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TRANS WORLD ENTERTAINMENT CORPORATION
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent
RIGHTS AGREEMENT
Dated as of
August 11, 2000
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TABLE OF CONTENTS
Page
Section 1. Certain Definitions..............................................1
Section 2. Appointment of Rights Agent......................................7
Section 3. Issue of Right Certificates......................................8
Section 4. Form of Right Certificates......................................10
Section 5. Countersignature and Registration...............................11
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost
or Stolen Right Certificates....................................12
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights...13
Section 8. Cancellation and Destruction of Right Certificates..............16
Section 9. Reservation and Availability of Shares of Capital Stock.........16
Section 10. Preferred Stock Record Date.....................................19
Section 11. Adjustment of Purchase Price, Number of Shares
or Number of Rights.............................................19
Section 12. Certificate of Adjusted Purchase Price or Number of Shares......29
Section 13. Fractional Rights and Fractional Shares.........................30
Section 14. Rights of Action................................................31
Section 15. Agreement of Right Holders......................................32
Section 16. Right Certificate Holder Not Deemed a Stockholder...............33
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Section 17. Concerning the Rights Agent.....................................33
Section 18. Merger or Consolidation or Change of Name of Rights Agent.......34
Section 19. Duties of Rights Agent..........................................35
Section 20. Change of Rights Agent..........................................38
Section 21. Issuance of New Right Certificates..............................39
Section 22. Redemption and Termination......................................40
Section 23. Exchange........................................................41
Section 24. Notice of Certain Events........................................43
Section 25. Notices.........................................................44
Section 26. Supplements and Amendments......................................45
Section 27. Successors......................................................45
Section 28. Determinations and Actions by the Board of Directors............45
Section 29. Benefits of This Agreement......................................46
Section 30. Severability....................................................46
Section 31. Governing Law...................................................47
Section 32. Counterparts....................................................47
Section 33. Descriptive Headings............................................47
EXHIBIT A Certificate of Amendment........................................A-1
EXHIBIT B Form of Right Certificate.......................................B-1
EXHIBIT C Summary of Rights to Purchase Preferred Stock...................C-1
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RIGHTS AGREEMENT
Rights Agreement (the "Agreement"), dated as of August 11, 2000 between
Trans World Entertainment Corporation, a New York corporation (the "Company"),
and ChaseMellon Shareholder Services, L.L.C. (the "Rights Agent").
W I T N E S S E T H :
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WHEREAS, the Board of Directors of the Company on August 11, 2000 (the
"Rights Dividend Declaration Date") authorized and declared a dividend
distribution (the "Distribution") of one Right for each outstanding share of the
Common Stock, $0.01 par value, of the Company (the "Common Stock") outstanding
at the close of business on September 29, 2000 (the "Record Date") and has
authorized and directed the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) in
respect of each share of Common Stock issued (whether originally issued or
delivered from the Company's treasury stock) between the Record Date and the
earlier of the Distribution Date or the Expiration Date (as such terms are
hereinafter defined), each Right initially representing the right to purchase,
under certain circumstances, one one-thousandth of a share of Series A Junior
Participating Preferred Stock of the Company having the rights, powers and
preferences set forth in the Certificate of Amendment attached hereto as Exhibit
A, upon the terms and subject to the conditions hereinafter set forth (the
"Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such
term is hereinafter defined) and Associates (as such term is hereinafter
defined) of such Person, shall be the Beneficial Owner (as such term is
hereinafter defined) of securities of the Company constituting a
Substantial Block (as such term is hereinafter defined), but shall not
include (i) the Company, any Sub-
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sidiary (as such term is hereinafter defined) of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any
Person organized, appointed or established by the Company or any Subsidiary
of the Company for or pursuant to the terms of any such plan; (ii) any
Person who or which, together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of a Substantial Block solely as a
result of a change in the aggregate number of shares of Voting Stock (as
such term is hereinafter defined) outstanding since the last date on which
such Person was the Beneficial Owner of any shares of the Voting Stock
constituting all or a portion of such Substantial Block; (iii) any Person
who or which, together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of a Substantial Block in the good faith
belief that such acquisition would not (x) cause such Person and its
Affiliates and Associates to become the Beneficial Owner of a Substantial
Block and such Person relied in good faith in computing the percentage of
its voting power on publicly filed reports or documents of the Company
which are inaccurate or out-of-date or (y) otherwise cause a Distribution
Date or the adjustment provided for in Section 11(a) to occur; and (iv) any
Higgins Stockholder (as such term is hereinafter defined). Notwithstanding
clause (ii) or (iii) of the prior sentence, if any Person that is not an
Acquiring Person due to such clause (ii) or (iii) does not cease to be the
Beneficial Owner of a Substantial Block by the close of business on the
fifth Business Day (as such term is hereinafter defined) after notice from
the Company (the date of notice being the first Business Day) that such
Person is the Beneficial Owner of a Substantial Block, such Person shall,
at the end of such five Business Day period, become an Acquiring Person
(and such clause (ii) or (iii) shall no longer apply to such Person). For
purposes of this definition, the determination whether any Person acted in
"good faith" shall be conclusively determined by the Board of Directors of
the Company.
(b) "Act" shall have the meaning set forth in Section 9(c) hereof.
(c) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
(d) "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 Ex-
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change Act of 1934, as amended (the "Exchange Act"), as in effect on the
date hereof.
(e) "Agreement" shall have the meaning set forth in the introduction
hereto.
(f) 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 has, directly or indirectly, the right to acquire (whether
such right is exercisable immediately or only after the passage of
time or upon the occurrence of an event) pursuant to any agreement,
arrangement or understanding (whether or not in writing), or upon the
exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "Beneficially Own," (1)
securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange, (2)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event (as such term is hereinafter defined)
or (3) securities issuable upon exercise of Rights from and after the
occurrence of a Triggering Event, which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) hereof ("Original
Rights") or pursuant to Section 11(i) or Section 21 hereof in
connection with an adjustment made with respect to Original Rights; or
(ii) which such Person or any of such Person's Affiliates or
Associates has, directly or indirectly, the right to vote or dispose
of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act),
including pursuant to any agreement, arrangement or understanding
(whether or not in writing) or has a "pecuniary interest" or an
"indirect pecuniary interest" in (as determined pursuant to Rule
16A-1(a)(2) of the General Rules and Regulations under the Exchange
Act); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of,
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or to "Beneficially Own," any security under this subparagraph (ii) if
the agreement, arrangement or understanding to vote such security (1)
arises solely from a revocable proxy given in response to a public
proxy or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations of the Exchange Act and (2)
is not 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 with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (f))
or disposing of any securities of the Company.
Notwithstanding the foregoing, nothing contained in this definition shall
cause a Person ordinarily engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "Beneficially Own," any
securities acquired in a bona fide firm commitment underwriting pursuant to
an underwriting agreement with the Company.
(g) "Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(h) "Certification" shall have the meaning set forth in Section 17
hereof.
(i) "close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, if such date is not a
Business Day it shall mean 5:00 P.M. on the next succeeding Business Day.
(j) "Common Stock" when used with reference to the Company shall mean
the Common Stock, $0.01 par value, of the Company. "Common Stock" when used
with reference to any Person other than the Company shall mean either the
capital stock with the greatest voting power of such other Person or, if
such Person is a Subsidiary of another Person, the equity securities or
other equity interest having
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power to control or direct the management of such other person.
(k) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(l) "Company" shall have the meaning set forth in the introduction
hereto.
(m) "Current Market Price" shall have the meaning set forth in Section
11(d) hereof.
(n) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(o) "Distribution" shall have the meaning set forth in the recitals
hereto.
(p) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(q) "Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) hereof.
(r) "Exchange Act" shall have the meaning set forth in the definitions
of "Affiliate" and "Associate" above.
(s) "Exchange Ratio" shall have the meaning set forth in Section 23(a)
hereof.
(t) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(u) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(v) "Higgins Stockholder" shall mean (i) Robert J. Higgins and his
spouse, their lineal descendants and their spouses (so long as they remain
spouses) and the estate of any of the foregoing persons, and any
partnership, trust, corporation or other entity to the extent any shares of
Voting Stock owned by such entity are considered Beneficially Owned by any
of such individuals or estates, and (ii) any person who would be an
Acquiring Person solely by reason of being deemed to be the Beneficial
Owner of any shares of Voting Stock of any such estate or of shares of
Voting Stock Beneficially Owned by such entity and by any such individual
or estate, whether by acting as an offi-
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cer, director, trustee or other managing person of any such entity, or by
reason of any ownership interest or other pecuniary interest in any such
entity, or otherwise.
(w) "NASDAQ" shall have the meaning set forth in Section 11(d)(i)
hereof.
(x) "Original Rights" shall have the meaning set forth in the
definition of "Beneficial Owner" above.
(y) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
(z) "Preferred Stock" shall mean the shares of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company.
(aa) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
(bb) "Record Date" shall have the meaning set forth in the recitals
hereto.
(cc) "Redemption Price" shall have the meaning set forth in Section
22(a) hereof.
(dd) "Rights" shall have the meaning set forth in the recitals hereto.
(ee) "Rights Agent" shall have the meaning set forth in the
introduction hereto.
(ff) "Right Certificate" shall have the meaning set forth in Section
3(a) hereof.
(gg) "Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals hereto.
(hh) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(ii) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(jj) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, includes a report
filed pursuant to Section
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13(d) of the Exchange Act) by the Company or an Acquiring Person that an
Acquiring Person has become such.
(kk) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(ll) "Subsidiary" shall mean, with reference to any Person, any
corporation (or other entity) of which an amount of voting securities (or
comparable ownership interests) sufficient to elect at least a majority of
the directors (or comparable individuals) of such corporation (or other
entity) is beneficially owned or otherwise controlled, directly or
indirectly, by such Person.
(mm) "Substantial Block" shall mean a number of shares of the Voting
Stock which has 20% or more of the aggregate voting power of all
outstanding shares of Voting Stock.
(nn) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(oo) "Summary of Rights" shall have the meaning set forth in Section
3(b) hereof.
(pp) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(qq) "Triggering Event" shall mean any Section 11(a)(ii) Event.
(rr) "Voting Stock" shall mean the outstanding shares of Common Stock,
$0.01 par value, and any other shares of capital stock, of the Company
which are entitled to vote generally in the election of directors.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company shall act as Co-Rights Agent and may from time to time appoint such
other Co-Rights Agents as it may deem necessary or desirable upon ten calendar
days' written notice to the Rights Agent. In no event shall the Rights Agent
have any duty to supervise or in any way be liable for the actions or omissions
of such Co-Rights Agents.
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Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the
close of business on the tenth calendar day after the Shares Acquisition Date
(or, if the tenth calendar day after the Shares Acquisition Date occurs before
the Record Date, the close of business on the Record Date) or (ii) the close of
business on the tenth calendar day (or such later date as may be determined by
action of the Board of Directors prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement of, or first public
announcement of the intent of any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company or any Person organized, appointed or established by the Company or
any Subsidiary of the Company or any Person organized, appointed or established
by the Company or any Subsidiary of the Company for or pursuant to the terms of
such plan) to commence, a tender or exchange offer if, upon consummation
thereof, such Person would be an Acquiring Person (the earlier of the dates in
subsections (i) and (ii) hereof being herein referred to as the "Distribution
Date") (x) the Rights will be evidenced (subject to the provisions of paragraph
(b) of this Section 3) by the certificates for the Common Stock registered in
the names of the holders of the Common Stock (which certificates for the Common
Stock shall be deemed also 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 Common Stock. As soon as
practicable after receipt by the Rights Agent of written notice from the Company
of the Distribution Date, the Rights Agent, at the Company's expense and upon
receipt by it of all relevant information, will send by first-class, postage
prepaid mail, to each record holder of Common Stock as of the close of business
on the Distribution Date, at the address of such holder shown on the records of
the Company, a Right Certificate, in substantially the form of Exhibit B hereto
(the "Right Certificate"), evidencing one Right for each share of the Common
Stock so held, subject to adjustment as provided herein. As of the Distribution
Date, the Rights will be evidenced solely by such Right Certificates.
(b) As soon as practicable following the Record Date, the Company will send
a copy of a Summary of Rights to Purchase Preferred Stock, in substantially the
form attached hereto as Exhibit C (the "Summary of Rights"), by first-class,
postage prepaid mail, to each record holder of Common Stock as of the close of
business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for Common Stock outstanding as of
the Record
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Date, until the Distribution Date, the Rights will be evidenced by such
certificates for Common Stock, and the registered holders of the Common Stock
shall also be the registered holders of the associated Rights. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the certificates for Common Stock outstanding
on the Record Date shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate.
(c) Rights shall be issued in respect of all shares of Common Stock issued
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date (as such term is defined in Section 7), or, in certain
circumstances provided in Section 21 hereof, after the Distribution Date.
Certificates representing such shares of Common Stock shall have impressed on,
printed on, written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Trans World
Entertainment Corporation and ChaseMellon Shareholder Services L.L.C.
(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 Trans World Entertainment Corporation. 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. Trans World Entertainment Corporation
will mail to the holder of this certificate a copy of the Rights
Agreement as in effect on the date of mailing without charge within
five Business Days after receipt of a written request therefor. Rights
beneficially owned by an Acquiring Person and certain other persons
will be null and void under certain circumstances set forth in the
Rights Agreement.
After the due execution of any supplement or amendment to this Agreement in
accordance with the terms hereof, the reference to this Agreement in the
foregoing legend shall mean the Agreement as so supplemented or amended. Until
the Distribution Date, the Rights associated with the Common Stock represented
by certificates containing the foregoing legend shall be evidenced by such
certificates alone, and the surrender for transfer of any
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of such certificates shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. In the event that the
Company purchases or acquires any shares of Common Stock after the Record Date
but prior to the Distribution Date, any Rights associated with such Common Stock
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the shares of Common Stock which are no
longer outstanding. The failure to print the foregoing legend on any such Common
Stock certificate or any other defect therein shall not affect in any manner
whatsoever the application or interpretation of the provisions of Section 7(e)
hereof.
Section 4. Form of Right Certificates. (a) The Right Certificates (and the
forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially the same as Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate (but which do
not affect the rights or duties of the Rights Agent) 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 the NASDAQ National Market or of any stock exchange on
which the Rights may from time to time be listed, or to conform to usage. The
Right Certificates shall be in machine-printable format and in a form reasonably
satisfactory to the Rights Agent. Subject to the provisions of Section 11 and
Section 21 hereof, the Right Certificates, whenever distributed, shall be dated
as of the Record Date, shall show the date of countersignature, and on their
face shall entitle the holders thereof to purchase such number of shares of
Preferred Stock (or following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as shall be set forth
therein at the price per one one-thousandth of a share of Preferred Stock set
forth therein (the "Purchase Price"), but the number of such shares and the
Purchase Price shall be subject to adjustment as provided herein.
(b) Notwithstanding any other provision of this Agreement, (i) any Right
Certificate issued pursuant to Section 3(a) or Section 21 hereof that represents
Rights beneficially owned by: (x) an Acquiring Person or any Associate or
Affiliate thereof, (y) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
became such, or (z) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes
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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 such Acquiring Person has any
agreement, arrangement or understanding (whether or not in writing) regarding
the transferred Rights or (B) a transfer which the Board of Directors of the
Company has determined is part of a plan, arrangement or understanding (whether
or not in writing) which has as a primary purpose or effect avoidance of Section
7(e) hereof, (ii) any Right Certificate issued at any time to any nominee of
such Acquiring Person, Associate or Affiliate, and (iii) 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 following the written
instruction of the Company to the Rights Agent) the following legend, modified
as applicable to apply to such Person:
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 an Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented will be null and void in the circumstances
specified in Section 7(e) of the Rights Agreement.
Section 5. Countersignature and Registration. The Right Certificates shall
be executed on behalf of the Company by one of its authorized officers either
manually or by facsimile signature. The Right Certificates shall be
countersigned by an authorized signatory of the Rights Agent either manually or
by facsimile signature and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
issued and delivered with the same force and effect as though the person who
signed such Right Certificates had not ceased to be such officer of the Company;
and any Right Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Right Certificate, shall be a
proper officer of the Company to sign such
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Right Certificate, although at the date of the execution of this Agreement any
such person was not such an officer.
In case any authorized signatory of the Rights Agent who shall have
countersigned any of the Right Certificates shall cease to be such signatory
before delivery by the Company, such Right Certificates, nevertheless, may be
issued and delivered by the Company with the same force and effect as though the
person who countersigned such Right Certificates had not ceased to be such
signatory; and any Right Certificate may be countersigned on behalf of the
Rights Agent by any person who, at the actual date of the countersignature of
such Right Certificate, shall be a proper signatory of the Rights Agent to
countersign such Right Certificate, although at the date of the execution of
this Agreement any such person was not such a signatory.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its office designated for such purpose, 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 date of each of the Right Certificates and the date of countersignature 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 13 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
Expiration Date, any 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
shares of Preferred Stock (or following a Triggering Event, Common Stock, other
securities, cash or other assets, 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 office of the Rights Agent designated for such
purpose, along with a signature guarantee and such other and further
documentation as the Rights Agent may reasonably re-
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quest. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Right
Certificate until the registered holder shall have properly 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, as the
Company or the Rights Agent shall reasonably request, of the identity of the
Beneficial Owner, Affiliates or Associates thereof or of the holder, or of any
other Person with which such holder or any of such holder's Affiliates or
Associates has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting or disposing of
securities of the Company. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e), Section 13 and Section 19(k) hereof, countersign and deliver
to the Person entitled thereto a Right Certificate or Right Certificates, as the
case may be, as so requested. The Company may require payment from a Right
Certificate holder 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. The Rights Agent shall have no duty or
obligation to take any action under any Section of this Agreement which requires
the payment by a Rights holder of applicable taxes and governmental charges
unless and until the Rights Agent is satisfied that all such taxes and/or
charges have been paid.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, along with a signature guarantee and such other
further documentation as the Rights Agent may reasonably request and
reimbursement to the Company 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 Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein, including, without limitation, the restrictions on
exercisability set forth in Sections 9(c), 11(a)(iii), 22(b) and 23(b) hereof)
in whole or in part at any time after the Distribution
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Date upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
designated office of the Rights Agent, together with payment of the aggregate
Purchase Price for the total number of one one-thousandths of shares of
Preferred Stock (or shares of Common Stock, other securities, cash or other
assets, as the case may be) as to which the Rights are then exercisable, at or
prior to the earliest of (i) the close of business on July 31, 2010 (the "Final
Expiration Date"), (ii) the time at which the Rights are exchanged as provided
in Section 23, or (iii) the time at which the Rights are redeemed as provided in
Section 22 (such earliest date being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each one one-thousandth of a share of Preferred
Stock pursuant to the exercise of a Right shall initially be $80.00, shall be
subject to adjustment from time to time as provided in Section 11 hereof and
shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed and
properly completed accompanied by payment of the Purchase Price for the number
of one one-thousandths of shares of Preferred Stock (or shares of Common Stock,
other securities, cash or other assets, as the case may be) to be purchased and
an amount equal to any applicable transfer tax, the Rights Agent shall
thereupon, subject to Section 19(k), promptly (i) requisition from any transfer
agent of Preferred Stock certificates for the number of one one-thousandths of
shares of Preferred Stock to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, (ii) if the
Company shall have elected to deposit the total number of shares of Preferred
Stock issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of shares of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs the depositary agent to comply with such request, (iii)
when appropriate, requisition from any transfer agent of the Common Stock of the
Company certificates for the total number of shares of Common Stock to be paid
in accordance with Section 11(a)(ii) and 11(a)(iii), (iv) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 13, (v) promptly after receipt
of such
<PAGE>
-15-
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 (vi) when appropriate,
after receipt promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate. The payment of the then Purchase Price may be
made in cash or by certified bank check or bank draft or money order payable to
the order of the Company or the Rights Agent. In the event that the Company is
obligated to issue securities, distribute property or pay cash pursuant to
Section 11(a)(iii) hereof, the Company will make all arrangements necessary so
that cash, property or securities are available for issuance, distribution or
payment by the Rights Agent, if and when appropriate.
(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 6 and Section 13
hereof.
(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 any Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person became such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any agreement, arrangement or understanding (whether or not
in writing) regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is a part of a plan, arrangement or
understanding (whether or not in writing) which has as a primary purpose or
effect the 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 Company shall notify the Rights Agent when this Section 7(e)
applies and shall use all reasonable efforts to insure that the provisions of
this Section 7(e) and Section 4(b) hereof are complied
<PAGE>
-16-
with, but neither the Company nor the Rights Agent shall have any liability to
any holder of Right Certificates or other Person as a result of the Company's
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 Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
properly 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, Affiliates or Associates thereof or of the holder, or of
any other Person with which such holder or any of such holder's Affiliates or
Associates has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting or disposing of any
securities of the Company as the Company or the Rights Agent shall reasonably
request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for 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 Agreement. The Company 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 Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Shares of Capital Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities) or out of its
authorized and issued shares of Preferred Stock
<PAGE>
-17-
(and, following the occurrence of a Triggering Event, out of its authorized and
issued Common Stock and/or other securities) held in its treasury, the number of
shares of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) that will be sufficient to permit the
exercise in full of all outstanding Rights (it being understood that any of the
foregoing shares or securities may also be reserved for other purposes) or will
take such other steps as are appropriate to assure that the number of such
shares or securities (or their equivalents) sufficient to permit the exercise in
full of all outstanding Rights will be available upon such exercise.
(b) So long as the shares of Preferred Stock (and, following the occurrence
of a Triggering Event, Common Stock and/or other securities) issuable upon the
exercise of Rights may be listed on any national securities exchange, or
admitted to trading on NASDAQ, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable (but only to the
extent that the Board of Directors of the Company determined that it is
reasonably likely that the Rights will be exercised), all shares reserved for
such issuance to be listed on such exchange or admitted to trading on NASDAQ
upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts (X) (i) to file, as soon as
practicable following the first occurrence of a Section 11(a)(ii) Event, or as
soon as required by law, as the case may be, a registration statement on an
appropriate form under the Securities Act of 1933, as amended (the "Act"), with
respect to the securities purchasable upon exercise of the Rights, (ii) to cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) to cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
earlier of (A) the date as of which the Rights are no longer exercisable for
such securities, and (B) the Expiration Date and (Y) (i) to file appropriate
applications with any state or federal regulatory bodies having jurisdiction
over the issuance of the securities (or assets) purchasable upon exercise of the
Rights in order to obtain any approvals or orders of such bodies as may be
legally required, (ii) to cause such approvals to be obtained or orders to be
issued as soon as practicable after such filing and (iii) to cause such
approvals or orders to remain effective until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities (or assets), and
(B) the Expiration Date, to the extent not previously obtained. The Company will
also take such ac-
<PAGE>
-18-
tion as may be appropriate under the blue sky laws of the various states. The
Company may temporarily suspend, (X) for a period of time not to exceed ninety
(90) days after the date set forth in clause (X)(i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare and file
such registration statement and permit it to become effective and (Y) for a
period of time not in excess of 180 days after such date (or for such longer
period as is required by any applicable law, rule or regulation of any
appropriate regulatory bodies), the exercisability of the Rights in order to
obtain any such required regulatory body approvals or orders. Upon any such
suspension, the Company shall issue a public announcement and shall give
simultaneous written notice to the Rights Agent stating that the exercisability
of the Rights has been temporarily suspended, as well as a public announcement
and notice to the Rights Agent at such time as the suspension is no longer in
effect. Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction unless the requisite
qualifications in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of the Preferred Stock (and following
the occurrence of a Triggering Event, Common Stock and/or other securities)
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all taxes and charges which may be payable in respect of the
issuance or delivery of the Right Certificates or of any shares of the Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required (a) to pay any
transfer tax which may be payable in respect of any transfer involved in the
transfer or delivery of Right Certificates or the issuance or delivery of
certificates for the Preferred Stock (or Common Stock 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 (b) to issue or
deliver any certificates for shares of the Preferred Stock (or Common Stock
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
<PAGE>
-19-
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for any number of shares of Preferred Stock (or Common Stock 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 such
whole and/or fractional shares of Preferred Stock (or Common Stock 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 taxes
and charges) was made and shall show the date of countersignature; provided,
however, that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the Preferred Stock (or Common Stock
and/or other securities, as the case may be) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number 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 Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Stock payable in shares of the
Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of shares or (D) issue any
shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for
<PAGE>
-20-
such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive upon payment of the Purchase Price then in
effect the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock (or Common Stock and/or other securities) transfer books of the
Company were open, he or she would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in
this Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 23 of this Agreement, in the event any Person,
alone or together with its Affiliates and Associates, becomes an Acquiring
Person, then, prior to the later of (x) the date on which the Company's rights
of redemption pursuant to Section 22(a) expire, or (y) five (5) days after the
date of the first occurrence of a Section 11(a)(ii) Event, proper provision
shall be made so that each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have a right to receive, upon exercise thereof at the
then current Purchase Price for the number of one one-thousandths of a share of
Preferred Stock for which such Right is then exercisable in accordance with the
terms of this Agreement, in lieu of shares of Preferred Stock, such number of
shares of the Common Stock of the Company as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the then number of one
one-thousandths of a share of Preferred Stock for which a Right is then
exercisable and dividing that product by (y) 50% of the Current Market Price per
share of the Common Stock of the Company (determined pursuant to Section 11(d))
on the date of the occurrence of the event listed above in this subparagraph
(ii) (such number of shares are hereinafter referred to as the "Adjustment
Shares") provided that the Purchase Price and the number of Adjustment Shares
shall be further adjusted as provided in this Agreement to reflect any events
occurring after the date of such first occurrence.
(iii) In the event that the number of shares of Common Stock which are
authorized by the Company's Restated Certificate of Incorporation but not
outstanding or reserved for issu-
<PAGE>
-21-
ance for purposes other than upon exercise of the Rights are not sufficient to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Company shall (A) determine the excess of (1) the value
of the Adjustment Shares issuable upon the exercise of a Right (the "Current
Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with
respect to each Right, make adequate provision to substitute for the Adjustment
Shares, upon exercise of the Rights and payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock which a majority of the Board of
Directors of the Company have deemed to have the same value as shares of Common
Stock (such shares of preferred stock, "Common Stock Equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by a majority of the Board of Directors of
the Company based upon the advice of a nationally recognized investment banking
firm selected by the Board of Directors of the Company; provided, however, if
the Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's
rights of redemption pursuant to Section 22(a) expires (the later of (x) and (y)
being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized for issuance
upon exercise in full of the Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional shares (such
period, as it may be extended, the "Substitution Period"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authoriza-
<PAGE>
-22-
tion of additional shares and/or to decide the appropriate form of distribution
to be made pursuant to such first sentence and to determine the value thereof.
In the event of any such suspension, the Company shall issue a public
announcement and shall give simultaneous written notice to the Rights Agent
stating that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement and notice to the Rights Agent at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Stock shall be the Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock on the Section
11(a)(ii) Trigger Date and the value of any Common Stock Equivalent shall be
deemed to have the same value as the Common Stock on such date. The Company
shall give the Rights Agent notice of the selection of any Common Stock
Equivalent under this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Preferred Stock (or securities having substantially the same rights,
privileges and preferences as the shares of Preferred Stock ("Equivalent
Preferred Stock") or convertible into the Preferred Stock or Equivalent
Preferred Stock) at a price per share of the Preferred Stock or Equivalent
Preferred Stock (or having a conversion price per share, if a security
convertible into the Preferred Stock or Equivalent Preferred Stock) less than
the Current Market Price (as defined in Section 11(d) per share of the Preferred
Stock or Equivalent Preferred Stock, as the case may be) 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, of which the numerator shall be the number of shares of Preferred
Stock outstanding on such record date plus the number of shares of Preferred
Stock or Equivalent Preferred Stock which the aggregate offering price of the
total number of shares of Preferred Stock or Equivalent Preferred Stock so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Current Market Price and of
which the denominator shall be the number of shares of Preferred Stock
outstanding on such record date plus the number of additional shares of
Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by delivery
of consideration part or all of which shall be
<PAGE>
-23-
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
Shares of Preferred Stock owned by or held for the account of the Company 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 Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness or assets
(other than a regular periodic cash dividend or a dividend payable in Preferred
Stock) or subscription rights or warrants (excluding those referred to in
Section 11(b)), the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, of which the numerator shall be the Current
Market Price per share of Preferred Stock (as defined in Section 11(d)) on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with 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 share of Preferred Stock and of which the denominator shall be
such Current Market Price per share of Preferred Stock. Such adjustments shall
be made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall 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, other than
computations made pursuant to Section 11(a)(iii), the "Current Market Price" per
share of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the 30 consecutive Trading
Days (as such term is hereinafter defined in this paragraph (d)) immediately
prior to but not including such date and for purposes of computations made
pursuant to Section 11(a)(iii) hereof, the "Current Market Price" per share of
Common Stock on any date shall be deemed to be the average of the
<PAGE>
-24-
daily closing prices per share of such Common Stock for the ten (10) consecutive
Trading Days immediately following but not including such date; provided,
however, that in the event that the Current Market Price per share of Common
Stock is determined during the period following the announcement by the issuer
of such Common Stock of (A) a dividend or distribution on such Common Stock
payable in shares of such Common Stock or securities convertible into shares of
such Common Stock (other than the Rights) or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of the
requisite 30 Trading Day or 10 Trading Day period, as set forth above 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 Market Price shall be appropriately adjusted to take into account
ex-dividend trading. 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 shares of the Common Stock 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 shares of the Common Stock are listed or
admitted to trading or, if the shares of the
<PAGE>
-25-
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the shares
of the Common Stock are not quoted by such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board of Directors of the Company.
If on any such date no market maker is making a market in the Common Stock, the
fair value of such shares on such date shall be as determined in good faith by
the Board of Directors (which may, in its sole discretion rely upon the opinion
of an independent investment banking firm selected by the Board of Directors)
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. The term "Trading Day" shall
mean a day on which the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of the Common Stock are not listed or
admitted to trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the State of New
York are not authorized or obligated by law or executive order to close. If the
Common Stock is not publicly held or not so listed or traded, "Current Market
Price" per share shall mean the fair value per share as determined in good faith
by the Board of Directors (which may, in its sole discretion, rely upon the
opinion of an independent investment banking firm selected by the Board of
Directors) whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current Market Price
per share of Preferred Stock shall be determined in the same manner as set forth
above for the Common Stock in clause (i) of this Section 11(d) (other than the
last sentence thereof). If the Current Market Price per share of Preferred Stock
cannot be determined in the manner provided above or if the Preferred Stock is
not publicly held or listed or traded in any manner described in clause (i) of
this Section 11(d), the Current Market Price per share of Preferred Stock shall
be conclusively deemed to be an amount equal to 1000 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date of
this Agreement) multiplied by the Current Market Price per share of the Common
Stock. If neither the Common Stock nor the Preferred Stock is publicly held or
so listed or traded, Current Market Price per share of the Preferred Stock shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes. For all
purposes of this Agreement, the Current Market Price of one one-thousandth of a
share of Preferred Stock shall be equal to the Current Market Price of one share
of Preferred Stock divided by 1000.
(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 such 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 ten-thousandth of a share of Common Stock or one-millionth of a
share of Preferred Stock as the case may be. Notwithstanding
<PAGE>
-26-
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three years from the
date of the transaction which mandates such adjustment or (ii) the Expiration
Date.
(f) If as a result of an adjustment made pursuant to Section 11(a), the
holder of any Right thereafter exercised shall become entitled to receive any
shares of capital stock other than shares of Preferred Stock, thereafter the
number of such other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares contained in Section 11(a) through (q), inclusive, and the
provisions of Sections 7, 9, 10, and 13 with respect to the Preferred Stock
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of shares (calculated to
the nearest one-millionth) obtained by (i) multiplying (x) the number of shares
covered by a Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Preferred Stock 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 shares of Preferred
Stock for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record
<PAGE>
-27-
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest 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 the adjustment of the Purchase
Price. The Company shall make a public announcement and shall give simultaneous
written notice to the Rights Agent of its election to adjust the number of
Rights, indicating the record date for 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
10 days later than the date of the public announcement. If Right Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of Right Certificates on such record date Right
Certificates evidencing, subject to Section 13, the additional Rights to which
such holders shall be entitled as a result of such adjustment, or, at the option
of the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates 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 may bear, at the option of the Company, the adjusted Purchase Price) and
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of shares of Preferred Stock issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may continue to express
the Purchase Price per share and the number of shares which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-thousandth of the then stated value, if any, of a
share of Preferred Stock issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable such number of one one-thousandths of a share of such Preferred
Stock at such adjusted Purchase Price.
<PAGE>
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(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the shares
of Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the shares of Preferred Stock and
other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that the Board of Directors of the Company shall determine to be
advisable in order that any consolidation or subdivision of shares of Preferred
Stock, issuance wholly for cash of any of shares of Preferred Stock at less than
the Current Market Price, issuance wholly for cash of the Preferred Stock or
securities which by their terms are convertible into or exchangeable for
Preferred Stock, stock dividends or issuance of rights, options or warrants
referred to hereinabove in this Section 11, hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Sections 22, 23 and 26 hereof, take (nor will
it permit any of its Subsidiaries to take) any action if at the time such action
is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(o) The Company 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 Company in a transaction which complies with Section 11(n)),
(ii) merge with or into any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(n)), or (iii) sell or transfer
(or permit any of its Subsidiaries to sell or transfer), in one or more
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole)
<PAGE>
-29-
to, any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(n)) if at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Record Date and prior to the
Distribution Date (i) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares
of Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
(q) Notwithstanding anything in this Agreement to the contrary, prior to
the Distribution Date, the Company may, in lieu of making any adjustment to the
Purchase Price, the number of shares of Preferred Stock eligible for purchase on
exercise of each Right or the number of Rights outstanding, which adjustment
would otherwise be required by Section 11(a)(i), 11(b), 11(c), 11(h) or 11(i),
make such other equitable adjustment or adjustments thereto as the Board of
Directors (whose determination shall be conclusive) deems appropriate in the
circumstances and not inconsistent with the objectives of the Board of Directors
in adopting this Agreement and such Sections.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11, the Company shall (a)
promptly prepare a certificate setting forth such adjustment, and a brief
statement of the calculations and facts accounting for such adjustment and the
adjusted Purchase Price, (b) promptly file with
<PAGE>
-30-
the Rights Agent and with each transfer agent for the Preferred Stock and the
Common Stock a copy of such certificate and (c) mail a brief summary thereof to
each holder of a Right Certificate in accordance with Section 25. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall have no duty with respect to and shall
not be deemed to have knowledge of any adjustment unless and until it shall have
received such a certificate.
Section 13. Fractional Rights and Fractional Shares. (a) The Company shall
not be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, the Company
shall pay 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 13(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 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 of the Company. 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 of the
Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Pre-
<PAGE>
-31-
ferred Stock) upon exercise of the Rights or to distribute certificates which
evidence fractional shares (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock). In lieu of fractional shares
that are not integral multiples of one one-thousandth of a share of Preferred
Stock, the Company may pay to the registered holders of Right Certificates at
the time the Rights evidenced thereby are exercised or exchanged as herein
provided an amount in cash equal to the same fraction of the current market
value of one one-thousandth of a share of Preferred Stock. For purposes of this
Section 13(b), the current market value of one one-thousandth of a share of
Preferred Stock shall be one one-thousandth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii)) for the Trading
Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event the Company shall not be
required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock, the Company may pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one (1) share of Common Stock. For purposes of this Section
13(c), the current market value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as otherwise permitted by this Section 13.
(e) The Rights Agent shall have no duty or obligation with respect to this
Section 13 and Section 23(e) unless and until it has received specific
instructions (and sufficient cash, if required) from the Company with respect to
its duties and obligations under such Sections.
Section 14. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right
<PAGE>
-32-
Certificate (or, prior to the Distribution Date, of the Common Stock), may, on
his own behalf and for his own benefit, enforce, and may institute and maintain
any suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 15. Agreement of Right Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed, along with a signature
guarantee and such other and further documentation as the Rights Agent may
reasonably request;
(c) subject to Section 6 and Section 7(f) hereof, the Company 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
Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent shall
be required to be affected by any notice to the contrary;
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent
<PAGE>
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shall have any liability to any holder of a Right or other Person as a
result of its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or other
order, decree, judgment or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; provided, however, the Company
must use its best efforts to have any such order, decree, judgment or
ruling lifted or otherwise overturned as soon as possible.
Section 16. 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 number of shares of Preferred
Stock or any other securities of the Company 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 shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 17. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the preparation, execution,
delivery, amendment and administration of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense (including
the reasonable fees and expenses of counsel), incurred without gross negligence,
bad faith or willful misconduct on the part of the Rights Agent (each as may be
finally determined by a court of competent jurisdiction) for any action taken,
suffered or omitted by the Rights Agent in connection with the acceptance and
administra-
<PAGE>
-34-
tion of this Agreement, including the costs and expenses of defending against
any claim of liability on the premises. Anything to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
punitive, indirect, consequential or incidental loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage. The indemnity
provided herein shall survive the termination of this Agreement and the
termination and the expiration of the Rights. The costs and expenses incurred in
enforcing this right of indemnification shall be paid by the Company. Any
liability of the Rights Agent under this Rights Agreement will be limited to the
amount of fees paid by the Company to the Rights Agent.
The Rights Agent shall be authorized and protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its acceptance and administration of this Agreement in reliance
upon any Right Certificate or certificate for Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
instruction, adjustment notice, 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.
In addition to the foregoing, 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
(i) the execution of the certification concerning beneficial ownership appended
to the Form of Assignment and the Form of Election to Purchase included as part
of Exhibit B hereto (the "Certification"), unless the Rights Agent shall have
actual knowledge that, as executed, the Certification is untrue or (ii) the
non-execution or failure to complete the Certification including, without
limitation, any refusal to honor any otherwise permissible assignment or
election by reason of such non-execution or failure.
Section 18. Merger or Consolidation or Change of Name of Rights Agent. Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any Person, succeeding to the corporate trust business of the Rights
Agent or any successor Rights
<PAGE>
-35-
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 Person would be eligible for appointment
as a successor Rights Agent under the provisions of Section 20. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor 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 Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 19. Duties of Rights Agent. The Rights Agent undertakes only the
duties and obligations expressly imposed by this Agreement upon the following
terms and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with the legal counsel (who may be
legal counsel for the Company), and the advice or opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent
as to any action taken, suffered, or omitted by it in accordance with such
advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking, suffering or
omitting to take 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
<PAGE>
-36-
established by a certificate signed by any one of the Chairman of the
Board, the President, any Vice President, the Treasurer or the Secretary of
the Company and delivered to the Rights Agent; and such certificate shall
be full authorization to the Rights Agent for any action taken, suffered or
omitted by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct (and as may be finally
determined by a court of competent jurisdiction). The issuance or
non-issuance of a Right Certificate or Preferred Stock or other security
issued in lieu of Preferred Stock in accordance with instructions given to
the Rights Agent by the Company pursuant to Section 19(k) hereof or in
accordance with the terms hereof shall not constitute gross negligence, bad
faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due 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 Company of any
covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment required under
the provisions of Section 11 or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise
of Rights evidenced by Right Certificates after actual notice of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
shares of Preferred Stock or Common Stock to be issued pursuant to this
Agreement or any Right Certificate or as to whether any shares of Preferred
Stock or Common Stock will, when issued, be validly authorized and issued,
fully paid and nonassessable.
<PAGE>
-37-
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or 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 and
certificates delivered pursuant to any provision hereof from any one of the
Chairman of the Board, the President, any Vice President, the Secretary or
the Treasurer of the Company, and is authorized to apply to such officers
for advice or instructions in connection with its duties, and it shall not
be liable for any action taken or suffered or omitted to be taken by it in
accordance with instructions of any such officer. An application by the
Rights Agent for instructions may set forth in writing any action proposed
to be taken, suffered or omitted by the Rights Agent with respect to its
duties and obligations under this Agreement and the date on and/or after
which such action shall be taken, and the Rights Agent shall not be liable
for any action taken, suffered or omitted in accordance with a proposal
included in any such application on or after the date specified therein
(which date shall not be less than one Business Day after the Company
receives such application) without the consent of the Company unless prior
to taking, suffering or omitting such action, the Rights Agent has received
written instructions in response to such application specifying the actions
to be taken, suffered or omitted.
(h) The Rights Agent and any shareholder, affiliate, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for
any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either by itself
or by or through its at-
<PAGE>
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torneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company or any other person
resulting from any such act, default, neglect or misconduct; provided,
however, reasonable care was exercised in the selection 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 it believes that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to
it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response, the Rights
Agent shall not take any further action with respect to such requested
exercise or transfer without first consulting the Company. The Company
shall give the Rights Agent prompt written instructions as to the action to
be taken regarding the Right Certificates involved. The Rights Agent shall
not be liable for acting in accordance with such instructions.
Section 20. 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 Company and to each
transfer agent of the Preferred Stock and the Common Stock by registered or
certified mail, and, at the Company's expense, to the holders of the Right
Certificates by first class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Preferred Stock and the Common Stock by registered or certified
mail, and to the holders of the Right Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who
<PAGE>
-39-
shall, with such notice, submit his Right Certificate for inspection by the
Company), then the Company shall become the temporary Rights Agent and the
registered holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (i) a
Person 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 Person is authorized to do business as a banking or trust institution in
the State of New York), in good standing, having an office in the State of New
York, which is subject to supervision or examination by federal or state
authority or which has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $25 million or (ii) an affiliate or such Person.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Preferred Stock
and the Common Stock, 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 20, 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 21. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its 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 shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter is-
<PAGE>
-40-
sued by the Company, and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Right Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Right Certificate shall be issued
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Right Certificate would be issued, and
(ii) no such 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 22. Redemption and Termination. (a) The Board of Directors of the
Company may, at its option, at any time prior to the earlier of (x) the close of
business on the tenth calendar day following the Shares Acquisition Date (or if
the Shares Acquisition Date shall have occurred prior to the Record Date, the
close of business on the tenth day following the Record Date), or (y) the close
of business on the Final Expiration Date, redeem all but not less than all of
the then outstanding Rights at a redemption price of $.001 per Right as
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"), and the Company may, at its
option, pay the Redemption Price either in shares of its Common Stock (valued at
their Current Market Price as defined in Section 11(d)(i) on the date of the
redemption), other securities, cash or other assets. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired.
(b) In deciding whether or not to exercise the Company's right of
redemption hereunder, the Board of Directors of the Company shall act in good
faith, in a manner they reasonably believe to be in the best interests of the
Company and with such care, including reasonable inquiry, skill and diligence,
as a person of ordinary prudence would use under similar circumstances, and they
may consider the long-term and short-term effects of any action upon employees,
customers and creditors of the Company and upon communities in which offices or
other establishments of the Company are located, and all other pertinent
factors.
<PAGE>
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(c) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, 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 held. Within 10 days after the action of the Board of
Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the holders of the then outstanding Rights by mailing such
notice to the Rights Agent and to all such holders 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
Stock. 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 Company 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 22, and other than in
connection with the repurchase of Common Stock prior to the Distribution Date.
Section 23. Exchange. (a) The Board of Directors of the Company may, at its
option, at any time and from time to time on or after a Section 11(a)(ii) Event,
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) hereof) for shares of Common Stock at an exchange ratio of one share of
Common Stock 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").
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to Section 23(a) and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of the holders of such Rights shall be
to receive that number of shares of Common Stock equal to the number of such
Rights held by such holders multiplied by the Exchange Ratio. Promptly after the
action of the Board of Directors ordering an exchange of the Rights, the Company
shall give notice of any such exchange to the Rights Agent and the holders of
the then outstanding Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Rights Agent;
pro-
<PAGE>
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vided, however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. 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 shares of Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become null and void pursuant to the provisions of
Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 23, the Company, at its
option, may substitute shares of Preferred Stock (or Equivalent Preferred Stock,
as such term is defined in Section 11(b) hereof) for shares of Common Stock
exchangeable for the Rights, at the initial rate of one one-thousandth of a
share of Preferred Stock (or Equivalent Preferred Stock) for each share of
Common Stock, as appropriately adjusted to reflect adjustments in the dividend
rights of the Preferred Stock pursuant to the terms thereof.
(d) In the event that there shall not be sufficient shares of Common Stock
or Preferred Stock issued, but not outstanding, or authorized but unissued, to
permit any exchange of Rights as contemplated in accordance with this Section 23
or that any regulatory actions or approvals are required in connection
therewith, the Company shall take all such action as may be necessary to
authorize additional Common Stock or Preferred Stock for issuance upon exchange
of the Rights.
(e) The Company shall not be required to issue fractional shares of Common
Stock or to distribute certificates which evidence fractional shares of Common
Stock pursuant to this Section 23. In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders of the Right Certificates
with regard to which such fractional shares of Common Stock would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole share of Common Stock. For the purposes of this Section 23(e),
the current market value of a whole share of Common Stock shall be the closing
price of a share of Common Stock (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 23.
(f) In any exchange pursuant to this Section 23, the Company, at its
option, may substitute for any share of Common
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Stock exchangeable for a Right (i) Common Stock Equivalents, (ii) cash, (iii)
debt securities of the Company, (iv) other assets, or (v) any combination of the
foregoing, having an aggregate value which a majority of the Board of Directors
of the Company shall have determined in good faith to be equal to the Current
Market Price of one share of Common Stock (determined pursuant to Section 11(d)
hereof) on the Trading Date immediately preceding the date of exchange pursuant
to this Section 23.
Section 24. Notice of Certain Events. In case the Company shall propose at
any time following the Distribution Date (a) to pay any dividend payable in
stock of any class to the holders of Preferred Stock or to make any other
distribution to the holders of Preferred Stock (other than a regular periodic
cash dividend), or (b) to offer to the holders of Preferred Stock rights or
warrants to subscribe for or to purchase any additional shares of Preferred
Stock or shares of stock of any class or any other securities, rights or
options, or (c) to effect any reclassification of Preferred Stock (other than a
reclassification involving only the subdivision of outstanding Preferred Stock),
or (d) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Company in a transaction which complies with
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 more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(n) hereof), or (e) to effect
the liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to the Rights Agent and to each holder of a Right,
in accordance with Section 25, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or Rights, 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 Stock, if
any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (a) or (b) above at least twenty (20) days prior to
the record date for determining holders of the Preferred Stock 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
<PAGE>
-44-
the holders of the Preferred Stock, whichever shall be the earlier.
In case a Section 11(a)(ii) Event shall occur, then, in any such case, the
Company shall as soon as practicable thereafter give to the Rights Agent and to
each holder of a Right, to the extent feasible and in accordance with Section
25, a notice of the occurrence of such event, which shall specify the event and
the consequences of the event to holders of Rights under Section 11(a)(ii) and
all references in the preceding paragraph to Preferred Stock shall be deemed to
thereafter refer to Common Stock and/or other securities, as the case may be.
Section 25. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Trans World Entertainment Corporation
38 Corporate Circle
Albany, NY 12203
Attention: Corporate Secretary
Subject to the provisions of Section 20, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
44 Wall Street
6th Floor
New York, NY 10005
Attention: Connie Adams
with a copy to:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, NJ 07660
Attention: General Counsel
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder
<PAGE>
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of any Right Certificate shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 26. Supplements and Amendments. Prior to the earlier of the
Distribution Date or the Shares Acquisition Date and subject to the penultimate
sentence of this Section 26, the Company may from time to time supplement or
amend this Agreement without the approval of any holders of Right Certificates.
From and after the earlier of the Distribution Date or the Shares Acquisition
Date, and subject to the penultimate sentence of this Section 26, the Company
may from time to time 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 lengthen the time period
during which the Rights may be redeemed following the Shares Acquisition Date
for up to an additional twenty days beyond the time period set forth in Section
22(a), or (iv) to change or supplement the provisions hereunder in any manner
which the Company 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). Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment
unless the Rights Agent shall have determined in good faith that such supplement
or amendment would affect its interests under this Agreement. Notwithstanding
anything in this Agreement to the contrary, no supplement or amendment shall be
made on or after the Distribution Date which changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of shares of Preferred
Stock for which a Right is then exercisable.
Section 27. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of Directors. For all
purposes of this Agreement, any calculation of the number of shares of Voting
Stock outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Voting Stock
<PAGE>
-46-
of which any Person is the Beneficial Owner, shall be made in accordance with
the provisions of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under
the Exchange Act. The Board of Directors of the Company shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Company's Board of Directors, or the Company,
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 and calculations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights or to amend the
Agreement). All such actions, calculations, interpretations and determinations
(including, for the purpose of clause (ii) below, all omissions with respect to
the foregoing) which are done or made by the Board in good faith, shall (i) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Right Certificates and all other parties, and (ii) not subject the Company's
Board of Directors to any liability to the holders of the Right Certificates.
The Rights Agent shall always be entitled to assume that the Company's Board of
Directors acted in good faith and shall be fully protected and incur no
liability in reliance thereon.
Section 29. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, registered holders of the Common Stock).
Section 30. 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 of the Company 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 redemp-
<PAGE>
-47-
tion set forth in Section 22 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 31. Governing Law. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
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 32. 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 33. 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.
<PAGE>
-48-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
[SEAL]
TRANS WORLD ENTERTAINMENT CORPORATION
Attest
By: /s/ Gary A. Brooks By: /s/ John J. Sullivan
----------------------------- --------------------
Name: Gary A. Brooks Name: John J. Sullivan
Title: Chief Financial Officer
[SEAL]
Attest: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.,
as Rights Agent
By: /s/ Frank R. Misciagnan By: /s/ Constance Adams
----------------------------- -------------------
Name: Frank R. Misciagnan Name: Constance Adams
Title: Assistant Vice President
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TRANS WORLD ENTERTAINMENT CORPORATION
(Pursuant to Section 805 of the New York Business Corporation Law)
Trans World Entertainment Corporation (the "Corporation"), a corporation
organized and existing under the Business Corporation Law of the State of New
York, does hereby certify as follows:
1. The name of the corporation is TRANS WORLD ENTERTAINMENT CORPORATION
(the "Corporation").
2. The Certificate of Incorporation of the Corporation was filed by the
Department of State of New York on the 7th day of February, 1972.
3. The following resolution, establishing and designating a series of
shares and fixing and determining the relative rights and preferences thereof,
was duly adopted by the Board of Directors of the Corporation on August 11,
2000:
RESOLVED, that the Board of Directors of the Corporation hereby establishes
and designates a series of Preferred Stock, par value $0.01 per share, of the
Corporation, and hereby states the designation and number of shares, and fixes
and determines the relative rights and preferences thereof as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as the Series A Junior Participating Preferred Stock (the "Series A
Junior Participating Preferred Stock") and the number of shares constituting
such series shall be 200,000.
Section 2. Dividends and Distributions.
<PAGE>
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(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 shares of
Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, dividends payable in cash in an amount
per share (rounded to the nearest cent) equal to, subject to the provision for
adjustment hereinafter set forth: the greater of (a) $1.00 per share, or (b)
1000 times the aggregate per share amount of all cash dividends, and 1000 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, par value $0.01 per share, of the
Corporation (the "Common Stock") since the immediately preceding dividend
payment date, or, with respect to the first 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 Corporation shall at any time
after August 11, 2000 (the "Rights Declaration Date") (i) declare any dividend
on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of 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 Corporation 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).
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Junior Participating Preferred Stock from the first business day of
each quarter following the issuance of the Series A Junior Participating
Preferred Stock
<PAGE>
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(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 30 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 1000 votes on all matters submitted to a vote of the shareholders of
the Corporation. In the event the Corporation 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.
<PAGE>
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(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 shareholders of the Corporation.
(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 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 quarterly
dividends thereon, voting as a class, irrespective of series, shall have the
right to elect two 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 shareholders, and thereafter at annual meetings of
shareholders, 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 at least 10% 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
directors or, if such right is exercised at an annual meeting, to elect two
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 di-
<PAGE>
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rectors 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.
(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 shareholder or shareholders owning in the
aggregate not less than 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 President, a vice-president or the Secretary of the Corporation.
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 Corporation. Such
meeting shall be called for a time not earlier than 20 days and not later than
60 days after such order or request or in 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 shareholder or shareholders owning in the aggregate not
less than 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 shareholders.
(iv) In any default period, the holders of Common Stock, and other classes
of stock of the Corporation 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
<PAGE>
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in Paragraph (C)(ii) of this Section 3) be filled by 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 have 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 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 certificate of incorporation or by-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining directors.
(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
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem
or purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Junior Participating Preferred Stock;
<PAGE>
-7-
(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 Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation 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, 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 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 Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Paragraph (A) of this Section 4,
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 Corporation in any manner
whatsoever shall be retired and cancelled 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 Series A Junior Participating Preferred
<PAGE>
-8-
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 Corporation, 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
an amount equal to $1000 per share of Series A Junior Participating Preferred
Stock, 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
Junior Participating Liquidation Preferred"). Following the payment of the full
amount of the Series A Junior Participating Liquidation Preferred, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Junior Participating
Liquidation Preferred by (ii) 1000 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of the
Series A Junior Participating Liquidation Preferred and the Common Adjustment in
respect of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to 1 with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Junior Participating Liquidation
Preferred 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
<PAGE>
-9-
to their respective liquidation preferences. In the event, however, that there
are not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(C) In the event the Corporation 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 Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding 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.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1000 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 Corporation 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 were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
<PAGE>
-10-
Section 9. Ranking. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation'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. Amendment. At any time when any shares of Series A Junior
Participating Preferred Stock are outstanding, neither the Certificate of
Incorporation of the Corporation nor this Certificate of Designation shall be
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 a majority or more of the outstanding shares of Series A Junior Participating
Preferred Stock, voting separately as a class.
Section 11. 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.
4. The foregoing amendment to the Certificate of Incorporation was
authorized by a majority vote of the Board of Directors of the corporation
pursuant to Section 502 of the Business Corporation Law of the State of New
York.
IN WITNESS WHEREOF, this Certificate of Amendment is executed on behalf of
the Corporation by one of its officers thereunto duly authorized.
Dated ___ , 2000 TRANS WORLD ENTERTAINMENT
CORPORATION
By:
-----------------------
Name:
Title:
<PAGE>
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER July 31, 2010 OR EARLIER IF NOTICE OF REDEMPTION
IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER WILL BE NULL AND VOID. [THE RIGHTS REPRESENTED BY
THIS RIGHT CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO
WAS OR BECAME AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
WILL BE NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF
THE RIGHTS AGREEMENT.]*
TRANS WORLD ENTERTAINMENT CORPORATION
Right Certificate
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 11, 2000 (the "Rights Agreement") between Trans World
Entertainment Corporation, a New York corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company
(the "Rights Agent"), to purchase from the Company 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 City time) on July 31, 2010 at the designated office of the
Rights Agent, or its successors as Rights Agent, in New York, New York, one
one-thousandth of a fully paid non-assessable share of the Series A Junior
Participating Preferred Stock, par value $0.01 per share (the "Preferred
Stock"), of the Company, at a purchase price of
----------
* The portion of the legend in brackets shall be inserted only if applicable.
<PAGE>
$80.00 per one one-thousandth of a share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase and related certificate duly executed, along with a signature
guarantee and such other and further documentation as the Rights Agent may
reasonably request. The number of Rights evidenced by this Right Certificate
(and the number of shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are the number
and Purchase Price as of August 11, 2000, based on the Preferred Stock of the
Company as constituted at such date.
Upon the occurrence of a Triggering 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
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Triggering Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock (or, in certain circumstances, common stock
and/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.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, 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 Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the above-mentioned office of the Rights
Agent, and at the executive offices of the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the designated office of the Rights Agent, along with a signature
guarantee and such other and further documentation as the Rights Agent may
reasonably request, may be exchanged for another Right Certificate or
B-2
<PAGE>
Right Certificates of like tenor and date evidencing Rights entitling the holder
to purchase a like aggregate number of one one-thousandth of a share of
Preferred Stock as the Rights evidenced by the Right Certificate or 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, along with a signature guarantee and such other
and further documentation as the Rights Agent may reasonably request, another
Right Certificate or Right Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be (i) redeemed by the Company at a redemption price of
$.001 per Right or (ii) exchanged by the Company in whole or in part for shares
of common stock or Preferred Stock.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Stock or of
any other securities of the Company 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 Company 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 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 Company and
its corporate seal. Dated as of __.
[SEAL]
ATTEST: TRANS WORLD ENTERTAINMENT CORPORATION
By: By: _________________________
----------------------------
Name: Name:
Title: Title:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES,
L.L.C., as Rights Agent
By: ______________________________
Authorized Signature
Date:
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 Company,
with full power of substitution.
Dated: _______________, ____
__________________________________
Signature
Signature Guaranteed:__________________________________________________________
(Signatures must be guaranteed by a commercial bank or trust company or by a
member of NASDAQ.)
B-5
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _______________, ____
___________________________________
Signature
Signature Guaranteed:__________________________________________________________
(Signatures must be guaranteed by a commercial bank or trust company or by a
member of NASDAQ.)
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
B-6
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights evidenced by the Right Certificate.)
Trans World Entertainment Corporation:
The undersigned hereby irrevocably elects to exercise ______________ Rights
represented by this Right Certificate to purchase the shares of the Preferred
Stock issuable upon the exercise of such Rights (or such other securities of the
Company or of any other Person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:
Please insert social security or
other taxpayer 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 taxpayer identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Dated: _____________, ____
____________________________________
Signature
Signature Guaranteed:__________________________________________________________
(Signatures must be guaranteed by a commercial bank or trust company or by a
member of NASDAQ.)
B-7
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ______________, ____ _______________________________________
Signature
Signature Guaranteed:
(Signatures must be guaranteed by a commercial bank or trust company or by a
member of NASDAQ.)
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-8
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
The Board of Directors of Trans World Entertainment Corporation (the
"Company") has declared a dividend distribution of one Right for each
outstanding share of Common Stock, $0.01 par value (the "Common Stock"), of the
Company. The distribution is payable to holders of record on September 29, 2000
(the "Record Date"). Each Right entitles the registered holder to purchase from
the Company one one-thousandth of a share of Series A Junior Participating
Preferred Stock (the "Preferred Stock"), at a price of $80.00 per one
one-thousandth of a 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 Company and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (the "Rights Agent").
Distribution Date; Transfer of Rights
Until the earlier to occur of (i) ten calendar days following the date (the
"Shares Acquisition Date") of public announcement that a person or group of
affiliated or associated persons, subject to certain exceptions (an "Acquiring
Person") acquired, or obtained the right to acquire, beneficial ownership of
Common Stock or other voting securities ("Voting Stock") that have 20% or more
of the voting power of the outstanding shares of Voting Stock or (ii) ten
calendar days (or such later date as may be determined by action of the Board of
Directors prior to the time any person or group of affiliated persons becomes an
Acquiring Person) following the commencement or announcement of an intention to
make a tender offer or exchange offer the consummation of which would result in
such person or group acquiring, or obtaining the right to acquire, beneficial
ownership of Voting Stock having 20% or more of the voting power of the
outstanding shares of Voting Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Company's Common Stock certificates outstanding as of the Record Date, by such
Common Stock certificates. The Rights Agreement provides that, until the
Distribution Date, the Rights will be transferred with and only with the
Company's Common Stock. Until the Distribution Date (or earlier redemption or
expiration of the Rights), new Common Stock certificates issued after the Record
Date upon transfer or new issuance of the Company's Common Stock will contain a
notation incorporating the Rights
C-9
<PAGE>
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any of the Company's
Common Stock certificates outstanding as of the Record Date will also constitute
the transfer of the Rights associated with the Common Stock 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 Company's Common Stock as of the close of business on
the Distribution Date and such separate Right Certificates alone will evidence
the Rights. The Rights Agreement provides that, as defined therein, the term
"Acquiring Person" shall not include any Higgins Stockholder.
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on July 31, 2010, unless earlier redeemed or
exchanged by the Company as described below.
Exercise of Rights for Common Stock of the Company
In the event that a Person becomes an Acquiring Person, each holder of a
Right will thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the Purchase Price of the Right.
Notwithstanding any of the foregoing, following the occurrence of the event set
forth in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void.
Exchange of Rights
At any time after the occurrence of the event set forth under the heading
"Exercise of Rights for Common Stock of the Company" above, the Board of
Directors may exchange the Rights (other than Rights owned by the Acquiring
Person which shall have become void), in whole or in part, at an exchange ratio
of one share of Common Stock (or a fraction of a share of Preferred Stock having
the same market value) per Right (subject to adjustment).
Redemption of Rights
C-10
<PAGE>
At any time prior to 5:00 P.M. New York City time on the tenth calendar day
following the Shares Acquisition Date, the Company may redeem the Rights in
whole, but not in part, at a price of $.001 per Right (the "Redemption Price").
Immediately upon the action of the Board of Directors of the Company electing to
redeem the Rights, the Company shall make announcement thereof, and upon such
action, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
Rights Holder Not a Stockholder
Until a Right is exercised or exchanged, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
Terms of the Preferred Stock
The Preferred Stock will rank junior to all other series of the Company's
preferred stock with respect to payment of dividends and as to distributions of
assets in liquidation. Each share of Preferred Stock will have a quarterly
dividend rate per share equal to the greater of $1.00 or 1000 times the per
share amount of any dividend (other than a dividend payable in shares of Common
Stock or a subdivision of the Common Stock) declared from time to time on the
Common Stock, subject to certain adjustments. The Preferred Stock will not be
redeemable. In the event of liquidation, the holders of the Preferred Stock will
be entitled to receive a preferred liquidation payment per share of $1.00 (plus
accrued and unpaid dividends) or, if greater, an amount equal to 1000 times the
payment to be made per share of Common Stock, subject to certain adjustments.
Generally, each share of Preferred Stock will vote together with the Common
Stock and any other series of cumulative preferred stock entitled to vote in
such manner and will be entitled to 1000 votes, subject to certain adjustments.
In the event of any merger, consolidation, combination or other transaction in
which shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or other property, each share of Preferred Stock will be
entitled to receive 1000 times the aggregate amount of stock, securities, cash
and/or other property, into which or for which each share of Common Stock is
changed or exchanged, subject to certain adjustments. The foregoing dividend,
voting and liquidation rights of the Preferred Stock are protected against
dilution in the event that additional shares of Common Stock are issued
C-11
<PAGE>
pursuant to a stock split or stock dividend or distribution. Because of the
nature of the Preferred Stock's dividend, voting, liquidation and other rights,
the value of the one one-thousandth of a share of Preferred Stock purchasable
with each Right is intended to approximate the value of one share of Common
Stock.
Adjustments to Purchase Price
The Purchase Price payable, and the number of shares of Preferred Stock (or
Common Stock or other securities, as the case may be) 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 shares of the
Preferred Stock or convertible securities at less than the current market price
of the Preferred Stock or (iii) upon the distribution to holders of the
Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends out of earnings or retained earnings or dividends
payable in the Preferred Stock) or of subscription rights or warrants (other
than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until the earlier of (i) three years from the date of the event giving
rise to such adjustment and (ii) the time at which cumulative adjustments
require an adjustment of at least 1% in such Purchase Price. No fractional
shares will be issued (other than fractional shares which are integral multiples
of one one-thousandth of a share of Preferred Stock) and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred Stock
on the last trading date prior to the date of exercise.
Amendments to Terms of the Rights
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, or to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person); provided, however, that no
supplement or amendment may be made af-
C-12
<PAGE>
ter the Distribution Date which changes those provisions relating to the
principal economic terms of the Rights.
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
__, 2000. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
C-13
