SEPARATION AND
DISTRIBUTION AGREEMENT
BY AND
BETWEEN
GAMES,
INC.
AND
LOTTERY
CORPORATION
DATED AS OF
DECEMBER 29, 2005
TABLE OF
CONTENTS
ARTICLE I DEFINITIONS
2
Section
1.1
Definitions
2
Section
1.2
General
Interpretive Principles
8
ARTICLE II THE RECAPITALIZATION AND
SEPARATION
8
Section
2.1
Recapitalization
and Other Transactions
8
Section
2.2
Wood
Loan
8
Section
2.3
The
Separation and Related Transactions.
9
Section
2.4
Conditions
Precedent to Consummation of the Recapitalization and
the
Separation
13
ARTICLE III THE
DISTRIBUTION
13
Section
3.1
Actions Prior to
the Distribution
13
Section
3.2
The
Distribution
14
Section
3.3
Conditions to
Distribution
15
Section 3.4
Actions Following the
Distribution
16
ARTICLE IV SURVIVAL AND
INDEMNIFICATION
16
Section
4.1
Survival of
Agreements
16
Section
4.2
Indemnification by
Lottery
16
Section
4.3
Indemnification by
Games
17
Section
4.4
Insurance.
18
Section
4.5
Procedures for
Indemnification of Third-Party Claims.
18
Section
4.6
Additional
Matters.
20
Section
4.7
Contribution
20
Section
4.8
Survival of
Indemnities
20
Section
4.9
Remedies
Cumulative
20
Section
4.10
Ancillary
Agreements
21
ARTICLE V CERTAIN ADDITIONAL
COVENANTS
21
Section
5.1
Consents for
Business
21
Section
5.2
Additional
Consents
21
Section
5.3
Further
Assurances.
21
Section
5.4
Certain Business
Matters.
22
ARTICLE VI ACCESS TO
INFORMATION
23
Section
6.1
Agreement for
Exchange of Information.
23
Section
6.2
Ownership of
Information
24
Section
6.3
Compensation for
Providing Information
24
Section
6.4
Record
Retention
24
Section
6.5
Limitation of
Liability
24
Section
6.6
Other
Agreements Providing for Exchange of Information
25
Section
6.7
Production of
Witnesses; Records; Cooperation.
25
Section
6.8
Confidentiality.
26
ARTICLE VII NO REPRESENTATION OR
WARRANTY
27
Section
7.1
No
Representations or Warranties
27
ARTICLE VIII
TERMINATION
28
Section
8.1
Termination
28
Section
8.2
Effect
of Termination
28
ARTICLE IX
MISCELLANEOUS
28
Section
9.1
Complete
Agreement; Representations.
28
Section
9.2
Costs
and Expenses
28
Section
9.3
Governing
Law
29
Section
9.4
Notices
29
Section
9.5
Amendment,
Modification or Waiver.
29
Section
9.6
No
Assignment; Binding Effect; No Third-Party
Beneficiaries.
30
Section
9.7
Counterparts
30
Section
9.8
Negotiation
30
Section
9.9
Specific
Performance
30
Section
9.10
Ohio
Forum
31
Section
9.11
Interpretation;
Conflict With Ancillary Agreements
31
Section
9.12
Severability
31
SEPARATION AND
DISTRIBUTION AGREEMENT
This SEPARATION AND DISTRIBUTION
AGREEMENT (this “Agreement”), dated as of
December 29, 2005, by and between Games, Inc., a Delaware
corporation (“Games”), and Lottery Corporation, a
Delaware corporation and a majority owned subsidiary of Games
(“Lottery”, and, together with Games, each, a
“Party” and collectively, the
“Parties”).
RECITALS
WHEREAS, the Board of Directors of Games
has determined that it is in the best interests of Games to
separate the Lottery Business (as defined below) and the Games
Business (as defined below) into two independent public companies
(the “Separation”), on the terms and subject to the
conditions set forth in this Agreement, in order to resolve issues
related to the allocation of capital and management resources
between the Lottery Business and the Games Business, and to give
Lottery greater flexibility to manage, invest in, and expand the
Lottery Business while ensuring that Games can focus its time and
resources on the development of the Games Business;
WHEREAS, to further effect the
Separation, Lottery intends to retain ownership and possession of
all Lottery Assets (as defined below) and Games intends to retain
ownership and possession of all Games Assets (as defined
below);
WHEREAS, to further effect the
Separation, Lottery intends to remain solely liable for all Lottery
Liabilities (as defined below) and Games intends to remain solely
liable for all Games Liabilities (as defined below);
WHEREAS, Games intends to distribute on a
pro rata basis to holders of issued and outstanding shares of
common stock, par value $.001 per share, of Games (“Games
Common Stock”), other than shares of Games Common Stock held
in the treasury of Games, all of the issued and outstanding shares
of Lottery Common Stock, par value $.001 per share, (“Lottery
Common Stock”) beneficially owned by Games, by means of a
dividend of such Lottery Common Stock to such shareholders (the
“Distribution”), on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, it is the intention of the
Parties that, for United States federal income tax purposes, the
Separation, and Distribution and the other transactions
contemplated herein shall qualify as transactions that are
generally tax-free within the meaning of Section 355 (and other
related provisions) of the U.S. Internal Revenue Code of 1986, as
amended (the “Code”);
WHEREAS, the Board of Directors of Games
has (i) determined that the Separation, the Distribution and the
other transactions contemplated by this Agreement and the Ancillary
Agreements (as defined below) are in furtherance of and consistent
with its business strategy and are in the best interests of Games
and (ii) approved this Agreement and each of the Ancillary
Agreements; and
WHEREAS, it is appropriate and desirable
to set forth the principal corporate transactions required to
effect the Separation, and the Distribution and certain other
agreements
1
that will govern certain matters relating
to these transactions and the relationship of Games and Lottery and
their respective Subsidiaries following the
Distribution.
NOW, THEREFORE, in consideration of the
premises, and of the representations, warranties, covenants and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the Parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section
1.1
Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
“Action” means any claim,
demand, action, cause of action, suit, countersuit, arbitration,
litigation, inquiry, proceeding or investigation by or before any
Governmental Authority or any arbitration or mediation tribunal or
authority.
“Affiliate” means, with
respect to any specified Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified
Person; provided, however, that for purposes of this Agreement, no
member of either Group shall be deemed to be an Affiliate of any
member of the other Group. As used herein, “control”
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
such entity, whether through ownership of voting securities or
other interests, by contract or otherwise.
“Agreement” has the meaning
assigned to such term in the Preamble hereto.
“Amended and Restated Bylaws”
means the Amended and Restated Bylaws of Lottery, with such changes
as may be agreed to by the Parties.
“Amended and Restated Certificate
of Incorporation” means the Amended and Restated Certificate
of Incorporation of Lottery, with such changes as may be agreed to
by the Parties.
“Ancillary Agreements” means
the Transition Services Agreement and the Tax Allocation
Agreement.
“Asset” means any right,
property or asset, whether real, personal or mixed, tangible or
intangible, of any kind, nature and description, whether accrued,
contingent or otherwise, and wheresoever situated and whether or
not carried or reflected, or required to be carried or reflected,
on the books of any Person.
“Business” means the Lottery
Business and/or the Games Business, as the context
requires.
“Code” has the meaning
assigned to such term in the Recitals hereto.
2
“Consents” means any
consents, waivers, notices, reports or other filings to be made, or
any registrations, licenses, permits, authorizations to be obtained
from, or approvals from, or notification requirements to, any third
parties, including any Governmental Authority.
“Delayed Transfer Asset and/or
Liability” has the meaning assigned to such term in Section
2.3(b).
“Dispute Escalation Notice”
has the meaning assigned to such term in Section 9.8.
“Distribution” has the
meaning assigned to such term in the Recitals hereto.
“Distribution Agent” means
Stock Trans, Inc., 44 West Lancaster Avenue, Ardmore, PA
19003.
“Distribution Agent
Agreement” has the meaning assigned to such term in Section
3.1(b).
“Distribution Date” means the
date on which the Distribution shall be effected, such date to be
determined by, or under the authority of, the Board of Directors of
Games in its sole and absolute discretion.
“Effective Time” means the
time at which the Distribution occurs on the Distribution
Date.
“Exchange Act” means the
United States Securities Exchange Act of 1934, as amended, together
with the rules and regulations promulgated thereunder.
“Exchange Act Registration
Statement” means the Registration Statement on Form 10 of
Lottery relating to the registration under the Exchange Act of
Lottery Common Stock, including any amendments or supplements
thereto.
“FIFO Basis” means, with
respect to the payment of Unrelated Claims pursuant to the same
Games insurance policy, the payment in full of each successful
claim (regardless of whether Games or Lottery is the claimant) in
the order in which such successful claim is approved by the
insurance carrier, until the limit of the applicable Games
insurance policy is met.
“Games” has the meaning
assigned to such term in the Preamble hereto.
“Games Assets” means all
Assets of the Games Group, other than the Lottery
Assets.
“Games Business” means all
businesses and operations of the Games Group, other than the
Lottery Business.
“Games Common Stock” has the
meaning assigned to such term in the Recitals hereto.
“Games Group” means Games and
each of its Affiliates and Subsidiaries, and any corporation or
entity that may become part of such Group from time to time, other
than the Lottery Group.
3
“Games Indemnified Parties”
has the meaning assigned to such term in Section 4.2.
“Games Liabilities” means
those Liabilities of Games, other than the Lottery
Liabilities.
“Governmental Authority”
means any federal, state, local, foreign or international court,
government, department, commission, board, bureau or agency, or any
other regulatory, self-regulatory, administrative or governmental
organization or authority.
“Group” means the Games Group
and/or the Lottery Group, as the context requires.
“Indemnified Party” has the
meaning assigned to such term in Section 4.3.
“Indemnifying Party” means
Lottery, for any indemnification obligation arising under Section
4.2, and Games, for any indemnification obligation arising under
Section 4.3.
“Information” means all
information, whether or not patentable or copyrightable, in
written, oral, electronic or other tangible or intangible forms,
stored in any medium, including non-public financial information,
studies, reports, records, books, accountants’ work papers,
contracts, instruments, surveys, discoveries, ideas, concepts,
know-how, techniques, designs, specifications, drawings,
blueprints, diagrams, models, prototypes, samples, flow charts,
data, computer data, disks, diskettes, tapes, computer programs or
other Software, marketing plans, customer data, communications by
or to attorneys, memos and other materials prepared by attorneys
and accountants or under their direction (including attorney work
product), and other technical, financial, legal, employee or
business information or data.
“Information Statement” means
the information statement and any related documentation to be
distributed to holders of Games Common Stock in connection with the
Distribution, including any amendments or supplements
thereto.
“Insurer” has the meaning
assigned to such term in Section 5.5(d).
“Intellectual Property” means
all intellectual property and other similar proprietary rights in
any jurisdiction, whether owned or held for use under license,
whether registered or unregistered, including such rights in and
to: (i) trademarks, trade dress, service marks, certification
marks, logos, and trade names, and the goodwill associated with the
foregoing (collectively, “Trademarks”); (ii) patents
and patent applications, and any and all divisions, continuations,
continuations-in-part, reissues, continuing patent applications,
reexaminations, and extensions thereof, any counterparts claiming
priority therefrom, utility models, patents of
importation/confirmation, certificates of invention, certificates
of registration, design registrations or patents and like rights
(collectively, “Patents”); inventions, invention
disclosures, discoveries and improvements, whether or not
patentable; (iii) writings and other works of authorship
(“Copyrights”); (iv) trade secrets (including, those
trade secrets defined in the Uniform Trade Secrets Act and under
corresponding foreign statutory Law and common law), Information,
business, technical and know-how information, business processes,
non-public information, proprietary information and confidential
information and rights to limit the use or disclosure thereof by
any Person (collectively, “Trade Secrets”); (v)
software, including data files, source code, object code,
application programming interfaces, databases and other
software-related specifications and documentation (collectively,
“Software”); (vi) domain names
4
and uniform resource locators; (vii)
moral rights; (viii) privacy and publicity rights; (ix) any and all
technical information, Software, specifications, drawings, records,
documentation, works of authorship or other creative works, ideas,
knowledge, invention disclosures or other data, not including works
subject to Copyright, Patent or Trademark protection
(“Technology”); (x) advertising and promotional
materials, whether or not copyrightable; and (xi) claims, causes of
action and defenses relating to the enforcement of any of the
foregoing; in each case, including any registrations of,
applications to register, and renewals and extensions of, any of
the foregoing with or by any Governmental Authority in any
jurisdiction.
“Inter-Group Indebtedness”
means any intercompany receivables, payables, accounts, advances,
loans, guarantees, commitments and indebtedness for borrowed funds
between a member of the Games Group and a member of the Lottery
Group; provided, that “Inter-Group Indebtedness” shall
not include any contingent Liabilities and accounts payable arising
pursuant to the Ancillary Agreements, any agreements with respect
to continuing transactions between Games and Lottery and any other
agreements entered into in the ordinary course of
business.
“Law” means any applicable
foreign, federal, national, state, provincial or local law
(including common law), statute, ordinance, rule, regulation, code
or other requirement enacted, promulgated, issued or entered into,
or act taken, by a Governmental Authority.
“Liabilities” means all
debts, liabilities, obligations, responsibilities, response
actions, Losses, damages (whether compensatory, punitive,
consequential, treble or other), fines, penalties and sanctions,
absolute or contingent, matured or unmatured, liquidated or
unliquidated, foreseen or unforeseen, on- or off-balance sheet,
joint, several or individual, asserted or unasserted, accrued or
unaccrued, known or unknown, whenever arising, including those
arising under or in connection with any Law, or other
pronouncements of Governmental Authorities constituting an Action,
order or consent decree of any Governmental Authority or any award
of any arbitration tribunal, and those arising under any contract,
guarantee, commitment or undertaking, whether sought to be imposed
by a Governmental Authority, private party, or a Party, whether
based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute, or otherwise, and including
any costs, expenses, interest, attorneys’ fees, disbursements
and expense of counsel, expert and consulting fees, fees of third
party administrators, and costs related thereto or to the
investigation or defense thereof.
“Loss” means any claim,
demand, complaint, damages, loss, liability, cost or expense
arising out of, relating to or in connection with any
Action.
“Lottery” has the meaning
assigned to such term in the Preamble hereto.
“Lottery Assets” means,
without duplication:
(i)
all of the outstanding shares of all
classes of capital stock of Lottery Subsidiaries owned (either of
record or beneficially) by Lottery, as of the Effective
Time;
(ii)
all of the Assets included on the
unaudited interim consolidated balance sheet of Lottery, including
the notes thereto, as of December 31, 2005 (the “Balance
Sheet”) to the extent such Assets would have been included
as
5
Assets on a consolidated balance sheet of
Lottery, and the notes thereto, as of the Effective Time (were such
balance sheet and notes to be prepared) on a basis consistent with
the determination of Assets included on the Balance
Sheet;
(iii)
all other Assets that are of a nature or
type that would have resulted in such Assets being included as
Assets on a consolidated balance sheet of Lottery, and the notes
thereto, as of the Effective Time (were such balance sheet and
notes to be prepared) on a basis consistent with the determination
of Assets included on the Balance Sheet;
(iv)
the Assets expressly contributed,
assigned, transferred, conveyed or delivered to Lottery pursuant to
the Ancillary Agreements;
(v)
the contract rights, licenses, Trade
Secrets, know-how, and any other rights and Intellectual Property,
and any other rights, claims or properties (including any and all
rights as an insured party under any Games insurance policy), in
each case of Lottery and as of the Effective Time; and
(vi)
all other Assets that are held by Lottery
and that are used or held primarily for use in or necessary to the
operation of the Lottery Business.
“Lottery Business” means the
business and operations conducted by the Lottery Group from time to
time, whether prior to, at or after the Effective Time, including
the business and operations conducted by the Lottery Group, as more
fully described in the Information Statement.
“Lottery Common Stock” has
the meaning assigned to such term in the Recitals
hereto.
“Lottery Group” means Lottery
and each of its Subsidiaries and Affiliates and any corporation or
entity that may become part of such Group from time to
time.
“Lottery Indemnified Parties”
has the meaning assigned to such term in Section 4.3.
“Lottery Liabilities” means,
without duplication:
(vii)
all outstanding Liabilities included on
the Balance Sheet, to the extent such Liabilities would have been
included on a consolidated balance sheet of Lottery, and the notes
thereto, as of the Effective Time (were such balance sheet and
notes to be prepared) on a basis consistent with the determination
of Liabilities included on the Balance Sheet;
(viii)
all other Liabilities that are of a
nature or type that would have resulted in such Liabilities being
included as Liabilities on a consolidated balance sheet of Lottery,
and the notes thereto, as of the Effective Time (were such balance
sheet and notes to be prepared) on a basis consistent with the
determination of Liabilities included on the Balance
Sheet;
6
(ix)
all Liabilities expressly assumed by
Lottery pursuant to the Ancillary Agreements; and
(x)
all Liabilities to the extent relating
to, arising out of or resulting from actions, inactions, events,
omissions, conditions, facts or circumstances occurring or existing
prior to, at or after the Effective Time, in each case to the
extent such Liabilities relate to, arise out of or result from any
Lottery Asset or the Lottery Business.
“Mixed Account” has the
meaning assigned to such term in Section 2.3(g)(ii).
“Mixed Contract” has the
meaning assigned to such term in Section 2.3(g)(i).
“Parties” has the meaning
assigned to such term in the Preamble hereto.
“Person” means any natural
person, corporation, general or limited partnership, limited
liability company or partnership, joint stock company, joint
venture, association, trust, bank, trust company, land trust,
business trust or other organization, whether or not a legal
entity, and any Governmental Authority.
“Policies” has the meaning
assigned to such term in Section 5.5(d).
“Recapitalization” has the
meaning assigned to such term in Section 2.1(a).
“Record Date” means the date
to be determined by the Board of Directors of Games as the record
date for determining shareholders of Games entitled to receive
shares of Lottery Common Stock pursuant to the
Distribution.
“Reimbursable Expenses” means
the costs and expenses incurred by Games or Lottery, as the case
may be, that are set forth on Schedule 9.2 hereof.
“Reimbursing Party” has the
meaning assigned to such term in Section 9.2.
“Related Claims” means a
claim or claims against an Games insurance policy made by each of
Games and/or its insured parties, on the one hand, or Lottery
and/or its insured parties, on the other hand, filed in connection
with Losses suffered by each of Games and Lottery arising out of
the same underlying transaction, transactions, event or
events.
“Release” has the meaning
assigned to such term in Section 5.5(d).
“SEC” means the United States
Securities and Exchange Commission.
“Securities Act” means the
Securities Act of 1933, as amended, together with the rules and
regulations promulgated thereunder.
“Securities Act Registration
Statement” means the registration statement on Form SB-2 (or
other appropriate form) of Lottery relating to the registration
under the Securities Act of Lottery Common Stock, including any
amendments or supplements thereto.
7
“Separation” has the meaning
assigned to such term in the Recitals hereto.
“Shared Employee” has the
meaning assigned to such term in Section 2.3(h).
“SOX” means the
Sarbanes-Oxley Act of 2002, as amended from time to
time.
“Subsidiary” means, with
respect to any Person, any other Person of which a Person (either
alone or through or together with any other Subsidiary of such
Person) owns, directly or indirectly, a majority of the stock or
other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other
governing body of such corporation or other legal
entity.
“Tax Allocation Agreement”
means the tax allocation agreement to be entered into by and
between Games and Lottery, substantially in the form attached
hereto as Exhibit A, with such changes as may be agreed to by
the Parties.
“Third-Party Claim” has the
meaning assigned to such term in Section 4.5(a).
“Transition Services
Agreement” means the transition services agreement to be
entered into by and between Games and Lottery, substantially in the
form attached hereto as Exhibit B, with such changes as may be
agreed to by the Parties.
“Unrelated Claims” means a
claim or claims against an Games insurance policy made by each of
Games and/or its insured parties, on the one hand, or Lottery
and/or its insured parties, on the other hand, filed in connection
with Losses suffered by each of Games and Lottery arising out of
unrelated and separate transactions or events.
Section
1.2
General Interpretive
Principles. Words in the
singular shall include the plural and vice versa, and words of one
gender shall include the other gender, in each case, as the context
requires. The words “hereof,”
“herein,” “hereunder,” and
“herewith” and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement and not
to any particular provision of this Agreement, and references to
Article, Section, paragraph, exhibit and schedule are references to
the Articles, Sections, paragraphs, exhibits and schedules to this
Agreement unless otherwise specified. The word
“including” and words of similar import when used in
this Agreement shall mean “including, without
limitation,” unless otherwise specified. Any reference
to any federal, state, local or non-U.S. statute or Law shall be
deemed to also refer to all rules and regulations promulgated
thereunder, unless the context otherwise requires.
ARTICLE II
THE RECAPITALIZATION AND
SEPARATION
Section
2.1
Recapitalization and Other
Transactions. On or
prior to the Distribution Date, and subject to satisfaction or
waiver of the conditions set forth in Section 2.4, the Lottery
Common Stock shall be recapitalized (the
“Recapitalization”) such that the number of shares of
Lottery Common Stock issued and outstanding and owned by Games
immediately prior to the Effective Time shall be in an amount
calculated on the basis of the following: one share of Lottery
Common Stock shall equal four shares of Games Common Stock issued
and outstanding immediately prior to the Distribution.
8
Section
2.2
Wood Loan.
On or prior to the Distribution Date,
Games and Lottery shall cause their joint loan documentation with
the lender, Frank E. Wood, to have been revised as necessary to
permit the Distribution.
Section
2.3
The Separation and Related
Transactions.
(a)
Immediate Separation
Transactions.
(i)
The Parties acknowledge that the
Separation, subject to the terms and conditions hereof and of the
Ancillary Agreements, will result in (A) Lottery directly or
indirectly operating the Lottery Group and the Lottery Business,
continuing to own the Lottery Assets and retaining and continuing
to be liable for the Lottery Liabilities and (B) Games directly or
indirectly operating the Games Group and the Games Business,
continuing to own the Games Assets and retaining and continuing to
be liable for the Games Liabilities.
(ii)
Pursuant to the Separation, Lottery, or a
member of the Lottery Group, shall remain and be the sole owner,
and shall have exclusive right, title and interest in and to, all
Lottery Assets. Concurrently therewith, Lottery shall remain solely
liable for and shall faithfully perform, fulfill and discharge
fully in due course all of the Lottery Liabilities in accordance
with their respective terms. Pursuant to the Separation, Games, or
a member of the Games Group, shall remain the sole owner, and shall
have exclusive right, title and interest in and to, all Games
Assets. Concurrently therewith, Games shall remain and be solely
liable for and shall faithfully perform, fulfill and discharge
fully in due course all of the Games Liabilities in accordance with
their respective terms. From and after the Effective Time, Lottery
or a member of the Lottery Group shall be solely responsible for
all Lottery Liabilities and Games or a member of the Games Group
shall be solely responsible for all Games Liabilities, regardless
of when or where such Liabilities arose or arise, or whether the
facts on which they are based occurred prior to, on or subsequent
to the Distribution Date, regardless of where or against whom such
Liabilities are asserted or determined (including any Liabilities
arising out of claims made by Games’ or Lottery’s
respective directors, officers, employees, agents, Subsidiaries or
Affiliates against any member of the Games Group or the Lottery
Group, as the case may be) or whether asserted or determined prior
to the date hereof, and regardless of whether arising from or
alleged to arise from negligence, recklessness, violation of Law,
fraud or misrepresentation by any member of the Games Group or the
Lottery Group or any of their respective directors, officers,
employees, agents, Subsidiaries or Affiliates, as the case may be.
Notwithstanding anything herein to the contrary, this Section
2.3(a)(ii) shall not apply to any Assets or Liabilities
contributed, assigned, transferred, conveyed, delivered and/or
assumed under any Ancillary Agreement, which shall be governed by
the terms thereof.
(iii)
Subject to any Ancillary Agreement and to
the extent that prior to the Effective Time, (A) Games owns or is
in possession of any Lottery Asset or Lottery owns or is in
possession of any Games Asset or (B) Games is liable to
any
9
third party for any Lottery Liability or
Lottery is liable to any third party for any Games Liability, Games
and Lottery shall, and shall cause the respective members of their
Groups to, cooperate and use their respective reasonable best
efforts to obtain the necessary Consents to, and shall, contribute,
assign, transfer, convey and/or deliver any Games Asset or Lottery
Asset, as the case may be, and/or assume any Games Liability or
Lottery Liability, as the case may be, such that, on or prior to
the Effective Time, Lottery or a member of the Lottery Group owns
and is in possession of the Lottery Assets and is solely liable for
the Lottery Liabilities and Games or a member of the Games Group
owns and is in possession of the Games Assets and is solely liable
for the Games Liabilities.
(b)
Delayed Transfer of Assets and/or
Liabilities. To the
extent that any assignment, transfer, conveyance, delivery or
assumption required pursuant to Section 2.3 shall not have been
consummated as of the Effective Time, whether by its terms or by
operation of Law (any such Asset and/or Liability, a “Delayed
Transfer Asset and/or Liability”) and subject to any
Ancillary Agreement: (i) Games and Lottery thereafter shall, and
shall cause the members of their respective Groups to, use
reasonable best efforts and cooperate to effect such assignment,
transfer, conveyance, delivery or assumption as promptly following
the Effective Time as shall be practicable; (ii) Games shall
thereafter, with respect to any such Lottery Asset, use reasonable
best efforts, with the costs of Games related thereto to be
promptly reimbursed by Lottery, to hold such Lottery Asset in trust
for the use and benefit of Lottery and, with respect to any such
Lottery Liability, retain such Lottery Liability for the account of
Lottery; and (iii) Lottery shall thereafter, with respect to any
such Games Asset, use reasonable best efforts, with the costs of
Lottery related thereto to be promptly reimbursed by Games, to hold
such Games Asset in trust for the use and benefit of Games and,
with respect to any such Games Liability, to retain such Games
Liability for the account of Games, in each case in order to place
each Party, insofar as is reasonably possible, in the same position
as would have existed had such Delayed Transfer Asset and/or
Liability been contributed, assigned, transferred, conveyed,
delivered or assumed as contemplated hereby (it being understood
that neither Games (with respect to any Lottery Asset or Lottery
Liability) nor Lottery (with respect to any Games Asset or Games
Liability) shall be required to take any action pursuant to this
clause that would, or could reasonably be expected to, result in
any financial obligation to it or any restriction on its business
or operations, except as may be required in any Ancillary
Agreement. To the extent that Lottery is provided the use or
benefit of any Lottery Asset or has any Lottery Liability held for
its account pursuant to this Section 2.3(b), Lottery shall perform,
for the benefit of Games and any third Person, the obligations of
Games thereunder or in connection therewith, or as may be directed
by Games and if Lottery shall fail to perform to the extent
required herein, Lottery shall hold Games harmless and indemnify
Games therefor. To the extent that Games is provided the use or
benefit of any Games Asset or has any Games Liability held for its
account pursuant to this Section 2.3(b), Games shall perform, for
the benefit of Lottery and any third Person, the obligations of
Lottery thereunder or in connection therewith, or as may be
directed by Lottery and if Games shall fail to perform to the
extent required herein, Games shall hold Lottery harmless and
indemnify Lottery therefor. Each Party shall, and/or shall cause
members of its Group to, as and when any such Delayed Transfer
Asset and/or Liability becomes contributable, assignable,
transferable, conveyable, deliverable or assumable by such Party,
effect such assignment, transfer, conveyance, delivery or
assumption, as applicable, as promptly as practicable
thereafter.
10
(c)
Assignment of Certain
Agreements. Subject
to the Ancillary Agreements and to Section 2.3(g) hereof, (i) Games
shall assign to Lottery all of its right, title and interest under
the agreements comprising Lottery Assets, as set forth on Schedule
2.3(c)(i) attached hereto, and (ii) Lottery shall assign to Games
all of its right, title and interest under the agreements
comprising Games Assets, as set forth on Schedule 2.3(c)(ii)
attached hereto, and each Party shall execute and deliver any and
all instruments of substitution and such other instruments or
agreements as shall be necessary in connection with the discharge
of the other Party from its respective obligations with respect to
such agreements.
(d)
Inter-Group
Indebtedness. The
Parties shall use their reasonable best efforts to settle all
amounts payable in connection with any Inter-Group Indebtedness on
or prior to the Distribution Date, but to the extent they are
unable to do so, any such Inter-Group Indebtedness shall remain
outstanding.
(e)
Guarantee
Obligations.
(i)
Games and Lottery shall cooperate, and
shall use their best efforts to cause their respective Groups to
cooperate, to terminate, or to cause a member of the Games Group to
be substituted in all respects for any member of the Lottery Group
in respect of, all obligations of such member of the Lottery Group
under any Games Liability for which such member of the Lottery
Group may be liable, as guarantor, original tenant, primary obligor
or otherwise. If such termination or substitution is not effected
by the Distribution Date, (A) Games shall indemnify and hold
harmless the Lottery Indemnified Party for any Liability arising
from or relating thereto and (B) without the prior written consent
of Lottery, from and after the Distribution Date, Games shall not,
and shall not permit any member of the Games Group or any of its
Affiliates to, amend, renew or extend the term of, increase its
obligations under, or transfer to a third Person, any loan, lease,
contract or other obligation for which any member of the Lottery
Group is or may be liable, unless all obligations of the Lottery
Group with respect thereto are thereupon terminated by
documentation reasonably satisfactory in form and substance to
Lottery; provided, that the limitations in clause (B) shall not
apply in the event that a member of the Games Group obtains a
letter of credit from a financial institution reasonably acceptable
to Lottery and for the benefit of any member of the Lottery Group
with respect to such obligation of the Lottery Group.
(ii)
Games and Lottery shall cooperate, and
shall use their best efforts to cause their respective Groups to
cooperate, to terminate, or to cause a member of the Lottery Group
to be substituted in all respects for any member of the Games Group
in respect of, all obligations of such member of the Games Group
under any Lottery Liability for which such member of the Games
Group may be liable, as guarantor, original tenant, primary obligor
or otherwise. If such termination or substitution is not effected
by the Distribution Date, (A) Lottery shall indemnify and hold
harmless the Games Indemnified Party for any Liability arising from
or relating thereto and (B) without the prior written consent of
Games, from and after the Distribution Date, Lottery shall not, and
shall not
11
permit any member of the Lottery Group
to, amend, renew or extend the term of, increase its obligations
under, or transfer to a third Person, any loan, lease, contract or
other obligation for which any member of the Games Group is or may
be liable, unless all obligations of the Games Group with respect
thereto are thereupon terminated by documentation reasonably
satisfactory in form and substance to Games; provided, that the
limitations in clause (B) shall not apply in the event that a
member of the Lottery Group obtains a letter of credit from a
financial institution reasonably acceptable to Games and for the
benefit of any member of the Games Group with respect to such
obligation of the Games Group.
(f)
Mixed Contracts; Mixed
Accounts.
(i)
Unless the Parties agree otherwise, any
agreement to which any member of the Games Group or the Lottery
Group is a party prior to the Effective Time that inures to the
benefit or burden of both of the Games Business and the Lottery
Business (a “Mixed Contract”) shall be assigned in part
to Lottery or one of its Subsidiaries, and/or to Games or one of
its Subsidiaries, as the case may be, if so assignable, prior to or
as of the Effective Time, such that each Party or its respective
Subsidiaries shall be entitled to the rights and benefits thereof
and shall assume the related portion of any obligations thereunder
and any Liabilities inuring to their respective Businesses;
provided, however, that in no event shall either Party be required
to assign any Mixed Contract in its entirety. If any Mixed Contract
cannot be so partially assigned, Games and Lottery shall, and shall
cause each of their respective Subsidiaries to, take such other
reasonable and permissible actions to cause: (A) the Assets
associated with that portion of each Mixed Contract that relates to
the Lottery Business to be enjoyed by Lottery or an Lottery
Subsidiary; (B) the Liabilities associated with that portion of
each Mixed Contract that relates to the Lottery Business to be
borne by Lottery or an Lottery Subsidiary; (C) the Assets
associated with that portion of each Mixed Contract that relates to
the Games Business to be enjoyed by Games or an Games Subsidiary;
and (D) the Liabilities associated with that portion of each Mixed
Contract that relates to the Games Business to be borne by Games or
an Games Subsidiary.
(ii)
Except as may otherwise be agreed by the
Parties, neither Party shall seek to assign any accounts receivable
or accounts payable relating to both the Games Business and the
Lottery Business (“Mixed Accounts”). Games and Lottery
shall, and shall cause each of their respective Subsidiaries to,
take such other reasonable and permissible actions to cause: (A)
the Assets associated with that portion of each Mixed Account that
relates to the Games Business to be enjoyed solely by Games or an
Games Subsidiary; (B) the Liabilities associated with that portion
of each Mixed Account that relates to the Games Business to be
borne solely by Games or an Games Subsidiary; (C) the Assets
associated with that portion of each Mixed Account that relates to
the Lottery Business to be enjoyed solely by Lottery or an Lottery
Subsidiary; and (D) the Liabilities associated with that portion of
each Mixed Account that relates to the Lottery Business to be borne
solely by Lottery or an Lottery Subsidiary.
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(iii)
Nothing in this Section 2.3(g) shall
require any member of either Group to make any payment, incur any
obligation or grant any concession to any third party in order to
effect any transaction contemplated by this Section
2.3(g).
(g)
Shared Employees.
Immediately prior to the Distribution
Date, (i) each Person who is an officer, director or employee of
any member of the Lottery Group and an officer, director or
employee of any member of the Games Group (a “Shared
Employee”) and who is to continue as an officer, director or
employee of any member of the Lottery Group after the Distribution
Date shall resign, effective at or prior to the Effective Time,
from each of such Person’s positions with each member of the
Games Group and (ii) each such Shared Employee who is to continue
as an officer, director or employee of any member of the Games
Group after the Distribution Date shall resign, effective at or
prior to the Effective Time, from each of such Person’s
positions with each member of the Lottery Group.
Section
2.4
Conditions Precedent to Consummation
of the Recapitalization and the Separation. The obligations of the Parties to consummate
each of the Recapitalization and the Separation is subject to the
prior or simultaneous satisfaction, or waiver by Games in its sole
and absolute discretion, of each of the following
conditions:
(a)
final approval of the Recapitalization
and the Separation shall have been given by the Board of Directors
of Games in its sole and absolute discretion; and
(b)
each of the conditions precedent to the
consummation of the Distribution set forth in Section 3.3 hereof
(other than Section 3.3(j)) shall have been satisfied or waived by
Games in its sole and absolute discretion.
Each of the foregoing conditions is for
the benefit of Games and Games may, in its sole and absolute
discretion, determine whether to waive any such condition. Any
determination made by Games prior to the Recapitalization or the
Separation concerning the satisfaction or waiver of any or all of
the conditions set forth in this Section 2.4 shall be conclusive
and binding on the Parties.
ARTICLE III
THE DISTRIBUTION
Section
3.1
Actions Prior to the
Distribution. Subject to
the satisfaction or waiver of the conditions set forth in Section
3.3, the actions set forth in this Section 3.1 shall be taken prior
to the Distribution Date.
(a)
The Board of Directors of Games shall
establish the Distribution Date and any ap
