Purchase Agreement, dated June 20, 2003



 



Exhibit 10.1





WMS INDUSTRIES INC.



$100,000,000



Principal Amount



2.75% Convertible Subordinated Notes due 2010



Purchase Agreement



June 20, 2003



CIBC WORLD MARKETS CORP.



 






 





2.75% Convertible Subordinated Notes due 2010 


of WMS INDUSTRIES INC. 


CIBC WORLD MARKETS CORP. 


June 20, 2003



CIBC World Markets Corp.

417 5th Avenue, 2nd Floor

New York, New York 10016



Dear Sirs and Madams:


          WMS Industries Inc., a Delaware corporation (the “Company”), proposes to
issue and sell to CIBC World Markets Corp. (“CIBC” or the “Initial Purchaser”),
an aggregate of $100,000,000 in principal amount of its 2.75% Convertible
Subordinated Notes due July 15, 2010 (the “Firm Notes”), subject to the terms
and conditions set forth herein. The Company also proposes to issue and sell
to the Initial Purchaser not more than an additional $15,000,000 aggregate
principal amount of its 2.75% Convertible Subordinated Notes due July 15, 2010
(the “Additional Notes”), if requested by the Initial Purchaser as provided in
Section 2 hereof. The Firm Notes and the Additional Notes are herein
collectively referred to as the “Notes.” The Notes are to be issued pursuant
to the provisions of an indenture (the “Indenture”), to be dated as of the
Closing Date (as hereinafter defined), between the Company, and BNY Midwest
Trust Company, as trustee (the “Trustee”), pursuant to which the Notes, as
provided therein, will be convertible at the option of the holders thereof into
shares of the Company’s common stock, $0.50 par value per share (the “Common
Stock”). The Notes and the Common Stock issuable upon conversion thereof are
herein collectively referred to as the “Securities.” The Securities and the
Indenture are more fully described in the Offering Circular (as hereinafter
defined). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture.



     1.     Offering Circular. The Notes will be offered and sold to the Initial
Purchaser pursuant to one or more exemptions from the registration requirements
under the Securities Act of 1933, as amended (the “Act”). As used in this
Agreement, “Offering Circular” means, collectively, the preliminary offering
circular dated as of June 19, 2003 and the final offering circular, dated June
20, 2003, each as amended or supplemented by the Company. All references to
the Offering Circular shall include the information incorporated by reference
therein (the “Incorporated Documents”)


 






 


        Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Notes (and all securities issued
in exchange therefor, in substitution thereof or upon conversion thereof) shall
bear the following legend:



	 	 	“THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS
HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.
	 
	 	 	THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A)(1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL
INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT THAT PRIOR TO SUCH TRANSFER PROVIDES TO THE TRUSTEE FOR THE
NOTES A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES
(THE FORM OF THE LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THE
NOTES), (4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT (IF AVAILABLE) (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO WMS INDUSTRIES INC.) OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B)
IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES AND OTHER JURISDICTIONS.
	 
	 	 	THIS NOTE, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION
AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM
TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER
TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE
IN APPLICABLE



 






 







	 	 	LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES
RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES
GENERALLY. THE HOLDER OF THIS NOTE AND SUCH SHARES SHALL BE
DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES TO HAVE
AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.”



     2.     Agreements to Sell and Purchase. 

          (a)     On the basis of the representations, warranties and covenants
contained in this Purchase Agreement (this “Agreement”), and subject to the
terms and conditions contained herein, the Company agrees to issue and sell to
the Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Company, all of the Firm Notes at a purchase price equal to 96.75% of the
principal amount thereof (the “Purchase Price”).



          (b)     On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, (i) the Company agrees to
issue and sell the Additional Notes and (ii) the Initial Purchaser shall have a
right, but not the obligation, to purchase the Additional Notes, from the
Company at the Purchase Price. Additional Notes may be purchased solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Notes. The Initial Purchaser may exercise its right to purchase
Additional Notes in whole or in part from time to time by giving written notice
thereof to the Company at any time within 30 days after the date of this
Agreement. Such notice shall specify the aggregate principal amount of
Additional Notes to be purchased pursuant to such exercise and the date for
payment and delivery thereof. The date specified in any such notice shall be a
business day (i) no earlier than the Closing Date, (ii) no later than ten
business days after such notice has been given and (iii) no earlier than two
business days after such notice has been given.



     3.     Terms of Offering. The Initial Purchaser has advised the Company that
the Initial Purchaser will make offers (the “Exempt Resales”) of the Notes
purchased hereunder on the terms set forth in the Offering Circular, as amended
or supplemented, solely to persons whom the Initial Purchaser reasonably
believes to be “qualified institutional buyers” as defined in Rule 144A under
the Act (“QIBs”). The Initial Purchaser will offer the Notes to QIBs initially
at a price equal to 100% of the principal amount thereof. Such price may be
changed at any time without notice.


     Holders (including subsequent transferees) of the Securities will have the
registration rights set forth in the registration rights agreement (the
“Registration Rights Agreement”), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Securities
constitute “Restricted Securities” (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the “Commission”),
under the circumstances set forth therein, a shelf registration statement
pursuant to Rule 415 under the Act (the “Registration Statement”) relating to
the resale by certain holders of the Securities and to use all reasonable best
efforts to cause such Registration Statements to be declared and remain
effective and usable for the periods specified in the Registration Rights
Agreement. This Agreement, the Indenture,


 






 


the Notes, and the Registration Rights Agreement are hereinafter sometimes
referred to collectively as the “Operative Documents.”


     4.          Delivery and Payment.


          (a)     Delivery of, and payment of the Purchase Price for, the Firm Notes
shall be made at the offices of Morgan, Lewis & Bockius, LLP, 101 Park Avenue,
New York, New York 10178, or such other location as may be mutually acceptable.
Such delivery and payment shall be made at 10:00 a.m., New York City time, on
June 25, 2003 or at such other time on the same date or such other date as the
Initial Purchaser and the Company shall agree in writing. The time and date of
such delivery and the payment for the Firm Notes are herein called the “Closing
Date.”



          (b)     Delivery of, and payment for, any Additional Notes to be purchased by
the Initial Purchaser shall be made at the offices of Morgan, Lewis & Bockius,
LLP, 101 Park Avenue, New York, New York 10178 at 10:00 a.m., New York City
time, on the date specified in the exercise notice given by CIBC pursuant to
Section 2(b) or such other time on the same or such other date as the Initial
Purchaser and the Company shall agree in writing. The time and date of
delivery and payment for any Additional Notes are hereinafter referred to as an
“Option Closing Date.”



          (c)     One or more of the Notes in definitive global form, registered in the
name of Cede & Co., as nominee of the Depository Trust Company (“DTC”), having
an aggregate principal amount corresponding to the aggregate principal amount
of the Notes (collectively, the “Global Note”), shall be delivered by the
Company to the Initial Purchaser (or as the Initial Purchaser directs) in each
case with any transfer taxes thereon duly paid by the Company against payment
by the Initial Purchaser of the Purchase Price thereof by wire transfer in same
day funds to the order of the Company. The Global Note shall be made available
to the Initial Purchaser for inspection not later than 9:30 a.m., New York City
time, on the business day immediately preceding the Closing Date.



     5.          Agreements of the Company. The Company hereby agrees with the Initial
Purchaser as follows:


          (a)     To advise the Initial Purchaser promptly and, if requested by the
Initial Purchaser, to confirm such advice in writing of (i) the issuance by any
state securities commission of any stop order suspending the qualification or
exemption from qualification of any Securities for offering or sale in any
jurisdiction designated by the Initial Purchaser pursuant to Section 5(e)
below, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii)
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Offering Circular
untrue or that requires any additions to or changes in the Offering Circular in
order to make the statements therein not misleading. The Company shall use its
reasonable best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Securities under any state
securities or Blue Sky laws and, if at any time any state securities commission
or other federal or state regulatory authority shall issue



 






 





an order suspending the qualification or exemption of any Securities under
any state securities or Blue Sky laws, the Company shall use its best efforts
to obtain the withdrawal or lifting of such order at the earliest possible
time.


          (b)     To furnish the Initial Purchaser and those persons identified by the
Initial Purchaser to the Company, without charge, as many copies of the
Offering Circular, any documents incorporated by reference therein, and any
amendments or supplements thereto, as the Initial Purchaser may reasonably
request for the time period specified in Section 5(c). Subject to the Initial
Purchaser’s compliance with its representations and warranties and agreements
set forth in Section 7 hereof, the Company consents to the use of the Offering
Circular, any documents incorporated by reference therein, and any amendments
and supplements thereto required pursuant hereto, by the Initial Purchaser in
connection with Exempt Resales.



          (c)     During such period as in the reasonable opinion of counsel for the
Initial Purchaser an Offering Circular is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser, (i) not to make any
amendment or supplement to the Offering Circular of which the Initial Purchaser
shall not previously have been advised or to which the Initial Purchaser shall
reasonably object after being so advised and (ii) to prepare promptly upon the
Initial Purchaser’s reasonable request any amendment or supplement to the
Offering Circular that may be necessary or advisable in connection with such
Exempt Resales.



          (d)     If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchaser, it becomes necessary to amend or supplement
the Offering Circular in order to make the statements therein, in the light of
the circumstances when the Offering Circular is delivered to a QIB, not
misleading, or if, in the opinion of counsel to the Initial Purchaser, it is
necessary to amend or supplement the Offering Circular to comply with any
applicable law, forthwith to prepare an appropriate amendment or supplement to
the Offering Circular so that the statements therein, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Offering Circular will comply with
applicable law, and to furnish to the Initial Purchaser and such other persons
as the Initial Purchaser may designate such number of copies thereof as the
Initial Purchaser may reasonably request.



          (e)     Prior to the sale of all Notes pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchaser and counsel to the
Initial Purchaser in connection with the registration or qualification of the
Notes for offer and sale to the Initial Purchaser and pursuant to Exempt
Resales under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchaser may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided, however, that the
Company shall not be required in connection therewith to qualify as a foreign
corporation in any jurisdiction in which it is not now so qualified or to take
any action that would subject it to general consent to service of process or
taxation, other than as to matters and transactions relating to the Offering
Circular or Exempt Resales, in any jurisdiction in which it is not now so
subject.



 






 





          (f)     So long as the Notes are outstanding, (i) to mail and make generally
available as soon as practicable after the end of each fiscal year to the
record holders of the Notes a financial report of the Company and its
subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), it being agreed that all such financial
reports will include a consolidated balance sheet, a consolidated statement of
operations, a consolidated statement of cash flows and a consolidated statement
of stockholders’ equity as of the end of and for such fiscal year, together
with comparable information as of the end of and for the preceding year,
certified by the Company’s independent public accountants and (ii) to mail and
make generally available as soon as practicable after the end of each quarterly
period (except for the last quarterly period of each fiscal year) to such
holders, a consolidated balance sheet, a consolidated statement of operations
and a consolidated statement of cash flows (and similar financial reports of
all unconsolidated subsidiaries, if any) as of the end of and for such period,
and for the period from the beginning of such year to the close of such
quarterly period, together with comparable information for the corresponding
periods of the preceding year.



          (g)     So long as the Notes are outstanding, to furnish to the Initial
Purchaser as soon as available copies of all reports or other communications
furnished by the Company to its security holders or furnished to or filed with
the Commission or any national securities exchange on which any class of
securities of the Company is listed and such other publicly available
information concerning the Company and/or its subsidiaries as the Initial
Purchaser may reasonably request.



          (h)     So long as any of the Notes remain outstanding and during any period
in which the Company is not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), to make available to any
holder of Securities in connection with any sale thereof and any prospective
purchaser of such Securities from such holder the information (“Rule 144A
Information”) required by Rule 144A(d)(4) under the Act or the information
(“Rule 144 Information”) required by Rule 144(c)(2) under the Act, as
applicable.



          (i)     Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company under
this Agreement, including: (i) the fees, disbursements and expenses of counsel
to the Company and accountants of the Company in connection with the sale and
delivery of the Notes to the Initial Purchaser and pursuant to Exempt Resales,
and all other fees and expenses in connection with the preparation, printing,
filing and distribution of the Offering Circular, any documents incorporated by
reference and all amendments and supplements to any of the foregoing (including
financial statements), including the mailing and delivering of copies thereof
to the Initial Purchaser and persons designated by it in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Notes to the Initial Purchaser and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale
or delivery of the Securities, (iv) all expenses in connection with the
registration or qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and fees and disbursements of



 






 





counsel for the Initial Purchaser in connection with such registration or
qualification and memoranda relating thereto), (v) the cost of printing
certificates representing the Securities, (vi) all expenses and listing fees in
connection with the application for quotation of the Notes in The PORTAL Market
of the National Association of Securities Dealers, Inc. (“PORTAL”), (vii) the
fees and expenses of the Trustee and the Trustee’s counsel in connection with
the Indenture and the Notes, (viii) the costs and charges of any transfer
agent, registrar and/or depositary (including DTC), (ix) any fees charged by
rating agencies for the rating of the Notes, (x) all costs and expenses of the
Registration Statement, as set forth in the Registration Rights Agreement, (xi)
all expenses and listing fees in connection with the application for listing
the Common Stock issuable upon conversion of the Notes on the New York Stock
Exchange (the “NYSE”) and (xii) and all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which a
provision is not otherwise made in this Section.


          (j)     To use its best efforts to effect the inclusion of the Notes in PORTAL
and to maintain the listing of the Notes on PORTAL for so long as the Notes are
outstanding.



          (k)     To obtain the approval of DTC for “book-entry” transfer of the Notes,
and to comply with all of its agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Notes by DTC for
“book-entry” transfer.



          (l)     To cause the Common Stock issuable upon conversion of the Notes to be
duly included for quotation on the NYSE prior to the Closing Date, subject to
notice of official issuance. The Company will ensure that such Common Stock
remain included for quotation on the NYSE or any other national securities
exchange following the Closing Date for so long as any shares of Common Stock
remain registered under the Exchange Act.



          (m)     The Company will reserve and keep available at all times, free of
preemptive rights, the shares of Common Stock for the purpose of enabling the
Company to satisfy its obligations to issue the Common Stock upon conversion of
the Notes.



          (n)     The Company shall not offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock (other than the issuance of
Common Stock upon conversion of the Notes) or any securities convertible into
or exercisable or exchangeable for Common Stock, for a period of 90 days after
the date hereof without the prior written consent of CIBC. Notwithstanding the
foregoing, during such period (i) the Company may grant securities convertible
into or exercisable or exchangeable for Common Stock pursuant to the Company’s
existing stock option, stock purchase or 401(k) plans, (ii) the Company may
issue shares of Common Stock upon the conversion or exchange of a convertible
or exchangeable security outstanding on the date hereof, and (iii) the Company
may create and issue up to $15,000,000 aggregate principal amount of Additional
Notes. The Company shall, prior to or concurrently with the execution of this
Agreement, deliver an agreement executed by each of the directors and executive
officers of the Company to the effect that such person will not, during the
period commencing on the date such person signs such agreement and ending 90
days after the date hereof, without the prior written consent of CIBC, (i)
engage in any of the transactions described in the first sentence of this



 






 





paragraph (whether such shares or any such securities are now owned by
such individual or are hereafter acquired) or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences associated with the ownership of any Common Stock (whether any
such transactions described in clause (i) or (ii) is to be settled by the
delivery of Common Stock or such other securities, in cash or otherwise).
Notwithstanding the foregoing, Messrs. Sheinfeld and McKenna will each retain
the right to sell, transfer or otherwise dispose of up to 62,955 shares of
Common Stock in connection with the exercise of options. In addition, in such
agreement each of the directors and executive officers of the Company will have
agreed not to make any demand for or exercise any registration rights for a
period of 90 days after the date hereof without the prior written consent of
CIBC.


          (o)     Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Notes to the Initial Purchaser or pursuant to
Exempt Resales in a manner that would require the registration of any such sale
of the Notes under the Act.



          (p)     During the period of two years after the Closing Date, the Company
will not, and will not permit any of its affiliates (as defined in Rule 144
under the Securities Act) to, resell any of the Securities that have been
reacquired by any of them.



          (q)     In connection with the offering, until CIBC shall have notified the
Company of the completion of the resale of the Securities, neither the Company
nor any of its subsidiaries or affiliates has or will, either alone or with one
or more other persons bid for or purchase for any account in which it or any of
its subsidiaries or affiliates has a beneficial interest any Securities or
attempt to induce any person to purchase any Securities; and neither it nor any
of its subsidiaries or affiliates will make bids or purchases for the purpose
of creating actual, or apparent, active trading in, or of raising the price of,
the Securities.



          (r)     Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes.



          (s)     To comply with all of its agreements set forth in the Registration
Rights Agreement.



          (t)     To use the net proceeds received by it from the sale of the Securities
in the manner specified in the Offering Circular under the caption “Use of
Proceeds.”



          (u)     To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Notes.



          (v)     To maintain such controls and other procedures, including without
limitation those required by Section 302 of the Sarbanes-Oxley Act and the
applicable regulations thereunder, that are reasonably designed to ensure that
information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is recorded, processed, summarized and
reported within the time periods specified in the Commission’s rules and forms,
including without limitation, controls and procedures reasonably reasonably
designed



 






 





to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the 1934 Act is accumulated and
communicated to the Company’s management, including its Chief Executive Officer
and its Principal Financial Officer, or persons performing similar functions,
as appropriate to allow timely decisions regarding required disclosure, to
ensure that material information relating to Company, including its
subsidiaries, is made known to them by others within those entities.


          (w)     To comply, in all material respects, with all effective applicable
provisions of the Sarbanes-Oxley Act.



          (x)     The Company will not, and will cause its subsidiaries not to, solicit
any offer to buy or offer to sell the Securities by means of any form of
general solicitation or general advertising (as defined in Regulation D under
the Act) or in any manner involving a public offering within the meaning of
Section 4(2) of the Act.



     6.     Representations, Warranties and Agreements of the Company. As of the
date hereof, the Company represents and warrants to, and agrees with, the
Initial Purchaser that:


          (a)     The Offering Circular (including the Incorporated Documents) does not,
and any supplement or amendment to it will not, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Offering Circular (or any supplement or
amendment thereto) based upon information relating to the Initial Purchaser
furnished to the Company in writing by the Initial Purchaser expressly for use
therein. None of the Incorporated Documents as of the time they were filed
contained an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. No stop order preventing the use of the Offering Circular, or
any amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued. The Incorporated Documents, at the
time they were or hereafter are filed or last amended, as the case may be, with
the Commission, complied and will comply in all material respects with the
requirements of the Exchange Act.



          (b)     Each of the Company and its subsidiaries has been duly incorporated,
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to
carry on its business as described in the Offering Circular and to own, lease
and operate its properties, and each is duly qualified and is in good standing
as a foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified would
not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries, taken
as a whole (a “Material Adverse Effect”).



          (c)     All of the issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights, and there
are no restrictions upon the voting or transfer of the



 






 





Common Stock pursuant to the Company’s charter or by-laws or other
governing documents or, except as described in the Company’s Proxy Statement
for the annual meeting held on November 14, 2002, any agreement or other
instrument to which the Company is a party or by which it may be bound. The
Company has the authorized, issued and outstanding capital stock as set forth
in the Offering Circular, and there have been no changes in the outstanding
capital stock of the Company since the date set forth under the heading
“Capitalization” in the Offering Circular, except to the extent that certain
outstanding options and warrants set forth in the Offering Circular may have
been exercised and shares were repurchased as described in the Incorporated
Documents.


          (d)     The entities listed on Schedule A hereto are the only subsidiaries,
direct or indirect, of the Company. All of the outstanding shares of capital
stock of each of the Company’s subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries, free and
clear of any security interest, claim, lien, encumbrance or adverse interest of
any nature (each, a “Lien”).



          (e)     This Agreement has been duly authorized, executed and delivered by the
Company, enforceable in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors’ rights generally.



          (f)     The Indenture has been duly authorized by the Company and, when duly
executed and delivered by the Company and duly authorized, executed and
delivered by the Trustee, will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors’ rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Indenture will conform in all
material respects to the requirements of the Trust Indenture Act of 1939, as
amended (the “TIA” or “Trust Indenture Act”), and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.



          (g)     The Notes have been duly authorized and, when duly executed, delivered
and authenticated in accordance with the provisions of the Indenture and when
delivered to and paid for by the Initial Purchaser in accordance with the terms
of this Agreement, the Notes will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company, enforceable in
accordance with their terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors’ rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On
the Closing Date, the Notes will conform as to legal matters to the description
thereof contained in the Offering Circular.



          (h)     The Notes are convertible into Common Stock in accordance with the
terms of the Indenture; the shares of Common Stock initially issuable upon
conversion of the Notes have been duly authorized and reserved for issuance
upon such conversion and, when issued upon such conversion, will be validly
issued, fully paid and nonassessable, will conform



 






 





to the description thereof contained in the Offering Circular and will be
duly authorized for listing on the NYSE, subject to notice of official
issuance. No stockholder approval is required for the Company to issue the
Notes. The stockholders of the Company or other holders of the Company’s
securities have no pre-emptive or similar rights with respect to the Notes or
the Common Stock issuable upon conversion of the Notes. The certificates
evidencing the Common Stock issuable upon conversion of the Notes will be in
due and proper legal form.


          (i)     The Registration Rights Agreement has been duly authorized by the
Company and, when duly executed and delivered by the Company, and assuming the
due execution and delivery by the Initial Purchaser, will be a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors’ rights generally
and (ii) rights of acceleration and the availability of equitable remedies may
be limited by equitable principles of general applicability. On the Closing
Date, the Registration Rights Agreement will conform as to legal matters to the
description thereof contained in the Offering Circular.



          (j)     Neither the Company nor any of its subsidiaries is (i) in violation of
its respective charter or by-laws (ii) in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound or (iii) in violation of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation where the consequences of such violation would have a Material
Adverse Effect.



          (k)     No statute, rule, regulation or order that has been enacted, adopted
or issued by any governmental agency, and no injunction, restraining order or
order of any nature by a Federal or state court of competent jurisdiction, to
which either the Company or any of its subsidiaries is subject, that has been
issued or is pending, (i) could interfere with or adversely affect the issuance
of the Securities, or (ii) could in any manner draw into question the validity
of any of the Operative Documents.



          (l)     The execution, delivery and performance of this Agreement and the
other Operative Documents by the Company, compliance by the Company with all
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or governmental agency (except such as may be required under
the securities or Blue Sky laws of the various states) other than those which
have been obtained or made, (ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any indenture, loan agreement, mortgage,
lease, license agreement or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, (iii) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property, (iv) result in
the imposition or creation of (or the obligation to create or impose) a Lien
under,



 






 





any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, or (v) result in the termination,
suspension or revocation of any Authorization (as defined below) of the Company
or any of its subsidiaries or result in any other impairment of the rights of
the holder of any such Authorization.


          (m)     Except as disclosed in the Offering Circular, there are no legal or
governmental proceedings pending or, to the Company’s knowledge, threatened to
which the Company or any of its subsidiaries is or could be a party or to which
any of their respective property is or could be subject that might result,
singly or in the aggregate, in a Material Adverse Effect or could materially
and adversely affect the ability of the Company to perform its obligations
under any of the Operative Documents, or which are otherwise material in the
context of the sale of the Securities.



          (n)     Each of the Company and its subsidiaries is in compliance in all
material respects with all rules, laws and regulations relating to the use,
treatment, storage and disposal of toxic substances and the protection of
health or the environment (“Environmental Law”) which are applicable to its
business; (ii) neither the Company nor any of its subsidiaries has received any
written notice from any governmental authority or third party of an asserted
claim under Environmental Laws; (iii) each of the Company and its subsidiaries
has received all permits, licenses and other approvals required of it under
applicable Environmental Laws to conduct its business and is in compliance with
all terms and conditions of any such permit, license or approval; (iv) to the
Company’s knowledge, no facts currently exist that will require the Company or
its subsidiaries to make future material capital expenditures to comply with
Environmental Laws; and (v) no property which is or has been owned, leased or
occupied by the Company or its subsidiaries has been designated as a Superfund
site pursuant to the Comprehensive Environmental Response, Compensation of
Liability Act of 1980 (“CERCLA”), as amended (42 U.S.C. Section 9601, et seq.)
or otherwise designated as a contaminated site under applicable state or local
law. Neither the Company nor any of its subsidiaries has been named as a
“potentially responsible party” under the CERCLA. In the ordinary course of
its business, the Company periodically reviews the effect of Environmental Laws
on the business, operations and properties of the Company and its subsidiaries,
in the course of which the Company identifies and evaluates associated costs
and liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws, or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties). On
the basis of such review, the Company has reasonably concluded that such
associated costs and liabilities would not, singly or in the aggregate, have a
Material Adverse Effect.



          (o)     The Company is not, nor will it be, as a result of or after giving
effect to the issuance of the Securities and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated thereby, (i) insolvent, (ii) left with an unreasonably small
capital with which to engage in its existing and anticipated businesses or
(iii) incurring debts beyond its ability to pay such debts as they mature. The
Company is not issuing the Securities in anticipation of insolvency.



 






 





          (p)     Neither the Company nor any of its subsidiaries has violated any
provisions of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), or any provisions of the Foreign Corrupt Practices Act or the rules
and regulations promulgated thereunder, except for such violations which,
singly or in the aggregate, would not have a Material Adverse Effect. None of
the Company, its subsidiaries or any director, officer or employee of the
Company or its subsidiaries has, in the course of such person’s actions for, or
on behalf of, the Company or its subsidiaries, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating
to political activity or made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; and
none of the Company, its subsidiaries, or to the Company’s knowledge, any
director, officer, employee, agent or other person acting on behalf of the
Company or its subsidiaries, has, in the course of such person’s actions for,
or on behalf of, the Company or its subsidiaries made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.



          (q)     Each of the Company and its subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
“Authorization”) of, and has made all filings with and given all notices to,
all governmental or regulatory authorities and self-regulatory organizations
and all courts and other tribunals, including without limitation under any
applicable gaming laws and Environmental Laws, as are necessary to own, lease,
license and operate its respective properties and to conduct its business,
except where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a Material Adverse
Effect. Each such Authorization is valid and in full force and effect and each
of the Company and its subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including without limitation the receipt of any notice from any
authority or governing body) that allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company or any of its subsidiaries; except where such failure
to be valid and in full force and effect or to be in compliance, the occurrence
of any such event or the presence of any such restriction would not, singly or
in the aggregate, have a Material Adverse Effect.



          (r)     The Company and its subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them that is material to the business of the Company and its
subsidiaries, in each case free and clear of all Liens and defects, except such
as are described in the Offering Circular or such as do not materially affect
the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries, in each case except as described in the Offering Circular.



 






 





          (s)     The Company and its subsidiaries own or license, free and clear of all
liens or encumbrances, or can acquire or license, free and clear of all liens
and encumbrances, on reasonable terms, all patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets, designs and other
unpatented and/or unpatentable designs, technologies, inventions and
innovations and proprietary or confidential information, systems or
procedures), rights to use names and likenesses, trademarks, service marks,
domain names and trade names (“Intellectual Property”) currently employed by
them in connection with the business now operated by them or currently used in
any products, advertising or other materials distributed by them, except where
the failure to own or license or otherwise to be able to acquire or license,
free and clear of all liens and encumbrances, such Intellectual Property would
not, singly or in the aggregate, have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of infringement
of or conflict with asserted rights of others with respect to any Intellectual
Property or rights of privacy that, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a Material Adverse
Effect, in each case except as described in the Offering Circular.



          (t)     Each agreement described in the Offering Circular or the Incorporated
Documents is in full force and effect and is valid and enforceable by the
Company or its subsidiary, as applicable, in accordance with its terms,
assuming the due authorization, execution and delivery thereof by each of the
other parties thereto except as (i) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors’ rights generally
and (ii) to the extent that rights to indemnity or contribution thereunder may
be limited by federal and state securities laws or the public policy underlying
such laws. None of the Company, any of its subsidiaries, or to the Company’s
knowledge, any other party is in default in the observance or performance of
any term or obligation to be performed by it under such agreement, and no event
has occurred that with notice or lapse of time or both would constitute such a
default, in any such case where such default or event would have Material
Adverse Effect. No default exists, and no event has occurred that with notice
or lapse of time or both would constitute a default, in the due performance and
observance of any term, covenant or condition, by the Company or any of its
subsidiaries of any other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which any of them or their respective
properties or business may be bound or affected where such default or event
would have a Material Adverse Effect.



          (u)     Except as disclosed in the Offering Circular, no relationship, direct
or indirect, exists between or among the Company or any of its subsidiaries on
the one hand, and the directors, officers, stockholders, customers or suppliers
of the Company or any of its subsidiaries on the other hand, that would be
required by the Act to be described in the Offering Circular if the Offering
Circular were a prospectus included in a registration statement on Form S-1
filed with the Commission.



          (v)     There is no (i) significant labor practice complaint, grievance or
arbitration proceeding pending or, to the Company’s knowledge, threatened
against the Company or any of its subsidiaries before the National Labor
Relations Board or any state or local labor relations board, (ii) strike, labor
dispute, slowdown or stoppage pending or threatened against the Company or any
of its subsidiaries or (iii) union representation question existing with




 






 





respect to the employees of the Company or any of its subsidiaries, except in
the case of clauses (i), (ii) and
(iii) for such actions that singly or in the aggregate, would not have a
Material Adverse Effect. To the knowledge of the Company, no collective
bargaining organizing activities are taking place with respect to the Company
or any of its subsidiaries.


          (w)     All material tax returns required to be filed by the Company and each
of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.



          (x)     The accountants, Ernst & Young LLP, that have certified the financial
statements and supporting schedules included in the Offering Circular are
independent public accountants with respect to the Company, as required by the
Act and the Exchange Act and such accountants are not in violation of the
auditor independence requirements of the Sarbanes-Oxley Act. The historical
financial statements, together with related schedules and notes, set forth in
the Offering Circular comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the Act.



          (y)     The historical financial statements, together with related schedules
and notes forming part of the Offering Circular (and any amendment or
supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the Company and its
subsidiaries on the basis stated or incorporated by reference in the Offering
Circular at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth or incorporated by
reference in the Offering Circular (and any amendment or supplement thereto)
are, in all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company. The Company’s ratio of earnings to fixed charges set forth in the
Offering Circular have been calculated in compliance with Item 503(d) of
Regulation S-K under the Act.



          (z)     The Company is not and, after giving effect to the offering and sale
of the Notes and the application of the net proceeds thereof as described in
the Offering Circular, will not be, an “investment company,” as such term is
defined in the Investment Company Act of 1940, as amended.



          (aa)     Except as disclosed in the Offering Circular or other than has been
waived, there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with the Notes
registered pursuant to any registration statement.



          (bb)     Neither the Company nor any of its subsidiaries nor any agent thereof
acting on the behalf of any of them has taken, and none of them will take, any
action that might




 






 





cause this Agreement or the issuance or sale of the Notes to
violate Section 7 of the Exchange
Act, or any regulation promulgated thereunder, including without
limitation, Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part
221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System.


          (cc)     No “nationally recognized statistical rating organization” as such
term is defined for the purpose of Rule 436(g)(2) under the Act (i) has imposed
(or has informed the Company that it is considering imposing) any condition
(financial or otherwise) on the Company’s retaining any rating assigned to the
Company or any securities of the Company or (ii) has indicated to the Company
that it is considering (A) the downgrading, suspension, or withdrawal of, or
any review for a possible change that does not indicate the direction of the
possible change in, any rating so assigned or (B) any change in the outlook for
any rating of the Company or any securities of the Company.



          (dd)     Since the respective dates as of which information is given in the
Offering Circular, other than as set forth in the Offering Circular (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement), (i) there has not occurred any material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii) there
has not been any material adverse change in the capital stock or in the
long-term debt of the Company or any of its subsidiaries, (iii) neither the
Company nor any of its subsidiaries has incurred any material liability or
obligation, direct or contingent except in the ordinary course of business,
(iv) neither the Company nor any of its subsidiaries has sustained any material
loss or interference with their respective assets, businesses or properties
(whether owned or leased) from fire, explosion, earthquake, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or any
court or legislative or other governmental action, order or decree that would
have a Material Adverse Effect; and (v) since the date of the latest
consolidated balance sheet included in the Offering Circular, except as
reflected therein, neither the Company nor any of its subsidiaries has (A)
issued any securities other than the issuance of securities pursuant to the
exercise of options granted under stock option plans or agreements existing
prior to the date of the latest consolidated balance sheet included in the
Offering Circular, (B) entered into any material transaction not in the
ordinary course of business or (C) declared or paid any dividend or made any
distribution on any shares of its capital stock or redeemed, purchased or
otherwise acquired or agreed to redeem, purchase or otherwise acquire any
shares of its capital stock.



          (ee)     The books, records and accounts of the Company and each of its
subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the results of
operations of, the Company and its subsidiaries, as applicable. The Company
and each of its subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.



 






 





          (ff)     When the Notes are issued and delivered pursuant to this Agreement,
the Notes will not be of the same class (within the meaning of Rule 144A under
the Act) as any security of the Company that is listed on a national securities
exchange registered under Section 6 of the Exchange Act or that is quoted in a
United States automated inter-dealer quotation system.



          (gg)     No form of general solicitation or general advertising (as defined in
Regulation D under the Act) was used by the Company, or any of its
representatives (other than the Initial Purchaser, as to whom the Company makes
no representation) in connection with the offer and sale of the Notes
contemplated hereby, including without limitation articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Notes have been issued and sold by the
Company within the six-month period immediately prior to the date hereof.



          (hh)     Except as permitted by the Securities Act, neither the Company nor
any of its subsidiaries has distributed and, prior to the completion of the
initial distribution of the Notes (which includes the sale by the Initial
Purchaser), neither will distribute, any offering materials in connection with
the offering and sale of the Notes other than the Offering Circular.



          (ii)     The Company has not taken, nor will it take, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in, or that has constituted or that might reasonably be expect to constitute,
the stabilization or manipulation of the price of the Common Stock or the
Notes.



          (jj)     Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.



          (kk)     No registration under the Act of the Securities is required for the
sale of the Securities to the Initial Purchaser as contemplated hereby or for
the Exempt Resales assuming the accuracy of the Initial Purchaser’s
representations and warranties and agreements set forth in Section 7 hereof.



          (ll)     Each certificate signed by any officer of the Company and delivered
to the Initial Purchaser or counsel for the Initial Purchaser shall be deemed
to be a representation and warranty by the Company to the Initial Purchaser as
to the matters covered thereby.



          (mm)     The Company is subject to Section 13 or 15(d) the Exchange Act.



          (nn)     Except as disclosed in the Offering Circular, there are no contracts,
agreements or understandings between the Company and any person that would give
rise to a valid claim against the Company or any Initial Purchaser for a
brokerage commission, finder’s fee or other like payment in connection with the
sale of the Securities.



          (oo)     Each of the Company and its subsidiaries are insured by recognized,
financially sound and reputable institutions with policies in such amounts and
with such



 






 





deductibles and covering such risks as are generally deemed adequate and
customary for their businesses, including, but not limited to, policies
covering real and personal property, owned or leased by the Company and its
subsidiaries against theft, damage, destruction or vandalism and earthquakes.
The Company has no reason to believe that it or any subsidiary will not be able
to (i) renew its existing insurance coverage as and when such policies expire
or (ii) to obtain comparable coverage from similar institutions as may be
necessary or appropriate to conduct its business as now conducted and at a cost
that would not result in a Material Adverse Effect. Neither of the Company nor
any subsidiary has been denied any insurance coverage which it has sought or
for which it has applied.


          (pp)     Neither the Company nor any of its subsidiaries nor, to the best of
the Company’s knowledge, any employee or agent of the Company or any
subsidiary, has made any contribution or other payment to any official of, or
candidate for, any federal, state or foreign office in violation of any law.



          (qq)     The Company is not a U.S. Real Property Holding Company within the
meaning of Section 897(c)(2) of the Code.



     The Company acknowledges that the Initial Purchaser and, for purposes of
the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and hereby
consents to such reliance.


     7.     Initial Purchaser’s Representations and Warranties. The Initial
Purchaser represents and warrants to, and agrees with, the Company:


          (a)     The Initial Purchaser is a QIB, or is an accredited investor within
the meaning of Regulation D under the Act with such knowledge and experience in
financial and business matters as is necessary in order to evaluate the merits
and risks of an investment in the Notes.



          (b)     The Initial Purchaser is not acquiring the Securities with a view to
any public distribution thereof or with any present intention of offering or
selling any of the Securities in a transaction that would violate the Act or
the securities laws of any state of the United States or any other applicable
jurisdiction.



          (c)     The Initial Purchaser agrees that no form of general solicitation or
general advertising (within the meaning of Regulation D under the Act) has been
or will be used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of the Securities pursuant hereto, including
without limitation articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.



          (d)     The Initial Purchaser has not offered or sold, and will not offer to
sell, the Securities except to persons whom they reasonably believe to be QIBs.



 






 





          (e)     The Initial Purchaser acknowledges that the Company, for purposes of
the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and the Initial
Purchaser hereby consents to such reliance.



     8.          Indemnification.


          (a)     The Company agrees to indemnify and hold harmless the Initial
Purchaser, its directors, its officers and each person, if any, who controls
the Initial Purchaser (within the meaning of Section 15 of the Act or Section
20 of the Exchange Act), from and against any and all losses, claims, damages,
liabilities and judgments (including without limitation any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Offering Circular (or any
amendment or supplement thereto) or any Rule 144 Information or Rule 144A
Information provided by the Company to any holder or prospective purchaser of
Securities pursuant to Section 5(h) or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Initial Purchaser furnished in writing to the
Company by the Initial Purchaser.



          (b)     The Initial Purchaser agrees to indemnify and hold harmless the
Company and its directors and officers and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company to the same extent as the foregoing indemnity from the Company to
the Initial Purchaser but only with reference to information relating to the
Initial Purchaser furnished in writing to the Company by the Initial Purchaser
expressly for use in the Offering Circular.



          (c)     In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
“indemnified party”), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the “indemnifying party”) in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as they are incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not
be required to assume the defense of such action pursuant to this Section 8(c)
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Initial Purchaser). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party,



 






 





and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party). In any such case, the indemnifying
party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties, and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by
CIBC, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into
more than twenty business days after the indemnifying party shall have received
a request from the indemnified party for reimbursement for the fees and
expenses of counsel (in any case where such fees and expenses are at the
expense of the indemnifying party) and, prior to the date of such settlement,
the indemnifying party shall have failed to comply with such reimbursement
request. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement or compromise of, or consent to
the entry of judgment with respect to, any pending or threatened action in
respect of which the indemnified party is or could have been a party and
indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of the indemnified party.


          (d)     To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchaser, on the other hand, from
the offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, on the one hand, and the Initial
Purchaser, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the Initial Purchaser, on the
other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (after Initial Purchaser’s
discounts or commissions, but before deducting expenses) received by the
Company, and the total discounts and commissions received by the Initial
Purchaser bear to the total price to investors of the Securities, in each case
as set forth on the cover page of the Offering Circular. The relative fault of
the Company, on the one hand, and the Initial Purchaser, on the other hand,
shall be determined by reference to, among other things,



 






 





whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or the Initial Purchaser, on the
other hand, and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.


     The Company and the Initial Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received
by the Initial Purchaser exceeds the amount of any damages that the Initial
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.


          (e)     The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies that may otherwise be available to any
indemnified party at law or in equity.



     9.     Conditions of the Initial Purchaser’s Obligations. The obligations of
the Initial Purchaser to purchase the Firm Notes under this Agreement on the
Closing Date and the Additional Notes, if any, on any Option Closing Date are
subject to the satisfaction of each of the following conditions.


          (a)     All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date, or on each Option
Closing Date, if any, with the same force and effect as if made on and as of
the Closing Date or on each Option Closing Date, if any.



          (b)     On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of
any review (or of any potential or intended review) for a possible change that
does not indicate the direction of the possible change in, any rating of the
Company or any securities of the Company (including without limitation the
placing of any of the foregoing ratings on credit watch with negative or
developing implications or under review with an uncertain direction) by any
“nationally recognized statistical rating organization” as such term is defined
for the purpose of Rule 436(g)(2) under the Act, (ii) there shall not have
occurred any change, nor shall any notice have been given of any potential or
intended change, in the outlook for any rating of the Company or any securities
of the Company by any such rating organization and (iii) no such rating
organization shall have given notice that



 






 





it has assigned (or is considering assigning) a lower rating to the Notes
than that on which the Notes were marketed.


          (c)     Since the respective dates as of which information is given in the
Offering Circular, other than as set forth in the Offering Circular (exclusive
of any amendments or supplements thereto after the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken
as a whole, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term debt of
the Company or any of its subsidiaries except in the ordinary course of
business, (iii) neither the Company nor any of its subsidiaries shall have
incurred any liability or obligation, direct or contingent except in the
ordinary course of business, and (iv) neither the Company nor any of its
subsidiaries shall have sustained any loss or interference with their
respective assets, businesses or properties (whether owned or leased) from
fire, explosion, earthquake, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, the effect of which, in case of any event
described in the foregoing clause (i), (ii), (iii) or (iv), in the judgment of
the Initial Purchaser, is material and adverse and makes it impracticable to
market the Securities on the terms and in the manner contemplated in the
Offering Circular.



          (d)     You shall have received on the Closing Date a certificate, dated the
Closing Date, and on an Option Closing Date, if any, dated such Option Closing
Date, signed by the President and the Chief Financial Officer of the Company,
confirming the matters set forth in Sections 6(dd), 9(a) and 9(b) and stating
that the Company has complied with all the agreements and satisfied all of the
conditions herein contained and required to be complied with or satisfied on or
prior to the Closing Date or Option Closing Date, as the case may be.



          (e)     You shall have received on the Closing Date and each Option Closing
Date, if any, an opinion, dated the Closing Date or such Option Closing Date,
as the case may be, of Shack Siegel Katz & Flaherty P.C., counsel for the
Company, to the effect that:



               (i)     The Company has been duly incorporated and is validly existing as a
corporation under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Circular.



               (ii)     The Company has the requisite corporate power to enter into, deliver
and perform its obligations under the Purchase Agreement and to issue and sell
the Securities.



               (iii)     Each subsidiary of the Company incorporated under a state of the
United States has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation and has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Circular.



 






 





               (iv)     All of the outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable.



               (v)     The Notes have been duly authorized by the Company and, when executed
and authenticated in accordance with the provisions of the Indenture, assuming
due authentication thereof by the Trustee, and delivered to and paid for by the
Initial Purchaser in accordance with the terms of the Purchase Agreement, will
be valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles, and will be
entitled to the benefits of the Indenture.



               (vi)     The Incorporated Documents, on the respective dates they were filed,
complied in all material respects with the requirements as to form under the
Exchange Act and the related rules and regulations in effect at the respective
dates of their filing.



               (vii)     The shares of Common Stock to be issued upon conversion of the Notes
have been duly authorized and reserved and, when issued upon conversion of the
Notes in accordance with the terms of the Notes and the Indenture, will be
validly issued, fully paid and non-assessable, and the issuance of the Common
Stock will not be subject to any preemptive rights arising by operation of law
or under the Company’s Certificate of Incorporation or Bylaws or, to such
counsel’s knowledge, similar rights under any other agreements of the Company.



               (viii)     All necessary corporate action has been duly and validly taken by
the Company to authorize the execution, delivery and performance of the
Purchase Agreement and the issuance and sale of the Notes and, upon conversion
thereof, the issuance of the Common Stock. The Purchase Agreement has been duly
and validly authorized, executed and delivered by the Company and the Purchase
Agreement constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting the
enforcement of creditors’ rights generally and by general equitable principles
and except to the extent that rights to indemnity or contribution under the
Purchase Agreement may be limited by Federal or state securities laws or the
public policy underlying such laws.



               (ix)     Neither the execution and delivery by the Company of, nor the
performance by the Company of its obligations under the Purchase Agreement, the
Indenture, the Registration Rights Agreement and the Securities (including,
without limitation, the issuance and sale by the Company of the Notes and, upon
conversion thereof, the Common Stock) will (a) give rise to a right to
terminate or accelerate the due date of any payment due under, or result in the
breach of any term or provision of, or constitute a default (or any event which
with notice or lapse of time, or both, would constitute a default) under, or
require consent or waiver under, or result in the execution or imposition of
any lien, charge, claim, security interest or encumbrance upon any properties
or assets of the Company pursuant to the terms of any indenture, mortgage, deed
trust, note or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
any of the assets or properties or



 






 





businesses of the Company or any of its subsidiaries are bound and which
is listed as an exhibit to the Incorporated Documents, (b) to such counsel’s
knowledge, violate any existing obligations of the Company or any of its
subsidiaries under the terms of any judgment, decree, or order of any court or
arbitrator or governmental agency or body, which names the Company or any of
its subsidiaries and is specifically directed to them or their properties, (c)
violate any applicable statute, rule or regulation of the Federal laws of the
United States of America and the laws of the States of Delaware and New York
(excluding any gaming laws, rules or regulations) or (d) violate any provision
of the charter or by-laws of the Company or any of its subsidiaries, except for
such consents, waivers, approvals and authorizations which have been obtained
prior to the Closing Date.


               (x)     No consent, approval, authorization, license, registration, or
qualification or order of any federal, Delaware or New York court or
governmental agency or regulatory body (excluding any gaming regulatory
authorities) is required for the due authorization, execution, delivery or
performance by the Company of its obligations under the Purchase Agreement, the
Indenture, the Registration Rights Agreement or the Securities except such as
may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities (except, other than as set
forth in paragraph (xiv) below, we give no opinion as to registration of the
Securities under the Act and the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended).



               (xi)     To such counsel’s knowledge, there is no litigation or governmental
proceeding or investigation, before any court or before or by any public body
or board pending or threatened in writing against, or involving the assets,
properties or businesses of, the Company or any of its subsidiaries which would
have a Material Adverse Effect.



               (xii)     Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable against the Company in accordance with
its terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting the enforcement of creditors’ rights generally and
by general equitable principles.



               (xiii)     The Company is not an “investment company” or an entity controlled
by an “investment company” as such terms are defined in the Investment Company
Act of 1940, as amended.



               (xiv)     The statements in the Offering Circular under the caption
“Description of the Notes” insofar as such statements constitute a summary of
documents referred to therein fairly summarize in all material respects such
documents and matters.



               (xv)     The capital stock of the Company conforms in all material respects to
the description thereof contained in the Offering Circular under the caption
“Description of Share Capital.”



               (xvi)     Assuming (i) each Initial Purchaser is a “qualified institutional
buyer” within the meaning of Rule 144A of the Act and (ii) the accuracy of the
representations



 






 





and warranties and compliance with the agreements of the Initial Purchaser
in Section 7 of the Purchase Agreement, it is not necessary in connection with
the offer, sale and delivery of the Securities to the Initial Purchaser under
the Purchase Agreement or in connection with the initial resale of the
Securities by the Initial Purchaser in accordance with Section 7 of the
Purchase Agreement and the Offering Circular to register the Securities under
the Act, or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended, it being understood that no opinion is expressed as to any subsequent
resale of any of the Notes or the Common Stock issuable upon conversion of any
of the Notes.


     Such counsel is called upon to opine as to factual matters, and the
character of determinations involved in the process is such that it is not
passing upon and does not need to assume any responsibility for the accuracy,
completeness or fairness of the information included in the Offering Circular.
Such counsel may assume the correctness and completeness of the information
included in the Offering Circular, and such counsel may make no independent
investigation or verification of that information. Such counsel can advise,
however, that in and on the basis of its review of the Offering Circular and
its participation in its preparation, nothing has come to such counsel’s
attention that causes it to believe that the Offering Circular, as of its date
or as of the date hereof, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Such counsel is not called upon to express an
opinion with respect to, and the preceding paragraph does not address, the
financial statements and related notes and schedules, and other financial,
accounting, and statistical information, included in, incorporated by reference
in, or omitted from the Offering Circular, or any further amendment or
supplement thereto. Such counsel is also not called upon to express any
opinion with respect to any mater relating to compliance with financial
covenants or financial requirements.


          (f)     You shall have received on the Closing Date and each Option Closing
Date, if any, an opinion of Kathleen McJohn, Vice President and General Counsel
to the Company, to the effect that:



               (i)     The Company and WMS Gaming Inc., Lenc-Smith Inc. and Williams
Electronics Games, Inc. are duly qualified to transact business and are in good
standing as a foreign corporation in the State of Illinois.



               (ii)     Neither the execution and delivery by the Company of, nor the
performance by the Company of its obligations under the Purchase Agreement, the
Indenture, the Registration Rights Agreement and the Securities (including,
without limitation, the issuance and sale by the Company of the Notes and, upon
conversion thereof, the Common Stock) will violate any applicable statute, rule
or regulation of the laws of the State of Illinois (excluding any gaming laws,
rules or regulations).



               (iii)     No consent, approval, authorization, license, registration or
qualification or order of any Illinois court or governmental agency or
regulatory body (excluding any gaming regulatory authorities) is required for
the due authorization, execution, delivery or performance by the Company of its
obligations under the Purchase Agreement, the Indenture, the Registration
Rights Agreement or the Securities.



 






 





               (iv)     To such counsel’s knowledge, there is no litigation or governmental
proceeding or investigation, before any court or before or by any public body
or board pending or threatened in writing against or involving the assets,
properties or businesses of, the Company or any of its subsidiaries which would
have a Material Adverse Effect.



               (v)     All of the issued and outstanding capital stock of each subsidiary of
the Company has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance or
claim.



          (g)     You shall have received on the Closing Date and each Option Closing
Date, if any, an opinion of Hogan & Hartson, tax counsel for the Company, to
the effect that the statements in the Offering Circular under the caption
“Certain United States Federal Income Tax Consequences,” insofar as such
statements constitute a summary of the United States federal tax laws referred
to therein, fairly summarize the matters referred to therein in all material
respects.



          (h)     You shall have received on the Closing Date and each Option Closing
Date, if any, an opinion dated the Closing Date or such Option Closing Date, as
the case may be, of Daurean Sloan, in-house regulatory counsel for the Company,
to the effect that:



               (i)     The statements contained in the Offering Circular and/or Form 10-K
under the captions “Government Regulation” and “Risk
Factors – Our gaming
machine business is heavily regulated, and we must obtain and maintain our
gaming licenses and regulatory approvals for our games to operate our business”
insofar as such statements constitute a summary of matters of law, are fair
summaries in all material respects.



               (ii)     The Company and each of its subsidiaries is currently in possession
of and in compliance in all material respects with all permits, licenses and
other approvals necessary to carry on its business.



               (iii)     No consent, approval, exemption, authorization, designation,
declaration or filing by or with any governmental agency or regulatory body is
required for the execution, delivery or performance of the Purchase Agreement
by the Company or the consummation of the transactions contemplated thereby,
including the use of proceeds from the sale of the Notes and the conversion of
the Notes in accordance with their terms, other than those obtained or made.



               (iv)     Neither the execution and delivery by the Company of, nor the
performance by the Company of its obligations under the Purchase Agreement, the
Indenture, the Registration Rights Agreements and the Securities (including,
without limitation, the issuance and sale by the Company of the Notes and, upon
conversion thereof, the Common Stock) will violate any gaming laws, rules or
regulations.



          (i)     The Initial Purchaser shall have received on the Closing Date and on
each Option Closing Date, an opinion, dated the Closing Date, of Morgan, Lewis
& Bockius LLP, counsel for the Initial Purchaser, in form and substance
reasonably satisfactory to the Initial Purchaser.



 






 





          (j)     The Initial Purchaser shall have received, at the time this Agreement
is executed and at the Closing Date and each Option Closing Date, if any,
letters dated the date hereof or the Closing Date or an Option Closing Date, as
the case may be, from Ernst & Young LLP, independent public accountants, in
form and substance satisfactory to the Initial Purchaser containing the
information and statements of the type ordinarily included in accountants’
“comfort letters” with respect to the financial statements and certain
financial information contained in the Offering Circular.



          (k)     The Notes shall have been approved by the National Association of
Securities Dealers, Inc. for trading and duly listed in PORTAL.



          (l)     The Initial Purchaser shall have received a counterpart, conformed as
executed, of the Indenture which shall have been entered into by the Company
and the Trustee.



          (m)     The Company shall have executed the Registration Rights Agreement, and
the Initial Purchaser shall have received an original copy thereof, duly
executed by the Company.



          (n)     The Company shall not have failed at or prior to the Closing Date or
each Option Closing Date, if any, as the case may be, to perform or comply with
all of the agreements contained herein and required to be performed or complied
with by the Company at or prior to the Closing Date or Option Closing Date, as
the case may be.



     10.     Effectiveness of Agreement and Termination. This Agreement may be
terminated at any time on or prior to the Closing Date by the Initial Purchaser
by written notice to the Company if any of the following has occurred: (i) any
significant attack on or significant acts of terrorism involving the United
States, outbreak or escalation of hostilities excluding current hostilities in
Iraq, declaration by the United States of a national emergency or war or other
calamity or crisis or any change or development involving a prospective change
in United States or international, political, financial or economic conditions
which has a material adverse effect on financial markets so as to make it, in
your sole judgment, impracticable or inadvisable to proceed with the offering
or delivery of the Securities as contemplated by the Offering Circular, (ii)
the suspension or material limitation of trading in securities or other
instruments on the New York Stock Exchange, the American Stock Exchange, the
Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Chicago
Board of Trade or the Nasdaq National Market or limitation on prices for
securities or other instruments on any such exchange or the Nasdaq National
Market, (iii) the suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority that in your judgment has
had, or will have, a Material Adverse Effect, (v) the declaration of a banking
moratorium by either federal or New York state authorities, (vi) any major
disruption of settlements of securities, (vii) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs that in your judgment has a material adverse effect on the
financial markets in the United States, (viii) in your judgment there shall
have occurred any Material Adverse Effect or (ix) there shall be any failure or
refusal on the part of the Company to comply with the terms or to fulfill any
of the conditions of this Agreement.


 






 


     11.     Miscellaneous.


          (a)     Notices given pursuant to any provision of this Agreement shall be
addressed as follows: (i) if to the Company to WMS Industries Inc., 800 South
Northpoint Boulevard, Waukegan, IL 60085, Attention Kathleen McJohn, General
Counsel, with a copy to Jeffrey Siegel, Shack Siegel Katz & Flaherty P.C., 530
South Fifth Avenue, New York, New York 10036 and (ii) if to the Initial
Purchaser, c/o CIBC World Markets Corp., 417 5th Avenue, 2nd Floor, New York,
New York 10016 Attention: David Berman, with a copy to Howard Shecter, Morgan,
Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, in any case to
such other address as the person to be notified may have requested in writing.



          (b)     The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the Initial Purchaser set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect and will survive delivery of and payment for the Securities
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of the Initial Purchaser, the officers or directors of the
Initial Purchaser, any person controlling the Initial Purchaser, the Company,
the officers or directors of the Company, or any person controlling the
Company, (ii) acceptance of the Securities and payment for them hereunder and
(iii) termination of the Agreement.



          (c)     If for any reason the Notes are not delivered by or on behalf of the
Company as provided herein as a result of any termination of this Agreement
pursuant to Section 10, clauses (iii), (viii) or (ix), the Company agrees to
reimburse the Initial Purchaser for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by it. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i). The Company also agrees
to reimburse the Initial Purchaser and the officers, directors and each person,
if any, who controls the Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act for any and all fees and expenses
(including without limitation the fees and expenses of counsel) incurred by
them in connection with enforcing their rights under this Agreement (including
without limitation its rights under Section 8).



          (d)     Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Initial
Purchaser, the Initial Purchaser’s directors and officers, any controlling
persons referred to herein, the directors of the Company and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term “successors and assigns” shall not include a purchaser of
any of the Securities from the Initial Purchaser merely because of such
purchase.



          (e)     This Agreement shall be governed and construed in accordance with the
laws of the State of New York, including without limitation, Section 5-1401 of
the New York General Obligations Law.



          (f)     This Agreement may be signed in various counterparts, which together
shall constitute one and the same instrument.



 






 





          Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchaser by signing in the space provided
below.




	 	 	 	 	 
	 	 	Very truly yours,
	 	 	 	 	 
	 	 	WMS INDUSTRIES INC.
	 	 	
By:
	 	      /s/ Scott D. Schweinfurth
	 	 	 	 	

	 	 	 	 	Name: Scott D. Schweinfurth
	 	 	 	 	Title:   Executive Vice President, Chief
	 	 	 	 	            Financial Officer and Treasurer




	 	 	 
	
CIBC WORLD MARKETS CORP.
	By:	 	
       /s/ Andrew McInnes
	 	 	


	 	 	
Name:  Andrew McInnes
	 	 	
Title:     Managing Director



 






 



SCHEDULE A

Subsidiaries



WMS Gaming Inc.



Lenc-Smith Inc.


Williams Electronics Games, Inc.


WMS Finance Inc.


WMS Gaming International S.L.


WMS Gaming Australia Pty Ltd.


WMS Gaming Africa (Pty) Ltd.


Big Foot Software Research and Development


WMS Gaming (Canada) Ltd.


WMS Gaming do Brasil Ltda., dissolution in process


 






 





EXHIBIT A

Form of Registration Rights Agreement

[conformed copy filed separately]