISTING AND DEREGISTRATION OF INTERLOTT COMMON STOCK
If the merger is completed, Interlott common stock will be delisted from
the American Stock Exchange and will be deregistered under the Securities
Exchange Act of 1934.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
TAX CONSEQUENCES TO GTECH AND INTERLOTT
The merger is structured to qualify as a tax-free reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended. If it so
qualifies, neither GTECH nor Interlott will recognize any gain or loss as a
result of the merger. Interlott will have received a legal opinion from Taft,
Stettinius & Hollister LLP, counsel to Interlott, that the merger will
constitute a "reorganization" under Section 368(a) of the Code, that each of
Interlott and GTECH will be a party to the reorganization within the meaning of
Section 368(b) of the Code and that no gain or loss will be recognized by
stockholders of Interlott who receive solely GTECH common shares in the merger,
except for cash received in lieu of fractional shares. GTECH will have received
a legal opinion from Edwards & Angell, LLP, counsel to GTECH, that the merger
will constitute a "reorganization" under Section 368(a) of the Code and that
each of Interlott and GTECH will be a party to the reorganization within the
meaning of Section 368(b) of the Code. Opinions of counsel are not binding upon
the Internal Revenue Service or the courts. No rulings have been sought from the
IRS in connection with the merger. The opinions of Taft, Stettinius & Hollister
LLP and Edwards & Angell, LLP will rely on specific assumptions that customarily
are made in transactions of this kind. The opinions also will rely on
representations and covenants, including those contained in officers'
certificates of GTECH and Interlott.
TAX CONSEQUENCES TO INTERLOTT STOCKHOLDERS
This description assumes that the merger will be treated as a tax-free
reorganization. It generally applies to Interlott stockholders who are U.S.
persons and who hold their Interlott shares as a capital asset for federal
income tax purposes. The description does not address all the tax consequences
that may be relevant to Interlott stockholders in light of their particular tax
circumstances or to stockholders who may be subject to special tax treatment
(including, without limitation, stockholders related to other stockholders who
make different elections with respect to the consideration they receive in the
merger; stockholders who hold Interlott common stock as part of a straddle,
hedge, conversion or other risk reduction transaction; broker-dealers;
stockholders who are subject to alternative minimum tax; stockholders who have a
functional currency other than the U.S. dollar; tax-exempt stockholders; foreign
persons; or those stockholders who acquired Interlott common shares pursuant to
the exercise of compensatory stock options or otherwise as compensation). Such
stockholders with special particular tax circumstances or who are subject to
special tax treatment are strongly urged to consult with their tax advisors
regarding their individual tax consequences. This description is based on the
Code, the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices as in effect on the
date hereof, all of which are subject to change (possibly with retroactive
effect) and to differing interpretations. Furthermore, no foreign, state or
local tax consequences of the merger are discussed in this proxy
statement/prospectus.
Stockholders Who Receive Only Cash
Character of Gain/Loss. Interlott stockholders who receive only cash in
exchange for their Interlott common stock will generally recognize gain or loss
equal to the difference between the amount of cash received and the federal
income tax basis of their Interlott common stock surrendered in the merger. The
gain or loss will be long term capital gain or loss if the Interlott common
stock surrendered in the merger were held as capital assets for a period
exceeding one year as of the time of the exchange. It is possible that with
respect
41
to Interlott stockholders who are related to other stockholders who have elected
to receive GTECH common shares, the IRS might seek to tax the cash received in
the merger as ordinary income. Such stockholders are urged to consult their tax
advisors.
Stockholders Who Receive Only GTECH Common Stock (Except for Cash in Lieu of
Fractional Shares)
No Gain or Loss. Interlott stockholders who receive only GTECH common
shares in exchange for their Interlott common stock will not recognize any gain
or loss on the exchange, except for gain or loss in connection with cash, if
any, received in lieu of fractional shares. See "Cash in Lieu of Fractional
Shares" below.
Tax Basis. The total federal income tax basis of the GTECH common shares
received by an Interlott stockholder will be the same as the total federal
income tax basis of the Interlott common stock surrendered by such stockholder
in the exchange (other than the portion of such basis that is allocated to a
fractional share of GTECH common shares for which cash is received.) See "Cash
in Lieu of Fractional Shares" below.
Stockholders Who Receive Cash (in Addition to Cash for Fractional Shares) and
GTECH Common Shares
Gain But Not Loss. An Interlott stockholder who receives cash and GTECH
common shares will recognize gain in an amount equal to the lesser of: (1) the
difference between (i) the amount of cash and the fair market value of the GTECH
common shares received in the exchange, and (ii) the stockholder's basis in the
Interlott common stock surrendered in the exchange, and (2) the amount of cash
received by the stockholder (excluding cash in lieu of fractional shares). For
this purpose, an Interlott stockholder must (after ratably allocating cash and
common shares received) calculate gain or loss separately for each identifiable
block of Interlott common shares exchanged by the stockholder in the merger. If
the Interlott common shares exchanged were held as a capital asset for a period
exceeding one year, any gain generally will be treated as a long term capital
gain. Such stockholders are urged to consult their tax advisors. An Interlott
stockholder will not be permitted to recognize a loss in the exchange except for
a loss, if any, in connection with cash received in lieu of fractional GTECH
common shares. See "Cash in Lieu of Fractional Shares" below.
Tax Basis. The total federal income tax basis of the GTECH common shares
received by an Interlott stockholder will be the same as the total federal
income tax basis of the Interlott common stock surrendered in the exchange by
such stockholder (other than that portion of such basis that is allocated to a
fractional share of GTECH common stock for which cash was received -- see "Cash
in Lieu of Fractional Shares" below) decreased by the amount of cash received in
the exchange (excluding cash in lieu of fractional shares), and increased by the
amount of gain, if any, recognized in the exchange (including any portion of the
gain that is treated as a dividend but excluding any gain recognized as a result
of cash received instead of a fractional share). This calculation must be made
separately for each identifiable block of Interlott common stock exchanged.
HOLDING PERIOD
The holding period of GTECH common shares received by Interlott
stockholders will include the holding period for the Interlott common stock
surrendered in the exchange, provided that the Interlott common stock was held
as a capital asset on the date of the exchange.
CASH IN LIEU OF FRACTIONAL SHARES
Interlott stockholders who receive cash in lieu of fractional shares of
GTECH common stock as a result of the merger will be treated for federal income
tax purposes as if the fractional share interest had been issued in the merger
to the stockholders and then had been redeemed by GTECH for cash. The amount of
gain or loss realized by a Interlott stockholder will be equal to the difference
between (1) the amount of cash received in lieu of a fractional share and (2)
the portion of the stockholder's basis in Interlott common stock that is
allocated to the fractional share. Such gain or loss will be capital gain or
loss, and will be long-term capital
42
gain or loss provided that the Interlott common stock was held as a capital
asset and for a period exceeding one year as of the time of the exchange.
REPORTING REQUIREMENTS
Interlott stockholders are required to file a statement with their U.S.
federal income tax returns setting forth their tax basis in the Interlott common
shares exchanged in the merger, the fair market value of the GTECH common shares
and the amount of any cash received in the merger. In addition, Interlott
stockholders will be required to retain permanent records relating to these
facts.
BACKUP WITHHOLDING
Cash payments made to Interlott stockholders pursuant to the merger may,
under certain circumstances, be subject to backup withholding at a rate of 30%.
There is no withholding for stockholders who provide the exchange agent with
their correct U.S. federal taxpayer identification number and who certify that
no loss of exemption from backup withholding has occurred on IRS Form W-9 or its
substitute. Certain categories of Interlott stockholders (for example,
corporations and some foreign individuals) are not subject to backup
withholding. In order for a foreign individual to qualify as an exempt
recipient, such individual must generally provide the exchange agent with a
completed IRS Form W-8BEN or its substitute. Any amounts withheld from an
Interlott stockholder under the backup withholding rules are not an additional
tax. Rather, any such amounts will be allowed as a credit or refund against such
stockholder's U.S. federal income tax liability provided that the stockholder
furnishes to the IRS all required information.
The discussion of federal income taxes is included in this proxy
statement/prospectus for general information only. EACH INTERLOTT STOCKHOLDER
SHOULD CONSULT HIS, HER OR ITS TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO THE STOCKHOLDER OF THE MERGER, INCLUDING THE APPLICATION AND
EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Act of 1976 and related rules, certain
transactions, including the merger, may not be completed unless certain waiting
period requirements have been satisfied. On April 1, 2003, GTECH and Interlott
each filed a Notification and Report Form with the Antitrust Division and the
Federal Trade Commission and requested an early termination of the required
waiting period. If early termination is not granted and a request for additional
information by the relevant antitrust authorities is not made, the waiting
period will expire at midnight on May 1, 2003. At any time before or after the
completion of the merger, the Antitrust Division, the Federal Trade Commission
or others could take action under the antitrust laws with respect to the merger,
including seeking to enjoin the completion of the merger, to rescind the merger
or to conditionally approve the merger upon the divestiture of substantial
assets of GTECH or Interlott.
It is possible that any of the governmental entities with which filings are
made may seek various regulatory concessions. There can be no assurance that:
- GTECH or Interlott will be able to satisfy or comply with such
conditions, or
- compliance or non compliance will not have adverse consequences for GTECH
after completion of the merger.
See "The Merger Agreement--Conditions to the Completion of the Merger" on
page .
EMPLOYEE BENEFITS MATTERS
GTECH has agreed that, for a period of 12 months beginning on the closing
date, GTECH will maintain for the benefit of employees of Interlott immediately
before the merger the Interlott employee benefit plans as in effect immediately
before the merger or provide benefits that are not materially less favorable, in
the aggregate, than the benefits provided to those employees immediately before
the merger.
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Interlott has agreed that it will cause its employee stock purchase plan to
terminate at least five business days before the closing of the merger in
accordance with the terms of that plan as in effect on the date of the merger
agreement. Employees will be permitted to elect to receive invested cash or to
purchase shares in accordance with the terms of the plan.
TREATMENT OF INTERLOTT STOCK OPTIONS
Under the terms of the merger agreement, all outstanding stock options will
be cancelled at the effective time of the merger and the holders will receive
cash payments in an amount per share subject to those options equal to the
excess of $9.00 over the exercise price.
RESALE OF GTECH COMMON STOCK
GTECH common stock issued pursuant to the merger will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except for
shares issued to any Interlott stockholder who may be deemed to be an
"affiliate" of GTECH or Interlott for purposes of Rule 145 under the Securities
Act (including, but not limited to, L. Rogers Wells, Jr.). It is expected that
each such affiliate will agree not to transfer any shares of GTECH common stock
received pursuant to the merger except in compliance with the resale provisions
of Rule 144 or 145 under the Securities Act or as otherwise permitted under the
Securities Act. Any affiliate who fails to enter into such an agreement may not
elect to receive GTECH common shares. This proxy statement/prospectus does not
cover resales of GTECH common shares received by any person upon completion of
the merger, and no person is authorized to make any use of this proxy
statement/prospectus in connection with any resale.
APPRAISAL RIGHTS
When the merger is completed, Interlott stockholders who have filed a
written demand for appraisal prior to the special meeting, who do not vote in
favor of the adoption of the merger agreement and who comply with the other
procedures prescribed in Section 262 of the General Corporation Law of the State
of Delaware will be entitled to a judicial appraisal of the fair value of their
shares, exclusive of any element of value arising from the accomplishment or
expectation of the merger, and to receive payment of the fair value of their
shares in cash, together with a judicially determined fair rate of interest. The
following is a brief summary of the statutory procedures that must be followed
by a Interlott stockholder in order to perfect appraisal rights under Delaware
law.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE DELAWARE LAW
PERTAINING TO APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT
OF SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE WHICH IS
ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS ANNEX D. BECAUSE OF THE
COMPLEXITY OF SECTION 262 AND THE NEED TO STRICTLY COMPLY WITH VARIOUS TECHNICAL
REQUIREMENTS, YOU SHOULD READ ANNEX D IN ITS ENTIRETY. A PERSON HAVING A
BENEFICIAL INTEREST IN SHARES OF INTERLOTT COMMON STOCK HELD OF RECORD IN THE
NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE, MUST ACT PROMPTLY TO CAUSE
THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY
MANNER TO PERFECT APPRAISAL RIGHTS.
Under Section 262, not less than 20 days prior to the meeting, Interlott
must notify each of its stockholders entitled to appraisal rights that such
appraisal rights are available and include in such notice a copy of Section 262.
THIS PROXY STATEMENT/PROSPECTUS CONSTITUTES SUCH NOTICE.
A holder of shares of Interlott common stock wishing to exercise appraisal
rights:
- must deliver to Interlott, before the vote on the adoption of the merger
agreement at the special meeting being held on [ -- ], 2003, a written
demand for the appraisal of his or her shares, and
- must not vote in favor of the adoption of the merger agreement.
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In order not to vote in favor of the adoption of the merger agreement, a
stockholder must either:
- not return a proxy card and not vote in person in favor of the adoption
of the merger agreement,
- return a proxy card with the "Against" or "Abstain" box checked,
- vote in person against the adoption of the merger agreement, or
- register in person an abstention from the proposal to adopt the merger
agreement.
ALL WRITTEN DEMANDS FOR APPRAISAL PURSUANT TO SECTION 262 SHOULD BE SENT OR
DELIVERED TO INTERLOTT AT 7697 INNOVATION WAY, MASON, OHIO 45040, ATTENTION:
SECRETARY.
A holder of shares of Interlott common stock wishing to exercise appraisal
rights must hold the shares of record on the date the written demand for
appraisal is made and through the effective time of the merger. A vote against
the adoption of the merger agreement will not in and of itself constitute a
written demand for appraisal satisfying the requirements of Section 262. The
demand must reasonably inform Interlott of the identity of the holder as well as
the intention of the holder to demand appraisal of the "fair value" of the
shares held by such holder. A stockholder's failure to make the written demand
prior to the taking of the vote on the adoption of the merger agreement at the
special meeting will constitute a waiver of appraisal rights.
Only a holder of record of shares of Interlott common stock is entitled to
assert appraisal rights for the shares registered in that holder's name. A
demand for appraisal in respect of shares of Interlott common stock should be
executed by or on behalf of the holder of record, fully and correctly, as such
holder's name appears on such holder's stock certificates, and must state that
such person intends thereby to demand appraisal of such holder's shares of
Interlott common stock in connection with the merger. If the shares of Interlott
common stock are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity,
and if the shares of Interlott common stock are owned of record by more than one
person, as in a joint tenancy and tenancy in common, the demand should be
executed by or on behalf of all joint owners. An authorized agent, including two
or more joint owners, may execute a demand for appraisal on behalf of a holder
of record; however, the agent must identify the record owner or owners and
expressly disclose the fact that in executing the demand, the agent is agent for
such owner or owners. A record holder such as a broker who holds shares of
Interlott common stock as nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of Interlott common stock held for
one or more beneficial owners while not exercising such rights with respect to
the shares held for other beneficial owners. In such case, however, the written
demand should set forth the number of shares of Interlott common stock as to
which appraisal is sought, and where no number of shares of Interlott common
stock is expressly mentioned the demand will be presumed to cover all shares of
Interlott common stock held in the name of the record owner. Stockholders who
hold their shares of Interlott common stock in brokerage accounts or other
nominee forms and who wish to exercise appraisal rights are urged to consult
with their brokers to determine the appropriate procedures for the making of a
demand for appraisal by such a nominee.
Within ten days after the effective time of the merger, the surviving
corporation must notify each holder of Interlott common stock who has complied
with Section 262 and who has not voted in favor of the adoption of the merger
agreement of the date that the merger has become effective. Within 120 days
after the effective time of the merger, the surviving corporation or any holder
of Interlott common stock who has complied with Section 262 and is entitled to
appraisal rights under Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of such holder's shares of
Interlott common stock. The surviving corporation is under no obligation to and
has no present intention to file such a petition. Accordingly, it is the
obligation of the holders of Interlott common stock to initiate all necessary
action to perfect their appraisal rights.
Within 120 days after the effective time of the merger, any holder of
Interlott common stock who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to receive from the
surviving corporation a statement setting forth the aggregate number of shares
not voted in favor of the adoption of the merger agreement and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such statement must be mailed within ten days after a
written
45
request for the statement has been received by the surviving corporation or
within ten days after the expiration of the period for delivery of demands for
appraisal, whichever is later.
If a petition for an appraisal is timely filed by a holder of shares of
Interlott common stock and a copy of the petition is served upon the surviving
corporation, the surviving corporation will then be obligated within 20 days to
file with the Delaware Register in Chancery a duly verified list containing the
names and addresses of all stockholders who have demanded an appraisal of their
shares and with whom agreements as to the value of their shares have not been
reached. After notice to such stockholders as required by the court, the
Delaware Court of Chancery will conduct a hearing on such petition to determine
those stockholders who have complied with Section 262 and who have become
entitled to appraisal rights. The Court may require the holders of shares of
Interlott common stock who demanded payment for their shares to submit their
stock certificates to the Delaware Register in Chancery for notation on the
certificate of the pendency of the appraisal proceeding. If any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
After determining the holders of Interlott common stock entitled to
appraisal, the Court will appraise the "fair value" of their shares of Interlott
common stock, exclusive of any element of value arising from the accomplishment
or expectation of the merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. Holders of Interlott
common stock considering seeking appraisal should be aware that the fair value
of their shares of Interlott common stock as so determined could be more than,
the same as or less than the consideration they would receive pursuant to the
merger if they did not seek appraisal of their shares and that investment
banking opinions as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262. The Delaware Supreme
Court has stated that proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court should be considered in the appraisal proceedings. In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy. The Delaware Court of Chancery will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
shares of Interlott common stock have been appraised. The costs of the action
may be determined by the Court and taxed upon the parties as the court deems
equitable. The Court also may order that all or a portion of the expenses
incurred by any stockholder in connection with an appraisal, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts
utilized in the appraisal proceeding, be charged pro rata against the value of
all the shares entitled to be appraised.
Any holder of shares of Interlott common stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the effective time of
the merger, be entitled to vote the shares for any purpose or be entitled to the
payment of dividends or other distributions on those shares.
If any stockholder who demands appraisal under Section 262 fails to
perfect, or withdraws or loses, the holder's right to appraisal, the holder's
shares of Interlott common stock will be deemed to have been converted at the
effective time of the merger into the right to receive the merger consideration.
A stockholder will fail to perfect, or lose or withdraw, the right to appraisal
if no petition for appraisal is filed within 120 days after the effective time
of the merger, or if the stockholder delivers to the surviving corporation a
written withdrawal of such holder's demand for appraisal and an acceptance of
the merger. Any attempt to withdraw made more than 60 days after the effective
time of the merger will require the written approval of the surviving
corporation and, once a petition for appraisal is filed, the appraisal
proceeding may not be dismissed as to any holder absent Court approval.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE FOR PERFECTING APPRAISAL RIGHTS MAY
RESULT IN THE LOSS OF SUCH RIGHTS.
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THE MERGER AGREEMENT
THE FOLLOWING DESCRIPTION OF THE TERMS OF THE MERGER AGREEMENT IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE MERGER AGREEMENT, A
COPY OF WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS ANNEX A AND IS
INCORPORATED BY REFERENCE. A NUMBER OF IMPORTANT PROVISIONS OF THE MERGER
AGREEMENT ARE SUMMARIZED ABOVE UNDER "THE MERGER." PLEASE READ THE FULL TEXT OF
THE MERGER AGREEMENT.
CONDITIONS TO THE COMPLETION OF THE MERGER. Each party's obligation to
complete the merger is subject to the satisfaction or waiver of specified
conditions before completion of the merger, including the following:
- the adoption of the merger agreement by holders of a majority of all
outstanding shares of Interlott common stock,
- the expiration or termination of any waiting period applicable to the
merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
- the absence of any restraining order, injunction or other court order or
other legal restraint or prohibition preventing or delaying completion of
the merger,
- the absence of any stop order or proceeding seeking a stop order with
respect to the registration statement on Form S-4 of which this proxy
statement/prospectus forms a part, and
- the GTECH common shares issuable to Interlott stockholders pursuant to
the merger having been approved for listing on the New York Stock
Exchange.
In addition, the obligation of each of GTECH and Interlott to complete the
merger is further subject to the satisfaction or waiver of the following
additional conditions:
- the representations and warranties of the other party set forth in the
merger agreement being true and correct as of the date of the merger
agreement and as of the closing date,
- the other party having performed and complied in all material respects
with all material agreements and covenants required by the merger
agreement to be performed or complied with by it,
- receipt from its counsel on the closing date of an opinion as to the tax
effects of the merger, and
- no event having occurred which is reasonably likely to have a material
adverse effect on Interlott or GTECH, respectively.
In addition, GTECH's obligation to complete the merger is further subject
to the satisfaction or waiver of the following conditions:
- there must not be pending any suit, action or proceeding by any
governmental entity seeking to restrain or prohibit the completion of the
merger or the other transactions contemplated by the merger agreement or
seeking material damages in connection with such transactions, or seeking
to materially limit the ownership, operation or control by GTECH of
Interlott,
- there must not be pending any suit, action or proceeding brought by any
third party other than a governmental entity seeking to restrain or
prohibit the completion of the merger or the other transactions
contemplated by the merger agreement or seeking material damages in
connection with such transactions, or seeking to materially limit the
ownership, operation or control by GTECH of Interlott, that could
reasonably be expected to succeed,
- GTECH must receive evidence that certain consents and approvals required
in connection with the merger agreement have been obtained by Interlott,
- the audited financial statements of Interlott for the fiscal year ended
December 31, 2002, must have been delivered to GTECH and must be
consistent in all material respects with the financial information
included in preliminary financial statements previously delivered to
GTECH, and
47
- the number of shares to which dissenters' rights have been demanded and
perfected under Section 262 of the Delaware General Corporation Law must
not exceed 10% of Interlott's total outstanding shares.
The merger agreement provides that a "material adverse effect" means, when
used in reference to Interlott or GTECH, any change, effect or event that:
- is or is reasonably likely to be material and adverse to the condition
(financial or otherwise), business, properties, assets, liabilities,
results of operations, cash flows or prospects of the applicable company
and its subsidiaries, taken as a whole, or
- does or is reasonably likely to materially impair the ability of the
applicable company to perform its obligations under the merger agreement
or otherwise materially threatens or impedes the completion of the merger
or the other transactions contemplated by the merger agreement or the
conduct of business by the surviving corporation in the merger.
NO SOLICITATION. The merger agreement contains detailed provisions
prohibiting Interlott from seeking an alternative transaction. Under these "no
solicitation" provisions, Interlott has agreed that it will not, and that it
will not authorize or permit any of its officers, directors, employees,
representatives, agents or affiliates (including any investment bankers,
attorneys, accountants or other advisors) to, directly or indirectly:
- initiate, solicit or encourage or take any action to facilitate any
acquisition proposal, as described below, or any inquiries or the making
of any proposal that constitutes or could reasonably be expected to lead
to an acquisition proposal, or
- have any discussions or negotiations regarding, or furnish to any person
any information with respect to, or agree to endorse, an acquisition
proposal.
The term "acquisition proposal" means an inquiry, offer or proposal
regarding any of the following (other than with GTECH) involving Interlott:
- a merger, consolidation, share exchange, recapitalization, business
combination or other similar transaction;
- a sale, lease, exchange, mortgage, pledge, transfer or other disposition
of 25% or more of the assets of Interlott, in a single transaction or in
a series of transactions,
- a tender offer or exchange offer for outstanding shares of capital stock
of Interlott or purchase from Interlott of any shares of capital stock of
Interlott or the filing of a registration statement with the SEC in
connection with any of these events, or
- a public announcement by Interlott of a proposal, plan or intention to do
any of the above or any agreement to engage in any of the above.
However, the merger agreement does not prevent the Interlott Board of
Directors, at any time prior to obtaining Interlott stockholder approval, from
furnishing information with respect to Interlott pursuant to a customary
confidentiality agreement to, and participating in discussions or negotiations
with, any person making an unsolicited bona fide written takeover proposal that
the Interlott Board determines in good faith, after consulting with legal
counsel and its financial advisors, could result in a superior proposal, as
described below, if the Board determines in good faith that to do otherwise is
reasonably likely to violate its fiduciary duties to the Interlott stockholders.
Interlott must give GTECH one full business day's notice of its intention to
undertake either of these actions.
The term "superior proposal" means an unsolicited bona fide acquisition
proposal that has the following characteristics:
- it is a proposal to acquire for cash or readily marketable securities (a)
at least 80% of the voting power of the Interlott common stock and the
Interlott common stock issuable upon exercise of outstanding options,
warrants and other rights to acquire Interlott common stock, or (b)
substantially all of the assets of Interlott;
48
- the terms of the proposal, in the good faith judgment of the Interlott
Board, are more favorable to Interlott's stockholders from a financial
point of view than the merger with GTECH (after taking into account the
termination fee described below and any changes to the terms of the
merger agreement offered by GTECH in response to the proposal);
- the transactions envisioned by the proposal, in the good faith judgment
of Interlott Board, are reasonably likely to be consummated without
unreasonable delay or unusual conditions compared to the transactions
contemplated with GTECH; and
- any financing required for the proposed transaction has been committed in
all material respects.
The merger agreement further provides that neither Interlott's Board nor
any of its committees may:
- withdraw, or modify in a manner adverse to GTECH, or propose to withdraw
or modify, its approval or recommendation of the merger agreement or the
merger,
- approve or recommend, or propose to approve or recommend, any alternative
acquisition proposal, or
- enter into any alternative acquisition proposal.
However, the merger agreement does not prevent Interlott's Board or any of
its committees from taking any of the actions specified in the three bullets of
the previous paragraph prior to the special meeting if the Interlott Board or
committee determines in good faith (after consulting with legal counsel) that
the failure to take any such action would be reasonably likely to result in a
breach of its fiduciary duties under applicable law. Interlott must give written
notice to GTECH that it intends to take such action no later than 12:00 noon on
the business day before it intends to take such action.
Furthermore, the merger agreement provides that the Interlott Board may, at
any time prior to obtaining Interlott stockholder approval, in response to an
unsolicited superior proposal and subject to the next sentence, cause Interlott
to terminate the merger agreement with GTECH and either withdraw or modify its
approval or recommendation of the merger or enter into a binding agreement for
that superior proposal. The Interlott Board cannot exercise its termination
right:
- unless Interlott has paid to GTECH the termination fee as described below
in "-- Termination Fee" prior to or simultaneously with the termination;
and
- until after 24 hours have passed since Interlott notified GTECH that it
has received a superior proposal, specifying the terms and conditions of
the proposal and the person or entity that made the superior proposal.
TERMINATION. The merger agreement may be terminated at any time prior to
completion of the merger, even if the merger agreement has been adopted by
Interlott stockholders:
- by mutual written consent of GTECH and Interlott;
- by either GTECH or Interlott, if the merger has not been completed by
September 17, 2003, so long as the party seeking to terminate the
agreement has not, by failing to fulfill its obligations under the
agreement, been the cause of the delay;
- by either GTECH or Interlott, if there exists a final and nonappealable
restraining order, injunction or other court order or decree or other
legal restraint or prohibition preventing completion of the merger;
- by either GTECH or Interlott, if Interlott stockholders do not adopt the
merger agreement at a duly held stockholders meeting;
- by either GTECH or Interlott, if the other party has materially breached
any of its covenants or agreements contained in the merger agreement,
which breach would result in a failure of a condition to the merger and
cannot or has not been cured within ten business days of notice;
- by either GTECH of Interlott, if the representations and warranties of
the other party shall be untrue in a way that would result in a failure
of a condition to the merger;
49
- by GTECH, if Interlott's Board or any of its committees:
- withdraws, or modifies in a manner adverse to GTECH, its recommendation
or approval of the merger agreement or the merger, or
- recommends or approves any alternative acquisition proposal, or
- if Interlott enters into an agreement with respect to any alternative
acquisition proposal;
- by Interlott, at any time prior to obtaining Interlott stockholder
approval and after compliance with specified provisions of the merger
agreement, in connection with withdrawing or modifying its approval or
recommendation or entering into a binding agreement for a superior
proposal as described above under "-- No Solicitation;"
- by GTECH, if, three business days before the special meeting of Interlott
stockholders, the average closing price of GTECH common stock as reported
on the New York Stock Exchange over the 20 trading days prior to that
date is less than $25.12; or
- by GTECH or Interlott if the special committee of Interlott's Board had
requested but not have received an opinion from its financial advisor
dated as of the date of this proxy statement/prospectus to the effect
described in "The Merger -- Opinion of Interlott's Financial Advisor."
Notwithstanding the next to last bullet above, GTECH will not be permitted
to terminate the merger agreement and the merger for the reason that its average
stock price has fallen below the level described in that bullet, if Interlott
notifies GTECH that it wants to proceed with a merger in which the consideration
is paid 100% in cash. If that happens, then the parties have agreed to negotiate
an amendment to the merger agreement to reflect the requirements of an all-cash
transaction. In that event, you will be mailed another proxy statement asking
you to approve the merger as an all-cash transaction and giving further details
as to the consequences of an all-cash transaction.
TERMINATION FEE. Interlott must pay to GTECH a termination fee of $2.75
million, together with out-of-pocket expenses up to $750,000, if:
- either GTECH or Interlott terminates the merger agreement due to
Interlott's stockholders failing to approve the merger;
- GTECH terminates the merger agreement because Interlott's Board of
Directors withdraws, modifies or changes its approval or recommendation
of the merger agreement or the merger in a manner adverse to GTECH or
approves or recommends an alternative acquisition proposal, or Interlott
enters into an alternative acquisition proposal; or
- Interlott terminates the merger agreement in connection with its Board
withdrawing or modifying its approval of the merger agreement or the
merger or in connection with Interlott entering into a definitive
agreement for an alternative acquisition proposal.
EXPENSES. The merger agreement provides that all fees and expenses
incurred in connection with the merger agreement, the merger and the other
transactions contemplated by the merger agreement will be paid by the party
incurring those fees or expenses. However, if the merger agreement is terminated
for any reason other than for a breach by GTECH, and Interlott consummates a
transaction concerning a superior proposal within 12 months of the termination,
Interlott will pay GTECH's out-of-pocket expenses, up to $750,000, to the extent
it has not already done so.
CONDUCT OF INTERLOTT'S BUSINESS PENDING THE MERGER. Under the merger
agreement, Interlott agreed that, during the period before completion of the
merger, it will:
- carry on its business in the ordinary course consistent with past
practice, and
- use all reasonable efforts to preserve intact its current business
organizations, keep available the services of its current officers and
employees and preserve its relationship with its customers, suppliers,
licensors, licensees, distributors and others having material business
dealings with it.
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In addition, Interlott has agreed that it will not:
- declare, set aside or pay dividends, or make any other distribution in
respect of any of its capital stock,
- adjust, split or reclassify any of its capital stock,
- repurchase or redeem its capital stock,
- grant any options, warrants or rights to purchase its securities, or
amend or reprice any existing options, warrants or rights to purchase its
securities,
- issue, sell or encumber any of its securities, other than the issuance of
common stock as a result of the exercise of existing stock options or
rights under the employee stock purchase plan,
- amend its certificate of incorporation or by-laws or similar
organizational documents, or create any subsidiaries,
- adopt or implement a plan of consolidation, merger or reorganization,
other than in connection with the merger described in this proxy
statement/prospectus,
- amend, modify or waive any material term of its common stock or any other
security,
- amend any existing agreement, or enter into any new agreement, relating
to the assumption or incurrence of indebtedness, except that Interlott
may draw on its existing credit facilities in the ordinary course of
business so long as the aggregate principal amount of indebtedness
outstanding under those facilities does not exceed $22 million, or if the
aggregate principal amount exceeds $22 million, so long as the draws are
contemplated in its capital budget for year 2003 or otherwise with the
consent of GTECH, which consent is not to be unreasonably withheld,
- guarantee any indebtedness or issue or sell any debt securities,
- enter into any lease other than in the ordinary course of business,
- create any liens, pledges or other encumbrances or charges on its
properties or assets,
- make any capital expenditures or acquisitions of properties or assets
other than in the ordinary course of business,
- enter into or amend in a material respect any employment, consulting or
similar agreement or arrangement with, or grant a material increase in
compensation to, any current or former director or, other than in the
ordinary course of business, any officer or employee,
- pay any pension, retirement allowance or other employee benefit not
required or contemplated by any existing Interlott employee benefit plan
in effect at the date of the merger agreement to any director or, other
than in the ordinary course of business, to any officer or employee,
- become obligated under any new employee benefit plan which was not in
existence on the date of the merger agreement, or amend any such plan or
arrangement already in existence if the effect would be to materially
enhance any benefits under those plans, except as may be required to
comply with applicable law,
- grant to any current or former director, officer or employee, any
increase in severance or termination pay (including the acceleration in
the exerciseability of stock options except for those which are
automatically accelerated by their existing terms or the terms of the
merger agreement),
- acquire any assets that are material, in the aggregate, to Interlott,
either:
- by merging with, consolidating with or acquiring an interest in another
entity or
- otherwise, if not in the ordinary course of business,
- sell, lease, encumber or otherwise dispose of any of its material
properties or assets, other than dispositions in the ordinary course of
business which are not material to Interlott,
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- voluntarily take any action that is reasonably likely to result in any of
Interlott's representations or warranties in the merger agreement being
untrue in any material respect or in any of its covenants in the merger
agreement, or the conditions to the merger, not being satisfied,
- waive any material term of any confidentiality or standstill agreement
with any person other than GTECH,
- implement or adopt any change in its accounting principles, practices or
methods, other than as may be required by generally accepted accounting
principles (GAAP),
- change any of its methods of reporting income and deductions for federal
income tax purposes,
- enter into, modify or amend, except in the ordinary course of business
any material contract,
- assign, waive, release or relinquish any material contractual right,
- pay, discharge or satisfy any claims, liabilities or obligations other
than in the ordinary course of business, or
- authorize any of the above, or commit or agree to take any of the above
actions.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains
representations and warranties relating to, among other things:
- corporate organization and similar corporate matters concerning GTECH and
Interlott,
- the authorization of the transactions contemplated by the merger
agreement,
- the compliance of the merger agreement with:
- the certificate of incorporation, by-laws and similar organizational
documents of GTECH, the merger subsidiary and Interlott,
- applicable law, and
- contracts and licenses,
- the capital structure of each of GTECH and Interlott,
- the absence of any subsidiaries of Interlott and the ownership by GTECH
of the capital stock of its subsidiaries,
- documents filed with the Securities and Exchange Commission by GTECH and
Interlott since January 1, 2000, and financial statements included in
those documents,
- the absence of material changes or events concerning GTECH and Interlott
since, in the case of GTECH, November 23, 2002, and, in the case of
Interlott, September 30, 2002,
- litigation involving or affecting GTECH or Interlott,
- compliance with applicable laws by GTECH and Interlott,
- the good operating order of computer systems owned by Interlott,
- title to property owned by GTECH or Interlott,
- contracts to which GTECH or Interlott is a party,
- insurance policies maintained by Interlott,
- rights in and non-infringement of intellectual property with respect to
GTECH and Interlott,
- tax matters with respect to GTECH and Interlott,
- certain labor and environmental matters with respect to GTECH and
Interlott,
- employee welfare and benefit plans matters with respect to Interlott,
52
- the absence of material liabilities of Interlott or GTECH which are not
reflected, or are not required to be reflected, on its respective balance
sheet,
- engagement and payment of fees of brokers, investment bankers and
financial advisors by each of GTECH and Interlott,
- receipt of a fairness opinion by the special committee of the board of
directors of Interlott,
- the vote of Interlott stockholders required to adopt the merger
agreement,
- in the case of Interlott, the inapplicability of state takeover laws to
the merger under Delaware law,
- certain business practices and related-party transactions,
- the accuracy and completeness of information delivered to GTECH by
Interlott and to Interlott by GTECH,
- common stock of GTECH to be issued pursuant to the merger, and
- matters relating to the ability of GTECH to finance the merger.
OTHER COVENANTS. The merger agreement also contains other covenants by
Interlott and GTECH, including a covenant to use all reasonable efforts to take
all actions that are necessary, proper or advisable to complete the merger.
AMENDMENT, EXTENSION AND WAIVER. The merger agreement provides that the
parties may amend, by an instrument in writing signed by each party, the merger
agreement, whether before or after any required stockholder approval has been
obtained. In addition, the merger agreement provides that at any time prior to
the completion of the merger, a party may, by a signed instrument in writing,
(1) extend the time for the performance of the obligations or other acts of the
other parties to the merger agreement, (2) waive any inaccuracies in the
representations and warranties of the other parties contained in the merger
agreement or in any document delivered pursuant to the merger agreement or (3)
to the extent permitted by law, waive compliance by the other parties with any
of the agreements or conditions contained in the merger agreement. However,
after any required stockholder approval has been obtained, no amendment or
waiver may be made which by law requires further approval or adoption by
stockholders without such further approval or adoption.
Under Section 251(d) of the General Corporation Law of the State of
Delaware, no amendment to a merger agreement made after the adoption of the
merger agreement by stockholders of a corporation may, without further approval
by the stockholders, alter or change the merger consideration to be received by
those stockholders, alter or change any term of the certificate of incorporation
of the surviving corporation, or alter or change any terms and conditions of the
merger agreement if the alteration or change would adversely affect the holders
of any class or series of stock of the corporation.
THE STOCKHOLDER AGREEMENT
In order to induce GTECH to enter into the merger agreement, L. Roger
Wells, Jr. entered into a stockholder voting and option agreement with GTECH and
the GTECH subsidiaries that are a party to the merger agreement dated as of
March 17, 2003. In this stockholder agreement, Mr. Wells has agreed to vote his
shares in favor of the merger. The shares subject to this agreement (including
options that vested within 60 days of March 17, 2003) represented 54.8% of
Interlott's outstanding capital stock at that date. The stockholder agreement
will terminate when the merger becomes effective, or if the merger agreement is
terminated under specified provisions due to any breach of a representation,
warranty or covenant of GTECH or if Interlott's Board of Directors terminates
the merger agreement in connection with a superior acquisition proposal. See
"The Merger Agreement--Termination." It will also terminate 60 days after any
termination of the merger agreement for other reasons, or at the latest,
December 17, 2003.
In addition, Mr. Wells irrevocably granted GTECH's subsidiary an option,
exercisable only upon certain events set forth in the agreement, to purchase all
of his shares at a purchase price per share equal to $9.00 in cash. Subject to
the conditions in the agreement, GTECH's subsidiary may exercise the option in
whole at any
53
time prior to the date 60 days after the expiration or termination of the merger
agreement if Mr. Wells fails to comply with any of his obligations under the
stockholder agreement. GTECH may also exercise the option if the merger is not
consummated, and the merger agreement is terminated, because of the failure to
satisfy specified conditions to the merger under the merger agreement. Funds
required to exercise the option would be furnished from the working capital of
GTECH. The stockholder agreement does not restrict Mr. Wells ability to act in
his capacity as a director or officer of Interlott.
A copy of the stockholder agreement is attached to this proxy
statement/prospectus as Annex B.
DESCRIPTION OF GTECH CAPITAL STOCK
This section of the proxy statement/prospectus describes the material terms
of the capital stock of GTECH under its amended and restated articles of
incorporation and amended by-laws. The terms of GTECH amended and restated
articles of incorporation and amended by-laws are more detailed than the general
information provided below. You should carefully consider the actual provisions
of these documents. The GTECH amended and restated articles of incorporation and
amended by-laws may be obtained without charge by following the instructions in
the section entitled "Where You Can Find More Information" on page .
The total authorized capital stock of GTECH consists of:
- 150 million shares of common stock, $.01 par value per share, and
- 20 million shares of preferred stock, $.01 par value per share.
On April 3, 2003, there were 56,699,012 shares of GTECH common stock issued
and outstanding, and no shares of GTECH preferred stock issued and outstanding.
The following is a summary description of the material terms of GTECH's
capital stock and is qualified in its entirety by reference to GTECH's
certificate of incorporation and by-laws, as amended, filed as exhibits to its
most recent Annual Report on Form 10-K filed with the SEC and incorporated by
reference in this proxy statement/prospectus. See "Where You Can Find More
Information" on page .
The holders of GTECH common stock are entitled to one vote per share for
each share held of record on all matters submitted to a vote of stockholders.
Subject to preferential rights with respect to any series of preferred stock
that may be issued, holders of GTECH common stock are entitled to receive
ratably such dividends as may be declared by the board of directors on common
stock out of funds legally available therefor, and in the event of a
liquidation, dissolution or winding-up of GTECH's affairs, are entitled to share
equally and ratably in all of GTECH remaining assets and funds. The holders of
common stock have no preemptive rights, cumulative voting rights, or rights to
convert shares of common stock into any other securities and are not subject to
future calls or assessments by GTECH.
GTECH's certificate of incorporation and by-laws provide for a classified
board of directors consisting of three classes as nearly equal in size as the
then authorized number of directors constituting the board of directors permits.
At each annual meeting of stockholders, one class of directors is elected for a
three-year term, and the directors in the other two classes continue in office.
Each class holds office until the date of the third annual meeting for the
election of directors following the annual meeting at which such class was
elected. As a result, approximately one-third of the GTECH board of directors is
elected each year. Moreover, under the Delaware General Corporation Law (and
GTECH's certificate of incorporation and by-laws), in the case of a corporation
having a classified board, stockholders may remove a director only for cause.
This provision, when coupled with the provisions of the certificate of
incorporation and by-laws authorizing the board of directors to fill vacant
directorships, may preclude a stockholder from removing incumbent directors
without cause and simultaneously gaining control of the board of directors by
filling the vacancies created by such removal with that stockholder's own
nominees.
GTECH's certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, none of its directors shall be personally liable to
GTECH or to its stockholders for monetary damages for the breach
54
of fiduciary duties as directors. The effect of this provision is to eliminate
GTECH's rights and the rights of its stockholders (through stockholder
derivative suits on GTECH's behalf) to recover monetary damages against a
director for breach of fiduciary duty as a director (including breaches
resulting from grossly negligent conduct). This provision does not, however,
exonerate the directors from liability under federal securities laws or for (i)
breaches of a director's duty of loyalty to GTECH or its stockholders, (ii) acts
or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) certain willful or negligent acts in connection
with the payment of dividends or the repurchase or redemption of securities, or
(iv) any transaction from which the director derived an improper personal
benefit. GTECH's by-laws provide for indemnification of its officers and
directors to the fullest extent permitted by applicable law, and officers and
directors also may be indemnified pursuant to agreements with GTECH.
The board of directors has the authority to issue preferred stock in one or
more classes or series and to fix the voting powers, preferences and relative
participating, optional or other special rights of such preferred stock without
any further vote or action by GTECH's stockholders. The ability of the board of
directors to issue preferred stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could adversely affect
the voting power of the holders of GTECH common stock and could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, control of GTECH. GTECH has no present plans to
issue any of the preferred stock.
Section 203 of the Delaware General Corporation Law prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the time
such stockholder became an interested stockholder, unless (i) prior to such time
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder is approved by the board of
directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced, excluding for purposes of determining the
number of shares outstanding (A) those shares owned by persons who are both
directors and officers and (B) certain employee stock plans, or (iii) at or
after such time the business combination is approved by the board of directors
and authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder. A "business
combination" includes certain mergers, consolidations, asset sales, transfers
and other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" generally is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock.
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF GTECH AND INTERLOTT
Interlott and GTECH are both organized under the law of the State of
Delaware. Any differences, therefore, in the rights of holders of Interlott
common stock and GTECH common stock arise primarily from differences between
Interlott's certificate of incorporation and by-laws and GTECH's amended and
restated certificate of incorporation and it amended and restated by-laws. Upon
completion of the merger, Interlott stockholders who elect to receive GTECH
stock will exchange all or a portion of their issued and outstanding shares of
Interlott common stock for GTECH common stock, subject to their election between
cash and stock consideration and the proration described above under "The
Merger -- Consideration to be Received in the Merger." Accordingly, upon
consummation of the merger, the rights of Interlott stockholders who become
stockholders of GTECH in the merger will be governed by Delaware law and by
GTECH's certificate of incorporation and by-laws. The following is a summary of
the material differences between the current rights of Interlott stockholders
and the rights of GTECH stockholders.
The following discussions are not intended to be complete and are qualified
by reference to the certificate of incorporation and by-laws of each company. In
addition, the identification of some of the differences in the rights of these
stockholders as material is not intended to indicate that other differences that
are equally important do not exist. Please read carefully the relevant
provisions of Delaware law, as well as the certificates of incorporation and the
by-laws of each company. Copies of these documents are incorporated by reference
55
into this document and will be sent to you upon request. See "Where You Can Find
More Information" on page .
Board of Directors
Interlott. The board of directors of Interlott has seven directors,
divided into three classes, each elected for a three-year term. The Interlott
by-laws provide that the Interlott board of directors will consist of at least
one member and not more than nine members. The number of directors is fixed from
time to time by resolution of the directors or the stockholders of Interlott.
GTECH. The board of directors of GTECH has eight directors, divided into
three classes, each elected for a three-year term. The GTECH amended and
restated by-laws provide that the GTECH board of directors will consist of a
number of directors not less than six and not more than twelve. The number of
directors is fixed from time to time by resolution of the board of directors of
GTECH.
Newly Created Directorships and Vacancies
Interlott. The Interlott certificate of incorporation provides that,
subject to any rights of holders of preferred stock, any vacancies in the board
of directors caused by the resignation, removal, death or other incapacity of a
director elected by the stockholders, and any newly created directorships
resulting from an increase in the number of directors, may be filled by the
affirmative vote of a majority of the remaining members of the board of
directors, even if less than a quorum, or by the sole remaining director;
provided, however, that if the holders of any class of stock or series thereof
are entitled to elect one or more directors, vacancies and newly created
directorships of such class or series may only be filled by a majority vote of
the directors elected by such class or series then in office, whether or not a
quorum.
GTECH. The GTECH certificate of incorporation provides that, subject to
any rights of holders of preferred stock, any vacancies in the board of
directors caused the resignation, removal, death or other incapacity of a
director elected by all the stockholders, and any newly created directorships
resulting from an increase in the number of directors, may be filled by the
affirmative vote of a majority of the remaining members of the board of
directors, even if less than a quorum, or by the sole remaining director.
Evaluation of Change of Control Offers
Interlott. Pursuant to the Interlott certificate of incorporation, the
board of directors of Interlott, when evaluating any offer of a person to (a)
make a tender or exchange offer for any equity security of Interlott, (b) merge
or consolidate Interlott with another person, or (c) purchase or otherwise
acquire all or substantially all of the properties and assets of Interlott
shall, in connection with the exercise of business judgment in determining the
best interests of Interlott and its stockholders, give due consideration to all
relevant factors including (i) the consideration being offered in relation to
current market price, but also in relation to the current value of Interlott in
a freely negotiated transaction and in relation to the board of directors'
current estimate of the future value of Interlott as an independent entity, (ii)
the social and economic effects on the employees, customers, suppliers and other
communities in which Interlott and its subsidiaries and on the communities in
which Interlott and its subsidiaries operate or are located, and (iii) the
desirability of maintaining independence from any other entity.
GTECH. The duties of GTECH directors in evaluating change of control
offers are governed by Delaware law.
Removal of Directors
Interlott. The Interlott certificate of incorporation and by-laws provide
that a director may be removed only for cause by an affirmative vote of the
stockholders holding at least a majority of the shares entitled to vote in an
election of directors, voting together as a single class.
GTECH. The GTECH certificate of incorporation provides that a director may
be removed only for cause by an affirmative vote of the stockholders holding a
majority of each class of shares entitled to vote in an
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election of directors at a stockholder meeting called specifically for that
purpose. The certificates of incorporation of both Interlott and GTECH define
"cause" to mean personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties or willful violation of any law, rule or regulation (other than traffic
violations or similar minor offenses).
Officers
Interlott. Pursuant to the by-laws of Interlott, the officers of Interlott
are a chairman of the Board, a president, one or more vice presidents, a
secretary and a treasurer. In addition, the board of directors may elect a chief
executive officer and one or more of the following: executive vice president,
senior vice president, assistant vice president, chief financial officer, chief
operating officer, general counsel, assistant secretary and assistant treasurer.
Any number of offices may be held by the same person.
GTECH. Pursuant to the GTECH by-laws, GTECH's officers consist of a chief
executive officer, a president, one or more corporate vice presidents, a
treasurer and a secretary. GTECH also has a chairman, and may have one or more
co-chairmen and one or more vice chairmen. One person may hold the offices and
perform the duties of any two or more of the offices above, with the following
exceptions: (a) no chairman, co-chairman or vice chairman may be an officer of
GTECH unless the resolution of the Board electing an individual to such position
expressly so designates, provided, however, that no person may serve as both
chairman and chief executive officer, except as may be necessary on an interim
basis in the event of a vacancy in the office of the chief executive officer,
and (b) no one person may hold the offices and perform the duties of both
president and secretary. In addition, GTECH may have one or more non-corporate
vice presidents, assistant treasurers, assistant secretaries and assistant
controllers and such other subordinate officers, agents and employees as the
board of directors may deem necessary.
Special Meetings of Stockholders
Interlott. A special meeting of stockholders can be called by (a) the
Board of Directors, (b) the chairman of the Board, (c) the chief executive
officer or (d) the holders of 2/3 of the votes entitled to be cast on any issue
proposed to be considered at the special meeting. Only business within the
purpose or purposes described in the special notice can be conducted at the
special meeting.
GTECH. Special meetings of stockholders for any purpose or purposes may be
called at any time by the board of directors. No other person or persons,
including the stockholders, may call a special meeting.
Voting
Interlott. When a quorum exists, action on a matter is approved if a
majority of the shares present in person or represented by proxy and entitled to
vote on the matter are voted in favor of the matter, unless a specified
provision of the certificate of incorporation, the by-laws or Delaware law
indicates a greater number of affirmative votes is necessary. Stockholders do
not have the right to accumulate their votes.
GTECH. The affirmative vote of a majority of the outstanding capital stock
of GTECH shall be the act of the stockholders; provided, however, that with
respect to any matter that has been approved by a majority of the total number
of directors of GTECH, the affirmative vote of a majority of the capital stock
present in person or represented by proxy at a meeting of stockholders and
entitled to vote on the matter shall be the act of the stockholders. Unless
otherwise provided by law or by a resolution or resolutions adopted by the board
of directors setting out the rights of the preferred stock holders, the
preferred stockholders (if any) of GTECH shall not vote on or consent to any
matter to be voted on or consented to by the stockholders of GTECH, and the
shares of preferred stock shall not be included in determining the number of
shares voting or entitled to vote on any such matters.
Advance Notice of Stockholder-Proposed Business at Annual Meetings
Interlott. The Interlott by-laws provide that in order to bring business
before an annual meeting, a stockholder must satisfy all the conditions set out
in Securities and Exchange Commission Rule 14a-8.
57
GTECH. The GTECH by-laws provide that in order to bring business before an
annual meeting, a stockholder must submit the proposal or nomination to the
Secretary of GTECH and it must be received in writing by the secretary not more
than 120 days and not less than 90 days in advance of the anniversary date of
the immediately preceding annual meeting. However, if the date of the annual
meeting is more than 30 days prior to or more than 70 days after such
anniversary date, notice by the stockholder shall be delivered not earlier than
120 days prior to said meeting and not later than the close of business on the
latter of the 90th day prior to the meeting or the 10th day following the first
public announcement of the meeting. A stockholder's notice proposing to nominate
certain persons for election to the board of directors must contain:
- information regarding the proposed nominee required by Regulation 14A of
the Securities and Exchange Act of 1934, and
- the proposed nominee's written consent to being named in the proxy
statement and to serving as a director if elected.
For a stockholder to bring other business before a meeting, he or she must
provide:
- a brief description of the business desired to be brought before the
meeting,
- the text of any proposal or business,
- the reasons for conducting such business at a meeting, and
- any material interest of such stockholder and the beneficial owner, if
any, on whose behalf the proposal is made.
Finally, the stockholder giving notice and the beneficial owner of the
stock must provide:
- the name and address of the stockholder as they appear in the corporate
books, and of any beneficial owner,
- the class and number of shares held by the stockholder and such
beneficial owner,
- a representation that the stockholder is entitled to vote and intends to
appear in person or by proxy to propose the nomination or other matter
specified in the notice, and
- a representation whether the stockholder or the beneficial owner, if any,
intends to be part of a group which intends to deliver a proxy statement
and or form of proxy to holders of the percentage of outstanding stock
necessary to approve or adopt the proposal, and/or to solicit proxies
from other stockholders in support of such nomination.
Amendment of Governing Documents
Interlott. Pursuant to its certificate of incorporation, Interlott
reserves the right at any time to amend, alter, change or repeal any provisions
contained in the certificate of incorporation. Under Delaware law, an amendment
to a corporation's certificate of incorporation requires:
- the recommendation of a corporation's board of directors;
- the approval of a majority of all shares entitled to vote thereon, voting
together as a single class; and
- the approval of a majority of the outstanding stock of each class
entitled to vote on the amendment,
unless a higher vote is required in Interlott's certificate of incorporation.
The by-laws may be amended or repealed and new by-laws may be adopted by
the board of directors or by the stockholders at any regular or special meeting.
Interlott's stockholders may amend or repeal any by-law adopted by its Board of
Directors.
GTECH. GTECH reserves the right to amend the restated certificate of
incorporation in any manner permitted by Delaware law, and, with the sole
exception of those rights and powers conferred under Article 8
58
of GTECH's amended and restated certificate of incorporation, all rights and
powers conferred by the restated certificate of incorporation on stockholders,
directors and officers, if any, are subject to this reserve power.
Under Article 8, a director of GTECH shall have no personal liability to
GTECH or to its stockholders for monetary damages for breach of fiduciary duty
as a director except to the extent that Section 107(b)(7) (or any successor or
additional provision) of the General Corporate Law of the State of Delaware, as
amended from time to time, expressly provides that the liability of a director
may not be eliminated or limited.
The by-laws may be amended or repealed and new by-laws may be adopted by
the board of directors or by the affirmative vote of the holders of 66.66% of
the voting power of the outstanding stock at any annual meeting, or at any
special meeting if the notice of said meeting contained notice of the proposed
amendment.
59
APPROVAL OF AMENDED AND RESTATED 1994 STOCK
INCENTIVE PLAN
Interlott's 1994 Stock Incentive Plan (the "Incentive Plan" or the "Plan")
provides for the grant of options to purchase common stock and the award of
restricted shares of common stock. Until late 2000, grants and awards under the
Incentive Plan only could be made to Interlott's employees, consultants and
advisors. Grants and awards to Interlott's nonemployee directors were required
to be made under a separate plan. The Incentive Plan was amended and restated in
December 2000, and approved by stockholders in May 2001, to permit grants to
nonemployee directors. At the time, additional shares were added to the Plan for
this purpose and to replenish the shares available for grants to employees.
After the 2000 amendment, the Plan authorized a total of 1,120,000 shares for
issuance, of which 663,450 were available for new grants.
In late 2002, it became apparent that an insufficient number of shares had
been added in 2000. Additionally, a number of desirable updating changes to the
Plan were identified, including revisions to the Plan's change of control
provisions, deletion of language relating to Interlott's 1994 initial public
offering and provisions that have been unnecessary since that offering, and
simplification (without substantive change) of the section on Plan amendments.
On January 15, 2003, Interlott's Board of Directors amended and restated the
Incentive Plan for these purposes and directed that it be presented to
stockholders for reapproval.
RECOMMENDATION OF THE BOARD. Interlott's Board of Directors recommends
that stockholders vote "FOR" approval of the 1994 Stock Incentive Plan, as
amended and restated effective January 15, 2003. The Board amended and restated
the Plan in the belief that it was a valuable means by which Interlott could
attract highly qualified employees, directors and others to serve Interlott and
can encourage them to further Interlott's growth. The Board recommends approval
of the amended and restated 1994 Stock Incentive Plan even in view of the merger
because the Board believes failure to do so would unfairly disadvantage those
persons who received options which have not yet vested, including those
described under "Grants" below.
A summary of the amended and restated Incentive Plan, including material
revisions, follows. The full text of the Plan is set forth as Annex E to this
proxy statement/prospectus and should be read for complete information.
THE AMENDED AND RESTATED INCENTIVE PLAN. Interlott may issue up to
2,120,000 shares of its common stock under the Incentive Plan, as amended.
Appropriate adjustments in the number of Plan shares issuable, and in the number
and price of shares covered by outstanding options, will be made to give effect
to changes in Interlott's capitalization. Shares attributable to the unexercised
portion of an expired or terminated option may be the subject of future Plan
grants. In order to comply with requirements of Section 162(m) of the Internal
Revenue Code relating to the deductibility of executive compensation, the
Incentive Plan includes a provision that options for no more than 500,000 shares
of common stock may be granted to any person during any 12-month period;
previously, this number was 300,000.
The Incentive Plan is administered by Interlott's Board of Directors, which
has the authority to select recipients of Plan awards, determine the number of
shares covered by an award and, subject to the requirements of the Plan, set all
the terms and conditions of an award. The Board may appoint a committee of
directors to approve Plan awards and otherwise administer the Plan. However,
only the Board may amend or terminate the Plan, and it may do so at any time.
Interlott must seek stockholder approval for amendments as required by law and
the rules of the American Stock Exchange.
When it was amended, the life of the Plan was extended from March 9, 2004
to January 14, 2013. No new awards under the Plan may be granted after that
date.
STOCK OPTIONS. Options granted under the Incentive Plan may be either
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
or "nonqualified" options. Either form of option may be granted to employees of
Interlott. Nonemployee directors and consultants and advisors may only receive
nonqualified options. To date, only employees and nonemployee directors of
Interlott have received options under the Incentive Plan, and all options
granted under the Plan have been nonqualified options. Interlott has never
awarded restricted shares.
60
The per share exercise price of any option granted under the Plan may not
be less than 100% of the fair market value of the common stock on the date the
option is granted. For purpose of the Plan, the "fair market value" of
Interlott's common stock is the closing price on the American Stock Exchange on
a given date. Incentive stock options granted to a person who holds more than
10% of Interlott's voting stock must have an exercise price of at least 110% of
fair market value on the date of grant and may be for a term no longer than five
years. Otherwise, no incentive stock option may have a term longer than ten
years. Unless otherwise provided by the Board, nonqualified options also have a
term of ten years and every option, whether incentive or nonqualified, becomes
exercisable as to 25% of its shares on each of the first through fourth
anniversaries of the option's date of grant. Notwithstanding any vesting
schedule, all of an optionee's options become fully exercisable if the optionee
becomes disabled or dies or in the event of a "change of control" (as described
below).
An option's exercise price may be paid, at the election of the optionee, in
cash, with shares of Interlott's common stock that have been owned for at least
six months or by a combination of these methods. Shares used for this purpose
are valued at their fair market value on the date of option exercise.
An option granted under the Incentive Plan is not transferable, except upon
the optionee's death, unless the board concludes that a transfer will not result
in accelerated taxation and otherwise is appropriate and desirable.
An option which is not exercisable terminates when the optionee's
employment by or service to Interlott terminates. If the option is exercisable
at the time of termination of employment or service, it usually will terminate
on the earliest of its full exercise, its expiration date or three months after
the termination date. If, however, the termination of employment or service is
due to disability, the option may be exercised for one year after termination.
If an optionee dies (a) while employed by or performing services for Interlott,
(b) within three months after termination of employment or service for a reason
other than cause or (c) within a year after termination due to disability, the
option may be exercised for one year after the date of death. As amended, the
Incentive Plan similarly provides that, if an optionee's employment terminates
for a reason other than death or disability within one year after a change of
control, all options held on the date of termination of employment will be
exercisable for a year after that date. This period previously was three months.
Regardless of the extension of time during which an option can be exercised
after disability, death or a change control, an option cannot be exercised after
its expiration date.
RESTRICTED SHARES. The Board may award shares of restricted stock under
the Plan, although it has never done so. Any restricted shares awarded will vest
over a four-year period, at the rate of 25% a year beginning on the first
anniversary of the award. In addition, the Board may make the vesting and
ultimate receipt of restricted shares subject to the satisfaction of other
conditions and must specify the purchase price, if any, for restricted shares
that are awarded. Any restricted shares issued will have full voting and
dividend rights during the restricted period. Generally, unvested restricted
shares will be forfeited if the recipient's employment by or service to
Interlott terminates for any reason other than a change of control; however, the
Board may provide otherwise or may waive any remaining restrictions at the time
of termination. Any outstanding restricted shares become fully vested in the
event of a change of control.
CHANGE OF CONTROL. As indicated above, the Incentive Plan's provisions
relating to a change of control of Interlott were revised when the Plan was
amended and restated. As amended, the Plan provides that a "change of control"
will occur if (1) the beneficial ownership of Interlott's common stock by L.
Roger Wells, Jr. falls below 50.1% and another person, without approval or
ratification by Interlott's Board of Directors acquires beneficial ownership of
30% or more of Interlott's common stock; (2) immediately after a merger or
consolidation of Interlott with, or a sale of all or substantially all
Interlott's assets to, another corporation, in a transaction in which
outstanding grants and awards under the Incentive Plan are assumed or
substituted for by the surviving or acquiring corporation, and the voting shares
of Interlott outstanding before the transaction do not represent more than 50%
of the voting power of the surviving or acquiring entity or its parent; or (3)
during any fiscal year, the individuals who comprised the board of directors at
the beginning of the year no longer constitute a majority of the board, unless
the election or nomination for election of the new directors
61
has been approved in advance by a majority of the directors in office at the
beginning of the fiscal year. The merger will constitute a change of control for
purposes of the Plan.
The amended Incentive Plan also provides that if Interlott proposes (1) to
merge, consolidate or sell all or substantially all its assets in a transaction
in which outstanding Plan grants and awards will not be assumed or substituted
for or (2) to liquidate or dissolve, all options and restricted shares will
become fully vested immediately before, and subject to, completion of the
transaction. Optionees will have the right to exercise their options contingent
on completion of the transaction. If the transaction is completed, options that
have not been exercised will terminate. If the transaction is not completed, the
conditional vestings of options and restricted shares, and any option exercises,
will be deemed annulled and all grants and awards will return to their prior
status.
FEDERAL INCOME TAX CONSEQUENCES. Generally, the recipient of an incentive
stock option recognizes no income upon the grant or exercise of the option. If
the stock purchased on exercise of an incentive stock option is not disposed of
within two years from the date of grant nor within one year after exercise, the
amount realized on the sale of the stock in excess of the option price is
treated as a long-term capital gain and Interlott is not entitled to a federal
income tax deduction. If stock acquired through the exercise of an incentive
stock option is disposed of before the expiration of either the prescribed
holding periods, the lesser of (a) the difference between the option price and
the fair market value at the time of exercise or (b) the difference between the
option price and the amount realized upon disposition is treated as ordinary
income to the optionee at the time of disposition, represents a preference item
for purposes of calculating alternative minimum tax and is allowed as a
deduction to Interlott. Any excess of the amount realized upon sale over the
fair market value at the time of exercise is generally treated as capital gain
to the optionee.
Under most circumstances, an optionee who exercises a nonqualified option
recognizes taxable ordinary income, and Interlott is entitled to a deduction, at
the time of exercise of the option, in an amount equal to the excess of the fair
market value of the shares purchased over the option price. At the time of a
subsequent sale of the shares, the optionee recognizes a taxable capital gain or
loss based upon the difference between the fair market value at the time of
exercise and the selling price.
The recipient of restricted shares may elect to treat as income for the
year in which the restricted shares are received the fair market value of the
restricted shares awarded. If this election is not made, the recipient realizes
taxable income equal to the then fair market value of the restricted shares on
the date on which the restrictions lapse. In general, Interlott is entitled to
deduct amounts realized as income by the recipient.
ACCOUNTING CONSIDERATIONS. The proceeds of the sale of stock under the
Plan constitute general funds of Interlott and may be used by it for any
purpose. Under accounting practices currently in effect and followed by
Interlott, the grant of an option to an employee or nonemployee director at fair
market value does not result in any charge against Interlott's earnings. On the
other hand, the grant of an option to an advisor or consultant to Interlott, and
any award of restricted shares, would result in compensation expense to
Interlott, with the expense and related tax benefits being recognized
systematically in Interlott's financial statements over the applicable vesting
or restricted period.
GRANTS. On January 15, 2003, the Board granted stock options under the
amended Incentive Plan for the following numbers of shares: L. Rogers Wells,
Jr., 211,000 shares; David F. Nichols, 55,200 shares; Dennis W. Blazer, 22,500
shares; Thomas W. Stokes, 24,600 shares; all current executive officers as a
group, 313,300 shares; each director who is not an executive officer (Gary S.
Bell, Kazmier J. Kasper, H. Jean McEntire, Edward F. Turek and John J.
Wingfield), 10,500 shares, for an aggregate of 52,500 shares; and all employees,
including all current officers who are not executive officers, as a group,
29,500 shares. Although these option grants are contingent on stockholder
approval of the amended Incentive Plan, that approval is assured due to Mr.
Wells' ownership of a majority of Interlott's common stock. The Plan has no
limit on the number of participants. Upon the closing of the merger, the Plan
will terminate, all outstanding options will be vested and option holders will
receive cash payments equal to the difference between $9.00 per share and the
exercise price of the options. See "The Merger-Interests of Certain Persons in
the Merger."
62
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE 1994 STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED EFFECTIVE
JANUARY 15, 2003.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Interlott's Board of Directors conducts its business through meetings of
the full board and through committees of the board, including standing Audit and
Compensation Committees. During 2002, the Board of Directors held three
meetings, the Audit Committee held three meetings and the Compensation Committee
met informally. Each director except Kazmier Kasper attended at least 75% of all
meetings of the full Board and of each committee of the Board of which he or she
is a member.
The Audit Committee is responsible for reviewing with Interlott's
independent auditors their audit plan and the scope and results of their audit;
reviewing the scope and results of Interlott's internal auditing procedures;
consulting with the independent auditors and management with regard to
Interlott's accounting methods and the adequacy of its internal accounting
controls; approving professional services provided by the independent auditors;
reviewing the independence of the independent auditors; and reviewing the range
of the independent auditors' audit and non-audit fees. The Audit Committee is
composed of Gary S. Bell, H. Jean McEntire and John J. Wingfield (Chair). Each
of the Committee's members is a nonemployee director of Interlott. Ms. McEntire
and Mr. Wingfield are "independent" directors within the meaning of Section
121(A) of the American Stock Exchange's current listing standards. Mr. Bell does
not qualify as independent under those standards because of his position as
President of International Investments, Inc., which is owned by L. Rogers Wells,
Jr. and to which Interlott has paid a fee for consulting services provided by
Mr. Bell. However, Interlott's Board has determined that Mr. Bell's membership
on the Audit Committee is in the best interests of Interlott and its
stockholders because of his banking and financial background. The Audit
Committee's charter was included as an exhibit to Interlott's Proxy Statement
for the 2001 Annual Meeting of Stockholders.
The Compensation Committee is responsible for setting the compensation of
the Chairman of the Board and the President and Chief Executive Officer and
ratifying the compensation of all other officers and general wage and salary
limits of employees. The Compensation Committee is composed of Gary S. Bell
(Chair), H. Jean McEntire and John J. Wingfield. The Compensation Committee's
annual report is furnished below.
The Board of Directors as a whole functions as a nominating committee to
select management's nominees for election as directors of Interlott. The Board
of Directors will consider nominees recommended by stockholders if submitted to
Interlott in accordance with the procedures set forth in Section 2.3 of
Interlott's Bylaws.
Audit Committee Report
The Audit Committee has reviewed and discussed Interlott's audited
consolidated financial statements with management. Further, the Audit Committee
has discussed with Grant Thornton LLP, Interlott's independent public
accountants, the matters required to be discussed by the Statement of Auditing
Standards No. 61 (SAS 61 -- Communication with Audit Committees) relating to the
accountants' judgment about the quality of Interlott's accounting principles,
judgments and estimates, as applied in its financial reporting.
The Audit Committee also has received the written disclosures and the
letter from Grant Thornton required by Independent Standards board Standard No.
1 (Independence Discussions with Audit Committees) that relates to Grant
Thornton's independence from Interlott, and has discussed with Grant Thornton
their independence.
63
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board that Interlott's audited financial statements be
included in its Annual Report on Form 10-K for the year ended December 31, 2002,
for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Gary S. Bell
H. Jean McEntire
John J. Wingfield
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report by the Compensation Committee of the Board of Directors (the
"Committee") discusses the compensation objectives and policies applicable to
Interlott's executive officers. The report reviews the Committee's policy
generally with respect to the compensation of all executive officers as a group
and specifically reviews the compensation of Interlott's Chief Executive
Officer. The Committee is composed entirely of non-employee directors of
Interlott.
To date, the Committee has made its compensation decisions based upon the
recommendations of Interlott's Chief Executive Officer and upon his and the
Committee's subjective evaluations of each executive officer's past performance
and anticipated ability to positively impact Interlott's future growth and
development. The Committee met informally in 2002 and its recommendations were
approved by the full Interlott Board of Directors.
COMPENSATION POLICY FOR EXECUTIVE OFFICERS
Interlott's compensation policies for its executive officers are intended
to create a direct relationship between the level of compensation paid and
Interlott's current and long-term performance. The Committee believes that this
relationship is best implemented by providing a compensation package consisting
of a base salary, discretionary bonus and long-term incentive compensation in
the form of stock options.
The Committee believes that base salaries need to be competitive when
compared to those of officers in corresponding positions at similarly sized
companies in the manufacturing and gaming industry, although Interlott's
salaries still remain modest in comparison to salaries of executives of those
companies. The bonuses reflected in the Summary Compensation Table for Messrs.
Blazer and Stokes were awarded in recognition of their positive contributions to
Interlott's performance in 2002.
To provide further incentive for employee performance, and to establish a
direct link between that performance and stockholder value, Interlott generally
makes an annual award of stock options under the Incentive Plan to its executive
officers (as well as certain other employees). Through these stock options,
opportunities for additional compensation by Interlott's executive officers are
tied directly to increases in the price of Interlott's Common Stock. The options
granted under the Incentive Plan have an exercise price equal to the fair market
value of Interlott's Common Stock on the date of grant and, to encourage a
long-term perspective by the employee, have an exercise period of ten years.
Each named executive officer received an option grant on March 6, 2002.
Information on these grants and on stock options held by the named executive
officers as of December 31, 2002 is set forth in the Interlott 10-K under the
heading "Item 11. Executive Compensation."
CHIEF EXECUTIVE OFFICER COMPENSATION
Effective January 1, 2001, Interlott entered into an employment agreement
with Mr. Nichols, Interlott's Chief Executive Officer, which provides for a
minimum annual base salary and for bonuses tied directly to Interlott's
financial performance. For 2002, Mr. Nichols' base salary was $226,317 and,
pursuant to the formula in his employment agreement, he received a year-end
bonus of $139,400. In 2002, Mr. Wells, Interlott's Chairman of the board,
received a salary of $350,000. Along with Interlott's other executive officers,
both Mr. Nichols and Mr. Wells received annual stock option awards in March
2002. These awards will
64
enable the executives to realize increased compensation if and to the extent
that Interlott's performance results in an increase in the price of the Common
Stock. As a result, any additional compensation due to these stock options will
be tied directly to an increase in overall stockholder value.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation paid to each of Interlott's named executive officers to $1 million
for any year unless several requirements are met. The Committee has reviewed
these requirements and believes that all compensation paid to its executive
officers in 2002 is fully deductible.
COMPENSATION COMMITTEE
Gary S. Bell
H. Jean McEntire
John J. Wingfield
EQUITY COMPENSATION PLAN INFORMATION
Interlott has three compensation plans under which shares of its common
stock may be issued: the 1994 Stock Incentive Plan, described above; the 1994
Directors Stock Incentive Plan, under which options were granted to Interlott's
nonemployee directors prior to 2000; and the Employee Stock Purchase Plan. Each
of these plans has been approved by stockholders. Interlott has no equity
compensation plans or arrangements that have not been approved by stockholders.
The following table provides information concerning Interlott's equity
compensation plans as of December 31, 2002. The additional shares authorized for
issuance under the Incentive Plan as amended and restated effective January 15,
2003, and the stock options granted on that date, are not included.
<Table>
<Caption>
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
TO BE ISSUED UPON EXERCISE PRICE OF EQUITY COMPENSATION
EXERCISE OF OUTSTANDING OUTSTANDING PLANS (EXCLUDING
OPTIONS, WARRANTS AND OPTIONS, WARRANTS SECURITIES REFLECTED IN
RIGHTS AND RIGHTS COLUMN (A))
PLAN CATEGORY (A) (B) (C)
- ------------- ----------------------- -------------------- -----------------------
Equity compensation plans approved by
security holders.................... 1,070,511 $4.68 201,594
Equity compensation plans not approved
by security holders................. -- -- --
Total................................. 1,070,511 $4.68 201,594
</Table>
65
STOCK PERFORMANCE GRAPH
Interlott's common stock trades on the American Stock Exchange. The
following performance graph and accompanying table compare the cumulative total
stockholders' return on Interlott's Common Stock with the AMEX Stock Market
Index (U.S. Companies) and with the AMEX index of U.S. and foreign manufacturers
of industrial and commercial machinery and computer equipment (SIC Codes
3500-3599) (the "AMEX Machine and Computer Manufacturers Index") assuming, in
each case, that $100 was invested on January 1, 1998 and that any dividends were
reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
INTERLOTT TECHNOLOGIES, INC.
LOGO
<Table>
<Caption>
12/1997 12/1998 12/1999 12/2000 12/2001 12/2002
------- ------- ------- ------- ------- -------
CRSP Total Returns Index for:
Interlott Technologies, Inc. 100.0 81.3 64.1 162.5 122.5 143.7
AMEX Stock Market (US Companies) 100.0 107.3 141.6 131.4 122.3 99.9
AMEX Stock (SIC 3500-3599 US Companies) 100.0 100.8 159.0 288.0 219.7 138.9
Industrial and commercial machinery and computer
equipment
</Table>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/31/1997.
66
LEGAL MATTERS
The legality of GTECH common stock offered by this proxy
statement/prospectus, and certain United States federal income tax consequences
of the merger, will be passed upon for GTECH by Edwards & Angell, LLP,
Providence, Rhode Island. Edwards & Angell, LLP acts as counsel for GTECH and
its subsidiaries from time to time.
Certain United States federal income tax consequences of the merger will be
passed upon for Interlott by Taft, Stettinius & Hollister LLP, Cincinnati, Ohio.
Taft, Stettinius & Hollister LLP regularly acts as counsel for Interlott.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements and schedule of GTECH Holdings Corporation included in its
Annual Report on Form 10-K for the year ended February 22, 2003, as set forth in
their report, which is incorporated by reference in this proxy
statement/prospectus and elsewhere in the registration statement. The financial
statements and schedule of GTECH Holdings Corporation are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
The consolidated financial statements of Interlott appearing in Interlott's
Annual Report on Form 10-K for the fiscal year ended December 31, 2002, have
been audited by Grant Thornton LLP independent auditors, as set forth in their
report thereon, included therein and incorporated herein by reference in
reliance upon that report given on the authority of Grant Thornton LLP as
experts in accounting and auditing.
STOCKHOLDER PROPOSALS
In view of the expected timing of the merger, Interlott does not expect to
hold an annual meeting of stockholders in 2003. Director nominations and other
proposals of stockholders intended to be presented at Interlott's 2004 annual
meeting of stockholders (if any is held), whether or not intended to be included
in the proxy statement for the meeting, must be submitted to Interlott in
accordance with the procedures set forth in Sections 2.3 and 1.1, respectively,
of Interlott's Bylaws and in accordance with applicable requirements of
Securities and Exchange Commission Rule 14a-8. All such proposals, nominations
and related information must be received by the Secretary of Interlott at 7697
Innovation Way, Mason, Ohio 45040, on or before December 2, 2003.
OTHER MATTERS
As of the date of this proxy statement/prospectus, Interlott's Board of
Directors knows of no matters that will be presented for consideration at the
special meeting other than as described in this proxy statement/prospectus. If
any other matter comes before the special meeting, the persons named as proxies
by a stockholder will vote in their discretion on the other matter unless:
- otherwise indicated on the proxy, or
- the other matter relates to the adjournment of the special meeting and
the shares represented by the proxy are to be voted against the proposal
to adopt the merger agreement.
WHERE YOU CAN FIND MORE INFORMATION
GTECH and Interlott file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that GTECH
and Interlott file with the Securities and Exchange Commission at the Securities
and Exchange Commission's public reference room at 450 Fifth Street N.W.,
Washington, D.C.
67
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the Public Reference Room. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the website maintained by the Securities and Exchange
Commission at "http://www.sec.gov".
GTECH's internet address is www.gtech.com. GTECH makes available free of
charge through its internet address its annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act, as soon as reasonably practicable after it electronically files such
material with, or furnishes it to, the SEC. Interlott's internet address is
www.interlott.com.
GTECH filed a registration statement on Form S-4 on April 25, 2003, with
the Securities and Exchange Commission to register the GTECH common stock to be
issued to Interlott stockholders pursuant to the merger. This proxy
statement/prospectus is a part of that registration statement and constitutes a
prospectus of GTECH in addition to being a proxy statement of Interlott. As
allowed by Securities and Exchange Commission rules, this proxy
statement/prospectus does not contain all the information you can find in
GTECH's registration statement or the exhibits to the registration statement.
The registration statement and its exhibits are available for inspection and
copying as set forth above.
The Securities and Exchange Commission allows GTECH and Interlott to
"incorporate by reference" information into this proxy statement/prospectus,
which means that the companies can disclose important information to you by
referring you to other documents filed separately with the Securities and
Exchange Commission. The information incorporated by reference is considered
part of this proxy statement/prospectus, except for any information superseded
by information contained directly in this proxy statement/prospectus or in later
filed documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that GTECH and Interlott have previously filed with the Securities
and Exchange Commission. These documents contain important business and
financial information about GTECH and Interlott that is not included in, or
delivered with, this proxy statement/prospectus.
<Table>
<Caption>
GTECH FILINGS PERIOD
- ------------- ------
(FILE NO. 001-11250)
Annual Report on Form 10-K................... Fiscal year ended February 22, 2003
Current Reports on Form 8-K.................. Filed on March 18, 2003 and April 10, 2003
The description of GTECH common stock as set Filed on June 25, 1998
forth on its amended registration statement
on Form 8-A12B/A...........................
</Table>
<Table>
<Caption>
INTERLOTT FILINGS PERIOD
- ----------------- ------
(FILE NO. 001-12986)
Annual Report on Form 10-K................... Fiscal year ended December 31, 2002
Current Reports on Form 8-K.................. Filed on March 17, 2003
</Table>
GTECH and Interlott also incorporate by reference all additional documents
that they file with the Securities and Exchange Commission under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 between the date of
this proxy statement/prospectus and the date of the special meeting, and these
additional documents are deemed to be a part of this proxy statement/prospectus
from the date of filing.
GTECH has supplied all information contained or incorporated by reference
in this proxy statement/ prospectus relating to GTECH, and Interlott has
supplied all such information relating to Interlott.
A copy of Interlott's Annual Report on Form 10-K for the year ended
December 31, 2002 is enclosed with this proxy statement/prospectus. Interlott
stockholders can also obtain any of the documents being incorporated by
reference through the companies, the Securities and Exchange Commission or the
Securities
68
and Exchange Commission's Internet website as described above. Documents
incorporated by reference are available from the companies without charge,
excluding all exhibits, except that if the companies have specifically
incorporated by reference an exhibit in this proxy statement/prospectus, the
exhibit will also be provided without charge. Interlott stockholders may obtain
documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate company at the
following addresses:
<Table>
GTECH Holdings Corporation Interlott Technologies Inc.
55 Technology Way 7697 Innovation Way
West Greenwich, Rhode Island 02817 Mason, Ohio 45040-9695
Attention: Investor Relations Attention: Dennis Blazer, CFO
Tel. (401) 392-1000 Tel. (513) 701-7000
</Table>
Interlott stockholders should rely only on the information contained or
incorporated by reference in this proxy statement/prospectus. Interlott has not
authorized anyone to provide Interlott stockholders with information that is
different from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated [ -- ], 2003. Interlott stockholders should not
assume that the information contained in this proxy statement/prospectus is
accurate as of any date other than that date. Neither the mailing of this proxy
statement/prospectus to Interlott stockholders nor the issuance of GTECH common
stock pursuant to the merger creates any implication to the contrary.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth opportunities
for existing products, plans and objectives of management, markets for the stock
of GTECH and Interlott and other matters. Statements in this proxy
statement/prospectus that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
Securities Act of 1933. Such forward-looking statements, including, without
limitation, those relating to the future business prospects, revenues and
income, in each case relating to GTECH and Interlott, wherever they occur in
this proxy statement/prospectus, are necessarily estimates reflecting the best
judgment of the senior management of GTECH and Interlott on the date of this
proxy statement/prospectus and involve a number of risks and uncertainties that
could cause actual results to differ materially from those suggested by the
forward-looking statements. Interlott stockholders should consider the forward-
looking statements in light of various important factors, including those set
forth in this proxy statement/prospectus. Important factors that could cause
actual results to differ materially from estimates or projections contained in
the forward-looking statements include without limitation:
- the ability to integrate the operations of GTECH and Interlott,
- the effects of vigorous competition in the markets in which GTECH and
Interlott operate,
- the ability of GTECH and Interlott to secure and protect trademarks and
other intellectual property rights,
- the unanticipated loss of a major customer,
- the future prospects for and stability of the lottery industry and other
businesses in which GTECH and Interlott are engaged or expect to be
engaged,
- the future operating and financial performance of GTECH and Interlott,
- the ability of GTECH and Interlott to retain existing contracts and to
obtain and retain new contracts, and
- the results and effects of legal proceedings and investigations.
69
For additional information about factors that could cause actual results to
differ materially from those described in the forward-looking statements, please
see the quarterly reports on Form 10-Q and the annual reports on Form 10-K that
GTECH and Interlott have filed with the Securities and Exchange Commission.
Neither GTECH nor Interlott is under any obligation, and each expressly
disclaims any obligation, to update or alter any forward-looking statements,
whether as a result of new information, future events or otherwise. All
subsequent forward-looking statements attributable to GTECH or Interlott or any
person acting on their behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section.
70
ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 17, 2003
BY AND AMONG
GTECH HOLDINGS CORPORATION,
GTECH CORPORATION,
BENGAL ACQUISITION CO.
AND
INTERLOTT TECHNOLOGIES, INC.
<Table>
ARTICLE I
THE MERGER
SECTION 1.1. The Merger..................................................
SECTION 1.2. Closing.....................................................
SECTION 1.3. Effective Time of The Merger................................
SECTION 1.4. Effects of the Merger.......................................
SECTION 1.5. Subsequent Actions..........................................
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. Conversion of Shares........................................
SECTION 2.2. Election and Proration Procedures; Exchange Procedures......
SECTION 2.3. Dissenting Shares...........................................
SECTION 2.4. Adjustment of Merger Consideration and Option
Consideration...............................................
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Certificate of Incorporation................................
SECTION 3.2. Bylaws......................................................
SECTION 3.3. Directors and Officers......................................
SECTION 3.4. Contribution of Company Business............................
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1. Corporate Existence and Power...............................
SECTION 4.2. Corporate Authorization.....................................
SECTION 4.3. Authorizations..............................................
SECTION 4.4. Non-Contravention...........................................
SECTION 4.5. Capitalization..............................................
SECTION 4.6. Subsidiaries................................................
SECTION 4.7. SEC and Related Filings.....................................
SECTION 4.8. Company Financial Statements................................
SECTION 4.9. Proxy/Prospectus; Registration Statement....................
SECTION 4.10. Absence of Certain Changes..................................
SECTION 4.11. Litigation..................................................
SECTION 4.12. Compliance with Laws........................................
SECTION 4.13. Systems.....................................................
SECTION 4.14. Real Property...............................................
SECTION 4.15. Personal Property...........................................
SECTION 4.16. Contracts...................................................
SECTION 4.17. Insurance...................................................
SECTION 4.18. Intellectual Property.......................................
SECTION 4.19. Taxes.......................................................
SECTION 4.20. Employee Benefits...........................................
SECTION 4.21. Labor Matters...............................................
SECTION 4.22. Environmental Matters.......................................
SECTION 4.23. Absence of Undisclosed Liabilities..........................
SECTION 4.24. Opinion of Financial Advisor................................
</Table>
A-i
<Table>
SECTION 4.25. Brokers.....................................................
SECTION 4.26. Board Recommendation; Section 203; Required Vote............
SECTION 4.27. Prior Negotiations..........................................
SECTION 4.28. Certain Business Practices..................................
SECTION 4.29. Affiliate Transactions......................................
SECTION 4.30. Full Disclosure.............................................
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
SECTION 5.1. Corporate Existence and Power...............................
SECTION 5.2. Corporate Authorization.....................................
SECTION 5.3. Authorizations..............................................
SECTION 5.4. Non-Contravention...........................................
SECTION 5.5. Capitalization..............................................
SECTION 5.6. Subsidiaries................................................
SECTION 5.7. SEC and Related Filings.....................................
SECTION 5.8. Parent Financial Statements.................................
SECTION 5.9. Disclosure Documents, Information Supplied..................
SECTION 5.10. Absence of Certain Changes..................................
SECTION 5.11. Litigation..................................................
SECTION 5.12. Compliance with Laws........................................
SECTION 5.13. Real Property...............................................
SECTION 5.14. Personal Property...........................................
SECTION 5.15. Taxes.......................................................
SECTION 5.16. Labor Matters...............................................
SECTION 5.17. Environmental Matters.......................................
SECTION 5.18. Absence of Undisclosed Liabilities..........................
SECTION 5.19. Brokers.....................................................
SECTION 5.20. Board Approval..............................................
SECTION 5.21. Certain Business Practices..................................
SECTION 5.22. Full Disclosure.............................................
SECTION 5.23. Financing...................................................
SECTION 5.24. Intellectual Property.......................................
SECTION 5.25. Contracts...................................................
ARTICLE VI
CONDUCT OF BUSINESS OF COMPANY PENDING THE MERGER
SECTION 6.1. Conduct of Company's Business...............................
SECTION 6.2. Agreements of Company's Affiliates..........................
SECTION 6.3. Notice of Certain Events....................................
SECTION 6.4. No Solicitation.............................................
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. HSR Act.....................................................
SECTION 7.2. Proxy Statement -- Prospectus...............................
SECTION 7.3. Stockholders Meeting........................................
SECTION 7.4. Access to Information, Confidentiality......................
</Table>
A-ii
<Table>
SECTION 7.5. Consents, Approvals.........................................
SECTION 7.6. Indemnification and Insurance...............................
SECTION 7.7. Employee Benefits...........................................
SECTION 7.8. Notification of Certain Matters.............................
SECTION 7.9. Further Action..............................................
SECTION 7.10. Public Announcements........................................
SECTION 7.11. Transfer Taxes..............................................
SECTION 7.12. AMEX Listing................................................
SECTION 7.13. Additional Financial Statements.............................
SECTION 7.14. Agreement with Supplier.....................................
SECTION 7.15. Tax Opinions................................................
SECTION 7.16. Section 16(b) Board Approval................................
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.1. Conditions to Obligation of Each Party to Effect the
Merger......................................................
SECTION 8.2. Additional Conditions to Obligations of Parent and Merger
Subsidiary..................................................
SECTION 8.3. Additional Conditions to Obligation of Company..............
ARTICLE IX
TERMINATION
SECTION 9.1. Termination.................................................
SECTION 9.2. Effect of Termination.......................................
SECTION 9.3. Fees and Expenses...........................................
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. Effectiveness of Representations and Warranties.............
SECTION 10.2. Survival....................................................
SECTION 10.3. Notices.....................................................
SECTION 10.4. Certain Definitions.........................................
SECTION 10.5. Amendment...................................................
SECTION 10.6. Waiver......................................................
SECTION 10.7. Headings....................................................
SECTION 10.8. Specific Performance........................................
SECTION 10.9 Waiver of Jury Trial........................................
SECTION 10.10. Severability................................................
SECTION 10.11. Entire Agreement............................................
SECTION 10.12. Assignment, Guarantee of Merger Subsidiary Obligations......
SECTION 10.13. Parties In Interest.........................................
SECTION 10.14. Failure or Indulgence Not Waiver; Remedies Cumulative.......
SECTION 10.15. Governing Law...............................................
SECTION 10.16. Counterparts................................................
</Table>
A-iii
<Table>
<Caption>
EXHIBITS
- --------
A Form of Opinion of Counsel to Company
B Form of Opinion of Counsel to Parent
C Form of Company Affiliates Agreement
D Form of Stockholder Voting and Option Agreement
E Lottery Contracts
F Other Contracts
</Table>
A-iv
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the "Agreement") is
made and entered into as of March 17, 2003, by and among Interlott Technologies,
Inc., a Delaware corporation (the "Company"), GTECH Holdings Corporation, a
Delaware corporation ("Parent"), GTECH Corporation, a Delaware corporation and a
direct wholly-owned subsidiary of Parent ("Merger Subsidiary"), and Bengal
Acquisition Co., a Delaware corporation and a wholly-owned subsidiary of Merger
Subsidiary (the "Original Merger Subsidiary"), as amended and restated hereby
(the "Amended and Restated Agreement") dated April , 2003 and effective as of
March 17, 2003.
WHEREAS, the parties hereto have agreed to amend and restate the Agreement
and Plan of Merger (the "Original Merger Agreement") dated as of March 17, 2003,
among the Company, Parent and Original Merger Subsidiary, in order to permit
Merger Subsidiary to assume the rights and responsibilities of Original Merger
Subsidiary thereunder;
WHEREAS, the parties intend, notwithstanding such amendment and
restatement, that this Agreement continues to speak as of March 17, 2003 and
unless otherwise expressly provided herein, the phrases "the date hereof," "the
date of this Agreement," and similar phrases used herein shall mean March 17,
2003;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto, effective as of March 17, 2003, hereby amend and restate the
Original Merger Agreement in its entirety as follows:
WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary
and the Company have approved the merger of the Company into Merger Subsidiary
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), whereby each issued and outstanding share of common
stock, $0.01 par value per share, of the Company (the "Company Common Stock" or
the "Shares"), excluding certain Shares described herein (including Dissenting
Shares), shall be converted into the right to receive the Merger Consideration
(as defined herein); and
WHEREAS, following the recommendations of the Special Committee, the Board
of Directors of the Company has unanimously approved and determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
advisable, fair to, and in the best interests of, the Company and the
stockholders of the Company, and has resolved to recommend approval and adoption
of this Agreement, the Merger and the other transactions contemplated hereby by
such stockholders; and
WHEREAS, Parent and Original Merger Subsidiary were unwilling to enter into
the Original Merger Agreement unless, contemporaneously with the execution and
delivery of this Agreement, the beneficial and record holder of a majority of
the Company Common Stock entered into the Stockholder Voting and Option
Agreement and the Noncompete Agreement, and such stockholder has executed and
delivered both such agreements, and Parent, Original Merger Subsidiary, Merger
Subsidiary and such stockholder are executing an Amended and Restated
Stockholder Voting and Option Agreement simultaneously with this Amended and
Restated Agreement; and
WHEREAS, each of Parent, Merger Subsidiary 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 consummation thereof;
A-1
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows (certain
capitalized terms used herein are defined in Section 10.4):
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 DGCL, the Company shall be
merged with and into Merger Subsidiary at the Effective Time (as defined
herein). At the Effective Time, the separate corporate existence of the Company
shall cease, and the Merger Subsidiary shall continue its corporate existence
under the laws of the State of Delaware as the surviving corporation. (Merger
Subsidiary and the Company are sometimes hereinafter referred to as "Constituent
Corporations" and Merger Subsidiary, after giving effect to the Merger, is
sometimes hereinafter referred to as the "Surviving Corporation.")
SECTION 1.2. Closing. Unless this Agreement shall have been terminated
and the transaction contemplated hereby shall have been abandoned pursuant to
Section 9.1, the closing of the Merger (the "Closing") shall take place at 10:00
a.m., (local time) on the first business day following satisfaction or, if
permissible, waiver of all of the conditions set forth in Article VIII hereof at
the offices of Edwards & Angell, LLP, Providence, Rhode Island, unless another
date, time or place is agreed to in writing by the parties hereto. At the time
of the Closing, the Company and Merger Subsidiary will file a certificate of
merger in such form as may be required by, and executed and acknowledged in
accordance with, the DGCL with the Secretary of State of the State of Delaware
and make all other filings or recordings required by the DGCL in connection with
the Merger.
SECTION 1.3. Effective Time of The Merger. The Merger shall, subject to
the DGCL, become effective as of such time as the certificate of merger is duly
filed with the Secretary of State of the State of Delaware or at such time
thereafter as is provided in the certificate of merger (the "Effective Time").
SECTION 1.4. Effects of the Merger. From and after the Effective Time,
the Merger shall have the effects set forth in the applicable sections of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the properties, rights, privileges, powers and franchises
of the Constituent Corporations shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Constituent Corporations shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.5. Subsequent 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 either of the Company or Merger Subsidiary
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out the purposes and intent of
this Agreement, the officers and directors of the Surviving Corporation are
hereby authorized to execute and deliver, in the name and on behalf of the
Company and the Merger Subsidiary, all such deeds, bills of sale, assignments
and assurances and to take, in the name and on behalf of each such corporation
or otherwise, 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 or
under such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the transactions contemplated by this Agreement.
A-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. Conversion of Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time, automatically by
virtue of the Merger and without any further action on the part of any party
hereto or the holder of any shares of capital stock of the Company or Merger
Subsidiary:
(a) All Shares owned by the Company as treasury stock and all Shares owned
by the Company, Parent, Merger Subsidiary or any of their respective
Subsidiaries (other than shares of Company Common Stock held directly or
indirectly in trust accounts, managed accounts and the like or otherwise held in
a fiduciary capacity, including Shares held by a Company Benefit Plan, that are
beneficially owned by third parties (any such Shares, and shares of Parent's
common stock which are similarly held, whether held directly or indirectly by
the Company or the Parent, being referred to as "Trust Account Shares") and
other than any Shares held directly or indirectly by the Company, Parent or any
of their respective Subsidiaries in respect of a debt previously contracted (any
such Shares, and shares of Parent's common stock which are similarly held,
whether held directly or indirectly by the Company or the Parent, being referred
to herein as "DPC Shares") immediately prior to the Effective Time shall be
canceled and retired and shall cease to exist and no consideration shall be
delivered or deliverable in exchange therefor. All shares of Parent's common
stock that are owned by the Company (other than Trust Account Shares and DPC
Shares) shall become treasury stock of Parent.
(b) Each share of common stock of Merger Subsidiary issued and outstanding
immediately prior to the Effective Time shall become one fully paid and
nonassessable share of common stock of the Surviving Corporation and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
(c) Each Share issued and outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Sections 2.1(a) and 2.1(f) or as
provided in Section 2.3 with respect to Dissenting Shares, and subject to
Section 9.1(k), be converted into, at the election of the holder as provided in
and subject to the limitations set forth in this Agreement, either (i) the right
to receive $9.00 in cash without interest (the "Cash Consideration"), less any
required withholding of Taxes or (ii) the number of shares of Parent Common
Stock equal to the Exchange Ratio (the "Stock Consideration"). The Cash
Consideration and the Stock Consideration are collectively referred to herein as
the "Merger Consideration". The "Exchange Ratio" shall be equal to the quotient
(rounded to the nearest fourth decimal place) obtained by dividing $9.00 by the
Average Closing Price on the trading day which is three business days preceding
the date on which the Company Stockholders Meeting occurs.
(d) All Shares issued and outstanding immediately prior to the Effective
Time, when converted as provided in this Section 2.1, shall cease to be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing such Shares, excluding Shares
described in Section 2.1(a) and Dissenting Shares, shall thereafter represent
only the right to receive the Merger Consideration. From and after the Effective
Time the holders of certificates evidencing Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to the Company
Common Stock except as otherwise provided herein or as required by Law.
(e) Each Person set forth in Section 4.5 of the Company's Disclosure
Schedule holds an option or options, in the amounts and at the prices set forth
in such section, to acquire Shares outstanding immediately prior to the
Effective Time under the Company's stock option plans or similar arrangements
(each, an "Option," and collectively, the "Options") that is or will be vested
prior to, or effective with, the Effective Time, and shall have the right to
receive from the Surviving Corporation in respect of each Share underlying such
Option, less any required withholding of Taxes, a cash payment in an amount
equal to the positive difference (if any) between the Cash Consideration and the
exercise price per Share applicable to such Option as stated in the applicable
stock option agreement or other document (the "Option Consideration"); provided
that with respect to any Person subject to Section 16 of the Exchange Act, no
Option Consideration shall be paid to such Person until payment can be made
without liability to such person under Section 16(b) of the
A-3
Exchange Act. The Company shall take such other actions (including, without
limitation, giving requisite notices to holders of Options advising them of such
accelerated exercisability and right to obtain payment for their respective
Options) as are necessary to fully advise holders of Options of their rights and
to facilitate their timely exercise of such rights. From and after the Effective
Time, other than as expressly set forth in this Section 2.1(e), the holders of
Options shall cease to have any rights in respect to such Options other than to
receive payment for his or her Options as set forth herein.
(f) Notwithstanding any other provision of this Agreement, no fraction of a
share of Parent Common Stock and no certificates or scrip therefor will be
issued in the Merger; instead, Parent shall pay to each holder of Company Common
Stock who would otherwise be entitled to a fraction of a share of Parent Common
Stock an amount in cash, rounded to the nearest cent, determined by multiplying
such fraction by the Average Closing Price on the trading day which is three
business days preceding the date on which the Company Stockholders Meeting
occurs.
SECTION 2.2. Election and Proration Procedures; Exchange Procedures.
(a) An election form (an "Election Form") and other appropriate and
customary transmittal materials, which shall specify that delivery shall be
effected and risk of loss and title to the certificates theretofore representing
Company Common Stock ("Certificates") shall pass only upon proper delivery of
such Certificates to a bank or trust company designated by Parent and reasonably
satisfactory to Company (the "Exchange Agent"), in such form as Company and
Parent shall mutually agree shall be mailed on the Mailing Date (as defined
below) to each holder of record of shares of Company Common Stock as of a record
date which shall be the same date as the record date for eligibility to vote on
the Merger. The "Mailing Date" shall be the date on which proxy materials
relating to the Merger are mailed to holders of shares of Company Common Stock.
The Parent shall pay the reasonable fees and expenses of the Exchange Agent.
(b) Each Election Form shall entitle the holder of shares of Company Common
Stock (or the beneficial owner through appropriate and customary documentation
and instructions) to (i) elect to receive the Cash Consideration for all of such
holder's shares (a "Cash Election"), (ii) elect to receive the Stock
Consideration for all of such holder's shares (a "Stock Election"), (iii) elect
to receive the Cash Consideration with respect to some of such holder's shares
and the Stock Consideration with respect to such holder's remaining shares (a
"Mixed Election"), or (iv) make no election or to indicate that such holder has
no preference as to the receipt of the Cash Consideration or the Stock
Consideration (a "Non-Election"). Holders of record of shares of Company Common
Stock who hold such shares as nominees, trustees or in other representative
capacities (a "Stockholder Representative") may submit multiple Election Forms,
provided that such Stockholder Representative certifies that each such Election
Form covers all the shares of Company Common Stock held by that Representative
for a particular beneficial owner. Shares of Company Common Stock as to which a
Cash Election has been made (including pursuant to a Mixed Election) are
referred to herein as "Cash Election Shares." Shares of Company Common Stock as
to which a Stock Election has been made (including pursuant to a Mixed Election)
are referred to herein as "Stock Election Shares." Shares of Company Common
Stock as to which no election has been made are referred to as "Non-Election
Shares." The aggregate number of shares of Company Common Stock with respect to
which a Stock Election has been made is referred to herein as the "Stock
Election Number."
(c) To be effective, a properly completed Election Form shall be submitted
to the Exchange Agent on or before 5:00 p.m., New York City time, on the fifth
business day immediately preceding the Company Stockholders Meeting (or such
other time and date as the Company and Parent may mutually agree) (the "Election
Deadline"). An election shall have been properly made only if the Exchange Agent
shall have actually received a properly completed Election Form by the Election
Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more Certificates (or customary affidavits and, if
required by Parent pursuant to Section 2.2(n), indemnification regarding the
loss or destruction of such Certificates or the guaranteed delivery of such
Certificates) representing all shares of Company Common Stock covered by such
Election Form, together with duly executed transmittal materials included with
the Election Form. Any Company stockholder may at any time prior to the Election
Deadline change his or her election by written notice received by the Exchange
Agent prior to the Election Deadline accompanied by a
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properly completed and signed revised Election Form. Any Company stockholder
may, at any time prior to the Election Deadline, revoke his or her election by
written notice received by the Exchange Agent prior to the Election Deadline or
by withdrawal prior to the Election Deadline of his or her Certificates, or of
the guarantee of delivery of such Certificates, previously deposited with the
Exchange Agent. All elections shall be revoked automatically if the Exchange
Agent is notified in writing by Parent and the Company that this Agreement has
been terminated. If a stockholder either (i) does not submit a properly
completed Election Form by the Election Deadline, or (ii) revokes its Election
Form prior to the Election Deadline and does not submit a new properly executed
Election Form prior to the Election Deadline, the shares of Company Common Stock
held by such stockholder shall be designated Non-Election Shares. Parent shall
cause the Certificates representing Company Common Stock described in (ii) to be
promptly returned without charge to the person submitting the Election Form upon
written request to that effect from the person who submitted the Election Form.
Subject to the terms of this Agreement and of the Election Form, the Exchange
Agent shall have reasonable discretion to determine whether any election,
revocation or change has been properly or timely made and to disregard
immaterial defects in any Election Form, and any good faith decisions of the
Exchange Agent regarding such matters shall be binding and conclusive.
(d) Notwithstanding any other provision contained in this Agreement, 51.5%
of the total number of shares of Company Common Stock outstanding at the
Effective Time (the "Stock Conversion Number") shall be converted into the Stock
Consideration and the remaining outstanding shares of Company Common Stock shall
be converted into the Cash Consideration (in each case, excluding (i) shares of
Company Common Stock to be canceled as provided in Section 2.1(a) of this
Agreement and (ii) Dissenters' Shares (together, the "Excluded Shares," with the
shares remaining outstanding after such exclusion constituting, for purposes of
this Agreement, the "Outstanding Company Shares")); provided, however, that for
federal income tax purposes, it is intended that the Merger will qualify as a
reorganization under the provisions of Section 368(a) of the Code and,
notwithstanding anything to the contrary contained herein, in order that the
Merger will not fail to satisfy continuity of interest requirements under
applicable federal income tax principles relating to reorganizations under
Section 368(a) of the Code, Parent shall increase the number of shares of
Company Common Stock that will be converted into the Stock Consideration and
reduce the number of shares of Company Common Stock that will be converted into
the right to receive the Cash Consideration to ensure that the Stock
Consideration will represent at least 50% of the value of the aggregate Merger
Consideration, increased by the value of any Excluded Shares, each as measured
as of the Effective Time.
(e) Within three business days after the later to occur of the Election
Deadline or the Effective Time, Parent shall cause the Exchange Agent to effect
the allocation among holders of Company Common Stock of rights to receive the
Cash Consideration and the Stock Consideration as follows:
(i) If the Stock Election Number equals or exceeds the Stock
Conversion Number, then all Cash Election Shares and all Non-Election
Shares shall be converted into the right to receive the Cash Consideration,
and each holder of Stock Election Shares will be entitled to receive the
Stock Consideration in respect of that number of Stock Election Shares
equal to the product obtained by multiplying (x) the number of Stock
Election Shares held by such holder by (y) a fraction, the numerator of
which is the Stock Conversion Number and the denominator of which is the
Stock Election Number, with the remaining number of such holder's Stock
Election Shares being converted into the right to receive the Cash
Consideration;
(ii) If the Stock Election Number is less than the Stock Conversion
Number (the amount by which the Stock Conversion Number exceeds the Stock
Election Number being referred to herein as the "Shortfall Number"), then
all Stock Election Shares shall be converted into the right to receive the
Stock Consideration and the Non-Election Shares and Cash Election Shares
shall be treated in the following manner:
(A) if the Shortfall Number is less than or equal to the number of
Non-Election Shares, then all Cash Election Shares shall be converted
into the right to receive the Cash Consideration and each holder of
Non-Election Shares shall receive the Stock Consideration in respect of
that number
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of Non-Election Shares equal to the product obtained by multiplying (x)
the number of Non-Election Shares held by such holder by (y) a fraction,
the numerator of which is the Shortfall Number and the denominator of
which is the total number of Non-Election Shares, with the remaining
number of such holder's Non-Election Shares being converted into the
right to receive the Cash Consideration; or
(B) if the Shortfall Number exceeds the number of Non-Election
Shares, then all Non-Election Shares shall be converted into the right
to receive the Stock Consideration, and each holder of Cash Election
Shares shall receive the Stock Consideration in respect of that number
of Cash Election Shares equal to the product obtained by multiplying (x)
the number of Cash Election Shares held by such holder by (y) a
fraction, the numerator of which is the amount by which (1) the
Shortfall Number exceeds (2) the total number of Non-Election Shares and
the denominator of which is the total number of Cash Election Shares,
with the remaining number of such holder's Cash Election Shares being
converted into the right to receive the Cash Consideration.
For purposes of this Section 2.2(e), if Parent is obligated to
increase the number of shares of Company Common Stock to be converted
into shares of Parent Common Stock as a result of the application of the
proviso of Section 2.2(d) above, then the higher number shall be
substituted for the Stock Conversion Number in the calculations set
forth in this Section 2.2(e).
(f) Appropriate transmittal materials (the "Letter of Transmittal") in a
form satisfactory to Parent and the Company shall be mailed within three
business days after the Effective Time to each holder of record of Company
Common Stock as of the Effective Time who did not previously submit a completed
Election Form. A Letter of Transmittal will be deemed properly completed only if
accompanied by certificates representing all shares of Company Common Stock to
be converted thereby.
(g) At and after the Effective Time, each Certificate (except as
specifically set forth in Section 2.1 and except for Dissenting Shares) shall
represent only the right to receive the Merger Consideration.
(h) Prior to the Effective Time, Parent shall deposit, or shall cause to
be deposited, with the Exchange Agent, for the benefit of the holders of shares
of Company Common Stock, for exchange in accordance with this Section 2.2, an
amount of cash sufficient to pay the aggregate Cash Consideration and the
aggregate amount of cash in lieu of fractional shares to be paid pursuant to
Section 2.1(f), and Parent shall reserve for issuance with its transfer agent
and registrar a sufficient number of shares of Parent Common Stock to provide
for payment of the aggregate Stock Consideration.
(i) The Letter of Transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, (ii) be in a form and
contain any other provisions as Parent may reasonably determine and (iii)
include instructions for use in effecting the surrender of the Certificates in
exchange for the Cash Consideration. Upon the proper surrender of the
Certificates to the Exchange Agent, together with a properly completed and duly
executed Letter of Transmittal, the holder of such Certificates shall be
entitled to receive in exchange therefor (w) a certificate representing that
number of whole shares of Parent Common Stock that such holder has the right to
receive pursuant to Section 2.1, if any, and (x) a check in the amount equal to
the cash that such holder has the right to receive pursuant to Section 2.1, if
any, (including any cash in lieu of fractional shares, if any, that such holder
has the right to receive pursuant to Section 2.1(f)) and any dividends or other
distributions to which such holder is entitled pursuant to this Section 2.2.
Certificates so surrendered shall forthwith be canceled. As soon as practicable
following receipt of the properly completed Letter of Transmittal and any
necessary accompanying documentation, the Exchange Agent shall distribute Parent
Common Stock and cash as provided herein. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to the shares
of Parent Common Stock held by it from time to time hereunder, except that it
shall receive and hold all dividends or other distributions paid or distributed
with respect to such shares for the account of the persons entitled thereto. If
there is a transfer of ownership of any shares of Company Common Stock not
registered in the transfer records of the Company, the Merger Consideration
shall be issued to the transferee thereof if the Certificates representing such
Company Common Stock are presented to the Exchange Agent, accompanied by all
documents required, in the reasonable judgment of Parent and the
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Exchange Agent, (y) to evidence and effect such transfer and (z) to evidence
that any applicable stock transfer taxes have been paid.
(j) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock issued pursuant to this
Agreement shall be remitted to any person entitled to receive shares of Parent
Common Stock hereunder until such person surrenders his or her Certificates in
accordance with this Section 2.2. Upon the surrender of such person's
Certificates, such person shall be entitled to receive any dividends or other
distributions, without interest thereon, which subsequent to the Effective Time
had become payable but not paid with respect to shares of Parent Common Stock
represented by such person's Certificates.
(k) The stock transfer books of the Company shall be closed immediately
upon the Effective Time and from and after the Effective Time there shall be no
transfers on the stock transfer records of the Company of any shares of Company
Common Stock. If, after the Effective Time, Certificates are presented to
Parent, they shall be canceled and exchanged for the Merger Consideration
deliverable in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Section 2.2.
(l) Any portion of the aggregate amount of cash to be paid pursuant to
Section 2.1, any dividends or other distributions to be paid pursuant to this
Section 2.2 or any proceeds from any investments thereof that remain unclaimed
by the stockholders of the Company for twelve months after the Effective Time
shall be repaid by the Exchange Agent to Parent upon the written request of
Parent. After such request is made, any stockholders of the Company who have not
theretofore complied with this Section 2.2 shall look only to Parent for the
Merger Consideration deliverable in respect of each share of Company Common
Stock such stockholder holds, as determined pursuant to Section 2.1 of this
Agreement, without any interest thereon. If outstanding Certificates are not
surrendered prior to the date on which such payments would otherwise escheat to
or become the property of any governmental unit or agency, the unclaimed items
shall, to the extent permitted by any abandoned property, escheat or other
applicable laws, become the property of Parent (and, to the extent not in its
possession, shall be paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims. Notwithstanding the foregoing,
neither the Exchange Agent nor any party to this Agreement (or any affiliate
thereof) shall be liable to any former holder of Company Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(m) Parent and the Exchange Agent shall be entitled to deduct and
withhold, or cause the Exchange Agent to deduct and withhold, from the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares or Options such amounts as are required to be deducted and withheld with
respect to the making of such payment under the Code, or any provision of state,
local or foreign Tax Law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Shares or Options in respect of which such
deduction and withholding was made. Parent and the Exchange Agent shall be
entitled to rely upon Company's stock transfer books to establish the identity
of those persons entitled to receive the Merger Consideration, which books shall
be conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any Certificate, Parent and the Exchange Agent
shall be entitled to deposit any Merger Consideration represented thereby in
escrow with an independent third party and thereafter be relieved with respect
to any claims thereto.
(n) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Exchange Agent or Parent,
the posting by such Person of a bond in such amount as the Exchange Agent may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration deliverable in respect
thereof pursuant to Section 2.1.
(o) Notwithstanding anything to the contrary herein or in any Election
Form, all shares of Company Common Stock beneficially owned by any Person
identified as a Company Affiliate under Section 6.2 hereof
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shall be deemed to be Cash Election Shares until such time as such person
delivers to Parent an executed copy of the Company Affiliates Agreement
described in such Section 6.2.
SECTION 2.3. Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, and unless otherwise provided by applicable Law,
Shares outstanding immediately prior to the Effective Time and held by a holder
of Shares who is entitled to and has demanded and perfected his or her right of
appraisal for such Shares in accordance with Section 262 of the DGCL (the
"Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration as provided in Section 2.1(c), unless and until such holder
withdraws or otherwise loses his or her right to an appraisal of the Shares and
payment under the DGCL. Such Shares instead shall, from and after the Effective
Time, represent only the right to receive payment of the appraised value of such
Shares in accordance with the provisions of such Section 262 of the DGCL, except
that if, after the Effective Time, any such holder withdraws or loses his or her
right to an appraisal of the Shares under the DGCL, such Shares shall thereupon
be treated as if they had been converted as of the Effective Time into the right
to receive the Merger Consideration, without interest thereon, upon surrender of
the certificate or certificates formerly representing such Shares, less any
required withholding of Taxes. The Company shall give all notices required under
Section 262 of the DGCL and otherwise comply with the requirements of Section
262 of the DGCL. In addition, the Company shall give Parent (i) prompt notice of
any written demands for appraisal of any Shares, withdrawals of such demands,
and any other instruments served pursuant to the DGCL and received by the
Company, and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Parent, voluntarily make any payment
with respect to any demands for appraisal of the Shares or settle or offer to
settle any such demands.
SECTION 2.4. Adjustment of Merger Consideration and Option
Consideration. The Merger Consideration payable pursuant to Section 2.1(c) and
the Option Consideration payable pursuant to Section 2.1(e) have been calculated
based upon the representations and warranties made by the Company in Section
4.5. Without limiting the effect of the failure of the representations and
warranties made by the Company in Section 4.5 to be true and correct, in the
event that, at the Effective Time, the actual number of shares of capital stock
of the Company outstanding and/or the actual number of shares of capital stock
of the Company issuable upon the exercise of outstanding Options, warrants or
similar agreements or upon conversion of securities (including without
limitation, as a result of any stock split, stock dividend, including any
dividend or distribution of securities convertible into Shares, or
recapitalization) is greater than as described in Section 4.5 (including the
exercise or conversion of any currently outstanding Options, warrants or similar
agreements described in Section 4.5), the Merger Consideration and the Option
Consideration shall be appropriately adjusted downward.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of Merger Subsidiary as in effect immediately prior
to the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until amended in accordance with applicable Law.
SECTION 3.2. Bylaws. At the Effective Time, the Bylaws of Merger
Subsidiary as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation until amended in accordance with applicable
Law.
SECTION 3.3. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable Law, the directors of Merger Subsidiary immediately prior to the
Effective Time shall comprise all of the directors of the Surviving Corporation.
Parent and Merger Subsidiary shall cause the directors of Merger Subsidiary to
appoint the officers of the Surviving Corporation immediately prior to the
Effective Time as all the officers of the Surviving Corporation.
SECTION 3.4. Contribution of Company Business. Prior to the Effective
Time, Merger Subsidiary shall have formed under the laws of the State of
Delaware a direct, wholly-owned subsidiary ("Newco"),
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which may be Original Merger Subsidiary, and which, prior to the date on which
such assets are transferred pursuant to the succeeding sentence, shall have no
assets and will have conducted no business operations (except for any assets and
business operations necessary for its formation and qualification as a foreign
corporation and any operations contemplated by the Original Merger Agreement or
this Amended and Restated Agreement). Promptly after the Effective Time, the
Surviving Corporation shall transfer to Newco all of the assets, liabilities and
businesses relating to the Company as the Company's business was conducted
immediately prior to the Effective Time in a transaction described in Section
368(a)(2) of the Code; provided, however, that such transfer and all
transactions to be undertaken in connection with this Section 3.4 hereof shall
not in any way expand the conditions to, or otherwise affect or delay, the
obligation of the parties to consummate the Merger in accordance with this
Amended and Restated Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary that,
except as otherwise set forth in the Company Disclosure Schedule:
SECTION 4.1. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority and all
licenses, authorizations, certificates, consents and approvals of Governmental
Authorities (collectively, "Licenses") required to own, lease and operate its
properties and assets and to carry on its business as now conducted, other than
those Licenses which the failure to so obtain would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the
properties and assets owned, leased or operated by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified and in good standing would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company. The Company has heretofore delivered to Parent true and complete
copies of the Company's Certificate of Incorporation and Bylaws as currently in
effect.
SECTION 4.2. Corporate Authorization. The Company has all requisite
corporate power and authority to execute, deliver and perform this Agreement and
to carry out the transactions contemplated hereby and the execution, delivery
and performance by the Company of this Agreement have been duly authorized by
all necessary corporate action, except for the affirmative vote of the holders
of a majority of the outstanding Shares entitled to vote on the Merger and this
Agreement. This Agreement has been duly executed and delivered by the Company
and, subject to receipt of the approvals specified in Section 4.3 herein and
subject to the approval and adoption of the Merger and this Agreement by a
majority of the outstanding Shares entitled to vote thereon, constitutes a
valid, legal and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as the enforceability of this
Agreement may be subject to or limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar Laws relating to or affecting the
rights of creditors, and (ii) general equitable principles, regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law.
SECTION 4.3. Authorizations. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby require no consent, approval, order or
authorization of, or registration, declaration or filing with or notice to any
Person by or with respect to the Company, other than (i) the filing of a
certificate of merger in accordance with the DGCL and this Agreement, (ii)
compliance with any applicable requirements of the HSR Act, (iii) compliance
with any applicable requirements of the Exchange Act and the Securities Act,
(iv) the affirmative vote of holders of a majority of the outstanding Shares
entitled to vote on the adoption of this Agreement and the Merger, (v)
compliance with state laws relating to takeovers, if applicable, state
securities or blue sky laws, (vi) any consents, authorizations, approvals,
filings or exemptions in connection with the rules of the NYSE or AMEX, and
(vii) such other consents, waivers, approvals, orders, authorizations the
failure of which to obtain or make would not (A) reasonably be expected to have,
individually or in the
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aggregate, a Material Adverse Effect on the Company, (B) materially impair the
ability of the Company to perform its obligations under this Agreement, or (C)
prevent the consummation of the Merger or any of the transactions contemplated
hereby or thereby.
SECTION 4.4. Non-Contravention. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not contravene or 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,
enhancement or acceleration of any obligation or the loss of a benefit under, or
give rise to the creation of any Lien or any right of first refusal with respect
to, any asset or property of the Company, pursuant to (i) any provision of the
certificate of incorporation, bylaws or other organizational documents of the
Company, (ii) assuming compliance with the matters referred to in Section 4.3,
any provision of any material Law binding upon or applicable to the Company or
its properties or assets, (iii) any Contract binding upon the Company, or (iv)
any License held by the Company, except in the case of clauses (iii) and (iv)
above, as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
SECTION 4.5. Capitalization.
(a) The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock and 20,000,000 shares of Company Preferred Stock.
As of the date of this Agreement, there are outstanding (i) 6,459,718 shares of
Company Common Stock, including all shares restricted under any compensation
plan or arrangement of the Company, and (ii) Options to purchase an aggregate of
1,439,500 shares of Company Common Stock, all of which are subject to the
Company's 1994 Stock Incentive Plan (as amended and restated effective January
15, 2003, subject to the approval of the Company's stockholders) (the "Stock
Incentive Plan"). As of the date of this Agreement, 22,444 shares of Company
Common Stock are reserved for issuance pursuant to the Company's Employee Stock
Purchase Plan (the "Stock Purchase Plan") and 1,439,500 shares of Company Common
Stock are reserved for issuance pursuant to the Stock Incentive Plan, and 10,500
shares of Company Common Stock are held in treasury by the Company. As of March
31, 2003, the Company expects that participants in the Stock Purchase Plan will
have made contributions toward the purchase of approximately 4,000 shares of
Company Common Stock under the Stock Purchase Plan. There are no shares of
Company Preferred Stock outstanding and no options, warrants or other agreements
outstanding to purchase shares of Company Preferred Stock.
(b) All outstanding shares of capital stock of the Company (i) have been
duly authorized and validly issued and are fully paid and nonassessable, (ii)
are not subject to preemptive or other similar rights (and were not issued in
violation of any such rights), and (iii) were issued in compliance with all
applicable federal and state securities Laws. Except as set forth in this
Section 4.5 and except for changes after the date of this Agreement resulting
solely from the exercise of Options outstanding on such date (and identified in
Section 4.5 of the Company Disclosure Schedule), there are no outstanding (i)
shares of capital stock or other voting securities of the Company, (ii)
securities of the Company convertible into or exercisable or exchangeable for
shares of capital stock or voting securities of the Company, and (iii) options
or other rights to acquire from the Company, or obligations of the Company to
issue, any capital stock, voting securities or securities convertible into or
exercisable or exchangeable for capital stock or voting securities of the
Company (the items in clauses (i), (ii) and (iii) being referred to collectively
as the "Company Securities"). There are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any Company Securities.
(c) There are no outstanding bonds, debentures, notes or other indebtedness
of the Company having the right to vote (or convertible into or exercisable or
exchangeable for Company Securities having the right to vote) on any matters.
(d) Section 4.5 of the Company Disclosure Schedule sets forth, as of the
date of this Agreement, a true and correct listing of (i) each option to
purchase any Company Securities, the holder thereof, the number and type of
Company Securities purchasable thereunder, the dates upon which such options
become exercisable and expire, and the exercise prices at which such options are
exercisable (none of which options has been repriced, except as set forth in
Section 4.5(d) of the Company Disclosure Schedule), and (ii) a list of each
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other right to acquire any Company Securities pursuant to any other agreement or
instrument, describing such right and indicating the holder thereof. There are
no employment, executive termination or other agreements providing for the
issuance of any Company Securities. There are no outstanding stock appreciation
rights or other outstanding contractual rights the value of which is derived
from the financial performance of the Company or the value of shares of Company
Common Stock. The amendment and restatement of the Stock Incentive Plan was
approved by the Company's Board of Directors as of January 15, 2003 and is
expected to be submitted to the Company's stockholders for approval at the
Company Stockholders Meeting. In a writing dated January 15, 2003, the Majority
Shareholder acknowledged his approval of such amendment and restatement and his
intention to vote 100% of his Company Common Stock in favor of approval thereof.
(e) Other than the Stockholder Voting and Option Agreement, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party, by which it is bound or of which the Company is
aware relating to the voting or disposition of any Company Securities (including
any such agreements or understandings that may limit in any way the solicitation
of proxies by or on behalf of the Company from, or the casting of votes by, the
stockholders of the Company with respect to the Merger). There are no
registration rights applicable to any Company Securities.
SECTION 4.6. Subsidiaries.
(a) The Company has no Subsidiaries. Without limiting the effect of the
failure of the representation in this Section 4.6(a) to be true and correct, to
the extent the Company does have any Subsidiaries, each of the representations
and warranties of the Company in this Agreement and any covenants or agreements
of the Company in this Agreement shall be read as if given as to or made by the
Company and/or any of its Subsidiaries, as applicable, in order not to limit the
effect of the representation, warranty or covenant.
(b) The Company (i) does not directly or indirectly own, (ii) has not
agreed to purchase or otherwise acquire, and (iii) does not hold any interest
convertible into or exercisable or exchangeable for, any of the capital stock or
other equity interest of any corporation, partnership, limited liability company
or other business association or entity.
SECTION 4.7. SEC and Related Filings.
(a) The Company has provided to Parent true and complete copies of (i) the
Company's annual reports on Form 10-K for its fiscal years ended December 31,
1999, 2000 and 2001 (the 2001 Form 10-K being referred to herein as the "Company
Form 10-K"), (ii) the Company's quarterly reports on Form 10-Q for its fiscal
quarters ended March 31, 2002, June 30, 2002 and September 30, 2002 (the
"Company Form 10-Qs"), (iii) the Company's proxy or information statements
relating to meetings of, or actions taken without a meeting by, the stockholders
of the Company since January 1, 2000 (the Company's proxy statements for the
2001 and 2002 annual meetings of shareholders being referred to herein as the
"Company 2001 and 2002 Proxy Statements"), and (iv) all of the Company's other
forms, reports, exhibits, schedules, registration statements, definitive proxy
statements and other documents, filed with the SEC since January 1, 2000 (the
items in subsections (i) through (iv) collectively, the "Company Securities
Documents"). Each document or report that the Company has been required to file
with the SEC since January 1, 2000 has been timely filed by the Company.
(b) As of their respective filing dates (or, in the case of registration
statements, their respective effective dates), the Company Securities Documents
complied in all material respects with the requirements of the Securities Act,
the Exchange Act or applicable state securities laws, as the case may be, and
the rules and regulations thereunder. None of the Company Securities Documents
at the time filed (or in the case of registration statements, their respective
effective dates) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 4.8. Company Financial Statements. The audited financial
statements and unaudited interim financial statements of the Company included in
the Company Securities Documents (including any pro forma financial information
contained therein) have been prepared from and are in accordance with the books
and records of the Company and complied as to form in all material respects with
the published rules
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and regulations of the SEC and all applicable accounting requirements with
respect thereto as in effect as of the respective dates thereof, were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis (except as may be otherwise noted therein) during the periods
involved ("GAAP") and fairly present in accordance with applicable requirements
of GAAP (subject, in the case of unaudited statements, to normal, recurring
year-end audit adjustments, none of which are or will be material, and to the
absence of notes) the financial position of the Company as of their respective
dates and the results of operations, changes in stockholders' equity and cash
flows of the Company for the periods presented therein.
SECTION 4.9. Proxy/Prospectus; Registration Statement. None of the
information to be supplied by the Company for inclusion in (a) the proxy
statement relating to the Company Stockholders Meeting, to be filed by the
Company with the SEC, and any amendments or supplements thereto (the "Proxy
Statement-Prospectus"), or (b) the Registration Statement on Form S-4 (the
"Registration Statement"), of which the Proxy-Statement Prospectus is a part, to
be filed by Parent with the SEC in connection with the Merger, and any
amendments or supplements thereto, will, at the respective times such documents
are filed, and, in the case of the Proxy Statement-Prospectus, at the time the
Proxy Statement-Prospectus or any amendment or supplement thereto is first
mailed to the Company's stockholders, at the time of the Company Stockholders
Meeting and at the Effective Time, and, in the case of the Registration
Statement, when it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be made therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
SECTION 4.10. Absence of Certain Changes. Except as contemplated by this
Agreement, since the date of the Company Balance Sheet, the Company has
conducted its business in the Ordinary Course, and (i) there has not been any
event, occurrence or development of a state of circumstances or facts which has
had or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company, and (ii) except for reasonable and
customary fees paid or to be paid to the Company's directors for service on the
Special Committee, the Company has not taken any action which, if taken after
the date hereof, would require Parent's consent under Section 6.1.
SECTION 4.11. Litigation. There is no claim, action, suit, investigation
or proceeding pending against, or to the knowledge of the Company, threatened in
writing against, the Company, any of its properties or assets or any of its
directors and officers in their capacities as such before any court or
arbitrator or any Governmental Authority, or with respect to which the Company
has retained or assumed responsibility by contract or operation of Law. No such
claim, action, suit, investigation or proceeding if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect on the Company.
There are no judgments, decrees, orders, writs, injunctions, determinations or
awards issued by any court or arbitrator or any Governmental Authority currently
outstanding and unsatisfied against the Company, or for which the Company has
retained or assumed responsibility by contract or operation of Law. Other than
as provided by the DGCL or the Company's certificate of incorporation or bylaws,
there are no indemnification agreements between the Company on the one hand, and
any directors, officers, employees or other agents of the Company or any of its
former Subsidiaries (if any) on the other hand. There are no indemnification or
similar claims by or against the Company that are pending or, to the knowledge
of the Company, threatened, or which could reasonably be expected to be asserted
in the future.
SECTION 4.12. Compliance with Laws.
(a) The Company is, and at all times during the last three years (and any
former Subsidiary or operations sold by the Company or any of its Subsidiaries
within the last three years, during such period while owned by the Company or
any of its Subsidiaries) has been, in compliance in all material respects with
all applicable material Laws, including, but not limited to, the HSR Act and all
applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages. The Company has not received during the last
three years any notice, order or other communication from any Governmental
Authority of any alleged, actual or potential violation of or failure to comply
in any material respect with any Law.
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(b) All Licenses required for the operation of the business of the Company
as currently conducted are in full force and effect without any default or
violation thereunder by the Company or, to the knowledge of the Company, by any
other party thereto, except where any such default or violation or the failure
of any such License to be in full force and effect has not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Since January 1, 2000, the Company has not
received any notice, order or other communication from any Governmental
Authority of any alleged, actual or potential violation of or default under any
such License in any material respect.
SECTION 4.13. Systems. To the Company's knowledge, all computer
databases, software, hardware and Embedded Controls (as defined below)
(collectively, the "Systems") owned, used or licensed by the Company are in good
operating order and free from defects that have had or would reasonably be
expected to have a Material Adverse Effect on the Company. "Embedded Control"
means any microprocessor, microcontroller, smart instrumentation or other
sensor, driver, monitor, robotic or other device containing a semiconductor,
memory circuit or microchip.
SECTION 4.14. Real Property. Section 4.14 of the Company Disclosure
Schedule describes each interest in real property owned or leased by the
Company. The Company has good and marketable title in fee simple to all of the
real property listed or required to be listed in Section 4.14 of the Company
Disclosure Schedule owned by the Company, and owns all right, title and interest
in all leasehold estates and other rights purported to be granted to it by the
leases and other agreements listed in Section 4.14 of the Company Disclosure
Schedule, in each case free and clear of any Liens except for such Liens, if
any, as are reflected on the Company Balance Sheet or such other Liens as do not
detract in any material respect from the value of the property subject thereto
and do not materially interfere with the current use of such property.
SECTION 4.15. Personal Property. The Company has good and marketable
title to all of its properties and assets (not including real property) free and
clear of any Liens except for Liens reflected on the Company Balance Sheet or
such other Liens, if any, as do not detract in any material respect from the
value or marketability of the property subject thereto and do not materially
interfere with the current use of such property. The material properties and
assets owned or leased by the Company are in the possession or under the control
of the Company and are in good condition and repair, ordinary wear and tear
excepted, are suitable for the purposes for which they are being used and are of
a condition, nature and quantity sufficient for the conduct of the business of
the Company as presently conducted.
SECTION 4.16. Contracts.
(a) Except for Contracts entered into after the date of the Agreement which
are permitted by Section 6.1 of this Agreement, the Company is not (i) a party
to or bound by any written agreement for the employment of any officer,
individual employee or other person on a full-time, part-time or consulting
basis, or relating to severance pay for any person other than those terminable
at will, (ii) a party to or bound by any Contract for the sale of any material
capital asset, (iii) a party to or bound by any Contract which is a material
contract (as defined in Item 601 of Regulation S-K) to be performed after the
date of this Agreement, (iv) a party to or bound by any Contract which prohibits
the Company or its affiliates in any material respect from freely engaging in
any business anywhere in the world, (v) a party to or bound by any Contract
relating to the borrowing of money or to mortgaging, pledging or otherwise
placing a material Lien on any of the assets of the Company, (vi) a party to or
bound by any Contract that provides for future payments to or by the Company in
excess of $200,000 and is not terminable by the Company within 180 days without
the payment of a penalty or premium, or (vii) a guarantor of, or otherwise party
to any obligation for, borrowed money.
(b) The Company is not and, to the knowledge of the Company, no other party
is, in violation of or in default under (nor does there exist any condition
affecting the Company, or to the Company's knowledge, other parties to such
Contracts, which upon the passage of time or the giving of notice or both would
reasonably be expected to cause such a violation of or default under) any
Contract to which the Company is a party or by which the Company or any of its
properties or assets are bound, except for violations or defaults that have not
had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. Each Contract set forth in
Section 4.16 of the Company Disclosure Schedule or filed as an exhibit to the
Company Form 10-K or the Company Form 10-Qs included in the Company
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Securities Documents constitutes a valid and binding obligation of the Company
and, to the knowledge of the Company, each other party thereto and is
enforceable against such other party in accordance with its terms. The Company
has performed all of the Company's material obligations under each such Contract
which were required to be performed on or before the date of this Agreement or
the Effective Time, as applicable.
(c) Prior to the date of this Agreement, except for Contracts identified in
writing to Parent whose terms have not been disclosed to Parent due to the need
for confidentiality (collectively, the "Confidential Contracts"), Parent has
been provided access to a true and correct copy of each written Contract, and a
written description of each material oral Contract (if any), set forth in the
Company Securities Documents or required to be identified in Section 4.16 of the
Company Disclosure Schedule, together with all amendments, waivers or other
changes thereto.
SECTION 4.17. Insurance. Section 4.17 of the Company Disclosure Schedule
sets forth a true and correct listing of the policies and binders of insurance
maintained by the Company, together with the Company's experience since January
1, 1996 with respect to material claims. With respect to each such insurance
policy or binder, neither the Company nor, to the Company's knowledge, any other
party to the policy is in breach or default thereunder (including with respect
to the payment of premiums or the giving of notices), and the Company does not
know of any occurrence or any event which (with notice or the lapse of time or
both) would constitute such a breach or default or permit termination,
modification or acceleration under the policy, except for such breaches or
defaults which, individually or in the aggregate, would not result in a Material
Adverse Effect on the Company.
SECTION 4.18. Intellectual Property.
(a) Section 4.18(a) of the Company Disclosure Schedule sets forth a true
and correct listing of all material Registered Intellectual Property owned by
the Company (the "Owned Intellectual Property") and all material Intellectual
Property used by the Company under license or similar agreement (the "Licensed
Intellectual Property" and, together with the Owned Intellectual Property, the
"Scheduled Intellectual Property"). The Company owns all right, title and
interest in and to the Owned Intellectual Property, free and clear of all Liens,
and is the valid licensee of the Licensed Intellectual Property. None of the
Scheduled Intellectual Property is subject to any outstanding order, ruling,
decree, judgment or stipulation to which the Company is or has been made a
party, nor is it the subject of any Proceeding by or against the Company. To the
knowledge of the Company, the Owned Intellectual Property is valid and
enforceable.
(b) Reasonable measures have been taken by the Company to maintain the
secrecy of its trade secret and know-how Intellectual Property, whether or not
identified on Schedule 4.18(a).
(c) There are no agreements or arrangements pursuant to which any of the
Scheduled Intellectual Property has been licensed by the Company to any Person,
or which permits the use of any of the Scheduled Intellectual Property (whether
through non-assertion, settlement or similar agreements or otherwise) by any
Person other than the Company.
(d) To the knowledge of the Company, the conduct by the Company of its
business does not infringe upon or violate the Intellectual Property rights of
any other Person. The Company has received no claim or demand of any Person in
writing, nor is there any proceeding that is pending or to the knowledge of the
Company threatened, which (in any such case) (i) challenges the rights of the
Company in respect of any Scheduled Intellectual Property, or (ii) asserts that
the Company is infringing or otherwise in conflict with, or is required to pay
any royalty, license fee, charge or other amount with regard to, any
Intellectual Property.
(e) To the knowledge of the Company, no other Person is infringing upon or
has infringed upon any Scheduled Intellectual Property, or the rights of the
Company in any Scheduled Intellectual Property where such infringement could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
SECTION 4.19. Taxes.
(a) The Company has timely filed all Tax Returns in the jurisdictions where
such returns are required to be filed through the Effective Time, except for
personal property, sales and use and other state and local non-
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income Tax Returns, the nonfiling of which would not reasonably be expected to
have a Material Adverse Effect on the Company. All such Tax Returns are complete
and correct in all material respects and have been prepared on a proper basis.
All Tax liabilities of the Company, whether or not shown to be due on Tax
Returns, have been paid or adequate reserves established on the Company's
financial statements.
(b) There are no Tax Liens upon the assets of the Company in any amount
except Liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or assessed
against the Company that has not been resolved or paid in full and, no audits or
other administrative proceedings or court proceedings are currently pending or
threatened in writing with regard to any Taxes or Tax Returns of the Company
where an adverse determination could reasonably be expected to have a Material
Adverse Effect on the Company.
(d) The Company has not waived any statute of limitations in respect to
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency where an adverse determination could reasonably be expected to have a
Material Adverse Effect on the Company.
(e) No claim has been made during the last three years by a taxing
authority in a jurisdiction where the Company does not file income or franchise
Tax Returns that such entity may be subject to income or franchise Taxes in that
jurisdiction.
(f) The Company has complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of Tax and
has duly and timely withheld from employees salaries, wages and other
compensation, and other amounts from which withholding is required, and have
paid over to the appropriate taxing authorities, all amounts required to be
withheld and paid over for all periods under all applicable laws.
(g) The Company has not been a member of an "Affiliated Group" as defined
in the Code filing a consolidated Federal Income Tax Return.
(h) The Company has not filed a consent under Code sec.341(f) concerning
collapsible corporations.
(i) The Company has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
sec.280G.
(j) The Company has not been a United States real property holding
corporation within the meaning of Code sec.897(c)(2) during the applicable
period specified in Code sec.897(c)(1)(A)(ii).
(k) The Company has not been required to include in income any adjustment
pursuant to Section 481 of the Code by reason of a voluntary change in
accounting method initiated by the Company or any of its Subsidiaries, and the
IRS has not initiated or proposed any such adjustment or change in accounting
method.
(l) The Company is not a foreign person within the meaning of Section 1445
of the Code.
(m) None of the assets or properties of the Company is an asset or property
that is or will be required to be treated as being (i) owned by any person or
entity pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986, or (ii) tax-exempt use property within the meaning of
Section 168(h)(1) of the Code.
SECTION 4.20. Employee Benefits.
(a) Section 4.20 of the Company Disclosure Schedule contains a true and
correct listing of all Company Benefit Plans. The Company has furnished or made
available to Parent, with respect to each Company Benefit Plan: all relevant
plan documents, handbooks, manuals, collective bargaining agreements and similar
documents governing employment policies, practices and procedures, the most
recent summary plan descriptions and any subsequent summaries of material
modifications and all other material employee communications discussing any
employee benefit; Forms series 5500 as filed with the IRS for the three most
recent plan years; the most recent report of the enrolled actuary for all
defined benefit plans, funded welfare plans or other plans requiring actuarial
valuation, all trust agreements with respect to employee benefit plans,
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plan contracts with service providers or with insurers providing benefits for
participants or liability insurance for fiduciaries and other parties in
interest or bonding; most recent annual audit and accounting of plan assets for
all funded plans; and most recent IRS determination letter for all plans
qualified under Code section 401(a).
(b) With respect to each Company Benefit Plan: (i) each Company Benefit
Plan has been operated and administered in material compliance with its
governing documents, and is in compliance in all material respects with the
applicable provisions of ERISA, the Code and all other applicable Laws.
(c) Neither the Company nor any of the Company Benefit Plans nor any trust
created thereunder nor any trustee or administrator thereof, has engaged in any
transaction as a result of which the Company would reasonably be expected to be
subject to any material liability pursuant to Sections 406 or 409 of ERISA or to
either a civil penalty assessed pursuant to Section 502(i) or Section 502(l) of
ERISA or a tax imposed pursuant to Section 4975 of the Code.
(d) Each Company Benefit Plan that is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the IRS to be so
qualified by issuance and receipt of a favorable determination letter or
reliance upon an opinion letter which states that the Company Benefit Plan meets
all requirements under the Code and that any trust(s) associated with such
Company Benefit Plan is tax exempt under Section 501(a) of the Code. Each such
Company Benefit Plan has filed or will file an application for a favorable
determination letter from the IRS which covers recent tax law changes commonly
known as "GUST" within the GUST remedial amendment period (to the extent such
Plan is required to file such an application) and has been or will be timely
amended for the tax law changes commonly known as "EGTRRA". No event has
occurred since the date of the most recent determination (other than the
effective date of certain amendments to the Code the remedial amendment period
for which has not expired) that would adversely affect the qualified status of
such Company Benefit Plan.
(e) There are no claims (other than routine claims for benefits), actions
or lawsuits pending, or to the knowledge of the Company, threatened, with
respect to any Company Benefit Plan or the Company in connection with any
Company Benefit Plan or the fiduciaries responsible for such Company Benefit
Plans, and to the knowledge of the Company, there are no circumstances that
would reasonably be expected to give rise to any action, lawsuit or claim, on
behalf of or against any of the Company Benefit Plans. There are no audits,
investigations or examinations with respect to any Company Benefit Plan by the
IRS, the Department of Labor, the PBGC or any other governmental agency (other
than a review associated with the application for a determination letter that
has or may be filed with the IRS) and to the knowledge of the Company, no such
audit, investigation or examination is threatened or pending.
(f) All contributions (including all employer contributions and employee
salary reduction contributions) that are due with respect to any Company Benefit
Plan have been made within the time periods prescribed by ERISA and the Code to
each such plan and all contributions for any period ending on or before the
Closing Date which are not yet due have been made to each such Company Benefit
Plan or accrued in accordance with the past custom and practice of the Company.
All premiums or other payments for all periods ending before the Closing Date
have been paid with respect to each Company Benefit Plan.
(g) None of the Company Benefit Plans is a plan subject to Title IV of
ERISA, the minimum funding requirements of Section 302 of ERISA or Section 412
of the Code. Neither the Company nor any ERISA Affiliate has incurred any
liability under Title IV of ERISA, and no events have occurred and no
circumstances exist that could reasonably be expected to result in such
liability to the Company or any ERISA Affiliate.
(h) Neither the Company nor any ERISA Affiliate maintains, contributes to
or has ever maintained or been obligated to contribute to, or has any liability
with respect to, a Multiemployer Plan. Neither the Company nor any ERISA
Affiliate has incurred any liability due to a complete or partial withdrawal
from a Multiemployer Plan or due to the termination or reorganization of a
Multiemployer Plan (except for any such liability as has been satisfied in
full), and no events have occurred and no circumstances exist that could
reasonably be expected to result in such liability to the Company or any ERISA
Affiliate.
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(i) All reports and information required to be filed with the DOL, IRS and
PBGC or with plan participants and their beneficiaries with respect to each
Company Benefit Plan have been filed and all annual reports (including Form 5500
series) of such Plans that require an audit were certified without qualification
by each Plan's accountants.
(j) All Company Benefit Plans may, without liability, be prospectively
amended, terminated or otherwise discontinued except as specifically prohibited
by federal law.
(k) Any bonding required under ERISA with respect to any Company Benefit
Plan has been obtained and is in full force and effect.
(l) Neither the Company nor any ERISA Affiliate maintains any retired life
and/or retired health insurance plans which provide for continuing benefits or
coverage for any employee or any beneficiary of an employee after such
employee's termination of employment, except where the continuation of such
coverage is required by Law. The Company and each ERISA Affiliate has complied
in all material respects with the continuation coverage requirements of Section
4980B of the Code and Sections 601-608 of ERISA.
(m) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement will: (i) result
in a material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due from the Company under
any Company Benefit Plan; (ii) materially increase any benefit otherwise payable
under any Company Benefit Plan; or (iii) accelerate the time of payment or
vesting, or increase the amount of, any compensation due to any individual.
(n) There are no agreements to which the Company is a party which will
provide payments to any officer, employee or highly compensated individual which
will be "parachute payments" under Section 280G or Section 4999 of the Code for
which the Parent or the Company would have withholding liability or that would
result in loss of tax deductions under Section 280G of the Code.
SECTION 4.21. Labor Matters. No application or petition for certification
of a collective bargaining agent is pending or, to the knowledge of the Company,
threatened, and none of the Company's employees are, or during the last three
years have been, represented by any union or other bargaining representative.
There is no labor strike, slow down, stoppage or lock out pending or, to the
knowledge of the Company, threatened against the Company.
SECTION 4.22. Environmental Matters.
(a) The Company, including all of its businesses and operations, is, and
since January 1, 2000 has been, operated in compliance with all applicable
Environmental Laws, except where the failure to so comply has not, and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(b) There are no conditions on or beneath any real property which is now
owned, used or leased to or by the Company ("Current Real Property") which
might, under any applicable Environmental Law, (i) give rise to a material
liability or the imposition of a statutory Lien, or (ii) require any Response,
Removal or Remedial Action or any other action, including without limitation
reporting, monitoring, cleanup or contribution, which would require a material
expenditure or material commitment by the Company.
(c) There were no conditions on or beneath any real property which was, but
is no longer, owned, used or leased to or by the Company ("Former Real
Property"), during the period of such ownership, use or lease, which might under
any applicable Environmental Law, (i) give rise to a material liability or the
imposition of a statutory Lien, or (ii) require any Response, Removal or
Remedial Action or any other action, including without limitation reporting,
monitoring, cleanup or contribution, which would require a material expenditure
or commitment by the Company.
(d) The Company has not received any written notification of a release or
threat of a release of a Hazardous Substance with respect to any Current Real
Property or Former Real Property.
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(e) No Hazardous Substances have been used, handled, generated, processed,
treated, stored, transported to or from, released, discharged or disposed of by
the Company or, to the best of the Company's knowledge, any third party on,
about or beneath any Current Real Property except in compliance with all
applicable Environmental Laws, or where the failure to so comply has not and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(f) During the Company's ownership, use or lease of the Former Real
Property, no Hazardous Substances were used, handled, generated, processed,
treated, stored, transported to or from, released, discharged or disposed of by
the Company or, to the best of the Company's knowledge, any third party on,
about or beneath the Former Real Property except in compliance with all
applicable Environmental Laws, or where the failure to so comply has not and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(g) To the Company's knowledge, there are no above or underground storage
tanks, asbestos containing materials, or transformers containing or contaminated
with PCBs on or beneath the Current Real Property.
(h) The Company has received no written notice and has no knowledge of:
(i) any claim, demand, investigation, enforcement action, Response,
Removal, Remedial Action, statutory Lien or other governmental or
regulatory action instituted or threatened against the Company or the
Current or Former Real Property pursuant to any applicable Environmental
Law;
(ii) any claim, demand notice, suit or action, made or threatened by
any Person against the Company, the Current Real Property or the Former
Real Property relating to (A) any form of damage, loss or injury resulting
from, or claimed to result from, any Hazardous Substance on or beneath the
Current or Former Real Property or (B) any alleged material violation of
any applicable Environmental Law by the Company; or
(iii) any written communication to or from any Governmental Authority
arising out of or in connection with Hazardous Substances on or beneath or
generated at the Current Real Property or Former Real Property, including,
without limitation, any notice of violation, citation, complaint, order,
directive, request for information or response thereto, notice letter,
demand letter or compliance schedule.
(i) To the Company's knowledge, no wastes generated by the Company have
ever been directly or indirectly sent, transferred, transported to, treated,
stored, or disposed of at any site listed or formally proposed for listing on
the National Priority List promulgated pursuant to CERCLA or to any site listed
on any state list of sites requiring or recommended for investigation or
clean-up. None of the Current Real Property or Former Real Property is listed on
the National Priorities List or any state list of sites requiring or recommended
for investigation or clean up.
SECTION 4.23. Absence of Undisclosed Liabilities. All of the material
obligations and liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due, and regardless of when asserted,
including Taxes) with respect to or based upon transactions or events
("Liabilities"), required to be reflected on the Company Balance Sheet in
accordance with GAAP, have been so reflected. The Company has no Liabilities
which are, in the aggregate, material to the condition (financial or otherwise),
business, properties, assets, results of operations, cash-flows or prospects of
the Company, except (i) as reflected on the Company Balance Sheet, (ii)
Liabilities which arose prior to the date of the Company Balance Sheet and are
not required under GAAP to be reflected on the Company Balance Sheet and which
have not had and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company, or (iii) Liabilities
which have arisen after the date of the Company Balance Sheet in the Ordinary
Course and which have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
SECTION 4.24. Opinion of Financial Advisor. The Board of Directors of the
Company and the Special Committee have received an opinion of Houlihan Lokey
Howard & Zukin Financial Advisors, Inc., financial advisor to the Special
Committee, dated the date of this Agreement to the effect that, as of such date,
the Merger Consideration to be received in the Merger by a holder of Shares is
fair from a financial point of view
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to the public stockholders of the Company. A signed copy of such opinion shall
be delivered to Parent promptly.
SECTION 4.25. Brokers. No person acting on behalf of the Company or under
its authority is or will be entitled to any brokers' or finders' fee or any
other commission or similar fee, directly or indirectly, from any of such
parties in connection with any of the transactions contemplated by this
Agreement, other than Houlihan Lokey Howard & Zukin Financial Advisors, Inc.,
whose fees and expenses shall be paid by the Company. A true and correct copy of
all agreements with Houlihan Lokey Howard & Zukin Financial Advisors, Inc. have
been delivered to Parent.
SECTION 4.26. Board Recommendation; Section 203; Required Vote.
(a) The Board of Directors of the Company, at a meeting duly called and
held, has by unanimous vote of those directors present (who constituted all of
the directors then in office) (i) approved and adopted this Agreement, (ii)
determined that the Merger, this Agreement, the Stockholder Voting and Option
Agreement and the transactions contemplated hereby and thereby are advisable and
fair to and in the best interests of the holders of Company Common Stock, and
(iii) recommended that the holders of Company Common Stock approve the Merger,
this Agreement and the transactions contemplated hereby. The Special Committee,
at a meeting duly called and held, has by unanimous vote recommended to the
Board of Directors of the Company (i) approval and adoption of this Agreement,
(ii) the determination that the Merger, this Agreement, the Stockholder Voting
and Option Agreement and the transactions contemplated hereby and thereby are
advisable and fair to and in the best interests of the public stockholders of
the Company, and (iii) the recommendation that the holders of Company Common
Stock approve the Merger, this Agreement and the transactions contemplated
hereby.
(b) The Board of Directors of the Company has approved this Agreement, the
Merger and the Stockholder Voting and Option Agreement, prior to execution,
delivery and performance of this Agreement and the Stockholder Voting and Option
Agreement, in accordance with Section 203 of the DGCL, so that such Section will
not apply to Parent, Merger Subsidiary, the Merger, this Agreement, the
Stockholder Voting and Option Agreement or the transactions contemplated hereby
or thereby. No provision of the certificate of incorporation, bylaws or other
organizational documents of the Company would, directly or indirectly, restrict
or impair the ability of Parent or its affiliates to vote, or otherwise to
exercise the rights of a stockholder with respect to, securities of the Company
that may be acquired or controlled by Parent or its affiliates or permit any
stockholder to acquire securities of the Company on a basis not available to
Parent in the event that Parent were to acquire securities of the Company, and
the Company does not have any rights plan, preferred stock or similar
arrangement which has any of the aforementioned consequences.
(c) The affirmative vote of a majority of the outstanding Shares entitled
to vote to approve this Agreement is the only vote of the holders of any class
of capital or series of the Company's capital stock or other voting securities
necessary to approve the Merger.
SECTION 4.27. Prior Negotiations. Since January 1, 2003, the Company and
its officers, directors, employees, representatives, agents and advisors
(including the Company's financial advisor) have not been involved in
substantive discussions with any group or Person or any of their respective
representatives or advisors, or furnished material confidential information to
any such group or Person or any of their respective representatives or advisors
in connection with a possible Acquisition Proposal.
SECTION 4.28. Certain Business Practices. Neither the Company nor any of
its directors, officers, agents or employees has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
governmental officials or employees or to foreign or domestic political parties
or campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, (iii) consummated any transaction, made any payment, entered
into any agreement or arrangement or taken any other action in violation of
Section 1128B(b) of the Social Security Act, as amended, or (iv) made any other
unlawful payment, that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
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SECTION 4.29. Affiliate Transactions. Except as set forth in the Company
Form 10-K, Company Form 10-Qs or the Company 2001 and 2002 Proxy Statements,
since January 1, 2001, no director, officer, partner, key employee, "affiliate"
or "associate" (as such terms are defined in Rule 12b-2 under the Exchange Act)
of the Company (or any immediate family member of any of the foregoing persons)
(i) has borrowed any monies from or has outstanding any indebtedness or other
similar obligations to the Company, (ii) to the best of the Company's knowledge,
except for shares of a publicly traded company (in an amount not in excess of 5%
of the outstanding shares of such company) owns any direct or indirect material
interest of any kind in, or is a director, officer, employee, partner, affiliate
or associate of, or consultant or lender to, or borrower from, or has the right
to participate in the management, operations or profits of, any person or entity
which since January 1, 2000 has been a material competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company, or (iii) is
otherwise a party to any material Contract with the Company. Any such Contract
with the Company, whether written or oral, has been negotiated on an arms length
basis and is on terms no less favorable to the Company than would be obtainable
from unaffiliated third parties.
SECTION 4.30. Full Disclosure. All documents and other papers delivered
by or on behalf of the Company in connection with the transactions contemplated
by this Agreement are accurate and complete in all material respects and are
authentic. No representation or warranty of the Company contained in this
Agreement or the Company Disclosure Schedule contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Parent and Merger Subsidiary, jointly and severally, represent and warrant
to the Company that:
SECTION 5.1. Corporate Existence and Power. Parent, Merger Subsidiary and
Original Merger Subsidiary are each duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and each has all requisite
corporate power and authority and all material Licenses required to own, lease
and operate its properties and assets and to carry on its business as now
conducted, other than those Licenses which the failure to so obtain would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent. Parent, Merger Subsidiary and Original Merger
Subsidiary are each duly qualified to do business as a foreign corporation and
are in good standing in each jurisdiction where the character of the properties
and assets owned, leased or operated by each or the nature of their respective
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified and in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Parent has delivered to the Company true and complete copies of the certificates
of incorporation and bylaws of Parent and Merger Subsidiary as currently in
effect.
SECTION 5.2. Corporate Authorization. Parent, Merger Subsidiary and
Original Merger Subsidiary each have all requisite corporate power and authority
to execute, deliver and perform this Agreement and the Stockholder Voting and
Option Agreement and to carry out the transactions contemplated hereby and
thereby, and the execution, delivery and performance by Parent, Merger
Subsidiary and Original Merger Subsidiary of this Agreement and the Stockholder
Voting and Option Agreement have been duly authorized by all necessary corporate
action. This Agreement and the Stockholder Voting and Option Agreement have been
duly executed and delivered by Parent, Merger Subsidiary and Original Merger
Subsidiary and constitute valid, legal and binding agreements of Parent, Merger
Subsidiary and Original Merger Subsidiary enforceable against each of them in
accordance with their respective terms, except as the enforceability of such
agreements may be subject to or limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar Laws relating to or affecting the
rights of creditors, and (ii) general equitable principles, regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law.
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SECTION 5.3. Authorizations. The execution, delivery and performance by
Parent, Merger Subsidiary and Original Merger Subsidiary of this Agreement and
the Stockholder Voting and Option Agreement and the consummation by each of them
of the transactions contemplated hereby and thereby require no consent,
approval, order or authorization of, or registration, declaration or filing with
or notice to any Person by or with respect to Parent, Merger Subsidiary or
Original Merger Subsidiary, other than (i) the filing of a certificate of merger
in accordance with DGCL and this Agreement; (ii) compliance with any applicable
requirements of the HSR Act. (iii) compliance with any applicable requirements
of the Exchange Act and the Securities Act, (iv) compliance with state laws
relating to takeovers, if applicable, state securities or blue sky laws, (v) any
consents, authorizations, approvals, filings or exemptions in connection with
the rules of the NYSE or AMEX, and (vi) such other consents, waivers, approvals,
orders, authorizations the failure of which to obtain or make would not (A)
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Parent, (B) materially impair the ability of the Parent or
Merger Subsidiary to perform their respective obligations under this Agreement,
or (C) prevent the consummation of the Merger or any of the transactions
contemplated hereby or thereby.
SECTION 5.4. Non-Contravention. The execution, delivery and performance
by Parent, Merger Subsidiary and Original Merger Subsidiary of this Agreement
and the Stockholder Voting and Option Agreement and the consummation by them of
the transactions contemplated hereby and thereby do not and will not contravene
or 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, enhancement or acceleration of any obligation or the loss of a
benefit under, or give rise to the creation of any Lien or any right of first
refusal with respect to, any asset or property of Parent, Merger Subsidiary or
Original Merger Subsidiary, pursuant to (i) any provision of the certificate of
incorporation or bylaws of Parent, Merger Subsidiary or Original Merger
Subsidiary, (ii) assuming compliance with the matters referred to in Section
5.3, any provision of any material Law binding upon or applicable to Parent,
Merger Subsidiary or Original Merger Subsidiary or their respective properties
or assets, (iii) any Contract binding upon Parent, Merger Subsidiary or Original
Merger Subsidiary, or (iv) any License held by Parent, Merger Subsidiary or
Original Merger Subsidiary, except in the case of clauses (iii) and (iv) above,
as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
SECTION 5.5. Capitalization.
(a) The authorized capital stock of the Parent consists of 150,000,000
shares of Parent Common Stock and 20,000,000 shares of Parent Preferred Stock.
As of February 22, 2003, there were outstanding (i) 56,638,331 shares of Parent
Common Stock, including all shares restricted under any compensation plan or
arrangement of Parent, and (ii) Options to purchase an aggregate of 5,351,926
shares of Parent Common Stock, all of which are subject to the Parent Stock
Option Plans. As of the date of this Agreement, an adequate number of shares of
Parent Common Stock are reserved for issuance pursuant to the Parent Stock
Purchase Plan and the Parent Stock Option Plans, and 35,658,073 shares of Parent
Common Stock were held in treasury by Parent. There are no shares of Parent
Preferred Stock outstanding and no options, warrants or other agreements
outstanding to purchase shares of Parent Preferred Stock.
(b) All outstanding shares of capital stock of Parent and its Subsidiaries
(i) have been duly authorized and validly issued and are fully paid and
nonassessable, (ii) are not subject to preemptive or other similar rights (and
were not issued in violation of any such rights), and (iii) were issued in
compliance with all applicable federal and state securities Laws. Except as set
forth in this Section 5.5, except for changes after February 22, 2003 resulting
solely from the exercise of options under the Parent Stock Option Plans or from
purchases of stock under the Parent Stock Purchase Plan, and except for the
Parent Convertible Debentures, there are no outstanding (i) shares of capital
stock or other voting securities of Parent or any of its Subsidiaries, (ii)
securities of Parent or any of its Subsidiaries convertible into or exercisable
or exchangeable for shares of capital stock or voting securities of Parent or
any of its Subsidiaries, and (iii) options or other rights to acquire from
Parent or any of its Subsidiaries, or obligations of Parent or any of its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exercisable or exchangeable for capital stock or voting
securities of Parent or any of its Subsidiaries.
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(c) The shares of Parent Common Stock to be issued to holders of Company
Common Stock as part of the Merger Consideration under Article II of this
Agreement have been duly authorized and, when issued, will be validly issued,
fully paid and non-assessable and will be issued in compliance with all
applicable federal and state securities Laws.
(d) There are no outstanding bonds, debentures, notes or other indebtedness
of Parent having the right to vote (or, other than the Parent Convertible
Debentures, convertible into or exercisable or exchangeable for securities
having the right to vote) on any matters.
SECTION 5.6. Subsidiaries. All outstanding shares of capital stock of the
Subsidiaries of Parent are owned by Parent or a direct or indirect Subsidiary of
the Parent, free and clear of all Liens.
SECTION 5.7. SEC and Related Filings.
(a) Parent has provided to Company true and complete copies of (i) Parent's
annual reports on Form 10-K for its fiscal years ended February 26, 2000,
February 24, 2001 and February 23, 2002 (the February 2002 Form 10-K being
referred to herein as the "Parent Form 10-K"), (ii) Parent's quarterly reports
on Form 10-Q for its fiscal quarters ended May 25, 2002, August 24, 2002 and
November 23, 2002 (the "Parent Form 10-Qs"), (iii) Parent's proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
stockholders of Parent since January 1, 2000, and (iv) all of Parent's other
forms, reports, exhibits, schedules, registration statements, definitive proxy
statements and other documents, filed with the SEC since January 1, 2000 (the
items in subsections (i) through (iv) collectively, the "Parent Securities
Documents"). Each document or report that Parent has been required to file with
the SEC since January 1, 2000 has been timely filed by Parent.
(b) As of their respective filing dates (or, in the case of registration
statements, their respective effective dates), the Parent Securities Documents
complied in all material respects with the requirements of the Securities Act,
the Exchange Act or applicable state securities laws, as the case may be, and
the rules and regulations thereunder. None of the Parent Securities Documents at
the time filed (or in the case of registration statements, their respective
effective dates) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 5.8. Parent Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
Parent included in Parent Securities Documents (including any pro forma
financial information contained therein) have been prepared from and are in
accordance with the books and records of Parent and complied as to form in all
material respects with the published rules and regulations of the SEC and all
applicable accounting requirements with respect thereto as in effect as of the
respective dates thereof, were prepared in accordance with GAAP and fairly
present in accordance with applicable requirements of GAAP (subject, in the case
of unaudited statements, to normal, recurring year-end audit adjustments, none
of which are or will be material, and to the absence of notes) the consolidated
financial position of Parent and its Subsidiaries as of their respective dates
and the consolidated results of operations, changes in stockholders' equity and
cash flows of Parent and its Subsidiaries for the periods presented therein.
SECTION 5.9. Disclosure Documents, Information Supplied. None of the
information to be supplied by Parent for inclusion in (a) the Proxy
Statement-Prospectus, or (b) the Registration Statement, and any amendments or
supplements thereto, will, at the respective times such documents are filed,
and, in the case of the Proxy Statement-Prospectus, at the time the Proxy
Statement-Prospectus or any amendment or supplement thereto is first mailed to
the Company stockholders, at the time of the Company Stockholders Meeting and at
the Effective Time, and, in the case of the Registration Statement, when it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be made therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.10. Absence of Certain Changes. Except as contemplated by this
Agreement, since the date of Parent Balance Sheet, Parent has conducted its
business in the Ordinary Course and there has not
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been any event, occurrence or development of a state of circumstances or facts
which has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
SECTION 5.11. Litigation. Except as set forth in the Parent Securities
Documents, there is no claim, action, suit, investigation or proceeding pending
against, or to the knowledge of Parent, threatened in writing against or
affecting, Parent or any of its Subsidiaries, any of their respective properties
or assets or any of their respective directors and officers in their capacities
as such before any court or arbitrator or any Governmental Authority, or with
respect to which Parent or any of its Subsidiaries has retained or assumed
responsibility by contract or operation of Law. No such claim, action, suit,
investigation or proceeding if adversely determined, would, individually or in
the aggregate, have a Material Adverse Effect on Parent. There are no judgments,
decrees, orders, writs, injunctions, determinations or awards issued by any
court or arbitrator or any Governmental Authority currently outstanding and
unsatisfied against Parent or any of its Subsidiaries, or for which Parent or
any of its Subsidiaries has retained or assumed responsibility by contract or
operation of Law. Except as set forth in the Parent Securities Documents, there
are no indemnification agreements between Parent or any of its Subsidiaries on
the one hand, and any directors, officers, employees or other agents of Parent
or any of its current or former Subsidiaries on the other hand. There are no
indemnification or similar claims by or against Parent or any of its
Subsidiaries that are pending or, to the knowledge of Parent, threatened, or
which could reasonably be expected to be asserted in the future.
SECTION 5.12. Compliance with Laws.
(a) Parent and each of its Subsidiaries are, and at all times during the
last three years (and any former Subsidiary or operations sold by Parent or any
of its Subsidiaries within the last three years, during such period while owned
by Parent or any of its Subsidiaries) have been, in compliance in all material
respects with all applicable material Laws, including, but not limited to, the
HSR Act and all applicable Laws respecting employment and employment practices,
terms and conditions of employment and wages. Neither Parent nor any of its
Subsidiaries has received during the last three years, any notice, order or
other communication from any Governmental Authority of any alleged, actual or
potential violation of or failure to comply in any material respect with any
Law.
(b) All Licenses required for the operation of the business of Parent and
each of its Subsidiaries as currently conducted are in full force and effect
without any default or violation thereunder by Parent or any of its Subsidiaries
or, to the knowledge of Parent, by any other party thereto, except where any
such default or violation or the failure of any such License to be in full force
and effect has not and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent. Since January 1, 2000,
neither Parent nor any of its Subsidiaries has received any notice, order or
other communication from any Governmental Authority of any alleged, actual or
potential violation of or default under any such License in any material
respect.
SECTION 5.13. Real Property. Except as disclosed in the Parent Securities
Documents, Parent and its Subsidiaries have good and marketable title to all
real properties owned by them, free from Liens that would materially affect the
value thereof or materially interfere with the current use made thereof. Parent
and its Subsidiaries hold any leased real property under valid and enforceable
leases with no exceptions that would materially interfere with the current use
thereof by them.
SECTION 5.14. Personal Property. Parent and each of its Subsidiaries have
good and marketable title to all of their respective properties and assets (not
including real property) free and clear of any Liens except for Liens reflected
on Parent Balance Sheet or such other Liens, if any, as do not detract in any
material respect from the value or marketability of the property subject thereto
and do not materially interfere with the current use of such property. The
material properties and assets owned or leased by Parent or any of its
Subsidiaries are in the possession or under the control of Parent or such
Subsidiaries and are in good condition and repair, ordinary wear and tear
excepted, are suitable for the purposes for which they are being used and are of
a condition, nature and quantity sufficient for the conduct of the businesses of
Parent and its Subsidiaries as presently conducted.
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SECTION 5.15. Taxes.
(a) Each of Parent and its Subsidiaries has timely filed all Tax Returns in
the jurisdictions where such returns are required to be filed, except for
personal property, sales and use and other state and local non-income Tax
Returns, the nonfiling of which would not reasonably be expected to have a
Material Adverse Effect on Parent or its Subsidiaries. All such Tax Returns are
complete and correct in all material respects. All Tax liabilities of Parent and
its Subsidiaries, whether or not shown to be due on Tax Returns, have been paid
or adequate reserves established on financial statements.
(b) There are no Tax Liens upon the assets of Parent or any of its
Subsidiaries in any amount except Liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or assessed
against Parent or any of its Subsidiaries that has not been resolved or paid in
full and, no audits or other administrative proceedings or court proceedings are
currently pending with regard to any Taxes or Tax Returns of Parent or any of
its Subsidiaries where an adverse determination could reasonably be expected to
have a Material Adverse Effect on the Parent.
(d) Neither Parent nor any of its Subsidiaries has waived any statute of
limitations in respect to Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency where an adverse determination could
reasonably be expected to have a Material Adverse Effect on the Parent.
(e) No claim has been made during the last three years by a taxing
authority in a jurisdiction where Parent or any of its Subsidiaries does not
file income or franchise Tax Returns that such entity may be subject to income
or franchise Taxes in that jurisdiction.
(f) Parent and each of its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Tax and have duly and timely withheld from employees
salaries, wages and other compensation, and other amounts from which withholding
is required, and have paid over to the appropriate taxing authorities, all
amounts required to be withheld and paid over for all periods under all
applicable laws.
SECTION 5.16. Labor Matters. No application or petition for certification
of a collective bargaining agent is pending or, to the knowledge of Parent,
threatened, and none of Parent's or its Subsidiaries' employees are, or during
the last three years have been, represented by any union or other bargaining
representative. There is no labor strike, slow down, stoppage or lock out
pending or, to the knowledge of Parent, threatened against Parent or any of its
Subsidiaries.
SECTION 5.17. Environmental Matters.
(a) Parent and each of its Subsidiaries, including all of their respective
businesses and operations, are, and since January 1, 2000, have been, operated
in compliance with all applicable Environmental Laws, except where the failure
to so comply has not, and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Parent.
(b) There are no conditions on or beneath any real property which is now
owned, used or leased to or by Parent or any of its Subsidiaries ("Parent
Current Real Property") which might, under any applicable Environmental Law, (i)
give rise to a material liability or the imposition of a statutory Lien, or (ii)
require any Response, Removal or Remedial Action or any other action, including
without limitation reporting, monitoring, cleanup or contribution, which would
require a material expenditure or material commitment by Parent or its
Subsidiaries.
(c) There were no conditions on or beneath any real property which was, but
is no longer, owned, used or leased to or by Parent or any of its Subsidiaries
("Parent Former Real Property"), during the period of such ownership, use or
lease, which might under any applicable Environmental Law, (i) give rise to a
material liability or the imposition of a statutory Lien, or (ii) require any
Response, Removal or Remedial Action or any other action, including without
limitation reporting, monitoring, cleanup or contribution, which would require a
material expenditure or commitment by Parent or its Subsidiaries.
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(d) Neither Parent nor any of its Subsidiaires has received any written
notification of a release or threat of a release of a Hazardous Substance with
respect to any Parent Current Real Property or Parent Former Real Property.
(e) No Hazardous Substances have been used, handled, generated, processed,
treated, stored, transported to or from, released, discharged or disposed of by
Parent, any of its Subsidiaries or, to the best of Parent's knowledge, any third
party, on or beneath any Parent Current Real Property except in compliance with
all applicable Environmental Laws, or where the failure to so comply has not and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
(f) During Parent's or its Subsidiaries' ownership, use or lease of the
Parent Former Real Property, no Hazardous Substances were used, handled,
generated, processed, treated, stored, transported to or from, released,
discharged or disposed of by Parent, its Subsidiaries or, to the best of
Parent's knowledge, any third party, on or beneath the Parent Former Real
Property except in compliance with all applicable Environmental Laws, or where
the failure to so comply has not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
(g) To Parent's knowledge, there are no above or underground storage tanks,
asbestos containing materials, or transformers containing or contaminated with
PCBs on or beneath the Parent Current Real Property.
(h) Neither Parent nor any of its Subsidiaries has received written notice
or has knowledge of:
(i) any claim, demand, investigation, enforcement action, Response,
Removal, Remedial Action, statutory Lien or other governmental or
regulatory action instituted or threatened against Parent, any of its
Subsidiaries or the Parent Current or Former Real Property pursuant to any
applicable Environmental Law;
(ii) any claim, demand notice, suit or action, made or threatened by
any Person against Parent, any of its Subsidiaires, the Parent Current Real
Property or the Parent Former Real Property relating to (A) any form of
damage, loss or injury resulting from, or claimed to result from, any
Hazardous Substance on or beneath the Parent Current or Former Real
Property or (B) any alleged material violation of any applicable
Environmental Law by Parent or any of its Subsidiaries; or
(iii) any written communication to or from any Governmental Authority
arising out of or in connection with Hazardous Substances on or beneath or
generated at the Parent Current Real Property or Parent Former Real
Property, including, without limitation, any notice of violation, citation,
complaint, order, directive, request for information or response thereto,
notice letter, demand letter or compliance schedule.
(i) To Parent's knowledge, no wastes generated by Parent or any of its
Subsidiaries have ever been directly or indirectly sent, transferred,
transported to, treated, stored, or disposed of at any site listed or formally
proposed for listing on the National Priority List promulgated pursuant to
CERCLA or to any site listed on any state list of sites requiring or recommended
for investigation or clean-up. None of the Parent Current Real Property or
Parent Former Real Property is listed on the National Priorities List or any
state list of sites requiring or recommended for investigation or clean up.
SECTION 5.18. Absence of Undisclosed Liabilities. All Liabilities
required to be reflected on Parent Balance Sheet in accordance with GAAP, have
been so reflected. Parent and its Subsidiaries have no Liabilities which are, in
the aggregate, material to the condition (financial or otherwise), business,
properties, assets, results of operations, cash-flows or prospects of Parent,
except (i) as reflected on Parent Balance Sheet, (ii) Liabilities which arose
prior to the date of Parent Balance Sheet and are not required under GAAP to be
reflected on Parent Balance Sheet and which have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent, or (iii) Liabilities which have arisen after the date
of Parent Balance Sheet in the Ordinary Course and which have not had and would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
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SECTION 5.19. Brokers. Except for Fleet Securities, Inc., the financial
advisor to Parent, no person acting on behalf of Parent or under its authority
is or will be entitled to any brokers' or finders' fee or any other commission
or similar fee, directly or indirectly, from any of such parties in connection
with any of the transactions contemplated by this Agreement.
SECTION 5.20. Board Approval. The Board of Directors of Parent, at a
meeting duly called and held, has approved the Merger, this Agreement and the
transactions contemplated hereby.
SECTION 5.21. Certain Business Practices. None of Parent, its
Subsidiaries, or any of their respective directors, officers, agents or
employees has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic governmental officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment, that
has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
SECTION 5.22. Full Disclosure. All documents and other papers delivered
by or on behalf of Parent in connection with the transactions contemplated by
this Agreement are accurate and complete in all material respects and are
authentic. No representation or warranty of Parent contained in this Agreement
contains any untrue statement of a material fact or omits to state, a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
SECTION 5.23. Financing. Parent has available sufficient funds to
consummate the transactions contemplated hereby including, but not limited to,
the funds necessary to pay the aggregate Cash Consideration and Option
Consideration to holders of Shares and Options in accordance with this
Agreement. Parent has a sufficient number of authorized but unissued shares of
Parent Common Stock to deliver the Stock Consideration.
SECTION 5.24. Intellectual Property. Parent and its Subsidiaries own or
possess the Intellectual Property necessary to conduct the business now operated
by them, or presently employed by them, and have not received any written notice
of infringement of or conflict with asserted rights of others with respect to
any Intellectual Property rights that, if determined adversely to Parent or its
Subsidiaries, would individually or in the aggregate have a Material Adverse
Effect on Parent.
SECTION 5.25. Contracts. Parent is not and, to the knowledge of Parent no
other party is, in violation of or in default under (nor does there exist any
condition affecting Parent, or to Parent's knowledge, other parties to such
Contracts, which upon the passage of time or the giving of notice or both would
reasonably be expected to cause such a violation of or default under) any
Contract to which Parent is a party or by which Parent or any of its properties
or assets are bound, except for violations or defaults that have not had and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
ARTICLE VI
CONDUCT OF BUSINESS OF COMPANY PENDING THE MERGER
SECTION 6.1. Conduct of Company's Business. During the period from the
date of this Agreement to the Effective Time, the Company shall carry on its
business in the Ordinary Course and, to the extent consistent therewith, use all
reasonable efforts to preserve intact its current business organizations, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, except as
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disclosed in Section 6.1 of the Company Disclosure Schedule, the Company shall
not, without the prior written approval of Parent:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any
Company Securities, (ii) adjust, split, combine or reclassify any Company
Securities or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any Company Securities,
except as permitted by Section 6.1(b)(iii), or (iii) purchase, redeem or
otherwise acquire any Company Securities or any rights, warrants or options
to acquire any such Company Securities or any other securities;
(b) (i) grant any options, warrants or rights to purchase Company
Securities, (ii) amend or reprice any outstanding option, warrant or right
to purchase Company Securities, or (iii) issue, deliver or sell, or pledge
or otherwise encumber, or authorize or propose to issue, deliver or sell,
or pledge or otherwise encumber, any Company Securities, other than the
issuance of Company Common Stock upon (A) the exercise of outstanding
Options set forth in the Company Disclosure Schedule in accordance with
their present terms, and (B) the exercise of rights pursuant to the Stock
Purchase Plan in accordance with its present terms, provided that the
participants thereunder shall be entitled to purchase Shares with
accumulated payroll deductions as permitted under Section 7.7(b) hereof;
(c) amend or propose to amend its certificate of incorporation, bylaws
or other organizational documents, create or establish any Subsidiaries, or
adopt or implement a plan of consolidation, merger or reorganization other
than in connection with the Merger;
(d) amend, modify or waive any material term of any outstanding
Company Security;
(e) (i) amend any existing agreement or instrument, or enter into any
new agreement or instrument, in each case relating to the assumption or
incurrence of indebtedness for borrowed money (except that the Company may
draw on its existing credit facilities in the Ordinary Course, so long as
the aggregate principal amount of indebtedness outstanding under such
facilities does not exceed $22 million; provided, however, that (x) such
$22 million limit may be increased if and only if the applicable draws on
the Company's existing credit facilities are made for items contemplated by
the budget delivered electronically to Parent on March 13, 2003 at 7:18
p.m., and (y) draws for purposes not contemplated in such budget and over
such limit may be made with the consent of Parent, such consent not to be
unreasonably withheld or delayed), or to the guarantee of any indebtedness
or the issuance or sale of any debt securities or warrants or rights to
acquire any debt securities of the Company or the guarantee of any debt
securities of others or enter into any lease (whether an operating or
capital lease) other than in the Ordinary Course or create any Liens on the
properties or assets of the Company, or enter into any "keep well" or other
agreement or arrangement to maintain the financial condition of another
Person, or (ii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than loans or advances to customers
in the Ordinary Course and in compliance with any applicable Law;
(f) make any capital expenditures or acquisitions of properties or
assets other than in the Ordinary Course;
(g) (i) enter into or amend in any material respect any employment,
consulting or similar agreement or arrangement with, or grant any material
increase in compensation or benefits to, any current or former director of
the Company or, other than in the Ordinary Course, any officer or employee
of the Company, (ii) pay or agree to pay any pension, retirement allowance
or other employee benefit not required or contemplated by any existing
Company Benefit Plan as in effect on the date hereof to any such director
or, other than in the Ordinary Course, to any such officer or employee,
(iii) except as may be required to comply with applicable law, become
obligated under any new Company Benefit Plan which was not in existence on
the date hereof, or amend any such plan or arrangement in existence on the
date hereof if such amendment would have the effect of materially enhancing
any benefits thereunder, or (iv) grant to any current or former director,
officer or employee any increase in severance or termination pay (including
the acceleration in the exercisability of Options or in the vesting of
Shares (or other property) except for automatic acceleration in accordance
with the terms of this Agreement or the terms
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of Options issued pursuant to the Stock Incentive Plan and in effect at the
date of this Agreement and listed on Schedule 4.5 of the Company Disclosure
Schedule);
(h) acquire (i) by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or (ii)
except in the Ordinary Course, any assets that are material, individually
or in the aggregate, to the Company;
(i) other than dispositions in the Ordinary Course which are not
material, individually or in the aggregate, to the Company, sell, lease,
encumber or otherwise dispose of any of its material properties or assets;
(j) voluntarily take any action that is reasonably likely to result in
any of the Company's representations or warranties hereunder being untrue
in any material respect or in any of the Company's covenants hereunder or
any of the conditions to the Merger not being satisfied;
(k) waive any material term of any confidentiality or standstill
agreement with any Person other than Parent or its affiliates;
(l) implement or adopt any change in its accounting principles,
practices or methods, other than as required by GAAP, or change any of its
methods of reporting income and deductions for Federal income tax purposes;
(m) other than in the Ordinary Course, enter into any material
Contract, or amend or modify any material Contract, lease, agreement or
commitment;
(n) assign, waive, release or relinquish any material Contract right
or pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction of any such claims, liabilities
or obligations, in the Ordinary Course; or
(o) authorize any of, or commit or agree to take any of, the foregoing
actions.
Furthermore, during the period from the date of this Agreement to the
Effective Time, except where the Company determines upon advice of counsel that
disclosure could result in the violation by the Company or Parent of state or
federal law, the Company shall confer on a regular basis with Parent concerning
operational matters, promptly advise Parent in writing of any change or event
that has or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. Each of Parent and the
Company shall promptly provide the other (or its counsel) with copies of all
filings made by it with the SEC or any other Governmental Authority (whether or
not in connection with this Agreement and the transactions contemplated hereby).
SECTION 6.2. Agreements of Company's Affiliates. The Company shall
identify in a letter to Parent, after consultation with counsel, all persons
who, at the time of the Company Stockholders Meeting, it believes may be deemed
to be "affiliates" of the Company, as that term is defined for the purposes of
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Company
Affiliates"). The Company shall use all reasonable efforts to cause each person
who is identified as a Company Affiliate in the letter referred to above to
deliver to Parent at least forty (40) days prior to the date of Closing an
executed copy of the Company Affiliates Agreement. Prior to the date of Closing,
the Company shall amend and supplement such letter and use all reasonable
efforts to cause each additional person who is identified as a Company Affiliate
as of the date of Closing to execute a copy of the Company Affiliates Agreement.
SECTION 6.3. Notice of Certain Events. The Company and Parent shall
promptly notify each other of:
(a) any notice or other written communication from any Person alleging
that the consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement, which consent if not
obtained, could reasonably be expected to have a Material Adverse Effect on
the Company or which could reasonably be expected to affect materially and
adversely the transactions contemplated hereby;
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(b) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement, and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to Parent's or the Company's knowledge, as the case may be,
threatened against, relating to or involving Parent or the Company which
relate to the consummation of the transactions contemplated by this
Agreement or which, with respect to the Company, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 4.11.
SECTION 6.4. No Solicitation.
(a) From and after the date hereof until the Effective Time, the Company
shall not, and shall not authorize or permit any of its officers, directors,
employees, representatives, agents or affiliates (including, without limitation,
any investment banker, financial advisor, attorney, accountant or other
representative retained by the Company), to directly or indirectly initiate,
solicit or encourage (including by way of furnishing information or assistance),
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
Acquisition Proposal, or enter into or maintain or continue discussions or
negotiate with any Person in furtherance of such inquiries with respect to an
Acquisition Proposal or agree to or endorse any Acquisition Proposal, provided,
however that prior to the Company Stockholders Meeting, if the Board of
Directors of the Company, after consultation with outside legal counsel,
determines in good faith that the failure to proceed in accordance with clause
(i) and/or (ii) below of this Section 6.4(a) is reasonably likely to violate the
directors' fiduciary duties to the Company's stockholders under applicable law,
the Company may, subject to compliance with Section 6.4(c), in response to an
unsolicited written bona fide Acquisition Proposal from any Person that the
Company's Board of Directors, after consultation with an independent nationally
recognized financial advisor and outside legal counsel, reasonably believes
could result in a Superior Proposal, (i) furnish information with respect to the
Company to such Person making such proposal after entering into a
confidentiality agreement with such Person on terms and conditions no less
favorable in any material respect to the Company than the terms and conditions
of the Mutual Confidentiality Agreement dated as of June 3, 2002 executed by
Parent and the Company together with the letter agreement dated as of January 8,
2003 between the Parent and the Company (collectively the "Parties'
Confidentiality Agreement") and (ii) participate in negotiations regarding such
Acquisition Proposal; provided that, in the case of clauses (i) and (ii) above,
the Company has provided not less than one full business day prior written
notice to Parent of its intention to proceed under such clause (i) or (ii)
above. Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding sentence by any director, officer,
employee, representative or agent of the Company or any investment banker,
financial advisor, attorney, accountant or other representative of the Company
shall be deemed to be a breach of this Section 6.4(a) by the Company. For
purposes of this Agreement, "Acquisition Proposal" shall mean an inquiry, offer
or proposal regarding any of the following (other than the transactions among
the Company, Parent and Merger Subsidiary contemplated hereunder) involving the
Company: (A) any merger, consolidation, share exchange, recapitalization,
business combination or other similar transaction; (B) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 25% or more of the
assets of the Company, in a single transaction or series of transactions, (C)
any tender offer or exchange offer for outstanding shares of capital stock of
the Company or purchase from the Company of any shares of capital stock of the
Company or the filing of a registration statement under the Securities Act in
connection with any of the foregoing; or (D) any public announcement by the
Company of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
(b) Except as set forth in this Section 6.4(b), neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner materially adverse to Parent or
Merger Subsidiary, the approval or recommendation by such Board of Directors or
any such committee of the Merger or this Agreement, (ii) approve or recommend,
or propose to approve or recommend, any Acquisition Proposal or (iii) enter into
any agreement with respect to any Acquisition Proposal. Prior to the Company
Stockholders Meeting, if the Board of Directors, after consultation with outside
counsel, determines in good faith that the failure to proceed in accordance with
clause (A), (B) and/or (C) below of this Section 6.4(b) is reasonably likely to
violate its fiduciary duties to the
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Company's stockholders under applicable law, the Board of Directors may (subject
to the terms of this sentence) (A) withdraw or modify its recommendation of the
Merger or this Agreement, (B) approve or recommend a Superior Proposal, or (C)
cause the Company to enter into an agreement with respect to a Superior
Proposal, in each case provided that the Company shall not take any of the
actions specified in such clauses (A), (B) or (C) unless the Parent shall have
received from the Company written notice specifying such actions to be taken no
later than 12:00 noon New York City time the business day prior to the date such
actions are proposed to be taken (a "Superior Proposal Notice").
(c) The term "Superior Proposal" shall mean any bona fide Acquisition
Proposal that has the following characteristics: (i) it is a proposal to
acquire, directly or indirectly, for consideration consisting of cash and/or
readily marketable securities, (A) shares of Company Common Stock representing
at least 80% of the voting power of the outstanding shares of Company Common
Stock, and the shares of Company Common Stock issuable upon the exercise of
outstanding Options, warrants and rights to purchase Company Common Stock, or
(B) substantially all the assets of the Company, (ii) the terms of such proposal
in the good faith judgment of the Board of Directors of the Company (after
consultation with an independent nationally recognized financial advisor) are
more favorable to the Company's stockholders from a financial point of view than
the Merger (after taking into account, if applicable, the payment of the
Expenses and the Termination Fee and any modifications to this Agreement
proposed by Parent), (iii) the transactions envisioned by such proposal, in the
good faith judgment of the Board of Directors of the Company, after consultation
with an independent nationally recognized financial advisor and the advice of
outside legal counsel, is reasonably likely to be consummated without
unreasonable delay or unusual conditions compared to the transactions
contemplated by this Agreement, and (iv) financing for the proposed transaction,
to the extent required, has been committed in all material respects.
(d) In addition to the obligations set forth in Section 6.4(b), the Company
shall promptly (and in no event later than 24 hours after the event) advise
Parent orally and in writing of any Acquisition Proposal and of any request for
information which may relate to an Acquisition Proposal, or any inquiry with
respect to or which could lead to any Acquisition Proposal, and the material
terms and conditions of such request, Acquisition Proposal or inquiry. Such
notification shall include, but shall not be limited to, the identity of the
party making such a proposal or inquiry. The Company will keep Parent fully and
timely informed of the status and details (including amendments or proposed
amendments) of any such request, Acquisition Proposal or inquiry, and will
promptly (and in no event later than 24 hours after the event) notify Parent of
any determination by the Company's Board of Directors that a Superior Proposal
has been made. Following delivery of such notice to Parent, the Company shall
engage in good faith negotiations with Parent with respect to such changes as
the Company may propose to the terms of this Agreement and the transactions
contemplated by this Agreement.
(e) Nothing contained in this Section 6.4 shall prohibit the Company from
(x) making and disclosing to its stockholders a position required by Rule
14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act or
(y) making any required disclosure to the stockholders of the Company if, in the
good faith judgment of the Board of Directors of the Company (after consultation
with outside legal counsel) failure to make such disclosure is reasonably likely
to constitute a violation of applicable law.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. HSR Act. Within ten business days after the date of this
Agreement, the Company and Parent shall each file notifications under the HSR
Act in connection with the Merger and the transactions contemplated hereby (and
make any required filings with any applicable foreign antitrust authorities) and
respond as promptly as practicable to any inquiries received from the FTC and
the Antitrust Division for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received from
any state Attorney General or other Governmental Authority in connection with
antitrust matters. The Company and Parent shall promptly take or commit to take
all actions reasonably requested to obtain all consents, waivers, approvals,
authorizations or orders from the FTC, the Antitrust Division and any
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state Attorney General or other Governmental Authority in connection with the
consummation of the transactions contemplated by this Agreement.
SECTION 7.2. Proxy Statement-Prospectus.
(a) Parent and the Company shall cooperate in preparing and each shall
cause to be filed with the SEC, as promptly as reasonably practicable following
the date hereof, mutually acceptable proxy materials which shall constitute the
Proxy Statement-Prospectus relating to the matters to be submitted to the
Company stockholders at the Company Stockholders Meeting and Parent shall
prepare and file with the SEC a registration statement on Form S-4 with respect
to the issuance of Parent Common Stock in the Merger. The Proxy
Statement-Prospectus will be included as a prospectus in and will constitute a
part of the Registration Statement as Parent's prospectus. Each of Parent and
the Company shall use its reasonable best efforts to have the Proxy
Statement-Prospectus cleared by the SEC and the Registration Statement declared
effective by the SEC and to keep the Registration Statement effective as long as
is necessary to consummate the Merger and the transactions contemplated hereby.
Parent and the Company shall, as promptly as practicable after receipt thereof,
provide the other party copies of any written comments and advise the other
party of any oral comments, received from the SEC with respect to the Proxy
Statement-Prospectus or Registration Statement. The parties shall cooperate and
provide the other with a reasonable opportunity to review and comment on any
amendment or supplement to the Proxy Statement-Prospectus and the Registration
Statement prior to filing such with the SEC, and will provide each other with a
copy of all such filings made with the SEC. Notwithstanding any other provision
herein to the contrary, no amendment or supplement (including by incorporation
by reference) to the Proxy Statement-Prospectus or the Registration Statement
shall be made without the approval of both parties, which approval shall not be
unreasonably withheld or delayed; provided that with respect to documents filed
by a party which are incorporated by reference in the Registration Statement or
Proxy Statement-Prospectus, this right of approval shall apply only with respect
to information relating to the other party or its business, financial condition
or results of operations. The Company will use its reasonable best efforts to
cause the Proxy Statement-Prospectus to be mailed to the Company's stockholders
as promptly as practicable after the Registration Statement is declared
effective under the Securities Act. Each party will advise the other party,
promptly after it receives notice thereof, of the time when the Registration
Statement has become effective, the issuance of any stop order, the suspension
of the qualification of the Parent Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement-Prospectus or the Registration Statement. If at
any time prior to the Effective Time any information relating to Parent or the
Company, or any of their respective affiliates, officers or directors, should be
discovered by Parent or the Company which should be set forth in an amendment or
supplement to any of the Registration Statement or the Proxy
Statement-Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other party hereto and, to
the extent required by law, rules or regulations, an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and
disseminated to the stockholders of the Company.
(b) Parent shall also take any action required to be taken under any
applicable state securities laws in connection with the Merger, and each of the
Company and Parent shall furnish all information concerning it and the holders
of Company Common Stock as may be reasonably requested in connection with any
such action.
(c) Parent shall use its reasonable best efforts to cause the shares of
Parent Common Stock to be issued in the Merger to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the Closing Date.
SECTION 7.3. Stockholders Meeting. The Company shall call, give notice
of, convene and hold a special stockholders meeting for the purpose of voting
upon the approval and adoption of the Merger and this Agreement as soon as
practicable after the date on which the Proxy Statement-Prospectus shall have
been cleared by the SEC. Subject to the provisions of Section 6.4, the Company
shall solicit from its stockholders
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proxies in favor of, necessary or advisable to obtain, approval and adoption of
the Merger and this Agreement, and, subject to the provisions of Section 6.4,
the Board of Directors shall recommend that holders of Shares vote in favor of
and approve and adopt the Merger and this Agreement at the Company Stockholders
Meeting.
SECTION 7.4. Access to Information, Confidentiality. The Company shall
afford to the officers, employees, accountants, counsel, potential lenders and
other representatives of Parent full access, at all reasonable times during the
period prior to the Effective Time, to all properties, books, Contracts and
records of the Company and, during such period, the Company shall furnish
promptly to Parent all information concerning the Company's business, properties
and personnel as Parent may reasonably request, and the Company shall make
available to Parent the appropriate individuals (including attorneys,
accountants and other professionals) for discussions of the Company's business,
properties and personnel as Parent may reasonably request. Without limiting the
foregoing, the Company shall provide Parent and Merger Subsidiary with access to
its books and records so as to enable Parent and Merger Subsidiary to ascertain
whether the Company has complied with all covenants herein. Parent acknowledges
that certain of the information which may be made available to it is proprietary
and includes confidential information. Prior to the Effective Time and/or seven
years after any termination of this Agreement, Parent will hold and will use its
commercially reasonable efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents (collectively,
"Representatives") to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of Law, all
confidential documents and information concerning the Company ("Evaluation
Material") furnished in connection with the transactions contemplated by this
Agreement. In the event that Parent or any of its Representatives becomes
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process) to disclose any of the
Evaluation Material, Parent shall provide the Company with prompt prior written
notice of such requirement so that the Company may seek a protective order or
other appropriate remedy and/or waive compliance with the terms of this
Agreement. In the event that such protective order or other remedy is not
obtained, or that the Company waives compliance with the provisions hereof,
Parent shall furnish only that portion of the Evaluation Material which Parent
is advised by written opinion of counsel is legally required and exercise best
efforts to obtain assurance that confidential treatment will be accorded such
Evaluation Material. The term "Evaluation Material" does not include any
information that (i) at the time of disclosure or thereafter is generally
available to the public (other than as a result of its disclosure directly or
indirectly by Parent or its Representatives), (ii) was available to Parent on a
non-confidential basis from a source other than the Company or its advisors,
provided that such source is not and was not bound by a confidentiality
agreement regarding the Company, or (iii) has been independently acquired or
developed by Parent without violating any of its obligations under this Section
7.4. At any time upon written request by the Company, Parent shall promptly
return to the Company all copies of the Evaluation Material in its possession or
in the possession of its Representatives, and Parent will promptly destroy all
copies of any analyses, compilations, studies or other documents prepared by or
for Parent or its Representatives or for Parent's or their use which reflect or
contain any Evaluation Material. Notwithstanding the foregoing, the Company may
deny access or disclosure where it determines upon advice of counsel that
disclosure could result in the violation by the Company of state or federal law,
provided that the Company informs Parent at the time that such a determination
has been made.
SECTION 7.5. Consents, Approvals. The Company and Parent shall each use
all reasonable efforts to obtain promptly all consents, waivers, approvals,
authorizations or orders (including, without limitation, from all Governmental
Authorities), and the Company and Parent shall promptly make all filings
(including, without limitation, with all Governmental Authorities) required in
connection with the authorization, execution and delivery of this Agreement by
the parties hereto and the consummation by them of the transactions contemplated
hereby. The Company and Parent shall furnish each other with all information
required to be included in the Proxy Statement-Prospectus or any application or
other filing to be made pursuant to the rules and regulations of any
Governmental Authority in connection with the transactions contemplated by this
Agreement.
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SECTION 7.6. Indemnification and Insurance.
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall contain provisions with respect to indemnification similar in
all material respects to those set forth in the certificate of incorporation and
bylaws of the Company on the date of this Agreement, which provisions shall not
be amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect in any material respect
the rights thereunder of individuals who at any time prior to the Effective Time
were directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification is
required by Law; provided, however, that nothing in this Section 7.6 shall
prevent the Surviving Corporation from effecting any merger, reorganization or
consolidation, provided that the surviving corporation in respect of any such
merger, reorganization or consolidation is obligated to comply with this Section
7.6.
(b) For a period of six years from and after the Effective Time, the
Surviving Corporation shall maintain in effect the liability insurance policies
(if any) for directors and officers currently maintained by the Company;
provided that the Surviving Corporation may substitute therefor policies,
including policies maintained by an affiliate of the Surviving Corporation,
providing substantially the same combined coverage and containing terms and
conditions substantially the same as the coverage currently maintained by the
Company; and provided further that in no event shall the Surviving Corporation
be required to expend more than an amount per year equal to 250% of the current
annual premiums paid by the Company to maintain or procure insurance coverage
required by this Section 7.6.
SECTION 7.7. Employee Benefits.
(a) For a period of at least one year after the Effective Time, Parent
shall maintain employee benefits and programs, including a 401(k) plan, for
employees of the Company that are in the aggregate not materially less favorable
than those being provided to such employees on the date hereof. To the extent
any employee benefit plan, program or policy of Parent is made available to the
employees of the Surviving Corporation or its Subsidiaries, service with the
Company by any employee prior to the Effective Time shall be credited in
determining such employee's eligibility and vesting levels (but not for accrual
of benefits) under such plans, programs and policies of Parent. For the
remainder of the calendar year which includes the Effective Time, Parent shall
maintain each of the Company's cafeteria plans within the meaning of Section 125
of the Code so as to prevent the forfeiture of unused participant account
balances under each such plan. This Section 7.7 shall not apply to salaries, and
bonuses, the amounts of which Parent shall have the right to establish in its
sole discretion, subject to any existing employment agreements.
(b) The Company shall take such actions as are necessary to terminate the
Stock Purchase Plan effective five business days before the Effective Time.
After such termination, employee participants in such Stock Purchase Plan shall
not be permitted to continue to have the Company withhold any monies for
investment in such Stock Purchase Plan, and each such employee shall be
permitted to elect to receive invested cash or purchase Shares in accordance
with the terms of such plan.
SECTION 7.8. Notification of Certain Matters. In the event that any
representations and warranties of the Company shall be or become materially
untrue such that the condition set forth in Section 8.2(a) would not be
satisfied, the Company shall promptly provide Parent and Merger Subsidiary with
a revised Company Disclosure Schedule, if necessary. In the event that the
representations and warranties of Parent and Merger Subsidiary shall be or
become materially untrue such that the condition set forth in Section 8.3(a)
would not be satisfied, Parent and Merger Subsidiary shall promptly notify the
Company. No such notification shall affect in any way the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
SECTION 7.9. Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents,
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approvals, orders and authorizations and to effect all necessary registrations
and filings, and otherwise to satisfy or cause to be satisfied all conditions
precedent to its obligations under this Agreement.
SECTION 7.10. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release, with respect to the Merger or
this Agreement, and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall not
be unreasonably withheld or delayed; provided, however, that any party may,
without the prior consent of the other party, issue such press release or make
such public statement as may upon the advice of counsel be required by Law or
the rules and regulations of the NYSE or AMEX, if it has used all reasonable
effort to consult with the other party.
SECTION 7.11. Transfer Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding all Taxes which become payable by the
Company in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time. Parent,
Merger Subsidiary and the Company agree that the Company (prior to the Merger)
and the Surviving Corporation (following the Merger) will pay any real property
transfer or gains tax, stamp tax, stock transfer tax or other similar tax
imposed on the Merger or the surrender of the Company Common Stock pursuant to
the Merger (collectively, "Transfer Taxes"), excluding any Transfer Taxes as may
result from the transfer of beneficial interests in the Shares or Options other
than as a result of the Merger, and any penalties or interest with respect to
the Transfer Taxes. The Company shall cooperate with Merger Subsidiary and
Parent in the filing of any returns with respect to the Transfer Taxes.
SECTION 7.12. AMEX Listing. The Company shall use its reasonable best
efforts to continue the quotation of the Company Common Stock on the AMEX during
the term of this Agreement.
SECTION 7.13. Additional Financial Statements. The Company and Parent
shall furnish to each other such additional financial data concerning itself as
the other party may reasonably request, including any audited financial
statements or financial statements for the fiscal year ended December 31, 2002
(in the case of the Company) or February 23, 2003 (in the case of Parent),
prepared in conformity with the requirements of the SEC applicable to annual
financial statements to be included in Form 10-K under the Exchange Act (such
financial statements of the Company, the "Company 2002 Audited Financial
Statements"). The Company shall furnish to Parent all interim quarterly
financial statements or consolidated financial statements of the Company
prepared after the date of this Agreement, accompanied by a statement of the
Chief Financial Officer of the Company that, in the opinion of such officer,
such quarterly financial statements were prepared in conformity with the
requirements of the SEC applicable to financial statements to be included in
Form 10-Q under the Exchange Act applied on a consistent basis (except as
otherwise stated in such quarterly financial statements) and present fairly the
financial position, results of operations and cash flows of the Company as of
the date and for the period indicated, subject to normal, recurring year-end
audit adjustments and the absence of notes.
SECTION 7.14. Agreement with Supplier. The Company shall use its
reasonable efforts to renew its Pull-Tab Manufacturing and License Agreement
with Algonquin Industries, Inc. ("Algonquin"), for a minimum of ten years and
shall use its reasonable efforts to enter into a written non-disclosure and
proprietary developments agreement with Algonquin, in each case on terms and
conditions satisfactory to Parent; provided that the Company's inability to
renew or enter into such agreements shall not be deemed to be a condition to the
obligations of the Parent to effect the Merger.
SECTION 7.15. Tax Opinions. Each of the Company and Parent shall use its
respective reasonable best efforts to obtain the tax opinions referred to in
Section 8.3(d) and 8.2(i), respectively.
SECTION 7.16. Section 16(b) Board Approval. Prior to the Effective Time,
Parent and the Company shall take all such steps as may be required to cause any
dispositions of Company Common Stock (including derivative securities with
respect to Company Stock) or acquisitions of Parent Common Stock (including
derivative securities with respect to Parent Common Stock) resulting from the
transactions contemplated by Article 1 or Article 2 of this Agreement by each
individual who is subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company, to be exempt under Rule 16b-3
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promulgated under the Exchange Act, such steps to be taken in accordance with
the No-Action Letter dated January 12, 1999, issued by the SEC to Skadden, Arps,
Slate, Meagher & Flom LLP.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.1. Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction or, to the extent permitted by applicable Law,
waiver at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of the
Company.
(b) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and any
investigations relating to the Merger that may have been opened by the FTC
or the Antitrust Division or any foreign antitrust authority (by means of a
written request for additional information or otherwise) shall have been
terminated.
(c) No Injunctions. 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 or delaying
the consummation of the Merger shall be in effect.
(d) Registration Statement. The Registration Statement shall have
been declared effective by the SEC and shall be effective and no
proceedings shall be pending or threatened by the SEC to suspend the
effectiveness of the Registration Statement, and Parent shall have received
all required approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement.
(e) NYSE Listing. The shares of Parent Common Stock issuable as part
of the Merger Consideration shall have been approved for listing on the
NYSE, subject to official notice of issuance.
SECTION 8.2. Additional Conditions to Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to effect the
Merger are also subject to the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Company contained in this Agreement shall have been true
and correct as of the date of this Agreement, and (ii) the representations
and warranties of the Company contained in this Agreement shall be true and
correct as of the Effective Time, as though made on and as of the Effective
Time, except those representations and warranties which address matters
only as of a particular date (which shall have been true and correct as of
such date). Parent and Merger Subsidiary shall have received a certificate
to the effect that the foregoing condition has been satisfied signed by the
President and the Chief Financial Officer of the Company, in their
capacities as such and not personally, which certificate shall specifically
indicate the manner in which any representation or warranty of the Company
contained in this Agreement, if any, is not true and correct in all
respects as of the Effective Time, as though made on and as of the
Effective Time.
(b) Agreements and Covenants. The Company shall have performed and
complied in all material respects with all material agreements and
covenants required by this Agreement to be performed or complied with by it
on or prior to the Effective Time, and Parent and Merger Subsidiary shall
have received a certificate to such effect signed by the President and
Chief Financial Officer of the Company in their capacities as such and not
personally.
(c) Consents Obtained. The Company shall have obtained (i) consents
required under the Lottery Contracts identified on Exhibit E representing
(together with revenue from Lottery Contracts executed after the date
hereof for which consents have similarly been obtained) at least 85% of the
projected revenue for fiscal year 2003 represented by all of the Lottery
Contracts identified on Exhibit E determined in accordance with the Company
2003 Budget and (ii) consents required under at least five of the Contracts
identified on Exhibit F.
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(d) No Litigation. There shall not be pending by any Governmental
Authority any claim, suit, action or proceeding (or by any other Person,
any claim, suit, action or proceeding which the Board of Directors of
Parent, based upon advice from counsel, believes has a reasonable
likelihood of success) (i) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking material damages in connection
therewith, or (ii) seeking to prohibit or limit the ownership or operation
by Parent, the Company or any of their respective Subsidiaries of any
material portion of the business or assets of the Company, Parent or any of
their respective Subsidiaries, as a result of the Merger or any of the
other transactions contemplated by this Agreement.
(e) Audited Financial Statements. The Company 2002 Audited Financial
Statements shall have been delivered to Parent and Merger Subsidiary and
shall be consistent in all material respects with the financial information
included in the preliminary financial statements delivered to Parent on
March 6, 2003.
(f) Deliveries. The Parent shall have received a payoff letter in
customary form with respect to the Company Credit Facility.
(g) Legal Opinion. Parent shall have received a legal opinion, dated
the Closing Date, of Taft, Stettinius & Hollister LLP in substantially the
form attached as Exhibit A.
(h) Dissenting Shares. The number of Dissenting Shares shall not
exceed 10% of the outstanding Shares.
(i) Tax Opinion. Parent shall have received an opinion dated as of
the date of Closing from its counsel, Edwards & Angell, LLP, substantially
to the effect that (i) the Merger should be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code, (ii) each of Parent, Merger Subsidiary and the Company should be a
party to a reorganization within the meaning of Section 368(a) of the Code,
and (iii) no gain or loss should be recognized by Parent, Merger Subsidiary
or the Company as a result of the Merger. In rendering such opinion,
Edwards & Angell, LLP shall be entitled to require delivery of, and to
refer to and rely upon, such facts and representations set forth in
certificates received from Parent, Merger Subsidiary and the Company, their
respective officers, directors and affiliates, and from the stockholders of
the Company, as it shall deem necessary or appropriate to enable it to
render such opinion, and the parties hereto agree to use their respective
best efforts to obtain such representations and certificates.
(j) No Material Adverse Effect. A Material Adverse Effect shall not
have occurred with respect to the Company.
SECTION 8.3. Additional Conditions to Obligation of Company. The
obligations of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Parent and Merger Subsidiary contained in this Agreement
shall have been true and correct as of the date of this Agreement, and (ii)
the representations and warranties of Parent and Merger Subsidiary
contained in this Agreement shall be true and correct as of the Effective
Time, as though made on and as of the Effective Time, except those
representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date).
The Company shall have received a certificate to the effect that the
foregoing condition has been satisfied signed by the President and the
Chief Financial Officer of Parent, which certificate shall specifically
indicate the manner in which any representation or warranty of Parent and
Merger Subsidiary contained in this Agreement, if any, is not true and
correct in all respects as of the Effective Time, as though made on and as
of the Effective Time.
(b) Agreements and Covenants. Parent and Merger Subsidiary shall have
performed or complied in all material respects with all material agreements
and covenants required by this Agreement to be performed or complied with
by them on or prior to the Effective Time, and the Company shall have
received a certificate to such effect signed by the President and the Chief
Financial Officer of Parent.
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(c) No Material Adverse Effect. A Material Adverse Effect shall not
have occurred with respect to the Parent.
(d) Tax Opinion. The Company shall have received an opinion dated as
of the date of Closing from its counsel, Taft, Stettinius & Hollister LLP,
substantially to the effect that (i) the Merger should be treated for
federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, (ii) a Company stockholder will recognize no
gain or loss upon receipt of Parent Common Stock in exchange for Company
Common Stock, (iii) a Company stockholder's receipt of Cash Consideration
will be treated as capital gain or loss if the Company Common Stock was a
capital asset in the hands of such stockholder, and (iv) a Company
stockholder's basis in Parent Common Stock received pursuant to the Merger
will be equal to such stockholder's basis in its Company Common Stock
surrendered in the exchange, increased by the gain, if any, recognized by
such stockholder's receipt of Cash Consideration. In rendering such
opinion, Taft, Stettinius & Hollister LLP shall be entitled to require
deliver of, and to refer to and rely upon, such facts and representations
set forth in certificates received from Parent, Merger Subsidiary and the
Company, their respective officers, directors and affiliates, and from the
stockholders of the Company, as it shall deem necessary or appropriate to
enable it to render such opinion, and the parties hereto agree to use their
respective best efforts to obtain such representations and certificates.
(e) Legal Opinion. The Company shall have received a legal opinion, dated
the Closing Date, of Edwards & Angell, LLP, in substantially the form attached
as Exhibit B.
ARTICLE IX
TERMINATION
SECTION 9.1. Termination. This Agreement may be terminated and the Merger
contemplated herein abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by September 17, 2003; provided, however, that the right to
terminate this Agreement under this Section 9.1(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of or resulted in the failure of the Merger to occur on
or before such date; or
(c) by either Parent or the Company if a court of competent
jurisdiction shall have issued a nonappealable final order, decree or
ruling having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger (provided that the right to terminate this Agreement
under this Section 9.1(c) shall not be available to any party who has not
complied with Section 7.9 and such noncompliance materially contributed to
the issuance of any such order, decree or ruling or the taking of such
action); or
(d) by either Parent or the Company if the requisite vote of the
holders of the Company Common Stock shall not have been obtained at the
Company Stockholders Meeting; or
(e) by Parent, if the Board of Directors of the Company shall
withdraw, modify or change its approval or recommendation of this Agreement
or the Merger in a manner adverse to Parent or approves or recommends an
Acquisition Proposal or the Company shall have entered into an agreement
with respect to an Acquisition Proposal; or
(f) by the Company if (i) the Board of Directors pursuant to Section
6.4(b) withdraws or modifies its approval or recommendation of this
Agreement or the Merger, and (ii) the Company simultaneously with
terminating this Agreement pays Parent all Expenses and the Termination Fee
in cash and otherwise complies with the provisions of Section 6.4(b); or
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(g) by the Company if (i) the Company enters into a definitive
agreement in accordance with Section 6.4(b), and (ii) the Company
simultaneously with terminating this Agreement pays Parent all Expenses and
the Termination Fee in cash and otherwise complies with the provisions of
Section 6.4(b); or
(h) by either Parent or the Company if the Special Committee shall
have requested but not have received an opinion from the Special
Committee's financial advisor dated as of the date of the Proxy
Statement-Prospectus to the effect that the Merger Consideration to be
received by the stockholders of the Company is fair from a financial point
of view to the public stockholders of the Company; or
(i) by Parent or the Company, upon a material breach of any covenant
or agreement on the part of the Company or Parent, respectively, set forth
in this Agreement, which breach has not been cured within ten business days
following receipt by the breaching party of notice of such breach from the
other party, such that the conditions set forth in Section 8.2(b) or
Section 8.3(b), as the case may be, would not be satisfied;
(j) by Parent, if any representation or warranty of the Company shall
be untrue such that the condition set forth in Section 8.2(a) would not be
satisfied, or by the Company, if any representation or warranty of Parent
shall be untrue such that the condition set forth in Section 8.3(a) would
not be satisfied; or
(k) by Parent, if the Average Closing Price on the trading day which
is three business days preceding the date on which the Company Stockholders
Meeting occurs is less than the Minimum Market Price; provided, however,
that Parent shall not be permitted to terminate this Agreement under this
Section 9.1(k) if the Company notifies Parent, by 12:00 noon on the
business day following the date Parent gives notice to the Company of its
determination to terminate this Agreement under this Section 9.1(k), that
the Company wishes to proceed with an all-cash merger transaction, in which
case the terms and conditions of this Agreement shall continue in full
force and effect, except that the Merger Consideration shall be payable in
cash only, such that all holders of shares of Company Common Stock (other
than Excluded Shares) shall be entitled to receive the Cash Consideration
in respect of such shares, less any required withholding of Taxes, and in
which case the parties hereto hereby agree to negotiate an amendment and
restatement of this Agreement to reflect the requirements of an all-cash
transaction.
Any party desiring to terminate this Agreement shall give written notice thereof
and the reasons therefor to the other parties hereto.
SECTION 9.2. Effect of Termination.
(a) In the event of the termination of this Agreement in accordance with
Section 9.1, this Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto or any of its directors, officers,
stockholders or affiliates except as set forth in Sections 6.4, 7.4, 9.2 or 9.3
and Article X hereof, provided that nothing herein shall relieve any party from
liability for any material breach of any covenant, agreement, representation or
warranty contained in this Agreement. The right of any party hereto to terminate
this Agreement pursuant to Section 9.1 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any party
hereto, any Person controlling any such party or any of their respective
officers, directors, employees, accountants, consultants, legal counsel, agents
or other representatives, whether prior to or after the execution of this
Agreement.
(b) The Company shall immediately pay, or cause to be paid, by wire
transfer to Parent the sum of (i) all of Parent's out-of-pocket expenses, up to
a maximum of $750,000, reasonably incurred in connection with the transactions
contemplated by this Agreement (the "Expenses"), and (ii) $2.75 million (the
"Termination Fee") upon demand if (A) Parent or the Company terminates this
Agreement in accordance with Section 9.1(d); (B) Parent terminates this
Agreement in accordance with Section 9.1(e) or (C) the Company terminates this
Agreement in accordance with Section 9.1(f), (g) or (h). The amount of Expenses
so payable shall be the amount set forth in an estimate delivered by Parent upon
termination subject to upward or downward adjustment as provided in the next
sentence. In the event that Parent's actual out-of-pocket
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expenses, as documented in reasonable detail, exceed such estimate, the amount
of any such excess (subject to the maximum limitation in the preceding sentence)
shall be payable upon demand, and in the event that Parent's actual expenses are
less than the amount of such estimate, Parent shall promptly refund to the
Company by wire transfer such lesser amount.
(c) If (i) this Agreement is terminated in accordance with Section 9.1, and
(ii) Merger Subsidiary has exercised the option granted to it pursuant to
Section 2.01 of the Stockholder Voting and Option Agreement, then Parent and
Merger Subsidiary shall, to the extent permitted by applicable state and federal
law, including rules and regulations of the SEC, (x) initiate a tender offer for
all of the then-outstanding shares of Company Common Stock and Options on the
same terms and conditions, including, without limitation, the same price to be
paid pursuant to such Section 2.01, as set forth in Article II of the
Stockholder Voting and Option Agreement and (y) cause the Company to execute and
deliver employment agreements with senior management of the Company, on
substantially the same terms as those employment agreements being executed and
delivered by such senior managers and Parent on the date hereof (which are to
become effective at the Effective Time, if it occurs).
SECTION 9.3. Fees and Expenses. Except as set forth in Section 9.2, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated; provided that (i) if this
Agreement is terminated for any reason other than a breach by Parent, and (ii)
Parent has not been paid its Expenses pursuant to Section 9.2(b), and (iii)
within 12 months of this Agreement being so terminated the Company consummates a
transaction concerning a Superior Proposal, the Company shall immediately pay or
cause to be paid, by wire transfer funds to Parent, all of Parent's Expenses.
Without limiting the generality of the foregoing, the Company shall be
responsible for and pay the reasonable fees and expenses for its legal,
financial and accounting advisors, including, without limitation, all printing,
mailing and other fees and expenses relating to the Proxy Statement-Prospectus
and the Company Stockholders Meeting.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. Effectiveness of Representations and Warranties. The
representations and warranties in this Agreement shall terminate at the
Effective Time. In the event of any inconsistency between the statements made in
the body of this Agreement and those contained in the Company Disclosure
Schedule (other than an express exception to a specifically identified
statement), those in this Agreement shall control.
SECTION 10.2. Survival. The provisions of this Agreement shall terminate
at the Effective Time or upon termination of this Agreement pursuant to Section
9.1, as the case may be, except that (i) if the Merger is consummated, the
agreements in Articles I and II and Sections 7.6, 7.7, 7.10 and 7.11 shall
survive the Effective Time indefinitely unless otherwise limited to specific
periods in accordance with their respective terms, and (ii) the agreements in
Sections 9.2 and 9.3 and this Article X shall survive termination of this
Agreement indefinitely.
SECTION 10.3. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Parent or Merger Subsidiary:
GTECH Holdings Corporation
55 Technology Way
West Greenwich, Rhode Island 02817
Facsimile (401) 392-4980
Attention: General Counsel
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With a copy to:
Edwards & Angell, LLP
2800 Financial Plaza
Providence, Rhode Island 02903-2499
Facsimile (401) 276-6611
Attention: Walter G.D. Reed, Esq.
(b) If to the Company:
Interlott Technologies, Inc.
7697 Innovation Way
Mason, Ohio 45040-9695
Facsimile (513) 701-0272
Attention: David Nichols, President and CEO
With copies to:
Taft, Stettinius & Hollister LLP
425 Walnut Street, Suite 1800
Cincinnati, Ohio 45202
Facsimile (513) 381-0205
Attention: John J. McCoy, Esq.
SECTION 10.4. Certain Definitions. The following terms, as used herein,
have the following meanings:
"Acquisition Proposal" shall have the meaning as set forth in Section
6.4(a) of the Agreement.
"Agreement" shall have the meaning as set forth in the Preamble.
"Amended and Restated Agreement" shall have the meaning set forth in the
Preamble.
"AMEX" shall mean the American Stock Exchange LLC.
"Antitrust Division" shall mean the Antitrust Division of the Department of
Justice.
"Average Closing Price" as of any date shall mean the average of the daily
last sales prices of Parent Common Stock on the NYSE (as reported in the Wall
Street Journal) for the 20 consecutive trading days in which such shares are
trading ending at the close of trading on the last day of trading before the
date of determination.
"Cash Consideration" shall have the meaning as set forth in Section 2.1(c)
of the Agreement.
"Cash Election" shall have the meaning set forth in Section 2.2(b) of the
Agreement.
"Cash Election Shares" shall have the meaning set forth in Section 2.2(b)
of the Agreement.
"CERCLA" shall mean the Comprehensive Environmental Response,-Compensation
and Liability Act, as amended.
"Certificates" shall have the meaning set forth in Section 2.2(a) of the
Agreement.
"Closing" shall have the meaning as set forth in Section 1.2 of the
Agreement.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Art of
1985, as amended.
"Code" shall mean The Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning as set forth in the Preamble.
"Company 2001 and 2002 Proxy Statements" shall have the meaning set forth
in Section 4.7 of the Agreement.
"Company 2002 Audited Financial Statements" shall have the meaning set
forth in Section 7.14 of the Agreement.
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"Company 2003 Budget" shall mean the budget for the Company's fiscal year
ending December 31, 2003, delivered to Parent on March 14, 2003.
"Company Affiliates" shall have the meaning set forth in Section 6.2 of the
Agreement.
"Company Affiliates Agreement" shall mean the agreements to be executed by
each of the Company Affiliates, substantially in the form of Exhibit C to this
Agreement, providing that such person will comply with Rule 145 under the
Securities Act.
"Company Balance Sheet" shall mean the balance sheet of the Company as of
September 30, 2002, as filed with the SEC in the Company Form 10-Q for the
fiscal period ended on such date.
"Company Benefit Plan" shall mean (i) each "employee pension benefit plan"
as defined in Section 3(2) of ERISA, (ii) each "employee welfare benefit plan"
as defined in Section 3(1) of ERISA and (iii) each other retirement, profit
sharing, deferred compensation, incentive compensation, bonus, stock option,
stock purchase, severance pay and change in control agreement, unemployment
benefit, vacation pay, health, life or other insurance, Section 125 cafeteria
plan or flexible benefit arrangement, fringe benefit or other employee benefit
plan, program, agreement or arrangement maintained or contributed to by the
Company or any ERISA Affiliate in respect of or for the benefit of any employee,
former employee or director of the Company and their eligible dependents and
beneficiaries or with respect to which the Company has any liability.
"Company Common Stock" shall have the meaning as set forth in the Preamble.
"Company Credit Facility" shall mean that certain Credit Agreement
($30,000,000), dated as of January 25, 2001 between the Company and Fifth Third
Bank, an Ohio banking corporation, as amended.
"Company Disclosure Schedule" shall mean the written disclosure schedule
delivered on or prior to the date hereof by the Company to Parent and Merger
Subsidiary that is arranged in paragraphs corresponding, and is intended to
relate solely to, to the numbered and lettered paragraphs corresponding to the
numbered and lettered paragraphs contained in this Agreement.
"Company Form 10-K" shall have the meaning as set forth in Section 4.7 of
the Agreement.
"Company Form 10-Qs" shall have the meaning as set forth in Section 4.7 of
the Agreement.
"Company Preferred Stock" shall mean the shares of preferred stock
authorized by the Company's Certificate of Incorporation in effect on the date
of this Agreement.
"Company Securities" shall have the meaning as set forth in Section 4.5(b)
of the Agreement.
"Company Securities Documents" shall have the meaning as set forth in
Section 4.7.
"Company Stockholders Meeting" shall mean the meeting of the holders of the
Company Common Stock described in Section 7.3 of the Agreement, held for the
purposes of approving the Agreement and the Merger and any adjournment thereof.
"Confidential Contracts" shall have the meaning as set forth in Section
4.16(c) of the Agreement.
"Constituent Corporations" shall have the meaning as set forth in Section
1.1 of the Agreement.
"Contract" shall mean any legally binding contract, agreement, indenture,
arrangement, instrument, commitment or understanding, whether written or oral.
"Current Real Property" shall have the meaning as is set forth in Section
4.22(b) of the Agreement.
"DGCL" shall have the meaning as set forth in the Preamble.
"Dissenting Shares" shall have the meaning as set forth in Section 2.3 of
the Agreement.
"DOL" shall mean the Department of Labor.
"DPC Shares" shall have the meaning as set forth in Section 2.1(a) of the
Agreement.
"Effective Time" shall have the meaning as set forth in Section 1.3 of the
Agreement.
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"Election Deadline" shall have the meaning set forth in Section 2.2(c) of
the Agreement.
"Election Form" shall have the meaning set forth in Section 2.2(a) of the
Agreement.
"Embedded Control" shall have the meaning as set forth in Section 4.13 of
the Agreement.
"Environmental Laws" means all Laws concerning or relating to industrial
hygiene or protection of human health or the environment or to emissions,
discharges or releases of pollutants, contaminants or other Hazardous Substances
or wastes into the environment, including without limitation ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or other Hazardous Substances or wastes or
the clean-up or other remediation thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall mean each entity which is treated as a single
employer with the Company for the purposes of Section 414 of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Agent" shall have the meaning as set forth in Section 2.2(a) of
the Agreement.
"Exchange Ratio" shall have the meaning as set forth in Section 2.1(c) of
the Agreement.
"Excluded Shares" shall have the meaning as set forth in Section 2.2(d) of
the Agreement.
"Expenses" shall have the meaning as set forth in Section 9.2(b) of the
Agreement.
"Evaluation Material" shall have the meaning as set forth in Section 7.4 of
the Agreement.
"Former Real Property" shall have the meaning as is set forth in Section
4.22(c) of the Agreement.
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall have the meaning as set forth in Section 4.8 of the Agreement.
"Governmental Authority" shall mean any Federal, state, local or foreign
government of any nature whatsoever, or any court, tribunal, administrative
agency or commission or other governmental or regulatory official, authority or
agency or body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Hazardous Substances" shall mean any substance regulated under any
Environmental Laws including, without limitation, any substance which is (A)
petroleum, asbestos or asbestos-containing material, or polychlorinated
biphenyls; (B) defined, designated or listed as a "Hazardous Substance" pursuant
to Sections 307 and 311 of the Clean Water Act, 33 U.S.C. sec.sec.1317, 1321,
Section 101(14) of CERCLA, 42 U.S.C. sec.9601; (C) listed in the United States
Department of Transportation Hazardous Material Tables, 49 C.F.R. sec.172-101;
or (D) defined, designated or listed as a "Hazardous Waste" under Section
1004(5) of the Resource and Conservation and Recovery Act, 42 U.S.C.
sec.6903(5).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Intellectual Property" shall mean any and all United States and foreign:
(a) issued patents (including, without limitation, design patents, industrial
designs and utility models), pending patent applications (including docketed
patent disclosures awaiting filing, reissues, divisions, continuations-in-part
and extensions), and pending patent disclosures awaiting filing determination;
(b) registered trademarks, service marks, trade names, domain names, trade
dress, logos, business and product names and slogans; (c) registered copyrights
(the Intellectual Property described in clauses (a), (b) and (c) being
collectively "Registered Intellectual Property"); (d) unregistered trademarks,
service marks, trade names, trade dress, logos, business and product names,
slogans, and copyrights; (e) inventions, processes, designs, formulae, trade
secrets and
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know-how; and (f) computer software (including, without limitation, data and
related documentation), other than off-the-shelf software.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean any law (including, without limitation, principles of
common law), statute, regulation, treaty, License, judgment, order, award or
other decision or requirement enacted, promulgated, issued, enforced or entered
by any arbitrator, court or Governmental Authority (domestic or foreign).
"Letter of Transmittal" shall have the meaning set forth in Section 2.2(f)
of the Agreement.
"Liabilities" shall have the meaning as set forth in Section 4.23 of the
Agreement.
"Licensed Intellectual Property" shall have the meaning set forth in
Section 4.18(a) of the Agreement.
"Licenses" shall have the meaning as set forth in Section 4.1 of the
Agreement.
"Lien" shall mean any mortgage, lien, pledge, charge, security interest,
encumbrance, hypothecation, adverse right or interest, charge or claim of any
nature whatsoever in respect to any asset, property or property interest.
"Lottery Contracts" shall mean Contracts to which the Company is a party or
by which the Company is bound relating to the provision of lottery goods or
services, directly or indirectly (and including through independent
contractors), to any Governmental Authority, and including without limitation
the Contracts listed on Exhibit E to this Agreement, but excluding any
agreements with Parent or its Subsidiaries.
"Mailing Date" shall have the meaning set forth in Section 2.2(a) of the
Agreement.
"Majority Shareholder" shall mean L. Rogers Wells, Jr.
"Material Adverse Effect" shall mean with respect to any Person, any
change, effect or event that (i) is or is reasonably likely to be material and
adverse to the condition (financial or otherwise), business, properties, assets,
liabilities, results of operations, cash flows or prospects of such Person and
its Subsidiaries taken as a whole, or (ii) does or is reasonably likely to
materially impair the ability of such Person to perform its obligations under
this Agreement or otherwise materially threatens or impedes the consummation of
the Merger and the other transactions contemplated by this Agreement or the
conduct of the business of the Surviving Corporation.
"Merger" shall have the meaning as set forth in the Preamble.
"Merger Consideration" shall have the meaning as set forth in Section
2.1(c) of the Agreement.
"Merger Subsidiary" shall have the meaning set forth in the Preamble.
"Minimum Market Price" shall mean a per share price for Parent Common Stock
which is eighteen percent (18%) below the per share price for Parent Common
Stock at the close of trading on the NYSE on the date of execution of this
Agreement.
"Mixed Election" shall have the meaning set forth in Section 2.2(b) of the
Agreement.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
3(37) and 4001(a)(3) of ERISA.
"Newco" shall have the meaning as set forth in Section 3.4 of the
Agreement.
"Noncompete Agreement" shall mean the Noncompete Agreement by and between
the Parent and the Majority Shareholder of even date herewith.
"Non-Election" shall have the meaning set forth in Section 2.2(b) of the
Agreement.
"Non-Election Shares" shall have the meaning set forth in Section 2.2(b) of
the Agreement.
"NYSE" shall mean the New York Stock Exchange, Inc.
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"Option" shall have the meaning as set forth in Section 2.1(e) of the
Agreement.
"Option Consideration" shall have the meaning set forth in Section 2.1(e)
of the Agreement.
"Ordinary Course" shall mean substantially in the same manner, nature and
amounts as previously conducted and on an arms length basis and, with respect to
the Company, shall include, without limitation, the implementation of Contracts
to sell or lease instant ticket vending machines and/or related services.
"Original Merger Agreement" and "Original Merger Subsidiary" shall each
have the meaning set forth in the Preamble.
"Outstanding Company Shares" shall have the meaning set forth in Section
2.2(d) of the Agreement.
"Owned Intellectual Property" shall have the meaning set forth in Section
4.18(a) of the Agreement.
"Parent" shall have the meaning as set forth in the Preamble.
"Parent Balance Sheet" shall mean the consolidated balance sheet of the
Parent and its Subsidiaries as of November 23, 2002, as filed with the SEC in
the Parent Form 10-Q for the fiscal period ended on such date.
"Parent Common Stock" shall mean the shares of common stock, par value
$0.01 per share, of Parent.
"Parent Convertible Debentures" shall mean the 1 3/4% Convertible
Debentures due December 15, 2021, of Parent, fully and unconditionally
guaranteed by certain of Parent's Subsidiaries.
"Parent Current Real Property" shall have the meaning set forth in Section
5.17(b) of the Agreement.
"Parent Form 10-K" shall have the meaning set forth in Section 5.7(a) of
the Agreement.
"Parent Form 10-Qs" shall have the meaning set forth in Section 5.7(a) of
the Agreement.
"Parent Former Real Property" shall have the meaning set forth in Section
5.17(c) of the Agreement.
"Parent Preferred Stock" shall mean the shares of preferred stock, par
value $0.01 per share, of Parent.
"Parent Securities" shall have the meaning set forth in Section 5.5(b) of
the Agreement.
"Parent Securities Documents" shall have the meaning set forth in Section
5.7(a) of the Agreement.
"Parent Stock Option Plans" shall mean, collectively, (i) the 1994 Stock
Option Plan of Parent, as amended and restated; (ii) the 1996 Non-Employee
Directors' Stock Option Plan of Parent, as amended; (iii) the 1997 Stock Option
Plan of Parent, as amended April 2, 2002; (iv) the 1998 Non-Employee Directors'
Stock Election Plan of Parent; and (v) the 1999 Non-Employee Directors' Stock
Option Plan of Parent, as amended.
"Parent Stock Purchase Plan" shall mean the 1998 Employee Stock Purchase
Plan, as amended and restated as of November 1, 2001, of Parent.
"Parties' Confidentiality Agreement" shall have the meaning set forth in
Section 6.4 of the Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Investments" shall have the meaning as set forth in Section
2.2(g) of the Agreement.
"Person" means an individual, a corporation, a partnership, an association,
a trust, a limited liability company or any other entity or organization,
including a Governmental Authority.
"Proxy Statement-Prospectus" shall have the meaning as set forth in Section
4.9 of the Agreement.
"Registered Intellectual Property" has the meaning set forth in the
definition of Intellectual Property, above.
"Registration Statement" shall have the meaning set forth in Section 4.9 of
the Agreement.
"Representatives" shall have the meaning as set forth in Section 7.4 of the
Agreement.
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"Response," "Removal" and "Remedial Action" shall have the meanings
ascribed to them in Sections 101(23)-101(25) of CERCLA, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. sec.sec.
9601(23)-9601(25).
"Scheduled Intellectual Property" shall have the meaning set forth in
Section 4.18(a) of the Agreement.
"SEC" shall refer to the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Shares" shall have the meaning set forth in the Preamble.
"Shortfall Number" shall have the meaning set forth in Section 2.2(e) of
the Agreement.
"Special Committee" shall mean a special committee of the Board of
Directors of the Company established to consider approval of this Agreement and
the transactions contemplated hereby including the Merger and to determine
whether such transactions are advisable, fair to and in the best interests of
the public stockholders of the Company.
"Stock Consideration" shall have the meaning set forth in Section 2.2(d) of
the Agreement.
"Stock Conversion Number" shall have the meaning set forth in Section
2.1(c) of the Agreement.
"Stock Election" shall have the meaning set forth in Section 2.2(b) of the
Agreement.
"Stock Election Number" shall have the meaning set forth in Section 2.2(b)
of the Agreement.
"Stock Election Shares" shall have the meaning set forth in Section 2.2(b)
of the Agreement.
"Stock Incentive Plan" shall have the meaning set forth in Section 4.5(a)
of the Agreement.
"Stock Purchase Plan" shall have the meaning set forth in Section 4.5(a) of
the Agreement.
"Stockholder Representative" shall have the meaning set forth in Section
2.2(b) of the Agreement.
"Stockholder Voting and Option Agreement" shall mean the Stockholder Voting
and Option Agreement dated as of the date hereof, as amended and restated on the
date of execution of this Amended and Restated Agreement, between and among
Parent, Merger Subsidiary, Original Merger Subsidiary and the Majority
Shareholder, providing for the Majority Stockholder to support the transactions
contemplated by this Agreement and providing Parent or Merger Subsidiary with
the option, under certain circumstances, to acquire the Shares owned by such
stockholder, which agreement shall be substantially in the form attached hereto
as Exhibit D.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof), (ii) any partnership (a) the sole general partner or managing general
partner of which is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof), and (iii) with respect to the Company, any
corporation, association or other business entity which is included or
consolidated in the Company's financial statements.
"Superior Proposal" shall have the meaning as is set forth in Section
6.4(c) of the Agreement.
"Superior Proposal Notice" shall have the meaning as is set forth in
Section 6.4(b) of the Agreement.
"Systems" shall have the meaning set forth in Section 4.13 of the
Agreement.
"Surviving Corporation" shall have the meaning as set forth in Section 1.1
of the Agreement.
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"Tax or Taxes" shall mean any federal, foreign, state, county or local
taxes, charges, fees, levies, duties or other assessments, including, but not
limited to, all net income, gross income, sales and use, transfer, gains,
profits, excise, franchise, real and personal property, gross receipts, capital
stock, production, business and occupation, customs, disability, employment,
payroll, license, estimated, severance or withholding taxes or charges imposed
by any Governmental Authority, and includes any interest and penalties (civil or
criminal) on or additions to any such taxes.
"Tax Return" means a return or report, including accompanying schedules,
required to be supplied to a Governmental Authority with respect to Taxes
including, where permitted or required, combined or consolidated returns for a
group of entities and information returns.
"Termination Fee" shall have the meaning as set forth in Section 9.2(b) of
the Agreement.
"Transfer Taxes" shall have the meaning as set forth in Section 7.11 of the
Agreement.
"Trust Account Shares" shall have the meaning as set forth in Section
2.1(a) of the Agreement.
SECTION 10.5. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that after approval
and adoption of the Merger and this Agreement by the stockholders of the
Company, no amendment may be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 10.6. Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) to the extent permitted by applicable Law,
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
SECTION 10.7. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.8. Specific Performance. The parties hereto agree that if for
any reason any party hereto shall have failed to perform its obligations under
this Agreement, then any other party hereto seeking to enforce this Agreement
against such nonperforming party in addition to any damages and other remedies
available to it, shall be entitled to specific performance and injunctive and
other equitable relief and the parties hereto further agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief. In addition, each of
the parties hereto (a) irrevocably and unconditionally submits itself to the
exclusive jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event of any dispute arising out of or relating
to this Agreement, (b) agrees not to commence any such action or proceeding
except in such courts, (c) agrees that any claim in respect of any such action
or proceeding may be heard and determined in such Delaware State court or, to
the extent permitted by law, in such Federal court, (d) waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such action or proceeding in any
such Delaware State or Federal court, and (e) waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such Delaware State or Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices in
Section 10.3. Nothing in this Agreement will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.
SECTION 10.9 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVO-
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CABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.9.
SECTION 10.10. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible, in an acceptable manner, to the
end that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.11. Entire Agreement.
(a) This Agreement (inclusive of the Company Disclosure Schedule)
constitutes the entire agreement and supersedes all prior agreements and
undertakings (including the Original Merger Agreement, but excluding the
confidentiality obligations contained in the Parties' Confidentiality Agreement)
both oral and written, among the parties, or any of them, with respect to the
subject matter hereof.
(b) The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
SECTION 10.12. Assignment, Guarantee of Merger Subsidiary
Obligations. Parent and Merger Subsidiary may assign their rights, but not
their obligations, under this Agreement in whole or in part to any direct or
indirect wholly-owned Subsidiary of Parent; otherwise, they shall not assign
this Agreement or any rights hereunder, or delegate any obligations hereunder,
without the prior written consent of the Company. The Company shall not assign
this Agreement or any rights hereunder, or delegate any obligations hereunder,
without prior written consent of Parent. Subject to the foregoing, this
Agreement and the rights, and obligations set forth herein shall inure to the
benefit of, and be binding upon, the parties hereto, and each of their
respective successor and assigns. Parent guarantees the full and punctual
performance by Merger Subsidiary and any assignee of Parent or Merger Subsidiary
of all the obligations hereunder of Merger Subsidiary or such assignee.
SECTION 10.13. Parties In Interest. Except as expressly provided herein,
this Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended to
or shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, including, without limitation,
by way of subrogation.
SECTION 10.14. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
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SECTION 10.15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware, without regard to laws that may be applicable under conflict of laws
principles.
SECTION 10.16. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Merger Subsidiary, Original Merger Subsidiary
and the Company have caused this Agreement to be executed on April , 2003 by
their respective officers thereunto duly authorized.
GTECH HOLDINGS CORPORATION
By: /s/ W. BRUCE TURNER
------------------------------------
Name: W. Bruce Turner
Title: President and Chief
Executive Officer
GTECH CORPORATION
By: /s/ W. BRUCE TURNER
------------------------------------
Name: W. Bruce Turner
Title: President and Chief
Executive Officer
BENGAL ACQUISITION CO.
By: /s/ W. BRUCE TURNER
------------------------------------
Name: W. Bruce Turner
Title: President and Chief
Executive Officer
INTERLOTT TECHNOLOGIES, INC.
By: /s/ DAVID F. NICHOLS
------------------------------------
Name: David F. Nichols
Title: President and Chief
Executive Officer
[SIGNATURE PAGE TO AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER]
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ANNEX B
AMENDED AND RESTATED
STOCKHOLDER VOTING AND OPTION AGREEMENT
AMENDED AND RESTATED STOCKHOLDER VOTING AND OPTION AGREEMENT dated as of
March 17, 2003 (this "Agreement"), among GTECH Holdings Corporation, a Delaware
corporation (the "Parent"), GTECH Corporation, a Delaware corporation and a
wholly owned subsidiary of the Parent ("Merger Subsidiary"), Bengal Acquisition
Co., a Delaware corporation and a wholly owned subsidiary of Merger Subsidiary
("Original Merger Subsidiary"), and L. Rogers Wells, Jr. (the "Stockholder"), as
amended and restated by this amendment (the "Amendment") dated April , 2003
and effective as of March 17, 2003.
WHEREAS, the parties hereto have agreed to amend and restate the
Stockholder Voting and Option Agreement (the "Original Stockholder Agreement")
dated as of March 17, 2003, among the Parent, Original Merger Subsidiary and the
Stockholder, in order to permit Merger Subsidiary to assume the rights and
responsibilities of Original Merger Subsidiary thereunder;
WHEREAS, the parties intend, notwithstanding such amendment and
restatement, that this Agreement continues to speak as of March 17, 2003 and
unless otherwise expressly provided herein, the phrases "the date hereof," "the
date of this Agreement" and similar phrases used herein shall mean March 17,
2003;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto, effective as of March 17, 2003, hereby amend and restate the
Original Stockholder Agreement in its entirety as follows:
WHEREAS, concurrently with the execution and delivery of this Agreement the
Parent, Merger Subsidiary and Interlott Technologies, Inc., a Delaware
corporation (the "Company"), have entered into an Agreement and Plan of Merger
dated as of the date hereof (such Agreement and Plan of Merger, as amended from
time to time, the "Merger Agreement"), which provides, among other things, that
the Company shall merge with and into the Merger Subsidiary, and that each
issued and outstanding share of common stock, $0.01 par value per share, of the
Company (the "Company Common Stock"), excluding certain shares of Company Common
Stock described therein, shall be converted into the right to receive the Merger
Consideration, upon the terms and subject to the conditions set forth in the
Merger Agreement (any term used herein without definition shall have the
definition ascribed thereto in the Merger Agreement);
WHEREAS, the Stockholder owns of record the number of shares of each class
of capital stock of the Company set forth on Exhibit A hereto (such shares of
capital stock being collectively referred to herein as the "Stockholder Shares"
or simply the "Shares"); and
WHEREAS, in order to induce the Parent, and Merger Subsidiary to enter into
the Merger Agreement, and as an inducement to them to do so, the Stockholder is
prepared, subject to the terms and conditions of this Agreement, to agree to and
be bound by the obligations and restrictions contained herein.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereby agree
as follows:
ARTICLE ONE
CONSENT AND VOTING
SECTION 1.01. Consent. The Stockholder hereby revokes any and all
previous proxies granted with respect to the Stockholder Shares. By entering
into this Agreement, the Stockholder hereby consents to the Merger Agreement and
the transactions contemplated thereby, including the Merger.
SECTION 1.02. Agreement to Vote. Subject to Section 5.07, the Stockholder
hereby irrevocably and unconditionally agrees to vote or cause to be voted all
of the Shares then owned beneficially or of record by
B-1
him at the Company Stockholders Meeting and at any other annual or special
meeting of shareholders of the Company (or any adjournment or postponement
thereof) where any such proposal is submitted, and in connection with any
written consent of stockholders, (A) in favor of the approval and authorization
of the Merger, the Merger Agreement and the other transactions contemplated
thereby (collectively, the "Proposed Transaction") and (B) against (i) approval
of any proposal made in opposition to or in competition with the Proposed
Transaction and the transactions contemplated by the Merger Agreement, (ii) any
merger, consolidation, sale of assets, business combination, share exchange,
reorganization or recapitalization of the Company or any of its subsidiaries,
with or involving a party other than as contemplated by the Merger Agreement,
(iii) any liquidation or winding up of the Company, (iv) any extraordinary
dividend by the Company, (v) any change in the capital structure or business of
the Company (other than pursuant to the Merger Agreement) and (vi) any other
action that may reasonably be expected to impede, interfere with, delay,
postpone or attempt to discourage the consummation of the transactions
contemplated by the Merger Agreement or result in a breach of any of the
covenants, representations, warranties or other obligations or agreements of the
Company under the Merger Agreement, or which would materially and adversely
affect the Company or Parent or their respective abilities to consummate the
transactions contemplated by the Merger Agreement.
SECTION 1.03. Granting of Irrevocable Proxy. (a) In furtherance of the
terms and provisions of this Agreement, the Stockholder hereby irrevocably
grants to, and appoints, President and Corporate Secretary of Parent, or any of
them, and any individual designated in writing by any of them, and each of them
individually, as the Stockholder's proxy and attorney-in-fact (with full power
of substitution and resubstitution), for and in the name, place and stead of the
Stockholder, to vote or act by written consent with respect to all of the Shares
in favor of the Proposed Transaction and in accordance with the provisions of
Section 1.02 and this Section 1.03. The Stockholder hereby ratifies and approves
each and every action taken by the President and Corporate Secretary of the
Parent and any other Parent-authorized representative or agent pursuant to the
foregoing proxy. Notwithstanding the foregoing, if requested by the Parent, the
Stockholder will execute and deliver applicable proxy material in furtherance of
the provisions of Section 1.02 and this Section 1.03.
(b) The proxy and power of attorney granted pursuant to Section 1.03(a) by
the Stockholder shall be irrevocable during the term of this Agreement, shall be
deemed to be coupled with an interest sufficient in law to support an
irrevocable proxy and shall revoke any and all prior proxies granted by such
Stockholder. The power of attorney granted by the Stockholder herein is a
durable power of attorney and shall survive the bankruptcy, death or incapacity
of such Stockholder. The proxy and power of attorney granted hereunder shall
terminate upon the termination of this Agreement.
(c) Notwithstanding anything to the contrary herein, no provision of this
Article ONE shall in any way limit or restrict the Stockholder from voting his
Shares in favor of approval of the amendment and restatement of the Stock
Incentive Plan, as more particularly described in Section 4.5 of the Merger
Agreement.
ARTICLE TWO
OPTION
SECTION 2.01. Option. (a) The Stockholder hereby irrevocably grants
Merger Subsidiary an option (the "Option"), exercisable only upon the events and
subject to the conditions set forth herein, to purchase all of the Shares at a
purchase price per share equal to $9.00 (the "Exercise Price").
(b) Subject to the conditions set forth in Section 2.02 hereof and the
termination provisions of Section 5.07 hereof, Merger Subsidiary may exercise
the Option in whole at any time prior to the date 60 days after the expiration
or termination of the Merger Agreement (such sixtieth day being herein called
the "Option Expiration Date") if (x) the Stockholder fails to comply with any of
its obligations under this Agreement (but the Option shall not limit any other
right or remedy available to the Parent or Merger Subsidiary against the
Stockholder for breach of this Agreement), or (y) (A) the Merger is not
consummated because of the failure to satisfy the conditions to the Merger set
forth in Article VIII of the Merger Agreement (other than as a result of a
failure of the conditions set forth in any of Sections 8.1(b), 8.1(c),
B-2
8.1(d), 8.1(e), 8.2(d), 8.3(a), 8.3(b), 8.3(c) or 8.3(e) thereof to be
satisfied) and (B) the Merger Agreement has been terminated pursuant to Sections
9.1(a), 9.1(b), 9.1(d), 9.1(h), 9.1(i) (other than solely as a result of a
breach by Parent) or 9.1(j) (other than solely as a result of an untrue
representation or warranty of Parent) thereof.
(c) Upon the occurrence of any of such circumstances, Merger Subsidiary
shall be entitled to exercise the Option and (subject to Section 2.02 hereof)
Merger Subsidiary shall be entitled to purchase the Shares and the Stockholder
shall sell the Shares to Merger Subsidiary. Merger Subsidiary shall exercise the
Option by delivering written notice thereof to the Stockholder (the "Notice"),
specifying the date, time and place for the closing of such purchase which date
shall not be less than three business days nor more than five business days from
the date the Stockholder receives the Notice and in no event shall such date be
later than the Option Expiration Date. The closing of the purchase of Shares
pursuant to this Section 2.01 (the "Closing") shall take place on the date, at
the time and at the place specified in the Notice; provided, that if at such
date any of the conditions specified in Section 2.02 hereof shall not have been
satisfied (or waived), Merger Subsidiary may postpone the Closing until a date
within five business days after such conditions are satisfied (but not later
than the Option Expiration Date).
(d) At the Closing, the Stockholder will deliver to Merger Subsidiary (in
accordance with Merger Subsidiary's instructions) the certificates representing
the Shares, duly endorsed or accompanied by stock powers duly executed in blank,
free and clear of all mortgages, liens, pledges, charges, security interests,
encumbrances, hypothecations, adverse rights, interests, or claims of any nature
whatsoever ("Liens"). At such Closing, Merger Subsidiary shall deliver to the
Stockholder, by bank wire transfer of immediately available funds, an amount
equal to the number of Shares multiplied by the Exercise Price.
SECTION 2.02. Conditions to Option. The obligation of Merger Subsidiary
to purchase the Shares at the Closing is subject to the following conditions:
(a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act")
applicable to such purchase shall have expired or been terminated; and
(b) there shall be no preliminary or permanent injunction or other order,
decree or ruling issued by any Governmental Authority, nor any statute, rule,
regulation or order promulgated or enacted by any Governmental Authority
prohibiting, or otherwise restraining, such purchase.
SECTION 2.03. No Purchase. Merger Subsidiary may allow the Option to
expire without exercising the Option and purchasing the Shares pursuant to such
exercise.
SECTION 2.04. Tender Offer. If (i) the Merger Agreement is terminated in
accordance with Section 9.1 thereof, and (ii) Merger Subsidiary has exercised
the Option, then Parent and Merger Subsidiary shall, to the extent permitted by
applicable state and federal law, including rules and regulations of the SEC,
(x) initiate a tender offer (directly or through a wholly-owned subsidiary) for
all of the then-outstanding shares of Company Common Stock and Options (as both
such terms are defined and used in the Merger Agreement) on the same terms and
conditions, including, without limitation, the same price per share to be paid
pursuant to Section 2.01 hereof, as set forth in Article II hereof and (y) cause
the Company to execute and deliver employment agreements with senior management
of the Company on substantially the same terms as those employment agreements
being executed and delivered by such senior managers and Parent on the date
hereof (which are to become effective at the Effective Time, if it occurs).
ARTICLE THREE
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE STOCKHOLDER
The Stockholder represents, warrants and covenants to the Parent and Merger
Subsidiary that:
SECTION 3.01. Ownership. (a) As of the date hereof the Stockholder is the
sole, true, lawful and record owner of the Stockholder Shares with sole voting
and dispositive power over such Stockholder Shares.
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As of the date hereof and for so long as this Agreement remains in effect
(including the date of the Company Stockholders Meeting, which, for purposes of
this Agreement, includes any adjournment or postponement thereof), except for
this Agreement and as otherwise permitted by this Agreement, the Stockholder has
full legal power, authority and right to vote all of the Stockholder Shares in
favor of the Proposed Transaction without the consent of, or any other action on
the part of, any other person or entity. Without limiting the generality of the
foregoing, none of the Stockholder Shares owned by the Stockholder is subject to
any pledges, mortgages, liens, charges, encumbrances, adverse claims or any
voting trust or other agreement, proxy (revocable or irrevocable), power of
attorney, arrangement or restriction with respect to the voting of such
Stockholder Shares other than those created by this Agreement.
(b) From and after the date of this Agreement, except as otherwise
permitted by this Agreement or required by order of a court of competent
jurisdiction, the Stockholder will not commit any act that could restrict or
otherwise affect his legal power, authority and right to vote all of the
Stockholder Shares then owned of record or beneficially by him. Without limiting
the generality of the foregoing, except for this Agreement and as otherwise
permitted by this Agreement, from and after the date hereof, the Stockholder
will not enter into any voting agreement with any person or entity with respect
to any of the Stockholder Shares, grant to any person or entity any proxy
(revocable or irrevocable) or power of attorney with respect to any of the
Shares, deposit any of the Shares in a voting trust or otherwise enter into any
agreement or arrangement with any person or entity limiting or affecting the
Stockholder's legal power, authority or right to vote the Shares in favor of the
approval of the Proposed Transaction.
SECTION 3.02. Restrictions on Transfer. Prior to the Effective Time, the
Stockholder shall not Transfer (or agree to Transfer) any of his Shares. As used
in this Agreement, "Transfer" means, with respect to any security, the direct or
indirect assignment, sale, transfer, tender, pledge, hypothecation, or the
grant, creation or sufferage of a Lien or encumbrance in or upon, or the gift,
placement in trust, or the constructive sale or other disposition of such
security (including transfers by testamentary or intestate succession or
otherwise by operation of law) or any right, title or interest therein
(including but not limited to any right or power to vote to which the holder
thereof may be entitled, whether such right or power is granted by proxy or
otherwise), or the record or beneficial ownership thereof, the offer to make
such a sale, transfer, constructive sale or other disposition, and each
agreement, arrangement or understanding, whether or not in writing, to effect
any of the foregoing. The term "constructive sale" means a short sale with
respect to such security, entering into or acquiring an offsetting derivative
contract with respect to such security, entering into or acquiring a futures or
forward contract to deliver such security or entering into any other hedging or
other derivative transaction that has the effect of materially changing the
economic benefits and risks of ownership.
SECTION 3.03. No Solicitation. (a) The Stockholder will not directly or
indirectly (i) solicit, initiate or encourage (or authorize any person to
solicit, initiate or encourage) any Acquisition Proposal, (ii) participate in
any discussion or negotiations regarding, or furnish to any other Person any
information with respect to, or otherwise cooperate in any way with, or
participate in, facilitate or encourage any effort or attempt by any other
Person to do or seek the foregoing, (iii) approve, endorse or recommend any of
the foregoing, or (iv) enter into any letter of intent or similar document or
any contract, agreement or commitment contemplating or otherwise relating to any
of the foregoing. The Stockholder shall immediately (and in any event within 24
hours) advise the Parent and Merger Subsidiary (orally and in writing) of the
terms of any communications he or any of his affiliates may receive relating to
any Acquisition Proposal (including, without limitation, the identify of the
party making any such Acquisition Proposal).
(b) The Stockholder shall not, nor shall such Stockholder permit any
affiliate of such Stockholder to, nor shall such Stockholder act in concert with
or permit any affiliate to act in concert with any person to make, or in any
manner participate in, directly or indirectly, a "solicitation" of "proxies" (as
such terms are used in the rules of the Securities and Exchange Commission) or
powers of attorney or similar rights to vote, or seek to advise or influence any
person with respect to the voting of, any shares of Company Common Stock in
connection with any vote or other action on any matter, other than to recommend
that Stockholders of the Company vote in favor of the Merger and the Merger
Agreement and otherwise as expressly provided by Article One of this Agreement.
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(c) Such Stockholder shall not, nor shall such Stockholder permit any
affiliate of such Stockholder to, nor shall such Stockholder act in concert with
or permit any affiliate to act in concert with any person to, deposit any shares
of Company Common Stock in a voting trust or subject any shares of Company
Common Stock to any arrangement or agreement with any person with respect to the
voting of such shares of Company Common Stock, except as provided by Article One
of this Agreement.
(d) Nothing herein shall prohibit any action permitted by Section 6.4 of
the Merger Agreement from being taken by any party thereto.
SECTION 3.04. Authority and Non-Contravention. The execution, delivery
and performance by the Stockholder of this Agreement and the consummation of the
transactions contemplated hereby (i) are within the Stockholder's power and
authority and have been duly authorized by all necessary action (including any
consultation, approval or other action by or with any other Person), (ii)
require no action by or in respect of, or filing with, any Governmental
Authority (except as may be required under the HSR Act and under the Exchange
Act), and (iii) do not and will not result in any breach or violation of or be
in conflict with, contravene or constitute a default under, or give rise to a
right of termination, cancellation or acceleration of any right or obligation of
the Stockholder or to a loss of any benefit of the Stockholder under, any
provision of applicable law or regulation or any agreement, judgment,
injunction, order, decree, or other instrument binding on the Stockholder or
result in the imposition of any Lien on any assets of the Stockholder.
SECTION 3.05. Binding Effect. This Agreement has been duly executed and
delivered by the Stockholder and is the valid and binding agreement of the
Stockholder, enforceable against him in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally.
SECTION 3.06. Total Shares. The Stockholder Shares owned by the
Stockholder are the only shares of Company Common Stock or other capital stock
beneficially owned as of the date hereof by the Stockholder and, except as set
forth on Exhibit A, the Stockholder has no option to purchase or right to
subscribe for or otherwise acquire any securities of the Company and has no
other interest in or voting rights with respect to any other securities of the
Company.
SECTION 3.07. Finder's Fees. No investment banker, broker or finder is
entitled to a commission or fee from the Parent, Merger Subsidiary or the
Company in respect of this Agreement based upon any arrangement or agreement
made by or on behalf of the Stockholder, except as otherwise disclosed in the
Merger Agreement.
SECTION 3.08. Reliance by Parent. Stockholder understands and
acknowledges that Parent is entering into the Merger Agreement in reliance upon
the execution and delivery of this Agreement by such Stockholder.
SECTION 3.09. Publication. The Stockholder hereby permits Parent to
publish and disclose in the Proxy Statement-Prospectus and the Registration
Statement (including all documents and schedules filed with the Securities and
Exchange Commission) his identity and ownership of shares of Company Common
Stock and the nature of his commitments, arrangements and understandings
pursuant to this Agreement.
ARTICLE FOUR
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARENT AND MERGER SUBSIDIARY
The Parent and Merger Subsidiary represent, warrant and covenant to the
Stockholder:
SECTION 4.01. Corporate Power and Authority; Noncontravention. The Parent
and Merger Subsidiary have all requisite corporate power and authority to enter
into this Agreement and to perform their respective obligations hereunder. The
execution, delivery and performance by the Parent and Merger Subsidiary of this
Agreement and the consummation by the Parent and Merger Subsidiary of the
transactions contemplated hereby (i) have been duly authorized by all necessary
corporate action on the part of the Parent and Merger Subsidiary, (ii) require
no action by or in respect of, or filing with, any Governmental Authority
(except as
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may be required under the HSR Act and under the Exchange Act), and (iii) do not
and will not contravene or constitute a default under, the certificate of
incorporation or by-laws of Parent or Merger Subsidiary or any provision of
applicable law or regulation or any judgment, injunction, order, decree,
material agreement or other material instrument binding on the Parent or Merger
Subsidiary.
SECTION 4.02. Binding Effect. This Agreement has been duly executed and
delivered by the Parent and Merger Subsidiary and is a valid and binding
agreement of the Parent and Merger Subsidiary, enforceable against each of them
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights generally.
SECTION 4.03. Acquisition for Merger Subsidiary's Account. Any Shares to
be acquired upon consummation of the Merger or upon exercise of the Option will
be acquired by Merger Subsidiary for its own account and not with a view to the
public distribution thereof and will not be transferred except in compliance
with the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
ARTICLE FIVE
MISCELLANEOUS
SECTION 5.01. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 5.02. Further Assurances. The Parent, Merger Subsidiary and the
Stockholder each agree to execute and deliver or cause to be executed and
delivered all further documents and instruments and use their respective
reasonable best efforts to secure such consents and take all such further action
as may be reasonably necessary in order to consummate the transactions
contemplated hereby and by the Merger Agreement.
SECTION 5.03. Additional Agreements. Subject to the terms and conditions
of this Agreement, each of the parties hereto agrees to use all reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations and which may be required under any agreements, contracts,
commitments, instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is governed or bound,
to consummate and make effective the transactions contemplated by this
Agreement. The Stockholder shall not issue any press release or make any other
public statement with respect to the Merger Agreement, the Merger or any other
transaction contemplated by the Merger Agreement without the prior written
consent of Parent, except as may be required by applicable law.
SECTION 5.04. Specific Performance. The parties acknowledge and agree
that performance of their respective obligations hereunder will confer a unique
benefit on the other and that a failure of performance will not be compensable
by money damages and will constitute irreparable harm. The parties therefore
agree that this Agreement shall be specifically enforceable and that specific
enforcement and injunctive and other equitable relief shall be available to the
Parent, Merger Subsidiary or the Stockholder for any breach by the other party
or parties of any agreement, covenant or representation hereunder, and each
party waives any objection to the imposition of such relief. The Parent, Merger
Subsidiary and the Stockholder each agree that this Agreement has been
negotiated with the advice of counsel.
SECTION 5.05. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by telecopy, or by registered or certified mail (postage prepaid,
return receipt requested) to such party at its address set forth below:
If to Parent or Merger Subsidiary:
GTECH Holdings Corporation
55 Technology Way
West Greenwich, Rhode Island 02817
Facsimile (401) 392-4980
Attention: General Counsel
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With a copy to:
Edwards & Angell, LLP
2800 Financial Plaza
Providence, Rhode Island 02903-2499
Facsimile (401) 276-6611
Attention: Walter G.D. Reed, Esq.
If to Stockholder:
L. Rogers Wells, Jr.
c/o Interlott Technologies, Inc.
7697 Innovation Way
Mason, Ohio 45040-9695
Facsimile (513) 701-0272
With a copy to:
Taft, Stettinius & Hollister LLP
425 Walnut Street, Suite 1800
Cincinnati, Ohio 45202
Facsimile (513) 381-0205
Attention: John J. McCoy, Esq.
or to such other address as such party shall have designated by notice so given
to each other party.
SECTION 5.06. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Shares pursuant to Section 2.02 hereof. None of
the representations and warranties contained in this Agreement shall survive the
Effective Time.
SECTION 5.07. Amendments; Termination; Modification. This Agreement may
not be modified, amended, altered or supplemented or waived, except upon the
execution and delivery of a written agreement executed by the parties hereto.
This Agreement will terminate automatically on the first to occur of (i) the
Effective Time; (ii) any termination of the Merger Agreement pursuant to Section
9.1(c), 9.1(e), 9.1(f), 9.1(g), 9.1(i) (due to any breach by Parent) or 9.1(j)
(due to any breach of a representation or warranty of Parent) thereof; (iii) 60
days after termination of the Merger Agreement for any reason other than set
forth in the preceding clause (ii); or (iv) December 17, 2003.
SECTION 5.08. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, including without limitation in the case of
any corporate party hereto any corporate successor by merger or otherwise, and
in the case of any individual party hereto, any trustee, executor, heir,
legatee, or personal representative succeeding to the ownership of such party's
Shares; provided, however, that Merger Subsidiary may assign its rights and
obligations to another wholly-owned subsidiary of the Parent which is the
assignee of Merger Subsidiary's rights under the Merger Agreement; and provided
further that except as set forth in the prior clause, a party may not assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto and any purported
assignment, delegation or transfer without such consent shall be null and void.
Without limiting the scope or effect of the restrictions on Transfer set forth
in Section 3.02, the Stockholder agrees that this Agreement and the obligations
hereunder shall attach to the Shares and shall be binding upon any person or
entity to which legal or beneficial ownership of such Shares shall pass, whether
by operation of law or otherwise.
SECTION 5.09. Governing Law; Consent to Jurisdiction; Waiver of Trial by
Jury. (a) This Agreement and the transactions contemplated hereby, and all
disputes between the parties under or related to the Agreement or the facts and
circumstances leading to its execution, whether in contract, tort or otherwise,
shall be governed by and construed in accordance with the laws of the State of
Delaware, without regard to the application of Delaware principles of conflicts
of laws.
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(b) Each of the parties hereto hereby irrevocably and unconditionally
submits itself to the exclusive jurisdiction of any Delaware State court, or
Federal court sitting in Delaware, in any action or proceeding arising out of or
relating to this Agreement or the agreements delivered in connection herewith or
the transactions contemplated hereby or thereby or for recognition or
enforcement of any judgment relating thereto, and each of the parties hereby
irrevocably and unconditionally (i) agrees not to commence any such action or
proceeding except in such courts, (ii) agrees that any claim in respect of any
such action or proceeding may be heard and determined in such Delaware State
court or, to the extent permitted by law, in such Federal court, (iii) waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any such action or
proceeding in any such Delaware State or Federal court, and (iv) waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such Delaware State or Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 5.05. Nothing in this Agreement shall
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH
WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 5.09.
SECTION 5.10. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effects as if the signatures thereto and thereof were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 5.11. Stockholder Capacity. The Stockholder signs solely in its
capacity as the record owner of the Stockholder Shares and nothing herein shall
limit or affect any actions taken by the Stockholder or any affiliate of the
Stockholder in his or her capacity as an officer or director of the Company and
no such actions shall be deemed a breach of this Agreement.
SECTION 5.12. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions be consummated as originally contemplated to the
fullest extent possible. To the extent that any provision of this Agreement and
the Merger Agreement conflict, the provisions of the Merger Agreement shall
control.
SECTION 5.13. Additional Shares; Adjustments. (a) If, after the date
hereof, the Stockholder acquires beneficial or record ownership of any
additional shares of capital stock of the company (any such shares, "Additional
Shares"), including, without limitation, upon exercise of any option, warrant or
right to acquire
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shares of capital stock of the Company or through any stock dividend or stock
split, the provisions of this Agreement applicable to the Shares shall
thereafter be applicable to such Additional Shares as if such Additional Shares
had been Shares as of the date hereof. The provisions of the immediately
preceding sentence shall be effective with respect to Additional Shares without
action by any person or entity immediately upon the acquisition by the
Stockholder of beneficial ownership of such Additional Shares.
(b) In the event of any change in the Company's capital stock by reason of
stock dividends, stock splits, mergers, consolidations, recapitalization,
combinations, conversions, exchanges of shares, extraordinary or liquidating
dividends, or other changes in the corporate or capital structure of the Company
which would have the effect of diluting or changing Merger Subsidiary's rights
hereunder, the number and kind of shares or securities subject to this Agreement
and the price set forth herein at which Shares may be purchased from the
Stockholder pursuant to exercise of the Option shall be appropriately and
equitably adjusted so that Merger Subsidiary shall receive pursuant to the
exercise of the Option the number and class of shares or other securities or
property that Merger Subsidiary would have received in respect of the Shares
purchasable pursuant to the exercise of the Option if such purchase had occurred
immediately prior to such event.
SECTION 5.14 Appraisal Rights. The Stockholder hereby waives, and agrees
not to exercise or assert, any appraisal rights under Section 262 of the
Delaware General Corporation Law in connection with the Merger.
SECTION 5.15. Entire Agreement; No Third Party Beneficiaries. This
Agreement (together with the Merger Agreement) (i) embodies the entire agreement
and understanding among the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such matter
(including the Original Stockholder Agreement) and (ii) is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
GTECH HOLDINGS CORPORATION
By: /s/ W. BRUCE TURNER
------------------------------------
Name: W. Bruce Turner
Title: President and Chief Executive
Officer
GTECH CORPORATION
By: /s/ W. BRUCE TURNER
------------------------------------
Name: W. Bruce Turner
Title: President and Chief Executive
Officer
BENGAL ACQUISITION CO.
By: /s/ W. BRUCE TURNER
------------------------------------
Name: W. Bruce Turner
Title: President and Chief Executive
Officer
STOCKHOLDER
/s/ L. ROGERS WELLS, JR.
--------------------------------------
L. Rogers Wells, Jr.
[SIGNATURE PAGE TO AMENDED AND RESTATED STOCKHOLDER VOTING AND OPTION AGREEMENT]
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EXHIBIT A TO
VOTING AND OPTION AGREEMENT
Shares of Common Stock, par
value $0.01................... 3,441,800
Options to purchase common
stock......................... 537,000, of which 210,500 are exercisable at
March 6, 2003
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ANNEX C
March 16, 2003
Special Committee of Independent Directors
Interlott Technologies, Inc.
7697 Innovation Way
Mason, Ohio 45040
Dear Special Committee of Independent Directors:
We understand that Interlott Technologies, Inc. ("Interlott" or the "Company")
is considering an outstanding offer to be acquired by a publicly-traded
competitor (the "Acquiror"). We further understand that the consideration to be
received by the stockholders of the Company is expected to be comprised of 50.0%
stock of the Acquiror and 50.0% cash. Such transaction and other related
transactions are referred to collectively herein as the "Transaction."
Additionally, the stock consideration received shall be registered and
unrestricted, except for shares issued to those subject to Rule 145 affiliate
rules. Further, it is our understanding that the Agreement and Plan of Merger
includes a fiduciary-out provision for the board of directors.
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction or the procedures it employed in arriving upon the
terms of the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Additionally, our Opinion does not address the tax consequences for the
stockholders, and does not constitute a recommendation to the stockholders as to
how they should vote. Furthermore, at your request, we have not negotiated the
Transaction or advised you with respect to alternatives to it.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's annual reports to shareholders and on Form 10-K for
the fiscal years ended 1998 through 2001 and quarterly reports on Form 10-Q
for the three quarters ended September 30, 2002 and preliminary 10-K for the
fiscal year ended 2002;
2. reviewed the Company's forecasted income statements for the fiscal years
2003 to 2004;
3. reviewed Acquior's annual reports to shareholders and on Form 10-K for the
fiscal years ended 1998 through 2001 and quarterly reports on Form 10-Q for
the three quarters ended October 31, 2002;
4. reviewed copies of the following agreements: Draft Agreement and Plan of
Merger Among Patriot Holdings Corporation, Bengal Acquisition Corporation,
and Bengal, Inc. dated March 12, 2003; Draft Stockholder Voting and Option
Agreement dated March 12, 2003; and Draft Noncompetition Agreement dated
March 12, 2003;
5. met with certain members of the senior management of the Company to discuss
Interlott's operations and financial condition;
6. met with certain members of the senior management of Acquiror, via
teleconference, to discuss its operations, strategy, expectations and
acquisition rational;
7. visited the business offices of the Company;
8. reviewed the presentation of Acquiror by the CEO and CFO dated March 2003;
9. reviewed the historical market prices and trading volume for the Company's
and Acquiror's publicly traded securities;
10. reviewed certain other publicly available financial data for certain
companies that we deem comparable to the Company including prices and
premiums paid in other transactions that Houlihan Lokey considered
similar to the transaction; and
11. conducted such other studies, analyses and inquiries as we have deemed
appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
This Opinion is furnished solely for your benefit and may not be relied upon by
any other person without our express, prior written consent. This Opinion is
delivered to each recipient subject to the conditions, scope of engagement,
limitations and understandings set forth in this Opinion and out engagement
letter, and subject to the understanding that the obligations of Houlihan Lokey
in the Transaction are solely corporate obligations, and no officer, director,
employee, agent, shareholder or controlling person of Houlihan Lokey shall be
subjected to any personal liability whatsoever to any person, nor will any such
claim be asserted by or on behalf of you or your affiliates.
Based upon the foregoing, and in reliance thereon, it is our opinion that the
consideration to be received by the unaffiliated public stockholders of the
Company in connection with the Transaction is fair to them from a financial
point of view.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
ANNEX D
DELAWARE CODE
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER, CONSOLIDATION OR CONVERSION
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Section
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not
D-2
more than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
D-3
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
D-4
ANNEX E
INTERLOTT TECHNOLOGIES, INC.
1994 STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 15, 2003)
1. Purpose.
(a) General Purpose. The purpose of this INTERLOTT TECHNOLOGIES, INC.
1994 STOCK INCENTIVE PLAN (the "Plan") is to further the growth and development
of Interlott Technologies, Inc. (the "Company") by encouraging employees and
others to obtain a proprietary interest in the Company by owning its stock. The
Company intends that the Plan will provide such persons with an added incentive
to continue in the employ or service of the Company and will stimulate their
efforts in promoting the growth, efficiency and profitability of the Company.
The Company also intends that the Plan will afford the Company a means of
attracting to its service persons of outstanding quality.
(b) Tax Effects of Stock Rights. It is further intended that part of the
Plan qualify as an incentive stock option plan, and that any option granted in
accordance with such portion of the Plan qualify as an incentive stock option
("ISO"), all within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). The tax effects of any other stock option (a
"Non-ISO") or restricted stock ("Restricted Stock") granted hereunder should be
determined under Section 83 of the Code. Unless otherwise specified, the term
"Options" shall refer to ISOs and Non-ISOs, and the term "Stock Rights" shall
refer to Options and Restricted Stock.
2. Administration.
(a) General Administration. The Plan shall be administered and
interpreted by the Company's Board of Directors (the "Board"). Subject to the
provisions of the Plan, the Board shall have the authority and sole discretion
to determine and designate, from time to time, those persons eligible for a
grant of Stock Rights under the Plan, those persons to whom Stock Rights are to
be granted, the purchase price (if any) of the shares covered by any Stock
Rights granted, the time or times at which Stock Rights shall be granted, and
the manner in and conditions under which Options are exercisable (including,
without limitation, any limitations or restrictions thereon) and shares of
Restricted Stock shall vest. In making such determinations, the Board may take
into account the nature of the services rendered by the respective persons to
whom Stock Rights may be granted, their present and potential contributions to
the Company's success and such other factors as the Board, in its sole
discretion, shall deem relevant. Subject to the express provisions of the Plan,
the Board also shall have authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, to determine the terms and
provisions of the instruments by which Stock Rights shall be evidenced (which
shall not be inconsistent with the terms of the Plan), and to make all other
determinations necessary or advisable for the administration of the Plan, all of
which determinations shall be final, binding and conclusive.
(b) Committee. At any time, or from time to time, the Board may appoint a
committee of at least two directors (the "Committee") to administer, or to
approve transactions pursuant to, the Plan. In the event a Committee is so
appointed, it may carry out all of the functions of the Board with respect to
the Plan, except for amendments to or suspension or termination of the Plan.
(c) Indemnification. In addition to such other rights of indemnification
as they have as directors, the members of the Board shall be indemnified by the
Company against reasonable expenses (including, without limitation, attorneys'
fees) actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal, to which they or
any of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan or any Stock Rights granted hereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved to the extent required by and in the manner provided by the Bylaws
of the Company relating to indemnification of directors) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Board member
E-1
or members did not act in good faith and in a manner he or they reasonably
believed to be in or not opposed to the best interest of the Company.
3. Stock.
The stock issuable under the Plan shall be authorized but unissued or
reacquired shares of the common stock of the Company (the "Common Stock").
Subject to adjustment in accordance with the provisions of Section 7, the total
number of shares of Common Stock for which Stock Rights may be granted to
persons participating in the Plan shall not exceed in the aggregate 2,120,000
shares of Common Stock and Options for no more than 500,000 shares of Common
Stock may be granted to any person during any period of twelve consecutive
months. Notwithstanding the foregoing, shares of Common Stock allocable to the
unexercised portion of any expired or terminated Option again may become subject
to Stock Rights under the Plan.
4. Eligibility to Receive Stock Rights.
(a) Eligible Optionees and Recipients. The persons eligible to receive
Stock Rights hereunder shall be employees of the Company and of any Parent or
Subsidiary of the Company (as defined in Sections 424(e) and 424(f) of the
Code), the Company's nonemployee directors and advisors and consultants to the
Company; provided, that only employees of the Company and any Parent or
Subsidiary corporations shall be eligible to receive grants of ISOs. The Board
from time to time may select such persons to whom Stock Rights are to be offered
and granted hereunder; such selected persons hereinafter are referred to as
"Optionees" if receiving Options and as "Recipients" if receiving Restricted
Stock.
(b) Grants. The Board may grant, at any time, new Stock Rights to an
Optionee or a Recipient who previously has received Stock Rights, regardless of
whether previously granted Stock Rights still are outstanding, have been
exercised in whole or in part, have expired or are canceled in connection with
the issuance of new Stock Rights.
(c) Limitation on Exercisability. Notwithstanding anything herein to the
contrary, the aggregate fair market value of ISOs which are granted to any
employee under the Plan and any other stock option plan adopted by the Company
that are first exercisable in any one calendar year shall not exceed $100,000.
As of the date any ISO is granted, the Board shall determine its fair market
value (for purposes of this paragraph) in accordance with the terms of Section 5
of the Plan. The Board shall interpret and administer the limitations set forth
in this paragraph in accordance with Section 422(d) of the Code.
5. Terms and Conditions of Options.
Options may be granted to Optionees from time to time and at such times as
may be authorized by the Board. Subject to the provisions hereinafter set forth,
each Option granted under the Plan shall be designated either as an ISO or a
Non-ISO. In its authorization of the granting of an Option hereunder, the Board
shall specify the name of the Optionee, the number of shares of stock subject to
such Option and whether such Option is an ISO or a Non-ISO. The Board then shall
cause to be prepared a written agreement, executed and dated by the Company,
evidencing such Option (the "Option Agreement") and setting forth the terms and
conditions of such Option; provided, an Option Agreement evidencing both an ISO
and a Non-ISO shall identify clearly the status and terms of each Option. Option
Agreements shall comply with and be subject to the following terms and
conditions:
(a) Optionee and Number of Shares. Each Option Agreement shall state the
name of the Optionee and the total number of shares of Common Stock to which it
pertains.
(b) Vesting.
(i) Unless otherwise provided by the Board, each Option shall first become
exercisable (that is, vested) with respect to such portions of the shares
subject to such Option as are specified in the schedule set forth hereinbelow;
provided, if an Optionee ceases to be an employee of, or ceases to perform
services for, the Company, the Optionee's rights with regard to all non-vested
Options shall cease immediately except as provided in paragraphs (ii) and (iii)
below. For purposes of this Plan, performance of services for the
E-2
Company shall include service as a nonemployee director of the Company, and a
nonemployee director of the Company shall be considered to have ceased to
perform services for the Company on the date he or she ceases to be a director
of the Company.
(A) Commencing as of the first anniversary of the date the Option is
granted, the Optionee shall have the right to exercise the Option with
respect to, and to thereby purchase, 25% of the shares subject to such
Option. Prior to said date, the Option shall be unexercisable in its
entirety.
(B) Commencing as of the second anniversary of the date the Option is
granted, the Optionee shall have the right to exercise the Option with
respect to, and to thereby purchase, an additional 25% of the shares
subject to the Option.
(C) Commencing as of the third anniversary of the date the Option is
granted, the Optionee shall have the right to exercise the Option with
respect to, and to thereby purchase, an additional 25% of the shares
subject to the Option.
(D) Commencing as of the fourth anniversary of the date the Option is
granted, the Optionee shall have the right to exercise the Option with
respect to, and to thereby purchase, the remainder of the shares subject to
such Option.
(ii) Notwithstanding the above, any Options previously granted to an
Optionee shall become immediately vested and exercisable for 100% of the number
of shares subject to the Options upon the Optionee's becoming totally and
permanently disabled or upon the Optionee's death.
(iii) Notwithstanding the above, all Options previously granted to an
Optionee shall become immediately vested and exercisable for 100% of the number
of shares subject to the Options upon a Change of Control (as defined in Section
8 hereof).
(iv) The Option Agreement and the Optionee's right as to vested stock
options shall not impose upon the Company any obligation to retain the Optionee
as an employee or as an advisor or consultant for any period.
(c) Option Price.
(i) The purchase price of the shares of Common Stock underlying each Option
(the "Option Price") shall be the fair market value of the Common Stock on the
date the Option is granted; provided, in no event shall the Option Price of any
ISO granted to an Optionee who owns more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary be less
than 110% of the fair market value of the Common Stock on the date the Option is
granted.
(ii) If the Common Stock subject to the Plan is listed on a national
securities exchange (as such term is defined by the Securities Exchange Act of
1934, as amended (the "1934 Act")) or is regularly traded in the
over-the-counter market on the date of determination, the fair market value per
share shall be the closing price of a share of the Common Stock on said national
securities exchange or over-the-counter market on the date of grant of the
Option. If shares are publicly traded on a national securities exchange or the
over-the-counter market but no shares of the Stock are traded on that date (or
if records of such sales are unavailable or burdensome to obtain) but there were
shares traded on dates within a reasonable period both before and after such
date, the fair market value shall be the average of the closing prices of the
Common Stock on the nearest date before and the nearest date after the date of
determination. If the Common Stock is traded both on a national securities
exchange and in the over-the-counter market, the closing price shall be
determined by the closing price on the national securities exchange, unless
transactions on such exchange and in the over-the-counter market are jointly
reported on a consolidated reporting system in which case the closing price
shall be determined by reference to such consolidated reporting system. If the
Common Stock is not listed for trading on a national securities exchange and is
not regularly traded in the over-the-counter market, then the Board shall
determine the fair market value of the Common Stock from all relevant available
facts, which may include opinions of independent experts as to value and may
take into account any recent sales and purchases of such Common Stock to the
extent they are representative.
E-3
(d) Terms of Options. Unless otherwise specified by the Board at the time
of grant, each Option shall expire on the date that is 10 years less one day
from its date of grant; provided that any ISO granted to an Optionee who owns
more than 10% of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary shall expire on the date that is 5 years
less one day from the date the ISO is granted.
(e) ISOs Converted to Non-ISOs. In the event any part or all of an ISO
granted under the Plan at any time fails to satisfy all of the requirements of
an incentive stock option, then the portion of the Option, if any, that still
qualifies as an incentive stock option shall remain an ISO, and the portion that
does not qualify as an incentive stock option shall become a Non-ISO.
(f) Terms of Exercise. The exercise of an Option may be for less than the
full number of shares of Common Stock subject to such Option, but such exercise
shall not be made for less than (i) 100 shares or (ii) the total remaining
shares subject to the Option, if less than 100 shares. Subject to the other
restrictions on exercise set forth herein, the unexercised portion of an Option
may be exercised at a later date by the Optionee.
(g) Method of Exercise. All Options granted hereunder shall be exercised
by written notice directed to the Secretary or Assistant Secretary of the
Company at its principal place of business or to such other person as the Board
may direct. Each notice of exercise shall identify the Option which the Optionee
is exercising (in whole or in part) and shall be accompanied by payment of the
Option Price for the number of shares specified in such notice. The Company
shall make delivery of such shares within a reasonable period of time.
(h) Medium and Time of Payment.
(i) The Option Price shall be payable upon the exercise of the Option in an
amount equal to the number of shares then being purchased times the per share
Option Price. Payment, at the election of the Optionee (or his successors as
provided in Section 5(i)(iii)), shall be (A) in cash; (B) by delivery to the
Company of a certificate or certificates for shares of the Common Stock duly
endorsed for transfer to the Company with signature guaranteed by a member firm
of a national stock exchange or by a national or state bank or a federally
chartered thrift institution (or guaranteed or notarized in such other manner as
the Board may require); or (C) by a combination of (A) and (B).
(ii) If all or part of the Option Price is paid by delivery of shares of
the Common Stock, the following conditions shall apply:
(A) Such shares shall be valued on the basis of the fair market value
of the Common Stock on the date of exercise. Fair market value shall be
determined in the manner provided in Section 5(c)(ii) (dealing with
determining the Option Price);
(B) On the date of such payment, the Optionee must have held such
shares for at least six months from the date of acquisition; and
(C) The value of such Common Stock shall be less than or equal to the
total Option Price payment. If the Optionee delivers Common Stock with a
value that is less than the total Option Price, then such Optionee shall
pay the balance of the total Option Price in cash.
(iii) In addition to the payment of the purchase price of the shares then
being purchased, an Optionee also shall pay in cash (or have withheld from his
normal pay) an amount equal to the amount, if any, which the Company at the time
of exercise is required to withhold under the income tax withholding provisions
of the Code and of the income tax laws of the state of the Optionee's residence.
(i) Effect of Termination of Employment, Termination of Service or
Death. Except as provided in parts (i), (ii) and (iii) of this subsection, no
Option shall be exercisable unless the Optionee thereof shall have been an
employee of, or providing services to, the Company from the date of the granting
of the Option until the date of exercise; provided, the Board, in its sole
discretion, may waive the application of this Section 5(i) with respect to any
Non-ISOs granted hereunder and, instead, may provide a different expiration date
or dates in a Non-ISO Option Agreement.
E-4
(i) In the event an Optionee ceases to be an employee of, or ceases to
perform services for, the Company for any reason other than death or total
and permanently disability, any Option or unexercised portion thereof
granted to the Optionee shall terminate on and shall not be exercisable
after the earliest to occur of (a) the expiration date of the Option, (b)
three months after termination of employment or cessation of service (as
applicable), or (c) the date on which the Company gives notice to such
Optionee of termination of employment or service if employment or service
is terminated by the Company because of an act or acts by the Optionee
involving personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform
stated duties or willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) (an Optionee's resignation in
anticipation of termination of employment or service by the Company because
of an act or acts of the type listed in this sentence ("cause") shall
constitute a notice of termination by the Company); provided, the Board may
provide in the Option Agreement that such Option or any unexercised portion
thereof shall terminate sooner. Notwithstanding the foregoing, in the event
that an Optionee's employment or service terminates for a reason other than
death or disability (as provided in the preceding sentence) within one year
after a Change of Control (as defined in Section 8 hereof), all Options
held by that Optionee on the date of termination of employment shall be
exercisable for a period ending on the earlier to occur of the first
anniversary of the date of termination or the respective expiration dates
of such Options. Prior to the earlier of the dates specified in the
preceding sentences of this Section 5(i)(i), the Option shall be
exercisable only in accordance with its terms and only for the number of
shares exercisable on the date of termination of employment or service. The
question of whether an authorized leave of absence or absence for military
or government service or for any other reason shall constitute a
termination of employment or service for purposes of the Plan shall be
determined by the Board, which determination shall be final and conclusive.
(ii) Upon the termination of an Optionee's employment or service due
to total and permanent disability, as determined by the Board in its sole
discretion, any Option or unexercised portion thereof granted to the
Optionee which is otherwise exercisable shall terminate on and shall not be
exercisable after the earlier to occur of (a) the expiration date of such
Option, or (b) one year after the date on which such Optionee ceases to be
an employee of, or ceases to perform services for, the Company; provided,
the Board may provide in the Option Agreement that such Option or any
unexercised portion thereof shall terminate sooner. Prior to the earlier of
such date, such Option shall be exercisable only in accordance with its
terms and only for the number of shares exercisable on the date such
Optionee's employment or performance of services ceases due to disability.
(iii) In the event of the death of the Optionee (A) while an employee
of, or performing services for, the Company, (B) within three months after
the date on which such Optionee's employment or services terminated (for a
reason other than cause) as provided in Section (5)(i)(i), or (C) within
one year after the date on which such Optionee's employment or services
terminated due to disability as provided in Section 5(i)(ii), any Option or
unexercised portion thereof granted to the Optionee which is otherwise
exercisable may be exercised by the Optionee's personal representatives,
heirs or legatees at any time prior to the expiration of one year from the
date of death of such Optionee, but in no event later than the expiration
date of the Option; provided, the Board may provide in the Option Agreement
that such Option or any unexercised portion thereof shall terminate sooner.
The Board may provide a beneficiary designation by the Optionee as to
specific persons eligible to exercise the Stock Rights upon the Optionee's
death. Such exercise shall be effected pursuant to the terms of this
Section 5 as if such designated beneficiary, personal representatives,
heirs or legatees are the named Optionee.
(j) Restrictions on Transfer and Exercise of Options. No Option shall be
assignable or transferable by the Optionee except by will or by the laws of
descent and distribution; provided, however, that the Board may (but need not)
permit other transfers where the Board concludes that such transferability (i)
does not result in accelerated taxation, and (ii) is otherwise appropriate and
desirable, taking into account any factors deemed relevant, including without
limitation, any state or federal tax or securities laws applicable to
transferable options. During the lifetime of an Optionee, the Option shall be
exercisable only by the Optionee or such permitted transferee; provided,
however, that in the event the Optionee is incapacitated and unable to exercise
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Options, such Options may be exercised by such Optionee's legal guardian, legal
representative, fiduciary or other representative whom the Board deems
appropriate based on applicable facts and circumstances.
(k) Right as a Stockholder. An Optionee shall have no rights as a
stockholder with respect to shares covered by an Option until date of the
issuance of the shares to the Optionee and only after the Option Price of such
shares is fully paid. Unless specified in Section 7, no adjustment will be made
for dividends or other rights for which the record date is prior to the date of
such issuance.
(l) Miscellaneous Provisions. The Option Agreements authorized under the
Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Option, as the Board shall deem advisable.
In the event of any conflict between the provisions of an Option Agreement and
the Plan, the Plan shall control.
(m) No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Optionee to exercise such Option.
6. Restricted Stock Awards.
Restricted Stock may be awarded to eligible persons from time to time and
at such times as may be authorized by the Board. The shares of Common Stock
covered by an award of Restricted Stock shall be subject to such restrictions as
the Board shall specify and shall be subject to forfeiture by the Recipient
until the earlier of (i) the time such restrictions lapse or are satisfied, or
(ii) the time such shares are forfeited. In its authorization of an award of
Restricted Stock hereunder, the Board shall specify the name of the Recipient,
the number of shares of Restricted Stock awarded, the consideration to be paid
(if any) and the restrictions to which such Restricted Stock shall be subject.
The Board then shall cause to be prepared and presented to the Recipient a
written agreement, executed and dated by the Company, evidencing such terms of
the award (the "Restriction Agreement"). The failure of the Recipient to execute
the Restriction Agreement within 30 days after the date of the receipt of same
shall render the Restriction Agreement and the underlying award of Restricted
Stock null and void ab inito. Restriction Agreements and the Restricted Stock
awarded thereby shall comply with and be subject to the following terms and
conditions:
(a) Recipient and Number of Shares. Each Restriction Agreement shall state
the name of the Recipient and the total number of shares of the Common Stock to
which it pertains.
(b) Restrictions on Stock.
(i) The vesting of complete ownership rights in any Restricted Stock
awarded pursuant to this Section 6 shall be subject to such terms and conditions
as the Board may determine in its sole discretion. A Recipient shall vest and
obtain a nonforfeitable interest in the Restricted Stock as of the date that the
last of such terms and conditions is satisfied; provided, if such terms and
conditions are not satisfied by the deadline, if any, designated by the Board
and specified in the Restriction Agreement, the portion of Restricted Stock
still subject to such terms and conditions shall be forfeited and returned to
the Company. The Board, in its sole discretion, may provide for the lapse of the
terms and conditions to which Restricted Stock is subject in installments, and
may provide for different terms and conditions and/or a different restriction
period with respect to each award, or any portion of an award, of Restricted
Stock.
(ii) In addition to such terms and conditions as the Board may determine
with respect to the vesting of any shares of Restricted Stock, all Restricted
Stock shall vest with respect to such portion of each grant of Restricted Stock
as is specified in the schedule set forth hereinbelow.
(A) Commencing as of the first anniversary of the date the Restricted
Stock is granted, complete ownership rights shall vest (subject to such
other terms and conditions as the Board may determine) in 25% of the
Restricted Stock so granted. Prior to said date, none of such Restricted
Stock shall be vested.
(B) Commencing as of the second anniversary of the date the Restricted
Stock is granted, complete ownership rights shall vest (subject to such
other terms and conditions as the Board may determine) in an additional 25%
of the Restricted Stock so granted.
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(C) Commencing as of the third anniversary of the date the Restricted
Stock is granted, complete ownership rights shall vest (subject to such
other terms and conditions as the Board may determine) in an additional 25%
of the Restricted Stock so granted.
(D) Commencing as of the fourth anniversary of the date the Restricted
Stock is granted, complete ownership rights shall vest (subject to such
other terms and conditions as the Board may determine) in the remainder of
the Restricted Stock so granted.
Notwithstanding the above, 100% of the shares of Restricted Stock previously
granted to a Recipient shall become immediately vested upon a Change of Control
(as defined in Section 8 hereof).
(c) Delivery of Restricted Stock.
(i) The Company shall make delivery of the shares of Restricted Stock
within a reasonable period of time after execution of a Restriction Agreement.
(ii) Unless the certificates representing shares of the Restricted Stock
are deposited with a custodian pursuant to paragraph (iii) of this subsection,
each such certificate shall bear the following legend (in addition to any other
restrictive legend required pursuant to Section 9):
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and conditions
(including forfeiture and restrictions against transfer) contained in the
Interlott Technologies, Inc. 1994 Stock Incentive Plan and a Restriction
Agreement, dated , , between and Interlott
Technologies, Inc. The Plan and Restriction Agreement are on file in the
office of the Secretary of Interlott Technologies, Inc.
Such legend shall be removed from any certificate evidencing such shares of
Restricted Stock as of the date that such shares become nonforfeitable.
(iii) As an alternative to delivering a stock certificate to the Recipient
pursuant to paragraph (ii) of this subsection, any certificate evidencing
Restricted Stock may be deposited by the Company with a custodian to be
designated by the Board. The Company shall cause the custodian to issue to the
Recipient a receipt for any Restricted Stock deposited with it in accordance
with this subsection. Such custodian shall hold the deposited certificates and
deliver the same to the Recipient in whose name the shares of Restricted Stock
evidenced thereby are registered only after such shares become nonforfeitable.
(iv) A Recipient shall pay in cash (or have withheld from his normal pay)
an amount equal to the amount, if any, which the Company is required at any time
to withhold under the income tax withholding provisions of the Code and of the
income tax laws of the state of the Recipient's residence.
(d) Termination of Employment or Service. Except as otherwise determined
by the Board and set forth in a Restriction Agreement, in the event that the
employment or service of a Recipient to whom Restricted Stock has been granted
terminates for any reason other than a Change of Control (including a
termination by the Company whether or not for cause and a termination by reason
of the death, disability or retirement of the Recipient) before satisfaction of
the terms and conditions to which the Restricted Stock is subject, all shares of
Restricted Stock still subject to restriction shall be forfeited and shall be
reacquired by the Company.
(e) Transfer. No shares of Restricted Stock shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of while such shares
are still subject to restriction, except that, subject to Section 6(d), such
Restricted Stock may be bequeathed by will or transferred by operation of the
laws of descent and distribution.
(f) Waiver of Restrictions. If the Board determines that, in cases of
death, disability, retirement or other circumstances determined by the Board, a
waiver of any or all remaining restrictions with respect to a Recipient's
Restricted Stock would be desirable, it may elect in its sole discretion to
waive such remaining restrictions.
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(g) Rights as a Stockholder. Upon delivery of Restricted Stock to the
Recipient (or the custodian, if any), the Recipient shall, except as set forth
in Section 6(e), have all of the rights of a stockholder with respect to the
Restricted Stock, including the right to vote the shares of Restricted Stock and
receive all dividends or other distributions paid or made with respect to the
Restricted Stock. Until such delivery, the Recipient shall have no rights as a
stockholder.
7. Recapitalizations and Certain Extraordinary Transactions.
(a) Recapitalization. In the event that the outstanding shares of the
Common Stock of the Company are hereafter increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, reclassification, stock split,
combination of shares, dividend payable in shares of the Common Stock or similar
transaction, the following rules shall apply:
(i) The Board shall make an appropriate adjustment in the number and kind
of shares available for the granting of Stock Rights under the Plan.
(ii) The Board also shall make an appropriate adjustment in the number and
kind of shares as to which outstanding Options, or portions thereof then
unexercised, shall be exercisable; any such adjustment in any outstanding
Options shall be made without change in the total price applicable to the
unexercised portion of such Option and with a corresponding adjustment in the
Option Price per share. No fractional shares shall be issued or optioned in
making the foregoing adjustments, and the number of shares available under the
Plan or the number of shares subject to any outstanding Options shall be the
next lower number of shares, rounding all fractions downward.
(iii) Any adjustment to or assumption of ISOs under this subsection (a)
shall be made in accordance with Section 424(a) of the Code and the regulations
promulgated thereunder so as to preserve the status of such ISOs as incentive
stock options under Section 422 of the Code.
(iv) If any rights or warrants to subscribe for additional shares are given
pro rata to holders of outstanding shares of the class or classes of stock then
set aside for the Plan, each Optionee shall be entitled to the same rights or
warrants on the same basis as holders of the outstanding shares with respect to
such portion of the Optionee's Option as is unexercised on or prior to the
record date for determining stockholders entitled to receive such rights or
warrants.
(b) Merger, Consolidation, Etc. In the event that the Company shall,
pursuant to action by its Board of Directors, propose to (i) merge into,
consolidate with, sell or otherwise dispose of all or substantially all of its
assets, to another corporation or entity and provision is not made pursuant to
the terms of such transaction for the assumption by the surviving, resulting or
acquiring corporation of outstanding Stock Rights under the Plan, or the
substitution of new Stock Rights of substantially equivalent value therefore, or
(ii) dissolve or liquidate, then (A) the Board shall cause written notice of the
proposed transaction to be given to each Optionee and Recipient not less than 30
days prior to the anticipated date of the proposed transaction, and (B) all
outstanding Stock Rights that are not so assumed or substituted for shall become
fully (100%) vested immediately prior, but subject, to actual consummation of
the transaction. Prior to a date specified in the notice, which shall not be
more than 3 days prior to the consummation of the transaction, each Optionee
shall have the right to exercise all Options held by the Optionee that are not
so assumed or substituted for on the following basis: (i) the exercise shall be
conditioned on consummation of the transaction, (ii) the exercise shall be
effective immediately prior to the consummation of the transaction, and (iii)
the Option Price for any such Options shall not be required to be paid until 7
days after written notice by the Company to the Optionee that the transaction
has been consummated. If the transaction is consummated, each Option, to the
extent not previously exercised prior to the date specified in the foregoing
notice of the proposed transaction, shall terminate upon the consummation of the
transaction. If the transaction is abandoned, (a) any and all conditional
exercises of Options in accordance with this Section 7(b) shall be deemed
annulled and of no force or effect and (b) to the extent that any Stock Right
shall have vested solely by operation of this Section 7(b), such vesting shall
be deemed annulled and of no force or effect and the vesting provisions of the
Stock Right shall be reinstated.
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(c) Limits on Adjustments. The grant of Stock Rights pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge, consolidate or dissolve, or to liquidate, sell or
transfer all or any part of its business or assets. All adjustments the Board
makes under this Section 7 shall be conclusive.
8. Change of Control.
(a) Definition of Change of Control. For purposes of the Plan, a "Change
of Control" shall mean the occurrence of any one of the events described in this
Section 8(a). For purposes of this Section 8, the terms used in this Section
with an initial capital letter shall have the meanings set forth in Section 8(b)
unless otherwise defined in the Plan.
(i) The beneficial ownership (as defined in Rules 13d-3 and 13d-5 of
the 1934 Act except that, for purposes of this Section 8(a)(i), a Person
will be deemed to have "beneficial ownership" of all shares that the Person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time) of Common Stock of L. Rogers Wells, Jr.
falls below 50.1% and any Person (including Affiliates and Associates of
such Person, but excluding L. Rogers Wells, Jr., the Company, any Parent or
Subsidiary of the Company, or any employee benefit plan of the Company or
of any Parent or Subsidiary) acquires beneficial ownership of 30% or more
of the total voting power of all the Company's voting securities then
outstanding ("Voting Shares"), but only if such acquisition occurs without
approval or ratification by a majority of the members of the Board of
Directors of the Company; or
(ii) Immediately after a merger or consolidation of the Company or any
Subsidiary of the Company with or into, or the sale or other disposition of
all or substantially all of the Company's assets to, any other corporation
(where pursuant to the terms of such transaction outstanding Stock Rights
are assumed by the surviving, resulting or acquiring corporation or new
Stock Rights of substantially equivalent value are substituted therefore),
the voting shares of the Company outstanding immediately prior to the
transaction do not represent (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity or
any parent thereof) more than 50% of the total voting power of the voting
securities of the Company or the surviving or acquiring entity or any
parent thereof outstanding immediately after such merger or consolidation;
or
(iii) During any fiscal year of the Company, individuals who at the
beginning of such year constitute the Board of Directors of the Company
cease for any reason to constitute at least a majority thereof, unless the
election, or nomination for election by the Company's stockholders, of each
director who was not a director at the beginning of such period has been
approved in advance by a majority of the directors in office at the
beginning of the fiscal year.
(b) The following definitions shall apply in determining when a Change of
Control has occurred:
(i) "Affiliate," "Associate," "Parent" and "Subsidiary" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the 1934 Act as in effect on the effective date
of the Plan.
(ii) "Person" shall mean any individual, organization, corporation,
partnership or other entity.
9. Registration and Listing.
Notwithstanding any other provision of this Plan, no Option shall be
exercisable, and no shares of Common Stock issued and delivered upon the
exercise of an Option or the award of Restricted Stock, unless and until the
Company has complied with (a) all applicable registration requirements of the
Securities Act of 1933 and any applicable state securities laws, (b) the
applicable listing requirements of any national securities exchange or other
market on which the Common Stock then is listed and (c) any other applicable
requirements of law.
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10. Amendment and Termination of the Plan.
In the event the Board shall determine that the Plan is not in the best
interest of the Company or its stockholders for any reason, the Board shall have
the power to add to, amend or repeal any of the provisions of the Plan, to
suspend the operation of the entire Plan or any of its provisions for any period
or periods or to terminate the Plan in whole or in part. Notwithstanding the
above provisions, no such addition, amendment, repeal, suspension or termination
shall adversely affect, in any way, the rights of the Optionees or Recipients
who have outstanding Stock Rights without the consent of such Optionees or
Recipients, nor may any such change in the Plan be made without the prior
approval of the stockholders of the Company if such stockholder approval is
required under Section 422 of the Code or any other applicable law, regulation
or requirement of any stock exchange on which the Common Stock is listed.
11. Application of Funds.
The proceeds received by the Company from the sale of the Common Stock
subject to the Stock Rights granted hereunder will be used for general corporate
purposes.
12. Notices.
All notices or other communications by an Optionee or Recipient to the
Board pursuant to or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Board at the location, or
by the person, designated by the Board for the receipt thereof.
13. Term of Plan.
Subject to stockholder approval, this amended and restated Plan shall
become effective as of January 15, 2003. No Stock Rights shall be granted or
awarded hereunder subsequent to January 14, 2013 or subsequent to any earlier
date as of which this Plan is terminated.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b) (7) of the Delaware General Corporation Law the ("DGCL")
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
the corporation or its stockholders for monetary damages for a breach of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit. The amended certificate of incorporation of GTECH
Holdings Corporation contains such a limitation on the personal liability of
directors.
Section 145 of the DGCL provides that a corporation may indemnify any
persons, including officers and directors, who were or are, or are threatened to
be made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person was an officer, director, employee or agent of such corporation or
is or was serving at the request of such corporation as an officer, director,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise. The indemnity may include expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
provided such person acted in good faith in a manner he reasonably believed to
be in or not opposed to the corporation's best interests and, for criminal
proceedings, had no reasonable cause to believe that his conduct was unlawful. A
Delaware corporation may indemnify officers and directors in an action by or in
the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify such officer or director
against the expenses that such officer or director actually and reasonably
incurred.
The amended and restated bylaws of GTECH Holdings Corporation provides that
such corporation shall indemnify, to the full extent permitted under Delaware
law, any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or officer of such company or while a director or officer of such
company is or was serving at the request of such company as a director or
officer of another corporation, partnership, joint venture, trust employee
benefit plan or other enterprise.
GTECH Holdings Corporation maintains directors' and officers' liability
insurance for its own officers and directors and those of its subsidiaries.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not applicable.
(c) Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
(included as Annex C to the proxy statement/prospectus which is a part of this
registration statement).
II-1
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c)(1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933
and is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise,
II-2
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, GTECH Holdings
Corporation has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of West
Greenwich, State of Rhode Island, on April 25, 2003.
GTECH HOLDINGS CORPORATION
By: /s/ W. BRUCE TURNER
------------------------------------
Name: W. Bruce Turner
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints William M. Pieri and Michael K. Prescott, and
each of them, his or her true and lawful attorney-in-fact and agent with full
power of substitution for him or her and in his or her name, place and stead, in
any and all capacities to sign any and all amendments (including pre-effective
and post-effective amendments) to this Registration Statement, and to file the
same with all exhibits thereto and other documents in connection therewith,
including any Registration Statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, with the Securities and Exchange Commission, grants unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, and hereby ratifies and confirms all that said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on April 25,
2003 in the capacities indicated below.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ W. BRUCE TURNER Chief Executive Officer, President and
-------------------------------------------------------- Director (Principal Executive Officer)
W. Bruce Turner
/s/ JAYMIN B. PATEL Senior Vice President and Chief Financial
-------------------------------------------------------- Officer (Principal Financial Officer)
Jaymin B. Patel
/s/ ROBERT J. PLOURDE Vice President and Corporate Controller
-------------------------------------------------------- (Principal Accounting Officer)
Robert J. Plourde
/s/ ROBERT M. DEWEY, JR Director
--------------------------------------------------------
Robert M. Dewey, Jr.
/s/ BURNETT W. DONOHO Director
--------------------------------------------------------
Burnett W. Donoho
/s/ THE RT. HON. SIR JEREMY HANLEY KCMG Director
--------------------------------------------------------
The Rt. Hon. Sir Jeremy Hanley KCMG
</Table>
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
Director
--------------------------------------------------------
Philip R. Lochner, Jr.
/s/ JAMES F. MCCANN Director
--------------------------------------------------------
James F. McCann
/s/ LT. GEN. (RET.) EMMETT PAIGE, JR. Director
--------------------------------------------------------
Lt. Gen. (Ret.) Emmett Paige, Jr.
/s/ ANTHONY RUYS Director
--------------------------------------------------------
Anthony Ruys
</Table>
EXHIBIT INDEX
EXHIBIT
<Table>
2.1 Amended and Restated Agreement and Plan of Merger, dated as
of March 17, 2003, among GTECH Holdings Corporation, GTECH
Corporation, Bengal Acquisition Co. and Interlott
Technologies, Inc. (included as Annex A to the proxy
statement/prospectus which is a part of this Registration
Statement).
2.2 Amended and Restated Stockholder Voting and Option
Agreement, dated as of March 17, 2003, among GTECH Holdings
Corporation, GTECH Corporation, Bengal Acquisition Co. and
L. Rogers Wells, Jr. (included as Annex B to the proxy
statement/prospectus which is a part of this Registration
Statement).
2.3 Non-Competition Agreement, dated as of March 17, 2003,
between GTECH Holdings Corporation and L. Rogers Wells, Jr.
3.1 Restated Certificate of Incorporation of GTECH Holdings
Corporation, as amended (incorporated by reference to
Exhibit 3.1 to the Form S-1 of GTECH Holdings Corporation
and GTECH Corporation, Registration No. 33-31867).
3.2 Certificate of Amendment to the Certificate of Incorporation
of GTECH Holdings Corporation (incorporated by reference to
Exhibit 3.2 to the Form S-1 of GTECH Holdings Corporation,
Registration No. 33-48264).
3.3 Amended and Restated By-Laws of GTECH Holdings Corporation
(incorporated by reference to Exhibit 3.3 to the Annual
Report on Form 10-K of GTECH Holdings Corporation for the
fiscal year ended February 23, 2002).
4.1 Credit Agreement, dated June 22, 2001, by and among GTECH
Corporation, as Borrower, Bank of American, N.A., as
Administrative Agent and as Lender and the Lenders party
thereto from time to time (incorporated by reference to
Exhibit 10.1 of GTECH Holdings Corporation's Quarterly
Report on Form 10-Q for the period ended May 26, 2001).
4.2 Indenture, dated as of December 18, 2001, by and among GTECH
Holdings Corporation, GTECH Corporation, GTECH Rhode Island
Corporation, GTECH Latin America Corporation and The Bank of
New York (incorporated by reference to Exhibit 4.1 of GTECH
Holdings Corporation's Quarterly Report on Form 10-Q for the
period ended November 24, 2001 (the 'November 2001 10-Q')).
4.3 Registration Rights Agreement, dated December 18, 2001, by
and among Credit Suisse First Boston Corporation, Bank of
America Securities LLC, and Merrill Lynch, Pierce Fenner &
Smith Incorporated, as Representatives, and GTECH Holdings
Corporation, GTECH Corporation, GTECH Rhode Island
Corporation and GTECH Latin America Corporation
(incorporated by reference to Exhibit 4.2 of the November
2001 10-Q).
4.4 Specimen Form of Certificate of Common Stock (incorporated
by reference to Exhibit 4.18 of the Form S-1 of GTECH
Holdings Corporation, Registration No. 33-54236).
5.1 Opinion of Edwards & Angell, LLP regarding the validity of
the securities being registered.
8.1 Opinion of Edwards & Angell, LLP regarding certain Federal
income tax matters.*
8.2 Opinion of Taft, Stettinius & Hollister LLP regarding
certain Federal income tax matters.*
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Grant Thornton LLP.
23.3 Consent of Edwards & Angell, LLP (included in Exhibits 5.1
and 8.1*).
23.4 Consent of Taft, Stettinius & Hollister LLP (included in
Exhibit 8.2) *
23.5 Consent of Houlihan Lokey Howard & Zukin Financial Advisors,
Inc.
24.1 Power of Attorney (included in the signature page of this
Registration Statement).
99.1 Form of Proxy Card of Interlott Technologies, Inc.
99.2 Opinion of Houlihan Lokey Howard & Zukin Financial Advisors,
Inc. (included as Annex C to the proxy statement/prospectus
which is a part of this Registration Statement).
</Table>
- ---------------
* To be filed by amendment.