IN THE CIRCUIT COURT FOR THE THIRD JUDICIAL CIRCUIT
MADISON COUNTY, ILLINOIS
IN RE ARGOSY GAMING CO.
SHAREHOLDER LITIGATION
x
:
:
:
x
C.A. No. 04 L 1304
NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION
TO:
ALL PERSONS AND ENTITIES WHO OWNED ARGOSY GAMING COMPANY COMMON STOCK AT ANY TIME
BETWEEN NOVEMBER 3, 2004, THROUGH AND INCLUDING OCTOBER 3, 2005 AND ALL OF THEIR SUCCESSORS IN
INTEREST AND TRANSFEREES, IMMEDIATE AND REMOTE
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT
OF THIS CLASS ACTION AND, IF YOU ARE A CLASS MEMBER, CONTAINS IMPORTANT INFORMATION AS TO YOUR
RIGHTS CONCERNING THE SETTLEMENT DESCRIBED BELOW.
I.
PURPOSE OF THIS NOTICE
This notice (the “Notice”) is given pursuant to an Order of the Circuit Court for the Third Judicial Circuit, Madison County, Illinois (the
“Court”) entered in the above-captioned action on January 27, 2006 (the “Scheduling Order”). The purpose of this Notice is to inform
you of the pendency and proposed settlement of the Actions (the “Settlement”), and the Court’s conditional certification of a class (the
“Class”) for purposes of the Settlement, and to notify you of your right to participate in a hearing to be held on April 7, 2006 at 10 a.m.,
before the Court in the Madison County Courthouse located at 155 North Main Street, Suite 405, Edwardsville, Illinois (the “Settlement
Hearing”) to determine whether the Court should approve the Settlement as fair, reasonable, adequate and in the best interests of the
Class; whether the Class should be permanently certified pursuant to §§ 735 ILCS 5/2-801 and 802; and whether a judgment should be
entered dismissing the Actions with prejudice on the merits and releasing all Released Parties from all Settled Claims (the “Final Order
and Judgment”). (All terms not defined herein shall have the meanings set forth in the parties’ Stipulation of Settlement dated
September 30, 2005 (the “Stipulation”).)
The Court has determined that for purposes of the Settlement only, the Actions shall be conditionally maintained as a class
action under §§ 735 ILCS 5/2-801 and 802 on behalf of the Class. At the Settlement Hearing, the Court will also consider whether the
Class should be permanently certified pursuant to §§ 735 ILCS 5/2-801 and 802 and whether plaintiffs and their counsel have
adequately represented the Class.
This Notice describes the rights that you may have pursuant to the Settlement and what steps you may, but are not required
to take, in relation to the Settlement.
If the Court approves the Settlement, the parties will ask the Court at the Settlement Hearing to enter the Final Order and Judgment.
The Court has reserved the right to adjourn the Settlement Hearing without further notice to the Class other than by
announcement at the Settlement Hearing or any adjournment thereof. The Court has further reserved the right to approve the
Settlement at or after the Settlement Hearing with such modifications as may be consented to by the parties to the Stipulation and
without further notice to the members of the Class.
II.
HISTORY AND BACKGROUND OF THE SETTLEMENT
THE FOLLOWING RECITATION DOES NOT CONSTITUTE FINDINGS OF THE COURT. IT IS BASED ON THE
STATEMENTS OF THE PARTIES AND SHOULD NOT BE UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF THE
COURT AS TO THE MERITS OF ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE PARTIES.
On November 3, 2004, Argosy Gaming Company (“Argosy”) announced that it had entered into a Merger Agreement (the
“Merger Agreement”) with Penn National Gaming, Inc. (“Penn”), pursuant to which Penn will acquire all of Argosy’s outstanding
common stock for $47.00 per share in cash (the “Merger”).
On November 19, 2004, Argosy filed with the U.S. Securities & Exchange Commission a preliminary proxy statement for the
Merger on Form PREM14A (the “Preliminary Proxy”).
On November 23, 2004, a class action lawsuit challenging the Merger titled Judi Ann Ringhofer v. Argosy Gaming Company
was filed in the Circuit Court for the Third Judicial Circuit, Madison County, Illinois.
On December 10, 2004, a complaint styled as Lemon Bay Partners, LLP v. Cellini was filed with the Circuit Court for the Third
Judicial Circuit, Madison County, Illinois (together with the Ringhofer action, the “Actions”). (The Actions were consolidated under the
caption In re Argosy Gaming Co. Shareholder Litigation, C.A. 04 L 1304, on January 27, 2006.)
On December 16, 2004, plaintiff Lemon Bay Partners, LLP filed and served a motion for expedited discovery.
Following extensive negotiations, the parties agreed to a Stipulation and Protective Order Regarding the Disclosure of
Confidential Information.
Between December 10 and December 21, 2004, counsel for the parties conferred concerning a possible resolution of the
Actions and discussed a reduction of the termination fee payable under certain circumstances by Argosy to Penn, and Plaintiffs’
counsel reviewed and provided comments on subsequent drafts of the Preliminary Proxy, which included the disclosure of additional
information to be included in the final proxy filed with the SEC and mailed to stockholders (the “Merger Proxy Statement”). The
comments related to (i) additional disclosure regarding Morgan Stanley’s conflicts or potential conflicts; (ii) additional disclosure
regarding the belief of the Argosy directors and their financial advisor, Morgan Stanley, that no party other than Penn was likely to offer
more than $47 per share; (iii) additional information regarding amounts that each director and/or executive officer will or could receive in
the Merger, including pursuant to the 2005 Cash Bonus Plan; (iv) additional information regarding the Morgan Stanley analysis; and
(v) disclosure regarding the shareholder suits filed in Madison County, Illinois.
Those settlement discussions intensified after the motion for expedited discovery was filed and served on December 16, 2004.
As consideration for the settlement reflected in the Stipulation, defendants agreed to reduce the termination fee payable by
Argosy to Penn under certain circumstances from $49.5 million to $41.5 million.
Also, as consideration for the settlement, defendants agreed to and did disclose additional information in the Merger Proxy
Statement, including, among other things, (i) additional disclosure regarding Morgan Stanley’s conflicts or potential conflicts;
(ii) additional disclosure regarding the belief of the Argosy directors and their financial advisor, Morgan Stanley, that no party other than
Penn was likely to offer more than $47 per share; (iii) additional information regarding amounts that each director and/or executive
officer will or could receive in the Merger, including pursuant to the 2005 Cash Bonus Plan; (iv) additional information regarding the
Morgan Stanley analysis; and (v) disclosure regarding the shareholder suits filed in Madison County, Illinois.
An agreement in principle to settle the Actions, i.e., the Settlement, was only reached after arm’s-length negotiations between
the parties who were represented by counsel with extensive experience and expertise in shareholder class action litigation. During the
negotiations, all parties had a clear view of the strengths and weaknesses of their respective claims and defenses. After further
negotiations, the parties executed a Memorandum of Understanding, which set forth the basic terms of the Settlement.
Plaintiffs’ counsel also reviewed several thousand pages of documents produced by defendants and took the depositions of
three (3) witnesses: John J. Jones, Senior Vice President, General Counsel and Corporate Secretary of Argosy; William J. Clifford,
Senior Vice President of Finance and the Chief Financial Officer of Penn; and James Stewart, a representative of Morgan Stanley
familiar with the transaction.
On January 20, 2005, the Merger was approved by a vote of 62.3% of the total common shares of Argosy stock outstanding.
All parties recognize the tremendous time and expense that would be incurred by further litigation in this matter and the
uncertainties inherent in such litigation.
Each defendant denies having committed or having attempted to commit any violation of law or breach of duty, including
breach of any duty to Argosy’s shareholders, or otherwise having acted improperly in any respect.
Plaintiffs and defendants have concluded that the interests of the parties would best be served by a settlement of the litigation.
For purposes of the Settlement only, the Court has preliminarily certified a Class consisting of all persons or entities who
owned Argosy common stock at any time between and including November 3, 2004 and October 3, 2005 (the date of the closing of the
Merger), and all of their successors in interest and transferees, immediate and remote, but not defendants and persons or entities
related to or affiliated with defendants.
The Court has designated as plaintiffs’ counsel in the Actions, David M. Duree & Associates, 312 South Lincoln Avenue,
O’Fallon, IL 62269; The Brualdi Law Firm, 29 Broadway, New York, NY 10006; and Schiffrin & Barroway, LLP, 280 King of Prussia
Road, Radnor, PA 19087. Plaintiffs’ counsel is available to answer any questions from members of the Class concerning any matter
contained in this Notice.
Based on their review and analysis of the relevant facts and evidence (including the discovery that they obtained) and
controlling legal principles, plaintiffs’ counsel have concluded that the terms and conditions of the Settlement are fair, reasonable and
adequate, and beneficial to and in the best interest of plaintiffs, the Class, and the members of the Class, and plaintiffs have agreed to
settle the Actions pursuant to the terms and provisions of the Settlement after considering, among other things, the benefits that the
Class has received pursuant to the Settlement.
Defendants deny all allegations of wrongdoing, fault, liability or damage to plaintiffs and the Class, deny that they engaged in
any wrongdoing, deny that they committed any violation of law, deny that they acted improperly in any way, believe that they acted
properly at all times, and believe that the litigation has no merit, but wish to settle the litigation on the terms and conditions stated in the
Settlement in order to eliminate the burden and expense of further litigation and to put the Settled Claims (as defined in the Stipulation)
to rest finally and forever, without in any way acknowledging any wrongdoing, fault, liability or damage to plaintiffs and the Class.
2
III.
TERMS OF THE PROPOSED SETTLEMENT
As provided in the Stipulation, counsel for the parties, after extensive discussion and arm’s-length negotiations, have agreed to
settle the Actions on, inter alia, the following terms:
1.
Defendants agreed to reduce the termination fee payable by Argosy to Penn under certain circumstances from $49.5 million to $41.5 million.
2.
Defendants agreed to and did disclose additional information in the Merger Proxy Statement, including, among other things,
(i) additional disclosure regarding Morgan Stanley’s conflicts or potential conflicts; (ii) additional disclosure regarding the belief of the
Argosy directors and their financial advisor, Morgan Stanley, that no party other than Penn was likely to offer more than $47 per share;
(iii) additional information regarding amounts that each director and/or executive officer will or could receive in the Merger, including
pursuant to the 2005 Cash Bonus Plan; (iv) additional information regarding the Morgan Stanley analysis; and (v) disclosure regarding
the shareholder suits filed in Madison County, Illinois.
3.
Defendants acknowledge that the decision to disclose the above additional information in the Merger Proxy Statement and
reduce the termination fee was a direct result of plaintiffs’ lawsuits, the efforts of plaintiffs’ counsel, and the negotiations between
counsel for plaintiffs and defendants.
IV.
FINAL ORDER AND JUDGMENT: RELEASE AND DISMISSAL OF CLAIMS
If, after the Settlement Hearing provided for herein, the Court approves the Settlement, the parties shall jointly ask the Court to
enter a Final Order and Judgment, which will, among other things:
(a)
permanently certify the Actions as a class action pursuant to §§ 735 ILCS 5/2-801 and 802, certify and define the
Class, and confirm the appointment of plaintiffs Judi Ann Ringhofer and Lemon Bay Partners, LLP as representatives of the Class and
the appointment of plaintiffs’ counsel as counsel for the Class;
(b)
approve the Settlement set forth in the Stipulation and find that said Settlement is, in all respects, fair, reasonable and
adequate to each of the Settling Parties;
(c)
authorize and direct performance of the Settlement in accordance with its terms and conditions and reserve
jurisdiction to supervise the consummation of the Settlement;
(d)
completely discharge, dismiss with prejudice, settle, release and enjoin all claims and rights, whether known or unknown,
against defendants and their corresponding Released Parties, belonging to plaintiffs and any or all members of the Class and their present or
past heirs, executors, estates, administrators, predecessors, successors, assigns, parents, subsidiaries, associates, affiliates, employers,
employees, agents, consultants, insurers, directors, managing directors, officers, partners, principals, members, attorneys, accountants,
financial and other advisors, investment bankers, underwriters, lenders, and any other representatives of any of these persons and entities
(including, without limitation, any claims, whether direct, derivative, representative or in any other capacity, arising under federal, state, local,
statutory or common law or any law, rule or regulation, including the law of any jurisdiction outside the United States) that relates in any way to
any violation of state, federal or any foreign country’s securities laws, any misstatement or omission, any breach of duty, any negligence or
fraud, or any other alleged wrongdoing or misconduct and that relates in any way to the sale of Argosy to Penn, the fiduciary and other duties
owed by defendants to shareholders of Argosy in connection therewith, defendants’ disclosure obligations under federal, state or any other law
in connection with the sale of Argosy to Penn, or any other claim (other than claims for appraisal pursuant to Section 262 of the General
Corporation Law of the State of Delaware) related in any way to any of the foregoing;
(e)
forever bar and enjoin all members of the Settlement Class from prosecuting the Released Claims (including the
Unknown Claims) against the Released Persons; and
(f)
V.
reserve jurisdiction over all matters relating to the administration and effectuation of the Settlement.
ATTORNEYS’ FEES AND EXPENSES
Additionally, defendants acknowledge that plaintiffs’ counsel have a claim for attorneys’ fees and reimbursement of expenses
in the Actions based upon the benefits that the Settlement has provided and will provide to Argosy’s public stockholders. Rather than
causing the Class members to pay these fees, defendants have agreed to cause to be paid to plaintiffs’ counsel the sum of $675,000 in
attorneys’ fees and expenses in settlement of this claim.
VI.
NOTICE TO BROKERS AND OTHER NOMINEES
The Court has ordered that record holders of common shares of Argosy stock included in the Class send the Notice to all
beneficial owners of such stock within ten (10) days after receipt of the Notice or send a list of the names and addresses of such
beneficial owners to the Notice Administrator within ten (10) days of receipt of the Notice. The Notice Administrator is:
In re Argosy Gaming Co. Shareholder Litigation
c/o The Garden City Group, Inc.
Notice Administrator
P.O. Box 9000 #6390
Merrick, NY 11566-9000
3
VII.
SETTLEMENT HEARING
The Settlement Hearing will be held on April 7, 2006 at 10 a.m. before the Honorable Nicholas G. Byron, to determine whether
the proposed Settlement of the Actions on the terms and conditions provided for in the Stipulation is fair, reasonable and adequate, and
should be approved by the Court. The Settlement Hearing may be adjourned by the Court without further notice.
Any Class member may appear at the Settlement Hearing in person or by counsel and be heard in support of, or in opposition
to, the fairness, reasonableness and adequacy of the Settlement. However, no Class member shall be heard in opposition to the
Settlement and no paper or brief submitted by any such person or entity shall be received or considered by the Court unless fourteen
(14) days before the Settlement Hearing, that person or entity shall file with the Clerk of this Court a written notice of his, her or its
intention to appear, proof that he, she or it is a Class member, a written statement of the position that he, she or it will assert, the
reasons for his, her or its position, and all papers that he, she or it intends to present to the Court in support of his, her or its position. In
addition, such person or entity must also file with the Clerk of this Court a proof of service of such notice and papers upon the following:
SCHIFFRIN & BARROWAY, LLP
Marc Topaz
280 King of Prussia Road
Radnor, PA 19087
THE BRUALDI LAW FIRM
Richard Brualdi
29 Broadway, 24th Floor
New York, NY 10006
DAVIS POLK & WARDWELL
Dennis E. Glazer
450 Lexington Avenue
New York, NY 10017
WINSTON & STRAWN
Gordon Dobie
35 W. Wacker Drive
Chicago, IL 60601
MAYER, BROWN ROWE & MAW
Alan Salpeter
71 South Wacker Drive
Chicago, IL 60606
Any person or entity who fails to object in the manner provided above shall be deemed to have waived any objection in the Actions.
VIII.
EXAMINATION OF PAPERS
This notice contains only a summary of the terms of the proposed Settlement. For a more detailed statement of the matters
involved in these proceedings, you may refer to the Stipulation and the other papers on file with the Court in the Actions.
IF YOU HAVE ANY QUESTIONS, PLEASE MAKE ALL INQUIRIES TO:
Sandra Smith
SCHIFFRIN & BARROWAY, LLP
280 King of Prussia Road
Radnor, PA 19087
(610) 667-7706
PLEASE DO NOT CALL OR WRITE THE COURT DIRECTLY.
Dated: January 27, 2006
DISTRIBUTED BY ORDER OF
THE CIRCUIT COURT FOR THE THIRD JUDICIAL CIRCUIT,
MADISON COUNTY, ILLINOIS
4