QuickLinks-- Click here to rapidly navigate through this document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
| Filed by the Registrant | ||
Filed by a Party other than the Registrant | ||
Check the appropriate box: | ||
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to | |
TRANS WORLD ENTERTAINMENT CORPORATION | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
| Payment of Filing Fee (Check the appropriate box): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i) | |||
| (1) | Title of each class of securities to which transaction applies: | |||
| (2) | Aggregate number of securities to which transaction applies: | |||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
| (4) | Proposed maximum aggregate value of transaction: | |||
| (5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |||
| (2) | Form, Schedule or Registration Statement No.: | |||
| (3) | Filing Party: | |||
| (4) | Date Filed: | |||
Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. | ||||
TRANS WORLD ENTERTAINMENT CORPORATION
38 CORPORATE CIRCLE
ALBANY, NEW YORKCorporate Circle
Albany, New York 12203
(518) 452-1242
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
Date and | Wednesday, June | |
Place | The Desmond 660 Albany Shaker Road Albany, New York 12211 | |
Items of | (1) To elect | |
(2) To approve the | ||
(3) | ||
Record | Shareholders of record as of | |
Proxy | A proxy and return envelope, requiring no postage if mailed in the United States, are enclosed for your convenience. Please complete and return |
| By order of the Board of Directors, | ||
 John J. Sullivan, Secretary |
May 11, 2005
TRANS WORLD ENTERTAINMENT CORPORATION
38 CORPORATE CIRCLE
ALBANY, NEW YORKCorporate Circle
Albany, New York 12203
(518) 452-1242
------------------------
This Proxy Statement is furnished to the shareholders of Trans World Entertainment Corporation, a New York corporation (the "Company"), in connection with the solicitation of proxies by the Board of Directors for use at the Company's Annual Meeting of Shareholders of the Company to be held on June 20, 2002,8, 2005, and any adjournment or adjournments thereof. A copy of the notice of annual meeting accompanies this Proxy Statement. It is anticipated that the mailing of this Proxy Statement and the form of proxy/voting instruction card will commence on May 23, 2002.
11, 2005.
The Company has only one class of voting securities, its Common Stock,common stock, par value $.01 per share (the "Common Stock"). On May 6, 2002,April 22, 2005, the record date, 40,751,54032,879,392 shares of Common Stock were outstanding. Each shareholder of record at the close of business on the record date will be entitled to one vote for each share of Common Stock owned on that date as to each matter presented at the meeting.
QUORUM AND TABULATION OF VOTES
The By-Laws of the Company provide that a majority of the shares of Common Stock issued and outstanding and entitled to vote, present in person or by proxy, shall constitute a quorum at the Annual Meeting of Shareholders of the Company. Votes at the Annual Meeting will be tabulated by an inspector from Mellon Investor Services appointed by the Company. Shares of Common Stock represented by a properly signed and returned proxy are considered as present at the Annual Meeting for purposes of determining a quorum.
Brokers holding shares for beneficial owners must vote those shares according to the specific instructions they receive from the owners. If specific instructions are not received, however, brokers may vote these shares in their discretion, depending upon the type of proposal involved.
Pursuant to the Company's By-Laws, directors of the Company will be elected by a favorable vote of a plurality of the shares of Common Stock present and entitled to vote, in person or by proxy, at the Annual Meeting.
Under New York law, abstentions and broker non-votes will have no effect on the outcome of the election of Directors at the Annual Meeting. Brokers have discretionary authority to vote on the election of directors.Directors. If a properly signed proxy form is returned to the Company by a shareholder of record and is not marked, it will be voted "FOR" the proposals set forth herein as Item 1 Item 2 and Item 3.2. The enclosed proxy may be revoked by a shareholder at any time before it is voted by the submission of a written revocation to the Company, by the returnsubmission of a new proxy to the Company, or by attending and voting in person at the Annual Meeting.
The only persons known to the CompanyBoard of Directors to be the beneficial owners of more than five percent of the outstanding shares of the Common Stock as of May 6,
2002,April 22, 2005, the record date, are indicated below:
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||
|---|---|---|---|---|---|---|
| Robert J. Higgins | 15,342,479 | (1) | 46.7 | % | ||
| 38 Corporate Circle | ||||||
| Albany, New York 12203 | ||||||
| Van Kampen Asset Management Company | 3,451,962 | (2) | 10.5 | % | ||
| 1585 Broadway | ||||||
| New York, New York 10036 | ||||||
| Dimensional Fund Advisors | 2,894,123 | (3) | 8.8 | % | ||
| 1299 Ocean Avenue, 11th Floor | ||||||
| Santa Monica, California 90401 | ||||||
- 1)
- Information is as of
May 6, 2002,April 22, 2005, as provided by the holder. Includes 2,900,000 shares that may be acquired within 60 days of April 22, 2005, 50,550 shares owned by the wife of Robert J. Higgins and37,500137,500 shares owned by a foundation controlled by Robert J. Higgins, and excludes769,762767,761 shares owned by certain other family members of Robert J. Higgins who do not share his residence. Mr. Higgins disclaims beneficial ownership with respect to those shares owned by family members other than his wife. - 2)
- Based on
Schedule 13FForm 13G, filed February14, 200216, 2005, byStephen Feinberg.Morgan Stanley and Van Kampen Asset Management Inc. - 3)
Information as of April 29, 2002, as provided by the holder. 4) - Based on
Schedule 13F,Form 13G, filed February14, 20029, 2005, byCramer Rosenthal McGlynn. 5) Based on Schedule 13F, filed February 12, 2002 by Merrill Lynch and Company.Dimensional Fund Advisors.
Mr. Higgins, who beneficially owns 13,275,15015,342,479 shares of Common Stock as of the record date (approximately 32.6%46.7% of all outstanding shares), has advised the Company that he presently intends to vote all of his shares for the election of the nominees for director named under "Item 1-ELECTION1—ELECTION OF DIRECTORS" and in
favorfor approval of the adoption of proposals (2) and (3).
2
ITEM"Item 2—APPROVAL OF THE LONG TERM INCENTIVE AND SHARE AWARD PLAN."
The Board of Directors currently intends to present forto the meeting the election at the
Annual Meeting threeof two Class II directors, each to hold office (subject to the Company's By-Laws) until the 20052008 Annual Meeting of Shareholders and until his or her respective successor has been elected and qualified and one Class III director to hold office (subject to the Company's By-Laws) until the 2006 Annual Meeting of Shareholders and until his or her respective successor has been elected and qualified. Directors of the Company will be elected by a plurality vote of the outstanding shares of Common Stock present and entitled to vote at the meeting.
If any nominee listed below should become unavailable for any reason, which management does not anticipate, the proxy will be voted for any substitute nominee or nominees who may be selected by the ChairmanNominating and Corporate Governance Committee of the Board prior to or at the meeting or if no substitute is selected prior to or at the meeting, for a motion to reduce the membership of the Board to the number of nominees available. The information concerning the nominees and their security holdings has been furnished by them to the Company.
NOMINEES FOR ELECTION AS DIRECTORS
GEORGE W. DOUGAN, has been a member of the Board of
Nominees for Election as Directors of Banknorth
Group, Inc. since January 1, 1999. From January 1999 to May 2001, Mr. Dougan
served as Vice Chairman of Banknorth Group, Inc. Mr. Dougan was Chief Executive
Officer and a member of the Board of Directors of Evergreen Bancorp Inc. from
March 1994 to December 1998, and Chairman of the Board from May 1994 to
December 1998. Mr. Dougan was the Chairman of the Board and Chief Executive
Officer of the Bank of Boston--Florida from June 1992 to March 1994. Mr. Dougan
was also the Senior Vice President and Director of Retail Banking of The Bank of
Boston Massachusetts from February 1990 to June 1992.
MARTIN
Martin E. HANAKAHanaka has served as Chairman Emeritus of the Board of The Sports Authority, Inc. since June 2004. Mr. Hanaka was the Chairman of the Board of the Sports Authority from November 1999 until June 2004 and aswas its Chief Executive Officer sincefrom September 1998.1998 until August 2003. Mr. Hanaka joined the Sports Authority's Board of Directors in February 1998. From August 1994 until October 1997, Mr. Hanaka served as President and Chief Operating Officer of Staples, Inc. an office supply superstore retailer. Mr. Hanaka's extensive retail career has included serving as Executive Vice President of Marketing and as President and Chief Operating Officer of Lechmere, Inc. from September 1992 through July 1994, and serving in various capacities for 20 years at Sears Roebuck & Co., most recentlyat the end as Vice President in charge of Sears Brand Central. Mr. Hanaka is also a directorDirector of Wil-Mar Industries, Inc. (marketingSports Authority and distributing repair and maintenance
products) and Nature's Heartland (food retailing).
ISAAC KAUFMANBrightstar Corporation, a certified public accountantwireless wholesale distributor.
Isaac Kaufman, a Certified Public Accountant has been Chief Financial Officer and Senior Vice President of AdvanceAdvanced Medical Management Inc., a manager of medical practices and an outpatient surgical center, since September 1998. Mr. Kaufman was Executive Vice President and Chief Financial Officer of Bio Science Contract Production Corporation, a contract manufacturer of biologics and pharmaceutical products, from February 1998 to September 1998. Mr. Kaufman was the Chief Financial Officer of VSI Group, Inc., a provider of contract staffing and management services, from November 1996 to February 1998. Mr. Kaufman serves as directorDirector of Kindred Healthcare, Inc. (operates nursing centers and long-term acute care hospitals).
3
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH NOMINEE
FOR DIRECTOR NAMED ABOVE.
CONTINUING CLASS II DIRECTORS (TERMS EXPIRING IN 2003)
DEAN S. ADLER
Lori J. Schafer has been a principalserved as Vice President of Lubert/Adler Partners, LP, a limited
partnership investing primarily in under-valuedMarketmax, Retail Division of SAS, since October of 2003, when Marketmax was acquired by SAS. Prior to the SAS acquisition, Ms. Schafer served as Marketmax's Chairman, President and opportunistic real estateChief Executive Officer. She has directed Marketmax operations since 1996. Prior to her move into retail consulting and real estate-related ventures, since March 1997. For ten years prior thereto,
Mr. Adler was a principalsoftware development, Ms. Schafer held positions of increasing and co-head of the private equity group of CMS
Companies, which specialized in acquiring operating businesses and real estate
within the private equity market. Mr. Adler was also an instructordiverse responsibility at The Wharton School of the University of Pennsylvania. Mr. Adler serves on the Boards
ofProcter & Gamble Company, including assignments in brand management, sales and management information systems.
Upon election, Ms. Schafer will be appointed a Class III Director with her term expiring in 2006.
Continuing Class III Directors of Electronics Boutique, The Lane Company, US Franchise
Systems, Inc. and Developers Diversified Realty Corporation.
MICHAEL(terms expiring in 2006)
Michael B. SOLOWSolow is currently the Managing Partner of the Chicago office of Kaye Scholer LLP, an international law firm based out of New York City, where he has practiced since January 2001.2001 and is currently a member of the firm's Executive Committee and Co-Chairman of the Corporate Restructuring Practice Group. Prior to joining Kaye Scholer LLP, Mr. Solow was a Partner and Practice Manager for the Financial Services Practice at Hopkins & Sutter, a Chicago, Illinois law firm.
Mr. Solow is also a member of the Board of Directors for ChriskenChristen Residential Trust, Inc. and has previously served on other corporate boards, including Camelot Music, Inc.
CONTINUING CLASS
Edmond Thomas has been Managing Partner for The Evans Thomas Company, LLC and AXIS Capital Fund I, DIRECTORS (TERMS EXPIRING IN 2004)
ROBERTLP since 2000. The Evans Thomas Company and AXIS Capital Fund provide advisory services for retail, catalog and consumer goods companies along with investing in emerging growth retail companies. Prior to joining The Evans Thomas Company, Mr. Thomas was the President and Chief Operating Officer of The Wet Seal, Inc., a publicly held leading junior apparel retailer. He has also served in various positions with several other retailers, including Domain, Inc., Foxmoor Specialty Stores and Child World, Inc. In addition, Mr. Thomas is a Certified Public Accountant.
Continuing Class I Directors (terms expiring in 2007)
Robert J. HIGGINS,Higgins, Chairman of the Board, founded the Company in 1972, and he has participated in its operations since 1973. Mr. Higgins has served as President,Chairman and Chief Executive Officer and a director of the Company for more than the past five years. He is also the Company's principal shareholder. See "PRINCIPAL SHAREHOLDERS."
DR. JOSEPH
Dr. Joseph G. MORONEMorone has been President of Bentley College since August 1997. Previously, Dr. Morone was the Dean of Rensselaer Polytechnic Institute's Lally School of Management and Technology from July 1993 to July 1997. Prior to his appointment as dean, Dr. Morone held the Andersen Consulting Professorship of Management and was Director of the School of Management's Center for Science and Technology Policy. Before joining the School of Management in 1988, Dr. Morone was a senior associate for the Keyworth Company, a consulting firm specializing in technology management and science policy. Dr. Morone also served in the White House office of science and technology policy and spent 7 years at General Electric Company's Corporate Research and Development. Dr. Morone serves on the Boards of Directors of Tufts New England Medical Center, The Massachusetts High Technology Council and Albany International Corp.
4
EQUITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Mark A. Cohen was the Chairman and Chief Executive Officer of Sears Canada Inc. from January 2001 to August 2004. Mr. Cohen joined Sears, Roebuck and Company as Senior Vice President, Merchandising in 1998. From December 1998 until August 1999 he served as Executive Vice President, Marketing before being promoted to Chief Marketing Officer and President, Softlines. Prior to joining Sears, Mr. Cohen was Chairman and CEO of Bradlees Department Stores from 1994 until 1998. Mr. Cohen has also held various positions at other retailers, including Federated Department Stores, Dayton Hudson Corporation, Gap Stores and Lord & Taylor.
Mr. Dougan has advised the Company that he has elected to retire from the Board of Directors on June 8, 2005, the end of his current term.
Equity Ownership of Directors and Executive Officers
The following table sets forth the beneficial ownership of Common Stock as of May 6, 2002,April 22, 2005, by each directorDirector and named executive officer of the Company and all directorsDirectors and executive officers as a group. All shares listed in the table are owned directly by the named individuals unless otherwise indicated therein. The Company believes that the beneficial owners have sole voting and investment power over their shares, except as otherwise stated or as to shares owned by spouses.
| Name | Positions With the Company | Age | Year First Elected as Director/ Officer | Direct Ownership | Shares that may be acquired within 60 days of April 22, 2005 | Total Shares Beneficially Owned | Percent of Class | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Robert J. Higgins | Chairman of the Board, Chief Executive Officer & President | 63 | 1973 | 12,442,479 | (1) | 2,900,000 | 15,342,479 | 46.7 | % | ||||||
| Mark A. Cohen | Director | 56 | 2003 | — | 3,750 | 3,750 | * | ||||||||
| George W. Dougan | Director | 65 | 1984 | 7,143 | (2) | 75,125 | 82,268 | * | |||||||
| Martin E. Hanaka | Director | 56 | 1998 | 9,698 | 32,437 | 42,135 | * | ||||||||
| Isaac Kaufman | Director | 58 | 1991 | 30,283 | 49,625 | 79,908 | * | ||||||||
| Dr. Joseph G. Morone | Director | 52 | 1997 | 7,286 | 10,625 | 17,911 | * | ||||||||
| Michael B. Solow | Director | 46 | 1999 | 9,198 | 26,452 | 35,650 | * | ||||||||
| Edmond Thomas | Director | 51 | 2003 | — | 3,750 | 3,750 | * | ||||||||
| Bruce J. Eisenberg | Executive Vice President—Real Estate | 45 | 1995 | 20,137 | 401,250 | 421,387 | 1.3 | % | |||||||
| Fred L. Fox | Executive Vice President—Merchandising and Marketing | 47 | 2002 | — | 90,000 | 90,000 | * | ||||||||
| John J. Sullivan | Executive Vice President, Chief Financial Officer and Secretary | 52 | 1995 | 100,468 | 281,250 | 381,718 | 1.2 | % | |||||||
| All directors and officers as a group (11 persons) | 12,626,692 | 3,874,264 | 16,500,956 | 50.2 | % |
- *
- Less Than 1%
- (1)
- Includes 50,550 shares owned by the wife of Robert J. Higgins and
37,500137,500 shares owned by a foundation controlled by Robert J. Higgins and excludes769,762767,761 shares owned by certain other family members of Robert J. Higgins who do not share his residence. Mr. Higgins disclaims beneficial ownership with respect to those shares owned by family members other than his wife.BOARD OF DIRECTORS MEETINGS AND ITS COMMITTEES - (2)
- Does not include 30,698 shares held in a trust. Mr. Dougan disclaims beneficial ownership with respect to shares owned by the trust.
Board of Directors Meetings and its Committees
The Board of Directors held 75 meetings during the 20012004 fiscal year. All of the directorsDirectors attended greater than 75% of the aggregate of: (i) the total number of meetings of the boardBoard of directors,Directors, and (ii) the total number of meetings held by all committees of the boardBoard on which such directorDirector served.
The Company has an Audit Committee of the Board of Directors whose members during the 20012004 fiscal year were: Isaac Kaufman (Chairman), Dr. Joseph G. Morone, Michael B. Solow and Joseph G. Morone.Edmond Thomas. These directorsDirectors are, in the opinion of the Board of Directors, "independent" (as defined under the standards of the National Association of
Securities Dealers)Nasdaq Stock Market) of management and free of any relationship that would interfere with their exercise of independent judgement as members of the audit
committee.Audit Committee. The Board of Directors has determined that Isaac Kaufman and Edmond Thomas are both independent and qualified as Audit Committee financial experts as such term is defined under the rules and regulations promulgated by the Securities and Exchange Commission and applicable to this Proxy Statement. The Audit Committee held 46 meetings during the 20012004 fiscal year. The Audit Committee's responsibilities consist of recommending the selection of independent auditors,accountants, reviewing the scope of the audit conducted by such auditors,accountants, as well as the audit itself, and reviewing the Company's audit activities and activities and matters concerning financial reporting, accounting and audit
procedures, related party transactions and policies generally. The Board of Directors has adopted a written charter for the Audit Committee.
The Company has a Compensation Committee of the Board of Directors, consisting solely of independent directors,Directors, whose members during the 20012004 fiscal year were: Martin E. Hanaka (Chairman), Isaac Kaufman andMark A. Cohen, George W. Dougan.Dougan and Isaac Kaufman. The Compensation Committee held 2 meetings during the 5
20012004 fiscal year. The Compensation Committee formulates and gives effect to policies concerning salary, compensation, stock options and other matters concerning employment with the Company. The Board of Directors has adopted a written charter for the Compensation Committee.
The Company has a Nominating and Corporate Governance Committee of the Board of Directors, consisting of independent Directors, whose members during the 2004 fiscal year were: Dr. Joseph G. Morone (Chairman), Mark A. Cohen, George W. Dougan, Martin E. Hanaka, Isaac Kaufman, Michael B. Solow and Edmond Thomas. The Nominating and Corporate Governance Committee held 2 meetings during the 2004 fiscal year. The Nominating Committee develops qualification criteria for Board members; interviews and screens individuals qualified to become Board members in order to make recommendations to the Board and oversees the evaluation of executive management. The Committee seeks to select a Board that is strong in its collective knowledge of and diversity of skills and experience concerning retail operations, accounting and finance, management and leadership, vision and strategy, risk assessment and corporate governance. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee.
The Committee will consider nominations submitted by Shareholders. To recommend a nominee, a Shareholder should write to the Company's Secretary. To be considered by the Committee for nomination and inclusion in the Company's Proxy Statement for its 2006 Annual Meeting of Shareholders, a Shareholder recommendation for a Director must be received by the Company's Secretary no standing nominating committee. Mr. Higgins,later than January 15, 2006. Any recommendation must include (i) the name and address of the candidate, (ii) a brief biographical description, including his or her occupation for at least the last five years, and a statement of the qualifications of the candidate, taking into account the qualification requirements summarized above, and (iii) the candidate's signed consent to be named in the Proxy Statement and to serve as a Director if elected. The Committee may seek additional biographical and background information from any candidate that must be received on a timely basis to be considered by the Committee.
The process followed by the Committee to identify and evaluate candidates includes requests to Board members and others for recommendations, including a search firm or outside consultant, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Committee and the Board. Assuming the appropriate biographical and background material is provided for candidates submitted by Shareholders, the Committee will evaluate those candidates by following substantially the same process, and applying substantially the same criteria, as for candidates submitted by Board members. The Committee did not receive any nominations from Shareholders for the 2005 Annual Meeting.
During 2004, the Board created an ad hoc Concept Advisory Committee whose members during the 2004 fiscal year were: Mark A. Cohen, Martin E. Hanaka, and Edmond Thomas. The Concept Advisory Committee held 4 meetings during the 2004 fiscal year. The Concept Advisory Committee reviews and evaluates different store concepts for the Company within the entertainment industry.
The Board has established a process for Shareholders to communicate with members of the Board. The Chairman of the Nominating and Corporate Governance Committee, with the assistance of the Company's Secretary, will be primarily responsible for monitoring communications from Shareholders and providing copies or summaries of such communications to the other Directors, as he or she considers appropriate. Communications will be forwarded to all Directors if they relate to appropriate
matters and may include suggestions or comments from the Chairman of the Nominating and Corporate Governance Committee. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to personal grievances and matters as to which the Company tends to receive repetitive or duplicative communications. Shareholders who wish to send communications to the Board Chief Executive Officer and principal shareholder, was actively
involved in the recruitment of allmay do so by writing to:
Dr. Joseph G. Morone
Chairman of the current directors.
COMPENSATION OF DIRECTORS
COMPENSATION.Nominating and
Corporate Governance Committee
c/o the Company's Secretary
Trans World Entertainment Corporation
38 Corporate Circle
Albany, New York 12203.
Compensation of Directors
Cash Compensation. Each directorDirector who is not a salaried employee of the Company receives a $25,000 retainer per annum plus a $2,000 attendance fee for each board meetingBoard Meeting attended and a $1,000 attendance fee for each committee meeting attended, except that the compensation for telephone conference meetings is $500$1,000 and $250$500 for committee telephone conference meetings. A committee chairperson receives an additional $5,000 retainer per year and the Audit Committee chairperson earns an additional $2,000 retainer per year.receives a $15,000 annual retainer. The Company may, in its discretion, determine to pay all or a portion of any annual retainer in shares of Common Stock, in lieu of cash and to make other discretionary grants of Common Stock to non-employee directorsDirectors from time to time. The Company currently
pays the annual retainer in the form of stock.
DIRECTOR STOCK OPTION PLAN.
Directors Stock Option Plan. Each outside Director is entitled to participate in the Company's 1990 Stock Option Plan for Non-Employee Directors (the "Directors Stock Option Plan"). Currently, Messrs. Adler,Cohen, Dougan, Hanaka, Kaufman, Morone, Solow and SolowThomas participate in the Director Stock OptionDirectors Plan. A total of 750,000 shares of Common Stock are reserved for issuance pursuant to non-qualified stock options (the "Director Options") issued under such plan, and Director Options covering 557,438376,645 shares of Common Stock have been granted.granted and are outstanding. Stock options issuable under the Director Stock OptionDirectors Plan are granted at an exercise price equal to the fair market value of the Common Stock on the date of grant.
An initial grant of 15,000 Director Options is made to each new director.Director. In addition, Director Options to purchase 2,500on or about May 1 of each year, Directors receive grants of deferred shares of the Company's Common Stock are("Deferred Shares") under the Directors Plan representing $80,000 in market value of Common Stock as of the date of grant. However, the number of Deferred Shares granted annually on May 1 (or, if May 1 is not a Nasdaq National
Market trading day,may be no greater than 15,000. The Deferred Share grants vest on the next succeeding trading day)third anniversary of any yearthe date of grant. Prior to any
eligible director.March 15, 2005, each Director elected to either receive Common Stock upon vesting or defer the receipt of such Common Stock until such person is no longer a Director; provided that Deferred Shares will immediately vest and be distributed upon (1) the death or permanent disability of a Director or (2) certain events amounting to a sale or reorganization of the Company. The Board of Directors is authorized, in its discretion, to grant additional Director Options or Common Stock awards to Director Stock OptionDirectors Plan participants. All Director Options vest ratably over four years. During fiscal 2001,2004, annual grants to outside Directors of 15,000 Director Options62,080 Deferred Shares were made at an exercise
price of $8.95 per share, equalmade.
Retirement Plan. Prior to June 1, 2003 the market value on the date of grant.
RETIREMENT PLAN. The Company providesprovided the Board of Directors with a noncontributory, unfunded retirement plan that payspaid a retired directorDirector an annual retirement benefit equal to 60% of the annual retainer at the time of retirement plus a 3% annual increase through the final payment. Payments beginbegan at age 62 or retirement, whichever iswas later, and continuecontinued for 10 years or the life of the directorDirector and his or her spouse, whichever period is shorter. Partial vesting in the retirement plan beginsbegan after six years of continuous service. Participants becomebecame fully vested after 12 years of continuous service on the board.
RELATED PARTY TRANSACTIONSBoard.
Effective June 1, 2003, new Directors were not covered by the retirement plan. Directors who were not yet vested in their retirement benefits had the present value of benefits already accrued converted to Deferred Shares under the Directors Plan. Directors that were fully or partially vested in their retirement benefits on June 1, 2003 were given a one time election to continue to participate in the retirement program or convert the present value of benefits already accrued to Deferred Shares under the Directors Plan as of June 1, 2003.
Related Party Transactions
The Company leases its 168,000 square foot distribution center/office facility in Albany, New York from Robert J. Higgins, its Chairman, President, Chief Executive Officer and principal shareholder, under three capitalized leases that expire in the year 2015. The original distribution center/office facility was constructed in 1985. A 77,100 square foot distribution center expansion was completed in October 1989 on real property adjoining the existing facility. A 19,100 square foot expansion was completed in September 1998 adjoining the existing facility.
Under the three capitalized leases, dated April 1, 1985, November 1, 1989 and September 1, 1998 (the "Leases"), the Company paid Mr. Higgins an annual rent of $1.7$1.8 million in fiscal 2001.2004. On January 1, 2002,2004, the aggregate rental payment increased in accordance with the biennial increase in the Consumer Price Index, pursuant to the provisions of each lease. EffectiveThe next such increase will be effective January 1, 2004,2006, and occurs every
6
thereafter, the rental payment will increase in accordance with the
biennial increase in the Consumer Price Index, pursuant to the provisions of the
lease.thereafter. None of the leases contains any real property purchase option at the expiration of its term. Under the terms of the Leases, the Company pays all property taxes, insurance and other operating costs with respect to the premises. Mr. Higgins' obligation for principal and interest on his underlying indebtedness relating to the real property is approximately $1.1 million annually.
The Company leases twoone of its retail stores from Mr. Higgins under a long-term leases, one location haslease, with an annual rental of $40,000 and the other has an annual
rental of $35,000.$40,000. Under the terms of the leases,lease, the Company pays property taxes, maintenance and a contingent rental if a specified sales level is achieved. Total additional charges during fiscal 2001 for both locations2004 were $11,000, including rent.$14,500.
The Company regularly utilizes privately-chartered aircraft owned or partially owned by Mr. Higgins. Under an unwritten agreement with Quail Aero Services of Syracuse, Inc., a corporation in which Mr. Higgins is a one-third
shareholder,owns 47.5%, the Company paid $70,000$1,000 for chartered aircraft services in fiscal 2001.2004. The Company also charters an aircraft from Crystal Jet, a corporation wholly ownedwholly-owned by Mr. Higgins. During fiscal 2001,2004, payments to Crystal Jet aggregated $91,000.$10,000. The Company also charters an aircraft from Richmor Aviation, an unaffiliated corporation which leases an aircraft owned by Mr. Higgins. Payments to Richmor Aviation were $289,000$314,000 in 2001.2004. The Company believes that the charter rates and terms are as favorable to the Company as those generally available to it from other commercial charters.
The transactions that were entered into with an "interested director"Director" were approved by a majority of disinterested directorsDirectors of the Board of Directors, either by the Audit Committee or at a meeting of the Board of Directors. The
Board
Mark Higgins, the son of Directors believes that the leases and other provisions are at rates
and on terms that are at least as favorable as those that would have been
available toRobert J. Higgins was employed with the Company from unaffiliated third parties underas the circumstances.
TheDivisional Merchandise Manager—Video and Games. During 2004, Mark Higgins received $202,771 in cash compensation and was granted options to purchase 10,000 shares of Trans World stock. John Cave, the son-in-law of Robert J. Higgins was employed with the Company as an Operations Manager in the Albany Distribution Center. Mr. Cave received $60,186 in cash compensation and was granted options to purchase 2,000 shares of Trans World stock.
Prior to July 30, 2002, the Company made loans aggregating $442,717 to John J. Sullivan, the Company's Executive Vice President and Chief Financial Officer, in connection with income taxes due on restricted stock. The full principal amountAs of January 29, 2005 the loan was outstanding onfully satisfied.
Prior to July 30, 2002, the date hereof. The loan bears interest at a rate of 5.88%
per annum.
The Company made a loan in the amount of $258,405 to Bruce J. Eisenberg, the Company's Executive Vice President--RealPresident—Real Estate, in connection with income taxes due on restricted stock. The full principal amountAs of January 29, 2005 the loan was outstanding
on the date hereof. The loan bears interest at a rate of 5.88% per annum.fully satisfied.
Mr. Solow, a member of the Company's Board of Directors, is a partner of the law firm Kaye Scholer L.L.P.,LLP, which rendered legal services to the Company in 2001 and is expected2004 for which the Company incurred
fees of $115,000. Kaye Scholer concluded its representation of the Company in 2004, prior to provide legal servicesthe Company's 2004 Annual Shareholders meeting held in 2002.
EMPLOYMENT AGREEMENTSJune of 2004.
Employment Agreements
As founder and Chief Executive Officer of the Company, Robert J. Higgins has been instrumental in the operations of the Company. During fiscal 2001,2004, Mr. Higgins was employed as Chief Executive Officer and President of the Company pursuant to an employment agreement that commenced on May 3, 1998 and continuesis in effect until April 30, 2004,2008, unless earlier terminated pursuant to its terms. Pursuant to its terms, Mr. Higgins earns a minimum annual salary of $1,030,000,$1,200,000, with annual increases based on performance, as determined by the Compensation Committee, provided however that such increase shall not be less than the percentage amount, if any, by which the Consumer Price Index for All Urban Consumers (the "CPI") for all items for New York, New York as of April exceeds the CPI for the previous April. Effective May 1, 2005, Mr. Higgins' annual salary will be adjusted based on the year over year percentage increase in the CPI for the month of April. Mr. Higgins is reimbursed for two club memberships and is entitled to payment of or reimbursement for life insurance premiums of an amount which has an annual net after tax cost to the Company of up to $150,000 per year on insurance policies for the benefit of persons designated by Mr. Higgins. In addition, the Company must provide Mr. Higgins with an automobile and Mr. Higgins is eligible to participate in the Company's executive bonus plan, health and accident insurance plans, stock option plans and in other fringe benefit programs adopted by the Company for the benefit of its executive employees. For the fiscal year ended February 2, 2002,January 29, 2005, Mr. Higgins did not receive anyreceived $900,000 in incentive compensation under the employment agreement.
7
In the event of a change in control of the Company, Mr. Higgins may elect to serve as a consultant to the Company at his then current compensation level for the remainder of the term of the Employment Agreement or elect to receive 2.99 times his annual compensation in the most recently completed fiscal year. The employment agreement provides for no further compensation to Mr. Higgins if he is terminated for cause, as defined therein.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION AND PURPOSE OF THE COMPENSATION COMMITTEE.
Compensation Committee Report on Executive Compensation
Compensation and Purpose of the Compensation Committee. The Company's Compensation Committee (the "Committee") was comprised during fiscal 20012004 of three non-employee directorsDirectors of the Company. Mr. Cohen was added to the Compensation Committee upon his appointment to the Board. It is the Company's policy to constitute the Committee with directorsDirectors that qualify as outside directorsDirectors under Section 162(m) of the Internal Revenue Code.
The Committee's purpose is to hire, develop and retain the highest quality managers possible. It is principally responsible for establishing and administering the executive compensation program of the Company. These duties include approving salary increases for the Company's key executives and administering both the annual incentive plan and stock option plans. COMPENSATION PHILOSOPHY AND OVERALL OBJECTIVES.Our decisions concerning the specific compensation elements and total compensation paid or awarded to senior executive officers, including the chief executive officer were made after consultation with an executive compensation expert. We also considered the balance between incentives for long-term and short-term performance, compensation paid to the executive's peers and the total compensation potentially payable to, and all of the benefits accruing to, the executive, including (1) supplemental executive pension plan benefits, (2) accumulated potential value of prior equity-based grants, and (3) the amount and type of perquisites. Specific decisions involving total senior executive officer compensation were based upon the Committee's judgment about the individual executive's performance and potential future contributions—and about whether each particular payment or award would provide an appropriate incentive and reward for performance that sustains and enhances long-term shareowner value.
Compensation Philosophy and Overall Objectives. The components of the executive compensation program are salary, annual incentive awards and stock options. This program is designed to: (1) attract and retain competent people with competitive salaries; (2) provide incentives for increased profitability; and (3) align the long-term interests of management with the interests of shareholders by encouraging executive ownership of Common Stock of the Company.
SALARY AND ANNUAL INCENTIVE COMPENSATION
SALARIES.Stock.
Salary and Annual Incentive Compensation
Salaries. The Committee believes that it is necessary to pay salaries that are competitive within the industry and geographic region in order to attract the types of executives needed to manage the business. Annual salary recommendations for the Company's executive officers (other than the Chief Executive Officer) are made to the Committee by the Chief Executive Officer. The Committee reviews and then approves, with any modifications it deems appropriate, such recommendations. Factors such as increased management responsibility and achievement of operational objectives are considered, but not formally weighted, in determining an increase. The Committee believes that it must keep the base pay component competitive to continue to attract competent management.
ANNUAL PERFORMANCE INCENTIVES.
Annual Performance Incentives. Key executives, including the named executive officers, were eligible for annual incentive (bonus) awards based on the performance of the Company against predetermined targets.
For 2001,2004, the Committee established as the principal goal a targeted level of operating income before bonuses would be paid to executive officers. Each named executive officer was eligible to earn from 17.5% to 150% of his salary in incentive payments if the targets were achieved by the Company. Below a certain target level no incentives were to be paid. Because the Company's operating income did not meetexceeded predetermined targets, noneeach of the named executives received annual incentive payments as outlined in the "SUMMARY COMPENSATION TABLE."
LONG-TERM INCENTIVES
Long-Term Incentives
The Committee uses a broad-based stock optionequity plan, with over 500 participants, as the principal long-term incentive for executives. The stock
optionequity plan is designed to encourage executive officers to become shareholders and to achieve meaningful increases in shareholder value. The Committee normally grants stock options to executive officers annually. The level of stock option grants is determined using a matrix that considers the executive's position, salary level, and performance as measured by the individual's performance rating.
8
The Company also has a restricted stock plan which the Committee may use to grant awards of Common Stock to officers and other key employees of the Company. The Committee believes that the Company's long-term goals are best achieved through long-term stock ownership. The level of awards is granted at the discretion of the Committee.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Chief Executive Officer's Compensation
The Chief Executive Officer was compensated in fiscal 20012004 pursuant to an employment agreement, approved by the Committee, which will be in effect through April 30, 2004. Mr. Higgins'2008. The Chief Executive Officer's base annual compensation, pursuant to the agreement, is $1,030,000$1,200,000 with annual increases based on performance, as determined by the compensation committee.Committee, provided however that such increase shall not be less than the percentage amount, if any, by which the Consumer Price Index for All Urban Consumers (the "CPI") for all items for New York, New York as of April exceeds the CPI for the previous April. The employment agreement provides for participation in the management bonus plan at a level of 0% to a maximum of 150% of his salary if certain targets are achieved by the Company. DEDUCTIBILITY OFBecause the Company's operating income exceeded predetermined targets, the Chief Executive Officer received an annual incentive payment as outlined in the "SUMMARY COMPENSATION EXPENSESTABLE."
Deductibility of Compensation Expenses
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a public corporation for annual compensation over $1 million for its chief
executive officerChief Executive Officer or any of its four other highest paid executive officers. Qualifying performance based compensation will not be subject to the deduction limit if certain requirements are met. The Committee believes that it is necessary to pay salaries that are competitive within the industry and geographic region in order to continue to attract the types of executives needed to manage the business. Executive compensation is structured to avoid limitations on deductibility where this result can be achieved consistent with the Company's compensation goals.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation Committee Interlocks and Insider Participation
There were no Compensation Committeecompensation committee interlocks during fiscal 2001.2004. None of thesethe Committee's members was an officer or employee of the Company, a former officer of the Company, or a party to any relationship requiring disclosure under Item 404 of Regulation S-K underS-K.
Compensation Committee of the Securities Exchange ActBoard of 1934, as amended.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
MARTINDirectors
Martin E. HANAKA, CHAIRMAN
GEORGEHanaka, Chairman
Mark A. Cohen
George W. DOUGAN
ISAAC KAUFMAN
- ------------------------
Dougan
Isaac Kaufman
Notwithstanding anything to the contrary set forth in the Company's previous filings under the Securities Act of 1933 or under the Securities Exchange Act of 1934 that might incorporate future filings, including this Proxy Statement, in whole or in part, the preceding report of the Compensation Committee and the performance graph below shall not be incorporated by reference to such filings.
EXECUTIVE OFFICERS AND COMPENSATION
Executive Officers and Compensation
The Company's executive officers (other than Mr. Higgins whose biographical information is included under "Election of Directors" herein) are identified below. At year end, threefour officers met the definition of "executive officer" under applicable regulations for the fiscal year 2001,2004, including the Chief Executive Officer. Executive officers of the Company currently hold the same respective positions with Record Town, Inc., the Company's wholly-owned subsidiary through which all retail operations are conducted.
JOHN
Bruce J. SULLIVAN has been Executive Vice President, Treasurer and Chief
Financial Officer of the Company since May 2001. Mr. Sullivan joined the Company
in June 1991 as the Corporate Controller and was named Vice President of Finance
and Treasurer in June of 1994 and Senior Vice President of Finance, Chief
Financial Officer and Treasurer in May 1995. Prior to joining the Company,
Mr. Sullivan was Vice President and Controller for Ames Department Stores, a
discount department store chain.
9
BRUCE J. EISENBERGEisenbergseniorSenior Vice President of Real Estate in May 1995. Prior to joining the Company, Mr. Eisenberg was responsible for leasing, finance and construction of new regional mall development at The Pyramid Companies.
Fred L. Fox has been Executive Vice President of Merchandising and Marketing at the Company since February 2002. Prior to joining Trans World, Mr. Fox held several key executive level positions within OfficeMax and Montgomery Ward as well as various management positions within Circuit City Incorporated, Target Stores and Fischer Scientific Company, LLC.
John J. Sullivan has been Executive Vice President, Secretary and Chief Financial Officer of the Company since May 2002. Mr. Sullivan joined the Company in June 1991 as the Corporate Controller and was named Vice President of Finance and Treasurer in June of 1994, Senior Vice President of Finance, Treasurer and Chief Financial Officer in May 1995 and Executive Vice President, Treasurer and Chief Financial Officer in May 2001. Prior to joining the Company, Mr. Sullivan was Vice President and Controller for Ames Department Stores, a discount department store chain.
The Summary Compensation Tablesummary compensation table sets forth the compensation paid by the Company and its subsidiaries for services rendered in all capacities during the last three fiscal years to the Chief Executive Officer and each of the three executive officers of the Company whose cash compensation for that year exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------
----------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) SARS(#) ($)
- --------------------------- -------- --------- -------- ------------ ---------- ---------- ------------
Robert J. Higgins................ 2001 1,030,000 -- 260,877(1) 196,900 500,000 5,274(3)
Chairman and Chief 2000 956,731 -- 230,335(1) -- 500,000 7,096(3)
Executive Officer 1999 712,500 425,000 91,254(1) -- 200,000 5,625(3)
Bruce J. Eisenberg............... 2001 287,495 -- --(2) 89,500 50,000 5,581(3)
Executive Vice President-- 2000 251,058 -- --(2) -- 50,000 5,620(3)
Real Estate 1999 227,500 50,000 --(2) -- 75,000 5,414(3)
John J. Sullivan................. 2001 287,495 -- --(2) 89,500 50,000 5,581(3)
Executive Vice President and 2000 251,058 -- --(2) -- 50,000 5,503(3)
Chief Financial Officer 1999 227,500 41,125 --(2) -- 75,000 9,234(3)
- ------------------------
| | | | | | Long-Term Compensation Awards | | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Annual Compensation | | |||||||||||||
| | | Restricted Stock Award(s) ($) | Securities Underlying Options/ SARs (#) | | ||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Other Annual Compensation ($) | All Other Compensation ($) | |||||||||||
| Robert J. Higgins | 2004 | 1,200,000 | 900,000 | 171,201 | (1) | — | 550,000 | 6,681 | (4) | |||||||
| Chairman and Chief | 2003 | 1,116,000 | 1,674,000 | 160,479 | (1) | — | 1,000,000 | 6,323 | (4) | |||||||
| Executive Officer | 2002 | 1,066,000 | — | 201,974 | (1) | — | 550,000 | 6,670 | (4) | |||||||
Bruce J. Eisenberg | 2004 | 327,500 | 132,000 | — | (2) | — | 60,000 | 12,767 | (4) | |||||||
| Executive Vice President— | 2003 | 317,625 | 320,000 | — | (2) | — | 150,000 | 6,061 | (4) | |||||||
| Real Estate | 2002 | 307,875 | — | — | (2) | — | 60,000 | 5,457 | (4) | |||||||
Fred L. Fox | 2004 | 317,500 | 128,000 | — | (2) | — | 60,000 | 923 | (4) | |||||||
| Executive Vice President— | 2003 | 307,500 | 310,000 | 75,096 | (3) | — | 150,000 | — | ||||||||
| Merchandising and Marketing | 2002 | 280,385 | — | — | (2) | — | 150,000 | — | ||||||||
John J. Sullivan | 2004 | 332,577 | 132,000 | — | (2) | — | 60,000 | 12,767 | (4) | |||||||
| Executive Vice President, Secretary | 2003 | 321,207 | 320,000 | — | (2) | — | 150,000 | 6,283 | (4) | |||||||
| and Chief Financial Officer | 2002 | 307,875 | — | — | (2) | — | 60,000 | 5,815 | (4) | |||||||
- (1)
"Other - "Other Annual Compensation" in fiscal
2001, 20002004, 2003 and19992002 for Mr. Higgins includes$237,837, $212,658,$150,000, $150,000, and$82,117,$154,755, respectively, in payments for, or reimbursement of, life insurance premiums made on behalf of Mr. Higgins or his beneficiaries, pursuant to his employment agreement.It also includes a maximum dollar value of premiums paid by the Company with respect to split dollar life insurance policies that the Company owns on the lives of Mr. Higgins and his wife. The Company will recoup most or all of such premiums upon maturity of the policies, but the maximum potential value is calculated in line with current SEC instructions as if the premiums were advanced without interest until the time that the Company expects to recover the premium. - (2)
"Other - "Other Annual Compensation" for the named executive was less than $50,000 and also less than 10% of the total annual salary and bonus reported.
- (3)
"All - "Other Annual Compensation" for the named executive was for relocation expenses.
- (4)
- "All Other Compensation" for the named executive consists of employer matching contributions for the 401(k) Savings Plan.
STOCK OPTION PLANS
Stock Option Plans
The Company has fivesix employee stock option plans with an aggregate of 10,800,00014,800,000 shares (collectively referred to as the "Stock Option Plan"). Stock Optionsoptions are exercisable annually in 4 equal installments, commencing on the first anniversary of the date of the grant. The stock options have a term of ten years. All options granted under the Stock Option Plan may become immediately exercisable upon the occurrence of certain business combinations. The Compensation Committee of the Board of Directors may accelerate or extend the term of any options subject to such terms and conditions as the Compensation Committee deems appropriate. The option exercise price was set at the fair market value (last reported sale price) on the date of grant. The following tables set forth, as to each of the 10
named executive officers,Named Executive Officers, certain information with respect to all options granted or exercised for the fiscal year ended February 2, 2002,January 29, 2005, under the Stock Option Plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of stock options made during the fiscal year ended February 2, 2002,January 29, 2005, to each of the Named Executive Officers.
| | Individual Grants | | | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(1) | ||||||||||||||
| | Number of Securities Underlying Options Granted (#) | Percent of Total Options Granted to Employees in Fiscal Year | | | |||||||||||
| Name | Exercise or Base Price Per Share | Expiration Date | |||||||||||||
| 5% | 10% | ||||||||||||||
| Robert J. Higgins | 550,000 | 42.3 | % | $ | 10.31 | 5/1/2014 | $ | 5,331,054 | $ | 11,847,637 | |||||
| Bruce J. Eisenberg | 60,000 | 4.6 | % | $ | 10.31 | 5/1/2014 | 581,570 | 1,292,469 | |||||||
| Fred L. Fox | 60,000 | 4.6 | % | $ | 10.31 | 5/1/2014 | 581,570 | 1,292,469 | |||||||
| John J. Sullivan | 60,000 | 4.6 | % | $ | 10.31 | 5/1/2014 | 581,570 | 1,292,469 | |||||||
- (1)
- These amounts are based on assumed appreciation rates of 5% and 10% as prescribed by the Securities and Exchange Commission rules, and are not intended to forecast possible future appreciation, if any, of the Company's stock price. The Company's stock price was
$7.83$12.28 atFebruary 2, 2002,January 29, 2005, the fiscal year end.
On May 1, 2003, stock options representing 1,000,000 shares of Common Stock were granted to Mr. Higgins subject to the following vesting arrangement: options representing 500,000 shares will vest over a 4-year period and options representing 500,000 shares will vest pursuant to a 5-year cliff vesting arrangement with a performance accelerator clause. The performance acceleration will apply at such time as Mr. Higgins recommends, and the Board of Directors approves, a successor Chief Executive Officer for Trans World Entertainment Corporation. If a successor Chief Executive Officer is hired before the 5-year cliff vesting is satisfied, the 500,000 shares vest in full.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning each exercise of stock options made during the fiscal year ended February 2, 2002,January 29, 2005, by each of the named
executive officersNamed Executive Officers of the Company, and the value of unexercised stock options held by such person as of February 2, 2002.
| | | | Number of Securities Underlying Unexercised Options at Fiscal Year End (#) | Value of Unexercised In-the-Money Options at Fiscal Year End ($) | |||||
|---|---|---|---|---|---|---|---|---|---|
| Name | Shares Acquired on Exercise (#) | Value Realized ($) | Exercisable/ Unexercisable | Exercisable/ Unexercisable(1) | |||||
| Robert J. Higgins | — | — | 1,737,500/1,862,500 | $ | 5,192,250/$10,353,750 | ||||
| Bruce J. Eisenberg | 78,000 | 742,030 | 353,750/263,750 | 1,867,438/1,522,113 | |||||
| Fred L. Fox | — | — | 75,000/285,000 | 458,500/1,693,700 | |||||
| John J. Sullivan | 195,000 | 1,879,857 | 263,750/263,750 | 904,738/1,522,113 | |||||
- (1)
- Calculated on the basis of the fair market value of the underlying securities as of
February 2, 2002January 29, 2005, minus the exercise price.11
Supplemental Executive Retirement Plan
The Company maintains a non-qualified Supplemental Executive Retirement Plan ("SERP") for certain executive officers of the Company. The SERP, which is unfunded, provides eligible executives defined pension benefits that supplement benefits under other retirement arrangements. The annual benefit amount is equal to 50% of the average of the participant's base compensation for the five years prior to retirement plus the average of the three largest bonus payments for the last five years prior to retirement, to the extent vested. The following table illustrates the total combined estimated annual benefits payable under the Supplemental Executive Retirement Plan:
| | Years of Service(1) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Remuneration(2) | ||||||||||
| 15 | 20 | 25 | 30 | 35 | ||||||
| 125,000 | 21,875 | 46,875 | 46,875 | 46,875 | 46,875 | |||||
| 150,000 | 26,250 | 56,250 | 56,250 | 56,250 | 56,250 | |||||
| 175,000 | 30,625 | 65,625 | 65,625 | 65,625 | 65,625 | |||||
| 200,000 | 35,000 | 75,000 | 75,000 | 75,000 | 75,000 | |||||
| 225,000 | 39,375 | 84,375 | 84,375 | 84,375 | 84,375 | |||||
| 250,000 | 43,750 | 93,750 | 93,750 | 93,750 | 93,750 | |||||
| 300,000 | 52,500 | 112,500 | 112,500 | 112,500 | 112,500 | |||||
| 400,000 | 70,000 | 150,000 | 150,000 | 150,000 | 150,000 | |||||
| 450,000 | 78,750 | 168,750 | 168,750 | 168,750 | 168,750 | |||||
| 500,000 | 87,500 | 187,500 | 187,500 | 187,500 | 187,500 | |||||
- (1)
- For a participant to vest 100%, they must have at least 20 years of service and work with the Company until age 65.
- (2)
- The compensation levels above are based on the average salary, as provided under the title "Salary" in the Summary Compensation table, for the last five years of employment. If the participant works until age 65, the benefit will be adjusted to include the average of the three largest bonus payouts during the last five years of employment.
Currently, Robert J. Higgins is a participant in this plan and his salary differs from those used in the compensation table. At his current salary, $1,200,000, Mr. Higgins would receive a benefit of $600,000.
The following is a table of current participants and their years of credited service:
| Participant | Years of Service | |
|---|---|---|
| Robert J. Higgins | 32 | |
| Mitch Davis | 4 | |
| Bruce J. Eisenberg | 11 | |
| Fred Fox | 3 | |
| John J. Sullivan | 13 |
The benefits above are not to subject to any deductions or offset amounts.
The following line graph reflects a comparison of the cumulative total return of the Company's Common Stock from January 31, 19972000 through January 31,
200229, 2005 with the Nasdaq Index (U.S. Stocks) and with the Nasdaq National Market Retail Trade Stocks index. Because only one of the Company's leading competitors has been an independent publicly traded company over the period, the Company has elected to compare shareholder returns with the published index of retail companies compiled by NASDAQ. All values assume a $100 investment on January 31, 1997,2000, and that all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
| | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Trans World Entertainment Corporation | 100 | 101 | 86 | 34 | 81 | 136 | ||||||
| NASDAQ (U.S.) | 100 | 70 | 49 | 34 | 53 | 53 | ||||||
| NASDAQ Retail Trade Stocks | 100 | 78 | 91 | 73 | 108 | 130 |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 generally requires the Company's directors,Directors, executive officers and persons who own more than ten percent of the registered class of the Company's equity securities to file reports of beneficial ownership and changes in beneficial ownership with the Securities and Exchange Commission. Based solely upon its review of the copies of such reports received by it, or upon written representations obtained from certain reporting persons, the Company believes that all Section 16(a) filing requirements applicable to its officers, directors,Directors, and greater-than-ten-percentgreater than ten percent stockholders were complied with.
12
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board has reviewed and discussed the Company's audited financial statements with the management of the Company. The Audit Committee has discussed with KPMG LLP, the Company's independent auditors,accountants, the matters required to be discussed by Statement on Auditing Standards 61. The Audit Committee also has received the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees) and has discussed with KPMG LLP the independence of such independent accounting firm. The Committee has also considered whether the independent auditors'accountants' provision of information technology and other non-audit services to the Company is compatible with the auditors'accountants' independence. Based on its review and discussions referred to in the preceding paragraph,above, the Audit Committee recommended to the Board that the audited financial statements for the fiscal year ended February 2, 2002January 29, 2005 be included in the Company's Annual Report on Form 10-K for the Company's fiscal year ended February 2, 2002.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
ISAAC KAUFMAN (CHAIRMAN)
MICHAEL SOLOW
JOSEPH MORONE
January 29, 2005.
Audit Committee of the Board of Directors
Isaac Kaufman (Chairman)
Michael B. Solow
Dr. Joseph G. Morone
Edmond Thomas
OTHER MATTERS
OTHER ITEMS.
Other Items. Management knows of no other items or matters that are expected to be presented for consideration at the meeting. If other matters properly come before the meeting, however, the persons named in the accompanying proxy intend to vote thereon in their discretion.
PROXY SOLICITATION.
Proxy Solicitation. The Company will bear the cost of the meeting and the cost of soliciting proxies, including the cost of mailing the proxy materials. In addition to solicitation by mail, directors,Directors, officers, and regular employees of the Company (none of whom will be specifically compensated for such services) may solicit proxies by telephone or otherwise. Arrangements will be made with brokerage houses and other custodians, nominees, and fiduciaries to forward proxies and proxy materials to their principals, and the Company will reimburse them for their ordinary and necessary expenses.
INDEPENDENT AUDITORS.
Independent Accountants. The Board of Directors currently intends to select KPMG LLP as independent auditorsaccountants for the Company for the fiscal year ending February 1, 2003.January 28, 2006. KPMG LLP has acted as auditorsaccountants for the Company since 1994.1994, when it purchased the Albany practice of Ernst & Young, the Company's accountants since 1985. Representatives of KPMG LLP will be present at the Annual Meeting of Shareholders and available to make statements to and respond to appropriate questions of shareholders.
The appointment of independent accountants is approved annually by the Board of Directors. The decision of the Board is based on the recommendation of the Audit Committee, which reviews and approves in advance the audit scope, the types of nonauditnon-audit services, and the estimated fees for the coming year. The committeeAudit Committee also reviews and approves nonauditnon-audit services to ensure that they will not impair the independence of the accountants.
Before making its recommendation to the Board for appointment of KPMG LLP, the audit committeeAudit Committee carefully considered that firm's qualifications as independent accountants for the Company. This included a review of its performance in prior years, as well as its reputation for integrity and competence in the fields of accounting and auditing. The committeeAudit Committee has expressed its satisfaction with KPMG LLP in all of these respects. The Audit Committee's review included inquiry concerning any litigation involving KPMG LLP and any proceedings by the Securities and Exchange Commission (the "SEC") against the firm. In this respect, the committeeAudit Committee has concluded that the ability of KPMG LLP to perform services for the Company is in no way adversely affected by any such investigation or litigation. 13
AUDIT FEES.The following is a description of the fees billed to the Company by KPMG LLP for fiscal years 2004 and 2003.
Audit Fees. Audit fees include fees paid by the Company to KPMG LLP in connection with the annual audit of the Company's consolidated financial statements and KPMG LLP's review of the Company's interim financial statements. Audit fees also include fees for services performed by KPMG LLP that are closely related to the audit and in many cases could only be provided by independent accountants. Such services include comfort letters and consents related to SEC registration statements and certain reports relating to the Company's regulatory filings. The aggregate fees billed for professional services rendered
forto the audit of the Company's annual financial statement for the fiscal year
ended February 2, 2002, and for the reviews of the financial statements included
in the Company's Quarterly Reports on Form 10-Q for that fiscal year were
$252,720.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. KPMG LLP did
not render professional services relating to financial information system design
and implementation for the fiscal year ended February 2, 2002.
ALL OTHER FEES. The aggregate fees billedCompany by KPMG LLP for audit services rendered to the Company other thanand its subsidiaries for fiscal years 2004 and 2003 totaled $850,000 and $281,578, respectively. The increase in 2004 fees was primarily related to services in connection with Section 404 of the Sarbanes-Oxley Act of 2002.
Audit Related Fees. Audit related services described above under "Audit Fees"include due diligence and audit services related to employee benefit plan audits and certain attest services. The aggregate fees billed to the Company by KPMG LLP for audit related services rendered to the Company and its subsidiaries for fiscal years 2004 and 2003 totaled $16,000 and $10,000, respectively.
Tax fees. Tax fees include corporate tax compliance and counsel and advisory services. The aggregate fees billed to the Company by KPMG LLP for tax related services rendered to the Company and its subsidiaries for fiscal years 2004 and 2003 totaled $263,000 and $127,689, respectively. Deloitte and Touche LLP will be the Company's primary tax advisor in 2005.
Each year, ended February 2, 2002 were $338,088.
FINANCIAL STATEMENTS.the Company reviews its existing practices regarding the use of its independent accountants to provide non-audit and consulting services, to ensure compliance with recent SEC proposals. The Company has a policy which provides that the Company's independent accountants may provide certain non-audit services which do not impair the accountants' independence. In that regard, the Audit Committee must pre-approve all audit services provided to the Company, as well as non-audit services provided by the Company's independent accountants. This policy is administered by the Company's senior financial management, which reports throughout the year to the Audit Committee.
Financial Statements. The Company's 20012004 Annual Report to Shareholders (which does not form a part of the proxy solicitation material), including financial statements for the fiscal year ended February 2, 2002January 29, 2005 is being sent concurrently to shareholders. If you have not received or had access to the 20012004 Annual Report to Shareholders, please write the Company to attention of:you may request a copy by writing to: Trans World Entertainment, Attention: Treasurer, 38 Corporate Circle, Albany, New YorkNY 12203, and a copy will be sent to you free of charge.
ITEM
Item 2. APPROVAL OF 2002 STOCK OPTIONTHE 2005 LONG TERM INCENTIVE AND SHARE AWARD PLAN
INTRODUCTION
The Board of Directors is seekinghas adopted the 2005 Long Term Incentive and Share Award Plan (the "Plan"), subject to shareholder approvalapproval. We now ask the shareholders to approve the adoption of the 2002Plan. The following summary of the Plan is qualified in its entirety by reference to the Plan, which is attached as Appendix A to this Proxy Statement.
General. The Plan is intended to provide incentives to attract, retain and motivate employees, consultants and Directors and to provide for competitive compensation opportunities, to encourage long term service, to recognize individual contributions and reward achievement of performance goals, and to promote the creation of long term value for stockholders by aligning the interests of such persons with those of stockholders. The Plan will provide for the grant to eligible employees, consultants and Directors of stock options, share appreciation rights ("SARs"), restricted shares, restricted share units, performance shares, performance units, dividend equivalents, and other share-based awards (the "Awards"). An aggregate of 5,000,000 shares of Common Stock Optionhave been reserved for issuance under the Plan. In addition, during a calendar year (i) the maximum number of shares with respect to which options and SARs may be granted to a participant under the Plan (the "2002 Plan"),will be 1,000,000 shares, and (ii) the maximum number of shares which will succeedmay be granted to a participant under the existing stock option
plan. The new plan was draftedPlan with respect to comply with the regulations issuedAwards intended to qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") (other than options and SARs) will be 200,000 shares. These share amounts are subject to ensure the
tax deductibility of compensation paid.
The purpose of the Company's stock option programs is to provide a flexible
mechanism to permit employees to obtain significant equity ownershipanti-dilution adjustments in the Company, giving them a permanent stakeevent of certain changes in the Company's growth and success, and
encouraging the continuation of their involvement with the Company. The
Compensation Committee has recommendedcapital structure, as described below. Shares issued pursuant to the BoardPlan will be authorized but unissued shares.
The Company currently awards stock options and restricted shares to associates through the 1990 Restricted Stock Plan, 1998 Stock Option Plan, the 1999 Stock Option Plan and the 2002 Stock Option Plan (the "Current Plans"). As of Directors that a stock
option program shouldMay 2, 2005, the Company has an aggregate of approximately 1,150,000 shares remaining for future awards under the Current Plans.No further awards will be continued. On March 15, 2002,made pursuant to the Board of Directors
adopted, subject toCurrent Plans upon shareholder approval of the 2002Plan.
Eligibility and Administration. Directors, Officers and other employees of, and consultants to, the Company and its subsidiaries and affiliates and Directors of the Company will be eligible to be granted Awards under the Plan. The following summary describes the principal features of the 2002 Plan and
compares the terms of the 2002 Plan to those of the 1999 Plan. This summary is
qualified in its entirety by reference to specific provisions of the 2002 Plan
set forth in Annex A.
THE 2002 PLAN
COMMITTEE. The 2002 Plan will be administered by the Compensation Committee or such other Board committee appointed(or the entire Board) as may be designated by the Board of Directors, consisting(the "Committee"). Unless otherwise determined by the Board, the Committee will consist of two or more directors. Each membermembers of the Committee will be a "non-employee director" as
defined inBoard who are nonemployee Directors within the meaning of Rule 16b-3 promulgated underof the Securities Exchange Act of 1934 as
amended (the "Exchange Act"), and an "outside director" as defined in
regulations issued underDirectors" within the meaning of Section 162(m) of the Internal Revenue CodeCode. The Committee will determine which eligible employees, consultants and Directors receive Awards, the types of 1986, as
amended.
ELIGIBILITY. Executive officers, managementAwards to be received and other employees (including
officersthe terms and employees who may be directors)conditions thereof. The Committee will have authority to waive conditions relating to an Award or accelerate vesting of the Company and of any
subsidiary shall beAwards. Approximately 8,000 persons are currently eligible to participate in the 2002 Plan. Selection of
employees eligiblePlan, but awards are generally limited to participateapproximately 500 upper level associates.
Awards. Incentive stock options ("ISOs") intended to qualify for special tax treatment in accordance with the 2002 Plan is within the discretion of
the Committee. It is expected that the 2002 Plan will be administered in a
manner similar to the 1994, 1998Code and 1999 Plans, in which approximately 600
employees currently participate.
COMMON STOCK ISSUABLE UPON EXERCISE. Under the 2002 Plan, up to 4,000,000
shares of the Company's Common Stock may be optioned or granted to eligible
employees, and no more than 750,000nonqualified stock options not intended to qualify for special tax treatment under the Code may be granted to any one
employee during any calendar year during the term of the plan. Shares of the
Company's Common Stock that are optioned or awarded under the 2002 Plan may be
either treasury shares or authorized but unissued shares. Shares reserved for issuance pursuant
14
to expired or terminated options under the 2002 Plan will be made available for
future option grants under the 2002 Plan.
The 2002 Plan provides for appropriate adjustments in the aggregatesuch number of shares of Common Stock subjectas the Committee determines. The Committee will be authorized to such plan and inset the number of sharesterms relating to an option, including exercise price and the price per share, or either,time and method of outstanding options in the case of changes in
the capital stock of the Company resulting from any stock dividend, stock split,
reverse split, subdivision or combination of shares resulting in an increase or
decrease of those outstanding shares of Common Stock. If the Company is merged
or consolidated with another corporation, or if substantially all of the
property, stock or assets of the Company are to be acquired by another
corporation, or if a separation, reorganization, or liquidation of the Company
occurs, then the Board of Directors shall either (i) make appropriate provisions
for the protection of any outstanding options by the substitution on an
equitable basis of cash or comparable stock or stock options or (ii) make a cash
payment equal to the difference betweenexercise. However, the exercise price of all vested options and the fair market value of the Common Stock on the date of such transaction,
as determined by the highest sales price of the Common Stock quoted by the
exchange on which it is traded.
GRANTS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. Under the 2002 Plan,
the Committee may grant to eligible employees either non-qualified or incentive
stock options, or both, to purchase shares of the Company's Common Stock. The
Committee may also provide that options maywill not be exercised in whole or in part
for any period or periods of time. The number of shares covered by incentive
stock options which may be first exercised by an optionee in any year cannot
have an aggregate fair market value in excess of $100,000, measured at the date
of grant. All options shall expire not more than ten years from the date of
grant. The Committee may provide that in the event the employment of an employee
is terminated, the right to exercise options held under the 2002 Plan may
continue through its original expiration date or for such shorter period of time
after such event as the Committee may determine appropriate. Unless otherwise
determined for a non-qualified stock option by the Committee and set forth in a
written option agreement, no Option shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution and during
the lifetime of a recipient, Options shall be exercisable only by the optionee.
The price at which shares of Common Stock may be purchased pursuant to stock
options granted by the Committee will be determined by the Committee, but in no
event will such price be less than the fair market value of the shares at the
time that the option is granted. Generally, each stock option will become
exercisable in increments of 25% of the total number of shares subject to option
on the one year anniversary of the date of grant, and annually thereafter. The
Committee may, in its discretion, provide atthe term will not be longer than ten years from the date of grant for another time
or times of exercisability of any such optionthe options.
A SAR will entitle the holder thereof to receive with respect to each share subject thereto, an amount equal to the terms and
conditionsexcess of the 2002 Plan. Infair market value of one share of Common Stock on the eventdate of
exercise (or, if the Committee so determines, at any time during a Change in Controlspecified period before or after the date of exercise) over the exercise price of the Company
(as defined inSAR set by the 2002 Plan) all options granted under the 2002 Plan shall
become immediately vested and exercisableCommittee as of the date of the Change in
Control. The Committee may, at any time prior to the expiration or termination
of a stock option previously granted, extend the term of such option for such
additional period (up to a total exercise period of not more than ten years) as
it shall, in its discretion, deem necessary or appropriate.
The option price must be paid to the Company by the optionee in full prior
to delivery of the Common Stock. If the optionee intends to obtain a permissible
broker loan or simultaneously sell the exercised shares, the exercise shall not
be deemed to have occurred until the Company receives the proceeds. The optionee
may pay the option price in cash or with shares of the Company's Common Stock
owned by him. The optionee has no rights as a shareholder with respect to the
shares subject to option until shares of Common Stock are issued upon exercise
of the option.
The Committee may, in its discretion, grant a stock option together with a
stock appreciation right. In the case of such grant the optionee may either
exercise the option and receive Common Stock, or receive cash or other property
equal to the difference betweengrant. However, the exercise price of the underlying option andSARs will not be less than the fair market value of the shares on the date of grant, and the term will not be longer than ten years from the date of grant of the SARs. Payment with respect to SARs may be made in cash or shares of Common Stock atas determined by the timeCommittee prior to grant.
Awards of exercise. Upon exerciserestricted shares will be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose. Such restrictions will lapse under circumstances as the Committee may determine, including based upon a specified period of continued employment or upon the achievement of performance criteria referred to below. Except as otherwise determined by the Committee, eligible employees granted restricted shares will have all of the rights of a stock appreciationstockholder, including the right the underlying stock option is deemed to have been
exercised,vote restricted shares and thosereceive dividends thereon, and unvested restricted shares will no longer be available underforfeited upon termination of employment during the 2002 Plan.
15
AMENDMENT AND TERMINATION. The 2002 Plan has a term of ten years and no
shares may be optioned and no rightsapplicable restriction period.
A restricted share unit will entitle the holder thereof to receive shares of Common Stock or cash at the end of a specified deferral period. Restricted share units will also be subject to such restrictions as the Committee may impose. Such restrictions will lapse under circumstances as the Committee may determine, including based upon a specified period of continued employment or upon the achievement of performance criteria referred to below. Except as otherwise determined by the Committee, restricted share units subject to restriction will be forfeited upon termination of employment during any applicable restriction period.
Performance shares and performance units will provide for future issuance of shares or payment of cash to the recipient upon the attainment of corporate performance goals established by the Committee over specified performance periods. Except as otherwise determined by the Committee, performance shares and performance units will be forfeited upon termination of employment during any applicable performance period. Performance objectives may vary from person to person and will be based upon such performance criteria as the Committee may deem appropriate. The Committee may revise performance objectives if significant events occur during the performance period which the Committee expects to have a substantial effect on such objectives.
The Committee may also grant dividend equivalent rights and it is authorized, subject to limitations under applicable law, to grant such other Awards that may be denominated in, valued in, or otherwise based on, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan.
If the Committee determines that an Award of restricted shares, restricted share units, performance shares, performance units or other share-based awards should qualify under the performance-based compensation exception to the $1 million cap on deductibility under Section 162(m) of the Code, the grant, vesting, exercise and/or settlement of such awards shall be contingent upon achievement of preestablished performance goals based on one or more of the following business criteria for the Company and/or for specified subsidiaries or affiliates or other business units or lines of business of the Company: (1) earnings per share (basic or fully diluted); (2) revenues; (3) earnings, before or after taxes, from operations (generally or specified operations), or before or after interest expense, depreciation, amortization, incentives, or extraordinary or special items; (4) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (5) return on net assets, return on assets, return on investment, return on capital, return on equity; (6) economic value added; (7) operating income or operating expense; (8) net income; (9) share price or total stockholder return; and (10) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion goals, cost targets, customer satisfaction, supervision of litigation and information technology, and goals relating to acquisitions or divestitures of subsidiaries, affiliates or joint ventures.
The targeted level or levels of performance with respect to such business criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. The maximum amount payable upon settlement of cash-settled performance units or other cash-settled awards granted under the Plan for any calendar year to any participant that is intended to satisfy the requirements of performance-based compensation under Section 162(m) of the Code shall not exceed $1,000,000.
Nontransferability. Unless otherwise set forth by the Committee in an award agreement, Awards (except for vested shares) will generally not be transferable by the participant other than by will or the laws of descent and distribution and will be exercisable during the lifetime of the participant only by such participant or his or her guardian or legal representative.
Change of Control. In the event of a change of control (as defined in the Plan), all Awards granted under the Plan then outstanding but not then exercisable (or subject to restrictions) shall become immediately exercisable, all restrictions shall lapse, and any performance criteria shall be deemed satisfied, unless otherwise provided in the applicable Award agreement.
Capital Structure Changes. If the Committee determines that any dividend in shares, recapitalization, share split, reorganization, merger, consolidation, spin-off, repurchase, share exchange, or other similar corporate transaction or event affects the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of eligible participants under the Plan, then the Committee shall make such equitable changes or adjustments as it deems appropriate, including adjustments to (i) the number and kind of shares which may thereafter be issued under the Plan, (ii) the number and kind of shares, other securities or other consideration issued or issuable in respect of outstanding Awards, and (iii) the exercise price, grant price or purchase price relating to any Award.
Amendment and Termination. The Plan may be amended, suspended or terminated by the Board of Directors at any time, in whole or in part. However, any amendment for which stockholder approval is required under the rules of any stock exchange or automated quotation system on which the Common Stock may then be listed or quoted will not be effective until such stockholder approval has been obtained. In addition, no amendment, suspension, or termination of the Plan may materially and adversely affect the rights of a participant under any Award theretofore granted to him or her without the consent of the affected participant. The Committee may waive any conditions or rights, amend any terms, or amend, suspend or terminate, any Award granted, provided that, without participant consent, such amendment, suspension or termination may not materially and adversely affect the rights of such participant under any Award previously granted to him or her.
Effective Date and Term. The Plan is effective as of June 8, 2005, subject to shareholder approval. Unless earlier terminated, the Plan will expire on the tenth anniversary of the effective date, and no further awards may be granted thereunder after the
expirationsuch date.
Market Value. The per share closing price of the plan. The Committee has full and final authority to determine
the employees to be granted stock options, to determine the number of shares
subject to each option (up to a maximum of 750,000 stock options to any one
employee in any calendar year during the term of the 2002 Plan), to determine
the option price within the prescribed limits, to determine the time or times
when each stock option will be issued and exercisable, and to adopt rules and
regulations for carrying out the 2002 Plan. The Board of Directors is authorized
to terminate or amend the 2002 Plan.
FEDERAL INCOME TAX CONSEQUENCESCommon Stock on April 26, 2005 was $65.9 million.
Federal Income Tax Consequences. The following discussion summarizesis a summary of the principal federal income tax consequences of the 2002 Plan. The discussion isPlan, based onupon current provisions of the Internal Revenue Code, of 1986, as amended (the "Code"), the Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, as in effect on the date hereof. The summaryand does not address the consequences under any state, local or foreign state or local tax consequences of participation in the
2002 Plan.
STOCK OPTIONS.laws.
Stock Options
In general, the grant of an option will not be a taxable event to the recipient and it will not result in a deduction to the Company. The tax consequences associated with the exercise of an option and the subsequent disposition of shares of Common Stock acquired on the exercise of such option depend on whether the option is an incentivea nonqualified stock option or a non-qualified
stock option.an ISO.
Upon the exercise of a non-qualifiednonqualified stock option, the Participantparticipant will recognize ordinary taxable income equal to the excess of the fair market value of the shares of Common Stock received upon exercise over the exercise price. The Company will generally be able to claim a deduction in an equivalent amount. Any gain or loss upon a subsequent sale or exchange of the shares of Common Stock will be capital gain or loss, long-term or short-term, depending on the holding period for the shares of Common Stock.
Generally, a Participantparticipant will not recognize ordinary taxable income at the time of exercise of an incentive stock optionISO and no deduction will be available to the Company, provided the option is exercised while the Participantparticipant is an employee or within three months following termination of employment (longer, in the case of termination of employment by reason of disability or death). If an incentive stock optionISO granted under the 2002 Plan is exercised after these periods, the exercise will be treated for federal income tax purposes as the exercise of a non-qualifiednonqualified stock option. Also, an incentive stock optionISO granted under the 2002 Plan will be treated as a non-qualifiednonqualified stock option to the extent it (together with any other incentive stock optionsISOs granted under
other plans ofto the Company and its subsidiaries)participant by the Company) first becomes exercisable in any calendar year for shares of Common Stock having a fair market value, determined as of the date of grant, in excess of $100,000.
If shares of Common Stock acquired upon exercise of an incentive stock
optionISO are sold or exchanged more than one year after the date of exercise and more than two years after the date of grant of the option, any gain or loss will be long-term capital gain or loss. If shares of Common Stock acquired upon exercise of an incentive stock optionISO are disposed of prior to the expiration of these one-year or two-year holding periods (a "Disqualifying Disposition"), the Participantparticipant will recognize ordinary income at the time of disposition, and the Company will generally be ableentitled to claim a deduction, in an amount equal to the excess of the fair market value of the shares of Common Stock at the date of exercise over the exercise price. Any additional gain will be treated as capital gain, long-term or short-term, depending on how long the shares of Common Stock have been held. Where shares of Common Stock are sold or exchanged in a Disqualifying Disposition (other than certain related party transactions) for an amount less than their fair market value at the date of exercise, any ordinary income recognized in connection with the Disqualifying Disposition will be limited to the amount of gain, if any, recognized in the sale or exchange, and any loss will be a long-term or short-term capital loss, depending on how long the shares of Common Stock have been held.
16
If an option is exercised through the use of shares of Common Stock previously owned by the participant, such exercise generally will not be considered a taxable disposition of the previously owned shares and, thus, no gain or loss will be recognized with respect to such previously owned shares upon such exercise. The amount of any built-in gain on the previously owned shares generally will not be recognized until the new shares acquired on the option exercise are disposed of in a sale or other taxable transaction.
Although the exercise of an incentive stock optionISO as described above would not produce ordinary taxable income to the Participant,participant, it would result in an increase in the Participant'sparticipant's alternative minimum taxable income and may result in an alternative minimum tax liability.
STOCK APPRECIATION RIGHTS.
Restricted Shares
A participant who receives restricted shares will generally recognize ordinary income at the time that they "vest", i.e., when they are not subject to a substantial risk of forfeiture. The amount of
ordinary income so recognized will generally be the fair market value of the Common Stock at the time the shares vest, less the amount, if any, paid for the shares. This amount is generally deductible for federal income tax purposes by the Company. Dividends paid with respect to Common Stock that is nonvested will be ordinary compensation income to the participant (and generally deductible by the Company). Any gain or loss upon a subsequent sale or exchange of the shares of Common Stock, measured by the difference between the sale price and the fair market value on the date the shares vest, will be capital gain or loss, long-term or short-term, depending on the holding period for the shares of Common Stock. The holding period for this purpose will begin on the date following the date the shares vest.
In lieu of the treatment described above, a participant may elect immediate recognition of income under Section 83(b) of the Code. In such event, the participant will recognize as income the fair market value of the restricted shares at the time of grant (determined without regard to any restrictions other than restrictions which by their terms will never lapse), and the Company will generally be entitled to a corresponding deduction. Dividends paid with respect to shares as to which a proper Section 83(b) election has been made will not be deductible to the Company. If a Section 83(b) election is made and the restricted shares are subsequently forfeited, the participant will not be entitled to any offsetting tax deduction.
SARs and Other Awards
With respect to stock appreciation rights
grantedSARs, restricted share units, performance shares, performance units, dividend equivalents and other Awards under the Plan not described above, generally, when a Participantparticipant receives payment with respect to a stock appreciation rightany such Award granted to him or her under the 2002 Plan, the amount of cash and the fair market value of any other property received will be ordinary income to such Participantparticipant and will be allowed as a deduction for federal income tax purposes to the Company.
PAYMENT OF WITHHOLDING TAXES.
Payment of Withholding Taxes
The Company may withhold, or require a Participantparticipant to remit to the Company,it, an amount sufficient to satisfy any federal, state, local or localforeign withholding tax requirements associated with awardsAwards under the 2002 Plan.
SPECIAL RULES. Special rules may apply to a Participant who is subject to
Section 16(b)
Deductibility Limit on Compensation in Excess of the Securities Exchange Act of 1934 as in effect from time to
time (generally directors, officers and 10% stockholders). Certain additional
special rules apply if the exercise price for an option is paid in shares
previously owned by the optionee rather than in cash.
LIMITATION ON DEDUCTIBILITY.$1 Million
Section 162(m) of the Code generally limits the deductible amount of annual compensation paid (including, unless an exception applies, compensation otherwise deductible in connection with awardsAwards granted under the Plan) by a public company to aeach "covered employee" (the chief
executive officer(i.e., the Chief Executive Officer and four other most highly compensated executive officers of the Company) to no more than $1 million. The Company currently intends to structure stock options and stock appreciation rightsSARs granted under the 2002 Plan to comply with an exception to nondeductibility under Section 162(m) of the Code.
In
New Plan Benefits. No benefits have been received or allocated to any employee, consultant or Director under the event shareholders doPlan, and therefore a "New Plan Benefits" table has not approvebeen included.
The Board of Directors Recommends a Vote "FOR" the 2002 Plan, the 2002 Plan will
not become effective.
To be adopted, this proposal requires the affirmative voteApproval of the majority
of the shares present in person or represented by proxy at the 2002 Annual
Meeting of Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE 2002 STOCK OPTION PLAN.
ITEM 3. APPROVAL OF THE TRANS WORLD ENTERTAINMENT CORPORATION BONUS PLAN
The Company has adopted, subject to shareholder approval, the Trans World
Entertainment Corporation Bonus Plan (the "Bonus Plan"). The Bonus Plan will be
administered by the Compensation Committee (the "Committee")2005 Long Term Incentive and is intended to
serve as a qualified performance-based compensation program under
Section 162(m) of the Internal Revenue Code (the "Code"). Section 162(m) of the
Code denies a deduction by an employer for certain compensation in excess of
$1 million per year paid by a publicly-traded corporation to the chief executive
officer and the four most highly compensated executive officers other than the
chief executive officer (the "Covered Employees"). Certain compensation,
including compensation based on performance goals, is excluded from this
deduction limit. Among the requirements for compensation to qualify for this
exception is that the material terms pursuant to which the compensation is to be
paid, including the performance goals, be disclosed to and approved by the
shareholders in a separate vote prior to the payment. Accordingly, the Bonus
Plan is being submitted to the shareholders for approval at the 2002 Annual
Meeting.
The chief executive officer and other management employees of the Company,
as selected by the Committee will be eligible to participate in the BonusShare Award Plan.
The Bonus Plan provides for the payment of annual incentive bonus awards to
participants if, and only to the extent that performance goals established by
the Committee are met. Although the Bonus Plan is designed to mitigate the
negative impact of Section 162(m) of the Code on shareholders, nothing contained
in the Bonus Plan shall prevent the Company or any affiliate from adopting or
continuing in effect other compensation
17
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.
The goals established by the Committee can be expressed in terms of pre-set
financial targets as they relate to an individual, the Company as a whole or to
the business unit for which a particular executive officer is responsible.
Financial targets will be based on factors that measure enhanced shareholder
value such as Operating income, Diluted Earnings Per Share or other financial
factors as the Committee may deem appropriate. The goals established by the
Committee can be (but need not be) different each year and different goals may
be applicable to different participants. The goals with respect to a particular
plan year will be established not later than the latest date permissible under
Section 162(m). Any such goals shall: (i) be determined in accordance with the
Company's audited financial statements and generally accepted accounting
principles and reported upon by the Company's independent accountants; or
(ii) be based upon a standard under which a third party with knowledge of the
relevant facts could determine whether the goal is met.
A participant's target incentive bonus for each plan year will generally be
expressed as a percentage of such participant's base salary for such year. The
actual amount of bonus payable under the Bonus Plan will generally be expressed
either as a dollar amount or as a percentage of such participant's base salary
for such year. The actual amount of bonus payable under the Bonus Plan will
generally be expressed as a percentage of the participant's target bonus, which
percentage will vary depending upon the extent to which the performance goals
have been attained. However, the bonus earned by any participant in respect of
any plan year shall not exceed 150% of the participant's annual base salary.
If approved by shareholders, the Bonus Plan will be effective with respect
to the 2002 plan year.
The Board can, from time to time, amend, suspend or discontinue the Bonus
Plan; provided, however, that no amendment which requires shareholder approval
in order for the Bonus Plan to continue to comply with Code Section 162(m) will
be effective unless it receives the requisite shareholder approval. In addition,
the Committee can make such amendments as it deems necessary to comply with
other applicable laws, rules and regulations.
To be adopted, this proposal requires the affirmative vote of the majority
of the shares present in person or represented by proxy at the 2002 Annual
Meeting of Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF
THE TRANS WORLD ENTERTAINMENT BONUS PLAN.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders of the Company wishing to include proposals in the proxy material relating to the Annual Meeting of the Company to be held in 20032006 must submit the same in writing so as to be received at the executive offices of the Company on or before January 23, 2003.15, 2006. Such proposals must also meet the other requirements of the rules of the Securities and Exchange Commission relating to shareholders' proposals. Proposals should be addressed to Michael Solow,John J. Sullivan, Secretary, Trans World Entertainment Corporation, 38 Corporate Circle, Albany, NY 12203. No such proposals were received with respect to the annual meeting scheduled for June 20, 2002.
8, 2005.
By Order of the Board of Directors,
[LOGO]
Michael Solow
SECRETARY
John J. Sullivan,
Secretary
May 23, 2002
18
APPENDIX A
TRANS WORLD ENTERTAINMENT CORPORATION
2002 STOCK OPTION
2005 LONG TERM INCENTIVE AND SHARE AWARD PLAN
1. PURPOSE
(a)Purposes.
The purposepurposes of this 2002 Stock Optionthe 2005 Long Term Incentive and Share Award Plan (the "Plan") isare to encourage
and enable selected management and other employeesadvance the interests of Trans World Entertainment Corporation (the "Company") orand its shareholders by providing a parent or subsidiarymeans to attract, retain, and motivate employees, consultants and directors of the Company, its subsidiaries and affiliates, to acquire
a proprietary interest inprovide for competitive compensation opportunities, to encourage long term service, to recognize individual contributions and reward achievement of performance goals, and to promote the creation of long term value for stockholders by aligning the interests of such persons with those of stockholders.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a) "Affiliate" means any entity other than the Company throughand its Subsidiaries that is designated by the Board or the Committee as a participating employer under the Plan;provided, however,that the Company directly or indirectly owns at least 20% of the combined voting power of all classes of stock of such entity or at least 20% of the ownership interests in such entity.
(b) "Award" means any Option, SAR, Restricted Share, Restricted Share Unit, Performance Share, Performance Unit, Dividend Equivalent, or Other Share-Based Award granted to an Eligible Person under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which have been designated by an Eligible Person in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under this Plan upon the death of stock inthe Eligible Person, or, if there is no designated Beneficiary or surviving designated Beneficiary, then the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company. Pursuant to the Plan, eligible employees will be offered the
opportunity to acquire such Common Stock through the grant of Incentive Stock
Options, and Non-Qualified Stock Options (Incentive Stock Options and
Non-Qualified Stock Options granted under the Plan are collectively referred to
herein as "Options"), with or without tandem Stock Appreciation Rights ("SARs").
(b) As used herein, the term "parent" or "subsidiary" shall mean any present
or future corporation which is or would be a "parent corporation" or "subsidiary
corporation" of the Company as the term is defined in Section 424 of
(f) "Code" means the Internal Revenue Code of 1986, as amended (the "Code") (determined as iffrom time to time. References to any provision of the Company were the employer corporation).
2. ADMINISTRATION OF THE PLAN
The PlanCode shall be administered bydeemed to include successor provisions thereto and regulations thereunder.
(g) "Committee" means the Compensation Committee of the Board, of
Directors, or such other Board committee appointed(which may include the entire Board) as may be designated by the Board of Directors (the
"Committee")to administer the Plan;provided, however, consistingthat, unless otherwise determined by the Board, the Committee shall consist of two or more directors. Eachdirectors of the Company, each of whom is a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act, to the extent applicable, and each of whom is an "outside director" within the meaning of Section 162(m) of the Code, to the extent applicable;provided, further, that the mere fact that the Committee shall fail to qualify under either of the foregoing requirements shall not invalidate any Award made by the Committee which Award is otherwise validly made under the Plan.
(h) "Company" means Trans World Entertainment Corporation, a corporation organized under the laws of New York, or any successor corporation.
(i) "Director" means a member of the Committee
willBoard who is not an employee of the Company, a Subsidiary or an Affiliate.
(j) "Dividend Equivalent" means a right, granted under Section 5(g), to receive cash, Shares, or other property equal in value to dividends paid with respect to a specified number of Shares. Dividend Equivalents may be awarded on a "non-employee director" as definedfree-standing basis or in Rule 16b-3 promulgated underconnection with another Award, and may be paid currently or on a deferred basis.
(k) "Eligible Person" means (i) an employee or consultant of the Company, a Subsidiary or an Affiliate, including any Director who is an employee, or (ii) a Director. Notwithstanding any provisions of this Plan to the contrary, an Award may be granted to an employee, consultant or Director, in connection with his or her hiring or retention prior to the date the employee, consultant or Director first performs services for the Company, a Subsidiary or an Affiliate;provided, however, that any such Award shall not become vested or exercisable prior to the date the employee, consultant or Director first performs such services.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and an
"outside director" as defined in regulations issued under Section 162(m)from time to time. References to any provision of the Internal Revenue Code of 1986, as amended. The Committee is authorized: (a)Exchange Act shall be deemed to adopt, alter and repeal administrative rules, guidelinesinclude successor provisions thereto and regulations for
carrying outthereunder.
(m) "Fair Market Value" means, with respect to Shares or other property, the Plan; (b)fair market value of such Shares or other property determined by such methods or procedures as shall be established from time to selecttime by the employees eligible for participation
underCommittee. If the Plan; (c) to determine whether and to what extent Options and SARsShares are to be granted under the Plan; (d) to determine the other terms, conditions and
provisions of grants under the Plan; (e) accelerate the vestinglisted on any established stock exchange or extend the
exercise period (up to a maximum of ten years); and (f) to interpret the Plan,
in all cases in the Committee's sole discretion consistent with the Plan
provisions. The interpretation of and decisions with regard to any questions
arising under the Plan madenational market system, unless otherwise determined by the Committee in good faith, the Fair Market Value of Shares shall be final and conclusive.
3. SHARES OF STOCK SUBJECT TO THE PLAN
(a) SHARES SUBJECT TO ISSUANCE. There shall be 4,000,000 shares ofmean the Company's Common Stock, par value $.01closing price per share (the "Common Stock") authorized
for issuance underShare on the Plan. Such shares may be authorized and unissued sharesdate (or, if the Shares were not traded on that day, the next preceding day that the Shares were traded) on the principal exchange or previously issued shares acquired ormarket system on which the Shares are traded, as such prices are officially quoted on such exchange.
(n) "ISO" means any Option intended to be acquired by the Company and held
in the treasury. Any shares subject todesignated as an Option which for any reason expires or
is terminated unexercised may again be subject to an Option under the Plan. The
aggregate fair market value (determined at the time the Option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by any optionee during any calendar year (under all plans of
the Company and any parent or subsidiary of the Company which plans provide for
granting of Incentive Stock Optionsincentive stock option within the meaning of Section 422 of the Code) shallCode.
(o) "NQSO" means any Option that is not exceed $100,000.
(b) ANTIDILUTION ADJUSTMENTS. Inan ISO.
(p) "Option" means a right, granted under Section 5(b), to purchase Shares.
(q) "Other Share-Based Award" means a right, granted under Section 5(h), that relates to or is valued by reference to Shares.
(r) "Participant" means an Eligible Person who has been granted an Award under the eventPlan.
(s) "Performance Share" means a performance share granted under Section 5(f).
(t) "Performance Unit" means a performance unit granted under Section 5(f).
(u) "Plan" means this 2005 Long Term Incentive and Share Award Plan.
(v) "Restricted Shares" means an Award of Shares under Section 5(d) that may be subject to certain restrictions and to a risk of forfeiture.
(w) "Restricted Share Unit" means a right, granted under Section 5(e), to receive Shares or cash at the end of a reorganization,
recapitalization, stock split, reverse stock split, stock dividend, combination
of shares, merger, consolidation, reclassification or other
A-1
changespecified deferral period.
(x) "Rule 16b-3" means Rule 16b-3, as from time to time in corporate structure, there shall be an appropriate adjustmenteffect and applicable to the number of shares authorized for issuance under the Plan pursuant to the
provision of Section 8 hereof.
4. ELIGIBILITY
Options may be granted only to executive officers, management and other
employees who are employedParticipants, promulgated by the Company or a parent or subsidiarySecurities and Exchange Commission under Section 16 of the Company, in each case as designatedExchange Act.
(y) "SAR" or "Share Appreciation Right" means the right, granted under Section 5(c), to be paid an amount measured by the Committee. An Option may be granted
to a director of the Company or a parent or subsidiary of the Company who is not
also a member of the Committee, provided that the director is also an officer or
employee.
5. GRANTING OF INCENTIVES
(a) TERM OF PLAN AND OPTION GRANTS. All Options granted pursuant to this
Plan shall be granted within 10 years from June 20, 2002. The date of the grant
of any Option shall be the effective date on which the Committee authorizes the
grant of such Option. In no event, however, shall any Option be exercisable
beyond 10 years from the date it is granted.
(b) LIMITS APPLICABLE TO ANY ONE EMPLOYEE. The maximum number of shares of
Common Stock with respect to which Options or SARs may be granted to any one
employee from this Plan in any calendar year is 750,000 shares of Common Stock
authorized for issuance under the Plan, subject to adjustment in accordance with
the provision of Section 8 hereof.
(c) STOCK APPRECIATION RIGHTS. The Committee may in its sole discretion
grant an Option together with an SAR. In the case of such a grant the employee
may either (i) exercise the Option and receive Common Stock of the Company or
(ii) receive in cash or other property, in the sole discretion of the Committee, the difference between the exercise price of the underlying optionright and the fair
market valueFair Market Value of Shares on the date of exercise of the Common Stock atright, with payment to be made in cash, Shares, or property as specified in the timeAward or determined by the SAR is exercised. An Incentive
Stock Option granted together with an SAR shall be subject to the limitations of
the Plan and such additional limitations as may be imposed under Section 422 of
the Code which limitations are necessary or appropriate to cause such Incentive
Stock Option or another Incentive Stock Option to qualify as an "incentiveCommittee.
(z) "Shares" means common stock, option" within the meaning of Section 422 of the Code. Upon exercise of an SAR,
the underlying option shall be deemed to have been exercised to the extent of
the Shares with respect to which the SAR is exercised and such Shares shall no
longer be available for issuance pursuant to the Plan.
(d) ACCELERATED EXERCISABILITY. The Committee in its discretion may include
provisions in any Option or SAR granted to an employee that become effective
upon a Change in Control$.01 par value per share, of the Company, and that providesuch other securities as may be substituted for Shares pursuant to Section 4(c) hereof.
(aa) "Subsidiary" means any corporation (other than the accelerationCompany) in an unbroken chain of corporations beginning with the Company if each of the exercisability of the Option or SAR. The provisions authorized by this
Section 5(d) may be included in an Option or SAR at the time of grant or
thereafter.
6. TERMS AND CONDITIONS OF OPTIONS
(a) OPTION PRICE. The purchase price under each Option shall be at least
100% of the fair market value of the Common Stock at the time the Option is
granted but not lesscorporations (other than the par value of such Common Stock. Inlast corporation in the case of an
Incentive Stock Option granted to an employee owningunbroken chain) owns shares possessing 50% or more than 10% of the total combined voting power of all classes of stock in one of the other corporations in the chain.
(bb) "Termination of Service" means the termination of the Participant's employment, consulting services or directorship with the Company, its Subsidiaries and its Affiliates, as the case may be. A Participant employed by a Subsidiary of the Company or one of its Affiliates shall also be deemed to incur a Termination of Service if the Subsidiary of the Company or Affiliate ceases to be such a Subsidiary or an Affiliate, as the case may be, and the Participant does not immediately thereafter become an employee or director of, or a consultant to, the Company, another Subsidiary of the Company or an Affiliate. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Subsidiaries and Affiliates shall not be considered a Termination of Service.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the Committee, and the Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:
(i) to select Eligible Persons to whom Awards may be granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to each Eligible Person;
(iv) to determine the type and number of Awards to be granted, the number of Shares to which an Award may relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, any exercise price, grant price, or purchase price, any restriction or condition, any schedule for lapse of restrictions or conditions relating to transferability or forfeiture, exercisability, or settlement of an Award, and waiver or accelerations thereof, and waivers of performance conditions relating to an Award, based in each case on such considerations as the Committee shall determine), and all other matters to be determined in connection with an Award;
(v) to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what circumstances cash, Shares, other Awards, or other property payable with respect to an Award will be deferred either automatically, at the election of the Committee, or at the election of the Eligible Person;
(vii) to prescribe the form of each Award Agreement, which need not be identical for each Eligible Person;
(viii) to adopt, amend, suspend, waive, and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement, or other instrument hereunder;
(x) to accelerate the exercisability or vesting of all or any portion of any Award or to extend the period during which an Award is exercisable;
(xi) to determine whether uncertificated Shares may be used in satisfying Awards and otherwise in connection with the Plan; and
(xii) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall have sole discretion in exercising its authority under the Plan. Any action of the Committee with respect to the Plan shall be final, conclusive, and binding on all persons, including the Company, Subsidiaries, Affiliates, Eligible Persons, any person claiming any rights under the Plan from or through any Eligible Person, and shareholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to other members of the Board or officers or managers of the Company or any Subsidiary or Affiliate the authority, subject to such terms as the Committee shall determine, to perform administrative functions and, with respect to Awards granted to persons not subject to Section 16 of the Exchange Act, to perform such other functions as the Committee may determine, to the extent permitted under Rule 16b-3 (if applicable) and applicable law.
(c) Limitation of Liability. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or other employee of the Company or any Subsidiary or Affiliate, the Company's independent certified public accountants, or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, and no officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.
(d) Limitation on Committee's Discretion. Anything in this Plan to the contrary notwithstanding, in the case of any Award which is intended to qualify as "performance-based compensation" within the meaning of Section 162(m)(4)(C) of the Code, if the Award Agreement so provides, the Committee shall have no discretion to increase the amount of compensation payable under the Award to the extent such an increase would cause the Award to lose its qualification as such performance-based compensation.
(e) No Option or SAR Repricing Without Shareholder Approval. Except as provided in the first sentence of Section 4(c) hereof relating to certain antidilution adjustments, unless the approval of shareholders of the Company is obtained, Options and SARs issued under the Plan shall not be amended to lower their exercise price and Options and SARs issued under the Plan will not be exchanged for other Options or SARs with lower exercise prices.
4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(c) hereof, the total number of Shares reserved for issuance in connection with Awards under the Plan shall be 5,000,000. No Award may be granted if the number of Shares to which such Award relates, when added to the number of Shares previously issued under the Plan, exceeds the number of Shares reserved under the preceding sentence. If any Awards are forfeited, canceled, terminated, exchanged or surrendered or such Award is settled in cash or otherwise terminates without a distribution of Shares to the Participant, any Shares counted against the number of Shares reserved and available under the Plan with respect to such Award shall, to the extent of any such forfeiture, settlement, termination, cancellation, exchange or surrender, again be available for Awards under the Plan. Upon the exercise of any Award granted in tandem with any
other Awards, such related Awards shall be canceled to the extent of the number of Shares as to which the Award is exercised.
(b) Subject to adjustment as provided in Section 4(c) hereof, the maximum number of Shares (i) with respect to which Options or SARs may be granted during a calendar year to any Eligible Person under this Plan shall be 1,000,000 Shares, and (ii) with respect to Performance Shares, Performance Units, Restricted Shares or Restricted Share Units intended to qualify as performance-based compensation within the meaning of Section 162(m)(4)(C) of the Code shall be the equivalent of 200,000 Shares during a calendar year to any Eligible Person under this Plan.
(c) In the event that the Committee shall determine that any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Eligible Persons under the Plan, then the Committee shall make such equitable changes or adjustments as it deems appropriate and, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares which may thereafter be issued under the Plan, (ii) the number and kind of shares, other securities or other consideration issued or issuable in respect of outstanding Awards, and (iii) the exercise price, grant price, or purchase price relating to any Award; provided, however, in each case that, with respect to ISOs, such adjustment shall be made in accordance with Section 424(a) of the Code, unless the Committee determines otherwise. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria and performance objectives, if any, included in, Awards in recognition of unusual or non-recurring events (including, without limitation, events described in the preceding sentence) affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, or in response to changes in applicable laws, regulations, or accounting principles; provided, however, that, if an Award Agreement specifically so provides, the Committee shall not have discretion to increase the amount of compensation payable under the Award to the extent such an increase would cause the Award to lose its qualification as performance-based compensation for purposes of Section 162(m)(4)(C) of the Code and the regulations thereunder.
(d) In the event that the Company is a party to a merger or consolidation or a Change of Control shall occur, outstanding Options shall be subject to the agreement of merger or consolidation or other applicable transaction agreement. Such agreement, without the Participants' consent, may provide for: (i) continuation or assumption of such outstanding Option under the Plan by the Company (if it is the surviving corporation) or by the surviving corporation or its parent; (ii) substitution by the surviving corporation or its parent of stock options with substantially the same terms for such outstanding Options (and, if the Company is not a publicly traded entity, substitution of option shares with equity of the surviving corporation or its parent with substantially the same terms as the outstanding option shares); (iii) acceleration of the vesting of or right to exercise such outstanding Options immediately prior to or as of the date of the merger or consolidation or Change of Control, and the expiration of such outstanding Options to the extent not timely exercised by the date of the merger, consolidation, Change of Control or other date thereafter designated by the Board; or (iv) cancellation of all or any portion of such outstanding Options by a cash payment of the excess, if any, of the Fair Market Value of the shares subject to such outstanding Options or portion thereof being canceled over the aggregate purchase price with respect to such Options or portion thereof being canceled.
(e) Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or treasury Shares including Shares acquired by purchase in the open market or in private transactions.
(a) General. Awards may be granted on the terms and conditions set forth in this Section 5. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 9(d)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms regarding forfeiture of Awards or continued exercisability of Awards in the event of Termination of Service by the Eligible Person.
(b) Options. The Committee is authorized to grant Options, which may be NQSOs or ISOs, to Eligible Persons on the following terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable under an Option shall be determined by the Committee; provided, however, that the exercise price per Share of an Option shall not be less than the Fair Market Value of a Share on the date of grant of the Option. The Committee may, without limitation, set an exercise price that is based upon achievement of performance criteria if deemed appropriate by the Committee.
(ii) Option Term. The term of each Option shall be determined by the Committee; provided, however, that such term shall not be longer than ten years from the date of grant of the Option.
(iii) Time and Method of Exercise. The Committee shall determine at the date of grant or thereafter the time or times at which an Option may be exercised in whole or in part (including, without limitation, upon achievement of performance criteria if deemed appropriate by the Committee), the methods by which such exercise price may be paid or deemed to be paid (including, without limitation, broker-assisted exercise arrangements), the form of such payment (including, without limitation, cash, Shares, notes or other property), and the methods by which Shares will be delivered or deemed to be delivered to Eligible Persons. Unless otherwise set forth by the Committee in an applicable Award Agreement, Options granted hereunder shall become exercisable in full upon a Termination of Service due to the death or Disability of the Participant. Unless otherwise set forth by the Committee in an applicable Award Agreement, a Termination of Service shall be due to the Disability of the Participant if, upon such Termination of Service, the Participant qualifies for long-term disability benefits under the Company's applicable long-term disability plan.
(iv) ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, including but not limited to the requirement that the ISO shall be granted within ten years from the earlier of the date of adoption or shareholder approval of the Plan. ISOs may only be granted to employees of the Company or a Subsidiary.
(c) SARs. The Committee is authorized to grant SARs (Share Appreciation Rights) to Eligible Persons on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Eligible Person to whom it is granted a right to receive with respect to each Share subject thereto, upon exercise thereof, the excess of (1) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine in the case of any such right, the Fair Market Value of one Share at any time during a specified period before or after the date of exercise) over (2) the exercise price per Share of the SAR as determined by the Committee as of the date of grant of the SAR (which shall not be less than the Fair Market Value per Share on the date of grant of the SAR and, in the case of a SAR granted in tandem with an Option, shall be equal to the exercise price of the underlying Option).
(ii) Other Terms. The Committee shall determine, at the time of grant or thereafter, the time or times at which a SAR may be exercised in whole or in part (which shall not be more than ten years after the date of grant of the SAR), the method of exercise, method of settlement, form of
consideration payable in settlement, method by which Shares will be delivered or deemed to be delivered to Eligible Persons, whether or not a SAR shall be in tandem with any other Award, and any other terms and conditions of any SAR. Unless the Committee determines otherwise, a SAR (1) granted in tandem with an NQSO may be granted at the time of grant of the related NQSO or at any time thereafter and (2) granted in tandem with an ISO may only be granted at the time of grant of the related ISO.
(d) Restricted Shares. The Committee is authorized to grant Restricted Shares to Eligible Persons on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Shares shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose at the date of grant or thereafter, which restrictions may lapse separately or in combination at such times, under such circumstances (including, without limitation, upon achievement of performance criteria if deemed appropriate by the Committee), in such installments, or otherwise, as the Committee may determine. Except to the extent restricted under the Award Agreement relating to the Restricted Shares, an Eligible Person granted Restricted Shares shall have all of the rights of a shareholder including, without limitation, the right to vote Restricted Shares and the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee, at the date of grant or thereafter, upon Termination of Service during the applicable restriction period, Restricted Shares and any accrued but unpaid dividends or Dividend Equivalents that are at that time subject to restrictions shall be forfeited;provided, however,that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Shares will be waived in whole or in part in the event of Termination of Service resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Shares.
(iii) Certificates for Shares. Restricted Shares granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Shares are registered in the name of the Eligible Person, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Shares, the Company shall retain physical possession of the certificate and the Participant shall deliver a stock power to the Company, endorsed in blank, relating to the Restricted Shares.
(iv) Dividends. Dividends paid on Restricted Shares shall be either paid at the dividend payment date, or deferred for payment to such date as determined by the Committee, in cash or in unrestricted Shares having a Fair Market Value equal to the amount of such dividends. Shares distributed in connection with a Share split or dividend in Shares, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Shares with respect to which such Shares or other property has been distributed.
(e) Restricted Share Units. The Committee is authorized to grant Restricted Share Units to Eligible Persons, subject to the following terms and conditions:
(i) Award and Restrictions. Delivery of Shares or cash, as the case may be, will occur upon expiration of the deferral period specified for Restricted Share Units by the Committee (or, if permitted by the Committee, as elected by the Eligible Person). In addition, Restricted Share Units shall be subject to such restrictions as the Committee may impose, if any (including, without limitation, the achievement of performance criteria if deemed appropriate by the Committee), at the date of grant or thereafter, which restrictions may lapse at the expiration of the deferral period or at earlier or later specified times, separately or in combination, in installments or otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee at date of grant or thereafter, upon Termination of Service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Restricted Share Units), or upon failure to satisfy any other conditions precedent to the delivery of Shares or cash to which such Restricted Share Units relate, all Restricted Share Units that are at that time subject to deferral or restriction shall be forfeited;provided, however,that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Share Units will be waived in whole or in part in the event of Termination of Service resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Share Units.
(iii) Dividend Equivalents. Unless otherwise determined by the Committee at date of grant, Dividend Equivalents on the specified number of Shares covered by a Restricted Share Unit shall be either (A) paid with respect to such Restricted Share Unit at the dividend payment date in cash or in unrestricted Shares having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Restricted Share Unit and the amount or value thereof automatically deemed reinvested in additional Restricted Share Units or other Awards, as the Committee shall determine or permit the Participant to elect.
(f) Performance Shares and Performance Units. The Committee is authorized to grant Performance Shares or Performance Units or both to Eligible Persons on the following terms and conditions:
(i) Performance Period. The Committee shall determine a performance period (the "Performance Period") of one or more years and shall determine the performance objectives for grants of Performance Shares and Performance Units. Performance objectives may vary from Eligible Person to Eligible Person and shall be based upon the performance criteria as the Committee may deem appropriate. The performance objectives may be determined by reference to the performance of the Company, or of any parenta Subsidiary or subsidiaryAffiliate, or of a division or unit of any of the foregoing. Performance Periods may overlap and Eligible Persons may participate simultaneously with respect to Performance Shares and Performance Units for which different Performance Periods are prescribed.
(ii) Award Value. At the beginning of a Performance Period, the Committee shall determine for each Eligible Person or group of Eligible Persons with respect to that Performance Period the range of number of Shares, if any, in the case of Performance Shares, and the range of dollar values, if any, in the case of Performance Units, which may be fixed or may vary in accordance with such performance or other criteria specified by the Committee, which shall be paid to an Eligible Person as an Award if the relevant measure of Company actually or constructivelyperformance for the Performance Period is met.
(iii) Significant Events. If during the course of a Performance Period there shall occur significant events as determined by the Committee which the Committee expects to have a substantial effect on a performance objective during such period, the Committee may revise such objective;provided, however,that, if an Award Agreement so provides, the Committee shall not have any discretion to increase the amount of compensation payable under the Award to the extent such an increase would cause the Award to lose its qualification as performance-based compensation for purposes of Section 424(d)162(m)(4)(C) of the Code and the option priceregulations thereunder.
(iv) Forfeiture. Except as otherwise determined by the Committee, at the date of grant or thereafter, upon Termination Service during the applicable Performance Period, Performance Shares and Performance Units for which the Performance Period was prescribed shall not be less than 110%forfeited;provided, however,that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in an individual case, that restrictions or forfeiture conditions relating to Performance Shares and Performance Units will be waived in whole or in part in the
event of Terminations of Service resulting from specified causes, and the fair market valueCommittee may in other cases waive in whole or in part the forfeiture of Performance Shares and Performance Units.
(v) Payment. Each Performance Share or Performance Unit may be paid in whole Shares, or cash, or a combination of Shares and cash either as a lump sum payment or in installments, all as the Common Stock subject to the OptionCommittee shall determine, at the time of its grant. The fair
market valuegrant of the Common Stock on suchPerformance Share or Performance Unit or otherwise, commencing as soon as practicable after the end of the relevant Performance Period.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to Eligible Persons. The Committee may provide, at the date of grant or thereafter, that Dividend Equivalents shall be determinedpaid or distributed when accrued or shall be deemed to have been reinvested in a manneradditional Shares, or other investment vehicles as the Committee may specify;provided, however,that Dividend Equivalents (other than freestanding Dividend Equivalents) shall be subject to all conditions and restrictions of the underlying Awards to which they relate.
(h) Other Share-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the requirementspurposes of the Code.
(b) MEDIUM AND TIME OF PAYMENT. Common Stock purchased pursuantPlan, including, without limitation, unrestricted shares awarded purely as a "bonus" and not subject to the
exerciseany restrictions or conditions, other rights convertible or exchangeable into Shares, purchase rights for Shares, Awards with value and payment contingent upon performance of an Option shall at the time of purchase be paid for in full in cash,
or with shares of Common Stock, or a
A-2
combination of cash and such Common Stock, to be valued at the fair market value
thereof on the date of such exercise. Common Stock to be used must have been
held by such optionee for a minimum of 6 months. If the optionee intends to
obtain a permissible broker loan or a simultaneous order to sell the shares
issuable upon exercise of any Options, upon the giving of at least 48 hours
prior written notice to the Company exercise thereof shall not be deemed to
occur untilor any other factors designated by the Company receives the proceeds of the recipient's broker loan or
other permitted transaction. Upon receipt of payment the Company shall, without
stock transfer tax to the optionee or other person entitled to exercise the
Option, deliver to the person exercising the Option a certificate or
certificates for such shares. It shall be a conditionCommittee, and Awards valued by reference to the performance of specified Subsidiaries or Affiliates. The Committee shall determine the Company's obligationterms and conditions of such Awards at date of grant or thereafter. Shares delivered pursuant to issuean Award in the nature of a purchase right granted under this Section 5(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares, notes or transfer Common Stock upon exerciseother property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, shall also be authorized pursuant to this Section 5(h).
6. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted to Eligible Persons either alone or in addition to, in tandem with, or in exchange or substitution for, any other Award granted under the Plan or any award granted under any other plan or agreement of the Company, any Subsidiary or Affiliate, or any business entity to be acquired by the Company or a Subsidiary or Affiliate, or any other right of an Eligible Person to receive payment from the Company or any Subsidiary or Affiliate. Awards may be granted in addition to or in tandem with such other Awards or awards, and may be granted either as of the same time as or a different time from the grant of such other Awards or awards. Subject to the provisions of Section 3(e) hereof prohibiting Option and SAR repricing without shareholder approval, the per Share exercise price of any Option, or Options thatgrant price of any SAR, which is granted, in connection with the optionee pay,substitution of awards granted under any other plan or make provision satisfactory toagreement of the Company for the payment of,or any withholding taxes whichSubsidiary or Affiliate or any business entity to be acquired by the Company is obligated
to collect with respect to the issuance or transfer of Common Stock upon such
exercise.
(c) VESTING AND EXERCISE PERIOD. The vesting period of time before
exercising an Optionany Subsidiary or Affiliate, shall be prescribeddetermined by the Committee, in its discretion.
(b) Term of Awards.The term of each particular
case, in the Committee's sole discretion. No Option may be exercised more than
10 years from the date it is granted. Unless otherwise specified by the
Committee, Options shall vest and become exercisable with respectAward granted to 25% of the
shares subject thereto on each of the first, second, third and fourth
anniversaries of the date of the grant. In the event of the death or permanent
disability of an optionee, all outstanding Options shall immediately vest and
become exercisable. Unless otherwise specified, all OptionsEligible Person shall be for such period as may be determined by the Committee; provided, however, that in no event shall the term of any Option or SAR exceed a termperiod of ten years from the date of grant. However, inits grant (or such shorter period as may be applicable under Section 422 of the caseCode).
(c) Form of Payment Under Awards.Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Subsidiary or Affiliate upon the grant,
maturation, or exercise of an Incentive Stock
Option granted to a 10% shareholder (as definedAward may be made in Section 6(a) hereof), such option, by its terms,forms as the Committee shall be exercisable only within five years fromdetermine at the date of grant.
(d) NO RIGHTS TO EMPLOYMENT OR AS A SHAREHOLDER. Nothinggrant or thereafter, including, without limitation, cash, Shares, notes or other property, and may be made in the Plana single payment or transfer, in any Option shall confer any rightinstallments, or on a deferred basis. The Committee may make rules relating to continue in the employ of the Companyinstallment or any parent or subsidiary of the Company or interfere in any way with the right
of the Company or any parent or subsidiary of the Company to terminate the
employment of the optionee at will at any time in accordance with the provisions
of applicable law. An optionee shall have no rights as a shareholder of the
Companydeferred payments with respect to any share issuable or transferable upon exercise thereof
untilAwards, including the date a stock certificate is issuedrate of interest to him for sharesbe credited with respect to such payments, and the Committee may require deferral of Common Stock.
7. EXERCISE AFTER SEPARATION OF EMPLOYMENT OR DEATH
(a) RETIREMENT, DEATH OR DISABILITY. Inpayment under an Award if, in the eventsole judgment of the retirement with the
consentCommittee, it may be necessary in order to avoid nondeductibility of the Company,payment under Section 162(m) of the OptionsCode.
(d) Nontransferability.Unless otherwise set forth by the Committee in an Award Agreement, Awards shall not be transferable by an Eligible Person except by will or unexercised portions thereof that were
otherwise exercisable on the datelaws of retirementdescent and distribution (except pursuant to a Beneficiary designation) and shall be exercisable during their specified terms but priorthe lifetime of an Eligible Person only by such Eligible Person or his guardian or legal representative. An Eligible Person's rights under the Plan may not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall not be subject to three years after the date of retirement,
whichever occurs earlier. In the eventclaims of the deathEligible Person's creditors.
(e) Noncompetition.The Committee may, by way of the Award Agreements or permanent disability (asotherwise, establish such other terms, conditions, restrictions and/or limitations, if any, of any Award, provided they are not inconsistent with the Plan, including, without limitation, the requirement that term is definedthe Participant not engage in competition with the Company.
7. Performance Awards.
(a) Performance Awards Granted to Covered Employees.If the Committee determines that an Award (other than an Option or SAR) to be granted to an Eligible Person should qualify as "performance-based compensation" for purposes of Section 22(e)(3)162(m) of the Code, the grant, vesting, exercise and/or settlement of such Award (each, a "Performance Award") shall be contingent upon achievement of preestablished performance goals and other terms set forth in this Section 7(a).
(i) Performance Goals Generally. The performance goals for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as now in effect or as
subsequently amended),specified by the Committee consistent with this Section 7(a). The performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of the recipient, all Options shall become vestedCode and immediately exercisableregulations thereunder (including Treasury Regulation 1.162-27 and successor regulations thereto), including the requirement that the level or levels of performance targeted by the optionee, Committee result in the achievement of performance goals being "substantially uncertain." The Committee may determine that such Performance Awards shall be granted, vested, exercised and/or if he is not living, by his heirs,
legateessettled upon achievement of any one performance goal or legal representatives (asthat two or more of the caseperformance goals must be achieved as a condition to grant, vesting, exercise and/or settlement of such Performance Awards. Performance goals may be), during their specified
terms but prior to the expiration of three years after the date of death or
permanent disability, whichever occurs earlier.
(b) SEPARATION OF EMPLOYMENT. With respectdiffer for Performance Awards granted to any separationone Participant or to different Participants.
(ii) Business Criteria. One or more of employment
fromthe following business criteria for the Company, on a consolidated basis, and/or for specified Subsidiaries or Affiliates or other than by reasonbusiness units or lines of retirement, death or permanent
disability, Options, if vested on the date of termination, may be exercised
during their specified terms but prior to the expirationbusiness of the earlier of
90 days from termination or such period up to the expiration date originally
scheduled for such option, unless changedCompany shall be used by the Committee in its soleestablishing performance goals for such Performance Awards: (1) earnings per share (basic or fully diluted); (2) revenues; (3) earnings, before or after taxes, from operations (generally or specified operations), or before or after interest expense, depreciation, amortization, incentives, or extraordinary or special items; (4) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (5) return on net assets, return on assets, return on investment, return on capital, return on equity; (6) economic value added; (7) operating margin or operating expense; (8) net income; (9) Share price or total stockholder return; and absolute discretion.
(c) LEAVE OF ABSENCE. If an optionee takes an approved leave(10) strategic business criteria, consisting of absence,one or more objectives based on meeting specified market penetration, geographic business expansion goals, cost targets, customer
satisfaction, supervision of litigation and information technology, and goals relating to acquisitions or divestitures of Subsidiaries, Affiliates or joint ventures. The targeted level or levels of performance with respect to such business criteria may be established at such levels and in such terms as the Committee may if it determines thatdetermine, in its discretion, including in absolute terms, as a goal relative to do so wouldperformance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies.
(iii) Performance Period; Timing for Establishing Performance Goals; Per-Person Limit. Achievement of performance goals in respect of such Performance Awards shall be inmeasured over a performance period, as specified by the best interestCommittee. A performance goal shall be established not later than the earlier of (A) 90 days after the Company, provide in a specific case for
A-3
continuationbeginning of Options duringany performance period applicable to such leavePerformance Award or (B) the time 25% of absence, such continuation to be on
such terms and conditions asperformance period has elapsed. In all cases, the Committee determines to be appropriate.
(d) CERTAIN INVESTMENT RESTRICTIONS. Each Option granted under the Planmaximum Performance Award of any Participant shall be subject to the requirement that, if at any timelimitation set forth in Section 4(b).
(iv) Settlement of Performance Awards; Other Terms. Settlement of such Performance Awards shall be in cash, Shares, other Awards or other property, in the Boarddiscretion of Directors
shall determine,the Committee. The Committee may, in its discretion, thatreduce the listing, registration or
qualificationamount of the shares issuable or transferable upon exercise thereof upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a condition of, orsettlement otherwise to be made in connection with such Performance Awards, but may not exercise discretion to increase any such amount payable to the grantingParticipant in respect of a Performance Award subject to this Section 7(a). Any settlement which changes the form of payment from that originally specified shall be implemented in a manner such that the Performance Award and other related Awards do not, solely for that reason, fail to qualify as "performance-based compensation" for purposes of Section 162(m) of the Code. The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of Termination of Service of the Participant or other event (including a Change of Control) prior to the end of a performance period or settlement of such Option orPerformance Awards.
(v) Maximum Annual Cash Award.The maximum amount payable upon settlement of a cash-settled Performance Unit (or other cash-settled Award) granted under this Plan for any calendar year to any Eligible Person that is intended to satisfy the issue,
transfer or purchaserequirements for "performance-based compensation" under Section 162(m) of shares therethe Code shall not exceed $1,000,000.
(b) Written Determinations. Determinations by the Committee as to the establishment of performance goals, the amount potentially payable in respect of Performance Awards, the level of actual achievement of the specified performance goals relating to Performance Awards and the amount of any final Performance Award shall be recorded in writing in the case of Performance Awards intended to qualify under Section 162(m) of the Code. Specifically, the Committee shall certify in writing, in a manner conforming to applicable regulations under Section 162(m), prior to settlement of each such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent, or
approval shallAward, that the performance objective relating to the Performance Award and other material terms of the Award upon which settlement of the Award was conditioned have been effected or obtained freesatisfied.
8. Change of any conditions not
acceptable toControl Provisions.
(a) Acceleration of Exercisability and Lapse of Restrictions.Unless otherwise provided by the Board of Directors. The Company shall not be obligated to sell
or issue any shares of Common Stock in any manner in contraventionCommittee at the time of the Securities ActAward grant, in the event of 1933, as amended,a Change of Control, (i) all outstanding Awards pursuant to which the Participant may have rights the exercise of which is restricted or any state securities law.
8. ADJUSTMENTS
(a) RECAPITALIZATION. The numberlimited, shall become fully exercisable at the time of sharesthe Change of Control, and (ii) unless the right to lapse of restrictions or limitations is waived or deferred by a Participant prior to such lapse, all restrictions or limitations (including risks of forfeiture and deferrals) on outstanding Awards subject to restrictions or limitations under the Plan shall lapse, and all performance criteria and other conditions to payment of Awards under which payments of cash, Shares or other property are subject to conditions shall be
deemed to be increasedachieved or decreased proportionately, asfulfilled and shall be waived by the case may be, inCompany at the event that
dividends payable in Common Stock during any fiscal yeartime of the Company or in
the event there is during any fiscal yearChange of the Company one or more splits,
reverse splits, subdivisions, or combinationsControl.
(b) Definition of sharesChange of Common Stock
resulting in an increase or decreaseControl.For purposes of the shares outstanding at the beginning
of the year. In the event of any such adjustment the number of underlying shares
and the purchase price per share applicable to Options previously granted shall,
be proportionately adjusted. All adjustments shall be made as of the date such
action necessitating such adjustment becomes effective.
(b) SALE OR REORGANIZATION. In case the Company is merged or consolidated
with another corporation, or in case substantially all of the property, stock or
assets of the Company is to be acquired by another corporation, or in case of a
separation, reorganization, or liquidation of the Company, the Board of
Directors of the Company, or the board of directors of any corporation assuming
the obligations of the Company hereunder, shall either (i) make appropriate
provisions for the protection of any outstanding Options by the substitution on
an equitable basis of cash or comparable stock or stock options of the Company,
or cash or comparable stock or stock options of the merged, consolidated, or
otherwise reorganized corporation, or (ii) make a cash payment equal to the
difference between the exercise price of all vested Options and the fair market
value of the Common Stock on the date of such transaction, as determined by the
highest sale price of the Common Stock quoted by the market or exchange on which
the security is traded.
(c) CHANGE IN CONTROL. Notwithstanding anything to the contrary in this Plan, if there should be a "Change in Control" of the Company, all of the
Options granted under the Plan that are not currently exercisable shall become
immediately vested as of the date of such Change in Control. Unless otherwise
determined by the Committee and set forth in a written agreement, "Change in Control" shall mean:
(A)
(i) the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) by any individual, entity or group (within the meaning of Section 13 (d)13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person"), of 30% or more of either (1) the then outstanding shares of Common Stockcommon stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities");provided, however, that the following shall not constitute a Change in Control;of Control: (i) such beneficial ownership by a subsidiarySubsidiary of the Company; (ii) such beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or any or its subsidiaries;Subsidiaries; (iii) such beneficial ownership by any corporation with respect to which, immediately following the
A-4
Common Stockcommon stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and no Person (other than Persons described in clause (iv) below) beneficially owns 30% or more of the voting securities of such corporation; (iv) such beneficial ownership by Robert J. Higgins, members of his immediate family or one or more trusts established for the benefit of such individual or family members; or (v) beneficial ownership by a Person of a percentage of Outstanding Company Common Stock or Outstanding Company Voting Securities which is less than the percentage of Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be, held by Robert J. Higgins, members of his immediate family and one or more trusts established for the benefit of such individual or family members; or
(B)
(ii) during any period of two consecutive years, individuals who, as of the beginning of such period, constitute the Board of Directors of the
Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board;provided, however, that any individual becoming a director subsequent to the beginning of such period whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or
(C) approval by the shareholders of the Company
(iii) consummation of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation, do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of Common Stockcommon stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities as the case may be; or
(D) approval by the shareholders
(iv) consummation of the Company of (1) a complete
liquidation or dissolution of the Company or (2) a sale or disposition of all or substantially all of the assets of the Company, other than to a corporation with respect to which, following such sale or other disposition, more than 50% of, respectively, the then outstanding shares of Common Stockcommon stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition, in substantially the same proportions as their ownership immediately priorof the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; or
(v) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
9. General Provisions.
(a) Compliance with Legal and Trading Requirements.The Plan, the granting and exercising of Awards thereunder, and the other obligations of the Company under the Plan and any Award Agreement, shall be subject to all applicable federal, state and foreign laws, rules and regulations, and to such saleapprovals by any stock exchange, regulatory or governmental agency as may be required. The Company, in its discretion, may postpone the issuance or delivery of Shares under any Award until completion of such stock exchange or market system listing or registration or qualification of such Shares or other disposition.
A-5
9. NON-TRANSFERABILITY OF OPTIONS
Unless otherwiserequired action under any state, federal or foreign law, rule or regulation as the Company may consider appropriate, and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Shares in compliance with applicable laws, rules and regulations. No provisions of the Plan shall be interpreted or construed to obligate the Company to register any Shares under federal, state or foreign law. The Shares issued under the Plan may be subject to such other restrictions on transfer as determined for a Non-Qualified Stock Option by the Committee and set forth in a written option agreement, no OptionCommittee.
(b) No Right to Continued Employment or Service.Neither the Plan nor any action taken thereunder shall be assignableconstrued as giving any employee, consultant or transferable by the optionee except by will or by the laws of
descent and distribution and during the lifetime of a recipient, Options shall
be exercisable only by the optionee.
10. TERMINATION AND AMENDMENT OF THE PLAN
The Board of Directors shall havedirector the right to be retained in the employ or service of the Company or any of its Subsidiaries or Affiliates, nor shall it interfere in any way with the right of the Company or any of its Subsidiaries or Affiliates to terminate any employee's, consultant's or director's employment or service at any time.
(c) Taxes.The Company or any Subsidiary or Affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to an Eligible Person, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Eligible Persons to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of an Eligible Person's tax obligations.
(d) Changes to the Plan and Awards.The Board may amend, alter, suspend, discontinue, or terminate the Plan; provided, however, that, withoutPlan or the written consent of the holder no
such action shall affect or in any way impair the rights of a recipient under
any Option or SAR theretofore granted under the Plan; and provided further,
however, that no amendment may be made increasing the number of shares
authorized for issuanceCommittee's authority to grant Awards under the Plan except as provided in Section 8 hereof,
without obtaining shareholder approval. Further, no such amendments shall be
made without obtaining the requisite shareholder approvalconsent of the Company's
Shareholders if shareholder approval is required as condition to the Plan
continuing to comply with the provision of Rule 16b-3
11. EFFECTIVE DATE OF PLAN
The Plan was adopted by the Board of Directorsshareholders of the Company on March 15,
2002 and shall become effective upon shareholder approval within 12 months
thereafter. The Plan shall, in all events, terminate on the tenth anniversary of
effectiveness or Participants, except that any such earlier date as the Board of Directors of the Company may
determine.
12. WRITTEN AGREEMENT
Each Option granted hereunder shall be embodied in a written agreement,
whichamendment or alteration shall be subject to the approval of the Company's shareholders (i) to the extent such shareholder approval is required under the rules of any stock exchange or automated quotation system on which the Shares may then be listed or quoted, or (ii) as it applies to ISOs, to the extent such shareholder approval is required under Section 422 of the Code;provided, however,that, without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may
materially and adversely affect the rights of such Participant under any Award theretofore granted to him or her. The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate, any Award theretofore granted, prospectively or retrospectively;provided, however,that, without the consent of a Participant, no amendment, alteration, suspension, discontinuation or termination of any Award may materially and conditions prescribed byadversely affect the rights of such Participant under any Award theretofore granted to him or her.
(e) No Rights to Awards; No Shareholder Rights.No Eligible Person or employee shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons and employees. No Award shall containconfer on any Eligible Person any of the rights of a shareholder of the Company unless and until Shares are duly issued or transferred to the Eligible Person in accordance with the terms of the Award.
(f) Unfunded Status of Awards.The Plan is intended to constitute an "unfunded" plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such other provisions asParticipant any rights that are greater than those of a general creditor of the Company;provided, however,that the Committee in its discretion shall
deem necessarymay authorize the creation of trusts or advisable. The agreement,make other arrangements to meet the Company's obligations under the Plan to deliver cash, Shares, other Awards, or other property pursuant to any Award, which need not be identical,trusts or other arrangements shall be signedconsistent with the "unfunded" status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.
(g) Nonexclusivity of the Plan.Neither the adoption of the Plan by the employee participant and byBoard nor its submission to the Chairman of the Board, the Vice
Chairman, the President, the Secretary or any Vice Presidentshareholders of the Company for and inapproval shall be construed as creating any limitations on the name and on behalfpower of the Company.
13. GOVERNING LAW
TheBoard to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of options and other awards otherwise than under the Plan, and all determinations made and actions taken pursuant heretosuch arrangements may be either applicable generally or only in specific cases.
(h) Not Compensation for Benefit Plans.No Award payable under this Plan shall be governed bydeemed salary or compensation for the lawspurpose of computing benefits under any benefit plan or other arrangement of the StateCompany for the benefit of its employees, consultants or directors unless the Company shall determine otherwise.
(i) No Fractional Shares.No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
(j) Governing Law.The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award Agreement shall be determined in accordance with the laws of New York, without referencegiving effect to its principles of conflict of laws thereof.
(k) Effective Date; Plan Termination.The Plan shall become effective as of June 8, 2005 (the "Effective Date"), subject to approval by the shareholders of the Company. The Plan shall terminate as to future awards on the date which is ten (10) years after the Effective Date.
(l) Section 409A.It is intended that the plan and Awards issued thereunder will comply with Secton 409A of the Code (and any regulations and guidelines issued thereunder) to the extent the awards are subject thereto, and the Plan and such Awards shall be construed accordingly.
A-6
- --------------------------------------------------------------------------------
Trans World Entertainment Corporation Please mark |X|
your votes as
indicatedinterpreted on a basis consistent with such intent. The Plan and any Award Agreements issued thereunder may be amended in this example
any respect deemed by the Board or the Committee to be necessary in order to preserve compliance with Section 409A of the Code.
(m) Titles and Headings.The Boardtitles and headings of Directors recommends a vote FOR items 1, 2 and 3.
Item 1-ELECTION OF DIRECTORS
Nominees:
01 George W. Dougan, 02 Martin E. Hanaka and 03 Isaac Kaufman
WITHHELD
FOR FOR ALL
|_| |_|
WITHHELD FOR: (Write that nominee's namethe sections in the space provided below).
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
Item 2- To approvePlan are for convenience of reference only. In the 2002 Employee Stock Option |_| |_| |_|
Plan.
FOR AGAINST ABSTAIN
Item 3- To approveevent of any conflict, the Trans World Entertainment Bonus |_| |_| |_|
Plan.
Item 4- In their discretion,text of the Proxies are authorized to
vote upon all other matters that properly may be
presented at the meeting.
CHANGE OF ADDRESS AND OR |_|
COMMENTS MARK HERE.
Signature ______________________ Signature ____________________ Date ___________
NOTE: Please sign as name appears herein. Joint owners should each sign. When
signing as attorney, executor, administrator, trusteePlan, rather than such titles or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
^ headings, shall control.
| Trans World Entertainment Corporation | Please Mark Here for Address Change or Comments SEE REVERSE SIDE | o |
| The Board of Directors recommends a vote FOR items 1 and 2. | ||||||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||||||
| Item 1—ELECTION OF DIRECTORS Nominees: 01 Martin Hanaka, 02 Isaac Kaufman and 03 Lori Schafer | Item 2—Approval of the 2005 Long Term Incentive and Share Award Plan | o | o | o | ||||||||||
FOR | WITHHELD FOR ALL | Item 3—In their discretion, the Proxies are authorized to vote upon all other matters that properly may be presented at the meeting. | ||||||||||||
| o | o | |||||||||||||
WITHHELD FOR: (Write that nominee's name in the space provided below). | Plan to Attend Meeting | o | ||||||||||||
| Signature | Signature | Date |
| NOTE: | Please sign as name appears herein. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. |
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE ^
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TRANS WORLD ENTERTAINMENT CORPORATION
The undersigned hereby appoints Robert J. Higgins and Michael B. SolowJohn J. Sullivan proxies, with power to act without the other and with power of substitution, and hereby authorizes them to represent and vote, as designated on the other side, all the shares of stock of Trans World Entertainment Corporation standing in the name of the undersigned with all powers which the undersigned would possess if present at the Annual Meeting of Stockholders of the Company to be held June 20,
20028, 2005 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 2 AND 3.
(Continued,and 2.
(Continued, and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
^
| Address Change/Comments (Mark the corresponding box on the reverse side) | ||||
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE ^
/\
You can now access your Trans World Entertainment account online.
Access your Trans World Entertainment shareholder account online via Investor ServiceDirect(SM)ServiceDirect® (ISD).
Mellon Investor Services LLC, agentTransfer Agent for Trans World Entertainment, Corporation, now makes it easy and convenient to get current information on your shareholder account. After a simple, and secure process of establishing a Personal
Identification Number (PIN), you are ready to log in and access your account to:
o View account status o Make address changes
o View certificate history o Establish/change your PIN
| • | View account status | • | Make address changes | |||
| • | View certificate history | • | Obtain a duplicate 1099 tax form | |||
| • | Establish/change your PIN | |||||
Visit us on the web at http://www.melloninvestor.com
and follow the instructions shown on this page.
Step 1: FIRST TIME USERS - Establish a PIN
You must first establish a Personal Identification Number (PIN) online by
following the directions provided in the upper right portion of the web screen
as follows. You will also need your Social Security Number (SSN) available to
establish a PIN.
Investor ServiceDirect(SM)is currently only available for domestic individual
and joint accounts.
o SSN
o PIN
o Then click on the Establish PIN button
Please be sure to remember your PIN, or maintain it in a secure place for future
reference.
- --------------------------------------------------------------------------------
Step 2: Log in for Account Access
You are now ready to log in. To access your account please enter your:
o SSN
o PIN
o Then click on the Submit button
If you have more than one account, you will now be asked to select the
appropriate account.
- --------------------------------------------------------------------------------
Step 3: Account Status Screen
You are now ready to access your account information. Click on the appropriate
button to view or initiate transactions.
o Certificate History
o Issue Certificate
o Address Change
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
- --------------------------------------------------------------------------------