Item 1.01 Entry into a Material Definitive Agreement.
Strategic Transaction
On November 18, 2020, Bally’s Corporation (the “Company”) and Sinclair Broadcast Group, Inc. (“Sinclair”) entered into a Framework Agreement (the “Framework Agreement,” and completed the transactions contemplated thereby, the “Transactions”), which provide for a long-term strategic relationship between the Company and Sinclair combining Bally’s integrated, proprietary sports betting technology with Sinclair’s portfolio of local broadcast stations and live regional sports networks and its Tennis Channel, Stadium sports network and STIRR streaming service.
Under the terms of the Transactions, over the ten-year term of the relationship the Company will be required to pay annual naming rights fees to the regional sports networks and has committed to spend a percentage of its annual interactive marketing spend on those networks. In addition, the Company has issued to Sinclair (i) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $0.01 per share, (ii) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $0.01 per share subject to the achievement of various performance metrics, and (iii) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing. The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments. The issuance pursuant to the warrants and options of shares in excess of 19.9% of the Company’s currently outstanding shares is subject to the approval of the Company’s stockholders in accordance with the rules of the New York Stock Exchange (“NYSE”), and to the extent stockholder approval is not obtained, the Company would pay cash to Sinclair in lieu of Sinclair being permitted to purchase, pursuant to the exercise of warrants or options, greater than 19.9% of the Company’s outstanding common shares. The Company has entered into a Voting and Support Agreement pursuant to which Standard RI Ltd., the holder of approximately 37.6% of the Company’s outstanding shares, and each of the executive officers and directors of the Company have agreed to vote the shares beneficially owned by them in favor of the share issuance at a meeting of the Company’s stockholders.
Sinclair may not hold more than 4.9% of the Company’s outstanding common shares at any time without obtaining necessary gaming approvals. Sinclair may not transfer any shares of common stock prior November 18, 2021 and, for a year thereafter, may not transfer during any quarter shares representing more than 1% of the Company’s outstanding common stock, other than in an underwritten offering.
Agreements Providing for Bet.Works Acquisition
On November 18, 2020, the Company and Bet.works Corp. (“Bet.Works”) entered into a definitive agreement pursuant to which the Company will acquire Bet.Works (the “Bet.Works Acquisition”). At closing, the Company will pay the shareholders of Bet.Works $62.5 million in cash and 2,528,194 Company common shares, subject in each case to customary adjustments. The shareholders of Bet.Works will not transfer any shares of Company common stock received in the Bet.Works Acquisition prior to the one-year anniversary of the closing and, for the next year thereafter, may transfer only up to 1% of the Company’s common stock per quarter.
To the extent required by NYSE listing requirements, the Company will submit the issuance of Company common stock in connection with the Bet.Works Acquisition to a stockholder vote at the same time as the Sinclair Transactions are submitted. To the extent stockholder approval is required, Standard RI Ltd. and each of the executive officers and directors of the Company have agreed to vote their beneficially-owned shares in favor of the Bet.Works Acquisition at the stockholder meeting to approve the share issuance.
Consummation of the Bet.Works Acquisition is subject to customary conditions, including receipt of required regulatory approvals. If the Bet.Works Acquisition is terminated in certain circumstances as a result of the failure of the Company to obtain regulatory approvals, then the Company may be obligated to pay a termination fee of $5.0 million.
The Company expects to close the Bet.Works Acquisition in the first quarter of 2021.