-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lz8pPUfOKLIk2Sf8DdTyufgh/nlH84S+/w81lMgqQRYPG4FyLyyt0WXh2qP18dYn GbzXofh1Ev/xCZ77RynjEA== /in/edgar/work/20000915/0000912057-00-041599/0000912057-00-041599.txt : 20000923 0000912057-00-041599.hdr.sgml : 20000923 ACCESSION NUMBER: 0000912057-00-041599 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20000915 GROUP MEMBERS: C4S & CO., LLC GROUP MEMBERS: LOTTOMATICA S.P.A. GROUP MEMBERS: OLIVETTI INTERNATIONAL S.A. GROUP MEMBERS: OLIVETTI INTERNATIONAL SA GROUP MEMBERS: OLIVETTI S.P.A. GROUP MEMBERS: PECONIC FUND,LTD. GROUP MEMBERS: RAMIUS CAPITAL GROUP,LLC GROUP MEMBERS: RAMIUS SECURITIES,LLC GROUP MEMBERS: THE OAK FUND SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AUTOTOTE CORP CENTRAL INDEX KEY: 0000750004 STANDARD INDUSTRIAL CLASSIFICATION: [3578 ] IRS NUMBER: 810422894 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-36154 FILM NUMBER: 724045 BUSINESS ADDRESS: STREET 1: 750 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 3027374300 MAIL ADDRESS: STREET 1: 750 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TOTE INC DATE OF NAME CHANGE: 19920317 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: OLIVETTI INTERNATIONAL SA CENTRAL INDEX KEY: 0001123646 STANDARD INDUSTRIAL CLASSIFICATION: [ ] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: PO BOX 251 STREET 2: PAMBIO NORANCO CITY: SWITZERLAND 6915 STATE: V8 MAIL ADDRESS: STREET 1: PO BOX 251 STREET 2: PAMBIA NORANCO CITY: SWITZERLAND 6915 STATE: V8 SC 13D 1 a2025809zsc13d.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 Autotote Corporation (Name Of Issuer) ----------- CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE (Title of Class of Securities) [ ] (CUSIP Number of Class of Securities) ----------- LUCIANO LA NOCE NIELS HECK Olivetti International S.A. The Oak Fund 125 Avenue du X Septembre PO Box 31106 SMB, Corporate Center Luxembourg West Bay Road Grand Cayman, Cayman Islands (1-345) 949 3977 CORRADO ARIAUDO PETER A. COHEN Olivetti S.p.A. Ramius Securities, LLC, Ramius Capital Via Jervis, 77 Group, LLC, Peconic Fund, Ltd. 10015 Ivrea, Italy and C4S & Co., LLC 666 Third Avenue 26th Floor New York, NY 10017 (212) 845-7900 ROBERTO SGAMBATI ROBERTO SGAMBATI Lottomatica S.p.A. Cirmatica Gaming, S.A. Via di Porta Latina, 8 Rambla de Catalunya 16, 4E2a Rome, Italy 00179 Barcelona, Spain 08007 (011 39) 06 772 991 (011 34) 93 317 8300 copies to Michael S. Immordino David S. Allinson Latham & Watkins Latham & Watkins 99 Bishopsgate 885 Third Avenue London New York, NY 10021 EC2M 3XF (212) 906-1200 (011 44) 20 7710 1000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) SCHEDULE 13D _________________ Page 1 of 18 CUSIP NO. - -------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Cirmatica Gaming, S.A. - -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------- 4 SOURCES OF FUNDS AF WC - -------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - -------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Spain - -------------------------------------------------------------------------- 7 SOLE VOTING POWER 16,666,666 -------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY 1,666,667 (1,333,334 shares solely with OWNED BY respect to the designation and voting EACH of directors - See Item 5.) REPORTING -------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER 16,666,666 -------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------- Page 2 of 18 - -------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 18,333,333 Shares - -------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /X/ - -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 33.2% - -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------- SCHEDULE 13D _________________ Page 3 of 18 CUSIP NO. - -------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Lottomatica S.p.A. - -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------- 4 SOURCES OF FUNDS Not applicable - -------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - -------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Italy - -------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 -------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY 0 OWNED BY EACH -------------------------------------- REPORTING PERSON WITH 9 SOLE DISPOSITIVE POWER 0 -------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------- Page 4 of 18 - -------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 - -------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)EXCLUDES CERTAIN SHARES /X/ - -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0% - -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON HC - -------------------------------------------------------------------------- SCHEDULE 13D _________________ Page 5 of 18 CUSIP NO. - -------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Ramius Securities, LLC - -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------- 4 SOURCES OF FUNDS OO - -------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - -------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,070,233 -------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY 0 OWNED BY EACH -------------------------------------- REPORTING PERSON WITH 9 SOLE DISPOSITIVE POWER 1,070,233 -------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------- Page 6 of 18 - -------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,070,233 Shares - -------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)EXCLUDES CERTAIN SHARES /X/ - -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 2.9% - -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------- SCHEDULE 13D _________________ Page 7 of 18 CUSIP NO. - -------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Peconic Fund, Ltd. - -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------- 4 SOURCES OF FUNDS WC - -------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - -------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - -------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 -------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY 666,666 (solely with resepct to the OWNED BY designation and voting of directors - EACH See Item 5.) REPORTING PERSON WITH -------------------------------------- 9 SOLE DISPOSITIVE POWER 666,666 -------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------- Page 8 of 18 - -------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 666,666 Shares - -------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)EXCLUDES CERTAIN SHARES /X/ - -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 1.8% - -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------- SCHEDULE 13D _________________ Page 9 of 18 CUSIP NO. 8 - -------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Ramius Capital Group, LLC - -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------- 4 SOURCES OF FUNDS Not applicable - -------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - -------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 -------------------------------------- 8 SHARED VOTING POWER NUMBER OF 0 SHARES BENEFICIALLY OWNED BY EACH -------------------------------------- REPORTING PERSON WITH 9 SOLE DISPOSITIVE POWER 0 -------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------- Page 10 of 18 - -------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 Shares - -------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)EXCLUDES CERTAIN SHARES /X/ - -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0% - -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON HC, IA - -------------------------------------------------------------------------- SCHEDULE 13D _________________ Page 11 of 18 CUSIP NO. - -------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS C4S & Co., LLC - -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------- 4 SOURCES OF FUNDS Not applicable - -------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - -------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 -------------------------------------- 8 SHARED VOTING POWER NUMBER OF 0 SHARES BENEFICIALLY OWNED BY EACH -------------------------------------- REPORTING PERSON WITH 9 SOLE DISPOSITIVE POWER 0 -------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------- Page 12 of 18 - -------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 Shares - -------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)EXCLUDES CERTAIN SHARES /X/ - -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0% - -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON OO - -------------------------------------------------------------------------- SCHEDULE 13D _________________ Page 13 of 18 CUSIP NO. - -------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS The Oak Fund - -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------- 4 SOURCES OF FUNDS WC - -------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - -------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - -------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 -------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY 666,666 (solely with respect to the OWNED BY designation and voting of directors - EACH See Item 5.) REPORTING PERSON WITH -------------------------------------- 9 SOLE DISPOSITIVE POWER 666,666 -------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------- Page 14 of 18 - -------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 666,666 Shares - -------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /X/ - -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 1.8% - -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------- SCHEDULE 13D _________________ Page 15 of 18 CUSIP NO. - -------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Olivetti International S.A. - -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------- 4 SOURCES OF FUNDS WC - -------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - -------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Luxembourg - -------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 -------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY 333,333 OWNED BY EACH -------------------------------------- REPORTING PERSON WITH 9 SOLE DISPOSITIVE POWER 333,333 -------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------- Page 16 of 18 - -------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 333,333 Shares - -------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /X/ - -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.9% - -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------- SCHEDULE 13D _________________ Page 17 of 18 CUSIP NO. - -------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Olivetti S.p.A. - -------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------- 4 SOURCES OF FUNDS WC - -------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - -------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Luxembourg - -------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 -------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY 0 OWNED BY EACH -------------------------------------- REPORTING PERSON WITH 9 SOLE DISPOSITIVE POWER 0 -------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------- Page 18 of 18 - -------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 Shares - -------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES /X/ - -------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0% - -------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER This Statement on Schedule 13D (this "Schedule 13D") relates to the Class A Common Stock, par value $0.01 per share ("Common Stock"), of Autotote Corporation, a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 750 Lexington Avenue, 25th Floor, New York, New York 10022. ITEM 2. IDENTITY AND BACKGROUND This Schedule 13D is being filed jointly by: (1) Cirmatica Gaming S.A., a company incorporated under the laws of Spain ("Cirmatica"); (2) Lottomatica S.p.A., a company incorporated under the laws of Italy ("Lottomatica"); (3) Ramius Securities, LLC, a limited liability company incorporated under the laws of Delaware ("Ramius Securities"); (4) Peconic Fund Ltd., a Cayman Islands exempted company ("Peconic"); (5) Ramius Capital Group, LLC, a limited liability company incorporated under the laws of Delaware ("Ramius Capital"); (6) C4S & Co., LLC a limited liability company incorporated under the laws of Delaware ("C4S & Co.") (7) The Oak Fund, a Cayman Islands exempted company ("Oak"); (8) Olivetti International S.A., a company incorporated under the laws of Luxembourg ("Olivetti International"); and (9) Olivetti S.p.A., a limited liability company organized under the laws of Italy ("Olivetti") (Each of the foregoing shall be known, individually, as a "Reporting Person" and, collectively, as the "Reporting Persons"). Olivetti is a conglomerate operating through its affiliates and subsidiaries in the electronics, information technology and telecommunication fields. The principal executive offices of Olivetti are located at the Via Jervis, 77, 10015 Ivrea, Italy. Olivetti International, a wholly owned subsidiary of Olivetti, is engaged in holding investments in subsidiaries and affiliated companies providing finance and guarantees to group affiliates and managing other investments and cash funds. The principal executive offices of Olivetti International are located at 125 Avenue du X Septembre, Luxembourg. Lottomatica is a privately held Italian company whose primary business is managing the Italian national lottery under the supervision of the Italian Ministry of Finance. Olivetti directly owns 18%, and through one of its subsidiaries owns 1.09%, of the shares of Lottomatica and Telecom Italia S.p.A, through a number of subsidiaries and affiliates, owns 19.7% of the shares of Lottomatica. Olivetti, through one of its subsidiaries, owns 39.50% of the shares in Telecom Italia S.p.A. The principal executive offices of Lottomatica are located at Via di Porta Latina, 8, Rome 00179, Italy. Cirmatica, a wholly owned subsidiary of Lottomatica, has been newly formed to hold and control Lottomatica's investment in the Issuer. Cirmatica has not carried on any significant activities other than in connection with purchasing shares of Series A Convertible Preferred Stock, par value $1.00 per share (the "Preferred Stock"), of the Issuer as described in Item 4 of this Schedule 13D. The principal executive offices of Cirmatica are located at Rambla De Catalunya 16, 4E2a, Barcelona, Spain. Peconic is principally engaged in the business of investing in securities. The principal business of Ramius Capital is performing the functions of, and serving as an advisor to, Peconic. The principal business of CS4 & Co. is performing the functions, and serving as the managing member, of Ramius Capital. The principal business of Ramius Securities is investing in securities and Ramius Securities is a wholly owned subsidiary of Ramius Capital. The principal business offices of Peconic, Ramius Capital, Ramius Securities and CS4 & Co. are at 666 Third Avenue, 26th Floor, New York, NY 10017. Oak is principally engaged in the business of investing in securities. The principal business office of Oak is P.O. Box 31106 SMB, Corporate Center, West Bay Road, Grand Cayman, Cayman Islands. (i) Schedule 1 attached to this Schedule 13D contains the following information concerning the directors, executive officers or managing members (as appropriate) of each Reporting Person: (i) name; (ii) citizenship; (iii) principal business occupation or employment and (iv) the home address or the name, principal business and address of any corporation or other organization in which such employment is conducted. Schedule 1 is incorporated herein by reference. 2 During the last five years, except as reported below, none of the Reporting Persons or, to the best of their knowledge, any of their respective executive officers, directors or managing members (as appropriate) (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); or (ii) has been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceedings was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. In March 1999, proceedings were taken under Italian law against Corrado Ariaudo, a director of Lottomatica, for failure to make accurate disclosures in Olivetti S.p.A's 1995 financial statements and 1996 first half financial report. At a preliminary hearing in the Court of Ivrea, Italy, Mr. Ariaudo was fined U.S.$15,158. Olivetti was fined Lire 100 million by the Italian Treasury Ministry for Olivetti's delay of 24 hours in meeting its obligation to notify Consob (the Italian equivalent of the Securities and Exchange Commission) of the sale by it of 24,405,000 shares of Telecom Italia S.p.A. The Court of Appeal has upheld this decision and Olivetti is considering a further appeal. Mr. Antonio Tesone, as Chairman and legal representative of Olivetti, is jointly liable for such fine. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Each of Oak, Peconic and Olivetti International funded its purchase of Preferred Stock as described in Item 5 from working capital. Cirmatica, which was formed for the purpose of holding shares of Preferred Stock as described in Item 5, received a $50,000,000 capital contribution from Lottomatica and borrowed $50,000,000 from Olivetti pursuant to an oral agreement whereby Cirmatica is obligated to pay the principal amount of the loan plus interest at a rate equal to the applicable EURIBOR rate plus 2% at the end of one year from the date the loan was made. Lottomatica and Olivetti provided such funds from working capital. ITEM 4. PURPOSE OF THE TRANSACTION Simultaneously with the completion of the Issuer's acquisition of Scientific Games Holding Corp., a Delaware corporation, on September 6, 2000, the Issuer sold an aggregate of 1,127,500 shares of Preferred Stock to Cirmatica, Oak, Peconic, Ramius Securities and Olivetti International (collectively, the "Purchasers") (of which Ramius Securities received 27,500 in respect of the payment of a placement agent fee). See Item 5 for details regarding the number of shares of Preferred Stock acquired by each Purchaser. The Issuer used most of the proceeds received in the sale of the Preferred Stock to repurchase certain of its existing subordinated debt. 3 The Purchasers acquired the Preferred Stock as an investment and to obtain a voice in the management of the Issuer through minority representation on the Issuer's Board of Directors. 4 Immediately after the Purchasers acquired the Preferred Stock in accordance with the rights granted to the Purchasers in the Certificate of Designations and the Stockholders' Agreement as more fully described in Item 6, the size of the Issuer's Board of Directors was increased to 10 directors and four representatives of the Purchasers -- Peter A. Cohen, Luciano La Noce, Roberto Sgambati and Michael S. Immordino -- were appointed as directors. The Purchasers have, collectively, been granted the right to elect or, upon conversion of the Preferred Stock into Common Stock, designate for election, up to four members to the Issuer's Board of Directors. See Item 6 for a description of the Purchasers' rights to elect or designate, as the case may be, members to the Board of Directors of the Issuer depending on the percentage of shares of Common Stock beneficially owned by the Purchasers. The foregoing descriptions do not purport to be complete and are qualified in their entirety by reference to the Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of the Series A Convertible Preferred Stock (the "Certificate of Designations"), the Preferred Stock Purchase Agreement, dated as of September 6, 2000, by and among the Purchasers and the Issuer (the "Stock Purchase Agreement"), the Stockholders' Agreement, dated as of September 6, 2000, by and among the Purchasers and the Issuer (the "Stockholders' Agreement"), and the Voting Agreement, dated as of September 6, 2000 (the "Voting Agreement"), by and among the Purchasers (other than Ramius Securities), a copy of each of which has been filed as an exhibit to this Schedule 13D and is incorporated herein by reference. Except as described herein or as contemplated pursuant to an agreement between Peconic and a third party dated September 6, 2000 whereby such third party will purchase all of the Preferred Stock held by Peconic in one or more closings prior to September 6, 2001, none of the Reporting Persons currently has (i) any plans to dispose of shares of Preferred Stock or shares of Common Stock into which the shares of Preferred Stock are convertible, (ii) any intention of acquiring additional shares of Preferred Stock (other than through in-kind dividends) or Common Stock (other than through the conversion of Preferred Stock or the exercise of pre-emptive or other rights under the agreements described in Item 6), or (iii) any plans or proposals which relate to or would result in (a) the acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer, (b) an extraordinary corporate transaction, (c) a sale or transfer of a material amount of the assets of the Issuer or any of its subsidiaries, (d) any change in the present management of the Issuer, (e) any material change in the present capitalization or dividend policy of the Issuer, (f) any other material change in the Issuer's business or corporate structure, (g) any other material change in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person, (h) causing a class of securities of the Issuer to be delisted from a national securities association, (i) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, or (j) any action similar to any of those enumerated in (a) through (i) above. Notwithstanding the foregoing, each of the Reporting Persons retains its right to (a) vote the Preferred Stock and elect or designate directors to the Issuer's Board of Directors as described in Item 6 (subject to the terms of the Voting Agreement), (b) change its investment intent, (c) propose one or more possible transactions to the Issuer's Board of Directors, and (d) acquire additional shares of Preferred Stock or Common Stock from time to time or to sell or otherwise dispose of all or part of the Preferred Stock (or any shares of Common Stock into which the Preferred Stock 5 is converted) beneficially owned by it in any manner permitted by law and the agreements described in Item 6. In reaching any decision as to its course of action, each Reporting Person currently expects that it would take into consideration a variety of factors, including, but not limited to, the following: the Issuer's business and prospects; other developments concerning the Issuer and its business generally; other business opportunities available to such Reporting Person; developments with respect to the business of such Reporting Person; changes in law and government regulations; general economic conditions; and money and stock market conditions, including the market price of the securities of the Issuer. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) and (b) As of September 14, 2000, there were then issued and outstanding 36,909,292 shares of Common Stock of the Issuer, as disclosed by the Issuer in its Quarterly Report to Form 10-Q filed on such date. On September 6, 2000, the Purchasers (other than Ramius Securities) acquired, for an aggregate purchase price of $110,000,000, a total of 1,100,000 shares of Preferred Stock. Olivetti International purchased 20,000 shares of Preferred Stock for an aggregate purchase price of $2,000,000 ($650,000 of which was credited to Olivetti as payment for certain transaction expenses), Cirmatica purchased 1,000,000 shares of Preferred Stock for an aggregate purchase price of $100,000,000, Oak purchased 40,000 shares of Preferred Stock for an aggregate purchase price of $4,000,000 and Peconic purchased 40,000 shares of Preferred Stock for an aggregate purchase price of $4,000,000. Also on September 6, 2000, Ramius Securities received 27,500 shares of Preferred Stock with an aggregate value of $2,750,000 6 as partial payment of a placement agent fee payable by the Issuer equal to 5% of the gross proceeds received by the Issuer in respect of the sale of Preferred Stock to the Purchasers pursuant to the Stock Purchase Agreement. The shares of Preferred Stock referred to above and recorded as owned by Olivetti International, Cirmatica, Oak and Peconic, together with any shares of Common Stock issued on the conversion of any such shares of Preferred Stock (the "Voting Agreement Stock"), are subject to the Voting Agreement as more fully described in Item 6 below and herein incorporated by reference. By virtue of the voting arrangements set forth in the Voting Agreement, the parties have agreed to vote the Voting Agreement Stock as directed by Cirmatica with respect to designating, and voting for, the persons who shall be elected to the Issuer's Board of Directors pursuant to the Certificate of Designations and the Stockholders' Agreement. Under the Voting Agreement, Olivetti International also agreed to vote all the shares of Preferred Stock owned by it (including all shares of Common Stock issued on the conversion of such Preferred Stock) as directed by Cirmatica on all voting matters relating to the Issuer in which Olivetti International has the right to vote. As a result of these voting arrangements, Cirmatica, and Lottomatica, as the sole shareholder of Cirmatica, may be deemed to beneficially own the Voting Agreement Stock which represents 33.2% of the outstanding Common Stock (assuming conversion of 1,100,000 shares of the Preferred Stock held by the parties to the Voting Agreement). Lottomatica hereby disclaims beneficial ownership of the Voting Agreement Stock and this Schedule 13D shall not be construed as an admission that Lottomatica is the beneficial owner of the Voting Agreement Stock. In addition to its beneficial ownership of the Voting Agreement Stock as described above, Cirmatica is the record owner of 1,000,000 shares of Preferred Stock. Assuming the conversion of all of its Preferred Stock as of the date hereof, Cirmatica would own in the aggregate 16,666,666 shares of Common Stock of the Issuer, representing approximately 31.1% of the outstanding Common Stock of the Issuer (the "Cirmatica Common Stock"). Cirmatica has the sole power to vote or to direct the voting of the Cirmatica Common Stock on all matters and has the sole power to dispose or to direct the disposition of, the Cirmatica Common Stock. Because Lottomatica is the sole shareholder of Cirmatica, Lottomatica may be deemed to beneficially own the Cirmatica Common Stock. Lottomatica disclaims beneficial ownership of the Cirmatica Common Stock reported herein and this Schedule 13D shall not be construed as an admission that Lottomatica is the beneficial owner of the Cirmatica Common Stock. 7 Ramius Securities is the record owner of 27,500 shares of Preferred Stock. Ramius Securities also owns 172,600 shares of Common Stock. Assuming the conversion of all of its Preferred Stock as of the date hereof, Ramius Securities would own in the aggregate 630,933 shares of Common Stock of the Issuer, representing approximately 1.7% of the outstanding Common Stock of the Issuer (the "Ramius Securities Common Stock"). Ramius Securities has the sole power to vote and to dispose of the Ramius Securities Common Stock. Because Ramius Capital is the sole shareholder of Ramius Securities and C4S & Co. is the managing member of Ramius Capital, each of Ramius Capital and C4S & Co. may be deemed to beneficially own the Ramius Securities Common Stock. Each of Ramius Capital and C4S & Co. disclaim beneficial ownership of the Ramius Securities Common Stock reported herein and this Schedule 13D shall not be construed as an admission that either Ramius Capital or C4S & Co. is the beneficial owner of the Ramius Capital Common Stock. In addition, Ramius Securities, acting in its capacity as an investment advisor to certain third parties, has the sole power to vote, or direct the voting of, and the sole power to dispose, or direct the disposition of, 439,300 shares of Common Stock of which Ramius Securities is not the record owner (the "Investment Advisor Common Stock"). Ramius Capital, as the sole shareholder of Ramius Securities, and C4S & Co., as the managing member of Ramius Capital, may be deemed to beneficially own the Investment Advisor Common Stock. Each of Ramius Capital and C4S & Co. disclaims beneficial ownership of the Investment Advisor Common Stock reported herein and this Schedule 13D shall not be construed as an admission that either Ramius Capital or C4S & Co. is the beneficial owner of the Investment Advisor Common Stock. Peconic is the record owner of 40,000 shares of Preferred Stock. Assuming the conversion of all of its Preferred Stock as of the date hereof, Peconic would own in the aggregate 666,666 shares of Common Stock of the Issuer, representing approximately 1.8% of the outstanding Common Stock of the Issuer (the "Peconic Common Stock"). As described above and solely with respect to designating, and voting for, the persons who shall be elected to the Issuer's Board of Directors, Cirmatica has, by contract, the sole power to direct the voting of the Peconic Common Stock. On all other matters, Peconic has the sole power to vote, or to direct the voting of, the Peconic Common Stock and has the sole power to dispose, or direct the disposition of, the Peconic Common Stock. Because Ramius Capital is the investment advisor to Peconic and C4S & Co. is the managing member of Ramius Capital, each of Ramius Capital 8 and C4S & Co. may be deemed to beneficially own the Peconic Common Stock. Each of Ramius Capital and C4S & Co. disclaim beneficial ownership of the Peconic Common Stock reported herein and this Statement shall not be construed as an admission that either Ramius Capital or C4S & Co. is the beneficial owner of the Peconic Common Stock. Oak is the record owner of 40,000 shares of Preferred Stock. Assuming the conversion of all of its Preferred Stock as of the date hereof, Oak would own in the aggregate 666,666 shares of Common Stock of the Issuer, representing approximately 1.8% of the outstanding Common Stock of the Issuer (the "Oak Common Stock"). As described above and solely with respect to designating, and voting for, the persons who shall be elected to the Issuer's Board of Directors, Cirmatica has, by contract, the sole power to direct the voting of the Oak Common Stock. On all other matters, Oak has the sole power to vote, or to direct the voting of, the Oak Common Stock and has the sole power to dispose, or direct the disposition of, the Oak Common Stock. Olivetti International is the record owner of 20,000 shares of Preferred Stock. Assuming the conversion of all of its Preferred Stock as of the date hereof, Olivetti International would own in the aggregate 333,333 shares of Common Stock of the Issuer, representing approximately 0.9% of the outstanding Common Stock of the Issuer ("Olivetti International Common Stock"). As described above, Cirmatica has, by contract, the sole power to direct the voting of the Olivetti International Common Stock with respect to all matters concerning the Issuer in which Olivetti International is entitled to vote. Olivetti International has the sole power to dispose, or to direct the disposition, of the Olivetti International Common Stock. As a result, Olivetti, as the sole shareholder of Olivetti International, may be deemed to beneficially own the Olivetti International Common Stock. Olivetti disclaims beneficial ownership of the Olivetti International Common Stock reported herein and this Schedule 13D shall not be construed as an admission that Olivetti is the beneficial owner of the Olivetti International Common Stock. Other than each Purchaser's ownership of Preferred Stock and Ramius Securities' ownership of 172,600 shares of Common Stock, together with its beneficial ownership of 439,900 shares of Common Stock by virtue of its capacity as an investment advisor to certain third parties, each as described herein, each Reporting Party hereby disclaims beneficial ownership of the Issuer's Common Stock reported herein and the filing of this Schedule 13D shall not be 9 construed as an admission that any such Reporting Person is the beneficial owner of any securities covered by this Schedule 13D. Except for the purchases of Preferred Stock as described herein, none of the Reporting Persons nor, to the best of their knowledge, any of their respective directors, executive officers or managing members (as appropriate) has effected any transaction involving the Issuer's Common Stock during the last 60 days. (d) and (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The responses to Items 4 and 5 and Exhibits 1, 2, 3, 4, & 5 of this Schedule 13D are herein incorporated by reference. PREFERRED STOCK PURCHASE AGREEMENT Pursuant to the Stock Purchase Agreement the Issuer made certain customary representations and warranties relating to, among other things, the Preferred Stock and the condition of the Issuer's business. The Stock Purchase Agreement provides that the Issuer shall indemnify each of the Purchasers and their respective affiliates, directors, shareholders, officers, employees and agents from and against all damages (including reasonable attorneys fees) arising out of a breach of (i) any representation or warranty relating to the due organization, authority and capitalization of the Issuer, the existence of certain exemptions applicable to Olivetti, Cirmatica, Lottomatica and their respective affiliates under the change of control provisions contained in the Issuer's employee severance agreements, and the accuracy of information provided to the Purchasers, or (ii) covenants made by the Issuer in the Stock Purchase Agreement and the other transaction documents. The foregoing description of the Stock Purchase Agreement is not, and does not purport to be, complete and is qualified in its entirety by reference to the Stock Purchase Agreement, a copy of which is filed herewith as Exhibit 2. CERTIFICATE OF DESIGNATIONS Each share of Preferred Stock is convertible (at the option of the holder thereof) at any time into the number of fully paid and nonassessable shares of Common Stock calculated by dividing the Liquidation Preference (as defined below) by $6.00 (the "Conversion Price"), such Conversion Price to be adjusted in certain circumstances as provided for in the Certificate of Designations. The Preferred Stock, with respect to payment of dividends, redemption payments and rights upon liquidation, dissolution or winding up the affairs of the Issuer, ranks senior and prior to the Common Stock and any other class or series of capital stock of the Company which by its terms ranks junior to the Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Issuer, the holders of the Preferred Stock will be entitled to receive $100.00 per share (the "Liquidation Preference") plus all accrued and unpaid dividends prior to the payment date. The holders of Preferred Stock will receive cumulative dividends at the annual rate of 6% of the sum of (x) the Liquidation Preference and (y) all unpaid dividends, if any, whether or not declared, from the date of issuance of Preferred Stock to the applicable dividend payment date. Dividends will be payable in additional shares of Preferred Stock or, at the Issuer's option beginning on September 30, 2002, in cash. In the event the Issuer pays cash dividends on any of its capital stock, the holders of Preferred Stock will be entitled to receive any such cash dividends as if the holders converted all of their Preferred Stock into Common Stock pursuant to the Certificate of Designations. From and after September 1, 2003, the Issuer at its option, may redeem all but not less than all of the shares of Preferred Stock, at the redemption price of 105% of the Liquidation Preference thereof, plus an amount equal to the unpaid dividends thereon, if the Current Market Price (as defined in the Certificate of Designations) of the Common Stock exceeds $10.00 per share and the Issuer has filed a registration statement covering the shares of Common Stock underlying the Preferred Stock which has been effective for at least 180 days. Holders of shares of Preferred Stock are entitled to vote together as a single class with the holders of shares of Common Stock on all matters as to which holders of shares of Common Stock are entitled to vote. In such instances, each share of Preferred Stock will vote on an "as converted" basis, using the Conversion Price then in effect. Pursuant to the Certificate of Designations, holders of shares of Preferred Stock voting together as a single class are entitled to elect: 4 of the Issuer's directors so long as the Purchasers collectively own more than 25% of the 10 outstanding shares of Common Stock (counting the Preferred Stock on an as converted basis); 3 of the Issuer's directors so long as the Purchasers collectively own more than 20% of the outstanding shares of Common Stock (counting the Preferred Stock on an as converted basis); 2 of the Issuer's directors so long as the Purchaser collectively own more than 10% of the outstanding Common Stock (counting the Preferred Stock on an as converted basis); and 1 of the Issuers directors so long as the Purchasers collectively own 5% of the outstanding Common Stock (counting the Preferred Stock on an as converted basis). In addition, if the Issuer fails to pay dividends on the Preferred Stock in accordance with the Certificate of Designations or fails to provide for the election of directors as specified in the Certificate of Designations, the number of directors of the Issuer's Board of Directors will be increased by 3 and the Purchasers will be entitled to elect such additional directors to serve on the Issuer's Board of Directors. When the failure to pay such dividends on the Preferred Stock or to provide for such election of directors is cured, then the rights of the Purchasers to elect such additional directors will cease, and the term of office of any person elected as an additional director will terminate and the number of the Issuer's Board of Directors will be reduced accordingly. The Certificate of Designations also provides that the Issuer shall need the consent of the holders of shares of Preferred Stock that own more than 50% of the then outstanding shares of Preferred Stock to effect any of the following: (i) any amendment, alteration or repeal of any provision of the Certificate of Designations; (ii) any amendment, alteration or repeal to any provision of the Certificate of Incorporation of the Issuer that could adversely affect the preferences, rights or powers of the Preferred Stock; (iii) any authorization, issuance or creation of any class or series of capital stock of the Issuer; (iv) any increase in size of the Board of Directors of Issuer (except in accordance with the Certificate of Designations or the Stockholders' Agreement; (v) any change in State of incorporation of the Issuer; (vi) any delisting of the Issuer's Common Stock from the American Stock Exchange or listing of Common Stock on a different exchange or national quotation system; and (vii) any decision, commitment or other arrangement to effect any of the foregoing. The foregoing description does not purport to be complete and is qualified in its entirely by reference to the Certificate of Designations, a copy of which is filed as Exhibit 3 to this Schedule 13D and is incorporated herein by reference. STOCKHOLDERS' AGREEMENT 11 The Stockholders' Agreement provides, among other things, that the Purchasers shall have the right under certain circumstances in connection with new issuances of securities by the Issuer to purchase a number of such securities from the Issuer necessary to maintain such Purchaser's percentage ownership interest in the Issuer. These rights to purchase additional securities of the Issuer will terminate upon the earliest to occur of (a) September 6, 2004 (b) the date on which all of the Preferred Stock is redeemed by the Issuer in accordance with the Certificate of Designations and (c) the date on which the Preferred Stock is automatically converted into shares of Common Stock in accordance with the Certificate of Designations. Each of the Purchasers shall have a right of over-allotment whereby if any Purchaser fails to purchase securities of the Issuer to which it is entitled, each other Purchaser shall have the right to purchase some of the non-purchasing Purchaser's portion of such securities on a pro rata basis. The Stockholders' Agreement further provides that Olivetti International and Cirmatica and their permitted assigns shall be subject to certain standstill provisions that generally prohibit them from acquiring until September 6, 2004 beneficial ownership of any equity interest of the Issuer which, together with any equity interest of the Issuer beneficially owned by them would equal more than 45% of the then outstanding shares of Common Stock of the Issuer or securities convertible into Common Stock of the Issuer on a fully diluted basis. Under the Stockholders' Agreement, Olivetti International, Cirmatica and their permitted assigns will also be prohibited from soliciting proxies with respect to the Issuer until September 6, 2003. In addition, the Stockholders' Agreement provides that, subject to the provisions of the Certificate of Designations, the Board of Directors of the Issuer shall consist of ten directors and that the Purchasers shall have the right to designate and have appointed: (A) 4 directors minus the number of directors that the Purchasers are entitled to elect as a single class pursuant to the Certificate of Designations, provided that the Purchasers beneficially own in aggregate at least 25% of the outstanding shares Common Stock of the Issuer on a fully diluted basis (counting the Preferred Stock on an as converted basis); (B) 3 directors minus the number of directors that the Purchasers are entitled to elect as a single class pursuant to the Certificate of Designations, provided that the Purchasers beneficially own in aggregate at least 20% of the outstanding shares Common Stock of the Issuer on a fully diluted basis (counting the Preferred Stock on an as converted basis); (C) 2 directors minus the number of directors that the Purchasers are entitled to elect as a single class pursuant to the Certificate of Designations, provided that the Purchasers beneficially own in aggregate at least 10% of the outstanding shares Common Stock of the Issuer on a fully diluted basis (counting the 12 Preferred Stock on an as converted basis); and (D) 1 director minus the number of directors that the Purchasers are entitled to elect as a single class pursuant to the Certificate of Designations, provided that the Purchasers beneficially own in aggregate at least 5% of the outstanding shares Common Stock of the Issuer on a fully diluted basis (counting the Preferred Stock on an as converted basis). If the Issuer fails to comply with these provisions, then for as long as the failure continues, the number of directors on the Board shall be increased by 3 and the Purchasers shall have the right to designate and have elected 3 additional directors to the Board regardless of the number of shares of Common Stock or Preferred Stock held by them. Pursuant to the Stockholders' Agreement, immediately after the closing of the purchase of the Preferred Stock, Messrs Luciano La Noce, Peter Cohen, Roberto Sgambati and Michael Immordino, the representatives of the Purchasers, were appointed as directors of the Issuer. The Stockholders' Agreement further provides that as long as the Purchasers beneficially own in aggregate at least 10% of the outstanding shares of Common Stock of the Issuer on a fully diluted basis (counting the Preferred Stock on an as converted basis), the consent of the Purchasers holding at least 50% of the shares of Common Stock issued or issuable upon conversion of the Preferred Stock shall be necessary for authorizing, effecting and validating (i) any amendment, alteration or repeal of any provision of the Certificate of Designations; (ii) any amendment, alteration or repeal to any provision of the Certificate of Incorporation of the Issuer that could adversely affect the preferences, rights or powers of the Preferred Stock; (iii) any authorization, issuance or creation of any class or series of capital stock of the Issuer; (iv) any increase in size of the Board of Directors of Issuer (except in accordance with the Certificate of Designations or the Stockholders' Agreement); (v) any change in the State of incorporation of Issuer; (vi) any delisting of Issuer's Common Stock from the American Stock Exchange or listing of Common Stock on a different exchange or national quotation system; and (vii) any decision, commitment or other arrangement to effect any of the foregoing. Under the Stockholders' Agreement, the Issuer has agreed to effect "demand" registrations at any time upon the request of any of the Purchasers or any other person holding Registrable Securities (as defined in the Stockholders' Agreement), including registrations made on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"), for an offering on a delayed or continuous basis pursuant to Rule 415 under the Securities Act. There is no limit on the number of "demand" registrations or Form S-3 registrations that may be requested. The Stockholders' Agreement further provides that, subject to certain limitations, the Purchasers may include their Registrable Securities in any registration of stock by the Issuer under the Securities Act. 13 Under the Stockholders' Agreement, the Issuer is required to pay all registration expenses (other than underwriting discounts and commissions) with respect to all registrations made for the benefit of the holders of Registrable Securities. The Issuer is also required to pay liquidated damages in an amount equal to 2% of the Issue Amount Per Share (as defined in the Stockholders' Agreement) in cash of Preferred Stock, in the event the Issuer is not able to pay cash, each month following the 150-day period in which a registration statement has not been declared effective by the Securities and Exchange Commission after the holders of Registrable Securities have requested registration. The foregoing description of the Stockholders' Agreement is not, and does not purport to be, complete and is qualified in its entirety by reference to the Stockholders' Agreement, a copy of which is filed as Exhibit 4 to the Schedule 13D and is incorporated herein by reference. VOTING AGREEMENT Pursuant to the Voting Agreement, Olivetti International, Oak and Peconic agreed that Cirmatica shall have the right to designate the persons who shall serve as the directors designees of the Purchasers pursuant to the Certificate of Designations and Stockholders' Agreement; provided that for so long as the Purchasers are allowed under the Stockholders' Agreement and the Certificate of Designations to designate 2 or more directors of the Issuer Peter Cohen shall be one of the appointed nominees for so long as he remains associated with Peconic and its affiliates unless Oak, Peconic, or their permitted assigns no longer beneficially own Preferred Stock (or Common Stock issued on conversion of such Senior Preferred Stock). Cirmatica, Olivetti International, Oak and Peconic agreed to vote of Preferred Stock and Common Stock in favor of the designees designated by Cirmatica. Under the Voting Agreement, Olivetti International, Oak and Peconic further agreed that Cirmatica shall have the right to designate the designees who shall serve as members of the committees of the Board. Olivetti International also agreed to vote as directed by Cirmatica in its sole and absolute discretion on all matters including, among other things, ordinary and extraordinary corporate actions and all matters submitted to a stockholder vote at general or special stockholder meetings of the Issuer. Each of Olivetti International, Oak and Peconic also agreed that it would not, and would not permit any of its affiliates (other than Cirmatica and its Subsidiaries), among other things, to, sell, encumber or otherwise transfer any of its shares of Preferred Stock or Common Stock without first giving Cirmatica prior written notice of such proposed 14 transfer and the opportunity to purchase all but not less than all of such shares of Preferred Stock or Common Stock at a cash price equal to the sum of the amount of any cash plus the fair market value of any other consideration offered by the prospective purchaser. The foregoing description of the Voting Agreement is not, and does not purport to be, complete and is qualified in its entirety by reference to the Voting Agreement, a copy of which is filed as Exhibit 5 to this Schedule 13D. Except as set forth in this Schedule, the Reporting Persons do not have any contracts, arrangements, understandings or relationships (legal or otherwise) with any person with respect of any securities of the Issuer, including but not limited to, transfer or voting of any of the securities of the Issuer, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, of the giving or withholding of proxies, or a pledge or contingency the occurrence of which would give another person voting power over the securities of the Issuer. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Filed herewith are these exhibits: (1) Joint Filing Agreement dated September 11, 2000 among Cirmatica Gaming S.A., Lottomatica S.p.A., Ramius Securities, LLC, Peconic Fund, Ltd., Ramius Capital Group, LLC, C4S & Co., The Oak Fund, Olivetti International S.A. and Olivetti S.p.A., (2) Preferred Stock Purchase Agreement dated September 6, 2000 between Autotote Corporation, Olivetti International S.A., Cirmatica Gaming S.A., The Oak Fund and Peconic Fund Ltd. (3) Certificate of Designations of Series A Convertible Preferred Stock of Autotote Corporation (incorporated by reference to Exhibit 3.3 to the 10-Q Quarterly Report of Autotote Corporation filed on September 14, 2000). (4) Stockholders' Agreement dated September 6, 2000 between Autotote Corporation, Olivetti International S.A., Cirmatica Gaming S.A., The Oak Fund and Peconic Fund Ltd. 15 (5) Voting Agreement dated September 6, 2000 between Olivetti International S.A., Cirmatica Gaming S.A., The Oak Fund and Peconic Fund Ltd. 16 SIGNATURE After due inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this Schedule 13D is true, complete and correct. Dated: September 15, 2000 OLIVETTI INTERNATIONAL S.A. By: /s/ Luciano La Noce ---------------------- Name: Luciano La Noce Title: Director OLIVETTI S.p.A. By: /s/ Corrado Ariaudo ---------------------- Name: Corrado Ariaudo Title: General Manager CIRMATICA GAMING S.A. By: /s/ Roberto Sgambati ---------------------- Name: Roberto Sgambati Title: Director LOTTOMATICA S.p.A. By: /s/ Roberto Sgambati ---------------------- Name: Roberto Sgambati Title: Chief Financial Officer THE OAK FUND By: /s/ Niels Heck ---------------------- Name: Niels Heck Title: Director 17 PECONIC FUND LTD. By: Ramius Capital Group, LLC Its: Investment Advisor By: C4S & Co., LLCC Its: Managing Member By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Managing Member RAMIUS SECURITIES, LLC By: Ramius Capital Group, LLC Its: Investment Advisor By: C4S & Co., LLCC Its: Managing Member By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Managing Member RAMIUS CAPITAL GROUP, LLC By: C4S & Co., LLCC Its: Managing Member By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Managing Member C4S & CO., LLC By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Managing Member
SCHEDULE 1 Board of Directors and Executive Officers of Cirmatica Gaming S.A. NAME POSITION WITH CITIZENSHIP PRINCIPAL OCCUPATION ADDRESS OF PRINCIPAL BUSINESS CIRMATICA OCCUPATION Roberto Director, Chairman Italy CFO, Lottomatica S.p.A. Via di Porta Latina 8 Sgambati 00179 Rome, Italy Antonio Director, Company Andorra Partner Rambla de Catalunya 144 Marimon Secretary Bufete Marimon Barcelona, Spain Prats Asesores Jaime Director Spain Promociones y Rambla de Catalunya 144 Guillem Actividades Barcelona, Spain Hernandez RAP S.A.
1
Board of Directors and Executive Officers of Lottomatica S.p.A. NAME POSITION WITH CITIZENSHIP PRINCIPAL BUSINESS ADDRESS OF PRINCIPAL BUSINESS LOTTOMATICA OCCUPATION* OCCUPATION Marco Staderini CEO Italy Via di Porta Latina, 8 00179 Rome, Italy Roberto Sgambati CFO Italy Via di Porta Latina, 8 00179 Rome, Italy Francesco Longo Administrative Director Italy Via di Porta Latina, 8 00179 Rome, Italy Emanuela Chiti Human Resources Director Italy Via di Porta Latina, 8 00179 Rome, Italy Luca Contiello Technologies Director Italy Via di Porta Latina, 8 00179 Rome, Italy Tommaso Collaro Business Development Italy Via di Porta Latina, 8 Director 00179 Rome, Italy Fabrizio Menichella Mktg & Communication Italy Via di Porta Latina, 8 Director 00179 Rome, Italy Daniele Bolognesi Customer Service Italy Via di Porta Latina, 8 Director 00179 Rome, Italy Antonio Pisanelli Legal & Societary Italy Via di Porta Latina, 8 Director 00179 Rome, Italy - ---------------- * To be completed only where principal occupation is not position held with Lottomatica S.p.A.
2
NAME POSITION WITH CITIZENSHIP PRINCIPAL BUSINESS ADDRESS OF PRINCIPAL BUSINESS LOTTOMATICA OCCUPATION* OCCUPATION Vitaliano Casalone Director Italy CEO of Lottomatica Via di Porta Latina, 8 International 00179 Rome, Italy Umberto D'addosio Chairman Italy Died on August 18, 2000 Via di Porta Latina, 8 00179 Rome, Italy Antonio Garroni Vice Chairman Italy Chairman & CEO Tecnost Sistemi S.p.A. Corso Massimo D'Azeglio, 69 10015 Ivrea (Torino), Italy Corrado Ariaudo Director Italy CEO Olivetti Lexicon S.p.A. Via Jervis, 77 10015 Ivrea, Italy Massimo Armellini Director Italy Via di Porta Latina, 8 00179 Rome, Italy Sergio Baronci Director Italy Consiglieri Amministrazioni Arianna 2001 S.R.L. Via Leopoldo Serra, 32 00153 Rome, Italy Giorgio Bertolina Director Italy CFO, Executive V.P., Marconi Communications S.p.A. Via Negrone S.A 10153 Genoa, Italy Mario Blankenburg Director Italy Via di Porta Latina, 8 00179 Rome, Italy Arturo Bonfanti Director Italy Technical Operations Manager Albacom S.p.A. V. Mario Bianchini, 15 Rome, Italy Massimo Brunelli Director Italy VP and C.F.O. Telecom Italia S.p.A. Via Flaminia, 189 00196 Rome, Italy
3
NAME POSITION WITH CITIZENSHIP PRINCIPAL BUSINESS ADDRESS OF PRINCIPAL BUSINESS LOTTOMATICA OCCUPATION* OCCUPATION Nicola Cajano Director Italy C.E.O. Sogei S.p.A. Via M Carucci, 99 00143 Rome, Italy Gianroberto Casaleggio Director Italy Project Manager Via di Porta Latina, 8 00179 Rome, Italy Luigi Castelli Director Italy Administrative Manager Banca Nazionale del Lavoro S.p.A. Via S. Basilico, 48 00187 Rome Italy Enzo Concina Director Italy Managing Director BNL Multiservizi S.p.A. Piazzale del l'Agricoltura, 24 001144 Rome, Italy Enrico Conti Director Italy Deputy General Manager BNL Multiservizi S.p.A. Piazzale del l'Agricoltura, 24 001144 Rome, Italy Luciano La Noce Director Italy Director of Corporate Finance Olivetti S.p.A. Via Jervis 77 10015 Ivrea (TO), Italy Vittorio Nola Director Italy Via di Porta Latina, 8 00179 Rome, Italy Massimo Panzali Director Italy Business Affairs Banca Nazionale del Lavoro S.p.A Via Vittorio Veneto 119 Rome, Italy Michele Reinero Director Italy Presidente del Consiglio di Consorzio Nazionale Per Amministrazione l'informatica Via delle Strelitzie 35 00134 Rome, Italy Gilberto Ricci Director Italy CEO & Chairman Finsiel S.p.A. Via Carciano, 4 00131 Rome, Italy
4
NAME POSITION WITH CITIZENSHIP PRINCIPAL BUSINESS ADDRESS OF PRINCIPAL BUSINESS LOTTOMATICA OCCUPATION* OCCUPATION Alberto Tripi Director Italy President Gruppo Almeviva Technologies Via Nazaionale, 82 00184 Rome, Italy
5
Board of Directors and Executive Officers of Olivetti S.p.A. NAME PRINCIPAL BUSINESS OCCUPATION CITIZENSHIP ADDRESS OF PRINCIPAL BUSINESS OCCUPATION Roberto Colaninno CEO Italy Via Jervis, 77 10015 Ivrea, Italy Luciano La Noce Director of Corporate Finance Italy Via Jervis, 77 10015 Ivrea, Italy Antonio Tesone Chairman Italy Via Jervis, 77 10015 Ivrea, Italy Sergio Erede Director Italy Via Jervis, 77 10015 Ivrea, Italy Cesare Geronzi Director Italy Via Jervis, 77 10015 Ivrea, Italy Bruno Lamborghini Director Italy Via Jervis, 77 10015 Ivrea, Italy Luciano Marinelle Director Italy Via Jervis, 77 10015 Ivrea, Italy Ivano Sacchetti Director Italy Via Jervis, 77 10015 Ivrea, Italy Piera Rosiello Director and Secretary of Italy Via Jervis, 77 the Board 10015 Ivrea, Italy Pier Luigi Fabrizi Director Italy Via Jervis, 77 10015 Ivrea, Italy
6
Board of Directors and Executive Officers of Olivetti International S.A. NAME POSITION WITH CITIZENSHIP PRINCIPAL BUSINESS* HOME ADDRESS OR ADDRESS OF OLIVETTI INTERNATIONAL OCCUPATION SUCH PRINCIPAL BUSINESS OCCUPATION Antonio Tesone Chairman Italy Chairman Olivetti S.p.A. Via Jervis 77 10015 Ivrea, Italy Luciano La Noce Director Italy Director of Corporate Finance Olivetti S.p.A. Via Jervis 77 10015 Ivrea, Italy Dirk Van Reeth Director Belgium Head of the Trust Department Banque General du Luxembourg 50 J F Kennedy L 2951 Luxembourg Edward Bruin Director Belgium Head of Fiscal Affairs Banque General du Luxembourg 50 J F Kennedy L 2951 Luxembourg - ---------------- * To be completed only where principal occupation is not position held with Olivetti International S.A.
7 Managing Members of C4S & Co., LLC
NAME CITIZENSHIP PRINCIPAL BUSINESS OCCUPATION ADDRESS OF PRINCIPAL BUSINESS OCCUPATION Peter A. Cohen U.S.A. Managing member of 666 Third Avenue C4S & Co., LLC 26th Floor New York, New York 10017 Morgan B. Stark U.S.A. Managing member of 666 Third Avenue C4S & Co., LLC 26th Floor New York, New York 10017 Thomas W. Strauss U.S.A. Managing member of 666 Third Avenue C4S & Co., LLC 26th Floor New York, New York 10017
8 Board of Executive Officers of The Oak Fund
NAME POSITION WITH CITIZENSHIP PRINCIPAL BUSINESS OCCUPATION* ADDRESS OF PRINCIPAL BUSINESS THE OAK FUND OCCUPATION Benjamin Schliemann Director Germany Vice President Hanseatic Corporation 450 Park Avenue, Suite 2302 New York, NY 10022 Paul A. Biddelman Director U.S.A. President Hanseatic Corporation 450 Park Avenue, Suite 2302 New York, NY 10022 Niels Heck Director The Netherlands Managing Director Cisco Funds Services (Cayman Islands) Ltd. Corporate Centre, West Bay Road P.O. Box 31106 SMB Grand Cayman, Cayman Islands Hubertus Langen Director Germany Private Investor Heinrich-Vogl-Str.17 81479 Munich Germany - ---------------- * To be completed only where principal occupation is not position held with The Oak Fund.
9 Exhibit Index Exhibit Number Title 1. Joint Filing Agreement dated September 11, 2000 among Cirmatica Gaming S.A., Lottomatica S.p.A., Ramius Securities, LLC, Peconic Fund, Ltd., Ramius Capital Group, LLC, C4S & Co., The Oak Fund, Olivetti International S.A. and Olivetti S.p.A. 2. Preferred Stock Purchase Agreement dated September 6, 2000 between Autotote Corporation, Olivetti International S.A., Cirmatica Gaming S.A., The Oak Fund and Peconic Fund Ltd. 3. Certificate of Designations of Series A Convertible Preferred Stock of Autotote Corporation (incorporated by reference to Exhibit 3.3 to the 10-Q Quarterly Report of Autotote Corporation filed on September 14, 2000). 4. Stockholders' Agreement dated September 6, 2000 between Autotote Corporation, Olivetti International S.A., Cirmatica Gaming S.A., The Oak Fund and Peconic Fund Ltd. 5. Voting Agreement dated September 6, 2000 between Olivetti International S.A., Cirmatica Gaming S.A., The Oak Fund and Peconic Fund Ltd. EX-99.1 2 a2025809zex-99_1.txt EXHIBIT 1 EXHIBIT 1 JOINT FILING AGREEMENT PURSUANT TO RULE 13d-1 (k) (l) The undersigned acknowledge and agree that the foregoing Statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to the Statement on Schedule 13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. This Agreement may be included as an exhibit to such joint filing. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning it contained therein, but shall not be responsible for the completeness and accuracy concerning the others, except to the extent that it knows or has reason to believe that such information is inaccurate. This agreement may be executed in any number of counterparts and all of such counterparts taken together shall constitute one and the same instrument. Dated: September 15, 2000 OLIVETTI INTERNATIONAL S.A. By: /s/ Luciano La Noce ---------------------- Name: Luciano La Noce Title: Director OLIVETTI S.p.A. By: /s/ Corrado Ariaudo ---------------------- Name: Corrado Ariaudo Title: General Manager CIRMATICA GAMING S.A. By: /s/ Roberto Sgambati ---------------------- Name: Roberto Sgambati Title: Director LOTTOMATICA S.p.A. By: /s/ Roberto Sgambati ---------------------- Name: Roberto Sgambati Title: Chief Financial Officer THE OAK FUND By: /s/ Niels Heck ---------------------- Name: Niels Heck Title: Director PECONIC FUND LTD. By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Principal RAMIUS SECURITIES, LLC By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Principal RAMIUS CAPITAL GROUP, LLC By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Principal C4S & Co., LLC By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Principal EX-99.2 3 a2025809zex-99_2.txt EXHIBIT 2 EXHIBIT 2 ================================================================================ PREFERRED STOCK PURCHASE AGREEMENT by and among CIRMATICA GAMING, S.A. a Spanish corporation THE OAK FUND, a Cayman Islands exempted company PECONIC FUND LTD., a Cayman Islands exempted company RAMIUS SECURITIES, LLC, a Delaware limited liability company OLIVETTI INTERNATIONAL S.A., a Luxembourg corporation and AUTOTOTE CORPORATION, a Delaware corporation Dated: September 6, 2000 ================================================================================ PREFERRED STOCK PURCHASE AGREEMENT This Preferred Stock Purchase Agreement (this "AGREEMENT"), dated as of September 6, 2000, is by and among Autotote Corporation, a Delaware corporation (the "COMPANY"), Cirmatica Gaming, S.A., a Spanish corporation ("CIRMATICA"), Olivetti International S.A., a Luxembourg corporation ("OLIVETTI"), The Oak Fund, a Cayman Islands exempted company ("OAK"), Peconic Fund Ltd., a Cayman Islands exempted company ("PECONIC") and Ramius Securities, LLC, a Delaware limited liability company ("RAMIUS" and, together with Cirmatica, Olivetti, Oak and Peconic, the "PURCHASERS"). RECITALS A. This Agreement provides that on the Closing Date, (i) Cirmatica will purchase from the Company, and the Company will issue and sell to Cirmatica, 1,000,000 shares (the "CIRMATICA SHARES") of the Company's Series A Convertible Preferred Stock, par value $1.00 per share (the "PREFERRED STOCK"), (ii) Olivetti will purchase from the Company, and the Company will issue and sell to Olivetti, 20,000 shares (the "OLIVETTI SHARES") of Preferred Stock, (iii) Oak will purchase from the Company, and the Company will issue and sell to Oak, 40,000 shares (the "OAK SHARES") of Preferred Stock, (iv) Peconic will purchase from the Company, and the Company will issue and sell to Peconic, 40,000 shares (the "PECONIC SHARES") of Preferred Stock and (v) Ramius will receive from the Company as partial payment of a placement agent fee relating to the sale of the Preferred Stock hereunder, and the Company will issue to Ramius, 27,500 shares (the "RAMIUS SHARES" and, together with the Cirmatica Shares, the Olivetti Shares, the Oak Shares and the Peconic Shares, the "SHARES") of Preferred Stock, in each case, having the rights, preferences, privileges and restrictions set forth in the form of Certificate of Designations (the "CERTIFICATE OF DESIGNATIONS") attached hereto as Exhibit A (the "EQUITY INVESTMENT"). B. The Purchasers are unwilling to enter into this Agreement unless, contemporaneously with the Closing under this Agreement, the Company and the Purchasers enter into an agreement in the form attached hereto as Exhibit B (the "STOCKHOLDERS' AGREEMENT") providing for certain actions relating to the shares of Preferred Stock and shares of Common Stock into which such Preferred Stock is convertible; and the Board of Directors of the Company has approved the execution, delivery and performance by the Company of the Stockholders' Agreement. C. The parties desire to make certain representations, warranties, covenants and agreements in connection with the Equity Investment and also to prescribe various conditions to the Equity Investment. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS.......................................................2 1.1 Defined Terms........................................................2 1.2 Other Defined Terms..................................................9 ARTICLE II. PURCHASE AND SALE OF THE SHARES.................................10 2.1 Closing.............................................................10 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................12 3.1 Organization and Capitalization.....................................12 3.2 Authorization.......................................................13 3.3 Subsidiaries........................................................14 3.4 Absence of Certain Changes or Events................................15 3.5 Title to Assets; Absence of Liens and Encumbrances, etc.............15 3.6 Contracts and Commitments...........................................17 3.7 Permits.............................................................19 3.8 No Conflict or Violation............................................19 3.9 Consents and Approvals..............................................20 3.10 SEC Documents; Financial Statements, etc............................20 3.11 Undisclosed Liabilities.............................................21 3.12 Exemption from Registration.........................................21 3.13 Litigation..........................................................21 3.14 Labor Matters.......................................................21 3.15 Compliance with Law.................................................22 3.16 No Brokers..........................................................22 3.17 Proprietary Rights..................................................22 3.18 Employee Plans......................................................23 3.19 Tax Matters.........................................................26 3.20 Insurance...........................................................27 3.21 Customers and Suppliers.............................................28 3.22 Compliance with Environmental Laws..................................28 3.23 No Other Agreements to Sell the Assets or Shares of the Company or its Subsidiaries.................................................30 3.24 Prohibited Payments.................................................30 3.25 Board Recommendation................................................30 3.26 Change of Control Exemptions........................................31 3.27 Accuracy of Information Furnished...................................31 3.28 Stockholder Approval................................................32 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS................32 4.1 Organization........................................................32 4.2 Authorization.......................................................32 4.3 Consents and Approvals..............................................32 i 4.4 No Conflict or Violation............................................32 4.5 Investment Representation...........................................33 4.6 No Brokers..........................................................33 4.7 No Investment Company...............................................33 ARTICLE V. COVENANTS OF THE COMPANY AND THE PURCHASERS......................33 5.1 Maintenance of Business Prior to Closing............................33 5.2 Investigation by the Purchasers.....................................34 5.3 Consents and Efforts; Further Assurances............................35 5.4 Notification of Certain Matters.....................................35 5.5 Exclusivity; Fees and Expenses......................................36 5.6 Change of Control Exemptions........................................37 5.7 Compliance with Laws................................................38 ARTICLE VI. CONDITIONS TO THE INVESTMENT....................................38 6.1 Conditions to the Obligations of Each Party.........................38 6.2 Conditions to the Obligations of the Company........................39 6.3 Conditions to the Obligations of the Purchasers.....................39 ARTICLE VII. INDEMNIFICATION................................................42 7.1 Indemnification by the Company......................................42 7.2 Defense of Claims...................................................43 7.3 Insurance Proceeds; Tax Effect......................................44 ARTICLE VIII. MISCELLANEOUS.................................................45 8.1 Termination.........................................................45 8.2 Assignment; Parties in Interest.....................................46 8.3 Notices.............................................................46 8.4 Entire Agreement; Waivers...........................................49 8.5 Multiple Counterparts...............................................49 8.6 Invalidity..........................................................49 8.7 Titles..............................................................49 8.8 Fees and Expenses...................................................49 8.9 Cumulative Remedies.................................................49 8.10 Governing Law; Jurisdiction.........................................49 8.11 Amendment...........................................................50 8.12 Public Announcements................................................50 8.13 Enforcement of Agreement............................................50 8.14 Interpretive Provisions.............................................50 ii EXHIBITS EXHIBIT A Certificate of Designations EXHIBIT B Stockholders' Agreement EXHIBIT C Opinion of Counsel to Company iii ARTICLE I. DEFINITIONS 1.1 DEFINED TERMS. As used herein, the terms below shall have the following meanings: "ACTION" shall mean any action, suit, proceeding, claim, arbitration, mediation, alternative dispute resolution procedure, inquiry or investigation by or before any arbitrator, mediator, court or other governmental authority. "AFFILIATE" shall mean, with respect to any Person or entity (the "REFERENT PERSON"), any Person or entity which controls the referent Person, any Person or entity which the referent Person controls, or any Person or entity which is under common control with the referent Person. For purposes of the preceding sentence, the term "control" shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of a Person or entity through voting securities, by contract or otherwise. For purposes of this Agreement, Target shall be deemed an Affiliate of the Company. "AMEX" shall mean the American Stock Exchange, or any successor thereto. "ASSETS" shall mean all of the Company's and its Subsidiaries' right, title and interest in and to all properties, assets and rights of any kind, whether tangible or intangible, real or personal, owned by the Company or any of its Subsidiaries. "BENEFIT ARRANGEMENT" shall mean any employment, consulting, severance or other similar contract, arrangement or policy (written or oral) and each plan, arrangement, program, agreement or commitment (written or oral) providing for insurance coverage (including, without limitation, any self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, life, health or accident benefits (including, without limitation, any "voluntary employees' beneficiary association" as defined in Section 501(c)(9) of the Code providing for the same or other benefits) or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights, stock purchases or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan, (b) is entered into, maintained, contributed to or required to be contributed to, as the case may be, by the Company, its Subsidiaries or any ERISA Affiliate or under which the Company, its Subsidiaries or any ERISA Affiliate may incur any liability, and (c) covers any current or former employee, officer, director or consultant of the Company, its Subsidiaries or any ERISA Affiliate (with respect to their relationship with such any entity). "BONA FIDE THIRD PARTY" shall mean a third party unrelated to the Purchasers, Lottomatica S.p.A., Olivetti S.p.A., Cirsa or their respective Affiliates. "BOOKS AND RECORDS" shall mean all books, records, lists, ledgers, files, reports, plans, drawings and operating records of every kind relating to the Company and its Subsidiaries, the Assets, business operations, customers, suppliers and Personnel, including, without 2 limitation, (a) all corporate books and records of the Company and its Subsidiaries, disk or tape files, printouts, runs or other computer-based information and the Company's and its Subsidiaries' interest in all computer programs required to access, and the equipment containing, all such computer-based information, (b) all product, business and marketing plans, (c) all environmental control records and (d) all sales, maintenance and production records. "CHANGE OF CONTROL" shall mean one or more of the following events: (i) less than a majority of the members of the Board (excluding any directors nominated or elected by Purchasers) shall be persons who either (A) were serving as directors on the date hereof or (B) were nominated as directors and approved by the vote of the majority of the directors who are directors referred to in clause (A) above or this clause (B); (ii) the stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company; (iii) an announcement by any Bona Fide Third Party or group of Bona Fide Third Parties acting in concert, of a merger with the Company or an acquisition of the Company's securities or other transaction which will require the filing with the Securities and Exchange Commission of a Schedule 13D under the Exchange Act, with respect to beneficial ownership of the Company (other than by a financial entity or other similar institutional investor holding securities of the Company for investment purposes that is eligible to file a Schedule 13G under the Exchange Act with respect to such merger or acquisition in accordance with Rule 13d-1(b)(1) of the Exchange Act) in which Item 4 thereof will indicate a plan or proposal under subsections (a)-(j) thereof with respect to either (x) the merger with a Bona Fide Third Party or acquisition of at least twenty percent (20%) of the Company's voting securities by a Bona Fide Third Party or (y) the merger or consolidation of the Company with a Bona Fide Third Party where the stockholders of the Company would not, immediately after the merger or consolidation, own at least fifty percent (50%) of the voting securities of the entity (unrelated to the Purchasers, Lottomatica S.p.A., Olivetti S.p.A., Cirsa and their respective Affiliates) issuing the cash or securities in the merger or consolidation, or the sale of substantially all of the assets of the Company; or (iv) the Company enters into negotiations that might reasonably be expected to cause any of the events specified in clauses (i), (ii) or (iii) above to occur. "CIRSA" shall mean Cirsa Business Corporation S.A. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute. "COMMON STOCK" shall mean the Class A Common Stock having a par value of $0.01 per share of the Company. "CONTRACT" shall mean any agreement, contract, lease, note, loan, evidence of indebtedness, purchase order, letter of credit, franchise agreement, undertaking, covenant not to compete, employment agreement, license, instrument, obligation, commitment, purchase and sales order, quotation and other executory commitment to which the Company or its Subsidiaries is a party or which specifically relates to the Company's or its Subsidiaries' businesses or any of the Assets, whether oral or written, express or implied, and which pursuant to its terms has not expired, terminated or been fully performed by the parties thereto. 3 "DEBT COMMITMENT LETTERS" shall mean that certain Commitment Letter and that certain Optional Note Purchase Letter, each dated as of May 18, 2000, by and among DLJ Capital Funding, Inc., DLJ Bridge Finance, Inc. and the Company, and by and between the Company and DLJ Capital Funding, Inc., respectively. "DGCL" shall mean the General Corporations Law of the State of Delaware. "EMPLOYEE PLANS" shall mean all Benefit Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans. "ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, right-of-way, encroachment, building or use restriction, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent or conditional sale agreement or other title retention agreement or lease in the nature thereof. "ENVIRONMENTAL CLAIMS" shall mean all accusations, allegations, notices of violation, liens, claims, demands, suits, or causes of action for any damage, including, without limitation, personal injury, property damage (including, without limitation, any depreciation or diminution of property values), lost use of property or consequential damages, arising directly or indirectly out of Environmental Conditions or Environmental Laws. By way of example only (and not by way of limitation), Environmental Claims include (i) violations of or obligations under any contract related to Environmental Laws or Environmental Conditions between the Company or its Subsidiaries and any other Person, (ii) actual or threatened damages to natural resources, (iii) claims for nuisance or its statutory equivalent, (iv) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, responses or remedial actions under any Environmental Laws, (v) requirements to implement "corrective action" pursuant to any order or permit issued pursuant to the Resource Conservation and Recovery Act, as amended, or similar provisions of applicable Environmental Law, (vi) claims related to Environmental Laws or Environmental Conditions for restitution, contribution, or indemnity, (vii) fines, penalties or liens of any kind against property related to Environmental Laws or Environmental Conditions, (viii) claims related to Environmental Laws or Environmental Conditions for injunctive relief or other orders or notices of violation from federal, state or local agencies or courts, and (ix) with regard to any present or former employees, claims relating to exposure to or injury from Environmental Conditions. "ENVIRONMENTAL CONDITIONS" shall mean the state of the environment, including natural resources (E.G., flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or ambient air. "ENVIRONMENTAL LAWS" shall mean all applicable foreign, federal, state, district and local laws, all rules or regulations promulgated thereunder, and all orders, consent orders, judgments, notices, permits or demand letters issued, promulgated or entered pursuant thereto, relating to pollution or protection of the environment (including, without limitation, ambient air, surface water, ground water, land surface, or subsurface strata), including, without limitation, (i) 4 laws relating to emissions, discharges, releases or threatened releases of Hazardous Substances into the environment and (ii) laws relating to the identification, generation, manufacture, processing, distribution, use, treatment, storage, disposal, recovery, transport or other handling of Hazardous Substances. Environmental Laws shall include, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous Materials Transportation Act, as amended, the Resource Conservation and Recovery Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as amended, the Occupational Safety and Health Act, as amended, and all analogous laws promulgated or issued by any state or other governmental authority. "ENVIRONMENTAL REPORTS" shall mean any and all written analyses, summaries or explanations, in the possession or control of the Company or its Subsidiaries, of (a) any Environmental Conditions in, on or about the properties currently or formerly owned, leased, or otherwise occupied or operated by the Company or its Subsidiaries or (b) the Company's or its Subsidiaries' compliance with Environmental Laws. "EQUITY SECURITIES" shall mean (i) shares of capital stock or other equity securities, (ii) subscriptions, calls, warrants, options or commitments of any kind or character relating to, or entitling any Person or entity to purchase or otherwise acquire, any capital stock or other equity securities and (iii) securities convertible into or exercisable or exchangeable for shares of capital stock or other equity securities. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" shall mean any entity which is (or at any relevant time was) a member of a "controlled group of corporations" with, under "common control" with, or a member of an "affiliated service group" with, or otherwise required to be aggregated with, the Company or its Subsidiaries as set forth in Section 414(b), (c), (m) or (o) of the Code. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "FACILITIES" shall mean all plants, offices, manufacturing facilities, stores, warehouses, administration buildings and all real property and related facilities owned or leased by the Company or its Subsidiaries. "FINANCING DOCUMENTS" shall mean (i) the Indenture relating to the Company's 12 1/2% Senior Subordinated Notes due 2010 (the "INDENTURE"), (ii) the Credit Agreement (the "CREDIT AGREEMENT") by and among the Company, the lenders listed as signatories thereto, DLJ Capital Funding, Inc., as administrative agent and syndication agent for such lenders, Lehman Commercial Paper Inc., as documentation agent for such lenders, and Lehman Brothers Inc., as co-arranger, and (iii) and all such other agreements, instruments and documents delivered in connection with the transactions contemplated by the Indenture, the Credit Agreement and Debt Commitment Letters. 5 "FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures, furnishings, machinery, equipment, spare parts, appliances and vehicles owned by the Company or its Subsidiaries, wherever located, including all warranty rights with respect thereto. "GAAP" shall mean, with respect to any Person, generally accepted accounting principles in the United States of America, as in effect from time to time, consistently applied. "HAZARDOUS SUBSTANCES" shall mean all pollutants, contaminants, chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or otherwise hazardous substances or materials (whether solids, liquids or gases) subject to regulation, control or remediation under Environmental Laws. By way of example only, the term Hazardous Substances includes petroleum, petroleum-derived substances urea formaldehyde, flammable, explosive and radioactive materials, PCBs, pesticides, herbicides, asbestos, solvents and waste waters. "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "LEASES" shall mean all of the leases or subleases for personal or real property to which the Company or any of its Subsidiaries is a party or by which the Company or its Subsidiaries is bound. "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" or a similar phrase shall mean, with respect to any Person, (a) any material adverse effect on or change with respect to (i) the business, operations, assets (taken as a whole), liabilities (taken as a whole), condition (financial or otherwise), results of operations or prospects of such Person and its Subsidiaries, taken as a whole, (ii) the relations with customers, suppliers, distributors or employees of such Person and its Subsidiaries, taken as a whole, or (iii) the right or ability of such Person or its Subsidiaries to consummate any of the transactions contemplated by this Agreement and the other Transaction Documents or (b) any event, condition or circumstance or set of facts which would, with the passage of time, the giving or receipt of notice or the occurrence or nonoccurrence of any other circumstance, action or event, constitute a "Material Adverse Effect" or "Material Adverse Change" described in the foregoing clause (a). "MERGER" shall mean the merger of a wholly owned Subsidiary of the Company with and into Target in accordance with the Merger Agreement. "MERGER AGREEMENT" shall mean that certain Agreement and Plan of Merger dated as of May 18, 2000, by and among the Company, a wholly owned Subsidiary of the Company and Target. "MULTIEMPLOYER PLAN" shall mean any "multiemployer plan," as defined in Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company, its Subsidiaries or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or, within the past six years, maintained, administered, contributed to or was required to contribute to, or under which the Company, its Subsidiaries or any ERISA Affiliate may incur any liability and (b) 6 covers any current or former employee, director, officer or consultant of the Company, its Subsidiaries or any ERISA Affiliate (with respect to their relationship with any such entity). "OPTIONS" shall mean the options to purchase shares of Common Stock issued to certain executive employees and non-employee directors of the Company pursuant to the Stock Option Plans. "PBGC" shall mean the Pension Benefit Guaranty Corporation. "PENSION PLAN" shall mean any "employee pension benefit plan" as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (a) which the Company, its Subsidiaries or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or, within the six years prior to the Closing Date, maintained, administered, contributed to or was required to contribute to, or under which the Company, its Subsidiaries or any ERISA Affiliate may incur any liability (including, without limitation, any contingent liability) and (b) which covers any current or former employee, director, officer or consultant of the Company, its Subsidiaries or any ERISA Affiliate (with respect to their relationship with any such entity). "PERMITS" shall mean all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, or notifications to, any governmental authority, whether foreign, federal, state or local, or any other Person, necessary for the past, present or currently anticipated conduct of, or relating to the operation of the business of, the Company or its Subsidiaries. "PERMITTED ENCUMBRANCES" shall mean (a) liens for Taxes or governmental charges or claims (i) not yet due and payable or (ii) being contested in good faith, if a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor, (b) statutory liens of landlords, liens of carriers, warehouse persons, mechanics and material persons and other liens imposed by law incurred in the ordinary course of business for sums (i) not yet due and payable or (ii) being contested in good faith, if a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor, (c) liens incurred or deposits made in connection with workers' compensation, unemployment insurance and other similar types of social security programs or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations, in each case in the ordinary course of business, consistent with past practice, (d) purchase money liens incurred in the ordinary course of business, consistent with past practice, and (e) easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case, which do not interfere with the ordinary conduct of business of the Company or its Subsidiaries and do not materially detract from the value of the property to which such encumbrance relates. "PERSON" shall mean any individual, corporation, partnership, limited liability company, association, trust and any other entity or organization. 7 "PERSONNEL" shall mean all directors, officers and employees of the Company and its Subsidiaries. "RETURNS" shall mean any and all returns, reports, declarations and information statements with respect to Taxes required to be filed by or on behalf of the Company or its Subsidiaries with any governmental authority or Tax authority or agency, whether domestic or foreign, including, without limitation, consolidated, combined and unitary returns and all amendments thereto or thereof. "SEC" shall mean the Securities and Exchange Commission. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "SEVERANCE AGREEMENT" means any agreement between a Person and such Person's officers, directors, employees, consultants or agents providing for any payment or benefit, whether contingent or otherwise, upon the occurrence of any event, development or transaction or any change in circumstances, relating to the parties to any such agreement. "STOCK OPTION PLANS" shall mean the 1984 Stock Option Plan, the 1992 and 1995 Equity Incentive Plans, and the 1997 Compensation Plan. "STOCKHOLDERS" shall mean the holders of Common Stock. "STOCKHOLDERS' AGREEMENT" shall mean that certain Stockholders' Agreement, dated as of the Closing Date, by and among the Company, Cirmatica, Olivetti, Oak, Peconic and Ramius. "SUBSIDIARY" shall mean, with respect to any of the parties to this Agreement, any corporation or other business entity, whether or not incorporated, of which at least 50% of the securities or interests having, by their terms, ordinary voting power to elect members of the board of directors, or other persons performing similar functions with respect to such entity, are held, directly or indirectly, by such party. For purposes of this Agreement, Target shall be deemed a Subsidiary of the Company. "TARGET" shall mean Scientific Games Holding Corp., a Delaware corporation. "TAX(ES)" shall mean all taxes, estimated taxes, withholding taxes, assessments, levies, imposts, fees and other charges, including, without limitation, any interest, penalties, additions to tax or additional amounts that may become payable in respect thereof, imposed by any foreign, federal, state or local government or taxing authority, which taxes shall include, without limitation, all income taxes, payroll and employee withholding taxes, unemployment insurance, social security, sales and use taxes, value-added taxes, excise taxes, franchise taxes, gross receipts taxes, occupation taxes, real and personal property taxes, stamp taxes, transfer taxes, workers' compensation and other obligations of the same or of a similar nature. 8 "TRANSACTION DOCUMENTS" shall mean this Agreement, the Stockholders' Agreement, the Certificate of Designations and all other instruments, certificates and documents delivered or required to be delivered by the parties pursuant to this Agreement. "WELFARE PLAN" shall mean any "employee welfare benefit plan" as defined in Section 3(1) of ERISA, (a) which the Company, its Subsidiaries or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or under which the Company, its Subsidiaries or any ERISA Affiliate may incur any liability and (b) which covers any current or former employee, director, officer or consultant of the Company, its Subsidiaries or any ERISA Affiliate (with respect to their relationship with any such entity). 1.2 OTHER DEFINED TERMS. In addition to the terms defined in the Preamble and the Recitals to this Agreement and Section 1.1, the following terms are defined in the Sections set forth below: TERM SECTION "Accounts Receivable"..........................................3.10 "Agreement"....................................................Preamble "Certificate of Designations"..................................Recitals "Change of Control Agreements".................................3.26(b) "Cirmatica"....................................................Preamble "Cirmatica Purchase Price".....................................2.1(c) "Cirmatica Shares".............................................Recitals "Claim Notice".................................................7.3 "Claim"........................................................7.3 "Closing Date".................................................2.1(a) "Closing"......................................................2.1(a) "Company Claim"................................................7.2 "Company Party"................................................7.2 "Company Reports"..............................................3.10 "Company"......................................................Preamble "Disclosure Schedule" .........................................Article III "Equity Investment"............................................Recitals "Exclusivity Period"...........................................5.5 "Financial Statements".........................................3.10 "Laws".........................................................3.15 "Leased Property"..............................................3.5(b)(ii) "Losses".......................................................7.1 "Oak"..........................................................Preamble "Oak Purchase Price"...........................................2.1(c) "Oak Shares"...................................................Recitals "Olivetti".....................................................Preamble "Olivetti Purchase Price"......................................2.1(c) "Olivetti Shares"..............................................Recitals "Peconic"......................................................Preamble 9 "Peconic Purchase Price".......................................2.1(c) "Peconic Shares"...............................................Recitals "Preferred Stock"..............................................Recitals "Proprietary Rights"...........................................3.17 "Purchase Price"...............................................2.1(c) "Purchaser Claim"..............................................7.1 "Purchaser Party"..............................................7.1 "Purchasers"...................................................Preamble "Ramius".......................................................Preamble "Ramius Shares"................................................Recitals "Regulatory Approvals".........................................6.1(c) "Regulatory Filings"...........................................3.9 "Shares".......................................................Recitals "Stockholders' Agreement"......................................Recitals "Third Party Claim"............................................7.3 ARTICLE II. PURCHASE AND SALE OF THE SHARES 2.1. CLOSING. (a) Upon the terms and conditions set forth herein, and subject to Section 8.1, the closing of the Equity Investment (the "CLOSING") shall be held at 10:00 a.m. on September 6, 2000 (the "CLOSING DATE"), or such other date as mutually agreed to by the parties hereto, at the offices of O'Melveny & Meyers LLP, 153 East 53rd Street, New York, New York 10022 or such other location as mutually agreed to by the parties hereto. (b) TRANSFER OF THE SHARES. Upon the terms and conditions contained herein, at the Closing, the Company shall issue and sell to Cirmatica, Olivetti, Oak and Peconic, and Cirmatica, Olivetti, Oak and Peconic shall purchase and accept from the Company, all of the Cirmatica Shares, the Olivetti Shares, the Oak Shares and the Peconic Shares, respectively, free and clear of any and all Encumbrances. Upon the terms and conditions contained herein, at the Closing, the Company shall issue to Ramius, and Ramius shall accept from the Company, all of the Ramius Shares, free and clear of any and all Encumbrances. (c) CONSIDERATION FOR THE SHARES. Upon the terms and conditions contained herein: as consideration for the purchase of the Cirmatica Shares, at the Closing, Cirmatica shall pay to the Company $100,000,000 (the "CIRMATICA PURCHASE PRICE"); as consideration for the purchase of the Olivetti Shares, at the Closing, Olivetti shall pay to the Company $1,350,000 (the "OLIVETTI PURCHASE PRICE"); as consideration for the purchase of the Oak Shares, at the Closing, Oak shall pay to the Company $4,000,000 (the "OAK PURCHASE PRICE"); and as consideration for the purchase of the Peconic Shares, at the Closing, Peconic shall pay to the Company $4,000,000 (the "PECONIC PURCHASE PRICE" and, together with the Cirmatica Purchase Price, the Olivetti Purchase Price and the Oak Purchase Price, the "PURCHASE PRICE"). Ramius shall receive the Ramius Shares pursuant to the terms hereunder as partial payment of a 10 placement agent fee payable by the Company to Ramius. The obligations under this Agreement of Cirmatica to purchase the Cirmatica Shares, of Olivetti to purchase the Olivetti Shares, of Oak to purchase the Oak Shares and of Peconic to purchase the Peconic Shares are several, and none of Cirmatica, Olivetti, Oak or Peconic shall have any liabilities or obligations with respect to the agreements of the other parties; PROVIDED, HOWEVER, that the obligation of Cirmatica to pay the Cirmatica Purchase Price hereunder shall be the joint and several obligation of Cirmatica and Olivetti. (d) DELIVERIES AT THE CLOSING. To effect the sale and purchase of the Shares and the delivery of the Purchase Price referred to in Section 2.1(c), the Company and the Purchasers shall, on the Closing Date, cause the following to occur: (i) SHARE CERTIFICATES. The Company shall deliver to Cirmatica stock certificates evidencing the Cirmatica Shares, to Olivetti stock certificates evidencing the Olivetti Shares, to Oak stock certificates evidencing the Oak Shares, to Peconic stock certificates evidencing the Peconic Shares, and to Ramius stock certificates evidencing the Ramius Shares, in each case, free and clear of any and all Encumbrances of any and every nature whatsoever. (ii) PURCHASE PRICE. (A) Cirmatica shall, against delivery of such certificates evidencing the Cirmatica Shares, deliver to the Company the Cirmatica Purchase Price by transferring by wire transfer immediately available funds in the aggregate amount of the Cirmatica Purchase Price to the Company's bank account designated in writing at least two business days prior to the Closing. (B) Olivetti shall, against delivery of such certificates evidencing the Olivetti Shares, deliver to the Company the Olivetti Purchase Price by transferring by wire transfer immediately available funds in the aggregate amount of the Olivetti Purchase Price to the Company's bank account designated in writing at least two business days prior to the Closing. (C) Oak shall, against delivery of such certificates evidencing the Oak Shares, deliver to the Company the Oak Purchase Price by transferring by wire transfer immediately available funds in the aggregate amount of the Oak Purchase Price to the Company's bank account designated in writing at least two business days prior to the Closing. (D) Peconic shall, against delivery of such certificates evidencing the Peconic Shares, deliver to the Company the Peconic Purchase Price by transferring by wire transfer immediately 11 available funds in the aggregate amount of the Peconic Purchase Price to the Company's bank account designated in writing at least two business days prior to the Closing. (iii) OTHER DOCUMENTS. Each of the Company and the Purchasers shall take all such other actions required hereby to be performed, and deliver all other documents, certificates, opinions of counsel and other items required to be delivered on its part, prior to or on the Closing Date, including, without limitation, delivering the documents and satisfying the conditions set forth in Article VI. All such documents and instruments delivered to any party pursuant hereto shall be in form and substance, and shall be executed in a manner, reasonably satisfactory to such party and its counsel. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY As an inducement to the Purchasers to enter into this Agreement, the Company hereby makes, as of the date hereof and as of the Closing Date, the following representations and warranties to the Purchasers, except as otherwise set forth in a written disclosure schedule (the "DISCLOSURE SCHEDULE") delivered by the Company to the Purchasers prior to the date hereof, a copy of which is attached hereto. The Disclosure Schedule shall contain sections numbered to correspond to the various sections of this Article III setting forth certain exceptions to the representations and warranties contained in this Article III and certain other information called for by this Agreement. Unless otherwise specified, no disclosure made in any particular numbered section of the Disclosure Schedule shall be deemed made in any other numbered section of the Disclosure Schedule unless expressly made therein (by cross-reference or otherwise) or unless, and only to the extent that, it is apparent on the face of such disclosure that such disclosure contains information which also applies to such other numbered section in the Disclosure Schedule or modifies another representation and warranty herein. 3.1 ORGANIZATION AND CAPITALIZATION. (a) ORGANIZATION. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to conduct its business as it is presently being conducted and to own and lease its Assets. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is necessary under applicable Law, except where the failure to be so qualified and in good standing would not reasonably be expected to have a Material Adverse Effect on the Company. The Company has delivered to the Purchasers true, correct and complete copies of its certificate of incorporation and by-laws (in each case, as amended to date). The Company is not in default under or in violation of any provision of its certificate of incorporation or by-laws. (b) CERTIFICATE OF DESIGNATIONS. The Certificate of Designations has been duly adopted by the Company and has been filed with the Secretary of State of the State of Delaware in accordance with the laws of the State of Delaware on or prior to the Closing Date. The Preferred Stock, when issued, will have the designations, preferences and relative, 12 participating, optional and other special rights and qualifications, limitations and restrictions set forth in the Certificate of Designations. (c) CAPITALIZATION. The total authorized capital stock of the Company consists of 99,300,000 shares of Common Stock, 700,000 shares of Class B nonvoting common stock, par value $.01 per share, and 2,000,000 shares, par value $1.00 per share, of blank check preferred stock. As of August 31, 2000, there were 36,909,292 shares of Common Stock issued and outstanding and no shares of Class B nonvoting common stock or shares of preferred stock of the Company issued and outstanding. Since such date, no additional shares of capital stock of the Company have been issued, except shares of Common Stock issued upon the exercise of Options outstanding under any Stock Option Plan. As of August 31, 2000, options to acquire 7,670,303 shares of Common Stock, and warrants to acquire 2,487,416 shares of Common Stock, and 324,140 shares of performance accelerated restricted stock (PARS), subject to future vesting, were outstanding. The Company has no outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. All issued and outstanding shares of Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. The Shares to be issued, sold and delivered to the Purchasers hereunder, and all shares of Common Stock issuable upon the conversion of the Shares shall, upon such issuance, sale, conversion and delivery in accordance with this Agreement and the Certificate of Designations, be duly authorized, validly issued, fully paid and non-assessable, and free and clear of any and all Encumbrances and preemptive and other similar rights (except as set forth in the Stockholders' Agreement). Section 3.1(c) of the Disclosure Schedule sets forth the total amount of indebtedness for borrowed money and the total amount of cash on hand of the Company and its Subsidiaries on a consolidated basis as of August 31, 2000. Section 3.1(c) of the Disclosure schedule sets forth the capitalization of the Company on a fully diluted basis (assuming conversion of all the Preferred Stock) in a form similar to the form of the capitalization table attached as Exhibit A to the commitment letter dated May 18, 2000 by and among the Company, Olivetti S.p.A. and Tote Holdings, L.P. Except as set forth in Section 3.1(c) of the Disclosure Schedule, there are no (i) outstanding Equity Securities of the Company or (ii) commitments or obligations of any kind or character for (A) the issuance of Equity Securities of the Company or (B) the repurchase, redemption or other acquisition of any Equity Securities of the Company. (d) VOTING TRUSTS, PROXIES, ETC. There are no stockholder agreements, voting trusts, proxies or other agreements or understandings with respect to or concerning the purchase, sale or voting of the Equity Securities of the Company to which the Company is a party. 3.2 AUTHORIZATION. The Company has all necessary corporate power and authority to execute and deliver this Agreement and the other Transaction Documents and to perform all its obligations hereunder and thereunder. The execution and delivery by the Company of each Transaction Document delivered or to be delivered by it and the consummation by the Company of the transactions contemplated by this Agreement and the other Transaction Documents has been duly authorized by all requisite corporate action on the part of the 13 Company. This Agreement and each of the other Transaction Documents delivered or to be delivered by the Company have been duly authorized, executed and delivered by the Company and, when so executed and delivered, will be the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors' rights generally or (b) general principles of equity, whether considered in a proceeding at law or in equity. 3.3 SUBSIDIARIES. (a) OWNERSHIP; CAPITALIZATION. The Company owns, directly or indirectly, each of the outstanding capital stock (or other ownership interests) of each of the Company's Subsidiaries as set forth in Section 3.3(a) of the Disclosure Schedule, and, except as set forth in Section 3.3(a) of the Disclosure Schedule, the Company has no equity or similar interest in any other Person or entity excluding securities in any publicly traded company held for investment. The Company, directly or indirectly, is the beneficial owner of all of the outstanding shares of capital stock of each Subsidiary shown to be owned by it, free and clear of any and all Encumbrances. The authorized, issued and outstanding capital stock, and the record ownership of all such shares of capital stock, of each Subsidiary is as set forth on part (a) of Section 3.3 of the Disclosure Schedule. All of the shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable, were issued and sold in accordance with federal and applicable state securities laws and were not issued in violation of any preemptive or other similar rights. Except as set forth in Section 3.3(a) of the Disclosure Schedule, there are no (i) outstanding Equity Securities of its Subsidiaries or (ii) commitments or obligations of any kind or character for (A) the issuance of Equity Securities of its Subsidiaries or (B) the repurchase, redemption or other acquisition of any Equity Securities of its Subsidiaries. Except as set forth in Section 3.3(a) of the Disclosure Schedule, there are no stockholder agreements, voting trusts, proxies or other agreements or understandings with respect to or concerning the purchase, sale or voting of the Equity Securities of the Company's Subsidiaries. (b) ORGANIZATION. Each of the Company's Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has full corporate power and authority (Corporate or otherwise) to conduct its business as it is presently being conducted and to own and lease its Assets. Each of the Company's Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is necessary under applicable law, except where the failure to be so qualified and in good standing would not reasonably be expected to have a Material Adverse Effect on the Company. None of the Company's Subsidiaries is in default under or in violation of any provision of its certificate of incorporation or by-laws, except, in the case of Subsidiaries of Target, for any possible violations which would not, individually or in the aggregate, have a Material Adverse Effect on the Company. 14 3.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since October 31, 1999, or December 31, 1999 in the case of Target and its Subsidiaries, (i) the Company and its Subsidiaries have been operated in the ordinary course of business, consistent with past practice, (ii) there has been no Material Adverse Change in or with respect to the Company or its Subsidiaries, and (iii) no events or developments have occurred, and no conditions, sets of facts or circumstances have existed or exist, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change with respect to the Company and its Subsidiaries, individually or in the aggregate. Without limiting the generality of the foregoing, since October 31, 1999, or December 31, 1999 in the case of Target and its Subsidiaries, neither the Company nor any of its Subsidiaries has: (a) sold, assigned, leased or transferred any of the Assets, which are material to the Company or its Subsidiaries singly or in the aggregate, other than Assets sold or disposed of in the ordinary course of business, consistent with past practice, to Persons who are not Affiliates of the Company or its Subsidiaries for fair consideration; (b) canceled, terminated, amended, modified or waived any material term of any Contract to which it is a party or by which it or any of the Assets is bound providing for aggregate annual revenues to it in excess of $1,000,000; (c) lost any employee who earned more than $200,000 in the most recent fiscal year (in salary, bonus and other cash compensation); (d) taken any action of the type contemplated by Section 5.1(b), (d) and (f); or (e) failed to take any action of the type contemplated by Section 5.1(a) hereof. 3.5 TITLE TO ASSETS; ABSENCE OF LIENS AND ENCUMBRANCES, ETC. (a) GENERAL. Each of the Company and its Subsidiaries owns or leases all Assets necessary for the conduct of the business of the Company and its Subsidiaries as presently conducted, and the Assets in the aggregate are in such operating condition and repair (subject to normal wear and tear) as is necessary for the conduct of its business as presently conducted. (b) REAL PROPERTY (i) OWNED REAL PROPERTY. Section 3.5(b)(i) of the Disclosure Schedule sets forth all material Facilities owned by the Company and its Subsidiaries. With respect to each such parcel of owned real property (A) the Company or its Subsidiaries has good and marketable fee simple title to such parcel of real property, free and clear of any and all Encumbrances other than Permitted Encumbrances, (B) there are no leases, subleases, licenses, options, rights, concessions or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of such parcel of real 15 property, (C) there are no outstanding options or rights of first refusal in favor of any other party to purchase any such parcel of real property or any portion thereof or interest therein, (D) there are no parties (other than the Company and its Subsidiaries) who are in possession of or who are using any such parcel of real property and (E) there is no (1) pending or, to the best knowledge of the Company, threatened condemnation proceeding relating to such parcel of real property, (2) pending or, to the best knowledge of the Company, threatened Action relating to such parcel of real property, or (3) other matter affecting the current or currently proposed use, occupancy or value of such parcel of real property in any material respect. (ii) LEASED REAL PROPERTY. Section 3.5(b)(ii) of the Disclosure Schedule sets forth all leases pursuant to which material Facilities are leased by the Company or its Subsidiaries (as lessee). Such Leases constitute all material leases, subleases or other occupancy agreements pursuant to which the Company or its Subsidiaries occupies or uses Facilities. The Company and its Subsidiaries have good and valid leasehold interests in, and enjoy peaceful and undisturbed possession of, all leased property described in such leases (the "LEASED PROPERTY"), free and clear of any and all Encumbrances other than any Permitted Encumbrances which would not permit the termination of the Lease therefor by the lessor. With respect to each such parcel of Leased Property (A) there are no pending or, to the best knowledge of the Company, threatened condemnation proceedings relating to, or any pending or, to the best knowledge of the Company, threatened Actions relating to, such Leased Property or any portion thereof, (B) none of the Company or its Subsidiaries or, to the best knowledge of the Company, any third party has entered into any sublease, license, option, right, concession or other agreement or arrangement, written or oral, granting to any Person the right to use or occupy such Leased Property or any portion thereof or interest therein and (C) neither the Company nor its Subsidiaries have received notice of any pending or threatened special assessment relating to such Leased Property or otherwise have any knowledge of any pending or threatened special assessment relating thereto. Each such leased Facility is supplied with utilities necessary for the operation of such Facility. (c) PERSONAL PROPERTY. (i) OWNED PERSONAL PROPERTY. Each of the Company and its Subsidiaries has good and marketable title to all personal property owned by it that is material to the business of the Company or its Subsidiaries, free and clear of any and all Encumbrances other than Permitted Encumbrances. With respect to each such item of personal property (A) there are no leases, subleases, licenses, options, rights, concessions or other agreements, written or oral, granting to any party or parties the right of use of any portion of such item of personal property, (B) there are no outstanding options or rights of first refusal in favor of any other party to purchase any such item of personal property or any portion thereof or interest therein and (C) there are no parties (other than the Company and its Subsidiaries) who are in possession of or who are using any such item of personal property. 16 (ii) LEASED PERSONAL PROPERTY. Each of the Company and its Subsidiaries has good and valid leasehold title to all of the Fixtures and Equipment, vehicles and other tangible personal property Assets leased by it from third parties that is material to the business of the Company or its Subsidiaries, free and clear of any and all Encumbrances other than Permitted Encumbrances which would not permit the termination of the lease therefor by the lessor. (d) With respect to each Lease listed in Section 3.5(b)(ii) and the material Leases described in Section 3.5(c), (A) there has been no default under any such Lease by the Company or its Subsidiaries, or to the best knowledge of the Company, by any other party, (B) such Lease is a valid and binding obligation of the Company and/or its Subsidiaries, is in full force and effect with respect to the Company and/or its Subsidiaries and is enforceable against the Company and/or its Subsidiaries in accordance with its terms, except as the enforceability thereof may be limited by (1) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors' rights generally or (2) general principles of equity, whether considered in a proceeding at law or in equity, and (C) no action has been taken by the Company and no event has occurred which, with notice or lapse of time or both, would permit termination, modification or acceleration by a party thereto other than the Company and/or its Subsidiaries, without the consent of the Company and/or its Subsidiaries, under any such Lease, except in each case, as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. 3.6 CONTRACTS AND COMMITMENTS. (a) Section 3.6 of the Disclosure Schedule sets forth a complete and accurate list of all Contracts in the following categories as of the date hereof (except to the extent that any such category specifies a different date, in which case such corresponding list is made as of such specified date): (i) each Contract (or group of related Contracts) for the furnishing of services by the Company and/or its Subsidiaries involving annual revenues of more than $1,000,000 to the Company and its Subsidiaries; (ii) each Contract (or group of related Contracts) concerning a partnership or joint venture with, or any other equity or similar investment in any other Person; (iii) each Contract (or group of related Contracts) (A) under which the Company or its Subsidiaries has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness for borrowed money, (B) constituting capital lease obligations, (C) under which the Company or its Subsidiaries has granted (or may grant) a security interest or lien on any of the Assets or (D) under which the Company or its Subsidiaries has incurred any obligations for any performance bonds, payment bonds, bid bonds, surety bonds, letters of credit, guarantees or similar instruments in each case in 17 an amount exceeding individually or in the aggregate as to any related items due to the same party or relating to the same transactions, $1,000,000; (iv) each Contract (or group of related Contracts) with any of the Personnel, any Affiliate of the Company or any member of any such person's immediate family, including, without limitation, Contracts (A) to employ or terminate executive officers or other Personnel and other Contracts with present or former officers, directors or stockholders or other corporate Personnel or (B) that will result in the payment by, or the creation of any commitment or obligation (absolute or contingent, matured or unmatured) to pay on behalf of the Company or its Subsidiaries or any Affiliate of the Company or its Subsidiaries, any severance, termination, "golden parachute" or other similar payments to any present or former Personnel following termination of employment or otherwise as a result of the consummation of the transactions contemplated by the Transaction Documents or as a result of a change of control of the Company; (v) each Contract (or group of related Contracts), other than Contracts covered by clause (vii) of this Section 3.6, providing for payments in excess of $1,000,000 over the life of such Contract (or group of related Contracts), except for such Contracts that are cancelable on not more than 30 days' notice by the Company or its Subsidiaries without penalty or increased cost; (vi) each distribution, franchise, license, sales, commission, consulting agency or advertising Contract related to the Assets or the business providing for payments in excess of $1,000,000, except for such Contracts that are cancelable on not more than 30 days' notice by the Company or its Subsidiaries without penalty or increased cost; (vii) each Contract (or group of related Contracts) containing covenants restraining or limiting the freedom of the Company or its Subsidiaries to engage in any line of business or compete with any Person including, without limitation, by restraining or limiting the right to solicit customers; (viii)each material Contract (or group of related Contracts) with the United States, any state or local government or any agency or department thereof; (ix) each material Contract (or group of related Contracts) pursuant to which the Company or its Subsidiaries have sold any Assets and have created any obligation to indemnify anyone with respect thereto; (x) any other material Contract. The Company and its Subsidiaries have delivered to the Purchasers a true and correct copy of those written Contracts listed in Section 3.6 of the Disclosure Schedule and marked with an asterisk (except for those Contracts relating to Target and its Subsidiaries, copies of which have not been delivered). 18 (b) ABSENCE OF BREACHES OR DEFAULTS IN GENERAL. With respect to each Contract set forth on or described in Section 3.6 of the Disclosure Schedule, (i) there is no default by the Company or its Subsidiaries or, to the knowledge of the Company, any other party to any Contract, (ii) the execution, delivery and performance of this Agreement or the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby will not cause a default hereunder or thereunder; (iii) such Contract is a legal, valid and binding obligation of the Company or its Subsidiaries that is a party thereto, is in full force and effect and is enforceable against the Company or its Subsidiaries and, to the knowledge of the Company, against each other party thereto in accordance with its terms, except as the enforceability thereof may be limited by (A) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors' rights generally or (B) general principles of equity, whether considered in a proceeding at law or in equity; and (iv) no action has been taken by the Company or its Subsidiaries and no event has occurred which, with notice or lapse of time or both and/or the occurrence, nonoccurrence, or existence or nonexistence of any other event or condition would permit termination, modification or acceleration by a party thereto other than the Company or its Subsidiaries under any such Contract, except, in each case, as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. 3.7 PERMITS. The Company and its Subsidiaries have all material Permits required to own and lease their properties, the Assets and the Facilities and to conduct their business as currently being conducted. All such Permits are valid and in full force and effect and are listed in Section 3.7 of the Disclosure Schedule. The Company and its Subsidiaries have not violated any such Permits in any material respect, and each is in compliance with all such Permits in all material respects. Neither the Company nor its Subsidiaries has received any notice to the effect that, or otherwise has any knowledge that, (a) the Company and its Subsidiaries are not currently in compliance with, or are in violation of, any such Permits in any material respect or (b) any currently existing circumstances are likely to result in a failure of the Company and its Subsidiaries to comply with, or in a violation by the Company and its Subsidiaries of, any such Permits in any material respect. No representation or warranty is made in this Section 3.7 with respect to the matters covered in Section 3.22 (Compliance with Environmental Laws). 3.8 NO CONFLICT OR VIOLATION. None of the execution, delivery and performance of any Transaction Document, or the consummation of the transactions contemplated hereby or thereby, by the Company or its Subsidiaries will result in (a) a violation of or a conflict with any provision of the certificate of incorporation or by-laws of the Company or its Subsidiaries, (b) with or without the giving of notice of the lapse of time or both, a breach of, or a default under, or the creation of any right of any party to accelerate, terminate or cancel pursuant to, or give rise to a loss of a benefit under, any term or provision of, or trigger any "change of control" right under, any Contract, indebtedness, Lease, Encumbrance, Permit, authorization or concession (including, without limitation, by reason of the failure to obtain a consent or approval thereunder) to which the Company or its Subsidiaries is a party or by which any of the Assets are bound, (c) a violation by the Company or its Subsidiaries of any statute, rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or award applicable to 19 the Company or its Subsidiaries, (d) an impairment of any right of the Company or its Subsidiaries under any Contract to which it is a party or by which its Assets are bound or under any Permit relating to the operation of its business, (e) the Company or its Subsidiaries being required to obtain any consent, waiver or approval or authorization of, or deliver any notice to, any Person or entity (other than any governmental or regulatory authority) or (f) an imposition of any Encumbrance (other than Permitted Encumbrances), restriction or charge on the business of the Company or its Subsidiaries or on any of the Assets, except in the case of clauses (b), (d), (e) and (f), where such event would not reasonably be expected to have a Material Adverse Effect on the Company or its Subsidiaries, individually or in the aggregate. 3.9 CONSENTS AND APPROVALS. Assuming the Purchasers' representations and warranties set forth herein or made in connection with any Regulatory Approvals are true and correct in all respects, no consent, waiver, agreement, approval, Permit or authorization of, or declaration, filing, notice or registration to or with, any federal, state, local or foreign governmental or regulatory authority or body or other Person or entity is required to be made or obtained by the Company or its Subsidiaries in connection with the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby other than (a) filings required in connection with or in compliance with the provisions of the HSR Act, the Exchange Act or applicable state securities and "Blue Sky" laws (collectively, the "REGULATORY FILINGS"), (b) Regulatory Approvals or (c) those consents, waivers, agreements, approvals, authorizations, declarations, filings, notices or registrations, that have been, or will be prior to the Closing Date, obtained or made, as set forth in Section 3.9 of the Disclosure Schedule. Section 3.9 of the Disclosure Schedule sets forth a complete and accurate list of all the jurisdictions and related governmental authorities from which the Company and the Purchasers are required to seek Regulatory Approvals. 3.10 SEC DOCUMENTS; FINANCIAL STATEMENTS, ETC. The Company has filed all forms, reports and documents required to be filed by it with the SEC since October 31, 1997 (collectively, the "COMPANY REPORTS"). As of their respective dates, the Company Reports (i) complied as to form in all material respects with the applicable requirements of the Securities Act, or the Exchange Act, as the case may be, and the rules and regulations thereunder and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The consolidated financial statements of the Company included in or incorporated by reference in the Company Reports (the "FINANCIAL STATEMENTS") (i) comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto; (ii) are in accordance in all material respects with the Books and Records of the Company and its Subsidiaries, (iii) have been prepared in accordance with GAAP, consistently applied throughout the periods covered thereby except as described therein and (iv) present fairly in accordance with GAAP, consistently applied throughout the periods covered, except as disclosed therein, the financial condition of the Company and its Subsidiaries as of the respective dates thereof and the results of operations, stockholders' equity and cash flows for the periods covered thereby, except that interim statements were or are subject to normal recurring year-end adjustments. The accounting and 20 financial records of the Company and its Subsidiaries have been prepared and maintained in accordance with GAAP, consistently applied throughout the periods indicated, and sound bookkeeping practices. 3.11 UNDISCLOSED LIABILITIES. Neither the Company nor its Subsidiaries has any liabilities, obligations or commitments of any nature (whether direct or indirect, known or unknown, absolute or contingent, liquidated or unliquidated, due or to become due, accrued or unaccrued, matured or unmatured) and, to the knowledge of the Company, there is no basis for any present or future charge, complaint, Action, hearing, investigation, claim or demand against the Company or its Subsidiaries giving rise to any such liability, other than (a) liabilities which are reflected and reserved against on the Financial Statements (in each case including, without limitation, in the notes thereto) which have not been paid or discharged since the date thereof, (b) liabilities incurred since October 31, 1999 (or December 31, 1999 in the case of Target and its Subsidiaries) in the ordinary course of business, consistent with past practice and (c) liabilities which, individually or in the aggregate, are not material to the Company and its Subsidiaries taken as a whole. None of the liabilities described in clause (b) of the preceding sentence has or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company and its Subsidiaries, individually or in the aggregate. 3.12 EXEMPTION FROM REGISTRATION. Assuming the representations and warranties of the Purchasers set forth in Section 4.6 hereof are true and correct in all material respects, the offer and sale of the Shares made pursuant to this Agreement and the acquisition of the Common Stock by the Purchasers upon the conversion of the Preferred Stock will be exempt from the registration requirements of the Securities Act and applicable state securities laws. 3.13 LITIGATION. Except as set forth in Section 3.13 of the Disclosure Schedule, there are no outstanding orders, writs, injunctions, judgments or decrees or Actions pending or, to the knowledge of the Company and its Subsidiaries, threatened or anticipated, (a) against, related to or affecting (i) the Company and its Subsidiaries, their business or operations or the Assets, (ii) any officers or directors of the Company and its Subsidiaries, as such, (iii) any stockholder of the Company and its Subsidiaries, as such, or (iv) other than routine claims for benefits, any Employee Plan of the Company and its Subsidiaries or any trust or funding instrument, fiduciary or administrator thereof, (b) relating to the transactions contemplated by the Transaction Documents, or (c) in which Company or its Subsidiaries is a plaintiff, including, without limitation, any derivative suits brought by or on behalf of the Company or its Subsidiaries, that would in the case of clause (a) and (b), if adversely determined, have a Material Adverse Effect on the Company and its Subsidiaries, individually or in the aggregate. 3.14 LABOR MATTERS. Except as set forth in Section 3.14 of the Disclosure Schedule, neither the Company nor its Subsidiaries is a party to, or a participant in any negotiation of, any labor agreement with respect to any of their employees with any labor organization, union, group or association and there are no employee unions (nor any other similar labor or employee organizations) under local statutes, custom or practice. In the past two years, neither the Company nor its Subsidiaries has been approached by organized labor or its representatives making an effort to cause the Company or its Subsidiaries to enter into a binding 21 agreement with organized labor that would cover any of their employees. There is no labor strike, slow-down or other work stoppage or labor disturbance pending or, to the knowledge of the Company, threatened against the Company or its Subsidiaries nor is any grievance currently being asserted, and in the past two years the Company and its Subsidiaries have not experienced a strike, slow-down or other work stoppage or other material labor disturbance or difficulty. The Company and its Subsidiaries are in compliance in all material respects with all applicable laws respecting employment practices, employee documentation, terms and conditions of employment and wages and hours and are not engaged in any unfair labor practice. There is no unfair labor practice charge or complaint against the Company and its Subsidiaries pending before or, to the knowledge of the Company, threatened by the National Labor Relations Board or any other domestic or foreign governmental agency arising out of the conduct of their businesses, and, to the knowledge of the Company, there are no facts or information which would give rise thereto, and in the past two years there have not been any unfair labor practice charges or complaints against the Company or its Subsidiaries which could have a Material Adverse Effect on the Company and its Subsidiaries, individually or in the aggregate. 3.15 COMPLIANCE WITH LAW. The Company and its Subsidiaries have not violated and are in compliance with (a) all applicable laws, statutes, ordinances, regulations, rules and orders of every federal, state, local or foreign government and every federal, state, local or foreign court or other governmental or regulatory agency, department, authority, body or instrumentality and (b) any judgment, decision, decree, writ, injunction or order of any court or governmental or regulatory agency, department, authority, body or instrumentality (collectively, "LAWS"), relating to the Assets, business or operations of the Company or its Subsidiaries, except to the extent that any such violation or failure to comply is not reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect on the Company and its Subsidiaries. Neither the Company nor its Subsidiaries has received any written notice to the effect that, or otherwise has any knowledge that, (i) the Company is not currently in compliance with, or is in violation of, any applicable Laws or (ii) any currently existing circumstances are reasonably likely to result in a failure of the Company to comply with, or a violation by the Company of, any Laws, in either case which such failure to comply or violation would be reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect on the Company and its Subsidiaries. No representation or warranty is made in this Section 3.15 with respect to compliance with Laws relating to the matters covered in Sections 3.14 (Labor Matters), 3.18 (Employee Plans), 3.19 (Tax Matters) and 3.22 (Compliance with Environmental Laws). 3.16 NO BROKERS. Other than Ramius Securies, Inc., whose fees (which may include newly issued shares of Preferred Stock) shall be paid exclusively by the Company, none of the Company, its Subsidiaries or any of their officers, directors, employees, stockholders or other Affiliates has employed or made any agreement with any broker, finder or similar agent or any Person or firm to pay any finder's fee, brokerage fee or commission or similar payment in connection with the transactions contemplated by the Transaction Documents. 3.17 PROPRIETARY RIGHTS. Section 3.17 of the Disclosure Schedule lists all material federal, state and foreign registrations of patents, trademarks, trade names, servicemarks or other trade rights and copyrights and all pending applications for any such material 22 registrations that are owned by the Company or its Subsidiaries, or that are being used in connection with, or relate to, the Assets, the business or operations, products or processes of the Company or its Subsidiaries or in which the Company or its Subsidiaries have any material interest (collectively, the "PROPRIETARY RIGHTS"). No Person has a right to receive a material royalty or similar payment in respect of any Proprietary Rights pursuant to any contractual arrangements entered into by the Company or its Subsidiaries or otherwise to the Company's knowledge. Neither the Company nor its Subsidiaries has any material licenses granted, sold or otherwise transferred by or to it or other material agreements to which it is a party, relating in whole or in part to any of the Proprietary Rights. Each of the Company and its Subsidiaries owns, or possesses valid and enforceable licenses or other rights to use, all Proprietary Rights used in or necessary for its business as it is currently conducted, and such ownership and licenses will not cease to be valid and in full force and effect by reason of the execution, delivery and performance of the Transaction Documents or the consummation of the transactions contemplated by the Transaction Documents, except where the failure to own or possess such licenses or rights would not be reasonably likely, individually or in the aggregate, to have a Material Adverse Effect on the Company and its Subsidiaries. Except as set forth in Section 3.17 of the Disclosure Schedule, no other firm, corporation, association or Person (a) has notified the Company or its Subsidiaries that it is claiming any ownership of or right to use such Proprietary Rights or (b) to the best of the Company's and its Subsidiaries' knowledge, has interfered with, infringed upon or otherwise come into conflict with any such Proprietary Rights in any material respect. 3.18 EMPLOYEE PLANS. (a) Section 3.18(a) of the Disclosure Schedule contains a complete list of Employee Plans. With respect to each such Employee Plan (other than those relating to Target and its Subsidiaries), the Company has provided to the Purchasers true and complete copies of (i) all plan documents and related trust agreements, annuity contracts or other funding instruments, (ii) all summary plan descriptions, summaries of material modifications, all material employee communications and a complete description of any Employee Plan which is not in writing, (iii) the most recent determination letter issued by the Internal Revenue Service and any opinion letter issued by the Department of Labor with respect to each Pension Plan and each voluntary employees' beneficiary association as defined under Section 501(c)(9) of the Code (other than a Multiemployer Plan), (iv) for the three most recent plan years, the Internal Revenue Service Form 5500 including all schedules and attachments thereto for each Pension Plan and Welfare Plan, and (v) a description setting forth the amount of any liability of the Company and its Subsidiaries as of the Closing Date for payments more than thirty (30) calendar days past due with respect to any Welfare Plan. (b) (i) Each Employee Plan including any related trust agreement, annuity contract or other funding instrument is legally valid and binding and in full force and effect. (ii) Each Pension Plan and each related trust agreement, annuity contract or other funding instrument which is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service stating that such Pension Plan and each related trust is qualified and tax-exempt under the provisions of Code Sections 401(a) 23 and 501(a) and has been so qualified during the period from its adoption to date. Each Employee Plan has been maintained in compliance in all material respects with its terms, both as to form and operation, and with the requirements prescribed by any and all statutes, orders, rules and regulations which are applicable to such Employee Plan, including, without limitation, ERISA and the Code. Except as provided by law or in any employment agreement set forth on Schedule 3.18, the employment of all persons presently employed or retained by the Company or its Subsidiaries is terminable at will. (c) Except as set forth in Section 3.18(c) of the Disclosure Schedule (i) none of the Employee Plans (other than any Multiemployer Plan) is a plan that is or has ever been subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code and (ii) none of the Employee Plans is a plan or arrangement described under Section 4(b)(5) or 401(a)(1) of ERISA, or a plan maintained in connection with a trust described in Section 501(c)(9) of the Code. (d) Multiemployer Plans (i) Neither the Company nor any ERISA Affiliate has, at any time, withdrawn from a Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and 4205 of ERISA, respectively, so as to result in a liability, contingent or otherwise (including without limitation the obligations pursuant to an agreement entered into in accordance with Section 4204 of ERISA), of the Company or any ERISA Affiliate. Neither the Company nor any ERISA Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Section 4212(c) of ERISA. (ii) All contributions required to be made by the Company or any ERISA Affiliate to each Multiemployer Plan have been made when due. (iii) If, as of the Closing Date, the Company (and all ERISA Affiliates) were to withdraw from all Multiemployer Plans to which it (or any of them) has contributed or been obligated to contribute, it (and they) would incur no liabilities to such plans under Title IV of ERISA. (iv) To the best of the Company's knowledge, with respect to each Multiemployer Plan: (A) no such Multiemployer Plan has been terminated or has been in reorganization under ERISA so as to result, directly or indirectly, in any liability, contingent or otherwise, of the Company or any ERISA Affiliate under Title IV of ERISA; (B) no proceeding has been initiated by any Person (including the PBGC) to terminate such Multiemployer Plan; (C) a "mass withdrawal", as defined in PBGC Reg. Section 2640.7, with respect to such Multiemployer Plan has not occurred; (D) the Company and the ERISA Affiliates have no reason to believe that such Multiemployer Plan will be terminated or will be reorganized under ERISA or that a "mass withdrawal", as defined in PBGC Reg. Section 2640.7, will occur with respect to such Multiemployer Plan; and (E) the Company and the ERISA Affiliates do not expect to withdraw in a "complete withdrawal" or "partial withdrawal" from such Multiemployer Plan. 24 (e) (i) None of the Company, or its Subsidiaries or any plan fiduciary of any Employee Plan has engaged in, or has any material liability in respect of, any transaction in violation of Sections 404 or 406 of ERISA or any "prohibited transaction," as defined in Section 4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code, or has otherwise materially violated or participated in a violation of the provisions of Part 4 of Title I, Subtitle B of ERISA. (ii) The Company and its Subsidiaries have not been assessed any civil penalty under Section 502(l) of ERISA. (f) No Employee Plan (or trust or other funding vehicle pursuant thereto) has incurred any liability under Code Section 511. (g) Except as required by Section 4980B of the Code or Part 6 of Title 1, Subtitle B of ERISA, neither the Company nor any ERISA Affiliate nor any Welfare Plan has any present or future obligation to make any payment to, or with respect to any present or former employee, officer, director or consultant of the Company or any ERISA Affiliate pursuant to any retiree medical benefit plan, or other retiree Welfare Plan, and no condition exists which would prevent the Company or an ERISA Affiliate from amending or terminating any such benefit plan or such Welfare Plan. (h) Except as set forth in Section 3.18(h) of the Disclosure Schedule, there is no contract, agreement, plan or arrangement covering any current or former employee, officer, director or consultant of the Company or its Subsidiaries that, individually or collectively, requires the payment by the Company or its Subsidiaries of any amount (i) that is not deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an "excess parachute payment" pursuant to Section 280G of the Code. (i) Except as set forth in Section 3.18(i) of the Disclosure Schedule, neither the Company nor any ERISA Affiliate has announced to current or former employees, officers, directors or consultants an intention to create, or has otherwise created, a legally binding commitment to adopt any additional Employee Plans which are intended to cover current or former employees, officers, directors or consultants of the Company or any Subsidiary or to amend or modify any existing Employee Plan which covers or has covered current or former employees, officers, directors or consultants of the Company or any Subsidiary, that, in any case, would materially increase the benefits under any Employee Plan, or materially increase the cost of maintaining any Employee Plan. (j) Neither the Company nor any Employee Plan holds as an asset any interest in any annuity contract, guaranteed investment contract or any other investment or insurance contract issued by an insurance company that is the subject of bankruptcy, conservatorship or rehabilitation proceedings. The insurance policies or other funding instruments, if any, for each Welfare Plan provide coverage for each current or former employee, director, officer or consultant of the Company or its Subsidiaries (and, if applicable, their respective dependents) who has been advised by the Company or its Subsidiaries, whether through an Employee Plan or otherwise, that he or she is covered by such Welfare Plan. 25 (k) Except as set forth in Section 3.18(k) of the Disclosure Schedule, neither the execution and delivery of this Agreement or the other Transaction Documents by the Company nor the consummation of the transactions contemplated hereby and thereby will result in the acceleration or creation of any rights of any Person to benefits under any Employee Plan (including, without limitation, the acceleration of the vesting or exercisability of any share options, the acceleration of the vesting of any restricted stock, the acceleration of the accrual or vesting of any benefits under any Pension Plan or the acceleration or creation of any rights under any severance, parachute or change in control agreement). (l) To the knowledge of the Company, no event has occurred in connection with which the Company or any Employee Plan, directly or indirectly, could reasonably be subject to any material liability (A) under any statute, regulation or governmental order relating to any Employee Plan or (B) pursuant to any obligation of the Company to indemnify any Person against liability incurred under any such statute, regulation or order as they relate to the Employee Plans. (m) Except as set forth in Section 3.18(m) of the Disclosure Schedule, the Company is not a party to any severance or similar arrangement in respect of any of the Personnel that will result in any obligation (absolute or contingent) of the Company or the Purchasers after the Closing to make any payment to any of such Personnel following termination of employment. (n) Each Welfare Plan which is a "group health plan," as defined in Section 607(1) of ERISA, has been operated in compliance with provisions of Part 6 of Title I, Subtitle B of ERISA and Section 4980B of the Code at all times. (o) There is no action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral action, governmental audit or investigation relating to or seeking benefits under any Employee Plan that is pending, or to the Company's knowledge, threatened or anticipated under which the Company or any Subsidiary thereof or any Employee Plan could have any material liability other than routine claims for benefits in the ordinary course of the operation of an Employee Plan. (p) The Company has no liability, whether absolute or contingent, including any obligations under the Employee Plans, with respect to any misclassification of a Person performing services for the Company as an independent contractor rather than as an employee. 3.19 TAX MATTERS. (a) FILING OF TAX RETURNS. The Company and its Subsidiaries have timely filed with the appropriate taxing authorities all Returns (including, without limitation, information returns) in respect of Taxes required to be filed through the date hereof and will timely file any such Returns required to be filed on or prior to the Closing Date. All such Returns and other information filed are complete and accurate in all material respects. The Company and its Subsidiaries have not requested any extension of time within which to file 26 Returns (including, without limitation, information Returns) in respect of any Taxes. The Company and its Subsidiaries have delivered to the Purchasers complete and accurate copies of the federal, state and local income tax Returns for the years 1997, 1998 and 1999. (b) PAYMENT OF TAXES. All material Taxes for which the Company and its Subsidiaries are liable, in respect of periods (or portions thereof) ending on or before the Closing Date, have been timely paid, or an adequate reserve (in conformity with GAAP) has been established therefor, as set forth in the Financial Statements. There are no material Taxes for which the Company and its Subsidiaries are or, to the Company's knowledge, may become liable that will apply in a period or a portion thereof beginning on or after the Closing Date and that are attributable to income earned or activities of the Company and its Subsidiaries occurring before the Closing Date for which adequate reserves have not been established in conformity with GAAP. (c) AUDITS, INVESTIGATIONS OR CLAIMS. No material deficiencies for Taxes have been claimed, proposed or assessed in writing by any taxing or other governmental authority against the Company or its Subsidiaries which have not been paid or reserved on the Financial Statements. There are no pending or, to the Company's knowledge, threatened audits, or known investigations or claims for or relating to any liability in respect of Taxes that in the reasonable judgment of the Company or its counsel are likely to result in an additional material amount of Taxes, and there is no matter under discussion with any taxing or other governmental authority with respect to Taxes that in the reasonable judgment of the Company or its counsel is likely to result in an additional material liability for Taxes with respect to the Company or its Subsidiaries. Audits of federal, state, and local returns for Taxes by the relevant taxing or other governmental authorities have been completed for the periods set forth in Section 3.19(c) of the Disclosure Schedule and none of the Company or its Subsidiaries has been notified that any taxing or other governmental authority intends to audit any other Return for any period. No extension of any statute of limitations relating to Taxes is in effect with respect to the Company or its Subsidiaries. No power of attorney has been executed by the Company or its Subsidiaries with respect to any matters relating to Taxes which is currently in force. (d) LIENS. There are no liens for Taxes (other than for current Taxes not yet due and payable) on the Assets. 3.20 INSURANCE. Section 3.20 of the Disclosure Schedule contains a complete and accurate list of all material policies or binders for business interruption, fire, liability, title, worker's compensation, product liability, errors and omissions and other forms of insurance (showing as to each policy or binder the carrier, policy number, coverage limits, expiration date, annual premium and a general description of the type of coverage provided) maintained by the Company and its Subsidiaries. Such insurance provides, and during its term has provided, in all material respects coverage to the extent and in the manner (a) adequate for the Company and its Subsidiaries and their Assets, businesses and operations and the risks insured against in connection therewith and (b) as may be or may have been required by law and by any and all Contracts to which the Company and/or its Subsidiaries are or have been a party. The Company and its Subsidiaries are not in any material default under any of such policies or binders, and the 27 Company and its Subsidiaries have not failed to give any notice or to present any material claim under any such policy or binder in a due and timely fashion. No insurer has refused, denied or disputed coverage of any material claim made thereunder. No insurer has advised the Company and/or its Subsidiaries that it intends to materially reduce coverage, materially increase any premium or fail to renew any existing policy or binder in all material respects. All such policies and binders are in full force and effect on the date hereof and shall be kept in full force and effect through the Closing Date. 3.21 CUSTOMERS AND SUPPLIERS. Section 3.21 of the Disclosure Schedule sets forth a true and correct list of (a) the 25 largest customers of the Company and its Subsidiaries, on a consolidated basis, in terms of sales during the fiscal year ended October 31, 1999 (or December 31, 1999 in the case of Target and its Subsidiaries), setting forth the total sales to each such customer during such period and (b) the 10 largest suppliers of the Company and its Subsidiaries, on a consolidated basis, in terms of purchases during the fiscal year ended October 31, 1999. To the Company's knowledge, there has not been any Material Adverse Change to the Company and its Subsidiaries, individually or in the aggregate, in the business relationship of the Company or its Subsidiaries with any customer or supplier named in Section 3.21 of the Disclosure Schedule. 3.22 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) The Company and its Subsidiaries are in material compliance with all Environmental Laws, including, without limitation, all Permits required thereunder to conduct their business as currently being conducted or proposed to be conducted. Neither the Company nor its Subsidiaries has received any notice to the effect that, or otherwise has knowledge that, (i) the Company and its Subsidiaries are not currently in compliance in any material respect with, or are in violation of, any Environmental Laws or Permits required thereunder or (ii) any currently existing circumstances are likely to result in a failure of the Company or its Subsidiaries to comply with, or a violation by the Company or its Subsidiaries of, any Environmental Laws or Permits required thereunder. The Company and its Subsidiaries at all times during the previous five years have been in material compliance with all Environmental Laws. (i) All material Permits that the Company and its Subsidiaries are required to have obtained pursuant to Environmental Laws have been obtained and are maintained by the Company or, where appropriate, its Subsidiaries, were duly issued by the appropriate governmental authority, are in full force and effect and are not subject to appeal. Neither the Company nor any of its Subsidiaries has received notice, or otherwise has knowledge, that any Permit has been, or is subject to being, rescinded, terminated, limited or amended in such a way as could result in a Material Adverse Effect on the Company and its Subsidiaries. (ii) The Company or, where appropriate, its Subsidiaries, have submitted timely applications for renewal of any Permits currently held by the Company or its Subsidiaries. To the best knowledge of the Company or its Subsidiaries, there are 28 no facts or circumstances upon which a governmental authority could refuse to renew any such Permit. (iii) To the best knowledge of the Company and its Subsidiaries, no additional capital expenditures will be required by either the Company or its Subsidiaries for purposes of compliance with the terms and conditions of any Permits or Permit renewals. (iv) The execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby will not require the assignment or transfer of any Permit except for those Permits that may be assigned or transferred on or prior to the Closing Date without the consent of any Person (other than ministerial approvals by relevant governmental authorities) and without causing any such Permit to be rescinded, terminated or limited. (b) There are no existing or, to the best knowledge of the Company, potential Environmental Claims against the Company or its Subsidiaries, nor have any of them received any written notification or otherwise have any knowledge, of any allegation of any actual, or potential responsibility for, or any inquiry or investigation regarding: (i) any disposal, release or threatened release at any location of any Hazardous Substance generated or transported by the Company or its Subsidiaries or (ii) any disposal, release or threatened release of any Hazardous Substance at any property owned or operated by the Company or its Subsidiaries. (c) (i) No underground tank or other underground storage receptacle for Hazardous Substances is currently located on the Facilities and there have been no releases of any Hazardous Substances from any such underground tank or related piping and (ii) there have been no releases (I.E., any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing, or dumping) of Hazardous Substances on, upon or into the Facilities other than those authorized by Environmental Laws including, without limitation, the Permits required thereunder. In addition, to the best knowledge of the Company, there have been no such releases by the Company's or its Subsidiaries' corporate predecessors and no releases on, upon, or into any real property in the vicinity of any of the real properties of the Company or its Subsidiaries other than those authorized by Environmental Laws which, through soil or ground water contamination, may have come to be located on the properties of the Company or its Subsidiaries. (d) There are no PCBs or asbestos-containing materials located at or on the Facilities. (e) The Company and its Subsidiaries are not a party, whether as a direct signatory or as successor, assign or third-party beneficiary, or otherwise bound, to any Lease or other Contract (excluding insurance policies disclosed on the Disclosure Schedule) under which the Company or its Subsidiaries are obligated by or entitled to the benefits of, directly or indirectly, any representation, warranty, indemnification, covenant, restriction or other undertaking concerning Environmental Conditions, Environmental Claims or compliance with Environmental Laws. 29 (f) The Company and its Subsidiaries have neither released any other Person from any claim under any Environmental Law nor waived any rights concerning any Environmental Condition or Environmental Claim. (g) There are no consent decrees, consent orders, judgments, judicial or administrative orders or liens issued by, or agreements (other than Permits) with, any governmental authority or quasi-governmental entity relating to any Environmental Law which regulate, obligate or bind the Company or its Subsidiaries. (h) True and correct copies of the Environmental Reports, as well as all other written environmental reports, audits or assessments that have been conducted, either by the Company or its Subsidiaries or by any Person engaged by the Company or its Subsidiaries for such purpose, at any facility presently or formerly owned by the Company or its Subsidiaries have been made available to the Purchasers and a list of all such reports, audits and assessments is set forth in Section 3.22 of the Disclosure Schedule. 3.23 NO OTHER AGREEMENTS TO SELL THE ASSETS OR SHARES OF THE COMPANY OR ITS SUBSIDIARIES. Other than sales of inventory or product in the ordinary course of business, the transactions contemplated by the Transaction Documents and the agreements among the Company and its lenders in connection with the financing of the Merger, neither the Company nor its Subsidiaries has any legal obligation, absolute or contingent, to any other Person or firm to (a) sell or effect a sale of any material portion or all of the Assets, (b) sell or effect a sale of any Equity Securities of the Company or its Subsidiaries, (c) effect any merger, consolidation or other reorganization of the Company or its Subsidiaries (except the Merger) or (d) enter into any Contract or cause the entering into a Contract with respect to any of the foregoing (except the Merger). 3.24 PROHIBITED PAYMENTS. The Company and its Subsidiaries have not, directly or indirectly, (a) made or agreed to make any contribution, payment or gift to any government official, employee or agent where either the contribution, payment or gift or the purpose thereof was illegal under the laws of any federal, state, local or foreign jurisdiction, (b) established or maintained any unrecorded fund or asset for any such purpose or made any false entries on the Books and Records for any reason, (c) made or agreed to make any contribution, or reimbursed any political gift or contribution made by any other Person, to any candidate for federal, state, local or foreign public office or (d) paid or delivered any fee, commission or any other sum of money or item of property, however characterized, to any finder, agent, government official or other party, in the United States or any other country, which in any manner relates to the Assets, business or operations of the Company or its Subsidiaries, which in any such case the Company or its Subsidiaries knows or has reason to believe to have been illegal under any federal, state or local laws (or any rules or regulations thereunder) of the United States or any other country having jurisdiction. 3.25 BOARD RECOMMENDATION. The Board of Directors of the Company, at a meeting duly called and held, has by unanimous vote of those directors present, determined that this Agreement, the other Transaction Documents and the transactions contemplated hereby and 30 thereby, including, without limitation, the Equity Investment and the Purchasers' acquisition of Common Stock pursuant to the conversion of Preferred Stock, taken together are fair to and in the best interests of the stockholders of the Company and has taken all actions necessary on the part of the Company to approve this Agreement, the Equity Investment and the other Transaction Documents, such that the restrictions on business combinations or other actions contained in Section 203 of the DGCL will be inapplicable to any business combination (as defined in Section 203 of the DGCL) or other action engaged in by the Company with any of the Purchasers or their respective Affiliates or associates. Other than Section 203 of the DGCL, no state takeover statute is applicable to the transactions contemplated by the Transaction Documents. 3.26 CHANGE OF CONTROL EXEMPTIONS. (a) All change of control provisions contained in the Financing Documents are as set forth in Section 3.26 of the Disclosure Schedule. Such change in control provisions set forth in, or required to be set forth in, Section 3.26 of the Disclosure Schedule do not and will not apply to, or otherwise have an effect on, the Company, Olivetti S.p.A. or their respective Affiliates in the event Olivetti S.p.A or its Affiliates take any action that would otherwise cause, or be deemed, a change of control under any such Financing Documents. None of the change of control provisions contained in the Severance Agreements of the Company and its Subsidiaries apply to or will apply to, or otherwise have an effect on, the Company, Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their respective Affiliates in the event Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their Affiliates take any action that would otherwise cause, or be deemed, a change of control under the Severance Agreements of the Company or its Subsidiaries, unless termination of employment by the Company or its Subsidiaries as a result of a change of control, and not the mere occurrence of a change of control, triggers payment to be made by the Company or its Subsidiaries. (b) The Company has used its best efforts to (i) amend all existing agreements of the Company or its Subsidiaries (other than Severance Agreements) so that no change of control provisions contained in any such agreements (collectively, and together with the Severance Agreements, the "CHANGE OF CONTROL Agreements") apply to or will apply to, or otherwise have an effect on, the Company, Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their respective Affiliates in the event Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their Affiliates take any action that would otherwise cause, or be deemed, a change of control under such Change of Control Agreements of the Company or its Subsidiaries. Section 3.26 of the Disclosure Schedule sets forth a complete and accurate list of all Change of Control Agreements. 3.27 ACCURACY OF INFORMATION FURNISHED. No representation or warranty by the Company contained in this Agreement or the other Transaction Documents (including, without limitation, the Disclosure Schedule) delivered by the Company in connection with the transactions contemplated by the Transaction Documents, and no statement contained in any certificate furnished or to be furnished by or on behalf of the Company pursuant hereto or in connection with the transactions contemplated by the Transaction Documents, contains or will contain as of the date such representation or warranty is made or such certificate is delivered, any untrue statement of a material fact or omits, or will omit, to state a material fact as of the date 31 such representation or warranty is made or such certificate is delivered, necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. 3.28 STOCKHOLDER APPROVAL. The transactions contemplated by the Transaction Documents do not require the approval of the Company's stockholders under any AMEX rules or regulations, including the rules promulgated under AMEX's company guide. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS As an inducement to the Company to enter into this Agreement, each of the Purchasers hereby makes, severally and not jointly, the following representations and warranties to the Company with respect to itself as of the date hereof and as of the Closing Date: 4.1 ORGANIZATION. Such Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. 4.2 AUTHORIZATION. Such Purchaser has all necessary corporate power and authority to, and has taken all corporate action necessary on its part to, execute and deliver this Agreement and the other Transaction Documents and to consummate the transactions contemplated hereby and thereby. This Agreement and each of the other Transaction Documents have been duly executed and delivered by such Purchaser and are the legal, valid and binding obligations of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as the enforceability thereof may be limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors' rights generally or (b) general principles of equity, whether considered in a proceeding at law or in equity. 4.3 CONSENTS AND APPROVALS. Assuming that the Company's representations and warranties set forth in Section 3.9 are true and correct in all respects, no consent, waiver, agreement, approval, Permit or authorization of, or declaration, filing, notice or registration to or with, any federal, state, local or foreign governmental or regulatory authority or body is required to be made or obtained by such Purchaser in connection with the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby other than any Regulatory Filings, any Regulatory Approvals and pursuant to the DGCL (it being understood that, with respect to the Regulatory Approvals, the Purchasers have relied on (i) the Company's representations as to which jurisdictions and related governmental authorities the Purchasers are required to seek Regulatory Approvals from by reason of the business and operations of the Company and its Subsidiaries and (ii) the accuracy and completeness of the Company's disclosure set forth in Section 3.9 of the Disclosure Schedule). 4.4 NO CONFLICT OR VIOLATION. None of the execution, delivery and performance of this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby by such Purchaser will result in (a) a violation of or 32 a conflict with any provision of the certificate of incorporation or by-laws (or other applicable governing documents) of such Purchaser, (b) with or without the giving of notice of the lapse of time or both, a breach of, or a default under, or the creation of any right of any party to accelerate, terminate or cancel pursuant to, or give rise to a loss of a benefit under, any term or provision of, or trigger any "change of control" right under, any Contract, indebtedness, Lease, Encumbrance, Permit, authorization or concession (including, without limitation, by reason of the failure to obtain a consent or approval thereunder) to which such Purchaser or its Subsidiaries is a party or by which any of their Assets are bound, (c) a violation by such Purchaser or its Subsidiaries of any statute, rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or award applicable to such Purchaser or its Subsidiaries, (d) such Purchaser or its Subsidiaries being required to obtain any consent, waiver or approval or authorization of, or deliver any notice to, any Person or entity (other than any governmental or regulatory authority), except in the case of clauses (b) and (d), where such event would not reasonably be expected to have a Material Adverse Effect on such Purchaser. 4.5 INVESTMENT REPRESENTATION. Such Purchaser is acquiring its Shares for its own account for investment purposes and with no present intention of distributing or reselling such shares or any part thereof in any transaction which would constitute a public "distribution" within the meaning of the Securities Act (it being understood that a Purchaser's sale of Shares pursuant to a private placement that is exempt from the registration requirements of the Securities Act shall not be deemed a public "distribution"). 4.6 NO BROKERS. Neither such Purchaser nor its Subsidiaries or any of its officers, directors, employees, stockholders or other Affiliates has employed or made any agreement with any broker, finder or similar agent or any Person or firm to pay any finder's fee, brokerage fee or commission or similar payment in connection with the transactions contemplated by the Transaction Documents. 4.7 NO INVESTMENT COMPANY. Such Purchaser (other than Oak, Peconic and Ramius) is not an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. ARTICLE V. COVENANTS OF THE COMPANY AND THE PURCHASERS 5.1 MAINTENANCE OF BUSINESS PRIOR TO CLOSING. Prior to the Closing, except as set forth in the Disclosure Schedule or as contemplated by any other provision of this Agreement, unless the Purchasers have consented in writing thereto, the Company: (a) shall, and shall cause each of its Subsidiaries to, conduct its operations and business according to their usual, regular and ordinary course consistent with past practice; (b) shall not, and shall cause its Subsidiaries not to, amend their respective certificates of incorporation or by-laws or comparable governing instruments; 33 (c) shall promptly deliver to the Purchasers correct and complete copies of any report, statement or schedule filed with the SEC subsequent to the date of this Agreement; (d) shall not, and shall not permit any of its Subsidiaries to, authorize, propose or announce an intention to authorize or propose, or enter into an agreement with respect to, any merger, consolidation or business combination, release or relinquishment of any material contract rights, or any acquisition or disposition of Assets or securities in excess of $1,000,000 in the aggregate other than in the ordinary course of business consistent with past practice; (e) other than the Equity Investment, shall not, and shall not permit any of its Subsidiaries to, (i) grant, confer or award any options, warrants, conversion rights or other rights or Equity Securities, not existing on the date hereof, to acquire any shares of its capital stock or other securities of the Company or its Subsidiaries or (ii) accelerate, amend or change the period of exercisability of options or restricted stock granted under any employee stock plan or authorize cash payments in exchange for any options granted under any of such plans; (f) shall not, and shall not permit any of its Subsidiaries to, (i) declare, set aside or pay any dividend or make any other distribution or payment with respect to any shares of its capital stock or other ownership interests (except, in the case of any of its wholly owned Subsidiaries, to the Company or another wholly owned Subsidiary of the Company), or (ii) directly or indirectly redeem, purchase or otherwise acquire any shares of its capital stock or capital stock of any of its Subsidiaries, or make any commitment for any such action or (iii) 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 share of its capital stock; (g) shall not, and shall not permit any of its Subsidiaries to, issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, securities or convertible securities (other than the issuance or shares of Common Stock upon the exercise of options, warrants or other rights outstanding on the date hereof in accordance with their present terms); or (h) shall not, and shall not permit any of its Subsidiaries to take, or agree (in writing or otherwise) or resolve to take, any of the foregoing actions. 5.2 INVESTIGATION BY THE PURCHASERS. Prior to the Closing, the Company shall allow the Purchasers, their respective counsel, accountants and other representatives during regular business hours upon reasonable notice, to make such reasonable inspection of the Assets, Facilities, business and operations of the Company and its Subsidiaries and to inspect and make copies of Contracts, Books and Records and all other documents and information reasonably requested by the Purchasers and related to the operations and business of the Company and its Subsidiaries including, without limitation, historical financial information concerning the business of the Company and its Subsidiaries and to meet with designated Personnel of the Company or its Subsidiaries and/or their representatives. The Company and its Subsidiaries 34 shall furnish to the Purchasers promptly upon request (a) all additional documents and information with respect to the affairs of the Company and its Subsidiaries relating to their businesses and (b) access to the Personnel and to the Company's and its Subsidiaries' accountants and counsel as the Purchasers, or their respective counsel or accountants, may from time to time reasonably request and the Company and its Subsidiaries shall instruct their Personnel, accountants and counsel to cooperate with the Purchasers, and to provide such documents and information as the Purchasers and their respective representatives may request. 5.3 CONSENTS AND EFFORTS; FURTHER ASSURANCES. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use its reasonable best 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 under applicable Laws and regulations to consummate and make effective, in the most expeditious manner as reasonably practicable, the Equity Investment and the other transactions contemplated by the Transaction Documents. The Purchasers and the Company will use their reasonable best efforts and cooperate with one another (i) in promptly determining whether any filings are required to be made or consents, approvals, waivers, licenses, permits or authorizations are required to be obtained (or, which if not obtained, would result in an event of default, termination or acceleration of any agreement or any put right under any agreement) under any applicable Law or regulation or from any governmental authorities or third parties, including parties to loan agreements or other debt instruments, in connection with the transactions contemplated by the Transaction Documents, including the Equity Investment, and (ii) in promptly making any such filings, in furnishing information required in connection therewith and in timely seeking to obtain any such consents, approvals, permits or authorizations. Notwithstanding the foregoing, the parties hereto acknowledge and agree that with respect to Regulatory Approvals, in order to satisfy this Section 5.3, each Purchaser shall only be required to cause its officers, directors and key employees in their capacity as such and any of its Affiliates that it controls to provide all required information in connection with such Regulatory Approvals and to use its reasonable efforts to obtain the cooperation of its substantial shareholders and any other third party in providing all required information in connection with such Regulatory Approvals. 5.4 NOTIFICATION OF CERTAIN MATTERS. The Company and its Subsidiaries shall give prompt notice to the Purchasers and the Purchasers shall give prompt notice to the Company, as applicable, of: (a) (i) the occurrence, or failure to occur, of any event, which occurrence or failure would be likely to cause any representation or warranty made by such party contained in this Agreement or in any exhibit or schedule hereto or in any other Transaction Document to be untrue or inaccurate, (ii) any Material Adverse Change with respect to such party, individually or in the aggregate, and (iii) any failure of such party and its Subsidiaries or any of their respective Affiliates, stockholders or representatives to comply with, perform or satisfy any covenant, condition or agreement to be complied with, performed by or satisfied by it under this Agreement or any exhibit or schedule hereto or under any Transaction Document; PROVIDED that such disclosure shall not be deemed to cure, or to relieve such party of any liability 35 or obligation with respect to, any breach of or failure to satisfy any representation, warranty, covenant, condition or agreement under any of the Transaction Documents. (b) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by the Transaction Documents; (c) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by the Transaction Documents; and (d) any Actions commenced or, to the best of its knowledge threatened against, relating to or involving or otherwise affecting such party or any of its Subsidiaries which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.13 (with respect to the Company and its Subsidiaries) or which relate to the consummation of the transactions contemplated by the Transaction Documents. 5.5 EXCLUSIVITY; FEES AND EXPENSES. (a) From the date of this Agreement until this Agreement terminates in accordance with its terms, (the "EXCLUSIVITY PERIOD"), the Company shall not, and shall cause its officers, board of directors, advisors and representatives not to, directly or indirectly, (i) solicit or initiate, or encourage the submission of, proposals or offers relating to, (ii) respond to any submissions, proposals or offers relating to, (iii) engage in any negotiations or discussions with any Person relating to, or (iv) otherwise cooperate in any way with any Person in connection with the issuance of any Equity Securities of the Company in connection with the Merger (except for the shares of Common Stock and warrants issued in respect of the financing contemplated by the Financing Documents), without first obtaining the written approval of the Purchasers. The Company will immediately notify the Purchasers of any submissions, proposals, offers or inquiries made during the Exclusivity Period. In the event of the Company's breach of the terms this Section 5.5(a), the Company shall reimburse the Purchasers for their damages, including, without limitation, their reasonable attorney's fees and expenses and other out of pocket expenses, incurred in connection with the evaluation and negotiation of the Equity Investment. (b) The Company shall reimburse the Purchasers (i) for any and all of their reasonable documented costs relating to the Equity Investment, whether or not the transactions contemplated by the Transaction Documents are ultimately consummated, in an amount not to exceed $150,000 and (ii) in addition to the costs set forth in clause (i) hereof, for any and all of their documented costs relating to regulatory authorization and filings related to the Equity Investment, including, without limitation, any and all costs of any regulatory body investigating the Purchasers and any of their Affiliates, officers, directors and key employees and fees and expenses of legal counsel, whether or not the transactions contemplated by the Transaction Documents are ultimately consummated, in an amount not to exceed $500,000. (c) If a Payment Event (as hereinafter defined) occurs, the Company shall pay to the Purchasers, within one business day following such event, a fee of $3,000,000 36 (90.9% of which shall be paid to Cirmatica, 1.8% of which shall be paid to Olivetti, 3.635% of which shall be paid to Oak and 3.635% of which shall be paid to Peconic). "PAYMENT EVENT" means (i) the failure by the Company to consummate the Equity Investment in accordance with the terms of this Agreement; (ii) the termination of this Agreement by the Purchasers pursuant to Section 8.1(a)(iii); (iii) the failure by the Company or Target to consummate the Merger as a result of a breach or alleged breach by the Company of its representations, warranties or covenants contained in the Merger Agreement or any of the other agreements related thereto, unless such breach or alleged breach is approved by each Purchaser in its sole discretion; or (iv) if this Agreement shall have been terminated in accordance with its terms and on or prior to the sixth month anniversary of the date of such termination, the Company enters into an agreement with respect to the sale of a material amount of Equity Securities of the Company. In addition, if the Company receives a fee or any expense reimbursement in connection with the termination of the Merger from Target, the Company shall pay to the Purchasers the lesser of (x) $1.0 million or (y) an amount equal to one-third of such fee plus expense reimbursement received by the Company (net of the payment of fees and expenses owed to the banks in connection with the debt financing and legal, accounting and other expenses incurred in connection with the Merger). (d) The Company acknowledges that the agreements contained in this Section 5.5 are an integral part of the transactions contemplated by the Transaction Documents, and that, without these agreements, the Purchasers would not enter into this Agreement; accordingly, if the Company fails to promptly pay any amount due pursuant to this Section 5.5, and, in order to obtain such payment, the other party commences a suit which results in a judgment against the Company for the fee or fees and expenses set forth in this Section 5.5, the Company shall also pay to the Purchasers their costs and expenses incurred in connection with such litigation. (e) This Section 5.5 shall survive any termination of this Agreement, however caused. 5.6 CHANGE OF CONTROL EXEMPTIONS. (a) The Company covenants and agrees that none of the change of control provisions contained in any Severance Agreements of the Company and its Subsidiaries entered into after the date of this Agreement will apply to, or otherwise have an effect on, the Company, Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their respective Affiliates in the event Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their Affiliates take any action that would otherwise cause, or be deemed, a change of control under the Severance Agreements of the Company or its Subsidiaries, except to the extent that a termination of employment by the Company or its Subsidiaries as a result of a change of control, and not the mere occurrence of a change of control, triggers payment to be made by the Company or its Subsidiaries. (b) The Company covenants and agrees to (i) use its best efforts to amend all Change of Control Agreements of the Company or its Subsidiaries (other than Severance Agreements) so that no change of control provisions contained in any such agreements apply to or will apply to, or otherwise have an effect on, the Company, Olivetti S.p.A., 37 Cirmatica, Lottomatica, S.p.A. or their respective Affiliates in the event Olivetti, Cirmatica, Lottomatica, S.p.A. or their Affiliates take any action that would otherwise cause, or be deemed, a change of control under such agreements of the Company or its Subsidiaries, and (ii) not enter into, or permit its Subsidiaries to enter into, any agreements of the Company or its Subsidiaries (other than Severance Agreements) which contains any change of control provisions that apply to or will apply to, or will otherwise have an effect on, the Company, Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their respective Affiliates in the event Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their Affiliates take any action that would otherwise cause, or be deemed, a change of control under such agreements of the Company or its Subsidiaries. (c) The Company covenants and agrees that it will not amend any of the change of control provisions contained in the Financing Documents in any manner that will cause any such change in control provisions to apply to, or otherwise have an effect on, the Company, Olivetti S.p.A. or their respective Affiliates in the event Olivetti S.p.A. or its Affiliates take any action that would otherwise cause, or be deemed, a change of control under any such Financing Documents. 5.7 COMPLIANCE WITH LAWS. The Purchasers shall comply with all applicable federal securities laws in their transactions in the Company's securities. ARTICLE VI. CONDITIONS TO THE INVESTMENT 6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the Company and the Purchasers to consummate the transactions contemplated hereby on the Closing Date are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions: (a) CONSENTS. All consents, approvals and licenses of any governmental or other regulatory body required in connection with the execution, delivery and performance of this Agreement and the other Transaction Documents and for the Company to conduct the business of the Company in substantially the manner now conducted, including approval by the Federal Trade Commission and the Department of Justice under the HSR Act or expiration of the waiting period thereunder, shall have been obtained, unless the failure to obtain such consents, authorizations, orders or approvals would not have a Material Adverse Effect on the Company and its Subsidiaries, individually or in the aggregate, after giving effect to the transactions contemplated by this Agreement and the other Transaction Documents. (b) NO LEGAL PROHIBITIONS. No provision of any applicable Law shall prohibit or restrain the consummation of the transactions contemplated by the Transaction Documents, including the Equity Investment; PROVIDED, HOWEVER, that the Company and the Purchasers shall each use its reasonable best efforts to have any judgment, order, decree or injunction prohibiting or restraining the consummation of the transactions contemplated by the Transaction Documents vacated. 38 (c) REGULATORY APPROVALS. The Company and the Purchasers shall have received all regulatory approvals, and findings of suitability or qualification, including any approvals by state governing commissions and gaming regulators, or temporary permits or authorizations, or, if applicable, the expiration of any notice periods with respect thereto ("REGULATORY APPROVALS"), reasonably satisfactory to the Company and the Purchasers, that are necessary for the Purchasers to own and continue to hold the Preferred Stock and shares of Common Stock, vote the Preferred Stock and appoint or elect at least four (or seven, if applicable) directors to the Board of Directors of the Company. (d) MERGER CLOSING. On or prior to the Closing, the Merger shall have been consummated in accordance with the terms of the Merger Agreement. 6.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the Company to consummate the transactions contemplated hereby on the Closing Date are subject, in sole discretion of the Company, to the satisfaction, on or prior to the Closing Date of the following conditions, which may be waived by the Company in accordance with Section 8.4: (a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) All representations and warranties of the Purchasers contained in this Agreement that are qualified by materiality shall be true and correct in all respects and all representations and warranties of the Purchasers contained in this Agreement not so qualified by materiality shall be true and correct in all material respects, in each case at and as of the date of this Agreement and the Closing Date as if such representations and warranties were made at and as of the date of this Agreement and the Closing Date (except to the extent that any such representations and warranties were made as of a specified date, which representations and warranties shall continue on the Closing Date to be true in all respects or all material respects, as required, as of such specified date). (ii) Each of the Purchasers shall have performed in all material respects all obligations arising under the agreements and covenants required hereby to be performed by it prior to or on the Closing Date. (b) STOCKHOLDERS' AGREEMENT. Each of the Purchasers shall have executed and delivered to the Company the Stockholders' Agreement, in the form attached hereto as EXHIBIT B. (c) NO PROCEEDINGS OR LITIGATION. No Actions by any governmental authority or any other entity or Person shall have been instituted or threatened for the purpose of enjoining or preventing, or which question the validity or legality of, the transactions contemplated by the Transaction Documents and which could reasonably be expected to damage the Company or materially adversely affect the ability of the Purchasers to consummate the transactions contemplated by the Transaction Agreement. 6.3 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS. The obligations of the Purchasers to consummate the transactions contemplated hereby on the Closing Date are subject, 39 in the sole discretion of the Purchasers, to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by the Purchasers in accordance with Section 8.4: (a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) All representations and warranties of the Company contained in this Agreement that are qualified by materiality shall be true and correct in all respects and all representations and warranties of the Company contained in this Agreement not so qualified by materiality shall be true and correct in all material respects, in each case at and as of the date of this Agreement and the Closing Date as if such representations and warranties were made at and as of the date of this Agreement and the Closing Date (except to the extent that any such representations and warranties were made as of a specified date, such representations and warranties shall continue on the Closing Date to have been true in all respects or all material respects, as required, as of such specified date). (ii) The Company shall have performed in all material respects all obligations arising under the agreements and covenants required hereby to be performed by it prior to or on the Closing Date. (iii) The Purchasers shall have received, at or prior to the Closing, a certificate executed by the President and the Chief Financial Officer of the Company certifying that, as of the Closing Date, the conditions set forth in Sections 6.3(a)(i), (a)(ii), (d), (e) and (i) have been satisfied. (b) NO PROCEEDINGS OR LITIGATION. No Actions by any governmental authority or any other entity or Person shall have been instituted or threatened for the purpose of enjoining or preventing, or which question the validity or legality of, the transactions contemplated by the Transaction Documents and which could reasonably be expected to damage the Purchasers or materially adversely affect the value of the Shares or the Assets, business or operations of the Company and its Subsidiaries or each Purchaser's ability to own its Shares, if the transactions contemplated by the Transaction Documents are consummated. (c) STOCKHOLDERS' AGREEMENT. The Company shall have executed and delivered to the Purchasers the Stockholders' Agreement, in the form attached hereto as EXHIBIT B. (d) MATERIAL CHANGES. There shall not exist any condition, circumstance or state of facts, and there shall not have been (or reasonably expected to occur) any event, occurrence, change, development or circumstance, which has had or could reasonably be expected to have a Material Adverse Effect on the Company or its Subsidiaries, individually or in the aggregate and, to the best knowledge of the Company, there shall have been no potential or threatened Material Adverse Change with respect to the Company or its Subsidiaries, individually or in the aggregate. 40 (e) BOARD APPROVAL. The Company's Board of Directors shall have approved the transactions contemplated by the Transaction Documents, including the Equity Investment, for purposes of Section 203 of the DGCL as specified in Section 3.25. (f) MERGER FINANCING. The Company shall have received all funds required to consummate the Merger and refinance the debt of the Company substantially in accordance with that certain Sources and Uses Table attached hereto as Schedule 6.3(f) on (i) the terms and conditions of the Debt Commitment Letters and the Financing Documents; PROVIDED, HOWEVER, that such Debt Commitment Letters and Financing Documents will not be materially amended or modified nor will any of the conditions to such Debt Commitment Letters and Financing Documents be waived, in each case, without the prior written consent of the Purchasers (not to be unreasonably withheld) or (ii) other terms and conditions no less favorable, in the aggregate, to the Company and reasonably satisfactory to the Purchasers. (g) MERGER AGREEMENT. The Purchasers shall have received, at or prior to the Closing, a certificate executed by the President and the Chief Financial Officer of the Company certifying that, as of the Closing Date, all of the material conditions to the consummation of the Merger set forth in the Merger Agreement shall have been satisfied; or if any such condition has not been satisfied, such condition shall have been waived only with the prior written consent of the Purchasers (not to be unreasonably withheld), after written disclosure to the Purchasers of the conditions proposed to be waived. (h) BOARD OF DIRECTORS. As of the effective time of the Merger, at least four directors designated by the holders of Preferred Stock as set forth in the Stockholders' Agreement shall have been appointed to the Board of Directors of the Company and the Company shall have delivered evidence reasonably satisfactory to the Purchasers of such designation. (i) CHANGE OF CONTROL EXEMPTIONS. All change of control provisions contained in the Financing Documents shall not apply to, or otherwise have an effect on, the Company, Olivetti S.p.A. or their respective Affiliates in the event Olivetti S.p.A. or its Affiliates take any action that would otherwise cause, or be deemed, a change of control under any such Financing Documents. All change of control provisions contained in the Severance Agreements of the Company and its Subsidiaries shall not apply to, or otherwise have an effect on, the Company, Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their respective Affiliates in the event Olivetti S.p.A., Cirmatica, Lottomatica S.p.A. or their Affiliates take any action that would otherwise cause, or be deemed, a change of control under the Severance Agreements of the Company or its Subsidiaries, unless termination of employment by the Company or its Subsidiaries as a result of a change of control, and not the mere occurrence of the change of control, triggers payment to be made by the Company or its Subsidiaries. (j) OPINION OF COUNSEL. The Company shall have delivered to the Purchasers an opinion of counsel for the Company, dated as of the Closing Date, substantially in the form of EXHIBIT C attached hereto. 41 (k) CERTIFICATE OF DESIGNATIONS. The Company shall have adopted the Certificate of Designations and the Certificate of Designations shall have been filed with, and accepted by, the Secretary of State of the State of Delaware in accordance with the laws of the State of Delaware. (l) SECRETARY'S CERTIFICATE. The Secretary or an Assistant Secretary of the Company shall have delivered to the Purchasers at the Closing Date a certificate dated as of the Closing Date, certifying: (a) that attached thereto is a true and complete copy of the By-Laws of the Company as in effect on the date of such certification; (b) that attached thereto is a true and complete copy of all resolutions adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of the Agreement and the other Transaction Documents, the issuance, sale and delivery of the Shares and that all such resolutions are in full force in effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement and the other Transaction Documents; (c) that attached thereto is a true and complete copy of the Certificate of Designations that has been filed with and declared effective by the Secretary of State of the State of Delaware on the date of such certification, (d) that attached thereto is a true and complete copy of the Certificate of Incorporation as in effect on the date of such certification; and (e) to the incumbency and specimen signature of certain officers of the Company. ARTICLE VII. INDEMNIFICATION 7.1 INDEMNIFICATION BY THE COMPANY. (a) The Company shall indemnify, save and hold the Purchasers and their respective Affiliates, directors, shareholders, officers, employees, and their respective agents (each, a "PURCHASER PARTY"), harmless from and against any and all costs, losses (including, without limitation, diminutions in value), charges, liabilities, obligations, damages (whether actual or consequential), punitive damages (but only to the extent that they are actually awarded in Third-Party Claims), lawsuits, actions, judgments, deficiencies, demands, fees, claims, settlements and expenses (whether arising out of Third-Party Claims or otherwise), including, without limitation, interest, penalties, costs of litigation, reasonable attorneys' fees and expenses, all amounts paid in the investigation, defense or settlement of any of the foregoing consistent with the indemnified party's past business practices and costs of enforcing this indemnity (collectively, "LOSSES") incurred in connection with, arising out of, resulting from or relating or incident to: (i) any untruth, inaccuracy or incorrectness of, or any other breach of, any representation or warranty of or by the Company in or pursuant to this Agreement or the other Transaction Documents that survives the Closing as set forth in Section 7.1(b), or (ii) the nonfulfillment, nonperformance, nonobservance or other breach of any covenant or agreement made by the Company in or pursuant to this Agreement or the other Transaction Documents. The claims for indemnity by Purchaser Parties pursuant to this Section 7.1 are referred to as "PURCHASER CLAIMS"). The indemnity provided for in this Section 7.1 is not limited to matters asserted by third parties against any Purchaser Party, but includes Purchaser Claims incurred or sustained by any Purchaser Party in the absence of third party claims. The indemnification 42 obligations of the Company pursuant to clause (i) of this Section 7.1 shall be limited to claims for Losses as to which written notice is delivered to the Company prior to the last date of survival of the applicable representation and warranty as provided in Section 7.1(b). (b) All statements contained in Articles III and IV herein or the other Transaction Documents or in the Disclosure Schedule, certificates specifically referred to herein or delivered by or on behalf of the parties pursuant to this Agreement shall be deemed to be representations and warranties by the parties hereunder. For purposes of this Article VII, the representations and warranties of the Company contained herein and as provided in the preceding sentence shall survive until the Closing, without regard to any investigation made by the Purchasers, except that (i) the representations and warranties contained in Sections 3.1 (Organization and Capitalization) and 3.2 (Authorization) shall survive the Closing indefinitely, (ii) the representations and warranties contained in Section 3.26 (Change of Control Exemptions) shall survive the Closing until all applicable statutes of limitation have expired, and (iii) the representations and warranties contained in Section 3.27 (Accuracy of Information Furnished) shall survive the Closing for a period of 18 months after the date of this Agreement. The covenants and agreements of the parties contained herein shall survive the Closing until all applicable statutes of limitation have expired. Notwithstanding the foregoing, the representations, warranties and covenants of the Company contained in this Agreement will not expire with respect to any written claims delivered to the Company prior to the applicable expiration period of any such representations, warranties or covenants as provided above. 7.2 DEFENSE OF CLAIMS. If a claim for Losses (a "CLAIM") is to be made by a Person entitled to indemnification hereunder, the Person claiming such indemnification shall give written notice (a "CLAIM NOTICE") to the indemnifying Person as soon as practicable after the Person entitled to indemnification becomes aware of any fact, condition or event which may give rise to Losses for which indemnification may be sought under this Article VII. The failure of any indemnified Person to give timely notice hereunder shall not affect rights to indemnification hereunder, except and only to the extent that, the indemnifying Person is prejudiced by such failure. In the case of a Claim involving the assertion of a claim by a third party (whether pursuant to a lawsuit or other legal action or otherwise, a "THIRD-PARTY CLAIM"), if the indemnifying Person shall acknowledge in writing to the indemnified Person that the indemnifying Person shall be obligated to indemnify the indemnified Person under the terms of its indemnity hereunder in connection with such Third-Party Claim, then (A) the indemnifying Person shall be entitled and, if it so elects, shall be obligated at its own cost, risk and expense, (1) to take control of the defense and investigation of such Third-Party Claim and (2) to pursue the defense thereof in good faith by appropriate actions or proceedings promptly taken or instituted and diligently pursued, including, without limitation, to employ and engage attorneys of its own choice reasonably acceptable to the indemnified Person to handle and defend the same, and (B) the indemnifying Person shall be entitled (but not obligated), if it so elects, to compromise or settle such claim, which compromise or settlement shall be made only with the written consent of the indemnified Person, such consent not to be unreasonably withheld. In the event the indemnifying Person elects to assume control of the defense and investigation of such lawsuit or other legal action in accordance with this Section 7.2, the indemnified Person may, at its own cost and expense, participate in the investigation, trial and defense of such Third-Party Claim; 43 PROVIDED that, if the named Persons to a lawsuit or other legal action include both the indemnifying Person and the indemnified Person and the indemnified Person has been advised in writing by counsel that a conflict of interest exists which makes representation by the same counsel of both such indemnified Person and such indemnifying Person inappropriate under applicable provisions of the code of professional responsibility, the indemnified Person shall be entitled, at the indemnifying Person's cost, risk and expense, to separate counsel of its own choosing reasonably acceptable to the indemnifying Person. If the indemnifying Person fails to assume the defense of such Third-Party Claim in accordance with this Section 7.2 within 20 calendar days after receipt of the Claim Notice, the indemnified Person against which such Third-Party Claim has been asserted shall (upon delivering notice to such effect to the indemnifying Person) have the right to undertake, at the indemnifying Person's cost, risk and expense, the defense, compromise and settlement of such Third-Party Claim on behalf of and for the account of the indemnifying Person; PROVIDED that such Third-Party Claim shall not be compromised or settled without the written consent of the indemnifying Person, which consent shall not be unreasonably withheld. In the event the indemnifying Person assumes the defense of the claim, the indemnifying Person shall keep the indemnified Person reasonably informed of the progress of any such defense, compromise or settlement, and in the event the indemnified Person assumes the defense of the claim, the indemnified Person shall keep the indemnifying Person reasonably informed of the progress of any such defense, compromise or settlement. The indemnifying Person shall be liable for any settlement of any Third-Party Claim effected pursuant to and in accordance with this Section 7.2 and for any final judgment (subject to any right of appeal), and the indemnifying Person agrees to indemnify and hold harmless each indemnified Person from and against any and all Losses by reason of such settlement or judgment. 7.3 INSURANCE PROCEEDS; TAX EFFECT. To the extent that any Purchaser Claim is covered by insurance held by or results in any Tax savings to such indemnified Purchaser Party, such indemnified Person shall be entitled to indemnification pursuant to Section 7.1, only with respect to the amount of the Losses that are in excess of the cash proceeds received by such indemnified Person pursuant to such insurance or the value of the Tax benefits resulting from such Purchaser Claim. If such indemnified Person receives such cash insurance proceeds or such Tax benefit can reasonably be determined prior to the time such claim is paid, then the amount payable by the indemnifying Person pursuant to such claim shall be reduced by the amount of such proceeds or the value of such Tax benefits. If such indemnified Person receives such cash insurance proceeds or the amount of such Tax Benefit is reasonably determined after such claim has been paid, then upon the receipt by the indemnified Person of any cash proceeds pursuant to such insurance or reasonable determination of Tax benefits in excess of the amount of any unreimbursed Purchaser Claim incurred by such indemnified Person with respect to such claim, such indemnified Person must repay any portion of such excess amount which was previously paid by the indemnifying Person to such indemnified party in satisfaction of such claim. 44 ARTICLE VIII. MISCELLANEOUS 8.1 TERMINATION. (a) TERMINATION. This Agreement may be terminated as follows: (i) by mutual written consent of the Purchasers and the Company at any time; (ii) by either the Company or the Purchasers, if the Closing shall not have occurred on or before November 18, 2000, provided that the party seeking to exercise such right is not then in breach in any material respect of any of its obligations under this Agreement; (iii) by either the Company or the Purchasers, if the Purchasers (in the case of termination by the Company) or the Company (in the case of termination by the Purchasers) shall have breached in any material respect any of its obligations under this Agreement or any representation and warranty of the Purchasers (in the case of termination by the Company) or the Company (in the case of termination by the Purchasers) which would result in a condition set forth in Section 6.2 or 6.3 of this Agreement, as the case may be, not being satisfied; or (iv) by either the Company or the Purchasers, if there shall be any Law or regulation that makes consummation of the Equity Investment or the transactions contemplated by the Transaction Documents illegal or otherwise prohibited or if any judgment, injunction, order or decree enjoining the Purchasers or the Company from consummating the Equity Investment or the transactions contemplated by the Transaction Documents is entered and such judgment, injunction, order or decree shall become final and non-appealable. The party desiring to terminate this Agreement pursuant to Sections 8.1(a)(ii)-(iv) shall give written notice of such termination to the other party in accordance with Section 8.3. (b) EFFECT OF TERMINATION. If this Agreement is terminated pursuant to Section 8.1, this Agreement shall become void and of no effect with no liability on the part of any party hereto, except that the agreements contained in Sections 5.5, 8.3, 8.8, 8.10, 8.12 and 8.13 hereof shall survive the termination hereof. (c) PROCEDURE UPON TERMINATION. In the event of termination of this Agreement pursuant to Section 8.1: (i) Each party shall redeliver all documents, work papers and other material of any other party and any and all copies thereof relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, to the party furnishing the same; and 45 (ii) Each party will hold and will cause its Affiliates, consultants, agents and advisors to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of Law, all documents and information concerning the other parties that were furnished to such party by such other parties or their representatives in connection with the transactions contemplated by the Transaction Documents (except to the extent that such information can be shown to have been (a) previously known by the party to which it was furnished, (b) in the public domain through no fault of such party or (c) later lawfully acquired from other sources by the party to which it was furnished), and each party will not release or disclose such information to any other Person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors. 8.2 ASSIGNMENT; PARTIES IN INTEREST. Neither this Agreement nor any of the rights or obligations hereunder may be assigned, in whole or in part, by operation of law or otherwise by any party without the prior written consent of all other parties to this Agreement prior to the Closing. After the Closing, subject to the terms of the Stockholders' Agreement, Regulatory Approvals and applicable Law, each of the Purchasers may transfer or assign, in whole or in part, any of its rights and obligations hereunder to any Person; PROVIDED that such transferee executes and delivers a counterpart copy of this Agreement and the Stockholders' Agreement to the Company and each of the Purchasers thereby agreeing to be bound by the terms and provisions set forth herein and in the Stockholders' Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other Person shall have any right, benefit or obligation hereunder, except for each Purchaser Party pursuant to Article VII hereof, each such Purchaser Party being an intended third party beneficiary of this Agreement. 8.3 NOTICES. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received, if personally delivered; when transmitted, if transmitted by telecopy, upon receipt of telephonic or electronic confirmation; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (E.G., Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: If to the Company, addressed to: Autotote Corporation 750 Lexington Avenue 25th Floor New York, NY 10022 Attention: Secretary and General Counsel Telecopy: (212) 754-2372 46 With a copy to: Kramer Levin Naftalis & Frankel LLP 919 Third Avenue New York, NY 10022 Attention: Peter Smith, Esq. Telecopy: (212) 715-8000 If to Cirmatica, addressed to: Cirmatica Gaming, S.A. Rambla De Catalunya 16, 4(0), 2a Barcelona, Spain Attention: Jaime Hernandez Guillem Telecopy: (01139) 02 621 3241 With a copy to: Lottomatica S.p.A. via di Porta Latina, 8 00179 Rome, Italy Attention: Roberto Sgambati Telecopy: (01139) 0670453122 Latham & Watkins 99 Bishopsgate London EC2M 3XF Attention: Michael S. Immordino, Esq. Telecopy: (01144) 2073744460 Latham & Watkins 885 Third Avenue New York, NY 10022 Attention: Samuel A. Fishman, Esq. David S. Allinson, Esq. Telecopy: (212) 751-4864 If to Olivetti, addressed to Olivetti International S.A. 125 Avenue du X Septembre Luxemborg Attention: Luciano La Noce 47 With a copy to: Olivetti S.p.A. P.zza Einaudi 8 20121 Milan, Italy Attention: Lucian La Noce Telecopy: (01139) 026213241 Latham & Watkins 99 Bishopsgate London EC2M 3XF Attention: Michael S. Immordino, Esq. Telecopy: (01144) 2073744460 Latham & Watkins 885 Third Avenue New York, NY 10022 Attention: Samuel A. Fishman, Esq. David S. Allinson, Esq. Telecopy: (212) 751-4864 If to Oak, addressed to The Oak Fund PO Box 31106 SMB, Corporate Center West Bay Road Grand Cayman, Cayman Islands Attention: Niels Heck Telecopy: (1345) 949-3877 If to Peconic, addressed to Peconic Fund Ltd. c/o Ramius Capital Group, LLC 666 Third Avenue New York, New York 10017 Attention: Peter A. Cohen Telecopy: (212) 845-7999 If to Ramius, addressed to Ramius Securities, LLC 666 Third Avenue New York, New York 10017 Attention: Peter A. Cohen Telecopy: (212) 845-7999 48 or to such other place and with such other copies as either party may designate as to itself by written notice to the others. 8.4 ENTIRE AGREEMENT; WAIVERS. This Agreement, together with all exhibits and schedules hereto (including, without limitation, the Disclosure Schedule), and the other the Transaction Documents, constitute the entire agreement among the parties pertaining to the subject matter hereof and thereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 8.5 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.6 INVALIDITY. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by Law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 8.7 TITLES. The titles, captions or headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 8.8 FEES AND EXPENSES. Except as provided in Section 5.5 hereof, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. 8.9 CUMULATIVE REMEDIES. All rights and remedies of either party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. 8.10 GOVERNING LAW; JURISDICTION. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. (b) THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (OR, IF SUBJECT MATTER JURISDICTION IN THAT COURT IS NOT AVAILABLE, IN THE SUPREME COURT OF THE STATE OF 49 NEW YORK, NEW YORK COUNTY) OVER ANY DISPUTE ARISING OUT OF OR RELATING TO THE TRANSACTION DOCUMENTS. EACH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH DISPUTE OR PROCEEDING WILL BE HEARD AND DETERMINED IN SUCH COURTS. THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH DISPUTE BROUGHT IN SUCH COURT OR ANY DEFENSE OF INCONVENIENT FORUM IN CONNECTION THEREWITH. 8.11 AMENDMENT. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 8.12 PUBLIC ANNOUNCEMENTS. Neither the Purchasers, on the one hand, nor the Company, on the other hand, will issue any press release or public statement with respect to the transactions contemplated by this Agreement and the other Transaction Documents, including the Equity Investment, without the other party's prior consent (such consent not to be unreasonably withheld), except as may be required by applicable Law, court process or the listing requirements of AMEX. In addition to the foregoing, the Purchasers and the Company will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any such press release or other public statements with respect to such transactions. The parties agree that the initial press release or releases to be issued with respect to the transactions contemplated by the Transaction Documents shall be mutually agreed upon prior to the issuance thereof. 8.13 ENFORCEMENT OF AGREEMENT. The parties hereby acknowledge and agree that money damages would not be adequate compensation for the damages that a party would suffer by reason of a breach of this Agreement or a failure of any other party to perform any of its obligations under this Agreement. Therefore, each party hereto agrees that in addition to and without limiting any other remedy or right it may have, the non-breaching part will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. 8.14 INTERPRETIVE PROVISIONS. (a) The words "hereof," "herein," "hereby" and "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision hereof. (b) Accounting terms used but not otherwise defined herein shall have the meanings given to such terms under GAAP. (c) The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." 50 (d) Any reference to any supranational, national, federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context otherwise requires. [Signature Page Follows] 51 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on their respective behalf, by their respective officers thereunto duly authorized, all as of the day and year first above written. AUTOTOTE CORPORATION OLIVETTI INTERNATIONAL S.A. By: /s/ Martin Schloss By: /s/ Luciano La Noce --------------------------- ---------------------- Name: Martin Schloss Name: Luciano La Noce Title: Vice President Title: Director CIRMATICA GAMING S.A. By: /s/ Roberto Sgambati ---------------------- Name: Roberto Sgambati Title: Director THE OAK FUND By: /s/ Niels Heck ---------------------- Name: Niels Heck Title: Director PECONIC FUND LTD. By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Principal RAMIUS SECURITIES, LLC By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Principal 52 DISCLOSURE SCHEDULE EXHIBIT A Certificate of Designations EXHIBIT B Stockholders' Agreement EXHIBIT C Opinion of Counsel to the Company 1. The Company has been duly incorporated and is validly existing and in good standing under the laws of the State of Delaware. The Company has full corporate power and authority to conduct its business as it is presently being conducted and to own and lease its Assets. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is necessary under applicable Law, except where the failure to be so qualified and in good standing would not reasonably be expected to have a Material Adverse Effect on the Company. 2. The Company has all necessary corporate power and authority to execute and deliver the Agreement and the other Transaction Documents and to perform all its obligations thereunder. The execution and delivery by the Company of each Transaction Document delivered by it and the consummation by the Company of the transactions contemplated by the Agreement and the other Transaction Documents has been duly authorized by all requisite corporate action on the part of the Company. 3. The Agreement and the other Transaction Documents delivered by the Company have been duly authorized, executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors' rights generally or (b) general principles of equity, whether considered in a proceeding at law or in equity. 4. The Certificate of Designations has been duly authorized by the Company, and has been filed with and declared effective by the Secretary of State of the State of Delaware in accordance with the General Corporation Law of the State of Delaware. 5. As of the date hereof, the authorized capital stock of the Company consists of 102,000,000 shares of capital stock comprised of: (a) 2,000,000 shares, par value $1.00 per share, of blank check preferred stock, of which 1,600,000 are designated as Series A Convertible Preferred Stock, par value $1.00 per share; (b) 99,3000,000 shares of Class A Common Stock, par value $.01 per share, of which ____________ shares are duly and validly issued, fully paid, non-assessable and outstanding; and (c) 700,000 shares of Class B Nonvoting Common Stock, par value $.01 per share, of which no shares are issued and outstanding. Of the authorized but unissued shares of Common Stock (i) 30,000,000 shares are reserved for issuance upon the conversion of the Preferred Stock and (ii) _____________ shares are reserved for issuance upon the exercised of options granted under the Company's stock option plan. 6. Upon delivery of the Series A Convertible Preferred Stock to the Purchasers against payment by the Purchasers of the consideration therefor in accordance with the terms of the Agreement, such shares of Series A Convertible Preferred Stock will be duly authorized, validly issued, fully paid and non-assessable and will have the rights, preferences and privileges specified therefor in the Certificate of Designations. 7. Upon conversion of shares of Series A Preferred Stock in accordance with the Certificate of Designations, the shares of Common Stock delivered therefor will be duly authorized, validly issued, fully paid and non-assessable. 8. Except for the conversion privileges of the Series A Convertible Preferred Stock, the rights of the Purchasers pursuant to the Transaction Documents, currently outstanding options to purchase shares of Common Stock granted to employees of the Company under the Company's stock option plan, and as disclosed in the Disclosure Schedule to the Agreement, there are no statutory preemptive rights or, to the best of counsel's knowledge, non-statutory preemptive rights, options, warrants, conversion privileges, or other rights (or agreements for any such rights) outstanding to purchase other otherwise obtain from the Company any of the Company's Equity Securities. 9. None of the execution, delivery and performance of any Transaction Document, or the consummation of the transactions contemplated thereby, by the Company or its Subsidiaries will result in a violation of or a conflict with any provision of the certificate of incorporation or by-laws of the Company or its Subsidiaries. 10. No consent, waiver, agreement, approval, Permit or authorization of, or declaration, filing, notice or registration to or with, any federal, state, local or foreign governmental or regulatory authority or body is required to be made or obtained by the Company or its Subsidiaries in connection with the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby other than (a) Regulatory Filings, (b) Regulatory Approvals or (c) any notices of sale required to be filed with the SEC under Regulation D of the Securities Act or such post-closing filings as may be required under applicable state securities laws. 11. Based in part on the representations and warranties of the Purchasers contained in the Agreement, the offer and sale of the shares of Series A Convertible Preferred Stock made pursuant to the Agreement is, and the acquisition of the Common Stock upon the conversion of such Preferred Stock will be, in compliance with the Securities Act and any applicable state securities laws and exempt from the registration requirements of the Securities Act and such state securities laws. 12. To the best of counsel's knowledge, except as set forth in the Disclosure Schedule to the Agreement, there are no outstanding orders, writs, injunctions, judgments or decrees or Actions pending or threatened or anticipated, (a) against, related to or affecting (i) the Company and its Subsidiaries, their business or operations or the Assets, (ii) any officers or directors of the Company and its Subsidiaries, as such, (iii) any stockholder of the Company and its Subsidiaries, as such, or (iv) other than routine claims for benefits, any Employee Plan of the Company and its Subsidiaries or any trust or funding instrument, fiduciary or administrator thereof, (b) relating to the transactions contemplated by the Transaction Documents, or (c) in which Company or its Subsidiaries is a plaintiff, including, without limitation, any derivative suits brought by or on behalf of the Company or its Subsidiaries that would, if adversely determined, have a Material Adverse Effect on the Company and its Subsidiaries, individually or in the aggregate. EX-99.4 4 a2025809zex-99_4.txt EXHIBIT 4 EXHIBIT 4 ================================================================================ STOCKHOLDERS' AGREEMENT by and among CIRMATICA GAMING, S.A. a Spanish corporation THE OAK FUND, a Cayman Islands exempted company PECONIC FUND LTD., a Cayman Islands exempted company RAMIUS SECURITIES, LLC, a Delaware limited liability company OLIVETTI INTERNATIONAL S.A., a Luxembourg corporation and AUTOTOTE CORPORATION, a Delaware corporation Dated: September 6, 2000 ================================================================================ STOCKHOLDERS' AGREEMENT This Stockholders' Agreement (this "AGREEMENT") is entered into as of September 6, 2000 by and among Autotote Corporation, a Delaware corporation (the "COMPANY"), Olivetti International S.A., a Luxembourg Company ("OLIVETTI"), Cirmatica Gaming, S.A., a Spanish corporation ("CIRMATICA"), The Oak Fund, a Cayman Island exempted company ("OAK"), Peconic Fund Ltd., a Cayman Island exempted company ("PECONIC") and Ramius Securities, LLC, a Delaware limited liability company ("RAMIUS"). RECITALS A. Each of the Stockholders (as defined below) will own shares of Preferred Stock (as defined below) upon the consummation of the transactions contemplated by that certain Preferred Stock Purchase Agreement, dated as of the date hereof, 2000, by and among the Company and the Stockholders. B. The Company and the Stockholders desire to enter into this Agreement to, among other things: (i) impose certain restrictions and obligations on the ownership, retention and disposition on the Preferred Stock, and (ii) provide the registration rights set forth herein. NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. CERTAIN DEFINITIONS. In addition to the terms defined elsewhere herein, the following terms have the following meanings when used herein with initial capital letters: "AFFILIATE" means, with respect to any Person or entity (the "REFERENT PERSON"), any Person or entity that controls the referent Person, any Person or entity that the referent Person controls, or any Person or entity that is under common control with the referent Person. For purposes of the preceding sentence, the term "control" means the power, direct or indirect, to direct or cause the direction of the management and policies of a Person or entity through voting securities, by contract or otherwise. "AGREEMENT" means this Agreement, as the same may be modified, supplemented or amended from time to time in accordance with its terms. "ASSETS" means all of the Company's and its Subsidiaries' right, title and interest in and to all properties, assets and rights of any kind, whether tangible or intangible, real or personal, owned by the Company or any of its Subsidiaries. "BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" means, with respect to any securities, having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities beneficially owned by a Person shall include securities beneficially owned by all other Persons with whom such Person would constitute a "group" as described in Section 13(d)(3) of the Exchange Act. "BOARD" has the meaning set forth in Section 4(b) hereof. "BONA FIDE THIRD PARTY" means a third party unrelated to the Stockholders, Olivetti S.p.A., Lottomatica S.A., Cirsa or their Affiliates. "CERTIFICATE OF DESIGNATIONS" means the Certificate of Designations of the Company relating to the Preferred Stock. "CHANGE OF CONTROL" means one or more of the following events: (i) less than a majority of the members of the Board (excluding any directors nominated or elected by the Stockholders) shall be persons who either (A) were serving as directors on the date hereof or (B) were nominated as directors and approved by the vote of the majority of the directors who are directors referred to in clause (A) above or this clause (B); (ii) the stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company; (iii) an announcement by any Bona Fide Third Party or group of Bona Fide Third Parties acting in concert, of a merger with the Company or an acquisition of the Company's securities or other transaction which will require the filing with the SEC of a Schedule 13D under the Exchange Act with respect to beneficial ownership of the Company (other than by a financial entity or other similar institutional investor holding securities of the Company for investment purposes that is eligible to file a Schedule 13G under the Exchange Act with respect to such merger or acquisition in accordance with Rule 13d-1(b)(1) of the Exchange Act) in which Item 4 thereof will indicate a plan or proposal under subsections (a)-(j) thereof with respect to either (x) the merger with a Bona Fide Third Party or acquisition of at least twenty percent (20%) of the Company's voting securities by a Bona Fide Third Party or (y) the merger or consolidation of the Company with a Bona Fide Third Party where the stockholders of the Company would not, immediately after the merger or consolidation, own at least fifty percent (50%) of the voting securities of the entity (unrelated to the Stockholders, Olivetti S.p.A., Lottomatica S.A., Cirsa and their respective Affiliates) issuing the cash or securities in the merger or consolidation, or the sale of substantially all of the assets of the Company; or (iv) the Company enters into negotiations that might reasonably be expected to cause any of the events specified in clauses (i), (ii) or (iii) above to occur. "CIRMATICA" has the meaning set forth in the preamble to this Agreement. "CIRSA" means Cirsa Business Corporation S.A. "COMMON STOCK" means the Class A common stock, par value $0.01 per share, of the Company. "COMPANY" has the meaning set forth in the preamble to this Agreement. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. 2 "FORM S-3" means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act. "HOLDERS" means the Stockholders and any Person owning or having the right to acquire Registrable Securities. "ISSUANCE NOTICE" has the meaning set forth in Section 3 hereof. "ISSUE AMOUNT" means $110.0 million. "ISSUE AMOUNT PER SHARE" means the Issue Amount divided by the number of shares of Common Stock issued and issuable upon conversion of the Preferred Stock. "MERGER" has the meaning set forth in Section 4(a) hereof. "OAK" has the meaning set forth in the preamble to this Agreement. "OLIVETTI" has the meaning set forth in the preamble to this Agreement. "PECONIC" has the meaning set forth in the preamble to this Agreement. "PERSON" means an individual, corporation, partnership, limited liability company, association, trust and any other entity or organization. "PREFERRED STOCK" means the Series A Convertible Preferred Stock, par value $1.00 per share, of the Company. "PURCHASE AGREEMENT" means that certain Preferred Stock Purchase Agreement, dated as of the date hereof, by and among the Company and the Stockholders, as the same may be amended, supplemented or modified in accordance with its terms. "RAMIUS" has the meaning set forth in the preamble to this Agreement. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement or document. "REGISTRABLE SECURITIES" means (i) the shares of Common Stock issuable or issued upon conversion of the Preferred Stock, and (ii) any other shares of capital stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares listed in (i); PROVIDED, HOWEVER, that the foregoing definition shall exclude in all cases any Registrable Securities sold by a Person in a transaction in which its rights under this Agreement are not assigned in accordance with this Agreement. Notwithstanding the foregoing, Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been sold (i) to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (ii) otherwise 3 pursuant to an effective registration statement under the Securities Act or an exemption from registration pursuant to Rule 144 (or any successor rules of the SEC under the Securities Act). "REGISTRABLE SECURITIES THEN OUTSTANDING" means the number of shares of Common Stock outstanding and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities that are, in each case, Registrable Securities. "REGULATORY APPROVAL" means all regulatory approvals and findings of suitability or qualification, including any approvals or findings by state governing commissions and gaming regulators, or temporary permits or authorizations, or, if applicable, the expiration of any notice periods with respect thereto, that are necessary for the Stockholders to own and continue to hold and vote the Preferred Stock or Registrable Securities and elect or designate for election at least four (or seven, if applicable) directors to the Board. "SEC" means the Securities and Exchange Commission. "SECURITIES" has the meaning set forth in Section 3 hereof. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SERVICE DATE" has the meaning set forth in Section 3 hereof. "SEVERANCE AGREEMENT" means any agreement between a Person and such Person's officers, directors, employees, consultants or agents providing for any payment or benefit, whether contingent or otherwise, upon the occurrence of any event, development or transaction or any change in circumstances, relating to the parties to any such agreement. "STOCKHOLDERS" means Olivetti, Cirmatica, Oak, Peconic, Ramius and any Person that becomes a party to this Agreement pursuant to Section 7 hereof. "SUBSIDIARY" means, with respect to any Person, any other Person, whether or not incorporated, of which at least 50% of the securities or interests having, by their terms, ordinary voting power to elect members of the board of directors, or other persons performing similar functions with respect to such other Person, are held, directly or indirectly, by such first Person. "TERMINATION EVENT" shall be deemed to have taken place (i) if the Company fails to (A) cause any of the directors designated or elected by the Stockholders in accordance with the terms of this Agreement or the Certificate of Designations to become members of the Board, (B) cause any vacancies created by the removal or resignation of directors designated or elected by the Stockholders to be filled by persons selected by the Stockholders in accordance with the terms of this Agreement or the Certificate of Designations, or (C) cause at least one director designated or elected by the Stockholders to serve on each committee of the Board (provided in each case that such director has received Regulatory Approval for such service), or (ii) in the event of a Change of Control of the Company. 4 2. REGULATORY APPROVAL. Each of the parties agrees to use its reasonable best 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 under applicable laws and regulations to obtain Regulatory Approvals in the most expeditious manner practicable, including, without limitation cooperating in promptly making any filings, in furnishing information required in connection therewith and in timely seeking to obtain any consents, approvals, permits or authorizations in respect of Regulatory Approvals. Notwithstanding the foregoing, the parties hereto acknowledge and agree that with respect to Regulatory Approvals, each party shall only be required to cause its officers, directors and key employees in their capacity as such and any of its Affiliates that it controls to provide all required information in connection with such Regulatory Approvals and to use its reasonable efforts to obtain the cooperation of its stockholders and any other third party in providing all required information in connection with such Regulatory Approvals. 3. PREEMPTIVE RIGHTS. (a) TERM AND TIMING OF NOTICE. For a period commencing on the date of this Agreement and ending on the earliest to occur of (a) the fourth anniversary of the date of this Agreement, (b) the date on which all of the shares of Preferred Stock are redeemed by the Company pursuant to Section 4 of the Certificate of Designations and (c) the date on which all of the shares of Preferred Stock are automatically converted into shares of Common Stock pursuant to Section 5(b) of the Certificate of Designations, and prior to incurring any debt convertible or exchangeable into equity securities or issuing any equity securities (including capital stock, rights, options or other equity interests convertible into, exercisable into or exchangeable for capital stock), whether privately placed or publicly offered (other than equity securities (a) issued as consideration to sellers in connection with any merger or to equity holders of a party to a merger or similar transaction, (b) issued upon exercise of options granted to officers, directors and employees of the Company pursuant to an option plan approved by the Board, not to exceed 20% of the fully diluted equity of the Company on the date of this Agreement, (c) issued upon the conversion of shares of Preferred Stock into shares of Common Stock pursuant to the Certificate of Designations or as dividends or distributions in respect of Common Stock of the Company or (d) issued as contemplated by Section 5(g)(i)(B) of the Certificate of Designations), the Company shall promptly give written notice (the "ISSUANCE NOTICE") to the Stockholders (the date on which the Issuance Notice is delivered or deemed delivered pursuant to Section 10 of this Agreement is referred to as the "SERVICE DATE") of any of the Company's proposals to incur any such debt or issue any such equity securities. (b) ISSUANCE NOTICE. The Issuance Notice shall disclose in reasonable detail the number of shares of stock proposed to be issued or the amount of debt to be incurred (collectively, the "SECURITIES") and the terms and conditions upon which the Company proposes to effect the issuance of the Securities and shall confirm that the offer by the Company to sell the portion of the Securities specified below, constituted by the service of the Issuance Notice, is irrevocable until all the Stockholders have either accepted or rejected (or been deemed to have rejected) the offer as provided below. The Stockholders shall, collectively, have the right to purchase, in whole or in part, a portion of such Securities proportionate to the percentage of the 5 fully diluted equity of the Company represented by the shares of Common Stock issuable and issued upon conversion of the Preferred Stock then owned by the Stockholders. The Stockholders may elect to purchase such portion of the Securities, in whole or in part, upon the same terms and conditions as those set forth in the Issuance Notice by delivering a written notice of such election to the Company within 15 days after the Service Date based on their respective pro rata ownership of the shares of Common Stock issuable and issued upon conversion of the Preferred Stock in proportion to the fully diluted equity of the Company. The failure by the Stockholders to serve notice in accordance with the foregoing provisions shall be deemed a rejection of the offer constituted by the service of the Issuance Notice. In addition, each Stockholder shall have a right of over-allotment such that if any Stockholder fails to exercise its rights hereunder to purchase its pro rata share of Securities, the other Stockholders may purchase the non-purchasing Stockholder's portion on a pro rata basis within 10 days from the date the Company provides written notice to such other Stockholders that such non-purchasing Stockholder failed to exercise its right hereunder to purchase its pro rata share of Securities. The Company shall promptly give written notice to all the other Stockholders of any Stockholder's failure to exercise its right hereunder to purchase Securities. The failure by any Stockholder to deliver written notice to the Company of such Stockholder's election to purchase additional Securities within the above-mentioned 10-day time period shall be deemed a rejection of the offer to purchase additional Securities pursuant to the over-allotment right. If the Stockholders elect to purchase any or all of the Securities, the closing of such purchase shall occur upon the later to occur of (x) the expiration of 120 days from the Service Date and (y) 5 days following the satisfaction of any anti-trust governmental authority consents, or other applicable governmental authority conditions, to the consummation of the issuance. If the Stockholders elect not to purchase all of the Securities, then the Company may issue any such Securities not purchased by the Stockholders at a price and on terms no more favourable to the transferee(s) thereof than specified in the Issuance Notice during the 120-day period immediately following the Service Date. Any Securities not issued within such 120-day period shall thereupon , if still proposed to be issued by the Company, be subject to the provisions of the preemptive rights set forth in this Section 3. 4. STANDSTILL, BOARD OF DIRECTORS AND VOTING MATTERS. (a) STANDSTILL. Until the earlier of (i) the occurrence of a Termination Event or (ii) the date that the current Chief Executive Officer of the Company ceases to serve in that capacity, Olivetti, Cirsa, Cirmatica and, if applicable, their permitted assigns will not, directly or indirectly, without the prior written consent of the Company, (A) for four years from the closing of the merger of a wholly owned Subsidiary of the Company with and into Scientific Games Holdings Corp. (the "MERGER"), acquire beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of any equity interest or any interest convertible or exchangeable into, or any right to acquire, any equity interest (including by becoming a member of a "group" as defined in Section 13(d)(3) of the Exchange Act) which, together with any equity interest and any such other interest beneficially owned by Olivetti, Cirsa, Cirmatica and, if applicable, their permitted assigns, would equal more than 45% of the then outstanding shares of Common Stock of the Company or securities convertible into Common Stock of the Company (including any paid-in-kind 6 dividends on the Preferred Stock or any Common Stock into which such paid-in-kind dividends were converted) on a fully diluted basis or (B) for three years from the closing of the Merger, solicit proxies with respect to the Company. Notwithstanding the foregoing, no calculation of beneficial ownership for purposes of this Section 4(a) shall (i) include any equity securities owned by Oak, Peconic or Ramius or their permitted assigns or (ii) or be affected by any change in Olivetti's, Cirmatica's and, if applicable, their permitted assigns, ownership by virtue of a stock repurchase, stock split, reclassification or similar transaction effected by the Company. (b) COMPOSITION OF BOARD. (i) The Stockholders and the Company acknowledge that, pursuant to the Certificate of Designations, the Stockholders holding Preferred Stock shall be entitled, as a single class, to elect a number of directors of the Company upon substantially the same terms, and under the same circumstances, as set forth below. To preserve the rights of the Stockholders to have their representatives on the Board in the event that any or all of the shares of Preferred Stock are converted into Common Stock, the Stockholders and the Company agree to the following provisions relating to the Board and its committees. Subject to the Certificate of Designations and Section 4(b)(ii) hereof, the Board of Directors of the Company (the "BOARD") shall consist of ten (10) directors, and the Stockholders shall have the right to designate and have elected and appointed: (A) that number of directors equal to four (4) minus the number of directors the holders of Preferred Stock are entitled to elect as a single class pursuant to the Certificate of Designations; PROVIDED, that the Stockholders beneficially own 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-five percent (25%) of the sum of (i) the number of shares of Common Stock outstanding plus (ii) 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 (including, without limitation, the Preferred Stock) may be converted, exercised or exchanged; (B) that number of directors equal to three (3) minus the number of directors the holders of Preferred Stock are entitled to elect as a single class pursuant to the Certificate of Designations; PROVIDED, that the Stockholders beneficially own 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 the sum of (i) the number of shares of Common Stock outstanding plus (ii) 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 (including, without limitation, the Preferred Stock) may be converted, exercised or exchanged; (C) that number of directors equal to two (2) minus the number of directors the holders of Preferred Stock are entitled to elect as a single class 7 pursuant to the Certificate of Designations; PROVIDED, that the Stockholders beneficially own 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 ten percent (10%) of the sum of (i) the number of shares of Common Stock outstanding plus (ii) 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 (including, without limitation, the Preferred Stock) may be converted, exercised or exchanged; and (D) that number of directors equal to one (1) minus the number of directors the holders of Preferred Stock are entitled to elect as a single class pursuant to the Certificate of Designations; PROVIDED, that Stockholders beneficially own 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 five percent (5%) of the sum of (i) the number of shares of Common Stock outstanding plus (ii) 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 (including, without limitation, the Preferred Stock) may be converted, exercised or exchanged; PROVIDED, HOWEVER, that if the Company shall have failed to comply with any provision of Section 3 or Section 4(b), (d) or (e) of the this Agreement, then for as long as such failure continues, the number of directors on the Board shall be increased to a number that is equal to three (3) more than the then current number of directors, and the Stockholders shall have a right to designate and have elected and appointed immediately by the Board by resolution or, if specified by the Stockholders, at the next annual meeting of the stockholders or at any special meeting, three (3) additional directors to the Board, regardless of the number of shares of Common Stock and Preferred Stock then held by the Stockholders. (ii) Whenever such voting rights with respect to three additional directors pursuant to Section 4(b) shall have vested, such rights may be exercised by written consent of the Stockholders then holding a majority of the outstanding shares of Common Stock and shares of Common Stock that would be issued upon the conversion of the Preferred Stock then held by the Stockholders or at a special meeting of the Stockholders, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors. Such right of the Stockholders to designate three additional directors may be exercised until the Company has cured any such failure, at which time the right of the Stockholders to elect such number of directors shall cease, the term of such three additional directors previously elected pursuant to Section 4(b) shall thereupon terminate, and the authorized number of directors shall thereupon return to the number of authorized directors otherwise in effect, but subject always to the same provisions for the renewal and divestment of such special voting rights as provided in Section 4(b). 8 (iii) At any time when such voting rights with respect to the designation of 3 additional directors shall have vested in the Stockholders pursuant to Section 4(b) and if such right shall not already have been initially exercised by written consent or otherwise, a proper officer of the Company shall, upon the written request of any Stockholder, addressed to the Secretary of the Company, call a special meeting of Stockholders. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Company or if none at a place designated by the Secretary of the Company. If such meeting shall not be called by the proper officers of the Company within thirty (30) days after the personal service of such written request upon the Secretary of the Company, or within thirty (30) days after mailing the same, within the United States, by registered mail, addressed to the Secretary of the Company at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the Stockholders of record of ten percent (10%) of the outstanding shares of Common Stock and shares of Common Stock that would be issued upon conversion of the Preferred Stock then held by all Stockholders may designate in writing a Stockholder to call such meeting at the expense of the Company, and such meeting may be called by such Person so designated upon the notice required for annual meeting of stockholders and shall be held at the place for holding annual meetings of the Company or, if none, at a place designated by such Stockholder. Any Stockholder that would be entitled to vote at such meeting shall have access to the stock books of the Company for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this Section 4(b). Notwithstanding the provisions of this Section 4(b), no such special meeting shall be called if any such request is received less than 90 days before the date fixed for the next ensuing annual or special meeting of stockholders. (iv) If a director so elected by the Stockholders shall cease to serve as a director for any reason before his or her term expires (other than in the event that the Stockholders are no longer entitled to designate such a director pursuant to the terms of this Agreement), or shall not receive or retain Regulatory Approval for service as a director, the Stockholders may by written consent or at a special meeting of the Stockholders called as provided above, elect a successor to hold office for the unexpired term of the director whose place shall be vacant, provided that any successor to Peter Cohen shall be reasonably satisfactory to the Board as a whole. (v) As soon as practicable after the date hereof, the Board shall adopt resolutions increasing the size of the Board to ten (10) members and appoint Luciano La Noce, Michael S. Immordino, Robert Sgambati and Peter Cohen as directors of the Company. In addition, the Company shall at all such times exercise all authority under applicable law and use its best efforts to cause the directors designated by the Stockholders for election to the Board to be nominated as Board members by the nominating committee of the Company as provided below or otherwise. The Company shall, if necessary to permit the Stockholders' designees to be elected to the Board, (i) cause the Stockholders' designees to be included in the slate of designees recommended by the Board to the Company's stockholders for election as directors at each annual meeting of the stockholders of the Company (or at any special meeting held for the election of directors) and (ii) use its best efforts to cause the election of the Stockholders' designees at such annual or special meeting, including soliciting proxies in favor of the election of such Persons. (c) NOMINATING COMMITTEE. Until the earlier of (i) three years from the closing of the Merger, (ii) a Termination Event, (iii) the date that the current Chief Executive Officer of the Company ceases to serve in that capacity or (iv) a Bona Fide Third Party commences a public solicitation of proxies pursuant to the Exchange Act seeking to replace a majority of the Board or otherwise seeks at a meeting of the stockholders to replace a majority of the Board, no member of the Board or candidate for the Board (except those designated or elected, as the case may be, by the Stockholders or holders of Preferred Stock in accordance with the terms of this Agreement or the Certificate of Designations) shall be proposed, nominated or elected except in accordance with the following procedures. There shall be a nominating committee of the Board composed of three directors, of whom (i) one member shall be the current Chief Executive Officer of the Company, (ii) one member shall be a person who either (A) was serving as a director on the date of the Merger or (B) was nominated for such committee and approved by the vote of the majority of the directors who are directors referred to in clause (A) above or this clause (B), and (iii) one member shall be a person who was designated or elected, as the case may be, by the Stockholders in accordance with the terms of this Agreement or the Certificate of Designations. No member of the Board or candidate for the Board shall be proposed, nominated or elected (including filling any vacancy on the Board) (except those designated or elected, as the case may be, by the Stockholders or holders of Preferred Stock in accordance with the terms of this Agreement or the Certificate of Designations), unless first approved by a majority vote of such nominating committee (which vote, in the case of any person who is not a director at the time of the Merger, shall include the vote (not to be unreasonably withheld) of the member of such committee who is a director elected by the Stockholders in accordance with the terms of this Agreement and the Certificate of Designations) and thereafter approved by a majority vote of the entire Board. At the time of any such Board vote, at least two of the members of the Board (not including any members of the Board designated or elected, as the case may be, by the Stockholders or the holders of Preferred Stock in accordance with the terms of this Agreement or the Certificate of Designations) shall qualify as independent directors for purposes of the applicable rules of the principal securities exchange on which the Company's Common Stock is then listed. The Stockholders agree to vote, or cause to be voted, any voting securities of the Company beneficially owned by them for the election of all members of the Board of Directors or candidates for the Board of Directors nominated as provided in this Section 4, and not for any other person (except those designated by the Stockholders in accordance with the terms of this Agreement); PROVIDED that if the Stockholders are prohibited from agreeing to so vote by the applicable rules of the principal securities exchange on which the Company's Common Stock is then listed, then the Stockholders agree not to vote, or cause to be voted, any such securities against any members or candidates so nominated and if such agreement as so modified is also prohibited by such rules, then the Stockholders agree to be subject to such agreement with respect to the foregoing matters, to the extent not prohibited by the rules of such securities exchange, as shall most closely achieve the purposes and effects of this Section 4(c). For purposes of this Section 4(c), the equity interests of a Stockholder and its Affiliates shall be aggregated. Except as set forth in Section 4(c) with respect to the election of certain directors, the parties hereto acknowledge that each Stockholder is free to vote its shares of Preferred Stock 10 or Common Stock into which such Preferred Stock is converted as it desires (subject to any agreements among the Stockholders). (d) OTHER COMMITTEES. For so long as any director has been designated or elected by the Stockholders or the holders of Preferred Stock in accordance with the Certificate of Designations, as the case may be, at least one of the directors so designated or elected by the Stockholders or the holders of the Preferred Stock in accordance with the Certificate of Designations, as the case may be, shall serve on all committees of the Board. (e) VOTING RIGHTS. For so long as the Stockholders and their Affiliates collectively have beneficial ownership of a number of 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 10% of the then outstanding shares of Common Stock, the affirmative consent of the Stockholders and their Affiliates that beneficially own more than fifty percent (50%) of the outstanding shares of Common Stock issuable and issued upon conversion of the Preferred Stock then owned by all the Stockholders, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for that purpose, shall be necessary for authorizing, effecting or validating: (i) any amendment, alteration or repeal of any of the provisions of the Certificate of Designations of the Company; (ii) any amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation of the Company that would adversely affect the preferences, rights or powers of the Preferred Stock; (iii) any authorization, issuance or creation of (by reclassification or otherwise) any class or series (or any security of any class or series) of capital stock of the Company; (iv) any increase in the size of the Board (except as required pursuant to the terms of this Agreement or the Certificate of Designations); (v) any change in the state of incorporation of the Company; (vi) any delisting of the Common Stock from the American Stock Exchange or listing of Common Stock on a different exchange or national quotation system; and (vii) any decision, or the entering into of any agreement, commitment or arrangement, to effect any of the foregoing. (f) RESERVATION OF SHARES. For so long as any of the shares of Preferred Stock are outstanding, the Company shall keep reserved for issuance a sufficient number of shares of Common Stock to satisfy its conversion obligations under the Certificate of Designations. (g) AVAILABLE FINANCIAL INFORMATION. (i) The Company will deliver, or will cause to be delivered, the following to each director designated by the Stockholders: an annual budget, a 11 business plan and financial forecasts for the Company for the next fiscal year of the Company, no later than thirty (30) days before the beginning of the Company's next fiscal year, in such manner and form as approved by the Board, which shall include at least a projection of income and a projected cash flow statement for each fiscal quarter in such fiscal year and projected balance sheet as of the end of each fiscal quarter in such fiscal year. Any material changes in such business plan shall be delivered to the directors designated by the Stockholders as promptly as practicable after the Board has approved such changes. (ii) Within 20 days after the end of each calendar month, the Company will provide each director designated by the Stockholders with the interim financial statements of the Company and its Subsidiaries relating to such calendar month. Such interim financial statements shall (a) be in accordance with the books and records of the Company and its Subsidiaries, (b) be prepared in accordance with U.S. generally accepted accounting principles consistently applied throughout the periods covered thereby (except for the absence of footnotes) and present fairly and accurately in accordance with U.S. generally accepted accounting principles, in all material respects, the Assets, liabilities (including, without limitation, reserves) and financial condition of the Company and its Subsidiaries as of the respective dates thereof and the results of operations, stockholders' equity and cash flows for the periods covered thereby. (iii) The Company will promptly deliver to each director designated by the Stockholders when available one copy of each annual report on Form 10-K and quarterly report on Form 10-Q of the Company, as filed with the SEC. In the event an annual report on Form 10-K or quarterly report on Form 10-Q is unavailable, the Company may, in lieu of the requirements of the preceding sentence, deliver, or cause to be delivered, the following to each director designated by the Stockholders: (A) as soon as practicable after the end of each fiscal year of the Company, and in any event within ninety (90) days thereafter, a consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year, and consolidated statements of income and cash flows of the Company and its Subsidiaries for such year, prepared in accordance with U.S. generally accepted accounting principles and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and followed promptly thereafter by such financial statements accompanied by the opinion of independent public accountants of recognized national standing selected by the Company, and a Company-prepared comparison to the Company's business plan for such year as approved by the Board; and (B) as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, and in any event within forty-five (45) days thereafter, a consolidated balance sheet of the Company and its Subsidiaries as of the end of each such quarterly period, and consolidated statements of income and cash flows of the Company and its Subsidiaries for such period and for the current fiscal year to dated, prepared in accordance with U.S. generally accepted accounting principles and setting forth in 12 comparative form the figures for the corresponding periods of the previous fiscal year and to the Company's business plan then in effect and approved by the Board, subject to changes resulting from normal year-end audit adjustments, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except that such financial statements need not contain the notes required by U.S. generally accepted accounting principles. (h) TAX MATTERS. (i) The Company and each Stockholder acknowledge and agree that it is intended that the Preferred Stock not constitute "preferred stock" within the meaning of Section 305 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder, and neither the Company nor the Stockholders shall treat the Preferred Stock as such. Accordingly, payment of any and all PIK Dividends (as defined in the Certificate of Designations) to be made under the Certificate of Designations or under any other transaction document by the Company to or for the benefit of any Stockholder is intended to be made free and clear of, and without deduction for, U.S. federal income and withholding taxes ("U.S. TAXES"). If the Company shall be required by law to deduct any such U.S. Taxes from or in respect of any PIK Dividends to be paid under the Certificate of Designations by the Company to or for the benefit of any Stockholder, then (a) the Stockholder shall pay to the Company the amount of such U.S. Taxes not to exceed ten percent (10%) of the fair market value of such PIK Dividend on the date such PIK Dividend is distributed in accordance with the Certificate of Designations (the "FAIR MARKET VALUE"), and (b) upon payment by the applicable Stockholder, the Company shall pay to or for the benefit of the applicable Stockholder, in addition to such PIK Dividend, an additional amount (the "TAX GROSS-UP AMOUNT"), in cash, as necessary so that after making all required deductions on account of U.S. Taxes (including deductions applicable to additional sums required to be paid or deposited under this Section 4(h)) the amount received by such Stockholder (disregarding the payment made by such Stockholder to the Company pursuant to this sentence) shall be equal to the sum that would have been so received had no such deductions been made. If a Stockholder is required to pay any U.S. Taxes (other than U.S. Taxes determined on a net income basis) with respect to any PIK Dividends (as a result of the Company's failure to withhold such U.S. Taxes or otherwise) in excess of ten percent (10%) of the Fair Market Value of such PIK Dividends, the Company shall indemnify and hold harmless such Stockholder from any such U.S. Taxes in an amount equal to the Tax Gross-Up Amount, and if the Company is required to pay any such U.S. Taxes with respect to any PIK Dividends, the Stockholder shall indemnify and hold harmless the Company from any such U.S. Taxes in an amount up to ten percent (10%) of the Fair Market Value of such PIK Dividends. (ii) The amount to be paid by the Company under this Section 4(h) shall be reduced by the amount of any credit, against any other tax due in any other jurisdiction, available to the Stockholder or its Affiliates by reason of the payment of U.S. Taxes pursuant to this Section 4(h). In no event shall the Company be liable for any U.S. Taxes required to be deducted from or in respect of any PIK Dividends by reason of any change in applicable law after the Initial Issue Date (as defined in the Certificate of Designations) (which shall be the responsibility of the Stockholder), or be obligated to make any payment under this Section 4(h) if, at the time of such payment, such payment (a "BLOCKED PAYMENT") would violate, or result in a default or event of default under, the Indenture relating to the Company's 12 1/2% Senior Subordinated 13 Notes due 2010 or the Company's Senior Credit Agreement dated as of September 6, 2000 (in each case including any amendments, modifications, extensions, refinancings or replacements thereof) (collectively, the "FINANCING DOCUMENTS"). Notwithstanding the foregoing, in the event the Company does not make a payment as required by this Section 4(h) because such payment would be deemed a Blocked Payment, (A) the Stockholder shall have no obligation to make the payment as described in clause (a) of Section 4(h)(i), but shall pay the amount otherwise required to be deducted directly to the U.S. taxing authority, and (B) the Company shall be obligated to pay an amount equal to any such Blocked Payments plus interest at an annual rate of 6% starting from the date any such Blocked Payment otherwise would have been made to the applicable Stockholders promptly following the date in which any such previously Blocked Payments would no longer violate, or result in a default or event of default under, the Financing Documents. Each Stockholder shall, if requested in writing by the Company, promptly provide the Company with a properly completed Form W-8 BEN or Form W-8 IMY (or successor forms), as applicable, including, if applicable, the eligibility of such Stockholder for a reduced rate of withholding pursuant to an applicable treaty. 5. REGISTRATION RIGHTS. The Company and the Holders covenant and agree as follows: (a) REQUEST FOR REGISTRATION. (i) If the Company shall receive at any time, a written request from any Holder of Registrable Securities then outstanding that the Company file a registration statement under the Securities Act covering the registration of Registrable Securities then outstanding then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders and shall, subject to the limitations of Section 5(b), use its best efforts to effect as soon as practicable the registration under the Securities Act of all Registrable Securities which the Holders request to be registered within fifteen (15) days of the delivery or deemed delivery of such notice by the Company in accordance with Section 10. (ii) If the Holders initiating the registration request hereunder ("INITIATING HOLDERS") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 5(a) and the Company shall include such information in the written notice referred to in Subsection 5(a)(i). The underwriter will be selected by a majority in interest of the Initiating Holders and shall be reasonably acceptable to the Company. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Subsection 5(d)(v)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 5(a), if the underwriter advises the Initiating Holders in writing that marketing 14 factors require a limitation of the number of Registrable Securities to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company requested to be included by each Holder; PROVIDED, HOWEVER, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. (iii) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 5(a), a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than 60 days after receipt of the request of the Initiating Holders; PROVIDED, HOWEVER, that the Company may not utilize this right more than once in any twelve-month period. (b) COMPANY REGISTRATION. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its stock under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock or similar plan or a transaction covered by Rule 145 (or any successor rule) under the Securities Act), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after delivery or deemed delivery of such notice by the Company in accordance with Section 10, the Company shall, subject to the provisions of Section 5(g), cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered. (c) FORM S-3 REGISTRATION. In case the Company shall receive from any Holder or Holders of the Registrable Securities then outstanding a written request or requests that the Company effect a registration on Form S-3 (or any comparable or successor form or forms) and any related reasonable qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (i) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (ii) as soon as practicable, use its best efforts to effect such registration and all such reasonable qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; PROVIDED, 15 HOWEVER, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 5(c): (i) if Form S-3 is not available for such offering by the Holders; (ii) if the Company shall furnish to the Holders a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 60 days after receipt of the request of the Holder or Holders under this Section 5(c); PROVIDED, HOWEVER, that the Company shall not utilize this right more than once in any twelve-month period; or (iii) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (iii) Subject to the foregoing, the Company shall file a registration statement on Form S-3 (or successor form) covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. (iv) Without limiting the rights of the Holders pursuant to this Section 5(c), the Company acknowledges and agrees that, if requested in writing by any Holder or Holders of Registrable Securities then outstanding, the Company shall effect the Form S-3 (or successor form) registration under the Securities Act pursuant to this Section 5(c) for an offering on a delayed or continuous basis pursuant to Rule 415 (or any successor provision then in force) under the Securities Act (a "Shelf Registration") or maintain the effectiveness of a registration statement to effect a Shelf Registration at the request of the Holders or Holders pursuant to this Section 5(c). (d) OBLIGATIONS OF THE COMPANY. Whenever required under this Section 5 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (i) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of the Registrable Securities registered thereunder, keep such registration statement effective for up to one hundred twenty (120) days (except in the case of a registration statement pursuant to Section 5(c)(iv)) or until the Holders have completed the distribution relating thereto; PROVIDED, HOWEVER, that such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter. (ii) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. 16 (iii) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (iv) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, PROVIDED that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (v) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (vi) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (vii) Cause all such Registrable Securities registered hereunder to be listed on each securities exchange on which securities of the same class issued by the Company are then listed. (viii) Provide a transfer agent and registrar for all Registrable Securities registered hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. (ix) Use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 5, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 5, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities. 17 (e) FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 5 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. (f) EXPENSES OF REGISTRATION. (i) REGISTRATION. All expenses (other than underwriting discounts and commissions) incurred in connection with registrations, filings or qualifications pursuant to Section 5(a), including, without limitation, all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holders selected by them with the approval of the Company, which approval shall not be unreasonably withheld, shall be borne by the Company. (g) UNDERWRITING REQUIREMENTS. In connection with any offering involving an underwriting, the Company shall not be required under Section 5(b) to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders) but in no event shall the amount of securities of the selling Holders included in the offering be reduced unless all securities offered by Persons other than the Company are first entirely excluded from the underwriting. For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder which is a Holder and which is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "SELLING STOCKHOLDER," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. (h) DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 5. 18 (i) INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under this Section 5: (i) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "VIOLATION"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity agreement contained in this Section 5(i)(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any Holder, underwriter or controlling Person for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling Person. (ii) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 5(i)(ii), in connection with investigating or defending any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity agreement contained in this Section 5(i)(ii) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; PROVIDED, that in no event shall any indemnity under this Section 5(i)(ii) 19 exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. (iii) Promptly after receipt by an indemnified party under this Section 5(i) of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 5(i), deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel reasonably satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 5(i), but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 5(i). (iv) If the indemnification provided for in this Section 5(i) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; PROVIDED, that in no event shall any contribution by a Holder under this Section 5(i)(iv) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (v) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. 20 (vi) The obligations of the Company and Holders under this Section 5(i) shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 5, and otherwise. (j) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to use its best efforts to: (i) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times, so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act; (ii) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities,; (iii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (iv) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. (k) LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 5(a) hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such Holder's securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demand registration which could result in such registration statement being declared effective within one hundred twenty (120) days of the effective date of any registration effected pursuant to Section 5(a). 21 6. LIQUIDATED DAMAGES. If any Holder requests that the Company file a registration statement pursuant to Section 5(a), and such registration statement is not declared effective by the SEC within 150 days after such Holder's request (the "EFFECTIVENESS TARGET DATE") (such failure to have such registration statement declared effective, a "REGISTRATION DEFAULT"), then commencing on the day following the date on which such Registration Default occurs, the Company agrees to pay to each such Holder 2% of the Issue Amount Per Share ("LIQUIDATED DAMAGES"), in respect of the Registrable Securities requested to be included in such registration statement by such Holder, in cash or, if the Company is not able to pay cash, in shares of Preferred Stock, each month, or a pro rata amount for any portion thereof, until the registration statement relating to the Registrable Securities requested by the Holder(s) has been declared effective by the SEC. 7. BINDING EFFECT; SUCCESSOR AND ASSIGNS. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and, assigns. Each of the Stockholders may transfer or assign, in whole or in part, any of its rights and obligations hereunder to any Person; PROVIDED that such transferee executes and delivers a counterpart copy of this Agreement to the Company and each of the Stockholders thereby agreeing to be bound by the terms and provisions set forth herein. 8. AMENDMENT. This Agreement may be amended only by a written instrument signed by the parties hereto. 9. APPLICABLE LAW. The laws of the State of New York shall govern the interpretation, validity and performance of the terms of this Agreement. 10. NOTICES. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received, if personally delivered; when transmitted, if transmitted by telecopy, upon receipt of telephonic or electronic confirmation; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (E.G., Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: 22 (a) If to the Company, addressed to: Autotote Corporation 750 Lexington Avenue 25th Floor New York, NY 10022 Attn: Secretary and General Counsel Telecopy: (212) 754-2372 with a copy to: Kramer Levin Naftalis & Frankel LLP 919 Third Avenue New York, NY 10022 Attn: Peter Smith, Esq. Telecopy: (212) 715-8000 (b) If to Cirmatica, addressed to: Cirmatica Gaming, S.A. Rambla De Catalunya 16, 4(0), 2a Barcelona, Spain Attention: Jaime Hernandez Guillem Telecopy: (01139) 02 621 3241 With a copy to: Lottomatica S.p.A. via di Porta Latina, 8 00179 Rome, Italy Attention: Roberto Sgambati Telecopy: (01139) 0670453122 Latham & Watkins 99 Bishopsgate London EC2M 3XF Attention: Michael S. Immordino, Esq. Telecopy: (01144) 2073744460 Latham & Watkins 885 Third Avenue New York, NY 10022 Attention: Samuel A. Fishman, Esq. David S. Allinson, Esq. Telecopy: (212) 751-4864 23 (c) If to Olivetti, addressed to Olivetti International S.A. 125 Avenue du X Septembre Luxemborg Attention: Luciano La Noce With a copy to: Olivetti S.p.A. P.zza Einaudi 8 20121 Milan, Italy Attention: Lucian La Noce Telecopy: (01139) 026213241 Latham & Watkins 99 Bishopsgate London EC2M 3XF Attention: Michael S. Immordino, Esq. Telecopy: (01144) 2073744460 Latham & Watkins 885 Third Avenue New York, NY 10022 Attention: Samuel A. Fishman, Esq. David S. Allinson, Esq. Telecopy: (212) 751-4864 (d) If to Oak, addressed to The Oak Fund PO Box 31106 SMB, Corporate Center West Bay Road Grand Cayman, Cayman Islands Attention: Niels Heck Telecopy: (1345) 949-3877 (e) If to Peconic, addressed to Peconic Fund Ltd. c/o Ramius Capital Group, LLC 666 Third Avenue New York, New York 10017 Attention: Peter A. Cohen Telecopy: (212) 845-7999 24 (f) If to Ramius, addressed to Ramius Securities, LLC 666 Third Avenue New York, New York 10017 Attention: Peter A. Cohen Telecopy: (212) 845-7999 or at such other address as the party shall have specified by notice in writing to the other parties in accordance with this Section 9. 11. HEADINGS. The headings in this Agreement are for convenience of reference only and will not control or affect the meaning or construction of any provisions hereof. 12. ENTIRE AGREEMENT. This Agreement, the Purchase Agreement and Certificate of Designations constitute the entire agreement among the parties with respect to the subject matter hereof and thereof. This Agreement, the Purchase Agreement and Certificate of Designations supersede all prior agreements and understandings, both oral and written, among the parties with respect to the subject matter hereof and thereof. This Agreement, the Purchase Agreement and Certificate of Designations is not intended to confer upon any Person other than the parties hereto and thereto and their respective permitted assigns any rights or remedies hereunder or thereunder, except as expressly provided herein and therein. 13. SEVERABILITY. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction will not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder will be enforceable to the fullest extent permitted by law. 14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall an original, but all of which together shall constitute one and the same instrument. 25 15. REMEDIES. The parties hereby acknowledge and agree that money damages would not be adequate compensation for the damages that a party would suffer by reason of a breach of this Agreement or a failure of any other party to perform any of its obligations under this Agreement. Therefore, each party hereto agrees that in addition to and without limiting any other remedy or right it may have, the non-breaching part will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. [Signature Page Follows] 26 IN WITNESS WHEREOF, the parties have executed this Stockholders' Agreement as of the date first above written. AUTOTOTE CORPORATION OLIVETTI INTERNATIONAL S.A. By: /s/ Martin Schloss By: /s/ Luciano La Noce --------------------------- ---------------------- Name: Martin Schloss Name: Luciano La Noce Title: Vice President Title: Director CIRMATICA GAMING S.A. By: /s/ Roberto Sgambati ---------------------- Name: Roberto Sgambati Title: Director THE OAK FUND By: /s/ Niels Heck ---------------------- Name: Niels Heck Title: Director PECONIC FUND LTD. By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Principal RAMIUS SECURITIES, LLC By: /s/ Peter Cohen ---------------------- Name: Peter Cohen Title: Principal 27 EX-99.5 5 a2025809zex-99_5.txt EXHIBIT 5 EXHIBIT 5 ================================================================================ VOTING AGREEMENT by and among CIRMATICA GAMING, S.A. a Spanish corporation THE OAK FUND, a Cayman Islands exempted company PECONIC FUND LTD., a Cayman Islands exempted company and OLIVETTI INTERNATIONAL S.A., a Luxembourg corporation Dated: September 6, 2000 ================================================================================ VOTING AGREEMENT This Voting Agreement (this "AGREEMENT") is entered into as of September 6, 2000 by and among Cirmatica Gaming, S.A., a Spanish corporation ("CIRMATICA"), Olivetti International S.A., a Luxembourg company ("OLIVETTI"), The Oak Fund, a Cayman Islands company ("OAK") and Peconic Fund Ltd., a Cayman Island company ("PECONIC"). RECITALS A. Each of the Stockholders (as defined below) will own shares of Preferred Stock (as defined below) upon the consummation of the transactions contemplated by that certain Preferred Stock Purchase Agreement, dated as of the date hereof, by and among the Stockholders, Ramius Securities, LLC and Autotote Corporation, a Delaware corporation (the "COMPANY"). B. Each of Cirmatica, Olivetti, Oak and Peconic desire to enter into this Agreement to, among other things, (i) impose certain restrictions and obligations on the disposition of the Preferred Stock and shares of Common Stock (as defined below) issuable upon the conversion of the Preferred Stock and (ii) establish the voting arrangements set forth herein. NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. CERTAIN DEFINITIONS. In addition to the terms defined elsewhere herein, the following terms have the following meanings when used herein with initial capital letters: "AFFILIATE" means, with respect to any Person or entity (the "REFERENT PERSON"), any Person or entity that controls the referent Person, any Person or entity that the referent Person controls, or any Person or entity that is under common control with the referent Person. For purposes of the preceding sentence, the term "control" shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of a Person or entity through voting securities, by contract or otherwise. "AGREEMENT" means this Agreement, as the same may be modified, supplemented or amended from time to time in accordance with its terms. "BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" means, with respect to any securities, having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities beneficially owned by a Person shall include securities beneficially owned by all other Persons with whom such Person would constitute a "group" as described in Section 13(d)(3) of the Exchange Act. "BOARD" means the Board of Directors of the Company. "CERTIFICATE OF DESIGNATIONS" means the Certificate of Designations of the Company relating to the Preferred Stock. "CIRMATICA" has the meaning set forth in the preamble to this Agreement. "COMMON STOCK" means the common stock, par value $0.01 per share, of the Company. "COMPANY" has the meaning set forth in the preamble to this Agreement. "COVERED SECURITIES" means (i) any and all shares (or other units) of capital stock of the Company, including, without limitation Preferred Stock and Common Stock, however denominated, of any class, series, issue or other type ("CLASS"), including shares of capital stock into which any such Class may be changed, and (ii) any and all Rights with respect to any such shares of capital stock of the Company of any Class. If, at any time, any Covered Securities of any Class are changed into shares of capital stock of any other Class or other securities of any Class, whether by reason of a reclassification, reorganization, recapitalization, consolidation, merger, exchange or any other event or transaction of any nature whatsoever, then such shares of capital stock or other securities into which such Covered Securities are changed shall also be "Covered Securities", and this sentence shall apply successively on each and every occasion on which any event or transaction of any kind referred to shall occur. If, in connection with any consolidation, merger, binding share exchange or reorganization to which the Company is a party and in which the Company is not the surviving or continuing corporation or any sales, conveyance, transfer or lease to another Person of the properties and assets of the Company as an entirety or substantially as an entirety, capital stock or other securities of any Class of the successor or acquiring Person are issued or issuable in respect of any Covered Securities on any Class, then such shares of capital stock or other securities of such successor or acquiring Person shall also be "Covered Securities." The term "Covered Securities" also includes all shares or other appropriate units of capital stock or other securities of any Class issued as a dividend or distribution on any other shares or other units of Covered Securities. "EXCHANGE ACT" means the Securities Exchange Act of 1834, as amended. "OAK" has the meaning set forth in the preamble to this Agreement. "OFFER" has the meaning set forth in Section 3(a) hereof. "OFFER NOTICE" has the meaning set forth in Section 3(a) hereof. "OFFER PRICE" has the meaning set forth in Section 3(a) hereof. "OFFERED SECURITIES" has the meaning set forth in Section 3(a) hereof. "OLIVETTI" has the meaning set forth in the preamble to this Agreement. "PECONIC" has the meaning set forth in the preamble to this Agreement. 2 "PERSON" means an individual, corporation, partnership, limited liability company, association, trust and any other entity or organization. "PREFERRED STOCK" means the Series A Convertible Preferred Stock, par value $0.01 per share, of the Company. "RIGHTS" means options, warrants, convertible or exchangeable securities or other rights, however denominated, to subscribe for, purchase or otherwise acquire any equity interest or other security of any Class, with or without payment of additional consideration in cash or property, either immediately or upon the occurrence of a specified date or a specified event or the satisfaction or happening of any other condition or contingency. "STOCKHOLDERS" means Olivetti, Cirmatica, Oak, Peconic and any Person that becomes a party to this Agreement pursuant to Section 6 hereof. "STOCKHOLDERS' AGREEMENT" means that certain Stockholders' Agreement, dated as of the date hereof, by and among the Company, the Stockholders and Ramius Securities, LLC, as the same may be modified, supplemented or amended from time to time in accordance with its terms. "STOCKHOLDERS' DESIGNEES" has the meaning set forth in Section 2. "SUBSIDIARY" means, with respect to any Person, any other Person, whether or not incorporated, of which at least 50% of the securities or interests having, by their terms, ordinary voting power to elect members of the board of directors, or other persons performing similar functions with respect to such other Person, are held, directly or indirectly, by such first Person. 2. VOTING ARRANGEMENTS. (a) BOARD OF DIRECTORS. Olivetti, Oak, and Peconic agree that Cirmatica shall have the right to designate the Persons who will serve as the director designees of the Stockholders pursuant to the Stockholders' Agreement and the Certificate of Designations (the "STOCKHOLDERS' DESIGNEES"); PROVIDED that Peter Cohen shall be one of the Stockholders' Designees so long as the Stockholders are entitled to designate or elect, as the case may be, two or more directors of the Company pursuant to the Stockholders' Agreement or the Certificate of Designations, unless (i) Oak, Peconic and their permitted assigns and Affiliates no longer hold or beneficially own any shares of Preferred Stock or shares of Covered Securities that were issued pursuant to the conversion or exchange of Preferred Stock, (ii) Peter Cohen ceases to be an associate of Peconic and their Affiliates or (iii) Peter Cohen is unable to serve as a director as a result of his permanent disability or death. Cirmatica, Olivetti, Oak and Peconic agree to vote, and cause their respective Affiliates to vote, all shares of Covered Securities of the Company held of record or beneficially owned by them in favor of the Stockholders' Designees for members of the Board at any meeting of stockholders (whether annual or special and whether or not an adjourned meeting) of the Company, or consent in lieu of any such meeting, or otherwise. 3 (b) COMMITTEE DESIGNEES. Olivetti, Oak and Peconic agree that Cirmatica shall have the right to designate the Stockholders' Designees who shall serve as members of the committees of the Board, including the Stockholders' Designee who shall serve as a member of the Board's nominating committee. (c) OLIVETTI VOTING ARRANGEMENTS. For so long as Cirmatica beneficially owns Covered Securities, Olivetti hereby agrees to vote or act by written consent with respect to (i) the Covered Securities held of record or beneficially owned by Olivetti at the time of such vote or action by written consent and (ii) all Covered Securities as to which Olivetti at the time of such vote or action by written consent has voting control, in each case, as directed by Cirmatica in its sole and absolute discretion, including, without limitation, all matters requiring or permitting the voting of any Covered Securities or the granting of a consent, proxy or approval in respect of any Covered Securities, including ordinary or extraordinary corporate actions and all matters submitted to a stockholder vote at general or special stockholder meetings of the Company. Olivetti further agrees not to enter into any other agreement or transaction that is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, discourage or adversely affect Olivetti's obligations to vote the Covered Securities as provided in this Agreement, and agrees not to enter into any other voting agreement or voting trust or grant any proxy, consent or approval or otherwise transfer, directly or indirectly, voting power with respect to any Covered Securities, in each case except as provided herein. 3. RIGHT OF FIRST REFUSAL. (a) OFFER NOTICE. Each of Olivetti, Oak and Peconic will not, and will not permit any of their Affiliates (other than Cirmatica and its Subsidiaries) to, sell, pledge, encumber or otherwise transfer any of the shares of Preferred Stock, Common Stock or other Covered Securities held of record or beneficially owned by them in accordance with Section 3 without first giving Cirmatica prior written notice thereof, which notice shall set forth in reasonable detail the material terms of such proposed transfer (an "OFFER NOTICE"), and the opportunity (as hereinafter provided) to purchase such Preferred Stock and/or Common Stock or other Covered Securities (the "OFFERED SECURITIES") at a cash price equal to the sum of the amount of any cash plus the fair market value of any other consideration offered by the prospective purchaser or other transferee (the "OFFER PRICE"); PROVIDED, HOWEVER, that the rights of first refusal set forth in this Section 3(a) shall not apply to Peconic or its Affiliates with respect to any sales of Preferred Stock, Common Stock or other Covered Securities made by them to PEI N.V or its designees. The Offer Notice shall constitute an offer (the "OFFER") by Olivetti, Oak and Peconic and their Affiliates (as applicable) to sell all, but not less than all, of the Offered Securities at the Offer Price to Cirmatica. (b) OFFER ACCEPTANCE. Cirmatica may accept an Offer within 15 days of receipt of an Offer Notice. If accepted, the Offered Securities shall be purchased within 5 days after the date of such acceptance or within five days following the satisfaction of any governmental authority consents, or other applicable governmental conditions, to the consummation of the purchase. If the Offer is not accepted or the Offered Securities are not purchased as contemplated above, Olivetti, Oak, Peconic or their Affiliates, as the case may be, may sell the Offered Securities to 4 such prospective purchaser or transferee at a price not less than the Offer Price. If the sale to such prospective purchaser or transferee is not consummated as contemplated above within 40 days after the expiration of the 15-day offer period or earlier irrevocable rejection of such Offer or failure to purchase the Offered Securities after acceptance of the Offer, no sale may be made by Olivetti, Oak, Peconic or their Affiliates, as the case may be, without again complying with this Section 3. (c) VALUATION. If the consideration offered by the prospective purchaser or transferee includes non-cash consideration, Cirmatica and the other party hereto proposing to transfer Covered Securities shall in good faith seek to agree upon the value of such non-cash consideration. If Cirmatica and such other party hereto fail to agree on the value of such non-cash consideration within 10 days following receipt by any party of an Offer Notice, then the items in dispute shall be referred to a nationally recognized investment banking firm selected jointly by Cirmatica and such other party hereto. Cirmatica and such other party hereto shall share all expenses of such investment banking firm. The value of any securities offered as consideration shall be the fair market value of such securities determined on a fully distributed basis, and the value of any property other than securities shall be the fair market value of such property. If a determination under this Section 3(c) is required, any date for acceptance of an Offer provided for in Section 3(b) hereof shall be postponed until the second business day after the date of such determination. All determinations made pursuant to this Section 3(c) shall be final and binding on the parties hereto. 4. REPRESENTATIVES AND WARRANTIES. Each of Cirmatica, Olivetti, Oak and Peconic represents and warrants to the other parties hereto as follows: (a) AUTHORITY. Such party has all requisite power and authority to execute and deliver this Agreement, to perform such party's obligations hereunder and to consummate the transactions contemplated hereby. (b) BINDING AGREEMENT. The execution, delivery and performance by such party of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of such party. This Agreement has been duly executed and delivered by such party and is a legal, valid and binding obligation of such party, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws and equitable principles now or hereafter in effect and affecting the rights and remedies of creditors generally. 5. FURTHER ASSURANCES. From time to time, at the other party's request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 5 6. BINDING EFFECT; SUCCESSOR AND ASSIGNS. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and, assigns. Each of the parties hereto may transfer or assign, in whole or in part, any of its rights and obligations hereunder to any Person; PROVIDED that such transferee executes and delivers a counterpart copy of this Agreement thereby agreeing to be bound by the terms and provisions set forth herein. 7. AMENDMENT. This Agreement may be amended only by a written instrument signed by the parties hereto. 8. APPLICABLE LAW. The laws of the State of New York shall govern the interpretation, validity and performance of the terms of this Agreement. 9. NOTICES. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received, if personally delivered; when transmitted, if transmitted by telecopy, upon receipt of telephonic or electronic confirmation; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (E.G., Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: (a) If to Cirmatica, addressed to: Cirmatica Gaming, S.A. Rambla De Catalunya 16, 4(0), 2a Barcelona, Spain Attention: Jaime Hernandez Guillem Telecopy: (01139) 02 621 3241 With a copy to: Lottomatica S.p.A. via di Porta Latina, 8 00179 Rome, Italy Attention: Roberto Sgambati Telecopy: (01139) 0670453122 6 Latham & Watkins 99 Bishopsgate London EC2M 3XF Attention: Michael S. Immordino, Esq. Telecopy: (01144) 2073744460 Latham & Watkins 885 Third Avenue New York, NY 10022 Attention: Samuel A. Fishman, Esq. David S. Allinson, Esq. Telecopy: (212) 751-4864 (b) If to Olivetti, addressed to Olivetti International S.A. 125 Avenue du X Septembre Luxemborg Attention: Luciano La Noce With a copy to: Olivetti S.p.A. P.zza Einaudi 8 20121 Milan, Italy Attention: Lucian La Noce Telecopy: (01139) 026213241 Latham & Watkins 99 Bishopsgate London EC2M 3XF Attention: Michael S. Immordino, Esq. Telecopy: (01144) 2073744460 Latham & Watkins 885 Third Avenue New York, NY 10022 Attention: Samuel A. Fishman, Esq. David S. Allinson, Esq. Telecopy: (212) 751-4864 (c) If to Oak, addressed to 7 The Oak Fund PO Box 31106 SMB, Corporate Center West Bay Road Grand Cayman, Cayman Islands Attention: Niels Heck Telecopy: (1345) 949-3877 (d) If to Peconic, addressed to Peconic Fund Ltd. c/o Ramius Capital Group, LLC 666 Third Avenue New York, New York 10017 Attention: Peter A. Cohen Telecopy: (212) 845-7999 or at such other address as the party shall have specified by notice in writing to the other parties in accordance with this Section 9. 10. HEADINGS. The headings in this Agreement are for convenience of reference only and will not control or affect the meaning or construction of any provisions hereof. 11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings, both oral and written, among the parties with respect to the subject matter hereof. This Agreement is not intended to confer upon any Person other than the parties hereto and any permitted assigns any rights or remedies hereunder. 12. SEVERABILITY. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction will not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder will be enforceable to the fullest extent permitted by law. 13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which will be an original with the same effect as if the signatures thereto and hereto were upon the same instrument. 8 14. REMEDIES. The parties hereby acknowledge and agree that money damages would not be adequate compensation for the damages that a party would suffer by reason of a breach of this Agreement or a failure of any other party to perform any of its obligations under this Agreement. Therefore, each party hereto agrees that in addition to and without limiting any other remedy or right it may have, the non-breaching part will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. [Signature Page Follows] 9 IN WITNESS WHEREOF, the parties have executed this Voting Agreement as of the date first above written. OLIVETTI INTERNATIONAL S.A. By: /s/ David S. Allinson ------------------------------------- Name: David S. Allinson Title: Attorney-in-Fact CIRMATICA GAMING, S.A. By: /s/ Roberto Siambati ------------------------------------- Name: Roberto Siambati Title: Chairman THE OAK FUND By: /s/ Niels Heck ------------------------------------- Name: Niels Heck Title: Director PECONIC FUND LTD. By: /s/ Peter A. Cohen ------------------------------------- Name: Peter A. Cohen Title: Principal -----END PRIVACY-ENHANCED MESSAGE-----