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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 29, 1999
SCIENTIFIC GAMES HOLDINGS CORP.
(Exact name of Registrant as Specified in its Charter)
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DELAWARE 000-22298 58-1943521
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
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1500 BLUEGRASS LAKES PARKWAY
ALPHARETTA, GEORGIA 30004
(770) 664-3700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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ITEM 5. OTHER EVENTS
As initially reported in July 1993 and periodically reported
thereafter, the Company's Scientific Games Inc. ("SGI") subsidiary owns a
minority interest in Wintech de Colombia S.A. ("Wintech"), which formerly
operated the Colombian national lottery under contract with Empresa Colombiana
de Recursos para la Salud, S.A. ("Ecosalud"), an agency of the Colombian
government. The contract projected that certain levels of lottery ticket sales
would be attained and provided a penalty against Wintech, SGI and the other
shareholders of Wintech of up to $5,000,000 if such performance levels of
lottery ticket sales were not achieved. In addition, with respect to a further
guarantee of performance under the contract with Ecosalud, SGI delivered to
Ecosalud a $4,000,000 bond issued by a Colombian surety, Seguros del Estado
("Seguros"). Wintech started the instant lottery in Colombia, but, due to
difficulties beyond its control, including, among other factors, social and
political unrest in Colombia, frequently interrupted telephone service and
power outages, and competition from another lottery being operated in a
province of Colombia in violation of Wintech's exclusive license from Ecosalud,
the projected sales level was not met for the year ended June 1993. On July 1,
1993, Ecosalud adopted resolutions declaring, among other things, that the
contract was in default and asserted various claims for compensation and
penalties against Wintech, SGI and other shareholders of Wintech. As the
Company has previously disclosed in its filings with the Commission, litigation
is pending in Colombia concerning various claims among Ecosalud, Wintech and
SGI, relating to the termination of the contracts with Ecosalud (the "Colombian
Litigation"). Ecosalud's claims in the Colombian litigation were for, among
other things, realization on the full amount of the penalty, plus interests and
costs of the bond.
SGI has consulted with Colombian counsel and been advised that SGI has
various legal defenses to Ecosalud's claims. SGI also has certain cross
indemnities and undertakings from the two other privately held shareholders of
Wintech for their respective shares of any liability to Ecosalud. SGI also has
certain cross indemnities and undertakings from the two other private
shareholders of Wintech for their respective shares of any liability to
Ecosalud. That obligation is secured in part by a $1,500,000 confirmed letter
of credit in favor of SGI. The Colombian surety which issued a $4,000,000 bond
to Ecosalud under the contract paid $2,400,000 to Ecosalud under the bond, and
made demand upon SGI for that amount under the indemnity agreement entered into
by the surety and SGI. SGI declined to make or authorize any such payment and
notified the surety that any payment in response to Ecosalud's demand on the
bond was at the surety's risk. No assurance can be given that the other
shareholders of Wintech will, or have sufficient assets to, honor their
indemnity undertakings to SGI when the claims by the Ecosalud against SGI and
Wintech are finally resolved, in the event such claims result in any final
liability.
On April 2, 1998, Seguros brought suit against SGI in the United
States District Court for the Northern District of Georgia, Atlanta Division,
Civil Action No. 1:98-CV-968-CAM. The plaintiff sought $2,400,000 for sums paid
by Seguros to Ecosalud under the surety bond on November 1, 1994, plus interest
at the Colombian bank rate of interest. SGI filed a motion to dismiss based on
the Colombian statute of limitations of two years and, alternatively, sought
that the
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case be dismissed on other grounds. Seguros filed a motion for summary judgment
with the Court on May 6,1998 seeking summary judgment on its claim in the
amount of $2,400,000, plus interest.
On September 29,1999, the District Court issued an order in which
it denied various motions of SGI, including a motion to dismiss, and granted
Seguros' motion for summary judgment. On September 29, 1999, the District Court
also entered judgment for Seguros in the amount of $2,400,000 or the
equivalent in Colombian pesos as of the judgment date, plus pre-judgment
interest at a rate of 38.76% per annum, equivalent to approximately $4.6
million.
SGI intends to appeal the matters covered by the District Court's
order and judgment. SGI may be required to post an appeal bond in approximately
the amount of $7 million and expects to do so through its existing bonding
arrangements. SGI continues to believe that it has meritorious defenses,
including that the amount paid by Seguros was improperly paid because of the
default by Ecosalud of its obligations to the SGI, which claims remain the
subject of separate litigation in Colombia.
In addition to vigorously prosecuting its appeal of the District
Court's order and judgment, SGI continues to vigorously defend the Colombian
litigation and has been advised by counsel that SGI has various defenses on the
merits as well as procedural defenses to the litigation (which it has
asserted). Nevertheless, it is not possible to determine the outcome of the
appeal of the order and judgment granted to Seguros or the outcome of any
litigation in Colombia.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
Exhibit 99.1 Press Release dated October 1, 1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SCIENTIFIC GAMES HOLDINGS CORP.
Date: October 5, 1999 By: /s/ C. Gray Bethea, Jr.
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C. Gray Bethea, Jr.
Vice President, Secretary and
General Counsel
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INDEX TO EXHIBITS
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Exhibit 99.1 Press Release dated October 1, 1999 ................................. 6
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE Contact:
Cliff O. Bickell
Vice President and CFO
770/664-3700
SCIENTIFIC GAMES REPORTS JUDGMENT
(ALPHARETTA, GA, USA, October 1, 1999) Scientific Games International, a
subsidiary of Scientific Games Holdings Corp. (NYSE:SG), today announced the
entry on September 29, 1999 of a judgment in U.S. District Court, Northern
District of Georgia, against the Company in favor of Seguros del Estado, S.A.,
a Colombian bonding company, in the principal amount of $2,400,000 and
approximately $4,600,000 in interest calculated at 39% per annum. This matter
arises from related litigation in Bogota, Colombia with Empresa Colombiana de
Recursos para la Salud, S.A. (Ecosalud), the former national lottery,
concerning an alleged default on obligations in Colombia in 1993, as described
in previous public disclosures. The Company has stated that the amount was
improperly paid by the bonding company because of the default by Ecosalud of
its obligations to the Company, which claims are the subject of separate
litigation in Colombia. The Company intends to appeal the judgment rendered in
Georgia, including the calculation of interest at 39%, and will continue to
assert its claim that the litigation should be returned to Colombia where it
arose.
Headquartered near Atlanta, Georgia, Scientific Games International is a world
leader in providing a full range of lottery products, integrated systems and
support services to lotteries in more than 54 nations and 28 U.S. states, as
well as various commercial businesses around the globe. The Company also has
production or operating facilities in California and the United Kingdom,
France, Germany, and Austria.
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Certain matters above may constitute forward-looking statements. As such, the
matters discussed in such statements necessarily are subject to certain risks
and uncertainties. A discussion of the various risks and uncertainties to which
the Company's business is subject is set forth in the Company's annual report
on Form 10-K and in the Company's most recent quarterly report on Form 10-Q.
