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1 BEFORE THE MISSOURI GAMING COMMISSION

2 OF THE CITY OF ST. CHARLES

3 STATE OF MISSOURI

7 IN RE: Public Hearing

12 BE IT REMEMBERED that the above-entitled matter

13 came on for public hearing at St. Charles City Hall, 200

14 North Second Street, in the City of St. Charles, State

15 of Missouri, on the 27th day of June, A. D., 2001,

16 commencing at the hour of 9:00 in the morning of that

17 day, said hearing having been called to order by the

18 Chairman and the board members of the Missouri Gaming

19 Commission of the City of Jefferson City, Missouri

20 pursuant to the issuance of due notice to all parties in

21 interest, and the following is the transcript of the

22 record made of all proceedings had during the course of

23 said hearing.

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1 A P P E A R A N C E S

3 L. C. Ullery - Chairman

4 Robert Smith - Vice Chairman

5 Lynne R. Nikolaisen - Secretary

6 Dr. Muriel W. Battle - Commission Member

7 J. Joe Adorjan - Commission Member

9 * * *

11 I N D E X

12 SPEAKER: Page:

13 GAVIN ISAACS ...................................... 5

14 RICK WILHOIT ..................................... 11

15 PATRICIA CHURCHILL ........................... 14, 19

16 JIM OBERKIRSCH.................................... 15

17 JEFF SMITH ....................................... 17

18 JOHN DAVIS ...................................... 19

19 MIKE BUSCHMANN .................................. 21

20 EARL KESSLER ..................................... 26

21 MELISSA STEPHENS ................................. 31

22 LARRY BUSCHJOST................................... 51

23 CLARENCE GREENO .................................. 56

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1 MR. ULLERY: Can we come to order, please?

2 Angie, would you call the roll?

3 MS. FRANKS: Chairman Ullery?

4 MR. ULLERY: Present.

5 MS. FRANKS: Commissioner Smith?

6 MR. SMITH: Present.

7 MS. FRANKS: Commissioner Nikolaisen?

8 MS. NIKOLAISEN: Present.

9 MS. FRANKS: Commissioner Battle?

10 MS. BATTLE: Present.

11 MS. FRANKS: Commissioner Adorjan?

12 MR. ADORJAN: Present.

13 MR. MULLALLY: Mr. Chairman and

14 Commissioners, the first item on the agenda is the

15 Consideration of Change in Control of a supplier. It's

16 Casino Data Systems and Aristocrat, Inc. There are two

17 representatives from Aristocrat who have requested to

18 make a brief presentation prior to hearing from

19 Lieutenant Wilhoit with the investigative reports. I'll

20 ask them to step forward.

21 MR. ULLERY: Okay. Thank you, Kevin.

22 MR. ISAACS: How do you do? Gavin Isaacs

23 is my name. I'm from Aristocrat Technologies of

24 Australia, the global subsidiary company of Aristocrat

25 Leisure Limited, parent company of the Aristocrat

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1 Group. I thank you for seeing me this morning. I have

2 a brief presentation, if I may.

3 MR. SMITH: Is the presentation in

4 Australian or English?

5 MR. ISAACS: Australian. I'm sorry.

6 MR. ULLERY: Talk slow for the Commissioner

7 over here, if you would.

8 MR. ISAACS: The purpose of us presenting

9 before you today is to get approval to proceed with our

10 merger with CDS, Casino Data Systems, a company that has

11 been operating in your state for a while with our

12 assistance.

13 Just a little bit about Aristocrat ourselves. We

14 were established in Australia in 1953. We're coming up

15 to 50 years in the gaming industry. We were listed on

16 the Australian stock exchange in 1996 after we got rid

17 of the family from the main control part of the

18 company. We are now one of the top 45 companies on that

19 stock exchange. We have global presence. After this

20 acquisition, we'll have over 2,300 staff; we have 450 in

21 America. We have over 105 licenses now in 11

22 countries. And our portfolio includes gaming machines

23 -- almost all video. We only do video in Australia.

24 It's a 100 percent video market -- gaming systems and

25 accessories, and services, and professional advice that

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1 we provide.

2 As a company we've had some strategic goals,

3 which we have to achieve by the end of 2003, primarily

4 to obtain our market leadership in Australia where we

5 have approximately 65 percent of the market. In

6 Australia, there's around 180,000 machines installed.

7 We're number one in market share of sales in South

8 Africa and number two in the United States. We have two

9 percent market share in Japan. We just launched our

10 Japanese product in that country there, and that's going

11 extremely well. In all of the markets we are operating

12 in, we aim to be profitable, and we are at the moment.

13 Splitting our revenue 50/50 between international and

14 Australia, we hope to actually raise that bar and make

15 international a lot higher. In software systems and

16 services, we're contributing 50 percent of our revenue

17 rather than just the actual physical box.

18 A little bit about CDS, which you know. They are

19 listed on the NASDAQ, based in Las Vegas. We agreed on

20 the 17th of January of this year to acquire all of their

21 stock for approximately $181 million U.S. On the 18th

22 of May, their shareholders met and approved the

23 transaction. The only outstanding -- I apologize. At

24 the time of writing this two weeks ago when I was in

25 Sidney, there were regulatory approvals from Nevada,

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1 which we have subsequently received, and New Mexico,

2 which we have subsequently received, and Mississippi,

3 which we received the other day, and now Missouri. We

4 hope, subject to approval today, to close the

5 transaction on Friday. And we believe that CDS is an

6 excellent fit for us, which is why we're proceeding with

7 it.

8 There is some background there, which I won't go

9 through, as to how we got to CDS. Needless to say, in

10 August of last year, when we finally got down to buy the

11 license, we started looking at American companies to

12 partner with to, essentially, expedite our expansion

13 into this market. We saw four different companies, and

14 we felt CDS was the best fit. I have set out there for

15 you how we were forced to move as quickly as we had to

16 because they were actually on the market at that time

17 with several other companies looking at them.

18 I've mentioned the regulatory approvals. As I

19 said, this hopefully is our final regulatory approval

20 required for the purposes of proceeding with this

21 acquisition.

22 Four major reasons why we're moving with this

23 acquisition: The first one, and most importantly, is

24 the product's synergies. In America, as distinct from

25 elsewhere in the world, we really only do video gaming.

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1 CDS has systems. CDS has stepper product. CDS has a

2 wide area of progressive. All -- CDS have signage. All

3 things that we don't have here but we'd like to have

4 here so we can provide customers with the full service,

5 which we can provide elsewhere in the world. We have

6 excellent relationships in this market, something that

7 we can obviously use to our benefit. Technical

8 expertise I've written down there. We based ourselves

9 on innovation, and we felt that they also had a very

10 strong desire to be an innovative company. And

11 infrastructure. Obviously, we had just moved to Las

12 Vegas for our head office. We were having to build a

13 new factory, etcetera, and do everything over there. We

14 could move into their premises quite comfortably.

15 There's a chart there which just shows the

16 synergies between the products. In systems, with the

17 Oasis System, which I think is installed in two of your

18 casinos, add that to our data now (sic) and computer

19 game systems, it makes us the largest system provider in

20 the world.

21 Just very quickly on the financing. We have the

22 finance secured. Rather than going with debt, we did a

23 combination of convertible bonds equating to U.S. $130

24 million and an equity placement of $80 million. It was

25 a private offering under your USCC rules. And the

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1 support that we received was extraordinary with the

2 bonds over nine times subscribed and the equity at

3 two-and-a-half times subscribed. That's in a period of

4 two-and-a-half days. The funds will be used for the

5 acquisition, and any surplus is going to go to working

6 capital. Drafts and details of the terms and the bonds

7 and the equity offering.

8 Going forward, we will launch, hopefully on

9 Tuesday, a new company from Aristocrat in America with a

10 new President and -- with a combination of the key

11 people from CDS and Aristocrat Technologies, Inc.,

12 forming the new Aristocrat moving forward. That's --

13 unless you have any questions.

14 MR. ULLERY: Do we have any questions?

15 MR. ADORJAN: I have one.

16 MR. ULLERY: We have one question.

17 MR. ADORJAN: Is this your first

18 acquisition in the U.S.?

19 MR. ISAACS: Yes, it is in recent times.

20 I'm not sure about before 1990 whether we made any

21 acquisitions.

22 MR. ADORJAN: You're not operating in the

23 U.S. today?

24 MR. ISAACS: Yes, we are.

25 MR. ADORJAN: You are operating in the

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1 U.S.

2 MR. ISAACS: Aristocrat Technologies, Inc.

3 is operating in the U.S. We have approximately 4

4 percent of the market in video games.

5 MR. ADORJAN: And the private placement was

6 done through an investment banking house?

7 MR. ISAACS: Deutsch Bank.

8 MR. ADORJAN: Pardon me?

9 MR. ISAAAS: Deutsch Bank.

10 MR. ADORJAN: Deutsch Bank.

11 MR. SMITH: What kind of technical controls

12 do you have on your machines?

13 MR. ISAACS: Technical controls?

14 MR. SMITH: Yes.

15 MR. ISAACS: Do you mean what kind of --

16 MR. SMITH: Yes. Do you have a testing

17 laboratory?

18 MR. ISAACS: Oh, absolutely. In Australia,

19 we have over 350 people in R & D. In Tuson, Arizona, we

20 have 50 people in R & D. Our games go through two

21 internal tests before they go to an independent

22 laboratory before they get submitted. We have what we

23 call SIT and then CDL, two testing internal

24 laboratories, and then it goes to one of our ATF

25 approved testing facilities, which, in some instances,

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1 is enough for regulatory approval. In other instances,

2 they then go to the laboratories themselves.

3 MR. ADORJAN: One more question. Kevin --

4 and I'm assuming we've done all of our due diligence? I

5 don't see the attached reports or anything here.

6 MR. MULLALLY: Yes. Lieutenant Wilhoit

7 will have a report following their presentation.

8 MR. ADORJAN: Okay.

9 MR. ULLERY: Any further questions?

10 Thank you, sir.

11 MR. ISAACS: Thank you.

12 MR. MULLALLY: Lieutenant Wilhoit, at this

13 time, will make a presentation on behalf of the staff.

14 MR. WILHOIT: Good morning, Mr. Chairman

15 and Commissioners.

16 MR. ULLERY: Good morning.

17 MR. WILHOIT: Investigators of the Missouri

18 Gaming Commission have conducted a preliminary

19 investigation regarding the proposed change in control

20 of Casino Data Systems, Inc. After the proposed change

21 in control, Casino Data Systems, Inc. will be a

22 wholly-owned subsidiary of Aristocrat Technologies,

23 Inc., who is an indirectly wholly-owned subsidiary of

24 Aristocrat Leisure Limited, an Australian company.

25 Aristocrat has satisfied the following criteria:

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1 They have completed a supplier's application and paid

2 the application fee and submitted fingerprints on all

3 required persons. The application does not reveal any

4 information that would result in an automatic denial,

5 and a criminal history check has not revealed that

6 Aristocrat or its principals have been convicted of a

7 felony under Missouri law or the laws of any other

8 state, or the laws of the United States. Australian

9 Criminal and Regulatory inquires of Aristocrat and its

10 principals have not revealed any derogatory information.

11 Based on the investigative team's preliminary

12 findings, we recommended that Aristocrat has shown good

13 cause for granting approval of change in control

14 pursuant at 11 CSR 45-10.040 (12).

15 MR. ULLERY: Do we have any questions of

16 the Lieutenant?

17 We have before us Resolution 01-050.

18 MR. SMITH: I move for the approval of the

19 resolution.

20 MR. ULLERY: I have a motion.

21 MS. NIKOLAISEN: I second.

22 MR. ULLERY: I have a second.

23 Angie, would you call the roll, please?

24 MS. FRANKS: Chairman Ullery?

25 MR. ULLERY: In favor.

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1 MS. FRANKS: Commissioner Smith?

2 MR. SMITH: In favor.

3 MS. FRANKS: Commissioner Nikolaisen?

4 MS. NIKOLAISEN: In favor.

5 MS. FRANKS: Commissioner Battle?

6 MS. BATTLE: In favor.

7 MS. ANGIE: Commissioner Adorjan?

8 MR. ADORJAN: In favor.