<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 28, 1998
------------------------------
Richman Gordman 1/2 Price Stores, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-24328 47-0771211
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No)
12100 West Center Road, Omaha, Nebraska 68144
-----------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code:
(402) 691-4000
-----------------------------------------------
Not Applicable
-----------------------------------------------
(Former name or former address, if changed since last report.)
Page 1 of 12
Exhibit Index Appears on Page 5
<PAGE> 2
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
Paragraph 6 of the Richman Gordman 1/2 Price Stores, Inc. (the
"Registrant") Certificate of Incorporation (the "Certificate") provides that
the shares of the Registrant's Series B Option Common Stock (the "Series B
Stock") shall be subject to an option (the "Option") to purchase such shares
exercisable first by the Registrant, and to the extent not exercised by the
Registrant, by the designee of A. D. Gordman. The Option is exercisable with
respect to those holders of shares of the Series B Option Common Stock (the
"Option Record Holders") as of the first business day following payment into
escrow of the final Cumulative Minimum Payment (as that term is defined in the
Certificate) (the "Valuation Date"). On July 15, 1998, the Registrant paid
into escrow the balance of the Cumulative Minimum Payment, and accordingly, the
Valuation Date is July 16, 1998.
The Certificate further provides that the exercise price for the Option
shall be the value of the Series B Option Common Stock determined by an
independent appraisal as of the Valuation Date, less any payment of Excess Cash
Balance (as defined in the Certificate). There is no Excess Cash Balance which
would serve to reduce the Option exercise price. The Registrant hired the firm
of Murray Devine & Co. (the "Appraiser") to perform the appraisal of the Series
B Option Common Stock. The Appraiser delivered its report regarding the value
of the Series B Option Common Stock to the Registrant on September 30, 1998
(the "Valuation Delivery Date"). In its report, the Appraiser determined the
value of each share of the Series B Option Common Stock on the Valuation Date
to be $0.076.
On October 28, 1998, the Registrant mailed to the Option Record Holders
its Notice of Exercise of Option, dated October 26, 1998 (the "Notice"). A
copy of the Notice is attached hereto as EXHIBIT 99 (i). In the Notice, the
Registrant indicated its intention to exercise the Option in its entirety with
respect to all issued and outstanding shares of the Series B Stock. The
Registrant has instructed its transfer agent to stop all transfers of the
Series B Stock from and after October 28, 1998, pending the Registrant's
exercise of the Option. To complete the exercise of the Option, the
Certificate provides that the Registrant must mail the full exercise price to
the Option Record Holders before January 28, 1999. If the Registrant fails to
mail the exercise price to the Option Record Holders within the specified time
period, then the designee of A. D. Gordman shall have the right to exercise the
Option, subject to the terms of the Certificate. In the event that both the
Registrant and the designee of A.D. Gordman fail to complete the exercise of
the Option in accordance with the terms of the Certificate, the Registrant will
remove the stop transfer instruction with respect to the Series B Stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
Not applicable.
2
<PAGE> 3
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
99(i) Notice of Exercise of Option, dated October 26, 1998
[Remainder of page intentionally left blank.]
3
<PAGE> 4
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.
Richman Gordman 1/2 Price Stores, Inc.
Date: October 30, 1998 By: /s/ Jeffrey J. Gordman
------------------ ---------------------------------
Jeffrey J. Gordman,
President and Chief Executive Officer
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
(99)(i) Notice of Exercise of Option
Dated October 26, 1998 6
</TABLE>
[Remainder of this page intentionally left blank]
5
<PAGE> 1
EXHIBIT (99)(i)
NOTICE OF EXERCISE OF OPTION,
DATED OCTOBER 26, 1998
6
<PAGE> 2
NOTICE OF EXERCISE OF OPTION
TO: Record Holders as of July 16, 1998 of Series B Option Common Stock of
Richman Gordman 1/2 Price Stores, Inc.
Jeffrey J. Gordman, Designee of A. D. Gordman
Paragraph 6 of the Certificate of Incorporation (the "Certificate") of
Richman Gordman 1/2 Price Stores, Inc. (the "Company") provides that the shares
of the Company's Series B Option Common Stock (the "Series B Stock") shall be
subject to an option (the "Option") to purchase such shares exercisable first
by the Company, and to the extent not exercised by the Company, by the designee
of A. D. Gordman. (See Paragraph 6 of the Certificate on the reverse of this
Notice of Exercise of Option.) The Option is exercisable with respect to those
holders of shares of the Series B Stock (the "Option Record Holders") as of the
first business day following payment into escrow of the Cumulative Minimum
Payment (as that term is defined in the Certificate) (the "Valuation Date").
On July 15, 1998, the Registrant paid into escrow the balance of the Cumulative
Minimum Payment, and accordingly, the Valuation Date is July 16, 1998.
The Certificate further provides that the exercise price for the Option
shall be the value of the Series B Stock determined by an independent appraisal
as of the Valuation Date, less any payment of Excess Cash Balance (as defined
in the Certificate). There is no Excess Cash Balance which would serve to
reduce the Option exercise price. The Company hired the firm of Murray Devine
& Co. (the "Appraiser") to perform the appraisal of the Series B Option Common
Stock. The Appraiser delivered its report regarding the value of the Series B
Option Common Stock to the Company on September 30, 1998 (the "Valuation
Delivery Date"). In its report, the Appraiser determined the value of each
share of Series B Option Common Stock on the Valuation Date to be $0.076.
Notice of the delivery of such valuation appraisal was given in the Form 8-K
dated September 30, 1998, filed by the Company on October 2, 1998.
THE COMPANY HAS DETERMINED, AND HEREBY GIVES NOTICE OF ITS INTENTION,
TO EXERCISE THE OPTION AS TO ALL ISSUED AND OUTSTANDING SHARES OF THE SERIES B
STOCK.
On or prior to January 28, 1999, the Company shall cause the Stock
Transfer Agent to mail to each record owner of Series B Stock as of July 16,
1998 (a "Record Holder") the applicable exercise option price, which shall be
equal to the number of shares shown on the records of the Company to be held by
such Record Holder on July 16, 1998, times $0.076. The Series B Stock shall be
deemed canceled as of January 28, 1999, and all certificates representing such
Series B Stock shall be null and void as of such date.
Each Record Holder is requested to surrender its certificate(s)
representing the Series B Stock, along with the executed Letter of Transmittal
enclosed with this Notice of Exercise of Option, to the Stock Transfer Agent at
the address shown below no later than January 15, 1999. In the event that the
address of a Record Holder has changed since the Record Date, the Record Holder
should indicate such change of address on such Letter of Transmittal. Record
Holders of lost or stolen
7
<PAGE> 3
certificates should execute and submit the enclosed Lost/Stolen Stock
Certificate Affidavit and Indemnity to the Stock Transfer Agent.
Stock Transfer Agent:
Boston Equiserve
Corporate Reorganization
Mailstop 45-01-40
Canton, Massachusetts 02021
Telephone: 781-575-3400
This Notice of Exercise of Option is dated as of October 26, 1998.
By order of the Board of Directors of
RICHMAN GORDMAN 1/2 PRICE STORES, INC.
By: /s/ Michael A. Mallaro
-------------------------------------
Michael A. Mallaro
Secretary and Chief Financial Officer
8
<PAGE> 4
REVERSE OF NOTICE OF OPTION EXERCISE
SECTION 6 OF THE ARTICLES OF INCORPORATION OF RICHMAN GORDMAN 1/2 PRICE
STORES, INC.:
6. Common Stock Repurchase Option.
a. For the purposes of this Certificate of Incorporation:
(1) The term "Allowed Class 3 Claims" means claims held by
unsecured creditors classified in Classes 3A, 3B, or 3C pursuant to the
Plan against the Debtors (as defined in the Plan) which have been
deemed allowed under the Bankruptcy Code or which have been allowed
pursuant to the Plan or by the court which has confirmed the Plan.
(2) The term "Creditors' Committee" shall mean the Official
Unsecured Creditors' Committee appointed pursuant to Section 1102 of
the Bankruptcy Code or which have been allowed pursuant to the Plan or
by the court which has confirmed the Plan with respect to the Debtors
under the Plan.
(3) The term "Cumulative Minimum Payment" shall mean the
Corporation's contractual obligation to make unconditional minimum
payments of stated principal and stated interest plus any contingent
interest as set forth in Section 6.02 of the Plan to Holders of Class 3
Claims from the Effective Date (as defined in the Plan) to the time of
computation.
(4) The term "Disqualified Stock" shall have the meaning assigned
in Section 108(a)(10)(B) of the Code.
(5) Other capitalized terms used in this Certificate of
Incorporation and not separately defined in this Certificate of
Incorporation shall have the meaning ascribed to those terms in the
Plan.
b. Upon receipt of a favorable ruling from the Internal Revenue
Service prior to the end of Fiscal Year 1993 (or at such later date as shall be
approved by the Creditors' Committee) concluding that subjecting the common
stock distributed to holders of Allowed Class 3 Claims (the "Creditors' Stock")
to the option and the related purchase adjustment for Excess Cash Balance paid
to the holders of Allowed Class 3 Claims described immediately below (the
"Option") would not cause the Creditors' Stock to be "Disqualified Stock", the
Corporation and A.D. (Dan) Gordman or his Designee shall be entitled to
exercise the Option, as provided in this Article 6 and the Plan, to purchase
all or a portion of the Creditors' Stock at the time and in the manner more
specifically described below. If the Internal Revenue Service does not rule
favorably prior to the end of Fiscal Year 1993 (or at such later date as shall
be approved by the Creditors' Committee), the Plan shall not grant the Option.
The Option may be exercised with respect to all or a
9
<PAGE> 5
portion of the Creditors' Stock but may not be exercised unless the Cumulative
Minimum Payment has been made. As more particularly provided below, the
Corporation shall have the right to exercise the Option prior to A.D. (Dan)
Gordman or his Designee.
c. Subject to the credit for Excess Cash Balance described below, the
exercise price of the Option with respect to all of the Creditors' Stock (the
"Purchase Price") shall be the price, on the business day immediately following
the payment in full of the Cumulative Minimum Payment (the "Valuation Date"),
at which the Creditors' Stock would change hands between a willing buyer and a
willing seller, each having a reasonable knowledge of the facts and neither
being under any compulsion to act, as determined according to customary
valuation methodologies, including, without limitation, analysis of the net
cash flow and market multiples of comparable companies, analysis of comparable
stock sales, and consideration of whether the Creditors' Stock is or is not
publicly traded as of the Valuation Date. Within 30 days following the
Valuation Date, an investment banker to be mutually agreed upon by (a) at least
a majority of members of the Corporation's Board of Directors at the time of
such agreement which were selected by the Creditors' Committee or were the
successors to directors selected by the Creditors' Committee pursuant to
Section 10.01 of the plan, and (b) at least a majority of members of the
Corporation's Board of Directors at the time of such agreement which were
selected by A.D. (Dan) Gordman or his Designee or were the successors to
directors selected by A.D. (Dan) Gordman or his Designee pursuant to Section
10.01 of the Plan, shall be engaged by and at the expense of the Corporation to
determine the Purchase Price of the Creditors' Stock as of the Valuation Date
(the "Valuation"). The investment banker shall deliver the final Valuation to
A.D. (Dan ) Gordman (or his Designee) and the Corporation. Delivery of the
final Valuation shall be deemed to occur on the day when such Valuation has
been mailed to all parties required by Section 10.03 of the Plan (the
"Valuation Delivery Date"). The investment banker who prepares the Valuation
shall be the final arbiter of the date of the Valuation Delivery Date.
d. The Excess Cash Balance, if any, previously paid to the holders of
Allowed Class 3 Claims ("Paid Excess Cash Balance") shall be a credit against,
and shall reduce, the exercise price for the Option whether or not (i) the
Option is exercised with respect to all or a portion of the Creditors' Stock,
and (ii) the holder of any Creditors' Stock with respect to which the Option is
exercised received such Excess Cash Balance. To the extent that the Option is
exercised with respect to less than all shares of the Creditors' Stock, the
Option shall be exercised Pro Rata with respect to all shares of Creditors'
Stock, and the exercise price for such Pro Rata share of Creditors' Stock shall
be (i) that percentage of the Purchase Price equal to the percentage of all
Creditors' Stock which such Creditors' Stock represents (the "Pro Rata Purchase
Price"), minus (ii) Paid Excess Cash Balance up to the amount of the Pro Rata
Purchase Price, provided, however, that any Paid Excess Cash Balance which the
Corporation applies as a credit and reduction against the Pro Rata Purchase
Price for Creditors' Stock with respect to which the exercise price is actually
paid may not be applied as a credit and reduction by A.D. (Dan) Gordman or his
Designee against the Pro Rata Purchase Price for Creditors' Stock pursuant to
A.D. (Dan) Gordman's or his Designee's exercise (if any) of the Option.
10
<PAGE> 6
e. Notice of intent to exercise the Option with respect to any
Creditors' Stock and the amount of such Creditors' Stock must be given to the
holders of the Creditors' Stock who were record holders as of the Valuation
Date (the "Option Record Holders") within 60 days following the Valuation
Delivery Date. Exercise of the Option with respect to any Creditors' Stock
must be completed within 120 days following the expiration of such 60 day
period. Exercise of the Option with respect to any Creditors Stock shall be
deemed completed upon the mailing by the party exercising the Option (or the
agent of such party) of the full exercise price with respect to such Creditors'
Stock. Notwithstanding the foregoing sentence, the giving of notice of intent
to exercise the Option with respect to all or a part of the Creditors' Stock
within 60 days following the Valuation Delivery Date shall be deemed completion
of the exercise of the Option to the extent of the Paid Excess Cash Balance to
be utilized by the party giving such notice.
f. If the Corporation intends to exercise the Option with respect to
all or a portion of the Creditors's Stock, it shall give written notice, not
later than 30 days after the Valuation Delivery Date, to (i) A.D. (Dan) Gordman
(or his Designee) at the address of the Corporation, and (ii) the Option Record
Holders. If the Corporation fails to give such notice within such period with
respect to any Creditors' Stock, the Corporation shall no longer be entitled to
exercise the Option with respect to such Creditors' Stock except upon the
express written consent of A.D. (Dan) Gordman (or his Designee) and subject to
the 60 day notice period for Option Record Holders described above. If A.D.
(Dan) Gordman (or his Designee) shall not have been given notice by the
Corporation of its intent to exercise the Option with respect to any Creditors'
Stock within 30 days after the Valuation Delivery Date, then A.D. (Dan) Gordman
(or his Designee) shall be entitled to exercise the Option with respect to such
Creditors' Stock by giving notice to the Corporation and the Option Record
Holders within 60 days after the Valuation Delivery Date of its intent to
exercise the Option and the amount of Creditors' Stock against which it intends
to exercise the Option. The Corporation shall be obligated to provide A.D.
(Dan) Gordman (or his Designee) a list of the Option Record Holders on or
before 30 days after the Valuation Delivery Date.
g. If the Corporation has timely given notice to A.D. (Dan) Gordman
(or his Designee) and the Option Record Holders of its intent to exercise the
Option with respect to any Creditors' Stock but has not mailed the full
exercise price in cash with respect to such Creditors' Stock to the Option
Record Holders by 120 days after the Valuation Delivery Date, then, except upon
the express written consent of A.D. (Dan) Gordman (or his Designee), the
Corporation shall no longer be entitled to exercise the Option with respect to
such Creditors' Stock and A.D. (Dan) Gordman (or his Designee) shall be
entitled to exercise the Option with respect to such Creditors' Stock and apply
Paid Express Cash Balance to the same extent as intended by the Corporation
within 180 days after the Valuation Delivery Date. The Corporation shall give
notice to A.D. (Dan) Gordman (or his Designee) at the address of the
Corporation of its mailing of the full exercise price in cash to the Option
Record Holders with respect to Creditors' Stock against which the Corporation
has exercised the Option within 3 business days of such mailing.
11
<PAGE> 7
h. If a favorable ruling is obtained from the Internal Revenue Service
as described above, the Creditors' Stock shall be marked with a legend
indicating that it is subject to the Option more particularly described in
Section 10.03 of the Plan.
12
