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): September 23, 1998
LOEHMANN'S, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-28410 22-2341356
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(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
2500 Halsey Street
Bronx, New York 10461
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (718) 409-2000
---------------------------
Not applicable
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Page 1
This document consists of 4 pages.
The exhibit index is contained on page 4 of this document.
<PAGE>
Item 5. Other Events.
On September 23, 1998, the Board of Directors of Loehmann's, Inc. (the
"Company") declared a dividend distribution of one Preferred Share Purchase
Right on each outstanding share of Common Stock to shareholders of record on
October 5, 1998. For a further description of the Rights, see the Press Release
attached hereto as Exhibit 99 and the Summary of Rights to Purchase Series B
Preferred Stock attached as Exhibit B to the Rights Agreement attached hereto as
Exhibit 4.
Item 7. Exhibits.
(c) Exhibits.
4 Rights Agreement, dated as of September 23, 1998,
between the Company and American Stock Transfer &
Trust Company, which includes the Certificate of
Designation in respect of the Series B Preferred
Stock as Exhibit A, the form of Right Certificate as
Exhibit B and the Summary of Rights to Purchase
Series B Preferred Stock as Exhibit C. Pursuant to
the Rights Agreement, Right Certificates will not be
mailed until after the Separation Date (as defined
therein).
99 Press Release, dated September 23, 1998, announcing
the adoption of the Rights Agreement and the dividend
distribution of the Rights.
Page 2
<PAGE>
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 by the
undersigned, hereunto duly authorized.
LOEHMANN'S, INC.
By: /s/ Robert N. Friedman
--------------------------
Robert N. Friedman
Chairman and Chief Executive Officer
Dated: September 23, 1998
Page 3
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Exhibit Page
- ------- ------- ------------
4 Rights Agreement, dated as of
September 23, 1998, between the Company
and American Stock Transfer & Trust
Company, which includes the Certificate of
Designation in respect of the Series B
Preferred Stock as Exhibit A, the form of
Right Certificate as Exhibit B and the
Summary of Rights to Purchase Series B
Preferred Stock as Exhibit C. Pursuant to
the Rights Agreement, Right Certificates
will not be mailed until after the Separation
Date (as defined therein).
99 Press Release, dated September 23, 1998,
announcing the adoption of the Rights
Agreement and the dividend distribution of
the Rights.
Page 4
================================================================================
RIGHTS AGREEMENT
between
LOEHMANN'S, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Dated: As of September 23, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
Section Page
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Section 1. Certain Definitions..............................................................1
Section 2. Appointment of Rights Agent......................................................6
Section 3. Issue of Right Certificates......................................................6
Section 4. Form of Right Certificates.......................................................7
Section 5. Countersignature and Registration................................................9
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates..........................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights...................10
Section 8. Cancellation and Destruction of Right Certificates..............................12
Section 9. Reservation and Availability of Series B Shares; Registration...................12
Section 10. Series B Shares Record Date.....................................................14
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights.............................................................14
Section 12. Certificate of Adjusted Purchase Price or Number of Shares......................22
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power................................................................22
Section 14. Fractional Rights and Fractional Shares.........................................24
Section 15. Rights of Action................................................................25
Section 16. Agreement of Right Holders......................................................26
Section 17. Right Certificate Holder Not Deemed a Shareholder...............................26
Section 18. Concerning the Rights Agent.....................................................27
Section 19. Merger or Consolidation or Change of Name of Rights Agent.......................27
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section Page
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Section 20. Duties of Rights Agent..........................................................28
Section 21. Change of Rights Agent..........................................................30
Section 22. Issuance of New Right Certificates..............................................31
Section 23. Redemption......................................................................31
Section 24. Exchange........................................................................32
Section 25. Notice of Certain Events........................................................34
Section 26. Notices.........................................................................34
Section 27. Supplements and Amendments......................................................35
Section 28. Successors......................................................................36
Section 29. Determinations and Actions by the Board of Directors............................36
Section 30. Benefits of this Agreement......................................................36
Section 31. Severability....................................................................36
Section 32. Governing Law...................................................................37
Section 33. Consequential Damages...........................................................37
Section 34. Counterparts....................................................................37
Section 35. Descriptive Headings............................................................38
Exhibits
A. Certificate of Designations in respect of Series B Preferred Stock
B. Form of Right Certificate
C. Summary of Rights to Purchase Series B Preferred Stock
</TABLE>
ii
<PAGE>
RIGHTS AGREEMENT
Rights Agreement, dated as of September 23, 1998, between LOEHMANN'S,
INC., a Delaware corporation (the "Company"), and AMERICAN STOCK TRANSFER &
TRUST COMPANY, a New York corporation (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding at the close of business on
October 5, 1998 (the "Record Date"), each Right representing the right to
purchase one one-hundredth (1/100) of a share of Series B Preferred Stock, par
value $0.01 per share, of the Company ("Series B Preferred Stock") having the
rights and preferences set forth in the Certificate of Designations of Preferred
Stock with respect to the Series B Preferred Stock, a copy of which is attached
hereto as Exhibit A. The Board of Directors has further authorized the issuance
of one Right with respect to each Common Share that shall become outstanding
(whether originally issued or delivered from the Company's treasury), including,
without limitation, Common Shares that may hereafter be issued upon conversions
of Class B Convertible Common Stock ("Class B Stock") into Common Stock after
the Record Date and on or prior to the earliest of the Separation Date, the
Redemption Date and the Final Expiration Date (each as hereinafter defined).
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 Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who, together
with all Affiliates and Associates of such Person, shall hereafter become the
Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall
not include the Company, any wholly owned Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company, or any
entity holding Common Shares for or pursuant to the terms of any such plan;
provided, however, that any Person, who, together with all Affiliates and
Associates of such Person, on the date of this Agreement is the Beneficial Owner
of 15% or more of the outstanding Common Shares shall not be, or be deemed to
be, an Acquiring Person unless and until such Person becomes the Beneficial
Owner of an additional one percent (1%) or more of the outstanding Common
Shares. Notwith standing the foregoing, no Person shall become an "Acquiring
Person" as a result of an acquisition of Common Shares by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 15% or more of the Common Shares of
the Company then outstanding; provided, however, that if a Person shall become
the beneficial owner of
<PAGE>
2
15% or more of the Common Shares of the Company then outstanding by reason of
share purchases by the Company and shall, after share purchases by the Company,
acquire any additional Common Shares of the Company, then such Person shall be
deemed to be an "Acquiring Person." Notwithstanding the foregoing, if the Board
of Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provision, has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions, then such Person shall not be deemed to be an "Acquiring Person" for
any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations (the "Rules") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the Record Date.
(c) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly, now or hereafter owns
or has (or by agreement with the Company is, on the date of this
Agreement, entitled to receive) the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights,
rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed to be the
Beneficial Owner of, or to beneficially own, 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; and provided
further, that a Person shall not be deemed to be the Beneficial Owner
of, or to beneficially own, securities that such Person has the right
to acquire (whether such right is exercisable immediately or only after
the passage of time) upon the exercise of (a) employee stock options
now or hereafter (but prior to the Separation Date) issued by the
Company, or (b) conversion rights conferred in any class or series of
Preferred Stock, of the Company issued prior to the Separation Date if
the resolutions of the Board providing for the issuance of such class
or series of Preferred Stock shall specifically refer to this Rights
Agreement and provide that the right to acquire securities upon the
exercise of conversion rights so conferred shall not be deemed to
constitute beneficial ownership of such securities;
(ii) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to vote
(except as hereinafter
<PAGE>
3
provided) or dispose of, or of which any of them, directly or
indirectly, has "beneficial ownership" (as determined pursuant to Rule
13d-3 of the Rules, as in effect on the Record Date) (including, except
as hereinafter provided, pursuant to any agreement, arrangement or
understanding, whether or not in writing); provided, however, that a
Person shall not be deemed to be the Beneficial Owner of, or to
beneficially own, any security under this subparagraph (ii) as a result
of an agreement, arrangement or understanding to vote such security if
such agreement, arrangement or understanding arises solely from a
revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the Rules and is not also then reportable on Schedule 13D
under the Exchange Act (or any comparable or successor report);
(iii) that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether or
not in writing), for the purpose of, or with respect to, acquiring,
holding, voting (except as described in the provisos to subparagraph
(ii) of this paragraph (c)) or disposing of any voting securities of
the Company; and
(iv) that are, pursuant to the foregoing
subparagraphs of this paragraph (c), or otherwise (except as set forth
in the proviso to subparagraph (ii) of this paragraph (c)), deemed to
be beneficially owned by a voting trust, voting agent, recipient of a
proxy that is not immediately revocable (a "Non-revocable Proxy") or
any other Person to whom such Person (the "Grantor Person") has
contributed, conveyed, delegated, given, granted, tendered, transferred
or otherwise assigned or conferred (collectively, "given") some or all
of the voting rights attributable to the Common Shares of which the
Grantor Person (alone or in conjunction with any other Person) is also
deemed to be a Beneficial Owner. Solely for purposes of this Agreement,
the Grantor Person shall be deemed to be the Beneficial Owner of all
Common Shares that such voting trust, voting Agent, proxy holder or
other Person has the right, by Non-revocable Proxy, agreement,
assignment, tender, grant or otherwise, to exercise some or all of the
voting rights attributable thereto, whether or not the Grantor Person
shall have contributed or given voting rights that constitute all or
less (even substantially less) than all of the voting rights held by
the voting trust, voting Agent, proxy holder or other Person to whom or
to which the Grantor Person has given some or all of the voting rights
attributable to Common Shares otherwise beneficially owned by the
Grantor Person;
provided, however, that nothing in this paragraph (c) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of or to
<PAGE>
4
"beneficially own" any securities acquired through such person's participation
in good faith in a firm commitment underwriting.
(d) "Board" means the Board of Directors of the Company.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00
P.M., New York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.
(g) "Common Shares" when used with reference to the Company
shall mean shares of Common Stock, par value $0.01 per share, of the Company;
but such term shall not mean or include Class B Stock. "Common Shares" or
"common shares," when used with reference to any Person other than the Company,
shall mean the capital stock of such Person with the greatest voting power or
the equity securities or other equity interest having power to control or direct
the management of such Person.
(h) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity and shall include any
successor (by merger or otherwise) of such entity.
(i) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii).
(j) "Section 13(a) Event" shall mean any event described in
clause (x) or (y) or (z) of Section 13(a).
(k) "Series B Shares" shall mean shares of Series B Preferred
Stock, par value $0.01 a share, of the Company, including any authorized
fraction of a Series B Share, unless the context otherwise requires.
(l) "Shares Acquisition Date" shall mean the first date of
public announcement (including, without limitation, a report filed pursuant to
Section 13(d) or 14(d) under the Exchange Act) by the Company or an Acquiring
Person indicating that an Acquiring Person has become such.
(m) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which a majority of the voting power of the
voting securities or voting interests is owned, directly or indirectly, by such
Person, or otherwise controlled by such Person.
<PAGE>
5
(n) "Triggering Event" shall mean any Section 11(a)(ii) Event
or Section 13(a) Event.
The following additional terms have the meanings indicated in the
specified Sections of this Agreement set forth below:
(i) "Act" -- Section 9(c).
(ii) "Adjustment Shares" -- Section 11(a)(ii).
(iii) "Common Share equivalent" -- Section
11(a)(iii).
(iv) "Current Value" -- Section 11(a)(iii).
(v) "equivalent preferred shares" -- Section 11(b).
(vi) "Exchange Act" -- Section 1(b).
(vii) "Extension Date" -- Section 27.
(viii) "Final Expiration Date" -- Section 7(a).
(ix) "Grantor Person" -- Section 1(c)(iv).
(x) "Principal Party" -- Section 13(b).
(xi) "Purchase Price" -- Sections 4(a), 11(a)(ii) and
13(a).
(xii) "Record Date" -- Preamble.
(xiii) "Redemption Date" -- Section 7(a).
(xiv) "Redemption Price" -- Section 23(a)(i).
(xv) "Rules" -- Section 1(b).
(xvi) "Separation Date" -- Section 3(a).
(xvii) "Series B Preferred Stock" -- Preamble.
(xviii) "Spread" -- Section 11(a)(iii).
(xix) "Springing Right of Redemption" -- Section
23(a)(i).
(xx) "Substitution Period" -- Section 11(a)(iii).
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6
(xxi) "Summary of Rights" -- Section 3(b).
(xxii) "Trading Day" -- Section 11(d)(i).
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Separation Date also be
the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment and agrees to act
as Rights Agent under this Agreement. The Company may from time to time appoint
such co-rights agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the close of business on the
tenth Business Day following the Shares Acquisition Date or (ii) the close of
business on the fifteenth (15th) Business Day (or such later date as may be
determined by action of the Board prior to the time as any Person becomes an
Acquiring Person) after the date on which a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first commenced within the meaning of Rule
14d-2(a) of the Rules, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the Common Shares then outstanding (the
earlier of (i) and (ii) being herein referred to as the "Separation Date"), (x)
the Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for Common Shares registered in the names of the
holders thereof (which certificates shall also be deemed to be Right
Certificates) and not by separate Right Certificates, and (y) the right to
receive Right Certificates will be transferable only in connection with the
transfer of Common Shares. As soon as practicable after the Separation Date, the
Rights Agent will send, by first-class, insured, postage-prepaid mail, to each
record holder of Common Shares as of the close of business on the Separation
Date, at the address of such holder shown on the records of the Company, one or
more Right Certificates, in substantially the form of Exhibit B hereto,
evidencing one Right for each Common Share so held. In the event that an
adjustment in the number of Rights per Common Share has been made pursuant to
Section 11(p) hereof, at the time of distribution of the Right Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Right Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Separation Date, the Rights will be
evidenced solely by such Right Certificates.
(b) As soon as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Series B Preferred
<PAGE>
7
Stock, in substantially the form attached hereto as Exhibit C (the "Summary of
Rights"), by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Separation Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof and the registered holders of the Common Shares shall also be
the registered holders of the associated Rights. Until the earliest of the
Separation Date, the Redemption Date or the Final Expiration Date, the surrender
for transfer of any certificate for Common Shares outstanding on the Record Date
shall also constitute the transfer of the Rights associated with the Common
Shares represented thereby.
(c) Certificates for Common Shares issued after the Record
Date but prior to the earliest of the Separation Date, the Redemption Date or
the Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN LOEHMANN'S,
INC. AND AMERICAN STOCK TRANSFER & TRUST COMPANY, DATED AS OF SEPTEMBER
23, 1998 (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF LOEHMANN'S, INC. 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. LOEHMANN'S, INC. WILL MAIL TO THE HOLDER OF THIS
CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE PROMPTLY
FOLLOWING RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR
HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY
AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY
ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
Section 4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to
purchase Series B Shares, exercise notice and of assignment to be printed on the
<PAGE>
8
reverse thereof) shall be substantially the same as Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates, whenever
distributed, shall be dated as of the Record Date and on their face shall
entitle the holders thereof to purchase such number of one one-hundredths of a
share of Series B Preferred Stock as shall be set forth therein at the price per
one one-hundredth of a Series B Share set forth therein (the "Purchase Price"),
but the amount and type of the securities purchasable (or other consideration to
be made available) upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of
an Acquiring Person (or such Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes such (other than a bona fide purchaser for
value who has no knowledge that the transferor was an Acquiring Person or an
Associate or Affiliate of an Acquiring Person) or (iii) a transferee of an
Acquiring Person (or such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person to holders of equity interests in such Acquiring Person or
to any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
that the Board has determined is part of a plan, arrangement or understanding
that has as a primary purpose or effect avoidance of Section 7(e) hereof, and
any Right Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Right Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR
AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.
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9
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board or its President, Chief Executive Officer
or any Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal, attested by the Secretary, the Treasurer or
any Assistant Secretary or Assistant Treasurer of the Company, or shall bear a
facsimile thereof. The Right Certificates shall not be valid for any purpose
unless countersigned by the Rights Agent. In case any officer of the Company who
shall have signed any of the Right Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent, and issued and delivered by the Company with
the same force and effect as though the person who signed such Right
Certificates had not ceased to be such 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 the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Separation Date, the Rights Agent will keep
or cause to be kept, at its office or agency designated for such purpose, books
for registration and transfer of the Right Certificates issued or to be issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Right Certificates, the number of Rights evidenced on its face 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.
(a) Subject to the provisions of Sections 4(b), 7(e) and 14
hereof, at any time after the close of business on the Separation Date, and at
or prior to the close of business on the earlier of the Redemption Date or the
Final Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
Series B Shares (or, following a Section 11(a)(ii) Event or Section 13(a) Event,
Common Shares, other securities or property, as the case may be) as the Right
Certificate or Right Certificates surrendered then entitled such holder to
purchase. 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 designated for such purpose. Neither the Rights Agent
nor the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Right Certificate until the registered
holder shall
<PAGE>
10
have completed and signed the certificate 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 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 and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a 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 and
deliver a new Right Certificate of like tenor to the Rights Agent for delivery
to the registered owner in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, 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 Separation
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 designated for such purpose, together with
payment of the Purchase Price for each one one-hundredth of a Series B Share as
to which the Rights are exercised, at or prior to the close of business on the
earlier of (i) October 5, 2008 (the "Final Expiration Date"), (ii) the date on
which the Rights are redeemed as provided in Section 23 hereof (the "Redemption
Date") or (iii) the time at which such Rights are exchanged as provided in
Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Series
B Share pursuant to the exercise of a Right shall initially be Fifteen Dollars
($15), shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.
(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 Series B Shares (or other
shares, securities or property, as the case may be) to be purchased and an
amount equal to any
<PAGE>
11
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, in cash, or by certified check
or cashier's check payable to the order of the Company, the Rights Agent shall,
subject to Section 20(k) hereof, thereupon promptly (i) either (A) requisition
from any transfer agent of the Series B Shares (or make available, if the Rights
Agent is the transfer agent for such shares) certificates for the number of
Series B Shares (or fractions thereof) 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 Series B Shares issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one
one-hundredths of a Series B Share as are to be purchased (in which case
certificates for the Series B Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (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. In the
event that the Company is obligated to issue other securities (including Common
Shares) or assets pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities or assets are available for
distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate
shall exercise less than all the rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the occurrence of a Triggering Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee from an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such (other than a bona fide purchaser for value who has no knowledge
that the transferor was an Acquiring Person or an Associate or Affiliate of an
Acquiring Person) or (iii) a transferee of an Acquiring Person (or such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer that the Board has determined
is part of a plan, arrangement or
<PAGE>
12
understanding that has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action, and any
holder of such Rights shall thereupon have no rights whatsoever with respect to
such Rights, whether under any provision of this Agreement or otherwise. The
Company shall use all reasonable efforts to insure that the provisions of this
Section 7(e) and Section 4(b) hereof are complied with, but shall have no
liability to any holder of Right Certificates or other Person as a result of its
failure to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported 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.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of 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 other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, 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 Series B Shares;
Registration.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Series B Shares
the number of Series B Shares that will be sufficient to permit the exercise in
full of all outstanding Rights. Prior to the occurrence of a Triggering Event,
the Company shall not be obliged to cause to be reserved and kept available out
of its authorized and unissued Common Shares or shares of preferred stock (other
than Series B Shares), any such Common Shares or any shares of preferred stock
(other than the Series B Shares) to permit exercise of outstanding Rights.
<PAGE>
13
(b) If the Series B Shares issuable upon the exercise of
Rights are listed on any national securities exchange, the Company shall use its
best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.
(c) If then required by applicable law, the Company shall use
its best efforts to (i) file, as soon as practicable following the earliest date
after the occurrence of a Triggering Event as to which the consideration to be
delivered by the Company upon exercise of the Rights has been determined
pursuant to this Agreement, or as soon as is required by law following the
Separation Date, as the case may be, a registration statement under the
Securities Act of 1933 (the "Act"), with respect to the securities purchasable
upon exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing and (iii)
cause such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities and (B) the
Final Expiration Date. If then required by applicable law, the Company will also
take such action as may be appropriate under the securities or "blue sky" laws
of the various states. The Company may temporarily suspend, for a period of time
not to exceed ninety (90) days after the date set forth in clause (i) of this
Section 9(c), the exercisability of the Rights in order to prepare and file 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. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Series B Shares delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(e) The Company covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Series B Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax that may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or delivery of
certificates for the Series B Shares (or Common Shares and/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 to issue or
deliver any certificates for Series B Shares (or Common Shares and/or other
securities, as the case may be) upon the
<PAGE>
14
exercise 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. Series B Shares Record Date. Each person in whose name any
certificate for Series B (or Common Shares and/or other securities, as the case
may be) is issued upon the exercise of Rights shall for all purposes be deemed
to have become the holder of record of the Series B Shares (or Common Shares
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered and payment of the 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 Series B Shares (or Common Shares
and/or other securities, as the case may be) transfer books of the Company are
closed, such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Series B Shares (or Common Shares and/or other securities, as the
case may be) transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled (in such holder's capacity as such) to any rights of a shareholder of
the Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote any shares, to receive
dividends or other distributions with respect to any shares or to exercise any
preemptive rights with respect to any shares, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right, and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event that the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Series B Shares payable
in Series B Shares, (B) subdivide the outstanding Series B Shares, (C) combine
the outstanding Series B Shares into a smaller number of Series B Shares or (D)
issue any shares of its capital stock in a reclassification of the Series B
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock that, if such Right had been exercised immediately prior to such
date and at a time when the Series B Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive
<PAGE>
15
by virtue of such dividend, subdivision, combination or reclassification;
provided however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right.
(ii) In the event that any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan), alone
or together with its Affiliates and Associates, shall become the Beneficial
Owner of 15% or more of the Common Shares then outstanding, other than pursuant
to (i) any transaction set forth in Section 13(a) hereof or (ii) any transaction
that, pursuant to the provisos of Section 1(a) hereof, does not cause such
Person to be or become an Acquiring Person, then proper provision shall be made
so that each holder of a Right, except as provided below and in Section 7(e)
hereof, shall thereafter have a right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, in
lieu of Series B Shares, and subject to the provisions of Section 11(a)(iii)
below, such number of Common Shares as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
one-hundredths of a Series B Share for which a Right was exercisable immediately
prior to the first occurrence of an event set forth in Section 11(a)(ii) above,
and dividing that product (which, following such first occurrence, shall be
referred to as the "Purchase Price" for all purposes of this Agreement) by (y)
fifty percent (50%) of the current per share market price of the Common Shares
(determined pursuant to Section 11(d) hereof), but not less than the par value
thereof, on the date of such first occurrence (such number of shares, the
"Adjustment Shares").
(iii) In the event that (x) the total of the Common
Shares that are issued but not outstanding and authorized but unissued
(excluding Common Shares reserved for issuance pursuant to the specific terms of
any indenture, option plan or other agreement) is not sufficient to permit the
exercise in full of the Rights in accordance with Section 11(a)(ii) hereof or
(y) the total number of Common Shares available for exercise of the Rights in
accordance with Section 11(a)(ii) hereof is sufficient to permit the exercise in
full of the Rights in accordance with Section 11(a)(ii) but the Board determines
that such exercise of the Rights will not afford adequate protection to the
shareholders of the Company and that shareholders should be given an option to
acquire a substitute for the Adjustment Shares, and subject to such limitations
as are necessary to prevent a default under any agreement for money borrowed to
which the Company is a party and to comply with applicable law, then the Board
shall: (A) determine the excess of (1) the value, based upon the current per
share market price of the Common Shares (determined pursuant to Section 11(d)
hereof), of the Adjustment Shares issuable upon the exercise of a Right (the
"Current Value") over (2) the Purchase Price (such excess, the "Spread") and (B)
with respect to each Right, make adequate provision to substitute for, or
provide an election to acquire in lieu of, the Adjustment Shares, upon payment
of the applicable Purchase Price (which term shall include any reduced Purchase
Price) any combination of the following having an aggregate value equal to the
Current Value (such aggregate value to be determined by the Board based upon the
advice of a nationally recognized investment banking firm selected by the
Board): (1) a reduction in the Purchase Price, (2) Common Shares and/or other
equity securities of the Company (including, without limitation, shares or
<PAGE>
16
units of shares of any series of preferred stock, including Series B Shares that
the Board has deemed to have the same value of Common Stock (such shares or
units of share of preferred stock hereinafter referred to as "Common Share
equivalents")) and/or (3) debt securities of the Company and/or cash and other
assets; provided, however, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the first occurrence of a Triggering Event, then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent available)
and then, if necessary, cash, which securities and/or cash in the aggregate are
equal to the Spread. If the Board shall determine in good faith that it is
likely that sufficient additional Common Shares could be authorized for issuance
upon exercise in full of the Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
following the first occurrence of a Triggering Event, in order that the Company
may seek shareholder approval for the authorization of such additional shares
(such period, as it may be extended, the "Substitution Period"). To the extent
that the Company determines that some action needs to be taken pursuant to the
first and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Shares shall be the current per share market price (as
determined pursuant to Section 11(d) hereof) of the Common Shares on the date of
the first occurrence of a Triggering Event.
The provisions of this Section 11(a)(iii) shall apply only to Common
Shares of the Company and shall not apply to the securities of any other Person.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Series B Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Series B Shares (or shares having the same
rights, privileges and preferences as the Series B Shares ("equivalent preferred
shares")) or securities convertible into Series B Shares or equivalent preferred
shares at a price per Series B Share or equivalent preferred share (or having a
conversion price per share, if a security convertible into Series B Shares or
equivalent preferred shares) less than the current per share market price of the
Series B Shares (as defined in Section 11(d) hereof) on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Series
<PAGE>
17
B Shares outstanding on such record date plus the number of Series B Shares that
the aggregate offering price of the total number of Series B Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number of
Series B Shares outstanding on such record date plus the number of additional
Series B Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the holders of the Rights. Series B Shares owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price that would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for the
distribution to all holders of the Series B Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of any debt securities, cash or assets
(other than a regular quarterly cash dividend or a dividend payable in Series B
Shares) or subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
current per share market price of the Series B Shares (as defined in Section
11(d) hereof) on such record date, less the fair market value (as determined in
good faith by the Board, whose determination shall be described in a statement
filed with the Rights Agent and binding on the holders of Rights) of the portion
of the assets or debt securities so to be distributed or of such subscription
rights or warrants applicable to one Series B Share and the denominator of which
shall be such current per share market price of the Series B Shares (as
determined pursuant to Section 11(d) hereof). Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price that would then be in effect if such record date had not been
fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of the Common Shares on any date shall be
deemed to be the lesser of (x) the average of the daily closing prices per
Common Share for the 30 consecutive Trading Days immediately prior to such date
or (y) the average of the daily closing prices per Common Share for the 30
consecutive Trading Days immediately following such date; provided, however,
that in the event that the current per share market price of the Common Shares
is determined during a period
<PAGE>
18
following the announcement by the issuer of such Common Shares of a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares (other than the Rights), or any subdivision,
combination or reclassification of such Common Shares, and prior to the
expiration of 20 Trading Days after the ex-dividend date for such dividend or
distribution, then, and in each such case, the current market price shall be
appropriately adjusted to reflect the current market price per Common Share
equivalent. The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange, if any, on which the
Common Shares are then listed or admitted to trading or, if the Common Shares
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use, or, if on any such date the Common Shares are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Shares
selected by the Board. The term "Trading Day" shall mean a day on which the
principal national securities exchange or NASDAQ on which the Common Shares are
listed or traded or are admitted to trading is open for the transaction of
business or, if the Common Shares are not listed or admitted to trading on any
national securities exchange or NASDAQ, a Business Day.
(ii) For the purpose of any computation hereunder,
the "current per share market price" of the Series B Shares shall be determined
in the same manner as set forth above for Common Shares in clause (i) of this
Section 11(d). If the current per share market price of the Series B Shares
cannot be determined in the manner provided above, the "current per share market
price" of the Series B Shares shall be conclusively deemed to be the current per
share market price of the Common Shares (appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof), multiplied by one hundred. If neither the Common Shares nor the Series
B Shares are publicly held or so listed or traded, "current per share market
price" shall mean the fair value per share as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and binding on the holders of Rights.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Purchase Price; provided, however, that any adjustments that
by reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or the nearest one
one-hundredth of a Common Share or other share or one one-thousandth of a Series
B Share, as the case may be.
<PAGE>
19
Notwithstanding the first sentence of this Section 11(e), any adjustment
provided for in this Section 11 shall be made no later than the earlier of (i)
three years from the date of the transaction that requires such adjustment or
(ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any property, other securities (other than
shares of capital stock of the Company) or shares of capital stock of the
Company other than Series B Shares, thereafter the amount of such property,
other securities (other than shares of capital stock of the Company) and the
number of such other shares of capital stock so receivable upon exercise of any
Right (as well as any consideration to be paid therefor) shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Series B Shares (and the
Purchase Price) contained in this Section 11, and the provisions of Sections 7,
9, 10 and 13 with respect to the Series B Shares shall apply on like terms to
any such property, other securities and other shares of capital stock.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Series B Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Series B Share (calculated to the nearest one one ten-
thousandth of a Series B Share) obtained by (i) multiplying (x) the number of
one one-hundredths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of Series B Shares purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of one one-hundredths of a
Series B Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become the number of Rights (calculated to the nearest one one
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The
<PAGE>
20
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of Series B Shares issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may continue to express
the Purchase Price per one one-hundredth of a share and the number of shares
that were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then stated value, if
any, of the Series B Shares issuable upon exercise of the Rights, the Company
shall take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Series B Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 requires that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Series B Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Series B Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
<PAGE>
21
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Series B Shares, (ii) issuance wholly for cash of any of the Series B Shares
at less than the current market price, (iii) issuance wholly for cash of Series
B Shares or securities that by their terms are convertible into or exchangeable
for Series B Shares, (iv) dividends on Series B Shares payable in Series B
Shares or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Series B Shares
shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, and
shall not permit any Subsidiary, at any time after the Separation Date, to (i)
consolidate with, (ii) merge with or into or (iii) sell or transfer, in one or
more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to, any other Person if at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect that would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
(o) The Company covenants and agrees that, after the
Separation Date, it will not, except as permitted by Section 23, Section 24,
Section 27 or Section 31 hereof, take (or permit any Subsidiary to take) any
action that at the time it is reasonably foreseeable will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights;
provided, however, that the issuance of additional Rights pursuant hereto,
including by action of the Board under Section 22 hereof, shall not be deemed to
violate this Section 11(o).
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Record Date (i) declare a dividend on the outstanding Common Shares payable in
Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the
outstanding Common Shares into a smaller number of shares, the number of Rights
associated with each Common Share then outstanding, or issued or delivered
thereafter, shall be proportionately adjusted so that the number of Rights
thereafter associated (whether before or after the Separation Date) with each
Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event. For purposes of
this Section 11(p), any Common Shares issued after the Separation Date that were
not issued together with a Right (pursuant to the Preamble hereto or
<PAGE>
22
by action of the Board pursuant to Section 22 hereof) shall not be counted as
outstanding.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, 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 Common Shares or
the Series B Shares a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate (or, if prior to the Separation
Date, to each holder of a certificate representing Common Shares) in accordance
with Section 25 hereof. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Shares Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company) and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company)
shall consolidate with, or merge with or into, the Company and the Company shall
be the continuing or surviving corporation of such consolidation or merger and,
in connection with such consolidation or merger, all or part of the Common
Shares shall be changed into or exchanged for stock or other securities of any
other Person or cash or any other property or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in a single transaction or a series of related transactions, assets
or earning power aggregating more than fifty percent (50%) of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company),
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right, except as provided in Section 7(e) hereof, shall thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, nonassessable and freely tradeable
Common Shares of the Principal Party, not subject to any rights of first
refusal, redemption or repurchase, as shall be equal to the result obtained by
(1) multiplying the then current Purchase Price by the number of one
one-hundredths of a Series B Share for which a Right is exercisable immediately
prior to the first occurrence of a Section 13(a) Event (or, if any event set
forth in Sections 11(a)(ii) has occurred prior to the Section 13(a) Event,
multiplying the number of such fractional shares for which a Right was
exercisable immediately prior to the first occurrence of an event set forth in
Sections 11(a)(ii) hereof by the Purchase Price immediately prior to such first
occurrence), and dividing that product (which, following the Section 13(a)
Event, shall thereafter be referred to
<PAGE>
23
as the "Purchase Price" for all purposes of this Agreement) by (2) fifty percent
(50%) of the current per share market price (determined pursuant to Section
11(d) hereof) per Common Share (or other securities or property as provided for
herein) of such Principal Party on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Company pursuant
to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13(a) Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
its Common Shares) in connection with the consummation of any such transaction
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Sections 11(a)(ii) and 11(a)(iii) hereof shall thereafter be of no effect
following the first occurrence of a Section 13(a) Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in
clause (x) or clause (y) of the first sentence of Section 13(a), the Person that
is the issuer of any securities into which Common Shares of the Company are
converted in such merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; provided, however, that in any
such case, (1) if the Common Shares of such Person are not at such time and have
not been continuously over the preceding twelve (12) month period registered
under Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized Common Shares, which have not been issued or reserved for
issuance, to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
<PAGE>
24
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will:
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date; and
(ii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act. The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that one of the transactions described in Section 13(a) hereof shall occur at
any time after the occurrence of a transaction described in Section 11(a)(ii)
hereof, the Rights that have not theretofore been exercised shall thereafter
become exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Separation Date as provided in Section 11(p) hereof,
or to distribute Right Certificates that evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange, if any, on
which the Rights are then listed or admitted to trading or, if the Rights are
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board.
If on any such date the Rights are not publicly held or so listed or traded, the
current market value of a whole Right shall
<PAGE>
25
mean the fair value of a whole Right as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent and binding on the holders of Rights.
(b) The Company shall not be required to issue fractions of
Series B Shares (other than fractions that are integral multiples of one
one-hundredth of a Series B Share) upon exercise of the Rights or to distribute
certificates that evidence fractional Series B Shares (other than fractions that
are integral multiples of one one-hundredth of a Series B Share). Fractions of
Series B Shares in integral multiples of one one-hundredth of a Series B Share
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Series B Shares. In lieu
of fractional Series B Shares that are not integral multiples of one
one-hundredth of a Series B Share, the Company shall pay to the registered
holders of Right Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one Series B Share. For purposes of this Section 14(b), the current
market value of a Series B Share shall be the closing price of a Series B Share
(as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of Common Shares upon exercise
of the Rights or to distribute certificates that evidence fractional Common
Shares. In lieu of fractional Common Shares, the Company may pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Common Share. For purposes of this Section 14(c), the
current market value of one Common Share shall be the closing price of one
Common Share (as determined pursuant to Section 11(d)(i) hereof) for the Trading
Day immediately prior to the date of such exercise.
(d) The holder of a Right, by the acceptance of the Rights,
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as otherwise set forth herein.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Separation Date, the registered holders of any
certificate representing Common Shares); and any registered holder of any Right
Certificate (or, prior to the Separation Date, of any other certificate
representing Common Shares), without the consent of the Rights Agent or of the
holder of any other Right Certificate (or, prior to the Separation Date, of the
Common Shares), may, in his own behalf and for his
<PAGE>
26
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 Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Separation Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Separation Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer and with appropriate
forms and certificates fully executed; and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the Separation Date,
the associated Common Shares certificate) 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 Common Shares
certificates 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.
(d) Notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Series B Shares, or any
other securities
<PAGE>
27
of the Company, that may at any time be issuable on the exercise 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 or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in Section 24 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be fully indemnified against, shall
be protected from, and shall incur no liability or expense (including without
limitation attorneys' fees and expenses) for, or in respect of, any action
taken, suffered or omitted by it in connection with, its administration of this
Agreement in reliance upon any Right Certificate or certificate for the Series B
Shares or Common Shares or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, instruction, consent, certificate, statement or other paper
or document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of its counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name 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 corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing
<PAGE>
28
of any paper or any further act on the part of any of the parties hereto;
provided, however, that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
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 Certificates 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
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 Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (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 or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any 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 Agreement in reliance upon such
certificate.
<PAGE>
29
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except 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 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 Agreement or in any Right Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof 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 Series B Shares to be issued
pursuant to this Agreement or any Right Certificate or as to whether any Series
B Shares will, when 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 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, any Vice President, the Secretary or the Treasurer of the Company,
and to apply to such officers for advice or 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 or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
<PAGE>
30
under this 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) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2 on
such certificate attached to the form of assignment or form of election to
purchase, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Series B Shares by registered or certified mail. In
such event, the Company shall give written notice of such resignation to the
holders of the Right Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Shares and Series B Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of
<PAGE>
31
any state of the United States, in good standing, that is authorized under such
laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and that has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and Series B Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, 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 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this 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 the Board to reflect any adjustment or change in the
Purchase Price per share and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, the Company may,
if deemed necessary or appropriate by the Board, issue Right Certificates in
connection with the issuance or sale of Common Shares following the Separation
Date.
Section 23. Redemption.
(a) (i) The Board may, at its option, at any time prior to the
earlier of (A) the close of business on the tenth Business Day following any
Shares Acquisition Date or (B) the Final Expiration Date, redeem all but not
less than all of the then outstanding Rights at a redemption price of One Cent
($0.01) per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"); provided,
however, that if, following the occurrence of a Shares Acquisition Date and
following the expiration of the right of redemption hereunder (other than a
Springing Right of Redemption, as defined below) but prior to any Triggering
Event, each of the following shall have occurred and remain in effect: (x) a
Person who is an Acquiring Person shall have transferred or otherwise disposed
of a number of Common Shares in a transaction, or series of transactions, that
did not result in the occurrence of a Triggering Event, such that such Person is
thereafter a Beneficial Owner of ten percent (10%) or less of the outstanding
Common Shares; (y) there are no other Persons, immediately following the
occurrence of the event described in clause (x) above, who are Acquiring
Persons;
<PAGE>
32
and (z) the transfer or other disposition described in clause (x) above was
other than pursuant to a transaction, or series of transactions, that directly
or indirectly involved the Company or any of its Subsidiaries, then the right of
redemption shall be reinstated and thereafter be subject to the provisions of
this Section 23. The reinstated right of redemption referred to in the preceding
sentence and the reinstated rights of redemption referred to in Sections 27 and
31 hereof is herein called the "Springing Right of Redemption." Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable pursuant to Section 11(a)(ii) at a time when the Rights are then
redeemable hereunder.
(ii) Following the occurrence of a Shares Acquisition
Date but prior to any event described in Section 13(a), the Board may also
redeem all but not less than all of the then outstanding Rights at the
Redemption Price in connection with any event of the type specified in Section
13(a) not involving an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (other than as a holder of Common Shares being treated like
other such holders generally).
(b) In the case of a redemption permitted under Section
23(a)(i), immediately upon the action of the Board ordering the redemption of
the Rights, evidence of which shall have been filed with the Rights Agent and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. In the case of a redemption permitted
only under Section 23(a)(ii), evidence of which shall have been filed with the
Rights Agent, the right to exercise the Rights will terminate and represent only
the right to receive the Redemption Price only after ten business days following
the giving of notice of such redemption to the holders of such Rights. Within
ten days after the action of the Board 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 Separation Date, on the registry books of the Transfer Agent for the
Common Shares; provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such redemption. Any notice that is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption shall state the
method by which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board may, at its option, at any time after the right
of the Company to redeem the Rights has expired or terminated (although such
right may be subject to restoration as a Springing Right of Redemption or
pursuant to Section 23(a)(ii) hereof), exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e) hereof) for Common Shares
at an exchange ratio of one
<PAGE>
33
Common Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary or the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of fifty percent (50%) or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of Common Shares equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall promptly
give notice to the Rights Agent and public notice of any such exchange;
provided, however, that failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
that 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 Common Shares for Rights will be effected and,
in the event of any partial exchange, the number of Rights that will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights that have become void pursuant to the provisions of
Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute Series B Shares for Common Shares at the rate of
one one-hundredth of a Series B Share for each Right.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates that evidence fractional Series B
Shares (except as hereinafter provided) or fractional Common Shares, but if the
exchange is for Series B Shares, the Company shall be obligated to issue
fractional shares so long as any fraction of a Series B Share so to be issued is
at least equal to one one-hundredth of a Series B Share. In lieu of such
fractional shares, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional shares would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole share. For the purposes of this Section 24(d), (i) the current
market value of a whole Common Share shall be the per share market price
determined as of the day immediately following the day of the public
announcement by the Company that an exchange is to be effected pursuant to this
Section 24 and (ii) the current market value of a Series B Share or fraction of
a
<PAGE>
34
Series B Share shall be the current market value on such day of a Series B Share
(or fraction of a Series B Share) as determined in accordance with Section
11(d)(ii) hereof.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Separation Date, (i) to pay any dividend payable in stock of any class to the
holders of Series B Shares or to make any other distribution to the holders of
Series B Shares (other than a regular quarterly cash dividend), (ii) to offer to
the holders of its Series B Shares rights or warrants to subscribe for or to
purchase any additional Series B Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of
Series B Shares (other than a reclassification involving only the subdivision of
outstanding Series B Shares), (iv) to effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more transactions,
of more than fifty percent (50%) of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Right Certificate, to the extent
feasible and in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the Common Shares and/or Series B Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the Series B Shares for purposes of such action, and in
the case of any such other action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Series B Shares, whichever shall be the
earlier.
(b) In case of the occurrence of a Section 11(a)(ii) Event,
then, in any such case, (i) the Company shall as soon as practicable thereafter
give to each holder of a Right Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii), and (ii) all references in the preceding
paragraph to Series B Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
<PAGE>
35
LOEHMANN'S, INC.
2500 Halsey Street
Bronx, NY 10461
Attn: Chief Executive Officer
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
6201 15th Avenue, 1st Floor
Brooklyn, New York 11219
Attention: Isaac Kagan
Phone: (718) 921-8293
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate 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.
Section 27. Supplements and Amendments. Prior to the Separation Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing Common Shares unless such approval is required by
Section 29(b), except for a supplement or amendment that would reduce the
Redemption Price, accelerate the Final Expiration Date, increase the Purchase
Price, or decrease the number of fractional Series B Shares, in each case, for
which a Right is then exercisable or this first sentence of this Section 27.
From and after the Separation Date (and at any time after the occurrence of a
Shares Acquisition Date subsequent to the occurrence of a Springing Right of
Redemption), the Company and the Rights Agent shall, if the Company shall so
direct, supplement or amend this Agreement without the approval of any holders
of Right Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein that may be defective or inconsistent
with any other provisions herein, (iii) to extend the period of redemption
provided in Section 23 hereof (which amendment shall set forth a date after
which the Rights are no longer redeemable ("Extension Date") unless the Rights
are further amended prior to the Extension Date to further extend the time
during that the Rights are redeemable, and which amendment may provide for the
termination of the right of redemption prior to any Extension Date or (iv) to
change or supplement the provisions hereunder in any manner that the Company may
deem necessary or desirable and that shall not adversely affect the interests of
the holders of
<PAGE>
36
Right Certificates (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); provided further, that this Agreement may not be
supplemented or amended in any way after the period for redemption of the Rights
pursuant to Section 23 hereof shall have expired unless there shall thereafter
arise and be in effect a Springing Right of Redemption. Upon the delivery of a
certificate from an appropriate officer of the Company, which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Separation Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors. For
all purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time and any determination of the particular
percentage of such outstanding Common Shares of which any Person is the
Beneficial Owner shall be made in accordance with the provisions of Rule
13d-3(d)(1)(i) of the Rules as in effect as of the date hereof. The Board shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or the Company,
or as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (ii) below, all omissions with respect to the foregoing) that are done or
made by the Board, in good faith, shall (i) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Right Certificates and all
other parties and (ii) not subject the Board or the Independent Directors to any
liability to the holders of the Right Certificates.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Separation Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Separation Date, the Common Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions,
<PAGE>
37
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; provided,
however, that notwithstanding anything in this Agreement to the contrary, if any
such term, provision, covenant or restriction is held by such court or authority
to be invalid, void or unenforceable and the Board determines in its good faith
judgment that severing the invalid language from this Agreement would adversely
affect the purpose or effect of this Agreement, the right of redemption set
forth in Section 23 hereof shall be reinstated and shall not expire until the
close of business on the tenth day following the date of such determination by
the Board.
Section 32. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware, and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts made and to be
performed entirely within such State; and any provision of this Agreement and
each such Right Certificate relating to the internal corporate governance or
other affairs of the Company shall be governed by and construed in accordance
with the laws of the State of Delaware.
Section 33. Consequential Damages. Neither party to this Agreement
shall be liable to the other party or any other Person for consequential
damages.
Section 34. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original and all such counterparts shall together constitute but one
and the same instrument.
<PAGE>
38
Section 35. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience of reference only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LOEHMANN'S, INC.
By: /s/ Robert N. Friedman
--------------------------
Name: Robert N. Friedman
Title: Chairman and Chief Executive Officer
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:
Name:
Title:
<PAGE>
EXHIBIT A
LOEHMANN'S, INC.
CERTIFICATE OF DESIGNATIONS
in respect of
SERIES B PREFERRED STOCK
------------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
------------------------
The undersigned, being the Chairman and Chief Executive Officer of
LOEHMANN'S, INC. (the "Corporation"), a corporation organized and existing under
the General Corporation Law of the State of Delaware, hereby certifies that,
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors of the Corporation duly adopted the
following resolution at a meeting of said Board of Directors duly called and
held on September 23, 1998, which resolution remains in full force and effect as
of the date hereof:
RESOLVED, that the Board of Directors of the Corporation,
pursuant to authority expressly vested in it by the provisions of the
Corporation's Certificate of Incorporation, as amended (the "Charter"),
hereby establishes a series of the Preferred Stock, par value $0.01 per
share, of the Corporation and fixes the number of shares of such series
and the powers, designations, preferences and relative, participating,
optional or other rights of such series, and the qualifications,
limitations or restrictions thereof, as follows:
This series of Preferred Stock, par value $0.01 per share, of
the Corporation shall be, and hereby is, designated "Series B Preferred
Stock" (the
<PAGE>
A-2
"Series B Shares"), and the number of shares constituting such series
shall be three hundred thousand (300,000). The relative rights and
preferences of the Series B Shares shall be as follows:
Section A. Dividends and Distributions.
(1) Subject to the prior and superior rights of the holders of any
shares of any series of stock ranking prior and superior to the Series B Shares
with respect to dividends, the holders of Series B Shares, in preference to the
holders of Common Stock, par value $0.01 per share, of the Corporation (the
"Common Stock") and of any other junior stock, shall be entitled to receive,
when and as declared by the Board of Directors, out of any funds lawfully
available therefor, cash dividends thereon, payable quarterly, from the date of
issuance thereof, upon the last days of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a Series B Share, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $0.25 or (b) subject to the provisions
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend or
distribution payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any Series B Share. In the event the Corporation shall at any
time after October 5, 1998
<PAGE>
A-3
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amounts to
which holders of Series B Shares were entitled immediately prior to such event
under clause (a) and clause (b) of the preceding sentence shall be adjusted by
multiplying each such amount by a fraction the numerator of which is the number
of shares of Common Shares outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(2) The Corporation shall declare a dividend or distribution on the
Series B Shares as provided in paragraph (1) of this Section A immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend or distribution payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.25 per share of the
Series B Shares shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date; and provided further that nothing contained in this
paragraph (2) shall be construed so as to conflict with any provision relating
to the declaration of dividends contained in the Charter.
(3) Dividends shall begin to accrue and be cumulative on outstanding
Series B Shares from the Quarterly Dividend Payment Date next preceding the date
of issue of such Series B Shares, unless (a) the date of issue of
<PAGE>
A-4
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or (b) unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of Series B Shares entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
Series B Shares 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. The Board of
Directors may fix a record date for the determination of holders of Series B
Shares entitled to receive payment of a dividend or distribution declared
thereon.
Section B. Redemption. The Series B Shares are not redeemable.
Section C. Liquidation, Dissolution or Winding Up. In the event of the
voluntary or involuntary liquidation of the Corporation the "preferential
amount" which the holders of the Series B Shares shall be entitled to receive
out of the assets of the Corporation shall be $100.00 per share plus all accrued
and unpaid dividends thereon.
(1) Upon any liquidation, dissolution or winding up of the Corporation,
no distribution shall be made to the holders of shares of stock ranking junior
(upon liquidation, dissolution or winding up) to the Series B Shares unless,
prior thereto, the holders of Series B Shares shall have received $100.00 per
share,
<PAGE>
A-5
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series B Liquidation
Preference"). Following the payment of the full amount of the Series B
Liquidation Preference, no additional distributions shall be made to the holders
of Series B Shares unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series B Liquidation Preference by (ii)
100 (as appropriately adjusted as set forth in paragraph (3) of this Section C
to reflect such events as stock splits, stock dividends and recapitalization
with respect to the Common Stock) (such number in clause (ii), the "Adjustment
Number"). Following the payment of the full amount of the Series B Liquidation
Preference and the Common Adjustment in respect of all outstanding Series B
Shares and Common Stock, respectively, holders of Series B Shares and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
one with respect to the Series B Shares and Common Stock, on a per share basis,
respectively.
(2) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series B Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series B Shares, then all such available assets
shall be distributed ratably to the holders of the Series B Shares and the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common
<PAGE>
A-6
Adjustment, then any such remaining assets shall be distributed ratably to the
holders of Common Stock.
(3) In the event the Corporation shall at any time after October 5,
1998 (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section D. Sinking Fund. The Series B Shares shall not be entitled to
the benefit of any sinking fund for the redemption or purchase of such shares.
Section E. Conversion.
(1) Subject to paragraph (2) of this Section E, the Series B Shares
shall not be convertible.
(2) In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the Series B Shares shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or
<PAGE>
A-7
for which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding sentence with respect to
the exchange or change of Series B Shares shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event, and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section F. Voting Rights.
(1) The holders of Series B Shares shall have no voting rights except
as provided by Delaware statutes or by paragraph (2) of this Section F.
(2) So long as any Series B Shares shall be outstanding, and in
addition to any other approvals or consents required by law, without the consent
of the holders of 66-2/3% of the Series B Shares outstanding as of a record date
fixed by the Board of Directors, given either by their affirmative vote at a
special meeting called for that purpose, or, if permitted by law, in writing
without a meeting:
(i) The Corporation shall not sell, transfer or lease all or
substantially all the properties and assets of the Corporation;
provided, however, that nothing herein shall require the consent of the
holders of Series B Shares for or in respect of the creation of any
mortgage, pledge, or other lien upon all or any part of the assets of
the Corporation.
<PAGE>
A-8
(ii) The Corporation shall not effect a merger or
consolidation with any other corporation or corporations unless as a
result of such merger or consolidation and after giving effect thereto
holders of Series B Shares are entitled to receive a per share amount
and type of consideration equal to the product arrived at by
multiplying the Adjustment Number by the per share amount and type of
consideration received by holders of shares of Common Stock, or (1)
either (A) the Corporation shall be the surviving corporation or (B) if
the Corporation is not the surviving corporation, the successor
corporation shall be a corporation duly organized and existing under
the laws of any state of the United States of America or the District
of Columbia, and all obligations of the Corporation with respect to the
Series B Shares shall be assumed by successor corporation, (2) the
Series B Shares then outstanding shall continue to be outstanding, and
(3) there shall be no alteration or change in the designation or the
preferences, relative rights or limitations applicable to outstanding
Series B Shares prejudicial to the holders thereof.
(iii) The Corporation shall not amend, alter or repeal any of
the provisions of its Certificate of Incorporation in any manner which
adversely affects the relative rights, preferences or limitations of
the Series B Shares or the holders thereof.
Section G. Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Shares as provided in Section A are in arrears,
thereafter and
<PAGE>
A-9
until all accrued and unpaid dividends and distributions, whether or not
declared, on Series B Shares 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 (as to dividends) to the Series B
Shares;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (as to
dividends) with the Series B Shares, except dividends paid ratably on
the Series B Shares 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 junior (as to dividends) to
the Series B Shares, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation, ranking junior
(as to dividends) to the Series B Shares; and
(iv) purchase or otherwise acquire for consideration any
Series B Shares, or any shares of stock ranking on a parity (as to
dividends) with the Series B Shares, 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 the relative rights and preferences of the
respective series and classes, shall determine in good faith
<PAGE>
A-10
will result in fair and equitable treatment among the respective series
or classes.
(2) 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 (1) of this Section G,
purchase or otherwise acquire such shares at such time and in such manner.
Section H. Fractional Shares. The Corporation may issue fractions and
certificates representing fractions of Series B Shares in integral multiples of
1/100th of a Series B Share, or in lieu thereof, at the election of the Board of
Directors of the Corporation at the time of the first issue of any Series B
Shares, evidence such fractions by depositary receipts, pursuant to an
appropriate agreement between the Corporation and a depository selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all rights, privileges and preferences to which they would
be entitled as beneficial owners of Series B Shares. In the event that
fractional Series B Shares are issued, the holders thereof shall have all the
rights provided herein of holders of full Series B Shares in the proportion
which such fraction bears to a full share.
<PAGE>
A-11
IN TESTIMONY WHEREOF, LOEHMANN'S, INC. has caused this Statement to be
signed under its corporate seal by its Chairman and Chief Executive Officer and
its Secretary as of the 23rd day of September, 1998.
LOEHMANN'S, INC.
By: ________________________________
Robert N. Friedman
Chairman and Chief Executive Officer
ATTEST:
- -------------------------
Robert Glass
President, Secretary and
Chief Operating Officer
<PAGE>
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER OCTOBER 5, 2008 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT (AS HEREINAFTER DEFINED)) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO
WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS
RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BE OR BECOME VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE AGREEMENT.]1/
Right Certificate
LOEHMANN'S, INC.
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 September 23, 1998 (the "Rights Agreement"), between
LOEHMANN'S, INC., a Delaware corporation (the "Company"), and AMERICAN STOCK
TRANSFER & TRUST COMPANY, a New York corporation (the "Rights Agent"), to
purchase from the Company at any time after the Separation Date (as such term is
defined in the Rights Agreement) and prior to the close of business (5:00 PM New
York time) on October 5, 2008 at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, nonassessable share of Series B Preferred Stock,
par value $0.01 per share ("Series B Share") of the Company, at a purchase price
of Fifteen
- --------
1/ The portion of the legend in brackets shall be inserted if applicable
and shall replace the preceding sentence.
<PAGE>
B-2
Dollars ($15) per one one-hundredth of a share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of rights
evidenced by this Right Certificate (and the number of shares that may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of September 23,
1998 based on the Series B Shares as constituted at such date.
Upon the occurrence of a Triggering Event (as such term is defined in
the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (a) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(b) a transferee of any such Acquiring Person, Associate or Affiliate (other
than a bona fide purchaser for value who has no knowledge that the transferor
was an Acquiring Person or an Associate or Affiliate of an Acquiring Person) or
(c) under certain circumstances specified in the Rights Agreement, a transferee
of a person or entity who, after such transfer, became an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such rights from and after the occurrence of any such Triggering
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Series B Shares or other securities or other property that may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
The Board may, at its option, at any time after the right of the
Company to redeem the Rights has expired or terminated (with certain exceptions)
exchange all or part of the then outstanding and exercisable Rights (other than
those held by the Acquiring Person and Affiliates and Associates of the
Acquiring Person) for Common Shares (as such term is defined in the Rights
Agreement) at an exchange ratio of one Common Share per Right, as adjusted.
Immediately upon the action of the Board ordering an exchange of the Rights, the
Rights affected by such order will no longer be exercisable and thereafter the
only right of the holders of such Rights will be to receive the Common Shares
issuable by the Company in exchange for such Rights.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights for not more than ninety (90) days at the election of the Company
and under certain circumstances specified in such Rights Agreement. Copies of
the Rights Agreement are on file at the above-
<PAGE>
B-3
mentioned office of the Rights Agent and are also available upon written request
to the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, 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 of Series B Shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If the Rights evidenced by 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 Certificate may be redeemed at a redemption price of One Cent ($0.01)
per Right at any time prior to the earlier of (A) the close of business 10
Business Days (as such term in defined in the Rights Agreement) after the Shares
Acquisition Date (as such term is defined in the Rights Agreement) or (B) the
Final Expiration Date (as such term is defined in the Rights Agreement), unless
the period for redemption is extended as permitted in the Rights Agreement.
Thereafter, the Board of Directors of the Company (the "Board") may only redeem
the Rights in certain specified circumstances including in connection with
certain events not involving an Acquiring Person or an Affiliate or Associate of
an Acquiring Person. In addition, the Company's right of redemption may be
reinstated if, among other things, an Acquiring Person reduces his beneficial
ownership to ten percent (10%) or less of the outstanding Common Shares of the
Company in a transaction or series of transactions not involving the Company.
Immediately upon the action of the Board ordering redemption of the Rights, the
Rights will no longer be exercisable, except where the redemption is made in
connection with an event not involving an Acquiring Person or Affiliate or
Associate of an Acquiring Person (in which circumstance the effective time of
the redemption may be deferred); and, in general, thereafter the only right of
the holders of the Rights evidenced hereby will be to receive the Redemption
Price.
The terms of the Rights evidenced by this Certificate may be
supplemented or amended without the approval of any holder of the Rights (or the
Common Shares) as set forth in the Rights Agreement.
No fractional Series B Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions that are integral
multiples of one one-hundredth of a Series B Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of Series B Shares
or of
<PAGE>
B-4
any other securities of the Company that 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
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Rights evidenced by this Right Certificate shall have been exercised as
provided in 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 signatures of the proper officers of the Company.
Dated: ___________, 19__
LOEHMANN'S, INC.
By_______________________
Name:
Title:
Attest___________________
Name:
Title:
(Corporate Seal)
Countersigned
AMERICAN STOCK TRANSFER
& TRUST COMPANY
as Rights Agent
By___________________
<PAGE>
B-5
[Form of Reverse Side of Right Certificate]
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 __________________________
- ------------------------------------------------------------
(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 Company,
with full power of substitution.
Dated: _______________, 19__
-------------------------
Signature
Signature Guaranteed:
<PAGE>
B-6
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(i) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement);
(ii) to the best knowledge of the undersigned, it [ ] did [ ] did not
acquire the Rights evidenced by this Right Certificate from any Person who is,
was or subsequently became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: _____________, 19__ _________________________
Signature
NOTICE
------
The signature(s) to the foregoing Assignment and Certificate must
correspond to the name(s) as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
B-7
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: LOEHMANN'S, INC.
The undersigned hereby irrevocably elects to exercise _________ Rights
represented by this Right Certificate to purchase the Series B Shares (or
fractions thereof) issuable upon the exercise of such Rights (or such other
securities of the Company or of any other entity that may be issuable upon the
exercise of the 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 of such Rights shall
be registered in the name of and delivered to:
<PAGE>
B-8
Please insert social security
or other identifying number: ______________________________
- ------------------------------------------------------------
(Please print name and address)
Dated: __________________, 19__
-------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) to the best knowledge of the undersigned, it [ ] did [ ] not
acquire the Rights evidenced by this Right Certificate from any Person who is,
was or became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated: ________________, 19__
-------------------------
Signature
<PAGE>
B-9
NOTICE
------
The signature(s) to the foregoing Election to Purchase and Certificate
must correspond to the name(s) as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT C
LOEHMANN'S, INC.
Summary of Rights to Purchase Series B Preferred Stock
On September 23, 1998, the Board of Directors (the "Board") of
Loehmann's, Inc. (the "Company") declared a dividend distribution of one Right
for each outstanding share of Common Stock, par value $0.01 per share (a "Common
Share"), of the Company to stockholders of record at the close of business on
October 5, 1998 (the "Record Date"). Except as set forth below, each Right
entitles the registered holder to purchase from the Company one one-hundredth of
a share of Series B Preferred Stock, par value $0.01 per share ("Series B
Shares"), at a price of $15 (the "Purchase Price"), subject to adjustment. The
Purchase Price shall be paid in cash. The description and terms of the Rights
are set forth in a Rights Agreement (the "Rights Agreement") between the Company
and AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent.
Initially, no separate Right Certificates will be distributed. Until
the earlier to occur of (a) 10 business days following a public announcement
that a person or group of affiliated or associated persons (collectively, an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding Common Shares or (b) 15 business
days (or such later date as may be determined by the action of the Board before
any person becomes an Acquiring Person) following the commencement of a tender
offer or exchange offer if, upon consummation thereof, such person or group
would be the beneficial owner of 15% or more of such outstanding Common Shares
(the earlier of such dates being called the "Separation Date"), the Rights will
be evidenced, with respect to any Common Shares outstanding as of the Record
Date, by the certificates representing such Common Shares. The Rights Agreement
provides that, until the Separation Date, the Rights will be transferred with,
and only with, Common Share certificates. From as soon as practicable after the
Record Date and until the Separation Date (or earlier redemption or expiration
of the Rights), new Common Share certificates issued after the Record Date upon
transfer or new issuance of Common Shares will contain a notation incorporating
the Rights Agreement by reference. Until the Separation Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for Common Shares outstanding as of the Record Date will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificates. As soon as practicable following the
Separation Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Separation Date and, thereafter, such separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Separation Date and will
expire on October 5, 2008 (the "Final Expiration Date"), unless earlier redeemed
by the Company as described below.
<PAGE>
C-2
In the event that a person (other than the Company and its affiliates)
becomes the beneficial owner of 15% or more of the then outstanding Common
Shares (in any manner, except pursuant to (i) the exercise of stock options
granted pursuant to the Company's existing and future stock option plans, and
(ii) the exercise of conversion rights contained in specified Stock issues of
the Company), the Rights Agreement provides that proper provision shall be made
so that each holder of a Right will thereafter be entitled to receive, upon
exercise, Common Shares (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right.
In the event that, at any time following the first date of public
announcement by the Company or an Acquiring Person indicating that an Acquiring
Person has become such (the "Shares Acquisition Date"), (a) the Company engages
in a merger or other business combination transaction in which the Company is
not the surviving corporation, (b) the Company engages in a merger or other
business combination transaction with another person in which the Company is the
surviving corporation, but in which its Common Shares are changed or exchanged
or (c) 50% or more of the Company's assets or earning power is sold or
transferred, the Rights Agreement provides that proper provision shall be made
so that each holder of a Right shall thereafter have the right to receive, upon
the exercise thereof at the then current exercise price of the Right, common
shares of the acquiring company having a value equal to two times the exercise
price of the Right.
The Board may, at its option, at any time after the right of the Board
to redeem the Rights has expired or terminated (with certain exceptions),
exchange all or part of the then outstanding and exercisable Rights (other than
those held by the Acquiring Person) for Common Shares at a ratio of one Common
Share per Right, as adjusted; provided, however, that such Right cannot be
exercised once a Person, together with such Person's Affiliates and Associates,
becomes the owner of 50% or more of the outstanding Common Shares. If the Board
authorizes such an exchange, the Rights will immediately cease to be
exercisable.
Notwithstanding any of the foregoing, following the occurrence of any
of the events set forth in the fourth and fifth paragraphs of this Summary, any
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person shall immediately
become null and void. The Rights Agreement contains provisions intended to
prevent the utilization of voting trusts or similar arrangements (except for a
contemplated voting arrangement between two of the Company's principal
stockholders) that could have the effect of rendering ineffective or
circumventing the beneficial ownership rules set forth in the Rights Agreement.
The Purchase Price payable, and the number of Series B Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (a) in the event of a dividend
of
<PAGE>
C-3
Series B Shares on, or a subdivision, combination or reclassification of, the
Series B Shares, (b) upon the grant to holders of the Series B Shares of certain
rights or warrants to subscribe for Series B Shares or securities convertible
into Series B Shares at less than the current market price of the Series B
Shares or (c) upon the distribution to holders of the Series B Shares of debt
securities or assets (excluding regular quarterly cash dividends and dividends
payable in Series B Shares) or of subscription rights or warrants (other than
those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares that are not integral multiples of one
one-hundredth of a Series B Share will be issued and, in lieu thereof, an
adjustment in cash will be made based on the closing price of the Series B
Shares on the last trading date prior to the date of exercise.
At any time after the date of the Rights Agreement until the earlier of
(A) 10 Business Days following the Shares Acquisition Date or (B) the Final
Expiration Date, the Board, may redeem the Rights in whole, but not in part, at
a price of $0.01 per Right, subject to adjustment (the "Redemption Price").
Thereafter, the Board may only redeem the Rights in certain specified
circumstances including in connection with certain events not involving an
Acquiring Person. In addition, the Company's right of redemption may be
reinstated if (a) an Acquiring Person reduces its beneficial ownership to 10% or
less of the outstanding Common Shares in a transaction or series of transactions
not involving the Company and (b) there is at such time no other Acquiring
Person. The Rights Agreement may also be amended, as described below, to extend
the period of redemption. Immediately upon the action of the Board ordering
redemption of the Rights, the Rights will no longer be exercisable, except upon
the occurrence of certain events that have the effect of deferring the effective
time of the redemption. In general, thereafter the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Shares (or other consideration) of the Company or for
common shares of the Acquiring Person as set forth above.
Other than those provisions relating to the principal economic terms of
the Rights or imposing limitations on the right to amend the Agreement, any of
the provisions of the Rights Agreement may be amended by the Board. Thereafter,
the period during which the Rights may be redeemed may be extended (by action of
the Board), and other provisions of the Rights Agreement may be amended by
action of the Board; provided, however, that (a) such amendment will not
adversely affect the
<PAGE>
C-4
interests of holders of Rights (excluding the interests of any Acquiring Person)
and (b) no amendment shall be made at such time as the Rights are no longer
redeemable (except for the possibility of the right of redemption being
reinstated as described above).
A copy of the Rights Agreement will be filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
LOEHMANN'S, INC. DECLARES DIVIDEND
DISTRIBUTION OF PREFERRED SHARE PURCHASE RIGHTS
-----------------------------------------------
Bronx, New York, September 23, 1998, LOEHMANN'S, INC. (Nasdaq: LOEH)
announced that its Board of Directors has adopted a stockholder rights plan
designed to protect the long-term value of the Company for its stockholders
during any future unsolicited acquisition attempt.
Robert Friedman, Chief Executive Officer of Loehmann's, Inc., stated:
"The plan is designed to give Loehmann's Board of Directors sufficient time to
study and respond to an unsolicited tender offer or other attempted
acquisition."
In connection with the plan, the Board declared a dividend of one
preferred share purchase right (a "Right") for each share of the Company's
common stock outstanding on October 5, 1998 (the "Record Date"). The Rights will
expire on October 5, 2008.
The Rights will be exercisable only if a person or group acquires 15%
or more of the Company's common stock or announces a tender offer upon the
consummation of which would result in ownership by a person or group of 15% or
more of the Company's common stock. Each Right will entitle stockholders to buy
one one-hundredth of a share of a new series of preferred stock at an exercise
price of $15.00.
If Loehmann's is acquired in a merger or other business combination
transaction after a person has acquired 15% or more of the Company's outstanding
common stock, each Right will entitle its holder to purchase, at the Right's
then-current exercise price, a number of the acquiring company's common shares
having a
<PAGE>
2
market value of twice such exercise price. In addition, if a person or group
acquires 15% or more of the Company's outstanding common stock, each Right will
entitle its holder (other than such person or members of such group) to
purchase, at the Right's then-current exercise price, a number of the Company's
common shares having a market value of twice such exercise price.
Under certain circumstances, the Board of Directors may exchange the
Rights, in whole or in part, at an exchange ratio of one share of common stock
(or one-hundredth of a share of the new series of preferred stock) per Right.
Prior to the acquisition by a person or group of beneficial ownership
of 15% or more of the Company's common stock, the Rights are redeemable for one
cent per Right at the option of the Board of Directors. Prior to such time, the
terms of the Rights may be amended by the Board.
* * *
Loehmann's, Inc. is a leading specialty retailer of well known designer
and brand name women's and men's fashion apparel, accessories and shoes at
prices that are typically 30% to 65% below department store prices. Loehmann's
operates 68 stores in major metropolitan markets located in 21 states.
