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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): March 17, 1997
MOTHERS WORK, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-21196 13-3045573
(State or Other Jurisdiction of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
456 North Fifth Street, Philadelphia, PA 19123
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 873-2200
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Exhibit Index Appears on Page 7
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Items 1-4. Not Applicable
Item 5. Other Events.
On October 5, 1995, the Board of Directors of Mothers Work,
Inc., a Delaware corporation (the "Company"), declared a distribution of one
Right (as defined below) for each outstanding share of Common Stock, par value
$.01 per share (the "Company Common Stock"), to stockholders of record at the
close of business on October 16, 1995 (the "Record Date") and for each share of
Company Common Stock issued (including shares distributed from Treasury) by the
Company thereafter and prior to the Distribution Date. Each Right entitles the
registered holder, subject to the terms of the Rights Agreement, to purchase
from the Company one one-thousandth of a share (a "Unit") of Series B Preferred
Stock, par value $.01 per share (the "Preferred Stock"), at a Purchase Price of
$85.00 per Unit, subject to adjustment (the "Right"). The Purchase Price is
payable in cash or by certified or bank check or money order payable to the
order of the Company. On March 17, 1997, the Company entered into an amendment
(the "Amended and Restated Rights Agreement") to its Rights Agreement, dated as
of October 9, 1995, with StockTrans, Inc., as Rights Agent (the "Rights
Agreement"). The Amended and Restated Rights Agreement restates the Rights
Agreement, makes certain minor changes, corrects certain scrivener's errors, and
provides the independent directors of the Company with some discretion in
determining when the Distribution Date (as defined below) shall occur and the
date until which the Rights may be redeemed. In addition, the Amended and
Restated Rights Agreement exempts from its operation any person that acquires,
obtains the right to acquire, or otherwise obtains beneficial ownership of 10%
or more of the then outstanding shares of Company Common Stock without any
intention of changing or influencing control of the Company provided that such
person, as promptly as practicable, divests himself or itself of a sufficient
number of shares of Common Stock so that such person would no longer be an
Acquiring Person (as defined below). The description and terms of the Rights are
set forth more fully in the Amended and Restated Rights Agreement.
Initially, the Rights will attach to all certificates
representing shares of outstanding Company Common Stock, and no separate Rights
Certificates will be distributed. The Rights will separate from the Company
Common Stock and the "Distribution Date" will occur (i) upon the earlier of
(x) 10 business days following a public announcement (the date of such
announcement being the "Stock Acquisition Date") that a person or group of
affiliated or associated persons (other than the Company, any subsidiary of the
Company or any employee benefit plan of the Company or such subsidiary) (an
"Acquiring Person") has acquired, obtained the right to acquire, or otherwise
obtained beneficial ownership of 10% or more of the then outstanding shares of
Company Common Stock, and (y) 10 business days following the commencement of a
tender offer or exchange offer that would result in an Acquiring Person owning
10% or more of the then outstanding shares of Company Common Stock, or (ii) such
later date as may be determined by action of a majority of the independent
members of the Board of Directors (such determination to be made prior to such
time as any person becomes an Acquiring Person pursuant to (x) or (y) above).
Until the Distribution Date, (i) the Rights will be evidenced by Company Common
Stock certificates and will be transferred with and only with such Company
Common Stock certificates, (ii) new Company Common Stock certificates issued
after the Record Date (also including shares distributed from Treasury) will
contain a notation incorporating the Rights Agreement by reference and (iii) the
surrender for transfer of any certificates representing outstanding Company
Common Stock will also
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constitute the transfer of the Rights associated with the Company Common Stock
represented by such certificates.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on the tenth anniversary of the Rights
Agreement unless earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of Company Common Stock as of
the close of business on the Distribution Date and, thereafter, the separate
Rights Certificates alone will represent the Rights.
In the event that (i) the Company is the surviving corporation
in a merger with an Acquiring Person and shares of Company Common Stock shall
remain outstanding, (ii) a Person becomes the beneficial owner of 10% or more of
the then outstanding shares of Company Common Stock, (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, or (iv) during such time as there is an Acquiring Person, an event
occurs which results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., by means of a reverse stock split or
recapitalization), then, in each such case, each holder of a Right will
thereafter have the right to receive, upon exercise, Units of Preferred Stock
(or, in certain circumstances, Company Common Stock, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. The exercise price is the Purchase Price multiplied by the number
of Units of Preferred Stock issuable upon exercise of a Right prior to the
events described in this paragraph. Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company is acquired in a merger or other business combination
transaction and the Company is not the surviving corporation (other than a
merger described in the preceding paragraph), (ii) any Person consolidates or
merges with the Company and all or part of the Company Common Stock is converted
or exchanged for securities, cash or property of any other Person or (iii) 50%
or more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as described
above) shall thereafter have the right to receive, upon exercise, common stock
of the Acquiring Person having a value equal to two times the exercise price of
the Right.
In light of the fact that certain stockholders of the Company
currently exceed the 10% threshold for distribution of the Rights, the Rights
Agreement exempts those stockholders from triggering the distribution of the
Rights unless they, individually or together with their affiliates or
associates, increase their beneficial ownership of Company Common Stock by more
than that number of shares of Company Common Stock equal to 1.5% of the
outstanding number of shares of Company Common Stock as of the close of business
on October 5, 1995. These stockholders consist of Meridian Venture Partners,
Massachusetts Financial Services Company, and Crown-Glynn Associates.
Additionally, Dan and Rebecca Matthias, the current Chairman and Chief Executive
Officer, and President and Chief Operating Officer, respectively, also
collectively exceed the 10%
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threshold. Under the Rights Agreement, their current level of ownership does not
result in the distribution of the Rights. However, if they acquire any
additional shares which results in an increase in their percentage ownership of
outstanding Company Common Stock, other than increases resulting from the future
issuance of employee stock options or from inheritance or by the laws of
descent, then the Rights are distributed.
The Purchase Price payable, and the number of Units of
Preferred Stock issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Preferred Stock,
(ii) if holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the distribution to the
holders of the Preferred Stock of evidences of indebtedness, cash or assets
(excluding regular quarterly cash dividends) 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 amount to at least 1% of the
Purchase Price. The Company is not required to issue fractional Units. In lieu
thereof, an adjustment in cash may be made based on the market price of the
Preferred Stock prior to the date of exercise.
At any time until (i) ten business days following the Stock
Acquisition Date or (ii) such later date as a majority of the independent
members of the Board of Directors shall determine (such determination to be made
prior to the date specified in (i) above), a majority of the Independent
Directors may redeem the Rights in whole, but not in part, at a price of $.01
per Right (subject to adjustment in certain events) (the "Redemption Price"),
payable, at the election of such majority of the Independent Directors, in cash
or shares of Company Common Stock. Immediately upon the action of a majority of
the Independent Directors ordering the redemption of the Rights, the Rights will
terminate and 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 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 Units of Preferred Stock (or other consideration).
Any of the provisions of the Rights Agreement may be amended
without the approval of the holders of Company Common Stock at any time prior to
the Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
The Units of Preferred Stock that may be acquired upon
exercise of the Rights will be nonredeemable and subordinate to any other shares
of preferred stock that may be issued by the Company.
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Each Unit of Preferred Stock will be entitled to dividends at
the same rate per share as dividends declared on the Company Common Stock and
shall be entitled to payment of dividends to the extent dividends are declared
on the Company Common Stock. In the event of liquidation, the holder of a Unit
of Preferred Stock will receive the per share amount paid in respect of a share
of Company Common Stock.
In the event of any merger, consolidation or other transaction
in which shares of Company Common Stock are exchanged, each Unit of Preferred
Stock will be entitled to receive the per share amount paid in respect of each
share of Company Common Stock. Each Unit of Preferred Stock will have one vote,
voting together with the Company Common Stock. The rights of holders of the
Preferred Stock to dividends, liquidation and voting, and in the event of
mergers and consolidations, are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend,
liquidation and voting rights, the economic value of one Unit of Preferred Stock
that may be acquired upon the exercise of each Right should approximate the
economic value of one share of the Company Common Stock.
The Amended and Restated Rights Agreement between the Company
and the Rights Agent specifying the term of the Rights, including the Form of
Series B Rights Certificate (as amended) (Exhibit A), the Form of Certificate of
Designation (Exhibit B), and Form of Summary of Rights (as amended) (Exhibit C),
is attached hereto as Exhibit 4.2 and is incorporated herein by reference. The
Rights Agreement, dated as of October 9, 1995, between the Company and the
Rights Agent, including the Form of Series B Rights Certificate (Exhibit A), the
Form of Certificate of Designation (Exhibit B), and Form of Summary of Rights
(Exhibit C), is incorporated herein by reference to Exhibit 4.1 to the Mothers
Work, Inc. Current Report on Form 8-K dated October 12, 1995. The foregoing
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to such documents.
Item 6. Not Applicable.
Item 7. Exhibits.
4.1 Rights Agreement, dated as of October 9, 1995, between Mothers
Work, Inc. and StockTrans, Inc., including Form of Series B
Rights Certificate (Exhibit A), Form of Certificate of
Designation (Exhibit B), and Form of Summary of Rights
(Exhibit C) (incorporated by reference to Exhibit 4.1 to the
Mothers Work, Inc. Current Report on Form 8-K dated October
12, 1995).
4.2 Amended and Restated Rights Agreement, dated as of March 17,
1997, between Mothers Work, Inc. and StockTrans, Inc.,
including Form of Series B Rights Certificate (as amended)
(Exhibit A), Form of Certificate of Designation (Exhibit B),
and Form of Summary of Rights (as amended) (Exhibit C).
Item 8. Not Applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MOTHERS WORK, INC.
Date: March 17, 1997 By: /s/ THOMAS FRANK
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Thomas Frank
Vice President -- Finance and Chief
Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
4.1 Rights Agreement, dated as of October 9, 1995, between Mothers
Work, Inc. and StockTrans, Inc., including Form of Series B
Rights Certificate (Exhibit A), Form of Certificate of
Designation (Exhibit B), and Form of Summary of Rights
(Exhibit C) (incorporated by reference to Exhibit 4.1 to the
Mothers Work, Inc. Current Report on Form 8-K dated October
12, 1995).
4.2 Amended and Restated Rights Agreement, dated as of March 17,
1997, between Mothers Work, Inc. and StockTrans, Inc.,
including Form of Series B Rights Certificate (as amended)
(Exhibit A), Form of Certificate of Designation (Exhibit B),
and Form of Summary of Rights (as amended) (Exhibit C).
Page 7 of 70 Pages
EXHIBIT 4.2
AMENDED AND RESTATED RIGHTS AGREEMENT
AMENDED AND RESTATED RIGHTS AGREEMENT dated as of March 17,
1997 (the "Agreement"), between MOTHERS WORK, INC., a Delaware corporation (the
"Company") and STOCKTRANS, INC. (the "Rights Agent").
WHEREAS, effective October 5, 1995 (the "Rights Dividend
Declaration Date"), the Board of Directors of the Company authorized and
declared a distribution of one right for each share of common stock, par value
$.01 per share, of the Company (the "Company Common Stock") outstanding at the
Close of Business (as hereinafter defined) on October 16, 1995 (the "Record
Date"), and authorized the issuance of one right (as such number may hereinafter
be adjusted pursuant hereto) for each share of Company Common Stock issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and, except as otherwise provided in Section 22, the
Distribution Date (as hereinafter defined), each right issued in respect of a
share of Company Common Stock ("Right") initially representing the right to
purchase, upon the terms and subject to the conditions hereinafter set forth,
one Unit of Series B Junior Participating Preferred Stock;
WHEREAS, the Company desires to amend the Agreement to, among
other things, provide provisions relating to an inadvertent triggering of the
impact of the Rights, and to restate the Agreement, as thereby amended, in its
entirety;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" means any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan maintained
by the Company or any of its Subsidiaries or any trustee or fiduciary with
respect to such plan acting in such capacity) that shall be the Beneficial Owner
of 10% or more of the shares of Common Stock then outstanding; provided,
however, that the term "Acquiring Person" shall not include an Exempt Person.
Notwithstanding the foregoing, if a majority of the Independent Directors
determines in good faith that a Person who would otherwise be an Acquiring
Person has become such inadvertently (including, without limitation, because
(A) such person was unaware that he or it is the Beneficial Owner of a
percentage of Common Stock that would otherwise cause such Person to be an
Acquiring
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Person, or (B) such Person was aware of the percentage of securities of which he
or it was the Beneficial Owner but had no actual knowledge of the consequences
of being the Beneficial Owner of such percentage under this Agreement) and
without any intention of changing or influencing control of the Company, and if
such Person, as promptly as practicable after being advised of such
determination, divests himself or itself of a sufficient number of shares of
Common Stock so that such Person would no longer be the Beneficial Owner of that
percentage of securities which would otherwise result in him or it being an
Acquiring Person, then such Person shall not be deemed to be or to have become
an Acquiring Person for any purposes of this Agreement.
(b) "Affiliate" and "Associate" have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," any securities:
(i) of which such Person or any of such Person's
Affiliates or Associates is considered to be a "beneficial owner" under Rule
13d-3 of the General Rules and Regulations under the Exchange Act (the "Exchange
Act Regulations") as in effect on the date hereof; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own",
any securities under this subparagraph (i) as a result of an agreement,
arrangement or understanding to vote such securities if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a proxy or consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the Exchange Act and the Exchange Act
Regulations, and (B) is not reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report);
(ii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate of such other
Person) with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (i) of this
paragraph (c) of Section 1) or disposing of such securities; or
(iii) which 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
or upon the satisfaction of conditions) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or upon the exercise of conversion
rights, exchange
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rights, rights, warrants or options, or otherwise; provided, however, that under
this paragraph (c) a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own", (A) securities tendered pursuant to a tender or exchange
offer made in accordance with Exchange Act Regulations by such Person or any of
such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, (B) securities that may be issued upon
exercise of Rights at any time prior to the occurrence of a Triggering Event, or
(C) securities that may be issued upon exercise of Rights from and after the
occurrence of a Triggering Event, which Rights were acquired by such Person or
any of such Person's Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(c) or Section 22 (the "Original Rights") or pursuant to
Section 11(i) in connection with an adjustment made with respect to any Original
Rights.
(d) "Business Day" means any day other than a
Saturday, Sunday or a day on which banking institutions in New York City are
authorized or obligated by law or executive order to be closed.
(e) "Close of Business" on any given date means 5:00
P.M., New York City time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(f) "Common Stock" of any Person other than the
Company means the capital stock of such Person with the greatest voting power,
or, if such Person shall have no capital stock, the equity securities or other
equity interest having power to control or direct the management of such Person.
(g) "Company Common Stock" has the meaning set forth
in the Recital.
(h) "Crown Group" means (i) Crown-Glynn Associates,
Ltd., (ii) Crown-Associates III, Limited, (iii) Crown Trust Limited Partnership,
and (iv) any Affiliate or Associate of any Person listed in clauses (i), (ii) or
(iii) of this paragraph (h).
(i) "Distribution Date" has the meaning set forth in
Section 3(a).
(j) "Exempt Person" means:
(i) the Company, any Subsidiary of the Company,
any employee benefit plan or employee stock plan of the Company or of any
Subsidiary of the Company, or any person or entity organized, appointed,
established or holding Company Common Stock for or pursuant to the terms of any
such plan;
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(ii) any member of the Matthias Group, any member
of the Meridian Group, any member of the Mass Financial Group, or any member of
the Crown Group; provided, however, that all the members of the Meridian Group,
the Mass Financial Group or the Crown Group, as applicable, shall immediately
and thereafter cease to be an Exempt Person if such group at any time shall
acquire additional shares resulting in an increase in its aggregate beneficial
ownership of Company Common Stock from time to time outstanding by more than
that number of shares of Company Common Stock equal to 1.5% of the outstanding
number of shares of Company Common Stock as of the close of business on the
Rights Dividend Declaration Date; and provided, further, that all members of the
Matthias Group shall immediately and thereafter cease to be an Exempt Person if
such group at any time shall acquire additional shares resulting in an increase
in its aggregate beneficial ownership of Company Common Stock from time to time
outstanding, except for increases resulting from the future issuance to such
members of options hereafter issued by the Company, or by inheritance or laws of
descent; and
(iii) any Person who would otherwise become an
Acquiring Person solely by virtue of a reduction in the number of outstanding
shares of Company Common Stock; provided, however, that such Person shall not be
an Exempt Person if, subsequent to such reduction, such Person shall become the
Beneficial Owner of any additional shares of Company Common Stock.
(k) "Expiration Date" has the meaning set forth in
Section 7(a).
(l) "Independent Director" means a member of the
Board of Directors of the Company who is not an officer or employee of the
Company, who is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or a representative or nominee of an Acquiring Person or of any
such Affiliate or Associate, and who either (i) was a member of the Board of
Directors of the Company prior to the date hereof or (ii) subsequently became a
director of the Company and whose election or nomination for election is
approved or recommended by a vote of a majority of the Board of Directors of the
Company, which majority includes a majority of the Independent Directors then on
the Board of Directors.
(m) "Mass Financial Group" means Massachusetts
Financial Services Company and any Affiliate or Associate of Massachusetts
Financial Services Company.
(n) "Matthias Group" means (i) Dan W. Matthias,
(ii) Rebecca C. Matthias, or (iii) any Affiliate or Associate of any Person
listed in clauses (i) or (ii) of this paragraph (n).
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(o) "Meridian Group" means Meridian Venture Partners
or any Affiliate or Associate of Meridian Venture Partners.
(p) "Person" means any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other entity, as
well as any syndicate or group deemed to be a person under Section 14(d)(2) of
the Exchange Act.
(q) "Preferred Stock" the Series B Junior
Participating Preferred Stock, par value $.01 per share, of the Company having
the voting powers, designation, preferences and relative, participating,
optional or other special rights and qualifications, limitations and
restrictions described in the Certificate of Designation set forth as Exhibit B.
(r) "Purchase Price" has the meaning set forth in
Section 7(b).
(s) "Record Date" has the meaning set forth in the
Recital.
(t) "Right" has the meaning set forth in the Recital.
(u) "Rights Certificate" has the meaning set forth in
Section 3(a).
(v) "Rights Dividend Declaration Date" has the
meaning set forth in the Recital.
(w) "Section 11(a)(ii) Event" means any event
described in Section 11(a)(ii)(A), (B) or (C).
(x) "Section 13 Event" means any event described in
clause (x), (y) or (z) of Section 13(a).
(y) "Stock Acquisition Date" means the first date of
public announcement (including, without limitation, the filing of any report
pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring
Person that an Acquiring Person has become such.
(z) "Subsidiary" means, with reference to any Person,
any other Person of which an amount of voting securities or equity interests
sufficient to elect at least a majority of the directors or equivalent governing
body of such other Person is beneficially owned, directly or indirectly, by such
Person, or otherwise controlled by such first-mentioned Person.
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(aa) "Summary of Rights" has the meaning set forth in
Section 3(b).
(bb) "Triggering Event" means any Section 11(a)(ii)
Event or any Section 13 Event.
(cc) "Unit" has the meaning set forth in Section
7(b).
SECTION 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. With the consent of the Rights Agent, the Company may from time to
time appoint such Co-Rights Agents as it may deem necessary or desirable.
SECTION 3. Issue of Rights Certificates.
(a) Until (i) the earlier of the Close of Business
on the tenth Business Day after the Stock Acquisition Date, and the Close of
Business on the tenth Business Day after the date that a tender or exchange
offer by any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such capacity) is
first published or sent or given within the meaning of Rule 14d-4(a) of the
Exchange Act Regulations or any successor rule, if upon consummation thereof
such Person would be the Beneficial Owner of 10% or more of the shares of
Company Common Stock then outstanding, or (ii) such later date as may be
determined by action of a majority of the Independent Directors (such
determination to be made prior to either of the dates specified in (i) above)
and of which the Company will give the Rights Agent prompt written notice (such
date above being the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for shares of Company Common Stock registered in the names of the
holders of shares of Company Common Stock as of and subsequent to the Record
Date (which certificates for shares of Company Common Stock shall be deemed also
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 shares of Company Common Stock (including a transfer to the Company).
As soon as practicable after the Distribution Date, the Rights Agent will send
by first-class, insured, postage prepaid mail, to each record holder of shares
of Company Common Stock as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, one or more
rights certificates, in substantially the form of Exhibit A (the "Rights
Certificates"), evidencing one Right for each share of Company Common Stock so
held, subject to adjustment as provided herein. In
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the event that an adjustment in the number of Rights per share of Company Common
Stock has been made pursuant to Section 11(p), at the time of distribution of
the Rights Certificates, the Company may make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record
Date, the Company will send a copy of a Summary of Rights to Purchase Preferred
Stock, in a form which may be appended to certificates that evidence shares of
Company Common Stock; in substantially the form attached hereto as Exhibit C
(the "Summary of Rights"), by first-class, postage prepaid mail, to each record
holder of shares of Company Common Stock as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the Company.
(c) Rights shall, without any further action, be
issued in respect of all shares of Company Common Stock that are issued
(including any shares of Company Common Stock held in treasury) after the Record
Date (but prior to the earlier of the Distribution Date and the Expiration
Date), and certificates evidencing such shares of Company Common Stock issued
after the Record Date shall bear the following legend:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement
between Mothers Work, Inc. (the "Company") and StockTrans,
Inc. (the "Rights Agent") originally dated as of October 9,
1995, and as amended to date (the "Rights Agreement), the
terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal office of the
stock transfer administration office of the Rights Agent.
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. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after 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
Page 14 of 70 Pages
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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."
With respect to certificates evidencing shares of Company Common Stock (whether
or not such certificates include the foregoing legend or have appended to them
the Summary of Rights), until the earlier of the Distribution Date and the
Expiration Date, the Rights associated with the shares of Company Common Stock
evidenced by such certificates shall be evidenced by such certificates alone and
registered holders of the shares of Company Common Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the shares of Company Common Stock evidenced by such certificates.
SECTION 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of
election to purchase, assignment and certificate to be printed on the reverse
thereof) shall each be substantially in the form set forth in Exhibit A hereto
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or any rule or regulation thereunder
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 Rights 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 Units of Preferred Stock as shall be set
forth therein at the price set forth therein, but the amount and type of
securities, cash or other assets that may be acquired upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant hereto
that represents Rights beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) that becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) that becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and that receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or such Associate or Affiliate) or to any
Person
Page 15 of 70 Pages
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with whom such Acquiring Person (or such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding either the
transferred Rights, shares of Company Common Stock or the Company or (B) a
transfer that a majority of the Independent Directors has determined to be part
of a plan, arrangement or understanding that has as a primary purpose or effect
the avoidance of Section 7(e) shall, upon the written direction of a majority of
the Independent Directors, contain (to the extent feasible) the following
legend:
"The Rights represented by this Rights 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 Rights Certificate and the
Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement."
SECTION 5. Countersignature and Registration.
(a) Rights Certificates shall be executed on behalf
of the Company by its Chairman of the Board, the President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Rights Certificates may be manual or facsimile. Rights
Certificates bearing the manual or facsimile signatures of the individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the countersignature of such Rights Certificates or did not
hold such offices at the date of such Rights Certificates. No Rights Certificate
shall be entitled to any benefit under this Agreement or be valid for any
purpose unless there appears on such Rights Certificate a countersignature duly
executed by the Rights Agent by manual signature of an authorized signatory, and
such countersignature upon any Rights Certificate shall be conclusive evidence,
and the only evidence, that such Rights Certificate has been duly countersigned
as required hereunder.
(b) Following the Distribution Date, the Rights
Agent will keep or cause to be kept, at its office designated for surrender of
Rights Certificates upon exercise or transfer, books for registration and
registration of transfer of the Rights Certificates issued hereunder. Such books
shall show the name and address of each holder of the Rights Certificates, the
number of Rights evidenced on its face by each Rights Certificate and the date
of each Rights Certificate.
Page 16 of 70 Pages
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SECTION 6. Transfer, Split Up, Combination and Exchange
of Rights Certificates: Mutilated, Destroyed, Lost or Stolen
Rights Certificates.
(a) Subject to the provisions of Sections 4(b),
7(e) and 14, at any time after the Close of Business on the Distribution Date,
and at or prior to the Close of Business on the Expiration Date, any Rights
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Rights Certificate or Certificates, entitling the registered holder
to purchase a like number of Units of Preferred Stock (or, following a
Triggering Event, other securities, cash or other assets, as the case may be) as
the Rights Certificate or Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Rights Certificate or Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the 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 Rights Certificate until
the registered holder shall have completed and executed the certificate set
forth in the form of assignment on the reverse side of such Rights Certificate
and shall have provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) of the Rights represented by such
Rights Certificate or Affiliates or Associates thereof as the Company shall
reasonably request; whereupon the Rights Agent shall, subject to the provisions
of Section 4(b), Section 7(e) and Section 14, countersign and deliver to the
Person entitled thereto, a Rights Certificate or Rights Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.
(b) If a Rights Certificate shall be mutilated,
lost, stolen or destroyed, upon request by the registered holder of the Rights
represented thereby and upon payment to the Company and the Rights Agent of all
reasonable expenses incident thereto, there shall be issued, in exchange for and
upon cancellation of the mutilated Rights Certificate, or in substitution for
the lost, stolen or destroyed Rights Certificate, a new Rights Certificate, in
substantially the form of the prior Rights Certificate, of like tenor and
evidencing the equivalent number of Rights, but, in the case of loss, theft or
destruction, only upon receipt of evidence satisfactory to the Company and the
Rights Agent of such loss, theft or destruction of such Rights Certificate and,
if requested
Page 17 of 70 Pages
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by the Company or the Rights Agent, indemnity also satisfactory to it.
SECTION 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
(a) Prior to the earlier of (i) the Close of
Business on the tenth anniversary hereof (the "Final Expiration Date"), and
(ii) the time at which the Rights are redeemed as provided in Section 23 (the
earlier of (i) and (ii) being the "Expiration Date"), the registered holder of
any Rights Certificate may, subject to the provisions of Sections 7(e) and 9(c),
exercise the Rights evidenced thereby in whole or in part at any time after the
Distribution Date upon surrender of the Rights Certificate, with the form of
election to purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price (as
hereinafter defined) for the number of Units of Preferred Stock (or, following a
Triggering Event, other securities, cash or other assets, as the case may be)
for which such surrendered Rights are then exercisable.
(b) The purchase price for each one one-thousandth
of a share (each such one one-thousandth of a share being a "Unit") of Preferred
Stock upon exercise of Rights shall be $85.00, subject to adjustment from time
to time as provided in Sections 11 and 13(a) (such purchase price, as so
adjusted, being the "Purchase Price"), and shall be payable in accordance with
paragraph (c) below.
(c) As promptly as practicable following the
occurrence of the Distribution Date, the Company shall deposit with a
corporation in good standing organized under the laws of the United States or
any State of the United States, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority (such institution being the
"Depositary Agent") certificates evidencing the shares of Preferred Stock that
may be acquired upon exercise of the Rights and shall cause such Depositary
Agent to enter into an agreement pursuant to which the Depositary Agent shall
issue receipts evidencing interests in the shares of Preferred Stock so
deposited. Upon receipt of a Rights Certificate evidencing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price for the Units of Preferred Stock (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) to be purchased thereby as
set forth below and an amount equal to any applicable transfer tax or evidence
satisfactory to the Company of payment of such tax, the Rights
Page 18 of 70 Pages
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Agent shall, subject to Section 20(k), thereupon promptly (i) requisition from
the Depositary Agent depositary receipts evidencing such number of Units of
Preferred Stock as are to be purchased and the Company will direct the
Depositary Agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14, (iii) after receipt of such depositary receipts,
cause the same to be delivered to or upon the order of the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate. In the event
that the Company is obligated to issue Company Common Stock, other securities of
the Company, pay cash and/or distribute other property pursuant to Section
11(a), the Company will make all arrangements necessary so that such Company
Common Stock, other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate. The payment of the
Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) may be made in cash or by certified or bank check or money order payable
to the order of the Company.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14.
(e) Notwithstanding anything in this Agreement to
the contrary, from and after the first occurrence of any Section 11(a)(ii)
Event, any Rights beneficially owned by (i) an Acquiring Person or any Associate
or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) that becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) that becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and that receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or any such Associate or Affiliate) or to
any Person with whom the Acquiring Person (or such Associate or Affiliate) has
any continuing agreement, arrangement or understanding regarding the transferred
Rights, shares of Company Common Stock or the Company or (B) a transfer that a
majority of the Independent Directors has determined to be part of a plan,
arrangement or understanding that has as a primary purpose or effect the
avoidance of this Section 7(e), shall be null and void
Page 19 of 70 Pages
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without any further action, and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to ensure
that the provisions of this Section 7(e) and Section 4(b) are complied with, but
shall have no liability to any holder of Rights or any other Person as a result
of its failure to make any determination under this Section 7(e) or such Section
4(b) with respect to an Acquiring Person or its Affiliates, Associates or
transferees.
(f) Notwithstanding anything in this Agreement or
any Rights Certificate 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 by such registered holder unless
such registered holder shall have (i) completed and executed the certificate
following the form of election to purchase set forth on the reverse side of the
Rights Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of the Rights evidenced by such Rights Certificate or
Affiliates or Associates thereof as the Company shall reasonably request.
SECTION 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled by it,
and no Rights Certificates shall be issued in lieu thereof except as expressly
permitted by this Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel and retire,
any Rights Certificates acquired by the Company otherwise than upon the exercise
thereof. The Rights Agent shall deliver all canceled Rights Certificates to the
Company, or shall, at the written request of the Company, destroy such canceled
Rights Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
SECTION 9. Reservation and Availability of Capital Stock.
(a) The Company shall at all times prior to the
Expiration Date cause to be reserved and kept available, out of its authorized
and unissued shares of Preferred Stock, the number of shares of Preferred Stock
that, as provided in this Agreement, will be sufficient to permit the exercise
in full of all outstanding Rights. Upon the occurrence of any events resulting
in an increase in the aggregate number of shares of Preferred Stock (or other
equity securities of the Company) issuable upon exercise of all outstanding
Rights above the number then reserved, the Company
Page 20 of 70 Pages
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shall make appropriate increases in the number of shares so reserved.
(b) If the shares of Preferred Stock to be issued
and delivered upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall during the period from the Distribution
Date through the Expiration Date use its best efforts to cause all securities
reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Company shall use its best efforts (i) as
soon as practicable following the occurrence of a Section 11(a)(ii) Event and a
determination by the Company in accordance with Section 11(a)(iii) of the
consideration to be delivered by the Company upon exercise of the Rights or, if
so required by law, as soon as practicable following the Distribution Date (such
date being the "Registration Date"), to file a registration statement on an
appropriate form under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities that may be acquired upon exercise of the
Rights (the "Registration Statement"), (ii) to cause the Registration Statement
to become effective as soon as practicable after such filing, (iii) to cause the
Registration Statement to continue to be effective (and to include a prospectus
complying with the requirements of the Securities Act) until the earlier of
(A) the date as of which the Rights are no longer exercisable for the securities
covered by the Registration Statement, and (B) the Expiration Date and (iv) to
take as soon as practicable following the Registration Date such action as may
be required to ensure that any acquisition of securities upon exercise of the
Rights complies with any applicable state securities or "blue sky" laws.
(d) The Company shall take such action as may be
necessary to ensure that all shares of Preferred Stock (and, following the
occurrence of a Triggering Event, any other securities that may be delivered
upon exercise of Rights) shall be, at the time of delivery of the certificates
or depositary receipts for such securities, duly and validly authorized and
issued and fully paid and non-assessable.
(e) The Company shall pay any documentary, stamp or
transfer tax imposed in connection with the issuance or delivery of the Rights
Certificates or upon the exercise of Rights; provided, however, that the Company
shall not be required to pay any such tax imposed in connection with the
issuance or delivery of Units of Preferred Stock, or any certificates or
depositary receipts for such Units of Preferred Stock (or, following the
occurrence of a Triggering Event, any other securities, cash or assets, as the
case may be) to any person other than the registered holder of the Rights
Certificates evidencing the Rights surrendered for exercise.
Page 21 of 70 Pages
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The Company shall not be required to issue or deliver any certificates or
depositary receipts for Units of Preferred Stock (or, following the occurrence
of a Triggering Event, any other securities, cash or assets, as the case may be)
to, or in a name other than that of, the registered holder upon the exercise of
any Rights until any such tax shall have been paid (any such tax being payable
by the holder of such Rights 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. Preferred Stock Record Date. Each Person in whose
name any certificate for Units of Preferred Stock (or, following the occurrence
of a Triggering Event, other securities) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Units of Preferred Stock (or, following the occurrence of a Triggering Event,
other securities) evidenced thereby on, and such certificate shall be dated, the
date upon which the Rights 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 Preferred Stock (or, following the occurrence
of a Triggering Event, other securities) transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
securities on, and such certificate shall be dated, the next succeeding Business
Day on which the Preferred Stock (or, following the occurrence of a Triggering
Event, other securities) transfer books of the Company are open and, further
provided, however, that if delivery of Units of Preferred Stock is delayed
pursuant to Section 9(c), such Persons shall be deemed to have become the record
holders of such Units of Preferred Stock only when such Units first become
deliverable. Prior to the exercise of the Rights evidenced thereby, the holder
of a Rights Certificate shall not be entitled to any rights of a shareholder of
the Company with respect to securities for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
SECTION 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of
securities 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 the Company shall at any time
after the date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding shares of
Preferred Stock, (C) combine the
Page 22 of 70 Pages
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outstanding shares of Preferred Stock into a smaller number of shares, or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a), the 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 Preferred Stock or capital stock, as the case may be, issuable on such date
upon exercise of the Rights, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an event occurs that
would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).
(ii) In the event:
(A) any Acquiring Person or any Associate
or Affiliate of any Acquiring Person, at any time after the date hereof,
directly or indirectly, (1) shall merge into the Company or otherwise combine
with the Company and the Company shall be the continuing or surviving
corporation of such merger or combination and Company Common Stock shall remain
outstanding and unchanged, (2) shall, in one transaction or a series of
transactions, transfer any assets to the Company or to any of its Subsidiaries
in exchange (in whole or in part) for shares of Company Common Stock, for other
equity securities of the Company or any such Subsidiary, or for securities
exercisable for or convertible into shares of equity securities of the Company
or any of its Subsidiaries (whether Company Common Stock or otherwise) or
otherwise obtain from the Company or any of its Subsidiaries, with or without
consideration, any additional shares of such equity securities or securities
exercisable for or convertible into such equity securities (other than pursuant
to a pro rata distribution to all holders of Company Common Stock), (3) shall
sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire
or dispose of, in one transaction or a series of transactions, to, from or with
the Company or any of its Subsidiaries or any employee benefit plan maintained
by the Company or any of its Subsidiaries or any trustee or fiduciary with
respect to such plan acting in such capacity, assets (including securities) on
terms and conditions less favorable to the Company or such Subsidiary or plan
than those that could have been obtained in arm's-length negotiations with an
Page 23 of 70 Pages
<PAGE>
unaffiliated third party, other than pursuant to a transaction set forth in
Section 13(a), (4) shall sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise acquire or dispose of, in one transaction or a series of
transactions, to, from or with the Company or any of the Company's Subsidiaries
or any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan acting in
such capacity (other than transactions, if any, consistent with those engaged
in, as of the date hereof, by the Company and such Acquiring Person or such
Associate or Affiliate), assets (including securities) having an aggregate fair
market value of more than $5 million, other than pursuant to a transaction set
forth in Section 13(a), (5) shall sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise acquire or dispose of, in one transaction or a
series of transactions, to, from or with the Company or any of its Subsidiaries
or any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan acting in
such capacity, any material trademark or material service mark, other than
pursuant to a transaction set forth in Section 13(a), (6) shall receive, or any
designee, agent or representative of such Acquiring Person or any Affiliate or
Associate of such Acquiring Person shall receive, any compensation from the
Company or any of its Subsidiaries 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 (7) shall receive the benefit, directly or
indirectly (except proportionately as a holder of Company Common Stock or as
required by law or governmental regulation), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax advantage
provided by the Company or any of its Subsidiaries or any employee benefit plan
maintained by the Company or any of its Subsidiaries or any trustee or fiduciary
with respect to such plan acting in such capacity; or
(B) any Person shall become an Acquiring
Person, other than pursuant to any transaction set forth in Section 13(a); or
(C) during such time as there is an
Acquiring Person, there shall be any reclassification of securities (including
any reverse stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries, other than a transaction or transactions to which the provisions
of Section 13(a) apply (whether or not with or into or otherwise involving an
Acquiring Person), which has the effect, directly or indirectly, of increasing
by more than 1% the proportionate share of the outstanding shares of any class
of equity securities of the Company or any of its Subsidiaries that is directly
or indirectly
Page 24 of 70 Pages
<PAGE>
beneficially owned by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person;
then, immediately upon the date of the occurrence of an event described in
Section 11(a)(ii)(A)-(C) (a "Section 11(a)(ii) Event"), proper provision shall
be made so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive, upon exercise thereof
at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of the number of Units of Preferred Stock for which a Right
was exercisable immediately prior to the first occurrence of a Section
11 (a)(ii) Event, such number of Units of Preferred Stock as shall equal the
result obtained by (x) multiplying the then current Purchase Price by the then
number of Units of Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event (such product
thereafter being, for all purposes of this Agreement other than Section 13, the
"Purchase Price"), and (y) dividing that product by 50% of the then current
market price (determined pursuant to Section 11(d) hereof) per Unit of Preferred
Stock on the date of such first occurrence (such Units of Preferred Stock being
the "Adjustment Shares").
(iii) In the event that the number of shares of
Preferred Stock that are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii) of this
Section 11(a), the Company, by the vote of a majority of the Independent
Directors, shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess being the "Spread"), and (B) with respect to each
Right, make adequate provision to substitute for such Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Company Common Stock or other equity securities of the
Company (including, without limitation, shares, or units of shares, of preferred
stock (such other shares being "preferred stock equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by a majority of the Independent Directors,
after receiving advice from a nationally recognized investment banking firm;
provided, however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within 30 days following the later of
(x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a) expires (the later
of (x) and (y) being referred to herein as the "Section 11(a)(iii) Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender for
Page 25 of 70 Pages
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exercise of a Right and without requiring payment of the Purchase Price, Units
of Preferred Stock (to the extent available) and then, if necessary, cash, which
Units of Preferred Stock and/or cash shall have an aggregate value equal to the
Spread. To the extent that the Company determines that some action need be taken
pursuant to the first sentence of this Section 11(a)(iii), the Company shall
provide, subject to Section 7(e), that such action shall apply uniformly to all
outstanding Rights. For purposes of this Section 11(a)(iii), the value of a Unit
of Preferred Stock shall be the current market price (as determined pursuant to
Section 11(d) hereof) per Unit of Preferred Stock on the Section 11(a)(iii)
Trigger Date and the value of any preferred stock equivalent shall be deemed to
have the same value as the Preferred Stock on such date.
(b) In case the Company shall fix a record date for
the issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within 45
days after such record date) shares of Preferred Stock (or shares having
substantially the same rights, privileges and preferences as shares of Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per share,
if a security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the current market price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the sum of the number of shares of Preferred
Stock outstanding on such record date plus the number of shares of Preferred
Stock that the aggregate offering price of the total number of shares of
Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date plus the number of additional shares of Preferred Stock and/or
Equivalent Preferred Stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by a majority of the Independent Directors,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights,
shares of Preferred Stock owned by or held for the account of the Company or any
Subsidiary shall not be deemed outstanding for the purpose of any
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such computation. Such adjustment 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 which would
then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for
a distribution to all holders of shares of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in shares of Preferred
Stock, but including any dividend payable in stock other than Preferred Stock)
or subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date less the fair market value (as determined in good
faith by a majority of the Independent Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holder of the Rights) of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
distributable in respect of a share of Preferred Stock and the denominator of
which shall be such current market price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock. 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 be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d) (i) For the purpose of any computation
hereunder, the "current market price" per share of Company Common Stock or
Common Stock on any date shall be deemed to be the average of the daily closing
prices per share of such shares for the 10 consecutive Trading Days (as such
term is hereinafter defined) immediately prior to such date; provided, however,
that if prior to the expiration of such requisite ten Trading Day-period the
issuer announces either (A) a dividend or distribution on such shares payable in
such shares or securities convertible into such shares (other than the Rights),
or (B) any subdivision, combination or reclassification of such shares, then,
following the ex-dividend date for such dividend or the record date for such
subdivision, as the case may be, the "current market price" shall be properly
adjusted to take into account such event. The closing price for each day shall
be, if the shares are listed and admitted to trading on a national securities
exchange, as reported in the principal
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consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such shares are listed or
admitted to trading or, if such 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 National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or, if on any such
date such 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 such shares selected by a majority of the Independent Directors. If
on any such date no market maker is making a market in such shares, the fair
value of such shares on such date as determined in good faith by a majority of
the Independent Directors shall be used. If such shares are not publicly held or
not so listed or traded, "current market price" per share shall mean the fair
value per share as determined in good faith by a majority of the Independent
Directors, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. The term "Trading Day"
shall mean, if such shares are listed or admitted to trading on any national
securities exchange, a day on which the principal national securities exchange
on which such shares are listed or admitted to trading is open for the
transaction of business or, if such shares are not so listed or admitted, a
Business Day.
(ii) For the purpose of any computation
hereunder, the "current market price" per share of Preferred Stock shall be
determined in the same manner as set forth above for Company Common Stock in
clause (i) of this Section 11(d) (other than the fourth sentence thereof). If
the current market price per share of Preferred Stock cannot be determined in
the manner provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this Section 11(d), the
"current market price" per share of Preferred Stock shall be conclusively deemed
to be an amount equal to 1,000 (as such amount may be appropriately adjusted for
such events as stock splits, stock dividends and recapitalizations with respect
to Company Common Stock occurring after the date of this Agreement) multiplied
by the current market price per share of Company Common Stock. If neither
Company Common Stock nor Preferred Stock is publicly held or so listed or
traded, "current market price" per share of the Preferred Stock shall mean the
fair value per share as determined in good faith by a majority of the
Independent Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. For all purposes of this Agreement, the "current market
price" of a Unit of Preferred Stock
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shall be equal to the "current market price" of one share of Preferred Stock
divided by 1,000.
(e) Anything herein to the contrary notwithstanding,
no adjustment in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one-thousandth of a share of Company
Common Stock or Common Stock or other share or hundred-thousandth of a share of
Preferred Stock, as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no later
than the earlier of (i) three years from the date of the transaction that
mandates such adjustment and (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant
to Section 11(a)(ii) or 13(a) the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof 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 Preferred Stock contained in Sections 11(a), (b),
(c), (d), (e), (g), (h), (i), (j), (k), (l) and (m), and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on
like terms to any such other shares.
(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 Units of
Preferred Stock (or other securities or amount of cash or combination thereof)
that may be acquired from time to time hereunder upon exercise of the Rights,
all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Units of Preferred Stock (calculated to the nearest hundred-thousandth of a
Unit) obtained by (i) multiplying (x) the number of Units of Preferred Stock
covered by a Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product
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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 lieu of
any adjustment in the number of Units of Preferred Stock that may be acquired
upon the exercise of a Right. Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of Units
of Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
hundred-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The 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 Rights
Certificates have been issued, shall be at least 10 days later than the date of
such public announcement. If Rights 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 Rights Certificates on such record date Rights 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 Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights 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 Units of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per Unit and the number of
Units of Preferred Stock that were expressed in the initial Rights Certificates
issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value of
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the number of Units of Preferred Stock issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
such fully paid and nonassessable number of Units of Preferred Stock at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require 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 issuance to the holder of any Right exercised after
such record date of that number of Units of Preferred Stock and shares of other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of Units of Preferred Stock and shares of 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 (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment a majority of
the Independent Directors shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly
for cash of any shares of Preferred Stock at less than the current market price,
(iii) issuance wholly for cash of shares of Preferred Stock or securities that
by their terms are convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Stock, shall not be taxable to such holders or shall reduce the taxes
payable by such holders.
(n) The Company shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of 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 or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section
Page 31 of 70 Pages
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11(o) hereof), if (x) 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 or
(y) prior to, simultaneously with or immediately after such consolidation,
merger or sale, the Person which constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) shall have distributed or
otherwise transferred to its shareholders or other persons holding an equity
interest in such Person, Rights previously owned by such Person or any of its
Affiliates and Associates; provided, however, that this Section 11(n) shall not
affect the ability of any Subsidiary of the Company to consolidate with, merge
with or into, or sell or transfer assets or earning power to, any other
Subsidiary of the Company.
(o) After the Distribution Date, the Company shall
not, except as permitted by Section 23 or Section 26, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Company Common Stock payable in shares
of Company Common Stock, (ii) subdivide the outstanding shares of Company Common
Stock, (iii) combine the outstanding shares of Company Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock in a
reclassification of Company Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), the number of Rights associated with each share of
Company Common Stock then outstanding, or issued or delivered thereafter but
prior to the Distribution Date, shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Company Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Company Common Stock immediately
prior to such event by a fraction, the numerator of which shall be the total
number of shares of Company Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of Company Common Stock outstanding immediately following the
occurrence of such event.
SECTION 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 or Section
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
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the Rights Agent, and with each transfer agent for the Preferred Stock and the
Company Common Stock, a copy of such certificate, and (c) mail a brief summary
thereof to each holder of a Rights Certificate (or, if prior to the Distribution
Date, to each holder of a certificate evidencing shares of Company Common Stock)
in accordance with Section 25. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of any such adjustment unless and until it
shall have received such certificate.
SECTION 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) In the event that, following the Stock
Acquisition Date, directly or indirectly, either (x) the Company shall
consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), 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 in a transaction which complies with Section 11(o) hereof) 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 outstanding
shares of Company Common Stock shall be converted into or exchanged for stock or
other securities of any other Person or cash or any other property, or (z) the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer) to any Person or Persons (other than the
Company or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), 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) (any such event being a "Section
13 Event"), then, and in each such case, proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e), shall thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price, such number of validly authorized and issued, fully paid and
nonassessable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), which shares shall not be subject to any liens,
encumbrances, rights of first refusal, transfer restrictions or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of Units of Preferred Stock for which a
Right is exercisable immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying the number of such Units for which
a Right would be exercisable hereunder but for the occurrence of such Section
11(a)(ii) Event by
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the Purchase Price which would be in effect hereunder but for such first
occurrence) and (2) dividing that product (which, following the first occurrence
of a Section 13 Event, shall be the "Purchase Price" for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to Section
11(d) hereof) per share of the Common Stock of such Principal Party on the date
of consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this 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 Event; (iv) such Principal Party shall take such steps (including, but not
limited to the reservation of a sufficient number of shares of its Common Stock)
in connection with the consummation of any such transaction as may be necessary
to ensure that the provisions of this Agreement shall thereafter be applicable
to its shares of Common Stock thereafter deliverable upon the exercise of the
Rights; and (v) the provisions of Section 11(a)(ii) shall be of no further
effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" means:
(i) in the case of any transaction described
in clause (x) or (y) of the first sentence of Section 13(a), (A) the Person that
is the issuer of any securities into which shares of Company Common Stock are
converted in such merger or consolidation, or, if there is more than one such
issuer, the issuer of Common Stock that has the highest aggregate current market
price (determined pursuant to Section 11(d) hereof) and (B) if no securities are
so issued, the Person that is the other party to such merger or consolidation,
or, if there is more than one such Person, the Person the Common Stock of which
has the highest aggregate current market price (determined pursuant to Section
11(d) hereof); and
(ii) in the case of any transaction described
in clause (z) of the first sentence of Section 13(a), the Person that is the
party receiving the largest portion of the assets or earning power transferred
pursuant to such transaction or transactions, or, if each Person that is a party
to such transaction or transactions receives the same portion of the assets or
earning power transferred pursuant to such transaction or transactions or if the
Person receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest aggregate
current market price (determined pursuant to Section 11(d) hereof); provided,
however, that in any such case, (1) if the Common Stock of such Person is not at
such time and has not been continuously over the
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preceding 12-month period registered under Section 12 of the Exchange Act
("Registered Common Stock"), or such Person is not a corporation, and such
Person is a direct or indirect Subsidiary of another Person that has Registered
Common Stock outstanding, "Principal Party" shall refer to such other Person:
(2) if the Common Stock of such Person is not Registered Common Stock or such
Person is not a corporation, and such Person is a direct or indirect Subsidiary
of another Person but is not a direct or indirect Subsidiary of another Person
which has Registered Common Stock outstanding, "Principal Party" shall refer to
the ultimate parent entity of such first-mentioned Person; (3) if the Common
Stock of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and one or more of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever of such other Persons is
the issuer of the Registered Common Stock having the highest aggregate current
market price (determined pursuant to Section 11(d) hereof); and (4) if the
Common Stock of such Person is not Registered Common Stock or such Person is not
a corporation, and such Person is directly or indirectly controlled by more than
one Person, and none of such other Persons have Registered Common Stock
outstanding, "Principal Party" shall refer to whichever ultimate parent entity
is the corporation having the greatest shareholders equity or, if no such
ultimate parent entity is a corporation, shall refer to whichever ultimate
parent entity is the entity having the greatest net assets.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock that have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13, and unless prior thereto the Company and 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 the Principal Party will:
(i) (A) file on an appropriate form, as soon
as practicable following the execution of such agreement, a registration
statement under the Securities Act with respect to the Common Stock that may be
acquired upon exercise of the Rights, (B) cause such registration statement to
remain effective (and to include a prospectus complying with the requirements of
the Securities Act) until the Expiration Date, and (C) as soon as practicable
following the execution of such agreement, take such action as may be required
to ensure that any acquisition of such Common Stock upon the exercise of the
Rights complies with any applicable state security or "blue sky" laws; and
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(ii) deliver to holders of the Rights
historical financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements for registration
on Form 10 under the Exchange Act.
(d) In case the Principal Party that is to be a
party to a transaction referred to in this Section 13 has a provision in any of
its authorized securities or in its Certificate of Incorporation or By-laws or
other instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in this Section
13, shares of Common Stock of such Principal Party at less than the then current
market price per share (determined pursuant to Section 11(d) hereof) or
securities exercisable for, or convertible into Common Stock of such Principal
Party at less than such then current market price (other than to holders of
Rights pursuant to this Section 13) or (ii) providing for any special payment,
tax or similar provisions in connection with the issuance of the Common Stock of
such Principal Party pursuant to the provisions of this Section 13; then, in
such event, the Company shall not consummate any such transaction unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing that the provision in
question of such Principal Party shall have been canceled, waived or amended, or
that the authorized securities shall be redeemed, so that the applicable
provision will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.
(e) 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 Event shall occur at any time after
the occurrence of a Section 11(a)(ii) Event, the Rights which 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 or to distribute Rights Certificates that evidence
fractional Rights. In lieu of such fractional Rights, there shall be paid to the
Persons to which such fractional Rights would otherwise be issuable, an amount
in cash equal to such fraction of the market value of a whole Right. For
purposes of this Section 14(a), the market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price of the Rights for any day shall be, if the Rights are listed or admitted
to trading on a national securities exchange, as reported in the principal
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consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are 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 a majority of the Independent Directors. If on any
such date no such market maker is making a market in the Rights, the fair value
of the Rights on such date as determined in good faith by a majority of the
Independent Directors shall be used and such determination shall be described in
a statement filed with the Rights Agent and the holders of the Rights.
(b) The Company shall not be required to issue
fractions of shares of Preferred Stock (other than fractions that are integral
multiples of one one-thousandth of a share of Preferred Stock) upon exercise of
the Rights or to distribute certificates that evidence such fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock). In lieu of such fractional shares
of Preferred Stock that are not integral multiples of one one-thousandth of a
share, the Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the then current market price of a share of Preferred Stock
on the day of exercise, determined in accordance with Section 11(d).
(c) The holder of a Right by the acceptance of the
Rights expressly waives his or her right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.
SECTION 15. Rights of Action. All rights of action in respect
of this Agreement, other than rights of action vested in the Rights Agent
pursuant to Section 18, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered holders
of certificates evidencing shares of Company Common Stock); and any registered
holder of a Rights Certificate (or, prior to the Distribution Date, of a
certificate evidencing shares of Company Common Stock), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of a certificate evidencing shares of Company Common
Stock), may, in his or her own behalf and for his or her own benefit, enforce,
and may institute and maintain any suit, action or proceeding against the
Company or any other Person to enforce,
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or otherwise act in respect of, his or her right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
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 shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
SECTION 16. Agreement of Rights Holders. Every holder of a
Right by accepting the same consents to and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will
be transferable only in connection with the transfer of Company Common Stock;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of the Rights Agent if
surrendered at the office of the Rights Agent designated for such purposes duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates duly executed;
(c) subject to Section 6(a) and Section 7(f), the
Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Company
Common Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Rights Certificates or the associated Company Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent, subject to the last
sentence of Section 7(e), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to
the contrary, neither the Company nor the Rights Agent shall have any liability
to any holder of a Right or any 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; provided, however, the Company must use its best
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efforts to have any such order, decree or ruling lifted or otherwise overturned
as promptly as practicable.
SECTION 17. Rights Certificate Holder Not Deemed a
Shareholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the number of
shares of Preferred Stock or any other securities of the Company that may at any
time be issuable on the exercise of the Rights evidenced thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or, except as provided in Section 24,
to receive notice of meetings or other actions affecting shareholders, or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights 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, including
reasonable fees and disbursements of its counsel, incurred in connection with
the execution and administration of this Agreement and the exercise and
performance of its duties hereunder. The Company shall indemnify the Rights
Agent for, and hold it harmless against, any loss, liability, or expense,
incurred without gross negligence, bad faith or wilful misconduct on the part of
the Rights Agent, for anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including the costs
and expenses of defending against any claim of liability hereunder.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Preferred Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to have
been signed and/or executed or made by the proper Person or Persons.
SECTION 19. Merger or Consolidation or Change of Name of
Rights Agent.
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(a) Any corporation into which the Rights Agent or
any successor Rights Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or shareholder services businesses of the
Rights Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any document 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
Rights Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in all
such cases such Rights Certificates shall have the full force provided in the
Rights 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 Rights Certificates shall
have been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
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
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person and the determination of
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"current market price") 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 specified herein) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; provided, however, that so long as any Person is
an Acquiring Person hereunder, such certificate shall be signed and delivered by
a majority of the Independent Directors; 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 hereunder only
for its own gross negligence, bad faith or wilful 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 Rights Certificates or be required to verify the same (except as to
its countersignature on such Rights Certificates), 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 have any
responsibility for the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or for the validity
or execution of any Rights Certificate (except its countersignature thereof);
nor shall it be responsible for any breach by the Company of any covenant or
failure by the Company to satisfy conditions contained in this Agreement or in
any Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 or 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 Rights Certificates after receipt by the Rights Agent of the
certificate describing any such adjustment contemplated by Section 12); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Preferred Stock or any
other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock or any other
securities will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company shall perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further acts, instruments and assurances as may
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reasonably be required by the Rights Agent for the performance by the Rights
Agent of its duties under this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer; provided, however, that so
long as any Person is an Acquiring Person hereunder, the Rights Agent shall
accept such instructions and advice only from a majority of the Independent
Directors and shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with such instructions of the majority of the
Independent Directors. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken or omitted by the Rights Agent under
this Rights Agreement and the date on and/or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not be liable
for any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
any such officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
the Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents.
(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 or
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in the exercise of its rights hereunder if the Rights Agent shall have
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 Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to purchase, as the case
may be, has either not been completed, not signed or indicates an affirmative
response to clause 1 and/or 2 thereof, the Rights Agent shall not take any
further action with respect to such requested exercise or transfer without first
consulting with the Company. If such certificate has been completed and signed
and shows a negative response to clauses 1 and 2 of such certificate, unless
previously instructed otherwise in writing by the Company (which instructions
may impose on the Rights Agent additional ministerial responsibilities, but no
discretionary responsibilities), the Rights Agent may assume without further
inquiry that the Rights Certificate is not owned by a person described in
Section 4(b) or Section 7(e) and shall not be charged with any knowledge to the
contrary.
SECTION 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' prior notice in writing mailed to the Company, and to
each transfer agent of the Preferred Stock and the Company Common Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' prior notice in writing, mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to each transfer agent of the
Preferred Stock and the Company Common Stock, by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his or her Rights
Certificate for inspection by the Company), then any registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a corporation organized and
doing business under the laws of the United States or any state of the United
States in good standing, shall be authorized to do business as a banking
institution in the State of New York or the Commonwealth of Pennsylvania, shall
be authorized under such laws to exercise corporate trust or stock transfer
powers, shall be
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subject to supervision or examination by federal or state authorities and shall
have at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000 or (b) an Affiliate of a corporation described
in clause (a). After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Preferred Stock and the Company Common Stock, and mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent.
SECTION 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by a majority of the
Independent Directors to reflect any adjustment or change made in accordance
with the provisions of this Agreement in the Purchase Price or the number or
kind or class of shares or other securities or property that may be acquired
under the Rights Certificates. In addition, in connection with the issuance or
sale of shares of Company Common Stock following the Distribution Date and prior
to the Expiration Date, the Company (a) shall with respect to shares of Company
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by a majority of the Independent
Directors, issue Rights Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) no
such Rights Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
SECTION 23. Redemption and Termination.
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(a) Subject to Section 30, the Company may, at its
option, by action of a majority of the Independent Directors, at any time prior
to (i) the Close of Business on the tenth Business Day following the Stock
Acquisition Date, or (ii) such later date as a majority of the Independent
Directors shall determine (such determination to be made prior to the date
specified in (i) above) and of which the Company will give the Rights Agent
prompt written notice, but in no event later than the Final Expiration Date,
redeem all but not less than all the then outstanding Rights at a redemption
price of $.01 per Right, as such amount may be appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being the "Redemption Price"), and the Company
may, at its option, by action of a majority of the Independent Directors, pay
the Redemption Price either in shares of Company Common Stock (based on the
"current market price" as defined in Section 11(d), of the shares of Company
Common Stock at the time of redemption) or cash.
(b) Immediately upon the action of a majority of
the Independent Directors ordering the redemption of the Rights, evidence of
which shall be 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 for each Right so held. Promptly after the action of a majority of the
Independent Directors ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for
Company Common Stock. 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 will state the method by which the payment of the
Redemption Price will be made.
SECTION 24. Notice of Certain Events.
(a) In case the Company shall propose, at any time
after the Distribution Date, (i) to pay any dividend payable in stock of any
class to the holders of Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company), (ii) to offer to the holders of
Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), (iv) to effect any consolidation or
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merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one or more transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), 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
Rights Certificate, to the extent feasible and in accordance with Section 25, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, 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 shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 20 days prior to the record
date for determining holders of the shares of Preferred Stock for purposes of
such action, and in the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the shares of Preferred Stock whichever shall be the
earlier; provided, however, that no such notice shall be required pursuant to
this Section 24, if any Subsidiary of the Company effects a consolidation or
merger with or into, or effects a sale or other transfer of assets or earnings
power to, any other Subsidiary of the Company.
(b) In case any of the events set forth in Section
11(a)(ii) shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25, a notice of the occurrence of
such event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii).
SECTION 25. Notices. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including by telex, telegram or cable) and mailed or sent or delivered, if to
the Company, at its address at:
456 North Fifth Street
Philadelphia, PA 19123
Attention: Chief Executive Officer
Fax: (215) 873-2200
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and if to the Rights Agent, at its address at:
StockTrans, Inc.
7 East Lancaster Avenue
Ardmore, PA 19003
Attention: President
Fax: (610) 649-7302
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Company Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
SECTION 26. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this Section 26,
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 evidencing shares of Company Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order (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 shorten or lengthen any time period hereunder, 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 Rights Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); provided, however, that this
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) subject to Section 30, a time period relating to
when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company or, so long as any Person is an Acquiring
Person hereunder, from the majority of the Independent Directors that states
that the proposed supplement or amendment is in compliance with the terms of
this Section 26, the Rights Agent shall execute such supplement or amendment,
subject to the Right Agent's right to apply to counsel chosen by the Right Agent
and the Right Agent being reasonably assured that such supplement or amendment
is in no way detrimental to the Right Agent's right or interest. Notwithstanding
anything contained in this Agreement to
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the contrary, no supplement or amendment shall be made that changes the
Redemption Price, the Purchase Price, the Expiration Date or the number of Units
of Preferred Stock for which a Right is exercisable without the approval of a
majority of the Independent Directors. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Company Common Stock.
SECTION 27. 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 28. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of Company Common Stock outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding shares of Company Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-
3(d)(1)(i) of the Exchange Act Regulations as in effect on the date hereof.
Except as otherwise specifically provided herein, the Board of Directors of the
Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power (i) to interpret the provisions of this Agreement, and (ii) to make all
determinations deemed necessary or advisable for the administration of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board or by a majority of the
Independent Directors in good faith shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board or any member thereof to any liability to
the holders of the Rights.
SECTION 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Company Common Stock)
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 Rights Certificates (and, prior to the
Distribution Date, registered holders of shares of Company Common Stock).
SECTION 30. Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of
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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
unenforceable and a majority of the Independent Directors determines in its good
faith judgment that severing the invalid language from this Agreement would
adversely affect the purpose or effect of this Agreement and the Rights shall
not then be redeemable, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth Business Day following the date of such determination by a majority of the
Independent Directors.
SECTION 31. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be governed by, and construed in
accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed entirely in such State; provided, however, that
Sections 18, 19, 20 and 21 shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Pennsylvania.
SECTION 32. Counterparts. This Agreement may be executed
(including by facsimile) in one or more counterparts and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original, but all of which taken together shall constitute one
and the same instrument.
SECTION 33. Descriptive Headings. The headings contained in
this Agreement are for descriptive purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 34. Exchange.
(a) The Company may at any time prior to the
Distribution Date, upon resolution of a majority of the Independent Directors,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to Section 7(e) hereof) for
Units of Preferred Stock at an exchange ratio specified in the following
sentence, as appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof. Subject to such
adjustment, upon such resolution each Right may be exchanged for that number of
Units of Preferred Stock obtained by dividing the Adjustment Spread (as defined
below) by the then current market price (determined pursuant to Section 11(d)
hereof) per Unit of Preferred Stock on the earlier of (i) the date on which any
Person becomes an Acquiring Person and (ii) the date on which a tender or
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exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan acting in
such capacity) is first published or sent or given within the meaning of Rule
14d-4(a) of the Exchange Act Regulations or any successor rule, if upon
consummation thereof such Person would be the Beneficial Owner of 10% or more of
the shares of Company Common Stock then outstanding (such exchange ratio being
the "Exchange Ratio"). The "Adjustment Spread" shall equal (x) the aggregate
market price on the date of such event of the number of Adjustment Shares
determined pursuant to Section 11(a)(ii), minus (y) the Purchase Price.
(b) Immediately upon the action of a majority of
the Independent Directors ordering the exchange of any Rights pursuant to
Section 34(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 Units of Preferred
Stock equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the 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 the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
shall state the method by which the exchange of Units of Preferred Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that the number of shares of
Preferred Stock that are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit any exchange of
Rights as contemplated in accordance with this Section 34, the Company shall
take all such action as may be necessary to authorize additional shares of
Preferred Stock for issuance upon exchange of the Rights or make adequate
provision to substitute (1) cash, (2) Company Common Stock or other equity
securities of the Company, (3) debt securities of the Company, (4) other assets,
or (5) any combination of the foregoing, having an aggregate value equal to the
Adjustment Spread, where such aggregate value has been determined by a majority
of the Independent Directors.
Page 50 of 70 Pages
<PAGE>
(d) The Company shall not be required to issue
fractions of Units of Preferred Stock or to distribute certificates that
evidence fractional Units. In lieu of fractional Units, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exchanged as herein provided an amount in cash equal to the same fraction of the
current market price (determined pursuant to Section 11(d) hereof) of one Unit
of Preferred Stock.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the date first above written.
ATTEST: MOTHERS WORK, INC.
By: /s/ DAN W. MATTHIAS By: /s/ REBECCA C. MATTHIAS
------------------------------- ------------------------------
Dan W. Matthias Rebecca C. Matthias
Secretary President
ATTEST: STOCKTRANS, INC.
By: /s/ BARBARA PHILLIPS By: /s/ JONATHAN MILLER
------------------------------ ------------------------------
Barbara Phillips Jonathan Miller
Vice-President and Secretary President
Page 51 of 70 Pages
<PAGE>
EXHIBIT A
Form of Series B Rights Certificate
Certificate No. B-__ ___________ Rights
NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT
REFERRED TO BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES (SPECIFIED IN THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY
ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER
OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
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 REFERRED TO BELOW). ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN
THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
Series B Rights Certificate
MOTHERS WORK, INC.
This certifies that _____________, or registered assigns, is
the registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms and conditions of
the Rights Agreement originally dated as of October 9, 1995, and as amended to
date (the "Rights Agreement; terms defined therein are used herein with the same
meaning unless otherwise defined herein) between MOTHERS WORK, INC., a Delaware
corporation (the "Company"), and STOCKTRANS, INC., as Rights Agent (which term
shall include any successor Rights Agent under the Rights Agreement), to
purchase from the Company at any time after the Distribution Date and prior to
the Expiration Date at the office of the Rights Agent, one one-thousandth of one
fully paid and nonassessable share of Series B Junior Participating Preferred
Stock, par value $.01 per share (the "Preferred Stock"), of the Company at the
Purchase Price initially of $85.00 per one one-thousandth share (each such one
one-thousandth of a share being a "Unit") of Preferred Stock, upon presentation
and surrender of this Rights Certificate with the Election to Purchase and
related certificate duly executed. The number of Rights evidenced by this
- --------
* The portion of the legend in brackets shall be inserted only if applicable and
shall replace the preceding sentence.
Page 52 of 70 Pages
<PAGE>
Rights Certificate (and the number of Units that may be purchased upon exercise
thereof) set forth above, and the Purchase Price per Unit set forth above shall
be subject to adjustment in certain events as provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the
Rights evidenced by this Rights Certificate are beneficially owned by an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person or,
under certain circumstances described in the Rights Agreement, a transferee of
any such Acquiring Person, Associate or Affiliate, 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 such Section 11(a)(ii) Event.
In certain circumstances described in the Rights Agreement,
the rights evidenced hereby may entitle the registered holder thereof to
purchase capital stock of an entity other than the Company or receive common
stock, cash or other assets, all as provided in the Rights Agreement.
This Rights Certificate is subject to all the terms and
conditions of the Rights Agreement, which terms and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal office of the Company and are
available from the Company upon written request.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing an aggregate number of Rights
equal to the aggregate number of Rights evidenced by the Rights Certificate or
Rights Certificates surrendered. If this Rights Certificate shall be exercised
in part, the registered holder shall be entitled to receive, upon surrender
hereof, another Rights Certificate or Rights Certificates for the number of
whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company under certain
circumstances at its option at a redemption price of $.01 per Right, payable at
the Company's option in cash or in common stock of the Company, subject to
adjustment in certain events as provided in the Rights Agreement.
Page 53 of 70 Pages
<PAGE>
No fractional shares of Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall he
entitled to vote or receive dividends or be deemed for any purpose the holder of
Preferred Stock or of any other securities which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be constituted to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Rights evidenced by this Rights Certificate shall have been exercised
as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of _____ __, 199_/200_.
ATTEST: MOTHERS WORK, INC.
By By
--------------------------------- ------------------------------------
Name: Name:
Title: Title:
Countersigned:
STOCKTRANS, INC.,
as Rights Agent
By
----------------------------------
Name:
Title:
Page 54 of 70 Pages
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the
Rights Certificate)
FOR VALUE RECEIVED hereby sells, assigns
----------------------------------------
and transfers unto
-------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------,
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated: _________ __, 199_/200_
------------------------------------
Signature
Signature Guaranteed:
Page 55 of 70 Pages
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate / / is / / is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, it / / did / / did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: , 199 /200
------------------- -- -- -------------------------------------
Signature
Signature Guaranteed:
------------------------------
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Signatures must be guaranteed by a member in the Securities
Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the
New York Stock Exchange Medallion Program.
In the event the certification set forth above is not
completed, the Company will deem the beneficial owner of the Rights evidenced by
this Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and, in the case of an Assignment,
will affix a legend. to that effect on any Rights Certificates issued in
exchange for this Rights Certificate.
Page 56 of 70 Pages
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder
desires to exercise Rights represented
by the Rights Certificate.)
To: MOTHERS WORK, INC.
The undersigned hereby irrevocably elects to exercise ________
Rights represented by this Rights Certificate to purchase the Units of Preferred
Stock issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person or other property which may be issuable upon the
exercise of the Rights) and requests that certificates for such Units be issued
in the name of and delivered to:
- -----------------------------------
(Please print name and address)
- -----------------------------------
Please insert social security
or other identifying number:
--------------------
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall he registered in the name of and delivered to:
- --------------------------------------
(Please print name and address)
- --------------------------------------
Please insert social security
or other identifying number:
-----------------------
Dated: , 199 /200
---------------- - -
--------------------------------------
Signature
Signature Guaranteed:
Page 57 of 70 Pages
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate
/ / are / / are not beneficially owned by an Acquiring Person or an Affiliate
or an Associate thereof (as defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned / / did / / did not acquire the Rights evidenced
by this Rights Certificate from any person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate thereof.
Dated: , 199 /200
-------------- - - ---------------------------------
Signature
Signature Guaranteed:
------------------------------
NOTICE
The signature in the foregoing Election to Purchase and
Certificate must conform to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
Signatures must be guaranteed by a member in the Securities
Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the
New York Stock Exchange Medallion Program.
In the event the certification set forth above is not
completed, the Company will deem the beneficial owner of the Rights evidenced by
this Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and, in the case of an Assignment,
will affix a legend to that effect on any Rights Certificates issued in exchange
for this Rights Certificate.
Page 58 of 70 Pages
<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATION
OF THE VOTING POWERS, DESIGNATIONS
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF THE
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
------------------------------
Pursuant to Section 151 of the
General Corporation Law of
the State of Delaware
------------------------------
I, Rebecca C. Matthias, President of Mothers Work, Inc., a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), DO HEREBY CERTIFY:
that, pursuant to authority conferred upon the Board of
Directors of the Corporation by its Certificate of Incorporation (the
"Certificate"), and, pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, such Board of Directors, at a duly
called meeting held on October 5, 1995, at which a quorum was present and acted
throughout, adopted the following resolutions, which resolutions remain in full
force and effect on the date hereof creating a series of 10,000 shares of
Preferred Stock having a par value of $.01 per share, designated as Series B
Junior Participating Preferred Stock (the "Series B Preferred Stock") out of the
class of two million shares of preferred stock of the par value of $.01 per
share (the "Preferred Stock"):
RESOLVED, that pursuant to the authority vested in the Board
of Directors in accordance with the provisions of the Certificate, the Board of
Directors does hereby create, authorize and provide for the issuance of the
Series B Preferred Stock having the voting powers, designation, relative,
participating, optional and other special rights, preferences, and
qualifications, limitations and restrictions thereof that are set forth as
follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series B Junior Participating Preferred Stock" and the
number of shares constituting such series shall be 10,000.
Page 59 of 70 Pages
<PAGE>
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the
holders of any shares of any other series of Preferred Stock or any other shares
of preferred stock of the Corporation ranking prior and superior to the shares
of Series B Preferred Stock with respect to dividends, each holder of one
one-thousandth (1/1000) of a share (a "Unit") of Series B Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for that purpose, (i) dividends payable in cash when
and if declared by the Board of Directors of the Corporation in respect of the
common stock (each such date being a "Dividend Payment Date") commencing on the
first Dividend Payment Date after the first issuance of such Unit of Series B
Preferred Stock, in an amount per Unit (rounded to the nearest cent) equal to,
subject to the provision for adjustment hereinafter set forth, the aggregate per
share amount of all cash dividends declared on shares of the common stock since
the immediately preceding Dividend Payment Date, or, with respect to the first
Dividend Payment Date, since the first issuance of a Unit of Series B Preferred
Stock, and (ii) subject to the provision for adjustment hereinafter set forth,
distributions (payable in kind) on each Dividend Payment Date in an amount per
Unit equal to the aggregate per share amount of all noncash dividends or other
distributions (other than a dividend payable in shares of common stock or a
subdivision of the outstanding shares of common stock, by reclassification or
otherwise) declared on shares of common stock since the immediately preceding
Dividend Payment Date, or with respect to the first Dividend Payment Date, since
the first issuance of a Unit of Series B Preferred Stock. In the event that the
Corporation shall at any time after October 5, 1995 (the "Rights Declaration
Date"), (i) declare any dividend on outstanding shares of common stock payable
in shares of common stock, (ii) subdivide outstanding shares of common stock or
(iii) combine outstanding shares of common stock into a smaller number of
shares, then in each such case the amount to which the holder of a Unit of
Series B Preferred Stock was entitled immediately prior to such event pursuant
to the next preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which shall be the number of shares of common stock
that are outstanding immediately after such event and the denominator of which
shall be the number of shares of common stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or
distribution on Units of Series B Preferred Stock as provided in paragraph (A)
above immediately after it declares a dividend or distribution on the shares of
common stock (other than a dividend payable in shares of common stock).
Page 60 of 70 Pages
<PAGE>
Section 3. Voting Rights. The holders of Units of Series B
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each Unit of Series B Preferred Stock shall entitle the
holder thereof to one vote on all matters submitted to a vote of the holders of
Common Stock of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on outstanding shares
of Common Stock payable in shares of Common Stock, (ii) subdivide outstanding
shares of Common Stock or (iii) combine the outstanding shares of Common Stock
into a smaller number of shares, then in each such case the number of votes per
Unit to which holders of Units of Series B Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which shall be the number of shares of Common Stock
outstanding immediately after such event and the denominator of which shall be
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law,
the holders of Units of Series B Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of holders of Common Stock of the Corporation.
(C) Except as set forth herein, holders of Units of
Series B Preferred Stock shall have no special voting rights and their consents
shall not be required (except to the extent they are entitled to vote with
holders of shares of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever any dividends or distributions
payable, on Units of Series B Preferred Stock as provided in Section 2 have not
been paid in full, thereafter and until all such accrued and unpaid dividends
and distributions, whether or not declared, on outstanding Units of Series B
Preferred Stock shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any
other distributions on, or redeem or repurchase or otherwise acquire for
consideration, any shares of junior stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of parity stock, except dividends paid ratably
on Units of Series B Preferred Stock and shares of all such parity stock on
which dividends are payable or in arrears in proportion to the total amounts to
which the holders of such Units and all such shares are then entitled;
Page 61 of 70 Pages
<PAGE>
(iii) redeem or repurchase or otherwise acquire
for consideration shares of any parity stock; provided, however, that the
Corporation may at any time redeem, repurchase or otherwise acquire shares of
any such parity stock in exchange for shares of any junior stock;
(iv) repurchase or otherwise acquire for
consideration (other than shares of junior stock) any Units of Series B
Preferred Stock, except in accordance with a repurchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of such
Units on the same terms.
(B) The Corporation shall not permit any subsidiary
of the Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, repurchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any Units of Series B Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such Units shall, upon their cancellation, become authorized but unissued
Units of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, no distribution shall be made
(i) to the holders of shares of junior stock unless the holders of Units of
Series B Preferred Stock shall have received, subject to adjustment as
hereinafter provided in paragraph (B), the amount, per Unit, equal to the
aggregate per share amount to be distributed to holders of shares of common
stock, or (ii) to the holders of shares of parity stock, unless simultaneously
therewith distributions are made ratably on Units of Series B Preferred Stock
and all other shares of such parity stock in proportion to the total amounts to
which the holders of Units of Series B Preferred Stock are entitled under clause
(i) of this sentence and to which the holders of shares of such parity stock are
entitled, in each case upon such liquidation, dissolution or winding up.
(B) In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on outstanding shares
of common stock payable in shares of common stock, (ii) subdivide outstanding
shares of common stock, or (iii) combine outstanding shares of common stock into
a smaller number of
Page 62 of 70 Pages
<PAGE>
shares, then in each such case the aggregate amount to which holders of Units of
Series B Preferred Stock were entitled immediately prior to such event pursuant
to clause (i)(b) of paragraph (A) of this Section 6 shall be adjusted by
multiplying such amount by a fraction the numerator of which shall be the number
of shares of common stock that are outstanding immediately after such event and
the denominator of which shall be the number of shares of common stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. 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 converted into other stock
or securities, cash and/or any other property, then in any such case Units of
Series B Preferred Stock shall at the same time be similarly exchanged for or
converted into an amount per Unit (subject to the provision for adjustment
hereinafter set forth) equal to the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of common stock is converted or exchanged. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on outstanding shares of common stock payable in shares of common
stock, (ii) subdivide outstanding shares of common stock, or (iii) combine
outstanding common stock into a smaller number of shares, then in each such case
the amount set forth in the immediately preceding sentence with respect to the
exchange or conversion of Units of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which shall be the number
of shares of common stock that are outstanding immediately after such event and
the denominator of which shall be the number of shares of common stock that were
outstanding immediately prior to such event.
Section 8. Redemption. The Units of Series B Preferred Stock
shall not be redeemable.
Section 9. Ranking. The Units of Series B Preferred Stock
shall rank junior to all other series of the Preferred Stock and to any other
class of preferred stock that hereafter may be issued by the Corporation as to
the payment of dividends and the distribution of assets, unless the terms of any
such series or class shall provide otherwise.
Section 10. Amendment. The Certificate, including, without
limitation, this resolution, shall not hereafter be amended, either directly or
indirectly, or through merger or consolidation with another corporation in any
manner that would alter or change the powers, preferences or special rights of
the Series B Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the
Page 63 of 70 Pages
<PAGE>
outstanding Units of Series B Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. The Series B Preferred Stock
may be issued in Units or other fractions of a share, which Units or fractions
shall entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series B Preferred Stock.
Section 12. Certain Definitions. As used herein with respect
to the Series A Preferred Stock, the following terms shall have the following
meanings:
(A) The term "Common Stock" means the class of
common stock designated as the Common Stock, par value $.01 per share, of the
Corporation at the date hereof or any other class of stock resulting from
successive changes or reclassification of the common stock.
(B) The term "junior stock" (i) as used in Section
4 means the common stock and any other class or series of capital stock of the
Corporation hereafter authorized or issued over which the Series B Preferred
Stock has preference or priority as to the payment of dividends and (ii) as used
in Section 6, shall mean the common stock and any other class or series of
capital stock of the Corporation over which the Series A Preferred Stock has
preference or priority in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(C) The term "parity stock" (i) as used in Section
4, means any class or series of stock of the Corporation hereafter authorized or
issued ranking pari passu with the Series B Preferred Stock as to dividends and
(ii) as used in Section 6, shall mean any class or series of capital stock
ranking pari passu with the Series B Preferred Stock in the distribution of
assets on any liquidation, dissolution or winding up.
Page 64 of 70 Pages
<PAGE>
IN WITNESS WHEREOF, Mothers Work, Inc. has caused this
Certificate to be signed by its President and attested by its Secretary this ___
day of October, 1995.
MOTHERS WORK, INC.
By:
-----------------------------------
Rebecca C. Matthias,
President
Attest:
By:
--------------------------------
Dan W. Matthias,
Secretary
Page 65 of 70 Pages
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On October 5, 1995, the Board of Directors of Mothers Work,
Inc., a Delaware corporation (the "Company"), declared a distribution of one
Right (as defined below) for each outstanding share of Common Stock, par value
$.01 per share (the "Company Common Stock"), to stockholders of record at the
close of business on October 16, 1995 (the "Record Date") and for each share of
Company Common Stock issued (including shares distributed from Treasury) by the
Company thereafter and prior to the Distribution Date. Each Right entitles the
registered holder, subject to the terms of the Rights Agreement (as defined
below), to purchase from the Company one one-thousandth of a share (a "Unit") of
Series B Preferred Stock, par value $.01 per share (the "Preferred Stock"), at a
Purchase Price of $85.00 per Unit, subject to adjustment (the "Right"). The
Purchase Price is payable in cash or by certified or bank check or money order
payable to the order of the Company. The description and terms of the Rights are
set forth in a Rights Agreement between the Company and StockTrans, Inc., as
Rights Agent (the "Rights Agreement").
Copies of the Rights Agreement and the Certificate of
Designation for the Preferred Stock have been filed with the Securities and
Exchange Commission as exhibits to a Registration Statement on Form 8-A dated
October 16, 1995 (the "Form 8-A"). Copies of the Rights Agreement and the
Certificate of Designation are available free of charge from the Company. This
summary description of the Rights and the Preferred Stock does not purport to be
complete and is qualified in its entirety by reference to all the provisions of
the Rights Agreement and the Certificate of Designation, including the
definitions therein of certain terms, which Rights Agreement and Certificate of
Designation are incorporated herein by reference.
The Rights Agreement
Initially, the Rights will attach to all certificates
representing shares of outstanding Company Common Stock, and no separate Rights
Certificates will be distributed. The Rights will separate from the Company
Common Stock and the "Distribution Date" will occur (i) upon the earlier of
(x) 10 business days following a public announcement (the date of such
announcement being the "Stock Acquisition Date") that a person or group of
affiliated or associated persons (other than the Company, any subsidiary of the
Company or any employee benefit plan of the Company or such subsidiary) (an
"Acquiring Person") has acquired, obtained the right to acquire, or otherwise
obtained beneficial ownership of 10%
Page 66 of 70 Pages
<PAGE>
or more of the then outstanding shares of Company Common Stock, and (y) 10
business days following the commencement of a tender offer or exchange offer
that would result in an Acquiring Person owning 10% or more of the then
outstanding shares of Company Common Stock, or (ii) such later date as may be
determined by action of a majority of the independent members of the Board of
Directors (such determination to be made prior to such time as any person
becomes an Acquiring Person pursuant to (x) or (y) above). Until the
Distribution Date, (i) the Rights will be evidenced by Company Common Stock
certificates and will be transferred with and only with such Company Common
Stock certificates, (ii) new Company Common Stock certificates issued after the
Record Date (also including shares distributed from Treasury) will contain a
notation incorporating the Rights Agreement by reference and (iii) the surrender
for transfer of any certificates representing outstanding Company Common Stock
will also constitute the transfer of the Rights associated with the Company
Common Stock represented by such certificates.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on the tenth anniversary of the Rights
Agreement unless earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of Company Common Stock as of
the close of business on the Distribution Date and, thereafter, the separate
Rights Certificates alone will represent the Rights.
In the event that (i) the Company is the surviving corporation
in a merger with an Acquiring Person and shares of Company Common Stock shall
remain outstanding, (ii) a Person becomes the beneficial owner of 10% or more of
the then outstanding shares of Company Common Stock, (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, or (iv) during such time as there is an Acquiring Person, an event
occurs which results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., by means of a reverse stock split or
recapitalization), then, in each such case, each holder of a Right will
thereafter have the right to receive, upon exercise, Units of Preferred Stock
(or, in certain circumstances, Company Common Stock, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. The exercise price is the Purchase Price multiplied by the number
of Units of Preferred Stock issuable upon exercise of a Right prior to the
events described in this paragraph. Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in the
Page 67 of 70 Pages
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Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company is acquired in a merger or other business combination
transaction and the Company is not the surviving corporation (other than a
merger described in the preceding paragraph), (ii) any Person consolidates or
merges with the Company and all or part of the Company Common Stock is converted
or exchanged for securities, cash or property of any other Person or (iii) 50%
or more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as described
above) shall thereafter have the right to receive, upon exercise, common stock
of the Acquiring Person having a value equal to two times the exercise price of
the Right.
In light of the fact that certain stockholders of the Company
currently exceed the 10% threshold for distribution of the Rights, the Rights
Agreement exempts those stockholders from triggering the distribution of the
Rights unless they, individually or together with their affiliates or
associates, increase their beneficial ownership of Company Common Stock by more
than that number of shares of Company Common Stock equal to 1.5% of the
outstanding number of shares of Company Common Stock as of the close of business
on October 5, 1995. These stockholders consist of Meridian Venture Partners,
Massachusetts Financial Services Company, and Crown-Glynn Associates.
Additionally, Dan and Rebecca Matthias, the current Chairman and Chief Executive
Officer, and President and Chief Operating Officer, respectively, also
collectively exceed the 10% threshold. Under the Rights Agreement, their current
level of ownership does not result in the distribution of the Rights. However,
if they acquire any additional shares which results in an increase in their
percentage ownership of outstanding Company Common Stock, other than increases
resulting from the future issuance of employee stock options or from inheritance
or by the laws of descent, then the Rights are distributed.
The Purchase Price payable, and the number of Units of
Preferred Stock issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Preferred Stock,
(ii) if holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the distribution to the
holders of the Preferred Stock of evidences of indebtedness, cash or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
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With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at least 1% of the
Purchase Price. The Company is not required to issue fractional Units. In lieu
thereof, an adjustment in cash may be made based on the market price of the
Preferred Stock prior to the date of exercise.
At any time until (i) ten business days following the Stock
Acquisition Date or (ii) such later date as a majority of the independent
members of the Board of Directors shall determine (such determination to be made
prior to the date specified in (i) above), a majority of the Independent
Directors may redeem the Rights in whole, but not in part, at a price of $.01
per Right (subject to adjustment in certain events) (the "Redemption Price"),
payable, at the election of such majority of the Independent Directors, in cash
or shares of Company Common Stock. Immediately upon the action of a majority of
the Independent Directors ordering the redemption of the Rights, the Rights will
terminate and 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 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 Units of Preferred Stock (or other consideration).
Any of the provisions of the Rights Agreement may be amended
without the approval of the holders of Company Common Stock at any time prior to
the Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
Description of Preferred Stock
The Units of Preferred Stock that may be acquired upon
exercise of the Rights will be nonredeemable and subordinate to any other shares
of preferred stock that may be issued by the Company.
Each Unit of Preferred Stock will be entitled to dividends at
the same rate per share as dividends declared on the Company Common Stock and
shall be entitled to payment of dividends to the extent dividends are declared
on the Company Common Stock.
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In the event of liquidation, the holder of a Unit of Preferred Stock will
receive the per share amount paid in respect of a share of Company Common Stock.
In the event of any merger, consolidation or other transaction
in which shares of Company Common Stock are exchanged, each Unit of Preferred
Stock will be entitled to receive the per share amount paid in respect of each
share of Company Common Stock. Each Unit of Preferred Stock will have one vote,
voting together with the Company Common Stock. The rights of holders of the
Preferred Stock to dividends, liquidation and voting, and in the event of
mergers and consolidations, are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend,
liquidation and voting rights, the economic value of one Unit of Preferred Stock
that may be acquired upon the exercise of each Right should approximate the
economic value of one share of the Company Common Stock.
Page 70 of 70 Pages
