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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
SODAK GAMING, INC.
- --------------------------------------------------------------------------------
(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.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock $.001 par value
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(2) Aggregate number of securities to which transaction applies: 22,814,140
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(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 state how it was determined): $10.00;
(.0002 X $10.00 X 22,814,140 shares)
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(4) Proposed maximum aggregate value of transaction: $228,141,400
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(5) Total fee paid: $45,628.28
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/X/ 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 date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Board of Directors of Sodak Gaming, Inc. has approved the merger of
Sodak with a subsidiary of International Game Technology. Under the merger
agreement, each outstanding share of Sodak common stock will be converted into
the right to receive $10.00 in cash, without interest.
We cannot complete the merger unless we obtain the approval of Sodak
stockholders owning at least a majority of Sodak's outstanding common stock and
unless we obtain the necessary regulatory approvals described in this document.
We are inviting you, as a holder of Sodak common stock, to attend a special
meeting to vote on the merger proposal.
The special meeting of Sodak's stockholders will be held at 11:00 a.m.,
local time, on Wednesday, July 7, 1999, at the Rushmore Plaza Holiday Inn, 505
North 5(th) Street, Rapid City, South Dakota.
We encourage you to read this entire document carefully. This document
provides detailed information about the merger we are proposing, and includes
the merger agreement as Appendix A. You can also obtain information about Sodak
from publicly available documents filed with the Securities and Exchange
Commission.
Your Board of Directors has determined that the merger is in the best
interests of Sodak and its stockholders, and has unanimously approved the merger
agreement and the merger. In making its determination, the Board took into
account, among other things, the opinion, dated March 10, 1999, of Sodak's
financial advisor, Salomon Smith Barney, that the $10.00 per share cash
consideration to be received by the stockholders in the merger was fair to the
stockholders from a financial point of view. THE BOARD UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER.
Your vote is very important. Whether or not you plan to attend the special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us. A prepaid return envelope is provided for this purpose. If you
date and mail your proxy card without indicating how you want to vote, your
proxy will be counted as a vote "for" adoption of the merger agreement and the
merger. If you do not return your card or instruct your broker how to vote any
shares held for you in your broker's name, the effect will be a vote against the
merger. You may revoke your proxy at any time before it is exercised and it will
not be used if you attend the meeting and prefer to vote in person. Your Board
and I urge all stockholders to be present in person or by proxy.
If the merger is consummated, you will receive instructions for surrendering
your common stock certificates in exchange for $10.00 cash for each share and a
letter of transmittal to be used for this purpose. You should not submit your
stock certificates for exchange until you have received the instructions and the
letter of transmittal.
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY CARD IN THE
ENCLOSED ENVELOPE.
Sincerely yours,
/s/ Roland W. Gentner
ROLAND W. GENTNER
Chief Executive Officer
Proxy Statement dated June 1, 1999 and first mailed to stockholders on June
2, 1999
<PAGE>
[LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 7, 1999
To the Stockholders of
SODAK GAMING, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Sodak
Gaming, Inc. will be held on Wednesday, July 7, 1999, at 11:00 a.m., local time,
at the Rushmore Plaza Holiday Inn, 505 North 5(th) Street, Rapid City, South
Dakota, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of March 10, 1999, by and among
International Game Technology, a Nevada corporation, SAC, Inc., a South
Dakota corporation and a wholly-owned subsidiary of IGT, and Sodak
Gaming, Inc., a South Dakota corporation, and the merger contemplated by
that agreement, as a result of which each outstanding share of common
stock, par value $0.001 per share, of Sodak (other than shares owned by
Sodak, IGT or their respective subsidiaries, which will be canceled, and
shares owned by Sodak stockholders who properly demand and perfect their
statutory dissenters' appraisal rights) will be converted, upon the
effectiveness of the merger, into the right to receive $10.00 in cash,
without interest.
2. To transact any other business as may properly come before the special
meeting or any adjournments or postponements of the special meeting.
The Board of Directors has fixed the close of business on May 26, 1999 as
the date of record for those stockholders entitled to vote at the special
meeting. Accordingly, only holders of record of Sodak common stock on that date
are entitled to notice of and to vote at the special meeting or any adjournments
or postponements of the special meeting.
By Order of the Board of Directors
/s/ Michael G. Diedrich
MICHAEL G. DIEDRICH
Secretary
5301 S. Highway 16
Rapid City, South Dakota 57701
June 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
QUESTIONS AND ANSWERS...................................................................................... 1
SUMMARY.................................................................................................... 3
The Companies............................................................................................ 3
The Merger............................................................................................... 3
Our Recommendation to Stockholders....................................................................... 3
Opinion of Financial Advisor............................................................................. 3
The Special Meeting...................................................................................... 3
Record Date; Vote Required............................................................................... 3
Irrevocable Proxy and Voting Agreements.................................................................. 4
Conditions to Completion of the Merger................................................................... 4
Regulatory Matters....................................................................................... 4
Termination of the Merger Agreement; Termination Fees and Expenses....................................... 5
Material Federal Income Tax Consequences................................................................. 5
Interests of Certain Persons in the Merger............................................................... 5
THE SPECIAL MEETING........................................................................................ 6
General.................................................................................................. 6
Time and Place........................................................................................... 6
Matters to be Considered................................................................................. 6
Proxies.................................................................................................. 6
Solicitation of Proxies.................................................................................. 7
Record Date; Voting Rights; Quorum; Vote Required........................................................ 7
THE MERGER................................................................................................. 8
Parties to the Merger.................................................................................... 8
Background of the Merger................................................................................. 8
Reasons for the Merger; Recommendation of Sodak Board.................................................... 10
Opinion of Financial Advisor............................................................................. 11
Regulatory Matters....................................................................................... 19
Material Federal Income Tax Consequences to Sodak Stockholders........................................... 20
Appraisal Rights of Dissenting Stockholders.............................................................. 21
THE MERGER AGREEMENT AND RELATED AGREEMENTS................................................................ 23
Form of Merger........................................................................................... 23
Merger Consideration..................................................................................... 23
Effective Time........................................................................................... 23
Exchange Procedures...................................................................................... 23
Representations and Warranties........................................................................... 24
Covenants................................................................................................ 25
Other Agreements of Sodak and IGT........................................................................ 27
Principal Conditions to the Merger....................................................................... 30
Termination.............................................................................................. 31
Amendment; Waiver........................................................................................ 32
Irrevocable Proxy and Voting Agreements.................................................................. 32
INTEREST OF CERTAIN PERSONS IN THE MERGER.................................................................. 33
Employment Agreements.................................................................................... 33
Non-Competition Agreements............................................................................... 34
Stock Options and Restricted Stock....................................................................... 34
Employee Benefits........................................................................................ 35
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Indemnification.......................................................................................... 35
Louisiana Joint Venture Put.............................................................................. 35
SELECTED SODAK FINANCIAL DATA.............................................................................. 36
SELECTED IGT FINANCIAL DATA................................................................................ 36
MARKET PRICE OF SODAK COMMON STOCK......................................................................... 37
BENEFICIAL OWNERSHIP OF SODAK COMMON STOCK................................................................. 38
INDEPENDENT PUBLIC AUDITORS................................................................................ 40
OTHER STOCKHOLDERS MEETINGS................................................................................ 40
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 40
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE............................................................ 40
INCORPORATION OF DOCUMENTS BY REFERENCE.................................................................... 40
</TABLE>
APPENDIX A--AGREEMENT AND PLAN OF MERGER
APPENDIX B--OPINION OF SALOMON SMITH BARNEY INC.
APPENDIX C--FORM OF IRREVOCABLE PROXY AND VOTING AGREEMENT
APPENDIX D--SOUTH DAKOTA DISSENTERS' RIGHTS STATUTE
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QUESTIONS AND ANSWERS
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You will receive $10.00 in cash for each share of Sodak common stock you own.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, sign it and mail it in
the enclosed return envelope as soon as possible, so that your shares may be
represented at the special meeting.
Q: SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A: No. After the merger is complete, we will send you written instructions for
transmitting your share certificates for payment.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may revoke your proxy or change your vote by sending a notice to the
secretary of Sodak, by sending in a later dated, signed proxy card before
the special meeting or by attending the special meeting and voting in
person.
Q: DO I HAVE DISSENTERS' RIGHTS?
A: Yes. Under South Dakota law, Sodak stockholders have dissenters' appraisal
rights in connection with the merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible. We expect
to complete the merger in the second half of 1999.
Q: WILL I RECOGNIZE GAIN OR LOSS ON THE TRANSACTION?
A: Yes. If the merger is completed, you will recognize gain or loss for federal
income tax purposes. You are urged to consult your own tax advisor to
determine your particular tax consequences.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A: We do not expect to ask you to vote on any other matters at the special
meeting.
<PAGE>
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the merger you should contact:
Sodak Gaming, Inc.
5301 S. Highway 16
Rapid City, South Dakota 57701
Attention: Michael G. Diedrich
Phone Number: (605) 341-5400
If you would like additional copies of this document, you should contact:
Sodak Gaming, Inc.
5301 S. Highway 16
Rapid City, South Dakota 57701
Attention: Investor Relations
Phone Number: (605) 355-4982
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT
CONTAINED OR INCORPORATED IN THIS DOCUMENT, AND IF GIVEN OR MADE, THAT
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THE DELIVERY OF THIS DOCUMENT DOES NOT IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH IN THIS DOCUMENT OR IN THE AFFAIRS OF SODAK
OR IGT SINCE THE DATE OF THIS DOCUMENT.
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SUMMARY
THIS BRIEF SUMMARY HIGHLIGHTS INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. WE HAVE INCLUDED PAGE
REFERENCES PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE DESCRIPTION OF EACH
TOPIC PRESENTED IN THIS SUMMARY. WE URGE YOU TO CAREFULLY READ THIS ENTIRE
DOCUMENT, THE ANNEXED DOCUMENTS AND THE OTHER AVAILABLE INFORMATION REFERRED TO
IN "WHERE YOU CAN FIND MORE INFORMATION" (PAGE 40).
THE COMPANIES (page 8)
SODAK GAMING, INC.
5301 S. HIGHWAY 16
RAPID CITY, SOUTH DAKOTA 57701
(605) 341-5400
Sodak, a South Dakota corporation, is a leading distributor and financier of
gaming equipment and a broad range of gaming-related products and services, and
is a provider of wide area progressive systems, primarily to Native American
casinos.
At March 31, 1999, the end of our first quarter, our total assets were
$144.4 million and our total shareholders' equity was $110.3 million. Our total
revenue for fiscal 1998 was $132.5 million.
INTERNATIONAL GAME TECHNOLOGY
9295 PROTOTYPE DRIVE
RENO, NEVADA 89511
(702) 448-7777
International Game Technology, which, together with its subsidiaries, we
refer to as IGT, is a world leader in the design, development and manufacture of
microprocessor-based gaming products and software systems in all jurisdictions
where gaming is legal.
At April 3, 1999, the end of its second quarter, IGT's total assets were
$1.5 billion and its total stockholder's equity was $469.2 million. Its total
revenue for fiscal 1998, which ended September 30, 1998, was $824.1 million.
THE MERGER (page 23)
We propose a merger in which Sodak will become a wholly-owned subsidiary of
IGT. On completion of the merger, each of your shares of Sodak common stock will
automatically become the right to receive $10.00 in cash, without interest, from
IGT. We have attached the merger agreement to this document as Appendix A.
Please read the merger agreement. It is the legal document that governs the
merger.
OUR RECOMMENDATION TO STOCKHOLDERS (page 10)
The Board of Directors of Sodak believes that the merger is fair to you and
in your best interests, and unanimously recommends that you vote "FOR" approval
and adoption of the merger agreement and the merger.
OPINION OF FINANCIAL ADVISOR (page 11)
On March 10, 1999, Salomon Smith Barney, our financial advisor, delivered an
opinion to the Sodak Board of Directors that, as of the date of the opinion, the
cash merger consideration of $10.00 per share was fair from a financial point of
view to the holders of Sodak common stock. We have attached the opinion as
Appendix B. This opinion does not constitute a recommendation as to how any
stockholder should vote on the merger agreement and merger. You should read it
completely to understand the procedures followed, assumptions made, matters
considered and limitations of the review undertaken by Salomon Smith Barney in
providing this opinion.
THE SPECIAL MEETING (page 6)
The special meeting of Sodak stockholders will be held at 11:00 a.m., local
time, on Wednesday, July 7, 1999, at the Rushmore Plaza Holiday Inn, 505 North
5(th) Street, Rapid City, South Dakota. At the special meeting, you will be
asked to approve and adopt the merger agreement and the merger, and to act on
any other matters that are properly brought before the special meeting.
RECORD DATE; VOTE REQUIRED (page 7)
You may vote at the special meeting if you owned Sodak common stock at the
close of business on May 26, 1999. The approval and adoption of the merger
agreement and the
3
<PAGE>
merger requires the affirmative vote of the holders of at least a majority of
the outstanding shares of Sodak common stock entitled to vote at the special
meeting. Accordingly, a failure to vote or an abstention has the same effect as
voting against the merger.
You may vote your shares in person by attending the special meeting or by
mailing us your proxy if you are unable or do not wish to attend.
IRREVOCABLE PROXY AND VOTING AGREEMENTS (page 32 and Appendix C)
Each of our four major stockholders, Harrah's Operating Company, Tom Celani,
Mike Wordeman and Roland Gentner, has entered into an irrevocable proxy and
voting agreement with IGT. Under the voting agreements, each of those four
stockholders agreed to vote all of the Sodak common stock owned by that
stockholder in favor of the merger. These voting agreements terminate if the
merger agreement is terminated. Those four stockholders collectively own
approximately 52% of our common stock. Accordingly, unless these agreements are
terminated, the approval of the merger by Sodak's stockholders is virtually
assured.
CONDITIONS TO COMPLETION OF THE MERGER (page 30)
Completion of the merger depends on a number of conditions being met,
including:
- approval of Sodak stockholders holding at least a majority of the
outstanding Sodak common stock
- receipt of necessary regulatory approvals and expiration of antitrust
waiting periods
- IGT obtaining necessary financing
- our divestiture of the MISS MARQUETTE riverboat
- our divestiture of our 50% joint venture interest in developing a gaming
riverboat in Louisiana
- Roland Gentner, chief executive officer of Sodak, and certain other
employees of Sodak remaining employed with Sodak
- dissenting shares comprising less than 10% of the outstanding Sodak common
stock
- no litigation having been brought or threatened by any government agency
to block the merger and no judicial order being in force prohibiting the
merger.
On March 31, 1999, we entered into an agreement with HWCC-Louisiana, Inc., a
subsidiary of Hollywood Casino Corporation, for the sale of our interest in the
Louisiana joint venture. The agreement was subject to the approval of the
Louisiana Gaming Control Board which was granted on April 20, 1999. The transfer
of our interest to HWCC-Louisiana, which was finalized on April 23, 1999,
satisfied that condition to the merger.
On May 19, 1999, IGT announced that it had completed the private placement
of $1.0 billion in aggregate principal amount of its senior notes. A portion of
the proceeds of that offering are expected to be used to finance IGT's
acquisition of Sodak. The financing raised by the private placement satisfied
the financing condition to the merger.
Either IGT or Sodak could choose to complete the merger even though a
closing condition has not been satisfied, as long as the law allows it to do so.
We cannot be certain when, or if, the conditions to the merger will be satisfied
or waived, or that the merger will be completed.
REGULATORY MATTERS (page 19)
The merger cannot take place until the necessary regulatory approvals have
been received and any waiting periods required by law have expired. Sodak and
IGT have filed (or will promptly file) all of the required applications or
notices necessary to complete the merger with each of the regulatory
authorities. We cannot be sure whether or when we will receive the regulatory
approvals or that we will obtain the approvals without conditions that would be
detrimental to Sodak or IGT.
We cannot complete the merger unless gaming regulatory requirements are
complied with, and approvals obtained, in a number of
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jurisdictions in which Sodak and IGT operate gaming activities.
We filed premerger notification and report forms with the Federal Trade
Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust
Improvements Act on May 17, 1999. The Federal Trade Commission granted early
termination of the waiting period on June 1, 1999, with immediate effectiveness.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES AND EXPENSES (page 31)
Sodak and IGT can mutually decide at any time to terminate the merger
agreement without completing the merger. Also, either Sodak or IGT can decide to
terminate the merger agreement in a number of situations, including the final
denial of a needed regulatory approval or the failure to complete the merger by
December 31, 1999. However, if the failure to complete the merger is due to a
failure to obtain regulatory approval and the approval is still pending, either
party may extend the termination date to March 31, 2000.
If we terminate the merger agreement under certain circumstances, we will
have to pay IGT a termination fee of $8 million.
Whether or not the merger is completed, the parties will each pay their own
fees and expenses, except that they have divided or will divide evenly the costs
and expenses of printing and mailing this document, the fees paid to the
Securities and Exchange Commission in connection with filing this document and
the fees paid in connection with filing the Hart-Scott-Rodino premerger
notification forms with the FTC and the DOJ.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (page 20)
The merger will be a taxable transaction to you. You will recognize taxable
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 Sodak common stock
canceled for that cash payment. The gain or loss will be a capital gain or loss
if the Sodak common stock is a capital asset in your hands and will be a
long-term capital gain or loss if your holding period exceeds one year.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (page 33)
In considering the recommendation of the Sodak Board of Directors to approve
the merger, you should be aware that some of our directors and executive
officers have interests in the merger that are in addition to the benefits they
will receive as stockholders. These interests exist because of rights under
benefit and compensation plans maintained by Sodak and, in the case of some of
the executive officers, under employment agreements with Sodak that may provide
some of our executive officers with severance benefits if their employment is
terminated following the merger. Additionally, some of our compensation and
benefit plans provide for accelerated vesting and distribution of stock options
and restricted stock as a result of the merger.
Following the merger, IGT will indemnify the officers and directors of Sodak
for some events occurring before the merger. IGT has also agreed to maintain
directors' and officers' liability insurance covering Sodak's directors and
officers for a period of six years.
If we had been unable to sell our interest in the Louisiana joint venture,
IGT would have had the right to require Roland Gentner and Tom Celani, two of
our directors and major stockholders, to purchase all of our interest in the
joint venture and assume all of our responsibilities under the related joint
venture documents. As a result of the sale of our interest in the Louisiana
joint venture in accordance with the terms of the merger agreement, the put
right will not be exercised.
The members of the Sodak Board of Directors knew about these additional
interests and considered them when they approved the merger.
5
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THE SPECIAL MEETING
GENERAL
This document is furnished in connection with the solicitation of proxies
from the holders of Sodak common stock by Sodak's Board for use at the special
meeting. This document and the accompanying form of proxy are first being mailed
to Sodak stockholders on or about June 2, 1999.
TIME AND PLACE
The special meeting will be held at the Rushmore Plaza Holiday Inn, 505
North 5(th) Street, Rapid City, South Dakota on Wednesday, July 7, 1999, at
11:00 a.m., local time.
MATTERS TO BE CONSIDERED
At the special meeting, Sodak stockholders will be asked to consider and
vote upon the approval and adoption of the merger agreement and the merger and
on other matters that may properly be raised at the special meeting. It is not
anticipated that any other matters will be raised at the special meeting.
PROXIES
The accompanying form of proxy is for use at the special meeting if a Sodak
stockholder will be unable or does not wish to attend in person. All shares of
Sodak common stock represented by proxies properly received prior to or at the
special meeting and not revoked will be voted in accordance with the
instructions indicated in the proxies. If no voting instructions are indicated
on a proxy, the shares represented by that proxy will be voted in favor of the
merger agreement proposal. Any proxy given on the accompanying form may be
revoked by the person giving it at any time before it is voted. Proxies may be
revoked, or the votes reflected in the proxy changed, by:
- submitting, including by telecopy, to the Secretary of Sodak, before the
vote is taken at the special meeting, a written notice of revocation
bearing a later date than the date of the proxy;
- submitting a properly executed later-dated proxy relating to the same
shares; or
- attending the special meeting and voting in person.
In order to vote in person at the special meeting, Sodak stockholders must
attend the meeting and cast their votes in accordance with the voting procedures
established for the meeting. Attendance at the meeting will not in and of itself
constitute a revocation of a proxy. Any written notice of revocation or
subsequent proxy must be sent so as to be delivered at or before the vote is
taken at the special meeting as follows:
Sodak Gaming, Inc.
5301 S. Highway 16
Rapid City, South Dakota 57701
Facsimile: (605) 355-5068
Phone: (605) 341-5400
Attention: Michael Diedrich, Vice President and Legal Counsel.
Sodak stockholders who require assistance in changing or revoking a proxy
should contact Michael Diedrich at the address or phone number provided above.
Sodak stockholders should not send in any stock certificates with their
proxy cards. A letter of transmittal with instructions for the surrender of
certificates representing Sodak common stock will be mailed by IGT to Sodak
stockholders as soon as practicable after the effective time of the merger.
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SOLICITATION OF PROXIES
The cost of soliciting the proxies from Sodak stockholders will be borne by
Sodak, except that Sodak and IGT have borne or will bear equally the cost of
printing and mailing this document, the filing fees related to the filing of
this document with the SEC and those related to the filing of the
Hart-Scott-Rodino forms with the FTC and the DOJ. In addition to solicitation by
mail, arrangements will be made with brokerage houses and other custodians,
nominees and fiduciaries to send the proxy materials to beneficial owners and
Sodak will, upon request, reimburse the brokerage houses and custodians for
their reasonable expenses in so doing.
RECORD DATE; VOTING RIGHTS; QUORUM; VOTE REQUIRED
The Board of Directors has fixed the close of business on May 26, 1999 as
the record date for Sodak stockholders entitled to notice of and to vote at the
special meeting.
The only outstanding voting securities of Sodak are the shares of common
stock. Only holders of record of Sodak common stock on the record date are
entitled to notice of the special meeting, and to vote at the special meeting.
Each holder of record, as of the record date, of shares of Sodak common stock is
entitled to cast one vote per share on the merger agreement proposal.
The presence in person or by proxy of holders of a majority of the shares
entitled to vote at the special meeting will constitute a quorum for the
transaction of any business. In case a quorum is not present, the meeting may be
adjourned from time to time without notice other than an announcement at the
time of the adjournment of the date, time and place of the adjourned meeting.
Approval and adoption of the merger agreement and the merger requires the
affirmative vote of the holders of a majority of the Sodak common stock
outstanding on the record date. Accordingly, a proxy marked "abstain" will have
the effect of a vote against the proposal. Similarly, the failure of a Sodak
stockholder to return a proxy or attend the special meeting to vote in person
will have the effect of a vote against the merger agreement proposal. The Sodak
Board urges you to complete, date and sign the accompanying proxy and return it
promptly in the enclosed, postage-paid envelope.
On the record date, there were approximately 22,814,140 shares of Sodak
common stock outstanding and entitled to vote at the special meeting, held by
approximately 273 holders of record. On the record date, the directors and
executive officers of Sodak and their affiliates beneficially owned and were
entitled to vote 12,133,605 shares of Sodak common stock, or approximately 53%
of the shares of Sodak common stock outstanding on the record date.
Three directors and executive officers and one other major stockholder, who
collectively own approximately 52% of the outstanding Sodak common stock, have
entered into voting agreements with IGT in which they agree, among other things,
to be present at the special meeting and to vote for the merger agreement
proposal. The voting agreements are described in more detail under the heading
"The Merger Agreement and Related Agreements--Irrevocable Proxy and Voting
Agreements below. Accordingly, if those voting agreements are not terminated, it
is virtually assured that a quorum will be present at the special meeting and
that the merger agreement and the merger will be approved and adopted.
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THE MERGER
PARTIES TO THE MERGER
IGT AND SAC
IGT is one of the largest manufacturers of computerized casino gaming
equipment and products and operators of proprietary gaming systems in the world.
IGT manufactures a broad range of microprocessor-based gaming machines,
including spinning reel slot machines and video gaming machines. IGT also
develops and operates electronically-linked, inter-casino proprietary gaming
machine systems, known as wide area progressive systems. In addition, IGT has
developed and sells systems for video lotteries and casino management systems.
SAC, Inc. is a wholly-owned subsidiary of IGT organized for the sole purpose
of effecting the merger. It has not conducted any business operations and, upon
completion of the merger, its separate corporate existence will cease.
ALL INFORMATION CONTAINED IN THIS DOCUMENT CONCERNING IGT OR SAC HAS BEEN
SUPPLIED BY IGT AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY SODAK.
SODAK
Sodak is a leading distributor and financier of gaming equipment and a broad
range of gaming-related products and services, and is a provider of wide area
progressive systems, primarily to Native American casinos and primarily
involving gaming equipment manufactured by, and wide area progressive systems
developed by, IGT under exclusive agreements. In addition, we currently operate
the MISS MARQUETTE riverboat casino entertainment facility in Marquette, Iowa.
Other business activities include a participation in Harrah's Entertainment
Inc.'s management fee from Harrah's Phoenix Ak-Chin casino in Arizona and income
from financing product sales and casino ventures.
BACKGROUND OF THE MERGER
Sodak and IGT have had extensive business dealings for many years. Since
1989, Sodak has had a distribution agreement with IGT giving Sodak the right to
distribute IGT manufactured or assembled gaming devices and slot machines. Under
the current agreement, Sodak has the exclusive right to distribute those
products in North Dakota, South Dakota, Wyoming and Native American reservations
in the United States, subject to some exceptions. Additionally, since 1993,
Sodak has had an exclusive distributor agreement with IGT that allows Sodak to
provide and market IGT's proprietary wide area progressive systems to Native
American casinos.
In February, 1998, with the approval of Sodak's Board of Directors, Salomon
Smith Barney contacted G. Thomas Baker, IGT's President and Chief Operating
Officer, to explore the possibility of an acquisition of Sodak by IGT. On March
13, 1998, IGT and Sodak executed a confidentiality agreement to facilitate
discussions concerning a possible transaction. After preliminary discussions,
IGT decided not to proceed with an acquisition at that time.
During the spring of 1998, Sodak conducted a review of its business and
prospects. In June, Sodak announced a corporate restructuring designed to
refocus the company on its core businesses-- distributing gaming equipment and
operating wide area progressive systems for Native American casinos. Sodak
determined to continue its ownership in the MISS MARQUETTE riverboat complex and
to develop a riverboat complex with Hollywood Casino Corporation in Shreveport,
Louisiana.
In connection with the restructuring, we engaged Salomon Smith Barney to
market our interests in gaming operations in Latin America. We successfully
completed the divestiture of our Brazil operation in late July, 1998 and our
Peru and Ecuador operations in December, 1998.
8
<PAGE>
In late October, 1998, Salomon Smith Barney reinitiated discussions with IGT
about a potential transaction with Sodak. It was becoming apparent that a Native
American gaming referendum would pass in California. In November, 1998, this
referendum indeed passed, increasing the likelihood of gaming in California.
In mid-November, IGT contacted Salomon Smith Barney to indicate IGT's
interest in again exploring the possibility of a transaction with Sodak. On
December 16, 1998, Roland Gentner, the Chief Executive Officer of Sodak,
discussed the possibility of exploring a transaction with IGT with the Sodak
Board of Directors, and summarized his and Salomon Smith Barney's discussions
with IGT. The Sodak Board encouraged Mr. Gentner to continue discussions and
appointed a special negotiating committee consisting of Mr. Gentner, Colin Reed
and Ronnie Lopez to consult and continue these discussions with IGT and to
report periodically to the Board members. Sodak formally engaged Salomon Smith
Barney in early December, 1998, to advise and assist the company in connection
with the possible transaction.
During late December, 1998, and early January, 1999, Sodak and IGT and their
legal advisors and Salomon Smith Barney had numerous discussions about possible
structures for a transaction. Preliminary negotiations included discussion of a
possible transaction in which IGT would acquire Sodak for a combination of cash
and IGT stock. On January 10, 1999, counsel for IGT distributed a draft merger
agreement for a possible transaction structured in that way. This transaction
structure presented a number of difficult structural issues including the amount
and make-up of the consideration. As discussions progressed, IGT indicated a
willingness to increase the aggregate consideration it would be willing to offer
to approximately $10.00 per share, and possibly even $10.25 per share, if Sodak
would agree to a deal for all cash consideration. The negotiators for Sodak
expressed a willingness to discuss an all-cash deal and negotiations proceeded.
Representatives of IGT also commenced a due diligence review of Sodak.
During this period, the members of the special negotiating committee
discussed the status of negotiations and the Board met frequently by
teleconference to receive updates on the discussions and advice from Salomon
Smith Barney and counsel. On January 22, 1999, the Sodak Board met with its
legal advisors and Salomon Smith Barney to discuss the status of negotiations,
strategy and the duties of the Board. Salomon Smith Barney presented certain
financial analyses intended to assist the Board in its deliberations. At that
point, there were a number of issues remaining for discussion between the
parties and the Sodak Board encouraged the negotiating committee to continue to
pursue discussions. However, discussions with IGT temporarily broke down as
these issues resulted in an impasse. Subsequently talks were re-initiated and
IGT stated it would agree to pursue further discussions only if the transaction
could be done at no more than $10.00 per share. Sodak's negotiators agreed to
continue the discussions.
Representatives of IGT and Sodak and their legal advisors and Salomon Smith
Barney continued to have frequent discussions and negotiations throughout
February, 1999. During this period, representatives of IGT continued their due
diligence investigations of Sodak. IGT insisted that the transaction could be
pursued only if the four significant stockholders of the company represented on
the Sodak Board--Mr. Gentner, Michael Wordeman, Harrah's Operating Company, Inc.
and Thomas Celani--agreed to support the transaction, including by granting a
proxy and agreeing to vote in favor of the deal. Following discussions, and
negotiation of the terms of the voting agreements, the four stockholders agreed
to do so. IGT also insisted that a means be agreed upon to deal with Sodak's
non-core businesses, principally the MISS MARQUETTE riverboat complex and the
Louisiana joint venture, which IGT would not be permitted to own under existing
gaming regulations. One solution that IGT suggested with respect to the
Louisiana joint venture was for the four stockholders to agree to assume all of
Sodak's responsibilities and obligations. Messrs. Gentner and Celani, neither of
whom wanted to acquire the Louisiana joint venture, agreed that, if Sodak made
an effort to dispose of the joint venture interest and failed, they would permit
IGT to put the interest, including all the obligations related to
9
<PAGE>
the joint venture, to them. Mr. Wordeman and Harrah's did not agree to the put.
The parties further agreed that Sodak would pursue the sale of the MISS
MARQUETTE.
Another condition to IGT's proceeding with the transaction was that Mr.
Gentner agree to renegotiate the terms of his employment agreement to reduce
significantly his benefits and that several other officers of Sodak enter into
employment agreements to provide for their continued employment following the
merger. During this time period, discussions were undertaken with these
employees, several of whom had been unaware of the merger discussions to this
point. The terms of Mr. Gentner's employment agreement and those of the other
employees were negotiated at this time. Finally, IGT insisted that Mr. Gentner
and Mr. Wordeman enter into non-competition agreements prohibiting competition
with Sodak and IGT after completion of the merger. The terms of these agreements
were negotiated extensively. The merger agreement and the related transaction
documents were further negotiated and substantially completed during late
February and early March, 1999.
On March 9 and 10, 1999, the Sodak Board of Directors met again with its
legal advisors and Salomon Smith Barney. At this meeting, representatives of
Salomon Smith Barney and Sodak's legal advisors updated the Board on the
developments since the last meeting. Sodak's legal advisors reviewed with the
Board the terms of the proposed agreements relating to the transaction and again
reviewed the duties of the Board in considering the transaction. Salomon Smith
Barney made a financial presentation. The meeting was adjourned on March 9 to
permit further negotiations of the various transaction agreements, which
continued on March 10. When the meeting resumed, Sodak's legal advisors reviewed
with the Board the updated terms of the various agreements. Salomon Smith Barney
delivered its oral opinion to the effect that, as of March 10, 1999, the $10.00
per share merger consideration was fair to Sodak's stockholders, from a
financial point of view. After further discussion and deliberation, the Sodak
Board of Directors unanimously determined that the merger agreement and the
merger were in the best interests of Sodak and its stockholders and authorized
and approved the merger agreement, the related transaction agreements, the
merger and the other transactions contemplated by the agreements and resolved to
recommend that stockholders vote to approve and adopt the merger agreement and
the merger.
The merger agreement, the voting agreements, the non-competition agreements
and the employment agreements with Mr. Gentner, Michael Beck, Don Gromer, Knute
Knudson, John Sears, David Salter, Clayton Trulson and Rollie Hill were signed
late in the day on March 10, 1999, and a joint press release announcing the
transaction was issued prior to the opening of trading on the Nasdaq National
Market on March 11, 1999.
REASONS FOR THE MERGER; RECOMMENDATION OF SODAK BOARD
The Board of Directors of Sodak believes that the merger is in the best
interests of Sodak and its stockholders, and unanimously approved the merger
agreement and the merger and recommends the approval and adoption of the merger
agreement and the merger by Sodak's stockholders. In reaching this decision, the
Board of Directors consulted with Sodak management and with Sodak's financial
and legal advisors and considered a variety of factors, including the following
material factors:
- The Board's belief that IGT is an attractive and strong merger partner
because of the existing strong business relationship with IGT. A majority
of Sodak's revenue is generated from distributing and operating IGT's wide
area progressive systems and distributing IGT gaming equipment and
proprietary software to Native American casinos through exclusive
agreements with IGT.
- The Board's belief that alignment with IGT is a natural progression of the
corporate restructuring set in motion in June, 1998, to focus on our core
business.
10
<PAGE>
- The earnings, operations, financial condition and business prospects of
Sodak, including the uncertainty of renewal of our exclusive agreements
with IGT.
- The current and prospective environment in which Sodak operates, including
economic conditions and the competitive environment of the gaming
industry.
- A review of the possible alternatives to a sale of Sodak, including the
prospects of continuing to operate Sodak as an independent company. We
considered the value to the stockholders of these alternatives, the timing
and likelihood of achieving value from these alternatives, and the
possibility that Sodak's future stock price might not have a present value
greater than the consideration to be paid in the merger.
- The opportunity for Sodak stockholders to realize a premium over recent
market prices for their shares.
- The presentation by Salomon Smith Barney, its analyses of the value of
Sodak and its opinion dated as of March 10, 1999 that, as of the date of
the opinion, the merger consideration was fair from a financial point of
view to Sodak's stockholders.
- The opportunities created by combining Sodak with IGT, including the
Board's belief that this combination was in the best interest of our
employees, customers and the communities we serve.
- The ability to complete the merger, including, in particular, the
likelihood of obtaining regulatory approval and the provisions of the
merger agreement regarding IGT's and Sodak's obligations to pursue the
regulatory approvals.
- The requirement that we divest the MISS MARQUETTE riverboat complex and
our 50% joint venture interest in developing a gaming riverboat in
Shreveport, Louisiana.
- The terms of the merger agreement, as negotiated, including IGT's
agreement to pay a termination fee if it fails to raise the financing
necessary for the merger, our ability to respond to, and to accept, an
unsolicited higher offer if consistent with the Board's fiduciary
responsibilities and the requirement that we pay a termination fee in
those circumstances.
- The interests of Sodak's officers and directors that are different from or
in addition to the interests of Sodak stockholders generally.
- The willingness of Sodak's four largest stockholders to approve the merger
and to execute voting agreements supporting the deal.
The above summary of the information considered and factors discussed by the
Board is not meant to be exhaustive, but includes the material matters
considered by the Board. In reaching its determination to approve the merger
agreement and the merger, the Board did not assign any relative or specific
weight to the factors, and individual directors may have considered 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
Sodak's stockholders. The Board relied on the experience and expertise of
Salomon Smith Barney, its financial advisor, for quantitative analysis of the
financial terms of the merger.
OPINION OF FINANCIAL ADVISOR
At the meeting of the Board of Directors of Sodak held on March 9 and 10,
1999, Salomon Smith Barney delivered its oral opinion, which was subsequently
confirmed in a written opinion dated March 10, 1999, to the effect that, as of
that date, the merger consideration was fair to Sodak's stockholders from a
financial point of view.
11
<PAGE>
Sodak stockholders are urged to read the Salomon Smith Barney opinion in its
entirety for information with respect to the procedures followed, assumptions
made, matters considered and limits of the review undertaken by Salomon Smith
Barney in rendering its opinion. References to the opinion in this document and
the summary of the opinion included below are qualified in their entirety by
reference to the full text of the opinion, which is included as Appendix B to
this document. The Salomon Smith Barney opinion does not constitute a
recommendation concerning how holders of Sodak common stock should vote on the
merger agreement proposal.
In connection with rendering its opinion, Salomon Smith Barney reviewed
publicly available information concerning Sodak and other financial information
concerning Sodak, including financial forecasts, that were provided to Salomon
Smith Barney by Sodak. Salomon Smith Barney discussed the past and current
business operations, financial condition and prospects of Sodak with officers
and employees of Sodak. Salomon Smith Barney also considered other information,
financial studies, analyses, investigations and financial, economic and market
criteria that it deemed relevant.
In its review and analysis and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon the accuracy and completeness of the information
provided by Sodak and reviewed by Salomon for purposes of its opinion, and
Salomon Smith Barney did not assume any responsibility for independent
verification of that information. Without limiting the generality of the prior
sentence, Salomon Smith Barney relied upon the accuracy of information provided
to it by Sodak relating to the rights of IGT under specified circumstances to
terminate certain material contracts between Sodak and IGT. With respect to the
financial forecasts prepared by Sodak, Salomon Smith Barney was advised by the
management of Sodak that those forecasts were reasonably prepared on bases
reflecting its best currently available estimates and judgments, and Salomon
Smith Barney expressed no opinion with respect to those forecasts or the
assumptions on which they were based. Salomon Smith Barney did not assume any
responsibility for any independent evaluation or appraisal of any of the assets
(including properties and facilities) or liabilities of Sodak. Salomon Smith
Barney was not asked to, and did not, solicit other proposals to acquire Sodak.
The Salomon Smith Barney opinion is necessarily based upon conditions as
they existed and could be evaluated on the date of the opinion. The opinion does
not address Sodak's underlying business decision to effect the merger, and it
does not express any view on the effect on Sodak of the merger and related
transactions. The opinion is directed only to the fairness, from a financial
point of view, to the Sodak stockholders of the merger consideration.
The following is a summary of the report presented on March 9, 1999, to our
Board of Directors by Salomon Smith Barney in connection with the Board's
consideration of the proposed merger. The summary of the financial analyses
includes information presented in tabular format. IN ORDER TO UNDERSTAND FULLY
THE FINANCIAL ANALYSES USED BY SALOMON SMITH BARNEY, THESE TABLES MUST BE READ
TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A
COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES.
12
<PAGE>
OVERVIEW OF VALUATION METHODOLOGIES
Salomon Smith Barney prepared a valuation of Sodak using several
methodologies, including discounted cash flow analysis, public company
comparables analysis, comparable transactions analysis and a sum of the parts
analysis. Each of these methodologies was used to generate a reference range for
the value of the Sodak common stock, which was then compared to the $8.25 per
share price of Sodak common stock as of March 5, 1999 and the $10.00 per share
merger consideration as part of Salomon Smith Barney's evaluation of the
fairness of the merger consideration. The following table represents a
compilation of implied reference ranges derived using several different
valuation methodologies. THIS TABLE IS NOT INTENDED TO PROVIDE A COMPLETE
UNDERSTANDING OF THE RESULTS OF EACH OF THE ANALYSES EMPLOYED, AND THE TABLE
MUST BE READ TOGETHER WITH THE TEXTUAL DESCRIPTION OF EACH PROCEDURE SET FORTH
BELOW TO UNDERSTAND THE SIGNIFICANCE OF EACH SET OF CONCLUSIONS.
<TABLE>
<CAPTION>
IMPLIED REFERENCE
RANGE OF PER
VALUATION METHODOLOGY SHARE VALUE
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Discounted Cash Flow
Initial Operating Plan....................................................................... $9.20 - $10.75
Revised Operating Plan....................................................................... $9.30 - $11.00
First Sensitivity Case....................................................................... $5.75 - $6.50
Second Sensitivity Case...................................................................... $1.75 - $2.25
Comparable Public Companies.................................................................... $5.00 - $8.75
Comparable Transactions........................................................................ $6.00 - $8.50
Sum of the Parts............................................................................... $8.50 - $12.15
</TABLE>
IMPLIED TRANSACTION PREMIUMS
Salomon Smith Barney reviewed implied transaction premiums using a range of
prices per share of Sodak common stock for the 12-month period ended March 5,
1999. Salomon Smith Barney noted that the merger consideration represented a
premium of:
- 21.2% to the closing stock price on March 5, 1999, of $8.25;
- 17.2% to the 30-day trailing average closing stock price from March 5,
1999, of $8.53;
- 40.4% to the closing stock price of $7.13 on November 6, 1998, after the
passage of Proposition 5 in California;
- 90.5% to the 52-week trading low of $5.25, which occurred on October 8,
1998; and
- 3.2% to the 52-week trading high of $9.69, which occurred on January 29,
1999.
HISTORICAL STOCK TRADING ANALYSIS
Salomon Smith Barney reviewed the historical trading prices and the
historical trading volumes of Sodak common stock from February 26, 1998, to
February 26, 1999. This review indicated that 100% of the trading activity
during that time had occurred at prices below the merger consideration price of
$10.00. Salomon Smith Barney also noted that the turnover of Sodak's common
stock from February 26, 1998, to February 26, 1999, had encompassed 72% of the
total shares outstanding and 154% of the public float.
DISCOUNTED CASH FLOW ANALYSIS
Using a discounted cash flow methodology, Salomon Smith Barney calculated
the present value of the projected future cash flows for Sodak (without giving
effect to the merger or any synergy estimates expected to be realized as a
result of the merger). The discounted cash flow analysis of Sodak was based on
the operating plan approved by our Board in December 1998 and on a revised
operating plan subsequently prepared by Sodak management. In addition, Salomon
Smith Barney analyzed two
13
<PAGE>
sensitivities to the revised operating plan which reflected the potential impact
of the termination of Sodak's equipment distribution and wide area progressive
agreements with IGT.
The first sensitivity case assumed that Sodak's equipment distribution
agreement with IGT was not renewed beyond its current term of 2001, but that the
wide area progressive agreement remained in place and Sodak continued to earn
royalties in perpetuity from the installed base at December 31, 2001. The second
sensitivity case assumed that Sodak's equipment distribution agreement was not
renewed beyond 2001 and that the wide area progressive agreement was terminated
simultaneously, causing the wide area progressive royalties to cease. The
calculations for these two sensitivity cases were performed without any
replacement of the revenues lost with respect to the terminated agreements from
any other potential sources.
Under each case, Salomon Smith Barney aggregated the present value of the
free cash flows over the applicable forecast period with the present value of
the range of terminal values described below. As part of the discounted cash
flow analysis, Salomon used discount rates ranging from 11.0% to 13.0%. The
range of terminal values was calculated by applying multiples ranging from 6.0
times to 7.0 times Sodak's earnings before interest and taxes, or EBIT, for the
last year of the forecast period. The discounted cash flow analyses based on the
cases considered resulted in ranges of values per share of Sodak common stock as
follows:
<TABLE>
<CAPTION>
REFERENCE RANGE OF
CASE PER SHARE VALUE
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
Initial Operating Plan........................................................................ $9.20 - $10.75
Revised Operating Plan........................................................................ $9.30 - $11.00
First Sensitivity Case........................................................................ $5.75 - $6.50
Second Sensitivity Case....................................................................... $1.75 - $2.25
</TABLE>
COMPARABLE PUBLIC COMPANIES ANALYSIS
Salomon Smith Barney reviewed publicly available financial and operating
information of the following six public companies:
- Anchor Gaming Inc.
- Aristocrat Leisure LTD
- Mikohn Gaming Corporation
- Powerhouse Technologies Inc.
- Scientific Games Holdings Corp.
- WMS Industries Inc.
In that review, actual 1998 and estimated 1999 price/earnings multiples and firm
value/EBIT multiples were developed from Salomon Smith Barney's research, First
Call calendarized mean estimates as of March 1999 and Wall Street research EBIT
estimates. The comparable companies were chosen because they operate in the
gaming equipment industry, as does Sodak, and are also publicly traded "small
cap" companies. Salomon Smith Barney believed that the most applicable
comparable company for its review was Anchor Gaming. Salomon Smith Barney also
reviewed information relating to two "large cap" companies in the gaming
equipment industry, GTECH Holdings Corp. and IGT, but did not include them in
the analysis. For this analysis, Salomon Smith Barney used trading information
as of March 5, 1999, except for one company which had disclosed adverse
information for which the various estimates of future performance had not been
revised. For this company a more conservative approach was taken and trading
information as of February 26, 1999, was used.
14
<PAGE>
The table below sets forth some of the findings from Salomon Smith Barney's
review of these comparable companies:
<TABLE>
<CAPTION>
COMPARABLE COMPANIES RANGE MEAN MEDIAN
- -------------------------------------------------------------------------------- -------------- --------- -----------
<S> <C> <C> <C>
CLOSING PRICE PER SHARE AS A MULTIPLE OF YEAR'S EARNINGS:
1998 (actual)................................................................. 7.2x - 36.1x 15.2x 19.7x
1999 (estimated).............................................................. 6.6x - 21.7x 13.1x 12.0x
FIRM VALUE AS A MULTIPLE OF YEAR'S EBIT:
1998 (actual)................................................................. 3.9x - 23.4x 12.3x 11.8x
1999 (estimated).............................................................. 3.9x - 12.3x 8.0x 8.0x
</TABLE>
This comparable public companies analysis resulted in values ranging from
$5.00 to $8.75 per share of Sodak common stock.
COMPARABLE TRANSACTIONS ANALYSIS
Using publicly available information, Salomon Smith Barney reviewed five
transactions in the gaming equipment industry. These transactions are presented
in the following table:
<TABLE>
<CAPTION>
ACQUIROR TARGET
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Ladbroke USA Colorado Gaming and Entertainment Co.
Mikohn Gaming Corporation Progressive Systems, Inc.
IGT Olympic Amusements
IGT Barcrest Ltd.
Alliance Gaming Corp. Bally Gaming
</TABLE>
The review showed that for these transactions the acquisition value as a
multiple of earnings before interest, taxes, depreciation and amortization based
on the 12 months prior to the relevant acquisition ranged from 4.6x to 7.4x,
with a median of 6.1x. This comparable transactions analysis resulted in values
ranging from $6.00 to $8.50 per share of Sodak common stock.
SUM OF THE PARTS ANALYSIS
Using both publicly available information and information provided by Sodak
management, Salomon Smith Barney analyzed each of Sodak's business segments to
determine valuation ranges for each business segment separately and a valuation
range for the enterprise as a whole.
PROGRESSIVE DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow
methodology, Salomon Smith Barney calculated the present value of the projected
future cash flows for Sodak's wide area progressive business segment (without
giving effect to the merger or any synergy estimates expected to be realized as
a result of the merger). This analysis was based on the revised operating plan
prepared by Sodak's management. Salomon Smith Barney aggregated the present
value of the free cash flows over the applicable forecast period with the
present value of the range of terminal values described below. As part of this
analysis, Salomon used discount rates ranging from 11.0% to 13.0%. The range of
terminal values was calculated by applying multiples ranging from 7.5x to 8.5x
the segment's EBIT for the last year of the forecast period.
PROGRESSIVE COMPARABLE COMPANIES. Salomon Smith Barney reviewed publicly
available financial and operating information of the following four public
companies:
- Anchor Gaming Inc.
- GTECH Holdings Corp.
- IGT
- Powerhouse Technologies Inc.
In the review, actual 1998 and estimated 1999 and 2000 price/earnings multiples
and firm value/EBIT multiples were developed from Salomon Smith Barney's
research, First Call calendarized mean
15
<PAGE>
estimates as of March 1999 and Wall Street research EBIT estimates. The
comparable companies were chosen because they operate systems similar to Sodak's
wide area progressive systems, and are also publicly traded. For this analysis
Salomon Smith Barney used trading information as of March 5, 1999, except for
two companies which had disclosed adverse information for which the various
estimates of future performance had not been revised. For these companies a
conservative approach was taken and trading information as of February 26, 1999,
was used.
The table below sets forth some of Salomon Smith Barney's findings from its
review of these comparable companies:
<TABLE>
<CAPTION>
COMPARABLE COMPANIES RANGE MEAN MEDIAN
- -------------------------------------------------------------------------------- -------------- --------- -----------
<S> <C> <C> <C>
CLOSING PRICE PER SHARE AS A MULTIPLE OF YEAR'S EARNINGS:
1998 (actual)................................................................. 7.2x - 34.2x 16.5x 12.4x
1999 (estimated).............................................................. 6.8x - 13.8x 10.3x 10.2x
2000 (estimated).............................................................. 6.3x - 11.4x 8.5x 8.2x
FIRM VALUE AS A MULTIPLE OF YEAR'S EBIT:
1998 (actual)................................................................. 3.9x - 23.4x 11.2x 8.9x
1999 (estimated).............................................................. 3.9x - 9.4x 6.9x 7.2x
2000 (estimated).............................................................. 3.5x - 7.2x 6.0x 6.7x
</TABLE>
These analyses of discounted cash flow and comparable public companies for
the wide area progressive segment resulted in a valuation range for the
progressive business of $4.50 to $6.00 per share of Sodak common stock.
EQUIPMENT SALES AND FINANCING DISCOUNTED CASH FLOW ANALYSIS. Using a
discounted cash flow methodology, Salomon Smith Barney calculated the present
value of the projected future cash flows for Sodak's gaming equipment sales and
financing segment (without giving effect to the merger or any synergy estimates
expected to be realized as a result of the merger). This analysis was based on
the revised operating plan prepared by Sodak's management. Salomon Smith Barney
aggregated the present value of the free cash flows over the applicable forecast
period with the present value of the range of terminal values described below.
As part of this analysis, Salomon used discount rates ranging from 11.0% to
13.0%. The range of terminal values was calculated by applying multiples ranging
from 6.0x to 7.0x the segment's EBIT for the last year of the forecast period.
EQUIPMENT SALES AND FINANCING COMPARABLE COMPANIES. Salomon Smith Barney
reviewed certain publicly available financial and operating information of the
following three public companies:
- Anchor Gaming Inc.
- Aristocrat Leisure LTD
- IGT
In the review, actual 1998 and estimated 1999 and 2000 price/earnings multiples
and firm value/EBIT multiples were developed from Salomon Smith Barney's
research, First Call calendarized mean estimates as of March 1999 and Wall
Street research EBIT estimates. The comparable companies were chosen because
they operate in the gaming equipment sales and financing industry, as does
Sodak, and are also publicly traded. For this analysis Salomon Smith Barney used
trading information as of March 5, 1999, except for two companies which had
disclosed adverse information for which the various estimates of future
performance had not been revised. For these companies a more conservative
approach was taken, and trading information as of February 26, 1999, was used.
16
<PAGE>
The table below sets forth some of Salomon Smith Barney's findings from its
review of these comparable companies:
<TABLE>
<CAPTION>
COMPARABLE COMPANIES RANGE MEAN MEDIAN
- --------------------------------------------------------------------------------- ------------- --------- -----------
<S> <C> <C> <C>
CLOSING PRICE PER SHARE AS A MULTIPLE OF YEAR'S EARNINGS:
1998 (actual).................................................................. 7.2x - 27.9x 16.3x 13.7x
1999 (estimated)............................................................... 6.8x - 21.7x 13.0x 10.6x
2000 (estimated)............................................................... 6.3x - 18.0x 10.4x 6.9x
FIRM VALUE AS A MULTIPLE OF YEAR'S EBIT:
1998 (actual).................................................................. 3.9x - 15.0x 9.6x 10.0x
1999 (estimated)............................................................... 3.9x - 12.3x 7.9x 7.5x
2000 (estimated)............................................................... 3.5x - 10.2x 6.7x 6.3x
</TABLE>
These analyses of discounted cash flow and comparable public companies for
the equipment sales and financing business segment resulted in a valuation range
for the equipment sales and financing business of $3.50 to $5.00 per share of
Sodak common stock.
COMPARABLE RIVERBOAT TRANSACTIONS. Salomon Smith Barney reviewed certain
publicly available information on ten transactions, including pending deals,
involving private acquisitions of riverboat assets from December 1996 to March
5, 1999. The table below sets forth some of Salomon Smith Barney's findings from
its review of these transactions:
<TABLE>
<CAPTION>
RANGE MEAN MEDIAN
------------ ----- -----------
<S> <C> <C> <C>
TRAILING ENTERPRISE VALUE /EBITDA(1).............................................. 4.3x - 7.1x 6.2x 6.6x
FORWARD ENTERPRISE VALUE/EBITDA(2)................................................ 3.8x - 7.0x 5.7x 5.9x
</TABLE>
- ------------------------
(1) Based on the 12 months prior to the relevant acquisition.
(2) Based on forward estimates for the next full year.
Based on a multiple of 4.5x to 5.5x 1998 EBITDA of $8.7 million for Sodak's
primary riverboat asset, Salomon Smith Barney determined a valuation range for
this asset to be $1.45 to $1.83 per share of Sodak common stock.
ANALYSIS OF OTHER NON-CORE SEGMENTS. Salomon Smith Barney also reviewed
other non-core businesses of Sodak to determine valuation ranges. For Sodak's
receivables under the Ak-Chin financing contract, Salomon Smith Barney
determined the valuation range to be $0.06 to $0.13 per share based on the net
present value of income over the remaining life of the contract, discounted at a
rate of 10.5%. Salomon Smith Barney determined the valuation range for the
Shreveport Louisiana joint venture to be $0.00 to $0.22 per share based on the
abandonment of Sodak's investment or twice the amount invested to date. Salomon
Smith Barney determined the valuation range for Sodak's former Latin American
businesses to be $0.17 per share based on the cash proceeds realized in the
divestitures of these businesses, net of expenses.
Based on its analysis of our business segments described above, Salomon
Smith Barney determined that the sum of the parts valuation ranged from $8.48 to
$12.15 per share of Sodak common stock.
The foregoing is a summary of the material financial analyses furnished by
Salomon Smith Barney to our Board of Directors but it does not purport to be a
complete description of the analyses performed by Salomon Smith Barney or of its
presentations to our Board of Directors. The preparation of financial analyses
and fairness opinions is a complex process involving subjective judgments and is
not necessarily susceptible to partial analysis or summary description. Salomon
Smith Barney made no attempt to assign specific weights to particular analyses
or factors considered, but rather made qualitative judgments as to the
significance and relevance of the analyses and factors considered.
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Accordingly, Salomon Smith Barney believes that its analyses (and the summary
set forth above) must be considered as a whole, and that selecting portions of
such analyses and of the factors considered by Salomon Smith Barney, without
considering all of such analyses and factors, could create a misleading or
incomplete view of the processes underlying the analyses conducted by Salomon
Smith Barney and its opinion. With regard to the comparable public company
analysis summarized above, Salomon Smith Barney selected comparable public
companies on the basis of various factors, including the size of the public
company and similarity of the line of business; however, no public company
utilized as a comparison in such analysis, and no transaction utilized as a
comparison in the comparable transaction analyses summarized above, is identical
to Sodak, any business segment of Sodak or the merger. As a result, these
analyses are not purely mathematical, but also take into account differences in
financial and operating characteristics of the comparable companies and other
factors that could affect the transaction or public trading value of the
comparable companies and transactions to which Sodak, the business segments of
Sodak and the merger are being compared. In its analyses, Salomon Smith Barney
made numerous assumptions with respect to Sodak, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Sodak. Any estimates contained in Salomon Smith
Barney's analyses 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 such analyses. Estimates of values of companies do not
purport to be appraisals or necessarily to reflect the prices at which companies
may actually be sold. Because such estimates are inherently subject to
uncertainty, none of Sodak, IGT, our Board of Directors, Salomon Smith Barney or
any other person assumes responsibility if future results or actual values
differ materially from the estimates. Salomon Smith Barney's analyses were
prepared solely as part of Salomon Smith Barney's analysis of the fairness, from
a financial point of view, of the merger consideration and were provided to our
Board of Directors in that connection. The opinion of Salomon Smith Barney was
only one of the factors taken into consideration by the our Board of Directors
in making its determination to approve the merger agreement and the merger.
Salomon Smith Barney is an internationally recognized investment banking
firm engaged, among other things, in the valuation of businesses and their
securities in connection with mergers and acquisitions, restructurings,
leveraged buyouts, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Sodak selected Salomon
Smith Barney to act as its financial advisor on the basis of Salomon Smith
Barney's international reputation and Salomon Smith Barney's familiarity with
Sodak. Salomon Smith Barney and its predecessors and affiliates have previously
rendered investment banking and financial advisory services to Sodak and IGT,
for which they have received or will receive customary compensation. Recently,
Salomon Smith Barney acted as the lead manager in connection with IGT's private
placement of its senior notes which was completed on May 19, 1999. In addition,
in the ordinary course of its business, Salomon Smith Barney and its affiliates
(including Citigroup Inc.) may actively trade the debt and equity securities of
both Sodak and IGT for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Pursuant to Salomon Smith Barney's engagement letter, Sodak has agreed to
pay Salomon Smith Barney a fee of approximately $2.8 million upon consummation
of the merger. Sodak has also agreed to reimburse Salomon Smith Barney for its
reasonable travel and other out-of-pocket expenses incurred in connection with
its engagement (including the reasonable fees and disbursements of its counsel)
and to indemnify Salomon Smith Barney against certain liabilities and expenses
relating to or arising out of its engagement, including certain liabilities
under the federal securities laws.
As noted under the caption "The Merger--Reasons for the Merger;
Recommendation of Sodak Board" the fairness opinion of Salomon Smith Barney was
only one of several factors considered by the Sodak Board of Directors in
determining to approve the merger agreement and the merger. The
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merger consideration was determined by arm's length negotiations between IGT and
Sodak, which consulted with Salomon Smith Barney in the process, and was not
established by Salomon Smith Barney.
REGULATORY MATTERS
Sodak and IGT are subject to extensive gaming regulations. Sodak, IGT and
their subsidiaries hold registrations, approvals, gaming licenses or permits in
each jurisdiction in which they operate gaming activities. In each of these
jurisdictions, regulatory requirements must be complied with in order for us to
complete the merger. Generally, regulatory authorities have broad discretion in
granting, renewing and revoking gaming licenses and granting approvals.
The following is a summary of the material regulatory approvals that we
believe must be obtained in connection with the merger. Other gaming
authorities, however, may assert that additional regulatory approvals are
required for the merger. For example, IGT has informed us that they have
received notice from the gaming authorities in the State of Washington that the
merger agreement and merger may be subject to their prior approval. If it is
determined that Washington gaming approval is required, we will file the
necessary application promptly. Similarly, if other gaming authorities assert
rights to prior approval of the merger, such approval will be sought. We cannot
be sure whether or when we will receive the regulatory approvals or that we will
obtain the approvals without conditions that would be detrimental to Sodak or
IGT.
The merger is subject to our sale of the MISS MARQUETTE riverboat complex
and our 50% interest in the Louisiana joint venture. Our interest in the
Louisiana joint venture was divested on April 23, 1999. Our ability to divest
our interests in the MISS MARQUETTE riverboat complex is subject to the
approvals of the regulatory authorities in Iowa and, potentially, the Federal
Trade Commission and the Antitrust Division of the Department of Justice under
the Hart-Scott-Rodino Act.
SOUTH DAKOTA
The South Dakota Commission on Gaming regulates gaming activities under the
South Dakota Limited Gaming Law. Under that law, the State of South Dakota has
delegated its right to regulate gaming within the State to the South Dakota
Commission on Gaming. The commission requires that all persons who design,
assemble, manufacture, sell, lease, or prepare a component of a slot machine
obtain a slot manufacturer or distributor license. Both Sodak and IGT have slot
manufacturer or distributor licenses. The commission also requires that all key
employees be licensed by the commission. The commission may approve or
disapprove any application for a license, depending upon whether it deems the
applicant suitable.
Sodak is required to submit to the commission all proposed "gaming
contracts," which may include the merger agreement. The commission may approve
or deny gaming contracts and require changes in a contract before the licensee
is allowed to proceed. Additionally, the commission may require a licensee to
terminate participation in a gaming contract.
Representatives of Sodak have contacted the South Dakota commission and are
providing information regarding the merger to the commission for its review, as
requested. The commission has not determined whether it will be necessary for
Sodak to submit a formal application for approval of the merger. We will provide
all necessary information and file any necessary application with the commission
for its review and approval as promptly as possible following any request.
IOWA
The ownership and operation of gaming facilities in Iowa are subject to
extensive state laws and the regulations of the Iowa Racing and Gaming
Commission concerning the responsibility, financial
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stability and character of gaming operators and persons financially interested
or involved in gaming operations. Anyone having a material relationship or
involvement with a gaming operation may be required to be suitable or to be
licensed. The Iowa Racing and Gaming Commission may deny an application for a
license for any cause it deems reasonable. In addition to its authority to deny
an application for a license, the Iowa Racing and Gaming Commission has
jurisdiction to disapprove a change in position by officers or key employees and
the power to require a gaming operator to suspend or dismiss officers, directors
or other key employees or sever relationships with persons who refuse to file
appropriate applications or whom the Iowa Racing and Gaming Commission finds
unsuitable.
Additionally, anytime a licensed corporation grants an option to purchase
10% or more of its stock, the Iowa Racing and Gaming Commission may revoke the
gaming license unless any sale or transfer during the period of the license
pursuant to the option was disclosed to and approved by the Iowa Racing and
Gaming Commission. The Iowa Racing and Gaming Commission must also pre-approve
any person who acquires 5% or more of a gaming operator's equity securities.
Our sale of the MISS MARQUETTE riverboat will be subject to a favorable
determination by the Iowa Racing and Gaming Commission of the purchasing party's
suitability and the approval of the transfer by the Iowa Racing and Gaming
Commission. We will file the necessary applications for Iowa Racing and Gaming
Commission approval promptly after we reach an agreement with a purchaser for
the MISS MARQUETTE.
LOUISIANA
The Louisiana Riverboat Economic Development and Gaming Control Act
regulates gaming activities in the State of Louisiana. The Louisiana law
specifies certain restrictions and conditions relating to the operation of
gaming riverboats, including restricting who may own an interest in an entity
with a gaming license. No person may have an ownership interest in a Louisiana
gaming license unless they are found by the State to be suitable.
On March 31, 1999, we entered into an agreement with HWCC-Louisiana, Inc., a
subsidiary of Hollywood Casino Corporation, to sell our interest in the
Louisiana joint venture. Under the agreement, in some circumstances, Hollywood
will reimburse Sodak for the amounts that we contributed to the joint venture.
The agreement was subject to the approval of the Louisiana Gaming Control Board
which was granted on April 20, 1999. The transfer was consummated on April 23,
1999.
HART-SCOTT-RODINO
We have given notification and furnished information under the
Hart-Scott-Rodino Act to the Federal Trade Commission and the Antitrust Division
of the Department of Justice in order to be allowed to complete the merger. Each
of Sodak and IGT filed the required notification and report forms on May 17,
1999, which began a 30-day waiting period, during which the merger could not be
completed unless the Federal Trade Commission terminated the waiting period
early. The Federal Trade Commission granted early termination of the waiting
period on June 1, 1999, with immediate effectiveness.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES TO SODAK STOCKHOLDERS
The following is a summary of the material United States federal income tax
consequences of the merger to the Sodak stockholders. The summary does not
purport to be a description of all tax consequences that may be relevant to
Sodak stockholders, and assumes an understanding of tax rules of general
application. It does not address special rules which may apply to Sodak
stockholders based on their tax status, individual circumstances or other
factors unrelated to the merger. Stockholders are encouraged to consult their
own tax advisors regarding the merger.
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The receipt of cash by you in exchange for Sodak common stock pursuant to
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. You will generally recognize gain or loss for federal income tax purposes
in an amount equal to the difference between (1) the amount of cash you receive
and (2) your adjusted tax basis in the Sodak common stock exchanged. The gain or
loss will be a capital gain or loss if you held the Sodak common stock as a
capital asset, and will be a long-term capital gain or loss if, at the effective
time of the merger, you held the Sodak common stock for more than one year. The
deductibility of capital losses is subject to certain limitations.
Under the federal income tax backup withholding rules, unless an exemption
applies, IGT is required to and will withhold 31% of all payments to which you
are entitled in the merger, unless you provide a tax identification number and
you certify under penalties of perjury that the number is correct. If you are an
individual your tax identification number is your social security number. If you
are not an individual your tax identification number is your employer
identification number. You should complete and sign the substitute Form W-9,
which will be included with the letter of transmittal to be returned to the
exchange agent, in order to provide the information and certification necessary
to avoid backup withholding, unless an applicable exception exists and is proved
in a manner satisfactory to the exchange agent. Some of our stockholders
including, corporations and some foreign individuals, are not subject to these
backup withholding and reporting requirements. In order for a foreign individual
to qualify as an exempt recipient, however, he or she must submit a Certificate
of Foreign Status on Form W-8 attesting to his or her exempt status. Any amounts
withheld will be allowed as a credit against the holder's federal income tax
liability for that year.
The foregoing discussion may not apply to Sodak stockholders who acquired
their Sodak common stock as a result of the exercise of employee stock options
or other compensation arrangements with Sodak or who are not citizens or
residents of the United States or who are otherwise subject to special tax
treatment. Each Sodak stockholder is urged to consult his, her or its tax
advisor to determine the tax consequences of the merger, including the effects
of applicable state, local, foreign or other tax laws.
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
Under South Dakota law, stockholders of Sodak have the right to dissent from
the merger and obtain payment for their shares of Sodak common stock. We have
described below the steps which you must take if you wish to exercise
dissenters' rights with respect to the merger. This description is not complete.
You should read sections 47-6-23 to 47-6-23.3 and 47-6-40 to 47-6-50 of the
South Dakota Business Corporation Act. Those sections are attached as Appendix D
to this document. FAILURE TO TAKE ANY ONE OF THE REQUIRED STEPS MAY RESULT IN
TERMINATION OF YOUR DISSENTERS' RIGHTS UNDER SOUTH DAKOTA LAW. IF YOU ARE
CONSIDERING DISSENTING, YOU SHOULD CONSULT YOUR OWN LEGAL ADVISOR.
To exercise dissenters' rights you must:
- be a stockholder of record on May 26, 1999 of the common shares of Sodak
as to which you seek relief
- file with Sodak, prior to the date of the special meeting, a written
notice of your intention to demand that you be paid fair consideration for
the shares if the merger is consummated
- not vote your dissenting shares of Sodak common stock in favor of the
merger
- demand payment for your shares and deposit certificated shares as
instructed by Sodak in the notice that we send to dissenting stockholders
following the special meeting.
A vote against the merger and the adoption of the merger agreement will not
satisfy the requirements of a written demand for payment. If you give proper
notice of your intention to dissent from the
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merger and refrain from voting at the meeting, we will give you written notice
that the merger has been approved following the special meeting. That notice
will:
- specify where and when demand for payment should be sent
- when and where certificates of certificated shares should be deposited in
order to obtain payment
- inform holders of uncertificated shares to what extent transfer will be
restricted from the time that demand for payment is received
- supply a form for demanding payment.
The time set for the demand and deposit will be at least 30 days from the date
that we mail the notice. If you fail to demand payment or fail to deposit any
certificated shares of Sodak common stock that you own, as required by the
notice, you will forfeit your right to receive payment for your shares under the
appraisal statute.
Within 60 days after the final date on which our stockholders may demand
payment and deposit certificated shares, we will make a payment to each
dissenting stockholder equal to the product of the amount which we estimate to
be the fair value per share of Sodak common stock and the number of shares of
Sodak common stock held by the stockholder, with interest, if any has accrued.
Our payment will be accompanied by:
- our balance sheet as of December 31, 1998 and statement of income for
fiscal year ended December 31, 1998
- our latest available interim financial statements
- a statement of our estimate of the fair value of the shares
- a notice of your right to demand supplemental payment
- a copy of the South Dakota dissenters' rights statute.
If you believe that the amount we pay in exchange for your dissenting shares
is less than the fair value of your shares or that the interest is not correctly
determined, you may send us your own estimate of the value of the shares or of
the interest and demand payment of the deficiency. If you do not file an
estimate within 30 days after we mail our initial payment to you, you will
forfeit your right to any additional payment.
If any demand for additional payment remains unsettled within 60 days after
we have received a timely demand from you, we will file in an appropriate court
a petition requesting that the fair value of the shares and the interest be
determined by the court. All dissenters whose demands have not been settled will
be made a party to the proceeding. The court may appoint one or more appraisers
to receive evidence and recommend a decision on the question of fair value.
After a hearing without a jury, the dissenters will be entitled to judgment for
the amount by which the fair value of the shares is found to exceed the amount
that we previously paid, with interest.
The costs and expenses of any court proceeding, including reasonable
compensation and expenses of appraisers appointed by the court, will be paid by
us, except that part of the costs and expenses may be allocated as the court
considers equitable against some or all of the dissenters who are parties and
whose actions the court determines to be arbitrary, vexatious or not in good
faith. Fees and expenses of counsel and of experts for the parties to the
proceeding will be assessed as the court considers equitable. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against us, it
may order that reasonable counsel fees be paid out of the amounts awarded to the
dissenters who were benefited.
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Notwithstanding the above summary, we can elect to withhold payment to a
dissenting stockholder with respect to shares of Sodak common stock that a
dissenting stockholder did not own on March 11, 1999, the date of our first
announcement of the merger to the news media. Instead, upon completing the
merger, we can notify those stockholders of our estimate of the fair value per
share of the Sodak common stock, state and explain the rate of interest to be
used and offer to make payment to those stockholders only upon their agreement
to accept that payment in full satisfaction of their appraisal rights. If those
stockholders believe that the amount offered is less than the fair value of the
shares and interest, they may, within 30 days the date of mailing of our offer,
send us their own estimate of the value and the interest and demand payment. If
those stockholders fail to do so, they will forfeit their right to any
additional payment.
One of the conditions precedent to IGT's obligation to consummate the merger
is that stockholders owning less than 10% of our outstanding common stock
exercise dissenters' rights with respect to the merger.
THE MERGER AGREEMENT AND RELATED AGREEMENTS
This section describes the material provisions of the merger agreement, the
legal document that governs the merger, and the irrevocable proxy and voting
agreements. The following information, as it relates to matters contained in or
contemplated by the agreements, is qualified in its entirety by reference to the
full text of the merger agreement, which is attached as Appendix A to this
document, or the voting agreements, a form of which is attached as Appendix C to
this document, each of which is incorporated into this document. We urge you to
read the agreements in their entirety.
FORM OF MERGER
Pursuant to the merger agreement, at the effective time of the merger, SAC
will merge with and into Sodak under South Dakota law. As a result of the
merger, the separate corporate existence of SAC will cease and Sodak, as the
surviving corporation in the merger, will continue its existence as a
wholly-owned subsidiary of IGT and will continue under the name of Sodak. As a
result of the merger, all of the properties, assets, rights, privileges,
immunities and powers of Sodak and SAC will vest in the surviving corporation,
and all liabilities, obligations and penalties of Sodak and SAC will become the
liabilities, obligations and penalties of the surviving corporation.
MERGER CONSIDERATION
At the effective time of the merger, each share of Sodak common stock then
outstanding (other than shares of Sodak common stock owned by Sodak or any of
its subsidiaries, or IGT, SAC or any of their subsidiaries, or by stockholders
who have properly demanded and perfected their statutory dissenters' appraisal
rights) will be converted into the right to receive $10.00 cash, without
interest.
EFFECTIVE TIME
As soon as practicable on or after the day the merger closes, on a date
specified by Sodak and IGT, which will be a date no later than the second
business day after satisfaction or waiver of the closing conditions, Sodak and
IGT will file articles of merger and all other filings required by South Dakota
law with the Secretary of State of South Dakota in the form required by South
Dakota law. The merger will become effective when the filings are made with the
Secretary of State of South Dakota or such other time as agreed by IGT and Sodak
and specified in the filings.
EXCHANGE PROCEDURES
- As of the effective time of the merger, each certificate previously
representing shares of Sodak common stock will represent only the right to
receive the merger consideration upon the surrender of the certificate and
the holder of the certificate will not have any additional rights with
respect to the shares of Sodak common stock.
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- After the effective time of the merger, an exchange agent designated by
IGT and reasonably acceptable to Sodak will mail to each Sodak stockholder
that was a stockholder of record immediately prior to the effective time
(other than holders of excluded shares of common stock) (1) a letter of
transmittal (including a substitute Form W-9) and (2) instructions for
surrendering certificates in exchange for the merger consideration. You
should not return your Sodak common stock certificates with the enclosed
proxy and should not forward those certificates to the exchange agent or
IGT unless and until you receive a letter of transmittal following the
effective time of the merger.
- Upon the proper surrender of a certificate to the exchange agent, together
with a properly completed and duly executed letter of transmittal, the
holder of the certificate will be entitled to receive in exchange for the
certificate a check in an amount equal to the product of the merger
consideration and the number of shares of Sodak common stock represented
by the certificate surrendered, less any required tax withholding. The
surrendered certificate will be canceled. No interest will be paid or
accrue on the merger consideration.
- In the event of a transfer of ownership of any shares of Sodak common
stock not registered in the transfer records of Sodak, a check for the
merger consideration may be issued to a person other than the person whose
name is on the certificate, if the certificate representing the Sodak
common stock, accompanied by all documents required to evidence and effect
the transfer, is delivered to the exchange agent properly endorsed with
signature guarantee and the person requesting the payment pays any
applicable transfer or other taxes.
- If any certificate has not been surrendered one year after the effective
time of the merger (or by an earlier date on which any payment in respect
of the certificate would otherwise become the property of any governmental
unit or agency), IGT may direct the exchange agent to deliver to IGT the
funds that would have been paid upon the surrender the certificates. After
this time, the holders of Sodak common stock that are entitled to
surrender their certificates for the merger consideration but have not
done so, will have only the rights of a general creditor of IGT for the
cash payable upon the surrender of the certificate.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations, warranties, and agreements of
Sodak, IGT, and SAC, including representations and warranties regarding their
due organization, good standing, authority to enter into the merger agreement
and consummate the merger and compliance with gaming laws and regulations. We
also made additional representations and warranties relating to:
- capitalization
- ownership of subsidiaries and other equity interest
- timely filing and accuracy of documents filed with the SEC
- truthfulness of information included or incorporated into this document
- absence of certain changes or events in our business since December 31,
1997
- absence of pending or threatened litigation
- absence of agreements with brokers or finders other than Salomon Smith
Barney
- necessary vote of our stockholders to approve the merger
- good and marketable title to and valid leasehold interest in our material
properties
- taxes, benefit plans and ERISA
- compliance with applicable laws and permits
- absence of accelerated parachute payments to employees triggered by the
merger
- environmental liabilities and compliance with environmental laws
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- material contacts and debt instruments including material contracts
related to the Louisiana joint venture
- licenses to intellectual property and absence of infringement
- transactions with insiders
- absence of non-competition restrictions on the operation of our business
- receipt of fairness opinion from financial advisor
- execution of non-competition agreements with our chief executive officer,
Roland Gentner, and our former chief executive officer, Mike Wordeman
- execution of employment agreements with our chief executive officer and
other officers.
Additionally, IGT and SAC made representations and warranties regarding the
information to be supplied for inclusion in this document, the absence of a
broker, absence of the necessity of a vote of its stockholders and the operation
of SAC pending the merger.
COVENANTS
CONDUCT OF THE BUSINESS PENDING THE MERGER
We have agreed that during the period from March 10, 1999 to the effective
time of the merger, except as expressly permitted by the merger agreement, we
will and will cause each of our subsidiaries to:
- carry on our business in the usual, regular and ordinary course in
substantially the same manner as presently conducted and in compliance in
all material respects with all applicable laws and regulations
- use commercially reasonable efforts to preserve intact our current
business organizations
- maintain the services of our current officers and employees and preserve
our relationships with customers, suppliers and others with which we have
business dealings.
With some exceptions and, except as contemplated by the merger agreement, we
have also agreed that during this period, unless we have the prior written
consent of IGT, we will not and will not allow any of our subsidiaries to:
- declare, set aside or pay dividends
- split, combine or acquire any shares of our capital stock or purchase,
redeem or otherwise acquire any shares of our capital stock
- issue, deliver, sell, award, pledge, dispose of or otherwise encumber or
authorize or propose the issuance, delivery, grant, sale, award, pledge,
or other encumbrance or authorization of any shares of our capital stock
or any securities convertible into or any rights, warrants or options to
acquire any of our capital stock
- amend our articles of incorporation, by-laws or other comparable
organizational documents or alter the corporate structure or ownership of
any of our material subsidiaries
- acquire or agree to acquire (1) by merging or consolidating with or
purchasing a substantial portion of the assets of, any organization or
division of any organization, or (2) any assets with a fair market value
in excess of $75,000, other than purchases of inventory, fixtures,
furniture, supplies, vehicles and equipment in the ordinary course of
business consistent with past practice
- commence or agree to commence the operation or development of a casino or
other gaming operations of any nature
- mortgage or otherwise encumber or sell, lease, exchange or otherwise
dispose of any of our properties or assets
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- incur any indebtedness for borrowed money, guarantee any indebtedness or
debt securities of
another person or issue or sell any debt securities or warrants or other
rights to acquire any of our debt securities
- make any loans, advances or capital contributions to, or investments in,
any other person
- make or agree to make any new capital expenditures other than those
consistent with the budget set forth in the disclosure schedules attached
to the merger agreement
- make or rescind any express or deemed election relating to material taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to material
taxes, or change any of our methods of reporting income or deductions for
federal income tax purposes from those used in preparing our federal
income tax return for the year ending December 31, 1998
- pay, discharge or satisfy any claims, liabilities or obligations
- increase the compensation payable to any of our directors, officers or
employees other than usual and customary increases to employees who are
not officers
- pay or agree to pay any pension, retirement allowance, severance,
continuation or termination benefit or other material employee benefit not
provided for by any existing pension plan, benefit plan or employment
agreement described in our documents filed with the SEC prior to March 10,
1999 and publicly available
- establish, adopt or commit to any additional pension, profit sharing,
bonus, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay, termination pay
or other material employee benefit plan, agreement or arrangement, or
amend or modify or increase the benefits under any collective bargaining
agreement or any employee benefit plan, agreement or arrangement
- enter into any severance or employment agreement with or for the benefit
of any person
- increase the rate of compensation under or otherwise change the terms of
any existing employment agreement
- modify, or amend in any material respect, or renew, fail to renew or
terminate, any material contract or agreement which we or one of our
subsidiaries is a party or waive, release or assign any material rights or
claims
- change our fiscal year
- authorize, recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation or dissolution of Sodak
- enter into any collective bargaining agreement
- engage in any transaction with, or enter into any agreement, arrangement
or understanding directly or indirectly with any of our affiliates other
than under agreements existing on the date of the merger agreement and
disclosed to IGT
- amend, modify or waive in any manner any of the provisions of any of the
non-competition agreements or employment agreements entered into in
connection with the merger agreement
- authorize any of, or commit or agree to take any of, the foregoing
actions.
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<PAGE>
NO SOLICITATION OF ALTERNATIVE TRANSACTIONS
We have agreed not to solicit or encourage, or negotiate with third parties,
in an attempt to effectuate a business combination with Sodak. However, this
does not prohibit our Board of Directors from furnishing information to or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited proposal to enter into a business combination with us in a
proposal which identifies a price or a range of values to be paid in connection
with a merger, consolidation, purchase of assets, tender offer or business
combination involving Sodak or any of our subsidiaries or any proposal or offer
to acquire, in any manner, an equity interest in, any voting securities of, or a
substantial portion of the assets of Sodak or any of our subsidiaries that our
Board of Directors determines:
- in good faith, after consultation with a financial advisor of nationally
recognized reputation, would provide more value to the Sodak stockholders
than the merger if the party making the proposal has demonstrated that the
funds necessary for its proposal are reasonably likely to be available
- in good faith, after consultation with outside counsel, that consideration
of the proposal is necessary in order for our Board to comply with its
fiduciary duties
if, prior to furnishing the requested information to, or entering discussions or
negotiations with, the third party, that party executes a confidentiality
agreement similar to the agreement between Sodak and IGT.
We have agreed to notify IGT of any inquiries, offers or proposals within 24
hours of the receipt of the proposal by any of our officers, directors or
advisors. We have also agreed to keep IGT informed of the status and details of
any inquiry, offer or proposal and to answer IGT's related questions.
OTHER AGREEMENTS OF SODAK AND IGT
LOUISIANA JOINT VENTURE
We agreed to use our commercially reasonable efforts to sell or terminate
all of our interests in the Louisiana joint venture pursuant to documentation in
form and substance, other than price, reasonably satisfactory to IGT. Under our
agreement, we would not have been allowed to provide any consideration in
connection with the sale other than the forfeiture of our $2.5 million capital
contribution made prior to March 10, 1998, but we were not required to recover
any "positive" purchase price, unless additional money was contributed to the
joint venture after March 10, 1999 with the consent of IGT. We were required to
consult with IGT regarding our efforts to sell the joint venture interest and to
use our commercially reasonable efforts to obtain the best terms for the sale of
the interest. The minimum price obtained for our interest in the Louisiana joint
venture had to be greater than or equal to all loans, advances and additional
capital contributions to or investments made after the date of the merger
agreement, with the consent of IGT, to Sodak LA, the joint venture or any joint
venture partner. Additionally, we agreed that we would not have any further
liabilities or obligations relating to the joint venture upon the finalization
of its sale.
On March 31, 1999, we entered into an agreement with HWCC-Louisiana, Inc., a
subsidiary of Hollywood Casino Corporation, for the sale of our interest in the
Louisiana joint venture. Under the agreement, in some circumstances,
HWCC-Louisiana will reimburse Sodak for the amounts that we contributed to the
joint venture. The agreement was subject to the approval of the Louisiana Gaming
Control Board which was granted on April 20, 1999. The transfer of our interest
to HWCC-Louisiana, which was finalized on April 23, 1999, satisfied the
condition to the merger.
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<PAGE>
MISS MARQUETTE RIVERBOAT COMPLEX
We also have agreed to use our commercially reasonable efforts to sell the
MISS MARQUETTE riverboat casino, together with all related shore-based
facilities, including the barge, the motel, the enclosed walkway, the parking
lot, the restaurant, the administrative offices and other entertainment
facilities on the best terms possible and to terminate all of our obligations
related to the riverboat complex. IGT has the right to approve the terms of the
sale, other than the price received, but can not unreasonably withhold its
approval. Once we find a buyer for the riverboat complex we must give IGT notice
of our intention to sell it. Upon this notice, IGT:
- will have a right to veto the sale if IGT has obtained, or has been
advised by a governmental agency that it is likely to obtain within 30
days, the gaming approvals necessary for IGT to acquire the riverboat
complex; or
- may give us notice that it either approves of the sale or approves of the
sale, subject to the receipt of a fairness opinion from a investment
banking firm designated by IGT and approved by us.
If we can not obtain a fairness opinion for the proposed sale of the riverboat
complex, we will not be permitted to proceed with the sale. We have agreed to
consult with IGT regarding our ongoing efforts to sell the riverboat complex.
We have engaged Salomon Smith Barney to assist us in the sale of the
riverboat complex. Salomon Smith Barney is currently conducting an auction
process and has had extensive discussions with several prospective buyers.
Several prospective buyers have submitted bids, and the process of selecting a
buyer and negotiating a contract is underway.
GAMING APPROVALS
Sodak and IGT agreed to promptly prepare and file all necessary
documentation in order to obtain as promptly as possible all necessary gaming
approvals and to comply with the terms and conditions of the gaming approvals.
Each of Sodak and IGT also agreed to use its commercially reasonable efforts to,
and to cause its officers, directors and affiliates to, file within 60 days
after March 10, 1999 all required initial applications and documents in
connection with obtaining the gaming approvals and to act reasonably and
promptly in responding to additional requests. Sodak believes that all required
initial applications and documents have been filed. We have cooperated with
regulatory authorities in connection with their review of these applications and
other filings.
ACCESS TO INFORMATION; CONFIDENTIALITY
Until the effective time of the merger, we have agreed to give and to cause
our subsidiaries to give IGT and its officers, employees, accountants, counsel,
financial advisors and other representatives reasonable access during normal
business hours to all of our properties, books, contracts, commitments,
personnel and records. Additionally, during this period, we will furnish
promptly to IGT:
- a copy of each report, schedule, registration statement and other document
filed by us during the period pursuant to the requirements of any federal
or state securities laws
- all other information concerning our business, properties and personnel
that IGT reasonably requests.
Except as required by law, Sodak and IGT have agreed to treat any confidential
information of the other party in accordance with the confidentiality agreement
between IGT and Sodak and to cause its officers, employees, accountants,
counsel, financial advisers and other representatives to do the same.
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<PAGE>
REASONABLE EFFORTS
Sodak and IGT each agreed to use commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate the merger and the other transactions contemplated by
the merger agreement, in the most expeditious manner practicable. For example,
we each agreed to:
- make all necessary applications, registrations and filings, including
filings with governmental entities
- obtain all necessary actions or nonactions, licenses, consents, approvals
or waivers from governmental entities and other third parties
- take all reasonable steps necessary to obtain an approval or waiver from,
or to avoid an action or proceeding by, any governmental entity
- execute and deliver additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, the
merger agreement
- defend any lawsuits or other legal proceedings challenging the merger
agreement or the consummation of the transactions contemplated under it
- use commercially reasonable efforts to fulfill all conditions to the
respective obligations of IGT (including obtaining any financing necessary
to consummate the merger), SAC or Sodak under the merger agreement
- use commercially reasonable efforts to prevent the entry, enactment or
promulgation of any threatened or pending temporary, preliminary or
permanent injunction or other order, decree or ruling or statute, rule,
regulation or executive order.
Notwithstanding these agreements, IGT is not obligated to take any action if
taking the action or obtaining any waiver, license, consent, approval or
exemption is reasonably likely to be materially burdensome to IGT and its
subsidiaries, taken as a whole, or to impact in a materially adverse manner the
economic or business benefits of the transactions contemplated by the merger
agreement which would render consummation of the merger inadvisable.
NOTIFICATION
Sodak and IGT have each agreed to give the other prompt written notice of:
- any representation or warranty made by it in the merger agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect,
or any representation or warranty that is not qualified as to materiality
becoming untrue or inaccurate in any material respect
- the failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it
under the merger agreement
- the occurrence of any change or event which has or can reasonably be
foreseen to have, a material adverse effect on Sodak.
No notice given as required above will affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under the merger agreement or limit or otherwise affect the remedies
available to the party receiving the notice.
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<PAGE>
PRINCIPAL CONDITIONS TO THE MERGER
Each of IGT's and Sodak's obligation to complete the merger is subject to
the satisfaction or waiver on or prior to the closing date of a number of
conditions including the following:
- approval of the merger and the transactions contemplated by the merger
agreement by the affirmative vote of the holders of a majority of the
outstanding shares of Sodak common stock
- no injunction, order, or other legal restraint prohibiting consummation of
the merger, and no pending or threatened governmental action or proceeding
seeking to enjoin or challenge the merger
- expiration or termination of any waiting period applicable to the merger
under the Hart-Scott-Rodino Act
- the representations and warranties of Sodak and IGT that are qualified as
to materiality must be true and correct in all respects as if made on the
closing date and all representations and warranties not qualified as to
materiality must be true and correct in all material respects as if made
on the closing date.
IGT's obligation to effect the merger is also subject to the following
additional conditions:
- Sodak having performed or complied in all material respects with all
agreements and covenants required by the merger agreement
- each Sodak stockholder who has entered a voting agreement having performed
all obligations under the voting agreement
- no material adverse change with respect to Sodak
- the receipt of all licenses, permits, consents, approvals, waivers,
authorizations, qualifications and orders required to be made or obtained
by Sodak from all governmental entities and third parties in connection
with the merger that would materially adversely affect the consummation of
the merger or would have a material adverse effect on the continuation of
the operations of our business or the business of the surviving
corporation following the effective time of the merger
- if required by any governmental entity as a condition to the receipt of
certain consents or approvals or in order for IGT to comply with any
gaming laws, the disposal of the MISS MARQUETTE riverboat complex
- the sale or termination of our interest in the Louisiana joint venture
- the agreement by each holder of an option to purchase Sodak common stock
that is outstanding immediately prior the effective time of the merger
that the stock option will be canceled at the effective time of the merger
and that the holder of the stock option will be entitled to receive only
the merger consideration less the option exercise price, less any
applicable withholding tax
- IGT must have obtained the funds necessary to pay the aggregate merger
consideration on terms reasonably acceptable to it
- stockholders owning less than 10% of our outstanding common stock shall
have exercised dissenters' rights with respect to the merger
- Roland Gentner and certain other employees must have continued in our
employ and will be employed by us at the effective time of the merger.
30
<PAGE>
On March 31, 1999, we entered into an agreement with HWCC-Louisiana, Inc., a
subsidiary of Hollywood Casino Corporation, for the sale of our interest in the
Louisiana joint venture. The agreement was subject to the approval of the
Louisiana Gaming Control Board which was granted on April 20, 1999. The transfer
of our interest to HWCC-Louisiana, which was finalized on April 23, 1999,
satisfied that condition to the merger.
On May 19, 1999, IGT announced that it had completed the private placement
of $1.0 billion in aggregate principal amount of its senior notes. A portion of
the proceeds of that offering are expected to be used to finance IGT's
acquisition of Sodak. The financing raised by the private placement satisfied
the financing condition to the merger.
The Federal Trade Commission granted early termination of the 30-day waiting
period under the Hart-Scott-Rodino Act on June 1, 1999, with immediate
effectiveness. The termination of the waiting period satisfied the condition to
the merger.
TERMINATION
TERMINATION RIGHTS
At any time prior to the consummation of the merger, the merger agreement
may be terminated:
1. by mutual written consent of the Boards of Directors of Sodak and IGT
2. by either party (A) upon a material breach of any representation,
warranty, covenant or agreement set forth in the merger agreement by the
other party or (B) if any representation or warranty of the other party
becomes untrue, and in each case, as a result the breaching party would
be unable to fulfill its obligation regarding the accuracy of its
representations, warranties, agreement and covenants by December 31,
1999; if, in each case, the party seeking to terminate is not then in
material breach under the merger agreement
3. by either party if a governmental entity has issued a final and
nonappealable order, decree or ruling or taken any other action that
prohibits consummation of the merger
4. by either party if the merger has not been consummated by December 31,
1999; provided that the failure to consummate the merger is not the
result of a breach of a covenant or the material breach of any
representation or warranty by the party seeking to terminate; PROVIDED
further that if the merger has not been consummated because of a failure
to obtain approval from a governmental entity and such approval is still
pending, either party may extend the termination date to March 31, 2000
5. by either party if the approval of our stockholders is not obtained;
provided that the terminating party is not in material breach of any of
its obligations under the merger agreement
6. by IGT if our Board of Directors (A) withdraws or modifies adversely its
recommendation of the merger to our stockholders following the receipt of
a takeover proposal, (B) recommends a takeover proposal to our
stockholders or (C) fails to call or hold the special meeting by reason
of the receipt of a takeover proposal
7. by Sodak if, prior to the approval of our stockholders, a superior
proposal has been made and we have determined in good faith after
consultation with our outside counsel, that the termination of the merger
agreement and acceptance of the superior proposal is necessary in order
to comply with our fiduciary duties; provided that we have given IGT a
good faith opportunity, for five business days, to amend its offer to
provide for substantially similar terms to those of the superior proposal
and IGT has not done so.
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TERMINATION FEES
We have agreed to pay IGT a termination fee of $8 million if:
- we terminate the merger agreement pursuant to the right described in
paragraph 7 above
- IGT terminates the merger agreement pursuant to the right described in
paragraph 6 above
- IGT terminates the merger agreement because we willfully and materially
breach our agreement not to solicit, encourage, or negotiate with third
parties, in an attempt to effectuate a business combination as described
in this document. For more information on the limitations placed on our
ability to negotiate a merger with a third party, see "Covenants--No
Solicitation of Alternative Transactions."
- any of our principal stockholders, Harrah's Operating Company, Tom Celani,
Mike Wordeman or Roland Gentner, fails to vote in favor of the merger
agreement proposal in breach of the voting agreement and the necessary
approval of our stockholders is not received
- the approval of our stockholders is not received, prior to the special
meeting a takeover proposal is made and within 12 months from the
termination of the merger agreement we enter into an agreement for the
takeover proposal and within 24 months from the termination of the merger
agreement we consummate the takeover proposal.
Additionally, IGT agreed to pay us a termination fee of $2 million if the
merger agreement is terminated by either Sodak or IGT because the merger has not
been consummated by December 31, 1999 (March 31, 2000 if the failure to
consummate the merger has not been consummated because of a failure to obtain
approval from a governmental entity and the approval is still pending) and at
the time of the termination, IGT has not obtained the funding necessary to pay
the aggregate merger consideration on terms reasonably acceptable to IGT but all
other closing conditions have been satisfied or waived. IGT has completed the
financing necessary to finance the acquisition of Sodak.
If we terminate the merger agreement, IGT's and SAC's exclusive remedy
against us, other than for a willful breach of our agreement not to solicit
third party takeover proposals, is our payment of a termination fee. Similarly,
the payment by IGT of a termination fee is our exclusive remedy against IGT if
the merger agreement is terminated by IGT or Sodak because the merger has not
occurred as a result of IGT's failure to obtain the funding necessary to pay the
aggregate merger consideration on terms reasonably acceptable to IGT.
AMENDMENT; WAIVER
The merger agreement may be amended in writing by agreement of Sodak, IGT
and SAC at any time, except that after adoption of the merger agreement by our
stockholders, no amendment may be made that by law would require further
approval of the stockholders unless that approval is obtained. At any time prior
to the effective time of the merger, any party to the merger agreement may
extend the time for the performance of any of the obligations or other acts of
the other parties, waive any inaccuracies in the representations and warranties
or, subject to the amendment provisions, waive compliance with any of the
agreements or conditions contained in the merger agreement.
IRREVOCABLE PROXY AND VOTING AGREEMENTS
Contemporaneously with the execution of the merger agreement, in order to
induce IGT to enter into the merger agreement, each of our four major
stockholders, Harrah's Operating Company, Tom Celani, Mike Wordeman and Roland
Gentner, entered into an irrevocable proxy and voting agreement with IGT. Under
the voting agreements, each of these four stockholders agreed to vote all of the
Sodak common stock owned by that stockholder in favor of the merger.
Additionally, each of these four stockholders has:
- granted IGT a proxy to vote his or its shares as directed in the voting
agreement
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- agreed not to pledge or otherwise dispose of any of the Sodak common stock
owned by that stockholder
- agreed not to solicit, initiate or encourage any takeover proposal or
engage in negotiations or discussions with or disclose any nonpublic
information relating to Sodak or any of its subsidiaries.
The four major stockholders collectively own approximately 52% of our common
stock. Accordingly, unless these agreements are terminated, the approval of the
merger agreement and the merger by our stockholders is virtually assured. The
voting agreements terminate upon a termination of the merger agreement.
INTEREST OF CERTAIN PERSONS IN THE MERGER
Some of our officers and directors have interests in the merger that are
different from or in addition to the interest that you have as a Sodak
stockholder. As described below, some of these officers and directors will
receive benefits from the merger that are in addition to the benefits they will
receive as stockholders. Our Board of Directors was aware of these interests and
fully considered them, among other things, in adopting the merger agreement and
approving the transactions contemplated by the merger agreement.
EMPLOYMENT AGREEMENTS
In connection with the merger agreement, Sodak entered into an employment
agreement with our chief executive officer, Roland Gentner, which supersedes Mr.
Gentner's prior employment agreement. The new agreement provides for a one year
initial term beginning on the date of the merger, and for additional one year
terms thereafter unless Mr. Gentner or Sodak chooses not to extend the
employment term. The agreement provides for an annual base salary of $400,000
and an annual cash bonus equal to a percentage of Mr. Gentner's base salary
ranging from 30% to 120%, depending on whether Sodak achieves its performance
goals for the year. At the effective time of the merger, IGT will grant Mr.
Gentner 50,000 shares of restricted IGT stock that will become vested two years
after the merger, except that Mr. Gentner will not be entitled to the shares of
restricted stock if his employment terminates due to his death or disability or,
before the one year anniversary of the date of the merger, his employment is
terminated by Sodak for "cause" (as defined in the agreement) or Mr. Gentner
resigns without "good reason" (as defined in the agreement). If Mr. Gentner is
terminated without "cause," if Mr. Gentner terminates his employment for "good
reason," or if Mr. Gentner's employment terminates as a result of his death or
disability, he is entitled to receive severance pay equal to his salary through
the end of the term plus a pro rata portion of his annual bonus. If Mr. Gentner
is terminated for "cause" or if Mr. Gentner terminates his employment without
"good reason" he is entitled to receive severance pay equal to any accrued
salary plus a pro rata portion of his annual bonus. If Mr. Gentner's employment
terminates due to his death or disability before the second anniversary of the
date of the merger, he will be entitled to receive $1,000,000 in lieu of the
50,000 restricted shares.
In connection with the merger agreement, Sodak also entered into employment
agreements with seven other executives: Michael Beck, Don Gromer, Knute Knudson,
John Sears, David Salter, Clayton Trulson and Rollie Hill. Each agreement
provides for a one year term beginning on the date of the merger. Each agreement
specifies the executive's annual base salary as follows: Mr. Beck--$150,800; Mr.
Gromer--$114,400; Mr. Knudson--$145,600; Mr. Sears--$135,200; Mr.
Salter--$124,800; Mr. Trulson--$130,000; and Mr. Hill--$104,000. In addition,
each agreement provides that IGT will grant options (which vest over a five-year
period) to the executives to purchase a specified number of shares of common
stock of IGT as follows: Mr. Beck, Mr. Gromer, Mr. Knudson, Mr. Trulson and Mr.
Hill each will receive options to purchase 10,000 shares; Mr. Sears will receive
options to purchase 15,000 shares; and Mr. Salter will receive options to
purchase 8,000 shares. The agreements also
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provide that, if the executive's employment is terminated by Sodak without
"cause" (as defined in the agreements), the executive will be entitled to
severance pay equal to one year's base salary plus, in the case of a termination
during the one year employment term, continued payments of the executive's base
salary until the end of the one year term. The agreements also contain customary
non-compete, non-solicitation and confidentiality provisions.
NON-COMPETITION AGREEMENTS
In connection with the merger agreement, we entered into non-competition
agreements with Mr. Gentner and our former chief executive officer, Mike
Wordeman. Under the non-competition agreements, Mr. Gentner and Mr. Wordeman
each agreed not to compete with Sodak or IGT in certain lines of business
throughout the world for a period commencing at the effective time of the merger
for five years, in the case of Mr. Gentner, and, in the case of Mr. Wordeman,
for five years in
North America and Hawaii and for three years in the rest of the world. Mr.
Wordeman's restriction on competition does not apply to activities in Brazil.
Additionally, each of Mr. Gentner and Mr. Wordeman agreed not to solicit
employees or customers of Sodak or IGT.
STOCK OPTIONS AND RESTRICTED STOCK
Each stock option outstanding immediately prior to the closing of the merger
that (1) is vested or vests as a result of the merger or (2) was granted to a
member of the Board of Directors under our 1993 Directors' Stock Option Plan,
will be canceled in exchange for a payment, in cash, to the option holder equal
to the product of (1) $10.00 less the option exercise price, multiplied by (2)
the number of shares of Sodak common stock subject to the stock option, less any
applicable withholding tax.
In connection with the merger, options held by Sodak's executive officers
and directors will be canceled in exchange for a cash payment as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES CASH PAYMENT
SUBJECT TO (LESS APPLICABLE WITHHOLDING
OFFICER/DIRECTOR OPTIONS TAXES)
- ------------------------------------------ ----------------- -------------------------------
<S> <C> <C>
Roland Gentner............................ 55,688 $ 146,301
Michael Beck.............................. 20,000 71,562
Don Gromer................................ 10,672 42,257
Knute Knudson, Jr......................... 74,012 293,524
John Sears................................ 46,624 186,436
David Salter.............................. 30,056 120,025
Clayton Trulson........................... 52,024 201,798
Rollie Hill............................... 29,852 118,954
Michael Diedrich.......................... 46,512 183,337
Kevin Buntrock............................ 100,012 398,274
Colin Reed................................ 22,000 69,125
Thomas Celani............................. 22,000 69,125
Ronnie Lopez.............................. 22,000 69,125
Manuel Lujan, Jr.......................... 10,000 35,625
Michael Wordeman.......................... 88,532 181,895
</TABLE>
A portion of the options held by each of the officers and directors listed in
the table above that were not vested will become vested as a result of the
merger. Options for which the exercise price is greater than the merger
consideration will be canceled at the effective time of the merger and are not
included in the table above.
All outstanding shares of Sodak restricted stock, whether or not vested,
will be canceled in exchange for the merger consideration. In connection with
the merger, the 15,000 shares of Sodak restricted stock held by Mr. Gentner will
be canceled and Mr. Gentner will receive a payment equal to $150,000, less
applicable withholding taxes. These shares of restricted stock will become
vested as a result of the merger.
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EMPLOYEE BENEFITS
SODAK STOCK PURCHASE PLAN
We agreed with IGT that all amounts contributed to the Sodak Stock Purchase
Plan that, prior to the effective time of the merger, have not been used to
purchase Sodak common stock will be used to purchase common stock immediately
prior to the effective time at a discounted purchase price provided under the
terms of the Plan. At the effective time, each share of Sodak common stock
purchased under the Stock Purchase Plan will be converted into the merger
consideration.
CONTINUATION OF AGREEMENTS AND BENEFIT PLANS
IGT agreed to honor all of the Sodak employment, severance, termination and
similar agreements that we identified as of the date of the merger agreement.
Each agreement will be honored until the termination of the agreement or one
year after the effective time of the merger, whichever is earlier. Additionally,
all of our employees and our subsidiaries' employees will be able to participate
in the IGT benefit plans that are provided to IGT's employees who are similarly
situated. All Sodak employees will receive credit for their service with Sodak
prior to the merger. Additionally, with some limited exceptions, waiting or
eligibility periods or exclusions for pre-existing conditions under IGT's
benefit plans will be waived.
INDEMNIFICATION
IGT has agreed that all rights of indemnification existing at the time of
the merger in favor of our present or former directors, officers, employees and
agents under our articles of incorporation or by-laws will survive the merger
for six years from the date of its consummation. IGT further agreed that, for
six years from the consummation of the merger, IGT and the surviving corporation
will indemnify each indemnified person, to the fullest extent permitted by law,
for any claim arising out of an officer's or director's acts or omissions
occurring on or after July 1, 1998 and on or prior to the effective time of the
merger.
Additionally, IGT agreed to maintain officer and director insurance for the
indemnitees for a period of six years from the consummation of the merger. In
lieu of purchasing that insurance, we may, with IGT's written consent, purchase
a five-year extended reporting period endorsement under our existing directors'
and officers' liability insurance coverage. If the cost of the insurance in any
year during the six-year period exceeds 150% of the premium for the policy for
the year ended June 30, 1999, then IGT will cause the surviving corporation to
provide coverage that gives our officers and directors the same protection that
IGT maintains for its officers and directors.
LOUISIANA JOINT VENTURE PUT
If we had been unable to sell our interest in the Louisiana joint venture,
IGT would have had the right to require Roland Gentner and Tom Celani, two of
our directors and major stockholders, to purchase all of Sodak's interest in the
joint venture and assume all of our responsibilities for an amount agreed to by
IGT, Mr. Gentner and Mr. Celani. IGT asked all four of our major stockholders to
stand behind this "put" right but only Messrs. Gentner and Celani agreed to do
so. Messrs. Gentner and Celani did not want to purchase these interests, but
agreed to allow IGT to cause them to do so in order to facilitate the merger. As
a result of the sale of our interest in the Louisiana joint venture in
accordance with the terms of the merger agreement, the put will not be
exercised.
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SELECTED SODAK FINANCIAL DATA
The following table summarizes selected items from our consolidated
financial statements as of and for the dates indicated:
<TABLE>
<CAPTION>
AT OR FOR
THREE MONTHS ENDED
AT OR FOR
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1998 1997 1996 1995 1994 1999 1998
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.............................................. $ 132,554 $ 137,578 $ 154,587 $ 93,172 $ 84,469 $ 31,276 $ 29,886
Income (loss) from operations........................ 17,219 (223) 20,901 20,059 14,754 5,277 3,180
Earnings (loss) before cumulative effect of
accounting change.................................. 2,686 (576) 13,233 12,893 9,897 3,113 1,953
Net earnings (loss).................................. 2,686 (3,707) 13,233 12,893 9,897 3,113 1,953
Earnings (loss) per share before cumulative effect of
accounting change.................................. 0.12 (0.02) 0.58 0.57 0.44 0.14 0.09
Earnings (loss) per share, basic and diluted......... 0.12 (0.16) 0.58 0.57 0.44 0.14 0.09
BALANCE SHEET DATA:
Working capital...................................... 34,812 21,571 37,728 37,501 29,703 44,080 25,188
Total assets......................................... 140,508 165,156 169,475 138,055 118,083 144,422 162,974
Long-term debt....................................... 4,366 19,818 27,189 18,044 600 3,828 21,526
Shareholders' equity................................. $ 106,996 $ 101,798 $ 106,431 $ 94,261 $ 81,357 $ 110,260 $ 103,222
</TABLE>
SELECTED IGT FINANCIAL DATA
The following table summarizes selected items from IGT's consolidated
financial statements as of and for the dates indicated:
<TABLE>
<CAPTION>
AT OR FOR
AT OR FOR SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, --------------------
------------------------------- APRIL 3, MARCH 31,
1998 1997 1996 1999 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue............................................... $ 824,123 $ 743,970 $ 733,452 $ 442,577 $ 347,103
Income from operations................................ 218,817 191,437 169,833 98,823 96,017
Net income............................................ 152,446 137,247 118,017 68,272 65,163
Earnings per share, basic............................. 1.35 1.14 0.93 0.64 0.57
Earnings per share, diluted........................... 1.33 1.13 0.93 0.64 0.56
BALANCE SHEET DATA:
Total current assets.................................. 670,543 571,546 615,592 664,705 624,839
Total assets.......................................... 1,543,628 1,215,052 1,154,187 1,532,941 1,475,282
Total current liabilities............................. 200,540 164,588 127,442 214,284 176,249
Long-term notes payable and capital lease obligations,
net of current maturities........................... 322,510 140,713 107,155 377,985 301,403
Long-term jackpot liabilities......................... 479,217 389,235 292,864 471,276 435,823
Shareholders' equity.................................. $ 541,276 $ 519,847 $ 623,200 $ 469,151 $ 561,069
</TABLE>
36
<PAGE>
MARKET PRICE OF SODAK COMMON STOCK
Our common stock trades on the Nasdaq National Market under the symbol SODK.
A two-for-one stock split of our common stock was effected September 27, 1996.
The following table sets forth the high and low sales price of the Sodak common
stock (adjusted to reflect the stock split) on the Nasdaq composite tape:
<TABLE>
<CAPTION>
1997 1998 1999
---------------- ---------------- ----------------
HIGH LOW HIGH LOW HIGH LOW
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
First Quarter.............................................. $18 3/8 $10 1/2 $ 7 13/16 $ 6 1/4 $ 9 7/8 $ 7 1/4
Second Quarter............................................. 16 5/8 9 7/8 7 1/8 5 7/8 9 3/8(1) 8 1/2(1)
Third Quarter.............................................. 15 3/8 9 15/16 7 5/8 5 5/8
Fourth Quarter............................................. 14 3/8 5 3/8 8 15/1 5 1/4
</TABLE>
- ------------------------
(1) Through May 28, 1999.
As of May 26, 1999 there were 3,389 beneficial owners of Sodak common stock.
On March 10, 1999, the last trading day before the execution of the merger
agreement was publicly announced, the closing sales price per share of Sodak
common stock on the Nasdaq National Market was $8.00. The closing price of the
Sodak common stock on May 28, 1999 was $9.25. Stockholders are urged to obtain
current information with respect to the market price of the Sodak common stock.
We did not pay cash dividends in 1997 or 1998 and do not anticipate paying
cash dividends in the foreseeable future.
Our registrar and transfer agent is Norwest Bank Minnesota, N.A., Stock
Transfer Department, P.O. Box 64854, St. Paul, MN 55164-0854; telephone (651)
450-4064 or (800) 468-9716.
37
<PAGE>
BENEFICIAL OWNERSHIP OF SODAK COMMON STOCK
The following tables set forth as of May 25, 1999, the number of shares and
percentage of Sodak common stock beneficially owned by each of Sodak's directors
and five most highly compensated executive officers, by Sodak's executive
officers and directors as a group and by each person who Sodak knows to be the
beneficial owner of more than 5% of Sodak's common stock.
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS
- ----------------------------------------------------- ---------------------- ---------------
<S> <C> <C>
Michael Wordeman(3).................................. 3,456,532 15.1%
Roland Gentner(4).................................... 2,311,288 10.1%
Thomas Celani(5)(6).................................. 3,156,000 13.8%
Colin Reed(7)(8)..................................... 3,295,488 14.4%
Ronnie Lopez(9)...................................... 43,075 *
Manuel Lujan, Jr.(10)................................ 39,000 *
Michael Diedrich(11)................................. 80,426 *
Kevin Buntrock(12)................................... 112,216 *
Knute Knudson, Jr.(13)............................... 86,217 *
Clayton Trulson(14).................................. 99,143 *
Directors and executive officers as a group (10 12,679,385 54.3%
persons)...........................................
</TABLE>
- ------------------------
* Less than 1%.
(1) The business address of each executive officer and director who is a
beneficial owner of more than 5% of Sodak common stock other than Thomas
Celani and Colin Reed is: c/o Sodak Gaming, Inc., 5301 S. Highway 16, Rapid
City, South Dakota 57701.
(2) Beneficial ownership includes shares with respect to which the stockholder
has voting power and/or investment power. Shares of common stock subject to
options currently exercisable or exercisable within the next 60 days are
deemed outstanding for computing the percentage of the person holding the
option but are not deemed outstanding for computing the percentage of any
other person. Except as indicated, the persons named in the table have sole
voting power and investment power with respect to all shares of common stock
shown as beneficially owned by them.
(3) Includes 148,532 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
(4) Includes 55,688 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
(5) The address of Thomas Celani is: 34900 Grand River, Farmington, Michigan
48335.
(6) Includes 42,000 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
(7) The address of Colin Reed is: 1023 Cherry Road, Memphis, Tennessee 38117.
(8) Includes 3,192,488 shares of common stock held by Harrah's Operating
Company, Inc., of which Mr. Reed is Executive Vice President and Chief
Financial Officer. Mr. Reed is Harrah's designee on Sodak's Board of
Directors and may be deemed to beneficially own the shares held by Harrah's.
Includes 42,000 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
38
<PAGE>
(9) Includes 42,000 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
(10) Includes 30,000 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
(11) Includes 33,012 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
(12) Includes 70,012 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
(13) Includes 44,012 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
(14) Includes 38,524 shares of common stock issuable upon exercise of options
exercisable within 60 days of May 1, 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS
- ------------------------------------------------------ -------------------- ---------------
<S> <C> <C>
State of Wisconsin Investment Board(1)................ 2,265,000 9.9%
P.O. Box 7842
Madison, Wisconsin 53707
Harrah's Operating Company, Inc....................... 3,192,488 14.0%
206 North Virginia Street
Reno, Nevada 89501
</TABLE>
- ------------------------
(1) Based on information provided in Amendment No. 2 to Schedule 13-G filed by
the State of Wisconsin Investment Board with the Securities and Exchange
Commission on February 2, 1999.
39
<PAGE>
INDEPENDENT PUBLIC AUDITORS
KPMG Peat Marwick LLP serves as Sodak's independent certified public
accountant. A representative of KPMG Peat Marwick LLP will be at the Special
Meeting to answer the questions of Sodak stockholders.
OTHER STOCKHOLDERS MEETINGS
We intend to hold an annual meeting of our stockholders in 1999 only if the
merger is not consummated. If an annual meeting is held, eligible Sodak
stockholders may submit proposals to be considered for stockholder action at the
annual meeting if they do so in accordance with applicable regulations of the
SEC and our by-laws. If an annual meeting is held, it is expected that a
representative of KPMG Peat Marwick LLP will be present and available to respond
to appropriate questions from stockholders. The representative will also have
the opportunity to make a statement at the annual meeting if he or she so
desires.
WHERE YOU CAN FIND MORE INFORMATION
Sodak files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at http://www.sec.gov.
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE
This document, and documents to which we refer you in this document, contain
forward-looking statements about, among other things, Sodak, IGT and our
expectations or beliefs concerning future events or future results of
operations. These statements are typically identified by terms indicating future
expectation such as "anticipates," "believes," "expects," "estimates," "intends"
and similar expressions. These forward-looking statements are subject to
numerous risks and uncertainties and many factors could cause actual results and
events to differ significantly from those discussed in forward-looking
statements.
All forward-looking statements are subject to the risks and uncertainties
inherent with predictions and forecasts. They are necessarily speculative
statements, and unforeseen factors, such as competitive pressures, changes in
regulatory structure, failure to gain the approval of regulatory authorities,
and changes in customer acceptance of gaming could cause results to differ
materially from any that may be expected. Forward-looking statements are made in
the context of information available as of the date stated. We do not undertake
any obligation to update or revise the statements to reflect new circumstances
or unanticipated events as they occur.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows Sodak to "incorporate by reference" information into this
document, which means that Sodak can disclose important information to you be
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this document, except for any
information superseded by information in this document. This document
40
<PAGE>
incorporates by reference the documents set forth below that Sodak has
previously filed with the SEC. These documents contain important information
about Sodak and its financial performance.
<TABLE>
<CAPTION>
SODAK SEC FILINGS PERIOD
- ------------------------------------ ----------------------------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998 (as amended)
Current Report on Form 8-K (Filed on March 11, 1999)
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
</TABLE>
You may already have received some of the documents incorporated by
reference, but you may obtain any of them from Sodak or the SEC. We are also
incorporating by reference any additional documents that we file with the SEC
between the date of this document and the date of the special meeting. Any
statements contained in this document or in a document incorporated or deemed to
be incorporated by reference shall be deemed to be modified or superseded for
the purposes of this document to the extent that a statement contained in this
document or in any subsequently filed document that is or is deemed to be
incorporated by reference in this document modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this document.
Documents incorporated by reference are available from Sodak without charge,
excluding all exhibits unless an exhibit has been specifically incorporated by
reference in this document. You may obtain documents incorporated by reference
by requesting them in writing or by telephone by contacting:
Sodak Gaming, Inc.
5301 S. Highway 16
Rapid City, South Dakota 57701
Telephone: (605) 341-5400
Attn: Michael G. Diedrich
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM SODAK, PLEASE DO SO BY JUNE 25, 1999
TO RECEIVE THEM BEFORE THE SPECIAL MEETING. SODAK WILL SEND REQUESTED DOCUMENTS
BY FIRST-CLASS MAIL WITHIN ONE BUSINESS DAY OF RECEIVING ANY TIMELY REQUEST.
41
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 10, 1999
AMONG
INTERNATIONAL GAME TECHNOLOGY,
SAC, INC.
AND
SODAK GAMING, INC.
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.............................................................................. 5
SECTION 1.2 Closing................................................................................. 5
SECTION 1.3 Effective Time.......................................................................... 6
SECTION 1.4 Effects of the Merger................................................................... 6
SECTION 1.5 Articles of Incorporation and By-laws................................................... 6
SECTION 1.6 Directors............................................................................... 6
SECTION 1.7 Officers................................................................................ 6
SECTION 1.8 Additional Actions...................................................................... 6
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock................................................................. 6
SECTION 2.2 Exchange of Certificates................................................................ 7
SECTION 2.3 No Liability............................................................................ 8
SECTION 2.4 Dissenters' Rights...................................................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company........................................... 9
SECTION 3.2 Representations and Warranties of Parent and Sub........................................ 19
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business..................................................................... 21
SECTION 4.2 No Inconsistent Activities.............................................................. 23
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Proxy Statement; Stockholders' Meeting............................... 24
SECTION 5.2 Access to Information; Confidentiality.................................................. 25
SECTION 5.3 Reasonable Efforts; Notification........................................................ 25
SECTION 5.4 Gaming Approvals........................................................................ 26
SECTION 5.5 Stock Options; Employee Benefits........................................................ 28
SECTION 5.6 Takeover Statutes; Inconsistent Actions................................................. 30
SECTION 5.7 Indemnification, Exculpation and Insurance.............................................. 30
SECTION 5.8 Letters of Accountants.................................................................. 31
SECTION 5.9 Fees and Expenses....................................................................... 31
SECTION 5.10 Public Announcements.................................................................... 32
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligations to Effect the Merger............................. 32
SECTION 6.2 Additional Conditions to Obligations of Parent and Sub.................................. 32
SECTION 6.3 Additional Conditions to Obligations of the Company..................................... 33
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination............................................................................. 34
SECTION 7.2 Effect of Termination................................................................... 35
SECTION 7.3 Amendment............................................................................... 35
SECTION 7.4 Extension; Waiver....................................................................... 35
SECTION 7.5 Termination Fee......................................................................... 36
SECTION 7.6 Procedure for Termination, Amendment, Extension or Waiver............................... 36
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties........................................... 36
SECTION 8.2 Notices................................................................................. 37
SECTION 8.3 Definitions............................................................................. 37
SECTION 8.4 Interpretation.......................................................................... 38
SECTION 8.5 Counterparts............................................................................ 38
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.......................................... 38
SECTION 8.7 Governing Law........................................................................... 38
SECTION 8.8 Assignment.............................................................................. 38
SECTION 8.9 Enforcement............................................................................. 38
</TABLE>
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
EXHIBITS
Exhibit A Irrevocable Proxy and Voting Agreement
A-3
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 10, 1999, among
International Game Technology, a Nevada corporation ("PARENT"), SAC, Inc., a
South Dakota corporation and a direct wholly owned subsidiary of Parent ("SUB"),
and Sodak Gaming, Inc., a South Dakota corporation (the "COMPANY").
BACKGROUND
A. The respective Boards of Directors of Parent, Sub and the Company have
determined that it is advisable and in the best interest of their respective
stockholders for Sub to merge with and into the Company (the "MERGER") and have
approved the Merger, upon the terms and subject to the conditions set forth in
this Agreement and in accordance with the South Dakota Business Corporation Act
(the "SDBCA"), whereby each issued and outstanding share of common stock of the
Company, $.001 par value per share (the "COMPANY COMMON STOCK"), other than
shares to be cancelled in accordance with Section 2.1(b), will be converted into
the right to receive $10.00 in cash (the "MERGER CONSIDERATION").
B. The Merger requires the approval of the holders of a majority of the
outstanding shares of the Company Common Stock (the "STOCKHOLDER APPROVAL").
C. Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
D. Concurrently with the execution and delivery of this Agreement and as a
condition and inducement to each of Parent's and Sub's willingness to enter into
this Agreement, Harrah's Operating Company, Inc., Michael G. Wordeman, Thomas
Celani and Roland W. Gentner, the significant stockholders of the Company (the
"SIGNIFICANT STOCKHOLDERS"), have each entered into an Irrevocable Proxy and
Voting Agreement (collectively, the "VOTING AGREEMENT") with Parent dated as of
the date of this Agreement substantially in the form of Exhibit A attached
hereto, pursuant to which each Significant Stockholder has agreed, among other
things, to vote all voting securities of the Company beneficially owned by such
Significant Stockholder or for which such Significant Stockholder exercises
voting power pursuant to an irrevocable proxy in favor of approval and adoption
of this Agreement and the Merger.
AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the SDBCA, Sub shall be merged
with and into the Company at the Effective Time (as defined in Section 1.3).
Following the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION") and shall succeed to and assume all the rights and obligations of
the Company and of Sub in accordance with the SDBCA.
SECTION 1.2 CLOSING. The closing of the Merger will take place at 2:00
p.m. on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article VI (the "CLOSING DATE"), at the offices of O'Melveny & Myers LLP,
Embarcadero Center West, 275 Battery Street, San Francisco, California, unless
another time, date or place is agreed to by the parties hereto; PROVIDED that in
no event shall the Closing Date occur on or before May 24, 1999, unless agreed
to by Parent.
A-4
<PAGE>
SECTION 1.3 EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall prepare,
execute, acknowledge and file with the Secretary of State of South Dakota
articles of merger in such form as is required by the relevant provisions of the
SDBCA and shall make all other filings or recordings required under the SDBCA.
The Merger shall become effective at such time as such filing or filings are
made with the Secretary of State of the State of South Dakota, or at such other
time as Sub and the Company shall agree should be specified in such filings (the
date and time of such effectiveness, being the "EFFECTIVE TIME").
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in 47-6-9 of the SDBCA and all other effects specified in the applicable
provisions of the SDBCA.
SECTION 1.5 ARTICLES OF INCORPORATION AND BY-LAWS. At the Effective Time,
the articles of incorporation and by-laws of Surviving Corporation shall be
amended to be identical to the articles of incorporation and by-laws,
respectively, of Sub as in effect immediately prior to the Effective Time
(except that the name of the Surviving Corporation shall be changed to a name
designated by Parent).
SECTION 1.6 DIRECTORS. The directors of Sub at the Effective Time shall
continue as the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.7 OFFICERS. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office until the earlier of their death, resignation or removal.
SECTION 1.8 ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Sub or the Company or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Sub or the
Company, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of Sub or the Company, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Sub, the Company or the
holders of any shares of Company Common Stock or any shares of capital stock of
Sub:
(a) CAPITAL STOCK OF SUB. Each share of the capital stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into one
(or such other number as may be specified by Parent at any time prior to the
Closing) fully paid and nonassessable share of common stock of the Surviving
Corporation, which shall be owned by Parent.
(b) CANCELLATION OF TREASURY STOCK AND PARENT OWNED STOCK. Each share of
Company Common Stock that is owned by the Company or by any subsidiary of the
Company and each share of Company Common Stock that is owned by Parent, Sub or
any other subsidiary of Parent immediately prior to the Effective Time shall
automatically be cancelled and retired without any conversion thereof and no
consideration shall be delivered with respect thereto.
(c) CONVERSION OF COMMON STOCK.
A-5
<PAGE>
(i) At the Effective Time, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock (A) owned by the Company or any subsidiary of the
Company, or Parent, Sub or any other subsidiary of Parent or (B) held by
stockholders ("DISSENTING STOCKHOLDERS") duly exercising appraisal rights
pursuant to Sections 47-6-23 and 47-6-48 of the SDBCA ("DISSENTING SHARES"
and, collectively with the shares of Company Common Stock owned by the
Company or any subsidiary of the Company or Parent, Sub or any other
subsidiary of Parent, the "EXCLUDED SHARES")) shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into
the right to receive, without interest, the Merger Consideration.
(ii) As of the Effective Time, all shares of Company Common Stock shall
no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each certificate previously representing any
such shares shall thereafter represent the right to receive cash upon
surrender of such certificates in accordance with Section 2.2 or the right,
if any, to require the Surviving Corporation to purchase such shares of
Company Common Stock for their "fair value" as determined in accordance with
Section 47-6-46 of the SDBCA. The holders of such certificates previously
evidencing such shares of Company Common Stock outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
shares of Company Common Stock as of the Effective Time except as otherwise
provided herein or by law.
SECTION 2.2 EXCHANGE OF CERTIFICATES.
(a) Promptly after the Effective Time, the Exchange Agent (as defined below)
shall mail to each holder of record of Company Common Stock immediately prior to
the Effective Time (other than Excluded Shares) (i) a letter of transmittal (the
"COMPANY LETTER OF TRANSMITTAL") (which shall specify that delivery shall be
effected, and risk of loss and title to the Company certificates representing
shares of the Company Common Stock (the "CERTIFICATES") shall pass, only upon
delivery of such Certificates to the Exchange Agent and shall be in such form
and have such other provisions as Parent and the Company shall mutually agree)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration with respect to the shares of Company
Common Stock formerly represented thereby.
(b) At the Effective Time, Parent shall make available, or cause to be made
available to the party specified by Parent and reasonably acceptable to the
Company as the exchange agent (the "EXCHANGE AGENT"), amounts sufficient in the
aggregate to provide all funds necessary for the Exchange Agent to make payments
pursuant to Section 2.1(c)(i) hereof to holders of Company Common Stock issued
and outstanding immediately prior to the Effective Time who are to receive the
Merger Consideration. Any interest, dividends, or other income earned on the
investment of cash deposited by Parent with the Exchange Agent in accordance
with this Section 2.2(b) shall be for the account of and payable to Parent.
(c) Upon surrender to the Exchange Agent of Certificates, together with the
Company Letter of Transmittal, duly executed and completed in accordance with
the instructions thereto, and only upon such surrender, the holder of such
Certificate shall be entitled to receive, in exchange therefor, and Parent shall
promptly cause to be delivered to such holder a check in the amount to which
such holder is entitled, after giving effect to any required tax withholdings.
The Certificates surrendered pursuant to this Section 2.2(c) shall forthwith be
cancelled. If any Certificate shall have been lost, stolen, mislaid or
destroyed, then upon (1) receipt of an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed and an
indemnity (each in form and substance reasonably satisfactory to Parent), and
(2) if required by Parent, the posting by such person of a bond in such
reasonable amount as the Company may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
shall issue to such holder the Merger
A-6
<PAGE>
Consideration into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted.
(d) No interest will be paid or will accrue on the amount payable upon the
surrender of any Certificate. If payment is to be made to a person other than
the registered holder of the Certificate surrendered, it shall be a condition of
such payment that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer, as determined by the Exchange Agent or
Parent, and that the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of the Parent or the Exchange Agent that such tax has been paid or
is not payable. One year following the Effective Time, Parent shall be entitled
to cause the Exchange Agent to deliver to it any funds (including any interest
received with respect thereto) made available to the Exchange Agent which have
not been disbursed to holders of Certificates formerly representing shares of
Company Common Stock outstanding on the Effective Time, and thereafter such
holders shall be entitled to look to the Parent only as general creditors
thereof with respect to cash payable upon due surrender of their Certificates.
(e) In the event of a transfer of ownership of Company Common Stock which is
not registered in the transfer records of the Company, the Merger Consideration
may be paid or issued to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate, accompanied by
all documents required to evidence and effect such transfer, shall be properly
endorsed with signature guarantee or otherwise be in proper form for transfer,
and the person requesting such payment shall pay any transfer or other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of such Certificate or establish to the satisfaction
of Parent that such tax has been paid or is not applicable.
(f) The Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to
have been paid in full satisfaction of all rights pertaining to the shares of
Company Common Stock theretofore represented by such Certificates, SUBJECT,
HOWEVER, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which may
have been declared or made by the Company on such shares of Company Common Stock
in accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time and have not been paid
prior to surrender. At the Effective Time, the stock transfer books of the
Company shall be closed, and there shall be no further registrations of
transfers of shares of Company Common Stock thereafter on the records of the
Company.
SECTION 2.3 NO LIABILITY. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any holder of shares of Company Common Stock for any
cash otherwise payable to such holder of shares of Company Common Stock
delivered or paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
SECTION 2.4 DISSENTERS' RIGHTS. If any Dissenting Stockholder shall be
entitled to require the Company to purchase such stockholder's shares for their
"fair value", as provided in Chapter 47-6-46 of the SDBCA, the Company shall
give Parent notice thereof and Parent shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the shares held by such stockholder shall thereupon be entitled to be
surrendered in exchange for the Merger Consideration as provided by Sections 2.1
and 2.2 hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Parent and Sub as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. The Company is and each of
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate power and authority to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed would not
have a Material Adverse Effect (as defined in Section 8.3) on the Company. The
Company has made available to Parent complete and correct copies of its articles
of incorporation and by-laws and the articles of incorporation and by-laws or
other organizational documents of its subsidiaries, in each case as amended to
the date of this Agreement.
(b) SUBSIDIARIES AND OTHER EQUITY INTERESTS. Section 3.1(b) of the
disclosure schedule delivered by the Company to Parent prior to execution of
this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), contains a list of each
subsidiary of the Company and its jurisdiction of incorporation or organization.
Except as set forth in Section 3.1(b) of the Company Disclosure Schedule, all
the outstanding shares of capital stock of each such subsidiary have been
validly issued and are fully paid and nonassessable and are owned as set forth
in Section 3.1(b) of the Company Disclosure Schedule, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "LIENS"). Except as set forth in Section
3.1(b) of the Company Disclosure Schedule, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, limited partnership, limited liability company, joint venture or
other entity.
(c) CAPITAL STRUCTURE. The authorized capital stock of the Company consists
of as of the date hereof, and will consist of as of the Effective Time,
75,000,000 shares of Company Common Stock and 25,000,000 shares of preferred
stock, $.001 par value per share (the "COMPANY PREFERRED STOCK"). The rights,
privileges and preferences of the Company Common Stock and Company Preferred
Stock are as stated in the Company's Amended and Restated Articles of
Incorporation. As of the close of business on March 9, 1999, (i) 22,789,908
shares of the Company Common Stock and no shares of the Company Preferred Stock
were issued and outstanding, (ii) no shares of Company Common Stock were held by
the Company in its treasury, and (iii) 894,378 shares of Company Common Stock
were reserved for issuance upon exercise of the Stock Options (as hereinafter
defined). All issued and outstanding shares of Company Common Stock are, and all
shares which may be issued upon the exercise of Stock Options will be, duly
authorized, validly issued, fully paid and nonassessable, and are not subject to
and were not issued in violation of any preemptive rights. To the Knowledge (as
defined in Section 8.3) of the Company, there are no voting trusts, voting
agreements, irrevocable proxies or other agreements with respect to any voting
shares of capital stock of the Company. There are no bonds, debentures, notes or
other indebtedness of the Company or any of its subsidiaries having the right to
vote (or convertible into or exchangeable for other securities having the right
to vote) on any matters on which the stockholders of the Company may vote.
Except as set forth above and except as set forth in Section 3.1(c) of the
Company Disclosure Schedule, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its subsidiaries is a party or by which any of them is bound obligating the
Company or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of the Company or of any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue, grant, extend or
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enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding contractual
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock (or options to acquire any such
shares) of the Company or any of its subsidiaries. There are no agreements,
arrangements or commitments of any character (contingent or otherwise) pursuant
to which any person is or may be entitled to receive any payment based on the
revenues, earnings or financial performance of the Company or any of its
subsidiaries or assets or calculated in accordance therewith (other than
ordinary course payments or commissions to sales representatives of the Company
based upon revenues generated by them without augmentation as a result of the
transactions contemplated hereby) or to cause the Company or any of its
subsidiaries to file a registration statement under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), or which otherwise relate to the registration
of any securities of the Company.
(d) AUTHORITY; NONCONTRAVENTION. The Company has the requisite corporate
power and authority to enter into this Agreement and, subject to the Stockholder
Approval, to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of the Company, subject
to the Stockholder Approval of this Agreement. Assuming the due authorization,
execution and delivery of this Agreement by Parent and Sub, this Agreement has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
Except as set forth in Section 3.1(d) of the Company Disclosure Schedule,
the execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of the Company or any of its subsidiaries
under, (i) the articles of incorporation or by-laws of the Company or the
comparable charter or organizational documents of any of its subsidiaries, (ii)
any contract for the provision of any form of gaming services or products
between the Company or any of its subsidiaries and any third party, any loan or
credit agreement, note, bond, mortgage, indenture, lease, joint venture or other
agreement, instrument, permit, concession, franchise or license applicable to
the Company or any of its subsidiaries or their respective properties or assets
or (iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation (including, without limitation, those of the National Indian
Gaming Commission, or any other tribal or governmental authority regulating any
form of gaming) applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults or rights that individually or
in the aggregate would not (A) have a Material Adverse Effect on the Company,
(B) impair in any material respect the ability of the Company to perform its
obligations under this Agreement or (C) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign, including, without limitation, the
National Indian Gaming Commission, or any other tribal or governmental authority
regulating any form of gaming (a "GOVERNMENTAL ENTITY"), is required by the
Company or any of its subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (i) the filing with the
Federal Trade Commission and the Antitrust Division of the Department of Justice
(the "SPECIFIED AGENCIES")
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of a premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"), (ii) the
filing with the Securities and Exchange Commission (the "SEC") of (x) the Proxy
Statement (as defined in Section 5.1) and (y) such reports under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (iii) the filing of the articles of merger with the Secretary of
State of the State of South Dakota and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(iv) the approval by (A) the South Dakota Commission on Gaming and South Dakota
Lottery Commission and (B) other gaming regulatory bodies in jurisdictions where
the Company or its subsidiaries are engaged in business and (v) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made would not have a Material
Adverse Effect on the Company, impair in any material respect the ability of the
Company to perform its obligations under this Agreement or prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement. Neither the Company nor any subsidiary of the Company nor, to the
Knowledge of the Company, any director or officer of the Company or of any
subsidiary of the Company has received any written claim, demand, notice,
complaint, court order or administrative order from any Governmental Entity in
the past three years, asserting that a license of it or them, as applicable,
under any Gaming Laws (as defined in Section 3.1(o)) is being or may be revoked
or suspended other than such claims, demands, notices, complaints, court orders
or administrative orders which would not have a Material Adverse Effect on the
Company.
(e) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 1, 1997, the Company
has timely filed with the SEC all required reports and forms and other documents
(the "COMPANY SEC DOCUMENTS"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents and none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the financial position of the Company as
of the dates thereof and the results of its operations and cash flows for the
periods then ended. Except as set forth in the Company SEC Documents filed prior
to the date of this Agreement and publicly available and as set forth in Section
3.1(e) of the Company Disclosure Schedule and except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since the date of the most recent balance sheet included in the Company
SEC Documents, neither the Company nor any of its subsidiaries has any material
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by generally accepted accounting principles to be set
forth on a balance sheet of the Company and its consolidated subsidiaries or in
the notes thereto.
(f) INFORMATION SUPPLIED. None of the information supplied or to be supplied
by the Company specifically for inclusion or incorporation by reference in the
Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders' Meeting (as defined in
Section 5.1(d)), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty is made by the
Company with
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respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Company
SEC Documents filed prior to the date of this Agreement and publicly available,
since December 31, 1997 and except as set forth in Section 3.1(g) of the Company
Disclosure Schedule, the Company has conducted its business only in the ordinary
course consistent with prior practice, and there has not been (i) any Material
Adverse Change in the Company, (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of the Company's capital stock, (iii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (iv) any granting by the
Company or any of its subsidiaries to any officer or employee of the Company or
any of its subsidiaries of (A) any increase in compensation or (B) any right to
participate in (by way of bonus or otherwise) the profits of the Company or any
of its subsidiaries, except, in each case, in the ordinary course of business
consistent with prior practice or as was required under employment agreements or
salary or wage policies in effect as of the date of the most recent audited
financial statements included in the Company SEC Documents filed prior to the
date of this Agreement (a list of all such employment agreements being set forth
in Section 3.1(g) of the Company Disclosure Schedule), (v) any granting by the
Company or any of its subsidiaries to any such officer or employee of any
increase in severance or termination pay, except as was required under
employment, severance or termination agreements in effect as of the date of the
most recent audited financial statements included in the Company SEC Documents
filed prior to the date of this Agreement and publicly available, (vi) any entry
into, or renewal or modification, by the Company or any of its subsidiaries, of
any employment, consulting, severance or termination agreement with any officer,
director or employee of the Company or any of its subsidiaries, (vii) any
damage, destruction or loss, whether or not covered by insurance, that has or
could have a Material Adverse Effect on the Company, (viii) any change in
accounting methods, principles or practices by the Company materially affecting
its assets, liabilities or business, or (ix) any other action taken since
September 30, 1998 by the Company or any of its subsidiaries which, if Section
4.1(a) had then been in effect, would have been prohibited by such Section if
taken without Parent's consent (and no agreement, understanding, obligation or
commitment to take any such action exists).
(h) LITIGATION. Except as disclosed in the Company SEC Documents filed prior
to the date of this Agreement and publicly available and except as set forth in
Section 3.1(h) of the Company Disclosure Schedule, there is no suit, action,
investigation, audit or proceeding pending or, to the Knowledge of the Company,
threatened against the Company or any of its subsidiaries that would (i) have a
Material Adverse Effect on the Company, (ii) impair in any material respect the
ability of the Company to perform its obligations under this Agreement or (iii)
prevent or delay the consummation of any of the transactions contemplated by
this Agreement, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any of
its subsidiaries having, or which is reasonably likely to have, any effect
referred to in the foregoing clauses (i), (ii) or (iii).
(i) BROKERS. Neither the Company nor any of its subsidiaries nor any of
their respective officers, directors or employees has employed any broker or
finder, other than Salomon Smith Barney Inc., or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees (other
than financial advisory fees paid to Salomon Smith Barney Inc.), and no broker
or finder has acted directly or indirectly for the Company or any of its
subsidiaries in connection with this Agreement or the transactions contemplated
hereby. A true, correct and complete copy of the Company's definitive engagement
letter with Salomon Smith Barney Inc. has been delivered to Parent.
(j) VOTING REQUIREMENTS. The Board of Directors of the Company at a meeting
duly called and held: (i) determined that the Merger is advisable and fair and
in the best interests of the Company and its
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stockholders; (ii) approved the Merger and this Agreement and the transactions
contemplated by this Agreement; and (iii) recommended approval of this Agreement
and the Merger by the holders of Company Common Stock and directed that the
Merger be submitted for consideration by the Company's stockholders. The
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock entitled to vote is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve the Merger,
this Agreement and the transactions contemplated by this Agreement.
(k) TITLE TO PROPERTIES. The Company and its subsidiaries have good and
marketable title to, or valid leasehold interests in, all their properties and
assets except where such failure would not have a Material Adverse Effect on the
Company.
The Company or Gamblers Supply Management Company ("GSMC") has good and
marketable title to the Miss Marquette riverboat casino, together with all
related shore-based facilities, including, without limitation, the barge, the
motel, the enclosed walkway, the parking lot, the restaurant, the administrative
offices and other entertainment facilities (collectively, the "RIVERBOAT
COMPLEX") free and clear of any Liens other than those set forth in Section
3.1(k) of the Company Disclosure Schedule. The Company or GSMC has all licenses,
approvals, rights of way, easements, privileges, permits and certificates from
all governmental or quasi-governmental authorities (including without limitation
from the United States Coast Guard) necessary to own and operate the Riverboat
Complex as it is currently being operated. The Riverboat Complex is not in
violation in any material respect of any applicable zoning ordinance, building
code, use or occupancy restrictions, or health and safety codes. The Riverboat
Complex is in good operating condition subject to ordinary wear and tear, and
the plumbing, electrical, heating, ventilation, air conditioning, and other
mechanical systems on the Riverboat Complex are in good working order and have
been maintained in accordance with good commercial maintenance practice. Except
as set forth in Section 3.1(k) of the Company Disclosure Schedule, to the
Knowledge of the Company, there are no material physical, mechanical or
structural defects in the Riverboat Complex, and there are no material repairs
which need to be made to the Riverboat Complex which have not been made. The
financial information delivered by the Company to Parent with respect to the
operation of the Riverboat Complex (including without limitation the EBITDA
(earnings before interest, taxes, depreciation and amortization)) from the
Riverboat Complex for the last two fiscal years, is true and correct in all
material respects.
(l) ERISA COMPLIANCE. Except as set forth in Section 3.1(l) of the Company
Disclosure Schedule,
(i) The Company has delivered to, or made available for review by,
Parent true, complete and correct copies of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein as
"PENSION PLANS"), "employee welfare benefit plans" (as defined in Section
3(1) of ERISA) and all other collective bargaining agreements or bonus,
pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other plans, arrangements or understandings (whether or not legally binding)
(collectively, "BENEFIT PLANS") currently maintained, or contributed to, or
required to be maintained or contributed to, by the Company or any other
person or entity that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each a "COMMONLY
CONTROLLED ENTITY"), including all employment, termination, severance or
other contracts for the benefit of any current or former employees, officers
or directors of the Company or any of its subsidiaries. The Company has
delivered to, or made available for review by, Parent true, complete and
correct copies of (A) the most recent annual report on Form 5500 filed with
the Internal Revenue Service ("IRS") with respect to each of its Benefit
Plans (if any such report was required), (B) the most recently prepared
actuarial report for each such Benefit Plan, (C) the most recent summary
plan description for each such Benefit Plan for which such summary plan
description is required,
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(D) the most recently received IRS determination letter for each such
Benefit Plan and (E) each trust agreement and group annuity contract
relating to any such Benefit Plan.
(ii) Each of the Company's and its subsidiaries' Benefit Plans has been
administered in all material respects in accordance with its terms. The
Company, each of its subsidiaries and all such Benefit Plans are in
compliance in all material respects with applicable provisions of ERISA and
the Code.
(iii) All of the Company's and its subsidiaries' Pension Plans intended
to be qualified under Section 401(a) of the Code have been the subject of
determination letters from the IRS to the effect that such Pension Plans are
qualified under Section 401(a) of the Code and no such determination letter
has been revoked nor, to the best knowledge of the Company, has revocation
been threatened, nor has any such Pension Plan been amended since the date
of its most recent determination letter or application therefor in any
respect that would adversely affect its qualification or materially increase
its costs.
(iv) No Pension Plan that the Company or any of its subsidiaries
maintains is subject to Title IV of ERISA. No Pension Plan to which the
Company or any of its subsidiaries contributes or is required to contribute
is a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(v) None of the Company, any of its subsidiaries, any officer of the
Company or any of its subsidiaries or any of the Company's or its
subsidiaries' Benefit Plans which are subject to ERISA, including, without
limitation, its Pension Plans, any trusts created thereunder or any trustee
or administrator thereof, has engaged in a non-exempt "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section
4975 of the Code) or any other breach of fiduciary responsibility that will
subject the Company, or any of its subsidiaries or any officer of the
Company or any of its subsidiaries, to tax or penalty under ERISA, the Code
or other applicable law that is material to the business of the Company and
that has not been corrected. Neither any of such Benefit Plans nor any of
such trusts has been terminated, nor has there been any "reportable event"
(as that term is defined in Section 4043 of ERISA) with respect thereto,
during the last five years.
(vi) Except as expressly set forth in this Agreement, the consummation
of the transactions contemplated by this Agreement will not result in an
increase in the amount of compensation or benefits or accelerate the vesting
or timing of payment of any benefits payable to or in respect of any
employee or former employee of the Company or any subsidiary of the Company
or the beneficiary or dependent of any such employee or former employee.
(vii) With respect to any of the Company's or any of its subsidiaries'
Benefit Plans that is an employee welfare benefit plan, (A) no such Benefit
Plan is funded through a "welfare benefit fund," as such term is defined in
Section 419(e) of the Code, (B) each such Benefit Plan that is a "group
health plan," as such term is defined in Section 5000(b)(1) of the Code,
complies in all material respects with the applicable requirements of
Section 4980B(f) of the Code and (C) each such Benefit Plan (including any
such Benefit Plan covering retirees or other former employees) may be
amended or terminated without material liability to the Company or any of
its subsidiaries on or at any time after the Effective Time.
(viii) No Commonly Controlled Entity has incurred any material liability
to a Pension Plan of the Company or any of its subsidiaries (other than for
contributions not yet due).
(m) TAXES.
(i) Each of the Company and its subsidiaries has timely filed all
federal, state, local and foreign tax returns, declarations, estimates,
information returns, statements and reports (collectively, "RETURNS")
required to be filed by it through the date hereof and shall timely file all
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such Returns required to be filed on or before the Effective Time. All such
Returns are and will be true, complete and correct in all material respects.
The Company and each of its subsidiaries has paid and discharged (or the
Company has paid and discharged on such subsidiary's behalf) all material
taxes due from them, other than such taxes as are being contested in good
faith by appropriate proceedings and are adequately reserved for on the most
recent financial statements contained in the SEC Documents filed prior to
the date of this Agreement and publicly available. There are no material
liens for taxes upon the assets of the Company or any subsidiary except
liens for taxes not yet due.
(ii) No claim or deficiency for any taxes has been proposed, threatened,
asserted or assessed by the IRS or any other taxing authority or agency
against the Company, or any of its subsidiaries which, if resolved against
the Company or any of its subsidiaries, would have a Material Adverse Effect
upon the Company. No requests for waivers of the time to assess any taxes
are pending. No power of attorney has been granted by the Company or any of
its subsidiaries with respect to taxes which is currently in force. None of
the Company and its Subsidiaries has waived any statute of limitations in
respect of federal or state income taxes or agreed to any extension of time
with respect to a tax assessment or deficiency, except as set forth in
Section 3.1(m) of the Company Disclosure Schedule, no Returns in respect of
federal or state income taxes for any taxable years are being examined by
the Internal Revenue Service or by any applicable state tax authority; no
material deficiency for any taxes has been proposed, asserted or assessed by
any taxing authority against the Company or its subsidiaries, which has not
been resolved or paid in full, other than such deficiency which is being
contested in good faith or is set forth in Section 3.1(m) of the Company
Disclosure Schedule. Except as set forth in Section 3.1(m) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has
made any election under Section 341(f) of the Code.
(iii) As used in this Agreement, "taxes" shall include all federal,
state, local and foreign income, property, sales, excise and other taxes, of
any nature whatsoever (whether payable directly or by withholding), together
with any interest and penalties, additions to tax or additional amounts
imposed with respect thereto. As used in this Section 3.1(m) only and
without impact on the term "material" as used elsewhere in the Agreement,
"material" means amounts in excess of $75,000. Notwithstanding the
definition of "subsidiary" set forth in Section 8.3 of this Agreement, for
the purposes of this Section 3.1(m), references to the Company and each of
its subsidiaries shall include former subsidiaries of the Company for the
periods during which any such corporations were included in the consolidated
federal income tax return of the Company.
(iv) The Company and each subsidiary has established (and until the
Effective Time will establish) on its respective books and records reserves
(to be specifically designated as an increase to current liabilities) that
are adequate for the payment of all taxes not yet due and payable, except
where failure to establish reserves would not reasonably be expected to be
material.
(v) Except as set forth in Section 3.1(m) of the Company Disclosure
Schedule, the Company is not a party to any tax-sharing or allocation
agreement, nor does the Company owe any amount under any tax-sharing or
allocation agreement, and any entity that is disposed of in connection with
the disposition of the Riverboat Complex shall not have any binding
contractual rights or obligations pursuant to any tax-sharing or similar
arrangement.
(vi) The Company and its subsidiaries has complied (and until the
Effective Time will comply) in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of taxes
(including, without limitation, withholding of taxes pursuant to Sections
1441 or 1442 of the Code or similar provisions under any foreign laws) and
have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper
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governmental authorities all amounts required to be so withheld and paid
over under all applicable laws.
(vii) The Company and its subsidiaries has never been (or has any
liability for unpaid taxes because it once was) a member of an "affiliated
group" (within the meaning of Section 1502 of the Code) during any part of
any consolidated return year within any part of which year any corporation
other than the Company or its current subsidiaries was also a member of such
affiliated group.
(n) NO EXCESS PARACHUTE PAYMENTS. Except as set forth in Section 3.1(n) of
the Company Disclosure Schedule, no amount required to be paid (whether in cash
or property or the vesting of property) in connection with any of the
transactions contemplated by this Agreement to any employee, officer or director
of the Company or any of its affiliates who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement or other compensation arrangement
of the Company or Benefit Plan currently in effect or in effect as of the
Closing Date is reasonably expected to be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
(o) COMPLIANCE WITH APPLICABLE LAWS.
(i) Each of the Company and its subsidiaries has in effect all federal,
state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("PERMITS") necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted, and there has occurred
no default under any such Permit, except for the lack of Permits and for
defaults under Permits, which lack or default would not have a Material
Adverse Effect on the Company. The Company does not have any reason to
believe any Governmental Entity is considering limiting, suspending or
revoking any of the Company's or its subsidiaries' Permits. Except as
disclosed in the Company SEC Documents filed prior to the date of this
Agreement and publicly available, the Company and its subsidiaries are in
compliance with all applicable statutes, laws, ordinances, rules, orders and
regulations of any Governmental Entity, except for noncompliance which would
not have a Material Adverse Effect on the Company.
(ii) The Company and each of its subsidiaries are, and each of their
respective directors, officers, and persons performing management functions
similar to officers are, in compliance with all applicable Gaming Laws,
except for any immaterial events of non-compliance, which have been
corrected prior to the Closing Date to the satisfaction of the applicable
Governmental Entity. The term "GAMING LAWS" means any Federal, state, local,
tribal or foreign statute, ordinance, rule, regulation, permit, consent,
registration, qualification, finding of suitability, approval, license,
judgment, order, decree, injunction or other authorization, including any
condition of limitation placed thereon, governing or relating to the current
or contemplated casino and gaming activities and operations of the Company
or the Parent, as the case may be, or any of their respective subsidiaries.
(p) ENVIRONMENTAL.
(i) The Company and each of its subsidiaries is, and has been, and each
of the Company's former subsidiaries, while subsidiaries of the Company,
was, in compliance with all applicable Environmental Laws, except for
noncompliance which would not have a Material Adverse Effect on the Company.
The term "ENVIRONMENTAL LAWS" means any federal, state, local or foreign
statute, code, ordinance, rule, regulation, policy, guideline, permit,
consent, approval, license, judgment, order, writ, decree, injunction or
other authorization, including the requirement to register underground
storage tanks, relating to: (A) emissions, discharges, releases or
threatened releases of Hazardous Material (as defined below) into the
environment, including, without limitation, into ambient air, soil,
sediments, land surface or subsurface, buildings or facilities,
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surface water, groundwater, publicly owned treatment works, septic systems
or land; (B) the generation, treatment, storage, disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Material; (C)
protection of the environment; or (D) employee health and safety.
(ii) During the period of ownership or operation by the Company and its
subsidiaries of any of their respective current or previously owned or
leased properties, there have been no releases of Hazardous Material in, on,
under or affecting such properties or, to the best Knowledge of the Company,
any surrounding site, except in each case for those which would not have a
Material Adverse Effect on the Company. The Company has not shipped any
Hazardous Material to any disposal site for which it is or will be subject
to any liability, except for such liabilities which would not have a
Material Adverse Effect on the Company. To the Knowledge of the Company,
prior to the period of ownership or operation by the Company and its
subsidiaries of any of their respective current or previously owned or
leased properties, no Hazardous Material was generated, treated, stored,
disposed of, used, handled, released or manufactured at, or transported,
shipped or disposed of from, such current or previously owned or leased
properties, and there were no releases of Hazardous Material in, on, under
or affecting any such property or any surrounding site, except in each case
for those which would not have a Material Adverse Effect on the Company. The
term "HAZARDOUS MATERIAL" means (A) hazardous materials, contaminants,
constituents, medical wastes, hazardous or infectious wastes and hazardous
substances as those terms are defined in the following statutes and their
implementing regulations: the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 ET SEQ., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 ET SEQ., the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. Section 9601 ET SEQ., the Clean Water Act, 33
U.S.C. Section 1251 ET SEQ. and the Clean Air Act, 42 U.S.C. Section 7401 et
seq., (B) petroleum, including crude oil and any fractions thereof, (C)
natural gas, synthetic gas and any mixtures thereof, (D) asbestos and/or
asbestos-containing material and (E) polychlorinated biphenyls ("PCBS") or
materials or fluids containing PCBs in excess of 50 ppm.
(q) CONTRACTS; DEBT INSTRUMENTS. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement or set forth in Section
3.1(q) of the Company Disclosure Schedule, there is no contract or agreement
that is material to the business, financial condition or results of operations
of the Company and its subsidiaries taken as a whole. Except as set forth in
Section 3.1(q) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries is in violation of or in default under (nor does there exist
any condition which upon the passage of time or the giving of notice, or both,
would cause such a violation or default under) any loan or credit agreement,
note, bond, mortgage, indenture, lease or any other contract, agreement,
arrangement or understanding to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults that would not
have a Material Adverse Effect on the Company.
The Louisiana Joint Venture Agreements (as defined in 5.4(a)(iii) hereof)
constitute all of the agreements pertaining to the joint venture described
therein (the "JOINT VENTURE") to which the Company or any of its subsidiaries is
a party, and true and complete copies of the Louisiana Joint Venture Agreements,
and all amendments thereto, have been delivered to Parent. Except for the
performance of its express duties, undertakings and obligations under the
Louisiana Joint Venture Agreements and any duties implied under Louisiana law,
neither the Company nor any subsidiary has any obligations, contingent or
otherwise, with respect to the Joint Venture. Neither the Company nor any
subsidiary has any obligation to make any loans or capital contributions to the
Joint Venture.
Section 3.1(g) of the Company Disclosure Schedule sets forth all of the
employment, consulting, severance or termination agreements of the Company with
any officer, director or employee of the Company or any of its subsidiaries.
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(r) INTELLECTUAL PROPERTY.
(i) Except as would not have a Material Adverse Effect on the Company,
(A) the Company and each of its subsidiaries owns, has the right to acquire
or is licensed or otherwise has the right to use (in each case, free and
clear of any Liens), all Intellectual Property (as defined below) used in or
necessary for the conduct of its business as currently conducted, (B) no
claims are pending or, to the Knowledge of the Company, threatened, that the
Company or any of its subsidiaries is infringing on or otherwise violating
the rights of any person with regard to any Intellectual Property, and (C)
to the Knowledge of the Company, no person is infringing on or otherwise
violating any right of the Company or any of its subsidiaries with respect
to any Intellectual Property owned by and/or licensed to the Company or its
subsidiaries.
(ii) For purposes of this Agreement, "INTELLECTUAL PROPERTY"shall mean
patents, copyrights, trademarks (registered or unregistered), service marks,
brand names, trade dress, trade names, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing; and trade secrets and rights in any
jurisdiction to limit the use or disclosure thereof by any person.
(s) INSIDER INTERESTS. Except as set forth in Section 3.1(s) of the Company
Disclosure Schedule, to the Knowledge of the Company, no stockholder, officer,
director, employee or agent of the Company or any of its subsidiaries or any
affiliate of any officer or director of the Company or any of its subsidiaries
(as the term "affiliate" is defined in Rule 12b-2 under the Exchange Act), (i)
has any interest in any assets or property (whether real or personal, tangible
or intangible) of or used in the business of the Company or any subsidiary of
the Company (other than as an owner of outstanding securities of the Company),
or (ii) is indebted or otherwise obligated to the Company in an amount in excess
of $50,000, individually, or, for all such persons, $250,000 in the aggregate.
The Company is not indebted or otherwise obligated to any such person, except
for amounts not in excess of $50,000 or amounts due under normal arrangements
applicable to directors, officers or employees generally as to salary or fees or
reimbursement of ordinary business expenses not unusual in amount or
significance. As of the date hereof, to the Knowledge of the Company there are
no material losses, claims, damages, costs, expenses, liabilities or judgments
which would entitle any director, officer or employee of the Company or any of
its subsidiaries to indemnification by the Company or its subsidiaries under
applicable law, the articles of incorporation or bylaws of the Company or any of
its subsidiaries or any insurance policy maintained by the Company or any of its
subsidiaries. Section 3.1(s) of the Company Disclosure Schedule sets forth all
outstanding loans to stockholders, officers, directors, employees or agents of
the Company or any of its subsidiaries or any affiliate of any officer or
director of the Company or any of its subsidiaries, and all such loans are
payable on demand.
(t) NONCOMPETITION. Except as set forth in Section 3.1(t) of the Company
Disclosure Schedule, the Company and its subsidiaries are not, and after the
Effective Time neither the Surviving Corporation nor Parent will be (by reason
of any agreement to which the Company is a party), subject to any
non-competition or similar restriction on their respective businesses.
(u) FAIRNESS OPINION. The Company has received an opinion from Salomon Smith
Barney Inc. to the effect that the Merger Consideration is, as of the date of
this Agreement, fair from a financial point of view to the stockholders of the
Company, and copies of such opinion shall be delivered to Parent when available.
(v) NON-COMPETITION AGREEMENTS. Each of Michael G. Wordeman and Roland W.
Gentner has entered into a non-competition agreement dated the date hereof with
the Company and Parent (together, the "NON-COMPETITION AGREEMENTS"), and copies
of such executed agreements have been delivered to Parent.
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(w) EMPLOYMENT AGREEMENTS. Each of Roland W. Gentner and those employees of
the Company identified in a letter provided by Parent to the Company on the date
hereof has entered into an employment agreement dated the date hereof with the
Company (collectively, the "EMPLOYMENT AGREEMENTS"), and copies of such executed
agreements have been delivered to Parent.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and
Sub represent and warrant to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Parent is and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate power and authority to carry on its business as now being
conducted. Parent is and each of its subsidiaries is duly qualified or licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed would not
have a Material Adverse Effect on Parent. Parent has delivered to the Company
complete and correct copies of its articles of incorporation and by-laws and the
articles of incorporation and by-laws or other organizational documents of its
subsidiaries of Sub, in each case as amended to the date of this Agreement.
(b) AUTHORITY; NONCONTRAVENTION. Parent and Sub have the requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub. Assuming the due authorization, execution and delivery
of this Agreement by the Company, this Agreement has been duly executed and
delivered by Parent and Sub and constitutes a valid and binding obligation of
each such party, enforceable against each such party in accordance with its
terms.
Except as set forth in Section 3.2(b) of the disclosure schedule delivered
by Parent and Sub to the Company (the "PARENT DISCLOSURE SCHEDULE"), the
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of Parent or any of its subsidiaries under, (i) the
articles of incorporation or by-laws of Parent or Sub or the comparable charter
or organizational documents of any other subsidiary of Parent, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, or material lease or other
agreement, instrument, permit, concession, franchise or license applicable to
Parent or any of its subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation (including, without limitation, those of the National Indian
Gaming Commission, or any other tribal or governmental authority regulating any
form of gaming) applicable to Parent or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts violations, defaults or rights that individually or in
the aggregate would not (x) have a Material Adverse Effect on Parent, (y) impair
in any material respect the ability of Parent and Sub to perform their
respective obligations under this Agreement or (z) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by Parent or any
of its subsidiaries in connection with the execution and delivery of this
Agreement or the consummation by Parent or Sub, as the case may be, of any of
the transactions contemplated by this Agreement, except for (i) the filing with
the Specified Agencies of a premerger notification and report form under the HSR
Act, (ii) the filing with the SEC of such
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reports under Sections 13(a), 13(d) and 16(a) of the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement, (iii) the filing of the articles of merger with the Secretary of
State of the State of South Dakota and appropriate documents with the relevant
authorities of other states in which Parent is qualified to do business, (iv)
the approval by (A) the Nevada State Gaming Control Board and the Nevada Gaming
Commission under the Nevada Gaming Control Act and the rules and regulations
promulgated thereunder, (B) South Dakota Commission on Gaming and South Dakota
Lottery Commission, (C) the National Indian Gaming Commission under the Indian
Gaming Regulatory Act of 1988 and the rules and regulations promulgated
thereunder, and (D) other gaming regulatory bodies in jurisdiction where Parent
or its subsidiaries are engaged in business (including, without limitation, the
State of Mississippi) and (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings, the failure of which to
be obtained or made would not have a Material Adverse Effect on Parent, impair
in any respect the ability of Parent to perform its obligations under this
Agreement, or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement. Neither Parent nor any subsidiary
of Parent nor, to the Knowledge of Parent, any director or officer of Parent or
of any subsidiary of Parent has received any written claim, demand, notice,
complaint, court order or administrative order from any Governmental Entity in
the past three years, asserting that a license of it or them, as applicable,
under any Gaming Laws (as defined in Section 3.1(o)) is being or may be revoked
or suspended other than such claims, demands, notices, complaints, court orders
or administrative orders which would not have a Material Adverse Effect on
Parent.
(c) INFORMATION SUPPLIED. None of the information supplied or to be supplied
by Parent or Sub for inclusion or incorporation by reference in the Proxy
Statement will, at the date the Proxy Statement is first mailed to the Company's
stockholders or at the time of the Company Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
(d) BROKERS. Neither Parent nor any of its subsidiaries nor any of their
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for Parent or any of its subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
(e) VOTING REQUIREMENTS. The Board of Directors of Parent at a meeting duly
called and held: (i) determined that the Merger is advisable and fair and in the
best interests of Parent and its stockholders; and (ii) approved the Merger and
this Agreement and the transactions contemplated by this Agreement. No vote of
the holders of any class or series of the Parent's capital stock is necessary to
approve the Merger, this Agreement or the transactions contemplated by this
Agreement.
(f) COMPLIANCE WITH GAMING LAWS. Parent and each of its subsidiaries, and
each of their respective directors, officers, and persons performing management
functions similar to officers, are in compliance with all applicable Gaming
Laws, except for any immaterial events of non-compliance, which have been
corrected prior to the Closing Date to the satisfaction of the applicable
Governmental Entity.
(g) INTERIM OPERATIONS OF SUB.
(i) Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
(ii) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, Sub has
not and will not have incurred, directly or indirectly, through any
subsidiary,
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any obligations or liabilities or engaged in any business activities of any
type or kind whatsoever or entered into any agreements or arrangements with
any person.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 CONDUCT OF BUSINESS.
(a) CONDUCT OF BUSINESS BY THE COMPANY. Except as expressly set forth in
this Agreement, as set forth in Section 4.1 of the Company Disclosure Schedule
or as consented to in writing by Parent during the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable laws and regulations
and, to the extent consistent therewith, use all commercially reasonable efforts
to preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
them. Without limiting the generality of the foregoing, and except as expressly
set forth in this Agreement, as set forth in Section 4.1 of the Company
Disclosure Schedule or as consented to in writing by Parent between the date of
this Agreement and the Effective Time or until the earlier termination of this
Agreement pursuant to its terms, the Company shall not, and shall not permit any
of its subsidiaries to:
(i) (A) declare, set aside or pay (whether in cash, stock, property or
otherwise) any dividends on, or make any other distributions in respect of,
any of its capital stock, other than dividends and distributions by any
direct or indirect wholly owned subsidiary of the Company to its parent, (B)
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities (other than pursuant
to the Stock Purchase Plan (as defined in Section 5.5);
(ii) other than the issuance of Company Common Stock upon the exercise
of the stock options to purchase shares of Company Common Stock outstanding
on the date of this Agreement (each a "Stock Option" and collectively the
"Stock Options") in accordance with their present terms or in accordance
with the present terms of any employment agreements existing on the date of
this Agreement, (A) issue, deliver, sell, award, pledge, dispose of or
otherwise encumber or authorize or propose the issuance, delivery, grant,
sale, award, pledge or other encumbrance (including limitations in voting
rights) or authorization of, any shares of its capital stock, any other
voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities, (B) amend, waive or otherwise modify the terms of
any such rights, warrants or options or (C) accelerate the vesting of any of
the Stock Options, except pursuant to the terms thereof as in effect on the
date hereof;
(iii) amend its articles of incorporation, by-laws or other comparable
charter or organizational documents, or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any material subsidiary of the Company;
(iv) acquire or agree to acquire (for cash or shares of stock or
otherwise) (A) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof or (B) any
assets with a fair market value in excess
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of $75,000 in the aggregate, except purchases of inventory, fixtures,
furniture, supplies, vehicles and equipment in the ordinary course of
business consistent with past practice;
(v) commence or undertake or agree to commence the operation or
development of a casino or other gaming operations of any nature (other than
(A) the existing gaming operations of the Company, which includes
obligations under the Louisiana Joint Venture Agreements (as hereinafter
defined), provided that the Company shall not make or commit to make any
loans, advances or capital contributions to, or investments in, the Joint
Venture or Sodak Louisiana L.L.C. ("SODAK LA") without the written consent
of Parent, and (B) additional wide area progressive systems);
(vi) mortgage or otherwise encumber or subject to any Lien, or sell,
lease, exchange or otherwise dispose of any of, its properties or assets,
except for sales of its properties or assets in the ordinary course of
business consistent with past practice;
(vii) (A) incur any indebtedness for borrowed money except in the
ordinary course of business consistent with past practices or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, or (B) make any loans, advances
or capital contributions to, or investments in, any other person, other than
(1) to the Company or any direct or indirect wholly owned subsidiary of the
Company, (2) loans or advances to employees of the Company or any of its
subsidiaries for travel or business expenses in the ordinary course of
business or (3) loans or advances to operators of casinos or gaming
operations to finance the purchase of furniture, fixtures and equipment in
the ordinary course of business consistent with past practice, provided such
loans or advances do not exceed the fair market value of such furniture,
fixtures and equipment;
(viii) make or agree to make any new capital expenditures other than
those consistent with the budget set forth in Section 4.1(a) of the Company
Disclosure Schedule;
(ix) make or rescind any express or deemed election relating to material
taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to material taxes,
or change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of its federal
income tax return for the taxable year ending December 31, 1998, except as
may be required by applicable law;
(x) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge, settlement or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by,
the most recent consolidated financial statements (or the notes thereto) of
the Company included in the Company SEC Documents or incurred in the
ordinary course of business consistent with past practice;
(xi) (A) increase the rate of compensation payable or to become payable
generally to any of the Company's or any of its subsidiaries' directors,
officers or employees other than usual and customary increases to employees
who are not officers, (B) pay or agree to pay any pension, retirement
allowance, severance, continuation or termination benefit or other material
employee benefit not provided for by any existing Pension Plan, Benefit Plan
or employment agreement described in the Company SEC Documents filed prior
to the date of this Agreement and publicly available, (C) establish, adopt
or commit itself to any additional pension, profit sharing, bonus,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group
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insurance, severance pay, continuation pay, termination pay, retirement or
other material employee benefit plan, agreement or arrangement, or amend or
modify or increase the benefits under or take any action to accelerate the
rights or benefits under any collective bargaining agreement or any employee
benefit plan, agreement or arrangement, including the Stock Option Plans or
other Benefit Plan, (D) enter into any severance or employment agreement
with or for the benefit of any person, or (E) increase the rate of
compensation under or otherwise change the terms of any existing employment
agreement;
(xii) except in the ordinary course of business consistent with past
practice, modify, or amend in any material respect, or renew, fail to renew
or terminate, any material contract or agreement to which the Company or any
subsidiary is a party or waive, release or assign any material rights or
claims;
(xiii) change fiscal years;
(xiv) authorize, recommend, propose or announce an intention to adopt a
plan of complete or partial liquidation or dissolution of the Company;
(xv) enter into any collective bargaining agreement;
(xvi) engage in any transaction with, or enter into any agreement,
arrangement or understanding with, directly or indirectly, any of the
Company's affiliates other than pursuant to such agreements existing on the
date hereof and disclosed on the Company Disclosure Schedule;
(xvii) amend, modify or waive in any manner any of the provisions of any
of the Non-Competition Agreements or Employment Agreements; or
(xviii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) OTHER ACTIONS. The Company and Parent shall not, and shall not permit
any of their respective subsidiaries to, take any action that would result in
(i) any of the representations and warranties of such party set forth in this
Agreement that are qualified as to materiality becoming untrue or (ii) any of
such representations and warranties that are not so qualified becoming untrue in
any material respect.
SECTION 4.2 NO INCONSISTENT ACTIVITIES.
(a) In light of the consideration given by the Board of Directors of the
Company prior to the execution of this Agreement to, among other things, the
transactions contemplated hereby, and in light of the Company's representations
contained in Section 3.1(u), the Company agrees that it shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, solicit or initiate, or encourage the submission of, any Takeover
Proposal (as defined below), or participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal;
PROVIDED, HOWEVER, that nothing in this Section 4.2 shall prevent the Company or
its Board of Directors from furnishing non-public information to, or entering
into discussions or negotiations with, another person in connection with an
unsolicited bona fide Takeover Proposal by such person, if and only to the
extent that (i) such person has made a proposal to the Board of Directors of the
Company to consummate a Takeover Proposal, which proposal identifies a price or
range of values to be paid for the outstanding securities or all or
substantially all of the assets of the Company, (ii) the Board of Directors of
the Company determines in good faith, after consultation with a financial
advisor of nationally recognized reputation, that such proposal would, if so
completed, result in a transaction that would provide greater value to the
holders of Company Common Stock than the Merger (a "SUPERIOR PROPOSAL") and that
the party making the proposal has demonstrated that the
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funds necessary for its proposal are reasonably likely to be available, (iii)
the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that such action is necessary in order to
comply with its fiduciary duties to the Company's stockholders under applicable
law, and (iv) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, the Board of Directors
receives from such person an executed confidentiality agreement in form and
substance similar to the Confidentiality Agreement dated March 13, 1998 (the
"CONFIDENTIALITY AGREEMENT") between the Company and Parent.
(b) The Company shall notify Parent orally and in writing of any inquiries,
offers or proposals with respect to a Takeover Proposal (including without
limitation the terms and conditions of such proposal, the identity of the person
or entity making it and all other information reasonably requested by Parent),
within 24 hours of the receipt thereof by an officer or director of the Company
or any advisor to the Company, shall keep Parent informed of the status and
details of any such inquiry, offer or proposal and answer Parent's questions
with respect thereto. For purposes of this Agreement, "TAKEOVER PROPOSAL" means
any proposal (whether or not in writing and whether or not delivered to the
Company's stockholders generally) for a merger, consolidation, purchase of
assets, tender offer or other business combination involving the Company or any
of its subsidiaries or any proposal or offer to acquire in any manner, directly
or indirectly, an equity interest in, any voting securities of, or a substantial
portion of the assets of, the Company or any of its subsidiaries, other than the
transactions contemplated by this Agreement. Neither the Company nor any of its
subsidiaries shall directly or indirectly, release any third party from any
confidentiality agreement, except in connection with a Superior Proposal if the
Company's Board of Directors shall have determined in good faith, after
consultation with outside counsel, that such release of any third party is
necessary in order to comply with its fiduciary duties to the Company's
stockholders under applicable law. Nothing contained herein shall prohibit the
Company from disclosing to its stockholders the statement required by Rule
14e-2(a) under the Exchange Act with respect to a Takeover Proposal by means of
a tender offer.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 PREPARATION OF THE PROXY STATEMENT; STOCKHOLDERS' MEETING.
(a) As soon as practicable following the date of this Agreement, the Company
shall call and hold a meeting of its stockholders (the "COMPANY STOCKHOLDERS'
MEETING"), for the purpose of obtaining the Stockholder Approval. Subject to the
fiduciary duties of its Board of Directors, the Company shall use its best
efforts to solicit from its stockholders proxies, and shall take all other
action necessary or advisable to secure the vote or consent of stockholders
required by applicable law or otherwise to obtain the Stockholder Approval, and
through its Board of Directors, shall recommend to its stockholders the
obtaining of the Stockholder Approval. As promptly as practicable after the
execution of this Agreement, the Company shall prepare and file with the SEC a
proxy statement relating to the Company's Stockholders' Meeting (together with
any amendments thereof or supplements thereto, the "PROXY STATEMENT"). Parent
shall furnish all information concerning itself to the Company as the Company
may reasonably request in connection with such actions and the preparation of
the Proxy Statement. As soon as reasonably practicable after clearance from the
SEC, the Company shall mail the Proxy Statement to its stockholders. The Proxy
Statement shall not be filed, and no amendment or supplement to the Proxy
Statement will be made by the Company, without prior consultation with Parent
and its counsel.
(b) Parent agrees promptly to advise the Company if at any time prior to the
Company Stockholders' Meeting (as defined above) any information provided by it
in the Proxy Statement is or becomes incorrect or incomplete in any material
respect and to provide the Company with the information needed to correct such
inaccuracy or omission.
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SECTION 5.2 ACCESS TO INFORMATION; CONFIDENTIALITY. The Company shall, and
shall cause its subsidiaries to, afford Parent, and the officers, employees,
accountants, counsel, financial advisors and other representatives of Parent,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause each of its subsidiaries to, furnish promptly to Parent, (a) a
copy of each report, schedule, registration statement and other document filed
by it during such period pursuant to the requirements of federal or state
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Except as required by
law, each of the Company and Parent will hold, and will cause its respective
officers, employees, accountants, counsel, financial advisers and other
representatives and affiliates to hold, any confidential information in
accordance with the Confidentiality Agreement.
SECTION 5.3 REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the Company, Parent and Sub agrees to use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) the making of all necessary
applications, registrations and filings (including filings with Governmental
Entities, if any), (ii) the obtaining of all necessary actions or nonactions,
licenses, consents, approvals or waivers from Governmental Entities and other
third parties and (iii) taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement, (v) the defending of any
lawsuits or other legal proceedings, judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby or
thereby, including the using of all commercially reasonable efforts necessary to
lift, rescind or mitigate the effect of any injunction or restraining order or
other order adversely affecting the ability of any party hereto to consummate
the transactions contemplated hereby, (vi) the using of all commercially
reasonable efforts to fulfill all conditions to the obligations of Parent
(including obtaining any financing necessary to consummate the Merger), Sub or
the Company pursuant to this Agreement, and (vii) the using of all commercially
reasonable efforts to prevent, with respect to a threatened or pending
temporary, preliminary or permanent injunction or other order, decree or ruling
or statute, rule, regulation or executive order, the entry, enactment or
promulgation thereof, as the case may be; provided, however, that Parent shall
not be obligated to take any action pursuant to the foregoing if the taking of
such action or the obtaining of any waiver, license, consent, approval or
exemption is reasonably likely to be materially burdensome to Parent and its
subsidiaries taken as a whole or to impact in a materially adverse manner the
economic or business benefits of the transactions contemplated by this Agreement
so as to render inadvisable the consummation of the Merger.
(b) The Company shall give prompt written notice to Parent, and Parent shall
give prompt written notice to the Company, of (i) any representation or warranty
made by it contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect, (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement or (iii) the occurrence of any change or event having,
or which insofar as can reasonably be foreseen to have, a Material Adverse
Effect on the Company; provided, however, that no such notification shall (A)
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement or (B)
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
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SECTION 5.4 GAMING APPROVALS.
(a) GAMING APPROVALS.
(i) Upon the terms and subject to the conditions set forth in this
Agreement, each of the Company and Parent agrees to promptly prepare and
file all necessary documentation, to effect all applications, notices,
petitions and filings, to obtain as promptly as practicable all permits,
registrations, licenses, findings of suitability, qualifications, consents,
waivers, variances, exemptions, orders, approvals and authorizations of all
Governmental Entities which are necessary in connection with the
consummation of the transactions contemplated by this Agreement (whether
required to be made or obtained prior to or after the Effective Time) (all
of the foregoing, collectively "GAMING APPROVALS") and to comply with the
terms and conditions of all such Gaming Approvals. Each of the Company and
Parent shall use all commercially reasonable efforts to, and to cause their
respective officers, directors and affiliates to, file within thirty days
after the date hereof, and in all events shall file within sixty days after
the date hereof, all required initial applications and documents in
connection with obtaining the Gaming Approvals and shall act reasonably and
promptly thereafter in responding to additional requests in connection
therewith. Parent and the Company shall have the right to review in advance,
and to the extent practicable, each will consult with the other on, in each
case subject to applicable laws relating to the exchange of information, all
the information relating to the Company or Parent as the case may be, and
any of their respective subsidiaries, directors, officers and stockholders,
which appear in any filing made with, or written materials submitted to, any
Governmental Entity in connection with the transactions contemplated by this
Agreement. The Company and Parent agree to promptly advise each other upon
receiving any communication from any Governmental Entity which causes such
party to believe that there is a reasonable likelihood that any Gaming
Approval required from such Governmental Entity will not be obtained or that
the receipt of any such approval will be materially delayed.
(ii) Promptly following the execution of this Agreement, the Company
shall use its commercially reasonable efforts to cause the sale of the
Riverboat Complex for cash in a stock or asset sale transaction (including a
transaction where the riverboat is first contributed to GSMC and the stock
of GSMC is sold), such disposition to (i) include the termination of, or the
assignment and assumption by the purchaser of the Riverboat Complex of, any
leases (including, without limitation, leases relating to furniture,
fixtures and equipment used thereon) or any guaranties thereof or other
agreements relating to the Riverboat Complex or its operation, (ii) be
effected for a price (including but not limited to provisions relating to
the allocation of the purchase price among the assets sold) satisfactory to
Parent and (iii) be made in a manner, to the extent possible, that is, after
consultation with Parent, tax efficient. Notwithstanding the foregoing, if
the Company presents to Parent a proposed sale of the Riverboat Complex,
Parent shall, within five business days thereof, either (i) subject to
Parent having obtained, or representing to the Company that it has been
advised by the applicable Governmental Entity that it is likely to receive
within thirty (30) days or less, all Gaming Approvals required to acquire
the Riverboat Complex, give notice to the Company that it is withholding its
approval of such sale and in such event the condition specified in Section
6.2(f) hereof and Parent's right to approve the price shall be deemed waived
by Parent, or (ii) give notice to the Company that it either approves of the
proposed sale or approves of the proposed sale subject to the receipt of an
opinion of an investment banking firm designated by Parent and approved by
the Company, such approval not to be unreasonably withheld, that the
consideration received for the Riverboat Complex is fair to the Company from
a financial point of view, such opinion to be given without taking into
consideration the existence of this Agreement or the proposed Merger (the
"FAIRNESS OPINION"). In the event that Parent approves of the sale subject
to the receipt of a Fairness Opinion and such opinion cannot for any reason
be obtained, then the Company shall not proceed with the sale and the
condition specified
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in Section 6.2(f) hereof and Parent's right to approve the price shall
remain effective. In all events, Parent shall have the right to review and
approve the terms of the sale other than the price received, such approval
not to be unreasonably withheld. The Company shall, as part of its efforts
to sell the Riverboat Complex, consult with Parent regarding its sales
efforts and shall use commercially reasonable efforts to obtain the best
terms for the sale of the Riverboat Complex. If requested by Parent, the
Company shall use its commercially reasonable efforts to assist Parent in
obtaining all Gaming Approvals necessary to permit Parent to acquire the
Riverboat Complex as part of the Merger (it being understood that any
conditions that may be imposed by regulatory authorities must be acceptable
to Parent).
(iii) The Company shall use its commercially reasonable efforts to sell
or terminate (by means of withdrawal or otherwise) all of the Company's
direct or indirect interests under that certain Amended and Restated Joint
Venture Agreement of QNOV, dated July 31, 1998, by and among Shreveport
Paddlewheels, LLC ("SPL"), Sodak LA and HWCC-Louisiana, Inc. ("HOLLYWOOD");
that certain Amended and Restated Assignment of Joint Venture Interest,
dated September 22, 1998, by and among Sodak LA and Hollywood, as Assignees
and SPL and New Orleans Paddlewheels Inc. ("NOP"), as assignors; that
certain Amended and Restated Master Agreement, dated July 31, 1998, by and
among NOP, SPL, Hollywood and Sodak LA; that certain Consulting Agreement,
dated July 31, 1998, by and between the Queen of New Orleans at the Hilton
Joint Venture ("QNOV") and the Company; that certain Loan and Settlement
Agreement, dated January 16, 1998, by and among NOP, SPL, Hollywood, Sodak
LA and Hilton New Orleans Corporation ("HNOC"); that certain Indemnity
Agreement, dated January 16, 1998 by and among NOP, HNOC, Sodak LA, SPL and
Hollywood; that certain Loan and Settlement Agreement, dated January 16,
1998, by and among NOP, Hollywood, Sodak LA, SPL and HNOC; that certain
Compromise Agreement, dated January 16, 1998, by and among HNOC, NOP, QNOV
and the City of New Orleans; that certain Side Agreement, dated January 16,
1998, by and among QNOV, Hollywood and Sodak LA; that certain Indemnity
Agreement--Physical Inspections, by and among NOP, SPL, Sodak LA, Hollywood
and Red River Entertainment of Shreveport Partnership in Commendam; those
certain Loan Agreement, Security Agreement, Guaranty Agreement and Marine
Services Agreement contemplated to be entered into by and among SPL,
Hollywood and Sodak LA (collectively, the "LOUISIANA JOINT VENTURE
AGREEMENTS") (either directly and/or through the sale of all of the
Company's interests in Sodak LA) pursuant to documentation in form and
substance (other than as to price) reasonably satisfactory to Parent;
PROVIDED that the minimum price shall be an amount equal to all loans,
advances and additional capital contributions to, or investments in, Sodak
LA, the Joint Venture or any Joint Venture partner made with the consent of
Parent after the date hereof (it being understood that $2.5 million has been
contributed by the Company as of the date hereof). The Company shall not
provide any consideration in connection with such sale or termination other
than a forfeiture of the $2.5 million capital contribution made by the
Company as of the date hereof. Upon the consummation of such sale, neither
the Company nor any of its subsidiaries shall have any further liabilities
or obligations of any nature whatsoever relating to the Louisiana Joint
Venture Agreements or the sale or termination thereof. The Company shall, as
part of its efforts to sell its interests in the Louisiana Joint Venture
Agreements, consult with the Parent regarding its sales efforts and shall
use commercially reasonable efforts to obtain the best terms for the sale of
its interests in the Louisiana Joint Venture Agreements.
Parent shall have the right, at any time during the period commencing on
the date 90 days after the date of this Agreement and ending on the date 180
days after the date of this Agreement, if the Company has not prior thereto
entered into a definitive agreement with a third party purchaser to sell its
interests in the Louisiana Joint Venture Agreements in accordance with the
preceding paragraph, to require Thomas Celani and Roland W. Gentner, or an
entity wholly owned by them, to purchase all of the Company's interests
under the Louisiana Joint Venture Agreements (either directly and/or through
the purchase of all the Company's interests in Sodak
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LA) and as consideration therefor Thomas Celani and Roland W. Gentner shall
assume all of the Company's obligations under the Louisiana Joint Venture
Agreements and, in addition, pay to Parent the consideration specified in
that certain letter to Thomas Celani and Roland W. Gentner dated as of the
date hereof; provided that such consideration shall be increased by an
amount equal to all loans, advances and additional capital contributions to,
or investments in, Sodak LA, the Joint Venture or any Joint Venture partner
made with the consent of Parent after the date hereof (it being understood
that $2.5 million has been contributed by the Company as of the date
hereof). Thomas Celani and Roland W. Gentner agree to promptly prepare and
file all necessary documentation, to effect all applications, notices,
petitions and filings, and to use best efforts to obtain as promptly as
practicable all Gaming Approvals necessary for Thomas Celani and Roland W.
Gentner to effect such transaction. The documentation to effect such
transaction shall be prepared by Parent, shall not contain any
representations or warranties by the Company other than with respect to the
Company's ownership of the interests being purchased and shall not provide
for any continuing obligations on the part of the Company or any of its
subsidiaries in connection with such purchase or with respect to the
Louisiana Joint Venture Agreements. Upon the request of Parent, the Company
shall promptly undertake any actions required under the Louisiana Joint
Venture Agreements in connection with such sale.
(iv) Nothing in this Agreement, including but not limited to the
provisions of Section 5.4(a)(ii) hereof, shall obligate Parent to take any
action which may require or result in the voluntary surrender, forfeiture or
other termination by Parent of, or otherwise have any material adverse
impact on, any permits, registrations, licenses, findings of suitability,
qualifications, consents, waivers, variances, exemptions, orders, approvals
and authorizations of all Governmental Entities which are then held by
Parent or any of its subsidiaries.
(b) DENIAL OF LICENSE; INDIVIDUALS. If any person shall become an Ineligible
Person prior to the Closing, then (i) each Ineligible Person shall, and the
Company shall cause each Ineligible Person to, immediately and permanently,
resign from any position, including as director or officer, in the Company,
Parent or Sub and each Ineligible Person shall have no further management role
in Parent, Sub or the Company, (ii) if required to do so by any Governmental
Entity as a condition to receipt of any Gaming Approval, each Ineligible Person
shall, and the Company shall cause each Ineligible Person to, dispose of all of
its securities or other ownership interests in the Company, and (iii) each
Ineligible Person shall, and the Company shall cause each Ineligible Person to,
cooperate with the Company, Parent and Sub in their efforts to obtain and retain
in full force and effect the Gaming Approval. "INELIGIBLE PERSON" shall mean any
person who owns any capital stock or other interest in the Company (i) who is
denied a Gaming Approval, disqualified from eligibility for a Gaming Approval or
found unsuitable by any Governmental Entity before the Closing Date, (ii) whose
continued involvement in the business of the Company as an employee, director,
officer or otherwise, may, in Parent's reasonable opinion after consultation
with counsel, have a Material Adverse Effect on the likelihood that any
Governmental Entity will issue a Gaming Approval to the Company, the Surviving
Corporation, Sub or Parent or (iii) is expressly precluded from having any
continuing interest in the Company, the Surviving Corporation, Sub or Parent in
any Gaming Approval granted by a Governmental Entity as a condition to the
issuance or continued validity of any Gaming Approval by any Governmental
Entity.
SECTION 5.5 STOCK OPTIONS; EMPLOYEE BENEFITS.
(a) STOCK OPTION PLANS.
(i) Any Stock Option outstanding immediately prior to the Effective Time
which is then exercisable or becomes exercisable as a result of an
acceleration triggered by the Merger pursuant to any existing option
agreements and all Stock Options outstanding immediately prior to the
Effective Time that were granted to members of the Board of Directors of the
Company pursuant to the 1993 Directors' Stock Option Plan (all such Stock
Options being the "VESTED OPTIONS"),
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shall be cancelled and, subject to the Company's receipt of the
acknowledgement described in Section 6.2(i) from the holder of such Vested
Options, shall entitle the holder thereof, upon surrender thereof, to
receive, for each share of Company Common Stock subject to such Vested
Option, an amount (subject to any applicable withholding tax) in cash equal
to the Merger Consideration minus the per share exercise or purchase price
of such Vested Option as of the date hereof.
(ii) Any restricted shares of Company Common Stock granted to any
employee of the Company outstanding immediately prior to the Effective Time
("RESTRICTED SHARES"), whether or not then vested and transferable by such
employee, shall be converted, by virtue of the Merger and without any action
on the part of the holder thereof, into the right to receive, without
interest, the Merger Consideration.
(iii) Amounts contributed to the Company's Employee Stock Purchase Plan
(the "STOCK PURCHASE PLAN") for the purchase of Company Common Stock that,
prior to the Effective Time, have not yet been applied to the purchase of
Company Common Stock shall be applied to the purchase of Company Common
Stock immediately prior to the Effective Time at a purchase price per share
equal to the purchase price that would have been paid pursuant to the terms
of the Stock Purchase Plan had the date on which the Effective Time occurs
been the last day of an investment cycle under the Stock Purchase Plan. Each
share of Company Common Stock purchased pursuant to this Section 5.5(a)(iii)
shall be converted into the Merger Consideration in accordance with Section
2.1(c)(i) of this Agreement. The Company will amend the Stock Purchase Plan
to provide that no contributions can be made to the Stock Purchase Plan
after a date that is no later than the last day of the Company's regular
payroll period ending immediately prior to the Effective Time, and no such
contributions shall actually be made.
(b) EMPLOYEE BENEFITS. From and after the Effective Time, Parent shall, or
cause the Surviving Corporation to, provide all of the employees of the
Surviving Corporation and its subsidiaries with all employee benefit plans,
programs, policies or arrangements (the "PARENT BENEFIT PLANS") as are provided
by Parent and its subsidiaries to their own employees who are similarly
situated. From and after the Effective Time, if any director, officer or other
employee of the Company or its subsidiaries becomes eligible to participate in
any compensation or benefit plan, agreement or arrangement maintained by Parent,
the Surviving Corporation or any of their respective subsidiaries, Parent shall
cause (i) all service of such director, officer or employee completed prior to
the Effective Time with Company or any of its subsidiaries to be recognized
under such plan, agreement or arrangement for all purposes except, in the case
of a defined benefit retirement plan, for benefit accrual purposes, (ii) to be
waived any waiting or eligibility periods or exclusions for pre-existing
conditions (except that the waiver of the exclusions for pre-existing conditions
shall not require coverage of any condition which would not have been covered
under Parent's medical benefit plans had the condition not been pre-existing)
of, any such director, officer or employee and his or her dependents and (iii)
to be recognized all co-payments, deductibles or similar amounts or costs
incurred by any such director, officer or employee under a comparable plan,
agreement or arrangement of the Company or any of its subsidiaries during the
plan year in which such director, officer or employee commences participation in
an applicable benefit plan, agreement or arrangement of Parent, the Surviving
Corporation or any of their respective subsidiaries. The foregoing shall not
constitute any commitment, contract, understanding or undertaking, guarantee
(express or implied) on the part of the Surviving Corporation to continue the
employment of any employee of the Company for any term of duration or on any
terms other than those as the Surviving Corporation may establish.
(c) CONTINUATION OF AGREEMENTS. The Surviving Corporation and its
subsidiaries shall honor, pay and perform all of their respective covenants and
obligations under, and in accordance with the existing terms of, all employment,
severance, termination and similar agreements identified in Section 3.1(g) of
the Company Disclosure Schedule between the Company or any such subsidiary and
any officer,
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director or employee thereof, from and after the Effective Time to and including
the earlier of (i) the termination of such agreement and (ii) one year after the
Effective Time.
SECTION 5.6 TAKEOVER STATUTES; INCONSISTENT ACTIONS. If any "fair price,"
"moratorium," "control share," "business combination," "shareholder protection"
or similar or other anti-takeover statute or regulation enacted under any state
or Federal law shall become applicable to the Merger or any of the other
transactions contemplated hereby, the Company and the Board of Directors of the
Company shall grant such approvals and take all such actions as are within its
authority so that the Merger and the other transactions contemplated hereby and
thereby may be consummated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise use all commercially reasonable efforts to
eliminate the effects of such statute or regulation on the Merger and the
transactions contemplated hereby and thereby. The Company has not and, during
the term of this Agreement shall not, adopt, effect or implement any
"shareholders' rights plan," "poison pill" or similar arrangement.
SECTION 5.7 INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) The articles of incorporation and the by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's articles of incorporation
and by-laws on the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who on or prior to the Effective Time were directors, officers,
employees or agents of the Company, unless such modification is required by law.
(b) For six years from the Effective Time, Parent shall maintain in effect
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy (a copy of which has been heretofore made available to Parent) on terms
no less favorable to such indemnified parties than the terms of such current
insurance coverage; PROVIDED, HOWEVER, that (i) in lieu of the purchase of such
insurance by the Surviving Corporation or Parent, the Company, with Parent's
written consent, may purchase a five-year extended reporting period endorsement
("reporting tail coverage") under its existing directors' and officers'
liability insurance coverage and (ii) if the cost of such insurance in any year
during such six-year period shall exceed 150% of the premium cost for such
policy for the year ended June 30, 1999 (such premium being the "CURRENT
PREMIUM"), then Parent shall cause the Surviving Corporation to, and the
Surviving Corporation shall, provide coverage affording the same protection as
maintained by Parent as of such date for its officers and directors. The Company
represents to Parent that the Current Premium is $270,500.
(c) In addition to the other rights provided for in this Section 5.7 and not
in limitation thereof, for six years from and after the Effective Time, Parent
and the Surviving Corporation shall, to the fullest extent permitted by
applicable law, (i) indemnify and hold harmless the individuals who on or prior
to the Effective Time were officers or directors of the Company (collectively,
the "INDEMNITEES") against all losses, Expenses (as hereinafter defined),
claims, damages, liabilities, judgments, or amounts paid in settlement
(collectively, "COSTS") in respect to any claim, action, suit or proceeding,
whether criminal, civil, administrative or investigative based on, or arising
out of or relating to the fact that such person is or was a director or officer
of the Company and arising out of acts or omissions occurring on or after July
1, 1998 and on or prior to the Effective Time (including, without limitation, in
respect of acts or omissions in connection with this Agreement and the
transactions contemplated hereby) to the fullest extent that the Company would
have been permitted under the SDBCA and its articles of incorporation and
by-laws in effect on the date hereof to indemnify such person (an "INDEMNIFIABLE
CLAIM") and (ii) advance to such Indemnitees all Expenses incurred in connection
with any Indemnifiable Claim promptly after receipt of reasonably detailed
statements therefor; PROVIDED, that
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the person to whom Expenses are to be advanced provides an undertaking to repay
such advances if it is ultimately determined that such person is not entitled to
indemnification from the Surviving Corporation. In the event any Indemnifiable
Claim is asserted or made within such six year period, all rights to
indemnification and advancement of Expenses in respect of any such Indemnifiable
Claim shall continue until such Indemnifiable Claim is disposed of or all
judgments, orders, decrees or other rulings in connection with such
Indemnifiable Claim are fully satisfied. For the purposes of this Section 5.7,
"EXPENSES" shall include reasonable attorneys' fees and all other costs, charges
and expenses paid or incurred in connection with investigating, defending, being
a witness in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in any Indemnifiable Claim.
(d) Any Indemnitee wishing to claim indemnification under paragraph (c) of
this Section 5.7, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Surviving Corporation thereof, but the
failure to so notify shall not relieve the Surviving Corporation of any
liability it may have to such Indemnitee if such failure does not materially
prejudice the indemnifying party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall have the right to assume the defense
thereof and the Surviving Corporation shall not be liable to such Indemnitees
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnitees in connection with the defense thereof, except that
if the Surviving Corporation does not elect to assume such defense or counsel
for the Indemnitees advises that there are issues which raise conflicts of
interest between the Surviving Corporation and any Indemnitees or between any
two or more Indemnitees, such Indemnitees may retain counsel satisfactory to
them, and the Surviving Corporation shall pay all reasonable fees and expenses
of such counsel for the Indemnitees promptly as statements therefor are
received; PROVIDED, HOWEVER, that the Surviving Corporation shall be obligated
pursuant to this paragraph (d) to pay for only one firm of counsel for all
Indemnitees in any jurisdiction (unless there is a conflict of interest as
provided above), (ii) the Indemnitees will cooperate in the defense of any such
matter and (iii) the Surviving Corporation shall not be liable for any
settlement effected without the prior written consent of the Surviving
Corporation, which consent shall not be unreasonably withheld.
(e) The obligations of the Company, the Surviving Corporation and Parent
contained in this Section 5.7 shall be binding on the successors and assigns of
Parent and the Surviving Corporation. If Parent, the Surviving Corporation or
any of their 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
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.7.
SECTION 5.8 LETTERS OF ACCOUNTANTS. The Company shall use its commercially
reasonable efforts to cause to be delivered to Parent a "comfort" letter of KPMG
Peat Marwick LLP, the Company's independent public accountants, dated and
delivered on the date on which the Proxy Statement is mailed to stockholders of
the Company and dated the Closing Date, each addressed to Parent, in form and
substance reasonably satisfactory to Parent and reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
SECTION 5.9 FEES AND EXPENSES. Except as provided in Section 7.5, whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses; PROVIDED, HOWEVER, that those expenses
incurred in connection with printing and mailing the Proxy Statement, including
the filing fee paid to the SEC, and all filing fees related to compliance with
the HSR Act in connection with the transactions contemplated hereby shall be
shared equally by Parent and the Company.
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SECTION 5.10 PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement, including the Merger, including without limitation those press
releases that may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. The Stockholder Approval shall have been obtained.
(b) NO INJUNCTIONS OR RESTRAINTS. No litigation brought by a Governmental
Entity shall be pending, and no litigation shall be threatened by any
Governmental Entity, which seeks to enjoin or prohibit the consummation of the
Merger, and no temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect.
(c) HSR ACT. The applicable waiting period (and any extension thereof) under
the HSR Act shall have expired or been terminated.
SECTION 6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to effect the Merger are also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company contained in this Agreement that is qualified by
materiality shall be true and correct at and as of the Closing Date as though
made on and as of the Closing Date, and each of such representations and
warranties that is not so qualified shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of the Closing Date,
provided that those representations and warranties which address matters only as
of a particular date shall remain true and correct at and as of such date.
Parent shall have received a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company to such effect.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. Parent shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company to that effect. The Significant
Stockholders shall have performed all of their obligations under the Voting
Agreements at or prior to the Closing Date.
(c) CERTIFICATES AND OTHER DELIVERIES. The Company shall have delivered, or
caused to be delivered, to Parent (i) a certificate of good standing from the
Secretary of State of the State of South Dakota and of comparable authority in
other jurisdictions in which the Company and its subsidiaries are incorporated
or qualified to do business stating that each is a validly existing corporation
in good standing; (ii) duly adopted resolutions of the Board of Directors and
stockholders of the Company approving the execution, delivery and performance of
this Agreement and the instruments contemplated hereby, certified by the
Secretary of the Company; and (iii) a true and complete copy of the articles of
incorporation or comparable governing instruments, as amended, of the Company
and its subsidiaries certified by the Secretary of State of the state of
incorporation or comparable authority in other jurisdictions, and a true and
complete copy of the by-laws or comparable governing instruments,
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as amended, of the Company and its subsidiaries certified by the Secretary of
the Company and its subsidiaries, as applicable.
(d) NO MATERIAL ADVERSE CHANGE. From and including the date hereof, there
shall not have occurred a Material Adverse Change with respect to the Company.
(e) CONSENTS AND APPROVALS. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits, consents,
approvals, waivers, findings of suitability, authorizations, qualifications and
orders of, and declarations, registrations and filings (including, without
limitation, all Gaming Approvals) (collectively, "CONSENTS AND FILINGS")
required to be made or obtained by the Company or Parent from all Governmental
Entities and parties to loan or credit agreements, notes, mortgages, indentures,
leases or other contracts, agreements or instruments to which the Company,
Parent or any of their respective subsidiaries is a party or by which the
Company, Parent or any of their respective subsidiaries or their respective
assets are bound or affected, as are required in connection with the Merger and
the consummation of the transactions contemplated hereby, have been obtained or
made, as applicable, by the Company or Parent, as the case may be, without the
imposition of any limitations, prohibitions or requirements and are in full
force and effect, other than those Consents and Filings (excluding Gaming
Approvals) which, if not obtained or made, or those limiting prohibitions or
requirements which would not, either have (i) a material adverse effect on the
transactions contemplated hereby, (ii) a Material Adverse Effect on the
Surviving Corporation or Parent after the Effective Time, or (iii) a Material
Adverse Effect on the continuation of the operations and business of the Company
and its subsidiaries by the Surviving Corporation after the consummation of the
transactions contemplated hereby.
(f) RIVERBOAT OPERATIONS. If so required by any Governmental Entity as a
condition to the receipt by the Company, Parent or Sub of any of the Consents
and Filings or in order for Parent to comply with applicable Gaming Laws, the
Company shall have disposed of the Riverboat in accordance with Section
5.4(a)(ii).
(g) LOUISIANA JOINT VENTURE AGREEMENTS. The Company shall have sold or
terminated (by withdrawal or otherwise) all of the Company's direct or indirect
interests in the Louisiana Joint Venture Agreements in accordance with Section
5.4(a)(iii).
(h) EMPLOYMENT. Each of Roland Gentner and the minimum number of persons
specified in the letter (such number to include those persons specifically
designated as included in such minimum number in such letter) delivered by
Parent to the Company pursuant to Section 3.1(w) shall have continued in the
employment of the Company through, and be employed by the Company on, the
Effective Time.
(i) OTHER AGREEMENTS. Parent shall have received acknowledgements from the
holders of all outstanding Stock Options that such Stock Options shall be
cancelled as of the Effective Time and that such holder is only entitled to
receive the per share Merger Consideration minus the per share exercise price of
such Stock Options.
(j) FINANCING. The funds necessary to pay the aggregate Merger Consideration
shall have been obtained by Parent on terms reasonably acceptable to Parent.
(k) DISSENTING SHARES. The Dissenting Shares shall comprise less than 10% of
the outstanding Company Common Stock.
SECTION 6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger are also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations of Parent
and Sub contained in this Agreement that is qualified by materiality shall be
true and correct at and as of the Closing Date as though made on and as of the
Closing Date and each of such representations and warranties that is not
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so qualified shall be true and correct in all material respects at and as of the
Closing Date as if made at and as of the Closing Date, provided that those
representations and warranties which address matters only as of a particular
date shall remain true and correct at and as of such date. The Company shall
have received a certificate of the Chief Executive Officer and Chief Financial
Officer of Parent to such effect.
(b) AGREEMENTS AND COVENANTS. Parent shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing Date. The
Company shall have received a certificate of the Chief Executive Officer and
Chief Financial Officer of Parent to such effect.
(c) CERTIFICATES AND OTHER DELIVERIES. Parent shall have delivered to the
Company (i) a certificate of existence from the Secretary of State of the State
of Nevada stating that Parent is a validly existing corporation together with a
certificate of good standing from the Secretary of State of the State of South
Dakota stating that Sub is a validly existing corporation in good standing; (ii)
duly adopted resolutions of the Board of Directors of each of Parent and Sub
approving the execution, delivery and performance of this Agreement and the
instruments contemplated hereby, and of the stockholders of Sub approving the
Merger, each certified by the Secretary or the Assistant Secretary of the
relevant party; and (iii) a true and complete copy of the articles of
incorporation, as amended, of Parent and Sub certified by the Secretary of State
of the state of each of their incorporation, and a true and complete copy of the
by-laws, as amended, of Parent and Sub certified by the Secretary or Assistant
Secretary of Sub or Parent, as applicable.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by mutual written consent of Parent and the Company, if the Board of
Directors of each so determines by the affirmative vote of a majority of the
members of its entire Board of Directors;
(b) by Parent (provided that Parent is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), upon a
material breach of any representation, warranty, covenant or agreement on the
part of the Company set forth in this Agreement, or if any representation or
warranty of the Company shall have become untrue, in either case such that the
conditions set forth in Section 6.2(a) or Section 6.2(b), as the case may be,
would be incapable of being satisfied by December 31, 1999;
(c) by the Company (provided that the Company is not then in material breach
of any representation, warranty, covenant or other agreement contained herein),
upon a material breach of any representation, warranty, covenant or agreement on
the part of Parent or Sub set forth in this Agreement, or if any representation
or warranty of Parent or Sub shall have become untrue, in either case such that
the conditions set forth in Section 6.3(a) or Section 6.3(b), as the case may
be, would be incapable of being satisfied by December 31, 1999;
(d) by either Parent or the Company if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the Merger
and such order, decree or ruling or other action shall have become final and
nonappealable;
(e) by either Parent or the Company, if the Merger shall not have occurred
by December 31, 1999, unless the failure to consummate the Merger is the result
of a breach of covenant set forth in this Agreement or a material breach of any
representation or warranty set forth in this Agreement by the party seeking to
terminate this Agreement and provided that if the Merger has not been
consummated
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because of a failure to obtain approval from a Governmental Entity and such
approval is still pending, then Parent or the Company may extend such date to
March 31, 2000 by providing written notice thereof to the other party on or
before December 31, 1999;
(f) by either Parent or the Company (provided that the terminating party is
not in material breach of any of its obligations hereunder), if any approval of
the stockholders of the Company required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of the Company's stockholders or at any adjournment
or postponement thereof;
(g) by Parent, if the Board of Directors of the Company (i) withdraws or
modifies adversely its recommendation of the Merger following the receipt by the
Company of a Takeover Proposal, (ii) recommends a Takeover Proposal to Company
stockholders or (iii) fails to call or hold the Company Stockholders' Meeting by
reason of the receipt by the Company of a Takeover Proposal; or
(h) by the Company if, prior to approval of the Merger by its stockholders
and as a result of a Superior Proposal, the Board of Directors of the Company
determines in good faith after consultation with outside counsel, that the
termination of this Agreement and acceptance of such Superior Proposal is
necessary in order to comply with its fiduciary duties; PROVIDED, HOWEVER, that
before the Company may terminate this Agreement pursuant to this subsection
7.1(h), the Company shall give notice to Parent of the proposed termination
under subsection 7.1(h) and Parent, within five (5) business days of receipt of
such notice, shall have the right, in its sole discretion, to offer to amend
this Agreement to provide for terms substantially similar to those of the
Superior Proposal and the Company shall negotiate in good faith with Parent with
respect to such proposed amendment; provided, further, that if Parent and the
Company are unable to reach an agreement with respect to the Parent's proposed
amendment within the five (5) business day period described above, the Company
may terminate this Agreement pursuant to this subsection 7.1(h).
SECTION 7.2 EFFECT OF TERMINATION In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except as set forth in the last sentence of Section 5.2,
Section 5.9, Section 7.5 and Article VIII which shall survive termination and
except to the extent that such termination results from the breach by a party of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties at any
time before or after approval hereof by the stockholders of the Company;
,cfiprovided, however, that after such stockholder approval there shall not be
made any amendment that by law requires further approval by the stockholders of
the Company without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
SECTION 7.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 7.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing, signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
SECTION 7.5 TERMINATION FEE.
(a) In the event (i) Company terminates this Agreement pursuant to Section
7.1(h), (ii) Parent terminates this Agreement pursuant to Section 7.1(g) or
Parent terminates this Agreement as a result
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of the Company's willful and material breach of Section 4.2, or (iii) any
Significant Stockholder fails to vote in favor of the Merger and Stockholder
Approval is not received, then the Company shall pay Parent an amount equal to
Eight Million Dollars ($8,000,000) (the "TERMINATION FEE") by wire transfer of
immediately available funds upon the occurrence of such event.
(b) In the event (i) Stockholder Approval is not received, (ii) prior to the
Company Stockholders' Meeting there shall have been a Takeover Proposal made
(whether or not such Takeover Proposal shall have been rejected or shall have
been withdrawn prior to the time of the Company Stockholders' Meeting) and (iii)
within twelve (12) months from the termination of this Agreement, the Company
shall have entered into an agreement for, and within twenty-four (24) months
from such termination shall have consummated, a transaction substantially in the
form proposed in such Takeover Proposal then the Company shall pay Parent an
amount equal to the Termination Fee by wire transfer of immediately available
funds, payable upon consummation of such transaction.
(c) Parent shall pay to the Company by wire transfer Two Million Dollars
($2,000,000) (the "PARENT TERMINATION FEE") if this Agreement is terminated by
Parent or the Company pursuant to Section 7.1(e) and at the time of such
termination (i) the conditions specified in Section 6.2(j) to the obligations of
Parent shall not have been satisfied or waived and (ii) each of the other
conditions set forth in Article VI to the obligations of the Company, Parent and
Sub shall have been satisfied or waived; PROVIDED that the conditions set forth
in Sections 6.2(a) through 6.2(c) and 6.3(a) through 6.3(c) will be deemed to be
satisfied if the certificates or documents required to be delivered pursuant to
such sections are capable of being delivered on the termination date.
(d) The parties agree that the agreements contained in Section 7.5 are an
integral part of the transactions contemplated by this Agreement. If the Company
fails to promptly pay to Parent any fee due under this Section 7.5, the Company
shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Bank of America from the date
such fee was first due. If Parent fails to promptly pay to the Company any fee
due under this Section 7.5, Parent shall pay the costs and expenses (including
legal fees and expenses) in connection with any action, including the filing of
any lawsuit or other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee at the publicly announced prime rate of
Bank of America from the date such fee was first due.
(e) The payment by the Company of the Termination Fee pursuant to this
Section 7.5 shall be Parent's and Sub's exclusive remedy against the Company
other than for a willful breach by the Company of Section 4.2. The payment by
the Parent of the Parent Termination Fee pursuant to this Section 7.5 shall be
the Company's exclusive remedy against the Parent if this Agreement is
terminated by Parent or the Company pursuant to Section 7.1(e) as a result of
Parent's failure to satisfy the condition set forth in Section 6.2(j).
SECTION 7.6 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver of this Agreement
pursuant to Section 7.4 shall, in order to be effective, require in the case of
Parent, Sub or the Company, action by its Board of Directors, acting by the
affirmative vote of a majority of the members of the entire Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by
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its terms contemplates performance after the Effective Time of the Merger
(including without limitation the provisions of Section 5.4 hereof).
SECTION 8.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
International Game Technology
9295 Prototype Drive
Reno, Nevada 89511
Facsimile: (775) 448-0120
Attention: Brian McKay
with copies to:
O'Melveny & Myers LLP
610 Newport Center Drive, 17th Floor
Newport Beach, California 92660
Facsimile: (949) 823-6994
Attention: J. Jay Herron
O'Melveny & Myers LLP
275 Battery Street, 26th Floor
San Francisco, California 94111
Facsimile: (415) 984-8958
Attention: Stephanie I. Splane
(b) if to the Company, to:
Sodak Gaming, Inc.
5301 South Highway 16
Rapid City, South Dakota 57701
Facsimile: (605) 355-5068
Attention: Michael Diedrich
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll
Facsimile: (212) 225-3999
SECTION 8.3 DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Knowledge" means a fact, event, circumstance or occurrence actually
known by any of the officers or directors of the Company or Parent, as the case
may be.
(c) "Material Adverse Change" or "Material Adverse Effect" means, when used
in connection with the Company, the Surviving Corporation or Parent, any change
or effect (or any development that insofar as can reasonably be foreseen, is
likely to result in any change or effect) that is or is likely to
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be, individually or in the aggregate, materially adverse to the business,
assets, properties, financial condition or results of operations of such party
and its subsidiaries taken as a whole, excluding any such adverse change that is
due to events, occurrences, facts, conditions, changes, developments or effects
which affect the economy generally.
(d) "person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity; and
(e) a "subsidiary" with respect to any person means ownership directly or
indirectly of an amount of the voting securities, other voting ownership or
voting partnership interests of another person which is sufficient to elect at
least a majority of its board of directors or other governing body or, if there
are no such voting interests, more than 50% of the equity interests.
SECTION 8.4 INTERPRETATION. When a reference is made in this Agreement to
a Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" and "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
and the Confidentiality Agreements constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement and except for
the provisions of Article II and Sections 5.5 and 15.7 are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
SECTION 8.7 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Nevada,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.9 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Nevada or in Nevada state court, this being in addition
to any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Nevada or any Nevada
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) 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 (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal or state court sitting in the State
of Nevada.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
PARENT:
INTERNATIONAL GAME
TECHNOLOGY, A NEVADA CORPORATION
By: ____________________________________________________________________________
Name: __________________________________________________________________________
Its: ___________________________________________________________________________
SUB:
SAC, INC., a South Dakota corporation
By: ____________________________________________________________________________
Name: __________________________________________________________________________
Its: ___________________________________________________________________________
THE COMPANY:
SODAK GAMING, INC., a South Dakota corporation
By: ____________________________________________________________________________
Name: __________________________________________________________________________
Its: ___________________________________________________________________________
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APPENDIX B
SALOMON SMITH BARNEY
A member of Citigroup
March 10, 1999
Board of Directors
Sodak Gaming, Inc.
5301 S. Highway 16
Rapid City, SD 57701
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $.001 per share ("Company Common
Stock"), of Sodak Gaming, Inc. (the "Company"), of the consideration to be
received by such holders in connection with the proposed merger (the "Merger")
of SAC, Inc. ("Sub"), a wholly owned subsidiary of International Game Technology
("Parent"), with and into the Company, pursuant to an Agreement and Plan of
Merger, dated as of March 10, 1999 (the "Merger Agreement"), among Parent, Sub
and the Company. Upon the effectiveness of the Merger, each issued and
outstanding share of Company Common Stock (other than shares of Company Common
Stock (a) owned by the Company or any subsidiary of the Company, or Parent, Sub
or any other subsidiary of Parent or (b) held by stockholders who duly exercise
appraisal rights) will be converted into the right to receive $10.00 in cash
(the "Merger Consideration").
In connection with rendering our opinion, we have reviewed certain publicly
available information concerning the Company and certain other financial
information concerning the Company, including financial forecasts, that were
provided to us by the Company. We have discussed the past and current business
operations, financial condition and prospects of the Company with certain
officers and employees of the Company. We have also considered such other
information, financial studies, analyses, investigations and financial, economic
and market criteria that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of the information reviewed by us
for the purpose of this opinion and we have not assumed any responsibility for
independent verification of such information. Without limiting the generality of
the foregoing, we have relied upon the accuracy of information provided to us by
the Company relating to the rights of Parent under specified circumstances to
terminate certain material contracts between the Company and Parent. With
respect to the financial forecasts of the Company, we have been advised by the
management of the Company that such forecasts have been reasonably prepared on
bases reflecting its best currently available estimates and judgments, and we
express no opinion with respect to such forecasts or the assumptions on which
they are based. We have not assumed any responsibility for any independent
evaluation or appraisal of any of the assets (including properties and
facilities) or liabilities of the Company. We were not asked to, and did not,
solicit other proposals to acquire the Company.
Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion does not address the Company's
underlying business decision to effect the Merger,
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and we express no view on the effect on the Company of the Merger and related
transactions. Our opinion is directed only to the fairness, from a financial
point of view, of the Merger Consideration to holders of Company Common Stock
and does not constitute a recommendation concerning how holders of Company
Common Stock should vote with respect to the Merger Agreement or the Merger.
We have acted as financial advisor to the Board of Directors of the Company
in connection with the Merger and will receive a fee for our services, all of
which is contingent upon consummation of the Merger. In the ordinary course of
business, we and our affiliates may actively trade the securities of the Company
and Parent for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition, we and our affiliates have previously rendered certain investment
banking and financial advisory services to the Company and Parent for which we
have received customary compensation. We and our affiliates (including Citigroup
Inc.) may have other business relationships with the Company or Parent in the
ordinary course of their businesses.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair to the holders of Company Common
Stock from a financial point of view.
Very truly yours,
SALOMON SMITH BARNEY INC.
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APPENDIX C
FORM OF IRREVOCABLE PROXY AND VOTING AGREEMENT
March 10, 1999
International Game Technology
9295 Prototype Drive
Reno, Nevada 89511
Attn: Brian McKay
Re: Agreement of Significant Stockholders Concerning Transfer and Voting of
Shares of Sodak Gaming, Inc.
I understand that you and Sodak Gaming, Inc. (the "Company"), of which the
undersigned is a significant stockholder, are prepared to enter into an
agreement for the merger of the Company with and into a wholly-owned subsidiary
("Sub") of Parent, but that you have conditioned your willingness to proceed
with such agreement (the "Agreement") upon your receipt from me of assurances
satisfactory to you of my support of and commitment to the Merger. I am familiar
with the Agreement and the terms and conditions of the Merger, as approved by
the board of directors of the Company. Terms used but not otherwise defined
herein shall have the same meanings as are given them in the Agreement. In order
to evidence such commitment and to induce you to enter into the Agreement, I
hereby represent and warrant to you and agree with you as follows:
1. VOTING. I will vote or cause to be voted all shares of capital stock of
the Company owned of record or beneficially owned or held in any capacity by me
or under my control, by proxy or otherwise, in favor of the Merger and other
transactions provided for in or contemplated by the Agreement and against any
inconsistent proposals or transactions. I hereby revoke any other proxy granted
by me and irrevocably appoint you, during the term of this letter agreement, as
proxy for and on behalf of me to vote (including, without limitation, the taking
of action by written consent) such shares, for me and in my name, place and
stead for the matters and in the manner contemplated by this Section 1. This
proxy is irrevocable.
2. OWNERSHIP. As of the date hereof, my only ownership of, or interest in,
equity securities of the Company, including proxies granted to me, consists
solely of the interests described in Schedule 1 attached hereto (collectively,
the "Shares").
3. RESTRICTION ON TRANSFER. I will not sell, transfer, pledge or otherwise
dispose of any of the Shares or any interest therein (including the granting of
a proxy to any person) or agree to sell, transfer, pledge or otherwise dispose
of any of the Shares or any interest therein prior to the Merger, without your
express written consent. Any transferee of the Shares must, as a condition to
receipt of such Shares, agree to bound by the terms hereof.
4. SHARE LEGEND. At your request, the following legend shall be placed on
the certificates for the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A VOTING AGREEMENT DATED MARCH 10, 1999 BETWEEN THE
REGISTERED HOLDER HEREOF AND INTERNATIONAL GAME TECHNOLOGY, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF INTERNATIONAL GAME
TECHNOLOGY.
5. NO SOLICITATION. From the date hereof until the termination hereof, I
will not, directly or indirectly, (i) take any action to solicit, initiate or
encourage any Takeover Proposal or (ii) engage in
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negotiations or discussions with, or disclose any nonpublic information relating
to the Company or any subsidiary of the Company to, or otherwise assist,
facilitate or encourage, any person (other than Parent and Sub) that may be
considering making, or has made, a Takeover Proposal. I will notify Sub within
24 hours after receipt by me of any Takeover Proposal or any indication that any
such third party is considering making a Takeover Proposal or any request for
nonpublic information relating to the Company or any subsidiary of the Company
or for access to the properties, books or records of the Company or any such
subsidiary by any such third party that may be considering making, or has made,
a Takeover Proposal. The foregoing provisions of this Section 5 shall not be
construed to limit actions taken, or to require actions to be taken, by me that
are required or restricted by my fiduciary duties or my employment duties, or
permitted by the Agreement, and that, in each case, are undertaken solely in my
capacity as a director or officer of the Company.
6. ACKNOWLEDGEMENT; WAIVER OF CLAIMS. The undersigned acknowledges that you
requested the undersigned and three other stockholders of the Company to provide
the agreements contained in this letter agreement and to agree, if required by
you, and subject to the receipt of all necessary Gaming Approvals, to purchase
the Company's interest in, and to assume the Company's obligations under, the
Louisiana Joint Venture Agreements in accordance with Section 5.4(a)(iii) of the
Agreement. The undersigned hereby declines to grant to you the right to require
the undersigned to purchase the Company's interest in, and to assume the
Company's obligations under, the Louisiana Joint Venture Agreements in
accordance with Section 5.4(a)(iii) of the Agreement. The undersigned shall have
no claims, and expressly waives any claim, direct or indirect, derivative or
other, against you, the Company or any such other stockholders arising out of,
related to or based upon the request for such assurances or agreement, the grant
or declination by any stockholder of such requests, any exercise of your rights
under such Section 5.4(a)(iii) and the transfer resulting therefrom or the
consummation of the transactions contemplated by the Agreement.
7. EFFECTIVE DATE; SUCCESSION; REMEDIES; TERMINATION. Upon your acceptance
and execution of the Agreement, this letter agreement shall mutually bind and
benefit you and me, any of our heirs, successors and assigns and any of your
successors. You will not assign the benefit of this letter agreement other than
to a wholly owned subsidiary. I agree that in light of the inadequacy of damages
as a remedy, specific performance shall be available to you, in addition to any
other remedies you may have for the violation of this letter agreement. This
letter agreement (including the proxy granted herein) shall terminate on the
earlier of (i) termination of the Agreement and (ii) December 31, 1999, or such
later date, if any, to which Parent and the Company agree to extend the date
specified in Section 7.1(e) of the Agreement. The provisions of Section 6 shall
survive any such termination and shall be for the benefit of you, the Company
and the other stockholders referred to in Section 6.
8. NATURE OF HOLDINGS; SHARES. All references herein to our holdings of the
Shares shall be deemed to include Shares held or controlled by the undersigned,
individually, jointly, or in any other capacity, and shall extend to any
securities issued to the undersigned in respect of the Shares.
[Remainder of this page intentionally left blank]
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[SHAREHOLDER]
By: __________________________________
Name: ________________________________
Title: _______________________________
AGREED:
INTERNATIONAL GAME
TECHNOLOGY, a Nevada corporation
By: ____________________________________________________________________________
Name:___________________________________________________________________________
Its:____________________________________________________________________________
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SCHEDULE 1
<TABLE>
<CAPTION>
NUMBER OF RECORD BENEFICIAL
CLASS SHARES OWNER OWNER PROXY HOLDER
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE>
APPENDIX D
SOUTH DAKOTA BUSINESS CORPORATION ACT
47-6-23 DISSENT BY SHAREHOLDER FROM MERGER, CONSOLIDATION, OR TRANSFER
PLAN.--Any shareholder of a domestic corporation shall have the right to dissent
from, and to obtain payment for his shares in the event of, any of the following
corporate actions:
(1) Any plan of merger or consolidation to which the corporation is a party;
(2) Any sale or exchange of all or substantially all of the property and
assets of the corporation not made in the usual and regular course of its
business, including a sale in dissolution, but not including a sale pursuant to
an order of a court having jurisdiction in the premises or a sale for cash on
terms requiring that all or substantially all of the net proceeds of sale be
distributed to the shareholders in accordance with their respective interests
within one year after the date of sale;
(3) Any plan of exchange to which the corporation is a party as the
corporation the shares of which are to be acquired;
(4) Any amendment of the articles of incorporation which materially and
adversely affects the rights appurtenant to the shares of the dissenting
shareholder in that it:
(a) Alters or abolishes a preferential right to such shares;
(b) Creates, alters or abolishes a right in respect of the redemption of
such shares, including a provision respecting a sinking fund for the redemption
or repurchase of such shares;
(c) Alters or abolishes a preemptive right of the holder of such shares to
acquire shares or other securities;
(d) Excludes or limits the right of the holder of such shares to vote on any
matter, or to cumulate his votes, except as such right may be limited by
dilution through the issuance of shares or other securities with similar voting
rights; or
(5) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles of incorporation, the bylaws, or a resolution of
the board of directors directs that dissenting shareholders shall have a right
to obtain payment for their shares.
47-6-23.1 DISSENT AS TO LESS THAN ALL SHARES HELD--BENEFICIAL OWNER.--A
record holder of shares may assert dissenters' rights as to less than all of the
shares registered in his name only if he dissents with respect to all the shares
beneficially owned by any one person, and discloses the names and address of the
person or persons on whose behalf he dissents. In that event, his rights shall
be determined as if the shares as to which he has dissented and his other shares
were registered in the names of different shareholders.
A beneficial owner of shares who is not the record holder may assert
dissenters' rights with respect to shares held on his behalf, and shall be
treated as a dissenting shareholder under the terms of this section if he
submits to the corporation at the time of or before the assertion of these
rights a written consent of the record holder.
47-6-23.2 RIGHTS OF SHAREHOLDERS NOT ENTITLED TO VOTE ON MERGER.--The right
to obtain payment under section 34 of this Act does not apply to the
shareholders of the surviving corporation in a merger if a vote of the
shareholders of such corporation is not necessary to authorize such merger.
47-6-23.3 SHAREHOLDER ENTITLED TO PAYMENT MAY NOT ATTACK VALIDITY OF
ACTION.--A shareholder of a corporation who has a right under Section47-6-23 to
obtain payment for his
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shares may not, at law or in equity, attack the validity of the corporate action
that gives rise to his right to obtain payment, have the action set aside or
rescinded, unless the corporate action is unlawful or fraudulent with regard to
the complaining shareholder or to the corporation.
47-6-40 DEFINITIONS.--Terms used in this Act mean:
(1) "Dissenter," a shareholder or beneficial owner who is entitled to and
does assert dissenters' rights under this Act, and who has performed every act
required up to the time involved for the assertion of such rights;
(2) "Corporation," the issuer of the shares held by the dissenter before the
corporate action, or the successor by merger or consolidation of that issuer;
(3) "Fair value" of shares, their value immediately before the effectuation
of the corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of such corporate action unless
such exclusion would be inequitable;
(4) "Interest," interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the corporation
on its principal bank loans, or, if none, at such rate as is fair and equitable
under all the circumstances.
47-6-41 NOTICE TO SHAREHOLDERS OF RIGHT TO DISSENT AND OBTAIN PAYMENT.--If a
proposed corporate action which would give rise to dissenters' rights under this
Act is submitted to a vote at a meeting of shareholders, the notice of meeting
shall notify all shareholders that they have or may have a right to dissent and
obtain payment for their shares by complying with the terms of this Act, and
shall be accompanied by a copy of SectionSection47-6-23 to 47-6-23.3, inclusive,
and SectionSection47-6-40 to 47-6-50, inclusive.
47-6-42 NOTICE OF INTENT TO DISSENT--REFRAIN FROM VOTING--EFFECT OF
FAILURE.--If the proposed corporate action is submitted to a vote at a meeting
of shareholders, any shareholder who wishes to dissent and obtain payment for
his shares shall file with the corporation, prior to the vote, a written notice
of intention to demand that he be paid fair compensation for his shares if the
proposed action is effectuated, and shall refrain from voting his shares in
approval of such action. A shareholder who fails in either respect acquires no
right to payment of his shares under this section or SectionSection47-6-23 to
47-6-23.3, inclusive.
47-6-43 NOTICE OF PROCEDURE FOR DEMANDING PAYMENT AND DEPOSITING
CERTIFICATES.--If the proposed corporate action is approved by the required vote
at a meeting of shareholders, the corporation shall mail a further notice to all
shareholders who gave due notice of intention to demand payment and who
refrained from voting in favor of the proposed action. If the proposed corporate
action is to be taken without a vote of shareholders, the corporation shall send
to all shareholders who are entitled to dissent and demand payment for their
shares a notice of the adoption of the plan of corporate action. The notice
shall (1) state where and when a demand for payment shall be sent and
certificates of certificated shares shall be deposited in order to obtain
payment, (2) inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is received, (3)
supply a form for demanding payment which includes a request for certification
of the date on which the shareholder, or the person on whose behalf the
shareholder dissents, acquired beneficial ownership of the shares, and (4) be
accompanied by a copy of SectionSection47-6-23 to 47-6-23.3, inclusive, and
SectionSection47-6-40 to 47-6-50, inclusive. The time set for the demand and
deposit shall be not less than thirty days from the mailing of the notice.
47-6-44 FAILURE TO DEMAND PAYMENT OR DEPOSIT CERTIFICATES--WAIVER--
RESTRICTION ON TRANSFERS.--A shareholder who fails to demand payment, or fails,
in the case of certificated shares, to deposit certificates, as required by a
notice pursuant to Section47-6-43 has no right under this Act to receive payment
for his shares. If the shares are not represented by certificates, the
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corporation may restrict their transfer from the time of receipt of demand for
payment until effectuation of the proposed corporate action, or the release of
restrictions under the terms of SectionSection47-6-45 and 47-6-46. The dissenter
shall retain all other rights of a shareholder until these rights are modified
by effectuation of the proposed corporate action.
47-6-45 RETURN OF CERTIFICATES OR RELEASE OF RESTRICTIONS ON FAILURE TO
EFFECTUATE ACTION--NEW NOTICE.--Within sixty days after the date set for
demanding payment and depositing certificates, if the corporation has not
effectuated the proposed corporate action and remitted payment for shares
pursuant to this Act, it shall return any certificates that have been deposited,
and release uncertificated shares from any transfer restriction imposed by
reason of the demand for payment.
If uncertificated shares have been released from transfer restrictions, and
deposited certificates have been returned, the corporation may at any later time
send a new notice conforming to the requirements of Section47-6-43 with like
effect.
47-6-46 REMITTANCE OF PAYMENT TO DISSENTING SHAREHOLDERS--INFORMATION TO
ACCOMPANY REMITTANCE.--Immediately upon effectuation of the proposed corporate
action, or upon receipt of demand for payment if the corporate action has
already been effectuated, the corporation shall remit to dissenters who have
made demand and, if their shares are certificated, have deposited their
certificates the amount which the corporation estimates to be the fair value of
the shares, with interest if any has accrued. The remittance shall be
accompanied by:
(1) The corporation's closing balance sheet and statement of income for a
fiscal year ending not more than sixteen months before the date of remittance,
together with the latest available interim financial statements;
(2) A statement of the corporation's estimate of fair value of the shares;
and
(3) A notice of the dissenter's right to demand supplemental payment,
accompanied by a copy of SectionSection47-6-23 to 47-6-23.3, inclusive, and
SectionSection47-6-40 to 47-6-50, inclusive.
47-6-47 DEMAND FOR DEFICIENCY--FAILURE TO DEMAND AS WAIVER.--If the
corporation fails to remit as required by Section47-6-46 or if the dissenter
believes that the amount remitted is less than the fair value of his shares, or
that the interest is not correctly determined, he may send the corporation his
own estimate of the value of the shares or of the interest and demand payment of
the deficiency.
If the dissenter does not file such an estimate within thirty days after the
corporation's mailing of its remittance, he shall be entitled to no more than
the amount remitted.
47-6-48 PETITION FOR JUDICIAL DETERMINATION OF VALUE OF SHARES--PARTIES--
PROCEDURE--EFFECT OF FAILURE TO FILE.--Within sixty days after receiving a
demand for payment pursuant to Section47-6-47, if any such demands for payment
remain unsettled, the corporation shall file in an appropriate court a petition
requesting that the fair value of the shares and interest thereon be determined
by the court.
An appropriate court shall be a court of competent jurisdiction in the
county of this state where the registered office of the corporation is located.
If, in the case of a merger or consolidation or exchange of shares, the
corporation is a foreign corporation without a registered office in this state
the petition shall be filed in the county where the registered office of the
domestic corporation was last located.
All dissenters, wherever residing, whose demands have not been settled shall
be made parties to the proceeding as in an action against their shares. A copy
of the petition shall be served on each such
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dissenter; if a dissenter is a nonresident, the copy may be served on him by
registered or certified mail or by publication as provided by law.
The jurisdiction of the court shall be plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers shall have such power and
authority as shall be specified in the order of their appointment or in any
amendment thereof. The dissenters shall be entitled to discovery in the same
manner as parties in other civil suits.
All dissenters who are made parties shall be entitled, after a hearing
without a jury, to judgment for the amount by which the fair value of their
shares is found to exceed the amount previously remitted with interest.
If the corporation fails to file a petition as provided in this section,
each dissenter who made a demand and who has not already settled his claim
against the corporation shall be paid by the corporation the amount demanded by
him with interest, and may sue therefor in an appropriate court.
47-6-49 ASSESSMENT OF COSTS AND EXPENSES OF ACTION.--The costs and expenses
of any proceeding under section 61 of this Act, including the reasonable
compensation and expenses of appraisers appointed by the court, shall be
determined by the court and assessed against the corporation, except that any
part of the costs and expenses may be apportioned and assessed as the court
considers equitable against all or some of the dissenters who are parties and
whose action in demanding supplemental payment the court finds to be arbitrary,
vexatious, or not in good faith.
Fees and expenses of counsel and of experts for the respective parties may
be assessed as the court considers equitable against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this section, and may be assessed against either the
corporation or a dissenter in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith in respect to the rights provided by
SectionSection47-6-23 to 47-6-23.3, inclusive, and SectionSection47-6-40 to
47-6-50, inclusive.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and should not be
assessed against the corporation it may award to these counsel reasonable fees
to be paid out of the amounts awarded to the dissenters who were benefited.
47-6-50 VALUE OF SHARES NOT BENEFICIALLY OWNED BY DISSENTER ON DATE OF FIRST
ANNOUNCEMENT.--Notwithstanding SectionSection47-6-40 to 47-6-49, inclusive, the
corporation may elect to withhold the remittance required by Section47-6-46 from
any dissenter with respect to shares of which the dissenter or the person on
whose behalf the dissenter acts was not the beneficial owner on the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action. With respect to such shares, the corporation shall, upon
effectuating the corporate action, state to each dissenter its estimate of the
fair value of the shares, state the rate of interest to be used, explaining the
basis thereof, and offer to pay the resulting amounts on receiving the
dissenter's agreement to accept them in full satisfaction.
If the dissenter believes that the amount offered is less than the fair
value of the shares and interest determined according to this section, he may
within thirty days after the date of mailing of the corporation's offer, mail
the corporation his own estimate of fair value and interest, and demand their
payment. If the dissenter fails to do so, he shall be entitled to no more than
the corporation's offer.
If the dissenter makes a demand as provided herein the provisions of
SectionSection47-6-48 and 47-6-49 shall apply to further proceedings on the
dissenter's demand.
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SODAK GAMING, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SODAK SPECIAL MEETING OF
HOLDERS OF COMMON STOCK -- JULY 7, 1999.
ROLAND W. GENTNER and MICHAEL G. DIEDRICH (collectively, the "Proxies"), or
either of them, with full power of substitution, are hereby appointed proxies to
vote all shares of common stock of Sodak Gaming, Inc. (the "Company") in
connection with its merger with a subsidiary of International Game Technology
that the undersigned is entitled to vote at the special meeting of holders of
the common stock of the Company to be held at the Rushmore Plaza Holiday Inn,
505 North 5(th) Street, Rapid City, South Dakota, July 7, 1999, at 11:00 a.m.
local time, or adjournments thereof, with all powers the undersigned would
possess if personally present, for each of the matters described in the Proxy
Statement, hereby revoking any proxy heretofore given.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED FOR ITEM 1.
In their discretion, the Proxies, or either of them, are authorized to vote
upon such other business as may come properly before the meeting.
PLEASE MARK AND DATE THE PROXY AND SIGN YOUR NAME ON THE
REVERSE SIDE.
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER /X/
USING DARK INK ONLY.
This proxy, when properly executed, will be voted in the manner described
therein. If no direction is made, this proxy will be voted FOR Item 1 and
according to the judgment of the Proxies with respect to any other business that
may come before the special meeting or any adjournment thereof.
(CONTINUED, AND TO BE DATED AND SIGNED, ON THE REVERSE SIDE)
<PAGE>
SODAK GAMING, INC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
1. APPROVAL AND ADOPTION OF MERGER AGREEMENT AND MERGER: Approval and adoption
of the Agreement and Plan of Merger, dated as of March 10, 1999, by and among
International Game Technology, a Nevada corporation, SAC, Inc., a South Dakota
corporation and a wholly-owned subsidiary of International Game Technology, and
Sodak Gaming, Inc., a South Dakota corporation.
/ / FOR / / WITHHOLD / / ABSTAIN
The undersigned hereby authorizes the Proxies to vote in their discretion on any
other business that may properly be brought before the special meeting or any
adjournment thereof.
Date _____________________________
__________________________________
Signature
SIGNATURES SHOULD CONFORM EXACTLY
WITH NAME(S) SHOWN ABOVE. IF
SIGNING FOR ESTATE, TRUST,
CORPORATION OR PARTNERSHIP, TITLE
OR CAPACITY SHOULD BE STATED. IF
SHARES ARE HELD JOINTLY EACH JOINT
HOLDER SHOULD SIGN.
DETACH HERE
IMPORTANT THIS IS YOUR PROXY CARD
PLEASE SIGN AND RETURN YOUR PROXY CARD PROMPTLY.
SODAK GAMING, INC.
