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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 2, 1999
Penn National Gaming, Inc.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2234473
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(State of other incorporation) (IRS Employer
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Identification No.)
Wyomissing Professional Center
825 Berkshire Boulevard, Suite 200, Wyomissing, Pennsylvania 19610
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-373-2400
Item 5. Description of Securities to be Registered.
PENN NATIONAL GAMING INC.
SUMMARY OF RIGHTS AGREEMENT
On May 20, 1998, the Board of Directors of Penn National
Gaming, Inc. (the "Company") declared a dividend distribution of one preferred
share purchase right (the "Rights") for each outstanding share of the Company's
Common Stock, par value $.01 per share (the "Common Shares"), payable to
shareholders of record at the close of business on March 19, 1999. Each Right
entitles the registered holder to purchase from the Company one one-hundredth of
a share (a "Preferred Share Fraction") of the Company's Preferred Shares, par
value $.01 per share (the "Preferred Shares"), or a combination of securities
and assets of equivalent value, at a purchase price of $40.00 per Preferred
Share Fraction (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement) dated as of March 2, 1999 between the Company and Continental Stock
Transfer and Trust Company as Rights Agent. All terms not otherwise defined
herein are used as defined in the Rights Agreement.
Initially, the Rights will be evidenced by all Common Share
certificates representing Common Shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from the Common
Shares and will be distributed to the holders thereof upon the first to occur of
(i) the close of business of the third Business Day following a public
announcement that a Person or group of Affiliated or Associated Persons (an
"Acquiring Person) has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding Common Shares (the "Stock
Acquisition Date"), (ii) the close of business on the tenth Business Day
following the commencement of a tender offer or exchange offer that would result
in a Person or group beneficially owning 20% or more of the outstanding Common
Shares, or (iii) the close of business on the tenth Business Day after a
determination by at least a majority of the Continuing Directors (as defined
below) that any Person is an Adverse Person, in that such Person, alone or
together with its Affiliates and Associates, has become the beneficial owner of
a substantial amount of Common Shares (which amount shall in no event be less
than 10% of the Common Shares then outstanding) and (a) such beneficial
ownership by such Person is intended to cause the Company to repurchase the
Common Shares beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of transactions
intended to provide such Person with short-term financial gain under
circumstances where at least a majority of the Continuing Directors determines
that the best long-term interests of the Company and its shareholders would not
be served by taking such action or entering into such transaction or series of
transactions at that time or (b) such beneficial ownership is causing or
reasonably likely to cause a material adverse impact (including, but not limited
to, impairment of relationships with customers or impairment of the Company's
ability to maintain its competitive position) on the business or prospects of
the Company (the date on which the Rights separate and are distributed being the
"Distribution Date").
A "Continuing Director" is any member of the Board of
Directors prior to March 2, 1999, who is (i) not an Acquiring Person or Adverse
Person, or an Associate or Affiliate of either of the foregoing, or (ii) any
Person who subsequently becomes a member of the Board of Directors who is not an
Acquiring Person or an Adverse Person, or an Associate or Affiliate of either of
the foregoing, and whose nomination or election to the Board of Directors is
recommended or approved by a majority of the Continuing Directors.
Until the Distribution Date, (i) the Rights will be evidenced
by Common Share certificates and will be transferred with and only with such
Common Share certificates, (ii) new Common Share certificates issued after March
19, 1999, will contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any certificates for Common
Shares outstanding will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificates.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on March 18, 2009, unless earlier redeemed
or exchanged by the Company as described below.
As soon as practical after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as deemed necessary and
appropriate by at least a majority of the Continuing Directors, and except in
connection with Common Shares issued upon the exercise of employee stock
options, issuances under other employee stock benefit plans or the conversion of
convertible securities issued prior to the Distribution Date, only Common Shares
issued prior to the Distribution Date will be issued with Rights.
In the event that (i) the Company is the surviving corporation
in a merger with an Acquiring Person and the Common Shares are not changed or
exchanged, (ii) a person or entity becomes the beneficial owner of more than 20%
of the then outstanding Common Shares except pursuant to an offer for all
outstanding Common Shares which at least a majority of the Continuing Directors
determines to be fair to, and otherwise in the best interests of, the
shareholders, (iii) an Acquiring Person engages in one or more "self-dealing"
transactions as set forth in the Rights Agreement, (iv) during such time as
there is an Acquiring Person, an event occurs which results in such Acquiring
Person's ownership interest being increased by more than 1%, or (v) at least a
majority of the Continuing Directors determines that a Person is an Adverse
Person, then in any such event each holder of a Right will thereafter have the
right to receive, upon exercise, that number of Preferred Share Fractions (or in
certain circumstances, that number of Common Shares, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. In lieu of requiring payment of the Purchase Price upon exercise
of the Rights following any such event, the Company, by action of at least a
majority of the Continuing Directors, may permit the holders simply to surrender
the Rights, in which event they will be entitled to receive Preferred Share
Fractions (and/or Common Shares or other property, as the case may be) with a
value of 50% of what could be purchased by payment of the full Purchase Price.
The Rights, however, are not exercisable following the occurrence of any of the
events set forth above until such time as the Rights are no longer redeemable by
the Company as set forth below. Notwithstanding any of the foregoing, following
the occurrence of any of the events set forth above, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or Adverse Person will be null and
void. The events set forth in this paragraph are referred to as "Section
11(a)(ii) Events."
For example, at an exercise price of $40.00 per Right, each
Right not owned by an Acquiring Person or an Adverse Person (or by certain
related parties) following a Section 11(a)(ii) Event would entitle its holder to
purchase $80.00 worth of Preferred Share Fractions (or Common Shares or other
consideration as noted above) for $40.00. Assuming that Preferred Shares had a
per share value of $1,000 at such time, and that Preferred Share Fractions had a
value of one one-hundredth of $1,000 or $10.00 per Preferred Share Fraction at
such time, the holder of each valid Right would be entitled to purchase 8
Preferred Share Fractions of $10.00 (or $80.00 worth of Preferred Share
Fractions). Alternatively, the Company could permit the holder to surrender each
Right in exchange for stock or cash equivalent to one Preferred Share Fractions
(with a value of $40.00) without the payment of any consideration other than the
surrender of the Right.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation or the Common
Shares are changed or exchanged (other than a merger which follows an offer
determined by at least a majority of the Continuing Directors to be fair to, and
otherwise in the best interests of, the shareholders) or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, that number of shares of
common stock of the acquiring company which equals the exercise price of the
Right divided by one-half of the current market price of such company's common
stock at the date of the occurrence of the event. Again, provision is made to
permit surrender of the Rights in exchange for one-half of the value otherwise
purchasable. The events set forth in this paragraph are referred to as "Section
13 Events," and the Section 11(a)(ii) Events and the Section 13 Events are
collectively referred to as the "Triggering Events."
For example, at an exercise price of $40.00 per Right, each
Right following a Section 11(a)(ii) Event set forth in the preceding paragraph
would entitle its holder to purchase for $40.00 such number of shares of common
stock of the acquiring company which equals $40.00 divided by one-half of the
current market price of such company's common stock. Assuming that such common
stock had a current market price of $10.00 per share at such time, the holder of
each valid Right would be entitled to purchase eight shares of common stock of
the acquiring company for $40.00 (or $80.00 worth of common stock).
At any time after the occurrence of a Section 11(a)(ii) Event,
at the election of a majority of the Continuing Directors, the Company may
exchange the Rights (other than Rights owned by an Acquiring Person or an
Adverse Person which have become void), in whole or in part, at an exchange
ratio of one Preferred Share Fraction (or, upon further election of such a
majority, Common Shares) per Right (subject to adjustment).
The Purchase Price payable, and the number of Preferred Share
Fractions or other securities or property issuable upon exercise of the Rights,
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Preferred Shares, (ii) if holders of the Preferred Shares are granted
certain rights or warrants to subscribe for Preferred Shares or convertible
securities at less than the current market price of the Preferred Shares, or
(iii) upon the distribution to holders of Preferred Shares of evidences of
indebtedness or assets (excluding quarterly cash dividends) or of subscription
rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the initial
Purchase Price will be required until cumulative adjustments amount to at least
1% of the Purchase Price. The Company will not be required to issue fractional
Preferred Shares, other than fractions which are integral multiples of Preferred
Shares (or, in the event of an appropriate election, Common Shares) and, in lieu
of such fractional Preferred Shares (or Common Shares, if appropriate), an
adjustment in cash will be made based on the market price of the Preferred
Shares (or Common Shares, as the case may be) on the last trading date prior to
the date of exercise.
In general, at any time until ten (10) days following the
Stock Acquisition Date or the date on which a person has been determined to be
an Adverse Person, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (payable in cash or stock). After the redemption
period has expired and prior to the occurrence of a Triggering Event, the
Company's right of redemption may be reinstated upon the approval of at least a
majority of the Continuing Directors if either (i) an Acquiring Person reduces
his beneficial ownership to 10% or less of the outstanding shares in a
transaction or series of transactions not involving the Company and there are no
other Acquiring Persons, or (ii) there is approval of the merger of the Company
with, or acquisition of the Company by, a person unrelated to any Acquiring
Person and such reinstatement is part of the approval of such transaction.
Immediately upon redemption of the Rights, the Rights will terminate and the
only right of the holders of the Rights will be to receive the $.01 redemption
price.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a shareholder of the Company, including, without limitation,
the right to vote or receive dividends. The creation of the Rights should not be
taxable to shareholders. Shareholders may, however, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Preferred Shares (or other consideration) of the Company or for
common stock of an acquiring company as set forth above.
Other than those provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by at least a majority of the Continuing Directors prior to the
Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended by at least a majority of the Continuing Directors in
order to cure any ambiguity, to make changes which do not adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring Person
or Adverse Person), or to shorten or lengthen certain time periods under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
As of March 2, 1999, there were 14,740,832 Common Shares
outstanding. As of March 2, 1999, options to purchase 1,184,500 Common Shares
had been granted and remained unexercised under the Company's stock option
plans, and 815,500 Common Shares were available thereunder for future grant of
options. Each outstanding Common Share on March 19, 1999 will receive one Right.
As long as the Rights are attached to the Common Shares and in certain other
circumstances described above, the Company will issue one Right for each Common
Share issued. As of March 2, 1999, no shares of Preferred Stock of the Company
had been issued.
The Rights have certain anti-takeover effects. The Rights will
cause substantial dilution to a Person or group that attempts to acquire the
Company without conditioning the offer on a substantial number of Rights being
redeemed or acquired. The Rights should not interfere with any merger or other
business combination approved by at least a majority of the Continuing Directors
of the Company because (i) the Continuing Directors may, at their option, at any
time prior to the close of business on the tenth Business Day following the
Stock Acquisition Date or the date a Person has been determined to be an Adverse
Person, redeem all, but not less than all, of the then outstanding Rights at the
redemption price. In addition, the Board has limited ability to reinstate the
redemption of the Rights as set forth above. Once a Triggering Event has
occurred, however, the redemption right cannot be reinstated.
The Rights Agreement between the Company and the Rights Agent
specifying the terms of the Rights, which includes as Exhibit B thereto the form
of Rights Certificate, is attached hereto as Exhibit 1 and is incorporated
herein by reference. The foregoing description of the Rights does not purport to
be complete and is qualified in its entirety by reference to such Exhibit.
Item 7. Exhibits.
1.Rights Agreement, dated as of March 2, 1999, between Penn National Gaming,
Inc. and Continental Stock Transfer and Trust Company, which includes the
form of resolutions of Penn National Gaming, Inc.'s Board of Directors as
Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of
Rights Agreement as Exhibit C.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned hereunto duly authorized.
PENN NATIONAL GAMING, INC.
Date: March 17, 1999
/s/Peter M. Carlino
Name: Peter M. Carlino
Title: Chairman and Chief Executive
Officer
EXHIBIT INDEX
Exhibit
Rights Agreement dated as of March 2, 1999 between Penn National
Gaming, Inc. and Continental Stock Transfer and Trust Company.
RIGHTS AGREEMENT
between
PENN NATIONAL GAMING, INC.
and
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY
dated as of March 2, 1999
TABLE OF CONTENTS
1.Certain Definitions..........................................................1
2.Appointment of Rights Agent..................................................6
3.Issue of Rights Certificates................................................ 6
4.Form of Rights Certificates..................................................8
5.Countersignature and Registration............................................9
6.Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates....................10
7.Exercise of Rights; Purchase Price; Expiration Date.........................11
8.Cancellation and Destruction of Rights Certificates.........................13
9.Reservation and Availability of Stock; Registration.........................13
10.Capital Stock Record Date..................................................14
11.Adjustment of Purchase Price, Number and Kind of Shares or Number of
Rights.....................................................................15
12.Certificate of Adjusted Purchase Price or Number of Shares.................24
13.Consolidation, Merger or Sale or Transfer of Assets or Earning Power.......24
14.Fractional Rights and Fractional Shares....................................27
15.Rights of Action...........................................................28
16.Agreement of Rights Holders................................................28
17.Rights Certificate Holder Not Deemed a Shareholder.........................29
18.Matters Concerning the Rights Agent............................... ........29
19.Merger or Consolidation or Change of Name of Rights Agent..................30
20.Duties of Rights Agent.....................................................30
21.Change of Rights Agent.....................................................34
22.Issuance of New Rights Certificates........................................34
23.Redemption and Termination.................................................35
24.Exchange...................................................................36
25.Notice of Certain Events...................................................37
26.Notices....................................................................38
27.Supplements and Amendments.................................................40
28.Successors.................................................................40
29.Determinations and Actions by the Board....................................40
30.Benefits of this Agreement.................................................41
31.Severability...............................................................41
32.Governing Law..............................................................41
33.Counterparts...............................................................42
34.Descriptive Headings.......................................................43
Exhibit A - Rights, Preferences, and Limitations of Series A Preferred Stock
Exhibit B - Rights Certificate
Exhibit C - Summary of Rights Agreement
THIS RIGHTS AGREEMENT is dated as of March 2, 1999, between Penn National
Gaming, Inc., a Pennsylvania corporation (the "Company"), and Continental Stock
Transfer and Trust Company, a New York corporation (the "Rights Agent"). On May
20, 1998 (the "Rights Dividend Distribution Date"), the Board of Directors of
the Company (the "Board") has authorized and declared a dividend of one
preferred share purchase right (a "Right") for each Common Share (as hereinafter
defined) of the Corporation outstanding at the close of business on March 19,
1999 (the "Record Date"), each Right representing the right to purchase one
one-hundredth (1/100) of a Preferred Share (as hereinafter defined), upon the
terms and subject to the conditions herein set forth, and has further authorized
and directed the issuance of one Right with respect to each Common Share that
shall become outstanding between the Record Date and the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may be issued
with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1........Certain Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
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1.1......"Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, is the Beneficial Owner of 15% or
more of the Common Shares then outstanding (other than as a result of a
Permitted Offer (as hereinafter defined)), but shall not include the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan, or any Person (an
"Existing Holder") who, on the date of this Agreement is already the Beneficial
Owner of 15% or more of the Common Shares (unless such person acquires
additional Common Shares such that such Person becomes the Beneficial Owner of
at least 1% more of the Common Shares than is the case on the date hereof).
Notwithstanding the foregoing, the term "Acquiring Person" shall not include any
Person (i) who or which together with all Affiliates and Associates of such
Person becomes the beneficial owner of 15% or more of the outstanding Common
Shares as a result of the acquisition of securities directly from the Company,
or (ii) either (A) as a result of an acquisition of Common Shares by the Company
which, by reducing the number of Common Shares outstanding, increases the
proportionate number of Common Shares beneficially owned by such Person to 15%
or more of the Common Shares then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of 15% or more of the Common Shares
then outstanding by reason of Common Share purchases by the Company and shall
thereafter become the Beneficial Owner of any additional Common Shares, then
such Person shall be deemed to be an "Acquiring Person," or (B) who (i) within 8
days after such Person would otherwise have become an Acquiring Person (but for
the operation of this subclause B), such Person notifies the Board of Directors
that such Person did so inadvertently and (ii) within 2 days after such
notification, such Person is the Beneficial Owner of less than 15% of the
outstanding Common Shares.
1.2......"Act" shall mean the Securities Act of 1933, as amended.
1.3......"Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii)(D).
1.4......"Adverse Person" shall mean any Person determined to be an Adverse
Person pursuant to the criteria set forth in Section 11(a)(ii)(D).
1.5......"Affiliate" and "Associate" shall have the respective meanings given to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act as in effect on the date hereof.
1.6......"Agreement" shall mean this Rights Agreement.
1.7......(i)......A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
1.7.1.1..which such Person or any of such Person's Affiliates or Associates,
directly or indirectly, beneficially owns;
1.7.1.2..which such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, other rights, warrants or
options or otherwise; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," (1) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, (2) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (3)
securities issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 (the "Original Rights") or pursuant to Section 11(i)
in connection with an adjustment made with respect to any Original Rights;
1.7.1.3..which such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has "beneficial
ownership" of (as determined pursuant to Rule 13d-3 promulgated under the
Exchange Act, or any comparable or successor rule), including without limitation
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," any security under this Section l(g)(i)(C)
as a result of an oral or written agreement, arrangement or understanding to
vote such security if such agreement, arrangement or understanding (1) arises
solely from a revocable proxy or consent given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
provisions of the rules and regulations promulgated under the Exchange Act, and
(2) is not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
1.7.1.4..which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person (or any of
such Person's Affiliates or Associates) has any agreement, arrangement or
understanding, whether or not in writing, for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy promulgated as described in Section
l(g)(i)(C)(1)) or disposing of such securities (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities) relating to the acquisition, holding, voting
(except to the extent contemplated by the proviso to Section l(g)(i)(B)) or
disposing of any securities of the Company.
1.7.2....Notwithstanding anything in this definition to the contrary, the phrase
"then outstanding," when used with reference to a Person's Beneficial Ownership
of securities of the Company, shall mean the number of such securities then
issued and outstanding together with the number of such securities not then
actually issued and outstanding which such Person could be deemed to own
beneficially hereunder.
1.8......"Board" shall have the meaning set forth in the Preamble to this
Agreement.
1.9......"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
1.10....."Close of business" on any given date shall mean 5:00 p.m. New York
City time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 p.m. New York City time, on the next succeeding Business
Day.
1.11....."Common Shares" when used with reference to the Company shall mean the
shares of Common Stock, par value $.01 per share, of the Company. "Common
Shares" when used with reference to any Person other than the Company shall
mean: (i) in the case of Persons organized in corporate form, the shares of
capital stock or units of equity security with the greatest voting power of such
Person or, if such Person is a Subsidiary of another Person, of the Person or
Persons which ultimately control such first-mentioned Person, and (ii) in the
case of Persons not organized in corporate form, the units of beneficial
interest which (A) represent the right to participate generally in the profits
and losses of such Person (including without limitation any flow-through tax
benefits resulting from an ownership interest in such Person) and (B) are
entitled to exercise the greatest voting power of such Person or, in the case of
a limited partnership, shall have the power to remove the general partner or
partners.
1.12....."Common stock equivalents" shall have the meaning set forth in
Section 11(a)(iii).
1.13....."Company" shall have the meaning set forth in the Preamble to this
Agreement.
1.14....."Continuing Director" shall mean (i) any member of the Board, while
such Person is a member of the Board, who is not an Acquiring Person or an
Adverse Person, or an Affiliate or Associate of any such Person, or a
representative or designee of an Acquiring Person or an Adverse Person or of any
such Affiliate or Associate, and was a member of the Board prior to the date of
this Agreement, or (ii) any Person who subsequently becomes a member of the
Board, while such Person is a member of the Board, who is not an Acquiring
Person or an Adverse Person, or an Affiliate or Associate of any such Person, or
a representative or designee of an Acquiring Person or an Adverse Person or of
any such Affiliate or Associate, if such Person's nomination for election or
election to the Board is recommended or approved by a majority of the Continuing
Directors.
1.15....."Current Market Price" shall have the meaning set forth in
Section 11(d).
1.16....."Current Value" shall have the meaning set forth in Section 11(a)(iii).
1.17....."Distribution Date" shall have the meaning set forth in Section 3(a).
1.18....."Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.19....."Exchange Ratio" shall have the meaning set forth in Section 24(a).
1.20....."Existing Holder" shall have the meaning set forth in Section 1(a).
1.21....."Expiration Date" shall have the meaning set forth in Section 7(a).
1.22....."Final Expiration Date" shall mean the close of business on March 18,
2009.
1.23....."Interested Shareholder" shall mean any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
1.24....."Original Rights" shall have the meaning set forth in
Section l(g)(i)(B)(3).
1.25....."Permitted Offer" shall mean a tender or exchange offer which is for
all outstanding Common Shares at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by at least a majority
of the members of the Board who are not officers of the Company and who are not
Acquiring Persons or Affiliates, Associates, nominees or representatives of an
Acquiring Person, to be adequate (taking into account all factors that the Board
deems relevant including, without limitation, prices that could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value) and otherwise in the best interests of the Company and
its shareholders (other than the Person or any Affiliate or Associate thereof on
whose basis the offer is being made) taking into account all factors that such
directors may deem relevant.
1.26..... "Person" shall mean any individual, firm, corporation, partnership or
other entity.
1.27....."Preferred Share" shall mean a share of Series A Preferred Stock, par
value $0.01 per share, of the Company and, to the extent that there are not a
sufficient number of shares of Series A Preferred Stock authorized to permit the
full exercise of the Rights, shares of any other series of Preferred Stock of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series A Preferred Stock.
1.28....."Preferred Share Fraction" shall mean one one-hundredth (1/100) of a
Preferred Share.
1.29....."Principal Party" shall have the meaning set forth in Section 13(b).
1.30....."Purchase Price" shall have the meaning set forth in Section 4(a).
1.31....."Record Date" shall have the meaning set forth in the Preamble to this
Agreement.
1.32....."Redemption Price" shall have the meaning set forth in Section 23(a).
1.33....."Rights" shall have the meaning set forth in the Preamble to this
Agreement.
1.34....."Rights Agent" shall have the meaning set forth in the Preamble to this
Agreement.
1.35....."Rights Certificates" shall have the meaning set forth in Section 3(a).
1.36....."Rights Dividend Declaration Date" shall have the meaning set forth in
the Preamble to this Agreement.
1.37....."Section 11(a)(ii) Election" shall mean the election described in
Section 11(a)(ii)(x) and (y).
1.38....."Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii)(A), (B), (C) or (D).
1.39....."Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii).
1.40....."Section 13 Event" shall mean any event described in clauses (i), (ii)
or (iii) of Section 13(a).
1.41....."Section 24(a) Election" shall have the meaning set forth in
Section 24(a).
1.42....."Spread" shall have the meaning set forth in Section 11(a)(iii).
1.43....."Stock Acquisition Date" shall mean the date of first public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) that
an Acquiring Person has become such.
1.44....."Subsidiary" shall mean, with reference to any Person, any other Person
of which at least a majority of the voting power of the voting equity securities
or equity interests is beneficially owned, directly or indirectly, by such
first-mentioned Person.
1.45....."Substitute Consideration" shall have the meaning set forth in
Section 11(a)(iii).
1.46....."Substitution Period" shall have the meaning set forth in
Section 11(a)(iii).
1.47....."Trading Day" shall have the meaning set forth in Section 11(d).
1.48....."Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
2........Appointment of Rights Agent. The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such additional Rights Agents as it may
deem necessary or desirable. The Company shall give the Rights Agent 45 days
notice of the appointment of any such additional Rights Agent.
3........Issue of Rights Certificates.
3.1......Until the first to occur of (i) the close of business on the third
Business Day after the Stock Acquisition Date (or, if the third Business Day
after the Stock Acquisition Date occurs before the Record Date, the close of
business on the Record Date), (ii) the close of business on the tenth business
day (as defined in Rule 14d-l(e)(6) promulgated under the Exchange Act, or any
comparable or successor rule) after the date that a tender or exchange offer by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) promulgated under the Exchange Act (or any comparable
or successor rule), if upon consummation thereof, such Person would become an
Acquiring Person (provided, however, that if such an offer is terminated prior
to the occurrence of a Distribution Date, then no Distribution Date shall occur
as a result of such offer, or (iii) the close of business on the tenth Business
Day after a determination, pursuant to Section 11(a)(ii)(D), that a Person is an
Adverse Person (the first to occur of (i), (ii) and (iii) being herein referred
to as the "'Distribution Date"), (A) the Rights will be evidenced (subject to
the provisions of Section 3(b)) by the certificates for the Common Shares (which
certificates for Common Shares shall be deemed also to be certificates for
Rights) and not by separate certificates and (B) the Rights will be transferable
only in connection with the transfer of the underlying Common Shares (including
a transfer to the Company). As soon as practicable after the Distribution Date,
the Rights Agent will send by first-class, insured, postage prepaid mail, to
each record holder of Common Shares as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more Rights certificates, in substantially the form of Exhibit B
hereto (the "Rights Certificates"), evidencing one Right for each Common Share
so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per Common Share has been made pursuant to
Section 11(p), at the time of distribution of the Right Certificates, the
Company shall make and notify the Rights Agent of the necessary and appropriate
rounding adjustments (in accordance with Section 14(a)) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
3.2......As promptly as practicable following the Record Date, the Company will
send a copy of a Summary of Rights Agreement, in substantially the form attached
hereto as Exhibit C, by first-class, postage prepaid mail, to each record holder
of Common Shares as of the close of business on the Record Date at the address
of such holder shown on the records of the Company. With respect to certificates
for the Common Shares outstanding as of the Record Date, until the Distribution
Date, ownership of and beneficial interests in the Rights will be evidenced by
such certificates for the Common Shares and the registered holders of the Common
Shares shall also be the registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date, the transfer of any
certificates representing Common Shares in respect of which Rights have been
issued shall also constitute the transfer of the Rights associated with such
Common Shares. Certificates issued after the Record Date upon the transfer of
Common Shares outstanding on the Record Date shall bear the legend set forth in
Section 3(c).
3.3......Certificates representing Common Shares (including, without limitation,
certificates issued upon transfer or exchange of Common Shares) issued after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date shall also be deemed to be certificates for the associated Rights, and
shall bear the following legend:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement
between Penn National Gaming, Inc. (the "Company") and
Continental Stock Transfer and Trust Company (the "Rights
Agent") dated as of March 2, 1999 (the "Rights Agreement"),
and as the same may be amended from time to time, the terms of
which are hereby incorporated herein by reference and a copy
of which is on file at the principal offices of the Company.
Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of
a written request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person, an
Adverse Person or any Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement), whether currently
held by or on behalf of such Person or by any subsequent
holder, may become null and void."
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Shares represented by such certificates shall be evidenced by
such certificates alone and registered holders of Common Shares shall also be
the registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
such Common Shares.
4. Form of Rights Certificates.
4.1. The Rights Certificates (and the forms of election to purchase,
certification and assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange, national market system or
over-the-counter market on which the Rights may from time to time be listed, or
to conform to usage. Subject to the provisions of Section 11 and Section 22, the
Rights Certificates, whenever distributed, shall entitle the holders thereof to
purchase such number of Preferred Share Fractions as shall be set forth therein
at the price per Preferred Share Fraction set forth therein (the "Purchase
Price"), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
4.2. Any Rights Certificate issued pursuant to Section 3(a) or Section 22 that
represents Rights beneficially owned by a Person reasonably believed by at least
a majority of the Continuing Directors to be (i) an Acquiring Person, an Adverse
Person or any Associate or Affiliate of any such Acquiring Person or Adverse
Person, (ii) a transferee of an Acquiring Person or an Adverse Person (or of any
such Associate or Affiliate) who becomes a transferee after the Acquiring Person
or Adverse Person becomes such, or (iii) a transferee of an Acquiring Person or
an Adverse Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person or Adverse Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person or Adverse Person
(or from any such Associate or Affiliate) to holders of equity interests in such
Acquiring Person or Adverse Person (or any such Associate or Affiliate) or to
any Person with whom such Acquiring Person or Adverse Person (or any such
Associate or Affiliate) has any continuing oral or written plan, agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which at least a majority of the Continuing Directors has determined is part of
an oral or written plan, arrangement or understanding that has as a primary
purpose or effect avoidance of Section 7(e), and any Rights Certificate issued
to any such Person pursuant to Section 6 or Section 11 upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
"The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an
[Acquiring] [Adverse] Person or an Affiliate or Associate of
an [Acquiring] [Adverse] Person (as such terms are defined in
the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in
the circumstances specified in Section 7(e) of such
Agreement."
5. Countersignature and Registration.
5.1. The Rights Certificates shall be executed on behalf of the Company by its
Chairman of the Board, its President or any Vice President, either manually or
by facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof, which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
5.2. On the Distribution Date, if the Rights Agent is not the sole transfer
agent for the Common Shares, the Company will furnish the Rights Agent with the
name and address of, and the number of Rights held by, each holder of Rights.
Following the Distribution Date, the Rights Agent will keep or cause to be kept,
at its office designated by the Rights Agent as the appropriate place for
surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates, the Rights Certificate number, the date of each of the Rights
Certificates and whether each such Rights Certificate contains a legend as set
forth in Section 4(b).
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates.
6.1. Subject to the provisions of Section 4(b), Section 7(e), Section 14 and
Section 20(k), at any time after the close of business on the Distribution Date,
and at or prior to the close of business on the earlier of the Redemption Date
or the Expiration Date, any Rights Certificate or Certificates (other than
Rights Certificates representing Rights that have been exchanged pursuant to
Section 24) may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of Preferred Share Fractions (or, upon an appropriate Section
11(a)(ii) Election or Section 24(a) Election, following a Triggering Event,
Common Shares, other securities, cash or other assets, as the case may be) as
the Rights Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged, with the form of assignment and certificate
appropriately executed, at the office of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section
14 and Section 20(k), countersign and deliver to each Person entitled thereto a
Rights Certificate or Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
6.2. Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, if so requested by the Company,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
7. Exercise of Rights; Purchase Price; Expiration Date.
7.1. Subject to the terms of Section 7(e), the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Rights Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the aggregate Purchase Price (except as provided in Section
11(q)) with respect to the total number of Preferred Share Fractions (or Common
Shares, other securities, cash or other assets, as the case may be) as to which
such surrendered Rights are then exercisable (except as provided in Section
11(q)), at or prior to the first to occur of: (i) the Final Expiration Date;
(ii) the time at which such Rights expire as provided in Section 13(d); (iii)
the time at which such Rights are redeemed as provided in Section 23; or (iv)
the time at which such Rights are exchanged as provided in Section 24 (the first
to occur of (i), (ii), (iii) and (iv) being herein referred to as the
"Expiration Date"). 7.2. The Purchase Price for each Preferred Share Fraction
pursuant to the exercise of a Right shall initially be $40, and shall be subject
to adjustment from time to time as provided in Section 11 and 13(a) and shall be
payable in accordance with Section 7(c). Anything in this Agreement to the
contrary notwithstanding, in the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Corporation shall (i) declare
or pay any dividend on the Common Shares payable in Common Shares or (ii) effect
a subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case, each
Common Share outstanding following such subdivision, combination or
consolidation shall continue to have a Right associated therewith and the
Purchase Price following any such event shall be proportionately adjusted to
equal the result obtained by multiplying the Purchase Price immediately prior to
such event by a fraction the numerator of which shall be the total number of
Common Shares outstanding immediately prior to the occurrence of the event and
the denominator of which shall be the total number of Common Shares outstanding
immediately following the occurrence of such event. The adjustment provided for
in the preceding sentence shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected.
7.3. Upon receipt of a Rights Certificate representing exercisable Rights, with
the form of election to purchase and the certificate on the reverse side thereof
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per Preferred Share Fraction (or Common Share, other
securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable tax or governmental charge,
the Rights Agent shall, subject to Section 14(b) and Section 20(k), thereupon
promptly (i) requisition from any transfer agent of the Preferred Shares (or
make available, if the Rights Agent is the transfer agent for such Preferred
Shares) certificates for the total number of Preferred Shares to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14, (iii)
after receipt of such certificates, cause the same to be delivered to or upon
the order of the registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder, and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii)) may be made by certified
bank check or money order payable to the order of the Company. In the event that
the Company is obligated to issue other securities of the Company (including,
upon an appropriate Section 11(a)(ii) Election or Section 24(a) Election, Common
Shares), pay cash and/or distribute other assets pursuant to Section 11(a), the
Company will make all arrangements necessary so that such other securities, cash
and/or other assets are available for distribution by the Rights Agent, if and
when appropriate.
7.4. In case the registered holder of any Rights Certificate shall exercise less
than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14.
7.5. Notwithstanding anything in this Agreement to the contrary, from and after
the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned
by (i) an Acquiring Person, an Adverse Person or any Associate or Affiliate of
any such Acquiring Person or Adverse Person, (ii) a transferee of an Acquiring
Person or an Adverse Person (or of any such Associate or Affiliate) who becomes
a transferee after the Acquiring Person or Adverse Person becomes such, or (iii)
a transferee of an Acquiring Person or an Adverse Person (or of any such
Associate. or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person or Adverse Person (or from any such Associate or Affiliate) to
holders of equity interests in such Acquiring Person or Adverse Person (or any
such Associate or Affiliate) or to any Person with whom the Acquiring Person or
Adverse Person (or any such Associate or Affiliate) has any continuing oral or
written plan, agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which at least a majority of the Continuing Directors
has determined is part of an oral or written plan, agreement, arrangement or
understanding that has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to ensure that the provisions of this Section
7(e) and Section 4(b) are complied with, but shall have no liability to any
holder of a Rights Certificate or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or Adverse Person or
any of their respective Affiliates, Associates or transferees hereunder.
7.6. Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported transfer or
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate following the form of assignment or
election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such assignment or exercise, and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company or the Rights Agent shall
reasonably request.
8. Cancellation and Destruction of Rights Certificates. All Rights Certificates
surrendered for the purpose of exercise, transfer, split up, combination or
exchange shall, if surrendered to the Company or any of its agents, be delivered
to the Rights Agent for cancellation or in cancelled form, or, if surrendered to
the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be
issued in lieu thereof except as expressly permitted by this Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any other Rights Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Rights Certificates to the Company,
or shall, at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
9. Reservation and Availability of Stock; Registration.
9.1. The Company covenants and agrees that it will cause to be reserved and kept
available for issuance upon the exercise of outstanding Rights as many of its
authorized and unissued Preferred Shares (and, upon an appropriate Section
11(a)(ii) Election or Section 24(a) Election, as many of its authorized and
unissued Common Shares and/or other securities or out of its authorized and
issued shares held in its treasury), which together at all times after the
Distribution Date as provided in this Agreement, including Section 11(a)(iii),
will be sufficient to permit the exercise in full of all outstanding Rights.
9.2. As long as the Preferred Shares (and, upon an appropriate Section 11(a)(ii)
Election or Section 24(a) Election, Common Shares or other securities) issuable
and deliverable upon the exercise of the Rights are listed or admitted for
trading on any national securities exchange or included for quotation on any
national market system, the Company shall use reasonable commercial efforts to
cause, from and after such time as the Rights become exercisable, all shares and
other securities reserved for such issuance to be listed or admitted for trading
on such national securities exchange or included for quotation on any such
national market system upon official notice of issuance upon such exercise.
9.3. The Company shall use reasonable commercial efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section
11(a)(iii), or as soon as is required by law following the Distribution Date, as
the case may be, a registration statement or statements under the Act, with
respect to the securities purchasable upon exercise of the Rights on an
appropriate form or forms, (ii) cause such registration statement or statements
to become effective as soon as practicable after such filing, and (iii) cause
such registration statement or statements to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities or (B)
the Expiration Date. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "Blue Sky"
laws of all states required in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed 90 days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare and file such
registration statement or statements and permit it to become effective. Upon any
such suspension, the Company shall give notice to the Rights Agent and issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a notice to the Rights Agent and a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction, if any, shall have been obtained.
9.4. The Company covenants and agrees that it will take all such action as may
be necessary to ensure that all Preferred Shares (and, upon an appropriate
Section 11(a)(ii) Election or Section 24(a) Election, Common Shares or other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares or other securities (subject to payment of the
Purchase Price), be duly and validly authorized and issued and, with respect to
Preferred Shares, Common Shares or other shares of capital stock, fully paid and
non-assessable.
9.5. The Company further covenants and agrees that it will pay when due and
payable any and all federal and state taxes and governmental charges that may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for Preferred Share Fractions (or Common Shares or other
securities, as the case may be) upon the exercise of Rights. The Company shall
not, however, be required (i) to pay any tax or governmental charge that may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of a number of Preferred Share
Fractions (or Common Shares or other securities, as the case may be) in a name
other than that of the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or (ii) to issue or deliver any certificates for
a number of Preferred Share Fractions (or Common Shares or other securities, as
the case may be) in a name other than that of the registered holder upon the
exercise of any Rights until such tax or charge shall have been paid (any such
tax or charge being payable by the holder of such Rights Certificate at the time
of surrender) or until it has been established to the Company's and Rights
Agent's satisfaction that no such tax or charge is due.
10. Capital Stock Record Date. Each Person in whose name any certificate for a
number of Preferred Share Fractions (or Common Shares or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of such Preferred Share Fractions (or
Common Shares or other securities, as the case may be) represented thereby on,
and such certificate shall be dated, the date on which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable taxes or governmental charges) was made; provided, however,
that if the date of such surrender and payment is a date upon which the transfer
books of the Company are closed, such Person shall be deemed to have become the
record holder of such shares (or other securities, as the case may be),
fractional or otherwise, on, and such certificate shall be dated, the next
succeeding Business Day on which the transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate, as such, shall not be entitled to any rights of a shareholder of
the Company with respect to shares (or other securities, as the case may be) for
which the Rights shall be exercisable, including, without limitation, the right
to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.
The Purchase Price, the number and kind of shares or other securities covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
11.1. (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on any security of the Company payable in
Preferred Shares, (B) subdivide or split the outstanding Preferred Shares, (C)
combine or consolidate the outstanding Preferred Shares into a smaller number of
shares or effect a reverse stock split of the outstanding Preferred Shares, or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e), the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, split, combination, consolidation or
reclassification, and the number and kind of shares of capital stock issuable on
such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Share transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, split, combination, consolidation or
reclassification. If an event occurs that would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Sections 23 and 24 of this Agreement, in the event:
11.1.1.1..........any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Agreement, directly or
indirectly, (1) shall merge into the Company or otherwise combine with the
Company and the Company shall be the continuing or surviving corporation of such
merger or combination and the Common Shares or other equity securities of the
Company shall remain outstanding and unchanged, (2) shall, in one transaction or
a series of transactions, transfer any assets to the Company or to any of its
Subsidiaries in exchange (in whole or in part) for Common Shares, for shares of
other equity securities of the Company or for securities exercisable for or
convertible into shares of equity securities of the Company (Common Shares or
otherwise) or otherwise obtain from the Company, with or without consideration,
any additional shares of such equity securities or securities exercisable for or
convertible into shares of such equity securities (other than pursuant to a pro
rata distribution to all holders of Common Shares or upon the exercise of Rights
or the conversion of a convertible security of the Company in accordance with
its terms), (3) shall sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise acquire or dispose of, in one transaction or a series of
transactions, to, from or with (as the case may be) the Company or any of its
Subsidiaries, assets (including securities) on terms and conditions less
favorable to the Company than the Company would be able to obtain in
arm's-length negotiation with an unaffiliated third party, other than pursuant
to a transaction set forth in Section 13(a), (4) shall receive any compensation
from the Company or any of the Company's Subsidiaries other than compensation
for full-time employment as a regular employee at rates in accordance with the
Company's (or its Subsidiaries') past practices, (5) shall receive the benefit,
directly or indirectly (except proportionately as a shareholder and except if
resulting from a requirement of law or governmental regulation), of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantage provided by the Company or any of its Subsidiaries, or
(6) shall make a tender or exchange offer (other than a Permitted Offer) for
such minimum number of shares of the common stock of the Company which, when
added to the number of shares of such common stock Beneficially Owned by such
Person prior to the making of such offer, equals or exceeds 20% of the Common
Shares then outstanding, or
11.1.1.2..........any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, any Person or entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan, or any Existing Holder (unless
such Existing Holder acquires additional Common Shares such that such Existing
Holder becomes the Beneficial Owner of at least 1% more of the Common Shares
than is the case on the date hereof), alone or together with its Affiliates or
Associates, shall, at any time after the Rights Dividend Declaration Date,
become the Beneficial Owner of 20% or more of the Common Shares then
outstanding, unless the event causing the 20% threshold to be crossed (1) is a
transaction set forth in Section 13(a), (2) is an acquisition of Common Shares
pursuant to a tender offer or an exchange offer for all outstanding shares of
Common Stock at a price and on terms determined by at least a majority of the
Continuing Directors to be (x) at a price that is fair to shareholders (taking
into account all factors which such members of the Board deem relevant
including, without limitation, prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed to realize maximum
value) and (y) otherwise in the best interests of the Company and its
shareholders, or (3) is the result of an acquisition of Common Shares by the
Company which, by reducing the number of Common Shares outstanding, increases
the proportionate number of Common Shares beneficially owned by such Person to
20% or more of the Common Shares then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of 20% or more of the Common Shares
then outstanding by reason of Common Share purchases by the Company and shall
thereafter become the Beneficial Owner of any additional Common Shares, then
such Person shall be deemed to be the Beneficial Owner of 20% or more of the
Common Shares, or
11.1.1.3..........during such time as there is an Acquiring Person, there shall
be any reclassification of securities (including any reverse stock split), or
recapitalization of the Company, or any merger or consolidation of the Company
with any of its Subsidiaries or any other transaction or series of transactions
involving the Company or any of its Subsidiaries, other than a transaction or
transactions to which the provisions of Section 13(a) apply (whether or not with
or into or otherwise involving an Acquiring Person), which has the effect,
directly or indirectly, of increasing by more than 1% the proportionate share of
the outstanding shares of any class of equity securities of the Company or any
of its Subsidiaries which is directly or indirectly beneficially owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring Person, or
11.1.1.4..........the Board shall declare any Person to be an Adverse Person,
upon a determination by at least a majority of the Continuing Directors, that
such Person, alone or together with its Affiliates and Associates, has, at any
time after the Rights Dividend Declaration Date, become the Beneficial Owner of
a substantial amount of Common Shares (which amount shall in no event be less
than 10% of the Common Shares then outstanding) and a determination by at least
a majority of the Continuing Directors, after reasonable inquiry and
investigation, including consultation with such Persons as such directors shall
deem appropriate, that (1) such Beneficial Ownership by such Person is intended
to cause the Company to repurchase the Common Shares beneficially owned by such
Person or to cause pressure on the Company to take action or enter into a
transaction or series of transactions intended to provide such Person or its
Affiliates or Associates with short-term financial gain under circumstances
where at least a majority of the Continuing Directors determines that the best
long-term interests of the Company and its shareholders would not be served by
taking such action or entering into such transaction or series of transactions
at that time or (2) such Beneficial Ownership is causing or reasonably likely to
cause a material adverse impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's ability to maintain
its competitive position) on the business or prospects of the Company;
then, promptly following the first occurrence of a Section 11(a)(ii) Event,
proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e)) shall thereafter have the right to receive,
upon exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, (x) such number of Preferred Share Fractions, or (y) at
the election of at least a majority of the Continuing Directors and in lieu of a
number of Preferred Share Fractions (a "Section 11(a)(ii) Election"), such
number of Common Shares, that equals the result obtained by (xx) multiplying the
then current Purchase Price by the then number of Preferred Share Fractions for
which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event, and (yy) dividing that product (which, following such
first occurrence, shall thereafter be referred to as the "Purchase Price" for
each Right for all purposes of this Agreement) by one one-hundredth of 50% of
the Current Market Price per Preferred Share (or 50% of the Current Market Price
per Common Share, as the case may be) on the date of such first occurrence (such
number of shares, the "Adjustment Shares")
(iii) In the event that the number of Preferred
Shares (or Common Shares, if
applicable) that are authorized by the Company's Articles of Incorporation but
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii), the Company shall: (A) determine the excess
of (1) the value of the Adjustment Shares issuable upon the exercise of a Right
(the "Current Value") over (2) the Purchase Price (such excess, the "Spread"),
and (B) with respect to each Right, make adequate provision to substitute for
the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash,
(2) a reduction in the Purchase Price, (3) Preferred Shares, Common Shares
and/or other equity securities of the Company (including, without limitation,
shares, or units of shares, of preferred stock which at least a majority of the
Continuing Directors have deemed (based on, among other things, the dividend and
liquidation rights of such preferred shares) to have substantially the same
economic value as Common Shares (such shares of preferred stock, "common stock
equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing (whichever substituted, the "Substitute
Consideration"), having an aggregate value equal to the Current Value, where
such aggregate value has been determined by at least a majority of the
Continuing Directors based upon the advice of a nationally recognized investment
banking firm selected by at least a majority of the Continuing Directors;
provided, however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within 30 days following the later of
(x) the date of the first occurrence of a Section 11(a)(ii) Event and (y) the
date on which the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of the
Purchase Price, Preferred Shares (or Common Shares, as the case may be), to the
extent available and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If at least a majority of the Continuing
Directors shall determine in good faith that it is likely that sufficient
additional Preferred Shares (or Common Shares, as the case may be) could be
authorized for issuance upon exercise in full of the Rights, the 30 day period
set forth above may be extended to the extent necessary, but not more than 90
days after the Section 11(a)(ii) Trigger Date, in order that the Company may
seek shareholder approval for the authorization of such additional shares (such
period, as it may be extended, the "Substitution Period"). To the extent that
some action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (xx) shall provide, subject to Section 7(e),
that such action shall apply uniformly to all outstanding Rights, and (yy) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall give notice to the Rights Agent and issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a notice to the Rights Agent and a public announcement at
such time as the suspension is no longer in effect. For purposes of this Section
11(a)(iii), (xxx) the value of the Preferred Shares shall be the Current Market
Price per Preferred Share on the Section 11(a)(ii) Trigger Date, (yyy) the value
of the Common Shares (if applicable) shall be the Current Market Price per
Common Share on the Section 11(a)(ii) Trigger Date, and (zzz) the value of any
other "common stock equivalent" shall be deemed to have the same value as a
Common Share on such date. Notwithstanding any other provision in this
Agreement, the Company shall not be obligated to pay Substitute Consideration
(or Preferred Shares, Common Shares and/or cash equal to the value of Rights if
and to the extent of any exercise of the Spread) in the event of any exercise of
Rights if and to the extent a determination is made by a majority of the
Continuing Directors (xxxx) that such payment could be in violation of
applicable law, or (yyyy) that such payment could result in a decrease in fair
market value per Preferred Share (or Common Share, if applicable) in excess of
that which would have occurred if sufficient Preferred Shares (or Common Shares,
if applicable) were authorized to permit exercise in full of the Rights in
accordance with Section 11(a)(ii) and such Rights were so exercised in full for
such Preferred Shares (or Common Shares, as the case may be). 11.2. In case the
Company shall fix a record date for the issuance of rights, options or warrants
to holders of any security of the Company entitling them to subscribe for or
purchase (for a period expiring within 45 calendar days after such record date)
Preferred Shares (or shares having the same rights, privileges and preferences
as the Preferred Shares ("equivalent preferred shares")) or securities
convertible into Preferred Shares or equivalent preferred shares at a price per
Preferred Share or equivalent preferred share (or having a conversion price per
share, if a security convertible into Preferred Shares or equivalent preferred
shares) less than the Current Market Price per Preferred Share on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date, plus the number of Preferred
Shares which the aggregate offering price of the total number of Preferred
Shares and/or equivalent preferred shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be the
number of Preferred Shares outstanding on such record date, plus the number of
additional Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
by delivery of consideration part or all of which may be in a form other than
cash, the value of such consideration shall be as determined in good faith by at
least a majority of the Continuing Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. Preferred Shares owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such rights, options or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
11.3. In case the Company shall fix a record date for a distribution to all
holders of Preferred Shares (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
dividend out of the earnings or retained earnings of the Company), assets (other
than a regular quarterly dividend referred to above or a dividend payable in
Preferred Shares, but including any dividend payable in stock other than
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b)), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
Current Market Price per Preferred Share on such record date, less the fair
market value (as determined in good faith by at least a majority of the
Continuing Directors, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a Preferred Share and the denominator of which shall be such
Current Market Price per Preferred Share. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
11.4. (i)......For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii), the "Current Market Price" per
Common Share on any date shall be deemed to be the average of the daily closing
prices per share of such Common Shares for the 30 consecutive Trading Days
immediately prior to such date, and for purposes of computations made pursuant
to Section 11(a)(iii), the "Current Market Price" per share of Common Shares on
any date shall be deemed to be the average of the daily closing prices per share
of such Common Shares for the 10 consecutive Trading Days immediately following
such date; provided, however, that in the event that the Current Market Price
per share of the Common Shares is determined during a period following the
announcement by the issuer of such Common Shares of (i) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares (other than the Rights), or (ii) any
subdivision, split, combination or reclassification of such Common Shares, and
prior to the expiration of the requisite 30 Trading Day or 10 Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "Current Market Price" shall
be properly adjusted to take into account ex-dividend trading. The closing price
for each Trading Day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Shares are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted to trading or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in
use, or, if on any such date the Common Shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Shares selected by the
Board. If on any such date no market maker is making a market in the Common
Shares, the fair value of such shares on such date as determined in good faith
by at least a majority of the Continuing Directors shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange or national market system on which the Common Shares are listed or
admitted to trading is open for the transaction of business or, if the Common
Shares are not listed or admitted to trading on any national securities exchange
or national market system, a Business Day. If the Common Shares are not publicly
held or not so listed or traded, "Current Market Price" per share shall mean the
fair value per share as determined in good faith by at least a majority of the
Continuing Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation
hereunder, the "Current Market Price" per
Preferred Share shall be determined in the same manner as set forth above for
the Common Shares in Section 11(d)(i) (other than the last sentence thereof). If
the Current Market Price per Preferred Share cannot be determined in the manner
provided above or if the Preferred Shares are not publicly held or listed or
traded in a manner described in Section 11(d)(i), the "Current Market Price" per
Preferred Share shall be conclusively deemed to be an amount equal to $100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares occurring
after the date of this Agreement) multiplied by the Current Market Price per
Common Share. If neither the Common Shares nor the Preferred Shares are publicly
held or so listed or traded, "Current Market Price" per Preferred Share shall
mean the fair value per share as determined in good faith by at least a majority
of the Continuing Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
For all purposes of this Agreement, the "Current Market Price" of a Preferred
Share Fraction shall be equal to the "Current Market Price" of one Preferred
Share divided by 100.
11.5. Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a Common Share or other share or
one-millionth of a Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three years from the date of the
transaction which mandates such adjustment or (ii) the Expiration Date.
11.6. If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a), the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Sections 11(a),
(b), (c), (e), (g), (h), (i), (j), (k), (m) and (q), and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply on
like terms to any such other shares.
11.7. All Rights originally issued by the Company subsequent to any adjustment
made to the Purchase Price hereunder shall evidence the right to purchase, at
the adjusted Purchase Price, the number Preferred Share Fractions purchasable
from time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
11.8. Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of Preferred Share
Fractions (calculated to the nearest one-millionth of a Preferred Share)
obtained by (i) multiplying (A) the number of Preferred Share Fractions covered
by a Right immediately prior to this adjustment, by (B) the Purchase Price in
effect immediately prior to such adjustment of the Purchase Price, and (ii)
dividing the product so obtained by the Purchase Price in effect immediately
after such adjustment of the Purchase Price.
11.9. The Company, acting by the decision of at least a majority of the
Continuing Directors, may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of Preferred Share Fractions purchasable upon the exercise of a Right.
Each of the Rights outstanding after the adjustment in the number of Rights
shall be exercisable for the number of Preferred Share Fractions for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest one-ten-thousandth of a Preferred Share)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 10 Business Days later than the date of the
public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
11.10. Irrespective of any adjustment or change in the Purchase Price or the
number of Preferred Share Fractions issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to
express the Purchase Price per Preferred Share Fraction and the number of
Preferred Share Fractions which were expressed in the initial Rights
Certificates issued hereunder.
11.11. Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated or par value, if any, of the number of
Preferred Share Fractions issuable upon exercise of the Rights, the Company
shall take the corporate action, if any, which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and non-assessable Preferred Share Fractions at such adjusted
Purchase Price.
11.12. In any case in which this Section 11 shall require that an adjustment in
the Purchase Price be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event the issuance
to the holder of any Right exercised after such record date the Preferred Share
Fractions and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above the number of Preferred Share Fractions and
other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.
11.13. Anything in this Section 11 to the contrary notwithstanding, the Company
shall be entitled to make such reductions in the Purchase Price, in addition to
those adjustments expressly required by this Section 11, as and to the extent
that in their good faith judgment at least a majority of the Continuing
Directors shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Shares, (ii) issuance wholly for cash of any
Preferred Shares at less than the Current Market Price, or (iii) issuance wholly
for cash of Preferred Shares or securities which by their terms are convertible
into or exchangeable for Preferred Shares, (iv) stock dividends or (v) issuance
of rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Preferred Shares shall not be taxable to such
shareholders.
11.14. The Company covenants and agrees that it shall not, at any time after the
Distribution Date, (i) consolidate with any Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(o)), (ii) merge with
or into any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)), or (iii) sell or transfer (or
permit any Subsidiary to sell or transfer), in one transaction, or a series of
related transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o)), if (A) at the time of or immediately after such consolidation, merger,
sale or transfer there are any rights, warrants or other instruments or
securities outstanding or agreements in effect that would substantially diminish
or otherwise eliminate the benefits intended to be afforded by the Rights or (B)
prior to, simultaneously with or immediately after such consolidation, merger,
sale or transfer, the shareholders of the Person who constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) shall have
received a distribution of Rights previously owned by such Person or any of its
Affiliates and Associates.
11.15. The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23, Section 24 or Section 27, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
11.16. Anything in this Agreement to the contrary notwithstanding, in the event
that the Company shall at any time after the Rights Dividend Declaration Date
and prior to the Distribution Date (i) declare or pay any dividend on the
outstanding Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares, or (iii) combine the outstanding Common Shares into a
smaller number of Common Shares, the number of Rights associated with each
Common Share then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each Common Share following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction, the
numerator of which shall be the number of Common Shares outstanding immediately
prior to the occurrence of such event and the denominator of which shall be the
total number of Common Shares outstanding immediately following the occurrence
of such event.
11.17. In the event that the Rights become exercisable following a Section
11(a)(ii) Event, the Company, by action of at least a majority of the Continuing
Directors, may permit the Rights, subject to Section 7(e), to be exercised for
50% of the Preferred Share Fractions (or other securities or assets to be
substituted for the Adjustment Shares pursuant to Section 11(a)(iii), Common
Shares, or cash, as the case may be) that would otherwise be purchasable under
Section 11(a), in consideration of the surrender to the Company of the Rights so
exercised and without other payment of the Purchase Price. Rights exercised
under this Section 11(q) shall be deemed to have been exercised in full and
shall be canceled.
12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an
adjustment is made as provided in Section 11 or Section 13, the Company shall
(a) promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment, (b) promptly file with
the Rights Agent, and with each transfer agent for the Preferred Shares and the
Common Shares, a copy of such Certificate, and (c) mail a brief summary thereof
to each holder of a Rights Certificate (or, if prior to the Distribution Date,
to each holder of a certificate representing Common Shares) in accordance with
Section 26. The Rights Agent shall be fully authorized to rely and be protected
in relying on any such certificate and on any adjustment therein contained and
shall be deemed not to have knowledge of any adjustment unless and until it
shall have received such certificate.
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
13.1. In the event that, following the Stock Acquisition Date, directly or
indirectly, (i) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o)), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) any Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(o)) shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or part of
the outstanding Common Shares shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (iii) the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of which complies with Section 11(o), and other
than a party holding a security interest in such transferred assets, and other
than a party to which the Company pledges such assets or to which the Company
gives a security interest in such assets), then, and in each such case and
except as contemplated by Section 13(d), proper provision shall be made so that:
(A) each holder of a Right, except as provided in Section 7(e), shall thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, non-assessable and freely tradable
Common Shares of the Principal Party, not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of
Preferred Share Fractions for which a Right is exercisable immediately prior to
the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has
occurred prior to the first occurrence of a Section 13 Event, multiplying the
number of such Preferred Share Fractions for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event by the
Purchase Price in effect immediately prior to such first occurrence), and
dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right for all
purposes of this Agreement) by (2) 50% of the Current Market Price per Common
Share of such Principal Party on the date of consummation of such Section 13
Event; (B) such Principal Party shall thereafter be liable for, and shall be
deemed to have assumed, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement; (C) the term "Company"
shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (D) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise of
the Rights; and (E) the provisions of Section 11(a)(ii) shall be of no effect
following the first occurrence of any Section 13 Event.
13.2. "Principal Party" shall mean (i) in the case of any transaction described
in Section 13(a)(i) or (ii), the Person that is the issuer of any securities
into which Common Shares are converted in such merger or consolidation, and if
no securities are so issued, the Person that is the other party to such merger
or consolidation, and (ii) in the case of any transaction described in Section
13(a)(iii), the Person that is the party receiving the greatest portion of the
assets or earning power transferred pursuant to such transaction or
transactions; provided, however, that in any such case, (A) if the Common Shares
of such Person are not at such time and have not been continuously over the
preceding 12 month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Shares of which are and have been so registered, "Principal Party" shall refer
to such other Person; and (B) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of two or more of which
are and have been so registered, "Principal Party" shall refer to whichever of
such Persons is the issuer of the Common Shares having the greatest aggregate
market value.
13.3. (i)......The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized Common Shares which have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in Section 13(a) and (b) and further providing that, as soon as
practicable after the date of any consolidation, merger, sale or transfer of
assets mentioned in Section 13(a), the Principal Party will (A) prepare and file
a registration statement under the Act with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form, and
will use its best efforts to cause such registration statement to (1) become
effective as soon as practicable after such filing and (2) remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
Expiration Date, and (B) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act.
(ii) The provisions of this Section 13 shall
similarly apply to successive mergers
or consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(iii) Notwithstanding anything in this Agreement to
the contrary, Section 13 shall
not be applicable to a transaction described in Section 13(a)(i) or (ii) if (i)
such transaction is consummated with a Person or Persons (or a Subsidiary of any
such Person or Persons) who acquired Common Shares pursuant to a tender offer or
exchange offer for all outstanding Common Shares which was approved by at least
a majority of the Continuing Directors in the manner described in Section
11(a)(ii)(B), (ii) the price per Common Share offered in such transaction is not
less than the price per Common Share paid to all holders of Common Shares whose
shares were purchased pursuant to such tender offer or exchange offer, and (iii)
the form of consideration being offered to the remaining holders of Common
Shares pursuant to such transaction is the same as the form of consideration
paid pursuant to such tender offer or exchange offer. Upon consummation of any
such transaction contemplated by Section 13(d), all Rights hereunder shall
expire.
14. Fractional Rights and Fractional Shares.
14.1. The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(p), or to distribute
Rights Certificates that evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For purposes of this Section 14(a), the current market value of a whole
Right shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading, or if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by at least a
majority of the Continuing Directors. If on any such date no such market maker
is making a market in the Rights the fair value of the Rights on such date as
determined in good faith by at least a majority of the Continuing Directors
shall be used.
14.2. The Company shall not be required to issue fractions of Preferred Shares
upon exercise of the Rights or to distribute certificates that evidence
fractional Preferred Shares, except in each case for fractions which are
integral multiples of Preferred Shares. In lieu of fractional Preferred Shares
which are not integral multiples of Preferred Shares, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Preferred Share. For purposes of this Section 14(b), the
current market value of a Preferred Share shall be the closing price of a
Preferred Share (as determined pursuant to Section 11(d)(ii)) for the Trading
Day immediately prior to the date of such exercise.
14.3. Following the occurrence of a Triggering Event and at or after a Section
11(a)(ii) Election or Section 24(a) Election, the Company shall not be required
to issue fractions of Common Shares upon exercise of the Rights or to distribute
certificates that evidence fractional Common Shares. In lieu of fractional
Common Shares, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one Common
Share. For purposes of this Section 14(c), the current market value of one
Common Share shall be the closing price of one Common Share (as determined
pursuant to Section 11(d)(i)) for the Trading Day immediately prior to the date
of such exercise.
14.4. In the event the Company determines it advisable to issue fractions of
Rights, fractions of Preferred Shares for fractions which are not integral
multiples of Preferred Shares or fractions of Common Shares as permitted in this
Agreement, the Company shall immediately so notify the Rights Agent, and in no
event later than 5 Business Days prior to the date such fractions are to be
issued. The Company and the Rights Agent shall then adopt mutually agreeable
procedures with respect to any such issuance. In the event the Company and the
Rights Agent are unable to agree upon such procedures, the Rights Agent may
resign and be discharged from its duties under this Agreement or the Company may
remove the Rights Agent, both as set forth in Section 21; provided, however,
that only one day's prior written notice need be given of such resignation or
removal.
14.5. The holder of a Right by the acceptance of the Right expressly waives his
right to receive any fractional Rights, any fractions of Preferred Shares for
fractions which are not integral multiples of Preferred Shares, or any
fractional Common Shares (if applicable) upon exercise of a Right, except as
permitted by this Section 14.
15. Rights of Action. All rights of action in respect of this Agreement, except
the rights of action of the Rights Agent with respect to its rights hereunder
against the Company, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered holders
of the Common Shares). Any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of the Common Shares), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights in the manner provided in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
16. Agreement of Rights Holders. Every holder of a Right by accepting the same
consents and agrees with the Company and the Rights Agent and with every other
holder of a Right that:
16.1. prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Shares;
16.2. after the Distribution Date, the Rights Certificates are transferable only
on the registry books of the Rights Agent if surrendered at the office of the
Rights Agent designated for such purposes, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate forms and certificates
duly completed and fully executed and otherwise complying with any other
requirements set forth in this Agreement;
16.3. subject to Section 6(a) and Section 7(f), the Company and the Rights Agent
may deem and treat the Person in whose name a Rights Certificate (or, prior to
the Distribution Date, the associated Common Share Certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Rights Certificate or the
associated Common Share Certificate made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent, subject to the last sentence of Section 7(e), shall be required to
be affected by any notice or knowledge to the contrary; and
16.4. notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to each other, any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
17. Rights Certificate Holder Not Deemed a Shareholder. No holder, as such, of
any Rights Certificate shall be entitled to vote, receive dividends or be deemed
for any purpose the holder of the number of Preferred Share Fractions or any
other securities of the Company (including the Common Shares) which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in Section 25), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
18. Matters Concerning the Rights Agent.
18.1. The Company agrees to pay to the Rights Agent reasonable compensation for
all services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the negotiation, acceptance, administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the negotiation,
acceptance, administration and execution of this Agreement and the exercise and
performance of its duties hereunder, including without limitation the costs and
expenses of defending against and appealing any such claim of liability.
18.2. The Rights Agent shall be authorized to rely upon and shall be protected
and shall incur no liability for or in respect of any action taken, suffered or
omitted by it in connection with its negotiation, acceptance, administration and
execution of this Agreement or the exercise and performance of its duties
hereunder in reliance upon any Rights Certificate or certificate for Common
Shares or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice,
instruction, direction, consent, certificate, statement or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20.
19. Merger or Consolidation or Change of Name of Rights Agent.
19.1. Any Person into which the Rights Agent or any successor Rights Agent may
be merged or with which it may be consolidated, or any Person resulting from any
merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any Person succeeding to the corporate trust or stock
transfer business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21. In case at the time
such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of a
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
19.2. In case at any time the name of the Rights Agent shall be changed and at
such time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
20. Duties of Rights Agent. The Rights Agent shall have only the duties and
obligations expressly set forth in this Agreement. There shall be no implied
duties or obligations of the Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
20.1. The Rights Agent may consult with legal counsel (who may be legal counsel
for the Company), and the advice of such counsel shall be full and complete
authorization and protection to the Rights Agent as to any action taken,
suffered or omitted by it in good faith and in accordance with such advice.
20.2. Whenever in the administration, exercise and performance of its duties
under this Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter (including without limitation, the identity of any Acquiring
Person or Adverse Person and the determination of "Current Market Price") be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and any
such certificate shall be full authorization and protection to the Rights Agent
for and the Rights Agent shall incur no liability for or in respect of any
action taken, suffered or omitted in good faith by it under the provisions of
this Agreement in reliance upon such certificate.
20.3. The Rights Agent shall not be liable or responsible hereunder except for
its own negligence, bad faith or willful misconduct.
20.4. The Rights Agent shall not be liable or responsible for or by reason of
any of the representations, warranties, statements of fact or recitals contained
in this Agreement or in the Rights Certificates or be required to verify the
same (except as to its countersignature on such Rights Certificates), but all
such representations, warranties, statements and recitals are and shall be
deemed to have been made by the Company only.
20.5. The Rights Agent shall not be under any liability or responsibility in
respect of the legality, validity or enforceability of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the legality, validity, enforceability or execution of
any Rights Certificate (except its countersignature thereof); nor shall it be
liable or responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor shall it be liable
or responsible for any adjustment required under the provisions of Section 11,
Section 13 or Section 24 or liable or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt of a certificate describing any
such adjustment delivered pursuant to Section 12); nor shall it be deemed to
make any representation or warranty as to the authorization or reservation of
any Preferred Shares or Common Shares to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any Preferred Shares or Common Shares
will, when so issued, be validly authorized and issued, fully paid and
non-assessable or as to any other matter except as expressly set forth herein.
20.6. The Company agrees that it will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered all such further
and other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement. 20.7. The Rights Agent is hereby authorized and
directed to accept instructions or direction with respect to the administration
of this Agreement and the exercise and performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company,
and to apply to such officers for advice, instructions or direction in
connection with its duties, and it shall not be liable or responsible for any
action taken, suffered or omitted by it in good faith in accordance with
instructions or direction of any such officer. Any application by the Rights
Agent for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken, suffered or omitted
by the Rights Agent with respect to its duties or obligations under this Rights
Agreement and the date on and/or after which such action shall be taken,
suffered or omitted and the Rights Agent shall not be liable or responsible for
any action taken, suffered or omitted in accordance with a proposal included in
any such application on or after the date specified therein (which date shall
not be less than five Business Days after the date any such officer actually
receives such application, unless any such officer shall have consented in
writing to an earlier date) unless, prior to taking, suffering or omitting any
such action, the Rights Agent has received written instructions in response to
such application specifying the action to be taken, suffered or omitted.
20.8. The Rights Agent and any shareholder, director, officer, employee, agent,
contractor or affiliate of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent or any shareholder, director, officer, employee, agent, contractor or
affiliate of the Rights Agent from acting in any other capacity for the Company
or for any other Person.
20.9. The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be liable or responsible
for any act, default, neglect or misconduct of any such attorneys or agents or
for any loss or damages to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.
20.10. No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or exercise of its rights unless it
shall have been first indemnified therefor to its satisfaction.
20.11. If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer until it has received instructions with respect
thereto from the Company.
21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may
resign and be discharged from its duties under this Agreement upon 30 days'
notice in writing mailed to the Company, and to each transfer agent of the
Common Shares and the Preferred Shares the existence of which the Rights Agent
has received notice from the Company, by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and the Preferred Shares, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a corporation organized and doing business under the laws of the United States,
the Commonwealth of Pennsylvania or the State of New York (or of any other state
of the United States so long as such corporation is authorized to do business as
a bank or trust company in the Commonwealth of Pennsylvania or the State of New
York) in good standing, having an office in the Commonwealth of Pennsylvania or
the State of New York, which is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus adequate in the judgment of at least
a majority of the Continuing Directors to assure the performance of its duties
hereunder and the protection of the interests of the Company and the holders of
Rights, or (b) an Affiliate of a corporation described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
and the Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Rights Certificates or, prior to the Distribution Date, to the
registered holders of the Common Shares. Failure to give any notice provided for
in this Section 21 or to appoint a successor Rights Agent, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
22. Issuance of New Rights Certificates. Notwithstanding any of the provisions
of this Agreement or of the Rights to the contrary, the Company may, at its
option, issue new Rights Certificates evidencing Rights in such form as may be
approved by the Board to reflect any adjustment or change in the Purchase Price
and the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the provisions
of this Agreement. In addition, in connection with the issuance or sale of
Common Shares following the Distribution Date and prior to the Expiration Date,
the Company (a) shall, with respect to Common Shares so issued or sold pursuant
to the exercise of stock options, grants or awards outstanding on the
Distribution Date under any benefit plan or arrangement for employees or
directors, or upon the exercise, conversion or exchange of securities issued by
the Company prior to the Distribution Date, and (b) may, in any other case, if
deemed necessary or appropriate by at least a majority of the Continuing
Directors, issue Rights Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) no
such Rights Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance could create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of issuance thereof.
23. Redemption and Termination.
23.1. The Board, acting by at least a majority of the Continuing Directors, may,
at its option, at any time prior to the first to occur of the close of business
on (i) the third Business Day following the Stock Acquisition Date (or, if the
Stock Acquisition Date shall have occurred prior to the Record Date, the close
of business on the tenth Business Day following the Record Date), (ii) the tenth
Business Day after a determination, pursuant to Section 11(a)(ii)(D), that a
Person is an Adverse Person, or (iii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.01
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price")
and the Company may, at its option, pay the Redemption Price in Preferred Shares
(based on the "Current Market Price," of the Preferred Shares at the time of
redemption), Common Shares (based on the "Current Market Price," of the Common
Shares at the time of redemption) or cash. If, following the occurrence of a
Stock Acquisition Date and following the expiration of the right of redemption
set forth above in this Section 23(a) but prior to any Triggering Event, either
(A)(1) a Person who is an Acquiring Person shall have transferred or otherwise
disposed of a number of Common Shares in one transaction or series of
transactions, not directly or indirectly involving the Company or any of its
Subsidiaries, which did not result in the occurrence of a Triggering Event such
that such Person is thereafter a Beneficial Owner of 10% or less of the
outstanding Common Shares, and (2) there are no other Persons, immediately
following the occurrence of the event described in the preceding clause (A)(1),
who are Acquiring Persons, and (3) at least a majority of the Continuing
Directors approve the reinstatement of the right of redemption pursuant to this
Section 23, or (B)(1) at least a majority of the Continuing Directors approves
the consolidation, merger or other combination of the Company with or into, or
the sale or other transfer (either by the Company or one or more of its
Subsidiaries), in one transaction or a series of related transactions, of more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole), to a Person other than the Acquiring Person (or any
Associate or Affiliate of such Acquiring Person) who caused the occurrence of
such Stock Acquisition Date, and (2) at least a majority of the Continuing
Directors, as part of the approval of such an event described in the preceding
clause (B)(1), approves the reinstatement of the right of redemption pursuant to
this Section 23, then, in either such case, the right of redemption shall be
reinstated and thereafter be subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board ordering the redemption of the
Rights, evidence of which shall have been filed with the Rights Agent, and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. Promptly after
the action of the Board ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner provided in Section 26
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. 24.
Exchange.
24.1. The Board, acting by at least a majority of the Continuing Directors, may,
at its option, at any time after a Section 11(a)(ii) Event, exchange all or part
of the then outstanding and exercisable Rights (which (i) shall not include
Rights that have become void pursuant to the provisions of Section 7(e), and
(ii) shall include, without limitation, any Rights issued after the Distribution
Date in connection with the exercise of options pursuant to the Company's
employee benefit plans, where such option is exercised for securities of the
Company or surrendered for cash) for Preferred Share Fractions (or, at the
election of at least a majority of the Continuing Directors (a "Section 24(a)
Election"), Common Shares) at an exchange ratio of one Preferred Share Fraction
(or Common Share, as the case may be) per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter referred to as the
"Exchange Ratio").
24.2. Immediately upon the action of the Board ordering the exchange of any
Rights pursuant to Section 24(a) and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall to be receive that number of
Preferred Share Fractions (or Common Shares, as the case may be) equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly notify the Rights Agent and give public notice of any
such exchange; provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry book of the Rights Agent.
Any notice which is mailed in the manner provided in Section 26 shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of Preferred Share
Fractions (or Common Shares, as the case may be) for Rights will be effected
and, in the event of any partial exchange, shall be effected pro rata based on
the number of Rights (other than Rights which have become void pursuant to the
provisions of Section 7(e)) held by each holder of Rights.
24.3. In the event that there shall not be sufficient Preferred Shares (or
Common Shares, if applicable) issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company shall take all such action as may be necessary to
authorize additional Preferred Shares (or Common Shares, as the case may be) for
issuance upon exchange of the Rights.
24.4. The Company shall not be required to issue fractions of Preferred Shares
or to distribute certificates which evidence fractional Preferred Shares, except
in each case for fractions which are integral multiples of Preferred Shares. In
lieu of such fractional Preferred Shares which are not integral multiples of
Preferred Shares, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Preferred Shares would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Preferred Share, as determined pursuant to
Section 11(d)(ii), for the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.
24.5. If applicable, the Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this Section 24(e), the current market value of a whole Common Share
shall be the closing price per Common Share (as determined pursuant to the
second sentence of Section 11(d)(i)) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.
25. Notice of Certain Events.
25.1. In case the Company shall propose, at anytime after the Distribution Date,
(i) to pay any dividend payable in stock of any class to the holders of
Preferred Shares or to make any other distribution to the holders of Preferred
Shares (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), (ii) to offer to the holders of Preferred Shares
rights or warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of the Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o)), or to effect any sale or other transfer (or to permit one
or more of its Subsidiaries to effect any sale or other transfer), in one
transaction or a series of related transactions, of more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o)), or (v)
to effect the liquidation, dissolution or winding up of the Company, then, in
each such case, the Company shall give to each holder of a Rights Certificate,
to the extent feasible and in accordance with Section 26, and to the Rights
Agent a notice of such proposed action, which shall specify the record date for
the purposes of such stock dividend or distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of Preferred Shares, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
Section 25(a)(i) or (ii) at least five Business Days prior to the record date
for determining holders of Preferred Shares for purposes of such action, and in
the case of any such other action, at least five Business Days prior to the date
of the taking of such proposed action or the date of participation therein by
the holders of Preferred Shares, whichever shall be the earlier.
25.2. In case any of the events set forth in Section 11(a)(ii) shall occur,
then, in any such case, (i) the Company shall as soon as practicable thereafter
give to each holder of a Right, to the extent feasible and in accordance with
Section 26, and to the Rights Agent a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii), and (ii) in the event of an appropriate Section
11(a)(ii) Election or Section 24(a) Election, all references in Section 25(a)
shall be deemed thereafter to refer to Common Shares and/or, if appropriate,
other securities.
26. Notices.
26.1. Notices, communications or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Penn National Gaming, Inc.
Wyomissing Professional Center
825 Berkshire Boulevard
Suite 200
Wyomissing, PA 19610
Attention: Mr. Peter M. Carlino
with a copy to:
Albert S. Dandridge, III, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson, LLP
38th Floor
1735 Market Street
Philadelphia, PA 19103
26.2. Subject to the provisions of Section 21, notices, communications or
demands authorized by this Agreement to be given or made by the Company or by
the holder of any Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
Continental Stock Transfer and Trust Company
72 Reade Street
New York, New York 10007
Attention: Compliance Department.
26.3. Notices, communications or demands authorized by this Agreement to be
given or made by the Company or the Rights Agent to the holder of any Rights
Certificate (or, if prior to the Distribution Date, to the holder of
certificates representing Common Shares) shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed to such holder at the
address of such holder as shown on the registry books of the Company, the
transfer agent for the Common Shares or the Rights Agent, as appropriate.
27. Supplements and Amendments. Prior to the Distribution Date and subject to
the penultimate sentence of this Section 27, the Company may, and the Rights
Agent shall, if the Company (acting by at least a majority of the Continuing
Directors) so directs, supplement or amend any provision of this Agreement
without the approval of any holders of certificates representing Common Shares.
From and after the Distribution Date and subject to the penultimate sentence of
this Section 27, the Company may, and the Rights Agent shall, if the Company
(acting by at least a majority of the Continuing Directors) so directs,
supplement or amend this Agreement without the approval of any holders of Rights
Certificates in order (a) to cure any ambiguity, (b) to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (c) to shorten or lengthen any time period hereunder,
or (d) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person,
an Adverse Person or an Affiliate or Associate of any such Person); provided,
this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (c) of this sentence, (i) a time period relating to when the Rights may
be redeemed at such time as the Rights are not then redeemable, or (ii) any
other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights. Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in this Agreement to
the contrary, no supplement or amendment shall be made which (i) changes the
Redemption Price, the Final Expiration Date, the Purchase Price or the number of
Preferred Share Fractions for which a Right is exercisable or (ii) without the
consent of the Rights Agent, substantially changes the nature of or increases
the duties, obligations, responsibilities or liabilities of the Rights Agent
hereunder. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Shares.
28. Successors. All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Rights Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
29. Determinations and Actions by the Board. For all purposes of this Agreement,
any calculation of the number of Common Shares outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding Common Shares of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General
Rules and Regulations under the Exchange Act. The Board (where specifically
provided for herein, acting by at least a majority of the Continuing Directors)
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board (where
specifically provided for herein, acting by at least a majority of the
Continuing Directors) or to the Company (where specifically provided for herein,
acting by at least a majority of the Continuing Directors), or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (a) interpret the provisions of this
Agreement, and (b) make all calculations and determinations deemed necessary or
advisable for the administration of this Agreement (including a determination to
redeem or not redeem the Rights or to amend or supplement the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (ii) below, all omissions with respect to the foregoing)
which are done or made by the Board (where specifically provided for herein,
acting by at least a majority of the Continuing Directors) in good faith
(provided that the Rights Agent shall be conclusively entitled to assume that
such actions are in good faith), shall (i) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Rights and all other parties,
and (ii) not subject the Board or the Continuing Directors to any liability to
the holders of the Rights.
30. Benefits of this Agreement. Nothing in this Agreement shall be construed to
give to any Person other than the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Shares) any legal or equitable right, remedy or
claim under this Agreement but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, registered holders
of the Common Shares).
31. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable for any purpose or under any set of circumstances
or as applied to any Person, such invalid, void or unenforceable term,
provision, covenant or restriction shall continue in effect to the maximum
extent possible for all other purposes, under all other circumstances and as
applied to all other Persons, and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; provided,
however, that notwithstanding anything in this Agreement to the contrary, if any
such term, provision, covenant or restriction is held by such court or authority
to be invalid, void or unenforceable and at least a majority of the Continuing
Directors determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose of effect of
this Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business on the tenth
Business Day following the date of such determination by such Continuing
Directors. Without limiting the foregoing, if any provisions requiring that a
determination be made by less than the entire Board (or at a time or with the
concurrence of a group of directors consisting of less than the entire Board) is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, such determination shall then be made by the Board in
accordance with applicable law and the Company's articles of incorporation and
by-laws.
32. Governing Law. This Agreement, each Right and each Rights Certificate issued
hereunder shall be deemed to be a contract made under the laws of the
Commonwealth- of Pennsylvania and for all purposes shall be governed by and
construed in accordance with the laws of such Commonwealth applicable to
contracts made and to be performed entirely within such Commonwealth.
33. Counterparts. This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
Descriptive Headings. Descriptive headings of the Sections of
this Agreement are inserted for convenience of reference only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: ......... PENN NATIONAL GAMING, INC.
By:/s/Robert S. Ippolito By: /s/Peter M. Carlino___
Name: Robet S. Ippolito Name: Peter M. Carlino
Title: Secretary/Treasurer Title: Chairman and Chief
Executive Officer
[Corporate Seal]
Attest: ......... CONTINENTAL STOCK TRANSFER
......... AND TRUST COMPANY
By: /s/Thomas Jennings By:_/s/William F. Seegraber
Name: Thomas Jennings Name: William F. Seegraber
Title: Assistant Secretary Title: Vice President
[Corporate Seal]
Exhibit A
RESOLUTIONS TO BE ADOPTED BY
THE BOARD OF DIRECTORS
OF
PENN NATIONAL GAMING, INC.
May 20, 1998
PREAMBLE
WHEREAS, the Board of Directors deems it desirable and in the
best interests of the Company and its shareholders that steps be taken to
preserve for shareholders the long-term value of the Company in the event of an
attempted takeover of the Company; and
WHEREAS, the Board of Directors believes that a dividend to
holders of the Company's Common Stock, par value $.01 per share (the "Common
Shares"), of rights to purchase fractional shares of Series A Preferred Stock
(the "Preferred Stock"), on the terms and subject to the conditions hereinafter
provided, is in the best interests of the Company and will contribute to the
preservation of the Company's long-term value for its shareholders; and in
arriving at this belief, the Board also considered the effects upon employees,
suppliers and customers of the Company, and upon communities in which offices or
other establishments of the Company are located and all other pertinent factors;
and
WHEREAS, the Board of Directors wishes to create the Preferred
Stock, and designate the number of shares thereof and the voting powers,
preferences, rights and restrictions thereof.
CREATION OF SERIES A PREFERRED STOCK
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
expressly vested in the Board of Directors of Penn National Gaming, Inc. (the
"Company") by Article 4(b) of the Articles of Incorporation of the Company, the
Board of Directors hereby creates the first series of Preferred Stock, par value
$0.01 per share, which shall consist of 400,000 shares and shall be designated
as the Preferred Stock, and fixes and determines the voting rights,
designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights and other special or relative rights
thereof as follows:
Section 1. Dividends and Distributions:
(a) The rate of dividends payable per share of Preferred Stock
on the first day of March, June, September and December in each year or such
other quarterly payment date as shall be specified by the Board of Directors
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of the Preferred Stock, shall be
(rounded to the nearest cent) equal to the product of 100 multiplied by the
aggregate per share amount of all cash dividends, and the product of 100
multiplied by the aggregate per share amount (payable in cash, based upon the
fair market value at the time the non-cash dividend or other distribution is
declared or paid as determined in good faith by the Board of Directors) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, $.01 par
value, of the Company since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of the Preferred Stock,
subject to the provision for adjustment hereinafter set forth. Dividends on the
Preferred Stock shall be paid out of funds legally available for such purpose.
In the event the Company shall at any time after May 20, 1998 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
then in each such case the amounts to which holders of Preferred Stock were
entitled immediately prior to such event under clause (ii) of the preceding
sentence shall be adjusted by multiplying each such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) Dividends shall begin to accrue and be cumulative on
outstanding Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
Section 2. Voting Rights. In addition to any other voting
rights required by law, the holders of Preferred Stock shall have the following
voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each Preferred Stock shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the Shareholders of the Company. In the event the
Company shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, then in each such case the number
of votes per share to which holders of Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) In the event that dividends on the Preferred Stock shall
be in arrears to an amount equal to six full quarterly dividends thereon, the
holders of such Preferred Stock shall become entitled to the extent hereinafter
provided to vote noncumulatively at all elections of directors of the Company,
and to receive notice of all Shareholders' meetings to be held for such purpose.
At such meetings, to the extent that directors are being elected, the holders of
such Preferred Stock voting as a class shall be entitled to elect two members of
the Board of Directors of the Company; and all other directors of the Company
shall be elected by all Shareholders of the Company entitled to vote in the
election of directors. Such voting rights of the holders of such Preferred Stock
shall continue until all accumulated and unpaid dividends thereon shall have
been paid or funds sufficient therefor set aside, whereupon all such voting
rights of the holders of shares of such series shall cease, subject to being
again revived from time to time upon the reoccurrence of the conditions above
described as giving rise thereto.
At any time when such right to elect directors separately as a
class shall have so vested, the Company may, and upon the written request of the
holders of record of not less than 20% of the then outstanding total number of
shares of all the Preferred Stock having the right to elect directors in such
circumstances shall, call a special meeting of holders of such Preferred Stock
for the election of directors. In the case of such a written request, such
special meeting shall be held within 90 days after the delivery of such request,
and, in either case, at the place and upon the notice provided by law and in the
By-laws of the Company; provided that the Company shall not be required to call
such a special meeting if such request is received less than 120 days before the
date fixed for the next ensuing annual or special meeting of Shareholders of the
Company. Upon the mailing of the notice of such special meeting to the holders
of such Preferred Stock, or, if no such meeting be held; then upon the mailing
of the notice of the next annual or special meeting of Shareholders for the
election of directors, the number of directors of the Company shall, ipso facto,
be increased to the extent, but only to the extent, necessary to provide
sufficient vacancies to enable the holders of such Preferred Stock to elect the
two directors hereinabove provided for, and all such vacancies shall be filled
only by vote of the holders of such Preferred Stock as hereinabove provided.
Whenever the number of directors of the Company shall have been increased, the
number as so increased may thereafter be further increased or decreased in such
manner as may be permitted by the By-laws and without the vote of the holders of
Preferred Stock, provided that no such action shall impair the right of the
holders of Preferred Stock to elect and to be represented by two directors as
herein provided.
As long as the holders of Preferred Stock are entitled
hereunder to voting rights, any vacancy in the Board of Directors caused by the
death or resignation of any director elected by the holders of Preferred Stock,
shall, until the next meeting of Shareholders for the election of directors, in
each case be filled by the remaining director elected by the holders of
Preferred Stock having the right to elect directors in such circumstances.
Upon termination of the voting rights of the holders of any
series of Preferred Stock the terms of office of all persons who shall have been
elected directors of the Company by vote of the holders of Preferred Stock or by
a director elected by such holders shall forthwith terminate.
(c) Except as otherwise provided herein, in the Articles of
Incorporation of the Company, or by law, the holders of Preferred Stock and the
holders of Common Stock (and the holders of shares of any other series or class
entitled to vote thereon) shall vote together as one class on all matters
submitted to a vote of Shareholders of the Company.
Section 3. Reacquired Shares. Any Preferred Stock purchased or
otherwise acquired by the Company in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued Preferred Stock and may be
reissued as part of a new series of Preferred Stock to be created by resolution
or resolutions of the Board of Directors.
Section 4. Liquidation, Dissolution or Winding Up. In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company, the holders of Preferred Stock shall be entitled to receive the
greater of (a) $1.00 per share, plus accrued dividends to the date of
distribution, whether or not earned or declared, or (b) an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock. In the event the Company shall at any time after the Rights Declaration
Date (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, then in each
such case the amount to which holders of Preferred Stock were entitled
immediately prior to such event pursuant to clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 5. Consolidation, Merger, etc. In case the Company
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other capital
stock or securities, cash and/or any other property, then in any such case the
Preferred Stock shall at the same time be similarly exchanged for, or changed
into an amount per share (subject to the provision for adjustment hereinafter
set forth) equal to 100 times the aggregate amount of capital stock, securities,
cash and/or any other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged. In the event
the Company shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, then in each such case the amount
set forth in the preceding sentence with respect to the exchange or change of
shares of Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to such event.
Section 6. No Redemption. The Preferred Stock shall not be redeemable.
Section 7. Fractional Shares. Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Preferred Stock.
DECLARATION OF RIGHTS DIVIDEND
RESOLVED FURTHER, that the Board of Directors hereby declares
that a dividend of one right (a "Right") for each Common Share be paid on March
19, 1999 to shareholders of record of the Common Shares issued and outstanding
at the close of business on such date, each Right representing the right to
purchase one-hundredth of a Preferred Stock (a "Preferred Stock Fraction") upon
the terms and subject to the conditions set forth in the form of Rights
Agreement between the Company and Continental Stock Transfer and Trust Company
as Rights Agent presented to this meeting (the "Rights Agreement"), which
agreement is hereby approved in all respects.
RESOLVED FURTHER, that the exercise price of the Rights shall
be $40.00 per Preferred Stock Fraction and that the redemption price therefor
shall be $.01 per Right, in each case, subject to the adjustments set forth in
the Rights Agreement.
RESOLVED FURTHER, that the President or Chief Executive
Officer of the Company, alone or together with the Secretary or Assistant
Secretary of the Company be, and each of them hereby is, authorized, empowered
and directed, for and on behalf of the Company, to execute the Rights Agreement,
with such modifications as the officers executing the same shall approve, and to
deliver the same to the Rights Agent thereunder, such execution and delivery
conclusively to evidence the due authorization and approval thereof by the
Company.
RIGHTS CERTIFICATES
RESOLVED FURTHER, that certificates evidencing the Rights (the
"Rights Certificates") shall be substantially in the form set forth in the
Rights Agreement and shall be issued and delivered as provided therein.
RESOLVED FURTHER, that the Rights Certificates shall be signed
by the Chairman of the Board, the President or any Vice President and by the
Secretary or any Assistant Secretary of the Company (collectively, the "Proper
Officers") under the corporate seal of the Company (which may be in the form of
a facsimile of the seal of the Company), provided that the signatures of any of
said officers of the Company may, but need not be, a facsimile signature
imprinted or otherwise reproduced on the Rights Certificates, and that the
Company adopts for such purpose the facsimile signature of the present or any
future Chairman of the Board, President, Vice President, Secretary and Assistant
Secretary of the Company, notwithstanding the fact that at the time the Rights
Certificates shall be authenticated and delivered or disposed of he shall have
ceased to be such officer.
RESOLVED FURTHER, that the Proper Officers be, and each of
them hereby is, authorized, empowered and directed, to execute for and on behalf
of the Company and under its corporate seal (which may be in the form of a
facsimile of the seal of the Company), Rights Certificates issued to replace
lost, stolen, mutilated or destroyed Rights Certificates, and such Rights
Certificates as may be required for exchange, substitution or transfer as
provided in the Rights Agreement in the manner and form to be required in, or
contemplated by, the Rights Agreement.
RESOLVED FURTHER, that the Rights Certificates shall be
manually countersigned by the Rights Agent and books for the registration and
transfer of the Rights Certificates shall be maintained by the Rights Agent as
provided for in the Rights Agreement.
RESERVATION OF PREFERRED STOCK
RESOLVED FURTHER, that 400,000 Preferred Stock be, and hereby
is, initially reserved for issuance upon exercise of the Rights, such number to
be subject to adjustment from time to time in accordance with the Rights
Agreement.
TRANSFER AGENT FOR PREFERRED STOCK
RESOLVED FURTHER, that Continental Stock Transfer and Trust Company (the "Bank")
be, and it hereby is, appointed Transfer Agent and Registrar for the Preferred
Stock.
RIGHTS AGENT
RESOLVED FURTHER, that the Bank be, and it hereby is,
appointed Rights Agent under the Rights Agreement, and that upon presentation to
it of Rights Certificates for exercise in accordance with the Rights Agreement,
the Bank is authorized, as Transfer Agent and Registrar for the Preferred Stock,
to issue, countersign, register and deliver the Preferred Stock Fractions
issuable upon such exercise.
REGISTRATION AND LISTING OF PREFERRED STOCK
RESOLVED FURTHER, that the Proper Officers be, and each of
them hereby is, authorized, empowered and directed, for and on behalf of the
Company, to take all such actions and to execute all such documents as they may
deem necessary or appropriate in connection with the issuance of the Rights and
the Preferred Stock or other securities issuable upon exercise of the Rights in
order to comply with the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange Act of 1934, as amended.
RESOLVED FURTHER, that the Secretary of the Company be and he
hereby is appointed as agent for service of the Company with respect to said
registration statement for the Preferred Stock or other securities, and any
amendments or supplements, with all the powers and functions specified in the
General Rules and Regulations of the Securities and Exchange Commission under
the Securities Act.
RESOLVED FURTHER, that the Proper Officers be, and each of
them hereby is, authorized, empowered and directed, for and on behalf of the
Company, to execute and file such application or applications, and amendments
and supplements thereto, and take such other action as may be necessary to
qualify the Rights (and, if in the judgment of such officers it is appropriate
to do so, the Preferred Stock or other securities issuable upon exercise
thereof) for trading on NASDAQ or any stock exchange or national market system
deemed appropriate by such officers of the Company or as is required by the
Rights Agreement, and that the proper officers of the Company be, and each of
them hereby is, authorized to appear before the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. and any stock
exchange, and to execute such papers and agreements as may be necessary to
conform with the requirements of any such body and to effectuate such
qualification and registration.
SUBSEQUENT ISSUANCE OF RIGHTS
RESOLVED FURTHER, that as long as the Rights are attached to
the Common Shares as provided in the Rights Agreement, one Right shall be
delivered with each Common Share that shall become outstanding after March 19,
1999.
RESOLVED FURTHER, in connection with the issuance or sale of
Common Shares following the Distribution Date (as defined in the Rights
Agreement) and prior to the Expiration Date (as is defined in the Rights
Agreement), the Company shall, with respect to Common Shares so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities issued
by the Company prior to the Distribution Date, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale, as provided in the Rights Agreement.
"BLUE SKY" QUALIFICATION
RESOLVED FURTHER, that the Board of Directors deems it
desirable and in the best interests of the Company that the Preferred Stock
issuable upon exercise of the Rights be qualified or registered for sale in
various jurisdictions; that the Proper Officers be, and each of them hereby is,
authorized, empowered and directed, for and on behalf of the Company, to
determine the jurisdictions in which appropriate action shall be taken to
qualify or register for sale all or such part of the Preferred Stock issuable
upon exercise of the Rights as said officers may deem advisable or as is
required by the Rights Agreement; that the Proper Officers be, and each of them
hereby is, authorized, empowered and directed, for and on behalf of the Company,
to perform any and all such acts as they may deem necessary or advisable in
order to comply with the applicable laws of any such jurisdictions, and in
connection therewith to execute and file all requisite papers and documents,
including, but not limited to, applications, reports, surety bonds, irrevocable
consents and appointments of attorneys for service of process; and the execution
by such officers of any such papers or documents or the doing by them of any act
in connection with the foregoing matters shall conclusively establish their
authority therefor and the approval and ratification by the Company of the
papers and documents so executed and the action so taken.
GENERAL RESOLUTIONS
RESOLVED FURTHER, that the Board of Directors hereby adopts,
as if expressly set forth herein, the form of any resolution required by any
authority to be filed in connection with any applications, consents to service,
issuer's covenants or other documents if (i) in the opinion of the officers of
the Company executing the same, the adoption of such resolutions is necessary or
desirable (such execution or delivery being deemed conclusive evidence of such
determination of such necessity or desirability) and (ii) the Secretary or an
Assistant Secretary of the Company evidences such adoption by inserting in the
minutes of this meeting copies of such resolutions, which will thereupon be
deemed to be adopted by the Board of Directors with the same force and effect as
if presented at this meeting.
RESOLVED FURTHER, that the Proper Officers be, and each of
them hereby is, authorized, empowered and directed, for and on behalf of the
Company, to execute and deliver any and all certificates, agreements and other
documents, take any and all steps and do any and all things which they may deem
necessary or advisable (such execution or delivery being deemed conclusive
evidence of such determination of such necessity or desirability) in order to
effectuate the purposes of each and all of the foregoing resolutions.
RESOLVED FURTHER, that any actions taken by the proper officers prior to the
date of this meeting that are within the authority conferred hereby are hereby
ratified, confirmed and approved in all respects as the act and deed of the
Company.
Exhibit B
Form of Rights Certificate
Certificate No. R-
_____________Rights
NOT EXERCISABLE AFTER MARCH 18, 2009 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR
AN ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN [ACQUIRING] [ADVERSE] PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN [ACQUIRING] [ADVERSE] PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]1
PENN NATIONAL GAMING, INC.
RIGHTS CERTIFICATE
This certifies that ________________, or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of March 2, 1999 (the "Rights Agreement"), between Penn
National Gaming, Inc., a Pennsylvania corporation (the "Company"), and
Continental Stock Transfer and Trust Company, a New York corporation (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 p.m.
(New York time) on March 18, 2009 at the office of the Rights Agent designated
for such purpose, or its successors as Rights Agent, one one-hundredth of a
fully paid, non-assessable Series A Preferred Stock, par value $0.01 per share
(the "Preferred Stock") of the Company, at a purchase price (the "Purchase
Price") of $40.00 per one one-hundredth of a Preferred Stock (such fraction, a
"Preferred Stock Fraction"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The Purchase Price may be paid by certified bank check or money order
payable to the order of the Company. The number of Rights evidenced by this
Rights Certificate (and the number of Preferred Stock Fractions which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
Preferred Stock Fraction set forth above, are the number and Purchase Price as
of the close of business on March 2, 1999, based on the Preferred Stock as
constituted at such date.
Capitalized terms used herein without definition shall have the respective
meanings given to them in the Rights Agreement. Upon the
occurrence of a Section 11(a)(ii) Event, if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person, an Adverse Person
or an Affiliate or Associate of any such Acquiring Person or Adverse Person,
(ii) a transferee of any such Acquiring Person, Adverse Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a Person who, after such transfer, became an
Acquiring Person, an Adverse Person or an Affiliate or Associate of any such
Person, such Rights shall become null and void and no holder hereof shall have
any right with respect to such Rights from and after the occurrence of such
Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price
and the number and kind of Preferred Stock or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
This Rights Certificate is subject to all of the
terms, provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are hereby incorporated herein by reference and made a
part hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Rights Certificates, which limitations of rights include the temporary
suspension of the exercisability of such Rights under the specific circumstances
set forth in the Rights Agreement. Copies of the Rights Agreement are on file at
the principal offices of the Company and the above-mentioned office of the
Rights Agent and are also available upon written request to the Company or the
Rights Agent.
Subject to the provisions of the Rights Agreement, this Rights
Certificate, with or without other Rights Certificates, upon surrender at the
office or offices of the Rights Agent designated for such purpose, with the Form
of Election and Certificate set forth on the reverse side duly executed, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of Preferred Stock Fractions as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed, subject to the approval of at least a
majority of the Continuing
Directors, at a redemption price of $.01 per Right at any time prior to the
earlier of the close of business on (i) the third Business Day following the
Stock Acquisition Date (as such time period may be extended pursuant to the
Rights Agreement), (ii) the tenth Business Day after a determination that a
Person is an Adverse Person, or (iii) the Final Expiration Date. After the
expiration of the redemption period, the Company's right of redemption may be
reinstated, subject to the approval of at least a majority of the Continuing
Directors, if either (A) an Acquiring Person reduces his beneficial ownership to
10% or less of the outstanding Common Shares in a transaction or series of
transactions not involving the Company and there are no other Acquiring Persons,
or (B) there is approval of the merger of the Company with, or acquisition of
the Company by, a Person unrelated to the Acquiring Person and such
reinstatement is part of the approval of such transaction subject to the
provisions of the Rights Agreement, the Company may, at its option, at any time
after a Section 11(a)(ii) Event, subject to the approval of at least a majority
of the Continuing Directors, exchange all or part of the Rights evidenced by
this Certificate for Preferred Stock Fractions or, upon an appropriate Section
11(a)(ii) Election, Common Shares. No fractional Preferred Stock will be issued
upon the exercise of any Right or Rights evidenced hereby (other than fractions
which are integral multiples of a Preferred Stock), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement. No holder of this
Rights Certificate, as such, shall be entitled to vote or receive dividends or
be deemed for any purpose the holder of Preferred Stock or of any other
securities of the Company (including Common Shares) which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose until
it shall have been countersigned by the Rights Agent. WITNESS the facsimile
signature of the proper officers of the Company and its corporate seal.
Dated: March 2, 1999.
ATTEST: ......... PENN NATIONAL GAMING, INC.
/s/ Robert S. Ippolito____________________ By:_/s/ Peter M. Carlino___________
Title:_Chairman and CEO
Countersigned:
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY
By:__________________________
Authorized Officer
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ___________________________________ hereby sells, assigns
and transfers unto
- ----------------------------------------------------
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
- ------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: ______________, ____ __________________________
Signature
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person,
an Adverse Person or an Affiliate or Associate of any such Acquiring Person
or Adverse Person (as such terms are defined pursuant to the Rights
Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such
Acquiring Person or Adverse Person.
Dated: ______________, ____ __________________________
Signature
NOTICE
The signature to the foregoing Assignment and Certificate must correspond to the
name as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: PENN NATIONAL GAMING, INC.:
The undersigned hereby elects to exercise ________________ Rights represented by
this Rights Certificate to purchase the Preferred Stock issuable upon the
exercise of the Rights (or Common Shares or such other securities of the Company
or of any other person which may be issuable upon the exercise of the Rights)
and requests that certificates for such shares be issued in the name of and
delivered to:
Please insert social security
or other identifying number____________________________________________________
- --------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
Please insert social security
or other identifying number____________________________________________________
- --------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------
Dated: _______________, ____ __________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being
exercised by or on behalf of a Person who is or was an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person (as such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person.
Dated: ______________, ____ __________________________
Signature
(9)
NOTICES
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever. In
the event the certification set forth above in the Form of Assignment or the
Form of Election to Purchase, as the case may be, is not completed, the Company
and the Rights Agent will deem the beneficial owner of the Rights evidenced by
this Right Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and such Assignment or Election to
Purchase will not be honored.
Exhibit C
PENN NATIONAL GAMING, INC.
SUMMARY OF RIGHTS AGREEMENT
On May 20, 1998, the Board of Directors of Penn National Gaming, Inc. (the
"Company") declared a dividend distribution of one Preferred Stock purchase
right (the "Rights") for each outstanding share of the Company's Common Stock,
par value $.01 per share (the "Common Shares"), payable to shareholders of
record at the close of business on March 19, 1999. Each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share (a
"Preferred Stock Fraction") of the Company's Series A Preferred Stock, par value
$.01 per share (the "Preferred Stock"), or a combination of securities and
assets of equivalent value, at a purchase price of $40.00 per Preferred Stock
Fraction (the "Purchase Price"), subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement)
dated as of March 2, 1999 between the Company and Continental Stock Transfer and
Trust Company as Rights Agent. All terms not otherwise defined herein are used
as defined in the Rights Agreement.
Initially, the Rights will be evidenced by the Common Share certificates
representing Common Shares then outstanding, and no separate Rights Certificates
will be distributed. The Rights will separate from the Common Shares and will be
distributed to the holders thereof upon the first to occur of (i) the close of
business on the third Business Day following a public announcement that a Person
or group of Affiliated or Associated Persons (an "Acquiring Person) has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding Common Shares (the "Stock Acquisition Date"), (ii) the close
of business on the tenth Business Day following the commencement of a tender
offer or exchange offer that would result in a Person or group beneficially
owning 20% or more of the outstanding Common Shares, or (iii) the close of
business on the tenth Business Day after a determination by at least a majority
of the Continuing Directors (as defined below) that any Person is an Adverse
Person, in that such Person, alone or together with its Affiliates and
Associates, has become the beneficial owner of a substantial amount of Common
Shares (which amount shall in no event be less than 10% of the Common Shares
then outstanding) and (a) such beneficial ownership by such Person is intended
to cause the Company to repurchase the Common Shares beneficially owned by such
Person or to cause pressure on the Company to take action or enter into a
transaction or series of transactions intended to provide such Person with
short-term financial gain under circumstances where at least a majority of the
Continuing Directors determines that the best long-term interests of the Company
and its shareholders would not be served by taking such action or entering into
such transaction or series of transactions at that time or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with customers or
impairment of the Company's ability to maintain its competitive position) on the
business or prospects of the Company (the date on which the Rights separate and
are distributed being the "Distribution Date").
A "Continuing Director" is any member of the Board of Directors prior to March
2, 1999, who is (i) not an Acquiring Person or Adverse Person, or an Associate
or Affiliate of either of the foregoing, or (ii) any Person who subsequently
becomes a member of the Board of Directors who is not an Acquiring Person or an
Adverse Person, or an Associate or Affiliate of either of the foregoing, and
whose nomination or election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors.
Until the Distribution Date, (i) the Rights will be evidenced by Common Share
certificates and will be transferred only with such Common Share certificates,
(ii) new Common Share certificates issued after March 19, 1999, will contain a
notation incorporating the Rights Agreement by reference and (iii) the surrender
for transfer of any certificates for Common Shares outstanding will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificates.
The Rights are not exercisable until the Distribution Date and will expire at
the close of business on March 18, 2009, unless earlier redeemed or exchanged by
the Company as described below.
As soon as practical after the Distribution Date, Rights Certificates will be
mailed to holders of record of the Common Shares as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights. Except as deemed necessary and appropriate by at
least a majority of the Continuing Directors, and except in connection with
Common Shares issued upon the exercise of employee stock options, issuances
under other employee stock benefit plans or the conversion of convertible
securities issued prior to the Distribution Date, only Common Shares issued
prior to the Distribution Date will be issued with Rights.
In the event that (i) the Company is the surviving corporation in a merger with
an Acquiring Person and the Common Shares are not changed or exchanged, (ii) a
person or entity becomes the beneficial owner of more than 20% of the then
outstanding Common Shares except pursuant to an offer for all outstanding Common
Shares which at least a majority of the Continuing Directors determine to be
fair to, and otherwise in the best interests of, the shareholders, (iii) an
Acquiring Person engages in one or more "self-dealing" transactions as set forth
in the Rights Agreement, (iv) during such time as there is an Acquiring Person,
an event occurs which results in such Acquiring Person's ownership interest's
being increased by more than 1%, or (v) at least a majority of the Continuing
Directors determines that a Person is an Adverse Person, then in any such event
each holder of a Right will thereafter have the right to receive, upon exercise,
that number of Preferred Stock Fractions (or in certain circumstances, that
number of Common Shares, cash, property or other securities of the Company)
having a value equal to twice the exercise price of the Right. In lieu of
requiring payment of the Purchase Price upon exercise of the Rights following
any such event, the Company, by action of at least a majority of the Continuing
Directors, may permit the holders simply to surrender the Rights, in which event
they will be entitled to receive Preferred Stock Fractions (and/or Common Shares
or other property, as the case may be) with a value of 50% of what could have
been purchased by payment of the Purchase Price. The Rights, however, are not
exercisable following the occurrence of any of the events set forth above until
such time as the Rights are no longer redeemable by the Company as set forth
below. Notwithstanding any of the foregoing, following the occurrence of any of
the events set forth above, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person or Adverse Person will be null and void. The events set forth in this
paragraph are referred to as "Section 11(a)(ii) Events."
For example, at an exercise price of $40.00 per Right, each Right not owned by
an Acquiring Person or an Adverse Person (or by certain related parties)
following a Section 11(a)(ii) Event would entitle its holder to purchase $80.00
worth of Preferred Stock Fractions (or Common Shares or other consideration as
noted above) for $40.00. Assuming that Preferred Stock had a per share value of
$1,000 at such time, and that Preferred Stock Fractions had a value of one
one-hundredth of $1,000 or $10.00 per Preferred Stock Fraction at such time, the
holder of each valid Right would be entitled to purchase 8 Preferred Stock
Fractions of $10.00 (or $80.00 worth of Preferred Stock Fractions).
Alternatively, the Company could permit the holder to surrender each Right in
exchange for stock or cash equivalent to one Preferred Stock Fractions (with a
value of $40.00) without the payment of any consideration other than the
surrender of the Right.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or the Common Shares are
changed or exchanged (other than a merger which follows an offer determined by
at least a majority of the Continuing Directors to be fair to, and otherwise in
the best interests of, the shareholders) or (ii) 50% or more of the Company's
assets or earning power is sold or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, that number of shares of common stock
of the acquiring company which equals the exercise price of the Right divided by
one-half of the current market price of such company's common stock at the date
of the occurrence of the event. Again, provision is made to permit surrender of
the Rights in exchange for one-half of the value otherwise purchasable. The
events set forth in this paragraph are referred to as "Section 11(a)(ii)
Events," and the Section 11(a)(ii) Events and the Section 13 Events are
collectively referred to as the "Triggering Events."
For example, at an exercise price of $40.00 per Right, each Right following a
Section 11(a)(ii) Event set forth in the preceding paragraph would entitle its
holder to purchase for $40.00 such number of shares of common stock of the
acquiring company which equals $40.00 divided by one-half of the current market
price of such company's common stock. Assuming that such common stock had a
current market price of $10.00 per share at such time, the holder of each valid
Right would be entitled to purchase eight shares of common stock of the
acquiring company for $40.00 (or $80.00 worth of common stock).
At any time after the occurrence of a Section 11(a)(ii) Event, at the election
of a majority of the Continuing Directors, the Company may exchange the Rights
(other than Rights owned by an Acquiring Person or an Adverse Person which have
become void), in whole or in part, at an exchange ratio of one Preferred Stock
Fraction (or, upon further election of such a majority, Common Shares) per Right
(subject to adjustment).
The Purchase Price payable, and the number of Preferred Stock Fractions or other
securities or property issuable upon exercise of the Rights, are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of Preferred Stock of evidences of indebtedness or assets (excluding
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
With certain exceptions, no adjustments in the initial Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. The Company will not be required to issue fractional Preferred Stock,
other than fractions which are integral multiples of Preferred Stock (or, in the
event of an appropriate election, Common Shares) and, in lieu of such fractional
Preferred Stock (or Common Shares, if appropriate), an adjustment in cash will
be made based on the market price of the Preferred Stock (or Common Shares, as
the case may be) on the last trading date prior to the date of exercise.
In general, at any time until ten (10) days following the Stock Acquisition Date
or the date on which a person has been determined to be an Adverse Person, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (payable in cash or stock). After the redemption period has expired and
prior to the occurrence of a Triggering Event, the Company's right of redemption
may be reinstated upon the approval of at least a majority of the Continuing
Directors if either (i) an Acquiring Person reduces his beneficial ownership to
10% or less of the outstanding shares in a transaction or series of transactions
not involving the Company and there are no other Acquiring Persons, or (ii)
there is approval of the merger of the Company with, or acquisition of the
Company by, a person unrelated to any Acquiring Person and such reinstatement is
part of the approval of such transaction. Immediately upon redemption of the
Rights, the Rights will terminate and the only right of the holders of the
Rights will be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a shareholder of the Company, including, without limitation, the right to vote
or receive dividends. The creation of the Rights should not be taxable to
shareholders. Shareholders may, however, depending upon the circumstances,
recognize taxable income in the event that the Rights become exercisable for
Preferred Stock (or other consideration) of the Company or for common stock of
an acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by at least
a majority of the Continuing Directors prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by at
least a majority of the Continuing Directors to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person or Adverse Person), or to
shorten or lengthen certain time periods under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
The Rights have certain anti-takeover effects. The Rights will cause substantial
dilution to a Person or group that attempts to acquire the Company without
conditioning the offer on a substantial number of Rights being redeemed or
acquired. The Rights should not interfere with any merger or other business
combination approved by at least a majority of the Continuing Directors of the
Company because (i) the Continuing Directors may, at their option, at any time
prior to the close of business on the tenth Business Day following the Stock
Acquisition Date or the date a Person has been determined to be an Adverse
Person, redeem all, but not less than all, of the then outstanding Rights at the
redemption price. In addition, the Board has limited ability to reinstate the
redemption of the Rights as set forth above. Once a Triggering Event has
occurred, however, the redemption right cannot be reinstated.
A copy of the Rights Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to a Registration Statement on Form 8-A dated March 12,
1999. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
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1 The portion of the legend in brackets shall be inserted only if applicable,
shall be modified to apply to an Acquiring Person or an Adverse Person, as
applicable, and shall replace the preceding sentence.