<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 29, 1994
---------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- --------------------
AMES DEPARTMENT STORES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2269444
- -------------------------------- ---------------------------------------
(State or other jurisdiction of I.R.S. Employer Identification Number
incorporation or organization)
2418 Main Street, Rocky Hill, Connecticut 06067
- ----------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (203) 257-2000
-------------------------
None
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Sections 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
YES X NO
---- ----
18,059,260 shares of Common Stock and 2,068,009 shares of
Priority Common Stock were outstanding on December 1, 1994.
Exhibit Index on page 16
Page 1 of 73 (including exhibits)
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AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 29, 1994
I N D E X
Page
Part I: Financial Information
Consolidated Condensed Statements of Operations 3
for the Thirteen and Thirty-nine Weeks Ended
October 29, 1994 and October 30, 1993
Consolidated Condensed Balance Sheets at 4
October 29, 1994, January 29, 1994 and
October 30, 1993
Consolidated Condensed Statements of Cash Flows 5
for the Thirty-nine Weeks Ended October 29, 1994
and October 30, 1993
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Part II: Other Information
Submission of Matters to a Vote of Security Holders 16
and Exhibits and Reports on Form 8-K
- - 2 -
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<TABLE>
PART I
FINANCIAL INFORMATION
AMES DEPARTMENT STORES, INC. AND SUSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
For the Thirteen For the Thirty-nine
Weeks Ended Weeks Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
TOTAL SALES $537,093 $552,649 $1,510,931 $1,532,747
Less: Leased department sales 25,825 26,147 72,608 74,634
----------- ----------- ------------ ------------
NET SALES 511,268 526,502 1,438,323 1,458,113
COSTS, EXPENSES AND (INCOME):
Cost of merchandise sold 376,487 382,723 1,055,037 1,060,007
Selling, general and administrative expenses 141,093 149,773 417,800 436,537
Leased department and other operating income (8,204) (9,317) (22,197) (23,977)
Depreciation and amortization expense 1,590 736 3,611 1,254
Amortization of the excess of revalued net assets
over equity under fresh-start reporting (1,538) (1,494) (4,614) (4,527)
Interest and debt expense, net 6,887 7,506 19,646 20,192
Nonrecurring gain - litigation settlement - - (12,001) -
Gain on disposition of properties - (844) (3,535) (844)
Distribution center closing costs 2,500 - 2,500 -
----------- ----------- ------------ ------------
LOSS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (7,547) (2,581) (17,924) (30,529)
Income tax benefit 2,445 - 5,807 -
----------- ----------- ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM (5,102) (2,581) (12,117) (30,529)
Extraordinary item - gain (loss) on early extinguish-
ment of debt (net of tax benefit of $727 in 1994) - 928 (1,517) 928
----------- ----------- ------------ ------------
NET LOSS ($5,102) ($1,653) ($13,634) ($29,601)
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 20,127 20,068 20,127 20,023
=========== =========== ============ ============
LOSS PER SHARE BEFORE EXTRAORDINARY GAIN (LOSS) ($0.25) ($0.13) ($0.60) ($1.52)
EXTRAORDINARY GAIN (LOSS) - 0.05 (0.08) 0.04
----------- ----------- ------------ ------------
NET LOSS PER SHARE ($0.25) ($0.08) ($0.68) ($1.48)
=========== =========== ============ ============
<FN>
(The accompanying notes are an integral part of these condensed financial statements)
-3-
</TABLE>
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<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(Unaudited)
<CAPTION>
October 29, January 29, October 30,
1994 1994 1993
ASSETS ------------------------------------
<S> <C> <C> <C>
Current Assets:
Unrestricted cash and short-term investments $26,910 $16,465 $28,983
Restricted cash and short-term investments 722 55,980 49,803
------------------------------------
Total cash and short-term investments 27,632 72,445 78,786
Receivables 45,843 18,703 44,302
Merchandise inventories 596,926 442,198 578,471
Prepaid expenses and other current assets 17,833 10,130 8,439
Net assets held for disposition - - 1,947
------------------------------------
Total current assets 688,234 543,476 711,945
Fixed Assets 45,332 23,686 19,083
Less - Accumulated depreciation and amortization (5,873) (2,098) (1,239)
------------------------------------
Net fixed assets 39,459 21,588 17,844
Other assets and deferred charges 6,633 2,067 473
------------------------------------
$734,326 $567,131 $730,262
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $200,480 $74,091 $123,424
Other 39,728 36,045 36,750
------------------------------------
Total accounts payable 240,208 110,136 160,174
Note payable - revolver 153,737 15,360 148,278
Current portion of long-term debt and capital lease obligations 18,831 18,609 20,033
Long-term debt classified as current (Note 5) - 67,702 -
Self-insurance reserve 49,908 48,433 54,303
Accrued expenses and other current liabilities 60,187 62,268 74,478
------------------------------------
Total current liabilities 522,871 322,508 457,266
Long-term debt and capital lease obligations 80,305 93,309 163,642
Other long-term liabilities 10,776 11,046 10,628
Unfavorable lease liability 23,426 25,072 25,603
Excess of revalued net assets over equity under fresh-start reporting 50,172 54,786 56,475
Stockholders' Equity:
Priority common stock 23 38 43
Common stock 178 163 158
Additional paid-in capital 73,278 73,278 69,940
Accumulated deficit (26,703) (13,069) (53,493)
------------------------------------
Total stockholders' equity 46,776 60,410 16,648
------------------------------------
$734,326 $567,131 $730,262
====================================
<FN>
(The accompanying notes are an integral part of these condensed balance sheets.)
-4-
</TABLE>
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<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
For the
Thirty-nine Weeks Ended
October 29, October 30,
1994 1993
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($13,634) ($29,601)
Adjustments to reconcile net loss to net cash
used for operating activities:
Extraordinary loss (gain) on early extinguishment of debt 1,517 (928)
Income tax benefit (5,807) -
Distribution center closing costs 2,500 -
Gain on disposition of properties (3,535) (844)
Depreciation and amortization of fixed assets 3,781 1,290
Amortization of deferred financing costs 2,076 38
Amort. of the excess of revalued net assets over equity (4,614) (4,527)
Amort. of debt discounts and unfavorable leases, net 554 2,599
Increase in accounts receivable (27,651) (20,115)
Increase in merchandise inventories (154,728) (113,915)
Increase in accounts payable 130,072 55,508
Decrease in accrued expenses and other current liabs. (75) (23,288)
Increase in other working capital and other, net (1,148) (1,328)
----------- ------------
Cash used for operations before restructuring items (70,692) (135,111)
Changes due to restructuring activities:
Payments of restructuring costs (4,399) (28,355)
----------- ------------
Net cash used for operating activities (75,091) (163,466)
----------- ------------
Cash flows from investing activities:
Proceeds from the sale of assets held for disposition 1,458 36,826
Proceeds from the disposition of properties 4,101 2,943
Purchases of fixed assets (21,148) (15,603)
Decrease in restricted cash and short-term investments 55,258 33,864
----------- ------------
Net cash provided by investing activities 39,669 58,030
----------- ------------
Cash flows from financing activities:
Payments of debt and capital lease obligations (84,741) (22,754)
Short-term borrowings under the revolver 150,306 138,915
Payments on the revolver (11,929) (13,597)
Increase in deferred financing costs (7,769) -
----------- ------------
Net cash provided by financing activities 45,867 102,564
----------- ------------
Increase (decr.) in unrest. cash and short-term invest. 10,445 (2,872)
Unrestricted cash and short-term invest., beg. of period 16,465 31,855
----------- ------------
Unrestricted cash and short-term invest., end of period $26,910 $28,983
=========== ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest and debt fees not capitalized $14,731 $15,555
Income taxes 7 19
<FN>
(The accompanying notes are an integral part of these condensed financial
statements.)
- 5 -
</TABLE>
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AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements of Ames Department Stores, Inc. and
subsidiaries (collectively the "Company") contain all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation of such
financial statements for the interim periods. Due to the seasonality of the
Company's operations, the results of operations for the interim periods ended
October 29, 1994 may not be indicative of results for the full year. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations promulgated by the
Securities and Exchange Commission. Certain prior year amounts have been
reclassified to conform to the presentation used for the current year. The
consolidated condensed balance sheet at January 29, 1994 was taken from
audited financial statements previously filed with the Commission in the
Company's latest Form 10-K. The accompanying unaudited consolidated condensed
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's latest Form 10-K.
2. EARNINGS PER COMMON SHARE:
Earnings per share was determined using the weighted average number of
common shares outstanding. There were no exercises of warrants during the
thirty-nine weeks ended October 29, 1994. Common stock equivalents and fully
diluted earnings per share were excluded as their inclusion would have reduced
the reported loss per share.
3. CASH AND SHORT-TERM INVESTMENTS:
The New Facility (Note 5), which became effective in June, 1994, does not
require cash collateralization of letters of credit, except in limited
instances as described in the New Facility. As of January 29, 1994 and
October 30, 1993, approximately $55.0 and $46.3 million, respectively, was
placed for collateral pledge and consignment with Republic National Bank of
New York as a condition precedent to the issuance of letters of credit under
the Letter of Credit Facility (Note 5). This cash collateral was included in
"Restricted cash and short-term investments." The amounts of cash collateral
changed as the balances outstanding under the Letter of Credit Facility
changed, since the cash collateral was required to equal 105% of the Company's
outstanding letters of credit, including expected future increases to stand-by
letters of credit to cover expected workers' compensation claims. The
Company earned interest on invested cash collateral.
In addition, as of October 29, 1994, January 29, 1994, and October 30,
1993, approximately $.7, $1.0 and $3.5 million of cash and short-term
investments, respectively, was restricted for expected payments of certain
remaining administrative and priority claims under the Company's plan of
reorganization. These amounts are also included in "Restricted cash and
short-term investments." The Company believes that the remaining segregated
funds are adequate to cover all related payments and the Company earns
interest on invested segregated funds.
- 6 -
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<PAGE>
4. INVENTORIES:
Substantially all inventories are valued at the lower of cost or market.
Cost is determined by the retail last-in, first-out (LIFO) cost method for all
merchandise inventories. If the first-in, first-out (FIFO) cost method had
been used, inventories would have increased by $.7 and $1.8 million at October
29, 1994 and October 30, 1993, respectively. No LIFO reserve was necessary at
January 29, 1994.
5. DEBT:
On April 28, 1994, the Company entered into an agreement with BankAmerica
Business Credit, Inc., as agent, two financial institutions as co-agents
(together with the agent, the "Agents"), and a syndicate of five other banks
and financial institutions, for a secured revolving credit facility of up to
$300 million, with a sublimit of $100 million for letters of credit (the "New
Facility"). The Company believes that the New Facility contains terms,
covenants and interest rates that are generally more favorable than those in
the Credit Agreement (see below) and the Republic $120 million Letter of
Credit Facility (see below). The New Facility is in effect until June 22,
1997, is secured by substantially all of the assets of the Company and
requires the Company to meet certain quarterly financial covenants. In
addition, each year the Company must have no outstanding borrowings under the
New Facility for a consecutive 30-day period between November 15th and
February 15th of the following year. The Company is in compliance with these
financial covenants through the quarter ended October 29, 1994.
As of October 29, 1994, borrowings of approximately $153.7 million were
outstanding under the New Facility. In addition, approximately $32.9 and $8.6
million of standby and trade letters of credit, respectively, were outstanding
under the New Facility as of October 29, 1994, including a standby amount
necessary to back-up letters of credit still outstanding under the Letter of
Credit Facility. The weighted average interest rate on all revolving credit
borrowings, including the borrowings under the Credit Agreement prior to June
22, was approximately 9.1% for the thirteen and thirty-nine weeks ended
October 29, 1994. The peak borrowing level through October 29, 1994 was
$165.7 million.
In June, 1994, the Company utilized the funds that were no longer
restricted for the collateralization of letters of credit (Note 3), and funds
from the New Facility, to prepay its then outstanding Series A, B and D Notes,
a $1.2 million term note, and the outstanding borrowings under the Credit
Agreement. As a result of the refinancing and associated commitment to prepay
the above debt, a non-cash extraordinary charge of approximately $1.5 million,
net of tax benefit of approximately $.7 million, was recorded in the quarter
ended April 30, 1994, primarily for the write-off of deferred financing costs
and debt discounts related to the debt to be prepaid. As of January 29, 1994,
approximately $67.7 million represented the portion of long-term debt that was
to be prepaid and was classified as "Long-term debt classified as current".
During the prior-year's third quarter, the Company recorded an extraordinary
gain of $.9 million, before and after income taxes, from the early settlement
of certain tax notes.
The amount of borrowing under the New Facility generally shall not exceed
the sum of (i) an amount equal to 55% of inventory not covered by any
outstanding letter of credit plus (ii) an amount equal to 50% of inventory
covered by any outstanding letter of credit less (iii) a reserve for
reinstated debt ($33,386 as of October 29, 1994). In addition, the New
Facility provides for potential establishment of other reserves contingent
upon the Company's financial performance. In addition, each Agent reserves
the right in good faith, based upon such collateral consideration as such
Agent may in its sole discretion deem necessary or appropriate to adjust the
total available to be borrowed by establishing reserves, making determinations
- 7 -
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<PAGE>
of eligible inventory, revising standards of eligibility or decreasing from
time to time the percentages set forth above. Reference can be made to the
latest Form 10-K for further descriptions of the New Facility and the
obligations summarized below, and for descriptions of the Company's other
obligations not discussed herein.
CREDIT AGREEMENT
Citibank was the agent in the post-Chapter 11 credit agreement (the
"Credit Agreement") which combined a $175.9 million revolving credit facility
and a $1.2 million term note. The Credit Agreement was between the Company,
Citibank, and a syndicate consisting of other banks and financial
institutions. Approximately $15.4 and $148.3 million was outstanding under
the revolver portion of the Credit Agreement at January 29, 1994 and October
30, 1993, respectively. The Credit Agreement was terminated when the New
Facility became effective.
LETTER OF CREDIT FACILITY
The $120 million letter of credit facility with Republic National Bank of
New York (the "Letter of Credit Facility") had sublimits of $60 million for
trade letters of credit and $60 million for standby letters of credit. As of
October 29, 1994, January 29, 1994, and October 30, 1993, approximately $2.8,
$11.3 and $9.6 million and $.6, $35.6 and $34.4 million was outstanding in
trade and stand-by letters of credit, respectively, under the Letter of Credit
Facility. Before the New Facility became effective and the Letter of Credit
Facility was terminated, all letters of credit outstanding under the Letter of
Credit Facility had to be cash collateralized at 105% from the date of
issuance.
DEFERRED CASH DISTRIBUTIONS
The Company's plan of reorganization, which was consummated on December
30, 1992, provided that approximately $46.5 million of cash distributions in
respect to several classes of claims would be paid subsequent to the
consummation date. Approximately $15.0 and $8.0 million of these deferred
cash distributions were paid as scheduled on January 31, 1993 and January 31,
1994, respectively, and the remaining unsecured amounts are due as follows,
with interest that began on February 1, 1994 at 5% per annum: $8.0 million due
at January 31, 1995 and January 31, 1996; and $7.5 million due at January 31,
1997.
6. INCOME TAXES:
The Company's estimated annual effective income tax rate was applied to
the loss incurred before income taxes and extraordinary item for the thirty-
nine weeks ended October 29, 1994 to compute an income tax benefit of
approximately $5.8 million for the period. The same method was used to
compute an income tax benefit of approximately $.7 million for the
extraordinary loss and an income tax benefit of approximately $2.4 million for
the third quarter of this year. The Company currently expects that, as a
result of the seasonality of the Company's business, the year-to-date income
tax benefit will be offset by non-cash income tax expense in the remaining
interim period. The year-to-date income tax benefit has been reflected in
other current assets in the accompanying balance sheet. Reference can be made
to the latest Form 10-K for discussion of other income tax issues affecting
the Company.
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<PAGE>
7. DISTRIBUTION CENTER CLOSING COSTS:
On November 1, 1994, the Company announced that it would close its
distribution center in Clinton, Massachusetts in June, 1995 and recorded a
provision of $2.5 million in the third quarter for the estimated costs
associated with closing the facility. Transfer of the Clinton operations to
the Company's distribution center in Leesport, Pennsylvania will begin in
January, 1995. The Clinton facility will be held for sale after the closing.
Approximately $.6 million of estimated termination benefits was included
in the above provision. Approximately 330 employees will be affected by the
closing. The following items represent the major components ($ in millions)
of the total provision for the Clinton closing costs:
Termination benefits and other
human resource costs $ .8
Real estate taxes and other
property holding costs 1.4
Asset write-off and
other closing costs .3
-----
$2.5
=====
8. LITIGATION:
Reference can be made to the latest Form 10-K (Note 12 to the
Consolidated Financial Statements) for various litigation involving the
Company, for which there were no material changes since the filing date of the
Form 10-K. The closing on the Wertheim Settlement Agreement took place in
June, 1994 and the Company recorded a nonrecurring gain for its $12 million
portion of the settlement. The Class AG-6A Trust received $7 million for its
portion of the settlement.
9. RESTRUCTURING:
As part of its restructuring prior to emergence from Chapter 11
Reorganization, the Company announced on October 30, 1992 that in early 1993
it would close 60 discount stores and the three remaining freestanding Crafts
& More stores. All of these stores were closed as planned in March, 1993.
Certain distribution centers/warehouses also were closed and office facilities
were further consolidated.
Restructuring costs represent losses from store operations from the date
of announcement until closing, employee payroll and severance costs, losses on
liquidation of inventories, and other related restructuring costs. Net assets
held for disposition are recorded net of anticipated costs associated with the
sale of such assets. Such assets, other than merchandise inventories, are
sold as market conditions permit.
Prior to the start of 1993, the Company entered into an agreement (the
"60-Store Agency Agreement") with an agent to assist the Company with the
disposition of merchandise inventory in "going-out-of-business" ("GOB") sales
at the 60 discount stores and three Crafts & More stores. The GOB sales
commenced in January 1993, were completed in March 1993, and the Company
realized approximately $46 million in cash for the merchandise inventory after
payment of all direct GOB expenses as defined in the 60-Store Agency
Agreement. This represented approximately 52% of the beginning GOB retail
inventory value at the closed stores.
- 9 -
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10. STOCK PURCHASE RIGHTS AGREEMENT:
On November 30, 1994, the Company adopted a Stock Purchase Rights
Agreement (the"Agreement"), a copy of which is attached to this Form 10-Q as
Exhibit 4. Under the terms of the Agreement, one purchase right ("Right"),
with an exercise price of $14.00, is attached to each share of the Company's
Common Stock outstanding as of, or issued subsequent to, November 30, 1994
but prior to the occurrence of certain events (as more fully described in
the Agreement).
The Rights become exercisable in the event that a person or group (an
"Acquiring Person") either acquires 15% or more of the Company's outstanding
voting stock or announces an intention to acquire 20% or more of such stock.
Once exercisable, each Right will, depending on the circumstances, entitle
a holder, other than an Acquiring Person, to purchase shares of either the
Company or an acquiring company having a market value equal to twice the
exercise price. The Agreement was adopted to assure that all of the
Company's shareholders receive full value for their investment in the event
of stock accumulation by an Acquiring Person. Unless previously redeemed
by the Company, the Rights will expire on November 29, 2004.
- 10 -
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<TABLE>
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
FISCAL QUARTER ENDED OCTOBER 29, 1994
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<CAPTION>
Results of Operations
The following table sets forth the number of stores in operation as of the dates indicated:
Number of Stores in Operation
October 29, January 29, October 30,
1994 1994 1993
--------- ----------- -----------
305 308 309
The following discussion and analysis is based on the historical results of operations for the thirteen
and thirty-nine weeks ended October 29, 1994 and October 30, 1993. Three stores were closed during this
year's first two quarters ended July 30, 1994. The Company's Mt. Pocono, PA store, which was destroyed
by fire on November 2, 1993, was rebuilt by the landlord and reopened by the Company in November of this
year.
The following table sets forth the historical operating results expressed as a percentage of net
sales for the periods indicated:
Thirteen Thirty-nine
Weeks Ended Weeks Ended
Oct. 29, Oct. 30, Oct. 29, Oct. 30,
1994 1993 1994 1993
------- -------- ------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of merchandise sold 73.6 72.7 73.4 72.7
------- ------- ------- --------
Gross margin 26.4 27.3 26.6 27.3
Expenses and (income):
Selling, general and administrative expenses 27.6 28.5 29.0 29.9
Leased department and other operating income (1.6) (1.8) (1.5) (1.6)
Depreciation and amortization expense 0.3 0.1 0.2 0.1
Amortization of the excess of revalued net
assets over equity (0.3) (0.3) (0.3) (0.3)
Interest and debt expense, net 1.4 1.4 1.3 1.4
Nonrecurring gain - litigation settlement - - (0.8) -
Distribution center closing costs 0.5 - 0.2 -
Gain on disposition of properties - (0.1) (0.3) (0.1)
------- ------- ------- --------
Loss before Income Taxes and
Extraordinary Item (1.5) (0.5) (1.2) (2.1)
Income tax benefit 0.5 - 0.4 -
------- ------- ------- --------
Loss before Extraordinary Item (1.0) (0.5) (0.8) (2.1)
Extraordinary gain (loss) - 0.2 (0.1) 0.1
------- ------- ------- --------
Net Loss (1.0)% (0.3)% (0.9)% (2.0)%
======= ======= ======= ========
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</TABLE>
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<PAGE>
Total sales (which include leased department sales) for the thirteen
weeks ended October 29, 1994 declined $15.6 million or 2.8% from the prior-
year's third quarter. Net sales for the same period decreased $15.2 million
or 2.9% from the prior year. These declines were due to a decrease of 1.8%
in comparable store sales on a 305-store base and the operation of four
fewer stores during this year's third quarter. The major causes for the
decline in comparable store sales were increased discount store competition
and weak apparel sales, partially offset by sales increases in certain home
product categories and increases from remodeled stores and expansions of
certain specialty departments.
Total sales for the thirty-nine weeks ended October 29, 1994 declined
$21.8 million or 1.4% from the same prior-year period. Net sales for the
same period decreased $19.8 million or 1.4% from the prior year. These
declines were due to a decrease of .5% in year-to-date comparable store
sales on a 305-store base, a decrease of 1.8% in leased department (shoes)
comparable store sales, and the operation of four fewer stores this year.
In addition to the factors discussed above for the third quarter,
year-to-date comparable store sales were partially affected by certain
merchandise shortages due to a partial roof collapse at the Company's
Leesport, PA distribution center and the temporary closing of the facility
in February and March. The Leesport facility became fully operational in
October.
Gross margin for the third quarter decreased $9.0 million, or 0.9% as a
percentage of net sales, compared to the prior-year's third quarter. Gross
margin for the thirty-nine weeks declined $14.8 million, or 0.7% as a
percentage of net sales, compared to the same prior-year period. The third
quarter's gross margin rate was negatively impacted by lower apparel sales,
higher markdowns in apparel and convenience goods, and a decrease in
purchase discounts. The decrease in the year-to-date gross margin rate was
principally the result of higher markdowns in apparel and convenience goods
and a decrease in purchase discounts. These year-to-date factors were
partially offset by a decrease of $1.1 million in the LIFO charge in the
thirty-nine weeks ended October 29, 1994 compared to the same prior-year
period.
Selling, general and administrative expenses declined approximately $8.7
and $18.7 million, or 0.9% as a percentage of net sales, in the thirteen and
thirty-nine weeks ended October 29, 1994, respectively, compared to the same
prior-year periods. Reductions in store non-payroll, advertising, home
office and field support expenses were partially offset by an increase in
store payroll expense in both periods.
Depreciation and amortization expense increased $.9 and $2.4 million, or
0.2% and 0.1% as a percentage of net sales, in the thirteen and thirty-nine
weeks ended October 29, 1994, respectively, compared to the same prior-year
periods. The adoption of fresh-start reporting as of December 26, 1992
resulted in the write-off of all of the Company's non-current assets at that
date, and therefore depreciation and amortization expense is for capital
additions after that date.
The amortization of the "excess of revalued net assets over equity under
fresh-start reporting" remained approximately the same in the current
periods presented as compared to the prior year. The Company is amortizing
this expense over a ten-year period.
Interest and debt expense, net declined $.6 and $.5 million for the
thirteen and thirty-nine weeks, respectively, and remained approximately the
same as a percentage of net sales as compared to the prior year. The
Company had an average of $137.0 and $101.0 million in outstanding debt
under its revolving credit facilities during this year's third quarter and
- 12 -
<PAGE>
<PAGE>
thirty-nine weeks, respectively. This compares to average borrowings of
$134.7 and $97.3 million under the prior revolving credit facility during
the prior-year's third quarter and thirty-nine weeks, respectively. As a
result of the partial roof collapse at the Leesport distribution center and
the temporary closing of the facility, the Company incurred incremental
borrowings of approximately $10 million during a portion of the current
year-to-date period to replace certain inventories. In June, 1994, the
Company prepaid approximately $69 million of debt utilizing a portion of the
New Facility (Note 5) and the funds that were no longer required to be
restricted for the collateralization of letters of credit. The favorable
impact on interest expense from this prepayment has been partially offset by
an increase in market interest rates and the amortization of the financing
costs associated with the New Facility.
The closing on the Wertheim Settlement Agreement (Note 8) took place in
June, 1994 and the Company recognized a nonrecurring gain in the second
quarter for its $12 million portion of the settlement.
During the thirteen-week period ended October 29, 1994, the Company
decided to close its Clinton, MA distribution center in June, 1995 and
recorded a provision of $2.5 million for the estimated costs related thereto
(Note 7). Transfer of the Clinton operations to the Company's Leesport, PA
distribution center will begin in January, 1995. This consolidation is part
of the Company's continuing productivity enhancement and expense-reduction
efforts. Use of enhanced automation capabilities in the Leesport facility
will allow the Company to efficiently service its stores with fewer
distribution centers. The Company currently anticipates that this
consolidation will result in future pre-tax savings of approximately $3
million per year.
The Company recognized approximately $3.5 million of net property gains
during the first two quarters ended July 30, 1994. During the first
quarter, the Company sold its interest in a store lease, which was an
operating property until closed in February, for approximately $1.2 million
in cash proceeds and recognized a gain of approximately $1.1 million. Also
during the first quarter, the Company received approximately $1.2 million,
representing the final payment for the settlement of the inventory portion
of its property insurance claim for the Mt. Pocono store, and recognized a
gain of approximately $.7 million. During this year's second quarter, the
Company recorded a net property gain of approximately $1.7 million,
primarily related to the sale of a shopping center property. This property
was an operating property and the Company has maintained ownership of its
store within the shopping center. In the prior year's third quarter, the
Company sold a shopping plaza for approximately $2.9 million in cash
proceeds and recognized a gain of approximately $.8 million.
The Company's estimated annual effective income tax rate was applied to
the loss incurred before income taxes and extraordinary item for the
thirteen and thirty-nine weeks ended October 29, 1994 to compute an income
tax benefit of approximately $2.4 and $5.8 million, respectively. The
quarterly and year-to-date income tax benefits were recorded because the
Company currently expects that there will be offsetting non-cash income tax
expense in the remaining interim period.
As a result of the debt refinancing and associated commitment to prepay
certain debt, the Company recorded a non-cash extraordinary charge of
approximately $1.5 million, net of tax benefit of approximately $.7 million,
in this year's first quarter. The charge was primarily for the write-off of
deferred financing costs and debt discounts related to the debt to be
prepaid. During the prior-year's third quarter, the Company recorded an
extraordinary gain of $.9 million, before and after income taxes, from the
early settlement of certain tax notes.
- 13 -
<PAGE>
<PAGE>
Compared with the projections for the third quarter of fiscal year 1995
contained in the Form 8-K filed on May 27, 1994 (referred to herein as the
"Plan"), sales for the third quarter were $22.4 million less than Plan and
EBITDA (earnings before interest, income taxes, LIFO expense, stock
appreciation rights accruals, extraordinary or non-recurring items,
depreciation and amortization, and other non-cash charges) was $10.6 million
less than Plan and $1.7 million less than last year. Year-to-date sales
were $34.6 million less than Plan and year-to-date EBITDA was $10.3 million
less than Plan but $8.4 million greater than last year. The unfavorable
year-to-date EBITDA variance to Plan was due to lower-than-planned sales and
gross margin, partially offset by lower-than-planned expenses.
LIQUIDITY AND CAPITAL RESOURCES
On April 28, 1994, the Company entered into an agreement with BankAmerica
Business Credit, Inc., as agent, and a syndicate consisting of seven other
banks and financial institutions (collectively, the "Bank Group")
for a secured revolving credit facility of
up to $300 million (the "New Facility"). The New Facility has a sublimit of
$100 million for letters of credit. The Company believes that the New
Facility contains terms, covenants and interest rates that are generally
more favorable than those in the prior Credit Agreement (Note 5) and Letter
of Credit Facility (Note 5). The New Facility is in effect until June 22,
1997, is secured by substantially all of the assets of the Company, and
requires the Company to meet certain quarterly financial covenants. In
addition, each year the Company must have no outstanding borrowings under
the New Facility for a consecutive 30-day period between November 15th and
February 15th of the following year. The Company was in compliance with
these financial covenants through the quarter ended October 29, 1994.
As a result, however, of the most recent quarter's performance, the Company
is not certain that it will be in compliance with these financial covenants
for the quarterly periods ending January 28, 1995 and beyond. The Company
and the Bank Group have agreed to discuss potential modifications to the
financial covenants after December results are available.
Reference can be made to Note 5 of this Quarterly Report and the latest
Form 10-K for further descriptions of the New Facility and the Company's
other obligations. In June, 1994, the Company utilized the funds that were
no longer restricted for the collateralization of letters of credit, and
funds from the New Facility, to prepay the Series A, B and D Notes, the $1.2
million term note, and the outstanding borrowings under the Credit
Agreement.
Notes 3 and 9 of the Notes to the Consolidated Condensed Financial
Statements discuss components of restricted cash and short-term investments,
restructuring activities, and cash flows from the sale of assets held for
disposition.
Merchandise inventories, valued on a LIFO basis, increased $18.5 million
from October 30, 1993 to October 29, 1994 due to this year's sales
shortfall, special purchases and a build-up for several new sales promotions
for the fall and Christmas seasons. The increase in inventories of $154.7
million from January 29, 1994 to October 29, 1994 was the result of a normal
seasonal build-up of inventories and the factors mentioned above.
The Company currently anticipates that it will receive some insurance
recoveries in excess of those recorded through October 29, 1994, in
connection with the partial roof collapse at the Leesport distribution
center. However, there is no current assurance of such reimbursement and
the Company has not yet completed its determination of the total insurance
claim. The Leesport recoveries and expected recoveries relate primarily to
incremental transportation costs, distribution center expenses and other
expenses incurred, lost sales and profit, and damages to inventory and
equipment.
- 14 -
<PAGE>
<PAGE>
Accounts payable increased $80.0 million from October 30, 1993 to October
29, 1994 due primarily to improved trade payment terms and the higher level
of merchandise purchases. The increase in accounts payable of $130.1
million from January 29, 1994 to October 29, 1994 was principally the result
of the seasonal build-up of inventories and improved trade payment terms.
The decline in accrued expenses and other current liabilities from October
30, 1993 was primarily due to the payments of restructuring costs previously
reserved.
Capital expenditures for the thirty-nine weeks ended October 29, 1994
totalled $21.1 million and for the balance of this fiscal year are estimated
to be approximately $6.0 million. The increase in capital expenditures of
$5.5 million from the prior-year's thirty-nine week period was primarily due
to the current year's expenditures for new apparel fixtures. The Company is
completing the purchase of the new apparel fixtures and the remodeling of
some of its stores during the fourth quarter, along with expansions of
certain specialty departments in additional stores.
The net operating loss carryovers remaining after fiscal year 1994,
subject to any limitations pursuant to Internal Revenue Code Sec. 382,
should offset income on which taxes would otherwise be payable in future
years.
Subject to compliance with the financial covenants of the New Facility,
the Company believes that available cash and expected cash flows from the
current fiscal year's operations and beyond, and the availability of
financing facilities, will enable the Company to fund its expected needs for
working capital, debt service requirements, and capital expenditures.
- 15 -
<PAGE>
<PAGE>
Part II
OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the third quarter ended October 29, 1994, through the solicitation of
proxies or otherwise.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) INDEX TO EXHIBITS
Exhibit No. Exhibit Page No.
----------- ------- --------
4 Rights Agreement dated as of November 18
30, 1994 between Ames Department
Stores, Inc. and Chemical Bank, as
Rights Agent
11 Schedule of computation of primary 73
earnings per share
(b) REPORTS ON FORM 8-K:
The following reports on Form 8-K were filed
with the Securities and Exchange Commission
during the third quarter:
DATE OF REPORT DATE OF FILING ITEM # DESCRIPTION
-------------- -------------- ------ -----------
August 25, 1994 August 25, 1994 5 Disclosure of fiscal
July 1994 results.
September 12, 1994 September 12,1994 5 Disclosure of fiscal
August 1994 results.
October 14, 1994 October 14, 1994 5 Disclosure of fiscal
September 1994
results.
- 16 -
<PAGE>
<PAGE>
SIGNATURES
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 thereunto duly authorized.
AMES DEPARTMENT STORES, INC.
(Registrant)
Dated: December 12, 1994 /s/ Joseph R. Ettore
---------------------------------------
Joseph R. Ettore, President, Director,
and Chief Executive Officer
Dated: December 12, 1994 /s/ John F. Burtelow
---------------------------------------
John F. Burtelow, Executive Vice
President and Chief Financial Officer
Dated: December 12, 1994 /s/ William C. Najdecki
---------------------------------------
William C. Najdecki, Senior Vice
President and Chief Accounting Officer
- 17 -
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 11
AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF PRIMARY EARNINGS PER SHARE
(Amounts in thousands except per share amounts)
<CAPTION>
For the Thirteen For the Thirty-nine
Weeks Ended Weeks Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Loss before extraordinary item ($5,102) ($2,581) ($12,117) ($30,529)
Extraordinary gain (loss) - 928 (1,517) 928
------------ ------------ ------------ ------------
Primary net loss ($5,102) ($1,653) ($13,634) ($29,601)
------------ ------------ ------------ ------------
Weighted average number of common shares
outstanding during the period 20,127 20,068 20,127 20,023
Add: Common stock equivalent shares
represented by the Series B Warrants (a) (a) (a) (a)
Common stock equivalent shares
represented by the Series C Warrants (a) (a) (a) (a)
Common stock equivalent shares represented
by management stock options granted on March
17, May 1, June 9, and August 1, 1994 (a) - (a) -
------------ ------------ ------------ ------------
Weighted average number of common and
common equivalent shares used in the
computation of primary earnings per share 20,127 20,068 20,127 20,023
============ ============ ============ ============
Primary earnings per share:
Primary loss per share
before extraordinary item ($0.25) ($0.13) ($0.60) ($1.52)
Extraordinary gain (loss) - 0.05 (0.08) 0.04
------------ ------------ ------------ ------------
Primary net loss per share ($0.25) ($0.08) ($0.68) ($1.48)
============ ============ ============ ============
<FN>
(a) Common stock equivalents have not been included because the effect would be anti-dilutive.
Note: Fully diluted earnings per share has not been presented because the effect would
be anti-dilutive for each of the periods.
- 18 -
</TABLE>
<PAGE>
AMES DEPARTMENT STORES, INC.
and
Chemical Bank
as Rights Agent
-----------
Rights Agreement
Dated as of November 30, 1994
======================================================
-19-
<PAGE>
<PAGE>
Table of Contents
Page
Section 1. Certain Definitions. . . . . . . . . . . . . . . . . . . . 1
Section 2. Appointment of Rights Agent. . . . . . . . . . . . . . . . 7
Section 3. Issuance of Right Certificates . . . . . . . . . . . . . . 7
Section 4. Form of Right Certificates . . . . . . . . . . . . . . . . 9
Section 5. Countersignature and Registration. . . . . . . . . . . . . 9
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated,Destroyed, Lost or Stolen Right
Certificates . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. Exercise of Rights; Exercise Price;
Expiration Date of Rights. . . . . . . . . . . . . . . . . 11
Section 8. Cancellation and Destruction of Right
Certificates . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9. Reservation and Availability of Shares of
Common Stock . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10. Common Stock Record Date . . . . . . . . . . . . . . . . . 15
Section 11. Adjustment of Exercise Price or Number of
Shares or Rights . . . . . . . . . . . . . . . . . . . . . 16
Section 12. Certification of Adjusted Exercise Price or
Number of Shares . . . . . . . . . . . . . . . . . . . . . 23
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. . . . . . . . . . . . . . . . . . 23
Section 14. Fractional Rights and Fractional Shares. . . . . . . . . . 27
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . 28
Section 16. Agreement of Right Holders . . . . . . . . . . . . . . . . 28
Section 17. Right Certificate Holder Not Deemed a
Stockholder. . . . . . . . . . . . . . . . . . . . . . . . 29
<PAGE>
<PAGE>
Section 18. Concerning the Rights Agent. . . . . . . . . . . . . . . . 29
Section 19. Merger or Consolidation of, or Change in
Name of, the Rights Agent. . . . . . . . . . . . . . . . . 30
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . 30
Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . 32
Section 22. Issuance of New Right Certificates . . . . . . . . . . . . 33
Section 23. Redemption; Cancellation.. . . . . . . . . . . . . . . . . 34
Section 24. Notice of Proposed Actions . . . . . . . . . . . . . . . . 35
Section 25. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 26. Supplements and Amendments . . . . . . . . . . . . . . . . 37
Section 27. Successors . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 28. Benefits of this Rights Agreement. . . . . . . . . . . . . 38
Section 29. Delaware Contract. . . . . . . . . . . . . . . . . . . . . 38
Section 30. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 38
Section 31. Descriptive Headings . . . . . . . . . . . . . . . . . . . 38
Section 32. Severability . . . . . . . . . . . . . . . . . . . . . . . 38
<PAGE>
<PAGE> RIGHTS AGREEMENT
-----------------
Agreement, dated as of November 30, 1994, by and
between Ames Department Stores, Inc., a Delaware corporation (the
"Company"), and Chemical Bank, a Delware Corporation (the "Rights
Agent").
W I T N E S S E T H :
---------------------
WHEREAS, on November 30, 1994, the Board of Directors
of the Company authorized the issuance and declared a
distribution of one right (a "Right") for each share of the
common stock, par value $0.01 per share ("Common Stock"), of the
Company outstanding as of the close of business on November 30,
1994 (the "Record Date"), each such Right representing the right
to purchase one share (subject to adjustment) of Common Stock
upon the terms and subject to the conditions hereinafter set
forth; and
WHEREAS, the Board of Directors of the Company further
authorized the issuance of one Right (subject to adjustment) with
respect to each share of Common Stock that shall become
outstanding (whether originally issued or delivered from the
Company's treasury) between the Record Date and the Distribution
Date (as such term is hereinafter defined);
NOW, THEREFORE, 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 shall have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such
term is hereinafter defined) who or which, together with all
Affiliates (as such term is hereinafter defined) and
Associates (as such term is hereinafter defined) of such
Person, shall be the Beneficial Owner (as such term is
hereinafter defined) of 15% or more of the shares of Voting
Stock (as such term is hereinafter defined) of the Company
then outstanding; provided, however, that an Acquiring
Person shall not include (i) an Exempt Person (as such term
is hereinafter defined), or (ii) any Person who or which,
together with all Affiliates and Associates of such Person,
would be an Acquiring Person solely by reason of (A) being
the Beneficial Owner of shares of Voting Stock of the
Company, the Beneficial Ownership of which was acquired by
such Person pursuant to any action or transaction or series
of related actions or transactions approved by the Board of
Directors (provided that at the time of such approval of the
<PAGE>
Board of Directors there are then in office not less than
two Continuing Directors (as such term is hereinafter
defined) and such action or transaction or series of related
actions or transactions are approved by a majority of the
Continuing Directors then in office) before such Person
otherwise became an Acquiring Person or (B) a reduction in
the number of issued and outstanding shares of Voting Stock
of the Company pursuant to a transaction or a series of
related transactions approved by the Board of Directors
(provided that at the time of such approval of the Board of
Directors there are then in office not less than two
Continuing Directors and such transaction or series of
related transactions are approved by a majority of the
Continuing Directors then in office); provided, further,
however, that in the event that such Person described in the
foregoing clause (ii) does not become an Acquiring Person by
reason of subclause (A) or (B) of said clause (ii), such
Person shall nonetheless become an Acquiring Person in the
event such Person thereafter acquires Beneficial Ownership
of an additional 1% of the Voting Stock of the Company,
unless the acquisition of such additional Voting Stock would
not result in such Person becoming an Acquiring Person by
reason of subclause (A) or (B) of said clause (ii).
(b) "Affiliate" shall have the meaning ascribed to
such term in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended
("Exchange Act"), as in effect on the date of this Rights
Agreement.
(c) "Associate" of a Person (as such term is here-
inafter defined) shall mean (i) with respect to a corpora-
tion, any officer or director thereof or of any Subsidiary
(as such term is hereinafter defined) thereof, or any Bene-
ficial Owner (as such term is hereinafter defined) of 10% or
more of any class of equity security thereof, (ii) with
respect to an association, any officer or director thereof
or of a Subsidiary thereof, (iii) with respect to a
partnership, any general partner thereof or any limited
partner thereof who is, directly or indirectly, the
Beneficial Owner of a 10% ownership interest therein, (iv)
with respect to a business trust, any officer or trustee
thereof or of any Subsidiary thereof, (v) with respect to
any other trust or an estate, any trustee, executor or simi-
lar fiduciary or any Person who has a 20% or greater
interest as a beneficiary in the income from or principal of
such trust or estate, (vi) with respect to a natural person,
any relative or spouse of such person, or any relative of
such spouse, who has the same home as such person, and (vii)
any Affiliate of such Person.
<PAGE>
<PAGE>
(d) A person shall be deemed the "Beneficial Owner"
of, or to "Beneficially Own", any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or
indirectly, for purposes of Section 13(d) of the
Exchange Act and Regulation 13D-G thereunder (or any
comparable or successor law or regulation), in each
case as in effect on the date hereof; or
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire
(whether such right is exercisable immediately or only
after the passage of time or the fulfillment of a
condition or both) pursuant to any agreement,
arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, other rights (other
than these Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "Beneficially Own",
securities tendered pursuant to a tender or exchange
offer made by such Person or any of such Person's
Affiliates or Associates until such tendered securities
are accepted for purchase or exchange or (B) the right
to vote, alone or in concert with others, pursuant to
any agreement, arrangement or understanding (whether or
not in writing); provided, however, that a Person shall
not be deemed the "Beneficial Owner" of, or to
"Beneficially Own", any securities if the agreement,
arrangement or understanding to vote such security (1)
arises solely from a revocable proxy or consent given
in response to a proxy or consent solicitation made
pursuant to, and in accordance with, the applicable
rules and regulations under the Exchange Act and (2) is
not at the time reportable by such Person on a Schedule
13D report under the Exchange Act (or any comparable or
successor report), other than by reference to a proxy
or consent solicitation being conducted by such Person;
or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person
or any of such Person's Affiliates or Associates has
any agreement, arrangement or understanding (whether or
not in writing) for the purpose of acquiring, holding,
voting (except as described in the proviso to subclause
(B) of clause (ii) of this paragraph (d)) or disposing
of any securities of the Company; provided, however,
that for purposes of determining beneficial ownership
of securities under this Rights Agreement, officers and
directors of the Company solely by reason of their
<PAGE>
status as such shall not constitute a group
(notwithstanding that they may be Associates of one
another or may be deemed to constitute a group for
purposes of the Exchange Act) and shall not be deemed
to own shares owned by another officer or director of
the Company.
Notwithstanding anything in this paragraph (d) to the
contrary, a Person shall not be deemed the "Beneficial
Owner" of, or to "Beneficially Own," any security
beneficially owned by another Person solely by reason
of an agreement, arrangement or understanding with such
other Person for the purposes of: (x) soliciting the
Company's stockholders for the election of director
nominees or any other stockholder resolution, the
formation of and membership on any committee for the
purpose of promoting or opposing any stockholder
resolution or for electing a slate of nominees to the
Company's Board of Directors, service on such a slate
of nominees, or agreement to a slate of director
nominees, provided that such other Person retains the
right at any time to withdraw as a nominee or member of
any such committee, and to withhold or revoke any vote
or proxy for or against any such stockholder resolution
or for such slate of nominees; (y) entering into
revocable voting agreements or the granting or
solicitation of revocable proxies with respect to any
of the matters described in the foregoing clause (x);
or (z) the sharing of expenses and the indemnification
against expenses and liabilities by any such other
Person with respect to expenses incurred or conduct
occurring during the time such other Person is a
nominee or a member of any such committee described in
the foregoing clause (x). Further, notwithstanding
anything in this Section 1(d) to the contrary, a Person
engaged in the business of underwriting securities
shall not be deemed the "Beneficial Owner" of, or to
"Beneficially Own," any securities acquired in good
faith in a firm commitment underwriting until the
expiration of forty days after the date of such
acquisition.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in
the State of New York are authorized or obligated by law or
executive order to close.
(f) "Close of Business" on any given date shall mean
5:00 P.M., New York City time, on such date; provided,
however, that if such date is not a Business Day, it shall
<PAGE>
mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(g) "Common Stock" when used with reference to the
Company shall mean the Common Stock (presently $0.01 par
value) of the Company. "Common Stock" when used with
reference to any Person other than the Company which shall
be organized in corporate form shall mean the capital stock
or other equity security with the greatest per share voting
power of such Person. "Common Stock" when used with
reference to any Person other than the Company which shall
not be organized in corporate form shall mean units of
beneficial interest which shall represent the right to
participate in profits, losses, deductions and credits of
such Person and which shall be entitled to exercise the
greatest voting power per unit of such Person.
(h) "Continuing Director" shall mean any member of the
Board of Directors, while such person is a member of the
Board of Directors, who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, and who
either (i) was a member of the Board of Directors prior to
the time that any Person became an Acquiring Person (other
than pursuant to a Qualifying Tender Offer), or (ii)
subsequently became a member of the Board of Directors, and
whose nomination for election or election to the Board of
Directors was recommended or approved by a majority of the
Continuing Directors then on the Board of Directors.
(i) "Distribution Date" shall have the meaning set
forth in Section 3(b) hereof.
(j) "Exchange Act" shall have the meaning set forth in
Section 1(b) hereof.
(k) "Exempt Person" shall mean the Company, any
Subsidiary of the Company, any employee benefit plan or
employee stock plan of the Company or of any Subsidiary of
the Company, or any trust or other entity organized,
appointed, established or holding Common Stock for or
pursuant to the terms of any such plan.
(l) "Exercise Price" shall have the meaning set forth
in Sections 4 and 7(b) hereof.
(m) "Expiration Date" shall have the meaning set forth
in Section 7(a) hereof.
(n) "Fair Market Value" of any property shall mean the
fair market value of such property as
determined in accordance with Section 11(d) hereof.
<PAGE>
(o) "Final Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(p) "Person" shall mean any individual, firm,
corporation or other entity.
(q) "Principal Party" shall have the meaning set forth
in Section 13(b) hereof.
(r) "Qualifying Tender Offer" shall mean a tender or
exchange offer for all outstanding shares of Common Stock of
the Company approved by a majority of the Board of Directors
(provided that at the time of such approval of the Board of
Directors there are then in office not less than two
Continuing Directors and such offer is approved by a
majority of the Continuing Directors then in office), after
taking into account the potential long-term value of the
Company and all other factors that they consider relevant.
(s) "Redemption Price" shall have the meaning set
forth in Section 23(a) hereof.
(t) "Right Certificate" shall have the meaning set
forth in Section 3(d) hereof.
(u) "Stock Acquisition Date" shall mean the first date
of public announcement by the Company or an Acquiring Person
that an Acquiring Person has become such or such earlier
date as a majority of the Continuing Directors shall become
aware of the existence of an Acquiring Person.
(v) "Subsidiary" of a Person shall mean any corpo-
ration or other entity of which securities or other own-
ership interests having voting power sufficient to elect a
majority of the board of directors or other persons
performing similar functions are beneficially owned,
directly or indirectly, by such Person or by any corporation
or other entity that is
otherwise controlled by such Person.
(w) "Summary of Rights" shall have the meaning set
forth in Section 3(a) hereof.
(x) "Trading Day" shall have the meaning set forth in
Section 11(b) hereof.
(y) "Transfer Tax" shall mean any tax or charge,
including any documentary stamp tax, imposed or collected by
any governmental or regulatory authority in respect of any
transfer of any security, instrument or right, including
Rights or shares of Common Stock.
<PAGE>
(z) "Voting Stock" shall mean (i) the Common Stock of
the Company and (ii) any other shares of capital stock of
the Company entitled to vote generally in the election of
directors or entitled to vote together with the Common Stock
in respect of any merger, consolidation, sale of all or
substantially all of the Company's assets, liquidation,
dissolution or winding up.
Any determination required to be made by the Board of Directors
of the Company for purposes of applying the definitions contained
in this Section 1 shall be made by the Board of Directors in its
good faith judgment, which determination shall be binding on the
Rights Agent and the holders of the Rights.
Section 2. APPOINTMENT OF RIGHTS AGENT.
The Company hereby appoints the Rights Agent to act as
agent for the Company in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such Co-Rights Agents
as it may deem necessary or desirable.
Section 3. ISSUANCE OF RIGHT CERTIFICATES.
(a) On the Record Date (or as soon as practicable
thereafter), the Company or the Rights Agent shall send a copy of
a Summary of Rights, in substantially the form attached hereto as
Exhibit A (the "Summary of Rights"), by first class mail, postage
prepaid, to each record holder of the Common Stock as of the
close of business on the Record Date, at the address of such
holder shown on the records of the Company.
(b) Until the close of business on the day which is
the earlier of (i) the tenth day after the Stock Acquisition Date
or (ii) the tenth business day (or such later date as may be
determined by action of the Board of Directors (but only if at
the time of such determination by the Board of Directors there
are then in office not less than two Continuing Directors and
such action is approved by a majority of the Continuing Directors
then in office) prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement by any
Person (other than an Exempt Person) of, or the first public
announcement of the intent of any Person (other than an Exempt
Person) to commence, a tender or exchange offer upon the
successful consummation of which such Person, together with its
Affiliates and Associates, would be the Beneficial Owner of 20%
or more of the then outstanding shares of Voting Stock of the
Company (irrespective of whether any shares are actually pur-
chased pursuant to any such offer) (the earlier of such dates
being herein referred to as the "Distribution Date"), (x) the
Rights shall be evidenced by the certificates for Common Stock
<PAGE>
registered in the name of the holders of the Common Stock
(together with, in the case of certificates for Common Stock
outstanding as of the Record Date, the Summary of Rights) and not
by separate Right Certificates and the record holders of such
certificates for Common Stock shall be the record holders of the
Rights represented thereby and (y) each Right shall be
transferable only simultaneously and together with the transfer
of a share of Common Stock (subject to adjustment as hereinafter
provided). Until the Distribution Date (or, if earlier, the
Expiration Date or Final Expiration Date), the surrender for
transfer of any certificate for Common Stock shall constitute the
surrender for transfer of the Right or Rights associated with the
Common Stock evidenced thereby, whether or not accompanied by a
copy of the Summary of Rights.
(c) Rights shall be issued in respect of all shares of
Common Stock that become outstanding after the Record Date but
prior to the earlier of the Distribution Date, the Expiration
Date or the Final Expiration Date and, in certain circumstances
provided in Section 22 hereof, may be issued in respect of shares
of Common Stock that become outstanding after the Distribution
Date. Certificates issued for Common Stock (including, without
limitation, certificates issued upon original issuance,
disposition from the Company's treasury or transfer or exchange
of Common Stock) after the Record Date but prior to the earlier
of the Distribution Date, the Expiration Date or the Final
Expiration Date (or, in certain circumstances as provided in
Section 22 hereof, after the Distribution 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 the same number of
Rights (subject to adjustment) as the number
of shares of Common Stock represented by this
certificate, such Rights being on the terms
provided under the Rights Agreement between
Ames Department Stores, Inc. and Chemical
Bank (the "Rights Agent"), dated as of
November 30, 1994, as it may be amended from
time to time (the "Rights Agreement"), the
terms of which are incorporated herein by
reference and a copy of which is on file at
the principal executive offices of Ames
Department Stores, Inc. Under certain
circumstances, as set forth in the Rights
Agreement, such Rights shall be evidenced by
separate certificates and shall no longer be
evidenced by this certificate. Ames
Department Stores, Inc. shall mail to the
registered holder of this certificate a copy
<PAGE>
of the Rights Agreement without charge within
five days after receipt of a written request
therefor. UNDER CERTAIN CIRCUMSTANCES AS
PROVIDED IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING
PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS SHALL BE NULL AND VOID AND MAY NOT BE
TRANSFERRED TO ANY PERSON.
(d) As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and
the Rights Agent will, if requested, send), by first class mail,
postage prepaid, to each record holder of the Common Stock as of
the close of business on the Distribution Date, as shown by the
records of the Company, at the address of such holder shown on
such records, a certificate in the form provided by Section 4
hereof (a "Right Certificate"), evidencing one Right (subject to
adjustment as provided herein) for each share of Common Stock so
held. As of and after the Distribution Date, the Rights shall be
evidenced solely by Right Certificates and may be transferred
only by the transfer of the Right Certificates as permitted
hereby, separately and apart from any transfer of one or more
shares of Common Stock.
Section 4. FORM OF RIGHT CERTIFICATES.
The Right Certificates (and the forms of election to
purchase shares, certificate and assignment to be printed on the
reverse thereof), when, as and if issued, shall be substantially
in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or
endorsements printed thereon as may be required to comply with
any law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the
Common Stock or the Rights may from time to time be listed or as
the Company may deem appropriate to conform to usage or otherwise
and as are not inconsistent with the provisions of this Rights
Agreement. Subject to the provisions of Section 22 hereof, Right
Certificates evidencing Rights whenever issued, (i) shall be
dated as of the date of issuance of the Rights they represent and
(ii) subject to adjustment from time to time as provided herein,
on their face shall entitle the holders thereof to purchase such
number of shares of Common Stock as shall be set forth therein at
the price per share payable upon exercise of a Right provided by
Section 7(b) hereof as the same may from time to time be adjusted
as provided herein (the "Exercise Price").
<PAGE>
<PAGE>
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) Each Right Certificate shall be executed on behalf
of the Company by its Chairman of the Board, President or any
Vice President, either manually or by facsimile signature, and
have affixed thereto the Company's seal or a facsimile thereof
which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile
signature. Each Right Certificate shall be countersigned by the
Rights Agent either manually or by facsimile signature and shall
not be valid for any purpose unless so countersigned. In case
any officer of the Company who shall have signed any Right
Certificate shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery of
the certificate by the Company, such Right Certificate,
nevertheless, may be countersigned by the Rights Agent and issued
and delivered 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. Any Right Certificate may be signed on
behalf of the Company by any person who, on the 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 Distribution Date, the Rights Agent
will keep or cause to be kept, at its principal office or one or
more offices designated as the appropriate place for surrender of
Rights Certificates upon exercise or transfer, and in such other
locations as may be required by law, books for registration and
transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of
the Right Certificates, the number of Rights evidenced on its
face by 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 7(e), 7(f)
and 14 hereof, at any time after the Close of Business on the
Distribution Date, and at or prior to the Close of Business on
the earlier of the Expiration Date or the Final Expiration Date,
any Right Certificate may be (i) transferred or (ii) split up,
combined or exchanged for one or more other Right Certificates,
entitling the registered holder to purchase a like number of
shares of Common Stock as the Right Certificate or Rights
Certificates surrendered then entitled such holder to purchase.
Any registered holder desiring to transfer any Right Certificate
shall surrender the Right Certificate at the principal office of<PAGE>
<PAGE>
the Rights Agent with the form of certificate and assignment on
the reverse side thereof duly endorsed (or enclosed with such
Right Certificate a written instrument of transfer in form
satisfactory to the Company and the Rights Agent), duly executed
by the registered holder thereof or his attorney duly authorized
in writing, and with such signature duly guaranteed. Any
registered holder desiring to 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 to be
split up, combined or exchanged at the principal office of the
Rights Agent. 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
Transfer Tax that may be imposed in connection with any transfer,
split up, combination or exchange of any Right Certificates.
(b) Subject to the provisions of Sections 7(e), 7(f)
and 14 hereof, 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, if requested by the Company,
reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, or upon surrender to the
Rights Agent and cancellation of the Right Certificate if
mutilated, the Company shall issue 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; EXERCISE PRICE;
EXPIRATION DATE OF RIGHTS.
(a) The Rights shall not be exercisable until, and
shall become exercisable on, the Distribution Date (unless
otherwise provided herein, including, without limitation, the
restrictions on exercisability set forth in Sections 7(e), 11(m)
and 23(a) hereof). Except as otherwise provided herein, the
Rights may be exercised, in whole or in part, at any time com-
mencing with the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase and
certificate on the reverse side thereof duly executed (with
signatures duly guaranteed), to the Rights Agent at the principal
office of the Rights Agent in New York, New York, together with
payment of the Exercise Price with respect to each Right
exercised, subject to adjustment as hereinafter provided, at or
prior to the close of business on the earlier of (i) November 29,
2004 (the "Final Expiration Date") or (ii) the date on which the
Rights are redeemed or cancelled as provided in Section 23 hereof
(the "Expiration Date").<PAGE>
<PAGE>
(b) The Exercise Price shall initially be $14.00.
The Exercise Price and the number of shares of Common Stock or
other securities to be acquired upon exercise of a Right shall be
subject to adjustment from time to time as provided in Sections
11 and 13 hereof. The Exercise Price shall be payable in lawful
money of the United States of America, in accordance with
paragraph (c) below.
(c) Except as otherwise provided herein, upon receipt
of a Right Certificate representing exercisable Rights with the
form of election to purchase duly executed, accompanied by
payment of the aggregate Exercise Price for the shares to be
purchased and an amount equal to any applicable Transfer Tax
required to be paid by the holder of such Right Certificate in
accordance with Section 9 hereof by certified check, cashier's
check, bank draft or money order payable to the Company or the
Rights Agent, the Rights Agent shall thereupon promptly (i)
requisition from any transfer agent of the Common Stock of the
Company one or more certificates representing the number of
shares of Common Stock to be so purchased, and the Company hereby
authorizes and directs such transfer agent to comply with all
such requests, (ii) as provided in Section 14(b), at the election
of the Company, cause depositary receipts to be issued in lieu of
fractional shares of Common Stock, (iii) if the election provided
for in the immediately preceding clause (ii) has not been made,
requisition from the Company the amount of cash to be paid in
lieu of the issuance of fractional shares in accordance with
Section 14(b) hereof, (iv) after receipt of such Common Stock
certificates and/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 (v) when appropriate, after
receipt, promptly deliver such cash to or upon the order of the
registered holder of such Right Certificate; provided, however,
that in the case of a purchase of securities, other than Common
Stock, pursuant to Section 13 hereof, the Rights Agent shall
promptly take the appropriate actions corresponding in such case
to that referred to in the foregoing clauses (i) through (v) of
this Section 7(c). Notwithstanding the foregoing provisions of
this Section 7(c), the Company may suspend the issuance of shares
of Common Stock or other securities upon exercise of a Right for
a reasonable period, not in excess of 90 days, during which the
Company seeks to register under the Securities Act of 1933, as
amended, and any applicable securities law of any other
jurisdiction, the shares of Common Stock or such other securities
to be issued pursuant to the Rights; provided, however, that
nothing contained in this Section 7(c) shall relieve the Company
of its obligations under Section 9(c) hereof.
(d) In case the registered holder of any Right
Certificate shall exercise less than all the Rights evidenced<PAGE>
<PAGE>
thereby, a new Right Certificate evidencing Rights equivalent to
the exercisable Rights remaining unexercised shall be issued by
the Rights Agent to the registered holder of such Right
Certificate or his assign, subject to the provisions of Section
14(b) hereof.
(e) Notwithstanding any provision of this Rights
Agreement to the contrary, from and after the time (the
"invalidation time") when any Person first becomes an Acquiring
Person, other than pursuant to a Qualifying Tender Offer, any
Rights that are beneficially owned by (x) such Acquiring Person
(or any Associate or Affiliate of such Acquiring Person), (y) a
transferee of such Acquiring Person (or any such Associate or
Affiliate) who becomes a transferee after the invalidation time
or (z) a transferee of such Acquiring Person (or any such
Associate or Affiliate) who becomes a transferee prior to or
concurrently with the invalidation time pursuant to either (I) a
transfer from the Acquiring Person to holders of its equity
securities or to any Person with whom it has any continuing
agreement, arrangement or understanding regarding the transferred
Rights or (II) a transfer which the Board of Directors has
determined is part of a plan, arrangement or understanding which
has the purpose or effect of avoiding the provisions of this
Section 7(e), and subsequent transferees of such Persons, shall
be void without any further action and any holder of such Rights
shall thereafter have no rights whatsoever with respect to such
Rights under any provision of this Rights Agreement. The Company
shall use all reasonable effort to insure that the provisions of
this Section 7(e) are complied with, but shall have no liability
to any holder of Right Certificates or any 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. No Right Certificate shall be issued pursuant to
Section 3 hereof that represents Rights beneficially owned by an
Acquiring Person whose Rights would be void pursuant to the
provisions of this Section 7(e) or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon
the transfer of any Rights to an Acquiring Person whose Rights
would be void pursuant to the provisions of this Section 7(e) or
any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an
Acquiring Person whose Rights would be void pursuant to the
provisions of this Section 7(e) shall be canceled.
(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 following the form of<PAGE>
<PAGE>
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 cancel
and retire, any 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 SHARES OF
COMMON STOCK.
(a) The Company covenants and agrees that, from and
after the Distribution Date, it will use reasonable efforts to
cause to be reserved and kept available out of its authorized and
unissued shares of Common Stock not reserved for another purpose
or shares of Common Stock not reserved for another purpose held
in its treasury, a number of shares of Common Stock as will from
time to time be sufficient to permit the exercise in full of all
outstanding Rights; provided, however, that the Company shall not
be required to reserve and keep available shares of Common Stock
or other securities sufficient to permit the exercise in full of
all outstanding Rights pursuant to the adjustments set forth in
Section 11(a)(ii) or Section 13 hereof unless the Rights become
exercisable pursuant to such adjustments, and then only to the
extent the Rights become exercisable pursuant to such
adjustments.
(b) As long as the shares of Common Stock (or any
other securities) issuable and deliverable upon the exercise of
the Rights may be 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, the Rights and all shares
reserved for such issuance to be listed on such exchange upon
official notice of issuance.<PAGE>
<PAGE>
(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the occurrence of the
event described in Section 11(a)(ii), or as soon as is required
by law following the Distribution Date, as the case may be, a
registration statement under the Securities Act of 1933, as
amended (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 date of the expiration of the Rights.
The Company may temporarily suspend, for a period of time not to
exceed ninety days, the exercisability of the Rights in order to
prepare and file a registration statement under the Act and
permit it to become effective. The Company will also take such
action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in
connection with the exercisability of the Rights.
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 and until a registration statement under the Act (if
required) shall have been declared effective.
(d) The Company covenants and agrees that it will take
all such action as may be necessary to insure that all shares of
Common Stock (or other securities, as the case may be) delivered
upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Exercise
Price in respect thereof), be duly and validly authorized and
issued and fully paid and nonassessable shares.
(e) The Company shall not be required to pay any
Transfer Tax which may be payable in respect of any transfer or
delivery of a Right Certificate to any Person or the issuance or
delivery of certificates for Common Stock (or other securities,
as the case may be) upon exercise of Rights in the name of any
Person, and the Company shall not be required to issue or deliver
a Right Certificate or certificate for Common Stock (or other
securities, as the case may be) to a Person until any such
Transfer Tax shall have been paid (any such Transfer 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 Transfer Tax is due.
Section 10. COMMON STOCK RECORD DATE.
Each Person in whose name any certificate for shares of
Common Stock is issued upon the exercise of Rights shall for all<PAGE>
<PAGE>
purposes be deemed to have become the holder of record of the
Common Stock represented thereby on, and such certificate shall
be dated as of, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the
Exercise 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 Common Stock transfer books of
the Company are closed, such Person shall be deemed to have be-
come the record holder of such shares on, and such certificate
shall be dated as of, the next succeeding Business Day on which
the Common Stock transfer books of the Company are open. Prior
to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate, as such, shall not be entitled to any rights
of a stockholder of the Company with respect to shares for which
the Rights shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. ADJUSTMENT OF EXERCISE PRICE OR NUMBER OF
SHARES OR RIGHTS.
The Exercise Price, the number and kind of shares which
may be purchased upon exercise of a 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 the Company shall at any time
after the Record Date (A) declare or pay any dividend
on Common Stock payable in shares of Common Stock, (B)
subdivide or split the outstanding shares of Common
Stock into a greater number of shares, (C) combine or
consolidate the outstanding shares of Common Stock into
a smaller number of shares or effect a reverse split of
the outstanding shares of Common Stock or (D) issue any
shares of its capital stock in a reclassification of
the Common Stock (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), the Exercise Price in effect at the time
of the record date for such event (if one shall have
been established or, if not, in effect on the effective
date of such event), and the number and kind of shares
of Common Stock or capital stock, as the case may be,
issuable upon exercise of a Right on such date, shall
be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to
receive, upon payment of the Exercise Price then in
effect, the aggregate number and kind of shares of<PAGE>
<PAGE>
Common Stock or capital stock, as the case may be,
that, if such Right had been exercised immediately
prior to such date and at a time when the Common Stock
transfer books of the Company were open, he would have
owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination,
reclassification or other event. If an event occurs
which would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall
be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) In the event that any Person, alone or
together with its Affiliates and Associates, shall
become an Acquiring Person, except pursuant to a
Qualifying Tender Offer, then, subject to the last
sentence of Section 23(a) and except as otherwise
provided in this Section 11, each holder of a Right,
except as provided in Section 7(e) hereof, shall
thereafter have the right to receive upon exercise of a
Right in accordance with the terms of this Rights
Agreement and payment of the Exercise Price with
respect to the total number of shares of Common Stock
for which a Right was exercisable immediately prior to
the first occurrence of the event described in this
Section 11(a)(ii), such number of shares of Common
Stock as shall equal the result obtained by (x)
multiplying the then current Exercise Price by the
number of shares of Common Stock for which a Right was
exercisable immediately prior to the first occurrence
of the event described in this Section 11(a)(ii) and
(y) dividing that product by 50% of the then current
per share Fair Market Value of the Common Stock
(determined pursuant to Section 11(d) hereof) on the
date of such first occurrence.
(b) In case the Company shall fix a record date for
the issuance of rights, options or warrants to all holders of
Common Stock entitling them (for a period expiring within 45
calendar days after such record date) to subscribe for or
purchase Common Stock or securities convertible into Common Stock
at a price per share of Common Stock (or having a conversion
price per share, if a security convertible into shares of Common
Stock) less than the then current per share Fair Market Value of
the Common Stock (as defined in Section 11(d)) on such record
date, the Exercise Price to be in effect after such record date
shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of<PAGE>
<PAGE>
Common Stock which the aggregate offering price of the total
number of shares of Common Stock 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 shares of Common
Stock outstanding on such record date plus the number of
additional shares of Common Stock 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 of Directors of
the Company, whose determination shall be described in a
statement filed with the Rights Agent. Shares of Common Stock
owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date
is fixed and in the event that such rights, options or warrants
are not so issued, the Exercise Price shall be adjusted to be the
Exercise Price which 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 making of a distribution to all holders of the Common Stock
(including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend not in excess of 150% of
the previous regular quarterly cash dividend out of the earnings
or retained earnings of the Company), assets (other than a
dividend payable in shares of Common Stock) or subscription
rights or warrants (excluding those referred to in Section 11(b)
hereof), the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction, the
numerator of which shall be the then current per share market
price of the Common Stock on such record date, less the fair
market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent) of the portion of the
assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one share of
Common Stock and the denominator of which shall be such current
per share market price of the Common Stock. Such adjustment
shall be made successively whenever such a record date is fixed
and in the event that such distribution is not so made, the
Exercise Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been
fixed.
<PAGE>
<PAGE>
(d) For the purpose of this Rights Agreement, the
"Fair Market Value" of any share of Common Stock or any other
stock or any Right or other security or any other property on any
date shall be determined as provided in this Section 11(d). In
the case of a publicly-traded stock or other security, the Fair
Market Value on any date shall be deemed to be the average of the
daily closing prices per share of such stock or per unit of such
other security for the 30 consecutive Trading Days (as such term
is hereinafter defined) immediately prior to such date; provided,
however, that in the event that the Fair Market Value per share
of any share of Common Stock is determined during a period which
includes any date that is within 30 Trading Days after (i) the
ex-dividend date for a dividend or distribution on such stock
payable in shares of Common Stock or securities convertible into
shares of Common Stock, or (ii) the effective date of any
subdivision, split, combination, consolidation, reverse stock
split or reclassification of such stock, then, and in each such
case, the Fair Market Value shall be appropriately adjusted by
the Board of Directors of the Company to take into account
exdividend or post-effective date trading. 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
applicable transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange), or, if the securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the
applicable transaction reporting system with respect to
securities listed on the principal national securities exchange
on which such security is listed or admitted to trading; or, if
not listed or admitted to trading on any national securities
exchange, the last quoted price (or, if not so quoted, the
average of the high bid and low asked prices) in the over-the-
counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or
such other system then in use; or, if no bids for such security
are 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 such security selected by the Board of
Directors of the Company. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which
such security is listed or admitted to trading is open for the
transaction of business or, if such security is not listed or
admitted to trading on any national securities exchange, a
Business Day. If a security is not publicly held or not so
listed or traded, "Fair Market Value" shall mean the fair value
per share of stock or per other unit of such other security, as
determined by an independent investment banking firm experienced
in the valuation of securities selected in good faith by the
Board of Directors of the Company, or, if no such investment
banking firm is, in the good faith judgment of the Board of<PAGE>
<PAGE>
Directors, available to make such determination, in good faith by
the Board of Directors of the Company. In the case of property
other than securities, the "Fair Market Value" thereof shall be
determined in good faith by the Board of Directors of the Company
based upon such appraisals or valuation reports of such
independent experts as the Board of Directors of the Company
shall in good faith determine to be appropriate in accordance
with good business practices and the interests of the holders of
Rights. Any such determination of Fair Market Value shall be
described in a statement filed with the Rights Agent and shall be
binding upon the Rights Agent.
(e) Unless the Company shall have exercised its
election as provided in Section 11(f), upon each adjustment of
the Exercise Price as a result of the calculations made in
Section 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 Exercise Price, that number of
shares of Common Stock obtained by (i) multiplying (x) the number
of shares covered by a Right immediately prior to the adjustment
pursuant to this Section 11(e) by (y) the Exercise Price in
effect immediately prior to such adjustment of the Exercise Price
and (ii) dividing the product so obtained by the Exercise Price
in effect immediately after such adjustment of the Exercise
Price.
(f) The Company may elect on or after the date of any
adjustment of the Exercise Price pursuant to Section 11(b) and
(c) to adjust the number of Rights in substitution for any
adjustment pursuant to Section 11(e) in the number of shares of
Common Stock 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 shares of Common
Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment
of the number of Rights shall become that number of Rights
obtained by dividing the Exercise Price in effect immediately
prior to adjustment of the Exercise Price by the Exercise Price
in effect immediately after adjustment of the Exercise Price.
The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which
the Exercise 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 the Right
Certificates have been issued, upon each adjustment of the number
of Rights pursuant to this Section 11(f), 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<PAGE>
<PAGE>
additional Rights, if any, 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.
(g) No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% of the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(g) are
not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
(h) Irrespective of any adjustment or change in the
Exercise Price or the number of shares of Common Stock issuable
upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the
Exercise Price and the number of shares to be issued upon
exercise of the Rights as in the initial Right Certificates
issued hereunder but, nevertheless, shall represent the Rights as
so adjusted.
(i) Before taking any action that would cause an
adjustment reducing the Exercise Price per whole share of Common
Stock upon exercise of the Rights below the then par value, if
any, of the shares of Common Stock, the Company shall use its
best efforts to take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and non-assessable
shares of such Common Stock at such adjusted Exercise Price per
share.
(j) Anything in this Section 11 to the contrary
notwithstanding, in the event of any recapitalization,
reorganization or partial liquidation of the Company or similar
transaction, the Company shall be entitled to make such further
adjustments in the number of shares of Common Stock which may be
acquired upon exercise of the Rights, and such adjustments in the
Exercise Price per share therefor, in addition to those
adjustments expressly required by the other paragraphs of this
Section 11, as the Board of Directors of the Company shall
determine to be necessary or appropriate in order for the holders<PAGE>
<PAGE>
of the Rights in such event to be treated equitably and in
accordance with the purpose and intent of this Rights Agreement
or in order that any such event shall not, but for such
adjustment, in the opinion of counsel to the Company, result in
the stockholders of the Company being subject to any United
States federal income tax liability by reason thereof.
(k) If, at any time after the Rights first become
exercisable pursuant to the terms of this Rights Agreement, the
number of shares of Common Stock that are authorized by the
Company's Restated Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon
exercise of the Rights ("Available Shares") are not sufficient to
permit exercise in full of the Rights in accordance with the
terms of this Rights Agreement, including after giving effect to
the adjustments provided for in Section 11(a)(ii) hereof, then
unless the Board of Directors shall have made adequate provision
in lieu thereof pursuant to Section 11(l) and subject to Section
11(m), the number of shares of Common Stock for which each Right
is exercisable shall be adjusted by multiplying the number of
shares of Common Stock for which a Right would otherwise be
exercisable without giving effect to this Section 11(k) by a
fraction, the numerator of which shall be the number of Available
Shares and the denominator of which shall be the aggregate number
of shares of Common Stock for which all outstanding Rights would
otherwise be exercisable without giving effect to this Section
11(k). In the event of an adjustment to the number of shares of
Common Stock for which a Right is exercisable pursuant to the
preceding sentence, the Exercise Price shall be automatically
adjusted by the same fraction appearing in the preceding
sentence. The adjustment provided for in this Section 11(k)
shall be made after all other applicable adjustments to the
Exercise Price for each Right and the number of shares of Common
Stock for which each Right is exercisable shall have been made in
accordance with the other provisions of this Rights Agreement.
(l) In lieu of the adjustments provided in Section
11(k) above, the Board of Directors may make adequate provision
to substitute for the shares of Common Stock in excess of the
Available Shares to be issued upon exercise of the Rights, upon
payment of the applicable Exercise Price, other equity securities
of the Company (including, without limitation, shares, or units
of shares, of preferred stock which, by virtue of having
dividend, voting and liquidation rights substantially comparable
to those of the Common Stock, are deemed in good faith by the
Board of Directors to have substantially the same value as shares
of Common Stock such shares or units of shares of preferred stock
are herein called "Common Stock equivalents").
(m) If, upon the occurrence of the event described in
Section 11(a)(ii), the number of shares of Common Stock that are<PAGE>
<PAGE>
authorized by the Company's Restated Certificate of Incorporation
but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit
exercise in full of the Rights in accordance with Section
11(a)(ii) hereof, and if the Board of Directors shall determine
in good faith that it is likely that sufficient additional shares
of Common Stock (or Common Stock equivalents) could be authorized
for issuance upon exercise in full of the Rights, then, the Board
of Directors, if it so elects, may suspend the exercisability of
the Rights for a period of time not more than ninety (90) days
after the event described in Section 11(a)(ii), in order that the
Company may seek stockholder approval or take other appropriate
action for the authorization for such additional shares. During
such time of suspension no adjustment shall be made under Section
11(k). Such suspension may be rescinded by the Board of
Directors in its sole discretion at any time, whereupon the
adjustment provided for in Section 11(k) shall be applicable,
unless the Board of Directors shall have made adequate provision
in lieu thereof pursuant to Section 11(l). 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
times as the suspension is no longer in effect.
Section 12. CERTIFICATION OF ADJUSTED EXERCISE PRICE
OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections
11, 13 or 23(c), the Company shall (a) promptly prepare a
certificate setting forth such adjustment, and a brief statement
of the facts giving rise to such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Common
Stock a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with
Section 25. Notwithstanding the foregoing sentence, the failure
of the Company to make such certification or give such notice
shall not affect the validity of or the force or effect of the
requirement for such adjustment. Any adjustment to be made
pursuant to Sections 11, 13 or 23(c) of this Rights Agreement
shall be effective as of the date of the event giving rise to
such adjustment. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any
adjustment unless and until it shall have received such
certificate.<PAGE>
<PAGE>
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER
OF ASSETS OR EARNING POWER.
(a) In the event that, at any time after the time
that any Person becomes an Acquiring Person (other than pursuant
to a Qualifying Tender Offer), (x) the Company shall, directly or
indirectly, consolidate with any other Person or Persons, or
merge with and into any other Person or Persons and the Company
shall not be the surviving or continuing corporation of such
merger, or (y) any Person or Persons shall, directly or
indirectly, merge with and into, the Company, and the Company
shall be the continuing or surviving corporation of such merger
and, in connection with such merger, all or part of the
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or of
the Company or cash or any other property, or (z) the Company or
one or more of its Subsidiaries shall, directly or indirectly,
sell or otherwise transfer to any other Person or any Affiliate
or Associate of such Person, in one or more transactions, or the
Company or one or more of its Subsidiaries shall sell or
otherwise transfer to any Persons in one or a series of related
transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) (any event described in clause
(x), (y) or (z) of this Section 13(a) being referred to as a
"Section 13 Event"), then, on the first occurrence of any such
event, proper provision shall be made so that (i) each holder of
record of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise
thereof and payment of the Exercise Price with respect to the
total number of shares for which a Right was exercisable
immediately prior to the first occurrence of a Section 13 Event
(or, if earlier, the first occurrence of the event described in
Section 11(a)(ii)) in accordance with the terms of this Rights
Agreement, such number of shares of validly issued, fully paid
and nonassessable and freely tradeable Common Stock of the
Principal Party (as defined herein) not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as
shall be equal to the result obtained by (1) multiplying the then
current Exercise Price by the number of shares of Common Stock
for which a Right was exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if the event described in
Section 11(a)(ii) has occurred prior to the first occurrence of a
Section 13 Event, multiplying the Exercise Price in effect
immediately prior to the first occurrence of the event described
in Section 11(a)(ii) by the number of shares of Common Stock for
which a Right was exercisable immediately prior to such first
occurrence of the event described in Section 11(a)(ii)) and (2)
dividing that product by 50% of the Fair Market Value (determined
as provided in Section 11(d) hereof) per share of the Common
Stock of such Principal Party on the date of consummation of such<PAGE>
<PAGE>
Section 13 Event; PROVIDED that the Exercise Price and the number
of shares of Common Stock of such Principal Party issuable upon
exercise of each Right shall be further adjusted as provided in
this Agreement to reflect any events occurring after the date of
the first occurrence of a Section 13 Event; (ii) such Principal
Party shall thereafter be liable for, and shall assume, by virtue
of such Section 13 Event, all the obligations and duties of the
Company pursuant to this Rights Agreement; (iii) the term
"Company" for all purposes of this Rights Agreement shall
thereafter be deemed to refer to such Principal Party; (iv) such
Principal Party shall take such steps (including, but not limited
to, the reservation of a sufficient number of shares of its
Common Stock) 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 shares of Common Stock thereafter
deliverable upon the exercise of the Rights; provided, however,
that, upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all of the assets,
recapitalization, reclassification of shares, reorganization or
other extraordinary transaction in respect of such Principal
Party, each holder of a Right shall thereupon be entitled to
receive, upon exercise of a Right and payment of the Exercise
Price, such cash, shares, rights, warrants and other property
which such holder would have been entitled to receive had it, at
the time of such transaction, owned the shares of Common Stock of
the Principal Party purchasable upon the exercise of a Right, and
such Principal Party shall take such steps (including, but not
limited to, reservation of shares of stock) as may be necessary
to permit the subsequent exercise of the Rights in accordance
with the terms hereof for such cash, shares, rights, warrants and
other property and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the occurrence of any Section 13
Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
(x) or (y) of the first sentence of Section 13(a) hereof:
(A) the Person that is the issuer of the securities into
which shares of Common Stock of the Company are converted in
such merger or consolidation, or, if there is more than one
such issuer, the issuer the Common Stock of which has the
greatest market value or (B) if no securities are so issued,
(x) the Person that is the other party to the merger or
consolidation and that survives such merger or
consolidation, or, if there is more than one such Person,
the Person the Common Stock of which has the greatest market
value or (y) if the Person that is the other party to the
merger or consolidation does not survive the merger or<PAGE>
<PAGE>
consolidation, the Person that does survive the merger or
consolidation (including the Company if it survives); and
(ii) in the case of any transaction described in
(z) of the first sentence in 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, or, if each Person that is a party to such
transaction or transactions receives the same portion of the
assets or earning power so transferred or if the Person
receiving the greatest portion of the assets or earning
power cannot be determined, whichever of such Persons which
is the issuer of Common Stock having the greatest market
value of shares outstanding; provided, however, that in any
such case described in Section 11(b)(i) or (b)(ii) above, if
the Common Stock of such Person is not at such time and has
not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, and such
Person is a direct or indirect Subsidiary of another Person
the Common Stock of which is and has been so registered, the
term "Principal Party" shall refer to such other Person, or
if such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Stocks of all of which are
and have been so registered, the term "Principal Party"
shall refer to whichever of such Persons is the issuer of
the Common Stock having the greatest market value of shares
outstanding.
(c) The Company shall not consummate any
consolidation, merger or sale or transfer of assets or earning
power referred to in Section 13(a) unless the Principal Party
shall have a sufficient number of authorized shares of its Common
Stock that 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 the Principal
Party involved therein shall have executed and delivered to the
Rights Agent an agreement confirming that the Principal Party
shall, upon consummation of such consolidation, merger or sale or
transfer of assets or earning power, assume this Rights Agreement
in accordance with Sections 13(a) and (b) hereof and that all
rights of first refusal or preemptive rights in respect of the
issuance of shares of Common Stock of the Principal Party upon
exercise of outstanding Rights have been waived and that such
transaction shall not result in a default by the Principal Party
under this Rights Agreement, and further providing that, as soon
as practicable after the date of any consolidation, merger or
sale or transfer of assets or earning power referred to in
Section 13(a) hereof, the Principal Party will:
(i) prepare and file a registration statement
under the Act with respect to the Rights and the securities<PAGE>
<PAGE>
purchasable upon exercise of the Rights on an appropriate
form, use its best efforts to cause such registration
statement to become effective as soon as practicable after
such filing and use its best efforts to cause such
registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act)
until the date of expiration of the Rights, and similarly
comply with applicable state securities laws;
(ii) use its best efforts to list (or continue
the listing of) the Rights and the securities purchasable
upon exercise of the Rights on a national securities
exchange or to meet the eligibility requirements for
quotation on NASDAQ; and
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party which comply in
all respects with the requirements for registration on Form
10 (or any successor form) under the Exchange Act.
In the event that any of the transactions described in Section
13(a) hereof shall occur at any time after the occurrence of the
transaction described in Section 11(a)(ii) hereof, the Rights
which have not theretofore been exercised shall, subject to the
provisions of Section 7(e) hereof, thereafter be exercisable in
the manner described in Section 13(a).
(d) In case the Principal Party which is to be a party
to a transaction referred to in this Section 13 has provision in
any of its authorized securities or in its Certificate of
Incorporation or By-laws or other instrument governing its
corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue, in connection with, or as
a consequence of, the consummation of a transaction referred to
in this Section 13, shares of Common Stock of such Principal
Party at less than the then Fair Market Value per share
(determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock of such
Principal Party at less than such then Fair Market Value (other
than to holders of Rights pursuant to this Section 13) or (ii)
providing for any special payment, tax or similar provisions in
connection with the issuance of the Common Stock of such
Principal Party pursuant to the provisions of Section 13, then,
in such event, the Company shall not consummate any such
transaction unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or
amended, or that the authorized securities shall be redeemed, so
that the applicable provision will have no effect in connection<PAGE>
<PAGE>
with, or as a consequence of, the consummation of the proposed
transaction.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue
fractions of Rights or to distribute Right Certificates which
evidence fractional Rights (i.e., Rights to acquire less than one
share of Common Stock). If the Company shall determine not to
issue such fractional Rights, then, in lieu of such fractional
Rights, there shall be paid to the holders of record 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 Fair Market Value of a whole Right.
(b) The Company shall not be required to issue
fractions of shares of Common Stock upon exercise or redemption
of the Rights or to distribute certificates which evidence
fractional shares. In lieu of issuing fractions of shares of
Common Stock, the Company may, at its election, (i) pay to the
registered holder of Right Certificates at the time such Right is
exercised or redeemed an amount in cash equal to the same
fraction of the Fair Market Value of a share of Common Stock or
(ii) cause depositary receipts to be issued evidencing fractions
of shares 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 of the rights, privileges and preferences
to which they would be entitled as owners of the Common Stock.
(c) The holder of a Right by the acceptance of a Right
expressly waives his right to receive any fractional Right or any
fractional shares of Common Stock upon exercise or redemption of
a Right.
Section 15. RIGHTS OF ACTION.
All rights of action in respect of this Rights
Agreement, except the rights of action given to the Rights Agent
in Section 18 hereof, are vested in the respective registered
holders of the Right Certificates (and, prior to the Distribution
Date, any holder of record of the Common Stock in its capacity as
a holder of Rights); and any holder of record of any Right
Certificate (or, prior to the Distribution Date, any holder of
record of the Common Stock in its capacity as a holder of
Rights), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution
Date, any holder of record of the Common Stock in their capacity
as holders of Rights), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in<PAGE>
<PAGE>
respect of, his right to exercise the Rights evidenced by such
Right Certificate in the manner provided in such Right
Certificate and in this Rights Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it
is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Rights
Agreement and 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 Rights Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS.
Each 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 Distribution Date, the Rights shall
be evidenced by the certificates for Common Stock registered
in the name of the holders of the Common Stock (together,
where applicable, with the Summary of Rights) and not by
separate Right Certificates, and each Right shall be
transferable only simultaneously and together with the
transfer of shares of Common Stock;
(b) after the Distribution 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, duly endorsed or accompanied by a proper
instrument of transfer; and
(c) the Company and the Rights Agent may deem and
treat the person in whose name the Right Certificate (or,
prior to the Distribution Date, the associated Common Stock
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 Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent
shall be affected by any notice to the contrary.
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER.
No holder, as such, of any Right Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose
the holder of Common Stock or any other securities which 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<PAGE>
<PAGE>
Certificate, 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 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 Rights
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 negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or
omitted to be done by the Rights Agent in connection with the
acceptance and administration of this Rights Agreement, including
the cost and expenses of defending against any claim of liability
relating to the Rights or this Rights Agreement.
(b) The Rights Agent shall be protected against, and
shall incur no liability for or in respect of, any action taken,
suffered or omitted by it in connection with its administration
of this Rights Agreement in reliance upon any Right Certificate
or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it
to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons.
Section 19. MERGER OR CONSOLIDATION OF, OR CHANGE IN
NAME OF, THE 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 or stock transfer business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights
Agent under this Rights Agreement without the execution or filing
of any paper or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for<PAGE>
<PAGE>
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 Rights
Agreement any of the Rights 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 Rights Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Right Certificates
shall have been countersigned but not delivered, the Rights Agent
may adopt the countersignature under its prior name and deliver
Right Certificates so countersigned; 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; in all such cases such
Right Certificates shall have the full force provided in the
Right Certificates and in this Rights Agreement.
Section 20. DUTIES OF RIGHTS AGENT.
The Rights Agent undertakes the duties and obligations
imposed by this Rights Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right
Certificates, 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 Rights 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 the Chairman of
the Board, the President or any Vice President and by the
Treasurer or the Secretary of the Company and delivered to the
Rights Agent. Any such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Rights Agreement in
reliance upon such certificate.<PAGE>
<PAGE>
(c) The Rights Agent shall be liable hereunder only
for its own negligence, bad faith or willful misconduct. In no
event shall the Rights Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including
but not limited to lost profits), even if the Rights Agent has
been advised of the likelihood of such loss or damage and
regardless of the form of action.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in
this Rights Agreement or in the Right Certificates (except its
countersignature thereof) or be required to verify the same, but
all such statements and recitals are and shall be deemed to have
been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Rights
Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in
this Rights Agreement or in any Right Certificate; nor shall it
be responsible for any adjustment required under the provisions
of Sections 11, 13 or 23 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 receipt of a certificate describing 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 shares of Common Stock to be issued pursuant
to this Rights Agreement or any Right Certificate or as to
whether any shares of Common Stock 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 the Rights Agreement.
(g) The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of its
duties hereunder from the Chairman of the Board, the President or
any Vice President or 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. <PAGE>
<PAGE>
(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 the
Rights Agent under this Rights Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or
agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting
from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued
employment thereof.
Section 21. CHANGE OF RIGHTS AGENT.
The Rights Agent or any successor Rights Agent may
resign and be discharged from its duties under this Rights
Agreement upon 30 days' notice in writing mailed to the Company
and to each transfer agent of the Common Stock by registered or
certified mail. The Company may remove the Rights Agent or any
successor Rights Agent (with or without cause) 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 Stock by registered or certified 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. Notwithstanding the foregoing provisions of this
Section 21, in no event shall the resignation or removal of a
Rights Agent be effective until a successor Rights Agent shall
have been appointed and have accepted such appointment. If the
Company shall fail to make such appointment within a period of 30
days after 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 incumbent
Rights Agent or the holder of record 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) a
corporation organized and doing business under the laws of the
United States or of any state thereof, in good standing, which is
authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination in<PAGE>
<PAGE>
the conduct of its corporate trust or stock transfer business by
federal or state authorities and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at
least $5,000,000 or (b) an Affiliate controlled by a corporation
described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed, but the
predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Stock, 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. Notwithstanding the foregoing provisions, in the
event of resignation, removal or incapacity of the Rights Agent,
the Company shall have the authority to act as the Rights Agent
until a successor Rights Agent shall have assumed the duties of
the Rights Agent hereunder.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES.
Notwithstanding any of the provisions of this Rights
Agreement or of the Rights to the contrary, the Company may, at
its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect
any adjustment or change in the Exercise Price per share and the
number or kind or class of shares of stock or other securities
or property purchasable under the Right Certificates made in
accordance with the provisions of this Rights Agreement.
Section 23. REDEMPTION; CANCELLATION.
(a) The Company may, at its option, but only by the
vote of a majority of the Board of Directors, redeem all but not
less than all the then outstanding Rights, at any time prior to
the close of business on the earlier of (i) the tenth day
following the Stock Acquisition Date, subject to extension by the
Company as provided in Section 26 hereof or (ii) the Final
Expiration Date, at a redemption price of $.01 per Right, subject
to adjustments as provided in subsection (c) below (the
"Redemption Price"); provided, however, that from and after the
time that any Person shall become an Acquiring Person (other than
pursuant to a Qualifying Tender Offer), the Company may redeem
the Rights only if at the time of the action of the Board of<PAGE>
<PAGE>
Directors there are then in office not less than two Continuing
Directors and such redemption is approved by a majority of the
Continuing Directors then in office. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not
be exercisable pursuant to Section 11(a)(ii) prior to the
expiration of the Company's right of redemption hereunder.
(b) Without any further action and without any notice,
the right to exercise the Rights will terminate effective at the
time so designated by action of the Board of Directors of the
Company ordering the redemption of the Rights, and the only right
thereafter of the holders of Rights shall be to receive the
Redemption Price. Within 10 days after the effective time of the
action of the Board of Directors ordering the redemption of the
Rights, the Company shall give notice of such redemption to the
holders of the then outstanding Rights by mailing such notice to
all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the
notice. Each notice of redemption will state the method by which
the payment of the Redemption Price will be made. At the option
of the Board of Directors, the Redemption Price may be paid in
cash to each Rights holder or by the issuance of shares (and, at
the Company's election pursuant to Section 14(b) hereof, cash or
depositary receipts in lieu of fractions of shares) of Common
Stock having a Fair Market Value equal to such cash payment.
(c) In the event the Company shall at any time after
the Record Date (A) pay any dividend on Common Stock in shares of
Common Stock, (B) subdivide or split the outstanding shares of
Common Stock into a greater number of shares or (C) combine or
consolidate the outstanding shares of Common Stock into a smaller
number of shares or effect a reverse split of the outstanding
shares of Common Stock, then and in each such event the
Redemption Price shall be appropriately adjusted to reflect such
event.
(d) In addition to the Company's right to redeem the
Rights as provided in Section 26(a) hereof, the Board of
Directors of the Company reserves the right to cancel the Rights,
at any time after the date hereof and prior to the time that any
Person first becomes an Acquiring Person, if it determines, in
its discretion, that the cancellation of the Rights is necessary
or advisable in connection with the Company's compliance with any
of its material contractual obligations in existence on the
Record Date. Without any further action and without any notice,
the right to exercise the Rights will terminate effective at the
time so designated by action of the Board of Directors of the
Company ordering the cancellation of the Rights, and the holders<PAGE>
<PAGE>
of Rights shall have no rights in respect thereof, including the
right to receive any consideration in respect of such
cancellation, the Rights in such circumstances being deemed to be
void ab initio. Within 10 days after the effective time of the
action of the Board of Directors ordering the cancellation of the
Rights, the Company shall give notice of such cancellation to the
holders of the then outstanding Rights by mailing such notice to
all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the
notice.
Section 24. NOTICE OF PROPOSED ACTIONS.
(a) In case the Company, after the Distribution Date,
shall propose (i) to effect any of the transactions referred to
in Section 11(a)(i) or to pay any dividend to the holders of
record of its Common Stock payable in stock of any class or to
make any other distribution to the holders of record of its
Common Stock (other than a regular periodic cash dividend at a
rate not in excess of 150% of the rate of the last cash dividend
theretofore paid), or (ii) to offer to the holders of record of
its Common Stock options, warrants, or other rights to subscribe
for or to purchase shares of Common Stock (including any security
convertible into or exchangeable for Common Stock) or shares of
stock of any class or any other securities, options, warrants,
convertible or exchangeable securities or other rights, or (iii)
to effect any reclassification of its Common Stock or any
recapitalization or reorganization of the Company, or (iv) to
effect any consolidation or merger with or into, 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 50% of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to,
any other Person or Persons, 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 record of a Right
Certificate, in accordance with Section 25, notice of such
proposed action, which shall specify the record date for the
purposes of such transaction referred to in Section 11(a)(i) or
such dividend or distribution, or the date on which such
reclassification, recapitalization, reorganization,
consolidation, merger, sale or transfer of assets, liquidation,
dissolution, or winding up is to take place and the record date
for determining participation therein by the holders of record of
Common Stock, 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 10 days prior to the record date for
determining holders of record of the Common Stock for purposes of<PAGE>
<PAGE>
such action, and in the case of any such other action, at least
10 days prior to the date of the taking of such proposed action
or the date or participation therein by the holders of record of
Common Stock, whichever shall be the earlier. The failure to
give notice required by this Section 24 or any defect therein
shall not affect the legality or validity of the action taken by
the Company or the vote upon any such action.
(b) In case any of the transactions referred to in
either Section 11(a)(ii) or Section 13 of this Rights Agreement
are proposed, then, in any such case, the Company shall give to
each holder of Rights, in accordance with Section 25 hereof,
notice of the proposal of such transaction at least 10 days prior
to consummating such transaction, which notice shall specify the
proposed event and the consequences of the event to holders of
Rights under Section 11(a)(ii) or Section 13 hereof, as the case
may be, and, upon consummating such transaction, shall similarly
give notice thereof to each holder of Rights.
Section 25. NOTICES.
Notices or demands authorized by this Rights Agreement
to be given or made by the Rights Agent or by the holder of
record of any Right Certificate or Right 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:
General Counsel
Ames Department Stores, Inc.
2418 Main Street
Rocky Hill, Connecticut 06067
Subject to the provisions of Section 21, any notice or demand
authorized by this Rights Agreement to be given or made by the
Company or by the holder of record of any Right Certificate or
Right 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:
Chemical Bank
450 West 33rd Street
New York, New York 10001-2697
Notices or demands authorized by this Rights Agreement to be
given or made by the Company or the Rights Agent to the holder of
record of any Right Certificate or Right shall be sufficiently
given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown
on the registry books of the Company.
<PAGE>
<PAGE>
Section 26. SUPPLEMENTS AND AMENDMENTS.
For as long as the Rights are then redeemable and
except as provided in the last sentence of this Section 26, the
Company may in its sole and absolute discretion, 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 the Rights or the Common Stock. At any time when the Rights
are not then redeemable and except as provided in the last
sentence of this Section 26, the Company may, and the Rights
Agent shall if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights
Certificates in order (a) to cure any ambiguity, (b) to correct
or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein or (c)
to change or supplement the provisions hereunder in any manner
which the Company may deem necessary or desirable, provided, that
no such supplement or amendment pursuant to clause (c) above
shall materially adversely affect the interests of the holders of
Right Certificates as such. 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 26, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in
this Rights Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price or the Final
Expiration Date and supplements or amendments may be made after
the time that any Person becomes an Acquiring Person (other than
pursuant to a Qualifying Tender Offer) only if at the time of the
action of the Board of Directors approving such supplement or
amendment there are then in office not less than two Continuing
Directors and such supplement or amendment is approved by a
majority of the Continuing Directors then in office.
Section 27. SUCCESSORS.
All of the covenants and provisions of this Rights
Agreement by or for the benefit of the Company or the Rights
Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 28. BENEFITS OF THIS RIGHTS AGREEMENT.
Nothing in this Rights 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 Distribution Date, the registered holders of
Common Stock in their capacity as holders of Rights) any legal or
equitable right, remedy or claim under this Rights Agreement; but
this Rights Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the holders of record of the<PAGE>
<PAGE>
Right Certificates (and, prior to the Distribution Date, the
registered holders of Common Stock in their capacity as holders
of Rights).
Section 29. DELAWARE CONTRACT.
This Rights 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 and enforced in accordance with the laws of such
state applicable to contracts to be made and performed entirely
within such state.
Section 30. COUNTERPARTS.
This Rights Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
Section 31. DESCRIPTIVE HEADINGS.
Descriptive headings of the several Sections of this
Rights Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the
provisions hereof.
Section 32. SEVERABILITY.
If any term, provision, covenant or restriction of this
Rights Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of
this Rights Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Rights Agreement to be duly executed, all as of the day and year
first above written.
AMES DEPARTMENT STORES, INC.
Attest: /s/ Angelina M. Spoto By: /s/ David H. Lissy
--------------------- ------------------------
(seal) Name: David H. Lissy
Angelina M. Spoto Title: SVP, General Cousel
Assistant Treasurer Corp. Secretary
CHEMICAL BANK
Attest: /s/ Joseph J. Flood By: /s/ Michael A. Nespoli
-------------------- -------------------------
(seal) Name: Michael A. Nespoli
Joseph J. Flood Title: Vice President
Assistant Vice President
Relationship Administration
<PAGE>
<PAGE>
Exhibit A
UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN THE
RIGHTS AGREEMENT (AS REFERRED TO BELOW), RIGHTS
ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING
PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL BE NULL AND
VOID AND MAY NOT BE TRANSFERRED TO ANY PERSON.
AMES DEPARTMENT STORES, INC.
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On November 30, 1994, the Board of Directors of Ames
Department Stores, Inc. (the "Company") declared a dividend
distribution of one Common Stock Purchase Right for each
outstanding share of Common Stock, par value $0.01 per share (the
"Common Stock"), of the Company. The distribution is payable as
of November 30, 1994 to stockholders of record on that date.
Each Right entitles the registered holder to purchase from the
Company one share of Common Stock at a price of $14.00 per share
("Exercise Price"). The description and terms of the Rights are
set forth in a Rights Agreement (the "Rights Agreement") between
the Company and Chemical Bank, as Rights Agent (the "Rights
Agent").
AS DISCUSSED BELOW, INITIALLY THE RIGHTS WILL NOT BE
EXERCISABLE, CERTIFICATES WILL NOT BE SENT TO STOCKHOLDERS AND
THE RIGHTS WILL AUTOMATICALLY TRADE WITH THE COMMON STOCK.
The Rights, unless earlier redeemed by the Board of
Directors, become exercisable upon the close of business on the
day (the "Distribution Date") which is the earlier of (i) the
tenth day following a public announcement that a person or group
of affiliated or associated persons, with certain exceptions set
forth below, has acquired beneficial ownership of 15% or more of
the outstanding voting stock of the Company (an "Acquiring
Person") or (ii) the tenth business day (or such later date as
may be determined by the Board of Directors prior to such time as
any person or group of affiliated or associated persons becomes
an Acquiring Person) after the date of the commencement or
announcement of a person's or group's intention to commence a
tender or exchange offer the consummation of which would result
in the ownership of 20% or more of the Company's outstanding
voting stock (even if no shares are actually purchased pursuant
to such offer).
<PAGE>
<PAGE>
Prior to the Distribution Date, the Rights would not be
exercisable, would not be represented by a separate certificate,
and would not be transferable apart from the Company's Common
Stock, but will instead be evidenced, with respect to any of the
Common Stock certificates outstanding as of November 30, 1994, by
such Common Stock certificate with a copy of this Summary of
Rights attached thereto.
An Acquiring Person does not include (A) the Company, (B) any
subsidiary of the Company, (C) any employee benefit plan or
employee stock plan of the Company or of any subsidiary of the
Company, or any trust or other entity organized, appointed,
established or holding Common Stock for or pursuant to the terms
of any such plan or (D) any person or group whose ownership of
15% or more of the shares of voting stock of the Company then
outstanding results solely from (i) any action or transaction or
transactions approved by the Board of Directors before such
person or group became an Acquiring Person or (ii) a reduction in
the number of issued and outstanding shares of voting stock of
the Company pursuant to a transaction or transactions approved by
the Board of Directors (provided that any person or group that
does not become an Acquiring Person by reason of clause (i) or
(ii) above shall become an Acquiring Person upon acquisition of
an additional 1% of the Company's voting stock unless such
acquisition of additional voting stock will not result in such
person or group becoming an Acquiring Person by reason of such
clause (i) or (ii)).
Until the Distribution Date (or earlier redemption or
expiration of the Rights), new Common Stock certificates issued
after November 30, 1994 will contain a legend incorporating the
Rights Agreement by reference. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the surrender
for transfer of any of the Common Stock certificates outstanding
as of November 30, 1994, with or without a copy of this Summary
of Rights attached thereto, will also constitute the transfer of
the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution
Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common
Stock as of the close of business on the Distribution Date and
such separate certificates alone will evidence the Rights from
and after the Distribution Date.
The Rights are not exercisable until the Distribution
Date. The Rights will expire at the close of business on
November 29, 2004, unless earlier redeemed by the Company as
described below.
<PAGE>
<PAGE>
The number of shares of Common Stock issuable upon
exercise of the Rights is subject to certain adjustments from
time to time in the event of a stock dividend on, or a
subdivision or combination of, the Common Stock. The Exercise
Price for the Rights is subject to adjustment in the event of
extraordinary distributions of cash or other property to holders
of Common Stock.
Unless the Rights are earlier redeemed, in the event
that, after the time that a Person becomes an Acquiring Person
(other than pursuant to a Qualifying Tender Offer (as defined
below)), the Company were to be acquired in a merger or other
business combination (in which any shares of Common Stock are
changed into or exchanged for other securities or assets) or more
than 50% of the assets or earning power of the Company and its
subsidiaries (taken as a whole) were to be sold or transferred in
one or a series of related transactions, the Rights Agreement
provides that proper provision will be made so that each holder
of record of a Right will from and after such date have the right
to receive, upon payment of the Exercise Price, that number of
shares of Common Stock of the acquiring company having a market
value at the time of such transaction equal to two times the
Exercise Price. In addition, unless the Rights are earlier
redeemed, in the event that a person or group becomes the
beneficial owner of 15% or more of the Company's voting stock
(other than pursuant to a tender or exchange offer (a "Qualifying
Tender Offer") for all outstanding shares of Common Stock that is
approved by the Board of Directors, after taking into account the
long-term value of the Company and all other factors they
consider relevant in the circumstances), the Rights Agreement
provides that proper provisions will be made so that each holder
of record of a Right, other than the Acquiring Person (whose
Rights will thereupon become null and void), will thereafter have
the right to receive, upon payment of the Exercise Price, that
number of shares of the Common Stock having a market value at the
time of the transaction equal to two times the Exercise Price.
<PAGE>
<PAGE>
Fractions of shares of Common Stock may, at the
election of the Company, be evidenced by depositary receipts.
The Company may also issue cash in lieu of fractional shares.
At any time on or prior to the close of business on the
earlier of (i) the tenth day after the time that a person has
become an Acquiring Person (or such later date as a majority of
the Board of Directors and a majority of the Continuing Directors
(as defined in the Rights Agreement) may determine) or
(ii) November 29, 2004, the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"). The Rights may be redeemed after the time
that any Person has become an Acquiring Person only if approved
by a majority of the Continuing Directors. Immediately upon the
effective time of the action of the Board of Directors of the
Company authorizing redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
For as long as the Rights are then redeemable, the
Company may, except with respect to the redemption price or date
of expiration of the Rights, amend the Rights in any manner,
including an amendment to extend the time period in which the
Rights may be redeemed. At any time when the Rights are not then
redeemable, the Company may amend the Rights in any manner that
does not materially adversely affect the interests of holders of
the Rights as such. Amendments to the Rights Agreement from and
after the time that any Person becomes an Acquiring Person
requires the approval of a majority of the Continuing Directors
(as provided in the Rights Agreement).
Until a Right is exercised, the holder, as such, will
have no rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Form 10Q
for the period ending October 29, 1994. A copy of the Rights
Agreement is available free of charge from the Company by
contacting Margaret E. Wyrwas, Vice President, Corporate
Communications/Investor Relations. 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 in this summary description herein by reference.
<PAGE>
<PAGE>
Exhibit B
[Form of Right Certificate]
Certificate No. W- ---------- Rights
NOT EXERCISABLE AFTER NOVEMBER 29, 2004 OR EARLIER IF
REDEEMED. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY AND UNDER CERTAIN OTHER
CIRCUMSTANCES, AT $.01 PER RIGHT (SUBJECT TO
ADJUSTMENT), ON THE TERMS SET FORTH OR REFERRED TO IN
THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES AS
PROVIDED IN THE RIGHTS AGREEMENT (AS REFERRED TO
BELOW), RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY
ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL BE NULL AND VOID
AND MAY NOT BE TRANSFERRED TO ANY PERSON.
Right Certificate
AMES DEPARTMENT STORES, 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 November 30, 1994 (the "Rights Agreement") between
AMES DEPARTMENT STORES, INC., a Delaware corporation (the
"Company"), and Chemical Bank, (the "Rights Agent"), to purchase
from the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to 5:00 P.M.
(New York City time) on November 29, 2004 at the office of the
Rights Agent designated in the Rights Agreement for such purpose,
or its successor as Rights Agent, in New York, New York, one of a
fully paid nonassessable share of Common Stock, par value $.01
per share (the "Common Stock") of the Company at a purchase price
of $14.00, as the same may from time to time be adjusted in
accordance with the Rights Agreement (the "Exercise Price"), upon
presentation and surrender of this Right Certificate with the
Form of Election to Purchase attached hereto duly executed.
As provided in the Rights Agreement, the Exercise Price
and the number of shares of Common Stock which may be purchased
upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the
<PAGE>
<PAGE>
happening of certain events and, upon the happening of certain
events, securities other than shares of Common Stock, or other
property, may be acquired upon exercise of the Rights evidenced
by this Right Certificate, as provided in the Rights Agreement.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are 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 of the Rights Agent,
the Company and the holders of record of Right Certificates.
Copies of the Rights Agreement are on file at the principal
executive office of the Company.
This Right Certificate, with or without other Right
Certificates, upon surrender at the office of the Rights Agent
designated in the Rights Agreement for such purpose, may be
exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder of
record to purchase a like aggregate number of shares of Common
Stock as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof,
another Right Certificate or Right Certificates for the number of
whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate may be redeemed by the
Company at its option or under certain other circumstances at a
redemption price of $.01 per Right.
No fractional shares of Common Stock are required to be
issued upon the exercise of any Right or Rights evidenced hereby,
and in lieu thereof the Company may cause depositary receipts to
be issued and/or a cash payment may 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 Common Stock or of any other securities of
<PAGE>
<PAGE>
the Company which may at any time be issuable on the exercise
hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such,
any of the rights of a stockholder of the Company or any right to
vote for the election of directors or upon any matter submitted
to stockholders at 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 Right or Rights evidenced by this
Right Certificate shall have been exercised as provided in the
Rights Agreement.
<PAGE>
<PAGE>
This Right Certificate shall not be valid or obligatory
for any purpose until it shall have been countersigned by the
Rights Agent.
WITNESS the facsimile signature of the proper officers
of the Company and its corporate seal. Dated as of .
------------
ATTEST: AMES DEPARTMENT STORES,INC.
- --------------------------- By:
Secretary -----------------------
Title:
Countersigned:
CHEMICAL BANK
By
------------------------
Authorized Signature
<PAGE>
<PAGE>
[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 Certificates.)
FOR VALUE RECEIVED -------------------------------
hereby sells, assigns and transfers unto -------------------
- ------------------------------------------------------------
(Please print name and address of transferee)
- ------------------------------------------------------------
Rights evidenced by 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:
------------------
-------------------------
Signature
Signature Guaranteed:<PAGE>
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the
appropriate boxes that:
this Right Certificate [ ] is [ ] is not being
sold, assigned or transferred by or on behalf of a Person who is
or was an Acquiring Person or an Associate or an Affiliate
thereof (as such terms are defined in the Rights Agreement); and
after due inquiry and 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 thereof (as such terms are defined in the
Rights Agreement).
Dated:
------------------- --------------------------
Signature
NOTICE
The signature to the foregoing Assignment and
Certificate must correspond to the name as written upon the face
of this Right Certificate in every particular, without alteration
or enlargement or any change whatsoever.<PAGE>
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if registered holder
desi res to exercise the Right Certificate.)
TO AMES DEPARTMENT STORES, INC.:
The undersigned hereby irrevocably elects to exercise -
- ----------------- Rights represented by this Right Certificate to
purchase the shares of Common Stock issuable upon the exercise of
such Rights and requests that certificates for such share(s) be
issued in the following name:
Please insert social security
or other identifying number:
-------------------------------
- ------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by
this Right Certificate, a new Right Certificate for the balance
remaining of such Rights shall be registered in the name of and
delivered to:
<PAGE>
<PAGE>
Please insert social security
or other identifying number:
-------------------------------
- ------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------
Dated:
----------------
------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the fact of this
Right Certificate)
Signature Guaranteed:
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-1994
<PERIOD-START> JAN-30-1994
<PERIOD-END> OCT-29-1994
<CASH> 27632
<SECURITIES> 0
<RECEIVABLES> 45843
<ALLOWANCES> 0
<INVENTORY> 596926
<CURRENT-ASSETS> 688234
<PP&E> 45332
<DEPRECIATION> 5873
<TOTAL-ASSETS> 734326
<CURRENT-LIABILITIES> 522871
<BONDS> 80305
<COMMON> 201
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 734326
<SALES> 1438323
<TOTAL-REVENUES> 1460520
<CGS> 1055037
<TOTAL-COSTS> 1055037
<OTHER-EXPENSES> 416797
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19646
<INCOME-PRETAX> (17924)
<INCOME-TAX> (5807)
<INCOME-CONTINUING> (12117)
<DISCONTINUED> 0
<EXTRAORDINARY> (1517)
<CHANGES> 0
<NET-INCOME> (13634)
<EPS-PRIMARY> (.68)
<EPS-DILUTED> (.68)
</TABLE>
