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 19, 1998
CHURCHILL DOWNS INCORPORATED
(Exact name of registrant as specified in its charter)
KENTUCKY 0-01469 61-0156015
(State or other (Commission File (IRS Employer
jurisdiction Number) Identification No.)
of incorporation)
700 Central Avenue
LOUISVILLE, KENTUCKY 40208
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (502) 636-4400
NOT APPLICABLE
(Former name or former address, if changed since last report)
ITEM 5. Other Events.
On March 19, 1998, the Board of Directors of Churchill Downs
Incorporated (the "Company") declared a dividend distribution of one right
(a "Right") for each outstanding share of common stock, no par value per
share (the "Common Stock") to shareholders of record at the close of
business on March 30, 1998 (the "Record Date"). The description and terms
of the Rights are set forth in a Rights Agreement dated as of March 19,
1998 (the "Rights Agreement") between the Company and Bank of Louisville,
as Rights Agent.
Prior to the Distribution Date (hereinafter defined), the Rights
will be represented by the certificates for shares of Common Stock.
Separate Right certificates will be distributed to shareholders as soon as
practicable after the Distribution Date. The Rights will expire on the
tenth anniversary of the effective date of the Rights Agreement (the
"Expiration Date") unless earlier redeemed or canceled by the Company as
provided below. Initially, the Rights will not be exercisable. The Rights
will become exercisable upon the earlier of (a) the tenth business day (or
such later date as may be determined by the Board) after such time as the
Company learns that a person or group (including any affiliate or associate
of such person or group) has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding Common Stock (such
person or group being called an "Acquiring Person") unless provisions
intended to prevent accidental triggering of the Rights apply, and (b) such
date, if any, as may be designated by the Board of Directors of the Company
following the commencement of, or first public disclosure of an intention
to commence, a tender or exchange offer for outstanding Common Stock which
could result in such person or group becoming the beneficial owner of 15%
or more of the outstanding Common Stock (the earlier of such dates being
called the "Distribution Date"). Each Right shall be exercisable for
1/1,000 of a share of Series 1998 Preferred Stock (the "Preferred Stock")
(as described below) at a purchase price (the "Purchase Price") of $80.00
(after giving effect to the 1 for 1 share dividend declared by the Company
on March 19, 1998), subject to adjustment. Prior to the Distribution Date,
the Rights shall be transferable only with the related shares of Common
Stock and shall automatically be transferred with such shares. After the
Distribution Date, the Rights shall be separately transferable and the
Company will provide Right certificates to all holders of Common Stock.
The terms of the Preferred Stock provide that each 1/1,000 of a
share of Preferred Stock is entitled to participate in dividends and other
distributions, and to vote, on an equivalent basis with one whole share of
the presently constituted Common Stock of the Company. In addition, the
Preferred Stock has certain minimum dividend and liquidation rights. The
amount of Preferred Stock issuable upon exercise of the Rights is subject
to adjustment by the Board of Directors of the Company in the event of any
change
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in the Common Stock or Preferred Stock, whether by reason of share
dividends, share splits, recapitalizations, mergers, consolidations,
combinations or exchanges of securities, split-ups, split-offs, spin-offs,
liquidations, other similar changes in capitalization, any distribution or
issuance of assets, evidences of indebtedness or subscription rights,
options or warrants to holders of Common Stock or Preferred Stock or
otherwise.
Subject to provisions of the Rights Agreement, at such time as
there is an Acquiring Person, proper provision shall be made so that the
holder of each Right will thereafter have the right to receive, upon
exercise thereof, for the Purchase Price, that number of thousandths of a
share of Preferred Stock equal to the number of shares of Common Stock
which at the time of such transaction would have a market value of twice
the Purchase Price (the "flip-in"). Any Rights that are or were
beneficially owned by an Acquiring Person on or after the Distribution Date
shall become null and void. In the event the Company is acquired in a
merger or other business combination by an Acquiring Person that is a
publicly traded corporation or 50% or more of the Company's assets or
assets representing 50% or more of the Company's earning power are sold,
leased, exchanged or otherwise transferred (in one or more transactions) to
an Acquiring Person that is a publicly traded corporation, each Right will
entitle its holder to purchase, for the Purchase Price, that number of
common shares of such corporation which at the time of the transaction
would have a market value of twice the Purchase Price (the "flip-over").
In the event the Company is acquired in a merger or other business
combination by an Acquiring Person that is not a publicly traded entity or
50% or more of the Company's assets or assets representing 50% or more of
the earning power of the Company are sold, leased, exchanged or otherwise
transferred (in one or more transactions) to an Acquiring Person that is
not a publicly traded entity, each Right will entitle its holder to
purchase, for the Purchase Price, at such holder's option, (a) that number
of shares of the surviving corporation in the transaction with such entity
(or, at such holder's option, of the surviving corporation in such
acquisition, which could be the Company) which at the time of the
transaction would have an aggregate book value of twice the Purchase Price,
or (b) that number of shares of such entity which at the time of the
transaction would have a book value of twice the Purchase Price, or (c) if
such entity has affiliates which have publicly traded common shares, that
number of common shares of the affiliate with the greatest aggregate market
value on the transaction date, which at the time of the transaction would
have a market value of twice the Purchase Price.
Any Rights that are or were beneficially owned by an Acquiring
Person on or after the Distribution Date shall become null and void. The
"flip-over" provision only applies to a merger or similar business
combination with an Acquiring Person, and it
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does not apply to a merger or business combination with any party which has
not triggered the "flip-in" provision.
The Rights are redeemable by the Board of Directors at a
redemption price of $.01 per Right (the "Redemption Price") any time prior
to the earlier of (a) the tenth business day (or such later date as may be
determined by the Board) after such time as there becomes an Acquiring
Person and (b) the Expiration Date. Immediately upon the action of the
Board electing to redeem the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right of the holders of Rights will be to receive the Redemption
Price.
After there is an Acquiring Person the Board of Directors may
elect to exchange each Right (other than Rights owned by an Acquiring
Person) for consideration per Right consisting of one-half of the
securities that would be issuable at such time upon the exercise of one
Right pursuant to the terms of the Rights Agreement (or equivalent value in
cash, shares of Common Stock, or other securities).
At any time prior to the Distribution Date, the Company may,
without the approval of any holder of the Rights, supplement or amend any
provision of the Rights Agreement (including the date on which the
Distribution Date shall occur and the definition of an "Acquiring Person"),
except that no supplement or amendment shall be made which reduces the
Redemption Price of the Rights or provides for an earlier date of
expiration of the Rights.
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 to receive dividends.
A copy of the Rights Agreement is included as an Exhibit to this
Report. 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 hereby incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following exhibits are filed as a part of this Report:
4.1 Rights Agreement dated as of March 19, 1998, between Churchill
Downs Incorporated and Bank of Louisville, as Rights Agent, which includes
as Exhibit A the Form of Articles of Amendment and as Exhibit B the Form of
Rights Certificate.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
of the undersigned hereunto duly authorized.
CHURCHILL DOWNS INCORPORATED
By: /S/ THOMAS H. MEEKER
Thomas H. Meeker, President
Date: March 19, 1998
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EXHIBIT INDEX
Exhibit Sequentially
NUMBER DESCRIPTION NUMBERED PAGE
4.1 Rights Agreement dated as of March
19, 1998 between Churchill Downs 6
Incorporated and Bank of Louisville,
as Rights Agent, which includes as
Exhibit A the Form of Articles of
Amendment and as Exhibit B the Form
of Rights Certificate
6
RIGHTS AGREEMENT dated as of March 19, 1998,
between CHURCHILL DOWNS INCORPORATED, a Ken-
tucky corporation (the "Company"), and BANK OF
LOUISVILLE, a Kentucky banking corporation as
Rights Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one Right (as hereinafter defined) for each share of Common
Stock, no par value per share, of the Company (the "Common Stock")
outstanding at the Close of Business (as hereinafter defined) on March 30,
1998 (the "Record Date"), and has authorized the issuance of one Right (as
such number may hereafter be adjusted pursuant to the provisions of this
Rights Agreement) with respect to each share of Common Stock that shall
become outstanding between the Record Date and the earliest of the
Distribution Date, the Redemption Date or the Expiration Date (as such
terms are hereinafter defined); PROVIDED, HOWEVER, that Rights may be
issued with respect to shares of Common Stock that shall become outstanding
after the Distribution Date and prior to the earlier of the Redemption Date
or the Expiration Date in accordance with the provisions of Section 23.
Each Right shall initially represent the right to purchase one-thousandth
(1/1,000) of a share of Series 1998 Preferred Stock, without par value, of
the Company (the "Preferred Shares"), having the powers, rights and
preferences set forth in the Articles of Amendment attached as EXHIBIT A.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Rights
Agreement, the following terms have the meanings indicated:
"ACQUIRING PERSON" shall mean any Person who or which, alone or
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding but
shall not include (a) the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any of its Subsidiaries, or any
Person holding Common Shares for or pursuant to the terms of any such
employee benefit plan, or (b) any such Person who has become and is such a
Beneficial Owner solely because (i) of a change in the aggregate number of
Common Shares outstanding since the last date on which such Person acquired
Beneficial Ownership of any Common Shares or (ii) it acquired such
Beneficial Ownership in the good faith belief that such acquisition would
not (A) cause such Beneficial Ownership to equal or exceed 15% of the
Common Shares then outstanding and such Person relied in good faith in
computing the percentage of its Beneficial Ownership on publicly filed
reports or documents of the Company which are inaccurate or out-of-date or
(B) otherwise cause a Distribution Date or the adjustment provided for in
Section 11(a) to occur. Notwithstanding clause (b)(ii) of the prior
sentence, if any Person that is not an Acquiring Person due to such clause
(b)(ii) does not reduce its percentage of Beneficial Ownership of Common
Shares to less than 15% by the Close of Business on the fifth Business Day
after notice from the Company (the date of notice being the first day) that
such Person's Beneficial Ownership of Common Shares so equals or exceeds 15%,
such Person shall, at the end of such five Business Day period, become an
Acquiring Person (and such clause (b)(ii) shall no longer apply to such
Person). For purposes of this definition, the determination whether any
Person acted in "good faith" shall be conclusively determined by the Board
of Directors of the Company.
"AFFILIATE" and "ASSOCIATE", when used with reference to any
Person, shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as in
effect on the date of this Rights Agreement.
A Person shall be deemed the "BENEFICIAL OWNER" of, and shall be
deemed to "BENEFICIALLY OWN", and shall be deemed to have "BENEFICIAL
OWNERSHIP" of, any securities:
(a) which such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of Rule
13d-3 of the General Rules and Regulations under the Exchange Act, as
in effect on the date of this Rights Agreement;
(b) which such Person or any of such Person's Affiliates or
Associates has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (written or oral), or upon
the exercise of conversion rights, exchange rights (other than the
Company's rights under Section 11(b)(i)), rights (other than the
Rights), warrants or options, or otherwise; PROVIDED, HOWEVER, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially
own, or to have Beneficial Ownership of, 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 thereunder, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding (written or oral); PROVIDED, HOWEVER, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own,
or to have Beneficial Ownership of, any security if (A) the agreement,
arrangement or understanding (written or oral) to vote such security
arises solely from a revocable proxy or consent given to such Person
in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations under
the Exchange Act and (B) the beneficial ownership of such security is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
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(c) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding (written
or oral) for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy or consent as described in clause
(b)(ii) of this definition) or disposing of any securities of the
Company.
Notwithstanding the foregoing, nothing contained in this definition shall
cause a Person ordinarily engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially own", or to
have "Beneficial Ownership" of, any securities acquired in a bona fide firm
commitment underwriting pursuant to an underwriting agreement with the
Company.
"ARTICLES OF AMENDMENT" shall mean the Articles of Amendment of
the Company designating and establishing the Series 1998 Preferred Stock
and setting forth the preferences, limitations and relative rights of such
series of Preferred Stock of the Company, a copy of which is attached as
EXHIBIT A.
"BOOK VALUE", when used with reference to Common Shares issued by
any Person, shall mean the amount of equity of such Person applicable to
each Common Share, determined (a) in accordance with generally accepted
accounting principles in effect on the date as of which such Book Value is
to be determined, (b) using all the consolidated assets and all the
consolidated liabilities of such Person on the date as of which such Book
Value is to be determined, except that no value shall be included in such
assets for goodwill arising from consummation of a business combination,
and (c) after giving effect to (i) the exercise of all rights, options and
warrants to purchase such Common Shares (other than the Rights), and the
conversion of all securities convertible into such Common Shares, at an
exercise or conversion price, per Common Share, which is less than such
Book Value before giving effect to such exercise or conversion (whether or
not exercisability or convertibility is conditioned upon occurrence of a
future event), (ii) all dividends and other distributions on the capital
stock of such Person declared prior to the date as of which such Book Value
is to be determined and to be paid or made after such date, and (iii) any
other agreement, arrangement or understanding (written or oral), or
transaction or other action prior to the date as of which such Book Value
is to be determined which would have the effect of thereafter reducing such
Book Value.
"BUSINESS COMBINATION" shall have the meaning set forth in
Section 11(c)(i).
"BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in
Louisville, Kentucky are authorized or obligated by law or executive order
to close.
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"CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,
Louisville, Kentucky time, on such date; PROVIDED, HOWEVER, that, if such
date is not a Business Day, "Close of Business" shall mean 5:00 p.m.,
Louisville, Kentucky time, on the next succeeding Business Day.
"COMMON SHARES", when used with reference to the Company prior to
a Business Combination, shall mean the shares of Common Stock of the
Company or any other shares of capital stock of the Company into which the
Common Stock shall be reclassified or changed. "Common Shares", when used
with reference to any Person (other than the Company prior to a Business
Combination), shall mean shares of capital stock of such Person (if such
Person is a corporation) of any class or series, or units of equity
interests in such Person (if such Person is not a corporation) of any class
or series, the terms of which do not limit (as a maximum amount and not
merely in proportional terms) the amount of dividends or income payable or
distributable on such class or series or the amount of assets distributable
on such class or series upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person and do not provide that such class
or series is subject to redemption at the option of such Person, or any
shares of capital stock or units of equity interests into which the
foregoing shall be reclassified or changed; PROVIDED, HOWEVER, that, if at
any time there shall be more than one such class or series of capital stock
or equity interests of such Person, "Common Shares" of such Person shall
include all such classes and series substantially in the proportion of the
total number of shares or other units of each such class or series
outstanding at such time.
"COMMON STOCK" shall have the meaning set forth in the
introductory paragraph of this Rights Agreement.
"COMPANY" shall have the meaning set forth in the heading of this
Rights Agreement; PROVIDED, HOWEVER, that if there is a Business
Combination, "Company" shall have the meaning set forth in Section
11(c)(iii).
The term "CONTROL" with respect to any Person shall mean the
power to direct the management and policies of such Person, directly or
indirectly, by or through stock ownership, agency or otherwise, or pursuant
to or in connection with an agreement, arrangement or understanding
(written or oral) with one or more other Persons by or through stock
ownership, agency or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
"DISTRIBUTION DATE" shall have the meaning set forth in Section
3(b).
4
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
in effect on the date in question, unless otherwise specifically provided.
"EXCHANGE CONSIDERATION" shall have the meaning set forth in
Section 11(b)(i).
"EXPIRATION DATE" shall have the meaning set forth in Section
7(a).
"MAJOR PART", when used with reference to the assets of the
Company and its Subsidiaries as of any date, shall mean assets (a) having a
fair market value aggregating 50% or more of the total fair market value of
all the assets of the Company and its Subsidiaries (taken as a whole) as of
the date in question, (b) accounting for 50% or more of the total value
(net of depreciation and amortization) of all the assets of the Company and
its Subsidiaries (taken as a whole) as would be shown on a consolidated or
combined balance sheet of the Company and its Subsidiaries as of the date
in question, prepared in accordance with generally accepted accounting
principles then in effect, or (c) accounting for 50% or more of the total
amount of earnings before interest, taxes, depreciation and amortization or
of the revenues of the Company and its Subsidiaries (taken as a whole) as
would be shown on, or derived from, a consolidated or combined statement of
income or operations of the Company and its Subsidiaries for the period of
12 months ending on the last day of the Company's monthly accounting period
next preceding the date in question, prepared in accordance with generally
accepted accounting principles then in effect.
"MARKET VALUE", when used with reference to 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 period which is the shorter of (a) 30
consecutive Trading Days immediately prior to the date in question or (b)
the number of consecutive Trading Days beginning on the Trading Day
immediately after the date of the first public announcement of the event
requiring a determination of the Market Value and ending on the Trading Day
immediately prior to the record date of such event; PROVIDED, HOWEVER,
that, in the event that the Market Value of such Common Shares is to be
determined in whole or in part during a period following the announcement
by the issuer of such Common Shares of any action of the type described in
Section 12(a) that would require an adjustment thereunder, then, and in
each such case, the Market Value of such Common Shares shall be
appropriately adjusted to reflect the effect of such action on the market
price of such Common Shares. The closing price for each Trading Day shall
be the closing price quoted on the principal United States securities
exchange regis-tered under the Exchange Act (or any recognized foreign stock
exchange) on which such securities are listed, or, if such securities are
not listed on any such exchange, the average of the
5
closing bid and asked quotations with respect to a share of such securities
on any National Association of Securities Dealers, Inc. quotations system,
or if no such quotations are available, the average of the closing bid and
asked prices as furnished by a professional market maker making a market
in such securities selected by the Board of Directors of the Company. If on
any such Trading Day no market maker is making a market in such securities,
the closing price of such securities on such Trading Day shall be deemed to
be the fair value of such securities as determined in good faith by the
Board of Directors of the Company (whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the
Rights Agent, the holders of Rights and all other Persons); PROVIDED,
HOWEVER, that for the purpose of determining the closing price of the
Preferred Shares for any Trading Day on which there is no such market maker
for the Preferred Shares the closing price on such Trading Day shall be
deemed to be the Formula Number (as defined in the Articles of Amendment)
times the closing price of the Common Shares of the Company on such Trading
Day.
"PERSON" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
"PREFERRED SHARES" shall have the meaning set forth in the
introductory paragraph of this Rights Agreement. Any reference in this
Rights Agreement to Preferred Shares shall be deemed to include any
authorized fraction of a Preferred Share, unless the context otherwise
requires.
"PRINCIPAL PARTY" shall mean the Surviving Person in a Business
Combination; PROVIDED, HOWEVER, that, if such Surviving Person is a direct
or indirect Subsidiary of any other Person, "Principal Party" shall mean
the Person which is the ultimate parent of such Surviving Person and which
is not itself a Subsidiary of another Person. In the event ultimate control
of such Surviving Person is shared by two or more Persons, "Principal
Party" shall mean that Person that is immediately controlled by such two or
more Persons.
"PURCHASE PRICE" with respect to each Right shall mean
$80.00, (after giving effect to the share dividend declared by the Board of
Directors of the Company as of the date of this Rights Agreement) as such
amount may from time to time be adjusted as provided herein. All references
herein to the Purchase Price shall mean the Purchase Price as in effect at
the time in question.
"RECORD DATE" shall have the meaning set forth in the
introductory paragraph of this Rights Agreement.
"REDEMPTION DATE" shall have the meaning set forth in Section
24(a).
6
"REDEMPTION PRICE" with respect to each Right shall mean $.01, as
such amount may from time to time be adjusted in accordance with Section
12. All references herein to the Redemption Price shall mean the Redemption
Price as in effect at the time in question.
"REGISTERED COMMON SHARES" shall mean Common Shares which are, as
of the date of consummation of a Business Combination, and have
continuously been for the 12 months immediately preceding such date,
registered under Section 12 of the Exchange Act.
"RIGHT CERTIFICATE" shall mean a certificate evidencing a Right
or Rights in substantially the form attached as EXHIBIT B.
"RIGHTS" shall mean the rights to purchase Preferred Shares (or
other securities) as provided in this Rights Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as in
effect on the date in question, unless otherwise specifically provided.
"SUBSIDIARY" shall mean a Person, at least a majority of the
total outstanding voting power (being the power under ordinary
circumstances (and not merely upon the happening of a contingency) to vote
in the election of directors of such Person (if such Person is a
corporation) or to participate in the management and control of such Person
(if such Person is not a corporation)) of which is owned, directly or
indirectly, by another Person or by one or more other Subsidiaries of such
other Person or by such other Person and one or more other Subsidiaries of
such other Person.
"SURVIVING PERSON" shall mean (a) the Person which is the
continuing or surviving Person in a consolidation or merger or share
exchange specified in Section 11(c)(i)(A) or 11(c)(i)(B) or (b) the Person
to which the Major Part of the assets of the Company and its Subsidiaries
is sold, leased, exchanged or otherwise transferred or disposed of in one
or more transactions specified in Section 11(c)(i)(C); PROVIDED, HOWEVER,
that, if the Major Part of the assets of the Company and its Subsidiaries
is sold, leased, exchanged or otherwise transferred or disposed of in one
or more transactions specified in Section 11(c)(i)(C) to more than one
Person, the "Surviving Person" in such case shall mean the Person that
acquired assets of the Company and/or its Subsidiaries with the greatest
fair market value in such transaction or transactions.
"TRADING DAY" shall mean a day on which the principal national
securities exchange (or principal recognized foreign stock exchange, as the
case may be) on which any securities or Rights, as the case may be, are
listed or admitted to trading is open for the transaction of business or,
if the securities or Rights in question are not listed or admitted to
trading on any national securities
7
exchange (or recognized foreign stock exchange, as the case may be), a
Business Day.
SECTION 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 one or more co-
Rights Agents as it may deem necessary or desirable upon notice to the
Rights Agent (the term "Rights Agent" being used herein to refer,
collectively, to the Rights Agent together with any such co-Rights Agents).
In the event the Company appoints one or more co-Rights Agents, the
respective duties of the Rights Agent and any co-Rights Agents shall be set
forth in an amendment to this Rights Agreement. As soon as practicable
after the Record Date, the Rights Agent will assist the Company in mailing
a letter summarizing the terms of the Rights to each holder of record of
Common Stock as of the Record Date, at such holder's address as shown by
the records of the Company.
SECTION 3. ISSUE OF RIGHTS AND RIGHT CERTIFICATES. (a) One Right
shall be associated with each Common Share outstanding on the Record Date,
each additional Common Share that shall become outstanding between the
Record Date and the earliest of the Distribution Date, the Redemption Date
or the Expiration Date and each additional Common Share with which Rights
are issued after the Distribution Date but prior to the earlier of the
Redemption Date or the Expiration Date as provided in Section 23; PROVIDED,
HOWEVER, that, if the number of outstanding Rights are combined into a
smaller number of outstanding Rights pursuant to Section 12(a), the
appropriate fractional Right determined pursuant to such Section shall
thereafter be associated with each such Common Share.
(b) Until the earlier of (i) the tenth Business Day (or such
later date as may be determined by the Board of Directors of the Company)
after such time as the Company learns that a Person has become an Acquiring
Person or (ii) the Close of Business on such date, if any, as may be
designated by the Board of Directors of the Company following the
commencement of, or first public disclosure of an intent to commence, 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 of its Subsidiaries, or any Person holding Common Shares for or
pursuant to the terms of any such employee benefit plan) for outstanding
Common Shares, if upon consummation of such tender or exchange offer such
Person could be the Beneficial Owner of 15% or more of the outstanding
Common Shares (the Close of Business on the earlier of such dates being the
"Distribution Date"), (x) the Rights will be evidenced by the certificates
or other evidences of ownership of Common Shares registered in the names of
the holders thereof and not by separate Right Certificates and (y) the
Rights, including the right to receive Right Certificates, will be
transferable only in connection with the transfer of Common Shares. As soon
as
8
practicable after the Distribution Date, the Rights Agent will send,
by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the Distribution Date, at the address of such holder shown
on the records of the Company, a Right Certificate evidencing one whole
Right for each Common Share (or for the number of Common Shares with
which one whole Right is then associated if the number of Rights per
Common Share held by such record holder has been adjusted in accordance
with the proviso in Section 3(a)). If the number of Rights associated with
each Common Share has been adjusted in accordance with the proviso in
Section 3(a), at the time of distribution of the Right Certificates the
Company may make any necessary and appropriate rounding adjustments so
that Right Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Right in accordance
with Section 15(a). As of and after the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(c) Until the earliest of the Distribution Date, the Redemption
Date or the Expiration Date, the Rights associated with Common Shares shall
be evidenced by the evidence of ownership of such Common Shares alone, the
registered holders of the Common Shares shall also be the registered
holders of the associated Rights, and the transfer of any Common Shares
shall also constitute the transfer of the Rights associated with such
Common Shares.
(d) Certificates issued for Common Shares after the Record Date
(including, without limitation, upon transfer or exchange of outstanding
Common Shares), but prior to the earliest of the Distribution Date, the
Redemption Date or the Expiration Date, shall have printed on, written on
or otherwise affixed to or attached to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement dated as of March
19, 1998, as it may be amended from time to time (the "Rights
Agreement"), between Churchill Downs Incorporated (the "Company") and
Bank of Louisville, as Rights Agent (the "Rights Agent"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive 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 Rights Agent will mail to the
holder of this certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor. Rights
beneficially owned by Acquiring Persons or their Affiliates or
Associates (as such terms are defined in the Rights Agreement) and
by any subsequent holder of such Rights are null and void and
nontransferable.
9
Notwithstanding this paragraph (d), the omission of a legend
shall not affect the enforceability of any part of this Rights Agreement or
the rights of any holder of Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and
the form of election to purchase and form of assignment to be printed on
the reverse side thereof) shall be in substantially the form set forth as
EXHIBIT B 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 Rights
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 on which the Rights may from time to time be listed,
or to conform to usage. Subject to the provisions of Sections 7, 11 and 23,
the Right Certificates, whenever issued, shall be dated as of the
Distribution Date, and on their face shall entitle the holders thereof to
purchase such number of Preferred Shares as shall be set forth therein for
the Purchase Price set forth therein, subject to adjustment from time to
time as herein provided.
SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION. (a) The
Right Certificates shall be executed on behalf of the Company by the
Chairman of the Board, the Chief Executive Officer, the President, the
Chief Operating Officer, the Chief Financial Officer, the Treasurer or a
Senior Vice President of the Company, either manually or by facsimile
signature, and 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 Right
Certificates shall be manually countersigned by the Rights Agent and shall
not be valid or obligatory for any purpose unless so countersigned. In case
any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such an officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the
Company, such Right Certificates may nevertheless 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 Right Certificates had not
ceased to be such an officer of the Company; and any Right Certificate may
be signed on behalf of the Company by any person who, at the actual date of
execution of such Right Certificate, shall be a proper officer of the
Company to sign such Right Certificate, although at the date of execution
of this Rights Agreement any such person was not such an officer of the
Company.
(b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal office in Louis-ville, Kentucky,
books for registration and transfer of the Right Certificates issued
hereunder. Such books shall show the names and addresses of the
respective holders of the Right Certificates, the
10
number of Rights evidenced by each of the Right Certificates, the certificate
number of each of the Right Certificates and the date of each of the
Right Certificates.
SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES;
UNCERTIFICATED RIGHTS. (a) Subject to the provisions of Sections 7(e) and
15, at any time after the Distribution Date, and at or prior to the Close
of Business on the earlier of the Redemption Date or the Expiration Date,
any Right Certificate or Right Certificates may be transferred, split-up,
combined or exchanged for another Right Certificate or Right Certificates
representing, in the aggregate, the same number of Rights as the Right
Certificate or Right Certificates surrendered then represented. Any
registered holder desiring to transfer, split-up, combine or exchange any
Right Certificate shall make such request in writing delivered to the
Rights Agent and shall surrender the Right Certificate or Right
Certificates to be transferred, split-up, combined or exchanged at the
principal office of the Rights Agent; PROVIDED, HOWEVER, that neither the
Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any Right Certificate
surrendered for transfer until the registered holder shall have completed
and signed the certification contained in the form of assignment on the
reverse side of such Right 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 shall
reasonably request. Thereupon the Rights Agent shall, subject to Sections
7(e) and 15, countersign and deliver to the Person entitled thereto a Right
Certificate or Right 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 Right Certificates.
(b) Upon receipt by the Company or the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a valid Right Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and,
at the Company's request, 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 Right Certificate if mutilated, the
Company will make a new Right Certificate of like tenor and deliver such
new Right Certificate to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.
(c) Notwithstanding any other provision hereof, the Company and
the Rights Agent may amend this Rights Agreement to provide for
uncertificated Rights in addition to or in place of Rights evidenced by
Right Certificates.
11
SECTION 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS. (a)
Subject to Section 7(e) and except as otherwise provided herein (including
Section 11), each Right shall entitle the registered holder thereof, upon
exercise thereof as provided herein, to purchase for the Purchase Price, at
any time after the Distribution Date and at or prior to the earlier of (i)
the Close of Business on the 10th anniversary of the date of this Rights
Agreement (the Close of Business on such date being the "Expiration Date")
or (ii) the Redemption Date, one-thousandth (1/1,000) of a Preferred Share,
subject to adjustment from time to time as provided in Sections 11 and 12.
(b) The registered holder of any Right 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
Right Certificate, with the form of election to purchase on the reverse
side thereof duly executed, to the Rights Agent at the principal office of
the Rights Agent in Louisville, Kentucky, together with payment of the
Purchase Price for each one-thousandth (1/1,000) of a Preferred Share as to
which the Rights are exercised, at or prior to the earlier of (i) the
Expiration Date or (ii) the Redemption Date.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the Preferred Shares to be purchased
together with an amount equal to any applicable transfer tax, in lawful
money of the United States of America, in cash or by certified check or
money order payable to the order of the Company, the Rights Agent shall
thereupon (i) either (A) promptly requisition from any transfer agent of
the Preferred Shares (or make available, if the Rights Agent is the
transfer agent) certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests or (B) if the Company shall have elected
to deposit the Preferred Shares with a depositary agent under a depositary
arrangement, promptly requisition from the depositary agent depositary
receipts representing the number of one-thousandth (1/1,000) of a Preferred
Share to be purchased (in which case certificates for the Preferred Shares
to be represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company will direct the depositary agent
to comply with all such requests, (ii) when appropriate, promptly
requisition from the Company the amount of cash to be paid in lieu of
issuance of fractional shares in accordance with Section 15, (iii) promptly
after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash
to or upon the order of the registered holder of such Right Certificate.
12
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be countersigned by the Rights Agent and delivered to the
registered holder of such Right Certificate or to his duly authorized
assigns, subject to the provisions of Section 15.
(e) Notwithstanding anything in this Rights Agreement to the
contrary, any Rights that are at any time beneficially owned by an
Acquiring Person or any Affiliate or Associate of an Acquiring Person shall
be null and void and nontransferable, and any holder of any such Right
(including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
(f) Notwithstanding anything in this Rights Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder of any Right
Certificates upon the occurrence of any purported exercise as set forth in
this Section 7 unless such registered holder shall have (i) completed and
signed the certificate contained in the form of election to purchase set
forth on the reverse side of the Right Certificate surrendered for such
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 shall reasonably request.
(g) The Company may temporarily suspend, for a period of time not
to exceed 90 calendar days after the Distribution Date, the exercisability
of the Rights in order to prepare and file a registration statement under
the Securities Act, on an appropriate form, with respect to the Preferred
Shares purchasable upon exercise of the Rights and permit such registration
statement to become effective; PROVIDED, HOWEVER, that no such suspension
shall remain effective after, and the Rights shall without any further
action by the Company or any other Person become exercisable immediately
upon, the effectiveness of such registration statement. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended and shall issue
a further public announcement at such time as the suspension is no longer
in effect. Notwithstanding any provision herein to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification
under the blue sky or securities laws of such jurisdiction shall not have
been obtained or the exercise of the Rights shall not be permitted under
applicable law.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES.
All Right Certificates surrendered or presented for the purpose of
exercise, transfer, split-up, combination or exchange shall, and any Right
Certificate representing Rights that have
13
become null and void and nontransferable pursuant to Section 7(e)
surrendered or presented for any purpose shall, if surrendered or presented
to the Company or to any of its agents, be delivered to the Rights Agent
for cancellation or in canceled form, or, if surrendered or presented
to the Rights Agent, shall be canceled by it, and no Right Certificates
shall be issued in lieu thereof except as expressly permitted by this Rights
Agreement. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any
Right Certificate purchased or acquired by the Company. The Rights Agent
shall deliver all canceled Right Certificates to the Company so that the
Company is able to maintain such certificates for such period of time as
may be required by law, or shall, at the written request of the Company,
destroy such canceled Right Certificates, and in such case shall deliver
a certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES. (a)
The Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares, free from
preemptive rights or any right of first refusal, a number of Preferred
Shares sufficient to permit the exercise pursuant to Section 7 or exchange
pursuant to Section 11 in full of all outstanding Rights.
(b) In the event that there shall not be sufficient authorized
but unissued Preferred Shares to permit the exercise or exchange of Rights
in accordance with Section 11, the Company covenants and agrees that it
will take all such action as may be necessary to authorize additional
Preferred Shares for issuance upon the exercise or exchange of Rights
pursuant to Section 11; PROVIDED, HOWEVER, that if the Company is unable to
cause the authorization of additional Preferred Shares, then the Company
shall, or in lieu of seeking any such authorization, the Company may, to
the extent necessary and permitted by applicable law and any agreements or
instruments in effect prior to the Distribution Date to which it is a
party, (i) upon surrender of a Right, pay cash equal to the Purchase Price
in lieu of issuing Preferred Shares and requiring payment therefor, (ii)
upon due exercise of a Right and payment of the Purchase Price for each
Preferred Share as to which such Right is exercised, issue equity
securities having a value equal to the value of the Preferred Shares which
otherwise would have been issuable pursuant to Section 11, which value
shall be determined by a nationally recognized investment banking firm
selected by the Board of Directors of the Company or (iii) upon due
exercise of a Right and payment of the Purchase Price for each Preferred
Share as to which such Right is exercised, distribute a combination of
Preferred Shares, cash and/or other equity and/or debt securities having an
aggregate value equal to the value of the Preferred Shares which otherwise
would have been issuable pursuant to Section 11, which value shall be
determined by a nationally recognized investment banking firm selected by
the Board of
14
Directors of the Company. To the extent that any legal or contractual
restrictions (pursuant to agreements or instruments in effect prior to the
Distribution Date to which it is party) prevent the Company from paying
the full amount payable in accordance with the foregoing sentence, the
Company shall pay to holders of the Rights as to which such payments are
being made all amounts which are not then restricted on a pro rata basis
as such payments become permissible under such legal or contractual
restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares delivered
upon exercise or exchange of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(d) So long as the Preferred Shares issuable upon the exercise or
exchange of Rights are to be listed on any national securities exchange,
the Company covenants and agrees to use its best efforts to cause, from and
after such time as the Rights become exercisable or exchangeable, all
Preferred Shares reserved for such issuance to be listed on such securities
exchange upon official notice of issuance upon such exercise or exchange.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all Federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of
Right Certificates or of any Preferred Shares or Common Shares or other
securities upon the exercise or exchange of the Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a Person other
than, or in respect of the issuance or delivery of certificates or other
evidences of ownership of the Preferred Shares or Common Shares or other
securities, as the case may be, in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered
for exercise or exchange or to issue or deliver any certificates or other
evidences of ownership of Preferred Shares or Common Shares or other
securities, as the case may be, upon the exercise or exchange of any Rights
until any such tax shall have been paid (any such tax being payable by the
holder of such Right Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
SECTION 10. PREFERRED SHARES RECORD DATE. Each Person in whose name
any certificate or other evidence of ownership of Preferred Shares or
Common Shares or other securities is issued upon the exercise or exchange
of Rights shall for all purposes be deemed to have become the holder of
record of the Preferred Shares or Common Shares or other securities, as the
case may be, represented thereby on, and such certificate or other evidence
of
15
ownership shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of any Purchase
Price (and any applicable transfer taxes) was made; PROVIDED, HOWEVER,
that, if the date of such surrender and payment is a date upon which the
transfer books of the Company for the Preferred Shares or Common Shares or
other securities, as the case may be, are closed, such Person shall be
deemed to have become the record holder of such Preferred Shares or Common
Shares or other securities, as the case may be, on, and such certificate or
other evidence of ownership shall be dated as of, the next succeeding
Business Day on which the transfer books of the Company for the Preferred
Shares or Common Shares or other securities, as the case may be, are open.
SECTION 11. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING
PERSON; EXCHANGE OF RIGHTS FOR SHARES; BUSINESS COMBINATIONS. (a) Upon a
Person becoming an Acquiring Person, proper provision shall be made so that
each holder of a Right, except as provided in Section 7(e), shall
thereafter have a right to receive, upon exercise thereof for the Purchase
Price in accordance with the terms of this Rights Agreement, such number of
thousandths (1/1,000s) of a Preferred Share as shall equal the result
obtained by multiplying the Purchase Price by a fraction, the numerator of
which is the number of thousandths (1/1,000s) of a Preferred Share for
which a Right is then exercisable and the denominator of which is 50% of
the Market Value of the Common Shares on the date on which a Person becomes
an Acquiring Person. As soon as practicable after a Person becomes an
Acquiring Person (provided the Company shall not have elected to make the
exchange permitted by Section 11(b)(i) for all outstanding Rights), the
Company covenants and agrees to use its best efforts to:
(i) prepare and file a registration statement under the
Securities Act, on an appropriate form, with respect to the Preferred
Shares purchasable upon exercise of the Rights;
(ii) cause such registration statement to become effective as
soon as practicable after such filing;
(iii) cause such registration statement to remain effective (with
a prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date; and
(iv) qualify or register the Preferred Shares purchasable upon
exercise of the Rights under the blue sky or securities laws of such
jurisdictions as may be necessary or appropriate.
(b)(i) The Board of Directors of the Company may, at its option,
at any time after a Person becomes an Acquiring Person, mandatorily
exchange all or part of the then outstanding and exercisable Rights (which
shall not include Rights that shall have become null and void and
nontransferable pursuant to the provisions
16
of Section 7(e)) for consideration per Right consisting of either (x)
one-half of the securities that would be issuable at such time upon the
exercise of one Right in accordance with Section 11(a) or, if applicable,
Section 9(b)(ii) or (iii) or, (y) if applicable, the cash consideration
specified in Section 9(b)(i) (the consideration issuable per Right pursuant
to this Section 11(b)(i) being the "Exchange Consideration"). The Board of
Directors of the Company may, at its option, issue, in substitution for
Preferred Shares, Common Shares in an amount per Preferred Share equal
to the Formula Number (as defined in the Articles of Amendment) if there are
sufficient authorized but unissued Common Shares. If the Board of Directors
of the Company elects to exchange all or part of the Rights for the
Exchange Consideration pursuant to this Section 11(b)(i) prior to the
physical distribution of the Rights Certificates, the Corporation may
distribute the Exchange Consideration in lieu of distributing Right
Certificates, in which case for purposes of this Rights Agreement holders
of Rights shall be deemed to have simultaneously received and surrendered
for exchange Right Certificates on the date of such distribution.
(ii) Any action of the Board of Directors of the Company ordering
the exchange of any Rights pursuant to Section 11(b)(i) shall be
irrevocable and, immediately upon the taking of such action and without any
further action and without any notice, the right to exercise any such Right
pursuant to Section 11(a) shall terminate and the only right thereafter of
a holder of such Right shall be to receive the Exchange Consideration in
exchange for each such Right held by such holder or, if the Exchange
Consideration shall not have been paid or issued, to exercise any such
Right pursuant to Section 11(c)(i). The Company shall promptly 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 holders of such Rights at their last addresses as they appear 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 herein provided 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 the Rights for the Exchange
Consideration will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which
shall have become null and void and nontransferable pursuant to the
provisions of Section 7(e)) held by each holder of Rights.
(c)(i) In the event that, following a Distribution Date, directly
or indirectly, any transactions specified in the following clause (A), (B)
or (C) of this Section 11(c) (each such transaction being a "Business
Combination") shall be consummated:
17
(A) the Company shall consolidate with, merge with and into,
or enter into a share exchange with any Acquiring Person or any
Affiliate or Associate of an Acquiring Person;
(B) any Acquiring Person or any Affiliate or Associate of an
Acquiring Person shall merge with and into or enter into a share
exchange with the Company and, in connection with such merger or share
exchange, all or part of the Common Shares shall be changed into or
exchanged for capital stock or other securities of the Company or of
any Acquiring Person or Affiliate or Associate of an Acquiring Person
or cash or any other property; or
(C) the Company shall sell, lease, exchange or otherwise
transfer or dispose of (or one or more of its Subsidiaries shall sell,
lease, exchange or otherwise transfer or dispose of), in one or more
transactions, the Major Part of the assets of the Company and its
Subsidiaries (taken as a whole) to any Acquiring Person or any
Affiliate or Associate of an Acquiring Person;
then, in each such case, proper provision shall be made so that each holder
of a Right, except as provided in Section 7(e), shall thereafter have the
right to receive, upon the exercise thereof for the Purchase Price in
accordance with the terms of this Rights Agreement, the securities
specified below (or, at such holder's option, the securities specified in
Section 11(a)):
(x) if the Principal Party in such Business Combination has Registered
Common Shares outstanding, each Right shall thereafter represent the
right to receive, upon the exercise thereof for the Purchase Price in
accordance with the terms of this Rights Agreement, such number of
Registered Common Shares of such Principal Party, free and clear of
all liens, encumbrances or other adverse claims, as shall have an
aggregate Market Value equal to the result obtained by multiplying the
Purchase Price by two; or
(y) if the Principal Party involved in such Business Combination does
not have Registered Common Shares outstanding, each Right shall
thereafter represent the right to receive, upon the exercise thereof
for the Purchase Price in accordance with the terms of this Rights
Agreement, at the election of the holder of such Right at the time of
the exercise thereof, any of:
(1) such number of Common Shares of the Surviving Person in such
Business Combination as shall have an aggregate Book Value immediately
after giving effect to such Business Combination equal to the result
obtained by multiplying the Purchase Price by two;
18
(2) such number of Common Shares of the Principal Party in such
Business Combination (if the Principal Party is not also the Surviving
Person in such Business Combination) as shall have an aggregate Book
Value immediately after giving effect to such Business Combination
equal to the result obtained by multiplying the Purchase Price by two;
or
(3) if the Principal Party in such Business Combination is an
Affiliate of one or more Persons which has Registered Common Shares
outstanding, such number of Registered Common Shares of whichever of
such Affiliates of the Principal Party has Registered Common Shares
with the greatest aggregate Market Value on the date of consummation
of such Business Combination as shall have an aggregate Market Value
on the date of such Business Combination equal to the result obtained
by multiplying the Purchase Price by two.
(ii) The Company shall not consummate any Business Combination
unless each issuer of Common Shares for which Rights may be exercised, as
set forth in this Section 11(c), shall have sufficient authorized Common
Shares that have not been issued or reserved for issuance (and which shall,
when issued upon exercise thereof in accordance with this Rights Agreement,
be validly issued, fully paid and nonassessable and free of preemptive
rights, rights of first refusal or any other restrictions or limitations on
the transfer or ownership thereof) to permit the exercise in full of the
Rights in accordance with this Section 11(c) and unless prior thereto:
(A) a registration statement under the Securities Act on an
appropriate form, with respect to the Rights and the Common Shares of
such issuer purchasable upon exercise of the Rights, shall be
effective under the Securities Act; and
(B) the Company and each such issuer shall have:
[1] executed and delivered to the Rights Agent a
supplemental agreement providing for the assumption by such issuer of
the obligations set forth in this Section 11(c) (including the
obligation of such issuer to issue Common Shares upon the exercise of
Rights in accordance with the terms set forth in Sections 11(c)(i) and
11(c)(iii)) and further providing that such issuer, at its own expense,
will use its best efforts to:
(x) cause a registration statement under the Securities
Act on an appropriate form, with respect to the Rights and
the Common Shares of such issuer purchasable upon exercise
of the Rights, to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until
the Expiration Date;
19
(y) qualify or register the Rights and the Common
Shares of such issuer purchasable upon exercise of the
Rights under the blue sky or securities laws of such
jurisdictions as may be necessary or appropriate; and
(z) list the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights on each
national securities exchange on which the Common Shares were
listed prior to the consummation of the Business Combination
or, if the Common Shares were not listed on a national
securities exchange prior to the consummation of the
Business Combination, on a national securities exchange;
[2] furnished to the Rights Agent a written opinion of
independent counsel stating that such supplemental agreement is a
valid, binding and enforceable agreement of such issuer; and
[3] filed with the Rights Agent a certificate of a
nationally recognized firm of independent accountants setting forth
the number of Common Shares of such issuer which may be purchased upon
the exercise of each Right after the consummation of such Business
Combination.
(iii) After consummation of any Business Combination and subject
to the provisions of Section 11(c)(ii), (A) each issuer of Common Shares
for which Rights may be exercised as set forth in this Section 11(c) shall
be liable for, and shall assume, by virtue of such Business Combination,
all the obligations and duties of the Company pursuant to this Rights
Agreement, (B) the term "Company" shall thereafter be deemed to refer to
such issuer, (C) each such issuer shall take such steps in connection with
such consummation as may be necessary to assure that the provisions hereof
(including the provisions of Sections 11(a) and 11(c)) 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 (D) the
number of Common Shares of each such issuer thereafter receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
of Sections 11 and 12 and the provisions of Section 7, 9 and 10 with
respect to the Preferred Shares shall apply, as nearly as reasonably may
be, on like terms to any such Common Shares.
SECTION 12. CERTAIN ADJUSTMENTS. (a) To preserve the actual or
potential economic value of the Rights, if at any time after the date of
this Rights Agreement there shall be any change in the Common Shares or the
Preferred Shares (other than pursuant to the share dividend declared by the
Board of Directors of the Company as of the date of this Rights Agreement),
whether by reason of share
20
dividends, share splits, recapitalization, mergers, consolidations,
combinations or exchanges of securities, split-ups, splitoffs, spin-offs,
liquidations, other similar changes in capitalization, any distribution
or issuance of cash, assets, evidences of indebtedness or subscription
rights, options or warrants to holders of Common Shares or Preferred Shares,
as the case may be (other than distribution of the Rights or regular annual
cash dividends) or otherwise, then, in each such event the Board of Directors
of the Company shall make such appropriate adjustments in the number of
Preferred Shares (or the number and kind of other securities) issuable upon
exercise of each Right, the Purchase Price and Redemption Price in effect
at such time and the number of Rights outstanding at such time (including
the number of Rights or fractional Rights associated with each Common Share)
such that following such adjustment such event shall not have had the effect
of reducing or limiting the benefits the holders of the Rights would have
had absent such event.
(b) If, as a result of an adjustment made pursuant to Section
12(a), the holder of any Right thereafter exercised shall become entitled
to receive any securities other than Preferred Shares, thereafter the
number of such securities so receivable upon exercise of any Right shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions of Sections 11 and 12 and the
provisions of Sections 7, 9 and 10 with respect to the Preferred Shares
shall apply, as nearly as reasonably may be, on like terms to any such
other securities.
(c) All Rights originally issued by the Company subsequent to any
adjustment made to the amount of Preferred Shares or other securities
relating to a Right shall evidence the right to purchase, for the Purchase
Price, the adjusted number and kind of securities purchasable from time to
time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(d) Irrespective of any adjustment or change in the Purchase
Price or the number of Preferred Shares or number or kind of other
securities issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the terms which
were expressed in the initial Right Certificates issued hereunder.
(e) In any case in which action taken pursuant to Section 12(a)
requires that an adjustment 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 issuing to the holder of any Right exercised after such
record date the Preferred Shares and/or other securities, if any, issuable
upon such exercise over and above the Preferred Shares and/or other
securities, if any, issuable before giving effect to such adjustment;
PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill
or other appropri-
21
ate instrument evidencing such holder's right to receive such additional
securities upon the occurrence of the event requiring such adjustment.
SECTION 13. CERTIFICATE OF ADJUSTMENT. Whenever an adjustment is
made as provided in Sections 11 or 12, 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 a copy
of such certificate and (c) mail a brief summary thereof to each holder of
a Right Certificate (or, prior to the Distribution Date, of the Common
Shares) in accordance with Section 25. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained.
SECTION 14. ADDITIONAL COVENANTS. (a) Notwithstanding any other
provision of this Rights Agreement, no adjustment to the number of
Preferred Shares (or fractions of a share) or other securities for which a
Right is exercisable or the number of Rights outstanding or associated with
each Common Share or any similar or other adjustment shall be made or be
effective if such adjustment would have the effect of reducing or limiting
the benefits the holders of the Rights would have had absent such
adjustment, including, without limitation, the benefits under Sections 11
and 12, unless the terms of this Rights Agreement are amended so as to
preserve such benefits.
(b) The Company covenants and agrees that, after the Distribution
Date, except as permitted by Section 26, it will not take (or permit any
Subsidiary of the Company to take) any action if at the time such action is
taken it is intended or reasonably foreseeable that such action will reduce
or otherwise limit the benefits the holders of the Rights would have had
absent such action, including, without limitation, the benefits under
Sections 11 and 12. Any action taken by the Company during any period after
any Person becomes an Acquiring Person but prior to the Distribution Date
shall be null and void unless such action could be taken under this Section
14(b) from and after the Distribution Date. The Company shall not
consummate any Business Combination if any issuer of Common Shares for
which Rights may be exercised after such Business Combination in accordance
with Section 11(c) shall have taken any action that reduces or otherwise
limits the benefits the holders of the Rights would have had absent such
action, including, without limitation, the benefits under Sections 11
and 12.
SECTION 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The
Company may, but shall not be required to, issue fractions of Rights or
distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, the Company may pay to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable an amount
22
in cash equal to the same fraction of the current market value of a whole
Right. For purposes of this Section 15(a), the current market value of a
whole Right shall be the closing price of the Rights (as determined pursuant
to the second and third sentences of the definition of Market Value
contained in Section 1) for the Trading Day immediately prior to the date
on which such fractional Rights would have been otherwise issuable.
(b) The Company may, but shall not be required to, issue
fractions of Preferred Shares upon exercise or exchange of the Rights or
distribute certificates which evidence fractional Preferred Shares. In lieu
of fractional Preferred Shares, the Company may elect to (i) utilize a
depository arrangement as provided by the terms of the Preferred Shares or
(ii) in the case of a fraction of a Preferred Share (other than one-
thousandth (1/1,000) of a Preferred Share or any integral multiple
thereof), pay to the registered holders of Right Certificates at the time
such Rights are exercised or exchanged as herein provided an amount in cash
equal to the same fraction of the current market value of one Preferred
Share, if any are outstanding and publicly traded (or the Formula Number
times the current market value of one Common Share if the Preferred Shares
are not outstanding and publicly traded). For purposes of this Section
15(b), the current market value of a Preferred Share (or Common Share)
shall be the closing price of a Preferred Share (or Common Share) (as
determined pursuant to the second and third sentences of the definition of
Market Value contained in Section 1) for the Trading Day immediately prior
to the date of such exercise or exchange. If, as a result of an adjustment
made pursuant to Section 12(a), the holder of any Right thereafter
exercised shall become entitled to receive any securities other than
Preferred Shares, the provisions of this Section 15(b) shall apply, as
nearly as reasonably may be, on like terms to such other securities.
(c) The Company may, but shall not be required to, issue
fractions of Common Shares upon exchange of Rights pursuant to Section
11(b), or to distribute certificates or other evidences of ownership which
evidence fractional Common Shares. In lieu of such fractional Common
Shares, the Company may pay to the registered holders of the Right
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 one Common Share as of the effective date of the
exchange under Section 11(b).
(d) The holders of Rights by the acceptance of the Right
Certificates (or, prior to the Distribution Date, of the Common Shares)
expressly waives the right to receive any fractional Rights or any
fractional shares upon exercise of a Right except as provided in this
Section 15.
23
SECTION 16. RIGHTS OF ACTION. (a) All rights of action in respect
of this Rights Agreement are vested in the respective registered holders of
the Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or the holder of any other Right
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 evidenced by
such Right Certificate in the manner provided in such Right Certificate and
in this Rights 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 Rights Agreement and shall be entitled to specific
performance of the obligations of any Person under, and injunctive relief
against actual or threatened violations of the obligations of any Person
subject to, this Rights Agreement.
(b) Any holder of Rights who prevails in an action to enforce the
provisions of this Rights Agreement shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred in such
action.
SECTION 17. TRANSFER AND OWNERSHIP OF RIGHTS AND RIGHT
CERTIFICATES. (a) Prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares and
the Rights associated with the Common Shares shall be automatically
transferred upon the transfer of the Common Shares.
(b) After the Distribution Date, the Right Certificates will be
transferable, subject to Section 7(e), only on the registry books of the
Rights Agent if surrendered at the principal office of the Rights Agent,
duly endorsed or accompanied by a proper instrument of transfer.
(c) The Company and the Rights Agent may deem and treat the
Person in whose name a Right Certificate (or, prior to the Distribution
Date, the associated certificate or other evidence of ownership of Common
Shares) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on
the Right Certificates or the associated certificate or other evidence of
ownership of Common Shares made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary.
SECTION 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote or
receive dividends or be deemed, for any
24
purpose, the holder of the Preferred Shares or of any other securities of
the Company which may at any time be issuable on the exercise or exchange
of the Rights represented thereby, nor shall anything contained herein or in
any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company,
including, without limitation, 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, or to
receive dividends or other distributions or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate
shall have been exercised or exchanged in accordance with the provisions
hereof.
SECTION 19. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered
by it hereunder from time to time and its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution
of this Rights Agreement and the exercise and performance of its duties
hereunder.
(b) The Rights Agent 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 administration of this Rights Agreement in reliance
upon any Right Certificate or certificate or other evidence of ownership of
the Common Shares or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, 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.
SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF RIGHTS AGENT. (a)
Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to
the stock transfer or corporate trust business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under
this Rights Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; PROVIDED that such
corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 22. In case, at the time such successor
Rights Agent shall succeed to the agency created by this Rights Agreement,
any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature
of the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and, in case at that time any of the Right Certifi-
25
cates shall not have been countersigned, any successor Rights Agent
may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and
in all such cases such Right Certificates shall have the full force provided
in the Right Certificates and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and, in case at that time any of the Right Certificates
shall not have been countersigned, the Rights Agent may countersign such
Right Certificates either in its prior name or in its changed name; and in
all such cases such Right Certificates shall have the full force provided
in the Right Certificates and in this Rights Agreement.
SECTION 21. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Rights Agreement upon the following
terms and conditions, by all of which the Company and the holders of Right
Certificates (or, prior to the Distribution Date, of the Common Shares), by
their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel satisfactory
to it (who may be legal counsel for the Company), and the opinion 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 opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any
Acquiring Person) be proved or established by the Company prior to taking,
refraining from 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 any one of the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, a Senior Vice President, the Treasurer or the Secretary
of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this Rights Agreement
in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or wilful misconduct.
26
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Rights Agreement or
in the Right Certificates (except as to its countersignature thereof) or be
required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Rights Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Rights Agreement
or in any Right Certificate; nor shall it have any responsibility with
respect to any exercise of Rights by an Acquiring Person in whose hands the
Rights are null and void and nontransferable unless the Company shall have
given actual notice to the Rights Agent of the identity of any such
Acquiring Person; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or 12 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 Right Certificates after
actual notice of any such adjustment); nor shall it by any act hereunder 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 Rights Agreement or any Right Certificate or as to whether any
Preferred Shares or Common Shares will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) 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 Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, a
Senior Vice President, the Secretary or the Treasurer of the Company, and
to apply to such officers for advice and instructions in connection with
its duties and it shall not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer.
(h) The Rights Agent and any shareholder, director, officer,
employee 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
27
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 the Rights Agent
under this Rights Agreement. Nothing herein shall preclude the Rights Agent
from acting in any other capacity for the Company or for any other legal
entity.
(i) 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
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct provided reasonable care was
exercised in the selection and continued employment thereof.
(j) The Company agrees to indemnify and to hold the Rights Agent
harmless against any loss, liability, damage or expense (including
reasonable fees and expenses of legal counsel) which the Rights Agent may
incur resulting from its actions as Rights Agent pursuant to this Rights
Agreement; PROVIDED, HOWEVER, that the Rights Agent shall not be
indemnified or held harmless with respect to any such loss, liability,
damage or expense incurred by the Rights Agent as a result of, or arising
out of, its own negligence, bad faith or wilful misconduct. The Rights
Agent shall notify the Company, by letter or by facsimile confirmed by
letter, of the assertion of any action, proceeding, suit or claim against
the Rights Agent, promptly after the Rights Agent shall have notice of any
such assertion of an action, proceeding, suit or claim or have been served
with the summons or other first legal process giving information as to the
nature and basis of the action, proceeding, suit or claim. The Company
shall not be liable with respect to any such action, proceeding, suit or
claim to the extent that any failure of the Rights Agent so to notify
promptly the Company prejudices the rights of the Company with respect to
such action, proceeding, suit or claim. The Company shall at its own
expense assume the defense of any such action, proceeding, suit or claim.
In the event that the Company assumes such defense, the Company shall not
thereafter be liable for the fees and expenses of any additional counsel
retained by the Rights Agent, so long as the Company shall retain counsel
satisfactory to the Rights Agent, in the exercise of its reasonable
judgment, to defend such action, proceeding, suit or claim. In the event
the Company fails so to defend, the Rights Agent agrees not to settle any
litigation in connection with any action, proceeding, suit or claim with
respect to which it may seek indemnification from the Company without the
prior written consent of the Company.
(k) The Rights Agent shall be under no obligation to institute
any action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more registered holders of
Right Certificates shall furnish the Rights
28
Agent with security and indemnity to its satisfaction for any costs and
expenses which may be incurred.
(l) The Rights Agent shall not be liable for failure to perform
any duties except as specifically set forth herein and no implied covenants
or obligations shall be read into this Agreement against the Rights Agent,
whose duties and obligations are ministerial and shall be determined solely
by the express provisions hereof.
SECTION 22. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under
this Rights Agreement upon 30 days' notice in writing mailed to the Company
and to each transfer agent of the Common Shares and the Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates
(or, prior to the Distribution Date, of the Common Shares) 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 Right Certificates (or, prior to the Distribution Date, of
the Common Shares) 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 Right Certificate (or, prior to the Distribution Date, of the Common
Shares) who shall, with such notice, submit his Right Certificate (or,
prior to the Distribution Date, the certificate or other evidence of
ownership of his Common Shares) for inspection by the Company, then the
registered holder of any Right Certificate (or, prior to the Distribution
Date, of the Common Shares) 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 corporation organized and doing business under the laws of the United
States or of any state of the United States, in good standing, having a
principal office in the United States, which is authorized under such laws
to exercise stock transfer or corporate trust 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 of at least $50,000,000; PROVIDED that the principal transfer agent
for the Common Shares shall in any event be qualified to be the Rights
Agent. 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
29
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 Right
Certificates (or, prior to the Distribution Date, of the Common Shares).
Failure to give any notice provided for in this Section 22, 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.
SECTION 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHT CERTIFICATES.
Notwithstanding any of the provisions of this Rights Agreement or of the
Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by its Board
of Directors to reflect any adjustment or change made in accordance with
the provisions of this Rights Agreement. In addition, in connection with
the issuance or sale of Common Shares following the Distribution Date and
prior to the earlier of the Redemption Date and the Expiration Date, the
Company (a) 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, notes or
debentures issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue
Rights and distribute Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; PROVIDED,
HOWEVER, that (x) no such Rights shall be issued if, and to the extent
that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights would be issued, and (y) no such
Rights shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
SECTION 24. REDEMPTION AND TERMINATION. (a) The Board of Directors
of the Company may, at its option, at any time prior to the earlier of (i)
the tenth Business Day (or such later date as may be determined by the
Board of Directors of the Company) after such time as a Person becomes an
Acquiring Person and (ii) the Expiration Date, order the redemption of all,
but not fewer than all, the then outstanding Rights at the Redemption Price
(the date of such redemption being the "Redemption Date"), and the Company,
at its option, may pay the Redemption Price either in cash or Common Shares
or other securities of the Company deemed by the Board of Directors of the
Company, in the exercise of its sole discretion, to be at least equivalent
in value to the Redemption Price.
30
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, 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. Within 10 Business Days after the action
of the Board of Directors of the Company ordering the redemption of the
Rights, the Company shall give notice of such redemption to the holders of
the then outstanding Rights by mailing such notice to all such holders at
their last addresses as they appear 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. Each such notice of redemption will
state the method by which payment of the Redemption Price will be made. The
notice, if mailed in the manner herein provided, shall be conclusively
presumed to have been duly given, whether or not the holder of Rights
receives such notice. In any case, failure to give such notice by mail, or
any defect in the notice, to any particular holder of Rights shall not
affect the sufficiency of the notice to other holders of Rights.
SECTION 25. NOTICES. Subject to the provisions of Section 22,
notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of a Right Certificate (or, prior to the
Distribution Date, of the Common Shares) 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:
Churchill Downs Incorporated
700 Central Avenue
Louisville, Kentucky 40208
Attn: General Counsel
Subject to the provisions of Section 22, any notice or demand authorized by
this Rights Agreement to be given or made by the Company or by the holder
of a Right Certificate (or, prior to the Distribution Date, of the Common
Shares) 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:
Bank of Louisville
500 West Broadway
Louisville, Kentucky 40202
Attn: General Counsel
Notices or demands authorized by this Rights Agreement to be given or made
by the Company or the Rights Agent to any holder of a Right Certificate
(or, prior to the Distribution Date, of the 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 Rights Agent or,
31
prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. At any time prior to the
Distribution Date and subject to the last sentence of this Section 26, the
Company may, and the Rights Agent shall if the Company so directs,
supplement or amend any provision of this Rights Agreement (including,
without limitation, the date on which the Distribution Date shall occur or
the time during which the Rights may be redeemed pursuant to Section 24)
and the Company may amend any provision of the Articles of Amendment
without the approval of any holder of the Rights. From and after the
Distribution Date and subject to applicable law, the Company may, and the
Rights Agent shall if the Company so directs, amend this Rights Agreement
without the approval of any holders of Right Certificates (a) to cure any
ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision of this Rights
Agreement or (b) to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders
of Right Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person). Any supplement or amendment to this
Rights Agreement duly approved by the Company that does not amend Sections
19, 20, 21 or 22 in a manner adverse to the Rights Agent shall become
effective immediately upon execution by the Company, whether or not also
executed by the Rights Agent. In addition, notwithstanding anything to the
contrary contained in this Rights Agreement, no supplement or amendment to
this Rights Agreement shall be made which (x) reduces the Redemption Price
(except as required by Section 12(a)), or (y) provides for an earlier
Expiration Date or (z) changes the rights or duties of the Rights Agent
without the consent of the Rights Agent.
SECTION 27. SUCCESSORS. All the covenants and provisions of this
Rights 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.
SECTION 28. BENEFITS OF RIGHTS AGREEMENT: DETERMINATIONS AND
ACTIONS BY THE BOARD OF DIRECTORS, ETC. (a) Nothing in this Rights
Agreement shall be construed to give to any Person other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, of the Common Shares) any legal or
equitable right, remedy or claim under this Rights Agreement; but this
Rights Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, of the Common Shares).
(b) Except as explicitly otherwise provided in this Rights
Agreement, the Board of Directors of the Company shall have
32
the exclusive power and authority to administer this Rights Agreement and to
exercise all rights and powers specifically granted to the Board of
Directors of the Company or to the Company, or as may be necessary or
advisable in the administration of this Rights Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Rights Agreement and (ii) make all determinations deemed necessary or
advisable for the administration of this Rights Agreement (including, without
limitation, a determination to redeem or not redeem the Rights or to amend
this Rights Agreement and whether there is an Acquiring Person).
(c) Nothing contained in this Rights Agreement shall be deemed to
be in derogation of the obligation of the Board of Directors of the Company
to exercise its fiduciary duty. Without limiting the foregoing, nothing
contained herein shall be construed to suggest or imply that the Board of
Directors shall not be entitled to reject any tender offer, or to recommend
that holders of Common Shares reject any tender offer, or to take any other
action (including, without limitation, the commencement, prosecution,
defense or settlement of any litigation and the submission of additional or
alternative offers or other proposals) with respect to any tender offer
that the Board of Directors believes is necessary or appropriate in the
exercise of such fiduciary duty.
SECTION 29. SEVERABILITY. If any term, provision, covenant or
restriction of this Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Rights Agreement shall remain in full force and effect and shall in no way
be affected, impaired or invalidated.
SECTION 30. GOVERNING LAW. This Rights Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under
the law of the Commonwealth of Kentucky and for all purposes shall be
governed by and construed in accordance with the law of such State
applicable to contracts to be made and performed entirely within such
State.
SECTION 31. COUNTERPARTS; EFFECTIVENESS. This Rights 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.
This Rights Agreement shall be effective as of the Close of Business on the
date hereof.
SECTION 32. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Rights Agreement are inserted for convenience only
and shall not control or affect the meaning or construction of any of the
provisions of this Rights Agreement.
33
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the day and year first above written.
CHURCHILL DOWNS INCORPORATED
By:____________________________
Thomas H. Meeker, President
BANK OF LOUISVILLE, as Rights
Agent
By:____________________________
Title:_________________________
34
EXHIBIT A
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
CHURCHILL DOWNS INCORPORATED
Pursuant to the provisions of Section 271B.10-060 of the Kentucky
Business Corporation Act, the undersigned corporation adopts the following
articles of amendment to set forth the preferences, limitations and relative
rights of a series of shares of its Preferred Stock, without par value, under
Article VII of its Articles of Incorporation.
FIRST: The name of the Corporation is Churchill Downs
Incorporated.
SECOND: The text of the amendment determining the terms of the
series of shares of the Preferred Stock is as follows:
I. DESIGNATION AND NUMBER OF SHARES. This series of the Preferred
Stock shall be designated as "Series 1998 Preferred Stock" (the "Series 1998
Preferred Stock"). The number of shares initially issuable as the Series 1998
Preferred Stock shall be 8,000; PROVIDED, HOWEVER, that, if more than a total
of 8,000 shares of Series 1998 Preferred Stock shall be issuable upon the
exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated
as of March 19, 1998, between the Corporation and Bank of Louisville, as
Rights Agent (the "Rights Agreement"), the Board of Directors of the
Corporation, shall, if then permitted by the Kentucky Business Corporation Act,
direct by resolution or resolutions that Articles of Amendment of the Articles
of Incorporation of the Corporation be properly executed and filed with the
Secretary of State of Kentucky providing for the total number of shares
issuable as Series 1998 Preferred Stock to be increased (to the extent that the
Articles of Incorporation then permit) to the largest number of whole shares
(rounded up to the nearest whole number) issuable upon exercise of such Rights.
II. DIVIDENDS OR DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the holders of
shares of any other series of Preferred Stock or other class of capital stock
of the Corporation ranking prior and superior to the shares of Series 1998
Preferred Stock with respect to dividends, the holders of shares of the Series
1998 Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, out of the assets of the Corporation legally available
therefor, (i) annual dividends payable in cash on January 15 of each year, or
such other dates as the Board of Directors of the Corporation shall approve
(each such date being referred to herein as an "Annual Dividend Payment Date"),
commencing on the first Annual Dividend Payment Date after the first issuance
of a share or a fraction of a share of Series 1998 Preferred Stock, in the
amount of $.01 per whole share (rounded to the nearest cent),
less the amount of all cash dividends declared on the Series 1998 Preferred
Stock pursuant to the following clause (ii) since the immediately preceding
Annual Dividend Payment Date or, with respect to the first Annual Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series 1998 Preferred Stock (the total of which shall not, in any event, be
less than zero) and (ii) dividends payable in cash on the payment date for each
cash dividend declared on the Common Stock in an amount per whole share
(rounded to the nearest cent) equal to the Formula Number (as hereinafter
defined) then in effect times the cash dividends then to be paid on each share
of Common Stock. In addition, if the Corporation shall pay any dividend or make
any distribution on the Common Stock payable in assets, securities or other
forms of non-cash consideration (other than dividends or distributions
solely in shares of Common Stock), then, in each such case, the Corporation
shall simultaneously pay or make on each outstanding whole share of Series 1998
Preferred Stock a dividend or distribution in like kind equal to the Formula
Number then in effect times such dividend or distribution on each share of the
Common Stock. As used herein, the "Formula Number" shall be 1,000; PROVIDED,
HOWEVER, that, if at any time after March 19, 1998, excluding, however, the
two-for-one stock split or stock dividend declared by the Corporation on
March 19, 1998, the Corporation shall (x) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or make any distribution on
the Common Stock in shares of Common Stock, (y) subdivide (by a stock split
or otherwise) the outstanding shares of Common Stock into a larger number of
shares of Common Stock or (z) combine (by a reverse stock split or otherwise)
the outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then, in each such event, the Formula Number shall be
adjusted to a number determined by multiplying the Formula Number in effect
immediately prior to such event by a fraction, the numerator of which is the
number of shares of Common Stock that are outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that are outstanding immediately prior to such event (and rounding the
result to the nearest whole number); and PROVIDED FURTHER, that, if at
any time after March 19, 1998, the Corporation shall issue any shares of its
capital stock in a merger, share exchange, reclassification, or change of the
outstanding shares of Common Stock, then, in each such event, the Formula
Number shall be appropriately adjusted to reflect such merger, share exchange,
reclassification or change so that each share of Preferred Stock continues to
be the economic equivalent of a Formula Number of shares of Common Stock prior
to such merger, share exchange, reclassification or change.
(b) The Corporation shall declare a dividend or distribution
on the Series 1998 Preferred Stock as provided in Section II(a) immediately
prior to or at the same time it declares a dividend or distribution on the
Common Stock (other than a dividend or distribution solely in shares of Common
Stock);
A-2
PROVIDED, HOWEVER, that, in the event no dividend or distribution (other
than a dividend or distribution in shares of Common Stock) shall have been
declared on the Common Stock during the period between any Annual Dividend
Payment Date and the next subsequent Annual Dividend Payment Date, a dividend
of $.01 per share on the Series 1998 Preferred Stock shall nevertheless be
payable on such subsequent Annual Dividend Payment Date. The Board of Directors
may fix a record date for the determination of holders of shares of Series 1998
Preferred Stock entitled to receive a dividend or distribution declared
thereon, which record date shall be the same as the record date for any
corresponding dividend or distribution on the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series 1998 Preferred Stock from and after the Annual
Dividend Payment Date next preceding the date of original issue of such shares
of Series 1998 Preferred Stock; PROVIDED, HOWEVER, that dividends on such
shares that are originally issued after the record date for the determination
of holders of shares of Series 1998 Preferred Stock entitled to receive an
annual dividend and on or prior to the next succeeding Annual Dividend Payment
Date shall begin to accrue and be cumulative from and after such Annual
Dividend Payment Date. Notwithstanding the foregoing, dividends on shares of
Series 1998 Preferred Stock that are originally issued prior to the record date
for the determination of holders of shares of Series 1998 Preferred Stock
entitled to receive an annual dividend on the first Annual Dividend Payment
Date shall be calculated as if cumulative from and after the last day of the
fiscal quarter next preceding the date of original issuance of such shares.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series 1998 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 and entitled to receive such dividends.
(d) So long as any shares of the Series 1998 Preferred Stock
are outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock,
unless, in each case, the dividend required by this Section II to be declared
on the Series 1998 Preferred Stock shall have been declared and paid.
(e) The holders of the shares of Series 1998 Preferred Stock
shall not be entitled to receive any dividends or other distributions, except
as provided herein.
III. VOTING RIGHTS. The holders of shares of Series 1998 Preferred
Stock shall have the following voting rights:
A-3
(a) Each holder of Series 1998 Preferred Stock shall be
entitled to a number of votes equal to the Formula Number then in effect, for
each whole share of Series 1998 Preferred Stock held of record on each matter
on which holders of the Common Stock or shareholders generally are entitled to
vote, multiplied by the maximum number of votes per share which any holder of
the Common Stock or shareholders generally then have with respect to such
matter (assuming any holding period or other requirement to vote a greater
number of shares is satisfied).
(b) Except as otherwise provided herein or by applicable law,
the holders of shares of Series 1998 Preferred Stock and the holders of shares
of Common Stock shall vote together as one voting group for the election of
directors of the Corporation and on all other matters submitted to a vote of
shareholders of the Corporation.
(c) If, at the time of any annual meeting of shareholders for
the election of directors, the equivalent of two annual dividends (whether or
not consecutive) payable on any share or shares of Series 1998 Preferred Stock
are in default, the number of directors constituting the Board of Directors of
the Corporation shall be increased by two. In addition to voting together with
the holders of Common Stock for the election of other directors of the
Corporation, the holders of record of the Series 1998 Preferred Stock, voting
separately as a voting group to the exclusion of the holders of Common Stock,
shall be entitled at said meeting of shareholders (and at each subsequent
annual meeting of shareholders), unless all dividends in arrears have been paid
or declared and set apart for payment prior thereto, to vote for the election
of two directors of the Corporation, the holders of any Series 1998 Preferred
Stock being entitled to cast a number of votes per whole share of Series 1998
Preferred Stock equal to the Formula Number. Until the default in payments of
all dividends that permitted the election of said directors shall cease to
exist, any director who shall have been so elected pursuant to the next
preceding sentence may be removed at any time, either with or without cause,
only by the affirmative vote of the holders of the shares of Series 1998
Preferred Stock at the time entitled to cast such number of votes as are
required by law for the election of any such director at a special meeting of
such holders called for that purpose, and any vacancy thereby created may be
filled only by the vote of such holders. If and when such default shall cease
to exist, the holders of the Series 1998 Preferred Stock shall be divested of
the foregoing special voting rights, subject to revesting in the event of each
and every subsequent like default in payments of dividends. Upon the
termination of the foregoing special voting rights, the terms of office of all
persons who may have been elected directors pursuant to said special voting
rights shall forthwith terminate to the extent permitted by law, and the number
of directors constituting the Board of Directors shall be reduced by two. The
voting rights granted by this Section III(c) shall be in addition to any
A-4
other voting rights granted to the holders of the Series 1998 Preferred Stock in
this Section III.
(d) Except as provided herein, in Section XI or by applicable
law, holders of Series 1998 Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for authorizing or
taking any corporate action.
IV. CERTAIN RESTRICTIONS.
(a) Whenever annual dividends or other dividends or
distributions payable on the Series 1998 Preferred Stock as provided in Section
II are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series 1998 Preferred
Stock outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series 1998
Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series 1998 Preferred Stock, except dividends paid ratably on the Series
1998 Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series 1998 Preferred Stock; PROVIDED that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series 1998 Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series 1998 Preferred Stock, or any shares of stock ranking on
a parity with the Series 1998 Preferred Stock, except in accordance with
a purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferenc-
A-5
es of the respective series and classes, shall determine in good faith
will result in fair and equitable treatment among the respective series
or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section IV, purchase or otherwise acquire such shares at such time and in
such manner.
V. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, no distribution shall
be made (a) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series 1998
Preferred Stock, unless, prior thereto, the holders of shares of Series 1998
Preferred Stock shall have received an amount equal to the accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (i)$.01 per whole share or
(ii) an aggregate amount per share equal to the Formula Number then in effect
times the aggregate amount to be distributed per share to holders of Common
Stock or (b) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series 1998
Preferred Stock, except distributions made ratably on the Series 1998 Preferred
Stock and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.
VI. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, share exchange, combination or other
transaction in which the shares of Common Stock are exchanged for or changed
into other stock or securities, cash or any other property, then, in any such
case, the then outstanding shares of Series 1998 Preferred Stock shall at the
same time be similarly exchanged or changed into an amount per whole share
equal to the Formula Number then in effect times the aggregate amount of stock,
securities, cash or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is exchanged or changed. In
the event both this Section VI and Section II appear to apply to a transaction,
this Section VI will control.
VII. NO REDEMPTION; NO SINKING FUND.
(a) The shares of Series 1998 Preferred Stock shall not be
subject to redemption by the Corporation or at the option of any holder of
Series 1998 Preferred Stock; PROVIDED, HOWEVER, that the Corporation may
purchase or otherwise acquire outstanding shares of Series 1998 Preferred Stock
in the open market or by offer to any holder or holders of shares of Series
1998 Preferred Stock.
A-6
(b) The shares of Series 1998 Preferred Stock shall not be
subject to or entitled to the operation of a retirement or sinking fund.
VIII. RANKING. The Series 1998 Preferred Stock shall rank junior to all
other series of Preferred Stock of the Corporation, unless the Board of
Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series and the qualifications, limitations and restrictions
thereof.
IX. FRACTIONAL SHARES. The Series 1998 Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one-thousandth (1/1,000) of
a share or any integral multiple of such fraction which shall entitle the
holder, in proportion to such holder's fractional shares, to receive dividends,
exercise voting rights, participate in distributions and have the benefit of
all other rights of holders of Series 1998 Preferred Stock. In lieu of
fractional shares, the Corporation, prior to the first issuance of a share or a
fraction of a share of Series 1998 Preferred Stock, may elect (a) to make a
cash payment as provided in the Rights Agreement for fractions of a share other
than one-thousandth (1/1,000) of a share or any integral multiple thereof or
(b) to issue depository receipts evidencing such authorized fraction of a share
of Series 1998 Preferred Stock pursuant to an appropriate agreement between the
Corporation and a depository selected by the Corporation; PROVIDED that such
agreement shall provide that the holders of such depository receipts shall have
all the rights, privileges and preferences to which they are entitled as
holders of the Series 1998 Preferred Stock.
X. REACQUIRED SHARES. Any shares of Series 1998 Preferred Stock
purchased or otherwise acquired by the Corporation 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 shares of
Preferred Stock, without par value, of the Corporation, undesignated as to
series, and may thereafter be reissued as part of a new series of such
Preferred Stock as permitted by law.
XI. AMENDMENT. None of the powers, preferences and relative,
participating, optional and other special rights of the Series 1998 Preferred
Stock as provided herein or in the Articles of Incorporation shall be amended
in any manner that would alter or change the powers, preferences, rights or
privileges of the holders of Series 1998 Preferred Stock so as to affect such
holders adversely without the affirmative vote of the holders of at least 66-
2/3% of the outstanding shares of Series 1998 Preferred Stock, voting as a
separate voting group; PROVIDED, HOWEVER, that no such amendment approved by
the holders of at least 66-2/3% of the outstanding
A-7
shares of Series 1998 Preferred Stock shall be deemed to apply to the powers,
preferences, rights or privileges of any holder of shares of Series 1998
Preferred Stock originally issued upon exercise of a Right after the time of
such approval without the approval of such holder.
THIRD: This amendment was duly adopted by the Board of Directors
of the Corporation without shareholder action on March 19, 1998. Shareholder
action was not required.
IN WITNESS WHEREOF, the undersigned has executed these Articles
of Amendment as of this 19th day of March, 1998.
CHURCHILL DOWNS INCORPORATED
By:________________________________
Title:______________________________
COMMONWEALTH OF KENTUCKY )
)
COUNTY OF JEFFERSON )
The foregoing instrument was acknowledged before me this 19th day
of March, 1998, by Thomas H. Meeker, of CHURCHILL DOWNS INCORPORATED, a
Kentucky corporation, on behalf of the corporation.
___________________________________
Notary Public
Commission Expires:_________________
THIS INSTRUMENT PREPARED BY:
______________________________
Robert A. Heath
WYATT, TARRANT & COMBS
2800 Citizens Plaza
Louisville, Kentucky 40202
(502) 589-5235
A-8
EXHIBIT B
[Form of Right Certificate]
Certificate No. [R]
Rights
NOT EXERCISABLE AFTER MARCH 19, 2008, OR EARLIER, IF REDEEMED OR
MANDATORILY EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT, ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL
AND VOID AND NONTRANSFERABLE.
Right Certificate
CHURCHILL DOWNS INCORPORATED
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 19, 1998 (the "Rights
Agreement"), between Churchill Downs Incorporated, a Kentucky corporation (the
"Company"), and Bank of Louisville, a Kentucky banking corporation, as Rights
Agent (the "Rights Agent"), unless the Rights evidenced hereby shall have been
previously redeemed or mandatorily exchanged by the Company, to purchase from
the Company at any time after the Distribution Date (as defined in the Rights
Agreement) and prior to 5:00 p.m., Louisville, Kentucky time, on the 10th
anniversary of the date of the Rights Agreement (the "Expiration Date"), at the
principal office of the Rights Agent, or its successors as Rights Agent, in
Louisville, Kentucky, one-thousandth (1/1,000) of a fully paid, nonassessable
share of Series 1998 Preferred Stock, without par value, of the Company (the
"Preferred Shares"), at a purchase price per one-thousandth (1/1,000) of a
share equal to $80.00, (the "Purchase Price"), payable in cash, upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed.
The Purchase Price and the number and kind of shares which may be
purchased upon exercise of each Right evidenced by this Right Certificate, as
set forth above, are the Purchase Price and the number and kind of shares which
may be so purchased as of March 19, 1998. As provided in the Rights Agreement,
the Purchase Price and the number and kind of shares which may be purchased
upon the exercise of each Right evidenced by this Right Certificate are subject
to modification and adjustment upon the happening of certain events.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in
the Rights Agreement), such Rights shall be null and void and nontransferable
and the holder of any such Right (including any purported transferee or
subsequent holder) shall not have any right to exercise or transfer any such
Right.
This Right Certificate is subject to all 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
reference to the Rights Agreement 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 Right Certificates. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
This Right Certificate, with or without other Right Certificates,
upon surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number and kind of shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Right Certificate may be redeemed by the Company at its
option at a redemption price (in cash or shares of Common Stock or other
securities of the Company deemed by the Board of Directors to be at least
equivalent in value) of $.01 per Right (which amount shall be subject to
adjustment as provided in the Rights Agreement) at any time prior to the
earlier of (a) the tenth Business Day (as such term is defined in the Rights
Agreement) (or such later date as may determined by the Board of Directors of
the Company) after such time as a Person becomes an Acquiring Person and (b)
the Expiration Date.
The Company may, but shall not be required to, issue fractions of
Preferred Shares or distribute certificates which evidence fractions of
Preferred Shares upon the exercise of any Right or Rights evidenced hereby. In
lieu of issuing fractional shares, the Company may elect to make a cash payment
as provided in the Rights Agreement for fractions of a share other than one-
thousandth (1/1,000) of a share or any integral multiple thereof or to issue
certificates or to utilize a depositary arrangement as provided in the terms of
the Rights Agreement and the Preferred Shares.
B-2
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company 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, including, without limitation,
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 other distributions or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in accordance with the provisions of the Rights
Agreement.
This Right 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 as of: ______________
CHURCHILL DOWNS INCORPORATED
By:_________________________
Name:_______________________
Title:______________________
Attest:
______________________________
Name:_________________________
Title:________________________
Countersigned:
BANK OF LOUISVILLE, as Rights
Agent
By:_________________________
Authorized Officer
B-3
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if
such holder desires to exercise the Rights
represented by this Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise Rights
represented by this Right Certificate to purchase the Preferred Shares (or
other shares) issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of:
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 Right Certificate, a new Right Certificate for the balance remaining 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:
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Right Certificate.)
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers unto _________________________________________________________________
B-4
________________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ______________
_________________________
Signature
Signature Guaranteed:
The undersigned hereby certifies that (a) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf
of a Person who is or was an Acquiring Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), (b) this Right
Certificate is not being sold, assigned or transferred to or on behalf of any
such Acquiring Person, Affiliate or Associate, and (c) after inquiry and to the
best knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Right Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
______________________________
Signature
NOTICE
The signature on the foregoing Form of Election to Purchase or Form of
Assignment must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
B-5
