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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): December 9, 1996
VIDEO LOTTERY TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19322 81-0470853
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
115 Perimeter Center Place, Suite 911, Atlanta, GA 30346
(Address of principal executive offices and zip code)
(770) 481-1800
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On December 9, 1996, the Special Committee of the Board of Directors of
Video Lottery Technologies, Inc. (VLT) responded by letter to Mr. William
Spier with respect to his proposal to acquire VLT. A copy of the letter to
Mr. William Spier is attached as Exhibit 5.1 hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
Exhibit 5.1 Letter by the Special Committee of the Board of
Directors of Video Lottery Technologies, Inc., to
Mr. William Spier, dated December 9, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
VIDEO LOTTERY TECHNOLOGIES, INC.
Date: December 10, 1996 /s/ Janet M. Bjork
-----------------------------------
Janet M. Bjork
Assistant Secretary
(authorized to sign on
behalf of Registrant)
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EXHIBIT INDEX
<TABLE>
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Exhibit Page
Number Description Number
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<S> <C> <C>
5.1 Letter to William Spier dated December 9, 1996 5
</TABLE>
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Exhibit 5.1
December 9, 1996
VIA FACSIMILE
AND U.S. MAIL
Mr. William Spier
444 Madison Avenue
58th Floor
New York, New York 10022
Dear Bill:
As you know, the Board of Directors of Video Lottery Technologies, Inc.
("VLT") on Friday, December 6, 1996 constituted a Special Committee (consisting
of me, Patty Becker, and Jim Davey) to consider your proposal to acquire VLT, as
reflected in your letters to the Board of November 14 and November 26, 1996 and
in a letter and enclosed term sheet sent on December 4, 1996 by your counsel,
Peter Golden, to Company counsel, Louis Cohen and Michael Rosenzweig. In
addition to evaluating your proposal and VLT's other options, the Special
Committee will oversee negotiations with you and other bidders and, if
appropriate, recommend to VLT's shareholders a transaction for their approval,
all in consultation with Salomon Brothers as VLT's financial adviser and with
VLT's inside and outside counsel.
The Special Committee has reviewed your proposal and has authorized me to
write this letter to you in response thereto. Subject to your prior
satisfaction of certain concerns that the Special Committee has, as enumerated
below, we believe that VLT should enter into negotiations with you promptly, in
a good faith effort to reach a mutually satisfactory Merger Agreement.
In general, your proposal is for a prompt cash merger of VLT and a new
company ("Newco") to be formed by the existing Spier Group and possibly other
investors, in which all other VLT shareholders would receive $6.00 per share in
cash. Your November 26 letter refers to a "cooperative effort to facilitate"
the proposal and to the Board's "endors[ing]" the proposal. We agree that there
should be a genuine spirit of cooperation, but I want to be clear that at this
point the Special Committee is committing only to negotiate with you promptly
and in good faith, subject to your prior satisfaction of the concerns expressed
below. Of course, if the Special Committee concludes, after due care and in
consultation with its financial and legal advisers, that entering into a Merger
Agreement with Newco is superior, from the standpoint of VLT's public
shareholders, to the other available courses of action, they will cause VLT to
enter into such an Agreement and submit it to shareholders for their approval.
But the Special Committee has not, at this point, decided that VLT is for sale
at all, nor has there been any agreement in advance of the negotiations on any
terms, including price.
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December 9, 1996
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Based on our review of your letters and term sheet, and without prejudging
the further work of the Special Committee or the negotiations, the Special
Committee wants to bring several matters to your attention, with the hope of
advancing the discussions.
Assurance of Feasibility. VLT is unlikely to enter into any Merger
Agreement, and present a transaction to its shareholders for their approval,
unless it is reasonably assured that Newco will be able and willing to close
promptly. In this regard, the correspondence and term sheet raise five
concerns.
Financing. The term sheet contains only a very broad and general
discussion of financing. VLT is unlikely to sign a Merger Agreement that
is subject to any substantive financing contingency. At the time of
signing, financing should be fully committed and in place, or the sources
of financing should have been identified and have given acceptable
assurances that the financing will be fully committed promptly after
signing.
Regulatory and Third-Party Approvals. The term sheet states that
closing would be contingent on receiving any needed regulatory and
third-party consents. VLT is unlikely to sign a Merger Agreement that is
subject to any substantive contingency in this regard. To the extent that
such consents are not in hand at signing, there should be reasonable
assurance that all remaining consents (or those whose absence could prevent
a closing) will be received promptly.
Representations and Warranties. The term sheet says that the Spier
Group will expect customary representations and warranties and that closing
will be conditioned on their accuracy. In view of your detailed "inside"
familiarity with VLT's affairs, and the fact that VLT is a public
"reporting" company, it would seem that representations and warranties, if
any, should be very limited; in any event they should not be such as to
pose any risk to a successful closing. (And of course, such
representations and warranties would not, in a transaction of this kind,
survive the closing.)
Deals with Third Parties. The term sheet refers to the possibility of
"asset dispositions" and "joint venture projects." VLT is unlikely to sign
a Merger Agreement that is subject to any substantive contingency in this
regard. To the extent that such deals are involved at all, they should be
sufficiently "in place" at signing so that they can be fully disclosed to
shareholders and the closing does not depend on the uncertain willingness
of a third party to proceed.
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December 9, 1996
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Spier Group Commitment. As the correspondence and term sheet suggest, VLT
will want, at the time it signs a Merger Agreement, to be assured that the Spier
Group is fully committed to carrying out the transaction and cannot easily walk
away. At this time, we do not anticipate needing to call on your offer to
provide collateral for the Maryland bond. We do anticipate that, in accordance
with the second-to-last paragraph of the term sheet, the Merger Agreement would
provide for an appropriate significant breakup fee to compensate VLT for its
out-of-pocket costs and (more important) the distraction of the Board and
management from other matters, if the Spier Group is unable or unwilling to
close.
Company Right to Terminate. The term sheet recognizes that VLT should have
a right to accept a better offer, if it comes, at no penalty (except that the
term sheet suggests that VLT be obliged to reimburse you for your expenses in
such event). We suggest several points: (i) VLT needs a somewhat longer period
than through December 31, 1996 in which it can actively solicit other proposals,
since in this season that date is virtually upon us; (ii) the Board's "out"
should cover any form of offer, or other strategic option, that the Board in its
reasonable good faith judgment deems preferable; (iii) the Special Committee
does not believe it appropriate for VLT to agree to reimburse any Spier Group
expenses; and (iv) VLT should not risk being held for any extended period to an
unconsummated Merger Agreement and should have the right to terminate if there
has been no closing within a fairly short specified period after the Merger
Agreement is signed.
Indemnification. The Merger Agreement should, of course, provide for
appropriate continuing indemnification by the surviving company of the directors
and officers of VLT with respect to any liabilities arising out of actions or
inactions before (or, of course, after) the closing.
Past Discussions with Asset Buyers and Other Parties. There is substantial
(but nonspecific) indication in the correspondence, the term sheet, and
conversations with you and your counsel that you have had discussions and
possibly correspondence with potential buyers of divisions or assets of VLT or
with other third parties that may be interested in joint ventures or other
dealings with VLT. The Special Committee insists that, as part of the
negotiations looking toward a Merger Agreement, you provide full particulars of
these discussions and any correspondence. There are at least three reasons for
this: (i) as a Director of VLT, you of course have a duty to bring any contact
that represents a "corporate opportunity" for VLT to the attention of the Board;
(ii) in turn, the Special Committee, in considering your proposal, has an
obligation to compare it with other options available to VLT, including any
options that may be offered by conversations that you have had with third
parties; and (iii) if a Merger Agreement is signed and presented to
shareholders, it will of course be necessary to make full disclosure of the
buyer's
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December 9, 1996
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plans for the company's future, including any possible dealings with third
parties with whom you have had contact.
Discussions with EDS and Other Third Parties with whom VLT is Dealing. As
you know, Dena Rosenzweig called you last Thursday to convey a request by the
independent members of the Board that you refrain from any further discussions
with Electronic Data Systems Corporation ("EDS") concerning your offer to
acquire VLT. In making this request, the independent members of the Board were
acting in a manner consistent with requests the Board has made of other parties
interested in a potential strategic transaction with VLT or Automated Wagering
International, Inc. ("AWI"). In addition, this request is also consistent with
statements you made in your November 26 letter, wherein you noted that you have
purposely avoided detailed discussions and negotiations with EDS in order to
avoid any suggestion that you are interfering with the efforts of VLT to resolve
the pending disputes with EDS. Your November 26 letter accordingly recognizes
that separate discussions and negotiations between you and EDS could suggest
that you had interfered with VLT's own dealings with that important supplier.
Our concerns in this regard were heightened when we learned last Thursday
that your counsel has apparently contacted Gil Friedlander, General Counsel of
EDS, with a view to beginning discussions with EDS regarding terms satisfactory
to the Spier Group for resolving all VLT-EDS disputes. This action potentially
threatens VLT's ability to settle its differences with EDS and also raises
concerns for the Special Committee regarding your roles as both bidder for VLT
and continuing member of the VLT Board. At the very least, the Special
Committee is concerned in this context about your ability to satisfy your
fiduciary duties as a director of VLT.
In view of the foregoing, the Special Committee asks that you agree that,
from the present until the signing of any Merger Agreement, you and other
members of the Spier Group will not have any discussions with third parties
with whom VLT has dealings, unless VLT representatives are present and
participating. Please note that this does not mean merely that VLT would be
given the opportunity to attend; the Special Committee may, on occasion, decide
that any meeting between Spier Group representatives and a particular third
party would be contrary to VLT's interests, and the Special Committee's
judgment on that point must be honored.
Your Participation as a Director. As you have recognized, it would not be
appropriate, while your proposal to acquire VLT is being considered, for you to
participate as a Director in the consideration either of your own proposal or
of any "competing" strategic option, or to receive information that bears on
the competing options. Conversely, we recognize that, in principle, if you
choose to remain a Director during the negotiations, you would have the right
to receive information about and participate in VLT's ordinary ongoing business
decisions. As I am sure you will agree, there is an unusual amount of
difficulty, in this particular case, in separating the
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December 9, 1996
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"strategic" from the "ordinary." You yourself have deemed many seemingly
"ordinary" issues, such as the hiring of a general counsel, relevant to your
bid. Our only suggestion for resolving this matter is that the Special
Committee be charged with deciding, from time to time, in good faith, what
information it is appropriate for VLT to provide to you and Bill Lyons, and what
Board discussions you should participate in, and that you both be asked to
accept the Special Committee's good faith determinations.
Counsel Advising the Special Committee. The Special Committee agrees with
the observation that you made Friday morning in our telephonic Board meeting,
that Company counsel (Rogers & Hardin and Wilmer, Cutler & Pickering) can advise
the Special Committee. This letter confirms our understanding that you
expressly consent to Company counsel acting in that role.
We will look forward to your response to this letter. In addition, we
would appreciate your signing below and returning a copy of this letter to me,
indicating your agreement, on behalf of the Spier Group, to the matters
discussed above under the headings "Past Discussions with Asset Buyers and other
Parties", "Discussions with EDS and Other Third Parties with whom VLT is
Dealing", "Your Participation as a Director" and "Counsel Advising the Special
Committee".
Sincerely,
Richard Burt
Chairman, Special Committee
Acknowledged and agreed to this _____ day of December, 1996.
_____________________________
William Spier
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