<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
FAY'S INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 16-0919350
- ---------------------------------------- ------------------
(State of incorporation or organization) (I.R.S. Employer
Identification No.)
7245 Henry Clay Boulevard
Liverpool, New York 13088
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which each class
to be so registered is to be registered
- ------------------- -------------------
Preferred Stock Purchase Rights New York Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Page 1 of 80 Pages
Exhibit Index on Page 9
[75346]
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Item 1. Description of Securities to be Registered.
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On August 17, 1995, the Board of Directors of Fay's Incorporated (the
"Corporation") declared a dividend distribution of one right (a "Right") for
each outstanding share of Common Stock, $.10 par value per share (the "Common
Shares"), of the Corporation. The dividend is payable to the stockholders of
record on August 29, 1995 (the "Record Date") and with respect to Common Shares
issued thereafter until the Distribution Date (as defined below), and, in
certain circumstances, with respect to Common Shares issued after the
Distribution Date. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Corporation
one-one-hundredth of a share of the Corporation's Series A Junior Participating
Preferred Stock, par value $1.00 per share, at a price of $30 per share (the
"Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Corporation and American Stock Transfer & Trust Corporation, as Rights Agent
(the "Rights Agent"), dated as of August 17, 1995.
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Right Certificates
(as defined below) will be distributed. The Rights will separate from the
Common Shares on the close of business on the tenth day after the earlier to
occur of (i) the first date of public announcement (which includes, without
limitation, a report filed pursuant to the Securities Exchange Act of 1934, as
amended) by the Corporation or an Acquiring Person (as defined below) that a
Person (together with all Affiliates and Associates of such Person) has become
the Beneficial Owner of 20% or more of the then outstanding Common Shares or was
such a Beneficial Owner at any time after August 17, 1995, whether or not such
Person continues to be the Beneficial Owner of 20% or more of the then
outstanding Common Shares (except pursuant to a Permitted Offer, as defined
below) or (ii) the tenth day (or such later date as may be determined by the
Board of Directors of the Corporation) after the date of the commencement by a
Person (other than the Corporation, any Subsidiary of the Corporation or certain
related entities thereof) of, or the first public announcement of an intention
of any such Person to commence (which intention to commence remains in effect
for five Business Days after such announcement), a tender offer or exchange
offer the consummation of which would result in a Person becoming an Acquiring
Person (the earlier of such dates contemplated in (i) and (ii) above being
called the "Distribution Date"). A Person whose acquisition of Common Shares
causes a Distribution Date pursuant to clause (i) above is an "Acquiring
Person," as that term is more fully defined in the Rights Agreement. An
Acquiring Person does not include a Grandfathered Person (as defined below).
The first date of public announcement that a person or group becomes an
Acquiring Person is the "Shares Acquisition Date."
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An Acquiring Person does not include the following persons (each, a
"Grandfathered Person"): (i) Henry A. Panasci, Jr., Chairman of the Board of
Directors and Chief Executive Officer of the Corporation, who at the date hereof
owns 27.5% of the outstanding Common Shares, any descendant of Henry A. Panasci,
Jr., or any spouse, widow or widower of Henry A. Panasci, Jr., or any such
descendant (Henry A. Panasci, Jr., and any such descendants, spouses, widows and
widowers collectively defined as the "Panasci Family Members"); (ii) any trust
(including any voting trust) which is in existence on the date of the Rights
Agreement and which has been established by one or more Panasci Family Members,
any estate of, or the executor or administrator of any estate of, or any
guardian or custodian for, a Panasci Family Member who died on or before the
date of the Rights Agreement (such trusts, estates, executors, administrators or
guardians or custodians collectively defined as the "Panasci Family Entities");
(iii) any estate of, or the executor or administrator of any estate of, or any
guardian or custodian for, a Panasci Family Member, or any trust established
after August 17, 1995 by one or more Panasci Family Members or Panasci Family
Entities, provided that one or more Panasci Family Members or Panasci Family
Entities, collectively, are the beneficiaries of at least 50% of the
actuarially-determined beneficial interests in such estate or trust; (iv) any
charitable organization which qualifies as an exempt organization under Section
501(c) of the Internal Revenue Code of 1986, as amended ("Charitable
Organization"), which is established by one or more Panasci Family Members or
Panasci Family Entities (a "Panasci Family Charitable Organization"); (v) any
corporation of which a majority of the voting power and a majority of the equity
interest is held, directly or indirectly, by or for the benefit of one or more
Panasci Family Members, Panasci Family Entities, estates, executors,
administrators, guardians or custodians or trusts described in clause (iii)
above, or Panasci Family Charitable Organizations; and (vi) any general
partnership, limited partnership, organization or other entity or arrangement of
which a majority of the voting interest and a majority of the economic interest
is held, directly or indirectly, by or for the benefit of one or more
Grandfathered Persons; provided, however, that Henry A. Panasci, Jr., and each
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of the other Persons contemplated by this paragraph shall not be a Grandfathered
Person if Henry A. Panasci, Jr., or any of such Persons makes an acquisition of
Common Shares that would increase the aggregate beneficial ownership of all
Grandfathered Persons to 50% or more of the outstanding Common Shares.
Notwithstanding the foregoing, Henry A. Panasci, Jr., and each of the other
Persons contemplated by this paragraph shall not cease to be a Grandfathered
Person either (x) as the result of the acquisition of Common Shares by the
Corporation which, by reducing the number of Common Shares outstanding,
increases the proportional number of shares beneficially owned by Henry A.
Panasci, Jr., or such other Grandfathered Persons, together with all Affiliates
and Associates thereof, unless (i) Henry A. Panasci, Jr., and each of such other
Persons would cease to be a Grandfathered Person (but for the operation of this
subclause (x)) as a result of the acquisition of Common Shares by the
Corporation and (ii) after such share acquisition by the Corporation, Henry A.
Panasci,
3
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Jr., or any such other Grandfathered Person, or an Affiliate or Associate
thereof, becomes the Beneficial Owner of any additional Common Shares or, (y) if
(i) within 8 days after Henry A. Panasci, Jr., and such other Persons would
otherwise have ceased to be Grandfathered Persons (but for the operation of this
subclause (y)) Henry A. Panasci, Jr., or any such other Person notifies the
Board of Directors that the Grandfathered Persons, together with all Affiliates
and Associates thereof, are the Beneficial Owners in the aggregate of less than
50% of the outstanding Common Shares.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (the "Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date (and to each initial record holder of certain Common Shares
issued after the Distribution Date), and these separate Right Certificates alone
will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will
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expire at the close of business on August 17, 2005, unless earlier redeemed by
the Corporation as described below.
In the event that any person becomes an Acquiring Person (except
pursuant to a tender or exchange offer for all outstanding Common Shares which
is at a price and on terms determined, prior to the purchase of shares under
such tender or exchange offer, by at least a majority of the members of the
Board of Directors who are not officers of the Corporation and who are not
Acquiring Persons or Transaction Persons or Affiliates, Associates, nominees or
representatives of an Acquiring Person or Transaction Person, to be adequate and
in the best interests of the Corporation and its stockholders (other than the
Person or any Affiliate or Associate thereof on whose behalf the offer is being
made) taking into account all factors that such directors may deem relevant,
including, without limitation, those factors described in Section 717(b) of the
New York Business Corporation Law (a "Permitted Offer")), each holder of a Right
will thereafter have the right (the "Flip-In Right") to receive upon exercise
the number of Common Shares (or, in certain circumstances, Preferred Stock or
other securities of the Corporation) having a value immediately prior to such
triggering event equal to two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of the event described
above, all Rights that are, or (under certain circumstances specified in the
4
<PAGE>
Rights Agreement) were, beneficially owned by any Acquiring Person or any
Affiliate or Associate thereof will be null and void. The Rights Agreement
provides that, in lieu of the Flip-In Right, the Corporation may, at its option,
issue Common Shares in exchange for all or part of the exercisable Rights at an
exchange ratio of one Common Share per Right after the time that any person or
group becomes an Acquiring Person, but before the Acquiring Person becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
If, at any time after a Person has become an Acquiring Person, the
Corporation shall (i) consolidate with, or merge with and into, any Person, (ii)
consolidate with, or merge with, any Person and the Corporation shall be the
continuing corporation of such consolidation or merger (other than, in the case
of any transaction described in (i) or (ii), where the holders of all of the
outstanding Common Shares immediately prior to the consummation of the
transaction are the holders of all of the surviving corporation's voting power),
or (iii) sell or otherwise transfer (or one or more of its Subsidiaries shall
sell or otherwise transfer) more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole), then in each such case
(except as provided below) each holder of a Right (except Rights which
previously have been voided as set forth above) shall thereafter have the right
(the "Flip-Over Right") to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the exercise price of the
Right. The holder of a Right will continue to have the Flip-Over Right whether
or not such holder exercises or surrenders the Flip-In Right. The Flip-Over
Right is not triggered by virtue of a transaction described in (i) or (ii) above
if (i) such transaction is consummated with a Person who acquired Common Shares
pursuant to a Permitted Offer, (ii) the price per Common Share offered in such
transaction is not less than the price per Common Share paid to all holders of
Common Shares whose shares were purchased pursuant to such Permitted Offer and
(iii) the form of consideration offered in such transaction is the same as the
form of consideration paid pursuant to such Permitted Offer. Upon consummation
of any transaction contemplated by the immediately preceding sentence, all
Rights shall expire.
The Purchase Price payable, and the number of one one-hundredths of a
share of Preferred Stock or other securities 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) 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 quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
5
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The Purchase Price is also subject to adjustment in the event of a
stock split of the Common Shares or a stock dividend on the Common Shares
payable in Common Shares or subdivisions, consolidations or combinations of the
Common Shares occurring, in any such case, prior to the Distribution Date.
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. Fractional Common Shares will not be required to be issued
by the Corporation, and in lieu thereof, an adjustment in cash will be made
based on the market price of the Common Shares on the last trading day prior to
the date of exercise.
At any time prior to the earlier to occur of (i) the expiration of the
Rights or (ii) the triggering of the Flip-In Right, and thereafter, prior to the
triggering of the Flip-Over Right, under limited circumstances, the Corporation
may redeem the Rights in whole, but not in part, at a price of $.01 per Right
(the "Redemption Price"). Under such limited circumstances, the Corporation may
redeem the then outstanding Rights in whole, but not in part, at the Redemption
Price, provided that such redemption is in connection with a merger or other
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business combination transaction or series of transactions involving the
Corporation in which all holders of Common Shares are treated alike and does not
involve an Acquiring Person or its Affiliates or Associates.
Any provision of the Rights Agreement may be amended by the Board of
Directors prior to the Distribution Date without the approval of any holders of
certificates representing Common Shares. From and after the Distribution Date,
the Rights Agreement may be amended without the approval of any holders of
certificates representing Common Shares in order to cure any ambiguity, correct
or supplement any defect or inconsistency, make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person) or, subject to certain limitations, shorten or lengthen any
time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders of the Corporation, stockholders may,
depending upon the circumstances, recognize taxable income should the Rights
become exercisable or upon the occurrence of certain events thereafter.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Corporation without conditioning the offer on (i) the Rights being redeemed,
(ii) a substantial number of Rights being acquired or (iii) the offer being
deemed a "Permitted Offer" under the Rights Agreement. However, the Rights
should not interfere with any merger or other business
6
<PAGE>
combination in connection with a Permitted Offer or that is approved by the
Corporation because the Rights are redeemable under certain circumstances.
Attached hereto as Exhibit 1 and incorporated herein by reference are
a copy of the Rights Agreement, dated as of August 17, 1995, between the
Corporation and American Stock Transfer Corporation, as Rights Agent, specifying
the terms of the Rights, and the exhibits thereto, as follows: Exhibit A --
Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock; Exhibit B -- Form of Rights Certificate; and
Exhibit C -- The Summary of Rights to Purchase Preferred Shares. The foregoing
description of the Rights is qualified by reference to the Rights Agreement and
the exhibits thereto.
Item 2. Exhibits.
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1. Rights Agreement, dated as of August 17, 1995, between Fay's
Incorporated and American Stock Transfer Trust Company, as Rights
Agent, which includes, as Exhibit A -- Certificate of Designation,
Preferences and Rights of Series A Junior Participating Preferred
Stock; Exhibit B -- Form of Rights Certificate; and Exhibit C --
The Summary of Rights to Purchase Preferred Shares.
7
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
FAY'S INCORPORATED
By: /s/ Warren D. Wolfson
---------------------
Name: Warren D. Wolfson
Title: Senior Vice President
and Secretary
Dated: August 28, 1995
8
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EXHIBIT INDEX
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<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
1 Rights Agreement, dated as of August 17,
1995, between Fay's Incorporated and
American Stock Transfer & Trust Company, as
Rights Agent, which includes, as Exhibit A
-- Certificate of Designation, Preferences
and Rights of Series A Junior Participating
Preferred Stock; Exhibit B -- Form of Rights
Certificate; and Exhibit C -- The Summary of
Rights to Purchase Preferred Shares.
</TABLE>
9
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Exhibit 1
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___________________________
FAY'S INCORPORATED
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Rights Agent
Rights Agreement
Dated as of August 17, 1995
___________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Certain Definitions................................................... 1
Section 2. Appointment of Rights Agent........................................... 6
Section 3. Issuance of Right Certificates........................................ 6
Section 4. Form of Right Certificate............................................. 8
Section 5. Countersignature and Registration..................................... 9
Section 6. Transfer, Split-Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates............... 10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights......... 11
Section 8. Cancellation and Destruction of Right Certificates.................... 13
Section 9. Reservation and Availability of Preferred Shares...................... 14
Section 10. Preferred Shares Record Date.......................................... 15
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights............................................................. 15
Section 12. Certificate of Adjusted Purchase Price or Number of Shares............ 23
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power................................................................. 23
Section 14. Fractional Rights and Fractional Shares............................... 26
Section 15. Rights of Action...................................................... 27
Section 16. Agreement of Right Holders............................................ 28
Section 17. Right Certificate Holder Not Deemed a Stockholder..................... 28
Section 18. Concerning the Rights Agent........................................... 29
Section 19. Merger or Consolidation or Change of Name of Rights Agent............. 29
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 20. Duties of Rights Agent......................................... 30
Section 21. Change of Rights Agent......................................... 32
Section 22. Issuance of New Right Certificates............................. 33
Section 23. Redemption and Termination..................................... 34
Section 24. Exchange....................................................... 35
Section 25. Notice of Certain Events....................................... 36
Section 26. Notices........................................................ 37
Section 27. Supplements and Amendments..................................... 38
Section 28. Determination and Actions by the Board of Directors, Etc....... 39
Section 29. Successors..................................................... 39
Section 30. Benefits of this Agreement..................................... 39
Section 31. Severability................................................... 39
Section 32. Governing Law.................................................. 40
Section 33. Counterparts................................................... 40
Section 34. Descriptive Headings........................................... 40
</TABLE>
Exhibit A - Form of Certificate of Designation, Preferences and
Rights designating the relative rights, preferences and
limitations of the Series A Junior Participating
Preferred Stock of Fay's Incorporated
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
-ii-
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Defined Term Cross Reference Sheet
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<TABLE>
<S> <C>
Acquiring Person.......................... Section 1(a)
Act....................................... Section 1(b)
Adjustment Shares......................... Section 11(a)(ii)
Adjusted Number of Shares................. Section 11(a)(iii)
Adjusted Purchase Price................... Section 11(a)(iii)
Affiliate................................. Section 1(d)
Agreement................................. Preface
Appointment of Rights Agent............... Section 2
Associate................................. Section 1(d)
Beneficial Owner.......................... Section 1(e)
Beneficially Own.......................... Section 1(e)
Business Day.............................. Section 1(f)
Capital Stock Equivalent.................. Section 11(a)(iii)
Charitable Organization................... Section 1(k)
Close of Business......................... Section 1(g)
Common Shares............................. Section 1(h)
Corporation............................... Preface
Current Per Market Price.................. Section 11(d)
Current Per Share Market Price............ Section 11(d)(i)
Distribution Date......................... Section 3(a)
Equivalent Preferred Shares............... Section 11(b)
Exchange Act.............................. Section 1(d)
Exchange Ratio............................ Section 24
Final Expiration Date..................... Section 7(a)
Grandfathered Person...................... Section 1(k)
Interested Stockholder.................... Section 1(e)
Panasci Family Charitable Organization.... Section 1(k)
Panasci Family Entities................... Section 1(k)
Panasci Family Members.................... Section 1(k)
Permitted Offer........................... Section 1(l)
Person.................................... Section 1(m)
Preferred Shares.......................... Section 1(n)
Principal Party........................... Section 13(b)
Proration Factor.......................... Section 11(a)(iii)
Purchase Price............................ Section 4(a)
Record Date............................... Preface
Redemption Date........................... Section 7(a)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Redemption Price.......................... Section 23
Right..................................... Preface
Right Certificate......................... Section 3(a)
Rights Agent.............................. Preface
Rights Agreement.......................... Section 3
Section 11(a)(ii) Event................... Section 11(a)(ii)
Section 13 Event.......................... Section 13(a)
Security.................................. Section 11(d)(i)
Shares Acquisition Date................... Section 1(r)
Subsidiary................................ Section 1(s)
Summary of Rights......................... Section 3(b)
Then Outstanding.......................... Section 1(d)(iii)
Trading Day............................... Section 11(d)(i)
Transaction............................... Section 1(t)
Transaction Person........................ Section 1(u)
Triggering Event.......................... Section 1(v)
Voting Securities......................... Section 13(a)
</TABLE>
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RIGHTS AGREEMENT
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RIGHTS AGREEMENT, dated as of August 17, 1995 (this "Agreement"),
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between Fay's Incorporated, a New York corporation (the "Corporation"), and
-----------
American Stock Transfer & Trust Company (the "Rights Agent").
------------
The Board of Directors of the Corporation ("Board of Directors") has
------------------
authorized and declared a dividend of one preferred share purchase right (a
"Right") for each Common Share (as hereinafter defined) of the Corporation
- ------
outstanding at the close of business on August 29, 1995, (the "Record Date"),
-----------
each Right representing the right to purchase one one-hundredth (subject to
adjustment as provided herein) of a Preferred Share (as hereinafter defined),
upon the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right (subject to adjustment as
provided herein) with respect to each Common Share that shall become outstanding
between the Record Date and the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date (as such terms are hereinafter
defined); provided, however, that Rights may be issued with respect to Common
-------- -------
Shares that shall become outstanding after the Distribution Date and prior to
the earlier of the Redemption Date and the Final Expiration Date in accordance
with the provisions of Section 22 of this Agreement.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
-------------------
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
----------------
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 20% or more of the then outstanding Common Shares (other than as a result of
a Permitted Offer (as hereinafter defined)) or was such a Beneficial Owner at
any time after the date hereof, whether or not such Person continues to be the
Beneficial Owner of 20% or more of the then outstanding Common Shares.
Notwithstanding the foregoing, (A) the term "Acquiring Person" shall not include
(i) the Corporation, (ii) any Subsidiary of the Corporation, (iii) any employee
benefit plan of the Corporation or of any Subsidiary of the Corporation, (iv)
any Person or entity organized, appointed or established by the Corporation for
or pursuant to the terms of any such plan, (v) any Person, who or which,
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 20% or more of the then outstanding Common Shares as a
result of the acquisition of Common Shares directly from the Corporation, or
(vi) any Grandfathered Person and (B) no Person shall be deemed to be an
"Acquiring Person" either (x) as a result of the acquisition of
<PAGE>
Common Shares by the Corporation which, by reducing the number of Common Shares
outstanding, increases the proportional number of shares beneficially owned by
such Person together with all Affiliates and Associates of such Person unless
(i) a Person would become an Acquiring Person (but for the operation of this
subclause (x)) as a result of the acquisition of Common Shares by the
Corporation and (ii) after such share acquisition by the Corporation, such
Person, or an Affiliate or Associate of such Person, becomes the Beneficial
Owner of any additional Common Shares, or (y) if (i) within 8 days after such
Person would otherwise have become an Acquiring Person (but for the operation of
this subclause (y)) such Person notifies the Board of Directors that such Person
did so inadvertently and (ii) within 2 days after such notification, such Person
is the Beneficial Owner of less than 20% of the outstanding Common Shares.
(b) "Act" shall mean the Securities Act of 1933, as amended and as in
---
effect on the date of this Agreement.
(c) "Affiliate" and "Associate" shall 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 and in effect on the date of
this Agreement (the "Exchange Act").
------------
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
----------------
deemed to "beneficially own" any securities:
----------------
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
-------- -------
Beneficial Owner of, or to beneficially own, securities tendered pursuant to
a tender or exchange offer made by or on behalf of such Person or any of
such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a Person
-------- -------
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant
to, and in
2
<PAGE>
accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on Schedule 13D
under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities) relating to the acquisition, holding, voting
(except to the extent contemplated by the proviso to Section l(d)(ii)(B)) or
disposing of any securities of the Corporation.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
----------------
Person's Beneficial Ownership of securities of the Corporation, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
------------
or federal holiday.
(f) "Close of business" on any given date shall mean 5:00 P.M., New
-----------------
York time, on such date; provided, however, that if such date is not a Business
-------- -------
Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(g) "Common Shares" when used with reference to the Corporation shall
-------------
mean the shares of Common Stock, par value $0.10 per share, of the Corporation
or, in the event of a subdivision, combination or consolidation with respect to
such shares of Common Stock, the shares of Common Stock resulting from such
subdivision, combination or consolidation. "Common Shares" when used with
-------------
reference to any Person other than the Corporation shall mean the capital stock
(or equity interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(h) "Distribution Date" shall have the meaning set forth in Section 3
-----------------
hereof.
(i) "Final Expiration Date" shall have the meaning set forth in
---------------------
Section 7 hereof.
3
<PAGE>
(j) "Grandfathered Person" shall mean any of the following:
--------------------
(i) Henry A. Panasci, Jr., who is at the date hereof, the
Beneficial Owner of 27.5% of the outstanding Common Shares, any
descendant of Henry A. Panasci, Jr., or any spouse, widow or widower
of Henry A. Panasci, Jr., or any such descendant (Henry A. Panasci,
Jr., and any such descendants, spouses, widows and widowers
collectively defined as the "Panasci Family Members");
----------------------
(ii) any trust (including any voting trust) which is in
existence on the date of this Agreement and which has been
established by one or more Panasci Family Members, any estate of,
or the executor or administrator of any estate of, or any guardian
or custodian for, a Panasci Family Member who died on or before
the date of this Agreement (such trusts, estates, executors,
administrators or guardians or custodians collectively defined as
the "Panasci Family Entities");
-----------------------
(iii) any estate of, or the executor or administrator of any
estate of, or any guardian or custodian for, a Panasci Family Member,
or any trust established after the date hereof by one or more Panasci
Family Members or Panasci Family Entities, provided that one or more
Panasci Family Members or Panasci Family Entities, collectively, are
the beneficiaries of at least 50% of the actuarially-determined
beneficial interests in such estate or trust;
(iv) any charitable organization which qualifies as an exempt
organization under Section 501(c) of the Internal Revenue Code of
1986, as amended ("Charitable Organization"), which is established by
-----------------------
one or more Panasci Family Members or Panasci Family Entities (a
"Panasci Family Charitable Organization");
---------------------------------------
(v) any corporation of which a majority of the voting power and
a majority of the equity interest is held, directly or indirectly, by
or for the benefit of one or more Panasci Family Members, Panasci
Family Entities, estates, executors, administrators, guardians or
custodians or trusts described in clause (iii) above, or Panasci
Family Charitable Organizations; and
(vi) any general partnership, limited partnership, organization
or other entity or arrangement of which a majority of the voting
interest and a
4
<PAGE>
majority of the economic interest is held, directly or indirectly, by
or for the benefit of one or more Grandfathered Persons;
provided, however, that Henry A. Panasci, Jr., and the Persons
-------- -------
contemplated by this Section 1(j) shall not be a Grandfathered Person if Henry
A. Panasci, Jr., or any of such Persons makes an acquisition of Common Shares
that would increase his or their ownership to 50% or more of the outstanding
Common Shares, except as a result of the acquisition of Common Shares by the
Corporation which, by reducing the number of Common Shares outstanding,
increases the proportional number of shares beneficially owned by Henry A.
Panasci, Jr., or such other Persons, together with all Affiliates and Associates
thereof, unless (i) Henry A. Panasci, Jr., or such other Person acquired 50% or
more of the outstanding Common Shares and would no longer be deemed to be a
Grandfathered Person (but for the operation of this clause) as a result of such
share acquisition by the Corporation and (ii) after such share acquisition by
the Corporation, Henry A. Panasci, Jr., or such other Persons, or an Affiliate
or Associate thereof, becomes the Beneficial Owner of any additional Common
Shares.
(k) "Interested Stockholder" shall mean any Acquiring Person or any
----------------------
Affiliate or Associate of an Acquiring Person or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
(l) "Permitted Offer" shall mean a tender or exchange offer for all
---------------
outstanding Common Shares which is at a price and on terms determined, prior to
the purchase of shares under such tender or exchange offer, by at least a
majority of the members of the Board of Directors who are not officers of the
Corporation and who are not Acquiring Persons or Transaction Persons or
Affiliates, Associates, nominees or representatives of an Acquiring Person or a
Transaction Person, to be adequate (taking into account all factors that such
directors deem relevant including, without limitation, prices that could
reasonably be achieved if the Corporation or its assets were sold on an orderly
basis designed to realize maximum value) and is otherwise in the best interests
of
5
<PAGE>
the Corporation and its stockholders (other than the Person or any Affiliate
or Associate thereof on whose behalf the offer is being made) taking into
account all factors that such directors may deem relevant, including, without
limitation, those factors described in Section 717(b) of the New York Business
Corporation Law.
(m) "Person" shall mean any individual, firm, partnership,
------
corporation, trust, association, joint venture or other entity, and shall
include any successor (by merger or otherwise) of such entity.
(n) "Preferred Shares" shall mean shares of Series A Junior
----------------
Participating Preferred Stock, with a par value of $1.00 per share, of the
Corporation having the relative rights, preferences and limitations set forth in
the Form of Certificate of Designation, Preferences and Rights attached to this
Agreement as Exhibit A.
(o) "Redemption Date" shall have the meaning set forth in Section 7
---------------
hereof.
(p) "Section 11(a)(ii) Event" shall mean any event described in
-----------------------
Section 11(a)(ii) hereof.
(q) "Section 13 Event" shall mean any event described in clause (x),
----------------
(y) or (z) of Section 13(a) hereof.
(r) "Shares Acquisition Date" shall mean the first date of public
-----------------------
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring Person has become such.
(s) "Subsidiary" of any Person shall mean any corporation or other
----------
Person of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(t) "Transaction" shall mean any merger, consolidation or sale of
-----------
assets described in Section 13(a) hereof or any acquisition of Common Shares of
the Corporation which would result in a Person becoming a Transaction Person.
(u) "Transaction Person" with respect to a Transaction shall mean (x)
------------------
any Person who (i) is or will become an Acquiring Person if the Transaction were
to be consummated, and (ii) directly or indirectly proposed or nominated a
director of the Corporation which director is in office at the time of
consideration of the Transaction, or (y) an Affiliate or Associate of such a
Person.
6
<PAGE>
(v) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
----------------
Section 13 Event.
Section 2. Appointment of Rights Agent. The Corporation hereby
---------------------------
appoints the Rights Agent to act as agent for the Corporation and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of Common Shares) in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint such co-Rights Agents
as it may deem necessary or desirable.
Section 3. Issuance of Right Certificates. (a) Until the earlier of
------------------------------
(i) the Shares Acquisition Date or (ii) the close of business on the tenth day
(or such later date as may be determined by action of the Board of Directors)
after the date of the commencement by any Person (other than the Corporation,
any Subsidiary of the Corporation, any employee benefit plan of the Corporation
or of any Subsidiary of the Corporation or any Person or entity organized,
appointed or established by the Corporation for or pursuant to the terms of any
such plan) of, or of the first public announcement of the intention of any
Person (other than the Corporation, any Subsidiary of the Corporation, any
employee benefit plan of the Corporation or of any Subsidiary of the Corporation
or any Person or entity organized, appointed or established by the Corporation
for or pursuant to the terms of any such plan) to commence (which intention to
commence remains in effect for five Business Days after such announcement), a
tender or exchange offer the consummation of which would result in any Person
becoming an Acquiring Person (including, in the case of both (i) and (ii), any
such date which is after the date of this Agreement and prior to the issuance of
the Rights), the earlier of such dates being herein referred to as the
"Distribution Date," (x) the Rights will be evidenced (subject to the provisions
-----------------
of Section 3(b) hereof) by the certificates for Common Shares registered in the
names of the holders thereof (which certificates shall also be deemed to be
Right Certificates) and not by separate Right Certificates, and (y) the right to
receive Right Certificates will be transferable only in connection with the
transfer of the underlying Common Shares (including a transfer to the
Corporation); provided, however, that if a tender offer is terminated prior to
-----------------
the occurrence of a Distribution Date, then no Distribution Date shall occur as
a result of such tender offer. As soon as practicable after the Distribution
Date, the Corporation will prepare and execute, the Rights Agent will
countersign, and the Corporation will send or cause to be sent by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Corporation, a Right Certificate, substantially in the form of
Exhibit B hereto (a "Right Certificate"), evidencing one Right (subject to
-----------------
adjustment as provided
7
<PAGE>
herein) for each Common Share so held. As of and after the Distribution Date,
the Rights will be evidenced solely by such Right Certificates.
(b) As promptly as practicable following the Record Date, the
Corporation will send a copy of a Summary of Rights to Purchase Preferred
Shares, in substantially the form of Exhibit C hereto (the "Summary of Rights"),
-----------------
by first-class, postage-prepaid mail, to each record holder of Common Shares as
of the close of business on the Record Date, at the address of such holder shown
on the records of the Corporation. With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights attached thereto.
Until the Distribution Date (or the earlier of the Redemption Date or the Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares outstanding on the Record Date, with or without a copy of the Summary of
Rights attached thereto, shall also constitute the transfer of the Rights
associated with such Common Shares.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date,
shall be deemed also to be certificates for Rights, and shall bear the following
legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Fay's
Incorporated and American Stock Transfer & Trust Company, dated as of
August 17, 1995, as the same may be amended from time to time (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal executive
offices of Fay's Incorporated. 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. Fay's Incorporated will mail to the holder of this
certificate a copy of the Rights Agreement without charge 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 an Affiliate or
--------------------------------------------------------------------
Associate thereof (as defined in the Rights Agreement) and
----------------------------------------------------------
8
<PAGE>
certain related persons, whether currently held by or on behalf of
------------------------------------------------------------------
such Person or by any subsequent holder, shall become null and void.
-------------------------------------------------------------------
With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Corporation purchases or acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed canceled and retired so that the Corporation
shall not be entitled to exercise any Rights associated with the Common Shares
which are no longer outstanding.
Section 4. Form of Right Certificate. (a) The Right Certificates (and
-------------------------
the forms of election to purchase and of assignment to be printed on the reverse
thereof) shall be substantially in the form set forth in Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Corporation 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 with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 22 hereof, the Right Certificates shall
entitle the holders thereof to purchase such number of one-hundredths of a
Preferred Share as shall be set forth therein at the price per one one-hundredth
of a Preferred Share set forth therein (the "Purchase Price"), but the amount
--------------
and type of securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights which are null and void pursuant to Section
7(e) of this Agreement and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
------------------------------------------------------------
beneficially owned by a Person who was or became an Acquiring Person
--------------------------------------------------------------------
or an Affiliate or Associate of an Acquiring Person (as such terms are
----------------------------------------------------------------------
defined in the Rights Agreement).
---------------------------------
9
<PAGE>
Accordingly, this Right Certificate and the Rights represented hereby
---------------------------------------------------------------------
are null and void.
-----------------
The Provisions of Section 7(e) of this Rights Agreement shall be
operative whether or not the foregoing legend is contained on any such Right
Certificate.
Section 5. Countersignature and Registration. The Right Certificates
---------------------------------
shall be executed on behalf of the Corporation by its Chairman of the Board, its
President or any of its Vice Presidents and its Secretary or its Treasurer,
either manually or by facsimile signature, shall have affixed thereto the
Corporation's seal or a facsimile thereof, and shall be attested by the
Secretary of the Corporation, either manually or by facsimile signature. The
Right Certificates shall be countersigned by the Rights Agent and shall not be
valid for any purpose unless so countersigned. In case any officer of the
Corporation who shall have signed any of the Right Certificates shall cease to
be such officer of the Corporation before countersignature by the Rights Agent
and issuance and delivery by the Corporation, such Right Certificates may
nevertheless be countersigned by the Rights Agent and issued and delivered by
the Corporation with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such officer of the Corporation;
and any Right Certificate may be signed on behalf of the Corporation by any
person who, at the actual date of the execution of such Right Certificate, shall
be a proper officer of the Corporation to sign such Right Certificate, although
at the date of the execution of this Rights Agreement any such person was not
such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office or offices designated as the appropriate
place for surrender of such Right Certificate for transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the certificate number and the date of each of the Right
Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
- ---------------------------------------------------------------------
to the provisions of Section 4(b), Section 7(e), Section 14 and Section 24
hereof, at any time after the close of business on the Distribution Date, and at
or prior to the close of business on the earlier of the Redemption Date or the
Final Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
one one-hundredth of a Preferred Share (or, following a Triggering Event,
10
<PAGE>
other securities, as the case may be) as the Right Certificate or Right
Certificates surrendered then entitled such holder (or former holder in the case
of a transfer) to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Right Certificate or Right Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Right Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Corporation shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Right Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Right Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Corporation shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and
Section 24 hereof, countersign and deliver to the Person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Corporation 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 Right Certificates.
Upon receipt by the Corporation and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Corporation's request,
reimbursement to the Corporation and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Corporation will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Right
- ------
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price for the total
number of one one-hundredths of a Preferred Share (or other securities, as the
case may be) as to which such surrendered Rights are exercised, at or prior
to the earliest of (i) the close of business on August 17, 2005 (the "Final
-----
Expiration Date"), (ii) the time at which the Rights are redeemed as provided in
- ---------------
Section 23 hereof (the
11
<PAGE>
"Redemption Date"), (iii) the time at which the Rights are exchanged as provided
---------------
in Section 24 hereof, or (iv) the consummation of a transaction contemplated by
Section 13(d) hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred Share
pursuant to the exercise of a Right shall initially be $30, shall be subject to
adjustment from time to time as provided in the next sentence and in Sections 11
and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
Anything in this Agreement to the contrary notwithstanding, in the event that at
any time after the date of this Agreement and prior to the Distribution Date,
the Corporation shall (i) declare or pay any dividend on the Common Shares
payable in Common Shares or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then in any such case, each Common Share outstanding following such
subdivision, combination or consolidation shall continue to have one Right
(subject to adjustment as provided herein) associated therewith and the Purchase
Price following any such event shall be proportionately adjusted to equal the
result obtained by multiplying the Purchase Price immediately prior to such
event by a fraction the numerator of which shall be the total number of Common
Shares outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of Common Shares outstanding
immediately following the occurrence of such event. The adjustment provided for
in the preceding sentence shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment of the aggregate Purchase Price for the Preferred Shares
(or other securities, as the case may be) to be purchased and an amount equal to
any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 6 hereof by certified check, cashier's
check or money order payable to the order of the Corporation, the Rights Agent
shall thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares certificates for the number of Preferred Shares to be purchased
and the Corporation hereby irrevocably authorizes its transfer agent to comply
with all such requests, or (B) if the Corporation, in its sole discretion, shall
have elected to deposit the Preferred Shares issuable upon exercise of the
Rights hereunder into a depositary, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Corporation will direct the depositary
12
<PAGE>
agent to comply with such requests, (ii) when appropriate, requisition from the
Corporation the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder, and (iv) when appropriate,
after receipt thereof, deliver such cash to or upon the order of the registered
holder of such Right Certificate. In the event that the Corporation is
obligated to issue other securities (including Common Shares) of the Corporation
pursuant to Section 11(a) hereof, the Corporation will make all arrangements
necessary so that such other securities are available for distribution by the
Rights Agent, if and when appropriate.
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii), the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement and if less than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby which continue to include
the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof, or the
Rights Agent shall place an appropriate notation on the Right Certificate with
respect to those Rights exercised.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the
13
<PAGE>
avoidance of this Section 7(e), shall become null and void 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 Corporation shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Corporation shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Corporation shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
--------------------------------------------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Corporation or to any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Agreement. The Corporation shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired by the
Corporation otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Right Certificates to the Corporation, or shall, at the
written request of the Corporation, destroy such canceled Right Certificates,
and in such case shall deliver a certificate of destruction thereof to the
Corporation.
14
<PAGE>
Section 9. Reservation and Availability of Preferred Shares. The
------------------------------------------------
Corporation covenants and agrees that at all times prior to the occurrence of a
Section 11(a)(ii) Event it will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares, or any authorized and issued
Preferred Shares held in its treasury, the number of Preferred Shares that will
be sufficient to permit the exercise in full of all outstanding Rights and,
after the occurrence of a Section 11(a)(ii) Event, shall, to the extent
reasonably practicable, so reserve and keep available a sufficient number of
Common Shares (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the Preferred Shares (and, after the occurrence of a
Section 11(a)(ii) Event, Common Shares or any other securities) issuable upon
the exercise of the Rights may be listed on any national securities exchange,
the Corporation shall use its best efforts to cause, from and after such time as
the Rights become exercisable, all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such exercise.
The Corporation covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or Common Shares and/or
other securities, as the case may be) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares or other securities
(subject to payment of (i) the Purchase Price and (ii) an amount equal to any
applicable transfer tax required to be paid by the holder of such Right in
accordance with Section 6 hereof), be duly and validly authorized and issued and
fully paid and non-assessable shares or securities.
The Corporation further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares (or Common Shares and/or other securities, as the case
may be) upon the exercise of Rights. The Corporation shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Right Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares (or
Common Shares and/or other securities, as the case may be) in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise, or to issue or to deliver any certificates or
depositary receipts for Preferred Shares (or Common Shares and/or other
securities, as the case may be) upon the exercise of any Rights, until any such
tax shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Corporation's reasonable satisfaction that no such tax is due.
15
<PAGE>
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date (or, if required by law, at
such earlier time following the Distribution Date as so required), a
registration statement under the Act, with respect to the securities purchasable
upon exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act and the rules and regulations
thereunder) until the date of the expiration of the rights provided by Section
11(a)(ii). The Corporation will also take such action as may be appropriate
under the blue sky laws of the various states.
Section 10. Preferred Shares Record Date. Each Person in whose name
----------------------------
any certificate for Preferred Shares (or Common Shares and/or other securities,
as the case may be) is issued upon the exercise of Rights shall for all purposes
be deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that, if the
-------- -------
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Corporation are closed, such Person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares (or Common Shares and/or
other securities, as the case may be) transfer books of the Corporation are
open.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of shares covered
- -------------------
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a) (i) In the event the Corporation shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares,
(C) combine the outstanding Preferred Shares into a smaller number of
Preferred Shares or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, 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
16
<PAGE>
capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if
such Right had been exercised immediately prior to such date and at a time
when the Preferred Shares transfer books of the Corporation were open, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the consideration to be paid upon
-----------------
the exercise of one Right be less than the aggregate par value of the shares
of capital stock of the Corporation issuable upon exercise of one Right. If
an event occurs which would require an adjustment under both 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 any Person, alone or together with its
Affiliates and Associates, shall become an Acquiring Person, then proper
provision shall be made so that each holder of a Right (except as provided
below and in Section 7(e) hereof) shall, for a period of 60 days after the
later of the occurrence of any such event or the effective date of an
appropriate registration statement under the Act pursuant to Section 9
hereof, have a right to receive, upon exercise thereof at a price equal to
the then current Purchase Price, in accordance with the terms of this
Agreement, such number of Common Shares (or, in the discretion of the Board
of Directors, one one-hundredths of a Preferred Share) as shall equal the
result obtained by (x) multiplying the then current Purchase Price by the
then number of one one-hundredths of a Preferred Share for which a Right is
exercisable and dividing that product by (y) 50% of the then current per
share market price of the Corporation's Common Shares (determined pursuant
to Section 11(d) hereof) (such number of shares being referred to as the
"Adjustment Shares"). For the purposes of this provision all determinations
-----------------
shall be made as of the date of the occurrence of such event, regardless of
when the exercise period commences; provided, however, that if the
-------- -------
transaction that would otherwise give rise to the foregoing adjustment is
also subject to the provisions of Section 13 hereof, then only the
provisions of Section 13 hereof shall apply and no adjustment shall be made
pursuant to this Section 11(a)(ii);
(iii) In the event that there shall not be sufficient treasury
shares or authorized but unissued (and unreserved) Common Shares to permit
the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) and the Rights become so exercisable (and the Board of
Directors has determined to make the Rights exercisable into fractions of a
Preferred Share), notwithstanding any other
17
<PAGE>
provision of this Agreement, to the extent necessary and permitted by
applicable law, each Right shall thereafter represent the right to receive,
upon exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, (x) a number of (or fractions of) Common Shares
(up to the maximum number of Common Shares which may permissibly be issued)
and (y) one one-hundredth of a Preferred Share or a number of (or fractions
of) other equity securities of the Corporation (or, in the discretion of the
Board of Directors, debt) which the Board of Directors has determined to
have the same aggregate current market value (determined pursuant to
Sections 11(d)(i) and (ii) hereof, to the extent applicable) as one Common
Share (such number of (or fractions of) Preferred Shares, debt, or other
equity securities or debt of the Corporation being referred to as a "capital
-------
stock equivalent"), equal in the aggregate to the number of Adjustment
----------------
Shares; provided, however, if sufficient Common Shares and/or capital stock
-----------------
equivalents are unavailable, then the Corporation shall, to the extent
permitted by applicable law, take all such action as may be necessary to
authorize additional Common Shares or capital stock equivalents for issuance
upon exercise of the Rights, including the calling of a meeting of
stockholders; and provided, further, that if the Corporation is unable to
-----------------
cause sufficient Common Shares and/or capital stock equivalents to be
available for issuance upon exercise in full of the Rights, then each Right
shall thereafter represent the right to receive the Adjusted Number of
Shares upon exercise at the Adjusted Purchase Price (as such terms are
hereinafter defined). As used herein, the term "Adjusted Number of Shares"
-------------------------
shall be equal to that number of (or fractions of) Common Shares (and/or
capital stock equivalents) equal to the product of (x) the number of
Adjustment Shares and (y) a fraction, the numerator of which is the number
of Common Shares (and/or capital stock equivalents) available for issuance
upon exercise of the Rights and the denominator of which is the aggregate
number of Adjustment Shares otherwise issuable upon exercise in full of all
Rights (assuming there were a sufficient number of Common Shares available)
(such fraction being referred to as the "Proration Factor"). The "Adjusted
---------------- --------
Purchase Price" shall mean the product of the Purchase Price and the
--------------
Proration Factor. The Board of Directors may, but shall not be required to,
establish procedures to allocate the right to receive Common Shares and
capital stock equivalents upon exercise of the Rights among holders of
Rights.
(b) In case the Corporation shall fix a record date for the issuance
of rights (other than the Rights), options or warrants to all holders of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Shares (or shares
having the same rights, privileges and preferences as the Preferred Shares
("equivalent preferred shares")) or securities convertible into Preferred Shares
---------------------------
or equivalent preferred shares at a price per Preferred
18
<PAGE>
Share or equivalent preferred share (or having a conversion price per share, if
a security convertible into Preferred Shares or equivalent preferred shares)
less than the then current per share market price of the Preferred Shares (as
determined pursuant to Section 11(d) hereof) 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 number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current per share market price, and the denominator of which shall be
the number of Preferred Shares outstanding on such record date plus the number
of additional Preferred Shares and/or equivalent preferred shares to be offered
for subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
-----------------
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be determined in good faith by the Board of
Directors, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent. Preferred Shares owned by
or held for the account of the Corporation shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such rights, options
or warrants are not so issued, the 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 Corporation shall fix a record date for the making of
a distribution to all holders of Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) 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 then current per share market price (as
determined pursuant to Section 11(d) hereof) of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent) of the portion
of the assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one Preferred Share and the
denominator of
19
<PAGE>
which shall be such current per share market price of the Preferred Shares;
provided, however, that in no event shall the consideration to be paid upon the
- -----------------
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Corporation to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such distribution is not so made, the Purchase Price shall
again be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the
------------------------------- --------
purpose of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the
thirty (30) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that in the event that
-------- -------
the current per share market price of the Security is determined during a
period following the announcement by the issuer of such Security of (A) a
dividend or distribution on such Security payable in shares of such Security
or securities convertible into such shares, or (B) any subdivision,
combination or reclassification of such Security and prior to the expiration
of thirty (30) Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price
per share equivalent of such Security. The closing price for each day shall
be the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the Security is not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is 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 Quotations System ("NASDAQ") or such other system
------
then in use, or, if on any such date the Security is 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 Security selected by
the Board of Directors. If on any such date no such market maker is making
a market in the Security, the fair value of the Security on such date as
determined in good faith by the Board of Directors shall be used. The term
"Trading Day" shall mean a day on
-----------
20
<PAGE>
which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or, if
the Security is not listed or admitted to trading on any national securities
exchange, a Business Day. Subject to Section 11(d)(ii), if any Security is
not publicly held or so listed or traded, "current per share market price"
of such Security shall mean the fair market value per share as determined in
good faith by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the
Rights Agent.
(ii) For the purpose of any computation hereunder, the "current
-------
per share market price" of the Preferred Shares shall be determined in
----------------------
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share
market price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof), multiplied by one
hundred. If neither the Common Shares nor the Preferred Shares are publicly
held or so listed or traded, "current per share market price" shall mean the
fair value per share as determined in good faith by the Board of Directors,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent.
(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 one-hundredth of a Preferred Share or one ten-
thousandth of any other share or security 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 (3) years from
the date of the transaction which mandates such adjustment or (ii) the Final
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Corporation other
than Preferred Shares, thereafter the number of other shares so receivable upon
exercise of any Right 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 Shares contained in
21
<PAGE>
Sections 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10,
13 and 14 with respect to the Preferred Shares shall apply on like terms to any
such other shares.
(g) All Rights originally issued by the Corporation subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the Adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) The Corporation 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 one one-hundredths of a Preferred Share purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of
the number of Rights shall be exercisable for the number of one one-hundredths
of a Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one ten-
thousandth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Corporation shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(h), the Corporation shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Corporation, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Corporation, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein and
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express
22
<PAGE>
the Purchase Price and the number of one one-hundredths of a Preferred Share
which were expressed in the initial Right Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the number of one one-
hundredths of a Preferred Share, Common Shares or other securities issuable upon
exercise of the Rights, the Corporation shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Corporation
may validly and legally issue such number of fully paid and nonassessable one
one-hundredths of a Preferred Share, Common Shares or other securities at such
adjusted Purchase Price.
(k) 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 Corporation may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the Preferred Shares, Common Shares or other securities of the Corporation, if
any, issuable upon such exercise over and above the Preferred Shares, Common
Shares or other securities of the Corporation, if any, issuable upon exercise on
the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Corporation shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, the
Corporation 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 it in its sole discretion shall determine to be advisable in
order that any (i) consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
stock dividends or (v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Corporation to holders of its Preferred
Shares shall not be taxable to such stockholders.
(m) The Corporation covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Corporation in a transaction which does not violate
Section 11(n) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Corporation in a transaction which does not violate Section
11(n) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
23
<PAGE>
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(n) hereof), if (x)
at the time of or immediately after such consolidation, merger, sale or transfer
there are any charter or by-law provisions or any rights, warrants or other
instruments or securities outstanding or agreements in effect or other actions
taken, which would materially 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 stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates. The Corporation
shall not consummate any such consolidation, merger, sale or transfer unless
prior thereto the Corporation and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(m).
(n) The Corporation covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action the purpose of which is to, or if
at the time such action is taken it is reasonably foreseeable that the effect of
such action is to, materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
(o) The exercise of Rights under Section 11(a)(ii) shall only result
in the loss of rights under Section 11(a)(ii) to the extent so exercised and
shall not otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights represented by Section 13 hereof.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 or 13 hereof,
- ------
the Corporation shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares and the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section
25 hereof. 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 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, directly or indirectly, at any time after
- -------------
a Person has become an Acquiring Person, (x) the Corporation shall consolidate
with, or merge with and into, any Person, (y) the Corporation shall consolidate
with, or merge with, any
24
<PAGE>
Person, and the Corporation shall be the continuing or surviving corporation of
such consolidation or merger (other than, in the case of any transaction
described in (x) or (y), a merger or consolidation which would result in all
of the securities generally entitled to vote in the election of directors
("voting securities") of the Corporation outstanding immediately prior thereto,
-----------------
continuing to represent (either by remaining outstanding or by being converted
into securities of the surviving entity) all of the voting securities of the
Corporation or such surviving entity outstanding immediately after such merger
or consolidation and the holders of such securities not having changed as a
result of such merger or consolidation), or (z) the Corporation shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any Person (other than
the Corporation or any Subsidiary of the Corporation in one or more transactions
each of which does not violate Section 11(n) hereof), then, and in each such
case (except as provided in Section 13(d) hereof) proper provision shall be made
so that (i) each holder of a Right (except as provided in Section 7(e) hereof)
shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of freely tradable Common
Shares of the Principal Party (as hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
equal the result obtained by (A) multiplying the then current Purchase Price by
the number of one one-hundredths of a Preferred Share for which a Right is then
exercisable (without taking into account any adjustment previously made pursuant
to Section 11(a)(ii)) and dividing that product by (B) 50% of the then current
per share market price of the Common Shares of such Principal Party (determined
pursuant to Section 11(d) hereof) 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 Corporation pursuant to this Agreement; (iii) the term "Corporation" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights.
(b) "Principal Party" shall mean
---------------
25
<PAGE>
(i) in the case of any transaction described in clause (x) or (y)
of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Corporation are converted in such
merger or consolidation, and if no securities are so issued, the Person that
is the other party to such merger or consolidation (including, if
applicable, the Corporation if it is the surviving corporation); 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 greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any of the foregoing cases, (1) if the
-------- -------
Common Shares of such Person are not at such time and have not been continuously
over the preceding twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary of another
Person the Common Shares of which are and have been so registered, "Principal
Party" shall refer to such other Person; (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common Shares
of two or more of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common Shares having the
greatest aggregate market value; and (3) in case such Person is owned, directly
or indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules set forth in (1)
and (2) above shall apply to each of the chains of ownership having an interest
in such joint venture as if such party were a "Subsidiary" of both or all of
such joint venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Corporation shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of its authorized Common Shares which have not been issued or reserved
for issuance to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Corporation and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of the
Rights on
26
<PAGE>
an appropriate form, and use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing
and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the blue sky
laws of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if: (i) such transaction is consummated with a
Person or Persons who acquired Common Shares pursuant to a Permitted Offer (or a
wholly owned Subsidiary of any such Person or Persons); (ii) the price per
Common Share offered in such transaction is not less than the price per Common
Share paid to all holders of Common Shares whose shares were purchased pursuant
to such Permitted Offer; and (iii) the form of consideration offered in such
transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares. (a) The
---------------------------------------
Corporation shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current 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 for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock
27
<PAGE>
Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal 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 the Board of 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 the Board of Directors shall be used.
(b) The Corporation shall not be required to issue fractions of
Preferred Shares (other than fractions which are one one-hundredth or integral
multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights
or to distribute certificates which evidence fractional Preferred Shares (other
than fractions which are one one-hundredth or integral multiples of one one-
hundredth of a Preferred Share). Fractions of Preferred Shares in integral
multiples of one one-hundredth of a Preferred Share may, at the election of the
Corporation, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Corporation and a depositary selected by it; provided that
--------
such agreement shall provide that the holders of such depositary receipts shall
have the rights, privileges and preferences to which they are entitled as
Beneficial Owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not one one-hundredth
or integral multiples of one one-hundredth of a Preferred Share, the Corporation
shall pay to the registered holders of Right Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For the purposes
of this Section 14(b), the current market value of a Preferred Share shall be
the closing price of a Preferred Share (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of one of the transactions or events
specified in Section 11 giving rise to the right to receive Common Shares,
capital stock equivalents (other than Preferred Shares) or other securities upon
the exercise of a Right, the Corporation shall not be required to issue
fractions of shares or units of such Common Shares, capital stock equivalents or
other securities upon exercise of the Rights or to distribute certificates which
evidence fractions of such Common Shares, capital stock equivalents or other
securities. In lieu of fractional shares or units of such Common
28
<PAGE>
Shares, capital stock equivalents or other securities, the Corporation may pay
to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a share or unit of such Common Shares, capital stock
equivalents or other securities. For purposes of this Section 14(c), the current
market value shall be determined in the manner set forth in Section 11(d) hereof
for the Trading Day immediately prior to the date of such exercise and, if such
capital stock equivalent is not traded, each such capital stock equivalent shall
have the value of one one-hundredth of a Preferred Share.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional share upon
exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of
----------------
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Corporation to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Corporation 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 the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such purpose,
duly endorsed or accompanied by a proper instrument of transfer and with the
appropriate form fully executed;
29
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(c) subject to Section 6 and Section 7(f) hereof, the Corporation and
the Rights Agent may deem and treat the person in whose name the Right
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificate or the associated Common Shares certificate made by anyone
other than the Corporation or the Rights Agent) for all purposes whatsoever, and
neither the Corporation nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Corporation nor the Rights Agent shall have any liability to any
holder of a Right or a beneficial interest in a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Corporation must use its best efforts to have any such
- -------- -------
order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
-------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Corporation which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Corporation or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or other distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Corporation agrees to
---------------------------
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Corporation
30
<PAGE>
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises. The indemnity provided for herein shall survive the
expiration of the Rights and the termination of this Agreement.
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 Right Certificate or
certificate for Common Shares or for other securities of the Corporation,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. 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
stock transfer or all or substantially all of the corporate trust business 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 paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
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 Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall
31
<PAGE>
not have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes only
----------------------
those duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Corporation and the holders of Right
Certificates, by their acceptance hereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation), 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 an Acquiring Person and the
determination of the current market price of any Security) be proved or
established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Corporation and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature on such Right Certificates) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Corporation only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Corporation of any covenant or
condition contained in this Agreement or in
32
<PAGE>
any Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 7(e) hereof) or any adjustment required under the provisions of Section
11 or Section 13 hereof or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that would require
any such adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after receipt of the certificate described in Section 12
hereof); nor shall it by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any Preferred Shares or
Common Shares to be issued pursuant to this Agreement or any Right Certificate
or as to whether any Preferred Shares or Common Shares will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Corporation agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Corporation, and to apply to such officers for advice
or instructions in connection with its duties, and shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer. Any application by the Rights Agent for written instructions
from the Corporation 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 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 officer of the Corporation 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 instruction in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Corporation or become pecuniarily interested in any
transaction in which the Corporation
33
<PAGE>
may be interested, or contract with or lend money to the Corporation or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Corporation or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Corporation resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any 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 not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the
Corporation.
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 thirty (30) days' notice in writing mailed to the Corporation and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Corporation may remove the Rights Agent or any successor Rights Agent
upon sixty (60) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
Shares or Preferred Shares by registered or certified mail, and to holders of
the Right Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Corporation shall
appoint a successor to the Rights Agent. If the Corporation shall fail to make
such appointment within a period of sixty (60) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Corporation), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the appointment
of a new
34
<PAGE>
Rights Agent. Any successor Rights Agent, whether appointed by the Corporation
or by such a court, shall be a corporation organized and doing business under
the laws of the United States or of the State of New York (or of any other state
of the United States so long as such corporation is authorized to do business as
a banking institution in the State of New York), in good standing, having an
office in the State of New York, 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 and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$100,000,000. 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 Corporation shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares or Preferred Shares, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Corporation may, at its option, issue new Right Certificates evidencing Rights
in such form as may be approved by the Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale of Common Shares
following the Distribution Date and prior to the earliest of (i) the Redemption
Date, (ii) the Final Expiration Date and (iii) the consummation of a transaction
contemplated by Section 13(d) hereof, the Corporation (a) shall with respect to
Common Shares 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, notes or debentures issued by the Corporation, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) the
-------- -------
Corporation shall not be obligated to issue any such Right Certificates if,
and to the extent that, the Corporation shall be advised by counsel that
such issuance would create a significant risk of material adverse tax
consequences to the
35
<PAGE>
Corporation or the Person to whom such Right Certificate would be issued and
(ii) no Right 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. (a) (i) The Board of
--------------------------
Directors may, at its option, 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
hereinafter referred to as the "Redemption Price"), at any time prior to the
----------------
earliest of (x) the occurrence of a Section 11(a)(ii) Event, (y) the Final
Expiration Date or (z) the consummation of a transaction contemplated by Section
13(d) hereof. The Corporation may, at its option, pay the Redemption Price
either in Common Shares (based on the "current per share market price," as
defined in Section 11(d) hereof, of the Common Shares at the time of redemption)
or cash; provided that if the Corporation elects to pay the Redemption Price in
--------
Common Shares, the Corporation shall not be required to issue any fractional
Common Shares and the number of Common Shares issuable to each holder of Rights
shall be rounded down to the next whole share.
(ii) The Board of Directors may also, at its option, at any time
following the occurrence of a Section 11(a)(ii) Event and the expiration of
any period during which the holder of Rights may exercise the rights under
Section 11(a)(ii) but prior to any Section 13 Event, redeem all but not less
than all of the then outstanding Rights at the Redemption Price (x) in
connection with any merger, consolidation or sale or other transfer (in one
transaction or in a series of related transactions) of assets or earning
power aggregating 50% or more of the earning power of the Corporation and
its subsidiaries (taken as a whole) in which all holders of Common Shares
are treated alike and not involving (other than as a holder of Common Shares
being treated like all other such holders) an Interested Stockholder or
(y)(aa) if and for so long as the Acquiring Person is not thereafter the
Beneficial Owner of 20% or more of the Common Shares, and (bb) at the time
of redemption no other Persons are Acquiring Persons.
(b) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the date for redemption set forth (or determined in the manner
specified) in a resolution of the Board of Directors ordering the redemption of
the Rights, evidence of which shall have been filed with the Rights Agent, and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. In the case of
a redemption permitted only under Section 23(a)(ii), evidence of which shall
have been filed with the Rights Agent, the right to exercise the
36
<PAGE>
Rights will terminate and represent only the right to receive the Redemption
Price upon the later of ten Business Days following the giving of such notice or
the expiration of any period during which the rights under Section 11(a)(ii) may
be exercised. The Corporation shall promptly give public notice of any such
redemption; provided, however, that the failure to give, or any defect in, any
-------- -------
such notice shall not affect the validity of such redemption. Within ten (10)
days after such date for redemption set forth in a resolution of the Board of
Directors ordering the redemption of the Rights, the Corporation shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. 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 redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Corporation nor any of its Affiliates
or Associates may redeem, acquire or purchase for value any Rights at any time
in any manner other than that specifically set forth in this Section 23 and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.
(c) The Corporation may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) (subject to any lapse of time required by the second sentence of Section
23(b)) mailing payment of the Redemption Price to the registered holders of the
Rights at their last addresses as they appear on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent of the Common Shares, and upon such action, all outstanding
Rights and Right Certificates shall be null and void without any further action
by the Corporation.
Section 24. Exchange. (a) The Board of Directors may, at its option,
--------
at any time after any Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 7(e) and Section
11(a)(ii) hereof) for Common Shares of the Corporation at an exchange ratio of
one Common Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
exchange ratio being hereinafter referred to as the "Exchange Ratio").
--------------
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Corporation,
any Subsidiary of the Corporation, any employee benefit plan of the Corporation
or any such Subsidiary, any entity holding Common Shares for or pursuant to the
terms of any such plan or any trustee, administrator or fiduciary of such a
plan),
37
<PAGE>
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of Common Shares equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Corporation 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 Corporation promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice 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 will state the method by
which the exchange of the Common Shares 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) and Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Corporation, at
its option, may substitute Preferred Shares (or equivalent preferred shares, as
such term is defined in Section 11(b) hereof) for some or all of the Common
Shares exchangeable for Rights, at the initial rate of one-hundredth of a
Preferred Share (or equivalent preferred share) for each Common Share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Shares pursuant to the terms thereof, so that the fraction of a
Preferred Share delivered in lieu of each Common Share shall have the same
voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares or
Preferred Shares issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 24, the
Corporation shall take all such action as may be necessary to authorize
additional Common Shares or Preferred Shares for issuance upon exchange of the
Rights.
Section 25. Notice of Certain Events. (a) In case the Corporation
------------------------
shall propose (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Shares or to make any other distribution to the holders
of its Preferred Shares (other than a regularly quarterly cash dividend), (ii)
to offer to the holders of its Preferred
38
<PAGE>
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with any other
Person (other than a Subsidiary of the Corporation in a transaction which does
not violate Section 11(n) 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 50% or more of the assets or earning power of
the Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(n) hereof), or (v)
to effect the liquidation, dissolution or winding up of the Corporation, then,
in each such case, the Corporation shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action to the extent feasible and file a certificate with the Rights Agent to
that effect, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Preferred Shares, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least twenty (20) days prior to the date
of the taking of such proposed action or the date of participation therein by
the holders of the Preferred Shares, whichever shall be the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Corporation
shall as soon as practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of the occurrence of
such event, which notice shall describe such event and the consequences of such
event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph (a) to Preferred Shares shall be deemed
thereafter to refer also to Common Shares and/or, if appropriate, other
securities of the Corporation.
Section 26. Notices. Subject to Section 21 hereof, any notice or
-------
demand authorized by this Agreement to be given or made by the Rights Agent or
by the holder of any Right Certificate to or on the Corporation shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as
follows:
Fay's Incorporated
7245 Henry Clay Boulevard
39
<PAGE>
Liverpool, NY 13088
Attention: General Counsel's Office
Subject to Section 21 hereof, any notice or demand authorized by this
Agreement to be given or made by the Corporation or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Corporation) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Attention: Executive Vice President
Notices or demands authorized by this Agreement to be given or made by
the Corporation or the Rights Agent to the holder of any Right Certificate or,
if prior to the Distribution Date, to the holder of certificates representing
Common Shares 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 Corporation.
Section 27. Supplements and Amendments. Prior to the Distribution
--------------------------
Date, the Corporation and the Rights Agent shall, if the Corporation so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing Common Shares. From and after the
Distribution Date, the Corporation and the Rights Agent shall, if the
Corporation so directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which 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 which the Corporation may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, however, that this Agreement may not be supplemented or
-------- -------
amended to lengthen, pursuant to clause (iii) of this sentence, (A) 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 Corporation which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment, provided that such supplement
or
40
<PAGE>
amendment does not adversely affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
Section 28. Determination and Actions by the Board of Directors, Etc.
---------------------------------------------------------
The Board of Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors, or the Corporation, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including, without limitation, a
determination to redeem or not redeem the Rights or to amend the Agreement and
whether any proposed amendment adversely affects the interests of the holders of
Right Certificates). For all purposes of this Agreement, any calculation of the
number of Common Shares or other securities outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding Common Shares or any other securities 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 General Rules and Regulations under the Exchange Act as
in effect on the date 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
of Directors in good faith, shall (x) be final, conclusive and binding on the
Corporation, the Rights Agent, the holders of the Right Certificates and all
other parties, and (y) not subject the Board of Directors to any liability to
the holders of the Right Certificates.
41
<PAGE>
Section 29. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 30. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the
Corporation, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim under this Agreement. This Agreement shall
be for the sole and exclusive benefit of the Corporation, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares).
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this 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 the Board of
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, 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 day
following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement, each Right and each Right
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
------------
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the date and year first above written.
FAY'S INCORPORATED
By /s/ Warren D. Wolfson
--------------------------------
Warren D. Wolfson
Senior Vice President
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By /s/ Herbert L. Lemmer
--------------------------------
Herbert L. Lemmer
Vice President
Attest:
By /s/ Susan Silber
-------------------------
Susan Silver
Assistant Secretary
43
<PAGE>
Exhibit A
---------
Certificate of Designation,
Preferences and Rights of
Series A Junior Participating Preferred Stock
of
Fay's Incorporated
(Pursuant to Section 502
of the Business Corporation Law of the State of New York)
We, Henry A. Panasci, Jr., Chairman of the Board of Directors and
Chief Executive Officer, and Warren D. Wolfson, Secretary, of Fay's Incorporated
(the "Company"), a corporation organized and existing under the Business
Corporation Law of the State of New York, in accordance with the provisions of
Section 104 thereof, DO HEREBY CERTIFY as follows:
That pursuant to the authority conferred upon the Board of Directors
by the Restated Certificate of Incorporation of the Company, the Board of
Directors, on August 17, 1995, adopted the following resolution creating a
series of 300,000 shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED that pursuant to the authority granted to and vested in the
Board of Directors of this Company in accordance with the provisions of the
Restated Certificate of Incorporation, the Board of Directors hereby creates a
series of Preferred Stock of the Company and hereby states the designation and
number of shares, and fixes the relative rights, preferences and limitations
thereof (in addition to the provisions set forth in the Restated Certificate of
Incorporation which are applicable to the Preferred Stock of all classes and
series) as follows:
Section 1. Designation and Amount. There shall be a series of
----------------------
Preferred Stock, par value $1.00 per share, of the Company which shall be
designated as "Series A Junior Participating Preferred Stock," par value $1.00
per share, and the number of shares constituting such series shall be 300,000.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; provided that no decrease shall reduce the number of shares of
Series A Junior Participating Preferred Stock to a number less
<PAGE>
than that of the shares then outstanding plus the number of shares issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Company.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the Series
A Junior Participating Preferred Stock with respect to dividends, the holders of
shares of Series A Junior Participating Preferred Stock, in preference to the
holders of shares of Common Stock, par value $0.10 per share (the "Common
Stock"), of the Company and any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of January, April, July, and October in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Junior Participating Preferred Stock in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $5 (i.e., 100
times the present quarterly dividend in the Common Stock) or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior Participating
Preferred Stock. In the event the Company shall at any time after August 29,
1995 (the "Rights Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Company shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or
A-2
<PAGE>
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $5 per share on the Series A Junior
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
-------------
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Company. In the event the Company shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Junior Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
A-3
<PAGE>
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Company.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which shall extend
until such time when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on all shares of
Series A Junior Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period, all
holders of Preferred Stock (including holders of the Series A Junior
Participating Preferred Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders
of Series A Junior Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at
any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
of one-third (1/3) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.
A-4
<PAGE>
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred Stock, which meeting
shall thereupon be called by the Chairman of the Board or the President and
Chief Executive Officer of the Company. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to vote pursuant to
this paragraph (C)(iii) shall be given to each holder of record of Preferred
Stock by mailing a copy of such notice to him at his last address as the same
appears on the books of the Company. Such meeting shall be called for a time not
earlier than 10 days nor later than 60 days after such order or request or, if
there shall occur any default of the calling of such meeting within 60 days
after such order or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no such special
meeting shall be called during the period within 60 days immediately preceding
the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Company if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect two (2) Directors voting as a
class, after the exercise of which right (x) the Directors so elected by the
holders of Preferred Stock shall continue in office until their successors shall
have been elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided in
paragraph (C)(ii) of this Section 3) be filled by a vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular class of stock
shall include Directors elected by such Directors to fill vacancies as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the Restated Certificate of Incorporation or By-laws
irrespective of any increase made pursuant to the provisions of paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the Restated Certificate of
Incorporation or By-laws). Any vacancies in the Board of Directors effected by
the
A-5
<PAGE>
provisions of clauses (y) and (z) in the preceding sentence may be filled by
a majority of the remaining Directors, even though less than a quorum.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Company shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock, and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Company ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Junior Participating Preferred Stock;
or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Participating Preferred Stock or any shares of stock ranking
on a parity with the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and
A-6
<PAGE>
preferences of the respective series and classes, shall determine in good faith
will result in fair and equitable treatment among the respective series or
classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
-----------------
Participating Preferred Stock purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares 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 liquidation (voluntary or otherwise), dissolution or
winding up of the Company, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Series A Junior Participating
Preferred Stock shall have received per share, the amount of $100, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall share pari passu on a per share
---- -----
basis in the remaining assets of the Company.
(B) In the event there are not sufficient assets available to permit
payment in full of the Series A Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any, which rank on a
parity with the Series A Junior Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences.
Section 7. Consolidation, Merger, etc. If the Company shall enter
---------------------------
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such event the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share
A-7
<PAGE>
(subject to the provision for adjustment hereinafter set forth) equal to 100
times 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 changed or exchanged. In the event the Company shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Junior Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that are outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior
-------------
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred
-------
Stock shall rank junior to all other series of the Company's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
Section 10. Fractional Shares. Series A Junior Participating
-----------------
Preferred Stock may be issued in fractions of a share which 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 A Junior Participating Preferred Stock.
Section 11. Amendment. The Restated Certificate of Incorporation of
---------
the Company shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of not less than a majority of the then
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
IN WITNESS WHEREOF, the undersigned have executed and subscribed this
Certificate and do affirm the foregoing as true under penalties of perjury this
17th day of August, 1995.
By: _______________________________
Henry A. Panasci, Jr.
A-8
<PAGE>
Chairman of the Board of Directors and
Chief Executive Officer
By: _______________________________
Warren D. Wolfson
Secretary
Attest:
______________________________
[Title]
A-9
<PAGE>
Exhibit B
---------
Form of Right Certificate
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER AUGUST 17, 2005, OR EARLIER IF REDEEMED BY
THE CORPORATION. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
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 AN AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED
IN THE RIGHTS AGREEMENT) AND CERTAIN RELATED PERSONS, WHETHER
CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT
HOLDER, SHALL BECOME NULL AND VOID.
Right Certificate
Fay's Incorporated
This certifies that ________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of August 17, 1995 (the "Rights Agreement"), between Fay's
----------------
Incorporated, a New York corporation (the "Corporation"), and American Stock
-----------
Transfer & Trust Company (the "Rights Agent"), to purchase from the Corporation
------------
at any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., New York time, on August 17, 2005, unless the
Rights evidenced hereby shall have been previously redeemed or exchanged by the
Corporation, at the principal office or offices of the Rights Agent designated
for such purpose, or at the office of its successor as Rights Agent, one one-
hundredth of a fully paid non-assessable share of Series A Junior Participating
Preferred Stock, without par value (the "Preferred Shares"), of the Corporation,
----------------
at a purchase price of $30 per one one-hundredth of a Preferred Share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
- ---------------
with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-hundredths of a
Preferred Share which may be purchased upon
<PAGE>
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of August 29, 1995 based on the Preferred
Shares as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of an Acquiring Person, (or any Affiliate or
Associate thereof) who becomes a transferee after the Acquiring Person becomes
such, or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of an Acquiring Person (or of any Associate or Affiliate thereof) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such, 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.
As provided in the Rights Agreement, the Purchase Price and the number
of one one-hundredths of a Preferred Share or other securities which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, as the same may be amended from time to
time, which terms, provisions 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
Corporation and the holders of the Right Certificates, which limitations of
rights include the voiding of the exercisability of such Rights under the
specific circumstances set forth in the Rights Agreement. Copies of the Rights
Agreement are on file at the principal executive offices of the Corporation and
the principal office or offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares or other securities as the Rights evidenced by this Right
Certificate or other Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of hole Rights not exercised.
B-2
<PAGE>
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Corporation at a redemption
price of $.01 per Right (subject to adjustment as provided in the Rights
Agreement) payable in cash or, at the option of the Corporation, in Common Stock
of the Corporation.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are one one-
hundredth or integral multiples of one one-hundredth of a Preferred Share, which
may, at the election of the Corporation, be evidenced by depositary receipts),
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Corporation which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate shall
have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-3
<PAGE>
WITNESS the facsimile signature of the proper officers of the
Corporation and its corporate seal. Dated as of ___________________.
[SEAL]
ATTEST: FAY'S INCORPORATED
_______________________________ By___________________________________
Name: Name:
Title: Title:
By___________________________________
Name:
Title:
Countersigned:
[ ]
By ____________________________
Authorized Signatory
Name:
Title:
B-4
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED __________________________________ hereby sells,
assigns and transfers unto___________________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: _________________
________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
---------------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Right Agreement) and (2) after due inquiry and
to the best knowledge of the undersigned, the undersigned did not acquire the
Rights evidenced by this Right
B-5
<PAGE>
Certificate from any Person who is or was an Acquiring Person or an Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement).
________________________________________
Signature
---------------------------------------------------------------
B-6
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise
_________________ Rights represented by this Right Certificate to purchase the
Preferred Shares, Common Shares or other securities issuable upon the exercise
of such Rights and requests that certificates for such Preferred Shares, Common
Shares or other securities be issued in the name of:
Please insert social security
or other identifying number ____________________________________________________
________________________________________________________________________________
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number ___________________________________________________
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Dated:__________________
______________________________________
Signature
Signature Guaranteed:
B-7
<PAGE>
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank, savings association, credit union or trust
company having an office or correspondent in the United States.
---------------------------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and (2) after due inquiry and to the best
knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Rights Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
--------------------------------------
Signature
--------------------------------------------------------------------------
NOTICE
------
The signature on the foregoing Forms of Assignment and Election and
certificates must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Corporation and the Rights Agent will deem the Beneficial Owner
of the Rights evidenced by this Right Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as such
B-8
<PAGE>
terms are defined in the Rights Agreement) and such Assignment or Election to
Purchase will not be honored.
B-9
<PAGE>
Exhibit C
---------
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 AN
AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
RELATED PERSONS, WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, SHALL BECOME NULL AND VOID.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On August 17, 1995, the Board of Directors of Fay's Incorporated (the
"Corporation") declared a dividend distribution of one preferred share purchase
-----------
right (a "Right") for each outstanding share of Common Stock, par value $0.10
-----
per share (the "Common Shares"), of the Corporation. The dividend is payable to
-------------
the stockholders of record on August 29, 1995 (the "Record Date"), and with
-----------
respect to Common Shares issued thereafter until the Distribution Date (as
defined below) and, in certain circumstances, with respect to Common Shares
issued after the Distribution Date. Except as set forth below, each Right, when
it becomes exercisable, entitles the registered holder to purchase from the
Corporation one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $1.00 per share (the "Preferred Shares"), of the
----------------
Corporation at a price of $30 per one one-hundredth of a Preferred Share (the
"Purchase Price"), subject to adjustment. The description and terms of the
- ---------------
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
----------------
Corporation and American Stock Transfer & Trust Company, as Rights Agent (the
"Rights Agent"), dated as of August 17, 1995.
------------
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Right Certificates
will be distributed. The Rights will separate from the Common Shares upon the
earlier of (i) a person or group of affiliated or associated persons having
acquired beneficial ownership of 20% or more of the outstanding Common Shares
(except pursuant to a Permitted Offer, as hereinafter defined); or (ii) 10 days
(or such later date as the Board may determine) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in a person or group becoming an Acquiring
Person (as hereinafter defined) (the earliest of such dates being called the
"Distribution Date"). A person or group whose acquisition of Common Shares
- ------------------
causes a Distribution Date pursuant to clause (i) above is an "Acquiring
---------
Person." An Acquiring
<PAGE>
Person does not include a person who acquires Common Shares pursuant to a tender
or exchange offer which is for all outstanding Common Shares at a price and on
terms which a majority of certain members of the Board of Directors determines
to be adequate and otherwise in the best interests of the Corporation and its
stockholders (other than the person on whose basis the offer is being made and
its affiliates and associates) taking into account all factors that such
directors may deem relevant (a "Permitted Offer").
---------------
An Acquiring Person does not include the following persons (each, a
"Grandfathered Person"): (i) Henry A. Panasci, Jr., Chairman of the Board of
Directors and Chief Executive Officer of the Corporation, who at the date hereof
owns 27.5% of the outstanding Common Shares, any descendant of Henry A. Panasci,
Jr., or any spouse, widow or widower of Henry A. Panasci, Jr., or any such
descendant (Henry A. Panasci, Jr., and any such descendants, spouses, widows and
widowers collectively defined as the "Panasci Family Members"); (ii) any trust
(including any voting trust) which is in existence on the date of the Rights
Agreement and which has been established by one or more Panasci Family Members,
any estate of, or the executor or administrator of any estate of, or any
guardian or custodian for, a Panasci Family Member who died on or before the
date of the Rights Agreement (such trusts, estates, executors, administrators or
guardians or custodians collectively defined as the "Panasci Family Entities");
(iii) any estate of, or the executor or administrator of any estate of, or any
guardian or custodian for, a Panasci Family Member, or any trust established
after August 17, 1995 by one or more Panasci Family Members or Panasci Family
Entities, provided that one or more Panasci Family Members or Panasci Family
Entities, collectively, are the beneficiaries of at least 50% of the
actuarially-determined beneficial interests in such estate or trust; (iv) any
charitable organization which qualifies as an exempt organization under Section
501(c) of the Internal Revenue Code of 1986, as amended ("Charitable
Organization"), which is established by one or more Panasci Family Members or
Panasci Family Entities (a "Panasci Family Charitable Organization"); (v) any
corporation of which a majority of the voting power and a majority of the equity
interest is held, directly or indirectly, by or for the benefit of one or more
Panasci Family Members, Panasci Family Entities, estates, executors,
administrators, guardians or custodians or trusts described in clause (iii)
above, or Panasci Family Charitable Organizations; and (vi) any general
partnership, limited partnership, organization or other entity or arrangement of
which a majority of the voting interest and a majority of the economic interest
is held, directly or indirectly, by or for the benefit of one or more
Grandfathered Persons; provided, however, that Henry A. Panasci, Jr., and each
-------- -------
of the other Persons contemplated by this paragraph shall not be a Grandfathered
Person if Henry A. Panasci, Jr., or any of such Persons makes an acquisition of
Common Shares that would increase the aggregate beneficial ownership of all
Grandfathered Persons to 50% or more of the outstanding Common Shares.
Notwithstanding the foregoing, Henry A. Panasci, Jr., and each of the other
Persons
C-2
<PAGE>
contemplated by this paragraph shall not cease to be a Grandfathered
Person either (x) as the result of the acquisition of Common Shares by the
Corporation which, by reducing the number of Common Shares outstanding,
increases the proportional number of shares beneficially owned by Henry A.
Panasci, Jr., or such other Grandfathered Persons, together with all Affiliates
and Associates thereof, unless (i) Henry A. Panasci, Jr., and each of such other
Persons would cease to be a Grandfathered Person (but for the operation of this
subclause (x)) as a result of the acquisition of Common Shares by the
Corporation and (ii) after such share acquisition by the Corporation, Henry A.
Panasci, Jr., or any such other Grandfathered Person, or an Affiliate or
Associate thereof, becomes the Beneficial Owner of any additional Common Shares
or, (y) if (i) within 8 days after Henry A. Panasci, Jr., and such other Persons
would otherwise have ceased to be Grandfathered Persons (but for the operation
of this subclause (y)) Henry A. Panasci, Jr., or any such other Person notifies
the Board of Directors that the Grandfathered Persons, together with all
Affiliates and Associates thereof, are the Beneficial Owners in the aggregate of
less than 50% of the outstanding Common Shares.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
------------------
holders of record of the Common Shares as of the close of business on the
Distribution Date (and to each initial record holder of certain Common Shares
issued after the Distribution Date), and such separate Right Certificates alone
will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will
----------------------------------------------------------
expire at the close of business on August 17, 2005, unless earlier redeemed by
the Corporation as described below.
In the event that any person becomes an Acquiring Person (except
pursuant to a Permitted Offer), each holder of a Right (other than an Acquiring
Person or related party) will thereafter have the right (the "Flip-In Right") to
-------------
receive upon exercise the number of Common Shares, or in the discretion of the
Board of Directors of one one-hundredths of a Preferred Share (or, in certain
circumstances, other securities of the Corporation) having a value (immediately
C-3
<PAGE>
prior to such triggering event) equal to two times the exercise price of the
Right. In lieu of the Flip-In, the Board, at its option, may exchange Common
Shares (or, in the discretion of the Board of Directors, Preferred Shares or
equivalents) at the ratio of one Common Share per Right (other than Rights held
by the Acquiring Person (the "Exchange Option"). Notwithstanding the foregoing,
---------------
the Board of Directors may not exercise the Exchange Option at any time after
any person (with certain exceptions), together with all affiliates and
associates, becomes the beneficial owner of 50% or more of the Common Shares
then outstanding.
In the event that, at any time after a person has become an Acquiring
Person, (i) the Corporation is acquired in a merger or other business
combination transaction in which the holders of all of the outstanding Common
Shares immediately prior to the consummation of the transaction are not the
holders of all of the surviving corporation's voting power, or (ii) more than
50% of the Corporation's assets or earning power is sold or transferred, in
either case with or to any person, then each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right (the "Flip-Over Right") to receive, upon exercise, common shares of the
---------------
acquiring company having a value equal to two times the exercise price of the
Right. The holder of a Right will continue to have the Flip-Over Right whether
or not such holder exercises or surrenders the Flip-In Right. The Flip-Over
provisions do not apply to a merger or other business combination with a person
who has acquired Common Shares pursuant to a Permitted Offer in which the price
per share is at least as great as the price (and is the same form of
consideration) paid in the Permitted Offer.
The Purchase Price payable, and the number of Preferred Shares, Common
Shares or other securities 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
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
C-4
<PAGE>
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $5 per share but, if greater, will be entitled to
an aggregate dividend per share of 100 times the dividend declared per Common
Share. In the event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100 per share;
thereafter, the holders of the Preferred Shares and the holders of the Common
Shares will share pari passu per share in the remaining assets of the
---- -----
Corporation. Finally, in the event of any merger, consolidation or other
transaction in which Common Shares are exchanged, each Preferred Share will be
entitled to receive one hundred times the amount received per Common Share.
These rights are protected by customary antidilution provisions. In the event
that the amount of accrued and unpaid dividends on the Preferred Shares is
equivalent to six full quarterly dividends or more, the holders of the Preferred
Shares shall have the right, voting as a class, to elect two directors in
addition to the directors elected by the holders of the Common Shares until all
cumulative dividends on the Preferred Shares have been paid through the last
quarterly dividend payment date or until non-cumulative dividends have been paid
regularly for at least one year.
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 Preferred Shares will be issued (other than
fractions which are one one-hundredth or integral multiples of one one-hundredth
of a Preferred Share, which may, at the election of the Corporation, be
evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Preferred Shares on the last
trading day prior to the date of exercise.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, and under certain other
circumstances, the Corporation may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (the "Redemption Price") which redemption shall be
effective upon the action of the Board of Directors. The Corporation may, at
its option, pay the Redemption Price in Common Shares. Additionally, after the
date that a person becomes an Acquiring Person, the Corporation may redeem the
then outstanding Rights in whole, but not in part, at the Redemption Price,
provided that such redemption is in connection with a merger or other business
- --------
combination transaction or series of transactions involving the Corporation in
which all holders of Common Shares are treated alike and not involving an
"Interested Stockholder" or if and for so long as the Acquiring Person's share
in the Company is not above 20% and at the time of the redemption there are no
other Acquiring Persons. "Interested Stockholder" means any Acquiring Person
----------------------
(including
C-5
<PAGE>
affiliates and associates thereof) or any Person in which any such
Acquiring Person, affiliate or associate has an interest, or any other Person
acting on behalf of or in concert with any Acquiring Person, affiliate or
associate.
All of the provisions of the Rights Agreement may be amended by the
Board of Directors prior to the Distribution Date. After the Distribution Date,
the provisions of the Rights Agreement may be amended by the Board of Directors
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, subject to certain limitations, to
shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders of the Corporation, stockholders may,
depending upon the circumstances, recognize taxable income should the Rights
become exercisable or upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
________, 1995. A copy of the Rights Agreement is available free of charge from
the Corporation. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement
as the same may be amended from time to time, which is hereby incorporated
herein by reference.
C-6
