MAFCO HOLDINGS INC.
00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
October 10, 2003
Scientific Games Corporation
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx X. Xxxx
Ladies and Gentlemen:
Reference is made to that certain Stock Purchase Agreement (the "STOCK
PURCHASE AGREEMENT") we are entering into contemporaneously with this letter
agreement with Cirmatica Gaming, S.A., a Spanish corporation ("SELLER"), which
provides for the purchase, upon the terms and conditions set forth therein, by
Mafco Holdings Inc., a Delaware corporation, or one of its affiliates ("BUYER"),
of all the Securities owned by Seller, and the assignment to Buyer of all of
Seller's rights under the Existing Agreements. All capitalized terms used herein
without definition shall have the meanings ascribed to them in the Stock
Purchase Agreement.
You and we acknowledge and agree, for good and adequate consideration, the
sufficiency of which is hereby acknowledged, as follows:
(a) COMPANY REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to Buyer, as of the date hereof and as of the Closing Date, as
follows:
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has
full corporate power and authority to execute and deliver this
letter and to perform its obligations under this letter in
accordance with its terms. The Company has taken all necessary
corporate action to authorize the execution and delivery of this
letter and the consummation of the transactions contemplated
hereby and to approve such transactions and the transactions
contemplated by the Stock Purchase Agreement for the purposes of
Section 203 of the Delaware General Corporate Law. This letter is
a valid and legally binding obligation of the Company,
enforceable in accordance with its terms (assuming due
authorization, execution and delivery hereof by Buyer).
(ii) The execution and delivery of this letter and the Stock Purchase
Agreement do not, and, assuming receipt of the Approvals, the
consummation of the transactions contemplated by this letter and
the Stock Purchase Agreement will not, conflict with, or result
in any violation of, or constitute a default
(with or without notice or lapse of time, or both) or give any
person the right to exercise any remedy under, (i) any provision
of the Certificate of Incorporation or Bylaws of the Company or
(ii) any material mortgage, indenture, lease or other material
agreement or instrument to which the Company or any of its
subsidiaries is a party, or (iii) any permit, concession,
franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of
its subsidiaries or any of their properties or assets, except (in
this clause (iii)) for such conflicts, violations, defaults or
rights as would not have a material adverse effect on the
Company.
(iii) Other than the Approvals , order or authorization of, or
registration, declaration or filing with any court,
administrative agency or commission or other governmental or
quasi-governmental authority or instrumentality, domestic or
foreign, is required to be obtained or made by the Company in
connection with the execution and delivery of this letter by the
Company or the performance of its obligations hereunder or the
execution, delivery or consummation of the transactions
contemplated by the Stock Purchase Agreement, except where the
failure to obtain or make would not have a material adverse
effect on the Company.
(iv) The dividend payable on the Series A Shares on September 30, 2003
was paid in additional Series A Shares in accordance with the
terms of the Series A Certificate of Designations (as defined
below) and the dividend payable on the Series A Shares on
December 30, 2003 will be paid in additional Series A Shares in
accordance with the terms of the Series A Certificate of
Designations.
(b) BUYER REPRESENTATIONS AND WARRANTIES. Buyer hereby represents and
warrants to the Company, as of the date hereof and as of the Closing Date, as
follows:
(v) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has
full corporate power and authority to execute and deliver this
letter and to perform its obligations under this letter in
accordance with its terms. Buyer has taken all necessary
corporate action to authorize the execution and delivery of this
letter and the consummation of the transactions contemplated
hereby. This letter is a valid and legally binding obligation of
Buyer, enforceable in accordance with its terms (assuming due
authorization, execution and delivery hereof by the Company).
(vi) The execution and delivery of this letter and the Stock Purchase
Agreement do not, and, assuming receipt of the Approvals, the
consummation of the transactions contemplated by this letter and
the Stock Purchase Agreement will not, conflict with, or result
in any violation of, or constitute a default (with or without
notice or lapse of time, or both) or give any person the right to
exercise any remedy under, (i) any provision of the Certificate
of
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Incorporation or Bylaws of Buyer or (ii) any material mortgage,
indenture, lease or other material agreement or instrument to
which Buyer or any of its subsidiaries is a party, or (iii) any
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Buyer
or any of its subsidiaries or any of their properties or assets,
except (in this clause (iii)) for such conflicts, violations,
defaults or rights as would not have a material adverse effect on
the Buyer.
(vii) Other than the Approvals, no consent, approval, order or
authorization of, or registration, declaration or filing with any
court, administrative agency or commission or other governmental
or quasi-governmental authority or instrumentality, domestic or
foreign, is required to be obtained or made by Buyer in
connection with the execution and delivery of this letter by
Buyer or the performance of its obligations hereunder or the
execution, delivery or consummation of the transactions
contemplated by the Stock Purchase Agreement.
(c) RELIANCE ON PUBLIC INFORMATION; NO OTHER REPRESENTATIONS OR WARRANTIES.
The Company agrees and acknowledges that Buyer has entered into the Stock
Purchase Agreement in reliance upon publicly available information regarding the
Company and its business, and that Buyer shall have no lesser or greater rights
under the Exchange Act with respect to such information than other purchasers of
the Company's securities. Buyer agrees and acknowledges that (i) the Company is
not making, and Buyer is not relying on, any representations or warranties of
the Company except as set forth in this letter agreement and (ii) Buyer has had
the opportunity to discuss the Company's business with the Company's
representatives and had access to such Company facilities, books and records as
it has requested.
(d) CONTINUATION OF RIGHTS. The Company agrees and acknowledges that,
following the consummation of the transactions contemplated by the Stock
Purchase Agreement and Buyer's execution and delivery of a notice substantially
in the form attached as Annex I hereto, Buyer will possess all of the rights of
Seller as of the date hereof vis a vis the Company under the Existing Agreements
and the Securities (subject to the obligations under the Existing Agreements),
and that such rights shall include, without limitation, the right to elect four
members of the Company's board of directors. For the avoidance of doubt, the
Company confirms that no transactions have been, or will be prior to or after
Closing, effected, approved or authorized by the Company that would have the
effect of modifying, limiting or restricting the aforementioned rights in any
way, without the prior written consent of Buyer; PROVIDED that Buyer
acknowledges that Seller has consented to the registration and issuance of
securities pursuant to a letter agreement which is attached here to as Annex II
(the "CONSENTS") (it being understood that the grant of options on one million
shares of Common Stock to Xx. Xxxx is included within the stock option plans
previously consented to by Seller or in respect of which no consent was
required), which include a consent to the issuance by the Company of shares of
Common Stock (and/or securities convertible into, or exercisable for, Common
Stock), such number of shares of Common Stock so issued (or issuable upon
conversion or exercise of such other securities) not to exceed 10 million shares
of Common Stock (such number subject to equitable adjustment in the event of
stock splits or combinations) (the "TEN MILLION SHARES CONSENT").
Notwithstanding the immediately preceding sentence, the Company shall not, prior
to the closing under the Stock Purchase
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Agreement, include shares of Common Stock issuable upon conversion of the Series
A Shares in a registration statement filed with the Securities and Exchange
Commission. The Company will not assert any breach by Seller of any Existing
Agreement as a basis for affecting the rights of Buyer under the Existing
Agreements. Seller and Buyer agree that Buyer shall have the preemptive rights
provided for in Section 3(b) of the Stockholders' Agreement with respect to
issuances contemplated by the Ten Million Shares Consent, and Buyer agrees that
such preemptive rights shall be provided in a manner that does not unduly
interfere with the Company's ability to effectuate financings contemplated by
the Ten Million Shares Consent; PROVIDED that Buyer shall continue to have the
protection against dilution of its interest in the Company contemplated by such
Section 3(b).
(e) BOARD OF DIRECTORS. (i) At Closing, the Company shall take all actions
necessary and appropriate to cause each of the three persons nominated by Buyer
to be a director of the Company (in addition to Xxxxx Xxxxx) to fill the
vacancies created by the resignations of Seller's designees, effective as of the
Closing.
(ii) The Company and Buyer agree that, notwithstanding the provisions of
Section 4(b) of the Stockholders' Agreement, Buyer shall have the right to
designate and have elected and appointed: (A) four (4) directors, provided that
Buyer beneficially owns in the aggregate shares of Common Stock plus shares of
Preferred Stock having the right to convert into a number of shares of Common
Stock that equals or exceeds twenty percent (20%) of (x) the number of shares of
Common Stock outstanding plus (y) the number of shares of Common Stock into
which or for which all outstanding securities of the Company convertible into or
exercisable or exchangeable for Common Stock may be converted, exercised or
exchanged, minus (z) the aggregate number of shares of Common Stock and shares
underlying other securities convertible into or exercisable or exchangeable for
Common Stock issued pursuant to the Ten Million Shares Consent (such amount
including (x), (y) and (z), the "ADJUSTED FULLY DILUTED SHARE AMOUNT"); (B)
three (3) directors, provided, that Buyer beneficially owns in the aggregate
shares of Common Stock plus shares of Preferred Stock having the right to
convert into a number of shares of Common Stock that equals or exceeds sixteen
percent (16%) of the Adjusted Fully Diluted Share Amount; (C) two (2) directors,
provided, that Buyer beneficially owns in the aggregate shares of Common Stock
plus shares of Preferred Stock having the right to convert into a number of
shares of Common Stock that equals or exceeds nine percent (9%) of the Adjusted
Fully Diluted Share Amount; and (D) one (1) director, provided, that Buyer
beneficially owns in the aggregate shares of Common Stock plus shares of
Preferred Stock having the right to convert into a number of shares of Common
Stock that equals or exceeds four and six-tenths percent (4.6%) of the Adjusted
Fully Diluted Share Amount. The intention of the immediately preceding sentence
is that the directors designated pursuant to Section 4(b) of the Stockholders'
Agreement, Section 5(d) of the Series A Certificate of Designations and Section
6(c) of the Certificate of Designations governing the Series B Preferred shall
include the individuals designated pursuant to this Section (e)(ii) and shall in
any event not exceed the number of directors to be designated pursuant to this
Section (e)(ii), The Company and Buyer further agree that, notwithstanding the
provisions of Section 4(b)(iv) of the Stockholders' Agreement but subject to
applicable law, Buyer's rights to select and designate directors (including
replacement directors) shall not be restricted as long as Buyer is entitled to
designate at least one but not more than two directors pursuant to this
Agreement. The Company will, and Buyer will cooperate to, take any further steps
that are necessary or appropriate to fully implement the foregoing provisions.
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(f) EXPENSES. At the Closing, the Company shall pay to Buyer an amount in
cash equal to the expenses incurred by Buyer in connection with the Stock
Purchase Agreement and the transactions contemplated thereby, up to a maximum of
$1,000,000.
(g) APPROVALS. Between the date hereof and the Closing, each of Buyer and
the Company will use its reasonable best efforts to obtain, and will cooperate
with each other in obtaining, as promptly as practicable and in any event prior
to the Closing, the Approvals and all other governmental and regulatory
approvals required with respect to the transactions contemplated by the Stock
Purchase Agreement (including consents from governmental or quasi-governmental
authorities pursuant to lottery or gaming agreements with such authorities).
Each of us agrees to make all required filings, and to execute all required
documents, certifications, forms, etc., and to provide the other with notice of
any requests or inquiries made by governmental or quasi-governmental authorities
relating to such approvals and consents, including copies of any written request
or inquiry received from any governmental or quasi-governmental authority. Buyer
shall not waive the closing conditions set forth in Section 2.2(a)(v) and (vi)
of the Stock Purchase Agreement nor shall it consent to amend such conditions.
(h) NO MANIPULATION. During the Valuation Period, the Company shall not,
directly or indirectly through its affiliates, agents or representatives,
purchase any Common Stock (or any interest in Common Stock), other than
transactions in the ordinary course, required by law or pursuant to preexisting
obligations, such as purchases to satisfy stock option issuances.
(i) PRECLOSING RESTRICTIONS. Between the date hereof and the Closing,
except with the prior written consent of Buyer, the Company will not (i) redeem
or otherwise acquire, or offer to redeem or otherwise acquire, any Securities,
(ii) except for the matters contemplated by the Consents, take any of the
actions set forth in Section 6(c) of the Certificate of Designations governing
the Series A Preferred (the "SERIES A CERTIFICATE OF DESIGNATIONS") or Section
6(b) of the Certificate of Designations governing the Series B Preferred or
(iii) amend, or permit the amendment of, any of the Existing Agreements to which
it is a party.
(j) PUBLICITY. Between the date hereof and the Closing, each of the Company
and Buyer agree to consult with each other and to coordinate the issuance of any
press release or similar public announcement or communication relating to the
execution or performance of this letter or the Stock Purchase Agreement or the
transactions contemplated hereby or thereby. Notwithstanding the foregoing,
neither party shall be restrained, after consultation with the other party, from
making such disclosure as it shall be advised by counsel that it is required to
make by law or regulation or by the rules of any stock exchange or NASDAQ.
(k) INDEMNIFICATION. The representations and warranties and agreements set
forth in this letter shall survive the Closing. The Company agrees to indemnify,
defend and hold harmless Buyer, its affiliates and its directors, officers,
employees, successors, assigns, agents and representatives, from and against all
losses, liabilities, damages, deficiencies, demands, claims, actions, judgments
or causes of action, assessments, costs or expenses (including, without
limitation, interest, penalties and reasonable attorneys' fees, disbursements
and related charges) based upon, arising out of or otherwise in respect of any
inaccuracy in or any breach of any representation, warranty, covenant or
agreement of the Company contained in this letter. Buyer agrees to
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indemnify, defend and hold harmless the Company, its affiliates and its
directors, officers, employees, successors, assigns, agents and representatives,
from and against all losses, liabilities, damages, deficiencies, demands,
claims, actions, judgments or causes of action, assessments, costs or expenses
(including, without limitation, interest, penalties and reasonable attorneys'
fees, disbursements and related charges) based upon, arising out of or otherwise
in respect of any inaccuracy in or any breach of any representation, warranty,
covenant or agreement of Buyer contained in this letter.
(l) STANDSTILL. The provisions of Section 4(a) (Standstill) of the
Stockholders Agreement shall continue to apply to Buyer with the changes set
forth in the immediately following sentence, and shall supercede the provisions
of the tenth paragraph of the confidentiality agreement dated as of September 8,
2003 between us (which shall have no further force or effect). Buyer agrees that
Section 4(a) of the Stockholders Agreement shall be amended so that (A) the
words "(A) for four years from the closing of the merger of a wholly owned
Subsidiary of the Company with and into Scientific Games Holding Corp. (the
"Merger")" shall be deleted and replaced with the words "(A) prior to October
10, 2005" and (B) the words "(B) for three years from the closing of the Merger"
shall be deleted and replaced with the words "(B) prior to October 10, 2004";
PROVIDED that Buyer shall not be responsible for compliance by any Stockholder
(as defined in the Stockholders Agreement) that is not affiliated with Buyer
with such amended provisions.
This letter may be executed in two counterparts, all of which taken
together shall constitute one instrument. No amendment to this letter shall be
effective unless it is in writing and signed by each of the parties hereto.
Notices delivered with respect to this letter shall be in writing and shall be
effective when personally delivered or delivered by telecopy at the appropriate
address or number designated below.
Buyer and the Company will cooperate and take all reasonable actions to
ensure that Buyer's acquisition of the Securities pursuant to the Stock Purchase
Agreement will not result in the loss of the Company's licenses or approvals to
do business in New Jersey or West Virginia. This letter agreement will terminate
on the earlier of (x) such date on which the Stock Purchase Agreement shall
terminate, or (y) April 1, 2004, provided that clauses (j) and (k) shall survive
any such termination.
If any provision of this letter shall be held illegal, void or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions shall remain in full force and effect, and the parties hereto agree
to take all actions necessary to give the fullest possible effect to the
intentions of the parties with respect to the illegal, void or unenforceable
provision.
This letter shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and to be performed
entirely within the State of New York (without regard to the conflicts of
interests rules of such State). Any dispute arising out of this letter shall be
submitted to the courts of the State of New York and the United States District
Court located in the Borough of Manhattan in New York City. Each party waives
the right to a trial by jury in connection with any such dispute.
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Very truly yours,
MAFCO HOLDINGS INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Xxxxx X. Xxxxxxxx
Executive Vice President and General
Counsel
Address: 00 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
Agreed and accepted as of the
date first written above:
SCIENTIFIC GAMES CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
Address: 000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Secretary and General Counsel
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