SCIENTIFIC GAMES CORPORATION (NASDAQ:SGMS) Files An 8-K Entry into a Material Definitive Agreement

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SCIENTIFIC GAMES CORPORATION (NASDAQ:SGMS) Files An 8-K Entry into a Material Definitive Agreement

Item 1.01


Entry into a Material Definitive Agreement.


On June 19, 2017, the Board of Directors (the Board) of
Scientific Games Corporation (the Company) approved, and
the Company entered into, a Rights Agreement (the Rights
Agreement
), between the Company and American Stock Transfer
Trust Company, LLC (the Rights Agent). The Rights
Agreement provides for a dividend of one preferred share purchase
right (a Right) for each share of Class A Common Stock,
par value $0.01 per share of the Company (the Common
Stock
) outstanding as of June 29, 2017 (the Record
Date
). Each Right entitles the holder to purchase from the
Company one ten-thousandth of a share of Series C Junior
Participating Preferred Stock (the Preferred Stock) for a
purchase price of $109.00 (the Purchase Price), subject to
adjustment as provided in the Rights Agreement. The description
and terms of the Rights are set forth in the Rights Agreement.


The Board adopted the Rights Agreement in an effort to protect
stockholder value by strengthening the Companys ability to secure
and maintain the Companys good standing with respect to its
licenses, contracts, franchises and other regulatory approvals
related to the operations of gaming and related businesses now or
hereafter engaged in by the Company or any of its affiliates,
which licenses, contracts, franchises or other approvals are
conditioned upon some or all of the holders of the Companys
securities possessing prescribed qualifications. The Board
determined that the Companys ability to enforce the provision of
Article Tenth of the Restated Certificate of Incorporation (the
Charter) would be potentially diminished if a 5% or
greater shareholder located outside the United States was found
not subject to jurisdiction in the state of Delaware for purposes
of Article Tenth of the Charter and the Rights Agreement while
maintaining the ability to transfer its shares of the Company
without any visibility. The Rights Agreement is limited in scope
and specifically tailored to address this concern. Due to the
regulatory regime to which the Company is subject, any
shareholder owning 5% or more of the Companys stock is already
required to comply with the requirements of various state gaming
regulators, including potentially limited submissions to
jurisdiction. In this regard, the Company believes that the
limited submission to jurisdiction that may be required to comply
with the Rights Agreement is similar to actions that a 5%
shareholder is already required to take in order to comply with
the requirements of a number of the Companys regulators.

The following description of the terms of the Rights Agreement
does not purport to be complete and is qualified in its entirety
by reference to the full text of the Rights Agreement, a copy of
which is filed herewith as Exhibit 4.1 and is incorporated herein
by reference.


Effectiveness. The Rights Agreement became effective on
June 19, 2017 (the Effective Date). Upon and following the
Effective Date, Rights will be issued in respect of all
outstanding shares of Common Stock on the Record Date, and for
all shares of Common Stock that become outstanding after the
Record Date and, subject to the next sentence, prior to the
earliest of the Distribution Date (as defined below), the
redemption of the Rights or the Expiration Date (as defined
below). Rights may be distributed with respect to shares of
Common Stock that become outstanding after the Distribution Date
only in certain limited circumstances as described in the Rights
Agreement (such as the issuance of Common Stock to stock options,
employee compensation or benefit plans and convertible
securities).

Term. The Rights will expire on the earlier of (i) June
19, 2020 and (ii) the close of business on the day that the Board
determines that the Rights Agreement is no longer necessary or
desirable for the preservation of the Companys good standing with
respect to its licenses, contracts franchises and other
regulatory approvals related to the operation of gaming and
related businesses of the Company or any of its affiliates (the
Expiration Date), unless the Rights are earlier redeemed
or exchanged by the Company, as provided below, as more fully set
forth in the Rights Agreement.


Exercisability. Initially, the Rights will not be
exercisable. The Rights will become exercisable upon the earlier
of the 10 business days from (such date, the Distribution
Date
):


i.
the public announcement that a person has become an
Acquiring Person, or such earlier date as a majority of
the Board shall become aware of the existence of an
Acquiring Person; and


ii.
such date (prior to such time as any person or group of
affiliated persons becomes an Acquiring Person), if any,
as may be determined by action of the Board following the
commencement of, or announcement of an intention to make,
a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a
person or group who meets the criteria of clauses (ii),
(iii) and (iv) the definition of Acquiring Person of 5%
or more of the outstanding shares of Common Stock.


An Acquiring Person shall mean any person who or which:


i.
shall be the Beneficial Owner of 5% or more of the shares
of Common Stock then outstanding;


ii.
is a person (if not a natural person) not organized under
the laws of the United States of America or any State of
the United States of America;


iii.
does not deliver to the Company a consent to jurisdiction
in Delaware for purposes of enforcing the Companys
Charter or the Rights Agreement in the form attached as
an exhibit to the Rights Agreement; and


iv.
does not hold all of such persons beneficially owned
shares of Common Stock as a registered holder directly
through the Companys transfer agent in certificated form,
subject to certain exceptions.


Grandfathered Persons. Any person or group (a
Grandfathered Person), that beneficially owned (as
disclosed in public filings) 5% or more of the outstanding Common
Stock as of June 19, 2017 (such percentage the Grandfathered
Percentage
), will not be deemed an Acquiring Person, so long
as such person or group does not exceed its Grandfathered
Percentage of the outstanding shares of Common Stock (other than
to a dividend or distribution paid or made by the Company on the
outstanding Common Stock, or to a split or subdivision of the
outstanding Common Stock).


If a Grandfathered Person sells or otherwise disposes of its
Common Stock, its Grandfathered percentage will be the lesser of
(a) its Grandfathered Percentage immediately prior to the sale or
other disposition or (b) the percentage of common stock
beneficially owned by the Grandfathered Person immediately
following the sale or other disposition.


If at any time a Grandfathered Person beneficially owns less than
5% of the outstanding shares of Common Stock it will cease to be
a Grandfathered Person under the Rights Agreement.


Exempt Persons and Exempt Transactions. A person shall not
be deemed to be or to have become an Acquiring Person if such
person (i) was unaware that it beneficially owned the number of
shares of Common Stock such that the person would otherwise
qualify as an Acquiring Person, or had no actual knowledge of the
consequences of such ownership, (ii) obtained the shares solely
as a result of a unilateral grant by the Company or through the
exercise of any options, warrants, rights or similar interests
granted by the Company to its directors, officers and employees,
(iii) obtained the shares solely as a result of acquisition of
Common Stock by the Company which, by reducing the number of
shares of Common Stock outstanding, increases the proportion of
shares beneficially owned by such person such that the person
would otherwise qualify as an Acquiring Person or (iv) received
the shares to an individuals will or charitable trust after their
death, when such individual was the Beneficial Owner of 5% or
more of Common Stock then outstanding.


Rights Certificates and Detachability. Prior to the
Distribution Date, the Rights will be evidenced by the
certificates for shares of Common Stock, and the Rights will be
transferable only in connection with the related Common Stock
(or, in the case of uncertificated Common Stock, the applicable
record of ownership) and will be automatically transferred with
any transfer of the related Common Stock. After the Distribution
Date, the Rights will detach from the Common Stock and will be
separately transferable.


Terms of Preferred Stock. The terms of the Preferred Stock
issuable upon exercise of the Rights are designed so that each
1/10,000th of a share of Preferred Stock is the economic and
voting equivalent of one whole share of Common Stock of the
Company. In addition, the Preferred Stock has certain minimum
dividend and liquidation rights.


Dilution Adjustments. The amount of Preferred Stock
issuable upon exercise of the Rights is subject to adjustment by
the board in the event of a stock dividend on the Common Stock
payable in shares of Common Stock or subdivisions, combinations
or reclassification of the Common Stock occurring, in any such
case, prior to the Distribution Date.


The Flip-In Provision. In the event any person or group
becomes an Acquiring Person, the holder of each Right will
thereafter have the right to receive, upon exercise of the Right
and the payment of the Purchase Price, that number of 1/10,000ths
of a share of Preferred Stock equal to the number of shares of
Common Stock which at the time of the applicable triggering
transaction would have a market value of twice the Purchase
Price. However, any Rights that are or previously were
beneficially owned by an Acquiring Person will become null and
void and will result in significant dilution to the Acquiring
Person.


The Flip-Over Provision. In the event, after a person or
group has become an Acquiring Person, the Company is acquired in
a merger or other business combination, or 50% or more of the
Companys consolidated assets or earning power are sold to any
other person, then each holder of a Right will have the right to
purchase common shares in the surviving entity (the Principal
Party
), at 50% of the current per share market price of the
stock of such Principal Party. As with the flip-in provision, any
Rights that are or previously were beneficially owned by an
Acquiring Person will become null and void.


Exchange. At any time after a person or group has become
an Acquiring Person, the Board may elect to exchange all or part
of the then outstanding Rights (other than any Rights that are or
previously were beneficially owned by an Acquiring Person, which
will become null and void) at an exchange ratio of one share of
Common Stock per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring in
respect of the Common Stock, after the date of the Rights
Agreement (the Exchange Ratio). However, the Board shall
not be empowered to effect such exchange at any time after an
Acquiring Person shall have become the Beneficial Owner of 50% or
more of the shares of the Common Stock then outstanding.


Redemption. The Rights are redeemable by the Board at a
redemption price of $0.0001 per Right (the Redemption
Price
) at any time prior to the earlier of (i) such time as
any person or group becomes an Acquiring Person and (ii) the
Expiration Date. Immediately upon the action of the Board
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 of the holders of Rights will
be to receive the Redemption Price.


Amendment. 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 a Distribution Date shall occur, the
amount of the Purchase Price, the definition of Acquiring Person,
or the time during which the Rights may be redeemed), except that
no supplement or amendment may be made which reduces the
Redemption Price of the Rights.


Item 3.03

Material Modification to Rights of Security Holders.


Please see the disclosure set forth under Items 1.01 and 5.03 of
this Current Report on Form 8-K, which is incorporated by
reference into this Item 3.03.

Item 5.03

Amendments to Articles of Incorporation or Bylaws; Change
in Fiscal Year.


In connection with the adoption of the Rights Agreement described
in Item 1.01 above, the Board adopted a Certificate of
Designation of Series C Junior Participating Preferred Stock (the
Certificate of Designation). The Certificate of
Designation was filed with the Secretary of State of the State of
Delaware and became effective on June 19, 2017. Please see the
disclosure set forth under Item 1.01 of this Current Report on
Form 8-K for a description of the rights and preferences of the
Series C Junior Participating Preferred Stock included in the
Certificate of Designation, which is incorporated by reference
into this Item 5.03. A copy of the Certificate of Designation,
the form of which is Exhibit A to the Rights Agreement, is filed
herewith as Exhibit 3.1 and is incorporated herein by reference.

Item 9.01

Financial Statements and Exhibits.

(d)

The following exhibits are filed with this report:

Exhibit

No.


Description

3.1

Certificate of Designation of Series C Junior Participating
Preferred Stock.

4.1

Rights Agreement, dated as of June 19, 2017, between
Scientific Games Corporation and American Stock Transfer
Trust Company, LLC which includes the Form of Certificate
of Designation of Series C Junior Participating Preferred
Stock of Scientific Games Corporation as Exhibit A, the
Form of Right Certificate as Exhibit B, the Summary of
Rights to Purchase Shares of Preferred Stock of Scientific
Games as Exhibit C and a the Form of Consent to
Jurisdiction as Exhibit D.






SCIENTIFIC GAMES CORP Exhibit
EX-3.1 2 ex3-1.htm Exhibit 3.1     CERTIFICATE OF DESIGNATION   of   SERIES C JUNIOR PARTICIPATING PREFERRED STOCK of SCIENTIFIC GAMES CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware Scientific Games Corporation,…
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About SCIENTIFIC GAMES CORPORATION (NASDAQ:SGMS)

Scientific Games Corporation is a developer of technology-based products and services, and associated content for the gaming, lottery and interactive gaming industries. The Company operates through three segments: Gaming, Lottery and Interactive. The Company’s portfolio includes gaming machines and game content, casino management systems, table game products and services, instant and draw-based lottery games, server-based gaming and lottery systems, sports betting technology, lottery content and services, loyalty and rewards programs, interactive gaming and social casino solutions. Its Gaming segment’s activities include supplying gaming machines, video lottery terminals (VLTs), conversion kits, automatic card shufflers. Its Lottery segment’s activities include designing, printing and selling instant lottery games. The Company’s Interactive business segment includes social (non-wagering) gaming and interactive real-money gaming (RMG).

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