As Filed with the Securities and Exchange Commission on July 23, 1999
Registration No. 333-81257
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 to
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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INTERNATIONAL GAME TECHNOLOGY
(Exact name of registrant as specified in its charter)
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Nevada 3990 88-0173041
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
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9295 Prototype Drive
Reno, Nevada 89511
(775) 448-7777
(Address, including zip code, and telephone number, including
area code,
of registrant's principal executive offices)
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Brian McKay copy to:
Senior Vice President J. Jay Herron, Esq.
and General Counsel Stephanie I. Splane,
International Game Esq.
Technology O'Melveny & Myers LLP
9295 Prototype Drive 275 Battery Street,
Reno, Nevada 89511 26th Floor
(775) 448-7777 San Francisco,
California 94111
(415) 984-8900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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. ?
<PAGE>
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 number of the earlier effective registration statement for the same
offering.
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 the Registration Statement shall become
effective on such date as the SEC, acting pursuant to said Section 8(a), may
determine.
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<PAGE>
SUBJECT TO COMPLETION, DATED _____________, 1999
PROSPECTUS
[LOGO]
International Game Technology
Offer to Exchange
All Outstanding 7.875% Senior Notes due 2004
For 7.875% Senior Exchange Notes due 2004
and
All Outstanding 8.375% Senior Notes due 2009
For 8.375% Senior Exchange Notes due 2009
----------------
We are offering to exchange all validly tendered and not validly withdrawn
Outstanding Notes for an equal amount of Exchange Notes that are registered
under the Securities Act of 1933.
The terms of the Exchange Notes we will issue in exchange for the Outstanding
Notes are substantially identical to those of the Outstanding Notes, except that
certain transfer restrictions and registration rights relating to the
Outstanding Notes will not apply to the Exchange Notes.
Our Exchange Offers will expire at 5:00 p.m., New York City time, on ________,
1999, unless extended.
You may withdraw Outstanding Notes tendered for exchange at any time prior to
the expiration of the Exchange Offers.
We will not receive any proceeds from the Exchange Offers.
Before participating in the Exchange Offers, please refer to
the section in this prospectus entitled "Risk Factors" beginning
on page 13.
----------------
Neither the Nevada Gaming Commission, the Nevada State Gaming Control Board,
the Mississippi Gaming Commission, nor any other gaming regulatory authority has
passed upon the adequacy or accuracy of this prospectus or the investment merits
of the notes offered hereby. Any representation to the contrary is unlawful.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
The date of this prospectus is ______________, 1999.
----------------
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
TABLE OF CONTENTS
Page
Forward-looking Statements ii
Certain Definitions ii
Summary 1
Risk Factors 13
The Exchange Offers 18
Use of Proceeds 26
Capitalization 27
Selected Consolidated Financial Information 28
Business 30
Regulation and Licensing 38
Description of Exchange Notes 40
Exchange Offers; Registration Rights 65
Certain United States Federal Tax Consequences 67
Plan of Distribution 70
Where You Can Find More Information 70
Documents Incorporated By Reference 71
Legal Matters 71
Experts 71
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements relate to analyses and other information which are based
on forecasts of future results and estimates of amounts not yet determinable.
These statements also relate to our future prospects, developments and business
strategies.
These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" and similar terms and
phrases, including references to assumptions. These statements are contained in
sections entitled "Summary," "Risk Factors," "Business" and other sections of
this prospectus and in the documents incorporated by reference in this
prospectus.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to be materially
different. Such factors include, but are not limited to, the following: a
decline in demand for IGT's gaming products or reduction in the growth rate of
new and existing markets; delays of scheduled openings of newly constructed or
planned casinos; the effect of changes in economic conditions; a decline in
public acceptance of gaming; unfavorable public referendums or anti-gaming
legislation; unfavorable legislation affecting or directed at manufacturers or
operators of gaming products and systems; delays in approvals from regulatory
agencies; political and economic instability in developing international markets
for IGT's products; a decline in the demand for replacement machines; a decrease
in the desire of established casinos to upgrade machines in response to added
competition from newly constructed casinos; a decline in the appeal of IGT's
gaming products or an increase in the popularity of existing or new games of
competitors; the loss of a significant distributor; changes in interest rates
causing a reduction of investment income or in market interest rate sensitive
investments; loss or retirement of our key executives; approval of pending
patent applications of parties unrelated to IGT that restrict the ability of IGT
to compete effectively with products that are the subject of such pending
patents or infringement upon existing patents; the effect of regulatory and
governmental actions; unfavorable determination of suitability by gaming
regulatory authorities with respect to our officers, directors or key employees;
the limitation, conditioning, suspension or revocation of any of our gaming
licenses; fluctuations in foreign exchange rates, tariffs and other barriers;
adverse changes in the credit worthiness of parties with whom IGT has forward
currency exchange contracts; the loss of sublessors of the leased properties no
longer used by IGT; IGT's inability to successfully remedy the Year 2000
readiness issue; and, with respect to legal actions pending against IGT, the
discovery of facts not presently known to IGT or determinations by judges,
juries or other finders of fact which do not accord with IGT's evaluation of the
possible liability or outcome of existing litigation.
We do not undertake to update our forward-looking statements to reflect
future events or circumstances.
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CERTAIN DEFINITIONS
In this prospectus, "IGT," "we," "us," and "our" refer to International Game
Technology and its wholly-owned subsidiaries and their subsidiaries;
"IGT-Australia" refers to I.G.T. (Australia) Pty. Limited; "IGT-Japan" refers to
IGT Japan K.K.; and "IGT-UK" refers to IGT-UK Limited. The references in this
prospectus to "fiscal" and "fiscal year" for IGT refer to the fiscal year ended
September 30.
The following trademarks are owned by us and are registered with the U.S.
Patent and Trademark Office: International Game Technology; IGT; the IGT logo
with spade design; Double Diamond; Megabucks; Player's Edge-Plus; and Red, White
& Blue. IGT also owns the trademark rights to the following: Game King; iGame
with Design (interactive gaming); IGS; IGT Gaming System; MegaJackpots; Nickels
Deluxe; Slot Line; S-Plus Limited Series; Super Megabucks; Totem Pole; Vision
Series; and Vision Slot. Wheel of Fortune is a registered trademark of Califon
Productions, Inc. Jeopardy! is a registered trademark of Jeopardy Productions,
Inc. Five-Deck Frenzy is a trademark of Shuffle Master. Elvis is a registered
trademark of Elvis Presley Enterprises.
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because it is a summary, it does not contain all of the information you should
consider before investing. You should read this entire prospectus carefully,
including the section entitled "Risk Factors" and the financial statements and
the related notes to those statements.
The Company
IGT is one of the largest manufacturers of computerized casino gaming
products and operators of proprietary gaming systems in the world and was the
first to develop computerized video gaming machines. IGT was founded in 1980 and
principally has served the casino gaming industry in the United States. In 1986,
IGT began expanding its business internationally and currently manufactures its
gaming products in Australia, Japan and the United Kingdom in addition to the
United States. IGT also maintains sales offices in legalized gaming
jurisdictions globally, including Argentina, Brazil, New Zealand, Peru, South
Africa and The Netherlands. IGT is currently licensed to provide gaming products
in every significant legalized gaming jurisdiction in the world. International
jurisdictions accounted for 23% of our total revenue in the fiscal year ended
September 30, 1998 and 31% for the six months ended April 3, 1999.
IGT operates principally in two lines of business: (1) the development,
manufacturing, marketing and distribution of gaming products, what we refer to
as "Gaming Product Sales" and (2) the development, marketing and operation of
wide-area progressive systems, what we refer to as "Gaming Operations."
Gaming Product Sales. IGT manufactures a broad range of microprocessor-based
gaming machines, consisting of traditional spinning reel slot machines, video
gaming machines and government-sponsored and other video gaming devices. We
offer products with such brand names as Double Diamond; Red, White and Blue;
Five Times Pay; Bonus Poker and Deuces Wild. We typically sell our machines
directly to casino operators, but may in certain circumstances finance the sale
or lease of equipment to the operator. In the North American gaming market, IGT
holds an estimated 64% share of the installed base of gaming machines and an
estimated 76% share of the installed base of casino gaming machines. We believe
our market share is the result of our research and development in video and slot
technology, the efforts of our experienced sales force and our focus on customer
service and reliability.
In addition to gaming machines, IGT develops and sells computerized casino
management systems which provide casino operators with slot and table game
accounting, player tracking and specialized bonusing capabilities. We also
develop and sell specialized video lottery terminals for lotteries and other
applications and computerized linked proprietary systems to allow the lottery
authorities to monitor video lottery terminals. We derive revenue related to the
operation of these systems and collect license and franchise fees for the use of
the systems. In fiscal 1998, gaming product sales produced $477.0 million of
revenue and $82.4 million of EBITDA. For the six months ended April 3, 1999,
gaming product sales produced $276.2 million of revenue and $31.1 million of
EBITDA.
Gaming Operations. Approximately 3% of the installed base of gaming machines
are revenue sharing machines, which include wide-area progressive systems and
stand-alone machines in which the manufacturer participates in the revenue from
the machine on a percentage or fee basis. Wide-area progressive systems are
electronically-linked, inter-casino systems that link gaming machines to a
central computer, allowing the system to build a "progressive" jackpot with
every wager made throughout the system until a player hits a winning
combination. In the North American market, IGT estimates it holds more than an
80% share of the installed base of revenue sharing machines.
We have developed and operated wide-area progressive systems for over 10
years. As of September 30, 1998, IGT operated 92 such systems in 14
jurisdictions under such brand names as Jeopardy!, Megabucks, Quartermania and
Wheel of Fortune. IGT operates some of these systems under joint marketing
alliances with Anchor Gaming ("Anchor") and Shuffle Master Gaming. The purpose
of these strategic alliances is to combine the game development efforts of other
companies with IGT's wide-area progressive system expertise. Wide-area
progressive systems are designed to increase gaming machine play for
participating casinos by giving players the opportunity to win larger or more
frequent jackpots than on machines not linked to progressive systems. Win (net
earnings to the operator) per machine on machines linked to progressive systems
are generally higher than on stand-alone machines.
<PAGE>
In fiscal 1998, gaming operations produced $347.1 million of revenue and $181.8
million of EBITDA. For the six months ended April 3, 1999, gaming operations
produced $166.4 million of revenue and $95.2 million of EBITDA.
Strategy. IGT's engineering and game design staff continually work to provide
innovations in slot and video technology. IGT spent approximately $38.1 million
for research and development in fiscal 1998. Innovations from research and
development increase our gaming machines' earning potential and entertainment
value by: improving the ease and speed of play, using local game preferences,
enhancing entertainment via larger jackpots, sound, bonus features and overall
aesthetics and decreasing down time through improved reliability. Historically,
the introduction of innovative products coupled with the addition of new casinos
have fueled the replacement market by encouraging existing casinos to upgrade to
new slot products in order to remain competitive.
In addition to replacement demand, we believe that material machine orders
will come from new casino openings and casino expansions. We have already
shipped products to Mandalay Bay and The Venetian, two mega-resorts that have
recently opened in Las Vegas and have commitments for product purchases from The
Resort at Summerlin. In addition, another mega-resort, Paris Resort, is
scheduled to open in Las Vegas in 1999, three casinos are planned for
development in Atlantic City in 2002 and beyond and three casinos are planned
for development or are under construction in Detroit.
To capitalize on these and other future opportunities, management is
committed to:
o innovative new product development like our Game King,
iGame-Plus, Vision Series and S-Plus Limited lines;
o development and rollout of new wide-area progressive systems
like Jeopardy!, Wheel of Fortune, Elvis and Party Time;
o continued focus on customer service and reliability through our more than
400 trained sales and service personnel; and
o increased focus on opportunities to roll out IGT products and systems into
new markets including international jurisdictions.
Address and Telephone Number
Our principal executive offices are located at 9295 Prototype Drive, Reno,
Nevada 89511; our telephone number is (775) 448-7777.
Recent Developments
Acquisition of Sodak Gaming, Inc.
On March 10, 1999, IGT and Sodak Gaming, Inc. ("Sodak") announced the signing
of a merger agreement by which IGT will acquire Sodak for approximately $228
million plus fees and expenses. Upon the closing of the merger each Sodak
shareholder will receive $10.00 in cash for each share of Sodak common stock.
After the merger closes, which we expect to occur in the second half of 1999,
Sodak will be a wholly-owned subsidiary of IGT.
Sodak distributes and finances gaming products, mainly IGT products, and
provides wide-area progressive systems primarily to Native American casinos.
Sodak also provides financing for gaming ventures on Native American lands,
operates a riverboat casino entertainment facility in Marquette, Iowa and holds
a 50% interest in a joint venture with Hollywood Casino Corporation to develop a
riverboat casino entertainment complex in Shreveport, Louisiana.
Sodak has been IGT's exclusive distributor of gaming products to Native
American casinos since 1989. During fiscal 1998, Sodak was the largest purchaser
of IGT's products, accounting for approximately 8% of total product sales.
<PAGE>
Sodak also has an exclusive agreement with IGT to provide and market wide-area
progressive systems to Native American casinos.
In addition to customary and certain other closing conditions, the
acquisition of Sodak is contingent on the following:
(1)the receipt by IGT and Sodak of all government approvals (including those
of gaming authorities) required in connection with the merger;
(2)the disposition of Sodak's Miss Marquette riverboat casino entertainment
complex in accordance with the terms of the merger agreement;
(3)the disposition of Sodak's 50% interest in the joint venture with
Hollywood Casino Corporation in accordance with the terms of the merger
agreement; and
(4)the president and certain other employees having continued in the employ
of Sodak and being employed by Sodak at the effective time of the merger.
On March 31, 1999, Sodak and a subsidiary of Hollywood Casino Corporation
entered into an agreement pursuant to which such subsidiary would purchase Sodak
Louisiana, LLC, the wholly-owned subsidiary of Sodak which owns the 50% joint
venture interest in the Shreveport project. Sodak will receive $2.5 million for
Sodak Louisiana, which is equal to the capital contribution made by Sodak
Louisiana to the Shreveport project. The agreement has been approved by the
Louisiana Gaming Control Board and the transfer of Sodak's interest to the
subsidiary of Hollywood Casino Corporation was finalized on April 23, 1999.
For the twelve months ended December 31, 1998, Sodak generated approximately
$133 million of revenue and $23 million of EBITDA. After giving effect to the
merger, for the twelve months ended January 2, 1999, IGT would have had pro
forma revenue of approximately $966 million and pro forma EBITDA of
approximately $296 million. Pro forma revenue and EBITDA include adjustments for
the effects of sales of IGT products to Sodak.
Sodak's shares trade on the Nasdaq National Market under the symbol "SODK,"
and it files annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any reports, statements or other information filed by Sodak at the
SEC's public reference rooms in Washington, D.C., Chicago, Illinois and New
York, New York.
Legislation
On March 22, 1999, legislation was introduced in the Nevada legislature
proposing additional regulations for gaming manufacturers who provide products
to casino customers through revenue sharing arrangements and wide-area
progressive systems. On April 9, 1999, the Judiciary Committee of the Nevada
Assembly approved a compromise version of the bill as agreed upon by the
proponents and opponents of the bill originally introduced. The revised bill
requires gaming manufacturers to pay their "full proportionate share" of: (a)
the Nevada gaming revenue tax; (b) the $80 annual per gaming machine tax; and
(c) the $250 annual tax paid on slot machines by certain Nevada casinos. The
bill also imposes additional regulatory requirements on gaming manufacturers.
The revised bill was passed by the Assembly on April 17, 1999 and passed by the
Senate on May 11, 1999. The bill was approved by the Governor and became
effective on May 21, 1999.
IGT does not believe this legislation will have a material adverse effect on
its results of operations. This legislation was introduced on behalf of some of
our customers, and IGT is working with its customers in an effort to address
their concerns. We cannot predict the outcome of any such efforts or the
financial impact these efforts may have on us.
<PAGE>
Investment in Access Systems Pty. Ltd.
In January 1999, IGT and Access Systems Pty. Ltd. of Sydney, Australia
("Access") signed an agreement to develop a global Internet gaming software
alliance. In June 1999, IGT purchased a 35% interest in Access and agreed to
assist in the marketing of Access' ACES Internet gaming system to major
operators in regulated and legalized Internet gaming markets. Access' ACES
software technology provides gaming operators with a secure, scaleable and
robust high volume transaction-processing platform. The ACES system supports a
broad range of games including lotto, bingo, keno, slots, blackjack and roulette
and also allows Access' customers or other game developers to develop new games
for the ACES system independent of Access. The Austrian Lotteries and Lasseters
Casino are current Access customers.
<PAGE>
SUMMARY OF THE EXCHANGE OFFERS
The following is a summary of the principal terms of the Exchange Offers. A
more detailed description is contained in this prospectus under the caption "The
Exchange Offers." The term "Senior Exchange Notes due 2004" refers to the 7.875%
Senior Exchange Notes due 2004 being offered in our Exchange Offer. The term
"Outstanding Senior Notes due 2004" refers to IGT's currently outstanding 7.875%
Senior Notes due 2004 that IGT is exchanging for its Senior Exchange Notes due
2004. The term "Senior Exchange Notes due 2009" refers to the 8.375% Senior
Notes due 2009 being offered in our Exchange Offer. The term "Outstanding Senior
Notes due 2009" refers to IGT's currently outstanding 8.375% Senior Notes due
2009 that IGT is exchanging for Senior Exchange Notes due 2009. The term
"Outstanding Notes" refers to the Outstanding Senior Notes due 2004 and the
Outstanding Senior Notes due 2009, collectively. The term "Exchange Notes"
refers to the Senior Exchange Notes due 2004 and the Senior Exchange Notes due
2009, collectively. The term "Indenture" refers to the indenture that applies to
both the Outstanding Notes and the Exchange Notes.
The Exchange Offers IGT is offering to exchange $1,000 principal
amount of our Senior Exchange Notes due 2004,
which have been registered under the Securities
Act, for each $1,000 principal amount of our
unregistered Outstanding Senior Notes due
2004. IGT is also offering to exchange $1,000
principal amount of its Senior Exchange Notes
due 2009, which have been registered under the
Securities Act, for each $1,000 principal
amount of its unregistered Outstanding Senior
Notes due 2009. IGT issued the Outstanding
Notes on May 19, 1999 in a private offering.
In order for your Outstanding Notes to be exchanged, you
must properly tender them before the expiration of the
Exchange Offers. All Outstanding Notes that are validly
tendered and not validly withdrawn will be exchanged. IGT
will issue the Exchange Notes on or promptly after the
expiration of the Exchange Offers.
Outstanding Notes may be tendered for exchange in whole or
in part in integral multiples of $1,000 principal amount.
Registration Rights
Agreement IGT sold the Outstanding Notes on May 19, 1999
to a group of initial purchasers which included
Salomon Smith Barney, BNY Capital Markets,
Inc., Goldman, Sachs & Co., Lehman Brothers and
Merrill Lynch & Co. Simultaneously with that
sale, IGT signed a registration rights
agreement relating to the Outstanding Notes
with these initial purchasers which requires
IGT to conduct the Exchange Offers.
You have the right under the registration rights agreement
to exchange your Outstanding Notes for Exchange Notes with
substantially identical terms. The Exchange Offers are
intended to satisfy these rights. After the Exchange Offers
are complete, you will no longer be entitled to any
exchange or registration rights with respect to your
Outstanding Notes.
For a description of the procedures for
tendering Outstanding Notes, see "The Exchange
Offers--Procedures for Tendering Outstanding
Notes."
Consequences of
Failure to Exchange
Your Outstanding If you do not exchange your Outstanding Notes
Notes for Exchange Notes in the Exchange Offers, you
will still have the restrictions on transfer provided in
the Outstanding Notes and in the Indenture. In general, the
Outstanding Notes may not be offered or sold unless
registered or exempt from registration under the Securities
Act, or in a transaction not subject to the Securities Act
and applicable state securities laws. IGT does not plan to
register the Outstanding Notes under the Securities Act.
<PAGE>
Expiration Date The Exchange Offers will expire at 5:00 p.m.,
New York City time, on ________, 1999. This
will be the Expiration Date unless extended by
IGT. If IGT does extend the offers, the
Expiration Date will be the latest date and
time to which an Exchange Offer is extended.
See "The Exchange Offers--Expiration Date;
Extensions; Amendments."
Conditions to the
Exchange Offers The Exchange Offers are subject to conditions
which IGT may waive at its sole discretion.
The Exchange Offers are not conditioned upon
any minimum principal amount of Outstanding
Notes being tendered for exchange. See "The
Exchange Offers--Conditions to the Exchange
Offers."
IGT reserves the right in its sole and absolute
discretion, subject to applicable law, at any
time and from time to time:
o to delay the acceptance of the
Outstanding Notes;
o to terminate either or both Exchange
Offers if specified conditions have not been
satisfied;
o to extend the Expiration Date of either or both Exchange
Offers and retain all tendered Outstanding Notes
subject, however, to the right of tendering holders to
withdraw their tender of Outstanding Notes; and
o to waive any condition or otherwise amend
the terms of the Exchange Offer in any
respect.
See "The Exchange Offers--Expiration Date;
Extensions; Amendments."
Procedures for
Tendering If you wish to tender your Outstanding Notes
Outstanding Notes for exchange, you must
o complete and sign a Letter of Transmittal
according to the instructions contained in
the Letter of Transmittal; and
o forward the Letter of Transmittal by
mail, facsimile transmission or hand
delivery, together with any other required
documents, to the relevant Exchange Agent,
either with the Outstanding Notes to be
tendered or in compliance with the specified
procedures for guaranteed delivery of such
Outstanding Notes.
Specified brokers, dealers, commercial banks, trust
companies and other nominees may also effect tenders by
book-entry transfer.
Please do not send your Letter of Transmittal or
certificates representing your Outstanding Notes to us.
Those documents should only be sent to the Exchange Agent.
Questions regarding how to tender and requests for
information should be directed to the Exchange Agent. See
"The Exchange Offers--Exchange Agent."
<PAGE>
Special Procedures
for Beneficial If your Outstanding Notes are registered in the
Owners name of a broker, dealer, commercial bank,
trust company or other nominee, IGT urges you
to contact such person promptly if you wish to
tender your Outstanding Notes. See "The
Exchange Offers--Procedures for Tendering
Outstanding Notes."
Withdrawal Rights.. You may withdraw the tender of your Outstanding
Notes at any time before the Expiration Date. To do this,
you should deliver a written notice of your withdrawal to
the Exchange Agent according to the withdrawal procedures
described under the heading "The Exchange
Offers--Withdrawal Rights."
Resales of Exchange IGT believes that you will be able to offer for
Notes resale, resell or otherwise transfer the
Exchange Notes issued in the Exchange Offers without
compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that:
o you are acquiring the Exchange Notes in
the ordinary course of your business;
o you are not participating, and have no
arrangement or understanding with any person
to participate, in the distribution of the
Exchange Notes; and
o you are not an affiliate of International
Game Technology.
IGT's belief is based on interpretations by the staff of
the SEC, as shown in no-action letters issued to third
parties unrelated to IGT. The staff of the SEC has not
considered the Exchange Offers in the context of a
no-action letter, and IGT cannot assure you that the staff
of the SEC would make a similar determination with respect
to these Exchange Offers. If IGT's belief is not accurate
and you transfer an Exchange Note without delivering a
prospectus meeting the requirements of the Securities Act
or without an exemption from such requirements, you may
incur liability under the Securities Act. IGT does not and
will not assume, or indemnify you against, such liability.
Each broker-dealer that receives Exchange Notes for its own
account in exchange for Outstanding Notes which were
acquired by such broker-dealer as a result of market-making
or other trading activities must acknowledge that it will
deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such
Exchange Notes. A broker-dealer may use this prospectus for
an offer to sell, resale or other transfer of Exchange
Notes. See "Plan of Distribution."
Exchange Agent The exchange agent for the Exchange Offers is
The Bank of New York. The address, telephone
and facsimile number of the exchange agent are
shown in "The Exchange Offers--Exchange Agent"
section of this prospectus and in the Letter of
Transmittal.
Use of Proceeds IGT will not receive any cash proceeds from the
issuance of the Exchange Notes offered hereby.
See "Use of Proceeds."
<PAGE>
Certain Federal
Income Tax Your acceptance of an Exchange Offer and the
Consequences related exchange of your Outstanding Notes for
Exchange Notes will not be a taxable exchange for United
States federal income tax purposes. You should not
recognize any taxable gain or loss or any interest income
as a result of the exchange.
See "The Exchange Offers" for more detailed information concerning the
Exchange Offers.
<PAGE>
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
Issuer International Game Technology.
Notes Offered $400,000,000 aggregate principal amount of
7.875% Senior Exchange Notes due 2004 and $600,000,000
aggregate principal amount of 8.375% Senior Exchange Notes
due 2009.
Maturity Date Senior Exchange Notes due 2004: May 15, 2004.
Senior Exchange Notes due 2009: May 15, 2009.
Interest Payment May 15 and November 15 of each year, commencing
Dates November 15, 1999.
Sinking Fund None.
Redemption We may redeem some or all of the Senior
Exchange Notes due 2004 at any time at prices
equal to the greater of (1) 100% of their
principal amount or (2) the sum of the present
value of 100% of the principal amount plus all
required interest payments due on such notes
(excluding accrued but unpaid interest)
discounted to the redemption date at the
treasury yield plus 37.5 basis points, plus
accrued interest on the principal amount being
redeemed to the date of redemption. See
"Description of Exchange Notes -- Optional
Redemption."
We may redeem some or all of the Senior
Exchange Notes due 2009 at any time at prices
equal to the greater of (1) 100% of their
principal amount or (2) the sum of the present
value of 100% of the principal amount plus all
required interest payments due on such notes
(excluding accrued but unpaid interest)
discounted to the redemption date at the
treasury yield plus 50.0 basis points, plus
accrued interest on the principal amount being
redeemed to the date of redemption. See
"Description of Exchange Notes -- Optional
Redemption."
Change of Control Upon a change of control, as defined under the
Indenture, you will have the right to require
us to repurchase all or a portion of your
Exchange Notes at a price equal to 101% of the
principal amount, plus accrued and unpaid
interest, if any, to the date of repurchase.
See "Description of Exchange Notes-- Repurchase
at the Option of Holders Upon a Change of
Control."
Ranking The Exchange Notes are senior unsecured
obligations of IGT, rank equally in right of
payment with any existing and future senior
indebtedness of IGT and rank senior in right of
payment to all future subordinated indebtedness
of IGT. As of April 3, 1999, after giving
effect to the offering of the Outstanding
Notes, the application of the proceeds thereof
and the Exchange Offers, IGT would have had, on
a consolidated basis, approximately $1 billion
of senior indebtedness outstanding.
All existing and future indebtedness and other
liabilities of IGT's subsidiaries, except for
any subsidiaries that become guarantors of the
Exchange Notes in the future, including the
claims of trade creditors and claims of
preferred stockholders, if any, of such
subsidiaries, are effectively senior to the
Exchange Notes. See "Description of Exchange
Notes-- Certain Covenants -- Future Subsidiary
Guarantors." As of April 3, 1999, after giving
effect to the offering of the Outstanding
Notes, the application of the proceeds thereof
and the Exchange Offers, the total balance
sheet liabilities of IGT's subsidiaries were
approximately $643 million of which
approximately $528 million were jackpot
liabilities offset on a dollar-for-dollar basis
by U.S. Treasury securities and cash. The
<PAGE>
Exchange Notes also will be effectively
subordinated to any secured debt of IGT to the
extent of the value of the assets securing such
debt.
Future Subsidiary
Guarantees The Exchange Notes will not be guaranteed when
issued. Subject to limited exceptions, if any
of our domestic subsidiaries have $10 million
or more of indebtedness (other than capital
leases, purchase money obligations and
intercompany indebtedness) or preferred stock
outstanding in the future, they will be
required to guarantee the Exchange Notes. Any
subsidiary guarantees will be released if the
Exchange Notes achieve an investment grade
rating. See "Description of Exchange Notes--
Certain Covenants -- Future Subsidiary
Guarantors."
Certain Covenants The Indenture limits our ability and the
ability of our subsidiaries to, among other
things:
o incur additional indebtedness;
o create liens;
o enter into certain sale and leaseback transactions;
o merge or consolidate with another company; and
o transfer or sell substantially all of our
assets.
All of these limitations are subject to a number of
important qualifications, including the suspension of the
covenants relating to the incurrence of indebtedness and
future subsidiary guarantees if the Exchange Notes achieve
an investment grade rating and the inapplicability of each
of the lien covenant and future subsidiary guarantee
covenant to our subsidiary that holds our domestic gaming
licenses until the earlier of such time as (1) prior
approval of such covenants is received in Nevada or (2) a
registered public offering of the Exchange Notes is made
pursuant to a Nevada regulatory shelf approval that
includes a prior approval of such covenants. See
"Regulation and Licensing" and "Description of Exchange
Notes -- Certain Covenants."
Risk Factors
See "Risk Factors" beginning on page 13 for a discussion of certain factors
that you should carefully consider before exchanging any Outstanding Notes for
Exchange Notes.
<PAGE>
Summary Financial Data
The following table presents financial information with respect to IGT's
operations and financial position. The following information should be read in
conjunction with "Selected Consolidated Financial Information" and IGT's
consolidated financial statements and accompanying notes incorporated by
reference in this prospectus.
<TABLE>
<CAPTION>
Fiscal years ended
Six months ended September 30,
April 3, March 31,
1999 1998 1998 1997 1996
------- -------- ------- ------- -------
(dollars in thousands, except ratios)
<S> <C> <C> <C> <C> <C>
Summary Income Statement Data:
Revenues
Gaming product sales........ $276,220 $ 187,016 $ 477,024 $461,150 $ 481,652
Gaming operations........... 166,357 160,087 347,099 282,820 251,800
------- -------- -------- ------- --------
Total revenue.......... $442,577 $ 347,103 $ 824,123 $743,970 $ 733,452
======== ========= ========= ======== =========
Income from operations........ $ 98,823 $ 96,017 $ 218,877 $191,437 $ 169,833
Other income, net............. 3,842 4,233 15,655 21,188 14,570
----- ------ ------- ------ -------
Income Before Income Taxes.... $102,655 $ 100,250 $ 234,532 $212,625 $ 184,403
======== ========= ========= ======== =========
Net Income.................... $ 68,272 $ 65,163 $ 152,446 $137,247 $ 118,017
======== ========= ========= ======== =========
Other Financial Data:
EBITDA(1)................... $122,145 $ 113,440 $ 260,345 $226,461 $ 200,335
Net cash provided by $100,716 $ 69,721 $ 107,126 $118,082 $ 55,261
operating activities..........
Net cash provided by (used $ 4,782 $(221,231) $(240,061) $(56,572) $(159,800)
in) investing activities....
Net cash provided by (used $(84,054) $ 193,209 $ 164,047 $(79,202) $ 32,376
in)financing activities.....
Ratio of EBITDA to interest 10.5x 20.4x 16.8x 23.4x 19.3x
expense(1)(2)...............
Ratio of total long-term -- -- 1.2x 0.6x 0.5x
debt to EBITDA(1)...........
Ratio of earnings to fixed 9.4x 14.1x 13.8x 19.3x 15.5x
charges(3)..................
Pro forma ratio of earnings 2.8x -- 2.8x -- --
to fixed charges(4).........
Diluted earnings per share.. $ 0.64 $ 0.56 $ 1.33 $ 1.13 $ 0.93
</TABLE>
<TABLE>
<CAPTION>
As of April 3,
1999
<S> <C>
Summary Balance Sheet Data:
Working capital.................................. $ 450,421
Total assets..................................... 1,532,941
Long-term notes payable and capital lease 377,985
obligations, net of current maturities...........
Stockholders' equity............................. 469,151
(Footnotes on following page)
<PAGE>
- ------------
<FN>
(1)EBITDA consists of income from operations excluding depreciation and
amortization as reflected on IGT's Consolidated Statements of Cash Flows.
EBITDA is a measure commonly used by the financial community but is not
prepared in accordance with United States generally accepted accounting
principles. While many in the financial community consider EBITDA to be an
important measure of comparative operating performance, it should be
considered in addition to, but not as a substitute for, income from
operations, net income, cash flows provided by operating activities and other
measures of financial performance prepared in accordance with generally
accepted accounting principles that are included or incorporated by reference
in this prospectus. EBITDA is defined differently for purposes of the
Indenture and may not be comparable to similarly titled measures reported by
other companies. See "Description of Exchange Notes."
(2)Interest expense includes capitalized interest and excludes interest expense
related to jackpot liabilities.
(3)For the purpose of computing this ratio, earnings represent net income
before taxes on income and fixed charges (such fixed charges have been
adjusted to exclude capitalized interest), and equity in undistributed
earnings of 50% owned equity investments. Fixed charges represent interest
expense, excluding the portion related to jackpot liabilities and including
capitalized interest, one-third of total rental expense and amortization of
loan expense related to long-term debt.
(4)For the purpose of computing the pro forma ratio of earnings to fixed
charges, the actual ratio of earnings to fixed charges computed in accordance
with footnote 3 above has been adjusted to reflect the pro forma effect, as
of October 1, 1997 for fiscal 1998, and as of October 1, 1998 for the
six-month period ended April 3, 1999, on fixed charges resulting from the
issuance of the notes and the application of the proceeds thereof. The
foregoing is not pro forma for the acquisition of Sodak. See "Use of
Proceeds."
</FN>
</TABLE>
<PAGE>
RISK FACTORS
You should carefully read this entire prospectus and the documents
incorporated by reference in this prospectus before participating in the
Exchange Offers. Among the factors that may adversely affect an investment in
the notes are the following:
There are consequences associated with failing to exchange the Outstanding Notes
for the Exchange Notes.
If you do not exchange your Outstanding Notes for Exchange Notes in the
Exchange Offers, you will still have the restrictions on transfer provided in
the Outstanding Notes and in the Indenture. In general, the Outstanding Notes
may not be offered or sold unless registered or exempt from registration under
the Securities Act, or in a transaction not subject to the Securities Act and
applicable state securities laws. IGT does not plan to register the Outstanding
Notes under the Securities Act.
Leverage may impair our financial condition and we may incur significant
additional indebtedness.
After the issuance of the Outstanding Notes, we have a significant amount of
indebtedness. As of April 3, 1999, after giving effect to the offering of the
Outstanding Notes, the application of the proceeds thereof and the Exchange
Offers, our total consolidated indebtedness would have been approximately $1
billion. See "Capitalization."
Our significant indebtedness could have important consequences for the
holders of the Exchange Notes, including:
o increasing our vulnerability to general adverse economic and
industry conditions;
o limiting our ability to obtain additional financing to fund future working
capital, capital expenditures, acquisitions and other general corporate
requirements;
o requiring a substantial portion of our cash flow from operations for the
payment of interest on our indebtedness and reducing our ability to use our
cash flow to fund working capital, capital expenditures, acquisitions and
general corporate requirements;
o limiting our flexibility in planning for, or reacting to,
changes in our business and the industry; and
o disadvantaging us compared to competitors with less
indebtedness.
Our ability to meet our debt service obligations on the Exchange Notes and
our other indebtedness will depend on our future performance. In addition, our
bank revolving line of credit requires us to maintain specified financial ratio
tests. Our ability to maintain such ratio tests will also depend on our future
performance. Our future performance will be subject to general economic
conditions and to financial, business, regulatory and other factors affecting
our operations, many of which are beyond our control. If we were unable to
maintain the financial ratio tests under the bank revolving line of credit, the
lenders could terminate their commitments and declare all amounts borrowed,
together with accrued interest and fees, to be immediately due and payable. If
this happened, other indebtedness that contains cross-default or
cross-acceleration provisions, including the Exchange Notes, may also be
accelerated and become due and payable. If any of these events should occur, we
may not be able to pay such amounts and the Exchange Notes.
Subject to conditions in our bank credit facilities and the Indenture, we may
incur significant additional indebtedness. The Indenture does not limit the
manner in which we may use any such additional indebtedness. Accordingly, IGT is
permitted to use any such additional indebtedness for, among other things,
acquisitions, share repurchases or dividends.
<PAGE>
The notes are junior to all liabilities of our subsidiaries.
We are a holding company. Our subsidiaries conduct substantially all of our
consolidated operations and own substantially all of our consolidated assets.
Consequently, our cash flow and our ability to make payments on our
indebtedness, including the Exchange Notes, substantially depends upon our
subsidiaries' cash flow and payments of funds to us by our subsidiaries. Our
subsidiaries are not obligated to make funds available to us for payment on the
Exchange Notes or otherwise. Our subsidiaries' ability to make any payments will
depend on their earnings, the terms of their indebtedness, business and tax
considerations and legal restrictions. The Exchange Notes will effectively rank
junior to all existing and future liabilities, including trade payables, of our
subsidiaries that are not guarantors of the Exchange Notes. On the date the
Outstanding Notes are exchanged for the Exchange Notes, there will be no
subsidiaries that guarantee the Exchange Notes, and there may be none in the
future. The existing credit facilities of IGT currently would not permit any
subsidiary to guarantee the Exchange Notes. See "Description of Notes -- Certain
Covenants -- Future Subsidiary Guarantors." In the event of a bankruptcy,
liquidation or dissolution of a subsidiary that is not a guarantor of the
Exchange Notes, the creditors of such subsidiary will be paid first, after which
the subsidiary may not have sufficient assets remaining to make any payments to
us as a shareholder or otherwise so that we can meet our obligations under the
Exchange Notes. As of April 3, 1999, after giving effect to the offering of the
Outstanding Notes, the application of the proceeds thereof and the Exchange
Offers, the total balance sheet liabilities of IGT's subsidiaries were
approximately $643 million of which approximately $528 million were jackpot
liabilities offset on a dollar-for-dollar basis by U.S. Treasury securities and
cash.
The gaming industry is highly regulated and such regulations may have an impact
on IGT and the holders of the notes.
We are subject to extensive gaming regulations and changes in these
regulations or findings of non-compliance could adversely effect our operations.
The manufacture, sale and distribution of gaming devices and operation of
gaming systems are subject to extensive state laws, regulations of the Nevada
Gaming Commission (the "Nevada Commission") and Nevada State Gaming Control
Board (the "Nevada Control Board") and various other gaming authorities as well
as numerous county and municipal ordinances. These laws, regulations and
ordinances vary from jurisdiction to jurisdiction, but primarily concern the
responsibility, financial stability and character of gaming equipment
manufacturers, distributors and operators, as well as persons financially
interested or involved in gaming operations. Changes in such laws, regulations
and procedures could have an adverse effect on our operations. For example,
legislation recently passed by the Nevada State legislature and approved by the
Governor will, among other things, impose additional regulatory requirements on
IGT and require IGT to pay additional gaming taxes. Gaming manufacturers are
currently subject to significant state and local taxation. Increases in
applicable taxes in any jurisdiction in which we operate could have an adverse
effect on us. See "Summary -- Recent Developments -- Legislation."
We and our licensed gaming subsidiaries are required to submit detailed
financial and operating reports to the various gaming authorities. If it were
determined that gaming laws were violated by a licensee, the gaming licenses it
holds could be limited, conditioned, suspended or revoked. In addition to the
licensee, IGT and the persons involved could be subject to substantial fines for
each separate violation of the gaming laws at the discretion of each gaming
authority. The limitation, conditioning, suspension or revocation of any gaming
license could materially and adversely affect our operations and future
performance.
We may require you to dispose of your Exchange Notes or redeem your Exchange
Notes if required by applicable gaming regulations.
Certain gaming authorities have the power to investigate any debt security
holder of IGT. These gaming authorities may, in their discretion, require the
holder of any debt security of IGT to file applications, be investigated and be
found suitable to own the debt security of IGT. Any person who fails or refuses
to apply for a finding of suitability or a license within 30 days after being
ordered to do so by such gaming authorities may be found unsuitable. Under
certain circumstances, we have the right, at our option, to cause a holder to
dispose of its Exchange Notes or to redeem its Exchange Notes in order to comply
with gaming laws to which we are subject. See "Regulation and Licensing" and
<PAGE>
"Description of Exchange Notes -- Mandatory Disposition Pursuant to Gaming
Laws."
Gaming authority approval is required for filing an Exchange Offer or shelf
registration statement with respect to the Exchange Notes.
The filing of this registration statement with respect to the Exchange Notes
constitutes a public offering of securities of IGT that requires the prior
approval of the Nevada Commission and the Mississippi Gaming Commission. See
"Exchange Offer; Registration Rights" and "Regulation and Licensing." On July
24, 1997 and September 15, 1998, the Nevada Commission and the Mississippi
Gaming Commission, respectively, granted IGT prior approval to make public
offerings of securities for a period of two years subject to some conditions (a
"Shelf Approval"). Each Shelf Approval may be rescinded for good cause without
prior notice upon the issuance of any interlocutory stop order by the chairman
of the Nevada Control Board or the Executive Director of the Mississippi Gaming
Commission, as applicable. In addition, IGT's Shelf Approval in Nevada expires
on July 29, 1999. IGT has filed an application with the Nevada Control Board and
Nevada Commission for a new Shelf Approval which will be considered in July
1999. If this registration statement of which this prospectus is a part is not
declared effective and the Exchange Offers are not commenced by July 29, 1999,
IGT will be precluded from seeking effectiveness of the registration statement
registering the Exchange Notes until a new Shelf Approval is granted by the
Nevada Commission or the Nevada Commission approves the registration statement
registering the Exchange Notes. If a new Shelf Approval is not granted by the
Nevada Commission, or if the Nevada or Mississippi Shelf Approvals were
rescinded, then the registration statement of which this prospectus is a part
will require the separate prior approval of the Nevada Commission or Mississippi
Gaming Commission, as applicable. There can be no assurance that a new Shelf
Approval will be approved by the Nevada Commission or if separate prior
approvals were required by the Nevada Commission or the Mississippi Gaming
Commission that such approvals would be granted in a timely fashion, or at all.
The filing of the registration statement with respect to the Exchange Notes
constitutes a public offering of securities which may require an approval in the
province of Mpumalanga, South Africa. There can be no assurance that such
approval would be granted in a timely fashion, or at all.
There will be no prohibition in the Exchange Notes on encumbering the capital
stock of IGT's licensed operating subsidiary and IGT's licensed operating
subsidiary will not be subject to the future subsidiary guarantee covenant until
we obtain regulatory approval for such covenants or consummate the Exchange
Offers for the Outstanding Notes.
Under Nevada gaming laws, we are prohibited from agreeing not to encumber the
capital stock of, or providing a subsidiary guarantee from, our subsidiary that
holds our domestic gaming licenses unless (1) the applicable covenant is made in
connection with a registered public offering that is being made pursuant to a
Shelf Approval that includes a prior approval of such covenant or (2) we have
obtained the prior approval of the Nevada Control Board and Nevada Commission of
such covenant. Therefore, the lien covenant included in the Indenture will not
prohibit IGT from encumbering the capital stock of its licensed operating
subsidiary and the future subsidiary guarantor covenant will not be applicable
to the licensed operating subsidiary until, in each case, the earlier of such
time as (1) prior approval of the applicable covenant is received in Nevada or
(2) a registered public offering of the Exchange Notes is made pursuant to a
Nevada Shelf Approval that includes a prior approval of such covenant. In the
event IGT grants a lien on the capital stock of its licensed operating
subsidiary prior to such time, IGT will be required to make an offer to purchase
the notes. See "Description of Exchange Notes -- Limitation on Liens" and "--
Repurchase at the Option of Holders Upon Granting of Lien." In addition, until
the approval is obtained with respect to granting a guarantee, the licensed
subsidiary will not be permitted to incur indebtedness or take any other action
that would otherwise require it to guarantee the Exchange Notes. We have filed
applications with the Nevada Control Board and Nevada Commission for approvals
of the applicability of such covenants to our licensed operating subsidiary. Our
applications, however, will not be considered until July 1999 at the earliest.
Risks Associated With the Gaming Industry
A reduction in the growth rate of new and existing markets for our products
or delays of scheduled openings of newly constructed or planned casinos could
have an adverse impact on our operations.
<PAGE>
Demand for our products is driven principally by the establishment of new
gaming jurisdictions and the addition of new casinos or expansion of existing
casinos within existing gaming markets. The establishment or expansion of gaming
in any jurisdiction typically requires a public referendum or other legislative
action. As a result, gaming continues to be the subject of public debate, with
numerous active organizations that oppose gaming and may attempt to cause gaming
operations to be restricted or prohibited in any jurisdiction. In addition, the
rate of growth in the North American marketplace has diminished since the
substantial growth experienced in the early 1990s. A continued reduction in
growth or in the number of gaming jurisdictions or delays in the opening of new
or expanded casinos could have an adverse impact on demand for our products and,
consequently, our operations.
A decline in the popularity of our gaming products with players, a lack of
success in developing new products or an increase in the popularity of existing
or new games of our competitors could have an adverse impact on our operations.
The popularity of any of our gaming products may decline over time as
consumer preferences change or as new, competing games are introduced by our
competitors. The markets for our products are intensely competitive, and many of
our competitors have an established presence in our market, have substantial
resources and specialize in the development and marketing of their products. If
we fail to develop games that achieve market acceptance or if our existing games
become obsolete due to the introduction of popular games by our competitors, the
effects on our operations could be material and adverse. In addition, the
introduction of new and innovative products by our competitors that are
successful in meeting consumer preferences could have a material and adverse
effect on us.
We place our wide-area progressive systems in casinos at no cost to the
casinos under short-term arrangements, making these games susceptible to
replacement due to pressure from competitors, changes in economic conditions,
obsolescence and declining popularity. We intend to maintain and expand the
number of installed wide-area progressive systems through the enhancement of
existing games, introduction of new games and customer service, but we cannot
assure you that these efforts will be successful.
The failure to receive patents on new technology or the infringement of
existing patents could have a material adverse impact on us.
We have obtained patents and copyrights with respect to various aspects of
our games and other products, including progressive systems and player tracking
systems. These patents include new game designs, bonus and secondary game
features, gaming device components, gaming systems and a variety of other
aspects of video and electronic slot machines and associated equipment. We
cannot provide any assurances that our patents will not be infringed or that
others will not develop technology that does not violate the patents.
We do not know what effect the National Gambling Impact Study Commission may
have on the gaming industry.
The National Gambling Impact Study Commission (the "NGIC") was created in
August 1996 to conduct a comprehensive legal and factual study of the social and
economic impacts of gambling on federal, state, local and Native American tribal
governments and on communities and social institutions. The NGIC is required to
issue a report containing its findings and conclusions, together with
recommendations for legislation and administrative actions, by June 20, 1999.
Any recommendations which may be made by the NGIC could result in the enactment
of new laws and/or the adoption of new regulations which could adversely impact
the gaming industry in general. On April 28, 1999, the NGIC voted 5-4 to
recommend "a pause" in the growth of legalized gambling and encourage state and
local governments to form their own gambling study commissions. We are unable at
this time to determine what additional recommendations, if any, the NGIC will
make, the ultimate disposition of any recommendations the NGIC may make or the
impact of the results of this report on us.
We derive a significant portion of our total revenues from our international
operations, and international operations present certain additional risks.
International jurisdictions accounted for approximately 23% of our total
revenue for fiscal 1998. IGT expects international revenues to continue to
represent a significant portion of total revenue. International product sales
are subject to inherent risks, including variation in local economies,
fluctuating exchange rates, greater difficulty in accounts receivable
<PAGE>
collection, trade barriers and burdens of complying with a variety of
international laws. There can be no assurance that one or more of these factors
will not have a material and adverse effect on our operations.
You cannot be sure that an active trading market will develop for the Exchange
Notes.
There is no established trading market for the Exchange Notes, and we cannot
assure you that a market for the Exchange Notes will develop in the future. If
such a market were to develop, the Exchange Notes could trade at prices that are
higher or lower than the initial offering prices depending on many factors,
including the number of holders of the Exchange Notes, the overall market for
similar securities, our financial performance and prospects, and prospects for
companies in our industry generally. The initial purchasers of the Outstanding
Notes have informed us that they currently intend to make a market in the
Exchange Notes. However, the initial purchasers have no obligation to do so and
may discontinue making a market at any time without notice. Therefore, we cannot
assure you as to the liquidity of any trading market for the notes and, if
issued, the notes to be exchanged for the notes. We do not intend to apply (and
are not obligated to apply) for listing of the Exchange Notes on any securities
exchange or any automated quotation system.
You must comply with the procedures for the Exchange Offer in order to receive
the Exchange Notes.
You are responsible for complying with all Exchange Offer procedures. You
will only receive Exchange Notes in exchange for your Outstanding Notes if,
prior to the Expiration Date, you deliver the following to the Exchange Agent:
o certificate for the Outstanding Notes or a book-entry confirmation of a
book-entry transfer of the Outstanding Notes into the Exchange Agent's
account at the Depository Trust Company ("DTC");
o the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed by you, together with any
required signature guarantees; and
o any other documents required by the Letter of Transmittal.
You should allow sufficient time to ensure that the Exchange Agent receives
all required documents before the Expiration Date. Neither IGT nor the Exchange
Agent has any duty to inform you of defects or irregularities with respect to
the tender of your Outstanding Notes for exchange. See "The Exchange Offers."
<PAGE>
THE EXCHANGE OFFERS
Purpose and Effect of the Exchange Offers
In connection with the sale of the Outstanding Notes, IGT entered into a
registration rights agreement with the initial purchasers of the Outstanding
Notes pursuant to which IGT agreed to file and to use its best efforts to cause
to become effective with the SEC a registration statement with respect to the
exchange of the Outstanding Notes for Exchange Notes with terms identical in all
material respects to the terms of the Outstanding Notes. A copy of the
registration rights agreement has been filed as an exhibit to the registration
statement of which this prospectus is a part. The Exchange Offers are being made
to satisfy the contractual obligations of IGT under the registration rights
agreement.
By tendering Outstanding Notes in exchange for Exchange Notes, each holder
represents to IGT that: (1) any Exchange Notes to be received by such holder are
being acquired in the ordinary course of such holder's business; (2) such holder
has no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of Exchange Notes; (3)
such holder is not an "affiliate" of IGT (within the meaning of Rule 405 under
the Securities Act), or if such holder is an affiliate, that such holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable; (4) such holder has full power and
authority to tender, exchange, sell, assign and transfer the tendered
Outstanding Notes, (5) IGT will acquire good, marketable and unencumbered title
to the tendered Outstanding Notes, free and clear of all liens, restrictions,
charges and encumbrances; and (6) the Outstanding Notes tendered for exchange
are not subject to any adverse claims or proxies. Each tendering holder also
will warrant and agree that such holder will, upon request, execute and deliver
any additional documents deemed by IGT or the Exchange Agent to be necessary or
desirable to complete the exchange, sale, assignment, and transfer of the
Outstanding Notes tendered pursuant to the Exchange Offers. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Outstanding
Notes pursuant to the Exchange Offers, where such Outstanding Notes were
acquired by such broker-dealer as a result of market-making or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
The Exchange Offers are not being made to, nor will IGT accept tenders for
exchange from, holders of Outstanding Notes in any jurisdiction in which the
Exchange Offers or the acceptance of the Exchange Notes would be in violation of
the securities or blue sky laws of that jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to an
Exchange Offer means any person in whose name the Outstanding Notes are
registered on the books of IGT or any other person who has obtained a properly
completed bond power from the registered holder, or any participant in DTC whose
name appears on a security position listing as a holder of Outstanding Notes
(which, for purposes of the Exchange Offers, include beneficial interests in the
Outstanding Notes held by direct or indirect participants in DTC and Outstanding
Notes held in definitive form).
Terms of the Exchange Offers
IGT hereby offers, upon the terms and subject to the conditions shown in this
prospectus and in the accompanying Letter of Transmittal, to exchange $1,000
principal amount of Senior Exchange Notes due 2004 for each $1,000 principal
amount of Outstanding Senior Notes due 2004 and $1,000 principal amount of
Senior Exchange Notes due 2009 for each $1,000 principal amount of Outstanding
Senior Notes due 2009, properly tendered before the Expiration Date and not
properly withdrawn according to the procedures described below. Holders may
tender their Outstanding Notes in whole or in part in integral multiples of
$1,000 principal amount.
The form and terms of the Exchange Notes are the same as the form and terms of
the Outstanding Notes except that (1) the Exchange Notes have been registered
under the Securities Act and therefore are not subject to the restrictions on
transfer applicable to the Outstanding Notes and (2) holders of the Exchange
Notes will not be entitled to some of the rights of holders of the Outstanding
Notes under the registration rights agreement. The Exchange Notes evidence the
same indebtedness as the Outstanding Notes (which they replace) and will be
issued pursuant to, and entitled to the benefits of, the Indenture.
<PAGE>
Neither Exchange Offer is conditioned upon the other Exchange Offer or on any
minimum principal amount of Outstanding Notes being tendered for exchange. IGT
reserves the right in its sole discretion to purchase or make offers for any
Outstanding Notes that remain outstanding after the Expiration Date in either
Exchange Offer or, as shown under "-Conditions to the Exchange Offers," to
terminate, either or both of the Exchange Offers and, to the extent permitted by
applicable law, purchase Outstanding Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offers. As of the date of this
prospectus, $400 million principal amount of Outstanding Senior Notes due 2009
and $600 million principal amount of Outstanding Senior Notes due 2009 are
outstanding.
Holders of Outstanding Notes do not have any appraisal or dissenters' rights
in connection with the Exchange Offers. Outstanding Notes which are not tendered
for, or are tendered but not accepted in connection with, the Exchange Offers
will remain outstanding. See "Risk Factors--You must comply with the procedures
of the Exchange Offer in order to receive Exchange Notes."
If any tendered Outstanding Notes are not accepted for exchange because of an
invalid tender, the occurrence of particular other events shown herein or
otherwise, certificates for any such unaccepted Outstanding Notes will be
returned, without expense, to the tendering holder thereof promptly after the
Expiration Date.
Holders who tender Outstanding Notes in connection with the Exchange Offers
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of the Outstanding Notes in connection with the Exchange Offers. IGT
will pay all charges and expenses, other than specified applicable taxes. See
"-Fees and Expenses."
IGT MAKES NO RECOMMENDATION TO THE HOLDERS OF THE OUTSTANDING NOTES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR
OUTSTANDING NOTES IN THE EXCHANGE OFFERS. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF THE OUTSTANDING NOTES
MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFERS,
AND, IF SO, THE AGGREGATE AMOUNT OF OUTSTANDING NOTES TO TENDER AFTER READING
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR
ADVISERS, IF ANY, BASED ON THEIR FINANCIAL POSITION AND REQUIREMENTS.
Expiration Date; Extensions; Amendments
The "Expiration Date" for each Exchange Offer is 5:00 p.m., New York City
time, on , 1999 unless the Exchange Offer is extended by IGT. (If IGT does
extend an Exchange Offer, the "Expiration Date" will be the latest date and time
to which that Exchange Offer is extended). Because neither Exchange Offer is
conditioned on the other Exchange Offer, it is possible that one Exchange Offer
could terminate before the other. To the extent practicable, however, IGT will
seek to terminate both Exchange Offers at the same time.
IGT expressly reserves the right in its sole and absolute discretion, subject
to applicable law, at any time and from time to time, (1) to delay the
acceptance of the Outstanding Notes for exchange, (2) to terminate an Exchange
Offer (whether or not any Outstanding Notes have theretofore been accepted for
exchange) if IGT determines, in its sole and absolute discretion, that any of
the events or conditions referred to under "-Conditions to the Exchange Offers"
has occurred or exists or has not been satisfied with respect to such Exchange
Offer, (3) to extend the Expiration Date of an Exchange Offer and retain all
Outstanding Notes tendered pursuant to such Exchange Offer, subject, however, to
the right of holders of Outstanding Notes to withdraw their tendered Outstanding
Notes as described under "-Withdrawal Rights," and (4) to waive any condition or
otherwise amend the terms of an Exchange Offer in any respect. If Exchange Offer
is amended in a manner determined by IGT to constitute a material change, or if
IGT waives a material condition of such Exchange Offer, IGT will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the registered holders of the affected Outstanding Notes, and IGT
will extend the Exchange Offer to the extent required by Rule 14e-1 under the
Exchange Act.
<PAGE>
Any such delay in acceptance, termination, extension or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent (any
such oral notice to be promptly confirmed in writing) and by making a public
announcement, and such announcement in the case of an extension will be made no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which IGT
may choose to make any public announcement, and subject to applicable laws, IGT
shall have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a release to an appropriate news
agency.
Acceptance for Exchange and Issuance of Exchange Notes
Upon the terms and subject to the conditions of each Exchange Offer, IGT will
exchange, and will issue to the Exchange Agent, Exchange Notes for Outstanding
Notes validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "-Withdrawal Rights") promptly after the Expiration Date.
In all cases, delivery of Exchange Notes in exchange for Outstanding Notes
tendered and accepted for exchange pursuant to each Exchange Offer will be made
only after timely receipt by the Exchange Agent of (1) Outstanding Notes or a
book-entry confirmation of a book-entry transfer of Outstanding Notes into the
appropriate Exchange Agent's account at DTC, (2) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and (3) any other documents required by the Letter of
Transmittal. Accordingly, the delivery of Exchange Notes might not be made to
all tendering holders at the same time, and will depend upon when Outstanding
Notes, book-entry confirmations with respect to Outstanding Notes and other
required documents are received by the relevant Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a book-entry
transfer of Outstanding Notes into the Exchange Agent's account at DTC.
Subject to the terms and conditions of each Exchange Offer, IGT will be deemed
to have accepted for exchange, and thereby exchanged, Outstanding Notes validly
tendered and not withdrawn as, if and when IGT gives oral or written notice to
the Exchange Agent (any such oral notice to be promptly confirmed in writing) of
IGT's acceptance of such Outstanding Notes for exchange pursuant to each
Exchange Offer. IGT's acceptance for exchange of Outstanding Notes tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and IGT upon the terms and subject to the
conditions of the Exchange Offers. The Exchange Agent will act as agent for IGT
for the purpose of receiving tenders of Outstanding Notes, Letters of
Transmittal and related documents, and as agent for tendering holders for the
purpose of receiving Outstanding Notes, Letters of Transmittal and related
documents and transmitting Exchange Notes to holders who validly tendered
Outstanding Notes. Such exchange will be made promptly after the Expiration Date
of each Exchange Offer. If for any reason the acceptance for exchange or the
exchange of any Outstanding Notes tendered pursuant to an Exchange Offer is
delayed (whether before or after IGT's acceptance for exchange of Outstanding
Notes), or IGT extends an Exchange Offer or is unable to accept for exchange or
exchange Outstanding Notes tendered pursuant to an Exchange Offer, then, without
prejudice to IGT's rights set forth herein, each Exchange Agent may,
nevertheless, on behalf of IGT and subject to Rule 14e-1(c) under the Exchange
Act, retain tendered Outstanding Notes and such Outstanding Notes may not be
withdrawn except to the extent tendering holders are entitled to withdrawal
rights as described under "-Withdrawal Rights."
Procedures for Tendering Outstanding Notes
Valid Tender
Except as set forth below, in order for Outstanding Notes to be validly
tendered pursuant to an Exchange Offer, either (1) (a) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, must be received by the
Exchange Agent at the address set forth under "-Exchange Agent" prior to the
Expiration Date and (b) tendered Outstanding Notes must be received by the
Exchange Agent, or such Outstanding Notes must be tendered pursuant to the
procedures for book-entry transfer set forth below and a book-entry confirmation
must be received by the Exchange Agent, in each case prior to the Expiration
Date, or (2) the guaranteed delivery procedures set forth below must be complied
with.
<PAGE>
If less than all of the Outstanding Notes are tendered, a tendering holder
should fill in the amount of Outstanding Notes being tendered in the appropriate
box on the Letter of Transmittal. The entire amount of Outstanding Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing. Unless waived by IGT, evidence satisfactory to
IGT of such person's authority to so act must also be submitted.
Any beneficial owner of Outstanding Notes that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offers.
The method of delivery of Outstanding Notes, the Letter Of Transmittal and all
other required documents is at the option and sole risk of the tendering holder.
Delivery will be deemed made only when actually received by the Exchange Agent.
Instead of delivery by mail, it is recommended that holders use an overnight or
hand delivery service. In all cases, sufficient time should be allowed to assure
timely delivery and proper insurance should be obtained. No Letter of
Transmittal or Outstanding Notes should be sent to IGT. Holders may request
their respective brokers, dealers, commercial banks, trust companies or nominees
to effect these transactions for them.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with respect to
the applicable Outstanding Notes at DTC for purposes of the applicable Exchange
Offer within two business days after the date of this prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Outstanding Notes by causing DTC to
transfer such Outstanding Notes into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Outstanding Notes may be effected through book-entry transfer into the Exchange
Agent's account at DTC, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, any required signature guarantees and any
other required documents, must in any case be delivered to and received by the
Exchange Agent at its address set forth under "-Exchange Agent" prior to the
Expiration Date, or the guaranteed delivery procedure set forth below must be
complied with.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE
AGENT.
Signature Guarantees
Certificates for Outstanding Notes need not be endorsed and signature
guarantees on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are unnecessary unless (a) a certificate for Outstanding Notes is registered
in a name other than that of the person surrendering the certificate or (b) a
registered holder completes the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" in the Letter of Transmittal. In the case of (a)
or (b) above, such certificates for Outstanding Notes must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or signature
on the bond power and on the Letter of Transmittal or the notice of withdrawal,
as the case may be, guaranteed by a firm or other entity identified in Rule
17Ad-15 under the Exchange Act as an "eligible guarantor institution," including
(as such terms are defined therein) (1) a bank, (2) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer, (3) a
credit union, (4) a national securities exchange, registered securities
association or clearing agency, or (5) a savings association that is a
participant in a Securities Transfer Association (each an "Eligible
Institution"), unless surrendered on behalf of such Eligible Institution. See
Instruction 1 to the Letter of Transmittal.
<PAGE>
Guaranteed Delivery
If a holder desires to tender Outstanding Notes pursuant to an Exchange Offer
and the certificates for such Outstanding Notes are not immediately available or
time will not permit all required documents to reach the Exchange Agent before
the Expiration Date, or the procedures for book-entry transfer cannot be
completed on a timely basis, such Outstanding Notes may nevertheless be
tendered, provided that all of the following guaranteed delivery procedures are
complied with
(1) such tenders are made by or through an Eligible
Institution;
(2) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
setting forth the name and address of the holder of Outstanding Notes and the
amount of Outstanding Notes tendered, stating that the tender is being made
thereby and guaranteeing that within three New York Stock Exchange trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Outstanding Notes, in proper form for
transfer, or a book-entry confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent. The Notice of Guaranteed Delivery
may be delivered by hand, or transmitted by facsimile or mail to the Exchange
Agent and must include a guarantee by an Eligible Institution in the form set
forth in the Notice of Guaranteed Delivery; and
(3) the certificates (or book-entry confirmation) representing all tendered
Outstanding Notes, in proper form for transfer, together with a properly
completed and duly executed Letter of Transmittal, with any required signature
guarantees and any other documents required by the Letter of Transmittal, are
received by the relevant Exchange Agent within three New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed Delivery.
Determination of Validity
All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered Outstanding Notes
will be determined by IGT, in its sole discretion, which determination shall be
final and binding on all parties. IGT reserves the absolute right, in its sole
and absolute discretion, to reject any and all tenders it determines not to be
in proper form or the acceptance for exchange of which may, in the view of
counsel to IGT, be unlawful. IGT also reserves the absolute right, subject to
applicable law, to waive any of the conditions of either Exchange Offer as set
forth under "--Conditions to the Exchange Offers" or any defect or irregularity
in any tender of Outstanding Notes of any particular holder whether or not
similar defects or irregularities are waived in the case of other holders.
IGT's interpretation of the terms and conditions of the Exchange Offers
(including the relevant Letter of Transmittal and the instructions thereto) will
be final and binding on all parties. No tender of Outstanding Notes will be
deemed to have been validly made until all defects or irregularities with
respect to such tender have been cured or waived. None of IGT, any affiliates of
IGT, the Exchange Agent or any other person shall be under any duty to give any
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
Resales of Exchange Notes
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties unrelated to IGT, IGT believes that holders of
Outstanding Notes who exchange their Outstanding Notes for Exchange Notes may
offer for resale, resell and otherwise transfer such Exchange Notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act. This would not apply, however, to any holder that is a
broker-dealer that acquired Outstanding Notes as a result of market-making
activities or other trading activities or directly from IGT for resale under an
available exemption under the Securities Act. Also, resale would only be
permitted for Exchange Notes that (1) are acquired in the ordinary course of a
holder's business, (2) where such holder has no arrangement or understanding
with any person to participate in the distribution of such Exchange Notes and
<PAGE>
(3) such holder is not an "affiliate" of IGT. The staff of the SEC has not
considered the Exchange Offers in the context of a no-action letter, and there
can be no assurance that the staff of the SEC would make a similar determination
with respect to the Exchange Offers. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Outstanding Notes under the Exchange
Offers, where such Outstanding Notes were acquired by such broker-dealer as a
result of market-making or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution."
Withdrawal Rights
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to the Expiration Date of an Exchange Offer. In
order for a withdrawal to be effective, such withdrawal must be in writing and
timely received by the Exchange Agent at its address set forth under "--Exchange
Agent" prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Outstanding Notes to be withdrawn, the
principal amount of Outstanding Notes to be withdrawn, and (if certificates for
such Outstanding Notes have been tendered) the name of the registered holder of
the Outstanding Notes as set forth on the Outstanding Notes, if different from
that of the person who tendered such Outstanding Notes. If certificates for
Outstanding Notes have been delivered or otherwise identified to the Exchange
Agent, the notice of withdrawal must specify the serial numbers on the
particular certificates for the Outstanding Notes to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Outstanding Notes tendered for the account of
an Eligible Institution. If Outstanding Notes have been tendered pursuant to the
procedures for book-entry transfer set forth in "--Procedures for Tendering
Outstanding Notes," the notice of withdrawal must specify the name and number of
the account at DTC to be credited with the withdrawal of Outstanding Notes and
must otherwise comply with the procedures of DTC. Withdrawals of tenders of
Outstanding Notes may not be rescinded. Outstanding Notes properly withdrawn
will not be deemed validly tendered for purposes of an Exchange Offer, but may
be retendered at any subsequent time prior to the Expiration Date of such
Exchange Offer by following any of the procedures described above under
"--Procedures for Tendering Outstanding Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by IGT, in its sole
discretion, which determination shall be final and binding on all parties.
Neither IGT, any affiliates of IGT, the Exchange Agent or any other person shall
be under any duty to give any notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification. Any Outstanding Notes which have been tendered but which are
withdrawn will be returned to the holder promptly after withdrawal.
Interest on the Exchange Notes
Interest on the Senior Exchange Notes due 2004 will be payable every six
months on March 15 and November 15 of each year at a rate of 7.875% per annum,
commencing November 15, 1999. The Senior Exchange Notes due 2004 will mature on
May 15, 2004. Interest on the Senior Exchange Notes due 2009 will be payable
every six months on March 15 and November 15 of each year at a rate of 8.375%
per annum, commencing November 15, 1999. The Senior Exchange Notes due 2009 will
mature on May 15, 2009.
Conditions to the Exchange Offers
If any of the following conditions has occurred or exists or has not been
satisfied prior to the Expiration Date of an Exchange Offer, IGT will not be
required to accept for exchange any Outstanding Notes and will not be required
to issue Exchange Notes in exchange for any Outstanding Notes. In addition, IGT
may, at any time and from time to time, terminate or amend an Exchange Offer
(whether or not any Outstanding Notes have theretofore been accepted for
exchange) or may waive any conditions to or amend an Exchange Offer.
o A change in the current interpretation by the staff of the SEC which
permits resale of Exchange Notes as described about under "-Resales of
Exchange Notes."
<PAGE>
o The institution or threat of an action or proceeding in any court or by or
before any governmental agency or body with respect to the Exchange Offers
which, in IGT's judgment, would reasonably be expected to impair the
ability of IGT to proceed with the Exchange Offers.
o The adoption or enactment of any law, statute, rule or regulation which, in
IGT's judgment, would reasonably be expected to impair the ability of IGT
to proceed with the Exchange Offers.
o The issuance of a stop order by the SEC, any state securities authority or
any gaming authority suspending the effectiveness of the registration
statement, or proceedings for that purpose.
o Failure to obtain any governmental approval, which IGT
considers necessary for the consummation of the Exchange
Offers as contemplated hereby.
o Any change or development involving a prospective change in the business or
financial affairs of IGT which IGT thinks might materially impair its
ability to proceed with the Exchange Offers.
If IGT determines in its sole and absolute discretion that any of the
foregoing events or conditions has occurred or exists or has not been satisfied
at any time prior to an Expiration Date, IGT may, subject to applicable law,
terminate the applicable Exchange Offer (whether or not any Outstanding Notes
have theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of an Exchange Offer in any respect. If such waiver or
amendment constitutes a material change to an Exchange Offer, IGT will promptly
disclose such waiver or amendment by means of a prospectus supplement that will
be distributed to the registered holders of the applicable Outstanding Notes. In
this case, IGT will extend the applicable Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
Exchange Agent
The Bank of New York has been appointed as the Exchange Agent. Delivery of the
Letters of Transmittal and any other required documents, questions, requests for
assistance, and requests for additional copies of this prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
By Facsimile (for Eligible Institutions Only):
(212) 815-6339
Confirm by telephone: (212) 815-3738
By Hand or Overnight Courier:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, New York 10286
By Registered or Certified Mail:
The Bank of New York
101 Barclay Street (7 East)
New York, New York 10286
Attention: Diane Amorso
DELIVERY TO OTHER THAN THE ABOVE ADDRESSES OR FACSIMILE NUMBER
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Fees and Expenses
The expenses of soliciting tenders will be borne by IGT. The principal
solicitation is being made by mail. Additional solicitation may be made
personally or by telephone or other means by officers, directors or employees of
IGT.
IGT has not retained any dealer-manager or similar agent in connection with
the Exchange Offers and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offers. IGT has agreed to pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for reasonable out-of-pocket expenses in connection therewith. IGT will also
pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
prospectus and related documents to the beneficial owners of Outstanding Notes,
and in handling or tendering for their customers.
Holders who tender their Outstanding Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that if Exchange Notes
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Outstanding Notes tendered, or if a transfer
tax is imposed for any reason other than the exchange of Outstanding Notes in
connection with the Exchange Offers, then the amount of any such transfer tax
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such transfer
tax or exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer tax will be billed directly to such tendering holder.
<PAGE>
USE OF PROCEEDS
The Exchange Offers are intended to satisfy certain obligations of IGT under
the registration rights agreement. IGT will not receive any proceeds from the
issuance of the Exchange Notes or the closing of the Exchange Offers.
In consideration for issuing the Exchange Notes as contemplated in this
prospectus, IGT will receive, in exchange, an equal number of Outstanding Notes
in like principal amount. The form and terms of the Exchange Notes are identical
in all material respects to the form and terms of the Outstanding Notes, except
as otherwise described in the section entitled "The Exchange Offers--Terms of
the Exchange Offers." The Outstanding Notes surrendered in exchange for the
Exchange Notes will be retired and canceled and cannot be reissued. A portion of
the proceeds from the offering of the Outstanding Notes has been or will be used
(1) to redeem our 7.84% Senior Notes due 2004, (2) to repay certain outstanding
borrowings under a bank facility available to IGT-Australia, (3) to repay all
outstanding borrowings under the bank revolving line of credit of IGT, (4) to
finance the Sodak acquisition, (5) to repurchase approximately $75 million of
our common stock in settlement of a forward equity purchase agreement and (6) to
pay fees and expenses in connection with the foregoing. The remaining proceeds,
together with the now undrawn $250 million credit facility, will be used for
working capital, repurchases of IGT's common stock, potential acquisitions and
general corporate purposes.
<PAGE>
CAPITALIZATION
The following table summarizes our cash position, current debt and
capitalization as of April 3, 1999 (1) on a historical basis and (2) as adjusted
to give effect to the offering of the Outstanding Notes and the application of
the proceeds of the offering of the Outstanding Notes as described in "Use of
Proceeds."
<TABLE>
<CAPTION>
As of April 3, 1999
Actual As Adjusted
(in thousands)
<S> <C> <C>
Cash and cash equivalents.......... $193,160 $ 439,564(1)
======== ========
Current portion of long-term debt.. $ 42,536 $ 5
======== ========
Long-term debt:
$250 million revolving credit $246,000 $ --
facility...........................
IGT-Australia debt (excluding 60,585 --
current portion)...................
7.84% Senior Notes due 2004 71,400 --
(excluding current portion)........
7.875% Senior Notes due 2004 and
8.375% Senior -- 990,056
Notes due 2009 offered hereby.
Total long-term debt........ 377,985 990,056
Stockholders' equity:
Common stock, $.000625 par value,
320,000,000 shares authorized; 95 95
152,775,332 shares issued and
outstanding........................
Additional paid in capital....... 260,277 260,277
Retained earnings................ 892,623 889,375(2)
Treasury stock; 52,154,165 shares (676,588) (752,081)
and 57,054,165 shares, at cost.....
Accumulated other comprehensive (7,256) (7,256)
------- ------
income.............................
Total stockholders' equity.. 469,151 390,410
Total capitalization............... $847,136 $1,380,466
======== ==========
<FN>
- ----------------
(1)Excludes approximately $228 million to be used as
consideration for the Sodak acquisition. See "Use of Proceeds."
(2)Reflects the pre-tax payment of approximately $4.6 million for premiums in
connection with the prepayment of the 7.84% Senior Notes due 2004.
</FN>
</TABLE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial data of IGT as
of and for each of the years in the five-year period ended September 30, 1998
and as of and for the six-month periods ended April 3, 1999 and March 31, 1998.
The statement of income and balance sheet data as of and for each of the years
in the five-year period ended September 30, 1998 are derived from IGT's audited
consolidated financial statements and related notes thereto. The audited
consolidated financial statements of IGT as of September 30, 1998 and 1997 and
for the years ended September 30, 1998, 1997 and 1996 and the report of Deloitte
& Touche LLP thereon are incorporated by reference in this prospectus. The
statement of income and balance sheet data as of and for the six-month periods
ended April 3, 1999 and March 31, 1998 are derived from the unaudited
consolidated financial statements of IGT and, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for such periods. The results
for such periods should not be considered indicative of results for a full
fiscal year. The selected consolidated financial data is not necessarily
indicative of IGT's future results of operations or financial condition, and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," contained in IGT's Report on
Form 10-K for the year ended September 30, 1998 and IGT's consolidated financial
statements and accompanying notes, which are incorporated by reference in this
prospectus.
<TABLE>
<CAPTION>
Six months ended Fiscal years ended September 30,
April 3 March 31,
1999 1998 1998 1997 1996 1995 1994
---------------------- ------- ------- ------- ------ ------
(dollars in thousands, except ratios and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Income
Statement Data:
Revenues
Product sales......... $276,220 $ 187,016 $ 477,024 $461,150 $481,652 $416,424 $514,121
Gaming operations..... 166,357 160,087 347,099 282,820 251,800 204,362 160,340
------- ------- ------- ------- ------- ------- -------
Total revenue..... 442,577 347,103 824,123 743,970 733,452 620,786 674,461
------- ------- ------- ------- ------- ------- -------
Costs and Expenses
Product sales......... 175,296 107,766 279,337 256,480 265,550 233,367 271,374
Gaming operations..... 69,739 74,135 158,528 145,245 139,706 110,779 81,714
Selling, general and 61,713 43,733 105,945 98,380 108,469 88,551 83,871
administrative..........
Depreciation and 12,373 6,806 18,635 11,846 12,570 14,380 9,052
amortization............
Research and 21,112 15,482 38,066 31,074 25,701 28,491 23,345
development.............
Provision for bad debt 3,521 3,164 4,735 9,508 11,623 5,877 7,199
----- ----- ----- ----- ------ ----- -----
Total costs and 343,754 251,086 605,246 552,533 563,619 481,445 476,555
expenses......... ------- ------- ------- ------- ------- ------- -------
Income from operations.. 98,823 96,017 218,877 191,437 169,833 139,341 197,906
Other income, net....... 3,842 4,233 15,655 21,188 14,570 5,423 16,854
Income before income $102,665 $ 100,250 $ 234,532 $212,625 $ 184,403 $144,764 $214,760
taxes...................
Net income.............. $ 68,272 $ 65,163 $ 152,446 $137,247 $ 118,017 $ 92,648 $140,447
======== ========= ========= ======== ========= ======== ========
Other Financial Data:
EBITDA(1)............. $122,145 $ 113,440 $ 260,345 $226,461 $ 200,335 $167,237 $217,980
Net cash provided by $100,716 $ 69,721 $ 107,126 $118,082 $ 55,261 $153,356 $ (543)
operating activities....
Net cash provided by
(used in) investing $ 4,782 $(221,231) $(240,061) $(56,572)$(159,800) $(56,929) $(31,995)
activities..........
Net cash provided by
(used in) financing $(84,054) $ 193,209 $ 164,047 $(79,202 $ 32,376 $ 2,879 $ 88,929
activities..........
Ratio of EBITDA to 10.5x 20.4x 16.8x 23.4x 19.3x 18.2x 64.0x
interest expense(1)(2)..
Ratio of total -- -- 1.2x 0.6x 0.5x 0.6x 0.5x
long-term debt to
EBITDA(1)...............
Ratio of earnings to 9.4x 14.1x 13.8x 19.3x 15.5x 13.5x 41.7x
fixed charges (3)....
Pro forma ratio of
earnings to fixed 2.8x -- 2.8x -- -- -- --
charges(4)..........
Diluted earnings per $ 0.64 $ 0.56 $ 1.33 $ 1.13 $ 0.93 $ 0.71 $ 1.05
share................
Cash dividends declared $ 0.03 $ 0.06 $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.12
per common share
</TABLE>
<TABLE>
<CAPTION>
As of
April 3, As of September 30,
1999 1998 1997 1996 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Selected Balance Sheet Data:
Working capital................. $ 450,421 $ 470,003 $ 406,958 $ 488,150 $508,917 $480,698
Total assets.................... 1,532,941 1,543,628 1,215,052 1,154,187 971,698 868,008
Long-term notes payable and
capital lease obligations, 377,985 322,510 140,713 107,155 107,543 111,468
net of current maturities....
Stockholders' equity............ 469,151 541,276 519,847 623,200 554,090 520,868
- ------------
<FN>
(1)EBITDA consists of income from operations excluding depreciation and
amortization as reflected on IGT's Consolidated Statements of Cash Flows.
EBITDA is a measure commonly used by the financial community but is not
prepared in accordance with United States generally accepted accounting
principles. While many in the financial community consider EBITDA to be an
important measure of comparative operating performance, it should be
considered in addition to, but not as a substitute for, income from
operations, net income, cash flows provided by operating activities and other
measures of financial performance prepared in accordance with generally
accepted accounting principles that are included or incorporated by reference
in this prospectus. EBITDA is defined differently for purposes of the
Indenture and may not be comparable to similarly titled measures reported by
other companies. See "Description of Notes."
(2)Interest expense includes capitalized interest and excludes interest expense
related to jackpot liabilities.
(3)For the purpose of computing this ratio, earnings represent net income
before taxes on income and fixed charges (such fixed charges have been
adjusted to exclude capitalized interest), and equity in undistributed
earnings of 50% owned equity investments. Fixed charges represent interest
expense, excluding the portion related to jackpot liabilities and including
capitalized interest, one-third of total rental expense and amortization of
loan expense related to long-term debt.
(4)For the purpose of computing the pro forma ratio of earnings to fixed
charges, the actual ratio of earnings to fixed charges computed in accordance
with footnote 3 above has been adjusted to reflect the pro forma effect, as
of October 1, 1997 for fiscal 1998, and as of October 1, 1998 for the
six-month period ended April 3, 1999, on fixed charges resulting from the
issuance of the notes and the application of the proceeds thereof. The
foregoing is not pro forma for the Sodak acquisition. See "Use of Proceeds."
</FN>
</TABLE>
<PAGE>
BUSINESS
We design, manufacture and market computerized casino gaming products and
systems for both domestic and international markets. In domestic markets, IGT
targets the traditional casino gaming market and the government-sponsored video
machine market. In international markets, IGT targets the amusement with prize,
casino-style, gaming-hall and government-sponsored video machine markets. We
operate principally in two lines of business: (1) the development,
manufacturing, marketing and distribution of gaming products, what we refer to
as "Gaming Products Sales" and (2) the development, marketing and operation of
wide-area progressive systems and other revenue sharing machines, what we refer
to as "Gaming Operations."
Description of Gaming Product Sales
Over the past decade, advancements in gaming machine technology, the advent
of large, expensive theme-based casinos and growth in the number of
jurisdictions with legalized gaming have attracted a greater number of North
American players to slot and video machines. IGT estimates that slot machine
revenue accounts for nearly 75% of total casino revenues. IGT was the first to
develop computerized video gaming machines under the Players Edge Plus
trademark, and today sells a variety of different video and spinning reel games.
Casino operators seek out machines with enhanced entertainment value such as a
secondary game or bonusing features, superior graphics and audio and
recognizable game themes. In response to this trend, IGT's newest product lines,
the Game King, iGame Plus, the Vision series and the S-Plus Limited, employ
advanced technology to incorporate enhanced entertainment and communication
features while retaining many familiar and popular features of older games. As
these new games are installed, the disparity between the older and newer
machines on the casino floor widens, and the replacement cycle is stimulated.
IGT's innovations in slot and video technology have increased the earning
potential of our gaming machines by improving the ease and speed of play, using
local game preferences, enhancing entertainment via sound, bonus features and
overall aesthetics and decreasing down-time through improved reliability and
added service features. All of IGT's new gaming machines offer a wide variety of
games, innovative designs, sophisticated security features, self-diagnostic
capabilities and various accounting and data retention functions. In addition,
IGT's engineering and game design staff continually provide technological
improvements and ongoing game development, while IGT's graphic design and
silkscreen departments customize the visual aspects of the product for each
customer.
IGT offers the Game King video product platform in domestic and Australian
markets. The Game King product line offers interactive game play features and
graphics in a highly secure and reliable multi-game package. Game King offers
single game video slots and poker including the popular Triple Play Poker game.
IGT further expanded its game library with the introduction of the iGame series
platform at the 1998 World Gaming Congress. This platform supports multi-line,
multi-coin video slots, poker and keno with bonusing features and digital sound.
Gaming machines for the casino markets in continental Europe, South Africa
and South America are similar to the spinning reel and video games in the North
American market except that in some jurisdictions the method of payout differs.
Gaming machines in Australia, Japan and the United Kingdom markets, however, are
manufactured locally and differ substantially from domestic machines. Gaming
machines manufactured and sold in Australia use video and tokenized play
exclusively and include enhanced features such as free games, second screen
animations and double up and bonusing features. The Australian gaming machines
are typically multi-reel, multi-line games with low denominations. In the United
Kingdom, IGT manufactures and sells amusement with prize machines. An amusement
with prize machine is a game of chance with low stake wagering for amusement
with low value cash prizes, typically under $25. In the Japanese market, IGT
manufactures and sells pachisuro machines. A pachisuro machine is a three reel
slot machine played with tokens and is considered a skill game which allows the
player to control the stopping of the reels.
In fiscal 1998, IGT began installing the IGT Gaming System ("IGS"), which
supports casinos' control and information needs. The IGS is a 14 module
integrated casino system which includes player tracking, pit cage and credit and
slot management, and offers specialized modules, including bus schedules and
events management.
<PAGE>
The following table sets forth revenues derived from gaming product sales:
<TABLE>
<CAPTION>
Six months ended Fiscal years ended September 30,
April 3, March 31,
1999 1998 1998 1997 1996
------- -------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Gaming products
Video products.... $ 84,292 $ 66,443 $170,622 $181,266 $144,699
Spinning reel slot 83,351 78,863 165,403 183,094 254,012
Amusement with prize 28,383 -- 22,019 -- --
Pachisuro......... 32,097 6,896 17,466 20,569 16,732
Video gaming 102 65 7,660 11,613 2,185
terminals........
Other gaming 47,995 34,749 93,854 64,608 64,024
------ ------ ------ ------ ------
products(1).........
Total gaming product $276,220 $187,016 $477,024 $461,150 $481,652
sales............ ======== ======== ======== ======== ========
- ------------
<FN>
(1)Other gaming products includes revenues from casino management systems,
parts, equipment and service.
</FN>
</TABLE>
Demand for Gaming Products
Demand for IGT's gaming products comes principally from four sources: the
establishment of new gaming jurisdictions; expansions of existing casinos;
additions of new casinos within existing gaming markets; and the replacement of
older machines. The replacement cycle is driven primarily by competition in the
casino industry to provide the customer with more entertaining and sophisticated
games. Technological advances, new designs, improvements in visual
characteristics, the development of new games, general wear and tear and the
evolving preferences of casino patrons also drive replacement. The construction
of new casino properties also has an impact on the replacement machine market
since, historically, the addition of new properties has encouraged existing
casinos to upgrade to new slot products in order to remain competitive. However,
demand for replacement products is dependent, in part, upon the willingness of
casinos to incur the costs associated with replacing existing gaming machines
with new machines.
North American Markets
In the last decade, the increased legalization of gaming in new
jurisdictions, expansion in existing gaming markets and growing popularity of
gaming as a leisure activity has influenced demand in North America and
presented growth opportunities for IGT. The introduction of riverboat gaming in
the Midwest U.S., the expansion of Native American casino gaming and the growth
in the Nevada, Canadian and government-sponsored gaming markets have all
expanded the market for gaming machines. While IGT anticipates future growth in
the gaming industry, the rate of growth in the North American marketplace has
diminished since the substantial growth experienced in the early 1990's.
The total installed base and IGT's share in segments of the North American
gaming market as of September 30, 1998 are estimated by IGT as follows:
<TABLE>
<CAPTION>
IGT %
of Machine Sales
Installed Base Installed by IGT
Total IGT Base 1998 1997
<S> <C> <C> <C> <C> <C>
Casino games
Nevada............. 197,100 154,900 79% 14,100 21,400
Midwest (riverboat) 94,400 79,500 84% 6,400 10,400
Native American.... 80,800 58,300 72% 5,900 7,000
Atlantic City...... 36,000 22,000 61% 2,700 4,800
Canada............. 17,600 10,600 60% 3,500 3,800
Colorado........... 13,600 12,400 91% 2,400 700
Other.............. 26,600 14,000 68% 2,800 3,800
------- ------- ----- -----
Total........... 466,100 351,700 76% 37,800 51,900
------- ------- ------ ------
Government sponsored 124,000 26,900 21% -- 2,100
and racetracks..... ------- ------ ------ ------
Total................ 590,100 378,600 64% 37,800 54,000
======= ======= ====== ======
</TABLE>
Machine sales in North America by IGT decreased in 1998 as compared to 1997
as a result of slower growth in the North American market due to fewer new
casino openings and expansions. Machine sales by IGT in international markets,
<PAGE>
however, increased by 55% in fiscal 1998 to 39,200 machines as compared to
25,300 machines in fiscal 1997. This increase was due primarily to acquisitions
of other manufacturers, together with increased sales in South Africa and Latin
America. See "International Markets."
Nevada
Throughout the 1990's, the addition of new casinos with enhanced
entertainment and leisure activities, including upscale retail and dining
establishments and elaborate shows, has increased demand for our machines in the
Nevada market. The expansion or refurbishment of existing operations and
replacement of older gaming machines has also increased demand for our machines
in the Nevada market.
In 1998, IGT provided gaming machines to two new Las Vegas casinos, the
Bellagio and The Reserve Hotel and Casino, and to several other Nevada
properties which underwent smaller-scale expansions. In addition, four major new
casinos have opened or are scheduled to open in Las Vegas during 1999: Mandalay
Bay, Paris Resort, The Resort at Summerlin and The Venetian. These new
properties are expected to add approximately 8,700 units to the Nevada installed
base. IGT has already shipped products to Mandalay Bay and The Venetian and has
commitments for product purchases from The Resort at Summerlin.
There are several new properties in the Las Vegas market in the early
planning stages of expansion or development for completion in 2000 and beyond,
including The Aladdin, Circus Project Z, Sahara Strip, Russell South,
Sands(2)/Venetian and the Suncoast. The expansion or completion of these
properties may be influenced by the level of success of the recently opened
properties in Las Vegas. IGT does not have any commitments for gaming product
purchases from these properties.
Midwest Gaming
Riverboat-style gaming began in Iowa in 1991 and currently is operating in
Illinois, Indiana, Iowa, Louisiana, Mississippi and Missouri. A new dockside
casino opened in Mississippi in early 1999 and several riverboat casinos are
expected to open in various states by 2001. In addition, temporary casinos are
expected to open in Detroit, Michigan in late 1999, with a permanent facility
completed by or after 2002. These new properties are expected to add
approximately 22,000 machines to the installed base in the Midwest. IGT has made
sales of 1,200 machines and has received commitments to purchase an additional
1,400 machines, but otherwise does not have commitments for gaming product
purchases from these properties.
Atlantic City
The Atlantic City market consists of 12 large casinos which are concentrated
in the mature boardwalk area and the marina district. During fiscal 1998, no new
casinos opened in Atlantic City, and Caesars was the only casino to initiate an
expansion. However, a joint venture of Boyd Gaming and Mirage Resorts began
construction of The Borgata, a new casino in the marina district, which is
estimated to be completed by 2002. In addition, Ocean One (a new casino to be
built by Starwood) is planned for the boardwalk area and Le Jardin (a new casino
to be built by Mirage Resorts) has been planned for the marina district, with
estimated completion dates in 2002 and 2003, respectively. IGT does not have
commitments for gaming product purchases for these casinos. As in Nevada,
expansion in this market may contribute to demand for replacement machines in
the existing casinos.
Native American Gaming
IGT, through its distributor Sodak, has sold machines to authorized Native
American casinos in 15 states since 1990. See "Summary -- Recent Developments --
Acquisition of Sodak Gaming, Inc." Casino-style gaming continued to expand on
Native American lands during fiscal 1998. Native American gaming is regulated
under the Indian Gaming Regulatory Act of 1988 which requires the Native
American tribe and the state government in which the Native American lands are
located to enter into a compact governing the terms of the proposed gaming
before gaming devices are permitted. IGT and Sodak place machines only with
Native American tribes who have negotiated compacts with their respective states
and have received approval by the U.S. Department of the Interior and only after
any related litigation has been resolved. Gaming compacts have been approved or
<PAGE>
are under consideration or there is ongoing litigation between Native American
tribes and the state governments in Washington, California, Florida and New
York. The favorable resolution and approval of compacts in any of these states
would provide additional market opportunities for IGT's products.
The Mohegan Sun casino in northeastern Connecticut has announced an expansion
of its existing facility, expected to be completed in 2001, which will add
approximately 2,000 machines. Demand in Native American jurisdictions may also
be influenced by a need for replacement gaming equipment. Native American gaming
expanded rapidly in 1992 and 1993, suggesting that a greater proportion of the
installed machine base is entering the replacement cycle, based on overall
gaming industry trends. The replacement of older machines has already begun in a
number of Native American casinos.
Canada
IGT's video gaming terminals are currently operational for government
sponsored gaming in the Canadian provinces of Alberta, Manitoba, New Brunswick,
Newfoundland, Nova Scotia, Ontario, Prince Edward Island, Quebec and
Saskatchewan. IGT has also supplied a management system to Manitoba. In addition
to government-sponsored video gaming, the following Canadian provincial
governments have approved and are operating casino-style gaming: Alberta,
British Columbia, Manitoba, Nova Scotia, Ontario, Quebec, Saskatchewan and
Yukon. The Windsor Casino, the first full service hotel and casino in Canada,
opened in Ontario in 1998. IGT sold approximately 2,000 machines to the Windsor
Casino in 1998. The OLC issued a request for proposal in June 1998 for up to
13,200 mechanical spinning reel slot machines to be placed in up to 18 horse
racing tracks and four new charity casinos. IGT shipped 3,000 machines to
Ontario in early 1999. British Columbia Lottery Corporation has installed
spinning reel slot machines in 17 government casinos and is approved for ten
destination resorts in casinos throughout the province.
International Markets
IGT has sold to international markets since 1986. Traditionally, gaming in
international markets has consisted of casino-style gaming, private clubs and,
in some countries, smaller-scale gaming halls. IGT responds to the specific
requirements of a number of international jurisdictions by maintaining a local
presence and providing products appropriate for each market. IGT's machine sales
in its international markets are estimated as follows:
<TABLE>
<CAPTION>
Machine Sales
by IGT
1998 1997
<S> <C> <C>
Jurisdiction
Australia and New 6,200 7,700
Zealand..............
United Kingdom..... 13,100(1) --
Europe, Middle East 3,000 2,800
and North Africa.....
South Africa....... 1,600 1,100
Japan.............. 9,500 9,500
Latin America...... 4,300 3,300
Other.............. 1,500 900
----- ---
Total........... 39,200 25,300
====== ======
- ------------
<FN>
(1) Includes 3,500 machines exported to Europe.
</FN>
</TABLE>
Australia and New Zealand
Australia is the largest and most established market for gaming products
outside of North America, with an installed base of 156,700 machines in both the
casino market and the pub and club market. Although Australia is predominately a
replacement market, several Australian jurisdictions have implemented or are
considering the legalization or expansion of gaming operations within their
borders. The state of New South Wales, the largest and most mature market for
gaming machines in Australia, adopted legislation in 1998 permitting an
additional 15 machines in each of the estimated 1,800 pubs and 1,500
not-for-profit clubs which currently have machines.
<PAGE>
IGT established manufacturing, sales, marketing and distribution operations
in Sydney in 1985 and began selling gaming machines in Australia in 1986. In
order to access new technologies, a specialized game design staff and greater
market share, in March 1998, IGT acquired the assets of Olympic Amusements Pty.
Limited, a manufacturer and supplier of electronic gaming machines, gaming
systems and other gaming equipment and services to the Australian gaming market.
The installed base of IGT and Olympic Amusements' machines in Australia and New
Zealand is in excess of 58,000 units. IGT plans, over time, to integrate the
design, manufacturing, service and distribution functions of the two
organizations into one primary site in an effort to achieve a number of
economies of scale. In fiscal 1998, IGT had sales of approximately 6,000
machines, including 2,000 Olympic Amusements machines, compared to approximately
7,700 units in fiscal 1997.
United Kingdom, Europe, Middle East and North Africa
Amusement With Prize Machines. IGT-UK sells directly in its largest market,
the United Kingdom. The installed base of gaming machines in the U.K., which is
not expected to grow in the near term, exceeds 200,000 throughout a variety of
outlets including pubs, clubs, bingo halls, casinos, licensed betting offices
and arcades. Of this number, approximately 55,000 are required by law to be
replaced each year. Since our acquisition of Barcrest Limited, a Manchester,
England-based manufacturer and supplier of gaming related amusement devices, in
March 1998, IGT sold 13,100 machines in fiscal 1998 to this market. Barcrest
launches new amusement with prize machines, which are typically priced lower
than IGT's domestic S-Plus slot, in the U.K. every four to six weeks.
IGT-UK also sells amusement with prize products through distributors to
Germany, the Netherlands, Spain and other smaller European markets. The total
European market size for amusement with prize products is 650,000 machines with
an annual replacement market of approximately 170,000 machines. U.K.
manufacturers exported approximately 10,000 machines to Europe during the year,
of which IGT exported 3,500. Export opportunities arise as various governments
recognize the benefits of amusement with prize products. To capitalize upon
these opportunities, IGT-UK has research and development centers in Holland and
Spain that design machines for various European markets. Each model must comply
with the individual country's legislation and machine sales may vary due to
fluctuations in the various currencies in the European markets.
Casino-Style Gaming Machines. In Europe, amusement with prize machines
compete with casino-style gaming machines. IGT estimates that the market base of
legally installed casino style gaming machines throughout Europe, the Middle
East and North Africa is in excess of 80,000, of which IGT estimates it
manufactured 18,700. The European, Middle Eastern and North African markets are
serviced by IGT's sales and distribution center located in the Netherlands. IGT
has had a direct sales presence in Europe since 1992, where gaming is prevalent
in casinos and non-casino environments such as pubs, bars and arcades.
Increasing customer awareness of product availability combined with service and
training assistance has contributed to improvements in IGT's share of this
market.
In fiscal 1998, IGT sold approximately 3,000 machines in this market,
compared to 2,800 machines in fiscal 1997. The majority of these machines were
sold to casino operations in France, Greece, Latvia, Poland, Portugal and The
Netherlands. IGT also made additional sales of video gaming terminals for a
linked system in Sweden. IGT does not anticipate substantial growth in the
European installed base in the near future and therefore, is dependent upon
replacement sales.
South Africa
Casino gaming in South Africa is governed under the National Gambling Act.
The National Gambling Act has allocated among each of the nine provinces in
South Africa licenses for a total of 40 casinos. Four provinces have begun
accepting applications or awarding new casino licenses, while the remaining
provinces have enacted gaming legislation and established gaming boards to award
new licenses. The thirteen casinos which were operating in South Africa prior to
the passage of the National Gambling Act were permitted to continue operating,
although it is anticipated that eight of these casinos will be required to close
in the near future. Eight temporary casinos have opened pursuant to licenses
granted under the National Gambling Act, three of which are anticipated to move
into their permanent facilities by the end of 1999. In addition, five additional
casinos are expected to begin operating by the end of 1999.
<PAGE>
South Africa is also in the final stages of legalizing a limited payout
market. The limited payout market permits smaller venues with a maximum of five
machines, with each machine limited to a maximum payout of approximately $100.
When fully established, the limited payout market will total an estimated 26,400
machines. The first limited payout machines are expected to begin operating in
the province of Mpumalanga by the end of 1999.
IGT's sales and service office in Midrand, Gauteng, South Africa serves this
market. By the end of fiscal 1998, IGT became licensed as a
supplier/manufacturer in four of the nine provinces and has applications pending
in two provinces. The remaining provinces have not begun the licensing process.
During fiscal 1998, IGT sold approximately 1,600 casino gaming machines in
South Africa, compared to 1,100 units in fiscal 1997. The majority of these were
sold in the province of Gauteng, the second province to award licenses based on
the new legislation. IGT is pursuing additional sales of gaming machines to new
casinos expected to open under the South African gaming legislation.
Japan
The Japanese market consists of approximately 850,000 pachisuro machines in
more than 17,000 gaming halls. Since new games in Japan have a sales life of
four to five months, the Japan market is driven by replacements which are
estimated at approximately 400,000 machines annually. Success in this market is
dependent on the ability to regularly introduce new games and the popularity of
each new game introduced.
IGT opened an office in Tokyo in 1992 and established a regional distribution
network to market IGT's pachisuro machines. IGT-Japan is a full member in
Nichidenkyo, an association of pachisuro manufacturers, which allows IGT-Japan
to manufacture products in Japan. IGT-Japan also utilizes an in-house sales team
to market products directly to customers in Tokyo.
IGT sold approximately 9,500 units in both fiscal 1998 and 1997. IGT released
its newest machine, Popper King, at the beginning of the first quarter of fiscal
1999 and has received orders for approximately 9,500 units. In an effort to
continually improve and enhance its products, IGT has submitted another new game
to the Japanese gaming authorities for approval and continues to make
enhancements on upcoming models. Barcrest KK, a Japanese subsidiary of IGT-UK,
contributed 1,000 units during the year, which were imported from IGT-UK.
Barcrest KK has applied for full membership in Nichidenkyo.
Latin America
IGT sells casino-style gaming equipment to many legalized gaming
jurisdictions in Latin America. To serve these markets, IGT has established
offices in Buenos Aires, Argentina; Sao Paulo, Brazil; and Lima, Peru to market
its products in the Latin American region. During fiscal 1998, IGT sold
approximately 4,300 machines in the Latin American market as compared to
approximately 3,300 machines in fiscal 1997. The increase was driven by sales to
Argentina and Brazil.
Gaming Operations
IGT's revenues and net income have been significantly enhanced through the
growth in wide-area progressive systems, primarily in the North American
markets. As of September 30, 1998, MegaJackpots were operating in 11 domestic
jurisdictions under the following 21 names: Dollars Deluxe, Elvis, Fabulous
Fifties, Five Deck Frenzy, High Rollers, Jeopardy!, Megabucks, Megapoker,
Nickelmania, Nickels, Nickels Deluxe, Pinball Mania, Pokermania, Quartermania,
Quarters Deluxe, Slotopoly, Super Megabucks, Supernickel Mania, Totem Pole,
Wheel of Fortune and Wheel of Gold. Typically, IGT maintains the ownership of
machines which comprise the systems and operates the systems for the casinos.
IGT collects a percentage of the money played on the machines to fund the
jackpots and cover its expenses for operating the systems.
<PAGE>
The following table presents MegaJackpots information by jurisdiction at
September 30, 1998.
<TABLE>
<CAPTION>
Number Number
of of
Systems Machines
<S> <C> <C>
Jurisdiction
Nevada....... 15 6,200
New Jersey... 16 2,600
Riverboat 36 2,100
markets........
Native American 15 1,800
Other domestic 7 700
International 3 500
--- ---
Total..... 92 13,900
=== ======
</TABLE>
IGT strives to continually provide innovation and enhanced player appeal to
its MegaJackpots line. This has been accomplished through the introduction of
games with multiple features and second event bonusing incorporating popular
themes including Jeopardy! and Wheel of Fortune. IGT's newest systems are also
utilizing the Vision series platform. Slotopoly, introduced in September 1998 on
the Vision platform, is the first system to provide an "Instant Winner" jackpot.
Instant Winner systems provide smaller more frequent jackpots which are paid out
immediately. All previous systems focused on large value jackpots paid out over
20 to 31 years. In early 1999, IGT introduced the first of two new Instant
Winner systems when it introduced the Elvis game, featuring Elvis songs, video
footage and trivia through use of the Vision series LCD and bonusing
capabilities. The second system, Party Time, is a collection of four games
incorporating a top box and bonusing features designed by Barcrest. IGT plans to
introduce Party Time in 1999.
IGT operates some of its MegaJackpots systems under joint marketing alliances
with Anchor and Shuffle Master Gaming. One system offered through the joint
venture with Anchor, the Wheel of Fortune, has grown from approximately 240
machines in Nevada and New Jersey in December 1996 to approximately 5,300
machines in 9 jurisdictions as of September 30, 1998. Other developments with
the Anchor joint venture include Pinball Mania, Totem Pole and Wheel of Gold.
There are approximately 600 of these machines operating in five jurisdictions.
IGT also supplies some of its MegaJackpots games as "stand alone" games that are
not linked to a progressive system in jurisdictions where progressive systems
are currently awaiting approval. Approximately 540 stand alone games are
operated in Colorado, Connecticut and Indiana, and each is leased on a per
machine per day basis.
IGT recognizes that all games, including MegaJackpot systems games, have a
finite life cycle. As a result, IGT systematically replaces older systems
experiencing declining play levels with new systems incorporating enhanced
entertainment value and improved player appeal. This serves to increase for both
IGT and the casino operators the revenue generated by the system overall as well
as on a per unit basis. During fiscal 1998, IGT removed five MegaJackpot systems
in three jurisdictions.
The operation of linked progressive systems varies among jurisdictions as a
result of different gaming regulations. In all jurisdictions, the casinos pay a
percentage of the handle to IGT to fund the progressive jackpot. Funding of the
progressive jackpot differs by jurisdiction but is generally administered by
IGT. Jackpots are currently paid in equal installments over a 20 to 31 year
period. Instant Winner jackpots will be paid out at the time they are won. In
October 1998, federal legislation was passed which permits the jackpot winners
to elect to receive a lump sum payment of the discounted value of progressive
jackpots in lieu of annual installments. Before IGT can offer such payments to
winners, regulatory agencies in each jurisdiction must also approve such
payments. All approvals have been obtained except in New Jersey, where approval
was not sought. In those jurisdictions which have approved lump sum payments,
IGT currently offers new jackpot winners and jackpot winners who won after
October 21, 1998, the option to receive a lump sum payment. After July 1, 1999,
jackpot winners who won before October 21, 1998, will also be able to elect to
receive a lump sum payment. Upon the winner's election to receive a lump sum
payment, investments currently held by IGT to fund jackpot liabilities will be
sold to make the lump sum payments to jackpot winners.
<PAGE>
Marketing and Sales
Product Development
The most significant factor influencing the purchase of all types of gaming
machines is player appeal followed by a mix of elements including service,
price, reliability, technical capability and the financial condition and
reputation of the manufacturer. Player appeal is the combination of machine
design, hardware, software and play features that ultimately improves the
earning power of gaming machines and the operator's return on investment.
To increase the player appeal of its machines, IGT has made significant
investments in research and development of products tailored toward the specific
demands of its customers (casino operators) as well as the users of its products
(players). In this context, IGT has for a number of years developed annually
more than 25 different game themes which are tested to measure player appeal.
IGT uses Megatest, an on-line computerized testing and monitoring system, to
evaluate and forecast acceptance of new products. Megatest uses a central
computer to monitor the performance of games placed in a representative sample
of casinos throughout the state of Nevada. The Megatest program allows IGT to
test more games with greater accuracy and in a shorter time frame and results in
the release of higher-performing games.
In international markets, IGT's strategy is to respond to developing markets
with local presence, customized games, new product introductions and local
production where feasible.
Customer Service
IGT considers its customer service department an important aspect of the
overall marketing strategy and a key differentiating factor when operators
purchase equipment. IGT typically provides a 90-day service and parts warranty
for its gaming machines. IGT currently employs more than 400 trained sales and
service personnel for customer assistance and maintains service offices
domestically in 11 jurisdictions and internationally in Argentina, Australia,
Brazil, England, Japan, New Zealand, Peru, South Africa and The Netherlands.
IGT also provides customer education in the form of installation training at
IGT locations, on-site training and videotape instruction. Other customer
services include a 24-hour customer service hotline, a quarterly technical
newsletter, customer notifications, a Slot Line newsletter for slot floor
managers and program summary reports designed to answer specific software
systems questions. The Technical Assistance Center is a fully staffed facility
to provide 24-hour telephone support to all types of casino system customers.
The Technical Assistance Center has access to a range of field support
engineering resources to resolve technical issues.
IGT also provides information to customers through a password protected
Intranet website. Customers can access this product information network 24 hours
a day, seven days a week. The system lets users view and download a variety of
information related to IGT products and services. This system gives customers
information on demand and provides a direct link for two-way communication
between the customer and IGT.
Sales and Distribution
IGT's products and services are sold to gaming operators and government
entities which conduct gaming operations. During fiscal 1998, IGT's ten largest
customers accounted for 25% of its gaming product sales. IGT markets gaming
products and proprietary systems through its internal sales staff, agents and
distributors. IGT employs more than 400 sales and service personnel in several
United States office locations, as well as Australia, Canada, Europe, Latin
America, New Zealand, South Africa and the United Kingdom.
IGT uses distributors for sales to specific markets including Louisiana, New
Jersey, New Zealand, Native American reservations, a Canadian maritime province,
the Caribbean, France and Japan. Sodak was our exclusive distributor to Native
American casinos prior to our announced acquisition of Sodak. IGT's agreements
with distributors do not specify minimum purchases but generally provide that
IGT may terminate the distribution agreement if certain performance standards
are not met.
<PAGE>
REGULATION AND LICENSING
The manufacture, sale and distribution of gaming devices are subject to
extensive state laws, regulations of the Nevada Commission and Nevada Control
Board and various other gaming authorities as well as numerous county and
municipal ordinances. These laws, regulations and ordinances vary from
jurisdiction to jurisdiction, but primarily concern the responsibility,
financial stability and character of gaming equipment manufacturers,
distributors and operators, as well as persons financially interested or
involved in gaming operations. Certain gaming authorities have the power under
these laws to investigate any debt security holder of IGT. Gaming authorities
may, in their discretion, require the holder of any debt security of IGT to file
applications, be investigated and be found suitable to own the debt security of
IGT. Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by such gaming authorities
may be found unsuitable. Under certain circumstances, IGT has the right, at its
option, to cause a holder of Exchange Notes to dispose of its Exchange Notes or
to redeem its Exchange Notes in order to comply with gaming laws to which IGT is
subject. See "Description of Exchange Notes -- Mandatory Disposition Pursuant to
Gaming Laws." If a gaming authority determines that a person is unsuitable to
own such security, then pursuant to gaming laws and regulations, IGT can be
sanctioned, which could include the loss of its gaming approvals, if, without
prior approval, it: (1) pays to the unsuitable person any dividend, interest, or
any distribution whatsoever; (2) recognizes any voting right by such unsuitable
person in connection with such securities; (3) pays the unsuitable person
remuneration in any form; or (4) makes any payment to the unsuitable person by
way of principal, redemption, conversion, exchange, liquidation or similar
transaction.
If any Exchange Notes are held in trust by an agent or by a nominee, the
record holder of any Exchange Notes may be required to disclose the identity of
the beneficial owner of any Exchange Notes to gaming authorities. A failure to
make such disclosure may be grounds for finding the record holder unsuitable.
IGT is also required to render maximum assistance in determining the identity of
the beneficial owner.
In addition, IGT may not make a public offering of any securities without the
prior approval of various gaming authorities if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities, or to retire or extend obligations incurred for such purposes. Such
approval, if given, does not constitute a finding, recommendation or approval by
the gaming authorities as to the accuracy or adequacy of the prospectus or the
investment merits of the securities. Any representation to the contrary is
unlawful.
The filing of the registration statement with respect to the Exchange Notes
constitutes a public offering of securities of IGT that will require the prior
approval of the Nevada Commission and the Mississippi Gaming Commission. On July
24, 1997 and September 15, 1998, the Nevada Commission and the Mississippi
Gaming Commission, respectively, granted IGT prior approval to make public
offerings of securities for a period of two years subject to some conditions (a
"Shelf Approval"). Each Shelf Approval may be rescinded for good cause without
prior notice upon the issuance of any interlocutory stop order by the chairman
of the Nevada Control Board or the Executive Director of the Mississippi Gaming
Commission, as applicable. The Shelf Approvals do not constitute a finding,
recommendation or approval by the Nevada Commission, the Nevada Control Board or
the Mississippi Gaming Commission as to the accuracy or adequacy of the
prospectus or the investment merits of the notes. Any representation to the
contrary is unlawful.
IGT's Shelf Approval in Nevada will expire on July 29, 1999, and IGT has
filed an application with the Nevada Control Board and Nevada Commission for a
new Shelf Approval which will be considered in July 1999. If this registration
statement is declared effective by the SEC and the Exchange Offers commenced
prior to July 29, 1999, no additional approvals of gaming regulators will be
required in connection with the Exchange Offers. If the registration statement
registering the Exchange Notes is not declared effective and the Exchange Offers
are not commenced by July 29, 1999, IGT will be precluded from seeking
effectiveness of such registration statement until a new Shelf Approval is
granted by the Nevada Commission or the Nevada Commission approves such
registration statement. There can be no assurance that a new Shelf Approval or
the approval of the applicable registration statement will be granted in a
timely fashion, or at all. The filing of the registration statement of which
this prospectus is part or a shelf registration statement constitutes a public
<PAGE>
offering of securities which may require an approval in the province of
Mpumalanga, South Africa. There can be no assurance that such approval would be
granted in a timely fashion, or at all. In the event that any required approval
is delayed or withheld, IGT may be required to pay Special Interest (as defined)
and trading in the Outstanding Notes would continue to be subject to the
limitations described in "Exchange Offers; Registration Rights."
For a more complete description of the various gaming regulatory requirements
applicable to IGT, see "Business-Government Regulation" in IGT's Annual Report
on Form 10-K for the fiscal year ended September 30, 1998.
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions." In this description, the words "Company"
and "we" refer only to International Game Technology and not to any of its
Subsidiaries.
The Company will issue the Exchange Notes under the Indenture for the
Outstanding Notes dated as of May 19, 1999 (the "Indenture"), between the
Company and The Bank of New York, as trustee (the "Trustee").
We urge you to read the Indenture because it, and not this description,
defines your rights as a holder of the Exchange Notes. A copy of the Indenture
is available upon request to the Company at the address set forth under "Where
You Can Find More Information."
General
The Exchange Notes will be limited to $1.0 billion aggregate principal
amount, consisting of $400 million principal amount of Senior Exchange Notes due
2004 and $600 million principal amount of Senior Exchange Notes due 2009.
Interest will be calculated on the basis of a 360-day year consisting of twelve
30-day months. The Company will issue Exchange Notes only in fully registered
form without coupons, in denominations of $1,000 and integral multiples of
$1,000.
The Senior Exchange Notes Due 2004. Each Senior Exchange Note due 2004 will
bear interest from May 19, 1999, at 7.875% per annum, payable semiannually on
May 15 and November 15 of each year, commencing November 15, 1999, to the Person
in whose name the Senior Exchange Note due 2004 is registered, subject to
certain exceptions as provided in the Indenture, at the close of business on May
1 or November 1 (each a "Record Date"), as the case may be, immediately
preceding such May 15 or November 15. The Senior Exchange Notes due 2004 will
mature on May 15, 2004 and are not subject to any sinking fund provision.
The Senior Exchange Notes Due 2009. Each Senior Exchange Note due 2009 will
bear interest from May 19, 1999, at 8.375% per annum, payable semiannually on
May 15 and November 15 of each year, commencing November 15, 1999, to the Person
in whose name the Senior Exchange Note due 2009 is registered, subject to
certain exceptions as provided in the Indenture, at the close of business on the
Record Date immediately preceding such May 15 or November 15. The Senior
Exchange Notes due 2009 will mature on May 15, 2009 and are not subject to any
sinking fund provision.
The interest rate on the Outstanding Notes will increase if:
(1) the Company does not file either:
(A) a registration statement to allow for the Exchange
Offers or
(B) a resale shelf registration statement for the Outstanding Notes;
(2) the registration statement referred to above is not
declared effective on a timely basis; or
(3) certain other conditions are not satisfied.
You should refer to the description under the heading "Exchange Offers;
Registration Rights" for a more detailed description of the circumstances under
which the interest rate will increase.
Ranking
The Exchange Notes will be senior unsecured obligations of the Company, will
rank pari passu in right of payment with any existing and future senior debt of
the Company and will be senior in right of payment to all future subordinated
<PAGE>
debt of the Company. As of April 3, 1999, after giving effect to the offering of
the Outstanding Notes, the application of the proceeds thereof and the Exchange
Offers, the Company would have had, on a consolidated basis, approximately $1.0
billion of senior debt outstanding.
Except as described under the covenant "Future Subsidiary Guarantors," all
existing and future debt and other liabilities, including the claims of trade
creditors and claims of preferred stockholders, if any, of the Company's
Subsidiaries, will be effectively senior to the Exchange Notes. As of April 3,
1999, after giving effect to the offering of the Outstanding Notes and
application of the proceeds thereof, the total balance sheet liabilities of the
Company's Subsidiaries were approximately $643 million, of which approximately
$528 million were jackpot liabilities offset on a dollar-for-dollar basis by
U.S. Treasury securities and cash. The Exchange Notes also will be effectively
subordinated to any secured debt of the Company to the extent of the value of
the assets securing such debt.
Subsidiary Guarantees
The Exchange Notes will not be guaranteed when issued.
Under the circumstances described below under "Certain Covenants -- Future
Subsidiary Guarantors," one or more Subsidiary Guarantors will jointly and
severally Guarantee the Company's payment obligations under the Exchange Notes.
The Subsidiary Guarantee of each Subsidiary Guarantor will be an unsecured
senior obligation of such Subsidiary Guarantor.
Certain consolidations, mergers and dispositions of Property
may result in the addition of additional Subsidiary Guarantors or
the release of Subsidiary Guarantors. See "Future Subsidiary
Guarantors."
Each of the Company and any Subsidiary Guarantor will agree to contribute to
any Subsidiary Guarantor which makes payments pursuant to its Subsidiary
Guarantee, as applicable, an amount equal to the Company's or such Subsidiary
Guarantor's proportionate share of such payment, based on the net worth of the
Company or such Subsidiary Guarantor relative to the aggregate net worth of the
Company and the Subsidiary Guarantors.
Optional Redemption
We may redeem all or a portion of the Exchange Notes of either series at any
time as set forth below. We will mail notice to registered holders of the
Exchange Notes of the applicable series of our intent to redeem on not less than
30 or more than 60 days' notice. We may redeem such Exchange Notes at a
redemption price equal to the greater of:
o 100% of the principal amount plus accrued interest to the
redemption date; or
o the sum of the present values of the remaining scheduled payments of
principal and interest (exclusive of the interest accrued to the date of
redemption) discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate plus 37.5 basis points in the case of the Senior Exchange
Notes due 2004 and 50.0 basis points in the case of the Senior Exchange
Notes due 2009, in each case plus accrued interest on the principal
amount being redeemed to the redemption date.
"Treasury Rate" means, with respect to any redemption date, (a) the yield,
under the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release designated
"H.15(519)" or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Comparable Treasury Issue (if no maturity is within three months before
or after the Remaining Life, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue shall be determined and
the Treasury Rate shall be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month) or (b) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semiannual equivalent yield to maturity of the Comparable Treasury Issue,
<PAGE>
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date. The Treasury Rate shall be calculated on the third
Business Day preceding the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term ("Remaining Life") of the notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the notes.
"Comparable Treasury Price" means, with respect to any redemption date, (a)
the average of five Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (b) if the Independent Investment Banker obtains fewer than five
such Reference Treasury Dealer Quotations, the average of all such Quotations.
"Independent Investment Banker" means Salomon Smith Barney Inc.
or one of the other Reference Treasury Dealers identified in
clause (a) of the definition thereof appointed by the Company.
"Reference Treasury Dealer" means (a) each of Salomon Smith Barney Inc., BNY
Capital Markets, Inc., Goldman, Sachs & Co., Lehman Brothers Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated and their respective successors,
provided that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), we
will substitute therefor another Primary Treasury Dealer and (b) any other
Primary Treasury Dealer selected by us.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Independent Investment Banker, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Independent Investment Banker by such Reference
Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption
date.
Mandatory Disposition Pursuant to Gaming Laws
Each holder, by accepting an Exchange Note in exchange for their Outstanding
Notes, shall be deemed to have agreed that if the gaming authority of any
jurisdiction in which the Company or any of its Subsidiaries does business
requires that a Person who is a holder or the beneficial owner of Exchange Notes
be licensed, qualified or found suitable under applicable gaming laws, such
holder or beneficial owner, as the case may be, shall apply for a license,
qualification or a finding of suitability within the required time period. If
such Person fails to apply or become licensed or qualified or is found
unsuitable, the Company shall have the right, at its option:
o to require such Person to dispose of its Exchange Notes or beneficial
interest therein within 30 days of receipt of notice of the Company's
election or such earlier date as may be requested or prescribed by such
gaming authority, or
o to redeem such Exchange Notes at a redemption price equal
to:
(1) the lesser of
(a) such Person's cost and
(b) 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the earlier of the redemption date or the date of the
finding of unsuitability, which may be less than 30 days following the
notice of redemption if so required or prescribed by the applicable gaming
authority or
(2) such other amount as may be required by applicable law or by order of
any applicable gaming authority.
<PAGE>
The Company shall notify the Trustee in writing of any such redemption as
soon as practicable. The Company shall not be responsible for any costs or
expenses any such holder may incur in connection with its application for a
license, qualification or a finding of suitability.
Repurchase at the Option of Holders Upon a Change of Control
Triggering Event
Upon the occurrence of a Change of Control Triggering Event, each holder of
Exchange Notes shall have the right to require the Company to repurchase all or
any part of such holder's Exchange Notes pursuant to the offer described below
(the "Change of Control Offer") at a purchase price (the "Change of Control
Purchase Price") equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the purchase date (subject to the right of holders
of record on the relevant record date to receive interest due on the relevant
interest payment date).
Within 30 days following any Change of Control Triggering Event, the Company
shall:
(a) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or a similar business news service in the United
States and
(b) send, by first-class mail, with a copy to the Trustee, to each holder
of Exchange Notes, at such holder's address appearing in the security
register, a notice stating:
o that a Change of Control Triggering Event has occurred and a Change of
Control Offer is being made pursuant to the covenant entitled
"Repurchase at the Option of Holders Upon a Change of Control Triggering
Event" and that all Exchange Notes timely tendered will be accepted for
payment;
o the Change of Control Purchase Price and the purchase date, which shall
be, subject to any contrary requirements of applicable law, a Business
Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed;
o the circumstances and relevant facts regarding the Change
of Control Triggering Event;
o the procedures that holders of Exchange Notes must follow in order to
tender their notes (or portions thereof) for payment, and the procedures
that holders of Exchange Notes must follow in order to withdraw an
election to tender Exchange Notes (or portions thereof) for payment.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of notes pursuant to a Change of Control
Offer. To the extent that the provisions of any securities laws or regulations
conflict with the provisions of the covenant described hereunder, the Company
will comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the covenant described hereunder
by virtue of such compliance.
The Change of Control repurchase feature is a result of negotiations between
the Company and the initial purchasers of the Outstanding Notes. Management has
no present intention to engage in a transaction involving a Change of Control,
although it is possible that the Company would decide to do so in the future.
Subject to certain covenants described below, the Company could, in the future,
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of debt outstanding at such time
or otherwise affect the Company's capital structure or credit ratings.
The definition of Change of Control includes a phrase relating to the sale,
transfer, assignment, lease, conveyance or other disposition of "all or
substantially all" the Company's assets. Although there is a developing body of
case law interpreting the phrase "substantially all", there is no precise
established definition of the phrase under applicable law. Accordingly, if the
Company disposes of less than all its assets by any of the means described
above, the ability of a holder of Exchange Notes to require the Company to
<PAGE>
repurchase its Exchange Notes may be uncertain. In such a case, holders of the
Exchange Notes may not be able to resolve this uncertainty without resorting to
legal action.
The Existing Credit Facilities provide that the occurrence of certain of the
events that would constitute a Change of Control would constitute a default
under such existing debt. Other future debt of the Company may contain
prohibitions of certain events which would constitute a Change of Control or
require such debt to be repurchased upon a Change of Control. Moreover, the
exercise by holders of Exchange Notes of their right to require the Company to
repurchase such Exchange Notes could cause a default under existing or future
debt of the Company, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to holders of Exchange Notes upon a repurchase may be
limited by the Company's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
required repurchases. The Company's failure to purchase Exchange Notes in
connection with a Change of Control Offer would result in a default under the
Indenture. Such a default would, in turn, constitute a default under other
existing debt of the Company, and may constitute a default under future debt as
well. The Company's obligation to make an offer to repurchase the Exchange Notes
of a series as a result of a Change of Control Triggering Event may be waived or
modified at any time prior to the occurrence of such Change of Control
Triggering Event with the written consent of the holders of a majority in
principal amount of the Exchange Notes of such series. See "Modification and
Waiver".
The Company will not be required to make a Change of Control Offer upon a
Change of Control Triggering Event if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Company and purchases all of the notes validly tendered and not
withdrawn under such Change of Control Offer.
Repurchase at the Option of Holders Upon Granting of Lien
Until the earlier of (a) approval by the Nevada gaming authorities of an
agreement by the Company as contemplated by the covenant described under
"Limitation on Liens" not to grant a Lien on the Capital Stock of its Wholly
Owned Subsidiary that currently holds the Company's domestic gaming licenses
(the "License Subsidiary") or (b) a registered public offering of Exchange Notes
pursuant to a Shelf Approval that includes prior approval of such covenant (such
earlier date being referred to herein as the "Put Fall-Away Date"), if the
Company shall grant any Lien on the Capital Stock of the License Subsidiary (a
"Put Event"), each holder of Exchange Notes shall have the right to require the
Company to repurchase all or any part of such holder's Exchange Notes pursuant
to the offer described below (the "Put Event Offer") at a purchase price (the
"Put Event Purchase Price") equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the purchase date (subject to the right
of holders of record on the relevant record date to receive interest due on the
relevant interest payment date).
Within 30 days following any Put Event, the Company shall:
(1) cause a notice of the Put Event Offer to be sent at least once to the
Dow Jones News Service or a similar business news service in the United States
and
(2) send, by first-class mail, with a copy to the Trustee, to each holder
of Exchange Notes, at such holder's address appearing in the security
register, a notice stating:
o that a Put Event has occurred and a Put Event Offer is being made
pursuant to the covenant entitled "Repurchase at the Option of Holders
Upon Granting of Lien" and that all Exchange Notes timely tendered will
be accepted for payment;
o the Put Event Purchase Price and the purchase date, which shall be,
subject to any contrary requirements of applicable law, a Business Day
no earlier than 30 days nor later than 60 days from the date such
notice is mailed;
o the circumstances and relevant facts regarding the Put
Event; and
<PAGE>
o the procedures that holders of Exchange Notes must follow in order to
tender their Exchange Notes (or portions thereof) for payment, and the
procedures that holders of Exchange Notes must follow in order to
withdraw an election to tender notes (or portions thereof) for payment.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Exchange Notes pursuant to a Put Event
Offer. To the extent that the provisions of any securities laws or regulations
conflict with the provisions of the covenant described hereunder, the Company
will comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the covenant described hereunder
by virtue of such compliance.
The exercise by holders of Exchange Notes of their right to require the
Company to repurchase such Exchange Notes could cause a default under existing
or future debt of the Company due to the financial effect of such repurchase on
the Company. In addition, the Company's ability to pay cash to holders of
Exchange Notes upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. The Company's failure
to purchase Exchange Notes in connection with a Put Event would result in a
default under the Indenture. Such a default would, in turn, constitute a default
under other existing debt of the Company, and may constitute a default under
future debt as well. The Company's obligation to make an offer to repurchase the
Exchange Notes of a series as a result of a Put Event may be waived or modified
at any time prior to the occurrence of such Put Event with the written consent
of the holders of a majority in principal amount of the Exchange Notes of such
series. See "Modification and Waiver".
The Company has no plans to effect any Put Event.
Certain Covenants
Covenant Suspension. During any period of time that:
(a) the Exchange Notes have Investment Grade Ratings from
both Rating Agencies and
(b) no Default or Event of Default has occurred and is
continuing under the Indenture,
the Company and the Subsidiaries will not be subject to the covenants described
under "-- Limitation on Indebtedness" and "-- Future Subsidiary Guarantors" (the
"Suspended Covenants") and any Subsidiary Guarantees existing at such time shall
be released. In the event that the Company and the Subsidiaries are not subject
to the Suspended Covenants for any period of time as a result of the preceding
sentence and, subsequently, one or both of the Rating Agencies withdraws its
ratings or downgrades the ratings assigned to the notes below the required
Investment Grade Ratings or a Default or Event of Default occurs and is
continuing, then the Company and the Subsidiaries will thereafter again be
subject to the Suspended Covenants.
Limitation on Indebtedness. The Company shall not, and shall not permit any
Subsidiary to, Incur, directly or indirectly, any Indebtedness unless, after
giving effect to the application of the proceeds thereof, no Default or Event of
Default would occur as a consequence of such Incurrence or be continuing
following such Incurrence and either:
(1) after giving effect to the Incurrence of such Indebtedness and the
application of the proceeds thereof, the Consolidated Interest Coverage Ratio
would be greater than 2.50 to 1.00, or
(2) such Indebtedness is Permitted Indebtedness.
The term "Permitted Indebtedness" is defined to include the following:
(a) Indebtedness of the Company evidenced by the notes
and of Subsidiary Guarantors evidenced by Subsidiary
Guarantees;
<PAGE>
(b) Indebtedness of the Company under Credit Facilities, provided that
the aggregate principal amount of all such Indebtedness under Credit
Facilities at any one time outstanding shall not exceed $250.0 million;
(c) Indebtedness in respect of Capital Lease Obligations and Purchase
Money Indebtedness, provided that:
(1) the aggregate principal amount of such Indebtedness does not
exceed the Fair Market Value (on the date of the Incurrence thereof) of
the Property acquired, constructed or leased, and
(2) the aggregate principal amount of all Indebtedness Incurred and
then outstanding pursuant to this clause (c) (together with all
Permitted Refinancing Indebtedness Incurred and then outstanding in
respect of Indebtedness previously Incurred pursuant to this clause
(c)) does not exceed $25.0 million;
(d) Indebtedness of the Company owing to and held by any Wholly Owned
Subsidiary and Indebtedness of a Subsidiary owing to and held by the
Company or any Wholly Owned Subsidiary; provided, however, that any
subsequent issue or transfer of Capital Stock or other event that results
in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Indebtedness (except to
the Company or a Wholly Owned Subsidiary) shall be deemed, in each case,
to constitute the Incurrence of such Indebtedness by the issuer thereof;
(e) Indebtedness of a Subsidiary Incurred and outstanding on or prior
to the date on which such Subsidiary was acquired by the Company or
otherwise became a Subsidiary (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of transactions
pursuant to which such Subsidiary became a Subsidiary of the Company or
was otherwise acquired by the Company), provided that at the time such
Subsidiary was acquired by the Company or otherwise became a Subsidiary
and after giving effect to the Incurrence of such Indebtedness, the
Company would have been able to Incur $1.00 of additional Indebtedness
pursuant to clause (1) of the first paragraph of this covenant;
(f) Indebtedness under Interest Rate Agreements entered into by the
Company or a Subsidiary for the purpose of limiting interest rate risk in
the ordinary course of the financial management of the Company or such
Subsidiary and not for speculative purposes, provided that the obligations
under such agreements are directly related to payment obligations on
Indebtedness otherwise permitted by the terms of this covenant, including
the Notes;
(g) Indebtedness under Currency Exchange Protection Agreements entered
into by the Company or a Subsidiary for the purpose of limiting currency
exchange rate risks directly related to transactions entered into by the
Company or such Subsidiary in the ordinary course of business and not for
speculative purposes;
(h) Indebtedness in connection with one or more standby letters of
credit, completion guarantees, performance or surety bonds and banker's
acceptances issued by the Company or a Subsidiary in the ordinary course
of business (including pursuant to contractual, lease, license, worker's
compensation or self-insurance obligations) and not in connection with the
borrowing of money or the obtaining of advances or credit;
(i) any Guarantee by the Company of Indebtedness or other obligations
of any of its Subsidiaries so long as the Incurrence of such Indebtedness
or other obligations of such Subsidiaries is permitted under the terms of
the Indenture;
(j) Indebtedness arising from agreements of the Company and its
Subsidiaries providing for indemnification, adjustment of purchase price
or similar obligations, in each case, incurred or assumed in connection
with the disposition of any assets, business or Subsidiary;
(k) Indebtedness outstanding on the Issue Date not
otherwise described in clauses (a) through (j) above;
<PAGE>
(l) Indebtedness in an aggregate principal amount
outstanding at any one time not to exceed $25.0 million; and
(m) Permitted Refinancing Indebtedness Incurred in respect of
Indebtedness Incurred pursuant to clause (1) of the first paragraph of
this covenant and clauses (a), (c), (e) and (k) above.
Notwithstanding anything to the contrary contained in this covenant,
(a) the Company shall not, and shall not permit any Subsidiary
Guarantor to, Incur any Indebtedness pursuant to this covenant if the
proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to
the notes or the applicable Subsidiary Guaranty, as the case may be, to at
least the same extent as such Subordinated Obligations, and
(b) the Company shall not permit any Subsidiary that is not a
Subsidiary Guarantor to Incur any Indebtedness pursuant to this covenant
if the proceeds thereof are used, directly or indirectly, to Refinance any
Indebtedness of the Company or any Subsidiary Guarantor.
For purposes of determining compliance with this covenant, Indebtedness need
not be permitted solely by reference to one provision but may be permitted in
part by one such provision and in part by one or more other provisions of this
section permitting such Indebtedness and in the event that an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Indebtedness described in clauses (a) through (m) of the definition thereof, the
Company shall, in its sole discretion, classify such item of Indebtedness on the
date of its Incurrence in any manner that complies with this covenant.
Limitation on Liens. The Company will not, nor will it permit any Subsidiary
to, create, assume, incur or suffer to exist any Lien upon any Property or any
Indebtedness or shares of Capital Stock of any Subsidiaries, whether owned on
the Issue Date or thereafter acquired, without making effective provision
whereby the notes shall be secured equally and ratably with (or, at the option
of the Company, prior to) any and all other obligations and Indebtedness thereby
secured; provided, however, that the foregoing restriction shall not apply to:
(a) Liens for taxes, assessments or governmental charges or levies on the
Property of the Company or any Subsidiary if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are being contested
in good faith and by appropriate proceedings, provided that any reserve or
other appropriate provision that shall be required in conformity with GAAP
shall have been made therefor;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law on the Property of the
Company or any Subsidiary arising in the ordinary course of business and
securing payment of obligations which are not yet delinquent or which are
being contested in good faith;
(c) Liens on the Property of the Company or any Subsidiary incurred in the
ordinary course of business to secure performance of obligations with respect
to statutory or regulatory requirements, performance or return-of-money bonds,
surety bonds or other obligations of a like nature, in each case which are not
incurred in connection with the payment of Indebtedness;
(d) Liens on Property at the time the Company or any Subsidiary acquired
such Property, including any acquisition by means of a merger or consolidation
with or into the Company or any Subsidiary; provided that such Lien was not
Incurred in connection with or in contemplation of such acquisition, and
provided, further that any such Lien may not extend to any other Property of
the Company or any Subsidiary except as otherwise provided herein;
(e) Liens on the Property of a Person at the time such Person becomes a
Subsidiary; provided, however, that any such Lien may not extend to any other
Property of the Company or any other Subsidiary which is not a direct
Subsidiary of such Person except as otherwise provided herein;
<PAGE>
(f) pledges or deposits by the Company or any Subsidiary under workmen's
compensation laws, unemployment insurance laws or similar legislation, or good
faith deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which the Company or any Subsidiary is
party, or deposits to secure public or statutory obligations of the Company,
or deposits for the payment of rent, in each case incurred in the ordinary
course of business;
(g) Liens on Property to secure Indebtedness permitted to be incurred
pursuant to clause (c) of the definition of Permitted Indebtedness, provided
that such Lien may not extend to any Property of the Company or any Subsidiary
other than the Property acquired, constructed or leased with the proceeds of
such Indebtedness and any improvements or accessions to such Property;
(h) rights of way, zoning restrictions, minor defects or irregularities in
title, covenants and restrictions, licenses, easements, building restrictions
and such other encumbrances or charges against real Property;
(i) Liens arising out of judgments or decrees which involve uninsured
amounts not exceeding $15.0 million (or the foreign currency equivalent) and
which are being contested in good faith, provided that any reserve or other
appropriate provision that shall be required in conformity with GAAP shall
have been made therefor;
(j) Liens consisting of leases, subleases or licenses (including licenses
of patents, trademarks and other intellectual property) granted to third
parties in the ordinary course of business of the Company or any Subsidiary,
and interests or title of a lessor, sublessor or licensor under any lease or
license;
(k) Liens incurred pursuant to regulatory requirements to secure the
performance of obligations of the Company or any Subsidiary in connection with
liabilities to jackpot winners and potential jackpot winners;
(l) Liens existing on the Issue Date and not otherwise
described in clauses (a) through (k) above; or
(m) Liens on the Property of the Company or any Subsidiary to secure any
Refinancing, in whole or in part, of any Indebtedness secured by Liens
referred to in clause (d), (e), (g) or (l) above; provided, however, that any
such Lien shall be limited to all or part of the same Property that secured
the original Lien (together with improvements and accessions to such Property)
and the aggregate principal amount of Indebtedness that is secured by such
Lien shall not be increased to an amount greater than the sum of (i) the
outstanding principal amount, or, if greater, the committed amount, of the
Indebtedness secured by Liens described under clause (d), (e), (g) or (l)
above, as the case may be, at the time of such Refinancing and (ii) an amount
necessary to pay any premiums, fees and other expenses incurred by the Company
or any Subsidiary in connection with such Refinancing.
Notwithstanding the foregoing provisions of this covenant, the Company may,
and may permit any Subsidiary to, create, assume, incur or suffer to exist any
Lien upon any Property which is not excepted by clauses (a) through (m) above
without equally and ratably securing the notes, provided that the aggregate
amount of all Indebtedness then outstanding secured by such Lien and all other
Liens not specifically excepted pursuant to clauses (a) through (m) above does
not exceed 15% of Consolidated Net Tangible Assets at the end of the immediately
preceding fiscal year of the Company.
Further, notwithstanding the foregoing provisions, this covenant shall not
prohibit any Lien on the Capital Stock of the License Subsidiary prior to the
Put Fall-Away Date.
Limitation on Sale and Leaseback Transactions. The Company will not, and will
not permit any Subsidiary to, directly or indirectly, sell or transfer (other
than to the Company or a Subsidiary) any Property owned on the date of the
Indenture or thereafter acquired with the intention that the Company or any
Subsidiary shall take back a lease thereof (a "Sale and Leaseback Transaction")
unless the Company or such Subsidiary would be entitled to:
(a) Incur Indebtedness in an amount equal to the Attributable Debt with
respect to such Sale and Leaseback Transaction pursuant to the covenant
described under "Limitation on Indebtedness"; and
<PAGE>
(b) create a Lien on such Property securing such Attributable Debt without
equally and ratably securing the notes as described above under "Limitation on
Liens".
Future Subsidiary Guarantors. The Company shall cause each Domestic
Subsidiary (other than the Spin For Cash Joint Venture as long as the Company
owns 50% or less of the equity interests therein) having an aggregate of $10.0
million or more of Indebtedness or Preferred Stock outstanding at any time to
promptly execute and deliver to the Trustee a Subsidiary Guarantee, provided
that (a) with respect to any Subsidiary acquired after the Issue Date in
accordance with the terms of this Indenture, any Indebtedness or Preferred Stock
outstanding on or prior to the date on which such Subsidiary was acquired by the
Company (unless such Indebtedness or Preferred Stock was Incurred or issued, as
applicable, as consideration, or to provide all or any portion of the funds or
credit support utilized to consummate, the transactions or series of
transactions pursuant to which such Subsidiary became a Subsidiary or was
otherwise acquired by the Company), (b) Indebtedness in respect of Capital Lease
Obligations and Purchase Money Indebtedness and (c) intercompany Indebtedness
shall not be considered for purposes of this covenant. In addition, any
Subsidiary that Guarantees Indebtedness of the Company will be required to
execute and deliver to the Trustee a Subsidiary Guarantee.
Notwithstanding the foregoing, the License Subsidiary shall not be subject to
the foregoing covenant until the earlier of such time as (1) prior approval of
such covenant with respect to the License Subsidiary is received in Nevada or
(2) a registered public offering of the Exchange Notes is made pursuant to a
Shelf Approval that includes a prior approval of such covenant (the "Applicable
Date"). Further, notwithstanding any other covenant described herein, until the
Applicable Date, the License Subsidiary shall not Incur any Indebtedness or take
any other action whatsoever that would have required it to execute and deliver a
Subsidiary Guarantee but for the immediately preceding sentence.
Each Subsidiary Guarantee shall be automatically and unconditionally released
and discharged upon any sale, exchange or transfer of all of the Capital Stock
in, or all or substantially all the assets of, such Subsidiary Guarantor (in
each case other than to the Company or an affiliate of the Company).
Mergers and Sales of Assets
The Company may not consolidate with or merge into any other corporation or
sell, convey, lease or transfer its Properties and assets substantially as an
entirety in any one transaction or series of transactions unless:
(a) the corporation formed by such consolidation or into which the Company
is merged or the Person to which the Properties and assets of the Company are
so transferred shall be a corporation organized and existing under the laws of
the United States of America, any state thereof or the District of Columbia
and shall execute and deliver to the Trustee a supplemental indenture
expressly assuming the due and punctual payment when due of the principal of
and interest (including Special Interest, if any) on the Exchange Notes and
the performance of each of the other covenants of the Company under the
Indenture,
(b) each Subsidiary Guarantor shall execute and deliver to the Trustee a
supplemental indenture confirming the obligation of such Subsidiary Guarantor
to pay the principal of and interest (including Special Interest, if any) on
the notes pursuant to such Subsidiary Guarantor's Subsidiary Guarantee,
(c) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing,
(d) such surviving corporation or such Person, as the case may be, shall
not immediately thereafter have outstanding Indebtedness secured by any Liens
not permitted by the Indenture or shall have secured the notes equally and
ratably with (or, at the option of the Company, prior to) any Indebtedness
secured thereby, and
(e) in the case of a sale, conveyance, lease or other transfer of assets
substantially as an entirety, such Property and assets shall have been
transferred as an entirety or virtually as an entirety to one Person.
<PAGE>
Events of Default
The Indenture defines an "Event of Default" with respect to the Exchange
Notes of each series as being any one of the following events:
(a) default for 30 days in any payment of interest (including Special
Interest, if any) on any Exchange Note of such series;
(b) default in the payment of all or any part of the principal of any
Exchange Note of such series when due (whether at maturity, upon acceleration
or otherwise);
(c) default, for 60 days after written notice thereof, in performance of
any other term, covenant or agreement in the Indenture;
(d) default on other Indebtedness of over $30.0 million (or its foreign
currency equivalent), after the applicable grace period, which results in
acceleration of the maturity of such Indebtedness or failure to pay such
Indebtedness at final maturity;
(e) certain events of bankruptcy, insolvency or reorganization with
respect to the Company and its Significant Subsidiaries (as that term is
defined in Regulation S-X, Rule 1-02(w)); or
(f) a Subsidiary Guarantee ceases to be in full force and effect (other
than in accordance with the terms of the Indenture and such Subsidiary
Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations
under its Subsidiary Guarantee.
In case an Event of Default shall occur and be continuing, the Trustee or the
holders of not less than 25% in aggregate principal amount of all of the
Exchange Notes of the applicable series then outstanding may declare such
principal amount to be due and payable immediately.
The Indenture requires the Company to file annually with the Trustee an
officers' certificate as to whether there has been any default under the terms
of the Indenture. The Indenture provides that the Trustee may withhold notice to
the holders of the Exchange Notes of any default (except in payment of principal
or interest (including Special Interest, if any)) if it considers such to be in
the interest of the holders of the Exchange Notes.
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Indenture
provides that the Trustee shall be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of the
holders of the Exchange Notes of a series unless such holders shall have offered
to the Trustee reasonable indemnity. Subject to such provisions for
indemnification and certain other rights of the Trustee, the Indenture provides
that the holders of a majority in aggregate principal amount of the Exchange
Notes of the applicable series then outstanding shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee with
respect to the Exchange Notes of such series.
No holder of any Exchange Note of either series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder unless:
(a) such holder shall have previously given to the Trustee written notice
of a continuing Event of Default,
(b) the holders of at least 25% in aggregate principal amount of all of
the Exchange Notes of such series then outstanding shall have made written
request to the Trustee to institute such proceeding as Trustee,
(c) such holder or holders shall have offered to the Trustee
reasonable indemnity,
(d) the Trustee shall have failed to institute such proceeding within 60
days after receipt of notice from such holders, and
<PAGE>
(e) the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the Exchange Notes of such series then
outstanding a direction inconsistent with such request.
However, the holder of any Exchange Note will have an absolute right to receive
payment of the principal of and interest on such Exchange Note when due and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such holder.
Modification and Waiver
Certain modifications and amendments of the Indenture as it relates to a
series may be made by the Company, the Subsidiary Guarantors and the Trustee
only with the consent of the holders of not less than a majority in aggregate
principal amount of all of the Exchange Notes of such series then outstanding,
provided that no such modification or amendment may, without the consent of the
holder of each Exchange Note of such series affected thereby,
(a) change the Stated Maturity of the principal of, or any installment of
interest (including Special Interest, if any) on, any such Exchange Note;
(b) reduce the principal amount of or the rate of interest (including
Special Interest, if any) on any such Exchange Note;
(c) change the place of payment where, or the coin or currency in which,
any principal of and interest (including Special Interest, if any) on any such
Exchange Note is payable;
(d) impair the right to institute suit for the enforcement of any such
payment on or with respect to any such Exchange Note;
(e) at any time after a Change of Control Triggering Event or Put Event
has occurred, change the time at which the Change of Control Offer or Put
Event Offer related thereto must be made or at which the Exchange Notes must
be repurchased pursuant to such Change of Control Offer or Put Event Offer; or
(f) reduce the above-stated percentage of Exchange Notes of any series
then outstanding the consent of the holders of which is necessary to modify or
amend the Indenture or for waiver of compliance with certain provisions of the
Indenture or for waiver of certain defaults.
The holders of not less than a majority in aggregate principal amount of all
of the Exchange Notes of a series then outstanding may waive (a) compliance by
the Company or any Subsidiary Guarantor with certain restrictive provisions of
the Indenture or (b) compliance by the Company or any Subsidiary Guarantor with
any other provision of the Indenture, including a past default under the
Indenture, except a default in the payment of the principal of or interest on
any Exchange Note or in respect of a provision which under the Indenture cannot
be modified or amended without the consent of the holder of each Exchange Note
of such series affected thereby.
Defeasance of Notes or Certain Covenants
Defeasance and Discharge. The Indenture provides that the Company shall be
deemed to have paid and discharged all obligations in respect of the Exchange
Notes of any series (except for certain obligations to register the transfer or
exchange of Exchange Notes, to replace stolen, lost or mutilated Exchange Notes,
to maintain paying agencies and hold money for payment in trust) on the 93rd day
after the date of deposit with the Trustee, in trust, of money or U.S.
Government Obligations, which through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay each installment of principal and interest on the Exchange
Notes of such series on the Stated Maturity of such payments, in accordance with
the terms of the Indenture and such Exchange Notes. Such discharge may only
occur if, among other things, the Company has received from, or there has been
published by, the United States Internal Revenue Service a ruling to the effect
that holders of the Exchange Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, and in
<PAGE>
the same manner and at the same time, as would have been the case if such
deposit, defeasance and discharge had not occurred.
Defeasance of Certain Covenants. The Indenture provides that the Company may
elect to omit to comply with the restrictive covenants of the Indenture
described under "Limitation on Indebtedness", "Limitation on Liens", "Limitation
on Sale and Leaseback Transactions" and "Future Subsidiary Guarantors" and with
the provisions described under "Repurchase at the Option of Holders upon a
Change of Control Triggering Event" and "Repurchase at the Option of Holders
Upon Granting of a Lien" with respect to the Exchange Notes of any series if the
Company deposits with the Trustee, in trust, money or U.S. Government
Obligations, which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay each installment of principal and interest on the notes of
such series on the Stated Maturity of such payments, in accordance with the
terms of the Indenture and such Exchange Notes. Such a trust may only be
established if, among other things, the Company has delivered to the Trustee an
opinion of counsel to the effect that the holders of the Exchange Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance of certain covenants and will be subject to federal
income tax on the same amount, and in the same manner and at the same times, as
would have been the case if such deposit and defeasance had not occurred.
Certain Definitions
"Approved Investments" means any Investment (a) approved by the Nevada
Commission and (b) rated AA (or the equivalent) or higher by S&P and Aa2 (or the
equivalent) or higher by Moody's.
"Asset Sale" means any sale, lease, transfer, issuance or other disposition
(or series of related sales, leases, transfers, issuances or dispositions) by
the Company or any Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (a) any shares of Capital Stock of a
Subsidiary (other than directors' qualifying shares or investments by foreign
nationals mandated by applicable law) or (b) any other assets of the Company or
any Subsidiary outside of the ordinary course of business of the Company or such
Subsidiary (other than, in the case of clauses (a) and (b) above, (i) any
disposition by a Subsidiary to the Company or by the Company or a Subsidiary to
a Wholly Owned Subsidiary and (ii) any disposition effected in compliance with
the covenant described under "Merger and Sales of Assets").
"Attributable Debt" in respect of a Sale and Leaseback Transaction means, at
any date of determination, (a) if such Sale and Leaseback Transaction is a
Capital Lease Obligation, the amount of Indebtedness represented thereby
according to the definition of "Capital Lease Obligation" and (b) in all other
instances, the present value (determined in accordance with GAAP) of the total
obligations of the lessee for net rental payments (after excluding amounts paid
in respect of insurance, taxes, assessments, utilities, labor and similar
charges not relating to payments for use of the Property) during the remaining
term of the lease included in such Sale and Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of any date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (a) the sum
of the product of the numbers of years (rounded to the nearest one-twelfth of
one year) from the date of determination to the dates of each successive
scheduled principal payment of such Indebtedness or redemption or similar
payment with respect to such Preferred Stock multiplied by the amount of such
payment by (b) the sum of all such payments.
"Business Day" means any calendar day that is not a Saturday, Sunday or legal
holiday in New York, New York and on which commercial banks are open for
business in New York, New York and Nevada.
"Capital Lease Obligations" means any obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP; and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligations determined in accordance with GAAP; and
the Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty. For purposes of
<PAGE>
"Certain Covenants--Limitation on Liens", a Capital Lease Obligation shall be
deemed secured by a Lien on the Property being leased.
"Capital Stock" means, with respect to any Person, any shares or other
equivalents (however designated) of any class of corporate stock or partnership
interests or any other participations, rights, warrants, options or other
interests in the nature of an equity interest in such Person, including
Preferred Stock, but excluding any debt security convertible or exchangeable
into such equity interest.
"Change of Control" means the occurrence of any of the
following events:
(a) if any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act or any successor provisions to either of the
foregoing), including any group acting for the purpose of acquiring, holding,
voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under
the Exchange Act, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act, except that a person will be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of 35% or more of the total voting
power of the Voting Stock of the Company (for purposes of this clause (a),
such person or group shall be deemed to beneficially own any Voting Stock of a
corporation held by any other corporation (the "parent corporation") so long
as such person or group beneficially owns, directly or indirectly, in the
aggregate a majority of the total voting power of the Voting Stock of such
parent corporation); or
(b) the sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all the assets of
the Company and the Subsidiaries (other than sales of investments held to fund
jackpot liabilities to make lump sum payments to jackpot winners), considered
as a whole to another person (other than a disposition of such assets as an
entirety or virtually as an entirety to a Wholly Owned Subsidiary) shall have
occurred, or the Company merges, consolidates or amalgamates with or into any
other Person or any other Person merges, consolidates or amalgamates with or
into the Company, in any event pursuant to a transaction in which the
outstanding Voting Stock of the Company is reclassified into or exchanged for
cash, securities or other Property, other than any such transaction where:
(1) the outstanding Voting Stock of the Company is reclassified into or
exchanged for other Voting Stock of the Company or for Voting Stock of the
surviving corporation, and
(2) the holders of the Voting Stock of the Company immediately prior to
such transaction own, directly or indirectly, not less than a majority of
the Voting Stock of the Company or the surviving corporation immediately
after such transaction and in substantially the same proportion as before
the transaction; or
(c) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election or appointment by such Board
or whose nomination for election by the shareholders of the Company was
approved by a vote of not less than three-fourths of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then
in office; or
(d) the shareholders of the Company shall have approved any plan of
liquidation or dissolution of the Company.
"Change of Control Triggering Event" means the occurrence of both a Change of
Control and a Rating Decline with respect to the Exchange Notes.
"Consolidated Interest Coverage Ratio" means, as of any date of
determination, the ratio of:
(a) the aggregate amount of EBITDA for the most recent four consecutive
fiscal quarters ending at least 45 days prior to such determination date to
<PAGE>
(b) Consolidated Interest Expense for such four fiscal
quarters;
provided, however, that (i) if
(A) since the beginning of such period the Company or any Subsidiary has
Incurred any Indebtedness that remains outstanding or Repaid any
Indebtedness or
(B) the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio is an Incurrence or Repayment of
Indebtedness, then
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Incurrence or Repayment as if such
Indebtedness was Incurred or Repaid on the first day of such period, provided
that, in the event of any such Repayment of Indebtedness, EBITDA for such
period shall be calculated as if the Company or such Subsidiary had not
earned any interest income actually earned during such period in respect of
the funds used to Repay such Indebtedness, and
(ii) if
(A) since the beginning of such period the Company or any Subsidiary
shall have made any Asset Sale or an Investment (by merger or otherwise)
in any Subsidiary (or any Person which becomes a Subsidiary) or an
acquisition of Property which constitutes all or substantially all of an
operating unit of a business,
(B) the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio is such an Asset Sale, Investment or
acquisition or
(C) since the beginning of such period any Person (that subsequently
became a Subsidiary or was merged with or into the Company or any
Subsidiary since the beginning of such period) shall have made such an
Asset Sale, Investment or acquisition, then
EBITDA for such period shall be calculated after giving pro forma effect
to such Asset Sale, Investment or acquisition as if such Asset Sale,
Investment or acquisition occurred on the first day of such period.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the base interest rate in effect for such floating rate of interest on the
date of determination had been the applicable base interest rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months). In the event the Capital Stock of any Subsidiary is sold during the
period, the Company shall be deemed, for purposes of clause (i) above, to have
Repaid during such period the Indebtedness of such Subsidiary to the extent the
Company and its continuing Subsidiaries are no longer liable for such
Indebtedness after such sale.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Subsidiaries (excluding interest
expense attributable to Jackpot Liabilities), plus, to the extent not included
in such total interest expense, and to the extent Incurred by the Company or its
Subsidiaries,
(a) interest expense attributable to leases constituting part of a Sale
and Leaseback Transaction and to Capital Lease Obligations,
(b) amortization of debt discount and debt issuance cost,
including commitment fees,
(c) capitalized interest,
(d) non-cash interest expenses,
(e) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing,
<PAGE>
(f) net costs associated with Hedging Obligations (including
amortization of fees),
(g) Disqualified Stock Dividends,
(h) Preferred Stock Dividends,
(i) interest Incurred in connection with Investments in
discontinued operations,
(j) unpaid interest accruing on any Indebtedness of any other Person to
the extent such Indebtedness is Guaranteed by the Company or any
Subsidiary, and
(k) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company) in connection with
Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(a) any net income (loss) of any Person (other than the Company) if such
Person is not a Subsidiary, except that:
(1) subject to the exclusion contained in clause (c) below, the
Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash distributed by such Person during such period to the
Company or a Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to a Subsidiary, to the
limitations contained in clause (b) below), and
(2) the Company's equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net Income,
(b) any net income (loss) of any Subsidiary if such Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or the
making of distributions, directly or indirectly, to the Company (which
restrictions have not been permanently waived), except that:
(1) subject to the exclusion contained in clause (c) below, the
Company's equity in the net income of any such Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash distributed by such Subsidiary during such period to the
Company or another Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to another
Subsidiary, to the limitation contained in this clause), and
(2) the Company's equity in a net loss of any such Subsidiary for such
period shall be included in determining such Consolidated Net Income,
(c) any gain (but not loss) realized upon the sale or other disposition of
any Property of the Company or any of its consolidated Subsidiaries (including
pursuant to any Sale and Leaseback Transaction) that is not sold or otherwise
disposed of in the ordinary course of business, provided that any loss
associated with the sale of U.S. Treasury securities in connection with the
July 1999 lump sum election period shall not be included in such Consolidated
Net Income,
(d) any extraordinary gain or loss,
(e) any interest income from investments purchased to fund
Jackpot Liabilities,
(f) the cumulative effect of a change in accounting
principles during such period and
<PAGE>
(g) any non-cash compensation expense realized for grants of restricted
stock, performance shares, stock options or other rights to officers,
directors and employees of the Company or any Subsidiary, provided that such
shares, options or other rights can be redeemed at the option of the holder
only for Capital Stock of the Company (other than Disqualified Stock).
"Consolidated Net Tangible Assets" means the total amount of assets of the
Company and its consolidated Subsidiaries (less applicable reserves) after
deducting therefrom: (a) all current liabilities of the Company and its
consolidated Subsidiaries (excluding intercompany items among the Company and
its consolidated Subsidiaries and excluding any current liabilities constituting
Funded Indebtedness by reason of being renewable or extendable) and (b)
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, such assets and exclusions and deductions
therefrom to be in such amounts, if any, as would appear on a consolidated
balance sheet of the Company and its consolidated Subsidiaries as of the date of
computation, prepared in accordance with GAAP applied on a consistent basis.
"Credit Facilities" means, with respect to the Company or any Subsidiary, one
or more debt or commercial paper facilities with banks or other institutional
lenders (including the Existing Credit Facilities) providing for revolving
credit loans, term loans, receivables or inventory financing (including through
the sale of receivables or inventory to such lenders or to special purpose,
bankruptcy remote entities formed to borrow from such lenders against such
receivables or inventory) or letters of credit, in each case together with any
extensions, revisions, refinancings or replacements thereof by a lender or
syndicate of lenders.
"Currency Exchange Protection Agreement" means, in respect of a Person, any
foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency exchange rates.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable, in either case at the option of the holder
thereof) or otherwise:
(a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise,
(b) is or may become redeemable or repurchaseable at the
option of the holder thereof, in whole or in part, or
(c) is convertible or exchangeable at the option of the
holder thereof for Indebtedness or Disqualified Stock,
on or prior to, in the case of clause (a), (b) or (c), the date which is 91 days
after the latest Stated Maturity of any of the notes then outstanding; provided,
however, that if such Capital Stock is issued to any employee or to any plan for
the benefit of employees of the Company or its Subsidiaries or by any such plan
to such employees, such Capital Stock shall not constitute Disqualified Stock
solely because it may be required to be repurchased by the Company in order to
satisfy applicable statutory or regulatory obligations.
"Disqualified Stock Dividends" means all dividends with respect to
Disqualified Stock of the Company held by Persons other than a Wholly Owned
Subsidiary. The amount of any such dividend shall be equal to the quotient of
such dividend divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the Company.
"Domestic Subsidiary" means any Subsidiary other than (a) a Foreign
Subsidiary or (b) a Subsidiary of a Foreign Subsidiary.
"EBITDA" means, for any period, an amount equal to, for the
Company and its consolidated Subsidiaries:
<PAGE>
(a) the sum of Consolidated Net Income for such period, plus the following
to the extent reducing Consolidated Net Income for such period:
(1) the provision for taxes based on income or profits or
utilized in computing net loss,
(2) Consolidated Interest Expense,
(3) depreciation,
(4) amortization, and
(5) any other non-cash items (other than any such non-cash item to the
extent that it represents an accrual of or reserve for cash expenditures
in any future period), minus
(b) all non-cash items increasing Consolidated Net Income for such period
(other than any such non-cash item to the extent that it will result in the
receipt of cash payments in any future period or represents a reversal of any
accrual of, or cash reserve for, anticipated cash charges in any prior period,
in either case taken after the Issue Date).
Notwithstanding the foregoing clause (a), the provision for taxes and the
depreciation, amortization and non-cash items of a Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Subsidiary or
its shareholders.
"Event of Default" has the meaning set forth under "Events of
Default".
"Existing Credit Facilities" means the Credit Agreement dated as of May 22,
1997, as amended, supplemented or otherwise modified from time to time, by and
among the Company, the lenders party thereto, The Bank of New York, as
Administrative Agent, Wells Fargo Bank, National Association, as Documentation
Agent, and the other Co-Agents named therein.
"Fair Market Value" means, with respect to any Property, the price that could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair Market Value shall be determined,
except as otherwise provided, (a) if such Property has a Fair Market Value equal
to or less than $5.0 million, by any Officer of the Company or (b) if such
Property has a Fair Market Value in excess of $5.0 million, by a majority of the
Board of Directors of the Company and evidenced by a resolution of such Board of
Directors, dated within 30 days of the relevant transaction, delivered to the
Trustee.
"Foreign Subsidiary" means any Subsidiary which is not organized under the
laws of the United States of America or any State thereof or the District of
Columbia.
"Funded Indebtedness" means, with respect to any Person, Indebtedness of such
Person if such Indebtedness shall be payable more than one year from the date of
such computation or shall be extendable or renewable at the option of such
Person to a time more than one year after the date of computation; and all
guarantees (direct or indirect) of such Indebtedness of others.
"GAAP" means United States generally accepted accounting principles as in
effect on the Issue Date, including those set forth:
(a) in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants,
<PAGE>
(b) in the statements and pronouncements of the Financial
Accounting Standards Board,
(c) in such other statements by such other entity as approved by a
significant segment of the accounting profession, and
(d) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person:
(a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay or to maintain financial
statement conditions or otherwise), or
(b) entered into for the purpose of assuring in any other manner the
obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligation" of any Person means any obligation of such Person
pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement
or any other similar agreement or
arrangement.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by merger, conversion, exchange or otherwise),
extend, assume, Guarantee or become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or obligation on the balance sheet of such Person (and
"Incurrence" and "Incurred" shall have meanings correlative to the foregoing);
provided, however, that a change in GAAP that results in an obligation of such
Person that exists at such time, and is not theretofore classified as
Indebtedness, becoming Indebtedness shall not be deemed an Incurrence of such
Indebtedness; provided further, however, that solely for purposes of determining
compliance with "Certain Covenants--Limitation on Indebtedness", amortization of
debt discount shall not be deemed to be the Incurrence of Indebtedness, provided
that in the case of Indebtedness sold at a discount, the amount of such
Indebtedness Incurred shall at all times be the aggregate principal amount at
Stated Maturity.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(a) the principal of and premium (if any) in respect of:
(1) debt of such Person for money borrowed, and
(2) debt evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable;
(b) all Capital Lease Obligations of such Person and all Attributable Debt
in respect of Sale and Leaseback Transactions entered into by such Person;
<PAGE>
(c) all obligations of such Person issued or assumed as the deferred
purchase price of Property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(d) all obligations of such Person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in (a) through (c) above) entered into in the
ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third Business Day following receipt by such
Person of a demand for reimbursement following payment on the letter of
credit);
(e) the amount of all obligations of such Person with respect to the
Repayment of any Disqualified Stock or, with respect to any Subsidiary of such
Person, any Preferred Stock (but excluding, in each case, any accrued
dividends);
(f) all obligations of the type referred to in clauses (a) through (e) of
other Persons and all dividends of other Persons for the payment of which, in
either case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any Guarantee;
(g) all obligations of the type referred to in clauses (a) through (f) of
other Persons secured by any Lien on any Property of such Person (whether or
not such obligation is assumed by such Person), the amount of such obligation
being deemed to be the lesser of the value of such Property or the amount of
the obligation so secured; and
(h) to the extent not otherwise included in this definition,
Hedging Obligations of such Person;
provided, however, that notwithstanding the foregoing, there shall be excluded
from the definition of Indebtedness all obligations with respect to Jackpot
Liabilities but only to the extent such obligations are offset by U.S. Treasury
securities, cash designated for satisfying such liabilities and other Approved
Investments on the Company's balance sheet to be used to satisfy such
obligations.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date. The amount of
Indebtedness represented by a Hedging Obligation shall be equal to:
(1) zero if such Hedging Obligation has been Incurred pursuant to clause
(f) or (g) of the definition of the term Permitted Indebtedness, or
(2) the notional amount of such Hedging Obligation if not Incurred
pursuant to such clauses.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect against fluctuations in interest rates.
"Investment" by any Person means any direct or indirect loan (other than
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of such Person), advance or other
extension of credit or capital contribution (by means of transfers of cash or
other Property to others or payments for Property or services for the account or
use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation
of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidence of Indebtedness issued by, any other Person.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or the
equivalent) by Moody's and BBB- (or the equivalent) by S&P.
"Issue Date" means the date on which the notes are initially
issued.
<PAGE>
"Jackpot Liabilities" means discounted payments due to winners for jackpots
won and amounts accrued for jackpots not yet won that are contractual
obligations of the Company to the extent that such liabilities are offset
dollar-for-dollar by U.S. Treasury securities, cash designated for satisfying
such liabilities and other Investments.
"Lien" means, with respect to any Property of any Person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such Property (including any Capital Lease
Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any Sale and
Leaseback Transaction).
"Moody's" means Moody's Investors Service, Inc. or any
successor to the rating agency business thereof.
"Officer" means the Chief Executive Officer, the President, the
Chief Financial Officer or any Executive Vice President of the
Company.
"Permitted Refinancing Indebtedness" means any Indebtedness that Refinances
any other Indebtedness, including any successive Refinancings, so long as:
(a) such Indebtedness is in an aggregate principal amount (or if Incurred
with original issue discount, an aggregate issue price) not in excess of the
sum of:
(1) the aggregate principal amount (or if Incurred with original issue
discount, the aggregate accreted value) then outstanding of the
Indebtedness being Refinanced, and
(2) an amount necessary to pay any fees and expenses, including premiums
and defeasance costs, related to such Refinancing,
(b) the Average Life of such Indebtedness is equal to or greater than the
Average Life of the Indebtedness being Refinanced,
(c) the Stated Maturity of such Indebtedness is no earlier than the Stated
Maturity of the Indebtedness being Refinanced, and
(d) the new Indebtedness shall not be senior in right of
payment to the Indebtedness that is being Refinanced;
provided, however, that Permitted Refinancing Indebtedness shall not include
Indebtedness of a Subsidiary that is not a Subsidiary Guarantor that Refinances
Indebtedness of the Company or a Subsidiary Guarantor.
"Person" means any individual, corporation, company (including any limited
liability company), association, partnership, joint venture, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to the payment of
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over shares of any other class of
Capital Stock issued by such Person.
"Preferred Stock Dividends" means all dividends with respect to Preferred
Stock of Subsidiaries held by Persons other than the Company or a Wholly Owned
Subsidiary. The amount of any such dividend shall be equal to the quotient of
such dividend divided by the difference between one and the maximum statutory
federal income rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Preferred Stock.
<PAGE>
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms hereof, a calculation performed in accordance with
Article 11 of Regulation S-X promulgated under the Securities Act, as
interpreted in good faith by the Board of Directors of the Company after
consultation with the independent certified public accountants of the Company,
or otherwise a calculation made in good faith by the Board of Directors of the
Company after consultation with the independent certified public accountants of
the Company, as the case may be.
"Property" means, with respect to any Person, all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
subsidiaries under GAAP.
"Purchase Money Indebtedness" means Indebtedness:
(a) consisting of the deferred purchase price of property, conditional sale
obligations, obligations under any title retention agreement, other purchase
money obligations and obligations in respect of industrial revenue bonds and
(b) Incurred to finance the acquisition, construction or lease by the
Company or a Subsidiary Guarantor of such Property, including additions and
improvements thereto;
provided, however, that such Indebtedness is Incurred within 180 days after the
acquisition, construction or lease of such Property by the Company or such
Subsidiary Guarantor.
"Rating Agencies" mean Moody's and S&P.
"Rating Date" means the date which is 90 days prior to the earlier of (a) a
Change of Control and (b) public notice of the occurrence of a Change of Control
or of the intention of the Company to effect a Change of Control.
"Rating Decline" means, with respect to the Exchange Notes, the occurrence of
the following on, or within 90 days after, the earlier of the date of public
notice of the occurrence of a Change of Control or of the intention of the
Company to effect a Change of Control (which period shall be extended so long as
the rating of the Exchange Notes is under publicly announced consideration for
possible downgrade by any of the Rating Agencies): (a) in the event the Exchange
Notes are assigned an Investment Grade Rating by both Rating Agencies on the
Rating Date, the rating of the Exchange Notes by one of the Rating Agencies
shall be below an Investment Grade Rating; or (b) in the event the Exchange
Notes are rated below an Investment Grade Rating by at least one of the Rating
Agencies on the Rating Date, the rating of the Exchange Notes by at least one of
the Rating Agencies shall be decreased by one or more gradations (including
gradations within rating categories as well as between rating categories).
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Repay" means, in respect of any Indebtedness, to repay, prepay, repurchase,
redeem, legally defease or otherwise retire such Indebtedness. "Repayment" and
"Repaid" shall have correlative meanings. For purposes of the definition of
"Consolidated Interest Coverage Ratio", Indebtedness shall be considered to have
been Repaid only to the extent the related loan commitment, if any, shall have
been permanently reduced in connection therewith.
"S&P" means Standard & Poor's Ratings Service or any successor to the rating
agency business thereof.
"Spin For Cash Joint Venture" means the Company's joint venture with Anchor
Gaming called Spin For Cash on the Issue Date.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
<PAGE>
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company or any
Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter
Incurred) that is subordinate or junior in right of payment to the notes or the
applicable Subsidiary Guaranty pursuant to a written agreement to that effect.
"Subsidiary" means (a) a Person more than 50% of the outstanding Voting Stock
of which is owned, directly or indirectly, by the Company or by one or more
other Subsidiaries of the Company, or by the Company and one or more other
Subsidiaries of the Company and (b) the Spin For Cash Joint Venture.
"Subsidiary Guarantor" means, unless released from its Subsidiary Guarantee
as permitted by the Indenture, each Domestic Subsidiary that becomes a Guarantor
of the notes pursuant to the covenant described under "Certain Covenants --
Future Subsidiary
Guarantors".
"Subsidiary Guaranty" means a Guarantee on the terms set forth in the
Indenture by a Subsidiary Guarantor of the Company's obligations with respect to
the Exchange Notes.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of any Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Subsidiary all the Voting
Stock of which (except directors' qualifying shares) is at such time owned,
directly or indirectly, by the Company and its other Wholly Owned Subsidiaries.
Book-Entry System
The Exchange Notes of each series will be initially issued in the form of one
or more global certificates ("Global Securities") registered in the name of The
Depository Trust Company ("DTC") or its nominee.
Upon the issuance of a Global Security, DTC or its nominee will credit the
accounts of persons holding through it with the respective principal amounts of
the Exchange Notes represented by such Global Security purchased by such persons
in the Offering. Such accounts shall be designated by the initial purchasers.
Ownership of beneficial interests in a Global Security will be limited to
persons that have accounts with DTC ("participants") or persons that may hold
interests through participants. Any person acquiring an interest in a Global
Security through an offshore transaction in reliance on Regulation S of the
Securities Act may hold such interest through Cedel or Euroclear. Ownership of
beneficial interests in a Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by DTC
(with respect to participants' interests) and such participants (with respect to
the owners of beneficial interests in such Global Security other than
participants). The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
Payment of principal of and interest on Exchange Notes represented by a
Global Security will be made in immediately available funds to DTC or its
nominee, as the case may be, as the sole registered owner and the sole holder of
the Exchange Notes represented thereby for all purposes under the Indenture. IGT
has been advised by DTC that upon receipt of any payment of principal of or
interest on any Global Security, DTC will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
or face amount of such Global Security as shown on the records of DTC. Payments
by participants to owners of beneficial interests in a Global Security held
through such participants will be governed by standing instructions and
customary practices as is now the case with securities held for customer
accounts registered in "street name" and will be the sole responsibility of such
participants.
<PAGE>
A Global Security may not be transferred except as a whole by DTC or a
nominee of DTC to a nominee of DTC or to DTC. A Global Security is exchangeable
for certificated Exchange Notes only if:
(a) DTC notifies IGT that it is unwilling or unable to continue as a
depositary for such Global Security or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act,
(b) IGT in its discretion at any time determines not to have all the
Exchange Notes represented by such Global Security, or
(c) there shall have occurred and be continuing an Event of Default with
respect to the Exchange Notes represented by such Global Security.
Any Global Security that is exchangeable for certificated Exchange Notes
pursuant to the preceding sentence will be exchanged for certificated Exchange
Notes in authorized denominations and registered in such names as DTC or any
successor depositary holding such Global Security may direct. Subject to the
foregoing, a Global Security is not exchangeable, except for a Global Security
of like denomination to be registered in the name of DTC or any successor
depositary or its nominee. In the event that a Global Security becomes
exchangeable for certificated Exchange Notes,
(a) certificated Exchange Notes will be issued only in fully registered
form in denominations of $1,000 or integral multiples thereof,
(b) payment of principal of and interest on the certificated Exchange Notes
will be payable, and the transfer of the certificated notes will be
registrable, at the office or agency of IGT maintained for such purposes, and
(c) no service charge will be made for any registration of transfer or
exchange of the certificated Exchange Notes, although IGT may require payment
of a sum sufficient to cover any tax or governmental charge imposed in
connection therewith.
So long as DTC or any successor depositary for a Global Security, or any
nominee, is the registered owner of such Global Security, DTC or such successor
depositary or nominee, as the case may be, will be considered the sole owner or
holder of the Exchange Notes represented by such Global Security for all
purposes under the Indenture and the Exchange Notes. Except as set forth above,
owners of beneficial interests in a Global Security will not be entitled to have
the Exchange Notes represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of
certificated Exchange Notes in definitive form and will not be considered to be
the owners or holders of any Exchange Notes under such Global Security.
Accordingly, each person owning a beneficial interest in a Global Security must
rely on the procedures of DTC or any successor depositary, and, if such person
is not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder under the
Indenture. IGT understands that under existing industry practices, in the event
that IGT requests any action of holders or that an owner of a beneficial
interest in a Global Security desires to give or take any action which a holder
is entitled to give or take under the Indenture, DTC or any successor depositary
would authorize the participants holding the relevant beneficial interest to
give or take such action and such participants would authorize beneficial owners
owning through such participants to give or take such action or would otherwise
act upon the instructions of beneficial owners owning through them.
DTC has advised IGT that DTC is a limited-purpose trust company organized
under the Banking Law of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered under the Exchange Act. DTC
was created to hold the securities of its participants and to facilitate the
clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers (which
may include the initial purchasers), banks, trust companies, clearing
corporations and certain other organizations some of whom (or their
representatives) own DTC. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies, that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
<PAGE>
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in Global Securities among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of IGT, the Trustee or the
initial purchasers will have any responsibility for the performance by DTC or
its participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
<PAGE>
EXCHANGE OFFERS; REGISTRATION RIGHTS
IGT agreed, jointly and severally, under a registration rights agreement with
the initial purchasers of the Outstanding Notes, for the benefit of the holders
of the Outstanding Notes, to keep the Exchange Offers open for not less than 20
days and not more than 30 days (or longer if required by applicable law) after
the date notice of the Exchange Offers is mailed to the holders of the
Outstanding Notes.
In the event that (a) applicable interpretations of the staff of the SEC do
not permit IGT to effect such Exchange Offers, (b) for any other reason the
registration statement registering the Exchange Notes is not declared effective
within 180 days after the date of the original issuance of the Outstanding Notes
or the Exchange Offers are not consummated within 210 days after the original
issuance of the Outstanding Notes, (c) the initial purchasers of the Outstanding
Notes so request with respect to Outstanding Notes not eligible to be exchanged
for Exchange Notes in the Exchange Offers or (d) any holder of Outstanding Notes
(other than an initial purchaser) is not eligible to participate in the Exchange
Offers or does not receive freely tradable Exchange Notes in the Exchange Offers
other than by reason of such holder being an affiliate of IGT (it being
understood that the requirement that a Participating Broker-Dealer deliver this
prospectus in connection with sales of Exchange Notes shall not result in such
Exchange Notes being not "freely tradable"), IGT will, at its cost, (i) as
promptly as practicable, file a shelf registration statement covering resales of
the Outstanding Notes or the Exchange Notes, as the case may be, (ii) use its
reasonable best efforts to cause the shelf registration statement to be declared
effective under the Securities Act and (iii) use its reasonable best efforts to
keep the shelf registration statement effective until two years after the
original issuance of the Outstanding Notes. IGT will, in the event a shelf
registration statement is filed, among other things, provide to each holder for
whom such shelf registration statement was filed copies of the prospectus which
is a part of the shelf registration statement, notify each such holder when the
shelf registration statement has become effective and take certain other actions
as are required to permit unrestricted resales of the Outstanding Notes or the
Exchange Notes, as the case may be. A holder selling such Outstanding Notes or
Exchange Notes pursuant to the shelf registration statement generally would be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the registration rights agreement which are
applicable to such holder (including certain indemnification obligations).
If (a) on or prior to the 90th day following the date of original issuance of
the Outstanding Notes, neither a registration statement registering the Exchange
Notes nor the shelf registration statement has been filed with the SEC, (b) on
or prior to the 180th day following the date of original issuance of the
Outstanding Notes, the registration statement registering the Exchange Notes has
not been declared effective, (c) on or prior to the 210th day following the date
of original issuance of the Outstanding Notes, neither the Exchange Offers have
been consummated nor the shelf registration statement has been declared
effective or (d) after either the registration statement registering the
Exchange Notes or the shelf registration statement has been declared effective,
such registration statement thereafter ceases to be effective or usable (subject
to certain exceptions) in connection with resales of Outstanding Notes or
Exchange Notes in accordance with and during the periods specified in the
registration rights agreement (each such event referred to in clauses (a)
through (d), a "Registration Default"), interest ("Special Interest") will
accrue on the principal amount of the Outstanding Notes (in addition to the
stated interest on the notes) from and including the date on which any such
Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. Special Interest will accrue at a rate of
0.25% per annum following the occurrence of such Registration Default.
The summary of certain provisions of the registration rights agreement is not
complete and is subject to the provisions of the registration rights agreement.
You may obtain a copy of the registration rights agreement upon request to IGT.
Based upon no-action letters issued by the staff of the SEC to third parties,
IGT believes that the Exchange Notes issued in the Exchange Offers in exchange
for Outstanding Notes would generally be freely transferable after the Exchange
Offer without further registration under the Securities Act if the holder of the
Exchange Notes represents:
<PAGE>
o that it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of IGT
o that it is acquiring the Exchange Notes in the ordinary
course of its business and
o that it has no arrangement or understanding with any person
to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes;
provided that, in the case of broker-dealers, a prospectus meeting the
requirements of the Securities Act be delivered as required. However, the SEC
has not considered the Exchange Offers in the context of a no-action letter and
there can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offers. Holders of Outstanding Notes
wishing to accept the Exchange Offer must represent to IGT that the conditions
have been met. Each broker-dealer that receives Exchange Notes for its own
account in the Exchange Offers, where it acquired the Outstanding Notes
exchanged for the Exchange Notes for its own account as a result of
market-making or other trading activities, may be deemed to be an "underwriter"
within the meaning of the Securities Act and must acknowledge that it will
deliver a prospectus in connection with the resale of the Exchange Notes. The
letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for
Outstanding Notes where the Outstanding Notes were acquired by the broker-dealer
as a result of market-making activities or other trading activities. IGT has
agreed that, for a period of 180 days after closing of the Exchange Offer, it
will make this prospectus available to any broker-dealer for use in connection
with the resale. A broker-dealer that delivers a prospectus to purchasers in
connection with those resales will be subject to certain of the civil liability
provisions under the Securities Act, and will be bound by the provisions of the
Registration Agreement (including certain indemnification and contribution
rights and obligations). See "The Exchange Offers-Resale of the Exchange Notes"
and "Plan of Distribution."
Each holder of the Outstanding Notes (other than certain specified holders)
who wishes to exchange Outstanding Notes for Exchange Notes in the Exchange
Offers will be required to represent
o that it is not an affiliate of IGT,
o any Exchange Notes to be received by it will be acquired in
the ordinary course of its business, and
o at the time of commencement of the Exchange Offers, it had no arrangement
with any person to participate in the distribution (within the meaning of
the Securities Act) of the Exchange Notes.
If the holder is a broker-dealer who acquired the Outstanding Notes for its
own account as a result of market-making or other trading activities, it may be
deemed to be an "underwriter" within the meaning of the Securities Act and will
be required to acknowledge that it must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of the Exchange
Notes. The SEC has taken the position that those broker-dealers may fulfill
their prospectus delivery requirements with respect to the Exchange Notes with
the prospectus contained in the Exchange Offer registration statement, except
that the prospectus cannot be used for a resale of an unsold allotment from the
original sale of the Outstanding Notes. Under the registration rights agreement,
IGT is required to allow those broker-dealers and any other persons subject to
similar prospectus delivery requirements to use the prospectus contained in the
Exchange Offer registration statement in connection with the resale of the
Exchange Notes.
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The following is a general discussion of the material United States federal
income tax consequences that IGT expects to apply to holders. As used in this
discussion, the term "Holder" means a holder of the Outstanding Notes who
purchased the Outstanding Notes for cash in the original offering, exchanges the
Outstanding Notes for Exchange Notes in the Exchange Offers, and holds the
Outstanding Notes, and will hold the Exchange Notes, as capital assets. This
discussion is a descriptive summary only and is not a complete technical
analysis or listing of all potential tax considerations that may be relevant to
holders. This discussion is based on the current provisions of the Internal
Revenue Code of 1986, as amended, the applicable Treasury regulations, and
public administrative and judicial interpretations of the Internal Revenue Code
and applicable Treasury regulations, all of which are subject to change. Any
change could be applied retroactively. This discussion is also based on the
information contained in this prospectus and the related documents, and on
certain representations from IGT as to factual matters. This discussion does not
cover all aspects of United States federal taxation that may be relevant to, or
the actual tax effect that any of the matters described in this discussion will
have on, particular holders and does not address foreign, state, or local tax
consequences. IGT has not sought and will not seek any ruling from the Internal
Revenue Service with respect to the Exchange Notes. The Internal Revenue Service
could take a different position concerning the tax consequences of the exchange
of Outstanding Notes for Exchange Notes or the ownership or disposition of the
Exchange Notes, and the Internal Revenue Service's position could be sustained
by a court.
The United States federal income tax consequences to a Holder may vary
depending upon the Holder's particular situation or status. Some of the rules
applicable to Holders that are subject to special rules under the Internal
Revenue Code are not discussed below. Examples of these Holders include
insurance companies, tax-exempt organizations, mutual funds, retirement plans,
financial institutions, dealers in securities or foreign currency, persons that
hold the Exchange Notes as part of a "straddle" or as a "hedge" against currency
risk or in connection with a conversion transaction, persons that have a
functional currency other than the United States dollar, investors in
pass-through entities, traders in securities that elect to mark to market, and
except as expressly addressed in this discussion, Non-U.S. Holders.
For purposes of this discussion, a "U.S. Holder" means a beneficial owner of
Exchange Notes that is a citizen or resident of the United States, a corporation
or other entity taxable as a corporation created or organized in the United
States or under the laws of the Unites States or of any political subdivision
thereof (including the states and the District of Columbia), a domestic
partnership as defined in Section 7701(a) of the Code, an estate whose income is
includable in gross income for United States federal income tax purposes
regardless of its source, or a trust whose administration is subject to the
primary supervision of a United States court and which has one or more United
States persons who control all substantial decisions of the trust. A Non-U.S.
Holder is a beneficial owner of Exchange Notes other than a U.S. Holder. In the
case of a Holder of Exchange Notes that is a domestic partnership within the
meaning of Section 7701(a)(30)(B) of the Code, each partner generally will take
into account its allocable share of income or loss from the Exchange Notes,
under the rules of U.S. federal income taxation applicable to such partner, and
taking into account the activities of the partnership and the partner.
U.S. Holders
Stated Interest/Original Issue Discount
U.S. Holders of Exchange Notes generally will include stated interest in
gross income in accordance with their methods of accounting for United States
federal income tax purposes. As of the date of this prospectus, IGT intends to
take the position (which generally will be binding on Holders) that the
Outstanding Notes were not issued with original issue discount within the
meaning of Section 1273 of the Code. The Internal Revenue Service may or may not
agree with this conclusion.
Disposition
In general, a U.S. Holder of Exchange Notes will recognize gain or loss upon
the sale, exchange, redemption or other taxable disposition of the Exchange
Notes measured by the difference between (i) the amount of cash and fair market
value of property received (reduced by any amounts attributable to accrued but
<PAGE>
unpaid interest, which will be taxable as such) and (ii) such Holder's tax basis
in the Exchange Notes. Any such gain or loss will generally be capital gain or
loss, and will be long-term gain or loss with respect to Exchange Notes held for
more than one year. The deductibility of capital losses is subject to
limitations.
The Exchange Offers
The exchange of Outstanding Notes for Exchange Notes pursuant to the Exchange
Offers will not be considered a taxable exchange for federal income tax purposes
because the Exchange Notes will not differ materially in kind or extent from the
Outstanding Notes and because the exchange will occur by operation of the terms
of the Outstanding Notes. Accordingly, such exchange will have no federal income
tax consequences to Holders of the Outstanding Notes. A Holder's adjusted tax
basis and holding period in an Exchange Note will be the same as such Holder's
adjusted tax basis and holding period, respectively, in the Outstanding Notes
exchanged therefor.
Holders considering the exchange of Outstanding Notes for Exchange Notes
should consult their own tax advisors concerning the United States federal
income tax consequences in light of their particular situations as well as any
consequences arising under state, local and foreign income tax and other tax
law.
Non-U.S. Holders
Under present United States federal income tax law, assuming certain
certification requirements are satisfied (which generally can be satisfied by
providing Internal Revenue Form W-8 or substantially similar form, identifying
the beneficial owner of the instrument as a foreign person and disclosing the
Non-U.S. Holder's name and address), and subject to the discussion of backup
withholding below:
(a) payments of interest on the Exchange Notes to any Non-U.S. Holder will
not be subject to United States federal income tax or withholding tax,
provided that (1) the Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of IGT
entitled to vote, (2) the Holder is not (i) a bank receiving interest
pursuant to a loan agreement entered into in the ordinary course of its trade
or business or (ii) a controlled foreign corporation that is related to IGT
through stock ownership, and (3) such interest payments are not effectively
connected with the conduct of a United States trade or business of the
Holder; and
(b) a Holder of Exchange Notes who is a Non-U.S. Holder will not be subject
to the United States federal income tax on gain realized on the sale,
exchange, or other disposition of Exchange Notes, unless (1) such Holder is
an individual who is present in the United States for 183 days or more during
the taxable year and certain other requirements are met, or (2) the gain is
effectively connected with the conduct of a United States trade or business
of the Holder.
If an Non-U.S. Holder fails to satisfy the requirements described in (a)
above, interest on the Exchange Notes generally will be subject to United States
withholding tax at a 30% rate unless (i) an applicable income tax treaty
provides for the reduction or elimination of such withholding tax or (ii) such
interest is considered to be effectively connected with a United States trade or
business conducted by such holder.
If interest on the Exchange Notes or gain realized on the disposition of the
Exchange Notes is effectively connected with a Non-U.S. Holder's conduct of a
United States trade or business, the Non-U.S. Holder generally will be subject
to United States federal income tax (and generally not United States withholding
tax) on such interest or gain as if it were a U.S. Holder. If such Non-U.S.
Holder is a foreign corporation, such foreign corporation's earnings and profits
attributable to such effectively connected income (and subject to certain
adjustments) may, in certain circumstances, be subject to an additional "branch
profits tax" at a 30% rate, or if applicable, a lower treaty rate.
Information Reporting and Backup Withholding
IGT will, where required, report to the Holders of Exchange Notes and the
Internal Revenue Service the amounts of any interest paid on the Exchange Notes
in each calendar year and the amounts of federal tax withheld, if any, with
respect to such payments. A noncorporate U.S. Holder may be subject to
information reporting and to backup withholding at a rate of 31% with respect to
payments of principal and interest made on Exchange Notes, or on proceeds of the
disposition of Exchange Notes before maturity, unless such U.S. Holder provides
<PAGE>
a correct taxpayer identification number or proof of an applicable exemption,
and otherwise complies with applicable requirements of the information reporting
and backup withholding rules.
Under temporary United States Treasury regulations, United States information
reporting requirements and backup withholding tax will generally not apply to
interest paid on the Exchange Notes to a Non-U.S. Holder at an address outside
the United States. Payments by a United States office of a broker of the
proceeds of a sale of the Exchange Notes are subject to both backup withholding
at a rate of 31% and information reporting unless the Holder certifies its
Non-U.S. Holder status under penalties of perjury and provides its name and
address or otherwise establishes an exemption. Information reporting
requirements (but not backup withholding) will also apply to payments of the
proceeds of sales of the Exchange Notes by foreign offices of United States
brokers, or foreign brokers with certain types of relationships to the United
States, unless the broker has documentary evidence it its records that the
Holder is a Non-U.S. Holder and certain other conditions are met, or the Holder
otherwise establishes an exemption.
On October 6, 1997, the United States Treasury Department issued final
Treasury regulations governing information reporting and the certification
procedures regarding withholding and backup withholding on certain amounts paid
to Non-U.S. Holders after December 31, 2000. The new Treasury regulations may
alter certain of the rules set forth above. Prospective investors should consult
their tax advisors concerning the effect, if any, of such new Treasury
regulations on an investment in the Exchange Notes.
Any amount withheld under the backup withholding rules may be refunded or
credited against the Non-U.S. Holder's United States federal income tax
liability, provided that the required information is furnished to the Internal
Revenue Service.
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account in the
Exchange Offers must acknowledge that it will deliver a prospectus in connection
with any resale of the Exchange Notes. A broker-dealer may use this prospectus,
as it may be amended or supplemented from time to time, by in connection with
resales of Exchange Notes received in exchange for Outstanding Notes where the
Outstanding Notes were acquired as a result of market-making activities or other
trading activities. IGT has agreed that for a period of 180 days after closing
of the Exchange Offers, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any the
resale.
IGT will not receive any proceeds from any sale of Exchange Notes by any
broker-dealer. Exchange Notes received by broker-dealers for their own account
in the Exchange Offers may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the Exchange Notes or a combination of the methods of resale, at
market prices prevailing at the time of resale, at prices related to the
prevailing market prices or negotiated prices. Any resale may be made directly
to purchasers or to or through brokers or dealers who may receive compensation
in the form of commissions or concessions from the broker-dealer and/or the
purchasers of the Exchange Notes. Any broker-dealer that resells Exchange Notes
that were received by it for its own account in the Exchange Offers and any
broker or dealer that participates in a distribution of the Exchange Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any resale of Exchange Notes and any commissions or concessions
received by those persons may be deemed to be underwriting compensation under
the Securities Act. The letter of transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 180 days after closing of the Exchange Offers, IGT will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests the documents
in the letter of transmittal. IGT has agreed to pay all expenses incident to
IGT's performance of, or compliance with, the registration rights agreement and
all expenses incident to the Exchange Offers, including the expenses of one
counsel for the holders of the Outstanding Notes but excluding commissions or
concessions of any brokers or dealers, and will indemnify the holders, including
any broker-dealers, and certain parties related to the holders against certain
liabilities, including liabilities under the Securities Act.
IGT has not entered into any arrangements or understanding with any person to
distribute the Exchange Notes to be received in the Exchange Offers.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information filed by us at the SEC's public reference rooms in Washington, D.C.,
Chicago, Illinois and New York, New York. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our filings with the SEC
are also available to the public from commercial document retrieval services and
at the SEC's Web site at "http://www.sec.gov."
If IGT is not subject to the informational requirements of the Exchange Act,
IGT will also provide to any prospective purchaser of the Exchange Notes or
beneficial owner of the Exchange Notes in connection with any sale thereof
reports and other information required by Rule 144A(d)(4) under the Securities
Act.
DOCUMENTS INCORPORATED BY REFERENCE
This prospectus hereby incorporates by reference the following documents
previously filed with the SEC:
o IGT's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998;
o IGT's Quarterly Reports on Form 10-Q for the fiscal quarters ended January
2, 1999 and April 3, 1999;
<PAGE>
o IGT's Current Reports on Form 8-K dated December 23, 1998, March 10, 1999,
April 29, 1999, April 30, 1999 and July 22, 1999; and
o IGT's Proxy Statement dated January 15, 1999.
All documents filed by IGT pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus and prior to the termination
of the offering of the Exchange Notes shall be deemed to be incorporated by
reference into this prospectus and to be part of this prospectus from the date
of filing thereof.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated herein modifies or replaces such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus. IGT will
provide without charge to each person to whom a copy of this prospectus has been
delivered, and who makes a written or oral request, a copy of any and all of the
documents incorporated by reference in this prospectus (other than exhibits
unless such exhibits are specifically incorporated by reference into such
documents). Requests should be submitted in writing or by telephone to
International Game Technology, 9295 Prototype Drive, Reno, Nevada, 89511,
Attention: Secretary (telephone (775) 448-7777).
LEGAL MATTERS
Brian McKay, who is our Senior Vice President, General Counsel and Secretary,
and O'Melveny & Myers LLP, San Francisco, California, will pass on the validity
of the Exchange Notes. As of April 3, 1999, Brian McKay owned 50,000 shares of
IGT common stock.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from IGT's Annual Report on Form
10-K for the year ended September 30, 1998, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
<PAGE>
===================================================================
$1,000,000,000
International Game Technology
Offer to Exchange
All Outstanding 7.875% Senior Notes due 2004
For 7.875% Series B Senior Notes due 2004
and
All Outstanding 8.375% Senior Notes due 2009
For 8.375% Series B Senior Notes due 2009
[LOGO]
----------------
PROSPECTUS
__________, 1999
----------------
===================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers.
Subsection 1 of Section 78.7502 of the Nevada General Corporation Law (the
"Nevada Law") empowers a corporation to indemnify 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 (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection 2 of Section 78.7502 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above against expenses,
including amounts paid in settlement and attorneys' fees actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted under similar standards, except that no indemnification may be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged by a court of competent jurisdiction to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which such action or suit was brought
determines that, despite the adjudication of liability, such person is fairly
and reasonably entitled to indemnity for such expenses as the court deems
proper.
Section 78.7502 further provides that to the extent a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to in subsections (1) and (2), or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith. Section 78.751 of the Nevada Law provides that the
indemnification provided for by Section 78.7502 shall not be deemed exclusive or
exclude any other rights to which the indemnified party may be entitled and that
the scope of indemnification shall continue as to directors, officers, employees
or agents who have ceased to hold such positions, and to their heirs, executors
and administrators. Section 78.752 of the Nevada Law empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against him or incurred
by him in any such capacity or arising out of his status as such whether or not
the corporation would have the power to indemnify him against such liabilities
under Section 78.7502.
Section 4.10 of the Bylaws of the Registrant provides for indemnification
of its officers and directors, substantially identical in scope to that
permitted under the above Sections of the Nevada Law. The Bylaws provide,
pursuant to Subsection 2 of Section 78.751, that the expenses of officers and
directors incurred in defending any action, suit or proceeding, whether civil or
criminal, must be paid by the corporation as they are incurred and in advance of
the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay all amounts so
advanced if it is ultimately determined by a court of competent jurisdiction
that the officer or director is not entitled to be indemnified by the
corporation. The Registrant also enters into indemnification agreements
consistent with Nevada law with certain of its directors and officers.
ITEM 21. Exhibits and Financial Statement Schedules.
The following exhibit is part of this amendment and is numbered in
accordance with Item 601 of Regulation S-K.
<PAGE>
ITEM 22. Undertakings
(a) International Game Technology hereby undertakes:
(1) 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) under the Securities Act of 1933, as amended (the meaning
of Rule 145(c) under the Securities Act of 1933, as amended (the "Securities
Act"), 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) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415 under the Securities Act, 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, 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act 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 proceedings) 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 indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 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.
(d) 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.
(e) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act or 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.
(f)
(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;
<PAGE>
(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 SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent 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, 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.
(4) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by IGT pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed part of the registration statement as of the time
it was declared effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, International Game
Technology has duly caused this Amendment to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Reno, State of Nevada, on July 23, 1999.
INTERNATIONAL GAME TECHNOLOGY
By: /s/Maureen T. Mullarkey
Maureen T. Mullarkey
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
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Chief Executive July 23, 1999
Charles N. Mathewson* Officer and Chairman
Charles N. Mathewson of the Board of
Directors
President and Chief July 23, 1999
G. Thomas Baker* Operating Officer
G. Thomas Baker
Chief Financial July 23, 1999
/s/Maureen T. Mullarkey Officer and Vice
Maureen T. Mullarkey President, Finance
(principal financial
officer and accounting
officer)
Director and Vice July 23, 1999
Albert J. Crosson* Chairman of the Board
Albert J. Crosson of Directors
Director July 23, 1999
John J. Russell*
John J. Russell
Director July 23, 1999
Warren L. Nelson*
Warren L. Nelson
Director July 23, 1999
Wilbur K. Keating*
Wilbur K. Keating
Director July 23, 1999
Frederick B. Rentschler*
Frederick B. Rentschler
Director July 23, 1999
Claudine B. Williams*
Claudine B. Williams
Director July 23, 1999
Rockwell A. Schnabel*
Rockwell A. Schnabel
*By: /s/Maureen T. Mullarkey
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index immediately
precedes the exhibits.
3.1 Articles of Incorporation of International Game Technology, as amended
(incorporated by reference to Exhibit 3.1 to Registrant's Report on Form
10-K for the year ended September 30, 1995).
3.2 Second Restated Code of Bylaws of International Game Technology, dated
November 11, 1987 (incorporated by reference to Exhibit 3.2 to
Registrant's Report on Form 10-K for the year ended September 30, 1995).
4.1 Note Agreement for the 7.84% Senior Notes due September 1, 2004
(incorporated by reference to Exhibit 4.1 to Registrant's Report on Form
10-K for the year ended September 30, 1995).
4.2 Indenture, dated as of May 19, 1999 by and between International Game
Technology and The Bank of New York.*
4.3 Registration Rights Agreement, dated as of May 11, 1999, by
and among International Game Technology, Salomon Smith
Barney Inc., BNY Capital Markets, Inc., Goldman, Sachs &
Co., Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner
& Smith, Incorporated.*
5.1 Opinion of O'Melveny & Myers LLP regarding the validity of the Exchange
Notes.*
5.2 Opinion of Brian McKay regarding the validity of the
Exchange Notes.*
10.1 Stock Option Plan for Key Employees of International Game
Technology, as amended (incorporated by reference to Exhibit
10.26 to Registration Statement No. 33-12610 filed by
Registrant).
10.2 International Game Technology 1993 Stock Option Plan (incorporated by
reference to Exhibit A to the Proxy Statement for the 1997 Annual Meeting
of Shareholders).
10.3 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3 to
Registrant's Report on Form 10-K for the year ended September 30, 1997).
10.4 Employment Agreement with David P. Hanlon, former Chief Executive Officer,
President, Chief Operating Officer, Chief Financial Officer and Treasurer
dated December 1, 1994 and amendment dated January 1, 1995 (incorporated
by reference to Exhibit 10.8 to Registrant's Report on Form 10-K for the
year ended September 30, 1996).
10.5 Employment Agreement with Robert A. Bittman, Executive Vice President,
Product Development dated March 12, 1996 (incorporated by reference to
Exhibit 10.9 to Registrant's Report on Form 10-K for the year ended
September 30, 1996).
10.6 Form of officers and directors indemnification agreement (incorporated by
reference to Exhibit 10.10 to Registrant's Report on Form 10-K for the
year ended September 30, 1996).
10.7 Credit Agreement by and among International Game Technology and the Bank
of New York, Wells Fargo and other banks, dated May 22, 1997 (incorporated
by reference to Exhibit 10.11 to Registrant's Report on Form 10-Q for the
quarter ended June 30, 1997).
10.7A Amendment No. 1 to Credit Agreement by and among
International Game Technology, The Bank of New York, Wells
Fargo and other banks, dated August 19, 1997.*
10.7B Amendment No. 2 to Credit Agreement by and among
International Game Technology, The Bank of New York, Wells
Fargo and other banks, dated January 16, 1998.*
10.7C Amendment No. 3 to Credit Agreement by and among
International Game Technology, The Bank of New York, Wells
Fargo and other banks, dated April 20, 1999.*
10.7D Amendment and Restatement of Credit Agreement by and among International
Game Technology, The Bank of New York, Wells Fargo and other banks, dated
April 30, 1999.*
<PAGE>
10.8 Employment Agreement with G. Thomas Baker, President, Chief Operating
Officer dated March 12, 1997 (incorporated by reference to exhibit 10.8 to
Registrant's Report on Form 10-K for the year ended September 30, 1997).
10.9 Facility Agreement between I.G.T. (Australia) Pty. Limited and National
Australia Bank Limited, dated March 18, 1998; guarantee from International
Game Technology to National Australia Bank Limited, dated March 18, 1998
(incorporated by reference to Exhibit 10.9 to Registrant's Report on Form
10-Q for the quarter ended March 31, 1998).
10.10 Joint Venture Agreement, dated December 3, 1996 by and between
International Game Technology and Anchor Games, a d.b.a. of Anchor Coin.
(incorporated by reference to Exhibit 10.10 to Registrant's Report on Form
10-K for the year ended September 30, 1998).
10.11 IGT Profit Sharing Plan (As Amended and Restated Effective as of December
31, 1998) (incorporated by reference to Exhibit 10.11 to Registrant's
Report on Form 10-Q for the quarter ended April 3, 1999).
11 Computation of Earnings Per Share (incorporated by reference to Exhibit 11
to Registrant's Report on Form 10-K for the year ended September 30, 1998.
The information required by this item for the quarters ended January 2,
1999 and April 3, 1999 is included in the notes to the financial
statements which are incorporated by reference in this registration
statement).
12 Computation of Unaudited Pro Forma Ratios of Earnings to
Fixed Charges.*
21 Subsidiaries (incorporated by reference to Exhibit 21 to Registrant's
Report on Form 10-K for the year ended September 30, 1998).
23.1 Consent of Deloitte & Touche LLP.*
23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5.1 hereto)
23.3 Consent of Brian McKay (included in Exhibit 5.2 hereto)
24 Power of Attorney (included on the signature page hereof).
25.1 Form T-1, Statement of Eligibility of Trustee.*
25.2 Form T-1, Statement of Eligibility of Trustee.*
99.1 Form of Letter of Transmittal for Outstanding Senior Notes
due 2004.*
99.2 Form of Notice of Guaranteed Delivery for Outstanding Senior
Notes due 2004.*
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees for Outstanding Senior Notes
due 2004.*
99.4 Form of Letter to Clients for Outstanding Senior Notes due
2004.*
99.5 Form of Letter of Transmittal for Outstanding Senior Notes
due 2009.*
99.6 Form of Notice of Guaranteed Delivery for Outstanding Senior
Notes due 2009.*
99.7 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees for Outstanding Senior Notes
due 2009.*
99.8 Form of Letter to Clients for Outstanding Senior Notes due
2009.*
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* Previously filed
