Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. POKERTEK, INC. (1302177) 10-Q published on Aug 14, 2014 at 12:01 pm
Reporting Period: Jun 29, 2014
The Company believes that the Merger will also have a significant effect on its cash requirements during 2014 as it will incur additional legal, banking and other professional fees and merger related costs in addition to its planned expenditures. In order to fund its operation and merger-related costs through the closing of the Merger, in July 2014, the Company entered into the Note Agreement with MGAM, the Founders’ Loan Payment Deferral Agreement with Arthur L. Lomax and the Executive Salary Deferral Agreements with its chief executive officer and its president (see Note 10 “Debt,” Note 17 “Merger with Multimedia Games, Inc.” and Note 18 “Subsequent Events.”)
The Company believes that the Actions are without merit and that the defendants committed no breach of any duty, aided or abetted any breach or violated any federal securities laws or other laws in connection with the Proposed Transaction. Further, the Company believes no further disclosure was required to supplement the Definitive Proxy Statement under any applicable rule, statute, regulation or law. However, to eliminate the burden, expense and uncertainties inherent in all such litigation, on July 13, 2014, the defendants entered into a memorandum of understanding (the "Memorandum of Understanding") regarding settlement of the Consolidated Action. The Memorandum of Understanding outlines the terms of the parties' agreement in principle to settle and release all claims which were or could have been asserted in the Consolidated Action and the Federal Action. In consideration for such settlement and release, the parties to the Consolidated Action agreed that the Company would make certain supplemental disclosures to the Definitive Proxy Statement, and those disclosures were made in a Current Report on Form 8-K dated July 13, 2014. The Memorandum of Understanding contemplates that the parties will attempt in good faith to agree promptly upon a stipulation of settlement to be submitted to the assigned Judge of the North Carolina Business Court of the General Court of Justice, Superior Court Division, Mecklenburg County, North Carolina for approval at the earliest practicable time. The stipulation will be subject to customary conditions, including confirmatory discovery and approval by the Court, which will consider the fairness, reasonableness and adequacy of the settlement. The parties have also agreed to negotiate in good faith regarding the amount of attorneys’ fees, if any, to be paid to Plaintiffs’ counsel. Any amount of agreed attorneys’ fees in the stipulation is subject to court approval, and in the event there is no agreement on attorneys’ fees or Plaintiffs’ counsel seeks an award of fees in excess of the negotiated amount then the Company has reserved the right to object to the requested award of attorneys’ fees. Under the terms of the proposed settlement, following final approval by the Court, the Consolidated Action will be dismissed with prejudice. There can be no assurance that the parties will ultimately enter into the stipulation or that the Court will approve the settlement even if the parties were to enter into the stipulation. In such event, or if the Merger is not consummated for any reason, the proposed settlement will be null and void and of no force and effect.
Loan Agreement with MGAM. On July 16, 2014, the Company and MGAM entered into the Note Agreement, pursuant to which MGAM agreed to loan up to $400,000 to the Company between July 16, 2014 and December 31, 2014. Any amount borrowed under the Note Agreement accrues interest at the rate of five (5%) percent per annum payable quarterly in arrears. If any amount is not paid when due, such overdue amount shall bear interest at the rate of fifteen (15%) percent per annum. All unpaid principal and interest will be due and payable on March 31, 2015. The Company may prepay the loan in whole or in part at any time without penalty. On July 18, 2014, $250,000 was advanced by MGAM to the Company under this facility.
Founders' Loan Payment Deferral Agreement. On July 16, 2014, the Company entered into an agreement (the "Founders' Loan Payment Deferral Agreement") with Arthur L. Lomax, pursuant to which Mr. Lomax has agreed to defer all payments due to him pursuant to the Second Amended and Restated Promissory Note for the period commencing June 1, 2014 through and including December 31, 2014. The deferred amounts will be payable to Mr. Lomax upon the earliest of: (i) the closing of either (a) the Merger contemplated by the Merger Agreement, or (b) the closing of a transaction in connection with a “Superior Proposal” (as defined in the Merger Agreement); or (ii) January 31, 2015.
Executive Officer Salary Deferral Agreement. Each of Mark D. Roberson, the Company’s chief executive officer and James T. Crawford, the Company's president and a director, have agreed to defer thirty (30%) percent of the compensation payable pursuant to their respective employment agreements with the Company for the period from June 1, 2014 through and including December 31, 2014 until the earliest of: (i) the closing of either (a) the Merger contemplated by the Merger Agreement, or (b) the closing of a transaction in connection with a "Superior Proposal" (as defined in the Merger Agreement); or (ii) January 31, 2015 (the “Executive Salary Deferral Agreement.”)
Settlement of Certain Litigation Related to the Merger. As described in Note 16. “Commitments and Contingencies” several purported class action complaints on behalf of the Company’s shareholders were filed after the announcement of the Merger Agreement.