<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO
SECTION 14A OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
SCIENTIFIC GAMES HOLDINGS CORP.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.001 per share
(2) Aggregate number of securities to which transactions applies: 11,923,077
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and how it was determined): X $26.00 per share
(4) Proposed maximum aggregate value of transaction: $310,000,000
(5) Total fee paid: 62,000
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date Filed:
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[SCIENTIFIC GAMES LOGO]
SCIENTIFIC GAMES HOLDINGS CORP.
1500 Bluegrass Lakes Parkway
Alpharetta, Georgia 30004
__________ ___, 2000
Dear Stockholder:
The Board of Directors of Scientific Games Holdings Corp. has
unanimously approved a business combination with Autotote Corporation. This
business combination will create a leading world-wide gaming company. Pursuant
to the merger agreement, a subsidiary of Autotote will merge with Scientific
Games and each outstanding share of Scientific Games common stock will be
converted into the right to receive $26 in cash, without interest.
You are cordially invited to attend a special meeting of stockholders
of Scientific Games to vote on the proposed business combination. The meeting
will be held at 10:00 a.m., local time, on ___________, _________, __, 2000 at
the Atlanta Windward Hilton Garden Inn, 4025 Windward Concourse, Alpharetta,
Georgia 30005. We can not complete the proposed business combination unless we
obtain the approval of the stockholders of Scientific Games owning at least a
majority of the outstanding shares of Scientific Games' common stock.
We urge you to take the time to vote on the proposed business
combination by designating a proxy to vote your shares. You may designate a
proxy by signing and dating the enclosed Proxy/Voting Instruction Card and
returning it in the enclosed postage paid return envelope, regardless of whether
you plan to attend the meeting. If you do attend the meeting, you may vote your
shares in person even if you previously designated a proxy. It is important that
your shares be represented at the meeting no matter how many shares you own. An
abstention or a failure to vote will have the same effect as a vote against the
merger agreement and the transactions contemplated thereby. If you have any
questions about the matters being voted upon or require assistance in completing
your Proxy/Voting Instruction Card, you may contact Cliff O.
Bickell at (770) 664-3700.
The formal Notice of the special meeting and the proxy statement
relating to the special meeting appear on the following pages of this document.
The proxy statement gives you detailed information about the business
combination we're proposing, and it includes our merger agreement as an
appendix. You can also obtain information about Scientific Games from publicly
available documents filed with the Securities and Exchange Commission. We
encourage you to read this entire document carefully.
<PAGE> 3
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE BUSINESS COMBINATION IS
IN THE BEST INTERESTS OF SCIENTIFIC GAMES AND ITS STOCKHOLDERS AND HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
Very truly yours,
[SIG CUT]
William G. Malloy
Chairman of the Board, Chief Executive Officer and President
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE REGULATORS HAVE
DETERMINED WHETHER THE ACCOMPANYING PROXY STATEMENT IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 4
[SCIENTIFIC GAMES LOGO]
SCIENTIFIC GAMES HOLDINGS CORP.
1500 Bluegrass Lakes Parkway
Alpharetta, Georgia 30004
770.664.3700
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _____________ ___, 2000
To the Stockholders of Scientific Games Corp.:
A special meeting of stockholders will be held 10:00 a.m., local time,
on ___________, __________, __, 2000 at the Atlanta Windward Hilton Garden Inn,
4025 Windward Concourse, Alpharetta, Georgia 30005 for the purpose of
considering and voting on:
- A proposal to approve and adopt the Agreement and Plan of
Merger, dated as of May 18, 2000, by and among Autotote
Corporation, ATX Enterprises, Inc. and Scientific Games Corp.
and the transactions contemplated thereby, as described in the
proxy statement that accompanies this notice; and
- Any other matters that may properly come before the special
meeting or any adjournments or postponements of the meeting.
The close of business on June 9, 2000 has been fixed as the date of
record for those stockholders entitled to notice of and to vote at the special
meeting. Only holders of record of Scientific Games common stock at that time
are entitled to vote at the meeting or any adjournments or postponements of the
meeting. A list of these stockholders will be maintained and open for
examination by any stockholder for any purpose germane to the meeting during
ordinary business hours at the above address of Scientific Games for ten (10)
days prior to the meeting. Please review the proxy statement and related
materials that accompany this notice for information regarding the proposed
merger and the meeting.
By order of the Board of Directors,
[SIG CUT]
C. Gray Bethea, Jr.
Secretary
Alpharetta, Georgia
__________ ___, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE> 5
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY...........................................................................................................1
GENERAL ................................................................................................1
THE MERGER...............................................................................................1
EXCHANGE PROCEDURES......................................................................................1
DISSENTERS' APPRAISAL RIGHTS.............................................................................2
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................................................................2
MARKET PRICE INFORMATION.................................................................................3
OPINION OF FINANCIAL ADVISOR TO SCIENTIFIC GAMES.........................................................3
THE COMPANIES............................................................................................4
SCIENTIFIC GAMES................................................................................4
AUTOTOTE .......................................................................................4
THE SPECIAL MEETING......................................................................................4
RECORD DATE; VOTE REQUIRED...............................................................................4
RECOMMENDATION OF THE SCIENTIFIC GAMES BOARD.............................................................5
REASONS FOR THE MERGER...................................................................................5
CONDITIONS TO COMPLETION OF THE MERGER...................................................................5
REGULATORY APPROVALS.....................................................................................6
TERMINATION OF THE MERGER AGREEMENT......................................................................6
INTERESTS IN THE MERGER THAT DIFFER FROM YOUR INTERESTS..................................................7
THE SPECIAL MEETING...............................................................................................7
GENERAL ................................................................................................7
MATTERS TO BE CONSIDERED.................................................................................7
PROXIES ................................................................................................8
SOLICITATION OF PROXIES..................................................................................8
RECORD DATE AND VOTING RIGHTS............................................................................9
RECOMMENDATION OF THE SCIENTIFIC GAMES BOARD.............................................................9
ADDITIONAL INFORMATION ON HOW TO VOTE YOUR PROXY........................................................10
THE MERGER.......................................................................................................10
GENERAL ...............................................................................................10
BACKGROUND OF THE MERGER................................................................................10
REASONS FOR THE MERGER..................................................................................14
OPINION OF FINANCIAL ADVISOR TO SCIENTIFIC GAMES........................................................15
Implied Merger Premiums........................................................................18
Historical Stock Trading Analysis..............................................................18
Sum of the Parts Discounted Cash Flow Analysis.................................................18
Leveraged Buyout Analysis......................................................................20
Selected Companies Analysis....................................................................20
</TABLE>
(i)
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<TABLE>
<S> <C>
Precedent Transactions Analysis................................................................21
Miscellaneous..................................................................................21
THE MERGER AGREEMENT.............................................................................................22
EFFECTIVE TIME..........................................................................................22
THE MERGER..............................................................................................22
CONVERSION OF CAPITAL STOCK AND STOCK-BASED AWARDS......................................................23
Scientific Games Common Stock..................................................................23
Scientific Games Stock Options and Other Stock-Based Awards....................................23
Payment Procedures; Lost Certificates..........................................................23
REPRESENTATIONS AND WARRANTIES..........................................................................25
CONDUCT OF THE BUSINESS PENDING THE MERGER..............................................................26
OTHER AGREEMENTS OF SCIENTIFIC GAMES AND AUTOTOTE ......................................................27
EMPLOYEE BENEFIT PLANS..................................................................................29
CONDITIONS TO COMPLETION OF THE MERGER..................................................................29
ALL PARTIES....................................................................................29
Autotote and Atx...............................................................................30
Scientific Games...............................................................................31
TERMINATION OF THE MERGER AGREEMENT.....................................................................31
AMENDMENT; WAIVER.......................................................................................34
EXPENSE AND TERMINATION FEE.............................................................................34
EVENTS REQUIRING PAYMENT OF TERMINATION FEE.............................................................34
Autotote Fees and Expenses.....................................................................34
Scientific Games' Fees and Expenses............................................................36
REGULATORY MATTERS......................................................................................36
MATERIAL FEDERAL INCOME TAX CONSEQUENCES................................................................37
INTERESTS OF CERTAIN PERSONS IN THE MERGER..............................................................38
CERTAIN AGREEMENTS CONTAINING CHANGE IN CONTROL AND SEVERANCE PROVISIONS.......................38
STOCK OPTIONS AND OTHER STOCK BASED AWARDS.....................................................40
INDEMNIFICATION AND INSURANCE..................................................................40
PRINCIPAL STOCKHOLDERS...........................................................................................41
PRICE RANGE OF SCIENTIFIC GAMES COMMON STOCK AND DIVIDENDS.......................................................44
PRICE RANGE.............................................................................................44
DIVIDEND POLICY.........................................................................................45
PARTIES TO THE MERGER............................................................................................45
SCIENTIFIC GAMES........................................................................................45
AUTOTOTE ...............................................................................................45
ATX ENTERPRISES, INC....................................................................................46
</TABLE>
(ii)
<PAGE> 7
<TABLE>
<S> <C>
ADDITIONAL INFORMATION...........................................................................................46
DISSENTERS' APPRAISAL RIGHTS............................................................................46
STOCKHOLDER PROPOSALS...................................................................................48
OTHER MATTERS...........................................................................................48
INDEPENDENT PUBLIC AUDITORS.............................................................................48
WHERE YOU CAN FIND MORE INFORMATION.....................................................................49
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE.........................................................50
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
OF SCIENTIFIC GAMES.....................................................................................51
APPENDIX A MERGER AGREEMENT.....................................................................A-1
APPENDIX B OPINION OF SALOMON SMITH BARNEY INC..................................................B-1
APPENDIX C DISSENTERS APPRAISAL RIGHTS (SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW).............................................................C-1
</TABLE>
(iii)
<PAGE> 8
[SCIENTIFIC GAMES LOGO]
SCIENTIFIC GAMES HOLDINGS CORP.
1500 BLUEGRASS LAKES PARKWAY
ALPHARETTA, GEORGIA 30004
770.664.3700
PROXY STATEMENT, DATED _________ ___, 2000
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD _____________ ___, 2000
------------------------------
SUMMARY
This summary highlights certain information from the proxy statement.
It does not contain all of the information that is important to you. We urge you
to read carefully the entire proxy statement and the other documents to which
this document refers so that you fully understand the merger. See "Additional
Information -- Where You Can Find More Information" on page 49.
GENERAL
We propose a combination of Scientific Games and Autotote in which a
Delaware subsidiary of Autotote will merge with Scientific Games. Scientific
Games will become a subsidiary of Autotote.
THE MERGER (Page 10)
WE HAVE ATTACHED THE MERGER AGREEMENT TO THIS DOCUMENT AS APPENDIX A.
PLEASE READ THE MERGER AGREEMENT. IT IS THE LEGAL DOCUMENT GOVERNING THE MERGER.
EXCHANGE PROCEDURES (Page 23)
When the merger is completed, each of your shares of Scientific Games
common stock will automatically be converted into the right to receive $26 in
cash, without interest, from Autotote, unless you have dissented from the merger
and sought appraisal of the fair value of your shares as described under the
heading "Additional Information -- Dissenters' Appraisal Rights" on page 46.
You must surrender your Scientific Games common stock certificates to
receive the $26
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per share merger consideration from Autotote. DO NOT SEND US YOUR CERTIFICATES
UNTIL AFTER YOU RECEIVE WRITTEN INSTRUCTIONS ON HOW TO SURRENDER YOUR
CERTIFICATES IN EXCHANGE FOR THE CASH MERGER CONSIDERATION, WHICH WILL BE SENT
TO YOU PROMPTLY AFTER THE MERGER IS COMPLETED.
DISSENTERS' APPRAISAL RIGHTS (Page 46)
Under Delaware law, you have the right to dissent from the merger and
have the appraised fair value of your shares of Scientific Games common stock
paid to you in cash. The value of the Scientific Games common stock for this
purpose will exclude any element of value arising from the accomplishment or
expectation of the merger. In order to dissent and receive the appraised fair
value of your shares, you must:
- make a proper demand for appraisal in accordance with the
Delaware law as more fully described on pages 46 through 48
(simply voting against adoption of the merger agreement will
not be considered a demand for appraisal);
- hold your shares of Scientific Games common stock until the
merger is completed;
- not vote in favor of the merger (including by appointing a
proxy to vote your shares); and
- otherwise comply with Delaware law.
Within ten days after the merger, if you have satisfied the
requirements of Delaware law, the surviving company of the merger will give you
written notice of the completion of the merger. Within 120 days after the
merger, you, any other dissenting stockholder or the surviving company may file
a court petition demanding a determination of the fair value of the shares of
Scientific Games common stock that you hold. If a petition for appraisal is
timely filed, the court will determine which stockholders are entitled to
appraisal rights and the fair value of the shares of Scientific Games common
stock held by dissenting stockholders. You can withdraw your demand for
appraisal by delivering written notice to Scientific Games or to the surviving
company within 60 days after the merger. If a petition for appraisal isn't filed
within 120 days after the merger, your right to an appraisal will cease and
you'll be entitled to receive only the cash merger consideration. Appendix C
contains a copy of the applicable section of the Delaware General Corporation
Law and is incorporated by reference into this proxy statement.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (Page 37)
The merger will be a taxable transaction to you. If you receive the
cash merger consideration, you will recognize gain or loss in the merger in an
amount determined by the difference between the cash merger consideration
received and your tax basis in the Scientific Games common stock you exchange
for that cash payment.
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<PAGE> 10
MARKET PRICE INFORMATION (Page 44)
Scientific Games common stock is listed on the New York Stock Exchange,
which is the principal market for Scientific Games common stock, under the
symbol "SG."
On April 18, 2000, one month before Scientific Games issued its initial
public announcement regarding the merger, the closing price quoted on the New
York Stock Exchange Composite Tape was $15.875.
On May 12, 2000, one week before Scientific Games issued its initial
public announcement regarding the merger and the last trading day prior to an
inadvertent public disclosure by Autotote with respect to a potential
transaction between Scientific Games and Autotote, including reference to a
potential merger consideration per share of $26.00, the closing sale price per
share of Scientific Games common stock quoted on the New York Stock Exchange
Composite Transactions Tape was $18.00.
On May 17, 2000, the last trading date before the joint public
announcement by Scientific Games and Autotote of the execution of the merger
agreement, the closing sale price per share of Scientific Games common stock
quoted on the New York Stock Exchange Composite Transactions Tape was $17.88.
On June 2, 2000, a recent trading day prior to the date of this proxy
statement, the closing price per share of Scientific Games common stock quoted
on the New York Stock Exchange Composite Transactions Tape was $24.19.
OPINION OF FINANCIAL ADVISOR TO SCIENTIFIC GAMES (Page 15)
In connection with the merger, the Scientific Games Board received a
written opinion from Salomon Smith Barney Inc. as to the fairness, from a
financial point of view, of the merger consideration to the holders of
Scientific Games common stock. The full text of Salomon Smith Barney's written
opinion dated May 18, 2000 is attached to this proxy statement as Appendix B. We
encourage you to read this opinion carefully in its entirety for a description
of the assumptions made, matters considered and limitations on the review
undertaken by Salomon Smith Barney in providing its opinion. SALOMON SMITH
BARNEY'S OPINION IS ADDRESSED TO THE SCIENTIFIC GAMES BOARD AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER WITH RESPECT TO ANY MATTER
RELATING TO THE PROPOSED MERGER.
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<PAGE> 11
THE COMPANIES (Page 45)
SCIENTIFIC GAMES
Scientific Games is a leading provider of lottery products, integrated
systems and support services to lotteries worldwide. We also provide promotional
games and related services to customers in the private sector and produce
pre-paid phone cards for the telecommunications industry. By population served,
Scientific Games is the second largest provider of lottery products and
services. We are the only full-service provider to the global lottery industry,
offering products, services and systems for both instant ticket and on-line
lotteries. We have the experience and capability to manage every component of a
lottery, including administration, prize structure, game design, marketing
distribution, communications, back-office accounting, validation and
fulfillment. We reported consolidated revenues of approximately $228.6 million
for the fiscal year ended December 31, 1999 and reported consolidated net
revenues of approximately $59.1 million for the fiscal quarter ended March 31,
2000. Our principal executive offices are located at 1500 Bluegrass Lakes
Parkway, Alpharetta, Georgia 3004 and our telephone number is 770.664.3700.
AUTOTOTE
Autotote is a leading worldwide supplier of technologically advanced
computerized wagering systems and related equipment, as well as a licensed
international operator of gaming venues. It provides technology, software,
equipment and services for pari-mutual wagering conducted at thoroughbred,
harness and greyhound racetracks, off-track betting establishments ("OTBs") and
jai alai frontons. It is a leading provider of sophisticated, customized
computer software, equipment and data communication services to
government-sponsored and privately operated lotteries. It also provides
operations management for domestic and international OTBs and gaming venues.
Autotote's principal executive offices are located at 750 Lexington Avenue, New
York, New York 10022 and its telephone number is 212.754.2233.
THE SPECIAL MEETING (Page 7)
The Scientific Games special meeting will be held at 10:00 a.m., local
time, on _________ __, 2000 at the Atlanta Windward Hilton Garden Inn, 4025
Windward Concourse, Alpharetta, Georgia 30005. At the Scientific Games meeting,
you will be asked to approve and adopt the merger agreement and the transactions
contemplated thereby and to act on any other matters that may properly be
brought before the meeting.
RECORD DATE; VOTE REQUIRED (Page 9)
You can vote at the special meeting if you owned Scientific Games
common stock at the close of business on June 9, 2000. To adopt the merger
agreement, the holders of at least a majority of the outstanding shares of
Scientific Games common stock entitled to vote at the
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meeting must vote in favor of adoption. Thus, a failure to vote or an abstention
has the same effect as a vote against the merger agreement.
You may vote your shares in person by attending the meeting or by
designating a proxy to vote your shares in the manner in which you direct the
proxy to vote. You may designate a proxy by completing and returning the
enclosed proxy/voting instruction card. At any time before the vote at the
meeting, you can revoke your proxy by sending a written notice revoking the
proxy or by sending a later dated proxy to the Secretary of Scientific Games or
by attending the meeting and voting in person.
RECOMMENDATION OF THE SCIENTIFIC GAMES BOARD (Page 9)
The Board of Directors of Scientific Games believes that the merger is
in your best interests and unanimously recommends that you vote "FOR" approval
and adoption of the merger agreement.
REASONS FOR THE MERGER (Page 14)
The Board of Directors of Scientific Games approved the merger
agreement based on its consideration of a number of factors, including:
- the strategic options available to Scientific Games;
- the premium to market prices represented by the $26 per share
to be received by Scientific Games stockholders;
- the opinion of Scientific Games' financial advisor as to the
fairness, from a financial point of view, and as of the date
of the opinion, of the $26 per share merger consideration to
the holders of Scientific Games common stock;
- the likelihood of approval of the merger by regulators;
- the opportunities afforded to Scientific Games' employees and
the likelihood of their support of the merger; and
- the belief that the merger will enable Scientific Games to
better serve the convenience and needs of its customers.
CONDITIONS TO COMPLETION OF THE MERGER (Page 29)
The obligation of each party to complete the merger depends on a number
of conditions being met, including Scientific Games stockholder approval and
regulatory approvals. Any party to the merger agreement can choose to complete
the merger even if one or more conditions to that party's obligations have not
been met, as long as the law allows it to do so. We can't be certain when, or
if, the conditions to the merger will be met or that the merger will be
completed.
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REGULATORY APPROVALS (Page 36)
We, along with Autotote, made the required filings with the Antitrust
Division of the U.S. Department of Justice and the Federal Trade Commission
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the applicable rules of the Federal Trade Commission on June 1,
2000 and June 2, 2000, respectively. We supplemented our filing on June 7, 2000.
The Department of Justice has contacted Scientific Games for purposes of
conducting a preliminary inquiry with respect to our filing. Scientific Games
is presently cooperating with the Department of Justice in providing information
requested during such inquiry.
Other regulatory filings and approvals in countries outside the United
States may also be required or advisable before we can complete the merger, and
Scientific Games and Autotote are currently in the process of determining
whether additional foreign competition filings are necessary or desirable.
Certain of our contracts permit the applicable lottery authority to
terminate the contract in the event a change in control occurs, unless such
lottery authority consents to such change.
The obligations of Autotote and Scientific Games to complete the merger
are subject to the expiration or termination of the waiting period under the
Hart-Scott-Rodino Act and approvals of the transaction by various other
governmental lottery authorities and agencies, as well as the absence of any
injunction, decree, order or other legal restraint or prohibition preventing the
completion of the merger. Clearance under all applicable antitrust laws has not
been obtained as of the date of the proxy statement but, although no assurances
can be given, may be obtained prior to the special meeting. Approvals and
clearances under certain customer contracts with various lottery authorities and
agencies may not occur or be completed until after the special meeting .
TERMINATION OF THE MERGER AGREEMENT (Page 31)
At any time before or after the special meeting we can agree with
Autotote to terminate the merger agreement without completing the merger. Also,
either of us can decide to terminate the merger agreement in a number of other
situations, including a final regulatory determination prohibiting the merger,
the failure of Scientific Games stockholders to approve the merger or the
failure to complete the merger by September 30, 2000.
Whether or not the merger is completed, we will pay our own fees and
expenses, except that we will evenly divide the costs and expenses of printing
and mailing this proxy statement and the fees that have been paid to the
Securities and Exchange Commission in connection with the merger between us, on
the one hand, and Autotote, on the other.
In some circumstances, if we or Autotote terminate the merger
agreement, we will be
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<PAGE> 14
required to pay Autotote and ATX's reasonable attorney fees and out-of-pocket
expenses up to $1 million, plus a termination fee of approximately $9.3
million. In general, the fee would be payable if the merger agreement is
terminated by Scientific Games or Autotote in connection with an alternative
transaction or a competing acquisition proposal.
INTERESTS IN THE MERGER THAT DIFFER FROM YOUR INTERESTS (Page 38)
Some of our directors and executive officers have interests in the
merger that are different from yours. For instance, completion of the merger
will constitute a change in control of Scientific Games for purposes of
determining the entitlement of some of our executive officers to severance and
other benefits. In addition, it is expected that certain executive officers of
Scientific Games will enter into employment agreements and that our chief
executive officer will enter into a consulting agreement that will, in each
case, become effective upon completion of the merger. Also, as a result of the
merger, all stock options and other stock based awards, including those held by
our directors and executive officers, will vest in full and become exchangeable
for the merger consideration, despite any current restrictions on vesting,
exercise, payment or distribution. In addition, after the merger, the surviving
company will indemnify the officers and directors of Scientific Games for events
occurring before the merger. The Scientific Games Board knew about these
additional interests and considered them when it approved the merger.
THE SPECIAL MEETING
GENERAL
We are first mailing this proxy statement on or about _________ __,
2000. We are also sending a notice of the special meeting of stockholders and a
proxy/voting instruction card that the Scientific Games Board is soliciting for
use at the meeting and at any adjournments or postponements of the meeting. The
meeting will be held at 10:00 a.m., local time, on ________ __, 2000 at the
Atlanta Windward Hilton Garden Inn, 4025 Windward Concourse, Alpharetta, Georgia
30005.
MATTERS TO BE CONSIDERED
At the meeting, you will be asked to consider and vote on the proposal
to approve and adopt an agreement and plan of merger, dated as of May 18, 2000,
by and among Autotote, a company organized under the laws of the State of
Delaware, ATX Enterprises, Inc., a corporation organized under the laws of the
State of Delaware and Scientific Games Holdings Corp., a corporation organized
under the laws of the State of Delaware, and the transactions contemplated
thereby, as well as any other matters that may properly be submitted to a vote
at the meeting. You may also be asked to vote on a proposal to adjourn or
postpone the meeting, which adjournment or postponement could be used for, among
other things, soliciting votes to approve and adopt the merger agreement and the
transactions contemplated by the merger agreement.
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PROXIES
If you don't want to, or can't, attend the meeting, you should
designate a proxy to vote your shares. You may designate a proxy by signing and
dating the enclosed proxy/voting instruction card and returning it in the
enclosed postage paid return envelope. You may revoke your proxy at any time
before the vote is taken at the meeting by submitting a written notice of
revocation to the Secretary of Scientific Games, by properly executing a later
dated proxy or by attending the meeting and voting in person. Written notices of
revocation and other communications concerning the revocation of a previously
executed proxy should be addressed to:
Scientific Games Holdings Corp.
1500 Bluegrass Lakes Parkway
Alpharetta, Georgia 30004
Attention: Secretary
All shares represented by valid proxies that we receive as a result of
this solicitation (other than those proxies that are revoked before they are
voted) will be voted in the manner specified by you. If you return a proxy but
do not specify how to vote your proxy, your shares will be voted "FOR" the
approval and adoption of the merger agreement and the transactions contemplated
thereby. The Scientific Games Board is not currently aware of any other matters
that may be presented for action at the meeting, but if other matters do
properly come before the meeting, we intend that shares represented by proxies
solicited by the Scientific Games Board will be voted by the named proxies in
their discretion. However, proxies that are voted against approval and adoption
of the merger agreement will not be voted in favor of any adjournment or
postponement of the meeting proposed in order to solicit additional proxies to
approve and adopt the merger agreement.
SOLICITATION OF PROXIES
The entire cost of soliciting proxies from you and the other Scientific
Games stockholders will be borne by us, except that Autotote has agreed to pay
one-half of the printing and mailing costs of this proxy statement and related
materials. In addition to the solicitation of proxies described in this proxy
statement, we will request banks, brokers and other record holders to send
proxy/voting instruction cards and proxy materials to the beneficial owners of
Scientific Games common stock to secure their voting instructions, if necessary.
We will reimburse those record holders for their reasonable expenses in so
doing. We have also made arrangements with Corporate Investors Communications,
Inc. to assist us in soliciting proxies at fees that in our estimation will not
exceed $10,000. If necessary, we may also use our regular employees, who will
not be specially compensated, to solicit proxies.
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RECORD DATE AND VOTING RIGHTS
In accordance with Delaware law, Scientific Games' By-Laws and the
rules of the New York Stock Exchange, the Scientific Games Board has fixed June
9, 2000 as the record date for determining the Scientific Games stockholders
entitled to notice of and to vote at the meeting. Accordingly, you are entitled
to notice of and to vote at the meeting only if you were a record holder of
Scientific Games common stock at the close of business on that date. At that
time, there were 11,924,151 shares of Scientific Games common stock outstanding,
including 509,200 treasury shares. In order to have a quorum that will permit us
to conduct business at the meeting, we need to have at least a majority of the
shares of Scientific Games common stock outstanding on the record date
(excluding treasury shares) represented at the meeting, whether in person or by
proxy. You are entitled to one vote for every share of Scientific Games common
stock that you held as of the close of business on the record date. Shares of
Scientific Games common stock represented in person at the meeting but not
voting, and shares of Scientific Games common stock for which we have received
proxies but with respect to which holders of those shares have abstained, will
be counted as present at the meeting for purposes of determining the presence or
absence of a quorum permitting us to conduct business at the meeting. Brokers
who hold shares of Scientific Games common stock in nominee or "street" name for
customers who are the beneficial owners of those shares cannot give a proxy to
vote those shares without specific instructions from those customers. Shares
represented by proxies returned by a broker holding shares in "street" name will
be counted for purposes of determining whether a quorum exists, even though
those shares will not be voted in matters where discretionary voting by the
broker is not allowed ("broker non-votes").
Under Delaware law, approval and adoption of the merger agreement
requires the affirmative vote of at least a majority of the shares of Scientific
Games common stock outstanding on the record date.
BECAUSE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF THE SHARES OF
SCIENTIFIC GAMES COMMON STOCK OUTSTANDING ON THE RECORD DATE, ABSTENTIONS AND
BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
ACCORDINGLY, THE SCIENTIFIC GAMES BOARD URGES YOU TO DESIGNATE A PROXY TO VOTE
YOUR SHARES. YOU MAY DESIGNATE A PROXY BY SIGNING AND DATING THE ENCLOSED
PROXY/VOTING INSTRUCTION CARD AND RETURNING IT IN THE ENCLOSED POSTAGE PAID
RETURN ENVELOPE.
RECOMMENDATION OF THE SCIENTIFIC GAMES BOARD
The Scientific Games Board has unanimously approved the merger
agreement and the transactions contemplated by the merger agreement. The
Scientific Games Board believes that the merger agreement and the transactions
contemplated by the merger agreement are in the best interests of Scientific
Games and its stockholders and recommends that you and the other Scientific
Games stockholders vote "FOR" approval and adoption of the merger agreement and
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the transactions contemplated thereby. See "The Merger - Reasons for the Merger"
on page 14.
ADDITIONAL INFORMATION ON HOW TO VOTE YOUR PROXY
If you are a holder of record of Scientific Games common stock to vote
your proxy: sign, date and mail the enclosed proxy/voting instruction card,
using the postage paid return envelope provided.
If your shares of Scientific Games common stock are held in "street
name" by a broker, bank or other nominee, you will receive instructions from
them on how to have your shares voted. If you have shares of Scientific Games
common stock allocated to your account in the Scientific Games Retirement
Savings Plan or any of our other employee stock ownership plans, proxies signed,
dated and returned will be considered voting instructions to the trustee to vote
the shares credited to such accounts.
THE MERGER
GENERAL
The information contained in this proxy statement with respect to
Autotote Corporation and its equity and debt financing commitments, including
from the Olivetti Group S.p.a. ("Olivetti"), set forth under the headings
"Summary The Companies" on page 4 and "Parties to the Merger - Autotote" on page
45 has been supplied by Autotote, for inclusion in this proxy statement, and we
have not independently verified the information that it provided.
BACKGROUND OF THE MERGER
From time to time over the past several years, Scientific Games has
considered potential strategic transactions involving companies in related or
complementary businesses. We have completed several strategic acquisitions and
alliances. In considering any possible business combinations, Scientific Games
has taken into account the current business environment, including intense price
based and non-price based competition in the lottery industry, capital
requirements associated with any significant expansion of our systems business,
the focus of the investment community on large capitalization and internet
related companies, limited equity research coverage of Scientific Games, the
limited number of significant acquisition candidates, and the strategic fit
between our businesses, the geographic markets we serve and our management and
employee cultures relative to those of potential business combination partners.
In May 1999, our management met with Salomon Smith Barney to discuss
strategic opportunities, including a potential combination with a publicly
traded company in the gaming business. From June 1999 through October 1999,
Scientific Games had several preliminary and informal discussions regarding a
potential combination with such company. Scientific Games and the
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<PAGE> 18
other company were not able to agree on the general terms of an agreement. The
discussions ended in October 1999.
In early November 1999, we asked Salomon Smith Barney to help us
explore strategic alternatives. On November 19, 1999, Scientific Games was
contacted by financial advisors of Autotote regarding a potential transaction
between the companies.
Based on our decision to explore alternatives to enhance stockholder
value and in light of the proposal we received from Autotote, in December 1999,
a public information package was distributed and expressions of interest were
solicited from ten potential buyers, including Autotote. Autotote and two other
parties ultimately requested confidential information concerning Scientific
Games and executed confidentiality agreements. Only one of the other parties
conducted even preliminary due diligence, which was conducted shortly before the
Merger Agreement was signed. No further inquiries were received and the Board
concluded such preliminary discussions were not likely to result in a
transaction as favorable or better than the proposed transaction with Autotote.
Discussions with that party were terminated when the Merger Agreement was signed
pursuant to the requirements imposed by the Merger Agreement.
Scientific Games was familiar with Autotote and its operations prior to
receiving an indication of interest. We also had studied it during our periodic
strategic review of competitors. In addition, we interacted with Autotote in our
1997 acquisition from Autotote of the business operations of our SG-Austria
subsidiary.
On January 12, 2000, Mr. Malloy and Mr. Lorne Weil, chairman, president
and chief executive officer of Autotote, initially met to discuss a potential
combination. At that meeting, Mr. Weil confirmed that Autotote might be
interested in a strategic combination between Scientific Games and Autotote. Mr.
Malloy agreed that a combination might be mutually beneficial to the companies
and their stockholders. Messrs. Malloy and Weil informally discussed a possible
combination in light of industry and market trends and the complementary
business strengths of Scientific Games and Autotote.
Following the January 12, 2000 meeting, Mr. Malloy contacted each of
the other members of the Scientific Games Board to inform them of his meeting
with Mr. Weil and his belief that a business combination involving Scientific
Games and Autotote might be beneficial to Scientific Games and its stockholders.
Mr. Malloy suggested that Scientific Games explore a potential business
combination with Autotote in more detail. The members of the Scientific Games
Board agreed and authorized the management team to further explore a potential
business combination, while continuing to review other strategic options that
might be available to Scientific Games.
By letter dated January 27, 2000, Autotote indicated in writing its
interest in pursuing a
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transaction and, on January 31, 2000, Autotote executed a confidentiality
agreement, including a two year "standstill" agreement with respect to
Scientific Games.
Additional meetings were held thereafter between Scientific Games' and
Autotote's senior management and their respective advisors to discuss the
possible terms upon which a strategic combination might be undertaken. They did
not agree on any definitive terms during the course of those meetings.
In early February, 2000, Mr. Malloy again contacted members of the
Scientific Games Board to inform them of the progress that was being made in the
discussions with Autotote. At the regular meeting of the Scientific Games Board
held on February 10, 2000, Mr. Malloy and other members of Scientific Games'
senior management updated the Board as to the progress of the discussions
between the parties. Representatives from Salomon Smith Barney were then asked
to join the meeting to discuss alternative proposals to increase shareholder
value and to update the Board on responses to the information package sent to
potential interested parties. The Scientific Games Board encouraged Mr. Malloy
to continue to explore a possible business combination with Autotote. Salomon
Smith Barney was requested to assist Scientific Games in this process and to
update the Board concerning proposals to increase shareholder value.
In March and April, 2000, Autotote conducted due diligence
investigations of Scientific Games. Negotiations with respect to the terms of a
potential transaction continued. Financial terms were discussed at an April 26,
2000 meeting in Atlanta, involving the parties and their legal and financial
advisors. As part of the process, during this time frame, legal counsel to
Autotote, together with Scientific Games' regular outside general counsel, began
drafting and negotiating definitive documentation with respect to the proposed
business combination, including drafts of the merger agreement.
At a special meeting of the Scientific Games Board held on May 1, 2000,
Mr. Malloy and other members of Scientific Games' senior management reviewed the
reasons for, and the potential benefits of, a proposed business combination in
light of the complementary nature of the companies' businesses and the global
environment for the gaming industry. Mr. Malloy also reviewed the current status
of the discussions between the parties.
At such meeting, Mr. Malloy informed the Board that the negotiations
were progressing with Autotote for a possible acquisition of the Company in an
all cash merger. Mr. Malloy reviewed the history of events leading up to these
negotiations and strategic alternatives considered by the Board to enhance
shareholder value, including potential business combinations with other
well-known companies in the gaming industry.
At the same meeting, Mr. C. Gray Bethea, Jr., the Company's General
Counsel, described for the Board the due diligence conducted by Autotote to
date, including inquiries and investigations at the Company's U.S., Austrian and
U.K. facilities. Mr. Bethea and our legal advisors then discussed various
proposed contractual provisions which might be embodied in a
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definitive agreement with Autotote. It was noted that the Board would have a
customary "fiduciary out" in the event that an offer more beneficial to the
shareholders was received after any agreement with Autotote was signed, although
a break-up fee would be payable in that event.
At a special meeting of the Scientific Games Board held on May 3, 2000,
senior management and Salomon Smith Barney again reviewed for the Scientific
Games Board various strategic alternatives for Scientific Games, including
remaining independent or engaging in a business combination with other parties
or with Autotote, although Scientific Games had not recently engaged in
negotiations with any other company.
At the May 3, 2000 meeting, the Board reviewed with Scientific Games'
management and legal and financial advisors, the potential transaction with
Autotote, based on a potential all cash structure. A summary of the material
terms of the proposal had been distributed to the Board prior to the meeting.
Based on the progress of negotiations and the previous Board meetings
at which the Scientific Games Board members had discussed the proposed
transaction, the Scientific Games Board authorized senior management to continue
to pursue discussions with Autotote.
At a regularly scheduled meeting of the Scientific Games Board held on
May 18, 2000, the Board reviewed with Scientific Games' senior management and
legal and financial advisors the progress of the negotiations with Autotote
since the Board's last update on May 3, 2000, including the financial and other
terms of the proposed transaction. Financial terms discussed included, among
other things, the $26 per share offer price. Scientific Games' legal advisors
reviewed for the Scientific Games Board the discussions and contacts with
Autotote occurring after the May 3 meeting. Scientific Games' legal advisors
also reviewed the final terms of the merger agreement and again discussed the
legal principles applicable to the Scientific Games Board's decision to adopt
the merger agreement and related legal matters. Salomon Smith Barney then
reviewed with the Board its financial analysis of the merger consideration and
delivered to the Board its oral opinion (subsequently confirmed by delivery of a
written opinion dated May 18, 2000) to the effect that, as of that date and
based on and subject to the matters described in its opinion, the $26 per share
merger consideration was fair, from a financial point of view, to holders of
Scientific Games common stock. See " Opinion of Financial Advisor to Scientific
Games" on page 15.
Following these discussions and questions by the Scientific Games Board
to Scientific Games senior management and legal and financial advisors, the
Scientific Games Board approved the proposed transaction and authorized senior
management of Scientific Games to complete any necessary final negotiations and
enter into a definitive merger agreement incorporating the terms substantially
as discussed with the Scientific Games Board. Autotote and Scientific Games
entered into the merger agreement and issued a joint press release announcing
the proposed transaction.
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REASONS FOR THE MERGER
In concluding that the merger is in the best interests of Scientific
Games and its stockholders, in approving the merger agreement and the
transactions contemplated by the merger agreement (including the merger) and in
recommending that the Scientific Games stockholders vote for approval and
adoption of the merger agreement and the transactions contemplated thereby, the
Scientific Games Board considered and reviewed with senior management, as well
as its legal and financial advisors, the following material factors:
- Scientific Games' knowledge of the current, and its beliefs
about the prospective, environment in which it operates,
including domestic and global economic conditions, competition
in the lottery industry and its other business segments and
the impact of these factors on Scientific Games' opportunities
as a stand-alone entity;
- the strategic options available to Scientific Games and
Scientific Games' assessment that none of these options was
reasonably likely to present superior opportunities, or was
reasonably likely to create greater value for Scientific Games
stockholders, than the prospects presented by the merger;
- the fact that the merger consideration on a per share basis
represented a substantial premium over recently prevailing
market prices of Scientific Games common stock;
- the financial presentation of Salomon Smith Barney, including
its opinion, as to the fairness from a financial point of
view, and as of the date of the opinion, of the $26 per share
merger consideration to holders of Scientific Games common
stock, as described below under "Opinion of Financial Advisor
to Scientific Games;"
- the terms of the merger and the merger agreement as
negotiated, including (1) the $26 per share merger
consideration, and (2) the possibility that the proposed
merger agreement might discourage other parties that might
have an interest in a business combination with Scientific
Games;
- the likelihood of the merger being approved by requisite
regulatory authorities, including lottery authorities and
agencies;
- Scientific Games' assessment that the needs and interests of
its customers would be served equally well or better through a
combination with Autotote than through operation as a
stand-alone entity; and
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<PAGE> 22
- the interests of certain officers and directors that are
different from, or in addition to, the interests of Scientific
Games stockholders generally, as described under "Interests of
Certain Persons in the Merger" on page 38.
This discussion of the information and factors considered by the
Scientific Games Board is not meant to be exhaustive, but includes the material
information and factors considered by the Scientific Games Board. In reaching
its determination to approve the merger agreement and the transactions
contemplated thereby, the Scientific Games Board did not assign any relative or
specific weight to the information and factors discussed above, and individual
directors may have assessed various factors differently. The Board considered
all of the factors as a whole and considered the factors in their totality to be
favorable to and to support the decision to approve the merger agreement and the
merger and to recommend them to Scientific Games' stockholders. The Scientific
Games Board is unanimous in its recommendation that Scientific Games
stockholders vote to approve the merger agreement.
OPINION OF FINANCIAL ADVISOR TO SCIENTIFIC GAMES
The Scientific Games Board retained Salomon Smith Barney to act as its
financial advisor with respect to the proposed merger or other business
combinations. In connection with its engagement, Scientific Games requested that
Salomon Smith Barney evaluate the fairness, from a financial point of view, of
the consideration to be received in the merger by holders of Scientific Games
common stock. On May 18, 2000, at a meeting of the Scientific Games Board held
to evaluate the proposed merger, Salomon Smith Barney delivered to the
Scientific Games Board an oral opinion, subsequently confirmed by delivery of a
written opinion dated May 18, 2000, to the effect that, as of the date of the
opinion and based on and subject to the matters described in the opinion, the
merger consideration was fair, from a financial point of view, to the holders of
Scientific Games common stock.
In arriving at its opinion, Salomon Smith Barney:
- reviewed the merger agreement;
- held discussions with senior officers, directors and other
representatives and advisors of Scientific Games and with
senior officers and other representatives and advisors of
Autotote concerning the business, operations and prospects of
Scientific Games;
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<PAGE> 23
- examined publicly available business and financial information
relating to Scientific Games;
- examined financial forecasts and other information and data
for Scientific Games which were provided to or otherwise
discussed with Salomon Smith Barney by the management of
Scientific Games;
- reviewed the financial terms of the merger as described in the
merger agreement in relation to, among other things, current
and historical market prices and trading volumes of Scientific
Games common stock, the financial condition and historical and
projected earnings and other operating data of Scientific
Games, and the capitalization of Scientific Games;
- considered, to the extent publicly available, the financial
terms of other transactions recently effected which Salomon
Smith Barney considered relevant in evaluating the merger;
- analyzed financial, stock market and other publicly available
information relating to the businesses of other companies
whose operations Salomon Smith Barney considered relevant in
evaluating those of Scientific Games; and
- conducted other analyses and examinations and considered other
financial, economic and market criteria as Salomon Smith
Barney deemed appropriate in arriving at its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied,
without independent verification, on the accuracy and completeness of all
financial and other information and data that it reviewed or considered. With
respect to these financial forecasts and other information and data provided to
or otherwise reviewed by or discussed with Salomon Smith Barney by Scientific
Games, the management of Scientific Games advised Salomon Smith Barney that they
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Scientific Games as to the future
financial performance of Scientific Games. Salomon Smith Barney did not make and
was not provided with an independent evaluation or appraisal of the assets or
liabilities, contingent or otherwise, of Scientific Games, and did not make any
physical inspection of the properties or assets of Scientific Games.
In connection with its engagement, Salomon Smith Barney was requested
to approach, and held discussions with, third parties to solicit indications of
interest in the possible acquisition of Scientific Games. Salomon Smith Barney
expressed no view as to, and its opinion does not address, the relative merits
of the merger as compared to any alternative business strategies that might
exist for Scientific Games or the effect of any other transaction in which
Scientific Games might engage. Salomon Smith Barney's opinion was necessarily
based on information available,
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and financial, stock market and other conditions and circumstances existing and
disclosed, to Salomon Smith Barney as of the date of its opinion. Although
Salomon Smith Barney evaluated the merger consideration from a financial point
of view, Salomon Smith Barney was not asked to and did not recommend the
specific consideration payable in the merger, which was determined through
negotiation between Scientific Games and Autotote. Scientific Games imposed no
other instructions or limitations on Salomon Smith Barney with respect to the
investigations made or procedures followed by Salomon Smith Barney in rendering
its opinion.
THE FULL TEXT OF SALOMON SMITH BARNEY'S WRITTEN OPINION DATED MAY 18,
2000, WHICH DESCRIBES THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX B AND
IS INCORPORATED INTO THIS PROXY STATEMENT BY REFERENCE. SALOMON SMITH BARNEY'S
OPINION IS ADDRESSED TO THE SCIENTIFIC GAMES BOARD AND RELATES ONLY TO THE
FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW, DOES NOT
RELATED TO ANY OTHER ASPECT OF THE MERGER OR ANY RELATED TRANSACTION AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER WITH RESPECT TO ANY MATTER
RELATING TO THE PROPOSED MERGER.
In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses, including those described below. The summary
of these analyses is not a complete description of the analyses underlying
Salomon Smith Barney's opinion. The preparation of a fairness opinion is a
complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, a fairness opinion
is not readily susceptible to summary description. Accordingly, Salomon Smith
Barney believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors, without considering all analyses
and factors, could create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In its analyses, Salomon Smith Barney considered industry performance,
general business, economic, market and financial conditions and other matters
existing as of the date of its opinion, many of which are beyond the control of
Scientific Games. No company, transaction or business used in those analyses as
a comparison is identical to Scientific Games or the proposed merger, and an
evaluation of those analyses is not entirely mathematical. Rather, the analyses
involve complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or transactions
analyzed.
The estimates contained in Salomon Smith Barney's analyses and the
valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by its analyses. In
addition, analyses relating to the value of businesses or securities do not
necessarily purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, Salomon Smith
Barney's analyses and estimates are inherently subject to substantial
uncertainty.
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Salomon Smith Barney's opinion and analyses were only one of various
factors considered by the Scientific Games Board in its evaluation of the merger
and should not be viewed as determinative of the views of the Scientific Games
Board or management with respect to the merger consideration or the proposed
merger.
The following is a summary of the material financial analyses performed
by Salomon Smith Barney in connection with its opinion dated May 18, 2000 to the
Scientific Games Board:
Implied Merger Premiums.
Salomon Smith Barney reviewed the premiums implied in the merger based
on closing stock prices of Scientific Games common stock over the 12-month
period ended May 17, 1999. Salomon Smith Barney noted that the merger
consideration represented a premium of:
- 41.5% to the closing stock price on May 17, 2000 of $17.88;
- 41.7% to the 30-day trailing average closing stock price from May 17,
1999 of $17.60;
- 55.7% to the 180-day trailing average closing stock price from May 17,
1999 of $16.70;
- 79.3% to the 52-week trading low of $14.50, which occurred on November
23, 1999; and
- 23.0% to the 52-week trading high of $21.00, which occurred on
September 7, 1999.
Historical Stock Trading Analysis
Salomon Smith Barney reviewed the historical trading prices and
historical trading volumes of Scientific Games' common stock from May 17, 1998
to May 17, 2000. This review indicated that 100% of the trading activity during
that period had occurred at prices below the merger consideration of $26.00 per
share, and that over 80% of the trading activity had occurred at prices below
$20.00 per share. Salomon Smith Barney also noted that the trading volume of
Scientific Games' common stock from May 17, 1998 to May 17, 2000 was 127% of the
total shares outstanding.
Sum of the Parts Discounted Cash Flow Analysis
Salomon Smith Barney performed a discounted cash flow analysis of the
projected free cash flows that each of Scientific Games' business operations or
prospects could generate during calendar years 2000 through 2004 based on
information provided by Scientific Games' management:
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- the core business, which includes all domestic and international
instant lottery ticket manufacturing, cooperative service contracts
and existing on-line systems contracts ("Core Business");
- probability instant ticket business, including all associated SciScan
Technology(R) terminal sales ("Probability Tickets");
- potential future U.S. on-line lottery contracts ("Future U.S.
On-Line"); and
- the prepaid phonecard manufacturing business ("Phonecards").
The discounted cash flow analysis was based on three scenarios. Two
scenarios were based on internal estimates of Scientific Games' management, one
of which consisted of the operating plan prepared by management in late December
1999 and reviewed by Scientific Games' Board in early February 2000 (the
"December Plan") and one of which consisted of management's operating plan
developed in April 2000 (the "April Plan"). The April Plan incorporated
revisions made to the December Plan based on the financial results for the
quarter ended March 31, 2000 and reflected a more optimistic outlook for
Scientific Games' business and financial performance. The third scenario (the
"Sensitized April Plan") was based on adjustments to the April Plan discussed
with the management of Scientific Games to reflect the potential impact of lower
sales growth in the Phonecards and Probability Tickets businesses and the
potential inability to win new contracts in the Future U.S. On-Line business.
In order to derive an implied equity reference range for Scientific
Games, Salomon Smith Barney aggregated the present value of the free cash flows
of each of Scientific Games' businesses over the forecasted period with the
present value of a range of terminal values. To calculate the terminal values of
the Core Business, and the Probability Tickets and Future U.S. On-Line
businesses, Salomon Smith Barney applied terminal value multiples ranging from
3.5x to 4.5x to the earnings before interest, taxes, depreciation and
amortization (commonly referred to as "EBITDA") of those businesses in the final
year of the forecasted period. To calculate the terminal value of the Phonecards
business, Salomon Smith Barney applied a perpetuity growth rate of 6% under the
April Plan and 3% under both the December Plan and the Sensitized April Plan to
that business' EBITDA in the final year of the forecasted period. In all three
scenarios, Salomon Smith Barney discounted the future cash flows and terminal
values to present value using selected discount rates ranging from 11% to 13% in
the case of the Core Business, Probability Tickets and Future U.S. On-Line
businesses, and 19% to 22% in the case of the Phonecards business.
This analysis resulted in an implied equity reference range for
Scientific Games of approximately $23.00 to $29.25 per share based on the
December Plan, approximately $33.75 to $43.00 per share based on the April Plan
and approximately $25.85 to $31.75 per share based on the Sensitized April Plan,
as compared to the merger consideration of $26.00 per share.
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Leveraged Buyout Analysis.
Salomon Smith Barney derived an implied equity reference range for
Scientific Games by performing a leveraged buyout analysis utilizing
management's April Plan and assuming a range of required rates of return to a
financial buyer of approximately 19% to 46% and a range of EBITDA terminal
multiples of 3.0x to 5.0x. This analysis indicated an implied equity reference
range for Scientific Games of approximately $24.00 to $28.00 per share, as
compared to the merger consideration of $26.00 per share.
Selected Companies Analysis.
Using publicly available information, Salomon Smith Barney analyzed the
market values and trading multiples of the seven selected publicly traded
companies in the gaming systems and equipment manufacturing industry listed
below. Since no publicly traded companies are engaged in entirely the same
businesses as Scientific Games, the following companies were selected because
each is engaged in one or more of Scientific Games' lines of business:
- Alliance Gaming Corp.
- Anchor Gaming
- GTECH Holdings Corp.
- International Game Technology
- Autotote
- Casino Data Systems, Inc.
- WMS Industries Inc.
All multiples were based on closing stock prices on May 17, 2000.
Estimated financial data for the selected companies were based on publicly
available research analysts' estimates, and estimated financial data for
Scientific Games were based on internal estimates of or discussions with the
management of Scientific Games. Salomon Smith Barney compared firm values of
Scientific Games and the selected companies as a multiple of latest 12 months
and estimated calendar year 2000 EBITDA. Salomon Smith Barney also compared
market values of Scientific Games and the selected companies as a multiple of
estimated calendar years 2000 and 2001 earnings per share. Salomon Smith Barney
then applied a range of selected multiples derived from the selected companies
of latest 12 months and estimated calendar year 2000 EBITDA and estimated
calendar years 2000 and 2001 earnings per share to corresponding financial data
of Scientific Games in order to derive an implied equity reference range for
Scientific Games. This analysis resulted in an implied equity reference range
for Scientific Games of approximately $17.00 to $22.00 per share, as compared to
the merger consideration of $26.00 per share.
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Precedent Transactions Analysis.
Using publicly available information, Salomon Smith Barney reviewed the
implied transaction value multiples paid or proposed to be paid in the following
six selected merger and acquisition transactions in the gaming systems and
equipment manufacturing industry:
<TABLE>
<CAPTION>
Acquiror Target
-------- ------
<S> <C>
International Game Technology Sodak Gaming, Inc.
Anchor Gaming Powerhouse Technologies, Inc.
Mikohn Gaming Corp. Progressive Systems, Inc.
International Game Technology Olympic Amusements Pty. Ltd.
International Game Technology Barcrest Ltd.
Alliance Gaming Corp. Bally Entertainment Corp. (a/k/a/ Bally Wulff)
</TABLE>
Salomon Smith Barney compared transaction values in the selected
transactions as a multiple of latest 12 months EBITDA. All multiples were based
on publicly available financial information for the selected transactions.
Salomon Smith Barney then applied a range of selected multiples derived from the
selected transactions of latest 12 months EBITDA to corresponding financial data
for Scientific Games in order to derive an implied equity reference range for
Scientific Games. This analysis resulted in an implied equity reference range
for Scientific Games of approximately $24.00 to $28.00 per share, as compared to
the merger consideration of $26.00 per share.
Miscellaneous.
Under the terms of its engagement, Scientific Games has agreed to pay
Salomon Smith Barney for its financial advisory services upon completion of the
merger an aggregate fee based on a percentage of the total consideration,
including liabilities assumed, payable in the merger. The fee payable to Salomon
Smith Barney is currently estimated to be approximately $3.1 million.
Scientific Games also has agreed to reimburse Salomon Smith Barney for
reasonable travel and other expenses incurred by Salomon Smith Barney in
performing its services, including reasonable fees and expenses of its legal
counsel, and to indemnify Salomon Smith Barney and related persons against
certain liabilities, including liabilities under the federal securities laws,
arising out of its engagement.
In the ordinary course of business, Salomon Smith Barney and its
affiliates may actively trade or hold the securities of Scientific Games and
Autotote for their own account or for the account of customers and, accordingly,
may at any time hold a long or short position in those securities. Salomon Smith
Barney and its affiliates have in the past provided investment banking services
to Scientific Games unrelated to the proposed merger, for which services Salomon
Smith
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Barney has received compensation. In addition, Salomon Smith Barney and its
affiliates, including Citigroup Inc. and its affiliates, may maintain
relationships with Scientific Games, Autotote and their respective affiliates.
Salomon Smith Barney is an internationally recognized investment
banking firm and was selected by Scientific Games based on its experience,
expertise and familiarity with Scientific Games and its business. Salomon Smith
Barney regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
THE MERGER AGREEMENT
This section of the proxy statement describes the principal provisions
of the merger agreement. The following information, insofar as it relates to
matters contained in or contemplated by the merger agreement, is qualified in
its entirety by reference to the full text of the merger agreement, which we
have attached as Appendix A to this proxy statement and which we incorporate by
reference into this document. We encourage you to read the merger agreement in
its entirety.
EFFECTIVE TIME
The effective time of the merger will occur at the time indicated on a
certificate of merger that we will file with the Secretary of State of the State
of Delaware on the closing date of the merger. The closing date will occur as
soon as practical after all of the conditions set forth in the merger agreement
have been satisfied (or waived), unless we agree with Autotote to complete the
transaction on another date. When we refer to the effective time of the merger
in this proxy statement, we mean the date and time when the merger becomes
effective as described in this paragraph.
THE MERGER
At the effective time of the merger, ATX Enterprises will merge into
Scientific Games, with Scientific Games surviving the merger. Immediately after
the merger is completed, Scientific Games will be a subsidiary of Autotote, with
all of its common stock owned, directly or indirectly, by Autotote. All of
Scientific Games' properties, assets, rights, privileges, immunities, powers and
purposes, and all of its liabilities, obligations and penalties will become
those of the surviving company. Following completion of the merger, the
Scientific Games common stock will be delisted from New York Stock Exchange,
deregistered under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") and no longer publicly traded. When we refer to the "surviving
company" in this agreement, we mean Scientific Games as it will exist after the
merger.
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CONVERSION OF CAPITAL STOCK AND STOCK-BASED AWARDS
Scientific Games Common Stock
At the effective time of the merger, each share of Scientific Games
common stock issued and outstanding immediately prior to the effective time of
the merger will be converted into the right to receive $26 in cash, without
interest.
Certain shares of Scientific Games common stock will not be converted
in the merger. These shares include those shares:
- held in Scientific Games' treasury immediately prior to the
effective time of the merger;
- held by Autotote or any direct or indirect wholly owned
subsidiary of Autotote which will be cancelled at the
effective time of the merger without any payment; and
- as to which Scientific Games stockholders demand appraisal
rights in compliance with Delaware law. See "Additional
Information -- Dissenters' Appraisal Rights" on page 46.
Scientific Games Stock Options and Other Stock-Based Awards Exchange
Procedures
At the effective time of the merger, all stock options and other
stock-based awards will become fully vested and exercisable, fully payable or
distributable, as the case may be, and any performance targets related to the
vesting of those awards will be deemed to have been fully achieved. At the
effective time of the merger, in exchange for the option or award held:
- each holder of options will be entitled to receive a cash
payment equal to (1) $26 minus the exercise price of the
option times (2) the number of shares of Scientific Games
common stock subject to the option (minus any applicable
withholding taxes); and
- each holder of restricted stock awards will be entitled to
receive a cash payment equal to $26 times the number of shares
of Scientific Games common stock subject to the award (minus
any applicable withholding taxes).
Payment Procedures; Lost Certificates
At the effective time of the merger, Autotote will cause cash
sufficient to pay the merger consideration to each holder of shares of
Scientific Games common stock to be deposited with a bank or trust company (the
"Exchange Agent") designated by Autotote and reasonably acceptable
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to us. Promptly after the effective time of the merger, the Exchange Agent will
mail a letter of transmittal and other instructional materials to you and the
other Scientific Games stockholders. The letter of transmittal and other
materials will tell you how to surrender your Scientific Games common stock
certificates in exchange for the merger consideration of $26 per share of
Scientific Games common stock. If you have shares of Scientific Games common
stock allocated to your accounts in the Scientific Games Retirement Savings Plan
or the Scientific Games Employee Stock Purchase Plan or have restricted shares
awarded under any other employee benefit plan, you will receive separate
instructions from the combined company on how you will receive the merger
consideration.
YOU SHOULD NOT RETURN YOUR SCIENTIFIC GAMES COMMON STOCK CERTIFICATES
WITH THE ENCLOSED PROXY/VOTING INSTRUCTION CARD. FURTHERMORE, YOU SHOULD NOT
FORWARD THOSE CERTIFICATES TO THE EXCHANGE AGENT, SCIENTIFIC GAMES OR AUTOTOTE
UNLESS AND UNTIL YOU RECEIVE A LETTER OF TRANSMITTAL FOLLOWING THE EFFECTIVE
TIME OF THE MERGER.
You will not be entitled to receive the merger consideration until you
surrender your Scientific Games common stock certificate or certificates to the
Exchange Agent, together with a properly completed and signed letter of
transmittal. When you surrender your certificates, you will be entitled to
receive in exchange for them a check in an amount equal to the product of the
merger consideration and the number of shares of Scientific Games common stock
represented by the certificates you surrender, and the surrendered certificates
will be cancelled. No interest will accrue or be paid on the merger
consideration. Any person presenting share certificates for exchange in a name
other than the name registered in our transfer records either will have to pay
to the Exchange Agent any transfer or similar taxes required to be paid because
of the payment of the merger consideration to a person other than the registered
holder or will have to establish that any taxes have been paid or are not
applicable.
At the effective time of the merger, our transfer record books will be
closed and there will be no transfers on our books of shares of Scientific Games
common stock, other than entries reflecting any open market purchases to the
extent necessary to satisfy our matching obligations under our 401(k) plan for
purposes, in each case, of paying the merger consideration. If shares are
presented for transfer after that time, they will be surrendered and cancelled
in exchange for the merger consideration (subject to Delaware law regarding
dissenting shares).
Autotote will be entitled to deduct and withhold from the merger
consideration any amounts that it is required to deduct and withhold under the
Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are withheld, the
withheld amounts (other than amounts withheld as a result of any foreign tax
law) will be treated for all purposes of the merger agreement as having been
paid to the holder of the surrendered certificate.
At any time after the one year anniversary of the effective time of the
merger, the surviving company will be entitled to take back any funds from the
Exchange Agent that the Exchange Agent
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has not yet paid, and after that time, holders of Scientific Games certificates
will have to surrender their certificates to the surviving company to receive
the merger consideration. Neither Scientific Games, Autotote, ATX, the surviving
company nor the Exchange Agent will be responsible to any former Scientific
Games stockholder for any amounts delivered to a public official under any
abandoned property, escheat or similar laws.
If you have lost a certificate, or if it has been stolen or destroyed,
before you will be entitled to receive the merger consideration, you will have
to make an affidavit that your certificate was lost, stolen or destroyed and if
Autotote requires, you'll have to post a bond indemnifying Autotote, the
surviving company and the Exchange Agent against any claims made against them
with respect to that certificate.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties by
Scientific Games, on the one hand, and Autotote and ATX, on the other hand.
Scientific Games made representations and warranties that relate to, among other
things, it and its subsidiaries' corporate organization and qualification;
certificate of incorporation and by-laws and similar organizational and
governance documents; capitalization; power and authority to enter into the
merger agreement and complete the transactions contemplated by the agreement;
absence of violation of organizational documents, law or contracts; filings and
consents required to be made in connection with the merger; possession of and
compliance with permits required to conduct business; Securities and Exchange
Commission filings and the financial statements contained in those filings;
absence of material adverse changes since December 31, 1999; employment,
employee benefits and related matters; validity of certain material contracts,
the absence of material defaults under those contracts; absence of material
legal proceedings; absence of material environmental liabilities; ownership and
possession of rights to use trademarks, patents, copyrights and other
proprietary rights; filing and accuracy of tax returns; existence or absence of
non-competition agreements; our stockholders rights agreement; the Scientific
Games Board's determinations and resolutions regarding the merger agreement;
receipt of the opinion of Scientific Games' financial advisor; and broker's
fees.
Autotote and ATX also have made representations and warranties. Their
representations and warranties relate to, among other things: corporate
organization; power and authority to enter into the merger agreement and
complete the transactions contemplated by the merger agreement; absence of
violation of organizational documents, law or contracts; filings and consents
required to be made in connection with the merger; absence of material legal
proceedings; broker's fees; solvency and possession of financing sufficient to
complete the transactions contemplated by the merger agreement.
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CONDUCT OF THE BUSINESS PENDING THE MERGER
Under the merger agreement, we have agreed that we will (and that we
will require our subsidiaries to) conduct business only in the ordinary course
and that we will (and that we will require our subsidiaries to) use reasonable
commercial efforts to keep substantially intact our business organization; to
maintain the services of our key officers and employees and to preserve our
relationships with customers, suppliers and others with whom we have significant
business relations. In addition, we have agreed that we will not (and that we
will not permit our subsidiaries to) take any of the following actions without
Autotote's consent, except for actions contemplated by the merger agreement or
disclosed to Autotote prior to signing the merger agreement:
- amend our certificate of incorporation or by-laws or the
similar organizational and governance documents of our
subsidiaries;
- issue, sell, pledge or otherwise dispose of or encumber (or
authorize any of those actions with respect to) shares of our
capital stock or that of our subsidiaries, securities
convertible into shares of our capital stock or that of our
subsidiaries, or rights to acquire shares of our capital stock
or that of our subsidiaries, except for the issuance of shares
as a result of the exercise of Scientific Games stock options
or stock awards existing when we entered into the merger
agreement or pursuant to any stock fund under any benefit plan
or in the ordinary course of business consistent with past
practice, or that we otherwise grant, pursuant to employment
offers, as permitted under the merger agreement;
- except in the ordinary course of business or in non-material
transactions, issue, sell, pledge or otherwise transfer or
encumber (or authorize any of those actions with respect to)
any of our property or assets or any of the property or assets
of our subsidiaries;
- declare, set aside, make or pay any dividend or other
distribution other than the dividends made to us by our
subsidiaries or to our subsidiaries by our other subsidiaries,
subject to limits for cross border transactions, or in
connection with tax withholding obligations, or in settlement
or discharge of claims by our stockholders based on their
equity interest in the Company;
- reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire any of our capital stock, except pursuant to
existing employee benefit plans;
- acquire any interests in any corporation or other business
entity or any portion of any other business entity other than
specific permitted transactions; incur indebtedness or issue
debt securities or assume, guarantee or otherwise become
responsible for the debts of another person, except for
indebtedness incurred under
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our existing credit facilities, or other indebtedness not in
excess of $500,000 in the aggregate; make or authorize any
material capital expenditures, other than pursuant to our
existing capital expenditure budget or in excess of $1
million; or enter into any contract that would not be
permitted by the foregoing;
- increase the compensation or severance payable to directors,
officers or employees, except for increases in salary or wages
of employees in the ordinary course of business, grant any
severance or termination pay or make any loan to any director,
officer or employee (except to make payments required to be
made under obligations existing of the date of the merger
agreement; enter into or modify any severance benefit
agreement in excess of specified limits; establish, adopt,
enter into or amend any collective bargaining agreement,
employee plan, trust, fund, policy or arrangement for the
benefit of any current or former directors, officers or
employees or any of their beneficiaries, except, in each case,
as may be required by law, or as would not result in a
material increase in the cost of maintaining such collective
bargaining agreement, employee plan, trust, fund, policy or
arrangement and would not otherwise impose any material
restraint on our business or operations;
- modify our accounting policies or procedures, other than in
the ordinary course of business or as required by law or GAAP;
- make any tax election or settle or compromise any United
States federal, state, local or non-United States tax
liability if the effect thereof would be adverse in any
material respect to Scientific Games;
- pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) except for the payment, discharge or
satisfaction in the ordinary course of business of liabilities
reflected or reserved against in the financial statements or
incurred in the ordinary course of business and except for any
other payment, discharge or satisfaction in an amount not to
exceed $75,000 in the aggregate;
- authorize or enter into any agreement or make any commitment
to do any of the foregoing;
OTHER AGREEMENTS OF SCIENTIFIC GAMES AND AUTOTOTE
In addition to our agreements regarding the conduct of our business,
Scientific Games and Autotote have also agreed to take several other actions:
- we have agreed, along with Autotote, to give each other prompt
notice of certain events, such as any communication from any
governmental entity and any event that
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is likely to be materially adverse to us or to our ability, or
the ability of Autotote to complete the merger;
- we have agreed to provide Autotote with reasonable access to
our properties, information and personnel and to furnish any
information regarding our properties, information and
personnel to Autotote as it may reasonably request;
- Autotote has agreed to arrangements regarding the liability,
indemnification of and insurance for our officers and
directors, as more fully discussed in "Interests of Certain
Persons in the Merger" on page 40;
- we have agreed, along with Autotote to take all reasonable and
lawful actions necessary or appropriate to complete the
merger, to use commercially reasonable efforts to obtain all
consents, waivers, approvals, authorizations or orders
required in connection with the merger agreement and the
transactions contemplated by the merger agreement, and to use
commercially reasonable efforts to make all necessary filings
and other submissions required or appropriate, including under
federal securities laws and state "blue sky" laws, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any
other applicable laws;
- we have agreed, along with Autotote, to consult and coordinate
with each other in issuing any press release or other public
statement related to the merger, and to not issue any release
or other statement without the consent of the other parties
unless required by law or the rules of certain self-regulatory
organizations and the New York Stock Exchange; and
- we have agreed not to (and to not permit any of our
subsidiaries or any of our or our subsidiaries'
representatives to) initiate, solicit or encourage, directly
or indirectly, any inquiries or proposals with respect to any
merger, sale of assets, sale of capital stock or similar
transaction involving, or any purchase or sale of all or any
significant portion of our assets, or 20% or more of our
equity securities (any proposal or offer of this nature being
referred to as an "Acquisition Proposal"). We may, however
(and may cause our subsidiaries and our subsidiaries'
representatives to) have discussions with or provide
confidential information or data relating to us or our
subsidiaries to any person with respect to an Acquisition
Proposal or engage in any negotiations concerning an
Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal or accept
an Acquisition Proposal, if the Acquisition Proposal involves
an unsolicited Superior Proposal (as described below). In this
connection, we may engage in discussions or negotiations with,
or provide information to, a person making an unsolicited
written offer to engage in an Acquisition Proposal or
recommend such a proposal to our stockholders, if (1) the
Scientific Games Board concludes in good faith that the
proposed Acquisition Proposal involves a proposal to acquire,
for cash and/or
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securities, all of the equity securities or substantially all
of the Assets of the Company and would be more favorable to
our stockholders from a financial point of view (a "Superior
Proposal"), (2) the Scientific Games Board determines in good
faith after consultation with independent legal counsel that
there is a reasonable risk that taking action with respect to
the proposal is necessary for it to properly discharge its
fiduciary duties, (3) prior to providing any information or
data, we have entered into a confidentiality agreement with
the person making the offer on terms substantially similar to
those contained in our confidentiality agreement with
Autotote, and (4) we notify Autotote promptly of the receipt
of the proposal.
EMPLOYEE BENEFIT PLANS
For a period of three years after the effective time of the merger, the
surviving company will maintain employee benefit plans and similar arrangements
that, in the aggregate, provide benefits to our employees covered under such
plans or similar arrangements as of the date of the merger agreement at a level
substantially similar to the level provided under our employee benefit plans and
arrangements as in effect immediately prior to the effective time of the merger,
except that such requirement will not apply to any employee benefit plans under
which employees may receive or which are based on company common stock or which
are inconsistent with any employment agreement. After the effective time of the
merger, the surviving company will honor our severance plans (or policies) and
all (or otherwise permitted) existing employment and severance agreements and
severance plans that apply to our current or former employees or directors in
accordance with their terms.
CONDITIONS TO COMPLETION OF THE MERGER
All Parties
The respective obligations of Scientific Games, on the one hand, and
Autotote, on the other, to complete the merger are subject to the satisfaction
at or prior to the effective time of the merger of the following conditions:
- approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement by the
stockholders of Scientific Games;
- absence of any action or proceeding that has resulted in or is
reasonably likely to result in any order, judgment or decree
issued by any governmental entity or any other legal restraint
(i) preventing or seeking to prevent consummation of the
merger, or (ii) as a condition to the obligations of Autotote
and ATX, prohibiting or seeking to prohibit, or limiting or
seeking to limit, Autotote from exercising all material rights
and privileges pertaining to its ownership of the surviving
corporation or any investor in Autotote from owning and
exercising all material rights and privileges pertaining to
its ownership of its interest in Autotote or the
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ownership or operation by Autotote or any of its subsidiaries
of all or a material portion of the business or assets of the
surviving corporation and its subsidiaries, or compelling or
seeking to compel Autotote or any of its subsidiaries to
dispose of or hold separate all or any material portion of the
business or assets of Autotote or any of its subsidiaries
(including the surviving corporation and its subsidiaries) as
a result of the merger or the transactions contemplated by the
merger agreement;
- no statute, rule, regulation or order shall be enacted,
entered, enforced or deemed applicable to the merger which
makes the consummation of the merger illegal; and
- expiration or termination of any waiting period (and any
extension of any waiting period) applicable to the merger
under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, and all clearances and approvals under any non-U.S.
monopoly laws, except where the failure to have obtained any
clearances or approvals with respect to any non-U.S. monopoly
laws could not reasonably be expected to have a material
adverse effect on Scientific Games, Autotote or their
respective subsidiaries.
Autotote and ATX
The obligations of Autotote and ATX to complete the merger are subject
to the satisfaction of the following additional conditions, unless waived by
Autotote and ATX: the truth and correctness in all material respects of the
representations and warranties of Scientific Games (without giving effect to
qualifications of materiality contained in such representations and warranties)
on and as of the effective time, with the same force and effect as if made on
and as of the effective time, except for changes contemplated by the merger
agreement, representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date or, if
incorrect, it is certified by Scientific Games that the failure of such
representations and warranties would not have a material adverse effect, or
where the failure to be true and correct would not, individually or in the
aggregate with all other such failures, have a material adverse effect and
Autotote and ATX shall have received a certification of Scientific Games to such
effect); Scientific Games shall, in all material respects, have performed or
complied with the agreements and covenants required to be performed or complied
with by it on or prior to the effective time; all material consents, waivers,
approvals, authorizations or orders required to be obtained, and all filings
required to be made for the authorization, execution and delivery of the merger
agreement and the consummation by Scientific Games of the contemplated
transactions shall have been obtained and made by Scientific Games, except where
the failure to receive such consents, waivers, approvals, authorizations or
orders would not, individually or in the aggregate with all other such failures,
have a material adverse effect on Scientific Games or Autotote and a
distribution date shall not have occurred under our rights agreement.
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Scientific Games
The obligation of Scientific Games to complete the merger is subject to
the satisfaction of the following additional conditions, unless waived by
Scientific Games: the representations and warranties of Autotote and ATX
contained in the merger agreement (other than those as to certain conflicts or
the absence of any litigation are true and correct in all respects (without
giving effect to qualifications of materiality contained in such representations
and warranties) on and as of the effective time, with the same force and effect
as if made on and as of the effective time, except for changes contemplated by
the merger agreement, representations and warranties which address matters only
as of a particular date (which shall have been true and correct as of such date,
or, if incorrect, it is certified by Autotote that the failure of such
representations and warranties to be true would not have a material adverse
effect, or where the failure to be true and correct would not, individually or
in the aggregate with all other such failures, have a material adverse effect,
and Scientific Games shall have received a certification to such effect);
Autotote and ATX shall, in all material respects, have performed or complied
with the agreements and covenants required to be performed or complied with by
them on or prior to the effective time; all material consents, waivers,
approvals, authorizations or orders required to be obtained and all filings
required to be made for the authorization, execution and delivery of the merger
agreement and the consummation by them of the contemplated transaction shall
have been obtained and made by Autotote or ATX, except where the failure to
receive such consents, waivers, approvals, authorizations or orders would not,
individually or in the aggregate with all other such failures, have a material
adverse effect; the opinion of Scientific Games' financial advisor shall not
have been withdrawn as of the date of the proxy statement; and Scientific Games
shall have received from a satisfactory investment banking or accounting firm, a
satisfactory opinion to the effect that the consummation by Autotote and ATX of
the transactions contemplated by the merger agreement, including, without
limitation, the entering into of any financing agreement which may be necessary
in connection therewith, will not render Autotote or the surviving corporation
insolvent or unable to pay its obligations as they mature.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the
effective time of the merger, notwithstanding approval thereof by the
stockholders of Scientific Games:
- by mutual written consent duly authorized by the Boards of
Directors of Autotote and Scientific Games; or
- by either Autotote or Scientific Games if the merger is not
consummated by September 30, 2000 (other than because the
Scientific Games special meeting has not been held by July 31,
2000 or because the stockholders of Scientific Games have not
approved the merger); provided, that any party whose failure
to fulfill any obligation under the merger agreement has been
the principal cause of, or resulted
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in, the failure of the merger to be consummated on or prior to
such date is not eligible to terminate the merger under this
provision; or
- by either Autotote or Scientific Games, if a court of
competent jurisdiction or governmental, regulatory or
administrative agency or commission having authority with
respect thereto shall have issued a non-appealable final
order, decree or ruling or taken any other non-appealable
final action having the effect of permanently restraining,
enjoining or otherwise prohibiting the merger; or
- by Autotote, if the special meeting has not been held by July
31, 2000, or by Autotote or Scientific Games if the
stockholders of Scientific Games shall not have approved the
merger and merger agreement at the special meeting; or
- by Autotote, if, whether or not permitted to do so by the
merger agreement, the Board of Directors of Scientific Games
or Scientific Games withdraws, modifies or changes its
approval or recommendation of the agreement or the merger in a
manner adverse to Autotote; approves or recommends to the
stockholders of Scientific Games an alternative transaction;
or approves or recommends that the stockholders of Scientific
Games tender their shares in any tender or exchange offer that
is an Alternative Transaction, or takes any position or makes
any disclosure to Scientific Games' stockholders permitted
under the merger agreement which has the effect of any of the
foregoing; or
- by Scientific Games, in order to accept a Superior Proposal,
if the merger and the merger agreement have not already been
approved at the special meeting, the Board of Directors of
Scientific Games determines in good faith (on the advice of
independent counsel), that there is a reasonable risk that the
Board is required to accept such proposal in order to
discharge properly its fiduciary duties, Scientific Games, in
fact, accepts such proposal and Scientific Games has complied
with the non-solicitation provisions of the merger agreement;
or
- by Autotote or Scientific Games, if any representation or
warranty of Scientific Games, Autotote or ATX, respectively,
set forth in the merger agreement shall be untrue in any
material respect when made, such that a material adverse
effect exists as a result thereof (a "Terminating
Misrepresentation"); provided that, if such Terminating
Misrepresentation is curable prior to September 30, 2000 by
Scientific Games or Autotote, as the case may be, through the
exercise of its reasonable best efforts to eliminate, undo or
reverse the event or circumstance giving rise to such
Terminating Misrepresentation and for so long as the
Scientific Games or Autotote, as the case may be, continues to
exercise such reasonable best efforts, neither Scientific
Games nor Autotote, respectively, may terminate the merger
agreement under this provision; or
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- by Autotote, if any representation or warranty of Scientific
Games shall have become untrue in any material respect such
that a material adverse effect exists as a result thereof, or
by Scientific Games, if any representation or warranty of
Autotote and ATX shall have become untrue in any material
respect such that a material adverse effect exists as a result
thereof (in each case, a "Terminating Change"), in either
case, other than by reason of a Terminating Breach (as
hereinafter defined); provided that, if any such Terminating
Change is curable prior to September 30, 2000 by Scientific
Games or Autotote, as the case may be, through the exercise of
its reasonable best efforts, and for so long as Scientific
Games or Autotote, as the case may be, continues to exercise
such reasonable best efforts, neither Scientific Games or
Autotote, respectively, may terminate this Agreement under
this provision; or
- by Scientific Games or Autotote, upon a material breach of any
covenant or agreement on the part of the Scientific Games or
Autotote set forth in the merger agreement such that a
material failure to perform would result (in each case, a
"Terminating Breach"); provided that, except for any breach of
Scientific Games' non-solicitation obligations, if such
Terminating Breach is curable prior to September 30, 2000 by
Scientific Games or Autotote, as the case may be, through the
exercise of its reasonable best efforts and for so long as
Scientific Games or Autotote, as the case may be, continues to
exercise such reasonable best efforts, neither Scientific
Games nor Autotote, respectively, may terminate this Agreement
under this provision.
As used in the merger agreement, "Alternative Transaction" means any of
(i) a transaction pursuant to which any person other than Autotote or its
affiliates (a "third party") acquires or would acquire more than 20% of the
outstanding shares of any class of equity securities of Scientific Games,
whether from Scientific Games or pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving Scientific
Games, pursuant to which any third party acquires more than 20% of the
outstanding equity securities of Scientific Games, or the entity surviving such
merger or business combination, or (iii) any transaction pursuant to which any
third party acquires or would acquire control of assets (including for this
purpose the outstanding equity securities of subsidiaries of Scientific Games
and securities of the entity surviving any merger or business combination
including any of Scientific Games' subsidiaries) of the Scientific Games, or any
of its subsidiaries, having a fair market value (as determined by the Board of
Directors of Scientific Games, in good faith) equal to more than 20% of the fair
market value of all the assets of Scientific Games and its subsidiaries, taken
as a whole, immediately prior to such transaction, or (iv) any other material
consolidation, business combination, recapitalization, redemption, extraordinary
dividend or similar transaction involving Scientific Games or any of Scientific
Games' significant subsidiaries (other than any acquisition by Scientific Games,
for fair market value, of any business, or any equity interest therein, having a
fair market value (as determined by the Board of Directors of Scientific Games,
in good faith) equal to no more than 20% of the fair market value of all the
assets of Scientific Games and its subsidiaries, taken as a whole,
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immediately prior to such transaction), other than the transactions contemplated
by the merger agreement; provided, however, that an Alternative Transaction will
not include any acquisition of securities by a broker dealer in connection with
a bona fide public offering of such securities. In the case of any Alternative
Transaction which has not, directly or indirectly, through any officer,
director, employee, representative or agent of Scientific Games or any of its
subsidiaries, been solicited or encouraged by Scientific Games, and which the
Board of Directors of Scientific Games has rejected, recommended that
stockholders of Scientific Games do not accept or approve, and used reasonable
best efforts in good faith to prevent, the applicable percentage is 35% instead
of 20%.
Whether or not we complete the merger, all fees and expenses incurred
in connection with the merger will be paid by the party incurring the expenses.
However, the costs and expenses of printing and mailing this proxy statement and
all filing and other fees paid to the Securities and Exchange Commission in
connection with the merger will be shared equally by Scientific Games, on the
one hand, and Autotote, on the other. In addition, under the circumstances
described below under "Termination Fee," Scientific Games will be obligated to
pay certain costs and expenses of Autotote.
AMENDMENT; WAIVER.
The merger agreement may be amended in writing by mutual agreement of
the parties by action taken by or on behalf of the parties' respective boards of
directors at any time prior to the effective time of the merger. However, after
adoption of the merger agreement by the Scientific Games stockholders, no
amendment may be made that would reduce the amount or change the type of
consideration that you are to receive under the merger agreement. At any time
prior to the effective time of the merger, any party to the merger agreement may
extend the time for the other party to perform its obligations under the
agreement, waive any inaccuracy in the other party's representations and
warranties or waive the other party's obligation to comply with any agreement or
condition contained in the merger agreement.
EXPENSE AND TERMINATION FEE
We have agreed that if the merger agreement is terminated under certain
circumstances described below, we will pay expenses of up to $1,000,000 and 3%
of the total cash merger consideration (an aggregate termination fee of
approximately $9.3 million based on the number of outstanding non-treasury
shares as of June 9, 2000) to Autotote.
EVENTS REQUIRING PAYMENT OF TERMINATION FEE.
Autotote Fees and Expenses
Except as described below, all fees and expenses incurred by Autotote
and ATX in connection with the merger agreement and the transactions
contemplated thereby shall be paid by
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<PAGE> 42
Autotote and ATX, whether or not the merger is consummated; provided, however,
that Autotote and Scientific Games will share equally all SEC filing fees and
printing expenses incurred in connection with the printing and filing of the
proxy statement (including any preliminary materials related thereto) and any
amendments or supplements thereto.
Scientific Games will pay to all of Autotote's and ATX's actual,
documented and reasonable out-of-pocket expenses, relating to the transactions
contemplated by the merger agreement (including reasonable fees and expenses of
counsel and accountants, commitment fees with respect to the financing of the
merger and out-of-pocket expenses and reasonable fees of financial advisors)
("Autotote Expenses"), such payment of Autotote Expenses not to exceed
$1,000,000, and a fee of 3% of the total cash merger consideration (the
"Autotote Fee"), in each case, upon the first to occur of any of the following
events:
- the termination of the merger agreement by Autotote or
Scientific Games if the merger agreement is not approved by
the Scientific Games stockholders at a timely meeting or if
the Scientific Games Board recommendation of the transaction
is withdrawn, provided that, if the merger agreement is
terminated because the stockholders have not approved and
adopted the merger at the special stockholders meeting, the
Autotote Fee and Autotote Expenses are only payable if there
has been a Payment Trigger (as defined below); or
- the termination of the merger agreement by Autotote if the
Scientific Games Board approves or recommends an Alternative
Transaction (whether by tender or exchange offer, or
otherwise) or takes a position which has the effect of the
foregoing; or
- the termination of the merger agreement by Scientific Games to
accept a Superior Proposal; or
- the termination of the merger agreement by Autotote as a
result of a Terminating Breach by Scientific Games; provided
that the Autotote Fee and Autotote Expenses are payable under
this provision only if there has been a Payment Trigger.
The term "Payment Trigger" means either at the time of the special
meeting, or at the time of the Terminating Breach, there shall be outstanding or
purport to be outstanding an Acquisition Proposal which has been made directly
to stockholders of Scientific Games or has otherwise become publicly known or
known to holders of 10% or more of Scientific Games' Common Stock or there shall
be outstanding an announcement by any credible third party of an intention to
make an Acquisition Proposal which, in either case, would, if consummated,
constitute an Alternative Transaction, or an Alternative Transaction shall be
publicly announced by Scientific Games or any third party and such transaction
shall be consummated within twelve months following the date of termination of
the merger agreement on substantially the terms announced.
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<PAGE> 43
Upon a termination of the merger agreement by Autotote as a result of a
Terminating Misrepresentation or a Terminating Breach, Scientific Games will pay
to Autotote the Autotote Expenses relating to the transactions contemplated by
the merger agreement, but in no event more than $1,000,000.
Scientific Games' Fees And Expenses
Except as described below, all fees and expenses incurred by Scientific
Games in connection with the merger agreement and the transactions contemplated
thereby, shall be paid by Scientific Games, whether or not the merger is
consummated; provided, however, that Scientific Games and Autotote will share
equally all SEC filing fees and printing expenses incurred in connection with
the printing and filing of the proxy statement (including any preliminary
materials related thereto) and any amendments or supplements thereto.
Autotote shall pay to Scientific Games the actual, documented and
reasonable out-of-pocket expenses of Scientific Games relating to the
transactions contemplated by the merger agreement (including, but not limited
to, reasonable fees and expenses of counsel and accountants, and out-of-pocket
expenses and reasonable fees of financial advisors) ("Scientific Games
Expenses"), such payment of Scientific Games Expenses not to exceed $1,000,000,
and a fee of 1% of the total of the total cash merger consideration (the
"Scientific Games Fee") upon the termination of the merger agreement by
Scientific Games as a result of a Terminating Breach by Autotote or ATX.
Upon a termination of the merger agreement by Scientific Games as a
result of a Terminating Misrepresentation or a Terminating Breach, Autotote will
pay to Scientific Games the Scientific Games Expenses relating to the
transactions contemplated by the merger agreement, but in no event more than
$1,000,000.
Scientific Games and Autotote also have agreed that the Scientific
Games Fee and Scientific Games Expenses are payable by Autotote in the event
that the merger is not consummated because Autotote does not receive financing
for the merger.
REGULATORY MATTERS.
We cannot complete the merger unless we have filed notifications with
the Antitrust Division of the Department of Justice and the Federal Trade
Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the applicable rules of the Federal Trade Commission, and specified
waiting periods have expired or terminated. We, along with Autotote, filed the
required notification and report forms under the Hart-Scott-Rodino Act with the
Federal Trade Commission and the Antitrust Division on June 1, 2000 and June 2,
2000, respectively. We supplemented our filing on June 7, 2000. The Department
of Justice has contacted Scientific Games for purposes of conducting a
preliminary inquiry with respect to that filing. Scientific Games is presently
cooperating with the Department of Justice in providing information requested
during such inquiry. Scientific Games and Autotote believe that the proposed
merger is compatible
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<PAGE> 44
with U.S. antitrust laws. Nevertheless, there can be no assurance that
completion of the merger will not be delayed or prevented because of the
requirements of the U.S. antitrust laws. In addition, at any time before or
after consummation of the merger, the Antitrust Division, the Federal Trade
Commission, other governmental authorities or private persons could take action
against the merger under the antitrust laws, including seeking to enjoin
consummation of the merger, rescind the merger or cause Scientific Games or
Autotote to divest, in whole or in part, any of their assets or businesses.
Scientific Games and Autotote conduct business in a number of
jurisdictions where regulatory filings or approvals are required or advisable in
connection with the consummation of the merger. We are currently in the process
of evaluating whether any foreign competition filings are required. The
obligations of the parties to complete the merger are subject to the condition
that (1) there not be any preliminary or permanent injunction decree or order
issued by any governmental entity or any other legal restraint or prohibition
preventing us from completing the transactions contemplated by the merger
agreement and (2) the waiting periods (and any extension of any waiting period)
applicable to the merger under the Hart-Scott-Rodino Act have expired or
terminated. Unless extended, the waiting period will expire prior to the
scheduled date of the special meeting. Clearance under all applicable customer
contracts is not likely to occur until after the special meeting of Scientific
Games stockholders. Scientific Games is not aware of any material governmental
approvals or actions that may be required for consummation of the merger other
than as described above. If any other governmental approval or action is or
becomes required, we currently contemplate that we would seek that additional
approval or action.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain U.S. federal income tax
consequences of the merger to the Scientific Games stockholders. The receipt of
the cash merger consideration in exchange for Scientific Games common stock
under the merger will be a taxable transaction for federal income tax purposes
and may also be a taxable transaction under applicable state, local and foreign
tax laws. Scientific Games stockholders will generally recognize gain or loss
for federal income tax purposes in an amount equal to the difference between the
adjusted tax basis in the Scientific Games common stock and the amount of the
cash merger consideration received in exchange for the Scientific Games common
stock. Gain or loss will be a capital gain or loss if the Scientific Games
common stock is held as a capital asset, and will be a long-term capital gain or
loss if, at the effective time of the merger, the Scientific Games common stock
was held for more than one year. This discussion may not apply to the following
Scientific Games stockholders: (1) those who acquired their Scientific Games
common stock by exercising employee stock options or through other compensation
arrangements with Scientific Games, (2) those who are not citizens or residents
of the United States, and (3) those who dissent and receive the appraised fair
value of their shares or who are otherwise subject to special tax treatment.
Each Scientific Games stockholder is urged to consult his, her or its tax
advisor with respect to the tax consequences of the merger, including the
effects of applicable state, local, foreign or other tax laws.
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<PAGE> 45
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some of Scientific Games' directors and executive officers have
interests in the merger that are in addition to their interests as Scientific
Games stockholders generally. Also, it is expected that certain executive
officers of Scientific Games will enter into employment agreements with the
surviving corporation and that Mr. Malloy will enter into a consulting agreement
with Autotote that will, in each case, become effective upon completion of the
merger. The Scientific Games Board was aware of these interests and considered
them, among other things, in adopting the merger agreement and approving the
transactions contemplated by the merger agreement.
Certain Agreements Containing Change In Control And Severance Provisions
Mr. Malloy and fourteen other members of senior management of
Scientific Games are parties to agreements with change in control provisions.
The Board of Directors has provided, for purposes of such agreements and the
Company's stock option plans and certain other benefit plans, that a potential
change in control has occurred in connection with the merger and a change in
control will occur upon completion of the merger, notwithstanding the Board's
approval of the merger.
Under Mr. Malloy's existing employment and severance benefits agreement
with Scientific Games, Mr. Malloy is entitled to resign (and, upon the effective
time of the merger will resign) from all positions with Scientific Games -- as
discussed below, Mr. Malloy will enter into a consulting agreement with Autotote
and join Autotote's Board of Directors.
Upon Mr. Malloy's resignation, Scientific Games will be obligated to
pay, in addition to his base salary through his resignation, a lump payment to
him equal to three times the average of Mr. Malloy's annual base salary plus
bonus paid for the preceding 24 months. All of his options and restricted stock
also will immediately vest. Mr. Malloy and his family also will be entitled to
the continuation of certain life, medical and other insurance benefits for up to
three years and Mr. Malloy will receive title to the motor vehicle provided by
Scientific Games. The amount of such severance payment will be adjusted upward
for the amount of any additional federal tax on Mr. Malloy's severance benefits
due under Section 280G of the Internal Revenue Code in connection with a change
in control of Scientific Games.
Scientific Games' employment and severance benefits agreement with Mr.
Malloy also contains confidentiality, non-competition and non-solicitation
provisions with regard to employment and customers of Scientific Games. Such
provisions will survive the merger generally for at least three years.
Under his consulting agreement with Autotote, Mr. Malloy will serve as
a consultant to Autotote and will be appointed to the Board of Directors of
Autotote as of the effective time of the merger. Under the consulting agreement,
Mr. Malloy will receive $16,667 per month, a lump sum payment of $2 million in
lieu of estimated and potential benefits which would be payable to him
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<PAGE> 46
under the Scientific Games Supplemental Executive Retirement Plan, $200,000 for
the extension of the coverage of his non-compete and other restrictive
agreements to cover Autotote in addition to Scientific Games, and certain other
benefits, including continuation of certain life, medical and other benefits and
customary director's fees. Payments in lieu of the actual and potential benefits
under Scientific Games' Supplemental Executive Retirement Plan and for extension
of the scope of his restrictive agreement also will be adjusted upward for the
amount of any tax payable thereon, based on the change in control of Scientific
Games, for purposes of the Code.
Fourteen (14) other members of senior management, including all named
executive officers, ("covered employees") also have severance benefits
agreements, pursuant to which Scientific Games has agreed to pay certain
benefits to such individuals in the event of termination of employment after a
change in control.
In the event of a termination by Scientific Games (other than for
defined cause) or by the covered employees on account of a constructive
termination within two years after the merger, severance benefits would be
payable, in addition to base salary owing and bonus prorated through the date of
termination, each month for three years, in an amount equal to one-twelfth of
the highest rate of base salary and highest bonus paid during the two-year
period immediately preceding the date of termination or the merger, whichever is
higher, and the officer would receive title to the motor vehicle provided by
Scientific Games. Also, Scientific Games would be required to maintain, for up
to three years, all life, medical and other all life, medical and other
insurance benefit plans (to the extent, after the COBRA period of 18 months,
that the covered employee is insurable) in which the covered employee was
entitled to participate prior to termination and to have assigned to him, to the
extent assignable, any such policies at the end of such three-year period. Such
agreements also require Scientific Games to pay the reasonable legal fees and
expenses, if any, incurred by the covered employee in the successful enforcement
of any right or benefit provided under such severance benefits agreements. In
such agreements, each covered employee has committed to remain an employee of
Scientific Games, notwithstanding any commencement of an exchange offer, proxy
contest or other steps to effect a change in control until any such tender
offer, proxy contest or other steps are abandoned or terminated or until a
change in control is actually effected.
It is anticipated that some number of the covered employees and certain
other key employees currently without such agreements will enter into three year
employment agreements providing benefits which, taken as a whole, are believed
to be at least as favorable to the employee as those provided by the severance
benefits agreements. Covered employees with such existing severance benefits
agreements who are offered and accept new employment agreements would terminate
their existing severance benefits agreements as of the effective time and
execution of their new employment agreements. Under the new employment
agreements, the employee would receive a specified base salary, plus an annual
cash bonus and stock options commensurate with, and based upon, substantially
the same criteria as applicable to Autotote's executive officers. The employee
would also be entitled to participate in disability, medical, life and other
insurance plans, as well as Autotote's retirement or savings plans based on
substantially the same criteria as stated
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<PAGE> 47
above and would be furnished with an annual transportation allowance ranging
from $8,000 to $16,000. In the event the employee's employment was terminated
without cause by the company, or by the employee, in the case of certain events
of constructive termination, Scientific Games would pay for up to three years,
as severance benefits to such employee each month, an amount equal to
one-twelfth of the employee's highest annual base salary plus bonus paid during
the prior twenty-four months, and maintain or fund certain benefits for up to
three years. Payments of certain benefits, including base salary, would continue
for specified periods of up to one year in the event of the employee's
disability or death. The new employment agreements also include certain
provisions prohibiting the covered employee from disclosing confidential
information of Scientific Games during the term of the agreement and for up to
two years thereafter.
Stock Options and Other Stock Based Awards
As described in "The Merger Agreement -- Conversion of Capital Stock
and Stock Based Awards" on page 23, at the effective time of the merger, all
stock options and other restricted stock will become fully vested and
exercisable, fully payable or distributable, as the case may be, any performance
targets related to the vesting of those options or awards will be deemed to have
been fully achieved, and the options and other awards will be cashed out.
Scientific Games' directors and executive officers are among those persons who
own stock options and other stock based awards that will vest and become payable
as a result of the merger. Each stock option will be converted into the right to
receive a cash payment equal to $26 minus the exercise price of the option times
the number of shares of Scientific Games common stock subject to the option and
each other stock based award will be converted into the right to receive a cash
payment equal to $26 times the number of shares of Scientific Games common stock
subject to the award. Some stock options, however, have exercise prices in
excess of $26 and therefore the holders of those options will not receive any
payment for those options. The Scientific Games Holding Corp. 1998 Stock
Purchase Plan will be suspended as of June 30, 2000 and will terminate if the
merger with Autotote is completed.
Indemnification and Insurance
Autotote has agreed that the certificate of incorporation and by-laws
of the surviving company will contain the same provisions regarding the
liability of directors and the indemnification of directors and officers that
were contained in the certificate of incorporation and by-laws of Scientific
Games on the date we entered into the merger agreement, and that those
provisions will not be amended, repealed or otherwise modified for a period of
seven years from the effective time of the merger. In addition, the surviving
company will indemnify and hold harmless each of our and our subsidiaries'
present and former directors, officers and employees (determined as of the
effective time of the merger) against any costs or expenses, judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to (in whole or in part) the transactions contemplated by the merger agreement
or otherwise with respect to acts or omissions occurring at or prior to the
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<PAGE> 48
effective time of the merger, whether asserted or claimed prior to, at or after
the effective time of the merger, to the same extent as provided under our
charter documents or any applicable contract or agreement (as in effect on the
date of the merger agreement) for a period of seven years after the effective
time of the merger. In addition, Autotote has agreed that, for a period of not
less than six years after the effective time of the merger, the surviving
company will provide directors' and officers' liability insurance with coverage
in amount and scope at least as favorable as our existing policies with respect
to claims arising from facts or events that occurred prior to the effective time
of the merger, although they are not obligated to pay any premiums in excess of
150% of the premiums currently paid by Scientific Games.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of May 31, 2000, certain information
concerning ownership of common stock by:
- each person who we know owns beneficially more than 5% of our
common stock
- each director individually
- our chief executive officer and each other named executive
officer (as defined) listed in the Summary Compensation Table
- all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT OF PERCENT
BENEFICIAL OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OR IDENTITY OF GROUP OWNERSHIP(1) SHARES(1)
--------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Paul F. Balser(2) ......................................................... 15,000 *
Mark E. Jennings(3) ....................................................... 25,000 *
Edith K. Manns(4) ......................................................... 16,200 *
Dennis L. Whipple(2) ...................................................... 16,200 *
William G. Malloy(5) ...................................................... 682,910 5.6%
William F. Behm(6) ........................................................ 177,608 *
Thomas F. Little(7) ....................................................... 63,123 *
Cliff O. Bickell (8) ...................................................... 69,873 *
All Executive Officers and Directors as a group (21 persons) (9) .......... 1,251,095 9.9%
Merrill Lynch & Co., Inc. (10) ............................................ 1,285,900 10.8%
Private Capital Management, Inc. (11) ..................................... 2,273,583 19.1%
Sanford C. Bernstein & Co., Inc. (12) ..................................... 924,450 7.8%
</TABLE>
* Less than 1%.
(1) The determinations of "beneficial ownership" of common stock are based
upon Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Such rule provides that shares will be deemed
"beneficially owned" where a person has, either solely or
41
<PAGE> 49
in conjunction with others, the power to vote or to direct the voting
of shares and/or the power to dispose, or to direct the disposition of,
shares or where a person has the right to acquire any such power within
60 days after the date such "beneficial ownership" is determined.
Except as disclosed in the other notes to the table, each person has
sole voting and investment power with respect to the entire number of
shares shown as beneficially owned by such person.
(2) Comprised of options exercisable within 60 days.
(3) Includes 15,000 shares issuable pursuant to options exercisable within
60 days.
(4) Includes 15,400 shares issuable pursuant to options exercisable within
60 days.
(5) Includes 251,748 shares issuable pursuant to options exercisable within
60 days, 952 shares in the company's 401(K) Plan and 2,943 shares under
the employee stock purchase plan ("ESPP") allocated to the named
officer.
(6) Includes 136,861 shares issuable pursuant to options exercisable within
60 days and 955 shares in the company's 401(K) Plan allocated to the
named officer.
(7) Includes 59,999 shares issuable pursuant to options exercisable within
60 days, 955 shares in the company's 401(K) Plan and 2,170 shares under
the ESPP allocated to the named officer.
(8) Includes 63,131 shares issuable pursuant to options exercisable within
60 days, 674 shares in the company's 401(K) Plan and 1,469 shares under
the ESPP allocated to the named officer.
(9) Includes 726,586 shares issuable pursuant to options exercisable within
60 days and 15,578 shares in the company's 401(K) Plan allocated to 14
of the company's 17 executive officers, and 10,499 shares allocated to
8 of the company's 17 executive officers under the ESPP.
(10) The following information is based on a Schedule 13G/A dated February
4, 2000. Merrill Lynch & Co Inc ("Merrill") reports its address as 250
Vesey Street, World Financial Center North Tower, New York, New York
10381-1334. Merrill reports that voting and dispositive power with
respect to all 1,285,900 shares is shared by Merrill Lynch Global
Allocation Fund, Inc. (the "Fund") and the Merrill Lynch Asset
Management Group ("MLAMG"), which includes Merrill Lynch Asset
Management, L.P. ("MLAM"). Merrill reports the Fund is advised by MLAM.
The Fund reports that it is an investment company registered under
Section 8 of the Investment Company Act of 1940. MLAMG reports that it
is an investment advisor registered under Section 203 of the Investment
Advisors Act of 1940.
(11) The following information is based on a Schedule 13G/A dated February
15, 2000. Private Capital Management, Inc. ("Private Capital") reports
its address as 3003 Tamiami Trail N., Naples, Florida 34103. Private
Capital reports beneficial ownership of 1,893,883 shares and voting
power with respect to none of the shares. Private Capital reports that
it shares dispositive power with respect to all 1,893,883 shares with
Bruce S. Sherman, Chairman of Private Capital, and that it exercises
shared dispositive power with respect to the shares held by it on
behalf of its clients. Private Capital reports that it is an Investment
Adviser registered under Section 203 of the Investment Advisers Act of
1940. Private Capital also reports that Mr. Sherman is the managing
general partner of SPS Partners, L.P. ("SPS") which acts as the
investment advisor to the Entrepreneurial Value Fund, L.P. ("EVF") and
exercises shared dispositive power with respect to 368,700 shares owned
by EVF. Mr. Sherman reports that he has sole voting and dispositive
power with respect to 11,000 shares. Mr. Gregg J. Powers, President of
Private Capital, reports that he has sole voting and dispositive power
with respect
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<PAGE> 50
to 5,000 shares. SPS reports it has shared dispositive power with
respect to 368,700 shares. Mr. Sherman thus reports beneficial
ownership of a total of 2,273,583 shares and shared dispositive power
with respect to all 1,893,883 shares beneficially held by Private
Capital. Mr. Sherman and Mr. Powers disclaim the existence of a group.
(13) The following information is based on a Schedule 13G dated February 8,
2000. Sanford C. Bernstein & Co., Inc. ("Sanford") reports its address
as 767 Fifth Avenue, New York, New York 10153. Sanford reports that it
is a registered investment advisor. Sanford reports that it
beneficially owns 924,450 shares, has sole voting power with respect to
755,590 shares, shared voting power with respect to 13,200 shares with
an independent voting agent who is required to vote the shares in the
same manner as Sanford, and sole dispositive power with respect to all
of the 924,450 shares it holds.
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<PAGE> 51
PRICE RANGE OF SCIENTIFIC GAMES COMMON STOCK AND DIVIDENDS
PRICE RANGE
Scientific Games common stock is listed on the New York Stock Exchange
("SG"). The following table sets forth, for the fiscal quarters indicated, the
high and low closing sale prices per share of Scientific Games common stock as
quoted on the New York Stock Exchange Composite Transactions Tape.
<TABLE>
<CAPTION>
1999 HIGH LOW
<S> <C> <C>
First Quarter $18.25 $16.75
Second Quarter 19.25 15.44
Third Quarter 21.00 19.19
Fourth Quarter 19.75 14.50
<CAPTION>
1998 HIGH LOW
<S> <C> <C>
First Quarter $23.00 $19.25
Second Quarter 23.44 17.56
Third Quarter 24.00 18.31
Fourth Quarter 19.31 16.00
</TABLE>
On April 18, 2000, one month before Scientific Games issued its initial
public announcement regarding the merger, the closing price on the New York
Stock Exchange Composite Tape was $15.875.
On May 12, 2000, one week before Scientific Games issued its initial
public announcement regarding the merger and the last trading day prior to an
inadvertent public disclosure by Autotote with respect to a potential
transaction between Scientific Games and Autotote, including reference to a
potential merger consideration per share of $26.00, the closing sale price per
share of Scientific Games common stock quoted on the New York Stock Exchange
Composite Transactions Tape was $18.00.
On May 17, 2000, the last trading date before the joint public
announcement by Scientific Games and Autotote of the execution of the merger
agreement, the closing sale price per share of Scientific Games common stock
quoted on the New York Stock Exchange Composite Transactions Tape was $17.88.
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<PAGE> 52
On June 2, 2000, a recent trading day prior to the date of this proxy
statement, the closing price per share of Scientific Games common stock quoted
on the New York Stock Exchange Composite Transactions Tape was $24.19.
You are urged to obtain current information with respect to the price
of the Scientific Games common stock.
DIVIDEND POLICY
Scientific Games has never declared or paid any dividends on its common
stock. Scientific Games currently anticipates that its earnings will be retained
for development of its business and does not anticipate paying any cash
dividends on its common stock in the foreseeable future.
PARTIES TO THE MERGER
SCIENTIFIC GAMES
Additional information regarding our business can be found in the
documents that we have filed with the Securities and Exchange Commission. See
"Additional Information -- Where You Can Find More Information" on page 49.
AUTOTOTE
Autotote is a leading worldwide supplier of technologically advanced
computerized wagering systems and related equipment, as well as a licensed
international operator of gaming venues. It provides technology, software,
equipment and services for pari-mutual wagering conducted at thoroughbred,
harness and greyhound racetracks, off-track betting establishments ("OTBs") and
jai alai frontons. Autotote also is a leading provider of sophisticated,
customized computer software, equipment and data communication services to
government-sponsored and privately operated lotteries. Additionally, Autotote
also provides operations management for domestic and international OTBs and
gaming venues. Related products and services that Autotote offer racetracks,
OTBs and frontons include wagering systems, simulcasting and telecommunications
services, venue management and lottery systems and services.
For fiscal 1999, Autotote generated revenues and EBITDA (earnings
before interest, taxes, depreciation and amortization, gains/loss on sale of
businesses and other income/deductions) of $211.1 million and $40.5 million,
respectively. The majority of its revenues were derived from its pari-mutual
systems operations. Pari-mutual operations accounted for 56%, 56% and 47% of
Autotote's total revenues for the fiscal years 1997, 1998 and 1999,
respectively, venue management operations service revenue accounted for 28%, 32%
and 29% of Autotote's total service revenue for fiscal 1997, 1998 and 1999,
respectively, and lottery operations accounted for 15%, 11% and 23% of
Autotote's total revenues for the fiscal years 1997, 1998 and 1999,
respectively.
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<PAGE> 53
In a transaction announced at the same time as the merger, Olivetti has
entered into a commitment letter with Autotote pursuant to which Olivetti
committed that it or its affiliates would acquire $100 million of new Autotote
convertible preferred stock, convertible into Autotote common stock, which, upon
conversion, would be equal to approximately 30% of the common entity of
Autotote. Other investors have issued similar commitment letters for an
additional $10 million of convertible preferred stock.
Olivetti, among many businesses is, through Telecom Italia, one of the
world's largest providers of telecommunications services with significant
presences in Europe and South America. Olivetti and Telecom Italia, in addition
to their forty-five percent ownership in Lottomatica, the leading operator in
the lottery business in Italy, provide wagering products and services to sports
betting outlets and pari-mutuel facilities in Italy.
ATX ENTERPRISES, INC.
ATX Enterprises, Inc. was organized as a Delaware corporation shortly
before we entered into the merger agreement and is currently a wholly owned
subsidiary of Autotote. ATX has not conducted any significant business
operations to date other than in connection with the merger agreement and the
transactions contemplated by the merger agreement. The principal offices of ATX
are located at 750 Lexington Avenue, 25th Floor, New York, New York 10022 and
its telephone number is 212.754.2233.
ADDITIONAL INFORMATION
DISSENTERS' APPRAISAL RIGHTS
You have the right to dissent from the merger and to demand and obtain
cash payment of the appraised value of your shares of Scientific Games common
stock under the circumstances described below. The appraised value that you
obtain for your shares by dissenting may be less than, equal to or greater than
the $26 per share cash merger consideration provided for in the merger agreement
but will not include any element of value arising from the accomplishment or
expectation of the merger. If you fail to comply with the procedural
requirements of Section 262 of the Delaware General Corporation Law, you will
lose your right to dissent and seek payment of the appraised value of your
shares. The following is a summary of Section 262, which specifies the
procedures applicable to dissenting stockholders. This summary is not a complete
statement of the law regarding your right to dissent under Delaware law, and if
you are considering dissenting, we urge you to review the provisions of Section
262 carefully. The text of Section 262 is attached to this proxy statement as
Appendix C, and we incorporate that text into this proxy statement by reference.
Among other matters, you should be aware of the following:
- to be entitled to dissent and seek appraisal, you must hold
shares of Scientific Games common stock on the date you make
the demand required under Delaware
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law, you must continuously hold those shares until the merger
has been completed, you must not vote in favor of the merger
and you must otherwise comply with the requirements of Section
262;
- before the special meeting, you must deliver a written notice
that states your identity and your intent to demand appraisal
to Scientific Games Holdings Corp., 1500 Bluegrass Lakes
Parkway, Alpharetta, Georgia 30004 (you should be aware that
simply voting against the merger is not a demand for appraisal
rights);
- within ten days after the effective time of the merger, the
surviving company will notify all of the dissenting Scientific
Games stockholders who have complied with Section 262 and who
have not voted in favor of the merger;
- within 120 days after the effective time of the merger, the
surviving company or any stockholder who has complied with the
requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the
value of the stock of the dissenting stockholders;
- the Court of Chancery will determine which dissenting
stockholders complied with the requirements of Section 262 and
are entitled to appraisal rights;
- the Court of Chancery will then appraise the shares,
determining their fair value exclusive of any value arising
from the accomplishment or expectation of the merger, together
with a fair rate of interest, if any, to be paid on the
appraised fair value; the Court of Chancery will consider all
relevant factors in determining the fair value and the fair
interest rate (if any);
- the Court of Chancery will then direct the surviving company
to pay the fair value of the dissenting shares, together with
any interest, to the stockholders entitled to payment; payment
will be made when the stockholder surrenders the certificates
to the surviving company;
- the costs of the proceeding for appraising the fair value may
be determined by the court and the court may require the
parties to bear the costs in any manner that the court
believes to be equitable;
- if you dissent from the merger, you will not be entitled to
vote your shares of Scientific Games common stock for any
purpose or to receive dividends or other distributions (other
than dividends or other distributions payable to stockholders
of record at a date prior to the effective time of the
merger); and
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- you may withdraw your demand for appraisal and accept the $26
per share merger consideration provided for in the merger
agreement at any time within 60 days after the effective date
of the merger.
STOCKHOLDER PROPOSALS
If the merger is not completed for any reason, we must receive any
stockholder proposal you intend to present at the next annual meeting of
Scientific Games stockholders by December 21, 2000, and any proposal must comply
with the rules of the Securities and Exchange Commission, to be included in our
proxy statement and Proxy/Voting Instruction Card relating to that meeting.
If a Scientific Games stockholder wishes to submit a proposal at the
annual meeting, but has not sought to have such proposal included in the proxy
statement and form of proxy for such meeting, applicable SEC rules allow us to
use our discretionary authority granted under the form of proxy to vote on such
proposal unless the proponent of such proposal notifies us that he will seek to
offer such proposal at the annual meeting and such notice is given to us no
later than forty-five (45) days prior to the anniversary of the prior year's
proxy statement, i.e., by March 5, 2000 with respect to our next annual meeting;
provided, however, if we change the date of next year's annual meeting by more
than thirty (30) days from the anniversary of the date of this year's meeting,
then notice of the stockholder proposal must be received a "reasonable" time
before we mail our proxy materials for next year's annual meeting.
With respect to nomination of directors, our By-Laws require
shareholders to provide us with advance notice of any intent to nominate anyone
for election to the board whose name is not listed in our proxy materials and
generally require that such notice be given not less than sixty (60) days in
advance of the meeting date. The requirements for giving proper notice are set
forth in our By-Laws.
OTHER MATTERS
The Scientific Games Board knows of no other matters that are likely to
be brought before the special meeting. If any other matters are brought before
the meeting, Messrs. Malloy, Bickell and Bethea, as the proxy agents named in
the enclosed proxy, will vote on those matters in accordance with their best
judgment.
INDEPENDENT PUBLIC AUDITORS
Ernst & Young LLP serves as our independent certified public accountant
and served in that role during the fiscal year ended December 31, 1999. A
representative of Ernst & Young, LLP will be at the special meeting to answer
questions you or other Scientific Games stockholders may have and to make a
statement if they desire to do so.
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WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information under the
Exchange Act. You may read and copy this information at the following locations
of the commission:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
New York Regional Office
7 World Trade Center
Suite 1300
New York, New York 10048
Chicago Regional Office
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661
You may also obtain copies of this information by mail from the public
reference section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The Securities and
Exchange Commission maintains an Internet web site that contains reports, proxy
and information statements and other information regarding issuers, like us, who
file electronically with the Securities and Exchange Commission. The address of
that site is http://www.sec.gov. You can also inspect reports, proxy statements
and other information concerning us at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
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FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
We have made forward-looking statements in this proxy statement that
are subject to risks and uncertainties, including statements relating to the
cost savings and opportunities for growth that are expected to result from the
merger. These forward-looking statements include information about possible or
assumed future results of our operations or the performance of the new company
after the merger is completed. When we use any of the words "believes,"
"expects," "anticipates," "estimates," or similar expressions, we are making
forward-looking statements. Many possible events or factors could cause these
results or performance to differ materially from those expressed in our
forward-looking statements. These possible events or factors include the
following:
- an inability to fully realize, or to realize within the
anticipated time frame, the expected cost savings from the
merger;
- intensified competitive pressures in the industries in which
we and Autotote compete;
- greater than expected costs or difficulties related to the
integration of our businesses with the businesses of Autotote;
- changes in general economic or capital market conditions, or
in the gaming industry in particular, that adversely affect
our operations or those of Autotote;
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- failure to obtain required approvals and consents or to
otherwise satisfy the conditions to the consummation of the
merger; and
- legislative or regulatory requirements or changes that
adversely affect our businesses or that of Autotote.
These forward-looking statements speak only as of the date on which the
statements were made, and neither we nor Autotote undertake any obligation to
update any forward-looking statements to reflect events or circumstances arising
after the date on which any of those statements are made.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AUTOTOTE CORPORATION,
ATX ENTERPRISES, INC.
and
SCIENTIFIC GAMES HOLDINGS CORP.
Dated as of May 18, 2000
<PAGE> 60
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE MERGER.................................................................5
SECTION 1.01. The Merger..........................................................5
SECTION 1.02. Effective Time......................................................5
SECTION 1.03. Effect of the Merger................................................6
SECTION 1.04. Certificate of Incorporation; By-laws...............................6
SECTION 1.05. Directors and Officers..............................................6
SECTION 1.06. Conversion of Shares................................................6
SECTION 1.07. Dissenting Shares...................................................7
SECTION 1.08. Surrender of Shares.................................................8
SECTION 1.09. Options.............................................................9
SECTION 1.10. No Further Ownership Rights in Company Common Stock.................10
SECTION 1.11. Lost, Stolen or Destroyed Certificates..............................10
SECTION 1.12. Taking of Necessary Action; Further Action..........................10
SECTION 1.13. Material Adverse Effect.............................................10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................11
SECTION 2.01. Organization and Qualification; Subsidiaries........................11
SECTION 2.02. Certificate of Incorporation and By-laws............................12
SECTION 2.03. Capitalization......................................................12
SECTION 2.04. Authority Relative to This Agreement................................13
SECTION 2.05. Material Contracts; No Conflict; Required Filings and Consents......14
SECTION 2.06. Compliance; Permits.................................................15
SECTION 2.07. SEC Filings; Financial Statements...................................15
SECTION 2.08. Absence of Certain Changes or Events................................16
SECTION 2.09. No Undisclosed Liabilities..........................................16
SECTION 2.10. Absence of Litigation...............................................16
SECTION 2.11. Employee Benefit Plans; Employment Agreements.......................16
SECTION 2.12. Employment and Labor Matters........................................20
SECTION 2.13. Proxy Statement.....................................................22
SECTION 2.14. Restrictions on Business Activities.................................22
SECTION 2.15. Title to Property...................................................22
SECTION 2.16. Taxes...............................................................23
SECTION 2.17. Environmental Matters...............................................24
SECTION 2.18. Brokers.............................................................25
SECTION 2.19. Intellectual Property...............................................25
SECTION 2.20. Interested Party Transactions.......................................27
SECTION 2.21. Opinion of Financial Advisor........................................27
SECTION 2.22. Rights Agreement....................................................27
</TABLE>
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<TABLE>
<S> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................27
SECTION 3.01. Organization and Qualification; Subsidiaries........................28
SECTION 3.02. Authority Relative to This Agreement................................28
SECTION 3.03. No Conflict.........................................................28
SECTION 3.04. Absence of Litigation...............................................29
SECTION 3.05. Parent Not an Interested Stockholder or an Acquiring Person.........29
SECTION 3.06. Proxy Statement.....................................................29
SECTION 3.07. Ownership of Merger Sub.............................................29
SECTION 3.08. Solvency............................................................29
SECTION 3.09. Financing Arrangements..............................................29
SECTION 3.10. Ownership of Shares.................................................30
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER....................................30
SECTION 4.01. Conduct of Business by the Company Pending the Merger...............30
SECTION 4.02. No Solicitation.....................................................33
ARTICLE V ADDITIONAL AGREEMENTS......................................................35
SECTION 5.01. Proxy Statement.....................................................35
SECTION 5.02. Company Stockholders Meeting........................................35
SECTION 5.03. Access to Information; Confidentiality..............................36
SECTION 5.04. Consents; Approvals.................................................36
SECTION 5.05. Indemnification and Insurance.......................................36
SECTION 5.06. Notification of Certain Matters.....................................38
SECTION 5.07. Further Action......................................................38
SECTION 5.08. Public Announcements................................................39
SECTION 5.09. Conveyance Taxes....................................................40
SECTION 5.10. Option Plans and Benefits, Etc......................................40
SECTION 5.11. Rights Agreement....................................................40
SECTION 5.12. Accountant's Letters................................................41
SECTION 5.13. Standstill..........................................................41
ARTICLE VI CONDITIONS TO THE MERGER..................................................41
SECTION 6.01. Conditions to Obligation of Each Party to Effect the Merger.........41
SECTION 6.02. Additional Conditions to Obligations of Parent and Merger Sub.......42
SECTION 6.03. Additional Conditions to Obligation of the Company..................42
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VII TERMINATION..............................................................43
SECTION 7.01. Termination.........................................................43
SECTION 7.02. Effect of Termination...............................................46
SECTION 7.03. Parent's Fees and Expenses..........................................46
SECTION 7.04. Company's Fees and Expenses.........................................47
ARTICLE VIII GENERAL PROVISIONS......................................................48
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements.........48
SECTION 8.02. Notices.............................................................49
SECTION 8.03. Certain Definitions.................................................51
SECTION 8.04. Amendment...........................................................52
SECTION 8.05. Waiver..............................................................52
SECTION 8.06. Headings............................................................52
SECTION 8.07. Severability........................................................52
SECTION 8.08. Entire Agreement....................................................53
SECTION 8.09. Assignment..........................................................53
SECTION 8.10. Parties in Interest.................................................53
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative...............53
SECTION 8.12. Governing Law; Jurisdiction.........................................53
SECTION 8.13. Counterparts........................................................53
SECTION 8.14. WAIVER OF JURY TRIAL................................................54
SECTION 8.15. Performance of Obligations..........................................54
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 18, 2000 (this
"Agreement"), among Autotote Corporation, a Delaware corporation ("Parent"), ATX
Enterprises, Inc., a Delaware corporation and a direct, wholly owned subsidiary
of Parent ("Merger Sub"), and Scientific Games Holdings Corp., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each determined that it is advisable and in the best interests of their
respective stockholders, and consistent with and in furtherance of their
respective business strategies and goals, for Parent to acquire all of the
outstanding shares of the Company through the merger of Merger Sub with and into
the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger (the "Merger")
of Merger Sub with and into the Company in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL"), and upon the
terms and subject to the conditions set forth herein;
WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of
the Company's Common Stock, par value $.001 per share (the "Company Common
Stock"), other than Shares to be cancelled pursuant to Section 1.06(b) and other
than any Dissenting Shares (as hereinafter defined), shall be converted into the
right to receive $26.00 per Share (the "Per Share Amount") in cash payable to
the holder thereof, upon the terms and subject to the conditions set forth
herein; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. (a) At the Effective Time (as defined in
Section 1.02), and subject to and upon the terms and conditions of this
Agreement and the DGCL, Merger Sub shall be merged with and into the Company,
the separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
SECTION 1.02. Effective Time. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.01, as
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promptly as practicable (and in any event within two business days) after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger as contemplated by the DGCL (the "Certificate of Merger"), together with
any required related certificates, with the Secretary of State of the State of
Delaware, in such form as is required by, and executed in accordance with, the
relevant provisions of the DGCL. The Merger shall become effective at the time
of such filing, or at such later time as may be agreed to by each of the parties
hereto in writing (which will be as soon as reasonably practicable), specified
in the Certificate of Merger (the "Effective Time"). Prior to such filings, a
closing (the "Closing") shall be held at the offices of Kramer Levin Naftalis &
Frankel LLP, 919 Third Avenue, New York, NY 10022, unless another time or place
is agreed to in writing by the parties hereto, for the purpose of confirming the
satisfaction or waiver, as the case may be, of the conditions set forth in
Article VI.
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in this Agreement, the Certificate of Merger
and the applicable provisions of the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.04. Certificate of Incorporation; By-laws.
(a) Certificate of Incorporation. Unless otherwise determined by Parent
prior to the Effective Time, subject to the provisions of Section 5.05(a), at
the Effective Time the Amended and Restated Certificate of Incorporation in the
form attached as Exhibit A hereto, shall be the Certificate of Incorporation of
the Surviving Corporation until thereafter amended as provided by the DGCL and
such Certificate of Incorporation.
(b) By-laws. Unless otherwise determined by Parent prior to the
Effective Time, and subject to the provisions of Section 5.05(a), at the
Effective Time the By-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by the DGCL, the Certificate of Incorporation of
the Surviving Corporation and such By-laws.
SECTION 1.05. Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.06. Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holder of any of the securities specified below:
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(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be cancelled pursuant to Section 1.06(b)
and other than any Dissenting Shares (as hereinafter defined)) shall be
converted into the right to receive the Per Share Amount in cash payable to the
holder thereof, without interest, upon surrender of the certificate representing
such Share in accordance with Section 1.08 hereof. From and after the Effective
Time, the holders of certificates evidencing ownership of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided for herein or by applicable
law.
(b) Each Share owned by the Company or any of its subsidiaries, Parent,
Merger Sub or any direct or indirect wholly owned subsidiary of Parent
immediately prior to the Effective Time shall be cancelled, and no payment or
other consideration shall be made with respect thereto.
(c) The shares of Merger Sub's common stock, par value $.01 per share,
issued and outstanding immediately prior to the Merger shall be converted into
and constitute a number of validly issued, fully paid and nonassessable shares
of common stock of the Surviving Corporation equal to the number of Shares owned
by Parent, Merger Sub or any direct or indirect wholly owned subsidiary of
Parent immediately prior to the Effective Time.
(d) The fact that any Share which is issued and outstanding immediately
prior to the Effective Time is restricted and/or not yet vested under any
Company stock purchase or stock grant plan, shall not affect the right of the
holder thereof to receive the Per Share Amount and all such Shares shall without
action by any party be deemed to be vested as of the Effective Time, any
provision of any such plan or this Agreement to the contrary notwithstanding.
SECTION 1.07. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any Shares issued and outstanding immediately prior to the Effective Time and
held by a holder who has demanded and perfected his demand for appraisal of his
Shares in accordance with the DGCL and as of the Effective Time has neither
effectively withdrawn nor lost his right to such appraisal ("Dissenting Shares")
shall not be converted into or represent a right to receive the Per Share Amount
pursuant to Section 1.06 hereof, but the holder thereof shall be entitled only
to such rights as are granted by the DGCL.
(b) Notwithstanding the provisions of Section 1.07(a) hereof, if any
holder of Shares who demands appraisal of his Shares under the DGCL shall
effectively withdraw or lose (through failure to perfect or otherwise) his right
to appraisal, then as of the Effective Time or the occurrence of such event,
whichever occurs later, such holder's Shares shall automatically be treated as
if converted at the Effective Time into, and thereafter represent only, the
right to receive the Per Share Amount as provided in Section 1.06(a) hereof,
without interest thereon, upon surrender of the certificate or certificates
representing such Shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals of
such demands and any other
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instruments served pursuant to the DGCL received by the Company after the date
hereof and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL. The Company shall not
voluntarily make any payment with respect to any demands for appraisal and shall
not, except with the prior written consent of Parent, settle or offer to settle
any such demands.
SECTION 1.08. Surrender of Shares.
(a) Prior to the Effective Time, Parent shall appoint First Union
National Bank or such other commercial bank or trust company as may be
designated by Parent and reasonably acceptable to the Company to act as exchange
agent hereunder (the "Exchange Agent") for the payment of the Per Share Amount
upon surrender of certificates representing the Shares. All the fees and
expenses of the Exchange Agent shall be borne by the Surviving Corporation,
provided, however, that, if the Merger shall not be consummated, such fees and
expenses shall be borne by Parent.
(b) At or before the Effective Time, Parent shall cause the Surviving
Corporation to provide the Exchange Agent with cash in the amounts necessary to
pay the Per Share Amount in respect of all the Shares pursuant to Section
1.06(a) hereof (including, if necessary, by providing or causing to be provided
cash for this purpose to the Surviving Corporation) to be held for the benefit
of and distributed to the holders of such Shares in accordance with this
Section.
(c) On the Closing Date, the Surviving Corporation shall instruct the
Exchange Agent to mail promptly to each holder of record of a certificate or
certificates representing any Shares canceled upon the Merger pursuant to
Section 1.06(a) hereof (i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
shall pass, only upon delivery of the certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of such
certificates. Each holder of a certificate or certificates representing any
Shares canceled upon the Merger pursuant to Section 1.06(a) hereof may
thereafter surrender such certificate or certificates to the Exchange Agent, as
agent for such holder, to effect the surrender of such certificate or
certificates on such holder's behalf for a period ending one year after the
Effective Time. Upon the surrender of certificates representing the Shares, the
Surviving Corporation shall cause the Exchange Agent to pay the holder of such
certificates in respect thereof cash in an amount equal to the Per Share Amount
multiplied by the number of Shares represented by such certificate. Until so
surrendered, each such certificate representing Shares cancelled upon the Merger
pursuant to Section 1.06(a) hereof shall represent solely the right to receive
the aggregate Per Share Amount relating thereto.
(d) If payment of cash in respect of canceled Shares is to be made to a
person other than the person in whose name a surrendered certificate is
registered, it shall be a condition to such payment that the certificate so
surrendered shall be properly endorsed or shall otherwise be in proper form for
transfer by delivery and that the person requesting such payment shall have paid
any transfer and other taxes required by reason of such payment in a name other
than that of
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the registered holder of the certificate or instrument surrendered or shall have
established to the satisfaction of Parent or the Exchange Agent that such tax
either has been paid or is not payable.
(e) At the Effective Time, the stock transfer books of the Company
shall be closed, and no transfer of Shares shall be made thereafter, other than
transfers of Shares that have occurred prior to the Effective Time and, if
necessary, entries reflecting (i) the purchase and issuance of up to 200,000
Shares as of June 30, 2000 in accordance with the Company's Employee Stock
Purchase Plan and (ii) entries reflecting the Company's purchase in the open
market of Shares outstanding on the date of this Agreement to the extent
necessary to satisfy the Company's matching obligations under its 401(k) plan,
which entries, in the case of either (i) or (ii), shall be made solely for the
purpose of paying the Per Share Amount with respect to each such Share. In the
event that, after the Effective Time, certificates representing Shares (other
than any Dissenting Shares) are presented to the Surviving Corporation, they
shall be canceled and exchanged for cash as provided in Section 1.06(a).
(f) The Per Share Amount paid in the Merger shall be net to the holder
of Shares in cash, and without interest thereon, subject to reduction only for
any applicable withholding taxes and, but only if the Per Share Amount is to be
paid other than to the registered holder, any applicable stock transfer taxes
payable by such holder.
(g) Promptly following the date which is one year after the Effective
Time, the Exchange Agent shall deliver to the Surviving Corporation all cash,
certificates and other documents in its possession relating to the transactions
contemplated hereby, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a certificate representing Shares (other than
certificates representing Dissenting Shares and certificates representing Shares
held directly or indirectly by the Surviving Corporation or Parent) may
surrender such certificate to the Surviving Corporation and (subject to any
applicable abandoned property, escheat or similar law) receive in respect
thereof the aggregate Per Share Amount relating thereto, without any interest
thereon.
(h) None of the Company, Parent, Merger Sub, the Surviving Corporation
or the Exchange Agent shall be liable to any holder of Shares for any cash
delivered to a public official pursuant to any abandoned property, escheat or
similar law, rule, regulation, statute, order, judgment or decree.
SECTION 1.09. Options. Each option to purchase Shares under any stock
option plan or agreement of the Company (including, without limitation, the
Company's non-employee Directors Plan) outstanding immediately prior to the
Effective Time (a "Company Option"), whether or not exercisable as provided
under the terms thereof, shall be cancelled and the holder thereof shall receive
from the Exchange Agent on the Closing Date or as promptly thereafter as
practicable an amount in cash equal to the positive difference, if any, between
the Per Share Amount and the exercise price of the Company Option multiplied by
the number of Shares for which the Company Option would have been exercisable
(assuming all such Company Options were by their terms exercisable) immediately
prior to the Effective Time, subject to reduction only for any applicable
withholding taxes (as reasonably determined and certified by the
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Company to the Exchange Agent). At or before the Effective Time, Parent shall
cause the Surviving Corporation to provide the Exchange Agent with cash in
amounts necessary to pay the difference between the Per Share Amount and the
exercise price of the Company Options as above provided. In no event will any
Company Options be exercisable after the Effective Time, except to receive cash
as provided in the first sentence of this Section 1.09.
SECTION 1.10. No Further Ownership Rights in Company Common Stock. The
Per Share Amount delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, certificates representing Shares are presented to the
Surviving Corporation, the Parent or the Exchange Agent for any reason, they
shall be canceled and exchanged as provided in this Article I.
SECTION 1.11. Lost, Stolen or Destroyed Certificates. In the event any
certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
pay in respect of such lost, stolen or destroyed Certificates, upon the making
of an affidavit of that fact by the holder thereof, such Per Share Amount as may
be required pursuant to Section 1.06(a); provided, however, that Parent may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent, the Surviving Corporation or the Exchange Agent with respect to
the certificates alleged to have been lost, stolen or destroyed.
SECTION 1.12. Taking of Necessary Action; Further Action. Each of
Parent, Merger Sub and the Company will take all such reasonable and lawful
actions in connection with the Closing as may be necessary or appropriate in
order to effectuate the Merger and the other transactions contemplated by this
Agreement in accordance with this Agreement as promptly as possible, upon the
terms and subject to the conditions hereof. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
SECTION 1.13. Material Adverse Effect.
(a) When used in connection with the Company or any of its subsidiaries
or Parent or any of its subsidiaries, as the case may be, the term "Material
Adverse Effect" means any change, effect or circumstance that is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial condition or results of operations, taken as a
whole, of the Company and its subsidiaries or Parent and its subsidiaries, as
the case may be.
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(b) The failure of a representation or warranty to be true and correct,
either individually or together with the failure of other representations or
warranties to be true and correct, or the failure to perform an obligation,
agreement or covenant shall be deemed to have a Material Adverse Effect if (x)
the business, assets (including intangible assets), financial condition, or
results of operations, taken as a whole, of the Company and its subsidiaries, or
Parent and its subsidiaries, as the case may be, are or are reasonably likely to
be materially worse than if such representation or warranty had been true and
correct or such obligation, agreement or covenant had been performed, (y) in the
case of the Company, such representation or warranty materially misstates the
capitalization of the Company or the capitalization of its subsidiaries taken as
a whole or (z) the failure of such representation or warranty to be true and
correct or the failure to perform such obligation, agreement or covenant
materially and adversely affects the ability of the Company or Parent, as the
case may be, to consummate the transactions substantially as contemplated by
this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
SECTION 2.01. Organization and Qualification; Subsidiaries. Each of the
Company and its subsidiaries is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
other organization, as the case may be, and has the requisite corporate or other
power and authority necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being conducted or is proposed to be conducted, except where the failure to be
so organized, existing and in good standing or to have such power or authority
would not have a Material Adverse Effect. Each of the Company and its
subsidiaries is duly qualified or licensed as a foreign corporation or other
organization, as the case may be, to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not have a Material Adverse Effect. A
true and complete list of all of the Company's "significant" subsidiaries, as
defined in Regulation S-X, is included as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 (the "Company
Significant Subsidiaries"). The Company has furnished to Parent a list of all
subsidiaries of the Company together with the jurisdiction of incorporation or
organization of each such subsidiary and the percentage of each such
subsidiary's outstanding capital stock or other equity interest owned by the
Company or another subsidiary of the Company in Section 2.01 of the written
disclosure schedule delivered by the Company to Parent (the "Company Disclosure
Schedule"). Except as set forth in Section 2.01 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries directly or indirectly
owns any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity
(other than its wholly owned subsidiaries), in each case with
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respect to which interest the Company or a subsidiary, individually or in the
aggregate, has invested (and currently owns) or is required to invest $2,000,000
or more, excluding securities in any publicly traded company held for investment
by the Company and comprising less than one percent of the outstanding stock of
such company.
SECTION 2.02. Certificate of Incorporation and By-laws. The Company has
heretofore made available to Parent and Merger Sub complete and correct copies
of (i) its Second Amended and Restated Certificate of Incorporation and Third
Amended and Restated By-laws, each as amended to date (the "Company's Charter
Documents"), and (ii) the Certificate of Incorporation and By-laws (or
equivalent organizational documents) the "Subsidiary Documents") of each of its
subsidiaries. All such Company Charter Documents and Subsidiary Documents are in
full force and effect. Neither the Company nor any of its subsidiaries is in
violation of any of the provisions of their respective Certificate of
Incorporation or By-laws or equivalent organizational documents, except, in the
case of any such subsidiaries, where such violations would not, individually or
in the aggregate, have a Material Adverse Effect.
SECTION 2.03. Capitalization. The authorized capital stock of the
Company consists of 25,750,000 shares of Company Common Stock and 3,000,000
shares of the Company's Preferred Stock (the "Company Preferred Stock"), par
value $.001 per share. As of April 28, 2000, (i) 11,414,199 shares of Company
Common Stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable, (ii) 509,200 shares of Company Common Stock were held in
treasury, (iii) no shares of Company Preferred Stock were outstanding or held in
treasury, (iv) no shares of Company Common Stock or Company Preferred Stock were
held by subsidiaries of the Company, (v) 1,173,213 shares of Company Common
Stock were issuable upon the exercise of outstanding Company Options (whether or
not presently exercisable) granted under the Company's stock option plans, (vi)
up to 200,000 shares of Company Common Stock were issuable pursuant to the
Company's Employee Stock Purchase Plan, (vii) 9,824 shares of Company Common
Stock were issued subject to vesting pursuant to the Company's Restricted Stock
Plan (all of which were included in clause (i) above) and (viii) 500,000 shares
of Company Preferred Stock are reserved for issuance in accordance with the
Company's Rights Agreement (as defined in Section 2.22). Except as set forth in
the preceding (i) through (viii), no other shares of capital stock of the
Company, or rights to acquire such shares, have been authorized or are
outstanding as of such date. Except as set forth in Section 2.03 of the Company
Disclosure Schedule, no change in such capitalization has occurred as of the
date hereof, except for changes resulting from the exercise of Company Options
(included in (v) above) in an aggregate amount of not more than 1,097,037 shares
of Company Common Stock, the issuance pursuant to the Company's Employee Stock
Purchase Plan of not more than 200,000 shares of Company Common Stock (included
in (vi) above) or the vesting pursuant to the Company's Restricted Stock Plan of
not more than 9,824 shares of Company Common Stock (included in (vii) above).
Except as set forth in Section 2.01, this Section 2.03 or Section 2.11 or
Section 2.03 or Section 2.11 of the Company Disclosure Schedule or for rights
granted pursuant to the Company's Rights Agreement (as defined in Section 2.22),
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character binding on the Company or any of its subsidiaries
relating to the issued or unissued capital stock of, or other equity interests
in, the Company or any of its subsidiaries or obligating the Company or any of
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its subsidiaries to issue or sell any shares of capital stock of, or other
equity interests in, the Company or any of its subsidiaries. All shares of
Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 2.03 of the Company Disclosure
Schedule, there are no obligations, contingent or otherwise, of the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of
Company Common Stock or the capital stock of any subsidiary. Except as set forth
in Section 2.01 or 2.03 of the Company Disclosure Schedule, and other than
intercompany loans in the ordinary course of business between the Company and
any of its subsidiaries or between any such subsidiaries, there are no
obligations, contingent or otherwise, of the Company or any of its subsidiaries
to make any investment (in the form of a loan, capital contribution or
otherwise) in any such subsidiary or any other entity other than guarantees of
bank obligations of subsidiaries entered into in the ordinary course of business
and other obligations not exceeding, in the aggregate, $1,000,000. Except as set
forth in Section 2.01 or 2.03 of the Company Disclosure Schedule, all of the
outstanding shares of capital stock (other than directors' qualifying shares
identified as such in Section 2.03 of the Company Disclosure Schedule) of, or
other equity interests in, each of the Company's subsidiaries are duly
authorized, validly issued, fully paid and nonassessable, and all such shares
(other than such directors' qualifying shares), or other equity interests, are
owned by the Company or another subsidiary free and clear of all security
interests, liens, claims, pledges, agreements, limitations in the Company's
voting rights, charges or other encumbrances of any nature whatsoever, except,
in the case of any subsidiaries of the Company other than Company Significant
Subsidiaries, for items which would not reduce the Company's equity interest
therein and would not, individually or in the aggregate, have a Material Adverse
Effect.
SECTION 2.04. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and, subject in the case of consummation of the Merger to obtaining the Company
Stockholder Approval (as defined in Section 5.02), to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than the approval of the
Merger and the adoption of this Agreement by the Company's stockholders in
accordance with the DGCL and the filing and recording of appropriate merger
documents consistent with this Agreement as required by the DGCL). As of the
date hereof, the Board of Directors of the Company has declared that it is
advisable and in the best interests of the Company's stockholders for the
Company to enter into this Agreement and to consummate the Merger upon the terms
and subject to the conditions of this Agreement. This Agreement has been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub of this
Agreement, constitutes a legal, valid and binding obligation of the Company.
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SECTION 2.05. Material Contracts; No Conflict; Required Filings and
Consents.
(a) Section 2.05 of the Company Disclosure Schedule includes, as of the
date hereof, a list of (i) all loan agreements, indentures, mortgages, pledges,
conditional sale or title retention agreements, security agreements, guaranties,
standby letters of credit (as to which the Company or any subsidiary is the
responsible party), equipment leases or lease purchase agreements, each in an
amount exceeding, individually or in the aggregate as to any related items due
to the same party or relating to the same transactions, $1,000,000, to which the
Company or any of its subsidiaries is a party or by which any of them is bound;
(ii) all other contracts, agreements, commitments or other understandings or
arrangements to which the Company or any of its subsidiaries is a party or by
which any of them or any of their respective properties or assets are bound or
affected, but excluding contracts, agreements, commitments or other
understandings or arrangements involving, in the case of any such contract,
agreement, commitment, or other understanding or arrangement, payments or
receipts by the Company or any of its subsidiaries, individually or in the
aggregate as to any related items due to the same party or relating to the same
transactions, of less than $1,000,000 and (iii) all agreements which are
required to be filed as "material contracts" with the United States Securities
and Exchange Commission ("SEC") pursuant to the requirements of the United
States Securities Exchange Act of 1934, as amended, and the SEC's rules and
regulations thereunder (the "Exchange Act") but have not been so filed with the
SEC.
(b) Except as set forth in Section 2.05 of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, subject as to
consummation of the Merger to the obtaining of the Company Stockholder Approval,
and the taking of the actions described in clause (c) of this Section, (i)
conflict with or violate the Company's Charter Documents or the Subsidiary
Documents, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which any of their respective properties is bound or affected or (iii) result in
any breach of, or constitute a default (or an event that with notice or lapse of
time or both would become a default) or impair the Company's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on
(including a right to purchase) any of the properties or assets of the Company
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties is bound or affected, except, in the case of clause (ii) or (iii),
for any such conflicts, violations, breaches, defaults or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect.
(c) Except as set forth in Section 2.05 of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any United States or foreign governmental or regulatory authority (each, a
"Governmental Authority"), except (i) for applicable requirements, if any, of
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the Exchange Act, the pre-merger notification requirements of the United States
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), filings and consents under any
applicable foreign laws intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade ("Non-U.S.
Monopoly Laws"), and the filing and recordation of appropriate merger or other
documents as required by the DGCL, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or materially delay consummation of the Merger,
or otherwise prevent or materially delay the Company from performing its
material obligations under this Agreement or prevent or materially delay Parent
from realizing substantially all of the benefits of this Agreement, and would
not otherwise, individually or in the aggregate, have a Material Adverse Effect.
SECTION 2.06. Compliance; Permits.
(a) Except as disclosed in Section 2.06 of the Company Disclosure
Schedule or the Company's periodic filings under the Exchange Act, from December
31, 1998 through the date of this Agreement (as such documents have since the
time of filing been amended or supplemented, collectively, the "Company SEC
Reports"), neither the Company nor any of its subsidiaries is in conflict with,
or in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which any of
their respective properties is bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or any of their
respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) Except as disclosed in Section 2.06 of the Company Disclosure
Schedule or the Company SEC Reports, the Company and its subsidiaries hold all
permits, licenses, easements, variances, exemptions, consents, certificates,
orders and approvals from Governmental Authorities which are material to the
operation of the business of the Company or any of its subsidiaries, as it is
now being conducted (collectively, the "Company Permits"), except where the
failure to hold such Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect. The Company and its subsidiaries are
in compliance with the terms of the Company Permits, except as described in the
Company SEC Reports or where the failure to so comply would not, individually or
in the aggregate, have a Material Adverse Effect.
SECTION 2.07. SEC Filings; Financial Statements.
(a) The Company has filed all Company SEC Reports. Except as disclosed
in Section 2.07 of the Company Disclosure Schedule, as of their respective
dates, the Company SEC Reports (i) complied as to form in all material respects
with the requirements of the United States Securities Act of 1933, as amended,
and the SEC's rules and regulations thereunder (the "Securities Act") or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which
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they were made, not misleading. None of the Company's subsidiaries is required
to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or in the Company SEC
Reports), and each fairly presents in all material respects the consolidated
financial position of the Company and its subsidiaries as at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount.
SECTION 2.08. Absence of Certain Changes or Events. Except as set forth
in Section 2.08 and Section 4.01 of the Company Disclosure Schedule or the
Company SEC Reports, since December 31, 1999, the Company and each of its
subsidiaries has conducted its business in the ordinary course, and: (i) there
has not occurred any change, effect or circumstance constituting, individually
or in the aggregate, a Material Adverse Effect; and (ii) neither the Company nor
any if its subsidiaries has taken any action which, if taken after the date of
this Agreement, would constitute a breach of any provision of Section 4.01.
SECTION 2.09. No Undisclosed Liabilities. Except as set forth in
Section 2.09 of the Company Disclosure Schedule or the Company SEC Reports,
neither the Company nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise), except liabilities (a) in the aggregate
adequately provided for in the Company's balance sheet (including any related
notes thereto) as of December 31, 1999 included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1999 (the "1999 Company Balance
Sheet"), (b) incurred in the ordinary course of business and not required under
GAAP to be reflected on the 1999 Company Balance Sheet (including the notes
thereto), (c) incurred since December 31, 1999 in the ordinary course of
business, (d) specifically contemplated by this Agreement or (e) not otherwise
excepted by clauses (a) through (d), inclusive, which otherwise non-excepted
liabilities would not, individually or in the aggregate, have a Material Adverse
Effect.
SECTION 2.10. Absence of Litigation. Except as set forth in Section
2.10 and Section 2.19 of the Company Disclosure Schedule or the Company SEC
Reports, there are no claims, actions, suits, proceedings or investigations
pending or, to the best knowledge of the Company, threatened against the Company
or any of its subsidiaries, or any properties or rights of the Company or any of
its subsidiaries, before any court, arbitrator or administrative body or
Governmental Authority, that would, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 2.11. Employee Benefit Plans; Employment Agreements.
(a) Section 2.11 of the Company Disclosure Schedule lists all "Pension
Plans" (as defined in Section 3(2) of the United States Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee welfare benefit
plans (as defined in Section 3(1) of
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ERISA), and all other bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe or
employee benefit plans, policies, programs, agreements or arrangements
(including those which contain change of control or pending change of control or
similar provisions), written or otherwise, as amended, modified or supplemented,
for the benefit of, or relating to, any former or current employee, officer,
director or consultant (or any of their beneficiaries) of the Company or any
subsidiary of the Company, as well as each plan with respect to which the
Company, a subsidiary or any other entity (whether or not incorporated) which is
a member of a controlled group, including the Company, or which is under common
control with the Company within the meaning of Section 414(b), (c), (m) or (o)
of the Code or Section 4001(a)(14) or (b) of ERISA (a "Company ERISA Affiliate")
could incur liability under Section 4980B of the Code or Part 6 of Subtitle B of
Title I of ERISA (hereinafter, "COBRA"), Title IV of ERISA or Section 412 of the
Code (together, for the purposes of this Section 2.11, the "Company Employee
Plans") that are maintained in the United States (the "U.S.") or cover primarily
U.S. employees. Section 2.11 of the Company Disclosure Schedule lists all
Company Employee Plans maintained outside the U.S. and covering primarily
non-U.S. employees (each, a "Non-U.S. Company Plan"), provided that any such
plan, agreement or arrangement described in Section 2.11(d) of this Agreement
shall be listed only if it is (x) an employment agreement with any of the three
most highly compensated officers or employees of the Company or any subsidiary
having an annual salary in excess of $100,000, (y) a plan, program, agreement,
policy or arrangement of the Company which contains one or more
change-in-control provisions which could result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment of any
benefits or compensation payable in respect of any non-U.S. Company employee or
(z) a severance plan, program, policy or agreement which provides nonstatutory
benefits. The Company has made available for inspection by Parent prior to the
date of this Agreement, copies of (i) each written Company Employee Plan (or a
written description of any Company Employee Plan which is not written) and all
related trust agreements, insurance and other contracts (including policies),
summary plan descriptions, summaries of material modifications and
communications distributed to plan participants that are inconsistent with any
Company Employee Plan or any provision under any Company Employee Plan or which
could result in any additional liability to the Company or such plan (including,
but not limited to, any communications that have not expressly reserved the
right of the Company to amend, terminate or otherwise modify any Company
Employee Plan), (ii) the three most recent annual reports on Form 5500 series,
with accompanying schedules and attachments, filed with respect to each Company
Employee Plan required to make such a filing, (iii) the most recent actuarial
valuation for each Company Employee Plan subject to Title IV of ERISA, (iv) the
latest reports which have been filed with the Department of Labor with respect
to each Company Employee Plan required to make such filing or that is required
to exempt any Company Employee Plan from filing a Form 5500 series annual report
and (v) the most recent favorable determination letters issued for each Company
Employee Plan and related trust which is intended to be qualified under Section
401(a) of the Code (and, if an application for such determination is pending, a
copy of the application for such determination).
(b) (i) Except as set forth in Section 2.11 of the Company Disclosure
Schedule, none of the Company Employee Plans promises or provides medical or
life insurance benefits to any director, officer, employee or consultant (or any
of their beneficiaries) after their service with the
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Company terminates, other than as required by COBRA, or any similar state laws;
(ii) none of the Company Employee Plans is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA or Section 414(f) of the Code or a "multiple
employer plan" within the meaning of Section 3(40) of ERISA or Section 413(c) of
the Code nor is a member of a "multiple employer welfare arrangement" as defined
in Section 3(40) of ERISA; (iii) none of the Company Employee Plans is or was
subject to Title IV of ERISA or the funding provisions of Section 412 of the
Code; (iv) no party in interest or disqualified person (as defined in Section
3(14) of ERISA and Section 4975 of the Code) has at any time engaged in a
transaction with respect to any Company Employee Plan which could subject the
Company or any Company ERISA Affiliate, directly or indirectly, to a tax,
penalty or other material liability for prohibited transactions under ERISA or
Section 4975 of the Code; (v) no fiduciary of any Company Employee Plan has
breached any of the responsibilities or obligations imposed upon fiduciaries
under Title I of ERISA, which breach would have a Material Adverse Effect; (vi)
all Company Employee Plans have been established and maintained in accordance
with their terms and have operated in compliance in all material respects with
the requirements of applicable law (including, but not limited to, the
applicable notification and other requirements of COBRA, the Health Insurance
Portability and Accountability Act of 1996, the Newborns' and Mothers' Health
Protection Act of 1996, the Mental Health Parity Act of 1996, and the Women's
Health and Cancer Rights Act of 1998), and may by their terms be amended and/or
terminated at any time subject to applicable law and to any requirements
relating to the payment of accrued benefits in accordance with the terms
thereof, and the Company and each of its subsidiaries have performed all
material obligations required to be performed by them under, are not in any
material respect in default under or violation of, and have no knowledge of any
material default or violation by any other party to, any of the Company Employee
Plans; (vii) each Company Employee Plan which is intended to be qualified under
Section 401(a) of the Code is the subject of a favorable determination letter
from the United States Internal Revenue Service (the "IRS"), and, to the
Company's knowledge, nothing has occurred which could reasonably be expected to
impair such determination or qualification; (viii) all contributions required to
be made with respect to any Company Employee Plan (pursuant to the terms of such
plan, any collective bargaining agreement or otherwise pursuant to applicable
law) have been made on or before their due dates (including any extensions
thereof); (ix) no filing or application has been made with respect to any
Company Employee Plan relating to any voluntary compliance resolution program or
closing agreement program; (x) none of the Company, any Company ERISA Affiliate
or any subsidiary thereof has incurred or reasonably expects to incur any
material liability under Title IV of ERISA including, without limitation, with
respect to an event described in Section 4062, 4063 or 4041 of ERISA (other than
liability for premium payments to the Pension Benefit Guaranty Corporation (the
"PBGC") arising in the ordinary course); (x) other than routine claims for
benefits made in the ordinary course of the operation of the Company Employee
Plans, there are no material pending, nor to the Company's knowledge threatened,
claims, investigations or causes of action with respect to any Company Employee
Plan, whether made by a participant or beneficiary of such a plan, a
governmental agency or otherwise, against the Company, any Company director,
officer or employee, any Company Employee Plan or any fiduciary of a Company
Employee Plan.
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(c) Section 2.11 of the Company Disclosure Schedule sets forth a true
and complete list of each current or former employee, officer or director of the
Company or any of its subsidiaries who holds, as of the close of business on May
2, 2000, (i) any option to purchase Company Common Stock as of the date hereof,
together with the number of shares of Company Common Stock subject to such
option, the exercise price of such option (to the extent determined as of the
date hereof), whether such option is intended to qualify as an incentive stock
option within the meaning of Section 422(b) of the Code (an "ISO"), and the
expiration date of such option; (ii) any shares of Company Common Stock that are
restricted; and (iii) any other right, directly or indirectly, to receive
Company Common Stock, together with the number of shares of Company Common Stock
subject to such right. No option to purchase Company Common Stock has been
granted between May 2, 2000 and the date of this Agreement.
(d) Section 2.11 of the Company Disclosure Schedule sets forth a true
and complete list of (i) all employment agreements with officers or employees of
the Company or any of its subsidiaries involving an annual salary in excess of
$100,000 who perform services in the U.S., other than any offer letter or
similar agreement that does not alter the at-will nature of the individual's
employment with the Company or any subsidiary; (ii) all agreements with
consultants who are former employees or directors involving annual payments in
excess of $75,000, (iii) all agreements with respect to the services of
independent contractors performing personal services for the Company or its
subsidiaries or leased employees, whether or not they participate in any of the
Company Employee Plans involving annual payments in excess of $75,000, (iv) all
severance agreements, programs and policies of the Company or any of its
subsidiaries with or relating to its employees and under which there is a
current or contingent obligation with the exception of statutory plans
maintained outside the U.S.; and (v) all plans, programs, agreements and other
arrangements of the Company which contain change of control provisions providing
any benefits to any employees, directors or independent contractors of the
Company or any of its subsidiaries who perform services primarily in the United
States. All agreements described in this Section 2.11(d) have been made
available for inspection by Parent prior to the date of this Agreement; to the
extent any such agreement has been entered into by the Company and one or more
individuals pursuant to one or more standard forms, the Company may make
available one example of each such standard form, together with a schedule
specifying each individual who has entered into an agreement with the Company
using such standard form, the expiration date of the agreement and any material
non-standardized terms included in the agreement.
(e) Except as set forth in Section 2.11 of the Company Disclosure
Schedule, (i) the Company does not and has never maintained an employee stock
ownership plan (within the meaning of Section 4975(e)(7) of the Code) or, any
other Company Employee Plan that invests in, provides for investment in or
provides benefits in or by reference to the value of Company stock; and (ii)
since December 31, 1999, the Company has not proposed nor agreed to any material
increase in benefits under any Company Employee Plan (or the creation of
material new benefits) or change in employee coverage which would materially
increase the expense of maintaining any Company Employee Plan other than in the
renewal of any insured employee welfare plans in the ordinary course of
business.
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(f) Except pursuant to those plans, programs, agreements or other
arrangements listed in Section 2.11 of the Company Disclosure Schedule, neither
the execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement, either alone or in combination with another
event, will result in (i) any payment (including, without limitation, severance,
unemployment compensation, golden parachute or bonus payments or otherwise)
becoming due to any current or former director, officer, employee or consultant
of the Company, (ii) any increase in the amount of compensation or benefits
payable in respect of any director, officer, employee or consultant of the
Company, (iii) accelerate the vesting or timing of payment of any benefits or
compensation payable in respect of any current or former director, officer,
employee or consultant of the Company, or (iv) result in any "parachute payment"
under Section 280G of the Code, whether or not such amount may be considered
reasonable compensation for personal services rendered.
(g) To the best knowledge of the Company, each Non-U.S. Company Plan
has been maintained in compliance with its terms and with the requirements
prescribed by any and all applicable laws (including any special provisions
relating to registered or qualified plans where such Non-U.S. Company Plan was
intended to so qualify) and has been maintained in good standing with applicable
regulatory authorities. To the best knowledge of the Company, except as set
forth in Section 2.11 of the Company Disclosure Schedule, each Non-U.S. Company
Plan which is required by contract or under applicable local law to be funded
has been funded at least to the extent so required; if and to the extent any
Non-U.S. Company Plan is not funded, the obligations under such Non-U.S. Company
Plan are reflected on the books and records of the entity maintaining the plan
and on the consolidated financial statements of the Company.
SECTION 2.12. Employment and Labor Matters.
Except as disclosed in Section 2.12 of the Company Disclosure Schedule:
(a) The Company and its subsidiaries have, as of the date hereof,
approximately 1,600 employees and the Company believes they have generally good
relationships with such employees.
(b) The Company believes it is in substantial compliance with all
applicable laws (including any legal obligation to engage in affirmative
action), agreements and contracts relating to employment practices, terms and
conditions of employment, and the employment of former, current, and prospective
employees, independent contractors and "leased employees" (within the meaning of
section 414(n) of the Code) of the Company or its subsidiaries, or employees of
any other entity with respect to whom the Company or its subsidiaries have any
responsibility under the "joint-employer doctrine" or any similar rule of law.
The Company believes that the Company and its subsidiaries are not engaged in
any unfair labor practice.
(c) (i) No collective bargaining agreement with respect to the business
of the Company or its subsidiaries is currently in effect or being negotiated,
(ii) to the best knowledge of the
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Company, the Company and its subsidiaries have no obligation to negotiate any
other collective bargaining agreement, and, (iii) to the best knowledge of the
Company, there is no indication that the employees not covered by such an
agreement of the Company or its subsidiaries desire to be covered by a
collective bargaining agreement.
(d) No strike or material slowdown or work stoppage has occurred or, to
the best knowledge of the Company, been threatened with respect to the employees
of the Company or its subsidiaries, nor, to the best knowledge of the Company,
has any such strike or material slowdown or work stoppage occurred or been
threatened within two years prior to the date hereof.
(e) There is no representation claim or petition pending before the
United States National Labor Relations Board or any similar foreign, state or
local labor agency of which the Company has been notified and, to the best
knowledge of the Company, no question concerning representation has been raised
or threatened respecting the employees of the Company or its subsidiaries.
(f) No notice has been received by the Company of any complaint filed
against the Company or its subsidiaries claiming that the Company or its
subsidiaries have violated in any material respect any applicable employment
standards, human rights or other labor legislation or any complaints or
proceedings of any kind involving the Company or its subsidiaries or, to the
knowledge of the Company, against any of the employees of the Company or
threatened to be filed against the Company or its subsidiaries before any
federal, state, local or foreign agency or labor relations board, including
without limitation the National Labor Relations Board and the Equal Employment
Opportunity Commission. No notice has been received by the Company of the intent
of any federal, state, local or foreign agency responsible for the enforcement
of labor or employment laws to conduct an investigation of the Company or its
subsidiaries, and, to the knowledge of the Company, no such investigation is in
progress.
(g) There are no outstanding material orders or charges against the
Company or, to the best knowledge of the Company, any of its subsidiaries, under
any occupational health or safety legislation and to the best knowledge of the
Company none have been threatened. All material levies, assessments and
penalties made against the Company or, to the best knowledge of the Company, any
of its subsidiaries, pursuant to all applicable workers compensation legislation
as of the date of the Balance Sheet have been paid or have been reserved for or
properly accrued on the books of the Company and the Company has not, as of the
Closing Date, been reassessed under any such legislation. Except as set forth in
Section 2.12 of the Company Disclosure Schedule, there are no outstanding
material levies, assessments or penalties against the Company or, to the best
knowledge of the Company, any of its subsidiaries.
(h) Section 2.12 of the Company Disclosure Schedule accurately sets
forth all unpaid severance or continuing payments of any kind (other than
pursuant to a plan or program described in Section 4.11 hereof) in excess of
$75,000 which, as of the date of this Agreement, are due or claimed in writing
to be due from the Company or any subsidiary to any person whose employment with
the Company or any subsidiary was terminated.
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(i) The Company has made no binding commitments to any employees of the
Company or its subsidiaries regarding continued employment of such employees
subsequent to the date hereof or the Closing Date.
(j) To the best knowledge of the Company, no contractor, manufacturer
or supplier used by or under contract with the Company or any subsidiary is in
material violation of any law relating to labor or employment matters which
could reasonably result in liability on the part of the Company or any
subsidiary.
SECTION 2.13. Proxy Statement. The information supplied by the Company
in writing specifically for inclusion in the proxy statement to be sent to the
stockholders of the Company in connection with the meeting of the stockholders
of the Company to consider the Merger (the "Company Stockholders Meeting") (such
proxy statement as amended or supplemented being referred to herein as the
"Proxy Statement") will not, on the date the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to stockholders or at the time of
the Company Stockholders Meeting, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein not false or misleading,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Company Stockholders Meeting which has become false or misleading. If at any
time prior to the Effective Time any event relating to the Company or any of its
respective affiliates, officers or directors should be discovered by the Company
which should be set forth in a supplement to the Proxy Statement, the Company
shall promptly inform Parent and Merger Sub. The Proxy Statement shall comply as
to form in all material respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by or on behalf of Parent or Merger Sub
in writing for inclusion in the Proxy Statement or any information incorporated
by reference therein from documents filed by Parent or any of its subsidiaries
with the SEC.
SECTION 2.14. Restrictions on Business Activities. Except as set forth
in Section 2.14 of the Company Disclosure Schedule or the Company SEC Reports,
there is no agreement, judgment, injunction, order or decree binding upon the
Company or any of its subsidiaries which has or could reasonably be expected to
have the effect of prohibiting or impairing the conduct of business by the
Company or any of its subsidiaries as currently conducted by the Company or such
subsidiary, except for any prohibition or impairment as would not, individually
or in the aggregate, have a Material Adverse Effect.
SECTION 2.15. Title to Property. Except as set forth in Section 2.15 of
the Company Disclosure Schedule or the Company SEC Reports, the Company and each
of its subsidiaries have good title to or have valid leasehold interests in or
valid rights under contract to use all of the real properties and other assets,
individually or in the aggregate, material to the conduct of the business of the
Company and its subsidiaries, taken as a whole, free and clear of all liens,
charges and encumbrances, except liens for taxes not yet due and payable and
such liens or other imperfections of title, if any, as do not materially detract
from the value of or interfere with the
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present use of the property affected thereby or which would not, individually or
in the aggregate, have a Material Adverse Effect, and except for liens which
secure indebtedness reflected in the 1999 Company Balance Sheet; and all leases
pursuant to which the Company or any of its subsidiaries lease from others any
real or personal property, are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default), on the part of the Company
or any of its subsidiaries or, to the best knowledge of the Company, any third
party, except where the lack of such good standing, validity and effectiveness
or the existence of such default or event of default would not, individually or
in the aggregate, have a Material Adverse Effect.
SECTION 2.16. Taxes.
(a) The Company and each of its subsidiaries has timely filed, or
caused to be timely filed, all material Tax Returns (as hereinafter defined)
required to be filed by it, and has paid, collected or withheld, or caused to be
paid, collected or withheld, all material amounts of Taxes (as hereinafter
defined) shown as payable thereon, other than such Taxes for which adequate
reserves in the 1999 Company Balance Sheet have been established which are being
contested in good faith by appropriate procedures. Except as set forth in
Section 2.16 of the Company Disclosure Schedule, there are no material claims or
assessments pending against the Company or any of its subsidiaries for any
alleged deficiency in any Tax, there are no pending or threatened audits or
investigations for or relating to any liability in respect of any Taxes, and the
Company has not been notified of any proposed Tax claims or assessments against
the Company or any of its subsidiaries (other than in each case, claims or
assessments for which adequate reserves in the 1999 Company Balance Sheet have
been established which are being contested in good faith).
(b) For purposes of this Agreement, the term "Tax" shall mean any
United States or non-United States federal, national, state, provincial, local
or other jurisdictional income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, alternative or add-on minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge imposed by any Governmental Authority,
together with any interest or penalty imposed thereon. The term "Tax Return"
shall mean a report, return or other information (including any attached
schedules or any amendments to such report, return or other information)
required to be supplied to or filed with a Governmental Authority with respect
to any Tax, including an information return, claim for refund, amended return or
declaration or estimated Tax.
(c) Except as set forth in Section 2.16 of the Company Disclosure
Schedule, other than with respect to the Company and its subsidiaries, neither
the Company nor any of its subsidiaries is liable for Taxes of any other person,
or is currently under any contractual obligation to indemnify any person with
respect to Taxes (except for customary agreements to indemnify lessors, lenders
or security holders pursuant to agreements disclosed elsewhere in the Company
Disclosure Schedule), or is a party to any tax sharing agreement or any other
agreement providing for payments by the Company or any of its subsidiaries with
respect to Taxes. Except
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as set forth in Section 2.16 of the Company Disclosure Schedule, there are no
outstanding powers of attorney enabling any party to represent the Company or
any subsidiary with respect to tax matters.
SECTION 2.17. Environmental Matters.
(a) Except as set forth in Section 2.17 of the Company Disclosure
Schedule or the Company SEC Reports or as would not, individually or in the
aggregate, have a Material Adverse Effect, the operations and properties of the
Company and its subsidiaries are in compliance with all Environmental Laws (as
hereinafter defined), which compliance includes the possession by the Company
and its subsidiaries of all permits and governmental authorizations required
under applicable Environmental Laws, and compliance with the terms and
conditions thereof.
(b) Except as set forth in Section 2.17 of the Company Disclosure
Schedule or the Company SEC Reports or as would not, individually or in the
aggregate, have a Material Adverse Effect, there are no Environmental Claims (as
hereinafter defined), pending or, to the best knowledge of the Company,
threatened against the Company or any of its subsidiaries or against any person
or entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has expressly retained or assumed.
(c) Except as set forth in Section 2.17 of the Company Disclosure
Schedule or the Company SEC Reports to the best knowledge of the Company, there
are no past or present actions, activities, circumstances, conditions, events or
incidents, including the release, emission, discharge, presence or disposal of
any Materials of Environmental Concern (as hereinafter defined), that are
reasonably likely to form the basis of any Environmental Claim against the
Company or any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim the Company or any of its subsidiaries
have expressly retained or assumed, except for such Environmental Claims that
would not, individually or in the aggregate, have a Material Adverse Effect.
(d) Except as set forth in Section 2.17 of the Company Disclosure
Schedule or the Company SEC Reports to the best knowledge of the Company, (i)
there are no off-site locations where the Company or any of its subsidiaries has
stored, disposed or arranged for the disposal of Materials of Environmental
Concern which have been listed on the United States National Priority List (the
"National Priorities List") or any state Superfund site list, and the Company
and its subsidiaries have not been notified or become aware that any of them may
be potentially responsible party at any such location, and (ii) except as would
not, individually or in the aggregate, have a Material Adverse Effect, (A) there
are no underground storage tanks located on property owned or leased by the
Company or any of its subsidiaries, (B) there is no material containing friable
asbestos contained in or forming part of any building, building component,
structure or office space owned, leased or operated by the Company or any of its
subsidiaries and (C) there are no polychlorinated biphenyls ("PCBs") or
PCB-containing items contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries.
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(e) For purposes of this Agreement:
(i) "Environmental Claim" means any claim, allegation, accusation,
action, cause of action, investigation or written notice by any person
or entity alleging potential liability (including potential liability
for investigatory costs, cleanup costs, response costs incurred by any
Governmental Authority or other person, natural resources damages,
property damages, personal injuries or penalties) arising out of, based
on or resulting from the presence, or release into the environment, of
any Material of Environmental Concern at any location, whether or not
owned or operated by the Company or any of its subsidiaries.
(ii) "Environmental Laws" means all United States and non-United
States federal, national, state, provincial, local or other
jurisdictional laws, regulations, codes and ordinances relating to
pollution or protection of human health and the environment (including
ambient air, surface water, ground water, land surface or sub-surface
strata), including laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Materials of Environmental Concern, including, but not
limited to, the United States Comprehensive Environmental Response
Compensation and Liability Act 42 U.S.C.ss.9601 et seq., the United
States Resource Conservation and Recovery Act 42 U.S.C.ss.6901 et seq.,
the United States Toxic Substances Control Act 15 U.S.C.ss.2601 et
seq., the United States Occupational Safety and Health Act 29 U.S.C.ss.
651 et seq., the United States Clean Air Act 42 U.S.C.ss.7401 et seq.,
the United States Clean Water Act 33 U.S.C.ss.1251 et seq., Proposition
65, as codified in the California Health and Safety Codess. 25249.5 et
seq., and any other analogous state laws, each as amended or
supplemented, and any applicable transfer statutes or laws.
(iii) "Materials of Environmental Concern" means chemicals,
pollutants, contaminants, hazardous materials, hazardous substances and
hazardous wastes, medical waste, toxic substances, petroleum and
petroleum products, asbestos-containing materials, polychlorinated
biphenyls, and any other chemicals, pollutants or substances regulated
under any Environmental Law.
SECTION 2.18. Brokers. Except as set forth in Section 2.18 of the
Company Disclosure Schedule, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of its stockholders.
SECTION 2.19. Intellectual Property.
(a) As used herein, the term "Intellectual Property Assets" shall
mean all worldwide intellectual property rights, including, without limitation,
patents, trademarks, service marks and copyrights, and registrations and
applications therefor, trade names, common law marks, know-how, trade secrets,
computer software programs and proprietary information. As used herein,
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"Company Intellectual Property Assets" shall mean the Intellectual Property
Assets used or owned by the Company or any of its subsidiaries.
(b) Except as set forth in Section 2.19 of the Company Disclosure
Schedule, the Company and each of its subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use, all Intellectual Property
Assets that are material to the conduct of the business of the Company and its
subsidiaries, taken as a whole, as currently conducted, without conflict with
the rights of others, except for conflicts, if any, which would not,
individually or in the aggregate, have a Material Adverse Effect.
(c) Except as set forth in Section 2.19 of the Company Disclosure
Schedule or as would not, individually or in the aggregate, have a Material
Adverse Effect, no claims (i) are currently pending or, to the best knowledge of
the Company, are threatened by any person with respect to the Company
Intellectual Property Assets or (ii) are, to the best knowledge of the Company,
currently pending or threatened by any person with respect to the Intellectual
Property Assets of a third party (the "Third Party Intellectual Property
Assets") to the extent arising out of any use, reproduction or distribution of
such Third Party Intellectual Property Assets by or through the Company or any
of its subsidiaries.
(d) Except as set forth in Section 2.19 of the Company Disclosure
Schedule or as would not have a Material Adverse Effect, neither the Company nor
any of its subsidiaries knows of any valid grounds for any bona fide claim to
the effect that the manufacture, sale or licensing or use of any product or
service now used, sold or licensed or proposed for use, sale or license by the
Company or any of its subsidiaries infringes on any Third Party Intellectual
Property Assets.
(e) Section 2.19 of the Company Disclosure Schedule sets forth a
list of (i) all material patents and patent applications owned by the Company or
any of its subsidiaries worldwide; (ii) all material trademark and service mark
registrations and all trademark and service mark applications; (iii) material
common law trademarks, material trade dress and material slogans, and all
material trade names owned by the Company or any of its subsidiaries worldwide;
(iv) all material copyright registrations and copyright applications owned by
the Company or any of its subsidiaries worldwide; and (v) all material licenses
owned by the Company or any of its subsidiaries in which the Company or such
subsidiary is (A) a licensor with respect to any of the patents, trademarks,
service marks, trade names or copyrights listed in Section 2.19 of the Company
Disclosure Schedule or (B) a licensee of any other person's patents, trade
names, trademarks, service marks or copyrights material to the Company except
for any licenses of software programs that are commercially available "off the
shelf." Except as disclosed in Section 2.19 of the Company Disclosure Schedule,
the Company and each of its subsidiaries has made all necessary filings and
recordations to protect and maintain its interest in the patents, patent
applications, trademark and service mark registrations, trademark and service
mark applications, copyright registrations and copyright applications and
licenses material to the conduct of the business of the Company and its
subsidiaries, taken as a whole, except where the failure to so protect or
maintain would not, individually or in the aggregate, have a Material Adverse
Effect.
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(f) To the best knowledge of the Company, except as set forth in
Section 2.19 of the Company Disclosure Schedule or the Company SEC Reports: (i)
each material patent, patent application, trademark or service mark
registration, trademark or service mark application, copyright registration and
copyright application of the Company and each of its subsidiaries is valid and
subsisting and (ii) each material license of Company Intellectual Property
Assets is to the best knowledge of the Company valid, subsisting and
enforceable.
(g) To the best knowledge of the Company, except as set forth in
Section 2.19 of the Company Disclosure Schedule, to the Company's knowledge,
there is no unauthorized use, infringement or misappropriation of any of the
Company's Intellectual Property Assets by any third party, including any
employee, former employee, independent contractor or consultant of the Company
or any of its subsidiaries which could reasonably be expected, individually or
in the aggregate, to result in a Material Adverse Effect.
(h) Except as set forth in Section 2.19 of the Company Disclosure
Schedule, the disclosure under the heading "Impact of Year 2000" contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999 is
accurate as of the date hereof in all material respects.
SECTION 2.20. Interested Party Transactions. Except as set forth in
Section 2.20 of the Company Disclosure Schedule or the Company SEC Reports,
since the Company's proxy statement dated April 19, 2000, no event has occurred
that would be required to be reported as a Certain Relationship or Related
Transaction pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 2.21. Opinion of Financial Advisor. The Board of Directors of
the Company has received an opinion of its financial advisor, Salomon Smith
Barney Inc., to the effect that, as of the date of this Agreement, the Per Share
Amount to be received in the Merger by the holders of Shares is fair to such
holders from a financial point of view.
SECTION 2.22. Rights Agreement. The Board of Directors of the Company
has authorized and approved an amendment to the Rights Agreement between the
Company and First Union National Bank, dated as of July 10, 1997, amended as of
October 15, 1999 (the "Rights Agreement"), in the form set forth in Section 2.22
of the Company Disclosure Schedule. The Company and the Rights Agent (as defined
in the Rights Agreement) shall execute such amendment to the Rights Agreement
prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company as follows:
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SECTION 3.01. Organization and Qualification; Subsidiaries. Each of
Parent and Merger Sub is an entity duly organized and validly existing under the
laws of the jurisdiction of its incorporation and has the requisite corporate or
other power and authority necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized and existing or to
have such power or authority could not reasonably be expected to have a Material
Adverse Effect. Each of Parent and its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that could not reasonably be expected to have a
Material Adverse Effect.
SECTION 3.02. Authority Relative to This Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, as applicable, and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Parent and
Merger Sub, and no other corporate proceedings on the part of Parent or Merger
Sub are necessary to authorize this Agreement or to consummate the transactions
so contemplated. The Board of Directors of Parent has determined that it is
advisable and in the best interests of Parent's stockholders for Parent to enter
into this Agreement, and for Parent to consummate the Merger upon the terms and
subject to the conditions of this Agreement. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub, and, assuming due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of Parent and Merger Sub.
SECTION 3.03. No Conflict. Except as set forth in Section 3.03 of the
Parent and Merger Sub Disclosure Schedule, the execution and delivery of this
Agreement by Parent and Merger Sub do not, and the performance of this Agreement
by Parent and Merger Sub will not, (i) violate Parent or Merger Sub's
certificate of incorporation or by-laws (or equivalent organizational documents)
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent, Merger Sub or any of their subsidiaries or by which
any of their respective properties is bound or affected or (iii) result in any
breach of, or constitute a default (or an event that with notice or lapse of
time or both would become a default) or impair Parent, Merger Sub's or any of
their subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on
(including a right to purchase) any of the properties or assets of Parent,
Merger Sub or any of their subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent, Merger Sub or any of their
subsidiaries is a party or by which Parent, Merger Sub or any of their
subsidiaries or any of their respective properties is bound or affected, except,
in the case of clause (ii) or (iii), for any such conflicts, violations,
breaches, defaults or other occurrences that would, individually or in the
aggregate, have a Material Adverse Effect.
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SECTION 3.04. Absence of Litigation. There are no claims, actions,
suits, proceedings or investigations pending or, to the best knowledge of Parent
or Merger Sub, threatened against Parent, Merger Sub or any of their
subsidiaries, or any properties or rights of Parent, Merger Sub or any of their
subsidiaries, before any court, arbitrator or administrative body or
Governmental Authority, that would, individually or in the aggregate, have a
material adverse effect on the ability of Parent and Merger Sub to consummate
the transactions contemplated by this Agreement. Neither Parent nor Merger Sub
is subject to any Order of any Governmental or Regulatory Authority that would,
individually or in the aggregate have a material adverse effect on the ability
of Parent and Merger Sub to consummate the transactions contemplated by this
Agreement.
SECTION 3.05. Parent Not an Interested Stockholder or an Acquiring
Person. Other than by reason of this Agreement or the transactions contemplated
hereby, to the best knowledge of Parent, neither Parent nor any of its
affiliates or associates (as such terms are defined in Section 203 of the DGCL)
is an "interested stockholder" (as such term is defined in Section 203 of the
DGCL), or an "Acquiring Person" as such term is defined in the Company Rights
Agreement.
SECTION 3.06. Proxy Statement. Subject to the accuracy of the
representations of the Company in Section 2.13, the information supplied by
Parent or Merger Sub in writing specifically for inclusion in the Proxy
Statement will not, on the date the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to stockholders or at the time of the
Company Stockholders Meeting, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event relating to Parent, Merger Sub or any of their
respective affiliates, officers or directors should be discovered by Parent or
Merger Sub which should be set forth in a supplement to the Proxy Statement,
Parent or Merger Sub will promptly inform the Company.
SECTION 3.07. Ownership of Merger Sub. Merger Sub is a direct, wholly
owned subsidiary of Parent.
SECTION 3.08. Solvency. The consummation by Parent and Merger Sub of
the transactions contemplated by this Agreement, including without limitation,
the entering into of any financing agreement which may be necessary in
connection therewith, will not render Parent or the Surviving Corporation
insolvent or unable to pay its obligations as they mature.
SECTION 3.09. Financing Arrangements.
(a) Parent has, on or prior to the date hereof, entered into a
commitment letter, in form furnished to the Company, pursuant to which the
issuer of such commitment has committed, subject to the conditions contained in
this Agreement and such letter and no other conditions, to lend an aggregate of
up to $440 million or more in cash to Parent for purposes of
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financing the Merger and refinancing certain indebtedness of Parent or its
affiliates (the "Debt Financing").
(b) Parent has, on or prior to the date of this Agreement, entered
into one or more commitment letters, in form furnished to the Company, pursuant
to which the subscribers thereunder have, subject to the conditions set forth in
this Agreement and such letters and no other conditions, agreed to make an
equity investment in Parent in an aggregate amount of $75 million in cash at the
time of the Closing and to make an equity investment in Parent in an aggregate
amount of $35 million in cash thereafter, in each case for the payment of
certain indebtedness and other obligations of Parent or its affiliates (the
"Equity Investment" and together with the Debt Financing, the "Financing").
(c) The Debt Financing is sufficient to pay the aggregate
consideration to the holders of Shares and Company Options as contemplated by
this Agreement and to make all other necessary payments of fees and expenses
required to be paid by Parent and Merger Sub in connection with the transactions
contemplated by this Agreement.
SECTION 3.10. Ownership of Shares. As of the date hereof, neither
Parent nor Merger Sub owns, beneficially or of record, any Shares.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. Conduct of Business by the Company Pending the Merger.
The Company covenants and agrees that, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless Parent shall otherwise agree in writing
(which consent shall not be unreasonably withheld, delayed or conditioned), and
except as set forth in Section 4.01 of the Company Disclosure Schedule, the
Company shall conduct its business and shall cause the businesses of its
subsidiaries to be conducted only the ordinary course of business; and the
Company shall use reasonable commercial efforts to preserve substantially intact
in all material respects the business organization of the Company and its
subsidiaries, to keep available the services of the present key officers,
employees and consultants of the Company and its subsidiaries and to preserve
the present relationships of the Company and its subsidiaries with customers,
suppliers and other persons with which the Company or any of its subsidiaries
has significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, neither the Company nor any of its
subsidiaries shall, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, and except as set forth in Section 4.01 of the Company
Disclosure Schedule, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent, which in the case of
clauses (c), (e), (g), (h) and (i), which will not be unreasonably withheld,
delayed or conditioned:
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(a) amend or otherwise change the Company's Charter Documents or
the Subsidiary Documents except as contemplated by this Agreement;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of its capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in the
Company, any of its subsidiaries (except for (A) the issuance of shares of
Company Common Stock issuable pursuant to Company Stock Options outstanding on
the date hereof, (B) the issuance of shares of Company Common Stock pursuant to
any employer stock fund under any Company Benefit Plan or the Company's Employee
Stock Purchase Plan in accordance with their respective terms as in effect on
the date hereof, (C) the issuance of Company Stock Options in the ordinary
course and consistent with past practice and (D) the granting of Company Stock
Options pursuant to written offers of employment that were extended prior to the
date hereof);
(c) sell, pledge, dispose of or encumber any assets of the Company
or any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business, (ii) dispositions of obsolete assets or assets no longer
useful to the Company in its business and (iii) sales of assets which are not,
individually or in the aggregate, material to the Company and its subsidiaries,
taken as a whole);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly owned subsidiary of
the Company may declare and pay a dividend to its parent that is not a
cross-border dividend (except as provided in clause (ii) below), (ii) declare or
allow any subsidiary of the Company to declare cross-border dividends, or make
or allow any subsidiary of the Company to make cross-border capital
contributions, in an amount that exceed $250,000 individually or $500,000 in the
aggregate; (iii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock; (iv) except as
required by the terms of any security as in effect on the date hereof, and
except to the extent necessary to effect any right of a grantee to have shares
of Company Common Stock withheld to meet minimum tax withholding obligations in
connection with any equity award under any Company Employee Plan that is
outstanding and in effect on the date of this Agreement, amend the terms or
change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, or permit any subsidiary to amend the terms or change the
period of exercisability of, purchase, repurchase, redeem or otherwise acquire,
any of its securities or any securities of its subsidiaries, including, without
limitation, shares of Company Common Stock, or any option, warrant or right,
directly or indirectly, to acquire any such securities; or (v) settle, pay or
discharge any claim, suit or other action brought or threatened against the
Company with respect to or arising out of a stockholder's equity interest in the
Company;
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(e) (i) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof, or any equity interest therein, other than those listed on
Section 4.01 of the Company Disclosure Schedule; (ii) incur any indebtedness for
borrowed money, except for borrowings and reborrowings under the Company's or
any of its subsidiaries' existing credit facilities listed on Section 2.05 of
the Company Disclosure Schedule and other borrowings not in excess of $500,000
in the aggregate, or issue any debt securities or assume, guarantee (other than
guarantees of the Company's subsidiaries entered into in the ordinary course of
business) or endorse, or otherwise as an accommodation become responsible for,
the obligations of any person, or make any loans or advances, except in any such
case in the ordinary course of business; (iii) authorize any capital
expenditures or purchases of fixed assets other than pursuant to the Company's
existing capital expenditures budget, a copy of which has been delivered to
Parent, except for capital expenditures or purchases which are, in the
aggregate, not in excess of $1,000,000, and except for the repair or replacement
of damaged assets from the proceeds of insurance with respect thereto; or (iv)
enter into or materially amend any contract, agreement, commitment or
arrangement to effect any of the matters prohibited by this Section 4.01(e);
(f) (i) increase the compensation or severance payable or to
become payable to its directors, officers or employees, except for increases in
salary or wages of employees of the Company or its subsidiaries in the ordinary
course of business; (ii) grant any severance or termination pay to any director,
officer or employee of the Company or any of its subsidiaries (except to make
payments required to be made under obligations existing on the date hereof in
accordance with the terms of such obligations); (iii) enter into any employment
or severance agreement with respect to which the total annual compensation or
the aggregated severance payments exceed $150,000 with any prospective officer
or employee of the Company or any of its subsidiaries; (iv) enter into or modify
any agreement with any director of the Company or any of its subsidiaries; (v)
establish, adopt, enter into or amend any collective bargaining agreement,
Company Employee Plan, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers or employees or any of their
beneficiaries, except, in each case of this clause, (x) as may be required by
law or (y) as would not result in a material increase in the cost of maintaining
such collective bargaining agreement, Company Employee Plan, trust, fund, policy
or arrangement and would not otherwise impose any material restraint on the
business or operations of the Company or any of its subsidiaries;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable and collection of accounts receivable), except in
the ordinary course of business or as required by law or GAAP;
(h) make any tax election or settle or compromise any United
States federal, state, local or non-United States tax liability if the effect
thereof would be adverse in any material respect to the Company;
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(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except for the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Reports filed prior to the date of this
Agreement or incurred in the ordinary course of business and except for any
other payment, discharge or satisfaction in an amount not to exceed $75,000 in
the aggregate, which settlement, discharge or satisfaction, in either such case,
provides for a complete release for the Company and its subsidiaries and which
imposes no obligation on the Company and its subsidiaries other than the payment
of money as aforesaid;
(j) make any loan to any director, officer, employee or
independent contractor of the Company or any of its subsidiaries, with the
exception of loans made in order to effect a cashless exercise of any Stock
Option in accordance with its terms or the terms of the plan under which it was
granted or advances for expenses in the ordinary course of business; or
(k) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.01(a) through (j) above.
SECTION 4.02. No Solicitation.
(a) The Company shall not, directly or indirectly, through
any officer, director, representative or agent of the Company or any of
its subsidiaries, and the Company shall use its best efforts to ensure
that the employees of the Company and its subsidiaries do not, solicit
or encourage the initiation of (including by way of furnishing
information) any inquiries or proposals regarding any merger, sale of
assets, sale of shares of capital stock (including, without limitation,
by way of a tender offer) or similar transactions involving the Company
or any subsidiaries of the Company that if consummated would constitute
an Alternative Transaction (as defined in Section 7.01) (any of the
foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"). Nothing contained in this Agreement shall
prevent the Board of Directors of the Company from (i) furnishing
information to a third party which has made a bona fide Acquisition
Proposal that is a Superior Proposal (as defined below) not solicited
in violation of this Agreement, provided that such third party has
executed an agreement with confidentiality provisions substantially
similar to those then in effect between the Company and Parent (except
that such agreement may permit such third party, consistent with the
other terms hereof, to present one or more further proposals to the
Board of Directors of the Company), (ii) subject to compliance with the
other terms of this Section 4.02, including Section 4.02(c),
considering and negotiating a bona fide Acquisition Proposal that is a
Superior Proposal not solicited in violation of this Agreement, (iii)
following receipt of an Acquisition Proposal, taking and disclosing to
its stockholders a position as required by Rules 14d-9 and 14e-2(a) of
the Exchange Act or otherwise making disclosure to the Company's
stockholders to the extent required by applicable law and (iv)
following receipt of an Acquisition Proposal that is a Superior
Proposal,
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modifying its recommendations referred to in Section 5.02 (subject
to the terms of such Section 5.02); provided, however, that, as to
each of clauses (i) and (ii), (x) such actions occur at a time prior
to approval of the Merger and this Agreement at the Company
Stockholders Meeting (or, if the Merger has not been consummated
within 30 days after the Company Stockholders Meeting (except by
reason of the Company's failure to fulfill any obligation under this
Agreement), such actions occur more than 30 days after such Company
Stockholders Meeting) and (y), as to each of clauses (i), (ii), (iii)
and (iv), the Board of Directors of the Company determines in good
faith (on the advice of independent counsel), that there is a
reasonable risk that the Board of Directors would be required to do so
in order to discharge properly its fiduciary duties. For purposes of
this Agreement, a "Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, all of the equity securities of
the Company entitled to vote generally in the election of directors or
all or substantially all the assets of the Company, on terms which the
Board of Directors of the Company in good faith determines to be more
favorable from a financial point of view to its stockholders than the
Merger and the transactions contemplated by this Agreement taking into
account at the time of determination any changes to the financial
terms of this Agreement proposed by Parent.
(b) The Company shall promptly notify Parent and Merger Sub after
receipt of any Acquisition Proposal, or any modification of or
amendment to any Acquisition Proposal, or any request for nonpublic
information relating to the Company or any of its subsidiaries in
connection with an Acquisition Proposal or for access to the
properties, books or records of the Company or any subsidiary by any
person or entity that informs the Board of Directors of the Company or
such subsidiary that it is considering making, or has made, an
Acquisition Proposal. Such notice shall be made orally and in writing,
and shall indicate the identity of the person making the Acquisition
Proposal or intending to make an Acquisition Proposal or requesting
non-public information or access to the books and records of the
Company, the terms of any such Acquisition Proposal or modification or
amendment to an Acquisition Proposal, and whether the Company is
providing or intends to provide the person making the Acquisition
Proposal with access to information concerning the Company as provided
in Section 4.02(a). The Company shall also immediately notify Parent
and Merger Sub, orally and in writing, if it enters into negotiations
concerning material terms and conditions of any Acquisition Proposal.
(c) Except to the extent the Board of Directors of the Company
determines in good faith (on the advice of independent counsel) that
there is a reasonable risk that the Board of Directors would be
required to act to the contrary in order to discharge properly its
fiduciary duties (and, with respect to the approval, recommendation or
entering into any understanding with respect to any Acquisition
Proposal, it may take such contrary action only after the second
business day following Parent's and Merger Sub's receipt of written
notice of the Board of Directors' intention to do so), neither the
Company nor the Board of Directors of the Company shall withdraw or
modify, or propose to withdraw or modify, in a manner adverse to
Parent or Merger Sub, the approval by such Board of Directors of this
Agreement or the Merger; provided, however, that in all events, unless
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this Agreement has been terminated in accordance with its terms, the
Merger and this Agreement shall be submitted for approval and adoption
by the Company's stockholders at the Company Stockholders Meeting and
the Board of Directors shall not recommend that stockholders vote
against approval of the Merger and adoption of this Agreement.
(d) The Company shall immediately cease and cause to be
terminated any existing discussions or negotiations with any persons
(other than Parent and Merger Sub) conducted heretofore with respect to
any of the foregoing. The Company agrees not to release any third party
from the confidentiality and standstill provisions of any agreement to
which the Company is a party. Unless this Agreement has been terminated
in accordance with its terms, the Company shall not redeem the Rights
or waive or amend any provision of the Rights Agreement to permit or
facilitate the consummation of any Acquisition Proposal or Alternative
Transaction.
(e) The Company shall ensure that the officers and directors
investment banker or other advisor or representative retained by the
Company are aware of the restrictions described in this Section 4.02.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Proxy Statement. As promptly as practicable after the
execution of this Agreement, the Company (subject to reasonable review by and
consultation with Parent) shall prepare and file with the SEC) preliminary proxy
materials which shall constitute the Proxy Statement. As promptly as practicable
after comments are received from the SEC thereon and after the furnishing by the
Company (subject to reasonable review by and consultation with Parent) of all
information required to be contained therein, the Company and Parent shall file
with the SEC the definitive Proxy Statement relating to the approval of the
Merger and the adoption of this Agreement by the stockholders of the Company
pursuant to this Agreement.
SECTION 5.02. Company Stockholders Meeting. The Company shall call the
Company Stockholders Meeting as promptly as practicable for the purpose of
voting upon the approval of the Merger and adoption of the Merger Agreement (the
"Company Stockholder Approval"), and the Company shall use its reasonable best
efforts to hold the Company Stockholders Meeting by June 30, 2000. The Proxy
Statement shall include the recommendation of the Board of Directors of the
Company in favor of this Agreement and the Merger. The Company shall solicit
from its stockholders proxies in favor of approval of this Agreement and the
Merger and shall take all other reasonable action necessary or advisable to
secure the vote or consent of stockholders in favor of such approval.
Notwithstanding anything to the contrary herein, the Company shall not be
obligated to take any of the actions set forth in the two preceding sentences of
this Section 5.02 (but not the first sentence of this Section 5.02) to the
extent that the Board of Directors of the Company determines in good faith (on
the advice of independent counsel) that there is a reasonable risk that any such
action would be inconsistent with the proper discharge of its
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fiduciary duties; provided, however, that in no event shall the Board of
Directors recommend that the Company's stockholders vote against approval of the
Merger and adoption of the Merger Agreement at the Company Stockholders Meeting
unless this Agreement has been terminated in accordance with its terms.
SECTION 5.03. Access to Information; Confidentiality. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements or
court orders to which such party is subject (from which the Company shall use
reasonable efforts to be released), the Company shall (and shall cause its
subsidiaries to) (i) afford to the officers, employees, accountants, counsel and
other representatives (collectively the "Representatives") of Parent and,
subject to reasonable confidentiality requirements, its financing sources
reasonable access, upon reasonable prior notice and during normal business hours
during the period after the execution and delivery of this Agreement and prior
to the Effective Time, to its properties, books, contracts, commitments and
records but only to the extent that such access does not unreasonably interfere
with the business and operations of the Company and its Subsidiaries and (ii)
during such period, furnish promptly to Parent all other information concerning
its business, properties and personnel as Parent may reasonably request, and
shall make available to Parent the appropriate individuals (including attorneys,
accountants and other professionals) for discussion of its business, properties
and personnel as Parent may reasonably request. Each party shall keep such
information confidential, and shall cause their respective Representatives to
keep such information confidential in accordance with the terms of the existing
confidentiality letters (the "Confidentiality Letters"), between Parent and the
Company.
SECTION 5.04. Consents; Approvals. Each of the Company, Parent and
Merger Sub each use commercially reasonable efforts to obtain all consents,
waivers, approvals, authorizations or orders (including, without limitation, all
United States and non-United States governmental and regulatory rulings and
approvals), and the Company, Merger Sub and Parent shall make all filings
(including, without limitation, all filings with United States and non-United
States governmental or regulatory agencies) required in connection with the
authorization, execution and delivery of this Agreement by the Company, Merger
Sub and Parent and the consummation by them of the transactions contemplated
hereby. The Company, Merger Sub and Parent shall furnish all information
required to be included in the Proxy Statement or for any application or other
filing to be made pursuant to the rules and regulations of any United States or
non-United States governmental body in connection with the transactions
contemplated by this Agreement. The Company, Merger Sub and Parent shall fully
cooperate with each other in order to obtain all consents, waivers, approvals,
authorizations or orders and to make all required filings in connection
therewith.
SECTION 5.05. Indemnification and Insurance.
(a) The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Company's Charter Documents, which provisions shall not be amended,
modified or otherwise repealed for a period of seven years from the Effective
Time in any manner that would adversely affect the rights thereunder as of the
Effective Time of individuals who at the Effective Time were directors,
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officers, employees or agents of the Company, unless such modification is
required after the Effective Time by law and then only to the minimum extent
required by such law.
(b) The Parent and Surviving Corporation shall, to the fullest
extent permitted under applicable law or under the Surviving Corporation's
Certificate of Incorporation or By-laws, indemnify and hold harmless, each
present and former director, officer or employee of the Company or any of its
subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, (x) arising out of or pertaining to (in whole
or in part) the transactions contemplated by this Agreement or (y) otherwise
with respect to (in whole or in part) any acts or omissions occurring at or
prior to the Effective Time, to the same extent as provided in the Company's
Charter Documents or any applicable contract or agreement set forth in the
Company Disclosure Schedule, as in effect on the date hereof, in each case for a
period of seven years after the date hereof. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time) and subject to the specific terms of any indemnification
contract, (i) any counsel retained by the Indemnified Parties for any period
after the Effective Time shall be reasonably satisfactory to the Surviving
Corporation, (ii) the Parent and Surviving Corporation shall pay expenses in
advance of the final disposition of any such claim, action, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by
applicable law, provided that the person to whom expenses are advanced provides
an undertaking to repay such advance if it is ultimately determined that such
person is not entitled to indemnification,(iii) after the Effective Time, the
Parent and the Surviving Corporation shall pay the reasonable fees and expenses
of such counsel, promptly after statements therefor are received and (iv) the
Surviving Corporation will use all commercially reasonable efforts to assist in
the vigorous defense of any such matter; provided, however, that the Surviving
Corporation shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld); and provided,
further, that, in the event that any claim or claims for indemnification are
asserted or made within such seven-year period, all rights to indemnification in
respect of any such claim or claims shall continue until the disposition of any
and all such claims. The Indemnified Parties as a group may retain only one law
firm to represent them in each applicable jurisdiction with respect to any
single action unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties, in which case each Indemnified Person with respect to
whom such a conflict exists (or group of such Indemnified Persons who among them
have no such conflict) may retain one separate law firm in each applicable
jurisdiction.
(c) The Surviving Corporation shall honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements
and employment agreements set forth in the Company Disclosure Schedule, (the
employee parties under such agreements being referred to as the "Officer
Employees") with the Company's directors and officers (including former
directors and officers) existing at or before the Effective Time, provided such
agreements have not been entered into or modified in violation of Section
4.01(f).
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(d) In addition, Parent will provide, or cause the Surviving
Corporation to provide, for a period of not less than six years after the
Effective Time, the Company's current directors and officers an insurance and
indemnification policy with a reputable and financially sound insurer that
provides coverage for events occurring at or prior to the Effective Time (the
"D&O Insurance") that is no less favorable than the policy maintained by the
Company and its Subsidiaries as of the date hereof or, if substantially
equivalent insurance coverage is unavailable, the most generally favorable
coverage reasonably available; provided, however, that Parent and the Surviving
Corporation, in the aggregate, shall not be required to pay an annual premium
for the D&O Insurance in excess of 150% of the annual premium currently paid by
the Company for such insurance (plus a percentage equal to any cumulative
increase in annual premiums for the same period in any D&O Insurance policy
maintained by Parent), but in such case shall purchase as much such coverage as
is reasonably available for such amount.
(e) From and after the Effective Time, Parent shall
unconditionally guarantee the timely payment of all funds owing by, and the
timely performance of all other obligations of, the Surviving Corporation under
this Section 5.05.
(f) This Section shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, the Officer Employees and their
respective heirs and legal representatives, shall be binding on all successors
and assigns of the Surviving Corporation and shall be enforceable by the
Indemnified Parties.
(g) In the event the Company, Parent or the Surviving Corporation
or any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the
Company, Parent or the Surviving Corporation, as the case may be, or at Parent's
option, Parent, shall assume the obligations set forth in paragraphs (a) and (b)
of this Section.
SECTION 5.06. Notification of Certain Matters. The Company shall give
prompt notice to Parent and Merger Sub, and Parent and Merger Sub shall give
prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would reasonably be expected to
cause any representation or warranty of the notifying party contained in this
Agreement to be materially untrue or inaccurate, or (ii) any failure of the
Company, Parent or Merger Sub, as the case may be, materially to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 5.07. Further Action.
(a) Upon the terms and subject to the conditions hereof, each of
the parties hereto shall use all commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make
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effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. The foregoing covenant shall not include any obligation by
Parent to agree to divest, abandon, license or take similar action with respect
to any material assets (tangible or intangible) of Parent or the Company or any
of their subsidiaries. The term "material" for purposes of the preceding
sentence means any assets to which are attributable annual revenues in an amount
equal to 10% or more of the Company's annual revenues for the fiscal year ended
December 31, 1999.
(b) Without limitation the generality of the foregoing, the
Company will provide, and will cause its subsidiaries and its and their
respective officers, employees and advisors to provide (at the sole cost and
expense of Parent), all reasonable cooperation in connection with the
arrangement of any equity investment and debt financing proposed to be
consummated by Parent substantially contemporaneously with the closing referred
to in Section 1.02 in respect of the transactions contemplated by this
Agreement, or thereafter, including, without limitation, (x) participation in
meetings, due diligence sessions and "road shows," (y) the preparation of
offering memoranda, private placement memoranda, and similar documents, and (z)
the execution and delivery of any customary commitment letters, documents, or
other requested certificates or documents, including comfort letters of
accountants and legal opinions, in each case as may be reasonably requested by
Parent or Merger Sub, provided that the form and substance of any of the
documents referred to in clause (y), and the terms and conditions of any of the
agreements and other documents referred to in clause (z), shall be consistent
with the consummation by Parent of the transactions contemplated by this
Agreement. In connection with the foregoing, Parent hereby agrees to indemnify,
defend and hold harmless, to the same extent, in the same manner and subject to
the same limitations set forth in Section 5.05, each person participating in any
such activities from and against any and all costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation arising out of or pertaining to such
participation, except in the case of such person's bad faith, willful misconduct
or gross negligence.
(c) Neither Parent nor Merger Sub, on one hand, nor the Company
nor any of its subsidiaries, on the other, shall take any action which the
officer or director authorizing such action believes or should reasonably
believe (x) would make any of the representations or warranties of any such
party contained in this Agreement materially untrue or incorrect or (y) prevent
any such party from performing or cause such party not to perform its covenants
hereunder (other than, in the case of the Company, actions permitted by Section
4.02).
SECTION 5.08. Public Announcements. Parent and the Company shall
consult with each other before issuing any press release or making any written
public statement with respect to the Merger or this Agreement and shall not
issue any such press release or make any such public statement without the prior
consent of the other party, which shall not be unreasonably withheld; provided,
however, that either party may, without the prior consent of the other, issue
such press release or make such public statement as may upon the advice of
counsel be required
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by law or the applicable rules and regulations of the New York Stock Exchange or
the American Stock Exchange, as the case may be, if it has used all reasonable
efforts to consult with the other party.
SECTION 5.09. Conveyance Taxes. Parent, Merger Sub and the Company
shall cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions contemplated
hereby that are required or permitted to be filed on or before the Effective
Time, and the Surviving Corporation shall be responsible for the payment of all
such taxes and fees.
SECTION 5.10. Option Plans and Benefits, Etc.
(a) Prior to the Effective Time, the parties to this Agreement
shall take all such actions as shall be necessary to effectuate the provisions
of Section 1.09, including without limitation, timely action by the Board of
Directors of the Company, if any is required, in accordance with the applicable
option plans to elect to pay holders of Company Options, upon any exercise
thereof, the applicable cash amount in lieu of delivery of the Shares and take
any additional action required to ensure that no such Company Options remain
otherwise outstanding after the Effective Time (in each case, including, without
limitation, Company Options granted under the Company's non-employee Directors
Plan).
(b) Parent shall either (i) cause the Company Employee Plans in
effect at the date of this Agreement to remain in effect until the third
anniversary of the Effective Time or (ii) maintain until such date, employee
benefit plans which in the aggregate, provide a substantially similar level of
benefits as those provided under comparable Company Employee Plans with respect
to employees of the Company covered under such plans as of the date of this
Agreement; provided, however, that the foregoing shall not apply to any
provisions of any Company Employee Plan under which employees may receive, or
under which employee benefits are based on, Company Common Stock or to the
extent inconsistent with any employment agreement with any employee.
(c) Parent shall, and shall cause the Surviving Corporation to,
honor without modification all employee severance plans (or policies) and
employment and severance agreements of the Company or any of its Subsidiaries
(i) which have been delivered to Parent prior to the execution and delivery of
this Agreement, or (ii) which are hereafter entered into accordance with Section
4.01 of the Company Disclosure Schedule as such agreements shall be in effect in
accordance with the terms of this Agreement at the Effective Time.
SECTION 5.11. Rights Agreement. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section 2.22),
if any, necessary in order to render the Rights (as defined in the Rights
Agreement) inapplicable to the Merger and the other transactions contemplated by
this Agreement (including any financing in connection therewith).
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SECTION 5.12. Accountant's Letters. Upon reasonable notice from Parent,
the Company shall use reasonable efforts to cause Ernst & Young LLP to deliver
to Merger Sub, a letter covering such matters as are reasonably requested by
Parent, and as are customarily addressed in accountants' "comfort letters."
SECTION 5.13. Standstill. Each of Parent, on one hand, and the Company,
on the other hand, agrees that until the expiration of six months from the date
of termination of this Agreement, without the prior written consent of the other
party, it will not (a) in any manner acquire, agree to acquire or make any
proposal to acquire, directly or indirectly (i) a substantial portion of the
assets of the other party and its subsidiaries taken as a whole or (ii) five
percent (5%) or more of the issued and outstanding shares of common stock of the
other party, (b) make or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
SEC) to vote, or seek to advise or influence any person with respect to the
voting of, any voting securities of the other party or any of its subsidiaries
or (c) form, join or in any way participate in a "group" (within the meaning of
Section 13(d) of the Exchange Act) with respect to any voting securities of the
other party or any of its subsidiaries.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of the
Company;
(b) Antitrust. All waiting periods applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated, and all
clearances and approvals required to be obtained in respect of the Merger prior
to the Effective Time under any Non-U.S. Monopoly Laws shall have been obtained,
except where the failure to have obtained any such clearances or approvals with
respect to any Non-U.S. Monopoly Laws could not reasonably be expected to have a
Material Adverse Effect on the Company, Parent or their respective subsidiaries;
(c) Governmental Actions. There shall not have been instituted,
pending or threatened any action or proceeding (or any investigation or other
inquiry that is reasonably likely to result in such an action or proceeding) by
any governmental authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction, United
States or non-United States, that is reasonably likely to result in an order,
nor shall there be in effect any judgment, decree or order of any governmental
authority, administrative agency or court of competent jurisdiction, or any
other legal restraint (i) preventing or seeking to prevent consummation of the
Merger or (ii) as a condition to the obligations of Parent and Merger Sub,
prohibiting or seeking to prohibit, or limiting or seeking to limit, Parent from
exercising all material rights and privileges pertaining to its ownership of the
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Surviving Corporation or any investor in Parent from owning and exercising all
material rights and privileges pertaining to its ownership of its interest
therein or the ownership or operation by Parent or any of its subsidiaries of
all or a material portion of the business or assets of the Surviving Corporation
and its subsidiaries, or compelling or seeking to compel Parent or any of its
subsidiaries to dispose of or hold separate all or any material portion of the
business or assets of Parent or any of its subsidiaries (including the Surviving
Corporation and its subsidiaries), as a result of the Merger or the transactions
contemplated by this Agreement; and
(d) Illegality. No statute, rule, regulation or order shall be
enacted, entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal.
SECTION 6.02. Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all respects (without for this purpose giving effect to qualifications of
materiality contained in such representations and warranties) on and as of the
Effective Time, with the same force and effect as if made on and as of the
Effective Time, except for (i) changes contemplated by this Agreement, (ii)
those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date, subject
to clause (iii)), or (iii) where the failure to be true and correct would not,
individually or in the aggregate with all other such failures, have a Material
Adverse Effect, and Parent and Merger Sub shall have received a certificate of
the Company to such effect signed by the Chief Executive Officer or Chief
Financial Officer of the Company;
(b) Agreements and Covenants. The Company shall in all material
respects have performed or complied with the agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by the Chief Executive Officer or Chief Financial Officer of
the Company; and
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by the Company for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by the Company, except where the failure to
receive such consents, waivers, approvals, authorizations or orders would not,
individually or in the aggregate with all other such failures, have a Material
Adverse Effect on the Company or Parent.
(d) Rights Agreement. A Distribution Date shall not have occurred
under the Rights Agreement.
SECTION 6.03. Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
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(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement (other than
those set forth in Sections 3.03(iii) or 3.04) shall be true and correct in all
respects (without for this purpose giving effect to qualifications of
materiality contained in such representations and warranties) on and as of the
Effective Time, with the same force and effect as if made on and as of the
Effective Time, except for (i) changes contemplated by this Agreement, (ii)
those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date, subject
to clause (iii)), or (iii) where the failure to be true and correct would not,
individually or in the aggregate with all other such failures, have a Material
Adverse Effect, and the Company shall have received a certificate to such effect
signed by the Chief Executive Officer or Chief Financial Officer of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall in all
material respects have performed or complied with the agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate of
Parent and Merger Sub to such effect signed by the Chief Executive Officer or
Chief Financial Officer of Parent and the President or Vice President of Merger
Sub;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by Parent or Merger Sub for the authorization, execution and delivery of
this Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent or Merger Sub, except where
the failure to receive such consents, waivers, approvals, authorizations or
orders would not, individually or in the aggregate with all other such failures,
have a Material Adverse Effect on the Company or Parent;
(d) Financial Advisor Opinion. The opinion from Salomon Smith
Barney Inc. referred to in Section 2.21 shall not have been withdrawn as of the
date of the Proxy Statement; and
(e) Solvency. The Company shall have received from an investment
banking or accounting firm satisfactory to the Company an opinion in form and
substance satisfactory to the Company to the effect that the consummation by
Parent and Merger Sub of the transactions contemplated by this Agreement,
including, without limitation, the entering into of any financing agreement
which may be necessary in connection therewith, will not render Parent or the
Surviving Corporation insolvent or unable to pay its obligations as they mature.
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company:
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(a) by mutual written consent duly authorized by the
Boards of Directors of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall
not have been consummated by September 30, 2000 (other than for the
reasons set forth in clause (d) below); provided, however, that the
right to terminate this Agreement under this Section 7.01(b) shall not
be available to any party whose failure to fulfill any obligation under
this Agreement has been the principal cause of, or resulted in, the
failure of the Merger to be consummated on or prior to such date; or
(c) by either Parent or the Company if a court of
competent jurisdiction or governmental, regulatory or administrative
agency or commission having authority with respect thereto shall have
issued a nonappealable final order, decree or ruling or taken any other
nonappealable final action having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger; or
(d) by Parent if the Company Stockholders Meeting has not
been held by July 31, 2000 or by Parent or the Company if the
stockholders of the Company shall not have approved the Merger and
adopted this Agreement at the Company Stockholders Meeting; or
(e) by Parent, if, whether or not permitted to do so by
this Agreement, the Board of Directors of the Company or the Company
shall (x) (i) withdraw, modify or change its approval or recommendation
of this Agreement or the Merger in a manner adverse to Parent; (ii)
approve or recommend to the stockholders of the Company an Alternative
Transaction; or (iii) approve or recommend that the stockholders of the
Company tender their shares in any tender or exchange offer that is an
Alternative Transaction, or (y) take any position or make any
disclosures to the Company's stockholders permitted pursuant to Section
4.02 which has the effect of any of the foregoing; or
(f) by the Company, in order to accept a Superior
Proposal, provided that the Merger and this Agreement shall not
theretofore have been approved at the Company Stockholders Meeting, the
Board of Directors of the Company determines in good faith (on the
advice of independent counsel), that there is a reasonable risk that it
would be required to accept such proposal in order to discharge
properly its fiduciary duties, the Company shall in fact accept such
proposal, and the Company shall have complied in all respects with the
provisions of Section 4.02; or
(g) by Parent or the Company, if any representation or
warranty of the Company, or Parent and Merger Sub, respectively, set
forth in this Agreement shall be untrue in any material respect when
made, such that the conditions set forth in Section 6.02(a) or 6.03(a),
as the case may be, would not be satisfied (in each case, a
"Terminating Misrepresentation"); provided that, if such Terminating
Misrepresentation is curable prior to September 30, 2000 by the Company
or Parent, as the case may be, through the exercise of its reasonable
best efforts to eliminate, undo or reverse the event
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or circumstance giving rise to such Terminating Misrepresentation and
for so long as the Company or Parent, as the case may be, continues to
exercise such reasonable best efforts, neither Parent nor the Company,
respectively, may terminate this Agreement under this Section 7.01(g);
or
(h) by Parent, if any representation or warranty of the
Company shall have become untrue in any material respect such that the
condition set forth in Section 6.02(a) would not be satisfied, or by
the Company, if any representation or warranty of Parent and Merger Sub
shall have become untrue in any material respect such that the
condition set forth in Section 6.03(a) would not be satisfied (in each
case, a "Terminating Change"), in either case other than by reason of a
Terminating Breach (as hereinafter defined); provided that, if any such
Terminating Change is curable prior to September 30, 2000 by the
Company or Parent, as the case may be, through the exercise of its
reasonable best efforts, and for so long as the Company or Parent, as
the case may be, continues to exercise such reasonable best efforts,
neither Parent nor the Company, respectively, may terminate this
Agreement under this Section 7.01(h); or
(i) by Parent or the Company, upon a material breach of
any covenant or agreement on the part of the Company or Parent,
respectively, set forth in this Agreement such that the conditions set
forth in Section 6.02(b) or 6.03(b), as the case may be, would not be
satisfied (in each case, a "Terminating Breach"); provided that, except
for any breach of the Company's obligations under Section 4.02, if such
Terminating Breach is curable prior to September 30, 2000 by the
Company or Parent, as the case may be, through the exercise of its
reasonable best efforts and for so long as the Company or Parent, as
the case may be, continues to exercise such reasonable best efforts,
neither Parent nor the Company, respectively, may terminate this
Agreement under this Section 7.01(i).
As used herein, "Alternative Transaction" means any of (i) a
transaction pursuant to which any person (or group of persons) other than Parent
or its affiliates (a "Third Party") acquires or would acquire more than 20% of
the outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 20% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination, or (iii) any transaction pursuant to which any Third Party acquires
or would acquire control of assets (including for this purpose the outstanding
equity securities of subsidiaries of the Company and securities of the entity
surviving any merger or business combination including any of the Company's
subsidiaries) of the Company, or any of its subsidiaries, having a fair market
value (as determined by the Board of Directors of the Company in good faith)
equal to more than 20% of the fair market value of all the assets of the Company
and its subsidiaries, taken as a whole, immediately prior to such transaction,
or (iv) any other material consolidation, business combination,
recapitalization, redemption, extraordinary dividend or similar transaction
involving the Company or any of the Company Significant Subsidiaries (other than
any acquisition by the Company, for fair market value, of any business, or any
equity interest therein,
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having a fair market value (as determined by the Board of Directors of the
Company in good faith) equal to no more than 20% of the fair market value of all
the assets of the Company and its subsidiaries, taken as a whole, immediately
prior to such transaction), other than the transactions contemplated by this
Agreement; provided, however, that the term Alternative Transaction shall not
include any acquisition of securities by a broker dealer in connection with a
bona fide public offering of such securities. In the case of any Alternative
Transaction which has not, directly or indirectly, through any officer,
director, employee, representative or agent of the Company or any of its
subsidiaries, been solicited or encouraged by the Company, and which the Board
of Directors of the Company has rejected, recommended that stockholders of the
Company do not accept or approve, and used reasonable best efforts in good faith
to prevent, each reference to the figure 20% in the preceding sentence shall
refer instead to the figure 35%.
SECTION 7.02. Effect of Termination. In the event of the valid
termination of this Agreement pursuant to Section 7.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto or any of its affiliates, directors, officers or stockholders except that
(i) the Company or Parent or Merger Sub may have liability as set forth in
Section 5.07, Section 7.03 and Section 8.01 hereof, and (ii) nothing herein
shall relieve the Company, Parent or Merger Sub from liability for any willful
material breach hereof (it being understood that the mere existence of a
Material Adverse Effect, by itself, shall not constitute such a willful material
breach).
SECTION 7.03. Parent's Fees and Expenses.
(a) Except as set forth in this Section 7.03, all fees and
expenses incurred by Parent and/or Merger Sub in connection with this Agreement
and the transactions contemplated hereby shall be paid by Parent and/or Merger
Sub, whether or not the Merger is consummated; provided, however, that Parent
and the Company shall share equally all SEC filing fees and printing expenses
incurred in connection with the printing and filing of the Proxy Statement
(including any preliminary materials related thereto) and any amendments or
supplements thereto.
(b) The Company shall pay to Parent (x) Parent's and Merger Sub's
respective actual, documented and reasonable out-of-pocket expenses, relating to
the transactions contemplated by this Agreement (including, but not limited to,
reasonable fees and expenses of counsel and accountants, commitment fees with
respect to the Financing and out-of-pocket expenses and reasonable fees of
financial advisors) ("Parent Expenses"), such payment of Parent Expenses not to
exceed $1,000,000, and (y) a fee of 3% of the total of the Per Share Amounts
respecting all the Shares (the "Parent Fee"), in each case upon the first to
occur of any of the following events:
(i) the termination of this Agreement by Parent or the
Company pursuant to Section 7.01(d) or (e)(i), provided that, if this
Agreement is terminated because the stockholders have not approved and
adopted the Merger and this Agreement at the Company's Stockholders
Meeting, the Parent Fee and Parent Expenses shall only be payable under
this clause (i) if there shall occur a Payment Trigger; or
(ii) the termination of this Agreement by Parent pursuant
to clause (x)(ii) or (x)(iii) of Section 7.01(e) or the corresponding
application of clause (y) thereof to clause
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(x)(ii) or (x)(iii); or
(iii) the termination of this Agreement by the Company
pursuant to Section 7.01(f); or
(iv) the termination of this Agreement by Parent pursuant
to Section 7.01(i) as a result of a willful breach by the Company;
provided that the Parent Fee and Parent Expenses shall only be payable
under this clause (iv) if there shall occur a Payment Trigger.
The term "Payment Trigger" means either (A) at the time of the Company
Stockholders Meeting, in the case of clause (i) above, or at the time of the
Terminating Breach, in the case of clause (iv) above, there shall be outstanding
or purport to be outstanding an Acquisition Proposal which has been made
directly to stockholders of the Company or has otherwise become publicly known
or known to holders of 10% or more of the Company Common Stock or there shall be
outstanding an announcement by any credible third party of an intention to make
an Acquisition Proposal which, in either case, would if consummated constitute
an Alternative Transaction, or (B) an Alternative Transaction shall be publicly
announced by the Company or any Third Party and such transaction shall be
consummated within twelve months following the date of termination of this
Agreement on substantially the terms so announced.
(c) Upon a termination of this Agreement by Parent pursuant to
Section 7.01(g) or (i), the Company shall pay to Parent the Parent Expenses
relating to the transactions contemplated by this Agreement, but in no event
more than $1,000,000.
(d) The Parent Fee and/or Parent Expenses payable pursuant to
Section 7.03(b) or Section 7.03(c) shall be paid within three business days
after a demand for payment following the first to occur of any of the events
described in Section 7.03(b) or Section 7.03(c).
(e) Parent agrees that the payments provided for in Section 7.03
shall be the sole and exclusive remedies of Parent upon a termination of this
Agreement (but only, in the case of Sections 7.01(g) or (i), if the Terminating
Misrepresentation or Terminating Breach is not the result of willful
misconduct).
SECTION 7.04. Company's Fees and Expenses.
(a) Except as set forth in this Section 7.04, all fees and
expenses incurred by the Company in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Company, whether or not
the Merger is consummated; provided, however, that the Company and Parent shall
share equally all SEC filing fees and printing expenses incurred in connection
with the printing and filing of the Proxy Statement (including any preliminary
materials related thereto) and any amendments or supplements thereto.
(b) Parent shall pay to the Company (x) the Company's actual,
documented and reasonable out-
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of-pocket expenses, relating to the transactions contemplated by this Agreement
(including, but not limited to, reasonable fees and expenses of counsel and
accountants, and out-of-pocket expenses and reasonable fees of financial
advisors) ("Company Expenses"), such payment of Company Expenses not to exceed
$1,000,000, and (y) a fee of 1% of the total of the Per Share Amounts respecting
all the Shares (the "Company Fee") upon the termination of this Agreement by
Company pursuant to Section 7.01(i) as a result of a willful breach by Parent or
Merger Sub of any material covenant herein contained.
(c) Upon a termination of this Agreement by the Company pursuant
to Section 7.01(g) or (i), the Parent shall pay to the Company the Company
Expenses relating to the transactions contemplated by this Agreement, but in no
event more than $1,000,000.
(d) The Company Expenses and/or Company Fee payable pursuant to
Section 7.04(b) or Section 7.04(c) shall be paid within three business days
after a demand for payment following the first to occur of any of the events
described in Section 7.04(b) or Section 7.04(c).
(e) The Company agrees that the payments provided for in Section
7.04 shall be the sole and exclusive remedies of the Company upon a termination
of this Agreement (but only, in the case of Sections 7.01(g) or (i), if the
Terminating Misrepresentation or Terminating Breach is not the result of willful
misconduct). The Company and Parent agree that the Company Fee and Company
Expenses shall be payable in the event that the Merger is not consummated
because Parent does not receive the proceeds of financing therefor, in which
case payment of the Company Fee and Company Expenses shall be the Company's sole
and exclusive remedy.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Effectiveness of Representations, Warranties and
Agreements.
(a) Except as otherwise provided in this Section 8.01, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. To the extent that as of the date hereof (i) a Responsible
Officer of Parent had actual knowledge that any representation or warranty of
the Company was untrue or incorrect such that conditions to the obligations of
Parent and Merger Sub to effect the Merger pursuant to Section 6.02(a) would not
be satisfied and (ii) no Responsible Officer of the Company had actual knowledge
that such representation or warranty was untrue or incorrect, then the failure
of such representation or warranty to be true and correct in such respect shall
no longer be a condition to the obligations of Parent and Merger Sub to effect
the Merger. To the extent that as of the date hereof (i) a Responsible Officer
of the Company had actual knowledge that any representation or warranty of
Parent or Merger Sub was untrue or incorrect such that the conditions to the
Company's obligations to effect the Merger pursuant to Section 6.03(a) would not
be satisfied and (ii) no Responsible Officer of Parent had actual knowledge that
such representation or warranty was untrue or incorrect, then the failure of
such representation or warranty to be true and correct in such respect shall no
longer be a condition to the Company's obligation to effect
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the Merger. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case may be, except that the agreements set
forth in Article I and this Article VIII and Sections 5.05, 5.07 and 5.10 and
any other agreement in this Agreement which contemplates performance after the
Effective Time shall survive the Effective Time indefinitely in accordance with
their terms and those set forth in Sections 5.07(b), 5.13, 7.02 and 7.03 and
this Article VIII shall survive the termination of this Agreement. The
provisions of the Confidentiality Letters (except the "standstill" or similar
provisions therein limiting Parent from proposing or entering into certain
transactions or taking certain actions involving the Company or its securities,
which shall be superseded by Section 5.13 hereof) regarding the non-disclosure
of confidential information shall survive termination of this Agreement.
(b) Any disclosure made with reference to one or more Sections of
the Company Disclosure Schedule shall be deemed disclosed with respect to each
other section therein as to which such disclosure is relevant provided that such
relevance is reasonably apparent. Disclosure of any matter in the Company
Disclosure Schedule shall not be deemed an admission that such matter is
material. No statement contained in any certificate or schedule required to be
furnished by any party hereto pursuant to the provisions of this Agreement,
including the Company Disclosure Schedule shall contain any untrue statement of
material fact.
SECTION 8.02. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally or by overnight courier to the
parties at the following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or at such other
address or telecopy number for a party as shall be specified by like notice):
(a) If to Parent:
Autotote Corporation
750 Lexington Avenue
25th Floor
New York, NY 10022
Attn: A. Lorne Weil, Chairman and Chief
Executive Officer
Telecopy: (212) 754-2372
Confirm: (212) 754-2233
With a copy to:
Autotote Corporation
750 Lexington Avenue
25th Floor
New York, NY 10022
Attn: Martin E. Schloss, Vice President and
General Counsel
Telecopy: (212) 754-2372
Confirm: (212) 754-2233
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With a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Peter G. Smith, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
If to Merger Sub:
ATX Enterprises, Inc.
750 Lexington Avenue
25th Floor
New York, NY 10022
Attn: Martin E. Schloss
Telecopy: (212) 754-2372
Confirm: (212) 754-2233
With a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Peter G. Smith, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
(b) If to the Company:
Scientific Games Holdings Corp.
1500 Bluegrass Lakes Parkway
Alpharetta, GA 30004
Attn: William G. Malloy, Chairman, President
and Chief Executive Officer
Telecopy: (770) 343-8798
Confirm: (770) 664-3742
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With a copy to:
Scientific Games Holdings Corp.
1500 Bluegrass Lakes Parkway
Alpharetta, GA 30004
Attn: C. Gray Bethea, Vice President,
Secretary and General Counsel
Telecopy: (678) 297-5118
Confirm: (770) 664-3719
With a copy to:
Smith, Gambrell & Russell, LLP
1230 Peachtree Street, Suite 3100
Atlanta, GA 30309
Attn.: Howard E. Turner, Esq.
Telecopy: (404) 685-6894
Confirm: (404) 815-3594
SECTION 8.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliates" means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
(b) "business day" means any day other than a day on
which banks in New York are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and
"under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause
the direction of the management or policies of a person, whether
through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise;
(d) "dollars" or "$" means United States dollars;
(e) "knowledge" or "best knowledge" means, with respect
to any matter in question, that the Responsible Officers of the Company
or Parent or Merger Sub, as the case may be, have or at any time had
actual knowledge of such matters. "Responsible Officers" for purposes
of this definition means the Chief Executive Officer, the President,
any Executive or Senior Vice President or Corporate Vice President, the
Chief Financial Officer or the General Counsel of any such person;
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(f) "person" means an individual, corporation,
partnership, limited liability company, association, trust,
unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the
Surviving Corporation, Parent or any other person means any
corporation, partnership, joint venture or other legal entity of which
the Company, the Surviving Corporation, Parent or such other person, as
the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
SECTION 8.04. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after approval
of the Merger and this Agreement by the stockholders of the Company, no
amendment may be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver. At any time prior to the Effective Time, any
party hereto may with respect to any other party hereto (a) extend the time for
the performance of any of the obligations or other acts, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
SECTION 8.06. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.07. Severability.
(a) If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon a determination that any term or other provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
(b) The Company and Parent agree that the Fee is fair and
reasonable in the circumstances. If a court of competent jurisdiction shall
nonetheless, by a final, non-appealable judgment, determine that the amount of
the Fee exceeds the maximum amount permitted by law, then the amount of the Fee
shall be reduced to the maximum amount permitted by law in the circumstances, as
determined by such court of competent jurisdiction.
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SECTION 8.08. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letters, except to the extent specifically superseded hereby),
both written and oral, among the parties, or any of them, with respect to the
subject matters hereof and thereof, except as otherwise expressly provided
herein.
SECTION 8.09. Assignment. This Agreement shall not be assigned by
operation of law or otherwise, except that all or any of the rights of Parent
and/or Merger Sub hereunder may be assigned to any wholly-owned, direct or
indirect, subsidiary of Parent, provided that no such assignment shall relieve
the assigning party of its obligations hereunder.
SECTION 8.10. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Section 5.05 (which is intended to be for the benefit of the Indemnified
Parties and Officer Employees and may be enforced by such Indemnified Parties
and Officer Employees).
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 8.12. Governing Law; Jurisdiction.
(a) This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware applicable to
contracts executed and fully performed within the State of Delaware.
(b) Each of the parties hereto submits to the exclusive
jurisdiction of the state and federal courts of the United States located in the
State of Delaware with respect to any claim or cause of action arising out of
this Agreement or the transactions contemplated hereby.
(c) Each of the parties to this Agreement (i) consents to submit
itself to the personal jurisdiction of such court in the event that any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, (ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (iii)
agrees that it will not bring any action in relation to this Agreement, the
Merger or any of the other transactions contemplated by this Agreement in any
court other than such court in the State of Delaware.
SECTION 8.13. Counterparts. This Agreement may be executed in two or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when
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executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.15. Performance of Obligations. Unless otherwise previously
performed, Parent shall cause Merger Sub to perform all of its obligations set
forth in this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
AUTOTOTE CORPORATION
By /s/
---------------------------------
Name:
Title:
ATX ENTERPRISES, INC.
By /s/
---------------------------------
Name:
Title:
Scientific Games HOLDINGS
CORP.
By /s/
---------------------------------
Name:
Title:
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APPENDIX B
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
May 18, 2000
The Board of Directors
Scientific Games Holdings Corp.
1500 Bluegrass Lakes Parkway
Alpharetta, Georgia 30201
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Scientific Games Holdings Corp.
("Scientific Games") of the Merger Consideration (defined below) provided for in
the Agreement and Plan of Merger, dated as of May 18, 2000 (the "Merger
Agreement"), among Autotote Corporation ("Autotote"), ATX Enterprises, Inc., a
wholly owned subsidiary of Autotote ("Merger Sub"), and Scientific Games. As
more fully described in the Merger Agreement, (i) Merger Sub will be merged with
and into Scientific Games (the "Merger") and (ii) each outstanding share of the
common stock, par value $0.001 per share, of Scientific Games (the "Scientific
Games Common Stock") will be converted into the right to receive $26.00 in cash
(the "Merger Consideration").
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Scientific Games and certain senior officers and other
representatives and advisors of Autotote concerning the business, operations and
prospects of Scientific Games. We examined certain publicly available business
and financial information relating to Scientific Games as well as certain
financial forecasts for Scientific Games and other information and data for
Scientific Games which were provided to or otherwise discussed with us by the
management of Scientific Games. We reviewed the financial terms of the Merger as
set forth in the Merger Agreement in relation to, among other things: current
and historical market prices and trading volumes of the Scientific Games Common
Stock; the financial condition and historical and projected earnings and other
operating data of Scientific Games; and the capitalization of Scientific Games.
We considered, to the extent publicly available, the financial terms of other
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of Scientific Games. In connection with
our engagement, we were requested to approach, and we held discussions with,
third parties to solicit indications of interest in the possible acquisition of
Scientific Games. In addition to the foregoing, we conducted such other analyses
and examinations and considered such other financial, economic and market
criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us by Scientific
Games, we have been advised by the management of Scientific Games that such
forecasts and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of Scientific Games as to the future financial performance of
Scientific Games. We have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Scientific Games nor have we made any
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The Board of Directors
Scientific Games Holdings Corp.
May 18, 2000
Page 2
physical inspection of the properties or assets of Scientific Games. Our opinion
expresses no view as to, and does not address, the relative merits of the Merger
as compared to any alternative business strategies that might exist for
Scientific Games or the effect of any other transaction in which Scientific
Games might engage. Our opinion is necessarily based upon information available
to us, and financial, stock market and other conditions and circumstances
existing and disclosed to us, as of the date hereof.
Salomon Smith Barney Inc. has acted as financial advisor to Scientific Games in
connection with the proposed Merger and will receive a fee for such services, a
significant portion of which is contingent upon the consummation of the Merger.
We and our affiliates have in the past provided investment banking services to
Scientific Games unrelated to the proposed Merger, for which services we have
received compensation. In the ordinary course of our business, we and our
affiliates may actively trade or hold the securities of Scientific Games and
Autotote for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition, we and our affiliates (including Citigroup Inc. and its affiliates)
may maintain relationships with Scientific Games, Autotote and their respective
affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Scientific Games in its evaluation of
the proposed Merger, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Merger.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Merger Consideration is fair, from a
financial point of view, to the holders of Scientific Games Common Stock.
Very truly yours,
/s/ SALOMON SMITH BARNEY INC.
SALOMON SMITH BARNEY INC.
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APPENDIX C
DISSENTERS' APPRAISAL RIGHTS
(Section 262 of the Delaware General Corporation Law)
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SECTION 262 -- APPRAISAL RIGHTS. (a) Any stockholder of a corporation
of this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to ss.228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a
non-stock corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of a
member of a non-stock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest in
one or more shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to ss.251
(other than a merger effected pursuant to ss.251 (g) of this
title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of
this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof,
at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities
exchange or designated as a national market system security on
an interdealer quotation system by National Association of
Securities Dealers, Inc. or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of ss.251 of this
title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of
any class or series of stock of a constituent corporation if
the holders thereof are required by the terms of an agreement
of merger or consolidation pursuant to ss.ss.251, 252, 254,
257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or
depository receipts in respect thereof;
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares
of stock (or depository receipts in respect thereof)
or depository receipts at the effective date of the
merger or consolidation will be either listed on a
national securities exchange or designated as a
national market system security on an interdealer
quotation system by the National Association of
Securities Dealers, Inc. or held of record by more
than 2,000 holders;
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c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing
subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or
fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss.253 of this
title is not owned by the parent corporation immediately prior
to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall
be available for the shares of any class or series of its
stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the
certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly
as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for
approval at a meeting of stockholders, the corporation, not
less than 20 days prior to the meeting, shall notify each of
its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of
the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand
the appraisal of such stockholder's shares shall deliver to
the corporation, before the taking of the vote on the merger
or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand
the appraisal of such stockholder's shares. A proxy or vote
against the merger or consolidation shall not constitute such
a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10
days after the effective date of such merger or consolidation,
the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to ss.228
or ss.253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or
within ten days thereafter, shall notify each of the holders
of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or
series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that,
if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any
class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given
on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder
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intends thereby to demand the appraisal of such holder's
shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each
such constituent corporation shall send a second notice before
the effective date of the merger or consolidation notifying
each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights
of the effective date of the merger or consolidation or (ii)
the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after
such effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given
shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is
fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d)
hereof and who is otherwise entitled to appraisal rights, may
file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time
within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept
the terms offered upon the merger or consolidation. Within 120
days after the effective date of the merger or consolidation,
any stockholder who has complied with the requirements of
subsections (a) and (d) hereof upon written request, shall be
entitled to receive from the corporation surviving the merger
or resulting from the consolidation a statement setting forth
the aggregate number of shares not voted in favor of the
merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed
to the stockholder within 10 days after such stockholder's
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after such
service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing
the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving
or resulting corporation. If the petition shall be filed by
the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in
the City of Wilmington, Delaware or such publication as the
Court deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting
corporation.
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(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have
become entitled to appraisal rights. The Court may require the
stockholders who have demanded an appraisal for their shares
and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if
any stockholder fails to comply with such direction, the Court
may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair
value exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining
such fair value, the Court shall take into account all
relevant factors. In determining the fair rate of interest,
the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of
the proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in
the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed
to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder
whose name appears on the list filed by the surviving or
resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates
of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing
such stock. The Court's decree may be enforced as other
decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this
State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal
rights as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock
(except dividends or other distributions payable to
stockholders of record at a date which is prior to the
effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed
within the time provided in subsection (e) of this section, or
if such stockholder shall deliver to the surviving or
resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such
terms as the Court deems just.
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(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation
shall have the status of authorized and unissued shares of the
surviving or resulting corporation.
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SCIENTIFIC GAMES HOLDINGS CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SCIENTIFIC GAMES HOLDINGS CORP. (THE "COMPANY")
IN CONNECTION WITH THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON _____, 2000
The undersigned hereby appoints William G. Malloy, Cliff O. Bickell
and C. Gray Bethea, Jr., and each of them, with full power of substitution, as
proxies and attorneys-in-fact on behalf of and in the name of the undersigned
to represent the undersigned and to vote all shares of Scientific Games
Holdings Corp. common stock held of record by the undersigned at the close of
business on June 9, 2000 and entitled to vote at the Special Meeting of
Stockholders of Scientific Games Holdings Corp. to be held at the Atlanta
Windward Hilton Garden Inn, 4025 Windward Concourse, Alpharetta, Georgia 30005
at 10:00 A.M. local time, on _____________, 2000, or at any adjournments or
postponements thereof, on the proposal for the approval and adoption of the
Agreement and Plan of Merger dated as of May 18, 2000 by and among Scientific
Games Holdings Corp., Autotote Corporation and ATX Enterprises, Inc. and the
transactions contemplated thereby, as described in the proxy statement for the
Special Meeting, and upon such other matters as may properly come before the
Special Meeting.
This card also constitutes directions to the Trustee of the Scientific
Games Holdings Corp. 401(K) Plan and Retirement Savings Plan by participants in
such plan.
(SEE REVERSE SIDE)
PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE: [X].
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE MERGER
PROPOSAL.
The Board of Directors Recommends a Vote FOR the Merger Proposal.
1. Approval and Adoption of the Agreement and Plan of Merger and the
transactions Contemplated Thereby.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
as further described in Scientific Games' Notice of Special Meeting of
Stockholders and Proxy Statement, receipt of which is hereby
acknowledged.
2. In the discretion of the Proxies named herein, the Proxies are
authorized to vote upon other matters as may properly come before the
meeting or any adjournments or postponements thereof.
The signer hereby revokes all Proxies
heretofore given by the signer to vote
at said meeting or any adjournments
or postponements thereof.
Please mark, then date and sign this
proxy, exactly as your name(s) appear
hereon, and return this entire proxy
card in the enclosed postage paid
envelope. When shares are held by joint
tenants, both should sign. When signing
as attorney, as executor, administrator,
trustee, guardian or in any other
fiduciary capacity, please give full
title as such. If a corporation, please
sign in full corporate name by the
president or other authorized officer.
If a partnership, please sign in full
partnership name by authorized person.
SIGNED: ________________________________
SIGNED: ________________________________
DATED: _________________________________
