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Share Name | Share Symbol | Market | Type |
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(MM) | NASDAQ:PTEK | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 1.35 | 0 | 01:00:00 |
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Filed by the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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TIME:
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9:00 A.M., Eastern Time, on July 24, 2014
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PLACE:
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PokerTek, Inc. Corporate Headquarters
1150 Crews Road, Suite F, Matthews, NC 28105
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ITEMS OF BUSINESS:
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·
Proposal #1
: To consider and vote to approve and adopt the Agreement and Plan of Merger, dated as of April 29, 2014, by and among PokerTek, Inc. (“PokerTek”), Multimedia Games, Inc. (“Parent”) and 23 Acquisition Co., a wholly-owned subsidiary of Parent (“Merger Sub”), as it may be amended from time to time (the “Merger Agreement”), and the Merger contemplated thereby (the “Merger”).
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Proposal #2
: To consider and vote to approve, solely on a non-binding, advisory basis, change of control payments and other compensation that certain executive officers of PokerTek will receive in connection with the Merger.
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Proposal #3
: To consider and vote upon a proposal to adjourn the Special Meeting, if necessary or appropriate, if there are insufficient affirmative votes present at the Special Meeting to approve and adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger.
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RECORD DATE:
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Only shareholders of record at the close of business on June 10, 2014, the date fixed by PokerTek’s Board of Directors (the “Board”) as the record date for the Special Meeting, are entitled to notice of, and to vote at, the Special Meeting. All shareholders of record on the record date are cordially invited to attend the Special Meeting in person.
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PROXY VOTING:
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Your vote is very important, regardless of the number of shares of PokerTek Common Stock you own.
The Merger cannot be completed unless the Merger Agreement and the transactions contemplated thereunder, including the Merger, are adopted by the affirmative vote of the holders of a majority of the outstanding shares of the PokerTek Common Stock entitled to vote thereon. Even if you plan to attend the Special Meeting in person, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying pre-paid reply envelope or submit your proxy by telephone or the Internet prior to the Special Meeting to ensure that your shares of PokerTek Common Stock will be represented at the Special Meeting if you are unable to attend. If you fail to return your proxy card and fail to submit your proxy by telephone or the Internet, your shares of PokerTek Common Stock will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the effect of a vote “
AGAINST
” the proposal to approve and adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger.
If you are a shareholder of record, voting by ballot at the Special Meeting will revoke any vote previously submitted whether by proxy, through the Internet or by telephone. If you hold your shares of PokerTek Common Stock through a bank, broker, trustee or other nominee, you should follow the procedures provided by your bank, broker, trustee or other nominee in order to vote.
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TABLE OF CONTENTS
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SUMMARY
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1 |
Parties to the Merger
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1 |
The Special Meeting
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1 |
Time, Place and Purpose
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1 |
Record Date and Quorum
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2 |
Vote Required
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2 |
Voting; Revocation of Proxies
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2 |
The Merger
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Merger Consideration
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Reasons for the Merger; Recommendation of the Special Committee and the Board
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3 |
Opinion of Burrill, Financial Advisor
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4 |
Financing of the Merger
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4 |
Interests of the Certain Persons in the Merger
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4 |
Material U.S. Federal Income Tax Consequences of the Merger
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5 |
Litigation Relating to the Merger
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5 |
The Merger Agreement
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7 |
Treatment of Common Stock, Restricted Stock Units and Options
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7 |
No Solicitation of Takeover Proposals
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7 |
Conditions to the Merger
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7 |
Termination
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8 |
Termination Fees
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9 |
Appraisal Rights
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9 |
Market Prices of PokerTek Common Stock and Dividend Information
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10 |
Delisting and Deregistration of PokerTek Common Stock
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10 |
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
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10 |
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
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18 |
THE SPECIAL MEETING
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20 |
Time, Place and Purpose of the Special Meeting
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Record Date and Quorum
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20 |
Attendance
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Vote Required
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Other Matters of Business
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21 |
How to Vote
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22 |
Revocation of Proxies
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22 |
Adjournments and Postponements
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23 |
Anticipated Date of Completion of the Merger
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Rights of Shareholders Who Seek Appraisal
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Questions and Additional Information
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PROPOSAL #1 – THE MERGER
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Merger Consideration
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Background of the Merger
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Reasons for the Merger; Recommendation of the Special Committee and the Board
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36 |
Special Committee
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Board of Directors
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Opinion of Burrill, Financial Advisor
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40 |
Fee Arrangements
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45 |
Voting Agreement
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Litigation Relating to the Merger
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46 |
Financing of the Merger
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Interests of Certain Persons in the Merger
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Equity Compensation and Incentive Awards
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Change of Control Payments
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Employment Arrangements with the Surviving Corporation
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48 |
Indemnification and Insurance
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Accounting Treatment
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Material U.S. Federal Income Tax Consequences of the Merger
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Exchange of Shares of PokerTek Common Stock for Cash Pursuant to the Merger Agreement
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Information Reporting and Backup Withholding
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THE MERGER AGREEMENT
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The Merger
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52 |
Closing
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Effective Time
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Directors and Officers of Surviving Corporation
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52 |
Organizational Documents of Surviving Corporation
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52 |
Effect of the Merger on the Capital Stock of the Parties
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53 |
Exchange and Payment Procedures
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53 |
PokerTek Stock Options
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54 |
Representations and Warranties
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54 |
Shareholders’ Meeting
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Conduct of Our Business Pending the Merger
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No Solicitation of Takeover Proposals
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Agreement to Use Reasonable Best Efforts
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Indebtedness and Company Transaction Expenses
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Other Covenants and Agreements
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Public Announcements
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Access to Information; Confidentiality
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Notification of Certain Matters
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Indemnification; Directors’ and Officers’ Insurance
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Shareholder Litigation
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Fees and Expenses
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Conditions to the Merger
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Termination
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Effect of Termination
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Termination Fees and Expense Reimbursement
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PokerTek Termination Fee
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Parent Termination Fee
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No Survival
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Amendment or Supplement
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Specific Performance
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VOTING AGREEMENT
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Agreement to Vote and Irrevocable Proxy
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68 |
Transfer Restrictions
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Termination
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APPRAISAL RIGHTS
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MARKET PRICES OF POKERTEK COMMON STOCK AND DIVIDEND INFORMATION
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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DELISTING AND DEREGISTRATION OF POKERTEK COMMON STOCK
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PROPOSAL #2 – ADVISORY VOTE ON CHANGE OF CONTROL PAYMENTS AND OTHER COMPENSATION TO BE PAID IN CONNECTION WITH THE MERGER
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PROPOSAL #3 – ADJOURNMENT OF THE SPECIAL MEETING
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OTHER MATTERS OF BUSINESS
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HOUSEHOLDING OF PROXY MATERIAL
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WHERE YOU CAN FIND MORE INFORMATION
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SUMMARY
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Parties to the Merger (Page 19
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The Special Meeting (Page 20
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Time, Place and Purpose (Page 20)
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Record Date and Quorum (Page 20)
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Vote Required (Page 21)
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Voting; Revocation of Proxies (Page 22)
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The Merger (Page 24
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Merger Consideration (Page 24
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Reasons for the Merger; Recommendation of the Special Committee and the Board (Page 36
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Opinion of Burrill, Financial Advisor (Page 40)
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Financing of the Merger (Page 47
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Interests of the Certain Persons in the Merger (Page 47
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·
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PokerTek’s employment agreements with each of Mark D. Roberson, James T. Crawford and Gehrig H. White, our Chief Executive Officer, President and Vice Chairman, respectively, provide that, in the event of a change of control, which the closing of the Merger will constitute, Messrs. Roberson, Crawford and White will receive a cash payment in the amount of $185,000, $100,000 and $100,000, respectively, payable in a lump sum if the respective executive’s employment is terminated following the closing of the Merger, or otherwise in 12 equal monthly installments.
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·
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Our directors and officers own options to purchase 416,000 shares of PokerTek Common Stock, 60,000 of which have an exercise price less than the $1.35 per share merger consideration payable to our shareholders. The options to purchase these 60,000 shares of PokerTek Common Stock are held by officers of PokerTek, are fully vested, and have an exercise price of $1.20 per share. Pursuant to the Merger Agreement, at the effective time of the Merger, each outstanding option will be cancelled and terminated and converted into the right to receive cash equal to the excess of the per share Merger consideration of $1.35 over the per share exercise price of such option, multiplied by the number of shares subject to the option, less any applicable tax withholding. As a result, upon the closing of the Merger, each of Mr. Roberson and Mr. Crawford will receive approximately $3,333, with respect to outstanding options held by them.
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·
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Mr. Roberson owns restricted stock units, or RSUs, with respect to 300,000 shares of PokerTek Common Stock. Pursuant to the terms of the RSU grant agreement, each share covered by the RSU will immediately vest and be settled upon the later of shareholder approval of the Merger Agreement and the receipt of all requisite regulatory approvals necessary to consummate the Merger. As a result, the shares of Common Stock underlying the RSUs will be treated as issued and outstanding shares of PokerTek Common Stock upon the closing of the Merger, and will entitle Mr. Roberson to the $1.35 per share Merger consideration. As a result, Mr. Roberson will receive $405,000 with respect to outstanding RSUs, less any applicable tax withholding.
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·
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The Merger Agreement provides that, following the Merger, Parent will indemnify each present and former director, officer, employee or agent of PokerTek to the fullest extent provided in PokerTek's articles of incorporation, bylaws, or any indemnification agreements in effect as of the date of the Merger Agreement and the North Carolina Business Corporation Act (the “NCBCA”). In addition, Parent will maintain PokerTek's directors' and officers' liability insurance policy (or a substantially similar policy) relating to acts or omissions occurring prior to the Merger for at least six (6) years following the completion of the Merger.
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Material U.S. Federal Income Tax Consequences of the Merger (Page 49
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Litigation Relating to the Merger (Page 46
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The Merger Agreement (Page 51
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•
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Common Stock.
At the effective time of the Merger, each share of PokerTek Common Stock issued and outstanding (except for any shares of PokerTek Common Stock held by PokerTek, Parent or Merger Sub and shares held by shareholders of PokerTek who have properly exercised their appraisal rights) will convert into the right to receive the per share Merger consideration of $1.35 in cash, without interest, less any applicable withholding taxes.
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•
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Restricted Stock Units
.
Upon the later of shareholder approval of the Merger Agreement and the receipt of all requisite regulatory approvals necessary to consummate the Merger, substantially all restricted stock units, or RSUs, that are outstanding will immediately vest and settle, entitling the holder to receive the underlying shares of PokerTek Common Stock. As a result, the shares issued upon settlement of these RSUs will be deemed outstanding shares of PokerTek Common Stock and will be converted in the Merger into the right to receive $1.35 in cash per share, less any applicable tax withholding. One outstanding RSU covering 15,000 shares of PokerTek Common Stock is subject to performance based vesting and is not expected to vest and settle on or before the closing date of the Merger. Upon the closing of the Merger, the shares underlying the unvested portion of this RSU will be converted into the right to receive $1.35 in cash per share of Common Stock, less any applicable tax withholding, in the event of vesting and settlement.
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•
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Options.
At the effective time of the Merger, each outstanding option will become fully vested and will be cancelled and terminated and converted into the right to receive cash equal to the excess, if any, of the per share Merger consideration of $1.35 over the per share exercise price of such option, multiplied by the number of shares subject to such option, less any applicable tax withholding.
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No Solicitation of Takeover Proposals (Page 59)
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Conditions to the Merger (Page 64)
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Termination (Page 65)
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Termination Fees (Page 67)
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Appraisal Rights (Page 69)
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Market Prices of PokerTek Common Stock and Dividend Information (Page 73
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Delisting and Deregistration of PokerTek Common Stock (Page 74
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
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Q:
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What is the proposed transaction and what effects will it have on PokerTek?
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A:
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The proposed transaction is the acquisition of PokerTek by Parent pursuant to the Merger Agreement. If the proposal to adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger, is approved by our shareholders and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will merge with and into PokerTek, with PokerTek continuing as the surviving corporation, and the separate corporate existence of Merger Sub shall thereupon cease. As a result of the Merger, PokerTek will become a subsidiary of Parent and will no longer be a publicly-traded corporation, PokerTek Common Stock will be delisted from the Nasdaq Capital Market and deregistered under the Exchange Act, we will no longer file periodic reports with the SEC on account of PokerTek Common Stock, and you will no longer have any interest in our future earnings or growth.
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Q:
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What will I receive if the Merger is completed?
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A:
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Upon completion of the Merger, you will be entitled to receive the per share Merger consideration of $1.35 in cash, without interest, less any applicable withholding taxes, for each share of PokerTek Common Stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the NCBCA with respect to such shares. For example, if you own 100 shares of PokerTek Common Stock, you will receive $135.00 in cash in exchange for your shares of PokerTek Common Stock, less any applicable withholding taxes.
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Q:
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Will I own any shares of PokerTek Common Stock or common stock of Parent or any other entity after the Merger?
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A:
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No. You will be paid cash for your shares of PokerTek Common Stock. Our shareholders will not have the option to receive equity interests of Parent in exchange for their shares instead of cash.
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Q:
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How does the per share Merger consideration compare to the market price of PokerTek Common Stock prior to announcement of the Merger?
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A:
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The per share Merger consideration represents a premium of approximately 37% to the closing price of PokerTek Common Stock on April 29, 2014, the last trading day prior to the public announcement of the Merger Agreement, and a premium of approximately 26% and 17%, respectively, to the average price for the six and twelve month period preceding April 29, 2014.
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Q:
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How does the Board recommend that I vote in connection with Proposal #1, which is the proposal to approve and adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger?
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A:
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The Board unanimously recommends that you vote “
FOR
” approval of Proposal #1, which is the proposal to approve and adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger.
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Q:
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What was the role of the Special Committee?
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A:
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The Board determined that it was advisable and in the best interests of PokerTek and its shareholders to form the Special Committee, consisting solely of non-employee, independent directors, for the purpose of directing a full review of strategic alternatives for PokerTek. The Board appointed each of Joseph J. Lahti, Lyle A. Berman and Arthur L. Lomax as members of the Special Committee. Mr. Lahti served as chairperson of the Special Committee. The Special Committee was delegated full power and authority to: (i) review and evaluate the terms and conditions, and determine the advisability, of a potential Merger of PokerTek; (ii) participate, directly or through their or PokerTek’s advisors, in negotiations with potentially interested parties of the terms and conditions of a Merger; and (iii) recommend to the Board whether a Merger should be approved or disapproved and any other action that should be taken by PokerTek in respect to a Merger transaction. In connection with the approval of the Merger Agreement, the Board determined to preserve the Special Committee and maintain its previously delegated power and authority so that it could: (i) consider, evaluate and negotiate the terms and conditions of any alternative transaction; and (ii) recommend, if appropriate, any alternative transaction to the Board as being in the best interests of PokerTek and its shareholders. See the section entitled “The Merger – Background of the Merger” beginning on page 24 of this proxy statement.
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Q:
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When do you expect the Merger to be completed?
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A:
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We are working towards completing the Merger as soon as possible. Assuming timely satisfaction of closing conditions, we anticipate that the Merger will be completed during calendar 2014. If our shareholders vote to approve the proposal to approve and adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger, the Merger will become effective as promptly as practicable following the satisfaction or waiver of the other conditions to the Merger. See the sections entitled “The Merger Agreement — Closing” and “The Merger Agreement — Effective Time” beginning on page 52 of this proxy statement.
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Q:
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What happens if the Merger is not completed?
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A:
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If the Merger Agreement is not adopted and approved by the shareholders of PokerTek or if the Merger is not completed for any other reason, the shareholders of PokerTek will not receive any payment for their shares of PokerTek Common Stock in connection with the Merger. Instead, PokerTek will remain an independent public company and PokerTek Common Stock will continue to be listed on the Nasdaq Capital Market. Under specified circumstances, PokerTek may be required to pay to or receive from Parent a fee with respect to the termination of the Merger Agreement, as described under “The Merger Agreement - Termination Fees and Expense Reimbursement” beginning on page 67 of this proxy statement.
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Q:
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Is the Merger expected to be taxable to me?
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A:
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Yes. The receipt of cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for U.S. federal income tax purposes, if you are a U.S. holder (defined below in the section of this proxy statement entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”), you will recognize gain or loss equal to the difference, if any, between the amount of cash you receive pursuant to the Merger and your adjusted tax basis in the shares of PokerTek Common Stock converted into cash pursuant to the Merger. If you are a non-U.S. holder (defined below in the section of this proxy statement entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”), the receipt of cash pursuant to the Merger will generally not be a taxable transaction to you under U.S. federal income tax laws unless you have certain connections to the United States, but may be a taxable transaction to you under non-U.S. federal income tax laws, and you are encouraged to seek tax advice regarding such matters. Because individual circumstances may differ, we recommend that you consult your own tax advisor to determine the particular tax effects to you of the Merger.
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Q:
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Do any of PokerTek’s directors or officers have interests in the Merger that may differ from or be in addition to my interests as a shareholder?
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A:
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Yes. In considering the recommendation of the Board with respect to the Merger Agreement and the Merger, you should be aware that certain of PokerTek’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of our shareholders generally. The Special Committee and the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement and the transactions contemplated thereunder, including the Merger, be adopted by the shareholders of PokerTek. See “The Merger — Interests of Certain Persons in the Merger” beginning on page 47 of this proxy statement.
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Q:
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What happens to PokerTek stock options in the Merger?
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A:
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Upon the consummation of the Merger, all outstanding options to acquire PokerTek Common Stock will accelerate and vest in full and will then be cancelled. In consideration for the cancellation of the options, the holder of any such option will receive an amount equal to the number of shares of PokerTek Common Stock underlying the option multiplied by the amount (if any) by which $1.35 exceeds the exercise price for each share of PokerTek Common Stock underlying the options, without interest and less any applicable withholding taxes. If the exercise price of the option is equal to or exceeds $1.35, the holder of such option will not be entitled to any payment in connection with the cancellation thereof.
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Q:
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What happens to PokerTek restricted stock units in connection with the Merger?
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A:
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Upon the later of shareholder approval of the Merger Agreement and the receipt of all requisite regulatory approvals necessary to consummate the Merger, substantially all restricted stock units, or RSUs, that are outstanding will immediately vest and settle, entitling the holder to receive the underlying shares of PokerTek Common Stock. As a result, the shares issued upon settlement of these RSUs will be deemed outstanding shares of PokerTek Common Stock and will be converted in the Merger into the right to receive $1.35 in cash per share, less any applicable tax withholding. One outstanding RSU covering 15,000 shares of PokerTek Common Stock is subject to performance based vesting and is not expected to vest and settle on or before the closing date of the Merger. Upon the closing of the Merger, the shares underlying the unvested portion of this RSU will be converted into the right to receive $1.35 in cash per share of Common Stock, less any applicable tax withholding, in the event of vesting and settlement.
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Q:
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Why am I receiving this proxy statement and proxy card or voting instruction form?
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A:
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You are receiving this proxy statement and proxy card or voting instruction form because you own shares of PokerTek Common Stock as of June 10, 2014, the record date fixed by the PokerTek Board for the Special Meeting. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares of PokerTek Common Stock with respect to such matters.
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Q:
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When and where is the Special Meeting?
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A:
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The Special Meeting of shareholders of PokerTek will be held on July 24, 2014 at 9:00 A.M. Eastern Time, at our corporate headquarters located at 1150 Crews Road, Suite F, Matthews, NC 28105.
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Q:
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What am I being asked to vote on at the Special Meeting?
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A:
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You are being asked to consider and vote on the following proposals:
Proposal #1
: Approval and adoption of the Merger Agreement and the transactions contemplated thereunder, including the Merger.
Proposal #2
: Approval, on a non-binding, advisory basis, of change of control payments and other compensation that certain executive officers of PokerTek will receive in connection with the Merger.
Proposal #3
: Approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve and adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger, if there are insufficient votes to approve and adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger.
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Q:
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Why is PokerTek asking that its shareholders approve, on an advisory non-binding basis, change of control payments and other compensation that certain executive officers of PokerTek will receive in connection with the Merger?
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A:
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Rules adopted by the SEC require that PokerTek provides its shareholders with the opportunity to vote to approve, on an advisory non-binding basis, change of control payments and other compensation that certain executive officers of PokerTek will receive in connection with the Merger. The approval of these payments is not a condition to completion of the Merger and the vote with respect to this proposal is advisory only. Accordingly, the vote will not be binding on PokerTek or the Board.
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Q:
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What vote is required to approve each proposal?
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A:
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Proposal #1
: Approval and adoption of the Merger Agreement and the transactions contemplated thereunder, including the Merger, requires the affirmative vote, in person or by proxy, of the holders of a majority of the outstanding shares of PokerTek Common Stock as of the record date of the Special Meeting.
Proposal #2
: Approval, on a non-binding, advisory basis, of change of control payments and other compensation that certain executive officers of PokerTek will receive in connection with the Merger requires the affirmative vote, in person or by proxy, of a majority of the votes cast at the Special Meeting .
Proposal #3
: Approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve and adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger, if there are insufficient votes to approve, adopt and ratify the Merger Agreement and the transactions contemplated thereunder, including the Merger, requires the affirmative vote, in person or by proxy, of a majority of the votes cast at the Special Meeting.
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Q:
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Have any shareholders agreed to vote in favor of the Merger?
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A:
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On April 29, 2014, PokerTek's officers and directors, in their capacity as shareholders, entered into the Voting Agreement with respect to approximately 36.6% of the outstanding shares of PokerTek Common Stock. Under the Voting Agreement, such shareholders have agreed to vote in favor of the approval and adoption of the Merger Agreement and the transactions contemplated thereunder, including the Merger, and against any proposal made in opposition to, or in competition or inconsistent with, the Merger Agreement and the transactions contemplated thereunder, including the Merger. As a result, the approval of Proposal #1 will therefore require that approximately an additional 13.4% of the shares of PokerTek Common Stock outstanding as for the record date for the Special Meeting are voted in favor of Proposal #1.
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Q:
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Who can vote at the Special Meeting?
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A:
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All of our holders of PokerTek Common Stock of record as of the close of business on June 10, 2014, the record date for the Special Meeting, are entitled to receive notice of, and to vote at, the Special Meeting. Each holder of PokerTek Common Stock is entitled to cast one vote on each proposal properly brought before the Special Meeting for each share of PokerTek Common Stock that such holder owned as of the record date.
|
Q:
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What is a quorum?
|
A:
|
A majority of the shares of PokerTek Common Stock outstanding at the close of business on the record date and entitled to vote at the meeting, present in person or represented by proxy, at the Special Meeting constitutes a quorum for the purposes of the Special Meeting. Abstentions and broker non-votes, will be counted for purposes of determining a quorum. A quorum is necessary to transact business at the Special Meeting.
|
Q:
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How do I vote?
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A:
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If you are a shareholder of record as of the record date, you may have your shares of PokerTek Common Stock voted on proposals presented at the Special Meeting in any of the following ways:
|
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•
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in person — you may attend the Special Meeting and cast your vote there;
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•
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by proxy — shareholders of record can choose to vote by proxy by signing and dating the proxy card you receive and returning it in the accompanying pre-paid reply envelope;
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•
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over the Internet — the website for Internet voting is identified on your proxy card; or
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•
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by telephone – a toll-free telephone number is noted on your proxy card.
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Q:
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What is the difference between holding shares as a shareholder of record and as a beneficial owner?
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A:
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If your shares of PokerTek Common Stock are registered directly in your name with our transfer agent, Colonial Stock Transfer, you are considered, with respect to those shares of PokerTek Common Stock, the “shareholder of record.” In that case, this proxy statement and your proxy card have been sent directly to you by PokerTek.
If your shares of PokerTek Common Stock are held through a bank, broker, trustee or other nominee, you are considered the “beneficial owner” of shares of PokerTek Common Stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker, trustee or other nominee who is considered, with respect to those shares of PokerTek Common Stock, the shareholder of record. As the beneficial owner, you have the right to direct your bank, broker, trustee or other nominee how to vote your shares of PokerTek Common Stock by following their instructions for voting.
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Q:
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If my shares of PokerTek Common Stock are held in “street name” by my bank, broker, trustee or other nominee, will my bank, broker, trustee or other nominee vote my shares of PokerTek Common Stock for me?
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A:
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Your bank, broker, trustee or other nominee will only be permitted to vote your shares of PokerTek Common Stock if you instruct your bank, broker, trustee or other nominee how to vote. You should follow the procedures provided by your bank, broker, trustee or other nominee regarding the voting of your shares of PokerTek Common Stock. If you do not instruct your bank, broker, trustee or other nominee to vote your shares of PokerTek Common Stock, your shares of PokerTek Common Stock will not be voted and the effect will be the same as a vote “
AGAINST
” approval of the proposal to adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger, and your shares of PokerTek Common Stock will not have an effect on the proposal to adjourn the Special Meeting or the advisory non-binding proposal relating to the change of control payments and other compensation, regardless of whether or not a quorum is present.
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Q:
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How can I change or revoke my vote?
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A:
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If you are a shareholder of record, you have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by voting again at a later date through any of the methods available to you, by giving written notice of revocation to our Corporate Secretary, which must be filed with the Corporate Secretary by the time the Special Meeting begins, or by voting by ballot at the Special Meeting. Attending the Special Meeting, by itself, is not enough to revoke a proxy. If you are a beneficial owner and wish to revoke your voting instructions, you should follow the instructions provided by your bank, broker, trustee or other nominee.
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Q:
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What is a proxy?
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A:
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A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of stock. The written document describing the proposals to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of stock is called a “proxy card.” The Board has designated Mr. Lahti and Mr. Roberson, and each of them, with full power of substitution, as proxies for the Special Meeting.
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Q:
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If a shareholder gives a proxy, how are the shares of PokerTek Common Stock voted?
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A:
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Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares of PokerTek Common Stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify that your shares of PokerTek Common Stock be voted for or against, or you may abstain from voting on, all, some or none of the
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Q:
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What happens if I fail to vote or I abstain from voting?
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A:
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If you do not vote, it will be more difficult for us to obtain the vote necessary to adopt the Merger Agreement and approve the transactions contemplated by the Merger Agreement, including the Merger.
You may vote “FOR,” “AGAINST” or “ABSTAIN” on each of the proposals. Abstentions and broker non-votes will be counted for purposes of determining a quorum. However, if you are the shareholder of record, and you fail to vote by proxy or by ballot at the Special Meeting, your shares will not be counted for purposes of determining a quorum. Abstentions, failures to submit a proxy card or vote in person and broker non-votes will be treated in the following manner with respect to determining the votes received for each of the proposals:
·
an abstention, failure to submit a proxy card or vote in person, or a broker non-vote will be treated as a vote “AGAINST” Proposal #1;
·
an abstention, failure to submit a proxy card or vote in person, or a broker non-vote will have no effect on the outcome of Proposal #2; and
·
an abstention, failure to submit a proxy card or vote in person, or a broker non-vote will have no effect on the outcome of Proposal #3.
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Q:
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Who will count the votes?
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A:
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A representative of our transfer agent, Colonial Stock Transfer, will count the votes and act as inspector of election at the Special Meeting.
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Q:
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What do I do if I receive more than one proxy or set of voting instructions?
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A:
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If you hold shares of PokerTek Common Stock in “street name” through a bank, broker, trustee or other nominee and also directly as a record holder or otherwise, you may receive more than one proxy and/or set of voting instructions relating to the Special Meeting. These materials should each be voted and/or returned separately in accordance with the instructions provided in this proxy statement in order to ensure that all of your shares of PokerTek Common Stock are voted.
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Q:
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What happens if I sell my shares of PokerTek Common Stock before the Special Meeting?
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A:
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The record date for shareholders entitled to vote at the Special Meeting is earlier than the date of the Special Meeting and the consummation of the Merger. If you transfer your shares of PokerTek Common Stock after the record date but before the Special Meeting, you will, unless special arrangements are made, retain your right to vote at the Special Meeting but will transfer the right to receive the Merger consideration to the person to whom you transfer your shares.
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Q:
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What happens if I have lost my stock certificate(s)?
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A:
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You will be sent a letter of transmittal promptly after completion of the Merger describing the procedures that you must follow if you have certificated shares and you cannot locate your stock certificate(s). This will include an affidavit that you will need to sign attesting to the loss of your certificate. You may also be required to provide a bond in order to cover any potential losses in connection with your failure to locate your stock certificates.
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Q:
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Who will solicit and pay the cost of soliciting proxies?
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A:
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Our directors, officers and employees may solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies. We will reimburse banks, brokers, trustees, nominees and other fiduciaries representing beneficial owners of shares of PokerTek Common Stock for their expenses in forwarding soliciting materials to beneficial owners of PokerTek Common Stock and in obtaining voting instructions from those owners.
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Q:
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What do I need to do now?
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A:
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Even if you plan to attend the Special Meeting, after carefully reading and considering the information contained in this proxy statement, including the attached Annexes, please vote promptly to ensure that your shares are represented at the Special Meeting. If you hold your shares of PokerTek Common Stock in your own name as the shareholder of record, please vote your shares of PokerTek Common Stock by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-paid reply envelope, using the telephone number printed on your proxy card, or using the Internet voting instructions printed on your proxy card. If you decide to attend the Special Meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you are a beneficial owner, please refer to the instructions provided by your bank, broker, trustee or other nominee to see which of the above choices are available to you.
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Q:
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Should I send in my stock certificates now?
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A:
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No. If you hold certificated shares, you do not need to send in your stock certificates now. You will be sent a letter of transmittal promptly after the completion of the Merger describing how you may exchange your shares of PokerTek Common Stock for the per share Merger consideration. If your shares of PokerTek Common Stock are held in “street name” by your bank, broker, trustee or other nominee, you will receive instructions from your bank, broker, trustee or other nominee as to how to effect the surrender of your “street name” shares of PokerTek Common Stock in exchange for the per share Merger consideration.
If you hold certificated shares, please do NOT return your stock certificate(s) with your proxy.
|
Q:
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Am I entitled to exercise appraisal rights under the NCBCA instead of receiving the per share Merger consideration for my shares of PokerTek Common Stock?
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A:
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As a holder of shares of PokerTek Common Stock, you are entitled to appraisal rights under the NCBCA in connection with the Merger if you take certain actions and meet certain conditions. See the section entitled “Appraisal Rights” beginning on page 69 of this proxy statement and the text of the North Carolina appraisal rights statute reproduced in its entirety as
Annex D
to this proxy statement.
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Q:
|
Who can help answer my other questions?
|
A:
|
If you have any questions concerning the Merger or this proxy statement, or if you would like additional copies of this proxy statement please contact Mark D. Roberson by telephone at (704) 849-0860 ext. 101 or by e-mail at
InvestorRelations@pokertek.com
.
If you require assistance in voting your shares of PokerTek Common Stock and you are a shareholder of record, please contact Colonial Stock Transfer, our transfer agent, by telephone toll-free at (877) 285-8605. If your shares are registered in the name of a bank, broker, trustee, or other nominee, please follow the proxy instructions on the form you receive from the nominee or contact the nominee for further assistance.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
|
•
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the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement;
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•
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the inability to complete the Merger due to the failure to obtain shareholder approval or the failure to satisfy other conditions required for the consummation of the Merger;
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•
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failure or delay in consummation of the Merger for other reasons;
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•
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that the proposed Merger disrupts current plans and operations and the potential difficulties in employee and agent retention as a result of the Merger;
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•
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the effect of the announcement of the Merger on our customer relationships, operating results and business generally;
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•
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the diversion of our management’s attention from our ongoing business concerns;
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•
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the outcome of any legal proceedings that may be instituted against PokerTek and/or others relating to the Merger Agreement;
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•
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limitations placed on our ability to operate the business by the Merger Agreement;
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•
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the amounts of the costs, fees, expenses and charges related to the Merger;
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•
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changes in laws or regulations;
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•
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changes in the financial or credit markets or economic conditions generally;
|
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PARTIES TO THE MERGER
|
THE SPECIAL MEETING
|
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Time, Place and Purpose of the Special Meeting
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Record Date and Quorum
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Attendance
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Other Matters
of
Business
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How to Vote
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Revocation of Proxies
|
·
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sending a written notice of revocation to PokerTek’s principal executive offices at 1150 Crews Road, Suite F, Matthews, NC 28105, Attention: Kathi Fath, Corporate Secretary, which must be received before their shares are voted at the Special Meeting;
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·
|
properly submitting a new proxy card, which must be received before their shares are voted at the Special Meeting (in which case only the later-submitted proxy is counted and the earlier proxy is revoked);
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|
·
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submitting a proxy via Internet or by telephone at a later date (in which case only the later-submitted proxy is counted and the earlier proxy is revoked); or
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·
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attending the Special Meeting and voting by ballot in person. Attendance at the Special Meeting will not, in and of itself, constitute a vote or revocation of a prior proxy, however.
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Adjournments and Postponements
|
Anticipated Date of Completion of the Merger
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Rights of Shareholders Who Seek Appraisal
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Questions and Additional Information
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PROPOSAL #1 – THE MERGER
|
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Merger Consideration
|
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Background of the Merger
|
Reasons for the Merger; Recommendation of the Special Committee and the Board
|
Special Committee
|
•
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the current and historical market prices of PokerTek Common Stock and the fact that the price of $1.35 per share of PokerTek Common Stock represented a premium of approximately 37% to the closing price of PokerTek Common Stock on April 29, 2014, the last trading day prior to the public announcement of the Merger Agreement, and a premium of approximately 26% and 17%, respectively, to the average closing price for the six- and twelve-month periods prior to April 29, 2014;
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||
•
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at no time in the ninety-day period prior to the execution and announcement of the Merger Agreement has the closing market price of PokerTek Common Stock been greater than $1.20 per share;
|
||
•
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the prospect that the following factors negatively affecting our stock price would continue to negatively affect our stock price in the future:
|
||
·
limited market liquidity;
|
|||
·
PokerTek Common Stock having periodically been subject to delisting from the Nasdaq Capital Market;
|
|||
·
the concentration of holdings of PokerTek Common Stock;
|
|||
·
no industry analyst coverage and no visibility on future coverage;
|
|||
·
a low market capitalization relative to our publicly-traded peer group; and
|
|||
·
given our size, the costs of being a public company outweighing the benefits of being a public company;
|
|||
•
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the Special Committee’s understanding of the business, operations, financial condition, earnings and prospects of PokerTek, including:
·
the lack of our ability to achieve and sustain year-over-year revenue growth;
·
our recurring losses in each of 2011, 2012, 2013 and the first quarter of 2014;
·
a reduction, in excess of 12%, in the number of our gaming positions from 2011 to 2013;
·
the impact of regulatory developments on our business, including recent developments in Mexico and the state of Ohio;
·
obstacles to further penetration into new and existing markets;
·
other obstacles to the execution of an organic growth strategy based on increased table installations; and
·
the uncertainty of successfully executing upon an acquisition strategy given our limited capital resources;
|
•
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the possible alternatives to the sale of PokerTek, including continuing to operate PokerTek on a stand-alone basis, and the significant risks and uncertainties associated with such alternatives, including the risks associated with our ability to achieve revenue growth and maintain margins and profitability at acceptable levels, compared to the certainty of realizing in cash a fair value for our shareholders through the Merger;
|
||
•
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the fact that we had contacted 14 parties that might be interested in a business combination transaction with PokerTek to solicit their interest in pursuing such a transaction, and that none, other than MGAM, submitted either a non-binding or a binding proposal to do so;
|
•
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the terms of the Merger Agreement and the related agreements, including:
|
·
the limited number and nature of the conditions to Parent’s obligation to consummate the Merger;
|
||
·
our ability, under certain circumstances specified in the Merger Agreement, at any time prior to the time our shareholders adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger, to consider and respond to written takeover proposals or provide non-public information to or engage in discussions or negotiations with the person making such proposals if the Board, prior to taking any such actions, determines in good faith after consultation with financial advisors and legal counsel that (i) failure to take action would violate the directors’ duties to PokerTek’s shareholders, and (ii) the takeover proposal either constitutes a superior proposal or could reasonably be expected to result in a superior proposal;
|
||
·
our ability, under certain circumstances specified in the Merger Agreement, to terminate the Merger Agreement in order to accept a superior proposal, subject to paying Parent a termination fee of up to $650,000;
|
||
·
the Board’s ability, under certain circumstances specified in the Merger Agreement, to withhold, withdraw, qualify or modify its recommendation that our shareholders vote to adopt the Merger Agreement, subject to Parent’s subsequent right to terminate the Merger Agreement and our subsequent obligation to pay a termination fee of up to $650,000;
|
|
·
the fact that the consummation of the Merger is not conditioned on Parent’s ability to secure debt financing or equity financing in order to pay the Merger consideration; and
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·
the fact that the termination date of December 31, 2014 under the Merger Agreement allows for sufficient time to complete the Merger;
|
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|
·
the fact that the Merger consideration is all cash, allowing our shareholders to immediately realize a fair value for their investment, while also providing the shareholders certainty of value for their shares of PokerTek Common Stock, while avoiding long-term business risk;
|
•
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the financial presentation of Burrill, including its written opinion to the Special Committee dated April 29, 2014, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth in such written opinion, the $1.35 per share in cash to be received by the holders of outstanding shares of PokerTek Common Stock pursuant to the Merger Agreement is fair from a financial point of view to our public shareholders (see the section entitled “Opinion of Burrill, Financial Advisor,” beginning on page 40 of this proxy statement);
|
•
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the availability of appraisal rights to holders of PokerTek Common Stock who comply with all of the required procedures under the NCBCA, which allows holders of PokerTek Common Stock to seek appraisal of the fair value of their shares as determined by the Superior Court Division of the North Carolina General Court of Justice and to receive cash payment based on that valuation instead of receiving the per share Merger consideration provided under the Merger Agreement (which fair value may be less than, greater than, or equal to the per share Merger consideration provided under the Merger Agreement);
|
•
|
the fact that the negotiations of the transaction with Parent, including the Merger Agreement and the Merger, were conducted under the oversight of the Special Committee, which:
|
|
·
is comprised solely of independent directors who are not employees of PokerTek and who have no material financial interest in the Merger that is different from that of our shareholders;
|
|
·
retained and received advice and assistance from the financial and legal advisors retained by the Special Committee in evaluating, negotiating and recommending the terms of the Merger Agreement; and
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·
was delegated the power and authority to review and evaluate, participate in the negotiations of, and make recommendations to the Board with respect to a transaction or any alternative thereto; and
|
|
•
|
the fact that the Merger is subject to the approval of our shareholders.
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|
•
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the current uncertain state of the economy and general uncertainty surrounding forecasted economic conditions in both the near-term and the long-term;
|
•
|
the risks and costs to PokerTek if the Merger does not close, including the diversion of management and employee attention, potential employee attrition and the potential effects on our business and our relationships with our customers;
|
•
|
the fact that our shareholders will not participate in any future earnings or growth of PokerTek and will not benefit from any appreciation in value of PokerTek, including any appreciation in value that could be realized as a result of any acquisitions or improvements to PokerTek’s operations;
|
•
|
the requirement that we pay Parent a termination fee of $650,000 if we enter into a definitive agreement as the result of a superior proposal, which may discourage other potential bidders from making a competing bid to acquire us;
|
•
|
the restrictions on the conduct of our business prior to the completion of the Merger, requiring us to conduct our business only in the ordinary course, subject to specific limitations, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the Merger;
|
•
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the fact that certain of our directors and executive officers have financial interests in the Merger that are different from, or in addition to, those of our shareholders generally (see the section entitled “The Merger — Interests of Certain Persons in the Merger” beginning on page 47 of this proxy statement);
|
•
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the fact that, even if the Merger is not completed, we will be required to pay our legal and accounting fees, a portion of the investment banking fees to Burrill, and other miscellaneous fees and expenses;
|
•
|
the fact that, for U.S. federal income tax purposes, the transaction would be taxable to our shareholders that are U.S. holders; and
|
•
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the fact that, while we expect that the Merger will be consummated, there can be no assurance that all conditions to the parties’ obligations to complete the Merger Agreement will be satisfied, and, as a result, the Merger may not be consummated.
|
|
•
|
reviewed and analyzed certain publicly available financial statements and reports regarding PokerTek;
|
|
|
|
•
|
reviewed and analyzed certain internal financial statements and other financial and operating data (including financial forecasts for fiscal years 2014-2019) concerning PokerTek prepared by the management of PokerTek;
|
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|
•
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reviewed the reported prices and trading activity for the Common Stock of PokerTek;
|
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|
•
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compared the financial performance of PokerTek and the prices and trading activity of the Common Stock with that of certain other publicly-traded companies that we deemed relevant and the securities of those companies;
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•
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reviewed the financial terms, to the extent publicly available, of certain other transactions that we deemed relevant;
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•
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reviewed the forecasted potential future cash flows of PokerTek;
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|
•
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reviewed the Merger Agreement and related documents;
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|
•
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discussed with management of PokerTek the operations of and future business prospects for PokerTek; and
|
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|
•
|
performed such other analyses and provided such other services as Burrill deemed appropriate.
|
|
|
|
|
•
|
29.8% based on the day-prior closing price of $1.04 per share
|
|
|
•
|
31.1% based on the week-prior closing price of $1.03 per share
|
|
|
•
|
27.4% based on the month-prior closing price of $1.06 per share
|
|
|
|
The results of these analyses are summarized in the table below:
|
|
Enterprise Value to:
|
PokerTek Multiple (Based on $1.35 offer price)
|
|
LTM Revenue
|
2.4x | |
2014E Revenue
|
2.4x | |
LTM EBITDA
|
22.5x | |
2014E EBITDA
|
26.3x |
|
·
|
Ainsworth Game Technology Ltd.
|
·
|
Amaya Gaming Group Inc.
|
·
|
Aristocrat Leisure Ltd.
|
·
|
Bally Technologies, Inc.
|
·
|
DEQ Systems Corporation
|
·
|
Galaxy Gaming, Inc.
|
·
|
Gaming Partners International Corporation
|
·
|
IBASE GAMING Inc.
|
·
|
International Game Technology
|
·
|
Multimedia Games Holding Company, Inc.
|
·
|
Scientific Games Corporation
|
·
|
Universal Entertainment Corporation
|
|
|
Burrill examined the market trading multiples for each company based on the April 25, 2014 closing price and information publicly available at that time, including the multiple of Enterprise Value to LTM
|
|
The results of these analyses are summarized in the table below:
|
|
|
Enterprise Value to:
|
Selected Companies Median
|
PokerTek
|
||||
LTM Revenue
|
3.6x | 2.4x | ||||
2014E Revenue
|
3.2x | 2.4x | ||||
LTM EBITDA
|
15.3x | 22.5x | ||||
2014E EBITDA
|
7.3x | 26.3x | ||||
Price to Book Value
|
3.4x | 4.1x |
|
|
|
·
|
Bally Technologies, Inc. / SHFL entertainment, Inc.
|
·
|
Scientific Games Corporation / WMS Industries Inc.
|
·
|
Amaya Gaming Group Inc. / Cadillac Jack, Inc.
|
·
|
Yuri Itkis Gaming Trust of 1993 / GameTech International Inc.
|
·
|
The Gores Group LLC / Elo Touch Solutions, Inc.
|
·
|
eBet Limited / Odyssey Gaming Limited
|
·
|
Konami Corp. / Abilit Corporation
|
·
|
Vitruvian Partners LLP / Inspired Gaming Group Limited
|
·
|
International Game Technology / Cyberview Technology, Inc.
|
·
|
PacificNet, Inc. / Octavian Global Technologies, Inc.
|
·
|
FL GROUP hf. / Inspired Gaming Group Limited
|
·
|
GameTech International Inc. / Summit Amusement & Distributing, Ltd.
|
·
|
Mattel, Inc. / Radica Games Ltd.
|
·
|
Lottomattica S.p.A. / GTECH Holdings Corporation
|
·
|
Shuffle Master Australasia Pty Limited / Stargames
|
·
|
Square Enix Holdings Co., Ltd. / Taito Corporation
|
·
|
GTECH Corporation / Atronic International
|
·
|
International Game Technology / Acres Gaming Incorporated
|
·
|
Affinity Gaming / Anchor Coin, Inc.
|
·
|
Aristocrat Leisure Ltd. / Casino Data Systems
|
Enterprise Value to:
|
Median Transactions
|
PokerTek (based on $1.35 offer)
|
||||
LTM Revenue
|
1.7x | 2.4x | ||||
LTM EBITDA
|
7.4x | 22.5x | ||||
Price to Book:
|
2.2x | 4.1x |
($ in thousands)
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
||||||||||||||||||
Revenue
|
$ | 5,413 | $ | 7,142 | $ | 9,390 | $ | 11,010 | $ | 12,660 | $ | 14,220 | ||||||||||||
Gross Profit
|
3,972 | 5,249 | 6,855 | 8,037 | 9,242 | 10,381 | ||||||||||||||||||
Operating Income
|
(736 | ) | (60 | ) | 865 | 1,445 | 1,943 | 2,329 | ||||||||||||||||
Earnings before Taxes
|
(766 | ) | (81 | ) | 854 | 1,445 | 1,943 | 2,329 | ||||||||||||||||
Net Income from Continuing Operations
|
(786 | ) | (101 | ) | 768 | 1,301 | 1,749 | 2,096 |
|
|
|
|
|
Holder
|
Number of Shares Subject to Vested Stock Options
|
Cash Consideration to be Received for Vested Stock Options
|
Number of Shares Subject to Unvested Stock Options
|
Cash Consideration to be Received for Unvested Stock Options
|
Number of Shares Subject to RSUs(1)
|
Cash Consideration to be Received for RSUs
|
Cash Consideration to be Received for All Stock Options and RSUs
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Mark D. Roberson
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191,000 | $ | 3,333 | 0 | 0 | 300,000 | $ | 405,000 | $ | 408,333 | ||||||||||||||||||
James T. Crawford, III
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125,000 | 3,333 | 0 | 0 | 0 | 0 | 3,333 | |||||||||||||||||||||
Gehrig H. White
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0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Joseph J. Lahti
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20,000 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Lyle Berman
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80,000 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Arthur L. Lomax
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0 | 0 | 0 | 0 | 0 | 0 | 0 |
(1)
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All of the shares underlying the RSU grant to Mr. Roberson will vest and settle upon the later of shareholder approval of the Merger Agreement and the receipt of all regulatory approvals required for the consummation of the Merger. Accordingly, such shares will be issued and outstanding shares of PokerTek Common Stock on the closing date of the Merger.
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Material U.S. Federal Income Tax Consequences of the Merger
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;
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a trust (i) the administration of which is subject to the primary supervision of a U.S. court and all substantial decisions of which are controlled by one or more U.S. persons or (ii) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or
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an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source.
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federal income tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules, such as holders who receive shares of PokerTek Common Stock in connection with the exercise of employee stock options or otherwise as compensation, holders who hold an equity interest, actually or constructively, in Parent or the surviving corporation after the Merger, holders who validly exercise their rights under the NCBCA to object to the Merger, banks, insurance companies and other financial institutions, tax-exempt organizations, broker-dealers, partnerships, S corporations or other pass-through entities, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, traders in securities who elect the mark-to-market method of accounting, holders subject to the alternative minimum tax, holders that have a functional currency other than the U.S. dollar, holders who hold PokerTek Common Stock as part of a hedge, straddle, constructive sale or conversion transaction, controlled foreign corporations and passive foreign investment companies. This discussion also does not address the U.S. federal income tax consequences of the receipt of cash in connection with the cancellation of options to purchase shares of PokerTek Common Stock or any other matters relating to equity compensation or benefit plans.
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U.S. Holders
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the gain, if any, on such shares is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to the non-U.S. holder’s permanent establishment in the United States);
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the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the exchange of shares of PokerTek Common Stock pursuant to the Merger and certain other conditions are met; or
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the non-U.S. holder owned, directly or under certain constructive ownership rules of the Code, more than 5% of the outstanding shares of PokerTek Common Stock at any time during the five-year period preceding the Merger, and PokerTek is or has been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code for U.S. federal income tax purposes at any time during the shorter of the five-year period preceding the Merger or the period that the non-U.S. holder held PokerTek Common Stock.
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THE MERGER AGREEMENT
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each issued and outstanding share of capital stock of Merger Sub will become one share of common stock of the surviving corporation;
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any shares of PokerTek Common Stock that are owned by us as treasury stock or any shares of PokerTek Common Stock owned by Parent or Merger Sub will be canceled and no consideration will be delivered in exchange for those shares;
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each issued and outstanding share of PokerTek Common Stock (other than those canceled as above and shares of PokerTek Common Stock of shareholders who have properly exercised appraisal rights) will be converted into the right to receive $1.35 in cash, without interest and less any applicable withholding taxes; and
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each share underlying outstanding Restricted Stock Units will convert into the right to receive the per share Merger consideration of $1.35 in cash, without interest, less any applicable withholding taxes.
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Exchange and Payment Procedures
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PokerTek Stock Options
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Representations and Warranties
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corporate matters, including our due organization, existence, good standing and requisite corporate power;
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the approval and declaration of the advisability of the Merger Agreement and the transactions contemplated thereunder, including the Merger, by the Board, the determination that the Merger Agreement and the transactions contemplated thereunder, including the Merger are advisable and fair to, and in the best interests of, our shareholders and the resolution to recommend that our shareholders adopt the Merger Agreement and the transactions contemplated thereunder, including the Merger;
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the receipt of an opinion from Burrill;
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our corporate power and authority to execute, and consummate the transactions under, the Merger Agreement, and the enforceability of the Merger Agreement against us;
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our capitalization;
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compliance with applicable laws, including gaming laws, and possession of required licenses and permits;
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the absence of certain unlawful payments;
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the absence of violations of, or conflicts with, our governing documents, applicable law and certain agreements as a result of our entering into and performing our obligations under the Merger Agreement;
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required governmental consents, approvals and filings;
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the timely filing of required reports and other filings with the SEC since January 1, 2010, material compliance of our filings with securities laws and our financial statements with accounting standards, and maintenance of internal controls;
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the conduct of our business in the ordinary course of business consistent with past practice and the absence of any material adverse effect since January 1, 2014;
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tax matters;
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the absence of any pending or threatened material investigation, legal or administrative proceeding or action;
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material contracts and the absence of any default under any material contract;
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affiliate transactions;
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employee benefits matters;
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labor and employment matters;
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real property, including leasehold interests in real property;
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environmental matters;
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intellectual property, including the ownership of certain patents and trademarks;
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customers and suppliers;
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the absence of a shareholder rights agreement and the non-applicability of antitakeover statutes to the Merger;
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the absence of any undisclosed broker’s or advisor fees;
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insurance; and
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the absence of untrue statements of material fact or omissions of material fact in information contained in certain documents.
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any change relating to the economy or securities markets in general, unless such change, effect, event, occurrence, state of facts, circumstance or development disproportionately affects PokerTek as compared to other participants in the industry in which PokerTek participates;
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any adverse change, effect, event, occurrence, state of facts or development attributable to conditions affecting the industry in which PokerTek any participates, unless such change, effect, event, occurrence, state of facts, circumstance or development disproportionately affects PokerTek as compared to other participants in the industry in which PokerTek participates; or
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any failure, in and of itself, by PokerTek to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after April 29, 2014 (provided that the underlying causes of any such failure may be considered in determining whether a material adverse effect has occurred).
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corporate matters, including their due organization, existence and good standing;
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their corporate power and authority to execute, and consummate the transactions under, the Merger Agreement, and the enforceability of the Merger Agreement against them;
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the absence of violations of, or conflicts with, their respective governing documents, applicable law and certain agreements as a result of entering into and performing their obligations under the Merger Agreement;
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required consents, approvals and filings;
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the absence of untrue statements of material fact or omissions of material fact in information provided for certain filings;
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the ownership and operations of Merger Sub; and
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the absence of any undisclosed broker’s or advisor’s fees.
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Shareholders’ Meeting
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Conduct of Our Business Pending the Merger
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(i) amend the articles of incorporation or bylaws (or equivalent organizational documents) of PokerTek or any of our subsidiaries, (ii) declare or pay any dividends, (iii) subdivide, reclassify, recapitalize, split, combine or exchange or enter into any similar transaction with respect to our Common Stock, (iv) repurchase, redeem or otherwise acquire any shares of our capital stock, or (v) issue, deliver or sell, or authorize, propose or reserve for issuance, delivery or sale, or otherwise encumber, any shares of our capital stock;
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incur, assume or guarantee any indebtedness for borrowed money or make any loans, advances or capital contributions or investments;
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transfer, license, lease, mortgage or otherwise encumber any of our properties or assets;
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directly or indirectly acquire (i) by merging or consolidating with, or by purchasing assets of, or by any other manner, any division, business or equity interest of any person (including in a transaction involving a tender or exchange offer, business combination, recapitalization, liquidation, dissolution, joint venture or similar transaction), or (ii) any material assets;
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adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger, consolidation or other reorganization of PokerTek or any PokerTek subsidiaries (other than the Merger Agreement);
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implement or adopt any change in our accounting methods, principles or policies other than as may be required by applicable law or GAAP and as concurred with by our independent auditors;
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(i) amend any of the terms or conditions of employment for any of our directors or officers, (ii) adopt, enter into, terminate or amend any benefit plan or any other labor agreement, (iii) increase in any manner the compensation or benefits of, or pay any bonus to, any employee, (iv) enter into or amend any contract with any employee benefit provider relating to any benefit plan or agreement, (v) grant any awards under any benefit plan (including the grant of stock options, stock appreciation rights, restricted stock units, restricted stock, deferred stock awards, stock purchase rights or other stock-based or stock-related awards) or remove or modify existing restrictions in any benefit plan, (vi) take any action to accelerate the vesting or payment of any compensation or benefits under any contract or benefit plan, agreement or award, or (vii) make any material determination under any benefit plan or agreement that is inconsistent with the ordinary course of business or past practice;
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hire any person to be employed by PokerTek or any of our subsidiaries or terminate the employment of any such employee; provided that PokerTek is entitled to replace an existing employee who terminates his or her employment at a compensation rate commensurate with what is market for such employee;
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modify or amend in any material respect or terminate or cancel or waive, release or assign any material rights or claims with respect to, any material contract or enter into any material agreement or contract;
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pay, loan or advance (other than the payment of compensation, directors’ fees or reimbursement of expenses in the ordinary course of business consistent with past practice, including pursuant to existing indemnification agreements with officers and directors) any amount to, or sell, transfer or lease any properties or assets (real, personal or mixed, tangible or intangible) to, or enter into any agreement with, any of our employees, officers or directors or any affiliate of any of our employees, officers or directors;
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form or commence the operations of any business or any corporation, partnership, joint venture, business association or other business organization or division thereof or enter into any new line of business that is material to PokerTek and its subsidiaries, taken as a whole;
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(i) make, change, or revoke any material tax election, (ii) adopt or change any method of tax accounting, (iii) apply for any ruling or benefit with respect to taxes, enter into any closing agreement or any other agreement relating to taxes with any governmental entity or otherwise settle or compromise any tax liability or surrender any claim for a refund of taxes, (iv) file any amended tax return or take any position on a tax return inconsistent with a position taken on a tax return previously filed, or (v) consent to any extension or waiver of the limitations period applicable to any claim or assessment with respect to taxes;
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(i) pay, discharge, settle or satisfy any claims, litigation, liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities (a) reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) included in our SEC reports or (b) incurred in the ordinary course of business consistent with past practice, or (ii) cancel any material indebtedness (individually or in the aggregate) or waive any claims or rights of substantial value;
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(i) make or agree to make any new capital expenditure or expenditures that are not budgeted and exceed $5,000 individually or $10,000 in the aggregate, or (ii) fail to make any capital expenditure or expenditures that are budgeted for;
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fail to take any action necessary or advisable to protect or maintain the intellectual property owned, used, licensed or held for use by PokerTek or any of our subsidiaries that is material to the conduct of their respective businesses as currently conducted, including, without limitation, the prosecution of all pending applications for patents and trademarks, the filing of any documents or other information or the payment of any maintenance or other fees related thereto, and the payment in full by the closing of any license fees or royalties that are due and payable through the Merger closing date;
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except as necessary for the ordinary conduct of our business consistent with past practice, (i) grant or acquire, agree to grant to or acquire from any person, or dispose of or permit to lapse any rights to any intellectual property, or disclose or agree to disclose to any person, other than representatives of Parent, any trade secrets, or (ii) compromise, settle or agree to settle any one or more actions or institute any action concerning any intellectual property;
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enter into any material contract or other material transaction between PokerTek or any of our subsidiaries, on the one hand, and any of our affiliates or subsidiaries, on the other hand, other than in the ordinary course of business on terms no less favorable to PokerTek than the terms governing such transactions with third parties;
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permit any insurance policy naming PokerTek or any PokerTek subsidiary as a beneficiary or a loss payable payee to lapse, be canceled or expire unless a new policy with substantially identical coverage is in effect as of the date of lapse, cancellation or expiration;
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take any action that (i) would reasonably be expected to (a) result in the surrender, revocation, limitation, suspension, or non-renewal of any of our material permits, (b) impose any material delay in the obtaining of, or significantly increase the risk of not obtaining, any consent, approval, order, authorization or permit of, or declaration, registration, filing with, or notification to, any governmental entity necessary to consummate the Merger or the transactions or the expiration or termination of any applicable waiting period, or (c) significantly increase the risk of any governmental entity entering an order prohibiting or impeding the consummation of the Merger or the Transactions or (ii) otherwise would reasonably be expected to materially delay or impair the consummation of the Merger or the other transactions contemplated by the Merger Agreement; and
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authorize or commit or agree to take any of the foregoing actions.
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No Solicitation of Takeover Proposals
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solicit, initiate, or encourage or take any other actions designed to facilitate, or which may reasonably be expected to facilitate, any takeover proposal;
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enter into, continue or participate in any discussions or negotiations regarding, or furnish any information or access to, our properties, books or records or otherwise cooperate with any proposal that constitutes, or that may reasonably be expected to lead to, any takeover proposal; or
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propose, agree, or publicly announce an intention to take any of the above actions.
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furnish information with respect to PokerTek to the person making such takeover proposal, but only after such person enters into a customary confidentiality agreement with PokerTek, provided that, (i) such confidentiality agreement shall include a “qualifying standstill” (as described below) and (ii) PokerTek advises Parent of all such non-public information delivered to such Person concurrently with its delivery to such Person and, concurrently with its delivery to such person, PokerTek delivers to Parent all such information not previously provided to Parent; and
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participate in discussions and negotiations with such person or its representatives regarding such takeover proposal.
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we must provide at least five days’ prior written notice to Parent of our intention to effect a change of the Board’s recommendation specifying the terms and conditions of any such superior proposal, including the identity of the person making such superior proposal;
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we must provide a copy to Parent of the relevant proposed transaction agreements with the party making such proposal;
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prior to taking any such action, we and our counsel and financial advisors must negotiate during the five-day notice period with Parent in good faith (to the extent Parent desires to negotiate) to enable Parent to revise the terms of the Merger Agreement such that it would cause such superior proposal not to constitute a superior proposal;
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The Board must have considered in good faith any changes to the Merger Agreement proposed in writing by Parent and must have determined that the superior proposal would still constitute a superior proposal if such changes were given effect; and
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we must deliver to Parent any amendment to the financial terms or other material terms of a superior proposal and, in such case, provide Parent an additional five days’ prior written notice and comply with the provisions above.
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Agreement to Use Reasonable Best Efforts
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• take all action necessary to ensure that no state takeover statute applies to the Merger and any and all of the transactions contemplated thereunder; and
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• if any takeover statute becomes applicable to the Merger or any of the other transactions contemplated by the Merger Agreement, ensure that the Merger or any of the transactions contemplated thereunder may be consummated as promptly as practicable on the terms contemplated by the Merger Agreement.
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Indebtedness and Company Transaction Expenses
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Other Covenants and Agreements
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Public Announcements
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Access to Information; Confidentiality
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Notification of Certain Matters
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Indemnification; Directors’ and Officers’ Insurance
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Shareholder Litigation
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Fees and Expenses
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Conditions to the Merger
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the approval of the adoption of the Merger Agreement and the transactions contemplated thereunder, including the Merger, by holders of a majority of the outstanding shares of PokerTek Common Stock; and
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no law or order shall be in effect prohibiting the consummation of the Merger, nor shall there be pending or threatened any litigation by any governmental entity which challenges or seeks to enjoin the Merger or any of the other transactions contemplated by the Merger Agreement.
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all applicable gaming approvals shall have been obtained and shall be in full force at the time of the closing;
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we shall have performed and complied, in all respects, with the covenants and obligations relating to the termination of certain agreements and operations and the development of certain intellectual property, to the sole reasonable satisfaction of Parent, and shall have performed and complied, in all material respects, with all of the other covenants and obligations required to be performed by us pursuant to the Merger Agreement at or prior to the closing;
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our representations and warranties set forth in Merger Agreement regarding (i) organization and standing, (ii) capitalization, (iii) authority, (iv) compliance with laws, and (v) brokers and other advisors shall be true and correct in all respects (without giving effect to any “materiality” or “material adverse effect” qualifications contained therein) both as of April 29, 2014 and as of the closing date as though made on and as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all respects on and as of such earlier date); and (ii) our representations and warranties contained in the Merger Agreement and in any certificate or other writing we deliver pursuant thereto (other than those specifically referred to in the foregoing clause (i)) shall be true and correct (without giving effect to any “materiality” or “material adverse effect” qualifications contained therein) both as of April 29, 2014 and as of the closing date as though made on and as of the such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all respects on and as of such earlier date) except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, be reasonably expected to have a material adverse effect;
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no applicable law or order shall be and remain in effect which imposes, and no litigation shall be pending or threatened by or before any governmental entity which seeks to impose, any material limitations on Parent’s ownership of PokerTek or any PokerTek subsidiary or operation of all or a material portion of Parent’s or PokerTek’s or any PokerTek subsidiary’s businesses or assets (whether held directly or through any subsidiary);
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since April 29, 2014, there shall not, with respect to PokerTek, have been any occurrence, event, change, effect or development that, individually or in the aggregate, together with all other occurrences, events, changes, effects or developments, has had or would be reasonably likely to have a material adverse effect; and
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holders of not more than five percent (5%) of our outstanding Common Stock as of April 29, 2014 shall have exercised their appraisal rights under Article 13 of the NCBCA.
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each of Parent and Merger Sub shall have performed and complied with, in all material respects, all of the covenants and obligations required to be performed by it pursuant to the Merger Agreement at or prior to the closing date; and
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the representations and warranties of Parent and Merger Sub set forth in Merger Agreement regarding (i) organization and good standing, authority, ownership and operation of Merger Sub and brokers shall be true and correct in all respects both as April 29, 2014 and as of the closing date as though made on and as of the closing date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all respects on and as of such earlier date), and (ii) the representations and warranties of Parent and Merger Sub contained in the Merger Agreement and in any certificate or other writing delivered by Parent or Merger Sub pursuant thereto (other than those referred to in the foregoing clause (i)) shall be true and correct (without giving effect to any “materiality” or “material adverse effect” qualifications contained therein) both as of April 29, 2014 and as of the closing date as though made on and as of the closing date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all respects on and as of such earlier date) except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, be reasonably expected to prevent or materially impede, interfere with, hinder or delay the consummation by Parent or Merger Sub of the Merger and or the other transactions contemplated by the Merger Agreement in a timely manner.
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Termination
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by either PokerTek or Parent, if:
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the Merger has not been consummated on or before December 31, 2014 (but this right to terminate will not be available to a party if the failure to consummate the Merger on or prior to December 31, 2014 was primarily due to the failure of such party to perform any of its obligations under the Merger Agreement);
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if any order having the effect of prohibiting the consummation of the Merger shall be in effect and shall have become final and nonappealable; or
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our shareholders’ meeting has been held and completed and our shareholders have not adopted the Merger Agreement and the transactions contemplated thereunder, including the Merger, at such meeting.
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by Parent, if:
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we shall have breached or failed to perform any of our representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach or failure to perform (i) would give rise to the failure (a) to obtain the required gaming approvals, (b) to terminate certain agreements or perform certain obligations, if applicable, (c) to develop certain intellectual property that we are obligated to develop, or (d) to satisfy certain conditions to Parent’s obligation to close the Merger, and (ii) has not been waived by Parent and is incapable of being cured, or is not cured, by us within thirty (30) calendar days following receipt of written notice of such breach or failure to perform from Parent;
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our Board shall have made an adverse recommendation change to our shareholders or not including the Board’s recommendation of the Merger in this proxy statement;
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we fail, in breach of our obligations under the Merger Agreement, to hold our shareholders’ meeting or to use our reasonable best efforts to solicit proxies in favor of the adoption of the Merger Agreement and to obtain shareholder approval thereof;
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our Board (or any committee thereof) shall have failed to reject (and, if made directly to shareholders or in a manner that would require shareholder approval, and thereafter if requested by Parent, publicly recommend against) any takeover proposal within ten (10) business days after our Board (or any committee thereof) becomes aware of such proposal;
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a tender or exchange offer relating to our equity securities shall have been commenced by a person unaffiliated with Parent, and we shall not have sent to our shareholders pursuant to Rule 14e-2 promulgated under the Securities Act of 1933, as amended, within ten (10) business days after such tender or exchange offer is first published, sent or given, a statement disclosing that our Board recommends rejection of such tender or exchange offer;
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our Board shall have failed to reaffirm publicly the recommendation to our shareholders to vote in favor of the Merger within five (5) days of Parent’s written request for such reaffirmation; or
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we shall have materially breached our no solicitation obligations; or
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there shall have occurred, with respect to PokerTek, a material adverse effect or an order which imposes any material limitations on Parent’s ownership of PokerTek or any PokerTek subsidiary or operation of all or a material portion of Parent’s or PokerTek’s or any PokerTek subsidiaries’ businesses or assets (whether held directly or through any subsidiary) has become final and non-appealable.
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By PokerTek, if:
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at any time prior to the time shareholder approval of the merger is obtained, if our Board determines to enter into a definitive agreement with respect to a superior proposal, but only if we are not in material breach of our on solicitation obligations and we immediately prior to or substantially concurrently with such termination pay to Parent in immediately available funds any termination fee required to be paid pursuant to the Merger Agreement; or
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Parent or Merger Sub shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the Merger Agreement, which breach or failure to perform (i) would give rise to a failure the satisfy certain conditions to PokerTek’s obligation to close the Merger, and (ii) cannot be cured by Parent within thirty (30) days following receipt of written notice from Parent of such breach or failure.
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Effect of Termination
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Termination Fees and Expense Reimbursement
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PokerTek Termination Fee
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If, prior to our shareholders’ meeting, (i)(a) a takeover proposal shall have been made to us and such Company Takeover Proposal becomes publicly known or shall have been made directly to our shareholders generally or any person shall have publicly announced an interest in making its intention (whether or not conditional) to make, or its consideration of making a takeover proposal, (b) the Merger Agreement is terminated by (1) Parent or us because (i) the closing of the Merger shall not have occurred by December 31, 2014, (ii) approval of the Merger by our shareholders shall not have been obtained after a shareholder meeting shall have been conducted or (2) Parent because we shall have breached or failed to perform any of our representations, warranties, covenants or other agreements contained in the Merger Agreement after the running of any applicable cure period, and (c) within twelve (12) months after such termination, we enter into a definitive agreement to consummate a takeover proposal or consummates a takeover proposal; or (ii) the Merger Agreement is terminated by Parent following (a) our Board making an adverse recommendation change, (b) our failure to include the Board’s recommendation to shareholders to approve the Merger in our proxy statement, (c) our failure to hold our shareholders meeting and solicit proxies in connection therewith as provided for in the Merger Agreement, (d) our Board’s failure to reject a takeover proposal within ten (10) business days after becoming aware of such proposal, (e) our Board’s failure to recommend that our shareholders reject any tender or exchange offer received within ten (10) business days after any such tender or exchange offer is first published, (f) our Board fails to reaffirm publicly its recommendation that our shareholders approve the Merger Agreement within five (5) days of receipt of a request to do so from Parent, or (g) we shall have materially breached our no solicitation obligations set forth in the Merger Agreement; or (iii) the Merger Agreement is terminated by us to enter into a definitive agreement with respect to a superior proposal, then, we are required to pay Parent a fee equal to $650,000.
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In the event that (i) the Merger Agreement is terminated by Parent or us following a shareholders meeting having been conducted at which the Merger Agreement was not approved and (ii) no amounts are otherwise payable to Parent, then we are required to pay Parent a fee equal to $500,000.
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Parent Termination Fee
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No Survival
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Amendment or Supplement
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Specific Performance
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VOTING AGREEMENT
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Agreement to Vote and Irrevocable Proxy
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Transfer Restrictions
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Termination
|
|
APPRAISAL RIGHTS
|
|
|
|
|
|
•
|
deliver to PokerTek, prior to the shareholder vote on the Merger proposal, a written notice of your intent to demand payment if the Merger is completed; and
|
|
•
|
not vote, or cause or permit to be voted, any of your shares of Common Stock in favor of the approval of the Merger Agreement and the Merger.
|
|
|
•
A form (i) specifying the first date of any announcement to shareholders, made prior to the date the Merger became effective, of the principal terms of the Merger, and if such an announcement was made, the form will require a shareholder asserting appraisal rights to certify whether beneficial ownership of those shares for which appraisal rights are asserted was acquired before that date, and (ii) requiring a shareholder asserting appraisal rights to certify that the shareholder did not vote for or consent to the Merger.
|
|
•
Disclosure of where the form must be sent and where certificates for certificated shares must be deposited, as well as the date by which those certificates must be deposited. The certificate deposit date must not be earlier than the date for receiving the appraisal form described in the next sentence.
|
|
|
|
• Disclosure of the date by which PokerTek must receive the payment demand, which date may not be fewer than 40 nor more than 60 days after the date the appraisal notice and form are sent. The form shall also state that the shareholder shall have waived the right to demand appraisal with respect to the shares unless the form is received by PokerTek by the specified date.
|
|
|
|
• Disclosure of PokerTek’s estimate of the fair value of the shares.
|
|
|
|
• Disclosure that, if requested in writing, PokerTek will provide to the shareholder so requesting, within 10 days after the date the appraisal notice and form are sent, the number of shareholders who return the forms by the specified date and the total number of shares owned by them.
|
|
|
|
• Disclosure of the date by which the notice to withdraw from the appraisal process must be received, which date must be within 20 days after the date the appraisal form must be received by PokerTek.
|
|
|
|
• A copy of Article 13 of the NCBCA.
|
|
|
|
|
|
•
PokerTek’s annual financial statements. The date of the financial statements will not be more than 16 months before the date of payment and will comply with the NCBCA. If annual financial statements that meet these requirements are not reasonably available, PokerTek will provide reasonably equivalent financial information.
|
|
|
|
• P
okerTek’s latest available quarterly financial statements, if any.
|
|
|
|
•
A statement of PokerTek’s estimate of the fair value of the shares. The estimate must equal or exceed PokerTek’s estimate provided in its appraisal notice and form.
|
|
|
|
•
A statement that if you have perfected your appraisal rights, you have the right to demand further payment under Article 13 of the NCBCA and that if you do not do so within the time period specified therein, then you shall be deemed to have accepted such payment in full satisfaction of PokerTek’s obligations under Article 13 of the NCBCA.
|
|
|
|
•
PokerTek’s estimate of fair value of your shares.
|
|
|
|
•
That you may accept PokerTek’s estimate of fair value, plus interest, in full satisfaction of your demands or may demand appraisal.
|
|
|
|
•
That, if you wish to accept PokerTek’s offer, you must notify PokerTek of your acceptance of the offer within 30 days after receiving the offer.
|
|
|
|
•
That if you do not satisfy the requirements for demanding appraisal under Article 13 of the NCBCA, you shall be deemed to have accepted PokerTek’s offer.
|
|
|
|
|
|
|
|
•
against PokerTek if the court finds that PokerTek did not substantially comply with the procedures for the exercise of appraisal rights prescribed by Article 13 of the NCBCA; or
|
|
|
•
against PokerTek or the shareholders demanding appraisal, if the court finds that the party against whom the expenses are assessed acted arbitrarily, vexatiously or not in good faith.
|
|
|
|
|
|
MARKET PRICES OF POKERTEK COMMON STOCK AND DIVIDEND INFORMATION
|
High
|
Low
|
|||||||
Year Ending December 31, 2014
:
|
||||||||
Second Quarter (through
June 13
,
2014)
|
$ | 1.35 | $ | 0.98 | ||||
First Quarter
|
$ | 1.32 | $ | 1.01 | ||||
Year Ending December 31, 2013
:
|
||||||||
Fourth Quarter
|
$ | 1.21 | $ | 0.96 | ||||
Third Quarter
|
$ | 1.38 | $ | 1.12 | ||||
Second Quarter
|
$ | 1.49 | $ | 1.10 | ||||
First Quarter
|
$ | 1.61 | $ | 1.17 | ||||
Year Ending December 31, 2012
:
|
||||||||
Fourth Quarter
|
$ | 1.40 | $ | 0.70 | ||||
Third Quarter
|
$ | 1.05 | $ | 0.64 | ||||
Second Quarter
|
$ | 1.08 | $ | 0.61 | ||||
First Quarter
|
$ | 1.04 | $ | 0.61 | ||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
DELISTING AND DEREGISTRATION OF POKERTEK COMMON STOCK
|
|
PROPOSAL #2 — ADVISORY VOTE ON CHANGE OF CONTROL PAYMENTS AND OTHER
COMPENSATION TO BE PAID IN CONNECTION WITH THE MERGER
|
|
PROPOSAL #3 — ADJOURNMENT OF THE SPECIAL MEETING
|
|
|
OTHER MATTERS OF BUSINESS
|
HOUSEHOLDING OF PROXY MATERIAL
|
WHERE YOU CAN FIND MORE INFORMATION
|
|
|
|
|
•
|
Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (filed with the SEC on March 21, 2014) and as amended on Form 10-K/A filed with the SEC on April 29, 2014;
|
•
|
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2014 (filed with the SEC on May 15, 2014); and
|
•
|
Current Reports on Form 8-K filed with the SEC on March 4, 2014 and April 30, 2014.
|
Section 1.1
|
The Merger
|
A-2
|
Section 1.2
|
Closing; Effective Time
|
A-2
|
Section 1.3
|
Effect of the Merger
|
A-2
|
Section 1.4
|
Organizational Documents of the Surviving Corporation
|
A-3
|
Section 1.5
|
Directors and Officers of the Surviving Corporation
|
A-3
|
Section 2.1
|
Effect on Capital Stock
|
A-3
|
Section 2.2
|
Exchange of Shares and Certificates
|
A-5
|
Section 2.3
|
Dissenting Shares
|
A-7
|
Section 2.4
|
Adjustments to Prevent Dilution
|
A-8
|
Section 3.1
|
Organization, Standing and Corporate Power
|
A-8
|
Section 3.2
|
Capitalization
|
A-9
|
Section 3.3
|
Authority
|
A-11
|
Section 3.4
|
No Conflict
|
A-12
|
Section 3.5
|
Required Filings and Consents
|
A-13
|
Section 3.6
|
Compliance; Regulatory Compliance
|
A-13
|
Section 3.7
|
SEC Filings; Financial Statements
|
A-14
|
Section 3.8
|
Absence of Certain Changes or Events
|
A-17
|
Section 3.9
|
Taxes
|
A-18
|
Section 3.10
|
Litigation
|
A-19
|
Section 3.11
|
Material Contracts
|
A-20
|
Section 3.12
|
Affiliate Transactions
|
A-23
|
Section 3.13
|
Employee Benefit Plans
|
A-23
|
Section 3.14
|
Labor and Employment Matters
|
A-27
|
Section 3.15
|
Real Property
|
A-29
|
Section 3.16
|
Environmental Matters
|
A-30
|
Section 3.17
|
Intellectual Property
|
A-31
|
Section 3.18
|
Commercial Relationships
|
A-34
|
Section 3.19
|
Shareholder Rights Agreements
|
A-35
|
Section 3.20
|
Brokers
|
A-35
|
Section 3.21
|
Insurance
|
A-35
|
Section 3.22
|
Information Supplied
|
A-35
|
Section 4.1
|
Organization and Good Standing
|
A-36
|
Section 4.2
|
Authority
|
A-36
|
Section 4.3
|
No Conflict
|
A-37
|
Section 4.4
|
Required Filings and Consents
|
A-37
|
Section 4.5
|
Information Supplied
|
A-38
|
Section 4.6
|
Ownership and Operations of Merger Sub
|
A-38
|
Section 4.7
|
Brokers
|
A-38
|
Section 5.1
|
Conduct of Company’s Business Pending the Merger
|
A-38 |
Section 5.2
|
Access to Information; Confidentiality
|
A-42
|
Section 5.3
|
Notification of Certain Matters
|
A-43
|
Section 5.4
|
Reasonable Best Efforts
|
A-44
|
Section 5.5
|
No Solicitation
|
A-45
|
Section 5.6
|
Shareholder Litigation
|
A-49
|
Section 5.7
|
Indemnification; Director and Officer Insurance
|
A-49
|
Section 5.8
|
Public Announcements
|
A-50
|
Section 5.9
|
Preparation of Proxy Statement; Shareholders’ Meeting
|
A-50
|
Section 5.10
|
Employees
|
A-51
|
Section 5.11
|
Rule 16b-3
|
A-53
|
Section 5.12
|
Takeover Statutes
|
A-53
|
Section 5.13
|
No Control of Other Party’s Business
|
A-53
|
Section 5.14
|
Delisting and Deregistration
|
A-54
|
Section 5.15
|
Indebtedness and Company Transaction Expenses
|
A-54
|
Section 5.16
|
Termination of Certain Agreements and Operations
|
A-54
|
Section 5.17
|
Development of Certain Intellectual Property
|
A-54
|
Section 6.1
|
Conditions to the Obligation of Each Party
|
A-54
|
Section 6.2
|
Conditions to the Obligation of Parent and Merger Sub
|
A-55
|
Section 6.3
|
Conditions to the Obligation of the Company
|
A-56
|
Section 7.1
|
Termination
|
A-56
|
Section 7.2
|
Effect of Termination
|
A-58
|
Section 7.3
|
Amendments
|
A-60
|
Section 7.4
|
Waiver
|
A-60
|
Section 8.1
|
Non-survival of Representations and Warranties
|
A-60
|
Section 8.2
|
Notices
|
A-61
|
Section 8.3
|
Interpretation
|
A-61
|
Section 8.4
|
Counterparts; Electronic Delivery
|
A-61
|
Section 8.5
|
Entire Agreement; No Third-Party Beneficiaries
|
A-62
|
Section 8.6
|
Governing Law
|
A-62
|
Section 8.7
|
Assignment
|
A-62
|
Section 8.8
|
Consent to Jurisdiction
|
A-62
|
Section 8.9
|
Headings, etc
|
A-62
|
Section 8.10
|
Mutual Drafting
|
A-62
|
Section 8.11
|
Severability
|
A-62
|
Section 8.12
|
Failure or Indulgence Not Waiver; Remedies Cumulative
|
A-63
|
Section 8.13
|
Waiver of Jury Trial
|
A-63
|
Section 8.14
|
Specific Performance
|
A-63
|
Section 8.15
|
Certain Definitions
|
A-63
|
EXHIBIT A | Form of Voting Agreement |
Affiliate
|
A-65
|
Agreement
|
A-1
|
Alternative Acquisition Agreement
|
A-45
|
Articles of Merger
|
A-2
|
Associate
|
A-65
|
Business Day
|
A-62
|
Canceled Company Stock Awards
|
A-4
|
Capitalization Date
|
A-9
|
CERCLA
|
A-29
|
Certificates
|
A-5
|
Cleanup
|
A-62
|
Closing
|
A-2
|
Closing Date.
|
A-2
|
Code
|
A-5
|
Commonly Controlled Entity
|
A-23
|
Company
|
A-1
|
Company Adverse Recommendation Change
|
A-45
|
Company Articles of Incorporation
|
A-9
|
Company Benefit Agreements
|
A-23
|
Company Benefit Plans
|
A-23
|
Company Board
|
A-1
|
Company Board Recommendation
|
A-11
|
Company Bylaws
|
A-9
|
Company Common Stock
|
A-1
|
Company Disclosure Letter
|
A-8
|
Company Financial Statements
|
A-15
|
Company Leases
|
A-27
|
Company Material Adverse Effect
|
A-65
|
Company Material Contract
|
A-19
|
Company Notice of Adverse Recommendation
|
A-46
|
Company Option
|
A-9
|
Company Organizational Documents
|
A-9
|
Company Participant
|
A-25
|
Company Pension Plan
|
A-23
|
Company Pension Plans
|
A-23
|
Company Permits
|
A-14
|
Company SEC Reports
|
A-14
|
Company Shareholder Approval
|
A-11
|
Company Shareholders’ Meeting
|
A-49
|
Company Stock Awards
|
A-9
|
Company Stock Plans
|
A-9
|
Company Stock Rights
|
A-10
|
Company Subsidiaries
|
A-10
|
Company Subsidiary
|
A-10
|
Company Takeover Proposal
|
A-44
|
Company Termination Fee
|
A-57
|
Company Welfare Plan
|
A-23
|
Company Welfare Plans
|
A-23
|
Confidentiality Agreement
|
A-40
|
Contract
|
A-62
|
Copyrights
|
A-64
|
Covered Employees
|
A-49
|
Credit Agreement
|
A-62
|
D&O Insurance
|
A-48
|
Dissenting Shares
|
A-7
|
Effective Time
|
A-3
|
Environmental Claim
|
A-62
|
Environmental Laws
|
A-62
|
Environmental Permits
|
A-63
|
ERISA
|
A-23
|
Exchange Act
|
A-13
|
Exchange Fund
|
A-5
|
FASB
|
A-17
|
GAAP
|
A-15
|
Gaming Approvals
|
A-13
|
Gaming Authority
|
A-63
|
Gaming Law
|
A-63
|
Gaming Notices
|
A-13
|
Governmental Entity
|
A-12
|
Hazardous Substances
|
A-63
|
Indebtedness
|
A-63
|
Insurance Policies
|
A-33
|
Intellectual Property
|
A-63
|
IP Contracts
|
A-21
|
known to Company
|
A-66
|
known to Parent
|
A-66
|
Law
|
A-12
|
Leased Real Property
|
A-27
|
Liability
|
A-15
|
Liens
|
A-10
|
Litigation
|
A-19
|
Merger
|
A-1
|
Merger Consideration
|
A-3
|
Merger Sub
|
A-1
|
Merger Sub Common Stock
|
A-4
|
Nasdaq
|
A-13
|
NCBCA
|
A-1
|
New Plan
|
A-50
|
Nonqualified Deferred Compensation Plan
|
A-25
|
Non-Surrender Jurisdictions
|
A-43
|
Notice Period
|
A-46
|
Order
|
A-12
|
Outside Date
|
A-54
|
Parent
|
A-1
|
Parent Disclosure Letter
|
A-34
|
Parent Material Adverse Effect
|
A-65
|
Patents
|
A-64
|
Paying Agent
|
A-5
|
Payor
|
A-57
|
Permitted Encumbrances
|
A-64
|
Person
|
A-65
|
Primary Company Executives
|
A-26
|
Proxy Statement
|
A-48
|
Recipient
|
A-57
|
Release
|
A-64
|
Representatives
|
A-64
|
Required Gaming Approvals
|
A-52
|
Sarbanes-Oxley Act
|
A-14
|
SEC
|
A-13
|
Securities Act
|
A-14
|
Software
|
A-64
|
Special Committee
|
A-1
|
Subsidiary
|
A-65
|
Surrender Jurisdictions
|
A-43
|
Surviving Corporation
|
A-2
|
Takeover Statute
|
A-64
|
Tax Return
|
A-19
|
Taxes
|
A-19
|
to the knowledge of Parent
|
A-66
|
to the knowledge of the Company
|
A-66
|
Trade Secrets
|
A-64
|
Trademarks
|
A-64
|
Transaction Expenses
|
A-64
|
Transactions
|
A-65
|
Uncertificated Shares
|
A-5
|
Voting Agreement
|
A-2
|
WARN Act
|
A-27
|
willful and material breach
|
A-56
|
|
(A)
|
each Company Option for which, as of the Effective Time, the Merger Consideration exceeds the exercise price per Share shall be canceled immediately following the Effective Time and, in exchange therefor, the Company shall pay to each former holder of such Company Option as soon as practicable, but in no event later than fifteen (15) Business Days following the Effective Time, an amount in cash (without interest, and subject to deduction for any required withholding Tax) equal to the product of (1) the excess, if any, of the Merger Consideration over the exercise price per Share under such Company Option and (2) the number of shares of Company Common Stock subject to such Company Option; and
|
|
(B)
|
each Company Option that is outstanding immediately prior to the Effective Time for which, as of the Effective Time, the Merger Consideration does not exceed the exercise price per Share shall be canceled without any payment being made in respect thereof.
|
|
if to the Company, to:
|
|
PokerTek, Inc.
|
|
1150 Crews Road, Suite F
|
|
Matthews, NC 28105
|
|
Attention: Mark D. Roberson, CEO
|
|
E-mail :
Mark.Roberson@pokertek.com
|
|
with a copy (which shall not constitute notice) to:
|
|
Morse, Zelnick, Rose & Lander LLP
|
|
825 Third Ave
|
|
New York, NY 10022
|
|
Attention: Kenneth S. Rose, Esq.
|
|
E-mail:
krose@mzrl.com
|
|
if to Parent or Merger Sub, to:
|
|
Multimedia Games, Inc.
|
|
206 Wild Basin Road South, Building A
|
|
Austin, Texas 78746
|
|
Attention: Patrick J. Ramsey, CEO
|
|
E-mail:
Patrick.Ramsey@mm-games.com
|
|
and
|
|
Attention: Todd F. McTavish, Esq., General Counsel
|
|
E-mail:
Todd.Mctavish@mm-games.com
|
|
with a copy (which shall not constitute notice) to:
|
|
Cadwalader, Wickersham & Taft LLP
|
|
One World Financial Center
|
|
New York, New York 10281
|
|
Attention: William P. Mills, Esq.
|
|
E-mail:
William.Mills@cwt.com
|
|
MULTIMEDIA GAMES, INC.
|
|
By:
/s/ Patrick J. Ramsey
|
|
Name: Patrick J. Ramsey
|
|
Title: CEO
|
|
23 ACQUISITION CO.
|
|
By:
/s/ Patrick J. Ramsey
|
|
Name: Patrick J. Ramsey
|
|
Title: CEO
|
|
POKERTEK, INC.
|
|
By:
/s/ Mark D. Roberson
|
|
Name: Mark D. Roberson
|
|
Title: CEO
|
Name and Address of Shareholder
(and controlled affiliates, if applicable)
|
Shares of Common Stock
|
Options
|
RSUs
|
Gehrig H. White
|
1,102,736
|
0
|
0
|
James T. Crawford
|
751,622
|
125,000
|
0
|
Lyle A. Berman
|
659,715
|
80,000
|
0
|
Joseph J. Lahti
|
447,919
|
20,000
|
0
|
Mark D. Roberson
|
211,648
|
191,000
|
300,000
|
Arthur L. Lomax
|
258,280
|
0
|
0
|
|
(1)
|
Affiliate. – A person that directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person or is a senior executive thereof. For purposes of G.S. 55-13-01(7), a person is deemed to be an affiliate of its senior executives.
|
|
(2)
|
Beneficial shareholder. – A person who is the beneficial owner of shares held in a voting trust or by a nominee on the beneficial owner's behalf.
|
|
(3)
|
Corporation. – The issuer of the shares held by a shareholder demanding appraisal and, for matters covered in G.S. 55-13-22 through G.S. 55-13-31, the term includes the surviving entity in a merger.
|
|
(4)
|
Expenses. – Reasonable expenses of every kind that are incurred in connection with a matter, including counsel fees.
|
|
(5)
|
Fair value. – The value of the corporation's shares (i) immediately before the effectuation of the corporate action as to which the shareholder asserts appraisal rights, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable, (ii) using customary and current valuation concepts and techniques generally employed for similar business in the context of the transaction requiring appraisal, and (iii) without discounting for lack of marketability or minority status except, if appropriate, for amendments to the articles pursuant to G.S. 55-13-02(a)(5).
|
|
(6)
|
Interest. – Interest from the effective date of the corporate action until the date of payment, at the rate of interest on judgments in this State on the effective date of the corporate action.
|
|
(7)
|
Interested transaction. – A corporate action described in G.S. 55-13-02(a), other than a merger pursuant to G.S. 55-11-04, involving an interested person and in which any of the shares or assets of the corporation are being acquired or converted. As used in this definition, the following definitions apply:
|
|
a.
|
Interested person. – A person, or an affiliate of a person, who at any time during the one-year period immediately preceding approval by the board of directors of the corporate action met any of the following conditions:
|
|
1.
|
Was the beneficial owner of twenty percent (20%) or more of the voting power of the corporation, other than as owner of excluded shares.
|
|
2.
|
Had the power, contractually or otherwise, other than as owner of excluded shares, to cause the appointment or election of twenty-five percent (25%) or more of the directors to the board of directors of the corporation.
|
|
3.
|
Was a senior executive or director of the corporation or a senior executive of any affiliate thereof, and that senior executive or director will receive, as a result of the corporate
|
|
action, a financial benefit not generally available to other shareholders as such, other than any of the following:
|
|
I.
|
Employment, consulting, retirement, or similar benefits established separately and not as part of or in contemplation of the corporate action.
|
|
II.
|
Employment, consulting, retirement, or similar benefits established in contemplation of, or as part of, the corporate action that are not more favorable than those existing before the corporate action or, if more favorable, that have been approved on behalf of the corporation in the same manner as is provided in G.S. 55-8-31(a)(1) and (c).
|
|
III.
|
In the case of a director of the corporation who will, in the corporate action, become a director of the acquiring entity, or one of its affiliates, rights and benefits as a director that are provided on the same basis as those afforded by the acquiring entity generally to other directors of the acquiring entity or such affiliate of the acquiring entity.
|
|
b.
|
Beneficial owner. – Any person who, directly or indirectly, through any contract, arrangement, or understanding, other than a revocable proxy, has or shares the power to vote, or to direct the voting of, shares. If a member of a national securities exchange is precluded by the rules of the exchange from voting without instruction on contested matters or matters that may affect substantially the rights or privileges of the holders of the securities to be voted, then that member of a national securities exchange shall not be deemed a "beneficial owner" of any securities held directly or indirectly by the member on behalf of another person solely because the member is the record holder of the securities. When two or more persons agree to act together for the purpose of voting their shares of the corporation, each member of the group formed thereby is deemed to have acquired beneficial ownership, as of the date of the agreement, of all voting shares of the corporation beneficially owned by any member of the group.
|
|
c.
|
Excluded shares. – Shares acquired pursuant to an offer for all shares having voting power if the offer was made within one year prior to the corporate action for consideration of the same kind and of a value equal to or less than that paid in connection with the corporate action.
|
|
(8)
|
Preferred shares. – A class or series of shares the holders of which have preference over any other class or series with respect to distributions.
|
|
(9)
|
Record shareholder. – The person in whose name shares are registered in the records of the corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with the corporation.
|
|
(10)
|
Senior executive. – The chief executive officer, chief operating officer, chief financial officer, or anyone in charge of a principal business unit or function.
|
|
(11)
|
Shareholder. – Both a record shareholder and a beneficial shareholder.
|
|
(1)
|
Consummation of a merger to which the corporation is a party if either (i) shareholder approval is required for the merger by G.S. 55-11-03 and the shareholder is entitled to vote on the merger, except that appraisal rights shall not be available to any shareholder of the corporation with respect to shares of any class or series that remain outstanding after consummation of the merger or (ii) the corporation is a subsidiary and the merger is governed by G.S. 55-11-04.
|
|
(2)
|
Consummation of a share exchange to which the corporation is a party as the corporation whose shares will be acquired if the shareholder is entitled to vote on the exchange, except that appraisal rights shall not be available to any shareholder of the corporation with respect to any class or series of shares of the corporation that is not exchanged.
|
|
(3)
|
Consummation of a disposition of assets pursuant to G.S. 55-12-02 if the shareholder is entitled to vote on the disposition.
|
|
(4)
|
An amendment of the articles of incorporation (i) with respect to a class or series of shares that reduces the number of shares of a class or series owned by the shareholder to a fraction of a share if the corporation has an obligation or right to repurchase the fractional share so created or (ii) changes the corporation into a nonprofit corporation or cooperative organization.
|
|
(5)
|
Any other amendment to the articles of incorporation, merger, share exchange, or disposition of assets to the extent provided by the articles of incorporation, bylaws, or a resolution of the board of directors.
|
|
(6)
|
Consummation of a conversion to a foreign corporation pursuant to Part 2 of Article 11A of this Chapter if the shareholder does not receive shares in the foreign corporation resulting from the conversion that (i) have terms as favorable to the shareholder in all material respects and (ii) represent at least the same percentage interest of the total voting rights of the outstanding shares of the corporation as the shares held by the shareholder before the conversion.
|
|
(7)
|
Consummation of a conversion of the corporation to nonprofit status pursuant to Part 2 of Article 11A of this Chapter.
|
|
(8)
|
Consummation of a conversion of the corporation to an unincorporated entity pursuant to Part 2 of Article 11A of this Chapter.
|
|
(1)
|
Appraisal rights shall not be available for the holders of shares of any class or series of shares that are any of the following:
|
|
a.
|
A covered security under section 18(b)(1)(A) or (B) of the Securities Act of 1933, as amended.
|
|
b.
|
Traded in an organized market and has at least 2,000 shareholders and a market value of at least twenty million dollars ($20,000,000)(exclusive of the value of shares held by the corporation's subsidiaries, senior executives, directors, and beneficial shareholders owning more than ten percent (10%) of such shares).
|
|
c.
|
Issued by an open-end management investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and may be redeemed at the option of the holder at net asset value.
|
|
(2)
|
The applicability of subdivision (1) of this subsection shall be determined as of (i) the record date fixed to determine the shareholders entitled to receive notice of, and to vote at, the meeting of shareholders to act upon the corporate action requiring appraisal rights or (ii) the day before the effective date of such corporate action if there is no meeting of shareholders.
|
|
(3)
|
Subdivision (1) of this subsection shall not be applicable and appraisal rights shall be available pursuant to subsection (a) of this section for the holders of any class or series of shares who are required by the terms of the corporate action requiring appraisal rights to accept for such shares anything other than cash or shares of any class or any series of shares of any corporation, or any other proprietary interest of any other entity, that satisfies the standards set forth in subdivision (1) of this subsection at the time the corporate action becomes effective.
|
|
(4)
|
Subdivision (1) of this subsection shall not be applicable and appraisal rights shall be available pursuant to subsection (a) of this section for the holders of any class or series of shares where the corporate action is an interested transaction.
|
|
(1)
|
Submits to the corporation the record shareholder's written consent to the assertion of rights no later than the date referred to in G.S. 55-13-22(b)(2)b.
|
|
(2)
|
Submits written consent under subdivision (1) of this subsection with respect to all shares of the class or series that are beneficially owned by the beneficial shareholder.
|
|
(1)
|
Written notice that appraisal rights are, are not, or may be available must be given to each record shareholder from whom a consent is solicited at the time consent of each shareholder is first solicited and, if the corporation has concluded that appraisal rights are or may be available, must be accompanied by a copy of this Article.
|
|
(2)
|
Written notice that appraisal rights are, are not, or may be available must be delivered together with the notice to the applicable shareholders required by subsections (d) and (e) of G.S. 55-7-04, may include the materials described in G.S. 55-13-22, and, if the corporation has concluded that appraisal rights are or may be available, must be accompanied by a copy of this Article.
|
|
(1)
|
The annual financial statements specified in G.S. 55-16-20(a) of the corporation that issued the shares to be appraised. The date of the financial statements shall not be more than 16 months before the date of the notice and shall comply with G.S. 55-16-20(b). If annual financial statements that meet the requirements of this subdivision are not reasonably available, then the corporation shall provide reasonably equivalent financial information.
|
|
(2)
|
The latest available quarterly financial statements of the corporation, if any.
|
|
(1)
|
Deliver to the corporation, before the vote is taken, written notice of the shareholder's intent to demand payment if the proposed action is effectuated.
|
|
(2)
|
Not vote, or cause or permit to be voted, any shares of any class or series in favor of the proposed action.
|
|
(1)
|
A form that specifies the first date of any announcement to shareholders, made prior to the date the corporate action became effective, of the principal terms of the proposed corporate action. If such an announcement was made, the form shall require a shareholder asserting appraisal rights to certify whether beneficial ownership of those shares for which appraisal rights are asserted was acquired before that date. The form shall require a shareholder asserting appraisal rights to certify that the shareholder did not vote for or consent to the transaction.
|
|
(2)
|
Disclosure of the following:
|
|
a.
|
Where the form must be sent and where certificates for certificated shares must be deposited, as well as the date by which those certificates must be deposited. The certificate deposit date must not be earlier than the date for receiving the required form under sub-subdivision b. of this subdivision.
|
|
b.
|
A date by which the corporation must receive the payment demand, which date may not be fewer than 40 nor more than 60 days after the date the appraisal notice required under subsection (a) of this section and form are sent. The form shall also state that the shareholder shall have waived the right to demand appraisal with respect to the shares unless the form is received by the corporation by the specified date.
|
|
c.
|
The corporation's estimate of the fair value of the shares.
|
|
d.
|
That, if requested in writing, the corporation will provide, to the shareholder so requesting, within 10 days after the date specified in sub-subdivision b. of this subdivision, the number of shareholders who return the forms by the specified date and the total number of shares owned by them.
|
|
e.
|
The date by which the notice to withdraw under G.S. 55-13-23 must be received, which date must be within 20 days after the date specified in sub-subdivision b. of this subdivision.
|
|
(3)
|
Be accompanied by a copy of this Article.
|
|
(1)
|
The following financial information:
|
|
a.
|
The annual financial statements specified in G.S. 55-16-20(a) of the corporation that issued the shares to be appraised. The date of the financial statements shall not be more than 16 months before the date of payment and shall comply with G.S. 55-16-20(b). If annual financial statements that meet the requirements of this sub-subdivision are not reasonably available, the corporation shall provide reasonably equivalent financial information.
|
|
b.
|
The latest available quarterly financial statements, if any.
|
|
(2)
|
A statement of the corporation's estimate of the fair value of the shares. The estimate must equal or exceed the corporation's estimate given pursuant to G.S. 55-13-22(b)(2)c.
|
|
(3)
|
A statement that the shareholders described in subsection (a) of this section have the right to demand further payment under G.S. 55-13-28 and that if a shareholder does not do so within the time period specified therein, then the shareholder shall be deemed to have accepted such payment in full satisfaction of the corporation's obligations under this Article.
|
|
(1)
|
The information required by G.S. 55-13-25(b)(1).
|
|
(2)
|
The corporation's estimate of fair value pursuant to G.S. 55-13-25(b)(2).
|
|
(3)
|
That they may accept the corporation's estimate of fair value, plus interest, in full satisfaction of their demands or demand appraisal under G.S. 55-13-28.
|
|
(4)
|
That those shareholders who wish to accept such offer must so notify the corporation of their acceptance of the corporation's offer within 30 days after receiving the offer.
|
|
(5)
|
That those shareholders who do not satisfy the requirements for demanding appraisal under G.S. 55-13-28 shall be deemed to have accepted the corporation's offer.
|
|
(1)
|
Against the corporation and in favor of any or all shareholders demanding appraisal if the court finds the corporation did not substantially comply with the requirements of G.S. 55-13-20, 55-13-22, 55-13-25, or 55-13-27.
|
|
(2)
|
Against either the corporation or a shareholder demanding appraisal, in favor of any other party, if the court finds that the party against whom expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this Article.
|
|
(1)
|
Was not authorized and approved in accordance with the applicable provisions of any of the following:
|
|
a.
|
Article 9, 9A, 10, 11, 11A, or 12 of this Chapter.
|
|
b.
|
The articles of incorporation or bylaws.
|
|
c.
|
The resolution of the board of directors authorizing the corporate action.
|
|
(2)
|
Was procured as a result of fraud, a material misrepresentation, or an omission of a material fact necessary to make statements made, in light of the circumstances in which they were made, not misleading.
|
|
(3)
|
Constitutes an interested transaction, unless it has been authorized, approved, or ratified by either (i) the board of directors or a committee of the board or (ii) the shareholders, in the same manner as is provided in G.S. 55-8-31(a)(1) and (c) or in G.S. 55-8-31(a)(2) and (d), as if the interested transaction were a director's conflict of interest transaction.
|
|
(4)
|
Was approved by less than unanimous consent of the voting shareholders pursuant to G.S. 55-7-04, provided that both of the following are true:
|
|
a.
|
The challenge to the corporate action is brought by a shareholder who did not consent and as to whom notice of the approval of the corporate action was not effective at least 10 days before the corporate action was effected.
|
|
b.
|
The proceeding challenging the corporate action is commenced within 10 days after notice of the approval of the corporate action is effective as to the shareholder bringing the proceeding.
|
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
PokerTek, Inc.
|
North Carolina
|
61-1455265
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
1150 Crews Road, Suite F, Matthews, North Carolina 28105
|
||
(Address of principal executive offices) (Zip Code)
|
(Registrant’s telephone number, including area code)
|
Title of each class
|
Name of each exchange on which registered
|
Common Stock, no par value
|
The NASDAQ Stock Market LLC
(NASDAQ Capital Market)
|
o
|
Large accelerated filer
|
o
|
Accelerated filer
|
|
o
|
Non-accelerated filer (do not check if a smaller reporting company)
|
x
|
Smaller reporting company
|
TABLE OF CONTENTS
|
||
Page
|
||
Cautionary Note Regarding Forward-Looking Statements
|
ii
|
|
PART I
|
||
Item 1.
|
Business
|
E-1
|
Item 1A.
|
Risk Factors
|
E-8
|
Item 1B.
|
Unresolved Staff Comments
|
E-15
|
Item 2.
|
Properties
|
E-15
|
Item 3.
|
Legal Proceedings
|
E-15
|
Item 4.
|
Mine Safety Disclosures
|
E-15
|
PART II
|
||
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
E-16
|
Item 6.
|
Selected Financial Data
|
E-16
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
E-17
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
E-25
|
Item 8.
|
Financial Statements and Supplementary Data
|
E-26
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
E-26
|
Item 9A.
|
Controls and Procedures
|
E-26
|
Item 9B.
|
Other Information
|
E-27
|
PART III
|
||
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
E-27
|
Item 11.
|
Executive Compensation
|
E-27
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
E-27
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
E-27
|
Item 14.
|
Principal Accounting Fees and Services
|
E-27
|
PART IV
|
||
Item 15.
|
Exhibits and Financial Statement Schedules
|
E-28
|
Signatures
|
E-54
|
|
·
|
pay that person any dividend or interest upon our voting securities;
|
|
·
|
allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; or
|
|
·
|
give remuneration in any form to that person.
|
|
·
|
pay to the unsuitable person any dividend, interest, or any distribution whatsoever
|
|
·
|
recognize any voting right by such unsuitable person in connection with such securities;
|
|
·
|
pay the unsuitable person remuneration in any form; or
|
|
·
|
make any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.
|
|
·
|
Nevada Gaming Control Board;
|
|
·
|
Société des Casinos du Québec Inc.;
|
|
·
|
Arkansas Racing Commission;
|
|
·
|
State of California Gambling Control Commission;
|
|
·
|
Indiana Gaming Commission;
|
|
·
|
Mississippi Gaming Commission;
|
|
·
|
Tuolumne Me-Wuk Tribal Gaming Agency;
|
|
·
|
Eastern Band of Cherokee Indians Tribal Gaming Commission;
|
|
·
|
Atlantic Lottery Corporation;
|
|
·
|
Alcohol and Gaming Commission of Ontario;
|
|
·
|
Victorian Commission for Gambling Regulation (Australia); and
|
|
·
|
Ho-Chunk Nation Gaming Commission
|
|
·
|
Conformité Européenne, a mandatory European marking for certain product groups to indicate conformity with the essential health and safety requirements set out in European Directives;
|
|
·
|
The U.S. Federal Communications Commission, which regulates radio emissions of electronic devices;
|
|
·
|
The RoHS Directive, which bans the placing on the European Union market of new electrical and electronic equipment containing more than agreed levels of certain hazardous materials;
|
|
·
|
Underwriters Laboratories, Inc., a product safety compliance testing laboratory; and
|
|
·
|
NOM (Norma Official Mexicana), a product safety compliance testing standard.
|
|
·
|
D512,446 (United States) – Design patent for an electronic poker table top
|
|
·
|
7,556,561 (United States) – A seat request button allowing players seated at an electronic poker table to request a different seat
|
|
·
|
7,618,321 (United States) – System and method for detecting collusion between poker players
|
|
·
|
7,758,411 (United States) – System and method for providing an electronic poker game
|
|
·
|
7,699,695 (United States) – Electronic card table and method with variable rake
|
|
·
|
7,794,324 (United States) – Electronic player interaction area with player customer interaction features (pre-selecting actions)
|
|
·
|
general economic conditions;
|
|
·
|
levels of disposable income of casino patrons;
|
|
·
|
downturn or loss in popularity of the gaming industry in general and table and slot games in particular;
|
|
·
|
the relative popularity of entertainment alternatives to casino gaming;
|
|
·
|
the growth and number of legalized gaming jurisdictions;
|
|
·
|
local conditions in key gaming markets, including seasonal and weather-related factors;
|
|
·
|
increased transportation costs;
|
|
·
|
acts of terrorism and anti-terrorism efforts;
|
|
·
|
changes or proposed changes to tax laws;
|
|
·
|
increases in gaming taxes or fees;
|
|
·
|
legal and regulatory issues affecting the development, operation and licensing of casinos;
|
|
·
|
the availability and cost of capital to construct, expand or renovate new and existing casinos;
|
|
·
|
the level of new casino construction and renovation schedules of existing casinos; and
|
|
·
|
competitive conditions in the gaming industry and in particular gaming markets, including the effect of such conditions on the pricing of our games and products.
|
|
·
|
increase our vulnerability to adverse economic and industry conditions, including interest rate fluctuations, because a portion of our borrowings are at variable rates of interest;
|
|
·
|
require us to dedicate future cash flows to the repayment of debt, reducing the availability of cash to fund working capital, capital expenditures or other general corporate purposes;
|
|
·
|
limit our flexibility in planning for, or reacting to, changes in our business and industry; and
|
|
·
|
limit our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants contained in our debt agreements.
|
Market Prices of Common Stock
|
||||||||||||||||
2013
|
2012
|
|||||||||||||||
Quarter ended
|
High
|
Low
|
High
|
Low
|
||||||||||||
March 31
|
$ | 1.62 | $ | 1.17 | $ | 1.04 | $ | 0.61 | ||||||||
June 30
|
1.49 | 1.10 | 1.08 | 0.61 | ||||||||||||
September 30
|
1.38 | 1.12 | 1.05 | 0.64 | ||||||||||||
December 31
|
1.21 | 0.96 | 1.40 | 0.70 |
Years Ended December 31,
|
||||||||||||||||||||
2013
(1)
|
2012
(1)
|
2011
(1)
|
2010
(1)
|
2009
(1)
|
||||||||||||||||
(in thousands, except per share amounts and gaming positions)
|
||||||||||||||||||||
Statement of operations data (continuing operations):
|
||||||||||||||||||||
Revenue
|
$ | 5,547 | $ | 5,177 | $ | 6,496 | $ | 5,899 | $ | 5,414 | ||||||||||
Gross profit
|
4,019 | 3,758 | 4,555 | 3,872 | 2,398 | |||||||||||||||
Operating loss
|
(553 | ) | (690 | ) | (1,497 | ) | (2,628 | ) | (4,864 | ) | ||||||||||
EBITDAS
(3)
|
586 | 423 | 456 | (126 | ) | (1,382 | ) | |||||||||||||
Statement of cash flows data (continuing operations):
|
||||||||||||||||||||
Net cash used in operating activities
|
$ | (136 | ) | $ | (843 | ) | $ | (882 | ) | $ | (634 | ) | $ | (2,438 | ) | |||||
Net cash provided by (used in) investing activities
|
(10 | ) | (1 | ) | (19 | ) | (3 | ) | 3,887 | |||||||||||
Net cash provided by (used in) financing activities
|
325 | 405 | 817 | 491 | (2,389 | ) | ||||||||||||||
Loss per common share:
|
||||||||||||||||||||
Net loss per common share from continuing
|
$ | (0.07 | ) | $ | (0.11 | ) | $ | (0.24 | ) | $ | (0.48 | ) | $ | (1.10 | ) | |||||
operations - basic and diluted
|
||||||||||||||||||||
Net loss per common share - basic and diluted
|
$ | (0.07 | ) | $ | (0.10 | ) | $ | (0.27 | ) | $ | (0.69 | ) | $ | (1.19 | ) | |||||
Weighted average common shares outstanding
(2)
|
9,161 | 7,974 | 6,784 | 5,888 | 4,787 | |||||||||||||||
Balance sheet data (at end of period from continuing
|
||||||||||||||||||||
operations):
|
||||||||||||||||||||
Current assets
|
$ | 2,285 | $ | 2,440 | $ | 3,335 | $ | 3,314 | $ | 5,230 | ||||||||||
Total assets
|
4,078 | 4,332 | 4,702 | 6,052 | 8,283 | |||||||||||||||
Current liabilities
|
645 | 946 | 1,198 | 1,959 | 1,970 | |||||||||||||||
Total liabilities
|
982 | 1,406 | 2,166 | 3,246 | 2,783 | |||||||||||||||
Shareholders' equity
|
3,096 | 2,855 | 2,536 | 2,806 | 5,500 | |||||||||||||||
Gaming positions:
|
||||||||||||||||||||
PokerPro
|
2,170 | 2,160 | 1,944 | 2,514 | 2,044 | |||||||||||||||
ProCore
|
102 | 150 | 84 | - | - | |||||||||||||||
Total
|
2,272 | 2,310 | 2,028 | 2,514 | 2,044 |
·
|
During fiscal 2010, we exited our amusement business and our Heads-Up Challenge product. As such, we report our amusement business as a discontinued operation for all periods presented.
|
·
|
On February 25, 2011, we completed a 2.5-to-1 reverse stock split. All share amounts have been restated to reflect the reverse stock split.
|
·
|
In addition to disclosing financial results prepared in accordance with GAAP, we disclose information regarding EBITDAS, which differs from the term EBITDA as it is commonly used. In addition to adjusting net loss to exclude taxes, interest, and depreciation and amortization, EBITDAS also excludes share-based compensation expense. EBITDA and EBITDAS are not measures of performance defined in accordance with GAAP. However, EBITDAS is used internally by our management and by our lenders in evaluating our operating performance. Accordingly, management believes that disclosure of this metric offers investors, lenders and other stakeholders with an additional view of our operations that, when coupled with the GAAP results, provides a more complete understanding of our financial results. EBITDAS should not be considered as an alternative to net loss or to net cash used in operating activities as a measure of operating results or of liquidity. It may not be comparable to similarly titled measures used by other companies, and it excludes financial information that some may consider important in evaluating our performance. A reconciliation of GAAP net loss from continuing operations to EBITDAS is as follows:
|
Years Ended December 31,
|
||||||||||||||||||||
(in thousands)
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
EBITDAS Reconciliation
|
||||||||||||||||||||
Net loss from continuing operations
|
$ | (634 | ) | $ | (846 | ) | $ | (1,642 | ) | $ | (2,815 | ) | $ | (5,260 | ) | |||||
Interest expense, net
|
38 | 69 | 94 | 132 | 288 | |||||||||||||||
Income tax provision
|
42 | 87 | 51 | 56 | 108 | |||||||||||||||
Other taxes
|
67 | 9 | 22 | 37 | 8 | |||||||||||||||
Depreciation and amortization
|
772 | 752 | 1,245 | 1,807 | 2,729 | |||||||||||||||
Stock-based compensation expense
|
301 | 352 | 686 | 657 | 745 | |||||||||||||||
EBITDAS
|
$ | 586 | $ | 423 | $ | 456 | $ | (126 | ) | $ | 1,382 |
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
Change
|
||||||||||
Revenue
|
||||||||||||
License and service fees
|
$ | 4,850,375 | $ | 4,367,132 | 11.1 | % | ||||||
Sales of systems and equipment
|
696,320 | 810,147 | (14.1 | %) | ||||||||
Total revenue
|
5,546,695 | 5,177,279 | 7.1 | % | ||||||||
Gross profit
|
4,018,955 | 3,757,928 | 6.9 | % | ||||||||
Percentage of revenue
|
72.5 | % | 72.6 | % | ||||||||
Operating expenses
|
4,572,196 | 4,448,060 | 2.8 | % | ||||||||
Interest expense, net
|
38,191 | 69,351 | (44.9 | %) | ||||||||
Income tax provision
|
42,310 | 86,908 | (51.3 | %) | ||||||||
Net loss from continuing operations
|
(633,742 | ) | (846,391 | ) | 25.1 | % | ||||||
Net income from discontinued operations
|
535 | 52,263 | (99.0 | %) | ||||||||
Net loss
|
$ | (633,207 | ) | $ | (794,128 | ) | 20.3 | % |
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
Change
|
||||||||||
Continuing Operations:
|
||||||||||||
Net cash (used in) operating activities
|
$ | (135,898 | ) | $ | (842,870 | ) | $ | 706,972 | ||||
Net cash used in investing activities
|
(10,190 | ) | (1,378 | ) | (8,812 | ) | ||||||
Net cash provided by financing activities
|
325,329 | 405,049 | (79,720 | ) | ||||||||
Net cash provided by (used in) continuing operations
|
179,241 | (439,199 | ) | 618,440 | ||||||||
Net cash provided by operating activities of discontinued operations
|
535 | 68,727 | $ | (68,192 | ) | |||||||
Net increase in cash and cash equivalents
|
179,776 | (370,472 | ) | |||||||||
Cash and cash equivalents, beginning of period
|
235,757 | 606,229 | ||||||||||
Cash and cash equivalents, end of period
|
$ | 415,533 | $ | 235,757 | ||||||||
|
·
|
20,000 with an exercise price of $2.50 and an expiration date of March 31, 2015 issued in connection with a private placement in May 2010; and
|
|
·
|
40,000 with an exercise price of $2.75 and an expiration date of December 29, 2015 issued in connection with the LPC transaction.
|
|
(i)
|
Beginning February 1, 2013 and the first day of each calendar month thereafter until January 1, 2017, we make monthly payments of interest and principal in the amount of $7,465.51, the amount required to fully amortize the remaining principal balance and the accrued interest thereon over 48 months. In the event of a prepayment, the monthly amount would be recalculated.
|
|
(ii)
|
The remaining principal balance of the Founders’ Loan and all accrued but unpaid interest thereon is finally due and payable on December 31, 2016.
|
|
·
|
the pace of growth in our recurring-revenue gaming business, the related investments in inventory and level of spending on development and regulatory efforts;
|
|
·
|
the level of investment in development and approval of new products, entry into new markets, and investments in regulatory approvals;
|
|
·
|
our ability to control growth of operating expenses as we grow the business, expand with new products in new markets;
|
|
·
|
our ability to negotiate and maintain favorable payment terms with our customers and vendors;
|
|
·
|
our ability to access the capital markets and maintain availability under our credit line;
|
|
·
|
demand for our products, and the ability of our customers to pay us on a timely basis; and
|
|
·
|
general economic conditions as well as political events and legal and regulatory changes.
|
Total
|
Less than
1 year
|
1 - 3 years
|
3 - 5 years
|
More than
5 years
|
||||||||||||||||
Debt obligations
(1)
|
$ | 240,429 | $ | 70,822 | $ | 169,607 | $ | - | $ | - | ||||||||||
Operating lease obligations
(2)
|
360,000 | 135,000 | 225,000 | - | - | |||||||||||||||
Purchase obligations
(3)
|
475,587 | 475,587 | - | - | - | |||||||||||||||
Other long-term liabilities
(4)
|
323,598 | 156,075 | 167,523 | - | - | |||||||||||||||
Total
|
$ | 1,399,614 | $ | 837,484 | $ | 562,130 | $ | - | $ | - | ||||||||||
|
(1)
|
Represents the outstanding principal amount and interest on the Founders’ Loan.
|
|
(2)
|
Represents operating lease agreements for office and storage facilities and office equipment.
|
|
(3)
|
Represents open purchase orders with our vendors.
|
|
(4)
|
Represents purchase of gaming inventory from Aristocrat International Pty. Limited and its Affiliates (“Aristocrat”), our former international distribution agent.
|
|
·
|
persuasive evidence of an arrangement exists
|
|
·
|
delivery has occurred
|
|
·
|
the customer’s price is fixed and determinable
|
|
·
|
collectability is reasonably assured.
|
|
·
|
Vendor specific objective evidence (“VSOE”).
When available, VSOE must be used to determine the selling price of a deliverable. We have not been able to establish VSOE for its deliverables as we do not sell our products separately regularly and/or have only a limited sales history.
|
|
·
|
Third-party evidence (“TPE”).
When VSOE is not available, we then determine whether TPE is available. TPE is determined based on competitor prices for similar deliverables when sold separately. We are unable to reliably determine and verify the pricing of similar competitor products on a stand-alone basis and have not been able to establish TPE for its deliverables.
|
|
·
|
Best estimate of selling price (
“
BESP
”
).
When TPE is not available, then the BESP is used. As we have not established VSOE or TPE for our deliverables, it uses BESP in its allocation of the arrangement consideration for contracts.
|
|
·
|
Financial Statements
|
|
·
|
Supplementary Data
|
2013
|
||||||||||||||||
Q1 | Q2 | Q3 | Q4 | |||||||||||||
Revenue
|
||||||||||||||||
License and service fees
|
$ | 1,360,670 | $ | 1,225,353 | $ | 1,129,246 | $ | 1,135,106 | ||||||||
Sales of systems and equipment
|
30,451 | 378,870 | 13,635 | 273,364 | ||||||||||||
Total revenue
|
1,391,121 | 1,604,223 | 1,142,881 | 1,408,470 | ||||||||||||
Cost of revenue
|
353,549 | 365,909 | 313,149 | 495,133 | ||||||||||||
Gross profit
|
1,037,572 | 1,238,314 | 829,732 | 913,337 | ||||||||||||
Operating expenses
|
1,188,308 | 1,268,328 | 1,086,748 | 1,028,812 | ||||||||||||
Net loss from continuing operations before interest and income taxes
|
(150,736 | ) | (30,014 | ) | (257,016 | ) | (115,475 | ) | ||||||||
Interest expense, net
|
(10,543 | ) | (9,470 | ) | (9,204 | ) | (8,974 | ) | ||||||||
Income tax provision
|
(34,081 | ) | (11,939 | ) | - | 3,710 | ||||||||||
Net loss from continuing operations
|
(195,360 | ) | (51,423 | ) | (266,220 | ) | (120,739 | ) | ||||||||
Income (loss) from discontinued operations
|
535 | - | - | - | ||||||||||||
Net loss
|
$ | (194,825 | ) | $ | (51,423 | ) | $ | (266,220 | ) | $ | (120,739 | ) | ||||
Net loss from continuing operations per common share - basic and diluted
|
$ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | ||||
Net loss from discontinued operations per common share - basic and diluted
|
- | - | - | - | ||||||||||||
Net loss per common share - basic and diluted
|
(0.02 | ) | (0.01 | ) | (0.03 | ) | (0.01 | ) | ||||||||
Weighted average common shares outstanding - basic and diluted
|
8,491,315 | 9,227,808 | 9,306,222 | 9,160,624 | ||||||||||||
2012 | ||||||||||||||||
Q1 | Q2 | Q3 | Q4 | |||||||||||||
Revenue
|
||||||||||||||||
License and service fees
|
$ | 1,083,414 | $ | 906,929 | $ | 1,097,641 | $ | 1,279,148 | ||||||||
Sales of systems and equipment
|
594,523 | 134,654 | 16,537 | 64,433 | ||||||||||||
Total revenue
|
1,677,937 | 1,041,583 | 1,114,178 | 1,343,581 | ||||||||||||
Cost of revenue
|
385,979 | 301,376 | 324,816 | 407,180 | ||||||||||||
Gross profit
|
1,291,958 | 740,207 | 789,362 | 936,401 | ||||||||||||
Operating expenses
|
1,204,999 | 1,114,746 | 1,045,497 | 1,082,818 | ||||||||||||
Net loss from continuing operations before income taxes
|
86,959 | (374,539 | ) | (256,135 | ) | (146,417 | ) | |||||||||
Interest expense, net
|
(20,855 | ) | (19,810 | ) | (17,752 | ) | (10,934 | ) | ||||||||
Income tax provision
|
(6,727 | ) | (714 | ) | (52,353 | ) | (27,114 | ) | ||||||||
Net loss from continuing operations
|
59,377 | (395,063 | ) | (326,240 | ) | (184,465 | ) | |||||||||
Income (loss) from discontinued operations
|
10,522 | 44,345 | (4,754 | ) | 2,150 | |||||||||||
Net loss
|
$ | 69,899 | $ | (350,718 | ) | $ | (330,994 | ) | $ | (182,315 | ) | |||||
Net loss from continuing operations per common share - basic and diluted
|
$ | 0.01 | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.02 | ) | |||||
Net loss from discontinued operations per common share - basic and diluted
|
0.00 | 0.01 | (0.00 | ) | 0.00 | |||||||||||
Net loss per common share - basic and diluted
|
0.01 | (0.05 | ) | (0.04 | ) | (0.02 | ) | |||||||||
Weighted average common shares outstanding - basic and diluted
|
7,564,104 | 7,563,120 | 8,130,413 | 8,627,770 |
|
·
|
Report of Independent Registered Public Accounting Firm;
|
|
·
|
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012;
|
|
·
|
Consolidated Balance Sheets as of December 31, 2013 and 2012;
|
|
·
|
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013 and 2012;
|
|
·
|
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012; and
|
|
·
|
Notes to Consolidated Financial Statements.
|
|
·
|
Valuation and Qualifying Accounts and Reserves
|
Page
|
|
Report of Independent Registered Public Accounting Firm
|
30
|
|
|
Consolidated Balance Sheets as of December 31, 2013 and 2012
|
31
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012 |
32
|
|
|
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013 and 2012
|
33
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012
|
34
|
|
|
Notes to Consolidated Financial Statements
|
35
|
|
|
Consolidated Financial Statement Schedules:
|
|
II. Valuation and Qualifying Accounts and Reserves
|
53
|
|
·
persuasive evidence of an arrangement exists
|
|
·
delivery has occurred
|
|
·
the customer
’
s price is fixed and determinable; and
|
|
·
collectability is reasonably assured.
|
|
·
|
Vendor specific objective evidence (
“
VSOE
”
).
When available, VSOE must be used to determine the selling price of a deliverable. The Company has not been able to establish VSOE for its deliverables as it does not sell its products separately regularly and/or has only a limited sales history.
|
|
·
|
Third-party evidence (
“
TPE
”
).
When VSOE is not available, the Company then determines whether TPE is available. TPE is determined based on competitor prices for similar deliverables when sold separately. The Company is unable to reliably determine and verify the pricing of similar competitor products on a stand-alone basis and has not been able to establish TPE for its deliverables.
|
|
·
|
Best estimate of selling price (
“
BESP
”
).
When TPE is not available, then the BESP is used. AS the Company has not established VSOE or TPE for its deliverables, it uses BESP in its allocation of the arrangement consideration for contracts.
|
|
·
|
Stock options to purchase 724,703 shares of common stock as of both December 31, 2013 and December 31, 2012;
|
|
·
|
253,312 and 356,000 restricted stock units as of December 31, 2013 and December 31, 2012, respectively; and
|
|
·
|
60,000 common stock purchase warrants as of both December 31, 2013 and December 31, 2012.
|
|
·
|
the level of investment in development and approval of new products, entry into new markets, and investments in regulatory approvals;
|
|
·
|
its ability to control growth of operating expenses as it grows the business and expands with new products in new markets;
|
|
·
|
its ability to negotiate and maintain favorable payment terms with customers and vendors;
|
|
·
|
its ability to access the capital markets and maintain availability under its credit line;
|
|
·
|
demand for its products, and the ability of its customers to pay on a timely basis; and
|
|
·
|
general economic conditions as well as political events and legal and regulatory changes.
|
Years Ended
|
||||||||
December 31,
|
||||||||
2013
|
2012
|
|||||||
Revenue
|
$ | 535 | $ | 151,555 | ||||
Cost of revenue
|
- | 88,312 | ||||||
Gross profit
|
535 | 63,243 | ||||||
Operating expenses
|
- | 10,980 | ||||||
Net income from discontinued operations
|
$ | 535 | $ | 52,263 |
December 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Accounts receivable
|
$ | 910,920 | $ | 980,438 | ||||
Allowance for doubtful accounts
|
(116,971 | ) | (185,669 | ) | ||||
Accounts receivable, net
|
$ | 793,949 | $ | 794,769 |
December 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Raw materials and components
|
$ | 1,182,150 | $ | 1,227,914 | ||||
Gaming systems in process
|
331,536 | 193,515 | ||||||
Finished goods
|
116,114 | 100,060 | ||||||
Reserve
|
(215,099 | ) | (178,539 | ) | ||||
Inventory, net
|
$ | 1,414,701 | $ | 1,342,950 |
December 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Prepaid expenses
|
$ | 62,924 | $ | 37,280 | ||||
Other
|
27,390 | 29,708 | ||||||
Prepaid expenses and other assets
|
$ | 90,314 | $ | 66,988 | ||||
Deferred licensing fees, net
|
$ | 60,560 | $ | 121,318 | ||||
Other
|
50,180 | 50,180 | ||||||
Other assets
|
$ | 110,740 | $ | 171,498 | ||||
December 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Gaming systems
|
$ | 6,716,864 | $ | 7,210,226 | ||||
Less: accumulated depreciation
|
(5,491,933 | ) | (5,517,175 | ) | ||||
Gaming systems, net
|
$ | 1,224,931 | $ | 1,693,051 |
December 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Equipment
|
$ | 462,404 | $ | 458,094 | ||||
Leasehold improvements
|
208,387 | 202,508 | ||||||
Capitalized software
|
157,067 | 157,067 | ||||||
827,858 | 817,669 | |||||||
Less: accumulated depreciation
|
(800,134 | ) | (790,702 | ) | ||||
Property and equipment, net
|
$ | 27,724 | $ | 26,967 |
December,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Accrued legal settlement
|
$ | - | $ | 175,000 | ||||
Inventory received, not invoiced
|
156,075 | 220,670 | ||||||
Other liabilities and customer deposits
|
154,051 | 173,734 | ||||||
Accrued liabilities
|
$ | 310,126 | $ | 569,404 |
December 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
SVB Credit Facility
|
$ | - | $ | - | ||||
Founders' Loan
|
240,429 | 300,000 | ||||||
Total debt
|
240,429 | 300,000 | ||||||
Current portion of debt
|
70,822 | 59,571 | ||||||
Long-term portion of debt
|
$ | 169,607 | $ | 240,429 |
|
(i)
|
Beginning February 1, 2013 and the first day of each calendar month thereafter until January 1, 2017, the Company will make monthly payments of interest and principal in the amount of $7,465.51, the amount required to fully amortize the remaining principal balance and the accrued interest thereon over 48 months. In the event of a prepayment, the monthly amount would be recalculated.
|
|
(ii)
|
The remaining principal balance of the note and all accrued but unpaid interest thereon is finally due and payable on December 31, 2016.
|
|
·
|
20,000 common stock warrants at an exercise price of $2.50 with an expiration date of March 31, 2015 issued in connection with a private placement in May 2010; and
|
|
·
|
40,000 common stock warrants at an exercise price of $2.75 with an expiration date of December 29, 2015 issued in connection with the LPC transaction.
|
2013
|
2012
|
||||
Expected Volatility
|
94% - 97% | 95% - 97 | |||
Expected Dividends
|
0 | 0 | |||
Expected Term
|
6 yrs
|
6 yrs
|
|||
Risk-free Rate
|
0.82% - 1.60% | 0.67% - 1.02 |
Weighted Average
|
||||||||||||||||
Shares
|
Exercise Price
|
Remaining Contractual Term
|
Aggregate Instrinsic Value
|
|||||||||||||
Stock Options
|
||||||||||||||||
Outstanding at December 31, 2012
|
724,720 | $ | 4.68 | |||||||||||||
Granted
|
- | - | ||||||||||||||
Exercised
|
- | |||||||||||||||
Forfeited
|
- | - | ||||||||||||||
Expired
|
- | - | ||||||||||||||
Outstanding at December 31, 2013
|
724,720 | $ | 4.68 | 5.5 | $ | (2,696,100 | ) | |||||||||
Exercisable at December 31, 2013
|
701,996 | $ | 4.43 | 5.5 | $ | (2,436,600 | ) |
Shares
|
Weighted Average Grant Date Fair Value
|
|||||||
Balance at December 31, 2012
|
70,777 | $ | 1.04 | |||||
Granted
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Vested
|
(48,054 | ) | 1.15 | |||||
Balance at December 31, 2013
|
22,723 | $ | 0.73 |
Weighted Average
|
|||||||||
Restricted Stock
|
Shares
|
Remaining Contractual Term
|
Grant Date Fair Value
|
||||||
Nonvested at December 31, 2012
|
125,000 | $ | 106,250 | ||||||
Granted
|
- | - | |||||||
Vested
|
(125,000 | ) | (106,250 | ) | |||||
Forfeited
|
- | - | |||||||
Nonvested at December 31, 2013
|
- |
-
|
$ | - |
Weighted Average
|
|||||||||
Restricted Stock Units (RSU's)
|
Shares
|
Remaining Contractual Term
|
Grant Date Fair Value
|
||||||
Nonvested at December 31, 2012
|
356,000 | $ | 267,000 | ||||||
Granted
|
85,000 | 63,750 | |||||||
Vested
|
(187,688 | ) | (140,766 | ) | |||||
Forfeited
|
- | - | |||||||
Nonvested at December 31, 2013
|
253,312 |
0.8
|
$ | 189,984 |
2013
|
2012
|
|||||||
Current tax expense:
|
||||||||
Federal
|
$ | - | $ | - | ||||
State
|
- | - | ||||||
Foreign
|
42,310 | 86,908 | ||||||
42,310 | 86,908 | |||||||
Deferred tax expense (benefit):
|
||||||||
Federal
|
- | - | ||||||
State
|
- | - | ||||||
Foreign
|
- | - | ||||||
- | - | |||||||
Total income tax expense (benefit):
|
||||||||
Federal
|
- | - | ||||||
State
|
- | - | ||||||
Foreign
|
42,310 | 86,908 | ||||||
$ | 42,310 | $ | 86,908 |
2013
|
2012
|
|||||||
Federal statutory income tax benefit
|
$ | (102,581 | ) | $ | (270,003 | ) | ||
Increases (reductions) in taxes due to:
|
||||||||
Nondeductible stock-based compensation
|
(48,404 | ) | 55,307 | |||||
State taxes, net of federal benefit
|
159,011 | (69,142 | ) | |||||
Change in valuation allowance
|
(393,282 | ) | (31,330 | ) | ||||
Imputed Interest Income
|
69,205 | |||||||
Other
|
131,882 | (55,718 | ) | |||||
Adjustment to NOL carryovers
|
184,169 | 370,886 | ||||||
Foreign income tax
|
42,310 | 86,908 | ||||||
Income tax expense
|
$ | 42,310 | $ | 86,908 |
2013
|
2012
|
|||||||
Deferred tax asset:
|
||||||||
Start-up costs capitalization
|
$ | 73,210 | $ | 85,592 | ||||
Loss carryforwards
|
11,200,108 | 11,583,968 | ||||||
Depreciation
|
1,516,881 | 1,626,090 | ||||||
Tax credit carryforwards
|
563,358 | 521,048 | ||||||
Share-based compensation expense
|
201,475 | 227,726 | ||||||
Accounts receivable
|
42,222 | 67,907 | ||||||
Inventory
|
761,323 | 646,970 | ||||||
Deferred costs
|
25,127 | |||||||
Other
|
3,176 | 10,029 | ||||||
14,386,880 | 14,769,330 | |||||||
Deferred tax liability:
|
||||||||
Prepaid expenses
|
(16,475 | ) | (5,643 | ) | ||||
(16,475 | ) | (5,643 | ) | |||||
14,370,405 | 14,763,687 | |||||||
Less valuation allowance
|
(14,370,405 | ) | (14,763,687 | ) | ||||
Net deferred tax asset
|
$ | - | $ | - |
2013
|
2012
|
|||||||
Unrecognized tax benefits at January 1
|
$ | 418,907 | $ | 418,907 | ||||
Gross increases—tax positions in prior period
|
- | - | ||||||
Gross decreases—tax positions in prior period
|
- | - | ||||||
Gross increases—tax positions in current period
|
- | - | ||||||
Gross decreases—tax positions in current period
|
- | - | ||||||
Settlements
|
- | - | ||||||
Unrecognized tax benefits at December 31
|
$ | 418,907 | $ | 418,907 |
2013
|
2012
|
|||||||
Revenue:
|
||||||||
United States
|
$ | 3,713,969 | $ | 3,968,865 | ||||
Other Americas
|
1,375,728 | 649,818 | ||||||
Europe
|
191,065 | 399,933 | ||||||
Other International
|
265,933 | 158,663 | ||||||
$ | 5,546,695 | $ | 5,177,279 | |||||
2013 | 2012 | |||||||
Long-lived assets, end of period:
|
||||||||
United States
|
$ | 450,714 | $ | 884,929 | ||||
Other America's
|
718,982 | 824,050 | ||||||
Europe
|
157,035 | 163,218 | ||||||
Other International
|
36,664 | 19,319 | ||||||
$ | 1,363,395 | $ | 1,891,516 |
Year Ending December 31,
|
Contractual Operating Lease Receipts
|
Contractual Operating Lease Payments
|
||||||
2014
|
$ | 19,200 | $ | 135,000 | ||||
2015
|
19,200 | 135,000 | ||||||
2016
|
11,200 | 90,000 | ||||||
$ | 49,600 | $ | 360,000 |
Balance at Beginning of Period
|
Additions Charged to Costs and Expenses
|
Charged to Other Accounts
|
Deductions (Chargeoffs)
|
Balance at End of Period
|
||||||||||||||||
ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
||||||||||||||||||||
Year ended December 31, 2013
|
$ | 185,669 | $ | 160,659 | $ | - | $ | 229,357 | $ | 116,971 | ||||||||||
Year ended December 31, 2012
|
$ | 146,183 | $ | 158,117 | $ | - | $ | 118,631 | $ | 185,669 | ||||||||||
INVENTORY RESERVE
|
||||||||||||||||||||
Year ended December 31, 2013
|
$ | 178,539 | $ | 48,576 | $ | - | $ | 12,016 | $ | 215,099 | ||||||||||
Year ended December 31, 2012
|
$ | 237,297 | $ | 41,424 | $ | - | $ | 100,182 | $ | 178,539 |
PokerTek, Inc.
|
|||
Date: March 21, 2014
|
By:
|
/s/ Mark D. Roberson
|
|
Mark D. Roberson
Chief Executive Officer
|
|||
/s/
|
Mark D. Roberson
|
Date:
|
March 21,2014
|
|||
Name:
|
Mark D. Roberson
|
|||||
Title:
|
Chief Executive Officer and Chief Financial Officer
(Principal Executive and Financial Officer)
|
|||||
/s/
|
Joseph J. Lahti
|
Date:
|
March 21, 2014
|
|||
Name:
|
Joseph J. Lahti
|
|||||
Title:
|
Chairman of the Board of Directors
|
|||||
/s/
|
Gehrig H. White
|
Date:
|
March 21, 2014
|
|||
Name:
|
Gehrig H. White
|
|||||
Title:
|
Vice Chairman of the Board of Directors
|
|||||
/s/
|
James T. Crawford, III
|
Date:
|
March 21, 2014
|
|||
Name:
|
James T. Crawford, III
|
|||||
Title:
|
President, Secretary and Director
|
|||||
/s/
|
Lyle A. Berman
|
Date:
|
March 21, 2014
|
|||
Name:
|
Lyle A. Berman
|
|||||
Title:
|
Director
|
|||||
/s/
|
Arthur L. Lomax
|
Date:
|
March 21, 2014
|
|||
Name:
|
Arthur L. Lomax
|
|||||
Title:
|
Director
|
EXHIBIT INDEX
|
Exhibit No.
|
Description
|
3.1
|
Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1 filed on August 4, 2005 (No. 333-127181)).
|
3.1(a) | Form of Articles of Amendment to the Restated Articles of Incorporation (incorporated by reference to Appendix A to our Definitive Schedule 14A filed on May 18, 2010). |
3.2
|
Bylaws (as amended and restated through July 29, 2005) (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form S-1 filed on August 4, 2005 (No. 333-127181)).
|
4.1
|
Specimen Common Stock certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to our Registration Statement on Form S-1 filed on October 5, 2005(No. 333-127181)).
|
10.1
|
Trademark Assignment Agreement among PokerTek, Inc., James Crawford and Gehrig H. White, effective July 13, 2005 (incorporated by reference to Exhibit 10.5 to our Registration Statement on Form S-1 filed on August 4, 2005 (No. 333-127181)).
|
10.2
|
PokerTek, Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 99 to our Registration Statement on Form S-8 filed on June 6, 2007 (No. 333-143552)).*
|
10.3
|
Form of Employee Incentive Stock Option Agreement for PokerTek, Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to our Form 10-Q for the quarterly period ending June 30, 2007 filed on August 14, 2007).*
|
10.4
|
Form of Employee Nonqualified Stock Option Agreement for PokerTek, Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to our Form 10-Q for the quarterly period ending June 30, 2007 filed on August 14, 2007).*
|
10.5
|
Form of Director Nonqualified Stock Option Agreement for PokerTek, Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to our Form 10-Q for the quarterly period ending June 30, 2007 filed on August 14, 2007).*
|
10.6
|
Form of Independent Contractor Nonqualified Stock Option Agreement for PokerTek, Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to our Form 10-Q for the quarterly period ending June 30, 2007 filed on August 14, 2007).*
|
10.7
|
Form of Restricted Stock Award Agreement for PokerTek, Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to our Form 10-Q for the quarterly period ending June 30, 2007 filed on August 14, 2007).*
|
10.8
|
PokerTek, Inc. 2005 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to our Registration Statement on Form S-1 filed on August 4, 2005 (No. 333-127181)).*
|
10.9
|
Form of Stock Option Agreement for PokerTek, Inc. 2005 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to our Registration Statement on Form S-1 filed on September 13, 2005 (No. 333-127181)).*
|
10.10
|
Form of Non-Employee Director Stock Option Agreement for PokerTek, Inc. 2005 Stock Incentive Plan (incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K filed on March 6, 2006).*
|
10.11
|
PokerTek, Inc. 2004 Stock Incentive Plan (as amended and restated through July 29, 2005) (incorporated by reference to Exhibit 10.8 to our Registration Statement on Form S-1 filed on August 4, 2005 (No. 333-127181)).*
|
10.12
|
Form of Stock Option Agreement for 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.9 to our Registration Statement on Form S-1 filed on August 4, 2005(No. 333-127181)).*
|
10.13
|
Note Purchase Agreement by and between PokerTek, Inc. and Lyle A. Berman, James T. Crawford, III, Arthur Lee Lomax and Gehrig H. “Lou” White, dated March 24, 2008 (incorporated by reference to Exhibit 10.4 to our Form 10-Q for the quarterly ended March 31, 2008 filed on May 15, 2008).
|
10.14
|
Loan and Security Agreement, effective July 25, 2008, between PokerTek, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to our Form 10-Q for the quarterly period ended June 30, 2008 filed August 14, 2008).
|
10.15
|
Export-Import Bank Loan and Security Agreement, dated July 25, 2008, between PokerTek, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit 10.2 to our Form 10-Q for the quarterly period ended June 30, 2008 filed August 14, 2008).
|
10.16
|
Borrower Agreement, dated July 25, 2008, made and entered into by PokerTek, Inc. in favor of the Export-Import Bank of the United States and Silicon Valley Bank (incorporated by reference to Exhibit 10.3 to our Form 10-Q for the quarterly period ended June 30, 2008 filed on August 14, 2008).
|
10.17
|
First Amendment to Loan and Security Agreement, dated December 23, 2008, between PokerTek, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to our Form 10-Q for the quarterly period ended March 31, 2009 filed on May 14, 2009).
|
10.18
|
First Amendment to Export-Import Bank Loan and Security Agreement, dated December 23, 2008, between PokerTek, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit 10.2 to our Form 10-Q for the quarterly period ended March 31, 2009 filed on May 14, 2009).
|
10.19
|
Second Amendment to Loan and Security Agreement, dated July 23, 2009, between PokerTek, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 to our Form 10-Q for the quarterly period ended June 30, 2009 filed on August 14, 2009).
|
10.20
|
Second Amendment to Export-Import Bank Loan and Security Agreement, dated July 23, 2009, between PokerTek, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit 10.2 to our Form 10-Q for the quarterly period ended June 30, 2009 filed on August 14, 2009).
|
10.21
|
Indemnification Agreement, dated July 15, 2009, between PokerTek, Inc. and Joseph J. Lahti (incorporated by reference to Exhibit 10.7 to our Form 10-Q for the quarterly period ended June 30, 2009 filed on August 14, 2009).
|
10.22
|
Indemnification Agreement, dated July 15, 2009, between PokerTek, Inc. and Arthur L. Lomax (incorporated by reference to Exhibit 10.8 to our Form 10-Q for the quarterly period ended June 30, 2009 filed on August 14, 2009).
|
10.23
|
Indemnification Agreement, dated July 15, 2009, between PokerTek, Inc. and James T. Crawford, III (incorporated by reference to Exhibit 10.9 to our Form 10-Q for the quarterly period ended June 30, 2009 filed on August 14, 2009).
|
10.24
|
Indemnification Agreement, dated July 15, 2009, between PokerTek, Inc. and Gehrig H. White (incorporated by reference to Exhibit 10.10 to our Form 10-Q for the quarterly period ended June 30, 2009 filed on August 14, 2009).
|
10.25
|
Indemnification Agreement, dated July 15, 2009, between PokerTek, Inc. and Mark D. Roberson (incorporated by reference to Exhibit 10.11 to our Form 10-Q for the quarterly period ended June 30, 2009 filed on August 14, 2009).
|
10.26
|
Amendment No. 1 to a $2.0 million Secured Promissory Note between PokerTek, Inc. and Lyle Berman, Gehrig H. White, James T. Crawford, III, and Arthur L. Lomax, effective as of July 9, 2009 (incorporated by reference to Exhibit 10.14 to our Form 10-Q for the quarterly period ended June 30, 2009 filed on August 14, 2009).
|
10.27
|
Amendment No. 2 to Secured Promissory Note and Amendment No. 1 to Note Purchase Agreement and Security Agreement, dated September 10, 2009 (incorporated by reference to Exhibit 10.2 to our Form 10-Q for the quarterly period ended September 30, 2009 filed on November 13, 2009).
|
10.28
|
PokerTek, Inc. 2009 Stock Incentive Plan (incorporated by reference to Appendix A to our Definitive Schedule 14A filed on August 7, 2009).*
|
10.29
|
Third Amendment to Loan and Security Agreement, dated August 27, 2010, between us and Silicon Valley Bank (incorporated by reference to Exhibit 10.2 from our Form 10-Q filed on November 15, 2010).
|
10.30
|
Amendment to the PokerTek, Inc. 2009 Stock Incentive Plan effective as of June 2, 2011 (incorporated by reference to Appendix A to our Definitive Schedule 14A filed on April 29, 2011).*
|
10.31
|
Loan Modification Agreement, dated June 2, 2011, by and among us and our founders (incorporated by reference to Exhibit 10.1 from our Form 8-K filed on June 7, 2011).
|
10.32
|
Employment letter, dated March 4, 2014, from us to Mark D. Roberson (incorporated by reference to Exhibit 10.2 from Current Report on Form 8-K filed on March 4, 2014).*
|
10.33
|
Employment letter, dated March 4, 2014, from us to James T. Crawford (incorporated by reference to Exhibit 10.3 from Current Report on Form 8-K filed on March 4, 2014).*
|
10.34
|
Office/Warehouse Lease Amendment No. 2 between us and Crawford White Investments, LLC dated August 11, 2011 (incorporated by reference to Exhibit 10.1 from our Form 10-Q filed on August 8, 2011).
|
10.35
|
Fifth Amendment to the Loan and Security Agreement between us and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 from our Form 8-K filed on November 14, 2011)
|
10.36
|
Sixth Amendment to the Loan and Security Agreement between us and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 from our Form 8-K filed on February 23, 2012).
|
10.37
|
Seventh Amendment to the Loan and Security Agreement between us and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 from our Form 8-K filed on March 7, 2013).
|
10.38
|
Eighth Amendment to the Loan and Security Agreement between us and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 from Current Report on Form 8-K filed on March 4, 2014).
|
10.39
|
Form of Employee Incentive Stock Option Agreement for the PokerTek, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.38 from our Form 10-K for the year ended December 31, 2011 filed on March 27, 2012).*
|
10.40
|
Form of Employee Nonqualified Stock Option Agreement for the PokerTek, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.39 from our Form 10-K for the year ended December 31, 2011 filed on March 27, 2012).*
|
10.41
|
Form of Director Nonqualified Stock Option Agreement for the PokerTek, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.40 from our Form 10-K for the year ended December 31, 2011 filed on March 27, 2012).*
|
10.42
|
Form of Independent Contractor Nonqualified Stock Option Agreement for the PokerTek, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.41 from our Form 10-K for the year ended December 31, 2011 filed on March 27, 2012).*
|
10.43
|
Form of Restricted Stock Award Agreement for the PokerTek, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.42 from our Form 10-K for the year ended December 31, 2011 filed on March 27, 2012).*
|
10.44
|
Form of Loan Modification Agreement, dated as of July 23, 2012, by and among the Registrant and Gehrig White and Arthur Lomax (incorporated by reference to Exhibit 10.1 from our Form 8-K filed on July 27, 2012).
|
21
|
List of Subsidiaries (incorporated by reference to Exhibit 21 from our Form 10-K for the year ended December 31, 2011 filed on March 27, 2012).
|
23
|
Consent of Independent Registered Public Accounting Firm
|
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
XBRL Instance Document.
|
101.SCH
|
XBRL Taxonomy Extension Schema.
|
101.CAL
|
XBRL Taxonomy Calculation Linkbase.
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase.
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase.
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase.
|
*
|
Compensatory plan or arrangement or management contract
|
PokerTek, Inc.
|
North Carolina
|
61-1455265
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
1150 Crews Road, Suite F, Matthews, North Carolina 28105
|
||
(Address of principal executive offices) (Zip Code)
|
(704) 849-0860
|
(Registrant’s telephone number, including area code)
|
o |
Large accelerated filer
|
o |
Accelerated filer
|
|
o |
Non-accelerated filer (do not check if a smaller reporting company)
|
x |
Smaller reporting company
|
Page
|
||
PART I – FINANCIAL INFORMATION
|
||
Item 1.
|
Consolidated Financial Statements
|
F-1
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
F-14
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
F-
19
|
Item 4.
|
Controls and Procedures
|
F-19
|
PART II- OTHER INFORMATION | ||
Item 1A.
|
Risk Factors
|
F-20
|
Item 6.
|
Exhibits
|
F-
21
|
Signatures
|
F-
22
|
|
Exhibit Index
|
F-
23
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
AND OTHER COMPREHENSIVE LOSS
|
||||||||
(Unaudited)
|
||||||||
Three Months Ended March 31,
|
||||||||
2014
|
2013
|
|||||||
Revenue
|
||||||||
License and service fees
|
$ | 1,083,881 | $ | 1,360,670 | ||||
Sales of systems and equipment
|
30,701 | 30,451 | ||||||
Total revenue
|
1,114,582 | 1,391,121 | ||||||
Cost of revenue
|
271,503 | 353,549 | ||||||
Gross profit
|
843,079 | 1,037,572 | ||||||
Operating expenses:
|
||||||||
Selling, general and administrative
|
898,932 | 946,780 | ||||||
Research and development
|
157,950 | 168,427 | ||||||
Share-based compensation expense
|
61,446 | 70,778 | ||||||
Depreciation
|
2,416 | 2,323 | ||||||
Total operating expenses
|
1,120,744 | 1,188,308 | ||||||
Operating loss
|
(277,665 | ) | (150,736 | ) | ||||
Interest expense, net
|
8,258 | 10,543 | ||||||
Net loss from continuing operations before income taxes
|
(285,923 | ) | (161,279 | ) | ||||
Income tax provision
|
- | 34,081 | ||||||
Net loss from continuing operations
|
(285,923 | ) | (195,360 | ) | ||||
Income from discontinued operations
|
- | 535 | ||||||
Net loss
|
$ | (285,923 | ) | $ | (194,825 | ) | ||
Other comprehensive loss:
|
||||||||
Adjustments to net loss
|
- | - | ||||||
Comprehensive loss
|
$ | (285,923 | ) | $ | (194,825 | ) | ||
Net loss from continuing operations per common share - basic and diluted
|
$ | (0.03 | ) | $ | (0.02 | ) | ||
Net income (loss) from discontinued operations per common share - basic and diluted
|
- | - | ||||||
Net loss per common share - basic and diluted
|
$ | (0.03 | ) | $ | (0.02 | ) | ||
Weighted average common shares outstanding - basic and diluted
|
9,363,434 | 8,491,315 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
|
CONSOLIDATED BALANCE SHEETS
|
||||||||
(Unaudited)
|
||||||||
March 31, 2014
|
December 31, 2013
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 576,719 | $ | 415,533 | ||||
Accounts receivable, net
|
445,294 | 793,949 | ||||||
Inventory
|
825,473 | 869,631 | ||||||
Prepaid expenses and other assets
|
120,742 | 90,314 | ||||||
Total current assets
|
1,968,228 | 2,169,427 | ||||||
Long-term assets:
|
||||||||
Inventory
|
645,844 | 545,070 | ||||||
Gaming systems, net
|
1,087,422 | 1,224,931 | ||||||
Property and equipment, net
|
27,767 | 27,724 | ||||||
Other assets
|
116,080 | 110,740 | ||||||
Total long-term assets
|
1,877,113 | 1,908,465 | ||||||
Total assets
|
$ | 3,845,341 | $ | 4,077,892 | ||||
Liabilities and Shareholders' Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 208,593 | $ | 243,960 | ||||
Accrued liabilities
|
374,800 | 310,126 | ||||||
Deferred revenue
|
8,556 | 20,051 | ||||||
Long-term debt, current portion
|
72,427 | 70,822 | ||||||
Total current liabilities
|
664,376 | 644,959 | ||||||
Long-term liabilities:
|
||||||||
Long-term liability
|
158,752 | 167,523 | ||||||
Long-term debt
|
150,887 | 169,607 | ||||||
Total long-term liabilities
|
309,639 | 337,130 | ||||||
Total liabilities
|
974,015 | 982,089 | ||||||
Commitments and contingencies
|
||||||||
Shareholders' equity
|
||||||||
Preferred stock, no par value per share;
|
- | - | ||||||
authorized 5,000,000 none issued and outstanding
|
||||||||
Common stock, no par value per share; authorized 100,000,000
|
- | - | ||||||
shares, issued and outstanding 9,363,434 and 9,363,434 shares at
|
||||||||
March 31, 2014 and December 31, 2013, respectively
|
||||||||
Additional paid-in capital
|
50,417,354 | 50,355,908 | ||||||
Accumulated deficit
|
(47,546,028 | ) | (47,260,105 | ) | ||||
Accumulated other comprehensive loss, net
|
- | - | ||||||
Total shareholders' equity
|
2,871,326 | 3,095,803 | ||||||
Total liabilities and shareholders' equity
|
$ | 3,845,341 | $ | 4,077,892 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
|
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
|
||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||
Common Stock
|
Additional Paid-in Capital
|
Accumulated Deficit
|
Accumulated Other Comprehensive Income (Loss)
|
Total Shareholders' Equity
|
||||||||||||||||||||
Shares
|
Value
|
|||||||||||||||||||||||
Balance, December 31, 2013
|
9,363,434 | $ | - | $ | 50,355,908 | $ | (47,260,105 | ) | $ | - | $ | 3,095,803 | ||||||||||||
Issuances of common stock, net
|
- | - | - | - | - | - | ||||||||||||||||||
Share-based compensation, net
|
- | - | 61,446 | - | - | 61,446 | ||||||||||||||||||
Net loss
|
- | - | - | (285,923 | ) | - | (285,923 | ) | ||||||||||||||||
Balance, March 31, 2014
|
9,363,434 | $ | - | $ | 50,417,354 | $ | (47,546,028 | ) | $ | - | $ | 2,871,326 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(Unaudited)
|
||||||||
Three Months Ended March 31,
|
||||||||
2014
|
2013
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$ | (285,923 | ) | $ | (194,825 | ) | ||
Net income (loss) from discontinued operations
|
- | (535 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
158,869 | 199,419 | ||||||
Share-based compensation expense
|
61,446 | 70,778 | ||||||
Provision for doubtful accounts and other receivables
|
30,364 | 49,065 | ||||||
Changes in assets and liabilities:
|
||||||||
Accounts and other receivables
|
318,291 | 196,435 | ||||||
Prepaid expenses and other assets
|
(35,768 | ) | (60,957 | ) | ||||
Inventory
|
(56,616 | ) | 54,880 | |||||
Gaming systems
|
(18,944 | ) | (177,256 | ) | ||||
Accounts payable and accrued expenses
|
20,536 | 106,901 | ||||||
Deferred revenue
|
(11,495 | ) | 105,234 | |||||
Net cash provided by operating activities from continuing operations
|
180,760 | 349,139 | ||||||
Net cash provided by operating activities from discontinued operations
|
- | 535 | ||||||
Net cash used in operating activities
|
180,760 | 349,674 | ||||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
(2,459 | ) | - | |||||
Net cash used in investing activities
|
(2,459 | ) | - | |||||
Cash flows from financing activities:
|
||||||||
Proceeds from issuance of common stock, net of expenses
|
- | 473,800 | ||||||
Repayments of long-term debt
|
(17,115 | ) | (10,470 | ) | ||||
Net cash used in financing activities
|
(17,115 | ) | 463,330 | |||||
Net increase (decrease) in cash and cash equivalents
|
161,186 | 813,004 | ||||||
Cash and cash equivalents, beginning of year
|
415,533 | 235,757 | ||||||
Cash and cash equivalents, end of period
|
$ | 576,719 | $ | 1,048,761 | ||||
Supplemental Disclosure of Cash Flow Information
|
||||||||
Cash paid for:
|
||||||||
Interest
|
$ | 5,282 | $ | 17,361 | ||||
Income taxes
|
- | 33,291 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
|
|
·
|
the pace of growth in the Company’s recurring-revenue gaming business, the related investments in inventory and level of spending on development and regulatory efforts;
|
|
·
|
the level of investment in development and approval of new products, entry into new markets, and investments in regulatory approvals;
|
|
·
|
its ability to control growth of operating expenses as it grows the business and expands with new products in new markets;
|
|
·
|
its ability to negotiate and maintain favorable payment terms with customers and vendors;
|
|
·
|
its ability to access the capital markets and maintain availability under its credit line;
|
|
·
|
demand for its products, and the ability of its customers to pay on a timely basis; and
|
|
·
|
general economic conditions as well as political events and legal and regulatory changes.
|
Three Months Ended
|
||||||||
March 31,
|
||||||||
2014
|
2013
|
|||||||
Revenue
|
$ | - | $ | 535 | ||||
Cost of revenue
|
- | - | ||||||
Gross profit
|
- | 535 | ||||||
Operating expenses
|
- | - | ||||||
Net income from discontinued operations
|
$ | - | $ | 535 |
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Accounts receivable
|
$ | 592,629 | $ | 910,920 | ||||
Allowance for doubtful accounts
|
(147,335 | ) | (116,971 | ) | ||||
Accounts receivable, net
|
$ | 445,294 | $ | 793,949 |
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Raw materials and components
|
$ | 1,164,444 | $ | 1,182,150 | ||||
Gaming systems in process
|
297,274 | 331,536 | ||||||
Finished goods
|
225,239 | 116,114 | ||||||
Reserve
|
(215,640 | ) | (215,099 | ) | ||||
Inventory, net
|
$ | 1,471,317 | $ | 1,414,701 | ||||
Long-Term Inventory
|
645,844 | 545,070 | ||||||
Current Inventory
|
$ | 825,473 | $ | 869,631 |
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Prepaid expenses
|
$ | 89,741 | $ | 62,924 | ||||
Other
|
31,001 | 27,390 | ||||||
Prepaid expenses and other assets
|
$ | 120,742 | $ | 90,314 | ||||
Deferred licensing fees, net
|
$ | 65,900 | $ | 60,560 | ||||
Other
|
50,180 | 50,180 | ||||||
Other assets
|
$ | 116,080 | $ | 110,740 |
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Gaming systems
|
$ | 6,749,372 | $ | 6,716,864 | ||||
Less: accumulated depreciation
|
(5,661,950 | ) | (5,491,933 | ) | ||||
Gaming systems, net
|
$ | 1,087,422 | $ | 1,224,931 |
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Equipment
|
$ | 464,863 | $ | 462,404 | ||||
Leasehold improvements
|
208,387 | 208,387 | ||||||
Capitalized software
|
157,067 | 157,067 | ||||||
830,317 | 827,858 | |||||||
Less: accumulated depreciation
|
(802,550 | ) | (800,134 | ) | ||||
Property and equipment, net
|
$ | 27,767 | $ | 27,724 |
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Inventory received, not invoiced
|
164,846 | 156,075 | ||||||
Other liabilities and customer deposits
|
209,954 | 154,051 | ||||||
Accrued liabilities
|
$ | 374,800 | $ | 310,126 |
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
SVB Credit Facility
|
$ | - | $ | - | ||||
Founders' Loan
|
223,314 | 240,429 | ||||||
Total debt
|
223,314 | 240,429 | ||||||
Current portion of debt
|
72,427 | 70,822 | ||||||
Long-term portion of debt
|
$ | 150,887 | $ | 169,607 |
|
·
|
20,000 common stock warrants at an exercise price of $2.50 with an expiration date of March 31, 2015 issued in connection with a private placement in May 2010; and
|
|
·
|
40,000 common stock warrants at an exercise price of $2.75 with an expiration date of December 29, 2015 issued in connection with the LPC transaction.
|
March 31,
|
December 31,
|
||
2014
|
2013
|
||
Expected Volatility
|
93%
|
94% - 97%
|
|
Expected Dividends
|
0
|
0
|
|
Expected Term
|
6 yrs
|
6 yrs
|
|
Risk-free Rate
|
1.15%
|
0.82% - 1.60%
|
Weighted Average
|
||||||||||||||||
Shares
|
Exercise Price
|
Remaining Contractual Term
|
Aggregate Intrinsic Value
|
|||||||||||||
Stock Options
|
||||||||||||||||
Outstanding at December 31, 2013
|
724,720 | $ | 4.68 | |||||||||||||
Granted
|
- | - | ||||||||||||||
Exercised
|
- | |||||||||||||||
Forfeited
|
- | - | ||||||||||||||
Expired
|
- | - | ||||||||||||||
Outstanding at March 31, 2014
|
724,720 | $ | 4.68 | 5.3 | $ | (2,630,875 | ) | |||||||||
Exercisable at March 31, 2014
|
715,316 | $ | 4.37 | 5.3 | $ | (2,377,417 | ) |
Weighted Average
|
|||||||||
Restricted Stock Units (RSUs)
|
Shares
|
Remaining Contractual Term
|
Grant Date Fair Value
|
||||||
Nonvested at December 31, 2013
|
253,312 | $ | 189,984 | ||||||
Granted
|
300,000 | 345,000 | |||||||
Vested
|
- | ||||||||
Forfeited
|
- | ||||||||
Nonvested at March 31, 2014
|
553,312 |
4.2
|
$ | 534,984 |
For Three Months Ended March 31,
|
||||||||
2014
|
2013
|
|||||||
Revenue:
|
||||||||
United States
|
$ | 801,899 | $ | 991,707 | ||||
Other Americas
|
268,675 | 371,506 | ||||||
Europe
|
32,633 | 15,150 | ||||||
Other International
|
11,375 | 12,758 | ||||||
$ | 1,114,582 | $ | 1,391,121 | |||||
March 31, 2014
|
December 31, 2013
|
|||||||
Long-lived assets, end of period:
|
||||||||
United States
|
$ | 434,957 | $ | 450,714 | ||||
Other America's
|
611,979 | 718,982 | ||||||
Europe
|
145,899 | 157,035 | ||||||
Other International
|
38,434 | 36,664 | ||||||
$ | 1,231,269 | $ | 1,363,395 |
Three Months Ended March 31,
|
||||||||||||
2014
|
2013
|
Change
|
||||||||||
Revenue
|
||||||||||||
License and service fees
|
$ | 1,083,881 | $ | 1,360,670 | (20.3 | %) | ||||||
Sales of systems and equipment
|
30,701 | 30,451 | 0.8 | % | ||||||||
Total revenue
|
1,114,582 | 1,391,121 | (19.9 | %) | ||||||||
Gross profit
|
843,079 | 1,037,572 | (18.7 | %) | ||||||||
Percentage of revenue
|
75.6 | % | 74.6 | % | ||||||||
Operating expenses
|
1,120,744 | 1,188,308 | (5.7 | %) | ||||||||
Interest expense, net
|
8,258 | 10,543 | (21.7 | %) | ||||||||
Income tax provision
|
- | 34,081 | (100.0 | %) | ||||||||
Net loss from continuing operations
|
(285,923 | ) | (195,360 | ) | (46.4 | %) | ||||||
Net loss from discontinued operations
|
- | 535 | (100.0 | %) | ||||||||
Net loss
|
$ | (285,923 | ) | $ | (194,825 | ) | (46.8 | %) |
Three Months Ended March 31,
|
||||||||||||
2014
|
2013
|
Change
|
||||||||||
Continuing Operations:
|
||||||||||||
Net cash provided by operating activities
|
$ | 180,760 | $ | 349,139 | $ | (168,379 | ) | |||||
Net cash used in investing activities
|
(2,459 | ) | - | (2,459 | ) | |||||||
Net cash used in/provided by financing activities
|
(17,115 | ) | 463,330 | (480,445 | ) | |||||||
Net cash provided by continuing operations
|
161,186 | 812,469 | (651,283 | ) | ||||||||
Net cash provided by operating activities of discontinued operations
|
- | 535 | $ | (535 | ) | |||||||
Net increase in cash and cash equivalents
|
161,186 | 813,004 | ||||||||||
Cash and cash equivalents, beginning of period
|
415,533 | 235,757 | ||||||||||
Cash and cash equivalents, end of period
|
$ | 576,719 | $ | 1,048,761 |
|
·
|
the pace of growth in our recurring-revenue gaming business, the related investments in inventory and level of spending on development and regulatory efforts;
|
|
·
|
the level of investment in development and approval of new products, entry into new markets, and investments in regulatory approvals;
|
|
·
|
our ability to control growth of operating expenses as we grow the business, expand with new products in new markets;
|
|
·
|
our ability to negotiate and maintain favorable payment terms with our customers and vendors;
|
|
·
|
our ability to access the capital markets and maintain availability under our credit line;
|
|
·
|
demand for our products, and the ability of our customers to pay us on a timely basis; and
|
|
·
|
general economic conditions as well as political events and legal and regulatory changes.
|
Total
|
Less than
1 year
|
1 - 3 years
|
3 - 5 years
|
More than
5 years
|
||||||||||||||||
Debt obligations
(1)
|
$ | 223,314 | $ | 72,427 | $ | 150,887 | $ | - | $ | - | ||||||||||
Operating lease obligations
(2)
|
330,701 | 136,548 | 194,153 | - | - | |||||||||||||||
Purchase obligations
(3)
|
476,166 | 476,166 | - | - | - | |||||||||||||||
Other long-term liabilities
(4)
|
323,598 | 164,846 | 158,752 | - | - | |||||||||||||||
Total
|
$ | 1,353,779 | $ | 849,987 | $ | 503,792 | $ | - | $ | - | ||||||||||
(1) Represents the outstanding principal amount and interest on our Founders' Loan
|
||||||||||||||||||||
(2) Represents operating lease agreements for office and storage facilities and office equipment
|
||||||||||||||||||||
(3) Represents open purchase orders with our vendors
|
||||||||||||||||||||
(4) Represents purchase of gaming inventory from Aristocrat
|
|
·
|
the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement;
|
|
·
|
the inability to complete the Merger due to the failure to obtain shareholder approval or the failure to satisfy other conditions required for the consummation of the Merger;
|
|
·
|
failure or delay in consummation of the Merger for other reasons;
|
|
·
|
that the proposed transaction disrupts current plans and operations;
|
|
·
|
the effect of the announcement of the Merger on our customer relationships, operating results and business generally;
|
|
·
|
the diversion of our management’s attention from our ongoing business concerns;
|
|
·
|
the outcome of any legal proceedings that may be instituted against us and/or others relating to the Merger Agreement;
|
|
·
|
limitations placed on our ability to operate the business by the Merger Agreement; and
|
|
·
|
the amounts of the costs, fees, expenses and charges related to the Merger.
|
Exhibit No.
|
Description
|
|||||||||
10.1
|
Eighth Amendment to the Loan and Security Agreement, dated February 27, 2014, between the Registrant and Silicon Valley Bank (incorporated by reference to Exhibit 10.1 from our Form 8-K filed on March 4, 2014).
|
|||||||||
10.2**
|
Employment Agreement, dated March 4, 2014, between the Registrant and Mark Roberson (incorporated by reference to Exhibit 10.2 from our Form 8-K filed on March 4, 2014).**
|
|||||||||
10.3**
|
Employment Agreement, dated March 4, 2014, between the Registrant and James Crawford (incorporated by reference to Exhibit 10.3 from our Form 8-K filed on March 4, 2014).**
|
|||||||||
10.4**
|
April 22, 2014 Amendment to Employment Letter Dated March 4, 2014 between PokerTek, Inc. and Mark Roberson (incorporated by reference to Exhibit 10.45 from our Form 10-K/A for the year ended December 31, 2013 filed on April 29, 2014).**
|
|||||||||
10.5**
|
April 22, 2014 Amendment to Employment Letter Dated March 4, 2014 between PokerTek, Inc. and James Crawford (incorporated by reference to Exhibit 10.46 from our Form 10-K/A for the year ended December 31, 2013 filed on April 29, 2014).**
|
|||||||||
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|||||||||
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|||||||||
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|||||||||
101.INS
|
XBRL Instance Document*
|
|||||||||
101.SCH
|
XBRL Taxonomy Extension Schema*
|
|||||||||
101.CAL
|
XBRL Taxonomy Calculation Linkbase*
|
|||||||||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase*
|
|||||||||
101.LAB
|
XBRL Taxonomy Extension label Linkbase*
|
|||||||||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase*
|
|||||||||
*Filed herewith.
|
||||||||||
**This exhibit is a management contract or compensatory plan or arrangement.
|
POKERTEK, INC.
|
||
Date: May 15, 2014
|
||
/s/ Mark D. Roberson
|
||
Mark D. Roberson
|
||
Chief Executive Officer and Chief Financial Officer
|
||
(Principal Executive Officer and Principal Financial Officer)
|
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