Entry into a
Material Definitive Agreement
On July 31, 2019, the
Board of Directors of Francesca’s Holdings Corporation (the “Company”) declared a dividend of one preferred share
purchase right (a “Right”) for each outstanding share of common stock, par value $0.01 per share, of the Company (the
“Common Stock”). The dividend is payable on August 29, 2019 to the stockholders of record at the close of business
on August 15, 2019 (the “Record Date”). Each Right initially entitles the registered holder to purchase from the Company
one five-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company (the
“Preferred Stock”) at a price of $18.00 per one five-thousandth of a share of Preferred Stock (the “Purchase
Price”), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement, dated as of
August 1, 2019, as the same may be amended from time to time (the “Rights Agreement”), between the Company and Computershare
Trust Company, N.A., as Rights Agent (the “Rights Agent”).
Until the earlier to
occur of (i) 10 business days following a public announcement that a person or group of affiliated or associated persons has become
an Acquiring Person (as defined below) or (ii) 10 business days (or such later date as may be determined by action of the Board
of Directors of the Company prior to such time as any person or group of affiliated or associated persons becomes an Acquiring
Person) following the commencement of, or public announcement of an intention to make, a tender or exchange offer the consummation
of which would result in any person or group of affiliated or associated persons becoming an Acquiring Person (the earlier of such
dates being called the “Distribution Date”), the Rights will be evidenced, with respect to certificates representing
Common Stock (or book entry shares of Common Stock) outstanding as of the Record Date, by such certificates (or such book entry
shares) together with a copy of a summary of the Rights (the “Summary of Rights”). Except in certain situations, a
person or group of affiliated or associated persons becomes an “Acquiring Person” upon acquiring beneficial ownership
of 15% or more of the outstanding shares of Common Stock. With respect to any person or group of affiliated or associated persons
that beneficially owns 15% or more of the outstanding shares of Common Stock prior to the issuance of the press release announcing
the adoption of the Rights Agreement, such person or group of affiliated or associated persons will become an “Acquiring
Person” only after becoming the beneficial owner of any additional shares of Common Stock, subject to certain exceptions.
The Rights Agreement
provides that, until the Distribution Date (or earlier expiration of the Rights), the Rights will be transferred with and only
with the Common Stock. Until the Distribution Date (or earlier expiration of the Rights), new Common Stock certificates issued
after the Record Date upon transfer or new issuances of Common Stock will contain a notation incorporating the Rights Agreement
by reference. Until the Distribution Date (or earlier expiration of the Rights), the surrender for transfer of any certificates
for shares of Common Stock (or book entry shares of Common Stock) outstanding as of the Record Date, even without such notation
or a copy of the Summary of Rights, will also constitute the transfer of the Rights associated with the shares of Common Stock
represented thereby. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (“Right
Certificates”) will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date
or the book entry accounts of such holders shall be credited and direct registration transaction advice shall be given to such
holders and such separate Right Certificates or book-entry shares alone will evidence the Rights.
The Rights are not
exercisable until the Distribution Date. The Rights will expire on August 1, 2022 (the “Final Expiration Date”), unless
the Final Expiration Date is advanced or extended, or the Rights are earlier redeemed or exchanged by the Company as described
The Purchase Price
payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights is 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) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for or
purchase Preferred Stock at a price, or securities convertible into Preferred Stock with a conversion price, less than the then-current
market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness
or assets (excluding regular periodic cash dividends or dividends payable in Preferred Stock) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding
Rights is subject to adjustment in the event of a stock dividend on the Common Stock payable in shares of Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case, prior to the Distribution Date.
Shares of Preferred
Stock purchasable upon exercise of the Rights will not be redeemable. Each share of Preferred Stock will be entitled, when, as
and if declared, to a minimum preferential quarterly dividend payment of the greater of (a) $50.00 per share, and (b) an amount
equal to 5,000 times the dividend declared per share of Common Stock. In the event of liquidation, dissolution or winding up of
the Company, the holders of the Preferred Stock will be entitled to a minimum preferential payment of the greater of (a) $5,000
per share (plus any accrued but unpaid dividends), and (b) an amount equal to 5,000 times the payment made per share of Common
Stock. Each share of Preferred Stock will have 5,000 votes, voting together with the Common Stock. Finally, in the event of any
merger, consolidation or other transaction in which outstanding shares of Common Stock are converted or exchanged, each share of
Preferred Stock will be entitled to receive 5,000 times the amount received per share of Common Stock. These rights are protected
by customary anti-dilution provisions.
Because of the nature
of the Preferred Stock’s dividend, liquidation and voting rights, the value of the one five-thousandth interest in a share
of Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of Common Stock.
In the event that any
person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a
Right that number of shares of Common Stock, in lieu of Preferred Stock, having a market value of two times the exercise price of the Right.
In the event that,
after a person or group has become an Acquiring Person, the Company is acquired in a merger or other business combination transaction
or 50% or more of its consolidated assets or earning power are sold, proper provisions will be made so that each holder of a Right
(other than Rights beneficially owned by an Acquiring Person which will have become void) will thereafter have the right to receive
upon the exercise of a Right that number of shares of common stock of the person with whom the Company has engaged in the foregoing
transaction (or its parent) that at the time of such transaction have a market value of two times the exercise price of the Right.
At any time after any
person or group becomes an Acquiring Person and prior to the earlier of one of the events described in the previous paragraph or
the acquisition by such Acquiring Person of 50% or more of the outstanding shares of Common Stock, the Board of Directors of the
Company may exchange the Rights (other than Rights owned by such Acquiring Person which will have become void), in whole or in
part, for shares of Common Stock or Preferred Stock (or a series of the Company’s preferred stock having equivalent rights,
preferences and privileges), at an exchange ratio of one share of Common Stock, or a fractional share of Preferred Stock (or other
preferred stock) equivalent in value thereto, per Right.
With certain exceptions,
no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such
Purchase Price. No fractional shares of Preferred Stock or Common Stock will be issued (other than fractions of Preferred Stock
which are integral multiples of one five-thousandth of a share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), and in lieu thereof an adjustment in cash will be made based on the current market price of
the Preferred Stock or the Common Stock.
At any time prior to
the time an Acquiring Person becomes such, the Board of Directors of the Company may redeem the Rights in whole, but not in part,
at a price of $0.001 per Right (the “Redemption Price”) payable, at the option of the Company, in cash, shares of Common
Stock or such other form of consideration as the Board of Directors of the Company shall determine. The redemption of the Rights
may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company in its sole
discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the
only right of the holders of Rights will be to receive the Redemption Price.
For so long as the
Rights are then redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Agreement in any manner.
After the Rights are no longer redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Agreement
in any manner that does not adversely affect the interests of holders of the Rights.
Until a Right is exercised
or exchanged, 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.
The Rights Agreement
between the Company and the Rights Agent specifying the terms of the Rights, which includes the form of Certificate of Designation
of the Series A Junior Participating Preferred Stock of the Company as Exhibit A, the form of Right Certificate as Exhibit B and
the form of the Summary of Rights to Purchase Shares of Preferred Stock of the Company as Exhibit C, is filed herewith as Exhibit
4.1 and incorporated herein by reference. The foregoing description of the Rights is qualified in its entirety by reference to
the Rights Agreement.
As of July 30, 2019,
there were 3,056,042 shares of the Company’s Common Stock outstanding (excluding 923,287 shares of treasury stock), and an
additional 39,698 shares of the Company’s Common Stock reserved for issuance under the Company’s existing benefit plans.
16,000 shares of Preferred Stock have been reserved for issuance upon the exercise of the Rights.