FORM 8-A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
CHIC BY H.I.S, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3494627
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(State of incorporation (I.R.S. Employer
or organization) Identification No.)
1372 Broadway
New York, New York 10018
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(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Rights to Purchase New York Stock Exchange
Series A Preferred
Stock
If this Form relates to the registration of a class of debt securities and
is effective upon filing pursuant to General Instruction A.(c)(1), please check
the following box. [ ]
If this Form relates to the registration of a class of debt securities and
is to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A.(c)(2), please check the following box. [ ]
Securities to be registered pursuant to Section 12(g) of the Act:
None
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This documents consists of 8 pages.
The exhibit index is contained on page 8 of this document.
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Item 1. Description of Registrant's Securities to be Registered.
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On February 28, 1997 the Board of Directors (the "Board") of Chic by
H.I.S, Inc. (the "Company") declared a dividend distribution of one Right for
each outstanding share of Common Stock, par value $.01 per share (a "Common
Share"), of the Company to stockholders of record at the close of business on
March 17, 1997 (the "Record Date"). Except as set forth below, each Right
entitles the registered holder to purchase from the Company one one-hundredth of
a share of Series A Preferred Stock, par value $1.00 per share ("Series A
Shares"), at a price of $30.00 (the "Purchase Price"), subject to adjustment.
The Purchase Price shall be paid in cash. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and Continental Stock Transfer & Trust Company, as Rights Agent.
Initially, no separate Right Certificates will be distributed. Until
the earlier to occur of (a) 10 Business Days (or such later date as the Board
may determine) following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding Common Shares or (b) 15 Business Days (or such later date as the
Board may determine) following the commencement of a tender offer or exchange
offer if, upon consummation thereof, such person or group would be the
beneficial owner of 20% or more of such outstanding Common Shares (the earlier
of such dates being called the "Separation Date"), the Rights will be evidenced,
with respect to any Common Shares outstanding as of the Record Date, by the
certificates representing such Common Shares. Any determination by the Board to
postpone the Separation Date would require the concurrence of a majority of the
Independent Directors (those members of the Board who are neither officers or
employees of the Company or any of its subsidiaries nor Acquiring Persons or
their Affiliates, Associates, nominees or representatives, and who either (a)
were members of the Board before any person became an Acquiring Person or (b)
are the successors of such members and were recommended for election by a
majority of the Independent Directors then on the Board). The Rights Agreement
excludes from the definition of "Acquiring Person" all persons who, on the date
of the Rights Agreement, beneficially own 15% or more of the outstanding Common
Shares (provided such persons do not subsequently acquire an additional 1% of
the outstanding Common Shares other than by exercise of options or warrants held
by such persons on the date of the Rights Agreement), as well as persons who
become the beneficial owner of 15% or more of the outstanding Common Shares in a
transaction approved in advance by a majority of the Independent Directors.
The Rights Agreement provides that, until the Separation Date, the
Rights will be transferred with, and only with, Common Share certificates. From
as soon as practicable after the Record Date and until the Separation Date (or
earlier redemption or expiration of the Rights), new Common Share certificates
issued after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Separation Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding as of
the Record Date will also constitute the transfer of the Rights associated with
the Common Shares
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represented by such certificates. As soon as practicable following the
Separation Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Separation Date and, thereafter, such separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Separation Date and will
expire on March 17, 2007, unless earlier redeemed by the Company as described
below.
In the event that a person (other than the Company and its
affiliates) becomes the beneficial owner of 20% or more of the then outstanding
Common Shares or, at any time following the Separation Date, (a) the Company is
the surviving corporation in a merger with an Acquiring Person and the Company's
Common Shares are not changed or exchanged, (b) an Acquiring Person engages in
one or more "self-dealing" transactions as set forth in the Rights Agreement or
(c) during such time as there is an Acquiring Person, an event occurs that
results in such Acquiring Person's ownership interest being increased by more
than 1%, the Rights Agreement provides that proper provision shall be made so
that each holder of a Right will thereafter be entitled to receive, upon
exercise, Common Shares having a value equal to two times the exercise price of
the Right. The Rights Agreement permits the Board, in lieu of issuing Common
Shares upon payment of the Purchase Price, to elect to distribute to holders of
Rights any combination of Common Shares, cash, other assets and/or other shares
or securities of the Company or any subsidiary of the Company, and in such
connection to reduce the Purchase Price, so that each Rights holder receives,
upon exercise of a Right, a total package equal in value to (i) two times the
Purchase Price less (ii) the amount of the reduction in the Purchase Price, if
any. However, Rights are not exercisable following the occurrence of any of the
events set forth above until such time as the Rights are no longer redeemable by
the Company as set forth below.
Notwithstanding anything herein to the contrary, following the
occurrence of any of the events set forth in the immediately preceding paragraph
of this Summary, any Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person shall
immediately become null and void.
In the event that, at any time following the first date of public
announcement by the Company or an Acquiring Person indicating that an Acquiring
Person has become such (the "Shares Acquisition Date"), (a) the Company engages
in a merger or other business combination transaction in which the Company is
not the surviving corporation, (b) the Company engages in a merger or other
business combination transaction with another person in which the Company is the
surviving corporation, but in which its Common Shares are changed or exchanged
or (c) 50% or more of the Company's assets or earning power is sold or
transferred, the Rights Agreement provides that proper provision shall be made
so that each holder of a Right shall thereafter have the right to receive, upon
the exercise thereof at the then current exercise price of the Right, common
shares of the acquiring company having a value equal to two times the exercise
price of the Right.
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The Board may, at its option, at any time after the right of the
Board to redeem the Rights has expired or terminated (with certain exceptions),
exchange all or part of the then outstanding and exercisable Rights (other than
those held by the Acquiring Person and Affiliates and Associates of the
Acquiring Person) for Common Shares or Common Share equivalents at a ratio of
one Common Share or one Common Share equivalent per Right, as adjusted;
provided, however, that such Right cannot be exercised once a Person, together
with such Person's Affiliates and Associates, becomes the owner of 50% or more
of the outstanding Common Shares. If the Board authorizes such an exchange, the
Rights will immediately cease to be exercisable.
The Purchase Price payable, and the number of Series A Shares or
other shares, securities or assets issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (a) in the event of
a dividend of Series A Shares on, or a subdivision, combination or
reclassification of, the Series A Shares, (b) upon the grant to holders of the
Series A Shares of certain rights or warrants to subscribe for Series A Shares
or securities convertible into Series A Shares at less than the current market
price of the Series A Shares or (c) upon the distribution to holders of the
Series A Shares of debt securi ties or assets (excluding regular quarterly cash
dividends and dividends payable in Series A Shares) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares that are not integral multiples of one
one-hundredth of a Series A Share will be issued and, in lieu thereof, an
adjustment in cash will be made based on the closing price of the Series A
Shares on the last trading date prior to the date of exercise.
At any time after the date of the Rights Agreement until ten (10)
Business Days (or such later date as the Board, with the concurrence of a
majority of the Independent Directors, may determine) following the Shares
Acquisition Date, the Board, with the concurrence of a majority of the
Independent Directors, may redeem the Rights in whole, but not in part, at a
price of $0.01 per Right, subject to adjustment (the "Redemption Price").
Thereafter, the Board may only redeem the Rights in certain specified
circumstances, including in connection with certain events not involving an
Acquiring Person or an Affiliate or Associate of an Acquiring Person. In
addition, the Company's right of redemption may be reinstated if (a) an
Acquiring Person reduces its beneficial ownership to 10% or less of the
outstanding Common Shares in a transaction or series of transactions not
involving the Company and (b) there is at such time no other Acquiring Person.
The Rights Agreement may also be amended, as described below, to extend the
period of redemption. Immediately upon the action of the Board ordering
redemption of the Rights, the Rights will no longer be exercisable, except upon
the occurrence of certain events that have the effect of deferring the effective
time of the redemption. In general, thereafter the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive
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dividends. While the distribution of the Rights will not be taxable to
stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Shares (or other consideration) or for common shares of
the Acquiring Person as set forth above.
Other than those provisions relating to the principal economic terms
of the Rights, any of the provisions of the Rights Agreement may be amended by
the Board with the concurrence of a majority of the Independent Directors or by
special approval of the stockholders of the Company prior to the Separation
Date. Thereafter, the period during which the Rights may be redeemed may be
extended and other provisions of the Rights Agreement may be amended by action
of the Board, with the concurrence of a majority of the Independent Directors,
or by special approval of the stockholders of the Company; provided, however,
that (a) such amendment will not adversely affect the interests of holders of
Rights (excluding the interests of any Acquiring Person) and (b) no amendment
shall be made at such time as the Rights are no longer redeemable (except for
the possibility of the right of redemption being reinstated as described above).
A copy of the Rights Agreement specifying the terms of the Rights
(including the following Exhibits: (A) the Certificate of Designation with
respect to Series A Preferred Stock, specifying the terms of the Series A
Shares, (B) the form of the Right Certificate and (C) the Summary of Rights to
Purchase Series A Shares) is attached hereto as Exhibit 1 and is incorporated
herein by reference. The foregoing description of the Rights and the Series A
Shares does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement.
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Item 2. Exhibits.
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The following exhibits are filed as part of this Registration
Statement on Form 8-A:
1 Rights Agreement, dated as of February 28, 1997, between the
Company and Continental Stock Transfer & Trust Company, which
includes the Certificate of Designation in respect of the
Series A Preferred Stock as Exhibit A, the form of Right
Certificate as Exhibit B and the Summary of Rights to Purchase
Series A Preferred Stock as Exhibit C. Pursuant to the Rights
Agreement, Right Certificates will not be mailed until after
the Separation Date (as defined therein).
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized.
CHIC BY H.I.S, INC.
(Registrant)
Date: May 8, 1997 By /s/ Burton M. Rosenberg
--------------------------------------
Burton M. Rosenberg
Chairman and Chief Executive Officer
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INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Exhibit Page
------ ------- ----
1 Rights Agreement, dated as of
February 28, 1997, between the Company
and Continental Stock Transfer & Trust
Company, which includes the Certificate
of Designation in respect of the Series A
Preferred Stock as Exhibit A, the form of
Right Certificate as Exhibit B and the
Summary of Rights to Purchase Series A
Preferred Stock as Exhibit C. Pursuant to
the Rights Agreement, Right Certificates
will not be mailed until after the
Separation Date (as defined therein).
Page 8
Exhibit 1
EXECUTION COPY
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RIGHTS AGREEMENT
between
CHIC BY H.I.S, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Dated: As of February 28, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
Section 1. Certain Definitions.......................................1
Section 2. Appointment of Rights Agent...............................6
Section 3. Issue of Right Certificates...............................6
Section 4. Form of Right Certificates................................8
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; Purchase Price;
Expiration Date of Rights.............................11
Section 8. Cancellation and Destruction of Right
Certificates..........................................13
Section 9. Reservation and Availability of
Series A Shares; Registration.........................14
Section 10. Series A Shares Record Date. ...........................15
Section 11. Adjustment of Purchase Price,
Number and Kind of Shares or
Number of Rights......................................16
Section 12. Certificate of Adjusted Purchase
Price or Number of Shares.............................27
Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power...................27
Section 14. Fractional Rights and Fractional Shares..................29
Section 15. Rights of Action.........................................31
Section 16. Agreement of Right Holders...............................32
Section 17. Right Certificate Holder Not
Deemed a Shareholder..................................32
Section 18. Concerning the Rights Agent..............................33
Section 19. Merger or Consolidation or Change
of Name of Rights Agent...............................33
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SECTION PAGE
Section 20. Duties of Rights Agent...................................34
Section 21. Change of Rights Agent...................................36
Section 22. Issuance of New Right Certificates.......................37
Section 23. Redemption...............................................38
Section 24. Exchange.................................................39
Section 25. Notice of Certain Events.................................41
Section 26. Notices..................................................42
Section 27. Supplements and Amendments...............................42
Section 28. Successors...............................................43
Section 29. Determinations and Actions by
the Board of Directors................................43
Section 30. Benefits of this Agreement...............................44
Section 31. Severability.............................................44
Section 32. Governing Law............................................45
Section 33. Consequential Damages....................................45
Section 34. Counterparts.............................................45
Section 35. Descriptive Headings.....................................45
ii
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RIGHTS AGREEMENT
Rights Agreement, dated as of February 28, 1997, between CHIC BY
H.I.S, INC., a Delaware corporation (the "COMPANY"), and Continental Stock
Transfer & Trust Company, a New York corporation (the "RIGHTS AGENT").
The Board of Directors of the Company has author ized and declared a
dividend of one preferred share purchase right (a "RIGHT") for each Common Share
(as hereinafter defined) of the Company outstanding at the close of business on
March 17, 1997 (the "RECORD DATE"), each Right repre senting the right to
purchase one one-hundredth (1/100) of a share of Series A Preferred Stock, par
value $1.00 per share, of the Company ("SERIES A PREFERRED STOCK") having the
rights and preferences set forth in the form of Certificate of Designation with
respect to the Series A Preferred Stock, a copy of which is attached hereto as
EXHIBIT A. The Board of Directors has further authorized the issuance of one
Right with respect to (a) each Common Share that shall become outstanding after
the Record Date and on, or prior to the earlier of the Redemption Date and the
Final Expiration Date (each as hereinafter defined) upon exercise of warrants to
purchase Common Shares, which warrants are outstanding on the Record Date, and
(b) each Common Share that shall otherwise become outstanding after the Record
Date and on, or prior to, the earliest of the Separation Date (as hereinafter
defined), the Redemption Date and the Final Expiration Date.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indi cated:
(a) "ACQUIRING PERSON" shall mean any Person who, together
with all Affiliates and Associates of such Person, shall hereafter become the
Beneficial Owner of fifteen percent (15%) or more of the Common Shares then out
standing, but shall not include (i) the Company, any wholly owned Subsidiary of
the Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to the terms of any
such plan or (ii) a Person who or which (together with all Affiliates or
Associates of such Person) shall become the Beneficial Owner of fifteen percent
(15%) or more of the Common Shares then outstanding, if the transaction in which
such Person (together with all Affiliates and Associates of such Person) became
the Beneficial Owner of fifteen percent (15%) or more of the Common Shares then
outstanding had
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2
received prior approval of a majority of the Independent Directors; PROVIDED,
HOWEVER, that any Person who or which (together with Affiliates or Associates of
such Person) on the date of this Agreement is the Beneficial Owner of fifteen
percent (15%) or more of the outstanding Common Shares shall not be deemed to
be, or be, an Acquiring Person unless such Person (or Affiliates or Associates
of such Person) subsequent to the date of this Agreement becomes the Beneficial
Owner (other than by exercise of options or warrants to purchase Common Shares,
which are held by such Person (or Affiliates or Associates of such Person) on
the date of this Agreement) of Common Shares (in addition to the Common Shares
beneficially owned by such Person (or Affiliates or Associates of such Person)
on the date of this Agreement) equal to one percent (1%) or more of the Common
Shares then outstanding; PROVIDED FURTHER that a Person, alone or together with
its Affiliates and Associates, shall not be deemed to have become the Beneficial
Owner of fifteen percent (15%) or more of the Common Shares then outstanding for
the purposes of this Section 1(a) solely as a result of a reduction in the
number of Common Shares outstanding due to the repurchase or other acquisition
of Common Shares by the Company, unless and until such time as such Person or
any Affiliate or Associate of such Person shall become the Beneficial Owner of
any additional Common Shares or any other Person who is the Beneficial Owner of
any Common Shares shall become an Affiliate or Associate of such Person, if
after giving effect to such additional shares or the shares beneficially owned
by such other Person, such Person, together with Affiliates and Associates of
such Person, shall be the Beneficial Owner of fifteen percent (15%) or more of
the Common Shares then outstanding.
(b) "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations (the "RULES") under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), as in effect on the Record Date.
(c) A Person shall be deemed the "BENEFICIAL OWNER" of and
shall be deemed to "BENEFICIALLY OWN" any securities:
(i) that such Person or any of such
Person's Affiliates or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise; PROVIDED, HOWEVER,
that a Person shall not be deemed to be the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a tender
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3
or exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such ten dered securities are accepted for
purchase or exchange; and PROVIDED FURTHER, that a Person shall not be deemed to
be the Beneficial Owner of, or to beneficially own, securities that such Person
has the right to acquire (whether such right is exercisable immediately or only
after the passage of time) upon the exercise of conversion rights conferred in
any class or series of Preferred Stock of the Company issued prior to the
Separation Date if the resolutions of the Board providing for the issuance of
such class or series of Preferred Stock shall specifically refer to this Rights
Agreement and provide that the right to acquire securities upon the exercise of
conversion rights so conferred shall not be deemed to constitute beneficial
ownership of such securities;
(ii) that such Person or any of such
Person's Affiliates or Associates, directly or indirectly, has the right to vote
or dispose of, or of which any of them, directly or indirectly, has "beneficial
ownership" (as determined pursuant to Rule 13d-3 of the Rules, as in effect on
the Record Date) (including pursuant to any agreement, arrangement or
understanding, whether or not in writing); PROVIDED, HOWEVER, that a Person
shall not be deemed to be the Beneficial Owner of, or to beneficially own, any
security under this subparagraph (ii) as a result of an agreement, arrangement
or understanding to vote such security if such agreement, arrangement or
understanding arises solely from a revocable proxy given in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable provisions of Rules, unless such agreement, arrangement or
understanding is also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) that are beneficially owned,
directly or indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether or not in
writing), for the purpose of, or with respect to, acquiring, holding, voting
(except as described in the proviso to subparagraph (ii) of this paragraph (c))
or disposing of any voting securities of the Company; PROVIDED, HOWEVER, that
nothing in this paragraph (c) shall cause a person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of or to "beneficially
own" any securities acquired through such person's participation in good faith
in a firm commitment underwriting until the expiration of forty (40) days after
the date of such acquisition.
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4
(d) "BOARD" means the Board of Directors of the Company.
(e) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday, or a day on which banking institu tions in New York, New York are
authorized or obligated by law or executive order to close.
(f) "CLOSE OF BUSINESS" on any given date shall mean 5:00
P.M., New York, New York time, on such date; PROVIDED, HOWEVER, that if such
date is not a Business Day it shall mean 5:00 P.M., New York, New York time, on
the next succeeding Business Day.
(g) "COMMON SHARES" when used with reference to the Company
shall mean shares of Common Stock, par value $.01 per share, of the Company.
"COMMON SHARES" or "COMMON SHARES," when used with reference to any Person other
than the Company, shall mean the capital stock of such Person with the greatest
voting power or the equity securities or other equity interest having power to
control or direct the management of such Person.
(h) "INDEPENDENT DIRECTOR" shall mean (i) any member of the
Board who is not an officer or employee of the Company or any of its
Subsidiaries and who is not an Acquiring Person or an Affiliate or Associate of
an Acquiring Person or a nominee or representative of an Acquiring Person or any
such Affiliate or Associate and who was a member of the Board prior to the time
any Person became an Acquiring Person and (ii) any successor to a member of the
Board who was a member of the Board prior to the time any Person became an
Acquiring Person, but only if such successor (x) is not an officer or employee
of the Company or any of its Subsidiaries and is not an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or a nominee or representative of
an Acquiring Person or of any such Affiliate or Associate and (y) was
recommended for election or elected to succeed such member of the Board by a
majority of the Independent Directors then on the Board.
(i) "PERSON" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity and shall include any
successor (by merger or otherwise) of such entity.
(j) "SECTION 11(A)(II) EVENT" shall mean any
event described in Section 11(a)(ii)(A), (B) or (C).
(k) "SECTION 13(A) EVENT" shall mean any
event described in clause (x), (y) or (z) of Section 13(a).
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(l) "SERIES A SHARES" shall mean shares of Series A Preferred
Stock of the Company, including any authorized fraction of a Series A Share,
unless the context otherwise requires.
(m) "SHARES ACQUISITION DATE" shall mean the first date of
public announcement (including, without limi tation, a report filed pursuant to
Section 13(d) or 14(d) under the Exchange Act) by the Company or an Acquiring
Person indicating that an Acquiring Person has become such.
(n) "SUBSIDIARY" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise con trolled by such Person.
(o) "TRIGGERING EVENT" shall mean any Sec
tion 11(a)(ii) Event or Section 13(a) Event.
The following terms shall have the meanings indi cated in the
following Sections of this Agreement:
(i) "ACT" -- Section 9(c).
(ii) "ADJUSTMENT SHARES" -- Section 11(a)(ii).
(iii) "COMMON SHARE EQUIVALENTS" -- Section 11(a)(iii).
(iv) "COMPANY" -- Preamble.
(v) "CURRENT VALUE" -- Section 11(a)(iii).
(vi) "EQUIVALENT PREFERRED SHARES" -- Section 11(b).
(vii) "EXCHANGE ACT" -- Section 1(b).
(viii) "EXCHANGE RATIO" -- Section 24(a).
(ix) "EXTENSION DATE" -- Section 27.
(x) "FINAL EXPIRATION DATE" -- Section 7(a).
(xi) "NASDAQ" -- Section 11(d)(i).
(xii) "PRINCIPAL PARTY" -- Section 13(b).
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(xiii) "PURCHASE PRICE" -- Sections 4(a),
11(a)(ii) and 13(a).
(xiv) "RECORD DATE" -- Preamble.
(xv) "REDEMPTION DATE" -- Section 7(a).
(xvi) "REDEMPTION PRICE" -- Section 23(a)(i).
(xvii) "RIGHT CERTIFICATES" -- Section 3(a).
(xviii) "RIGHTS" -- Preamble.
(xix) "RIGHTS AGENT" -- Preamble.
(xx) "RULES" -- Section 1(b).
(xxi) "SEPARATION DATE" -- Section 3(a).
(xxii) "SERIES A PREFERRED STOCK" -- Preamble.
(xxiii) "SPREAD" -- Section 11(a)(iii).
(xxiv) "SPRINGING RIGHT OF REDEMPTION" --
Section 23(a)(i).
(xxv) "SUBSTITUTION PERIOD" -- Section 11(a)(iii).
(xxvi) "SUMMARY OF RIGHTS" -- Section 3(b).
(xxvii) "TRADING DAY" -- Section 11(d)(i).
Section 2. APPOINTMENT OF RIGHTS AGENT. The Com pany hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accord ance with Section 3, shall prior to the Separation Date also be
the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment and agrees to act
as Rights Agent under this Agreement. The Company may from time to time appoint
such co-rights agents as it may deem necessary or desirable.
Section 3. ISSUE OF RIGHT CERTIFICATES.
(a) Until the earlier of (i) the close of business on the
tenth Business Day following the Shares
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7
Acquisition Date (or such later date as the Board may determine) or (ii) the
close of business on the fifteenth Business Day (or such later date as the Board
may determine) after the date on which a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first commenced within the meaning of Rule 14d-2(a) of the
Rules, if upon consummation thereof, such Person would be the Beneficial Owner
of twenty percent (20%) or more of the Common Shares then outstanding (the
earlier of (i) and (ii) being herein referred to as the "SEPARATION DATE"), (x)
the Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for Common Shares regis tered in the names of the
holders thereof (which certifi cates shall also be deemed to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying Common
Shares. As soon as practicable after the Separation Date, the Rights Agent will
send, by first-class, insured, postage-prepaid mail, to each record holder of
Common Shares as of the close of business on the Separation Date, at the address
of such holder shown on the records of the Company, one or more certificates, in
substantially the form of EXHIBIT B hereto (the "RIGHT CERTIFICATES"),
evidencing one Right for each Common Share so held. In the event that an
adjustment in the number of Rights per Common Share has been made pursuant to
Section 11(p), at the time of distribution of the Right Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a)) so that Right Certificates representing only
whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Separation Date, the Rights will be
evidenced solely by such Right Certificates.
(b) As soon as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Series A Preferred
Stock, in substan tially the form attached hereto as EXHIBIT C (the "SUMMARY OF
RIGHTS"), by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Separation Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof and the registered holders of the Common Shares shall also be
the registered holders of the associated Rights. Until the earliest of the
Separation Date, the Redemption Date or the Final Expiration Date, the surrender
for transfer of any
<PAGE>
8
certificate for Common Shares outstanding on the Record Date shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Certificates for Common Shares issued after the Record
Date but prior to the earliest of the Separation Date, the Redemption Date or
the Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN CHIC BY H.I.S, INC. AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, DATED AS OF FEBRUARY 28, 1997
(THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED
HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF CHIC BY H.I.S, INC. UNDER CERTAIN CIRCUMSTANCES, AS
SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY
SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE.
CHIC BY H.I.S, INC. WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF
THE RIGHTS AGREEMENT WITHOUT CHARGE PROMPTLY FOLLOWING RECEIPT OF A
WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR
BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR
ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND
VOID.
Section 4. FORM OF RIGHT CERTIFICATES.
(a) The Right Certificates (and the forms of election to
purchase Series A Shares, exercise notice and of assignment to be printed on the
reverse thereof) shall be substantially the same as Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provi sions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22, the Right Certificates, whenever
distributed, shall be dated as of the Record Date and on their face shall
entitle the holders thereof to purchase such number of one one-hundredths of a
share of
<PAGE>
9
Series A Preferred Stock as shall be set forth therein at the price per one
one-hundredth of a Series A Share set forth therein (the "PURCHASE PRICE"), but
the amount and type of the securities purchasable (or other consideration to be
made available) upon the exercise of each Right and the Purchase Price thereof
shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 that represents Rights beneficially owned by (i) an Acquiring Person
or an Associ ate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such (other than a bona fide purchaser for value
who has no know ledge that the transferor was an Acquiring Person or an
Associate or Affiliate of an Acquiring Person) or (iii) a transferee of an
Acquiring Person (or such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person to holders of equity interests in such Acquiring Person or
to any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
that the Board has determined is part of a plan, arrangement or understanding
that has as a primary purpose or effect avoidance of Section 7(e), and any Right
Certificate issued pursuant to Section 6 or Section 11 upon transfer, exchange,
replacement or adjustment of any other Right Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(E) OF
SUCH AGREEMENT.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the
Company by the Chairman of the Board of the Company or the Company's President,
Chief Executive Officer or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal, attested by the
Secretary, the Treasurer or any Assistant Secretary or Assistant Treasurer of
the Company, or shall bear a facsimile thereof. The Right Certificates
<PAGE>
10
shall not be valid for any purpose unless countersigned by the Rights Agent. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Separation Date, the Rights Agent will keep
or cause to be kept, at its office or agency designated for such purpose, books
for registration and transfer of the Right Certificates issued or to be issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Right Certifi cates, the number of Rights evidenced on its face
by each of the Right Certificates, the certificate number of each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
(a) Subject to the provisions of Sec tions 4(b), 7(e), 14 and
16(b), at any time after the close of business on the Separation Date, and at or
prior to the close of business on the earlier of the Redemption Date or the
Final Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certifi cates, entitling the registered holder to purchase a like number
of Series A Shares (or, following a Triggering Event, Common Shares or other
shares, securities or assets, as the case may be) as the Right Certificate or
Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be trans
ferred, split up, combined or exchanged at the principal office of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Right Certificate until the
<PAGE>
11
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Right Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably re quest. Thereupon the Rights Agent shall countersign and
deliver to the person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in con nection with any transfer, split up, combination or exchange of
Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certi ficate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and cancel
lation of the Right Certificate if mutilated, the Company will make and deliver
a new Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(e), the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Separation Date upon
surrender of the Right Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at the principal office
of the Rights Agent designated for such purpose, together with payment of the
Purchase Price for each one one-hundredth of a Series A Share as to which the
Rights are exercised, at or prior to the close of business on the earlier of (i)
March 17, 2007 (the "FINAL EXPIRATION DATE") or (ii) the date on which the
Rights are redeemed as provided in Section 23 (the "REDEMPTION DATE").
(b) The Purchase Price for each one one-hundredth of a Series
A Share pursuant to the exercise of a Right shall initially be Thirty Dollars
($30.00), shall be subject to adjustment from time to time as provided in
Sections 11 and 13 and shall be payable in lawful money of the United States of
America in accordance with Section 7(c).
<PAGE>
12
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the Series A Shares (or other
shares, securities or assets, as the case may be) to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of such
Right Certificate in accor dance with Section 9, in cash, or by certified check
or cashier's check payable to the order of the Company, the Rights Agent shall,
subject to Section 20(k), thereupon promptly (i) either (A) requisition from any
transfer agent of the Series A Shares (or make available, if the Rights Agent is
the transfer agent for such shares) certificates for the number of Series A
Shares (or fractions thereof) to be purchased (and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests) or
(B) if the Company shall have elected to deposit the Series A Shares issuable
upon exercise of the Rights here under with a depositary agent, requisition from
the deposi tary agent depositary receipts representing such number of one
one-hundredths of a Series A Share as are to be pur chased (in which case
certificates for the Series A Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of frac tional shares in accordance with Section 14, (iii) promptly
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, promptly deliver such cash to
or upon the order of the registered holder of such Right Certificate. In the
event that the Company is obligated to issue other shares or securities or
deliver other assets, as the case may be, pursuant to Section 11(a), the Company
will make all arrangements necessary so that such other shares, securities or
assets are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Right Certificate
shall exercise fewer than all the rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns subject to the provisions of
Section 14.
(e) Notwithstanding anything in this Agree ment to the
contrary, from and after the occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
<PAGE>
13
Acquiring Person, (ii) a transferee from an Acquiring Person (or of any such
Associate or Affiliate) who becomes a trans feree after the Acquiring Person
becomes such (other than a bona fide purchaser for value who has no knowledge
that the transferor was an Acquiring Person or an Associate or Affiliate of an
Acquiring Person) or (iii) a transferee of an Acquiring Person (or such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer that the Board has determined
is part of a plan, arrangement or understanding that has as a primary purpose or
effect the avoidance of this Sec tion 7(e), shall become null and void without
any further action, and any holder of such Rights shall thereupon have no rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to insure
that the provisions of this Section 7(e) and Section 4(b) are complied with, but
shall have no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or trans ferees hereunder.
(f) Notwithstanding anything in this Agree ment to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to pur chase set forth on the reverse side of the Right Certificate
surrendered for such exercise and (ii) provided such addi tional 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 cancella tion or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly per mitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancella tion and retirement, and the Rights Agent shall so
cancel
<PAGE>
14
and retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF SERIES A SHARES;
REGISTRATION.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Series A Shares
the number of Series A Shares that will be sufficient to permit the exercise in
full of all outstanding Rights. Prior to the occurrence of a Triggering Event,
the Company shall not be obliged to cause to be reserved and kept available out
of its authorized and unissued Common Shares or shares of preferred stock (other
than Series A Shares), any such Common Shares or any shares of preferred stock
(other than the Series A Shares) to permit exercise of outstanding Rights.
(b) If the Series A Shares issuable upon the exercise of
Rights are listed on any national securities exchange or market, the Company
shall use its best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be listed on or
included in such exchange or market upon official notice of issuance upon such
exercise.
(c) If then required by applicable law, the Company shall use
its best efforts to (i) file, as soon as practicable following the earliest date
after the occurrence of a Triggering Event as to which the consideration to be
delivered by the Company upon exercise of the Rights has been determined
pursuant to this Agreement, or as soon as is required by law following the
Separation Date, as the case may be, a registration statement under the
Securities Act of 1933 (the "ACT"), with respect to the securities purchasable
upon exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing and (iii)
cause such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities and (B) the
Final Expiration Date. If then required by applicable law, the Company will also
take such action as may be appropriate under the securities or "blue sky" laws
of the various states. The Company may temporarily suspend, for a period of time
not to exceed ninety (90) days after the date set
<PAGE>
15
forth in clause (i) of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement. Upon any such suspension,
the Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended. Notwithstand ing any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such jurisdiction shall have
been obtained.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Series A Shares delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassess able shares.
(e) The Company covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Series A Shares (or Common Shares and/or other shares or securities, as the
case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax that may be payable in respect of any transfer
or delivery of Right Certificates to a person other than, or the issuance or
delivery of certificates for the Series A Shares (or Common Shares and/or other
shares or securities, as the case may be) in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or deliver any certificates for Series A Shares (or Common
Shares and/or other shares or securities, as the case may be) upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax is
due.
Section 10. SERIES A SHARES RECORD DATE. Each person in whose name
any certificate for Series A Shares (or Common Shares and/or other shares or
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Series A
Shares (or Common Shares and/or other shares or securities, as the case may be)
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; PROVIDED,
HOWEVER, that if the date of such surrender and payment is a date upon which the
Series A Shares (or Common Shares and/or other
<PAGE>
16
shares or securities, as the case may be) transfer books of the Company are
closed, such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Series A Shares (or Common Shares and/or other shares or
securities, as the case may be) transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled (in such holder's capacity as such) to any rights of a
shareholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote any shares, to
receive dividends or other distributions with respect to any shares or to
exercise any preemptive rights with respect to any shares, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered
by each Right, and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a) (i) In the event that the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Series A Shares payable
in Series A Shares, (B) subdivide the outstanding Series A Shares, (C) combine
the outstanding Series A Shares into a smaller number of Series A Shares or (D)
issue any shares of its capital stock in a reclassification of the Series A
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Sec tion 11(a) and Section 7(e), the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportion ately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock that, if such Right had been exercised immediately prior to such
date and at a time when the Series A Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification.
(ii) In the event that:
(A) any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, at any time after the date
of this Agreement, directly or indirectly, (1) shall merge into the
Company or other wise combine with the Company and the Company shall be
the continuing or surviving corporation of such merger or combination and
the Common Shares of the Company shall remain outstanding and unchanged,
(2) shall, in one or more transactions, transfer any assets to the Company
or to any of its Subsidiaries (including, in the case of Subsidiaries, by
way of a merger or con solidation of any such Subsidiary) in exchange (in
whole or in part) for shares of any class of capital stock of the Company
or any of its Subsidiaries or for securities exercisable for or
convertible into shares of any class of capital stock of the Company or
any of its Subsidiaries or otherwise obtain from the Company or any of its
Subsidiaries, with or without considera tion, any additional shares of any
class of capital stock of the Company or any of its Subsidiaries or
securities exercisable for or convertible into shares of any class of
capital stock of the Company or any of its Subsidiaries (other than as
part of a pro rata dis tribution to all holders of such shares of any
class of capital stock of the Company), (3) shall sell, pur chase, lease,
exchange, mortgage, pledge, transfer or otherwise dispose of assets (in
one or more trans actions), to, from, with or of, as the case may be, the
Company or any of its Subsidiaries (including, in the case of
Subsidiaries, by way of a merger or consolida tion of any Subsidiary), on
terms and conditions less favorable to the Company than the Company would
be able to obtain in arm's-length negotiation with an unaffili ated third
party, other than pursuant to a transaction set forth in Section 13(a),
(4) shall receive any compensation from the Company or any of its Subsidi
aries other than compensation for full time employment as a regular
employee at rates in accordance with the Company's (or its Subsidiaries')
past practices or (5) shall receive the benefit, directly or indirectly
(except proportionately as a shareholder and except if resulting from a
requirement of law or governmental regulation), of any loans, assumptions
of loans, advances, guarantees, pledges or other financial assis tance, or
any tax credits or other tax advantage, pro vided by the Company or any of
its Subsidiaries;
(B) any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity organized,
appointed or estab lished by the Company for or pursuant to the terms of
any such plan), alone or together with its Affiliates and Associates,
shall become the Beneficial Owner of twenty percent (20%) or more of the
Common Shares then outstanding, other than pursuant to any transaction set
forth in Section 13(a); PROVIDED that a Person, alone
<PAGE>
17
or together with its Affiliates and Associates, shall not be deemed to
have become the Beneficial Owner of twenty percent (20%) or more of the
Common Shares then outstanding for the purposes of this Section
11(a)(ii)(B) solely as a result of a reduction in the number of Common
Shares outstanding due to the repurchase or other acquisition of Common
Shares by the Company, unless and until such time as such Person or any
Affiliate or Associate of such Person shall become the Beneficial Owner of
any additional Common Shares or any other Person who is the Beneficial
Owner of any Common Shares shall become an Affiliate or Associate of such
Person, if after giving effect to such additional shares or the shares
beneficially owned by such other Person, such Person, together with
Affiliates and Associates of such Person, shall be the Beneficial Owner of
twenty percent (20%) or more of the Common Shares then outstanding; or
(C) during such time as there is
an Acquiring Person, there shall be any reclassifica tion of securities
(including any reverse stock split), or recapitalization of the Company,
or any merger or consolidation of the Company with any of its Subsidiar
ies or any other transaction or series of transactions involving the
Company or any of its Subsidiaries (whether or not with or into or
otherwise involving an Acquiring Person), other than a transaction to
which Section 13(a) applies, that has the effect, directly or indirectly,
of increasing by more than one percent (1%) the proportionate share of the
outstanding shares of any class of equity securities or of securities
exercisable for or convertible into equity securities of the Company or
any of its Subsidiaries, that is directly or indirectly owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring Person;
then, and in each such case, proper provision shall be made so that each holder
of a Right, except as provided below and in Section 7(e), shall thereafter have
a right to receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of Series A Shares, and
subject to the provisions of Sec tion 11(a)(iii), such number of Common Shares
as shall equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of one one-hundredths of a Series A Share for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, and dividing that product (which, following such first
occurrence, shall be referred to as the "PURCHASE PRICE" for all purposes of
this Agreement) by (y) fifty percent (50%) of the current per share market price
of the Common Shares (determined pursuant to Section 11(d)), but not less than
<PAGE>
18
the par value thereof, on the date of such first occurrence (such number of
shares, the "ADJUSTMENT SHARES").
(iii) In the event that (x) the total
of the Common Shares that are issued but not outstanding and authorized but
unissued (excluding Common Shares reserved for issuance pursuant to the specific
terms of any inden ture, convertible security, option plan, warrant or other
agreement) is not sufficient to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii), and subject to such limitations as are
necessary to prevent a default under any agreement for money borrowed to which
the Company is a party and to comply with applicable law, then the Board shall:
(A) determine the excess of (1) the value, based upon the current per share
market price of the Common Shares (determined pursuant to Section 11(d)), of the
Adjustment Shares issuable upon the exercise of a Right (the "CURRENT VALUE")
over (2) the Purchase Price (such excess, the "SPREAD") and (B) with respect to
each Right, make adequate provision to substitute for, or provide an election to
acquire in lieu of, the Adjustment Shares, upon payment of the applicable
Purchase Price (which term shall include any reduced Purchase Price) any
combination of the following having an aggregate value equal to the Current
Value (such aggregate value to be determined by the Board based upon the advice
of a nationally recognized investment banking firm selected by the Board): (1) a
reduction in the Purchase Price, (2) Common Shares and/or other equity
securities of the Company (including, without limitation, shares or fractions of
shares of any series of preferred stock that the Board, upon approval by a
majority of the Independent Directors, has deemed are, with respect to such
share or fraction of a share of preferred stock, substantially equivalent in
value to a Common Share, which preferred stock may also include substantially
equivalent voting rights to a Common Share (such shares or fractions of shares
of preferred stock being hereinafter referred to as "COMMON SHARE
EQUIVALENTS")), and/or (3) debt securities of the Company and/or cash or other
assets; PROVIDED, HOWEVER, that if the Company shall not have made adequate
provision to deliver value pursuant to Section 11(a)(ii)(B) within thirty (30)
days following the first occurrence of a Triggering Event, then the Company
shall be obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, Common Shares (to the extent
available) and then, if necessary, Common Share equivalents or cash, which
securities and/or cash in the aggregate are equal to the Spread. If the Board
shall determine in good faith that it is likely that suffi cient additional
Common Shares could be authorized for issuance upon exercise in full of the
Rights, the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days
<PAGE>
19
following the first occurrence of a Triggering Event, in order that the Company
may seek shareholder approval for the authorization of such additional shares
(such period, as it may be extended, the "SUBSTITUTION PERIOD"). To the extent
that the Company determines that some action needs to be taken pursuant to the
first and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e), that such action shall apply uniformly to all
outstanding Rights and (y) may suspend the exercisa bility of the Rights until
the expiration of the Substi tution Period in order to seek any authorization of
additional shares and/or, for not more than ninety (90) days following the first
occurrence of a Triggering Event, to decide the appropriate form of distribution
to be made pursuant to such first sentence and to determine the value thereof.
In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspen sion is
no longer in effect. For purposes of this Sec tion 11(a)(iii), the value of the
Common Shares shall be the current per share market price (as determined
pursuant to Section 11(d)) of the Common Shares on the date of the first
occurrence of a Triggering Event.
The provisions of this Section 11(a)(iii) shall apply only to Common
Shares of the Company and shall not apply to the securities of any other Person.
(iv) In the event that the Rights
become exercisable in accordance with Section 11(a)(ii), holders of all Rights
shall thereafter have a right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, in lieu
of Series A Shares, and subject to the provisions of Section 11(a)(iii), such
number of Common Shares as shall be determined in accordance with Section
11(a)(ii).
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Series A Shares
entitling them (for a period expiring within forty-five (45) calendar days after
such record date) to subscribe for or purchase Series A Shares (or shares having
the same rights, privileges and preferences as the Series A Shares ("EQUIVALENT
PREFERRED SHARES")) or securities convertible into Series A Shares or equivalent
preferred shares at a price per Series A Share or equivalent preferred share (or
having a conversion price per share, if a security convertible into Series A
Shares or equivalent preferred shares) less than the current per share market
price of the Series A Shares (as defined in Section 11(d)) on such record date,
the Purchase Price to be in effect after such record date shall be determined by
<PAGE>
20
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Series A Shares
outstanding on such record date plus the number of Series A Shares that the
aggregate offering price of the total number of Series A Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number of
Series A Shares outstanding on such record date plus the number of additional
Series A Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such sub scription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the holders of the Rights. Series A Shares owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price that would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for the
distribution to all holders of the Series A Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of any debt securities, cash or other
assets (other than a regular quarterly cash dividend or a dividend payable in
Series A Shares) or subscription rights or warrants (excluding those referred to
in Section 11(b)), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
current per share market price of the Series A Shares (as defined in Section
11(d)) on such record date, less the fair market value (as determined in good
faith by the Board, whose determination shall be described in a statement filed
with the Rights Agent and binding on the holders of Rights) of the portion of
the assets or debt securities so to be distributed or of such subscription
rights or warrants applicable to one Series A Share and the denominator of which
shall be such current per share market price of the Series A Shares (as
determined pursuant to Section 11(d)). Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again
<PAGE>
21
be adjusted to be the Purchase Price that would then be in effect if such record
date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of the Common Shares on any date shall be
deemed to be the lesser of (x) the average of the daily closing prices per
Common Share for the thirty (30) consecutive Trading Days immediately prior to
such date or (y) the average of the daily closing prices per Common Share for
the thirty (30) consecutive Trading Days immediately following such date;
PROVIDED, HOWEVER, that in the event that the current per share market price of
the Common Shares is determined during a period following the announcement by
the issuer of such Common Shares of a dividend or distribution on such Common
Shares payable in such Common Shares or securities convert ible into such Common
Shares (other than the Rights), or any subdivision, combination or
reclassification of such Common Shares, and prior to the expiration of twenty
(20) Trading Days after the ex-dividend date for such dividend or distribution,
then, and in each such case, the current market price shall be appropriately
adjusted to reflect the current market price per Common Share, as adjusted to
take into account such subdivision, combination or reclassification. The closing
price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange, if any, on which the Common Shares are then listed
or admitted to trading or, if the Common Shares are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by The Nasdaq Stock Market ("NASDAQ") or such other system
then in use, or, if on any such date the Common Shares are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Shares selected by
the Board. The term "TRADING DAY" shall mean a day on which the principal
national securities exchange on which the Common Shares are listed or admitted
to trading is open for the transaction of business or, if the Common Shares are
not listed or admitted to trading on any national securities exchange, a
Business Day.
(ii) For the purpose of any computation
hereunder, the "current per share market price" of the Series A Shares shall be
determined in the same manner as set forth above for Common Shares in clause (i)
of this Sec tion 11(d). If the current per share market price of the
<PAGE>
22
Series A Shares cannot be determined in the manner provided above, the "current
per share market price" of the Series A Shares shall be conclusively deemed to
be the current per share market price of the Common Shares (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multi plied by one hundred (100). If neither
the Common Shares nor the Series A Shares are publicly held or so listed or
traded, "current per share market price" shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and binding on the holders of Rights.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Purchase Price; PROVIDED, HOWEVER, that any adjustments that
by reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Sec tion 11 shall be made to the nearest cent or the nearest one
one-hundredth of a Common Share or other share or one ten-thousandth of a Series
A Share, as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment provided for in this Section 11 shall be made no later
than the earlier of (i) three years from the date of the transaction that
requires such adjustment or (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a) or Section 13(a), the holder of any Right thereafter exercised shall
become entitled to receive any assets, other securities (other than shares of
capital stock of the Company) or shares of capital stock of the Company other
than Series A Shares, thereafter the amount of such assets, other securities
(other than shares of capital stock of the Company) and the number of such other
shares of capital stock so receivable upon exercise of any Right (as well as any
consideration to be paid therefor) shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Series A Shares (and the Purchase Price)
contained in this Section 11, and the provi sions of Sections 7, 9, 10 and 13
with respect to the Series A Shares shall apply on like terms to any such
assets, other securities and other shares of capital stock.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Series A Shares
purchasable from time to time hereunder upon exercise of the
<PAGE>
23
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjust ment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Series A Share (calculated to the nearest one
ten-thousandth of a Series A Share) obtained by (i) multiplying (x) the number
of one one-hundredths of a share covered by a Right immediately prior to this
adjustment by (y) the Pur chase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of Series A Shares purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of one one-hundredths of a
Series A Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become the number of Rights (calculated to the nearest one
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect immedi
ately after adjustment of the Purchase 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 Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidenc ing all the Rights to which such holders shall be entitled
<PAGE>
24
after such adjustment. Right Certificates so to be distri buted shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of Series A Shares issuable upon the exercise of the Rights,
the Right Certifi cates theretofore and thereafter issued may continue to
express the Purchase Price per one one-hundredth of a share and the number of
shares that were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then stated value, if
any, of the Series A Shares issuable upon exercise of the Rights, the Company
shall take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Series A Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 requires that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Series A Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Series A Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the con trary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board shall
determine to be advisable in order that any (i) consolida tion or subdivision of
the Series A Shares, (ii) issuance wholly for cash of any of the Series A Shares
at less than the current market price, (iii) issuance wholly for cash of Series
A Shares or securities that by their terms are convertible into or exchangeable
for Series A Shares, (iv) dividends on Series A Shares payable in Series A
Shares or (v) issuance of rights, options or warrants referred to
<PAGE>
25
in this Section 11, hereafter made by the Company to holders of its Series A
Shares shall not be taxable to such share holders.
(n) The Company covenants and agrees that it shall not, and
shall not permit any Subsidiary, at any time after the Separation Date, except
as permitted by Section 23, to (i) consolidate with, (ii) merge with or into, or
(iii) sell or transfer, in one or more transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person if at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
that would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights.
(o) The Company covenants and agrees that, after the
Separation Date, it shall not, except as permitted by Section 3(a), Section 23,
Section 24, Section 27 or Section 31, take (or permit any Subsidiary to take)
any action that at the time it is reasonably foreseeable will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights; PROVIDED, HOWEVER, that the issuance of additional Rights pursuant
hereto, including by action of the Board under Section 22, shall not be deemed
to violate this Section 11(o).
(p) Anything in this Agreement to the con trary
notwithstanding, in the event that the Company shall at any time after the
Record Date (i) declare a dividend on the outstanding Common Shares payable in
Common Shares, (ii) subdivide the outstanding Common Shares or (iii) com bine
the outstanding Common Shares into a smaller number of shares, the number of
Rights associated with each Common Share then outstanding, or issued or
delivered thereafter, shall be proportionately adjusted so that the number of
Rights thereafter associated (whether before or after the Separation Date) with
each Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immedi ately
prior to such event by a fraction the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event. For purposes of
this Section 11(p), any Common Shares issued after the Separation Date that were
not issued together with a Right (pursuant to the Preamble hereto or by action
of the Board pursuant to Section 22) shall not be counted as outstanding.
<PAGE>
26
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Sections 11 and 13, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares or
Series A Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate (or, if prior to the Separation Date, to
each holder of a certificate representing Common Shares) in accordance with
Section 25. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR
TRANSFER OF ASSETS OR EARNING POWER.
(a) In the event that, following the Shares Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company) and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company)
shall consolidate with, or merge with or into, the Company and the Company shall
be the continuing or surviving corporation of such consolidation or merger and,
in connection with such consolidation or merger, all or part of the Common
Shares shall be changed into or exchanged for stock or other securities of any
other Person or cash or any other assets or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in a single transaction or a series of related transactions, assets
or earning power aggregating more than fifty percent (50%) of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company),
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of the Principal Party, not
subject to any rights of first refusal, redemption or repurchase, as shall be
equal to the result obtained by (1) multiplying the then current Purchase Price
by the number of one one-hundredths of a Series A Share for which a Right is
exercisable immediately prior to the first occur rence of a Section 13(a) Event
(or, if any Section 11(a)(ii) Event has occurred prior to the Section 13(a)
Event, multiplying the number of such fractional shares for which a Right was
exercisable immediately prior to the first occur rence of a Section 11(a)(ii)
Event by the Purchase Price immediately prior to such first occurrence), and
dividing that product (which, following the Section 13(a) Event, shall
thereafter be referred to as the "PURCHASE PRICE" for all purposes of this
Agreement) by (2) fifty percent (50%) of the current per share market price
(determined pursuant to Section 11(d)) per Common Share (or other securities or
assets as provided for herein) of such Principal Party on the date of
consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolida tion, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 shall apply only to such Principal
Party following the first occurrence of a Section 13(a) Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise of
the Rights; and (v) the provisions of Section 11(a)(ii) and 11(a)(iii) shall
thereafter be of no effect following the first occurrence of a Section 13(a)
Event.
(b) "PRINCIPAL PARTY" shall mean:
(i) in the case of any transaction
described in clause (x) or (y) of the first sentence of Sec tion 13(a), the
Person that is the issuer of any securities into which Common Shares of the
Company are converted in such merger or consolidation, and if no securities are
so issued, the Person that is the other party to such merger or consolidation;
and
(ii) in the case of any transaction
described in clause (z) of the first sentence of Sec tion 13(a), the Person that
is the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions; PROVIDED, HOWEVER,
that in any such case, (1) if the Common Shares of such Person are not at such
time and have not been con tinuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary of another Person the Common Shares of which are and have
been so registered, "Principal Party" shall refer to such other Person; and (2)
in case such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Shares of two or more of which are and have been so
registered,
<PAGE>
27
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized Common Shares, which have not been issued or reserved for
issuance, to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will:
(i) prepare and file a registration
statement under the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and will use its
best efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the Final
Expiration Date; and
(ii) deliver to holders of the Rights
historical financial statements for the Principal Party and each of its
Affiliates that comply in all respects with the requirements for registration on
Form 10 under the Exchange Act. The provisions of this Section 13 shall
similarly apply to successive mergers or consolidations or sales or other
transfers. In the event that a Section 13(a) Event shall occur at any time after
the occurrence of a Sec tion 11(a)(ii) Event, the Rights that have not
theretofore been exercised shall thereafter become exercisable in the manner
described in Section 13(a).
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Separation Date as provided in Section 11(p), or to
distribute Right Certificates that evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the regis tered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Sec tion 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day
<PAGE>
28
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated trans action reporting system with respect to securities
listed on the principal national securities exchange, if any, on which the
Rights are then listed or admitted to trading or, if the Rights are not listed
or admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by Nasdaq or such other system then in
use or, if on any such date the Rights are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board. If on any such
date the Rights are not publicly held or so listed or traded, the current market
value of a whole Right shall mean the fair value of a whole Right as determined
in good faith by the Board, whose determination shall be described in a
statement filed with the Rights Agent and binding on the holders of Rights.
(b) The Company shall not be required to issue fractions of
Series A Shares (other than fractions that are integral multiples of one
one-hundredth of a Series A Share) or Common Share equivalents (other than
fractions that are multiples of the original fraction that created the Common
Share equivalent) upon exercise of the Rights or to distribute certificates that
evidence fractional Series A Shares (other than fractions that are integral
multiples of one one-hundredth of a Series A Share) or Common Share equivalents
(other than fractions that are multiples of the original fraction that created
the Common Share equivalent). Fractions of Series A Shares in integral multiples
of one one-hundredth of a Series A Share (or Common Share equivalents in
integral multiples of its original fraction) may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it, provided that
such agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of the Series A Shares (or Common Share equivalents). In lieu
of fractional Series A Shares that are not integral multiples of one
one-hundredth of a Series A Share (or Common Share equivalents that are not
integral multiples of its original fraction), the Company shall pay to the
registered holders of Right Certi ficates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Series A Share (or Common Share
<PAGE>
29
equivalent). For purposes of this Section 14(b), (i) the current market value of
a Series A Share shall be the current per share market price of a Series A Share
(as determined pursuant to Section 11(d)) for the Trading Day immediately prior
to the date of such exercise and (ii) the market value of a Common Share
equivalent shall be the current per share market price on such day of such
Common Share equivalent as determined in accordance with Section 11(d) as if the
Common Share equivalent were a Series A Share).
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of Common Shares upon exercise
of the Rights or to distri bute certificates that evidence fractional Common
Shares. In lieu of fractional Common Shares, the Company may pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Common Share. For purposes of this Section 14(c), the
current market value of one Common Share shall be the current per share market
price of one Common Share (as determined pursuant to Section 11(d)) for the
Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right, by the acceptance of the Rights,
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as otherwise set forth herein.
Section 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18, are vested in the respective registered holders of the Right
Certificates (and, prior to the Separation Date, the regis tered holders of any
certificate representing Common Shares); and any registered holder of any Right
Certificate (or, prior to the Separation Date, of any other certificate
representing Common Shares), without the consent of the Rights Agent or of the
holder of any other Right Certificate (or, prior to the Separation Date, of the
Common Shares), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual
<PAGE>
30
or threatened violations of the obligations of any Person subject to, this
Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Separation Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Separation Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer and with appropriate
forms and certificates fully executed; and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certifi cate (or, prior to the Separation Date,
the associated Common Share certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwith standing any notations of
ownership or writing on the Right Certificates or the associated Common Share
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.
(d) Notwithstanding anything in this Agree ment to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Series A Shares, or any
other shares or securities of the Company, that may at any time be issuable on
the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of any
Right Certificate, as such, any of the rights of a
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31
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in Section 25), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connec tion with the acceptance and administration of
this Agree ment, including the costs and expenses of defending against any claim
of liability in the premises.
(b) The Rights Agent shall be fully indemni fied against,
shall be protected from, and shall incur no liability or expense (including
without limitation attor neys' fees and expenses) for, or in respect of, any
action taken, suffered or omitted by it in connection with, its administration
of this Agreement in reliance upon any Right Certificate or certificate for the
Series A Shares, Common Shares or for other shares or securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, instruction, consent, certificate, statement or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of its counsel as set forth in Section 20.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF
NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the
<PAGE>
32
successor to the Rights Agent under this Agreement without the execution or
filing of any papers or any further act on the part of any of the parties
hereto; PROVIDED, HOWEVER, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21. In
case at the time such successor Rights Agent shall succeed to the agency created
by this Agreement, any of the Right Certificates shall have been countersigned
but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predeces sor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authori zation and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certi ficate signed by any one of the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President,
<PAGE>
33
the Treasurer or the Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable here under to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execu tion hereof by the Rights Agent) or in respect of the
valid ity or execution of any Right Certificate (except its coun tersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any adjustment required under the provi sions of
Sections 11 or 13 or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Series A Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Series A Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or per forming
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it
<PAGE>
34
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agree ment. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certifi cate surrendered to
the Rights Agent for exercise or trans fer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2 on
such certificate attached to the form of assignment or form of election to
purchase, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be dis charged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares and Series A Shares by registered or
certified mail. In such event, the Company shall give written notice of such
resignation to the holders of the Right Certificates by first-class mail. The
Company
<PAGE>
35
may remove the Rights Agent or any successor Rights Agent upon thirty (30) days'
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Shares and Series A Shares
by registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, that is authorized under
such laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and that has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000. After appoint ment, 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 assets at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and Series A Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the suc cessor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by the Board to reflect any adjustment or change in
the Purchase Price per share and the number or kind or class of shares or other
securities or assets purchasable under the Right Certificates made in accordance
with the provisions of this Agreement. In
<PAGE>
36
addition, the Company may, if deemed necessary or appropriate by the Board,
issue Right Certificates in connection with the issuance or sale of Common
Shares following the Separation Date.
Section 23. REDEMPTION.
(a) (i) The Board may, at its option, at any time prior to the
earlier of (A) the close of business on the tenth Business Day (or such later
date as the Board may determine) following any Shares Acquisition Date or (B)
the Final Expiration Date, redeem all but not less than all the then outstanding
Rights at a redemption price of One Cent ($0.01) per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "REDEMPTION PRICE"); PROVIDED, HOWEVER, that if, following
the occurrence of a Shares Acquisition Date and following the expiration of the
right of redemption hereunder (other than a Springing Right of Redemption, as
defined below) but prior to any Triggering Event, each of the following shall
have occurred and remain in effect: (x) a Person who is an Acquiring Person
shall have transferred or otherwise disposed of a number of Common Shares in a
transaction, or series of transactions, that did not result in the occurrence of
a Triggering Event, such that such Person is thereafter a Beneficial Owner of
ten percent (10%) or less of the outstanding Common Shares; (y) there are no
other Persons, immediately following the occurrence of the event described in
clause (x) above, who are Acquiring Persons; and (z) the transfer or other
disposition described in clause (x) above was other than pursuant to a
transaction, or series of transactions, that directly or indirectly involved the
Company or any of its Subsidiaries, then the right of redemption shall be
reinstated and thereafter be subject to the provisions of this Section 23. The
reinstated right of redemption referred to in the preceding sentence and the
reinstated right of redemption referred to in Sections 23(a)(ii) and 31 is
herein called the "SPRINGING RIGHT OF REDEMPTION." Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
pursuant to Section 11(a)(ii) at a time when the Rights are then redeemable
hereunder.
(ii) Following the occurrence of a
Shares Acquisition Date but prior to any Section 13(a) Event, the Board may also
redeem all but not less than all of the then outstanding Rights at the
Redemption Price in connection with any event of the type specified in Sec tions
11(a)(ii)(A)(1) or 13(a) not involving an Acquiring Person or an Affiliate or
Associate of an Acquiring Person
<PAGE>
37
(other than as a holder of Common Shares being treated like other such holders
generally).
(b) In the case of a redemption permitted under Section
23(a)(i), immediately upon the action of the Board ordering the redemption of
the Rights, evidence of which shall have been filed with the Rights Agent and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. In the case of a redemption permitted
only under Section 23(a)(ii), evidence of which shall have been filed with the
Rights Agent, the right to exercise the Rights will terminate and represent only
the right to receive the Redemption Price only after ten (10) Business Days
following the giving of notice of such redemption to the holders of such Rights
if no Section 11(a)(ii) Event shall have occurred, and, if such event shall have
occurred, upon the later of ten (10) Business Days following the giving of such
notice or the expiration of any period during which the Rights under Section
11(a)(ii) may be exercised. Within ten (10) Business Days after the action of
the Board ordering the redemption of the Rights, the Company shall give notice
of such redemption to the holders of the then outstanding Rights by mailing such
notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Separation Date, on the
registry books of the Transfer Agent for the Common Shares. Any notice that is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption shall state the
method by which the payment of the Redemption Price will be made.
Section 24. EXCHANGE.
(a) The Board may, at its option, at any time after the right
of the Company to redeem the Rights has expired or terminated (although such
right may be subject to restoration as a Springing Right of Redemption),
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e)) for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "EXCHANGE RATIO"). Notwithstanding the foregoing,
the Board shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary or the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Shares for or pursuant to the terms of any such plan),
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38
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of fifty percent (50%) or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board ordering the
exchange of any Rights pursuant to Sec tion 24(a) and without any further action
and without any notice, the right to exercise such Rights shall terminate and
the only right thereafter of a holder of such Rights shall be to receive that
number of Common Shares equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give notice to the
Rights Agent and public notice of any such exchange; PROVIDED, HOWEVER, that
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice that is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of Rights for Common Shares will be effected and, in the event of any partial
exchange, the number of Rights that will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights that
have become void pursuant to the provisions of Section 7(e)) held by each holder
of Rights.
(c) In any exchange pursuant to this Sec tion 24, the Company,
at its option, may substitute Common Share equivalents for Common Shares.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certifi cates that evidence fractional Common
Share equivalents (except as hereinafter provided) or fractional Common Shares,
but if the exchange is for Common Share equivalents, the Company shall be
obligated to issue fractional shares so long as any fraction of a Common Share
equivalent so to be issued is at least equal to, or is a multiple of, the
original fraction that created the Common Share equivalent. In lieu of such
fractional shares, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional shares would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole share. For the purposes of this Section 24(d), (i) the current
market value of a whole Common Share shall be the current per share market price
of the Common Shares determined pursuant to Section 11(d) for the Trading Day
immediately following the day of the public announcement by the Company that an
exchange is to be effected pursuant to this Section 24 and (ii) the current
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39
market value of a Common Share equivalent shall be the current per share market
price on such day of such Common Share equivalent as determined pursuant to
Section 11(d) as if the Common Share equivalent were a Series A Share.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Separation Date, (i) to pay any dividend payable in stock of any class to the
holders of Series A Shares or to make any other distribution to the holders of
Series A Shares (other than a regular quarterly cash divi dend), (ii) to offer
to the holders of its Series A Shares rights or warrants to subscribe for or to
purchase any additional Series A Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of
Series A Shares (other than a reclassification involving only the subdivision of
outstand ing Series A Shares), (iv) to effect any consolidation or merger into
or with, or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of more than fifty percent (50%) of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to any other Person or (v)
to effect the liquidation, dissolution or winding up of the Company, then, in
each such case, the Company shall give to each holder of a Right Certificate, to
the extent feasible and in accordance with Section 26, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the Common Shares and/or Series A Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least twenty (20) days prior to the record date
for determining holders of the Series A Shares for purposes of such action, and
in the case of any such other action, at least twenty (20) days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the Common Shares and/or Series A Shares, whichever shall be
the earlier.
(b) In case of the occurrence of a Sec tion 11(a)(ii) Event,
then, in any such case, (i) the Company shall as soon as practicable thereafter
give to each holder of a Right Certificate, to the extent feasible and in
accordance with Section 26, a notice of the occurrence of such event, which
shall specify the event and the conse quences of the event to holders of Rights
under Sec tion 11(a)(ii), and (ii) all references in the preceding
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40
paragraph to Series A Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other shares or securities.
Section 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Chic by H.I.S, Inc.
1372 Broadway
New York, NY 10018
Attention: Chief Executive Officer
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Continental Stock Transfer
& Trust Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Rights Agent.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Separation
Date, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing Common Shares unless such approval is
required by Section 29(b), except for a supplement or amendment that would
change the Redemption Price, Final Expiration Date, Purchase Price, or number of
fractional Series A Shares for which a Right is then exercisable; PROVIDED,
HOWEVER, that nothing in this Section 27 shall be deemed to derogate from the
right of the Board to reduce the Purchase Price under Section 11(a)(iii). From
and after the Separation Date (and at any time after the occurrence of a Shares
Acquisition Date subsequent to the occurrence of a
<PAGE>
41
Springing Right of Redemption), the Company and the Rights Agent shall, if the
Company shall so direct, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein that may be defective or
inconsistent with any other provisions herein, (iii) to extend the period of
redemption provided in Section 23 (which amendment shall set forth a date after
which the Rights are no longer redeemable ("EXTENSION DATE"), unless the Rights
are further amended prior to the Extension Date to further extend the time dur
ing that the Rights are redeemable, and which amendment may provide for the
termination of the right of redemption prior to any Extension Date) or (iv) to
change or supplement the provisions hereunder in any manner that the Company may
deem necessary or desirable and that shall not adversely affect the interests of
the holders of Right Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); PROVIDED FURTHER, that this
Agreement may not be supplemented or amended in any way after the period for
redemption of the Rights pursuant to Section 23 shall have expired unless there
shall thereafter arise and be in effect a Springing Right of Redemption. Upon
the delivery of a certificate from an appropriate officer of the Company, which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.
Prior to the Separation Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Shares.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS.
(a) For all purposes of this Agreement, any calculation of the
number of Common Shares outstanding at any particular time and any determination
of the particular percentage of such outstanding Common Shares of which any
Person is the Beneficial Owner shall be made in accordance with the provisions
of Rule 13d-3(d)(1)(i) of the Rules as in effect as of the date hereof. Subject
to the provisions of Section 29(b), the Board (where specifically provided for,
with the concurrence of the Independent Directors) shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or the Company (where specifically
provided for, with the concurrence of the
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42
Independent Directors), or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agree ment). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (ii) below, all omissions with
respect to the foregoing) that are done or made by the Board (where specifically
provided for, with the concurrence of the Independent Directors), in good faith,
shall (i) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Right Certificates and all other parties and (ii) not subject the
Board or the Independent Directors to any liability to the holders of the Right
Certificates.
(b) Notwithstanding anything in this Agree ment to the
contrary, any actions by the Board pursuant to Section 3(a), Section 11(a)(iii),
Section 23, Section 24, Section 27 or Section 31, and any determinations
concerning the occurrence of any Triggering Event, shall require the concurrence
of such number of Independent Directors as shall constitute a majority of the
Independent Directors then in office; PROVIDED, HOWEVER, that any such action
approved by the Board without such required concurrence of Independent Directors
(whether or not there shall then be Independent Directors in office) shall
nevertheless be, and be deemed to be, duly approved if such action is approved
(at a meeting of stockholders duly called and held upon at least thirty (30)
days' prior written notice to the stockholders) by the affirmative votes of
two-thirds of all outstanding Common Shares including the affirmative votes of
the holders of at least two-thirds of all outstanding Common Shares held as of
the record date for such meeting by persons other than an Acquiring Person or
any Affiliate or Associate of such Acquiring Person.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Separation Date, the registered holders of Common Shares) any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Separation
Date, the registered holders of Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a
<PAGE>
43
court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; PROVIDED, HOWEVER, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforce able and the Board determines in its good faith
judgment that severing the invalid language from this Agreement would adversely
affect the purpose or effect of this Agreement, the right of redemption set
forth in Section 23 shall be reinstated and shall not expire until the close of
business on the tenth day following the date of such determination by the Board.
Section 32. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to con tracts made and to be
performed entirely within such State.
Section 33. CONSEQUENTIAL DAMAGES. Neither party to this Agreement
shall be liable to the other party for consequential damages.
Section 34. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original and all such counterparts shall together constitute but
one and the same instrument.
Section 35. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience of reference
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
<PAGE>
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
CHIC BY H.I.S, INC.
By /s/ Burton Rosenberg
----------------------------
Name: Burton Rosenberg
Title: Chairman & CEO
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By /s/ William F. Seegraber
----------------------------
Name: William F. Seegraber
Title: Vice President
<PAGE>
EXHIBIT A
CHIC BY H.I.S, INC.
CERTIFICATE OF DESIGNATION
in respect of
SERIES A PREFERRED STOCK
------------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
------------------------
The undersigned, being the Chairman and Chief Executive Officer of
Chic by H.I.S, Inc. (the "CORPORA TION"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, hereby certifies
that, pursuant to the provisions of Section 151 of the General Corporation Law
of the State of Delaware, the Board of Directors of the Corporation duly adopted
the following resolution at a meeting of said Board of Directors duly called and
held on February 28, 1997, which resolution remains in full force and effect as
of the date hereof:
RESOLVED, that the Board of Directors of the Corporation,
pursuant to authority expressly vested in it by the provisions of the
Corporation's Certificate of Incorporation, as amended (the "CHARTER"),
hereby establishes a series of the Preferred Stock, par value $1.00 per
share, of the Corporation and fixes the number of shares of such series
and the powers, desig nations, preferences and relative, participating,
optional or other rights of such series, and the quali fications,
limitations or restrictions thereof, as follows:
The first series of Preferred Stock, par value $1.00 per share, of
the Corporation shall be, and hereby is, designated "Series A Preferred
Stock" (the "SERIES A SHARES"), and the number of shares constitut ing
such series shall be One Hundred and Ten Thousand (110,000). The relative
rights and preferences of the Series A Shares shall be as follows:
Section a. DIVIDENDS AND DISTRIBUTIONS.
(1) Subject to the prior and superior rights of the holders of any
shares of any series of stock ranking prior and superior to the Series A
Shares with respect to dividends, the holders of Series A Shares, in
preference to the holders of Common Stock, par value
<PAGE>
A-2
$.01 per share, of the Corporation (the "COMMON STOCK"), and of any other
junior stock, shall be entitled to receive, when and as declared by the
Board of Directors, out of any funds lawfully available therefor, cash
dividends thereon, payable quarterly, from the date of issuance thereof,
on the tenth day of January, April, July and October in each year (each
such date being referred to herein as a "QUARTERLY DIVIDEND PAYMENT
DATE"), commencing on the first Quarterly Dividend Payment Date after the
first issuance of a Series A Share, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) One Dollar ($1.00) or (b)
subject to the provisions for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend or distribution on shares of
Common Stock payable in shares of Common Stock, or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a
Series A Share. In the event the Corporation shall at any time after March
17, 1997 (i) declare any dividend on the Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine
the out standing Common Stock into a smaller number of shares, then in
each such case the amounts to which holders of Series A Shares were
entitled immediately prior to such event under clause (a) and clause (b)
of the preceding sentence shall be adjusted by multiplying each such
amount by a fraction the numerator of which is the number of shares of
Common Stock and outstanding imme diately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(2) The Corporation shall declare a dividend or distribution on the
Series A Shares as provided in paragraph (1) of this Section immediately
after it declares a dividend or distribution on the Common Stock (other
than a dividend or distribution payable in shares of Common Stock);
PROVIDED, HOWEVER, that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of One Dollar ($1.00) per share on the Series A
Shares shall nevertheless be declared and payable on such
<PAGE>
A-3
subsequent Quarterly Dividend Payment Date; and PROVIDED FURTHER, that
nothing contained in this paragraph (2) shall be construed so as to
conflict with any provision relating to the declaration of dividends
contained in the Charter.
(3) Dividends shall begin to accrue and be cumulative on outstanding
Series A Shares from the Quarterly Dividend Payment Date next preceding
the date of issue of such Series A Shares, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series A Shares entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the Series A Shares
in an amount less than the total amount of such dividends at the time
accrued and pay able on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders
of Series A Shares entitled to receive payment of a dividend or
distribution declared thereon.
Section b. REDEMPTION. The Series A Shares are not redeemable.
Section c. LIQUIDATION, DISSOLUTION OR WINDING UP.
(1) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (upon liquidation, dissolution or winding up) to the
Series A Shares unless, prior thereto, the holders of Series A Shares
shall have received an amount per share (rounded to the nearest cent)
equal to the greater of (a) $0.01 or (b) subject to the provisions for
adjustment set forth in the last sentence of Section a(1) above, 100 times
the aggregate per share amount to be distributed to the holders of Common
Stock, plus in each case an amount equal to all accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date
of such payment (the "SERIES A LIQUIDATION PREFERENCE"). Following the
payment of the full amount
<PAGE>
A-4
of the Series A Liquidation Preference, no additional distributions shall
be made to the holders of Series A Shares unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share
(the "COMMON ADJUSTMENT") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted
as set forth in paragraph (3) of this Section c to reflect such events as
stock splits, stock dividends and recapitalizations with respect to the
Common Stock) (such number in clause (ii), the "ADJUSTMENT NUMBER").
Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjust ment in respect of all outstanding Series
A Shares and shares of Common Stock, respectively, holders of Series A
Shares and holders of shares of Common Stock shall receive their ratable
and proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to one with respect to the Series A Shares
and the shares of Common Stock, on a per share basis, respectively.
(2) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquida tion preferences of all other series of preferred stock,
if any, that rank on a parity with the Series A Shares, then all such
available assets shall be distri buted ratably to the holders of the
Series A Shares and the holders of such parity shares in proportion to
their respective liquidation preferences.
(3) In the event the Corporation shall at any time after March 17,
1997 (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each
such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immedi ately after such event and the denominator of which is the number
of shares of Common Stock that were out standing immediately prior to such
event.
Section d. SINKING FUND. The Preferred Shares shall not be entitled
to the benefit of any sinking fund for the redemption or purchase of such
shares.
<PAGE>
A-5
Section e. CONVERSION.
(1) Subject to paragraph (2) of this Section e,
the Preferred Shares shall not be convertible.
(2) In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other shares or securities, cash
and/or any other assets, then in any such case the Series A Shares shall
at the same time be similarly exchanged or changed in an amount per share
(subject to the provi sion for adjustment hereinafter set forth) equal to
100 times the aggregate amount of shares, securities, cash and/or any
other assets (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any divi dend on the Common
Stock payable in shares of Common Stock or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares
of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of Series A
Shares shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immedi ately after such event, and the denominator of which is the number
of shares of Common Stock that were out standing immediately prior to such
event.
Section f. VOTING RIGHTS.
(1) The holders of Series A Shares shall have no voting rights
except as provided by Delaware statutes or by paragraph (2) of this
Section f.
(2) So long as any Series A Shares shall be out standing, and in
addition to any other approvals or consents required by law, without the
consent of the holders of 66-2/3% of the Series A Shares outstanding as of
a record date fixed by the Board of Directors, given either by their
affirmative vote at a special meeting called for that purpose, or, if
permitted by law, in writing without a meeting:
(i) The Corporation shall not sell, transfer or lease all or
substantially all the properties and assets of the Corporation;
PROVIDED, HOWEVER, that nothing herein shall require the consent of
the holders of Series A Shares for or in respect
<PAGE>
A-6
of the creation of any mortgage, pledge, or other
lien upon all or any part of the assets of the
Corporation.
(ii) The Corporation shall not effect a merger or consolidation
with any other corporation or corporations unless as a result of
such merger or consolidation and after giving effect thereto holders
of Series A Shares are entitled to receive a per share amount and
type of consideration equal to 100 times the per share amount and
type of con sideration received by holders of shares of Common
Stock, or (1) either (A) the Corporation shall be the surviving
corporation or (B) if the Corpora tion is not the surviving
corporation, the succes sor corporation shall be a corporation duly
organized and existing under the laws of any state of the United
States of America or the District of Columbia, and all obligations
of the Corporation with respect to the Series A Shares shall be
assumed by such successor corporation, (2) the Series A Shares then
outstanding shall continue to be outstanding and (3) there shall be
no altera tion or change in the designation or the pre ferences,
relative rights or limitations applic able to outstanding Series A
Shares prejudicial to the holders thereof.
(iii) The Corporation shall not amend, alter or repeal any of the
provisions of its Charter in any manner that adversely affects the
relative rights, preferences or limitations of the Series A Shares
or the holders thereof.
Section g. CERTAIN RESTRICTIONS.
(1) Whenever quarterly dividends or other divi dends or
distributions payable on the Series A Shares as provided in Section a are
in arrears, thereafter and until all accrued and unpaid dividends and
distribu tions, whether or not declared, on Series A Shares out standing
shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (as to dividends) to the Series A
Shares;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking
<PAGE>
A-7
on a parity (as to dividends) with the Series A Shares, except
dividends paid ratably on the Series A Shares and all such parity
stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (as to dividends) to the Series A
Shares; PROVIDED, HOWEVER, that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation,
ranking junior (as to dividends) to the Series A Shares; or
(iv) purchase or otherwise acquire for con sideration any Series
A Shares, or any shares of stock ranking on a parity (as to
dividends) with the Series A Shares, except in accordance with a
purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the
respective annual dividend rates and other rela tive rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(2) The Corporation shall not permit any sub sidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under para graph
(1) of this Section g, purchase or otherwise acquire such shares at such
time and in such manner.
Section h. FRACTIONAL SHARES. The Corporation may issue fractions
and certificates representing fractions of Series A Shares in integral multiples
of 1/100th of a Series A Share, or in lieu thereof, at the election of the Board
of Directors of the Corporation at the time of the first issue of any Series A
Shares, evidence such fractions by depositary receipts, pursuant to an
appropriate agreement between the Corporation and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all rights, privi leges and preferences to which they would
be entitled as beneficial owners of Series A Shares. In the event that
fractional Series A Shares are issued, the holders thereof
<PAGE>
A-8
shall have all the rights provided herein for holders of full Series A Shares in
the proportion that such fraction bears to a full share.
IN WITNESS WHEREOF, Chic by H.I.S, Inc. has caused this Statement to
be signed under its corporate seal by its Chairman and Chief Executive Officer
and attested by its Secretary as of the 28th day of February, 1997.
CHIC BY H.I.S, INC.
By
----------------------------
Burton M. Rosenberg
Chairman and Chief
Executive Officer
ATTEST:
- ----------------------
Stuart Jaeger
Secretary
<PAGE>
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- Rights
------------
NOT EXERCISABLE AFTER MARCH 17, 2007 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT (AS HEREINAFTER DEFINED)) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO
WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS
RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BE OR BECOME VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE AGREEMENT.]*/
Right Certificate
CHIC BY H.I.S, INC.
This certifies that , or registered
-----------------------------
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of February 28, 1997 (the "RIGHTS
AGREEMENT"), between Chic by H.I.S, Inc., a Delaware corporation (the
"COMPANY"), and Continental Stock Transfer & Trust Company, a New York
corporation (the "RIGHTS AGENT"), to purchase from the Company at any time after
the Separation Date (as such term is defined in the Rights Agreement) and prior
to the close of business (5:00 PM New York, New York time) on March 17, 2007 at
the office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-hundredth of a fully paid, nonassessable
share of Series A Preferred Stock, par value $1.00 per share ("SERIES A SHARE")
of the Company, at a purchase price of Thirty Dollars ($30) per one
one-hundredth of a share (the "PURCHASE PRICE"), upon
- --------
*/ The portion of this legend in brackets shall be inserted if applicable and
shall replace the preceding sentence.
<PAGE>
B-2
presentation and surrender of this Right Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of rights
evidenced by this Right Certificate (and the number of shares that may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of March 17, 1997
based on the Series A Shares as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (a) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (b) a transferee of any such Acquiring Person, Associate or
Affiliate (other than a bona fide purchaser for value who has no knowledge that
the transferor was an Acquiring Person or an Associate or Affiliate of an
Acquiring Person) or (c) under certain circumstances specified in the Rights
Agreement, a transferee of a person or entity who, after such transfer, became
an Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such rights from and after the occurrence
of any such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of Series A Shares or other shares, securities or other assets
that may be purchased upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events.
The Board may, at its option, at any time after the right of the
Company to redeem the Rights has expired or terminated (with certain exceptions)
exchange all or part of the then outstanding and exercisable Rights (other than
those held by the Acquiring Person and Affiliates and Associates of the
Acquiring Person) for Common Shares (as such term is defined in the Rights
Agreement) at an exchange ratio of one Common Share per Right, as adjusted. In
any such exchange, the Company, at its option, may substitute Common Share
equivalents for Common Shares. Immediately upon the action of the Board ordering
an exchange of the Rights, the Rights affected by such order will no longer be
exercisable and thereafter the only right of the holders of such Rights will be
to receive the Common Shares (or Common Share equivalents) issuable by the
Company in exchange for such Rights.
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement,
<PAGE>
B-3
which terms, provisions and conditions are hereby incorpo rated 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, obliga
tions, duties and immunities hereunder of the Rights Agent, the Company and the
holders of the Right Certificates, which limitations of rights include the
temporary suspension of the exercisability of such Rights for not more than
ninety (90) days at the election of the Company and under certain circumstances
specified in such Rights Agreement. Copies of the Rights Agreement are on file
at the above-mentioned office of the Rights Agent and are also available upon
written request to the Company.
This Right Certificate, with or without other Right Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Series A Shares as the Rights evidenced by
the Right Certi ficate or Right Certificates surrendered shall have entitled
such holder to purchase. If the Rights evidenced by this Right Certificate shall
be exercised in part, the holder shall be entitled to receive upon surrender
hereof another Right Certificate or Right Certificates for the number of whole
Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed at a redemption price of One Cent
($0.01) per Right (the "REDEMPTION PRICE") at any time prior to the close of
business ten (10) Business Days (as such term in defined in the Rights
Agreement) after the Shares Acquisition Date (as such term is defined in the
Rights Agreement) unless the period for redemption is extended as permitted in
the Rights Agreement. Thereafter, the Board of Directors of the Company
("BOARD") may only redeem the Rights in certain specified circumstances,
including in connection with certain events not involving an Acquiring Person or
an Affiliate or Associate of an Acquiring Person. In addition, the Company's
right of redemption may be reinstated if, among other things, an Acquiring
Person reduces its beneficial ownership to ten percent (10%) or less of the
outstanding Common Shares of the Company in a transaction or series of
transactions not involving the Company. Immediately upon the action of the Board
ordering redemption of the Rights, the Rights will no longer be exercisable,
except where the redemption is made in connection with an event not involving an
Acquiring Person or Affiliate or Associate of an Acquiring Person (in which
circumstance the effective time of the redemption may be deferred); and, in
<PAGE>
B-4
general, thereafter the only right of the holders of the Rights evidenced hereby
will be to receive the Redemption Price.
The terms of the Rights evidenced by this Certifi cate may be
supplemented or amended without the approval of any holder of the Rights (or the
Common Shares) as set forth in the Rights Agreement.
No fractional Series A Shares will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions that are integral
multiples of one one-hundredth of a Series A Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Series A
Shares or of any other securities of the Company that may at any time be
issuable on the exercise hereof, nor shall anything con tained 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 stock holders at any
meeting thereof, or to give or withhold con sent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Rights evidenced by this Right Certificate shall
have been exer cised as provided in the Rights Agreement.
<PAGE>
B-5
This Right Certificate shall not be valid or obli gatory for any
purpose until it shall have been counter signed by the Rights Agent.
WITNESS the facsimile signatures of the proper officers of the
Company.
Dated:
-----------
CHIC BY H.I.S, INC.
By
-----------------------
Name:
Title:
Attest:
-------------------------
Name:
Title:
(Corporate Seal)
Countersigned
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY, as
Rights Agent
By:
-------------------
Authorized Officer
<PAGE>
B-6
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Right Certificate.)
FOR VALUE RECEIVED hereby
-----------------------------------------------
sells, assigns and transfers unto
----------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of Transferee)
- --------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint attorney, to
------------------
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated:
---------------
-------------------------
Signature
Signature Guaranteed:
<PAGE>
B-7
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) to the best knowledge of the undersigned, it [ ] did [ ] did
not acquire the Rights evidenced by this Right Certificate from any Person who
is, was or subsequently became an Acquiring Person or an Affiliate or Associate
of an Acquiring Person.
Dated:
-------------- ------------------------------
Signature
NOTICE
The signature(s) to the foregoing Assignment and Certificate must
correspond to the name(s) as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
B-8
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented
by the Right Certificate.)
To: CHIC BY H.I.S, INC.
The undersigned hereby irrevocably elects to exercise
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Rights represented by this Right Certifi cate to purchase the Series A Shares
(or fractions thereof) issuable upon the exercise of such Rights (or such other
securities of the Company or of any other entity that may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of:
Please insert social security
or other identifying number:
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(Please print name and address)
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If such number of Rights shall not be all the Rights evidenced by
this Right Certificate, a new Right Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:
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(Please print name and address)
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Dated:
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Signature
Signature Guaranteed:
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B-9
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certifi cate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined in the Rights Agreement);
(2) to the best knowledge of the undersigned, it [ ] did [ ] not
acquire the Rights evidenced by this Right Certificate from any Person who is,
was or became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated:
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Signature
NOTICE
The signature(s) to the foregoing Election to Purchase and
Certificate must correspond to the name(s) as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.
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EXHIBIT C
CHIC BY H.I.S, INC.
Summary of Rights to Purchase Series A Preferred Stock
On February 28, 1997 the Board of Directors of Chic by H.I.S, Inc.
(the "COMPANY") declared a dividend distribution of one Right for each
outstanding share of Common Stock, par value $.01 per share (a "COMMON SHARE"),
of the Company to stockholders of record at the close of business on March 17,
1997 (the "RECORD DATE"). Except as set forth below, each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Preferred Stock, par value $1.00 per share ("SERIES A SHARES"), at a
price of $30.00 (the "PURCHASE PRICE"), subject to adjustment. The Purchase
Price shall be paid in cash. The description and terms of the Rights are set
forth in a Rights Agreement (the "RIGHTS AGREEMENT") between the Company and
Continental Stock Transfer & Trust Company, as Rights Agent.
Initially, no separate Right Certificates will be distributed. Until
the earlier to occur of (a) 10 Business Days (or such later date as the Board
may determine) following a public announcement that a person or group of
affiliated or associated persons (an "ACQUIRING PERSON") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding Common Shares or (b) 15 Business Days (or such later date as the
Board may determine) following the commencement of a tender offer or exchange
offer if, upon consummation hereof, such person or group would be the beneficial
owner of 20% or more of such outstanding Common Shares (the earlier of such
dates being called the "SEPARATION DATE"), the Rights will be evidenced, with
respect to any Common Shares outstanding as of the Record Date, by the
certificates representing such Common Shares. Any determination by the Board to
postpone the Separation Date would require the concurrence of a majority of the
Independent Directors (those members of the Board who are neither officers or
employees of the Company or any of its subsidiaries nor Acquiring Persons or
their Affiliates, Associates, nominees or representatives, and who either (a)
were members of the Board before any person became an Acquiring Person or (b)
are the successors of such members and were recommended for election by a
majority of the Independent Directors then on the Board). The Rights Agreement
excludes from the definition of "Acquiring Person" all persons who, on the date
of the Rights Agreement, beneficially own 15% or more of the outstanding Common
Shares (provided such persons do not subsequently acquire an additional 1% of
the outstanding Common Shares other than by
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C-2
exercise of options or warrants held by such persons on the date of the Rights
Agreement), as well as persons who become the beneficial owner of 15% or more of
the outstanding Common Shares in a transaction approved in advance by a majority
of the Independent Directors.
The Rights Agreement provides that, until the Separation Date, the
Rights will be transferred with, and only with, Common Share certificates. From
as soon as practicable after the Record Date and until the Separation Date (or
earlier redemption or expiration of the Rights), new Common Share certificates
issued after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Separation Date (or earlier redemption or expira tion of the Rights), the
surrender for transfer of any cer tificates for Common Shares outstanding as of
the Record Date will also constitute the transfer of the Rights associated with
the Common Shares represented by such certi ficates. As soon as practicable
following the Separation Date, separate certificates evidencing the Rights
("RIGHT CERTIFICATES") will be mailed to holders of record of the Common Shares
as of the close of business on the Separation Date and, thereafter, such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Separa tion Date and will
expire on March 17, 2007, unless earlier redeemed by the Company as described
below.
In the event that a person (other than the Company and its
affiliates) becomes the beneficial owner of 20% or more of the then outstanding
Common Shares or, at any time following the Separation Date, (a) the Company is
the surviving corporation in a merger with an Acquiring Person and the Company's
Common Shares are not changed or exchanged, (b) an Acquiring Person engages in
one or more "self-dealing" transactions as set forth in the Rights Agreement or
(c) during such time as there is an Acquiring Person, an event occurs that
results in such Acquiring Person's ownership interest being increased by more
than 1%, the Rights Agreement provides that proper provision shall be made so
that each holder of a Right will thereafter be entitled to receive, upon
exercise, Common Shares having a value equal to two times the exercise price of
the Right. The Rights Agreement permits the Board, in lieu of issuing Common
Shares upon payment of the Purchase Price, to elect to distribute to holders of
Rights any combination of Common Shares, cash, other assets and/or other shares
or securities of the Company or any subsidiary of the Company, and in such
connection to reduce the Purchase Price, so that each Rights holder receives,
upon exercise of a Right, a total package
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C-3
equal in value to (i) two times the Purchase Price less (ii) the amount of the
reduction in the Purchase Price, if any. However, Rights are not exercisable
following the occurrence of any of the events set forth above until such time as
the Rights are no longer redeemable by the Company as set forth below.
Notwithstanding anything herein to the contrary, following the
occurrence of any of the events set forth in the immediately preceding paragraph
of this Summary, any Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person shall
immediately become null and void.
In the event that, at any time following the first date of public
announcement by the Company or an Acquiring Person indicating that an Acquiring
Person has become such (the "SHARES ACQUISITION DATE"), (a) the Company engages
in a merger or other business combination transaction in which the Company is
not the surviving corporation, (b) the Company engages in a merger or other
business combination transaction with another person in which the Company is the
surviving corporation, but in which its Common Shares are changed or exchanged
or (c) 50% or more of the Company's assets or earning power is sold or
transferred, the Rights Agreement provides that proper provision shall be made
so that each holder of a Right shall thereafter have the right to receive, upon
the exercise thereof at the then current exercise price of the Right, common
shares of the acquiring company having a value equal to two times the exercise
price of the Right.
The Board may, at its option, at any time after the right of the
Board to redeem the Rights has expired or terminated (with certain exceptions),
exchange all or part of the then outstanding and exercisable Rights (other than
those held by the Acquiring Person and Affiliates and Associates of the
Acquiring Person) for Common Shares or Common Share equivalents, at a ratio of
one Common Share or one Common Share equivalent per Right, as adjusted;
PROVIDED, HOWEVER, that such Right cannot be exercised once a Person, together
with such Person's Affiliates and Associates, becomes the owner of 50% or more
of the outstanding Common Shares. If the Board authorizes such an exchange, the
Rights will immediately cease to be exercisable.
The Purchase Price payable, and the number of Series A Shares or
other shares, securities or assets issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (a) in the event of
a dividend of Series A Shares on, or a subdivision,
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C-4
combination or reclassification of, the Series A Shares, (b) upon the grant to
holders of the Series A Shares of certain rights or warrants to subscribe for
Series A Shares or securities convertible into Series A Shares at less than the
current market price of the Series A Shares or (c) upon the distribution to
holders of the Series A Shares of debt securities or assets (excluding regular
quarterly cash dividends and dividends payable in Series A Shares) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares that are not integral multiples of one
one-hundredth of a Series A Share will be issued and, in lieu thereof, an
adjustment in cash will be made based on the closing price of the Series A
Shares on the last trading date prior to the date of exercise.
At any time after the date of the Rights Agreement until ten (10)
Business Days (or such later date as the Board, with the concurrence of a
majority of the Independent Directors, may determine) following the Shares
Acquisition Date, the Board, with the concurrence of a majority of the
Independent Directors, may redeem the Rights in whole, but not in part, at a
price of $0.01 per Right, subject to adjustment (the "REDEMPTION PRICE").
Thereafter, the Board may only redeem the Rights in certain specified
circumstances including in connection with certain events not involving an
Acquiring Person or an Affiliate or Associate of an Acquiring Person. In
addition, the Company's right of redemption may be reinstated if (a) an
Acquiring Person reduces its beneficial ownership to 10% or less of the
outstanding Common Shares in a transaction or series of transactions not
involving the Company and (b) there is at such time no other Acquiring Person.
The Rights Agreement may also be amended, as described below, to extend the
period of redemption. Immediately upon the action of the Board ordering
redemption of the Rights, the Rights will no longer be exercisable, except upon
the occurrence of certain events that have the effect of deferring the effective
time of the redemption. In general, thereafter the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders or to the Company, shareholders may, depending
upon the circumstances, recog nize taxable income in the event that the Rights
become exercisable for Common Shares (or other consideration) or for common
shares of the Acquiring Person as set forth above.
Other than those provisions relating to the prin cipal economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board with the concurrence of a majority of the Independent
Directors or by special approval of the stockholders of the Company prior to the
Separation Date. Thereafter, the period during which the Rights may be redeemed
may be extended and other provisions of the Rights Agreement may be amended by
action of the Board (with the concurrence of a majority of the Independent
Directors) or by special approval of the stockholders of the Company; PROVIDED,
HOWEVER, that (a) such amendment will not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person) and (b) no
amendment shall be made at such time as the Rights are no longer redeemable
(except for the possibility of the right of redemption being reinstated as
described above).
A copy of the Rights Agreement will be filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
