EXHIBIT 5
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of April 29,
2005, by and among The Wet Seal, Inc., a Delaware corporation, with headquarters
located at 00000 Xxxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the "COMPANY"), and
the investors listed on the Schedule of Buyers attached hereto (individually, a
"BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and certain Buyers (the "ORIGINAL BUYERS") entered into
that certain Securities Purchase Agreement dated as of November 9, 2004 (as
amended and restated and further amended prior to the date hereof, the "EXISTING
SPA"), whereby the Company, among other things, issued Series A Warrants (the
"SERIES A WARRANTS") and Series B Warrants (the "SERIES B WARRANTS")
(collectively, the "EXISTING WARRANTS"), which Existing Warrants are exercisable
to acquire up to specified numbers of shares of the Company's Class A Common
Stock, $0.10 par value per share (the "CLASS A COMMON STOCK"). In connection
therewith, the Company and the Original Buyers entered into a Registration
Rights Agreement with respect to, among other things, the shares of Class A
Common Stock to be received upon exercise of the Existing Warrants (as amended
prior to the date hereof, the "EXISTING RRA").
B. The Company and each Buyer is executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and Rule 506 of
Regulation D ("REGULATION D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act.
C. The Company has authorized a new series of convertible preferred stock
of the Company designated as Series C Convertible Preferred Stock, the terms of
which are set forth in the certificate of designations for such series of
preferred stock (the "CERTIFICATE OF DESIGNATIONS") in the form attached hereto
as Exhibit A (the "PREFERRED SHARES"), which Preferred Shares shall be
convertible into shares of the Class A Common Stock (as converted, the
"CONVERSION SHARES"), in accordance with the terms of the Certificate of
Designations.
D. Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) that aggregate number of
Preferred Shares set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers (which aggregate number for all Buyers shall be 24,600
Preferred Shares and (ii) Series E Warrants, in substantially the form attached
hereto as Exhibit B (the "WARRANTS"), to acquire up to that number of additional
shares of Class A Common Stock set forth opposite such Buyer's name in column
(4) on the Schedule of Buyers attached hereto (which aggregate number for all
Buyers shall be 7,500,000 shares of Class A Common Stock) (as exercised,
collectively, the "WARRANT SHARES").
E. Each Buyer wishes to exercise (i) its Series A Warrants for that
aggregate number of shares of Class A Common Stock set forth opposite such
Buyer's name in column (2) on the Schedule of Closing Exercise Shares attached
hereto (which aggregate number for all Buyers shall be 2,300,000 shares of Class
A Common Stock) on the terms and conditions of the Series A Warrants and (ii) a
portion of its Series B Warrants for that aggregate number of shares of Class
A Common Stock set forth opposite such Buyer's name in column (3) on the
Schedule of Closing Exercise Shares attached hereto (which aggregate number for
all Buyers shall be 1,059,997 shares of Class A Common Stock) on the terms and
conditions of the Series B Warrants (the shares received upon the exercises
referred to in clauses (i) and (ii) are collectively referred to herein as the
"CLOSING EXERCISE SHARES").
F. On or prior to the Closing, the parties hereto shall execute and
deliver a Registration Rights Agreement, substantially in the form attached
hereto as EXHIBIT C (as amended or modified from time to time in accordance with
its terms, the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company
has agreed to provide certain registration rights with respect to the Preferred
Shares, Warrants, Conversion Shares and the Warrant Shares under the 1933 Act
and the rules and regulations promulgated thereunder, and applicable state
securities laws.
G. In connection with the transactions contemplated by the Existing SPA,
the Company entered into the following agreements: (i) a credit agreement by and
among the Company and certain of its Subsidiaries, S.A.C. Capital Associates,
LLC, as administrative agent and collateral agent (in such capacity the "BRIDGE
AGENT"), and certain of the Buyers, as lenders, as amended prior to the date
hereof (the "BRIDGE FACILITY"); (ii) an intercreditor and lien subordination
agreement by and among the Bridge Agent, Fleet Retail Group, Inc., as
administrative agent and collateral agent (the "SENIOR AGENT") for certain
lenders (the "SENIOR LENDERS") and the Company and certain of its Subsidiaries,
as amended prior to the date hereof (the "INTERCREDITOR AGREEMENT"); (iii) an
Amended and Restated Subordination Agreement, by and among the Senior Lenders,
the Buyers, The Bank of New York, as trustee (the "TRUSTEE") and the Company
(the "AMENDED AND RESTATED SUBORDINATION AGREEMENT").
H. On the Escrow Date (as defined below), the parties hereto shall
execute and deliver the following documents: (i) a second amendment to the
Bridge Facility, (ii) a first amendment to the Amended and Restated
Subordination Agreement, (iii) a third amendment to the Senior Credit Facility
(as defined below) and (iv) a second amendment to the Intercreditor Agreement,
(collectively, the "SECURITY AMENDMENTS"). Certain obligations under the
Warrants, the Certificate of Designations and the Registration Rights Agreement
shall also be fully subordinated to the debt and liens in favor of the Senior
Agent and the Senior Lenders pursuant to a Subordination Agreement, to be dated
as of the Closing Date, among the Senior Lenders, the Buyers and the Company
(the "SUBORDINATION AGREEMENT", and together with the Security Amendments, the
"SECURITY DOCUMENTs").
I. The Preferred Shares, the Conversion Shares, the Warrants and the
Warrant Shares collectively are referred to herein as the "SECURITIES".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS; EXERCISE OF
EXISTING WARRANTS.
(a) PURCHASE OF PREFERRED SHARES AND WARRANTS.
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(i) PREFERRED SHARES AND WARRANTS. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but not jointly,
agrees to purchase from the Company on the Closing Date (as defined below), (A)
that number of Preferred Shares as is set forth opposite such Buyer's name in
column (3) on the Schedule of Buyers and (B) one or more Series E Warrants to
acquire up to that number of Warrant Shares as is set forth opposite such
Buyer's name in column (4) on the Schedule of Buyers.
(ii) PURCHASE PRICE. The aggregate purchase price for the
Preferred Shares and the Warrants to be purchased by each Buyer at the Closing
(the "PURCHASE PRICE") shall be the amount set forth opposite such Buyer's name
in column (6) of the Schedule of Buyers less: (A) such principal amount, if any,
as is set forth opposite such Buyer's name in column (5) on the Schedule of
Buyers, together with any accrued, but unpaid interest thereon, with respect to
the Bridge Facility reduction in accordance with Section 4(x) hereof and (B) in
the case of S.A.C. Capital Associates, LLC ("SAC") (a Buyer), a withholding
amount with respect to certain expenses in accordance with Section 4(g)(ii)
(collectively, the "PRICE REDUCTION AMOUNTS"); provided, however, that if SAC's
Purchase Price has been reduced to zero as a result of the application of the
Price Reduction Amounts, SAC may apply any remaining Price Reduction Amounts to
its Closing Exercise Price (as defined below).
(b) PURCHASE OF CLOSING EXERCISE SHARES. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 6 and 7 below, each Buyer
shall exercise its Series A Warrants and Series B Warrants pursuant to the
respective terms and conditions thereof for such number of shares Class A Common
Stock with respect thereto as set forth opposite such Buyer's name in columns
(2) and (3) on the Schedule of Closing Exercise Shares, respectively. The
aggregate purchase price for the Closing Exercise Shares to be purchased by each
Buyer at the Closing (the "CLOSING EXERCISE PRICE," together with the Purchase
Price, the "TOTAL PURCHASE PRICE") shall be the amount set forth opposite such
Buyer's name in column (7) of the Schedule of Closing Exercise Shares.
(c) FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall pay
its Total Purchase Price to the Company for the Preferred Shares, the Warrants
and the Closing Exercise Shares to be issued and sold to such Buyer at the
Closing, by wire transfer of immediately available funds in accordance with the
Company's written wire instructions, and (ii) the Company shall deliver to each
Buyer (A) the Preferred Shares (represented by one or more certificates in the
number and denominations as such Buyer shall request) which such Buyer is then
purchasing, (B) the Warrants (allocated in the amounts as such Buyer shall
request) such Buyer is purchasing, in each case duly executed on behalf of the
Company and registered in the name of such Buyer or its designee and (C) the
Closing Exercise Shares (represented by one or more certificates in the number
and denominations as such Buyer shall request) such Buyer is purchasing, in each
case duly executed on behalf of the Company and registered in the name of such
Buyer or its designee.
(d) CLOSING. The date and time (the "CLOSING DATE") of the
consummation of the transactions contemplated by Section 1(a)(ii) above (the
"CLOSING") shall be on or before May 3, 2005, after notification of satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below
(or such other date as is mutually agreed to by the Company and
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holders of at least a majority of the Preferred Shares issued and, prior to the
Closing, issuable hereunder (the "MAJORITY BUYERS")) at the offices of Xxxxxxx
Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. For purposes of
this Agreement, "BUSINESS DAY" means any day other than Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law to remain closed.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
(a) NO SALE OR DISTRIBUTION. Such Buyer is acquiring the Preferred
Shares, the Warrants and the Closing Exercise Shares and, upon conversion of the
Preferred Shares, will acquire the Conversion Shares issuable upon conversion of
the Preferred Shares and, upon exercise of the Warrants, will acquire the
Warrant Shares issuable upon exercise of the Warrants for its own account, not
as nominee or agent, and not with a view towards, or for resale in connection
with, the sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; PROVIDED, HOWEVER, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities. For the purpose of this Agreement,
"PERSON" shall mean any individual, corporation, partnership (general or
limited), limited liability company, firm, joint venture, association,
joint-stock company, trust, estate, unincorporated organization or government or
any department or agency thereof.
(b) ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) INFORMATION. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities,
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein. Such Buyer understands that its investment in the Securities involves a
high degree of risk. Such Buyer has
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sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities.
(e) NO GOVERNMENTAL REVIEW. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
offered for sale, sold, assigned or transferred to an affiliate of such Buyer,
(B) subsequently registered thereunder, (C) such Buyer shall have delivered to
the Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (D) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the 1933 Act, as amended, (or a successor rule thereto) (collectively,
"RULE 144"); (ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in which the
seller (or the Person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.
(g) LEGENDS. Such Buyer understands that, until such time as the
resale of the Securities have been registered under the 1933 Act as contemplated
by the Registration Rights Agreement, the certificates or other instruments
representing the Securities, except as set forth below, shall bear any legend as
required by the "blue sky" laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such instruments):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
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NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144
OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the Company with reasonable assurance that the Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A.
(h) VALIDITY; ENFORCEMENT. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(i) NO CONFLICTS. The execution, delivery and performance by such
Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such Buyer
or (ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such Buyer, except
in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of such
Buyer to perform its obligations hereunder.
(j) RESIDENCY. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
(k) TRANSFERS TO COMPANY EMPLOYEES. As of the date hereof, such Buyer
does not have any agreement or arrangement to transfer any of the Securities to
any of the Company's officers, directors, employees or consultants or any
affiliate entities of such Person.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
(a) ORGANIZATION AND QUALIFICATION.
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(i) The Company and its "SUBSIDIARIES" (which for purposes of
this Agreement means any entity in which the Company, directly or indirectly,
owns outstanding capital stock or holds an equity or similar interest
representing the outstanding equity or similar interest of such entity) are
entities duly organized and validly existing in good standing under the laws of
the jurisdiction in which they are formed, and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign entity to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect.
The Company has no Subsidiaries except as set forth on SCHEDULE 3(A). SCHEDULE
3(A) sets forth the nature and percentage ownership of the Company in each
Subsidiary. As used in this Agreement, "MATERIAL ADVERSE EFFECT" means any
material adverse effect on the business, properties, assets, operations, results
of operations or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, or on the transactions contemplated hereby and
in the Transaction Documents (as defined below) or by the agreements and
instruments to be entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents.
(b) AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement, the Certificate of Designations, the Warrants, the Registration
Rights Agreement, the Security Documents, the Existing Warrants to be exercised
for the Closing Exercise Shares, the Irrevocable Transfer Agent Instructions (as
defined in Section 5(b)) and any other certificate, instrument or document
contemplated hereby or thereby (collectively, the "TRANSACTION DOCUMENTS") and
to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Preferred Shares, the
Warrants and the Closing Exercise Shares, the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion of the Preferred
Shares, and the reservation for issuance and issuance of Warrant Shares issuable
upon exercise of the Warrants have been duly authorized by the Company's Board
of Directors and, other than the filings specified in Section 3(e) and the
filing of the Certificate of Designations with the Secretary of State of the
State of Delaware, no further filing, consent, or authorization is required by
the Company, its Board of Directors or its stockholders. This Agreement and the
other Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies. Any other Transaction
Documents dated after the date herewith upon execution shall have been duly
executed and delivered by the Company, and constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies. As of the Closing, each
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of the Series A Warrants and the Series B Warrants shall be in full force and
effect, enforceable against the Company in with its terms and shall not have
been amended, except in accordance with their respective terms. As of the
Closing, the Certificate of Designations in the form attached as EXHIBIT A shall
have previously been filed with the Secretary of State of the State of Delaware
and shall be in full force and effect, enforceable against the Company in with
its terms and shall not have been amended.
(c) ISSUANCE OF SECURITIES. The issuance of the Preferred Shares, the
Warrants and the Closing Exercise Shares are duly authorized and are free from
all taxes, liens and charges with respect to the issue thereof and, as of the
Closing Date, the Preferred Shares shall be entitled to the rights and
preferences set forth in the Certificate of Designations. As of the Closing, a
number of shares of Class A Common Stock shall have been duly authorized and
reserved for issuance which equals or exceeds 130% of the aggregate of the
maximum number of shares Class A Common Stock: (i) issuable upon conversion of
the Preferred Shares as of the trading day immediately preceding the Closing
Date and (ii) issuable upon exercise of the Warrants as of the trading day
immediately preceding the Closing Date. Upon issuance or conversion in
accordance with the Certificate of Designations or exercise in accordance with
the Warrants, as the case may be, the Conversion Shares and the Warrant Shares,
respectively, will be duly authorized, validly issued, fully paid and
nonassessable and free from all preemptive or similar rights, taxes, liens and
charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of shares of Class A Common Stock. Assuming the
accuracy of each of the representations and warranties set forth in Section 2 of
this Agreement, the offer and issuance by the Company of the Preferred Shares,
Warrants and Closing Exercise Shares is exempt from registration under the 1933
Act.
(d) NO CONFLICTS. Except as set forth in Schedule 3(d), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby
(including, without limitation, the issuance of the Preferred Shares, the
Warrants and Closing Exercise Shares, and reservation for issuance and issuance
of the Conversion Shares and the Warrant Shares, without regard to the
limitation on issuance thereof) will not (i) result in a violation of any
certificate of incorporation, certificate of formation, any certificate of
designations or other constituent documents of the Company or any of is
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or
bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Nasdaq National Market (the "PRINCIPAL MARKET")) applicable
to the Company or any of its Subsidiaries or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected, except in the case
of (ii) and (iii) to the extent that such violation, conflict, default or right
would not have a Material Adverse Effect. As of the Closing Date, after giving
effect to any consents or waivers obtained by the Company, the transactions
contemplated hereby to effect the pay-off of the Bridge Facility will not
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, acceleration or cancellation of the Senior Credit Facility (as
defined below).
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(e) CONSENTS. Except as set forth in SCHEDULE 3(E), the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence shall have been obtained or
effected on or prior to the Closing Date, and the Company and its Subsidiaries
are unaware of any facts or circumstances which might prevent the Company from
obtaining or effecting any of the registration, application or filings pursuant
to the preceding sentence. Except as set forth in SCHEDULE 3(E), the Company is
not in violation of the listing requirements of the Principal Market and has no
knowledge of any facts which would reasonably lead to delisting or suspension of
the Class A Common Stock in the foreseeable future.
(f) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES. The
Company acknowledges and agrees that each Buyer is acting individually and
solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and thereby and
that no Buyer is: (i) an officer or director of the Company, (ii) an "affiliate"
of the Company (as defined in Rule 144) or (iii) to the knowledge of the
Company, a "beneficial owner" of more than 10% of the shares of Class A Common
Stock (as defined for purposes of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "1934 Act")). The Company further
acknowledges that no Buyer is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and any advice given by a
Buyer or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer's purchase of the Securities. The Company further
represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
(g) NO GENERAL SOLICITATION; AGENT'S FEES. Neither the Company, nor
any of its affiliates, nor any Person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offer or sale of the Securities. The
Company shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or brokers' commissions (other than for Persons engaged
by any Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby. Except as set forth on SCHEDULE 3(G) hereto,
the Company has not engaged any investment advisor, placement agent or other
agent in connection with the sale of the Securities.
(h) NO INTEGRATED OFFERING. None of the Company, its Subsidiaries,
any of their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of
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the Company are listed or designated. None of the Company, its Subsidiaries,
their affiliates and any Person acting on their behalf will take any action or
steps referred to in the preceding sentence that would require registration of
any of the Securities under the 1933 Act or cause the offering of the Securities
to be integrated with other offerings.
(i) DILUTIVE EFFECT. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
may increase in certain circumstances. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Shares in
accordance with this Agreement and the Certificate of Designations is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company.
(j) APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. The
Company and its Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the jurisdiction of its formation which is or could become
applicable to any Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities. Except as set forth on
SCHEDULE 3(J)(A), the Company has not adopted a stockholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of Class A
Common Stock or a change in control of the Company (each "RIGHTS PLAN"). The
Board of Directors of the Company has, prior to the execution of this Agreement,
adopted a resolution exempting the issuance of the Securities from any Rights
Plan of the Company and from any control share acquisition statute applicable to
the Company, which is attached hereto as SCHEDULE 3(J)(B).
(k) SEC DOCUMENTS; FINANCIAL STATEMENTS. During the two (2) years
prior to the date hereof, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing filed prior
to the date hereof and all exhibits included therein and financial statements,
notes and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the "SEC DOCUMENTS"). The Company has delivered
to the Buyers or their respective representatives true, correct and complete
copies of the SEC Documents not available on the XXXXX system. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, or as of the date of the
last amendment thereof, if amended after filing, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. Except as set
forth on Schedule 3(k), as of their respective dates, the financial statements
of the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be
- 10 -
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(l) ABSENCE OF CERTAIN CHANGES. Other than as set forth in the SEC
Documents or as set forth in Schedule 3(l), since the date of the Company's most
recent SEC Documents, there has been no material adverse change and no material
adverse development, which constitutes a Material Adverse Effect. Since January
31, 2004, the Company has not (i) declared or paid any dividends, (ii) sold any
assets, individually or in the aggregate, in excess of $100,000 outside of the
ordinary course of business or (iii) had capital expenditures, individually or
in the aggregate, in excess of $100,000 outside of the ordinary course of
business. The Company has not taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
The Company and its Subsidiaries, individually and on a consolidated basis, are
not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent. For purposes
of this Section 3(l), "INSOLVENT" means, with respect to any Person, (i) the
present fair saleable value of such Person's assets is less than the amount
required to pay such Person's total Indebtedness (as defined in Section 3(s))
(other than any future lease liabilities as such exist on the date hereof), (ii)
the Person is unable to pay its debts and liabilities (other than any future
lease liabilities as such exist on the date hereof), subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii) such
Person intends to incur or believes that it will incur debts (other than any
future lease liabilities as such exist on the date hereof) that would be beyond
its ability to pay as such debts mature or (iv) such Person has unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted.
(m) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Company or its
Subsidiaries or their respective business, properties, prospects operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Class A Common
Stock and which has not been publicly announced.
(n) CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the Company nor
its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation or Bylaws or their organizational charter or
certificate of incorporation or bylaws, respectively. Neither the Company nor
any of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Except as set forth in Schedule 3(n), without limiting the
generality of the foregoing, the Company is not in violation of any of the
rules, regulations or requirements of the Principal Market and has no knowledge
of any facts or circumstances which would reasonably lead to delisting or
suspension of the Class A Common Stock by the Principal
- 11 -
Market in the foreseeable future. Since January 31, 2004, (i) the Class A Common
Stock has been designated for quotation on the Principal Market, (ii) trading in
the Class A Common Stock has not been suspended by the SEC or the Principal
Market and (iii) the Company has received no communication, written or oral,
from the SEC or the Principal Market regarding the suspension or delisting of
the Class A Common Stock from the Principal Market. The Company and its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate regulatory authorities necessary to conduct their respective
businesses, as presently operated, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(o) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(p) XXXXXXXX-XXXXX ACT. Except as set forth in Schedule 3(p), the
Company is in compliance with any and all applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and any and
all applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof, except where such noncompliance would not have,
individually or in the aggregate, a Material Adverse Effect.
(q) TRANSACTIONS WITH AFFILIATES. Except as set forth in the SEC
Documents filed at least ten days prior to the date hereof and other than the
grant of stock options or restricted stock disclosed on SCHEDULE 3(Q), none of
the officers, directors or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
(r) EQUITY CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 150,000,000 shares of Class A
Common Stock, of which as of the date hereof, 41,250,582 are issued and
outstanding, 10,302,540 shares are reserved for issuance pursuant to the
Company's stock option and purchase plans and 67,903,332 shares are reserved for
issuance prior to the exercise by the Buyers of the Closing Exercise Shares
pursuant to securities (other than the aforementioned options and shares, the
Preferred Shares and the Warrants) exercisable or exchangeable for, or
convertible into, shares of Class A Common Stock, (ii) 10,000,000 shares of
Class B Common Stock, $0.10 par value per share (the "CLASS B
- 12 -
COMMON STOCK"), of which as of the date hereof, none are issued and outstanding
and (iii) 2,000,000 shares of preferred stock, $0.01 par value per share, of
which as of the date hereof none of which is issued and outstanding and
1,000,000 of which are reserved for issuance under the Company's Rights Plan.
Immediately prior to the Closing Date, 24,600 shares of Series C Convertible
Preferred Stock shall be designated, none of which shall be issued and
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in
SCHEDULE 3(R): (i) none of the Company's share capital is subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company; (ii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any share capital of the Company or any of its Subsidiaries,
or contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to issue additional share
capital of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any share capital of the Company or any of its Subsidiaries;
(iii) there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
(as defined in Section 3(s)) of the Company or any of its Subsidiaries or by
which the Company or any of its Subsidiaries is or may become bound; (iv) there
are no financing statements securing obligations in any material amounts, either
singly or in the aggregate, filed in connection with the Company; (v) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except the Existing RRA and the Registration Rights Agreement); (vi) there are
no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; (viii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement; and (ix) the Company and its Subsidiaries have no liabilities or
obligations required to be disclosed in the SEC Documents but not so disclosed
in the SEC Documents, other than those incurred in the ordinary course of the
Company's or its Subsidiaries' respective businesses and which, individually or
in the aggregate, do not or would not have a Material Adverse Effect. The
Company has furnished to the Buyer true, correct and complete copies of the
Company's Certificate of Incorporation, as amended and as in effect on the date
hereof (the "CERTIFICATE OF INCORPORATION"), and the Company's Bylaws, as
amended and as in effect on the date hereof (the "BYLAWS"), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of Class
A Common Stock and the material rights of the holders thereof in respect thereto
to the extent not available on the Xxxxx System.
(s) INDEBTEDNESS AND OTHER CONTRACTS. Except as disclosed in SCHEDULE
3(S), neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults
- 13 -
would not result, individually or in the aggregate, in a Material Adverse
Effect, or (iv) is a party to any contract, agreement or instrument relating to
any Indebtedness, the performance of which, in the judgment of the Company's
officers, has or is expected to have a Material Adverse Effect. SCHEDULE 3(S)
provides a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "INDEBTEDNESS" of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; and (y) "CONTINGENT OBLIGATION"
means, as to any Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto.
(t) ABSENCE OF LITIGATION. Except as set forth in SCHEDULE 3(T),
there is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against the Company, the Class A Common Stock or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or
directors. SCHEDULE 3(T) sets forth the details of any such litigation.
(u) INSURANCE. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers
- 14 -
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.
(v) EMPLOYEE RELATIONS. (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. Except as set forth on SCHEDULE 3(V), the Company and its
Subsidiaries believe that their relations with their employees are good. Except
as set forth on SCHEDULE 3(V), no executive officer of the Company (as defined
in Rule 501(f) promulgated under the 0000 Xxx) has notified the Company that
such officer intends to leave the Company or otherwise terminate such officer's
employment with the Company. No executive officer of the Company, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters
except a would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(ii) The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
(w) TITLE. Except as set forth in SCHEDULE 3(W), the Company and its
Subsidiaries have good and marketable title to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and material defects except such as do not materially affect
the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and any of its Subsidiaries. Any real
property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(x) INTELLECTUAL PROPERTY RIGHTS. Except as set forth in SCHEDULE
3(X), the Company and its Subsidiaries own or possess adequate rights or
licenses to use (A) patents (and any renewals and extensions thereof), patent
rights (and any applications therefor), rights of priority and other rights in
inventions; (B) trademarks, service marks, trade names and trade dress, and all
registrations and applications therefor and all legal and common-law equivalents
of any of the foregoing; (C) copyrights and rights in mask works (and any
applications or registrations for the foregoing, and all renewals and extensions
thereof), common-law copyrights and rights of authorship including all rights to
exploit any of the foregoing in any media and by any manner and means now known
or hereafter devised; (D) industrial design rights, and all registrations and
applications therefor; (E) rights in data, collections of data and databases,
and all legal or common-law equivalents thereof; (F) rights in domain names and
domain name reservations; (G) rights in trade secrets, proprietary information
and know-how (collectively, "INTELLECTUAL PROPERTY RIGHTS"), collectively with
all licenses and other agreements providing
- 15 -
the Company or its Subsidiaries the Intellectual Property Rights material to the
operation of their businesses as now conducted and as described in the SEC
Documents. Except as set forth in SCHEDULE 3(X), none of the Company or any of
its Subsidiaries has knowledge that any of them has infringed on any of the
Intellectual Property Rights of any Person and none of the Company or any of its
Subsidiaries is infringing on any of the Intellectual Property Rights of any
Person. There is no action, suit, hearing, claim, notice of violation,
arbitration or other proceeding, hearing or investigation that is pending, or to
the Company's knowledge, is threatened against, the Company regarding the
infringement of any of the Intellectual Property Rights. The Company is not, to
its knowledge, making unauthorized use of any confidential information or trade
secrets of any third party, and the Company has not received any notice of any
asserted infringement (nor is the Company aware of any reasonable basis for any
third party asserting an infringement) by the Company of, any rights of a third
party with respect to any Intellectual Property Rights. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.
(y) ENVIRONMENTAL LAWS. Except as set forth in SCHEDULE 3(Y), the
Company and its Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval where, in each of
the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term "ENVIRONMENTAL LAWS" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(z) SUBSIDIARY RIGHTS. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
(aa) TAX STATUS. The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
when and as due, (ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
- 16 -
(bb) INTERNAL ACCOUNTING AND DISCLOSURE CONTROLS. Except as set forth
in Schedule 3(bb), the Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management's general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. Except as set forth in Schedule 3(bb), the Company
maintains disclosure controls and procedures (as such term is defined in Rule
13a-14 promulgated under the 0000 Xxx) that are effective in ensuring that
information required to be disclosed by the Company in the reports that it files
or submits under the 1934 Act is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms of the SEC, including,
without limitation, controls and procedures designed in to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the 1934 Act is accumulated and communicated to the Company's
management, including its principal executive officer or officers and its
principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure.
(cc) FORM S-3 ELIGIBILITY. The Company is eligible to register the
Preferred Shares, Warrants, Conversion Shares, the Warrant Shares and the
Closing Exercise Shares for resale by the Buyers using Form S-3 promulgated
under the 1933 Act. The Closing Exercise Shares shall be registered for resale
by the Buyers in accordance with the terms of the Existing RRA.
(dd) MANIPULATION OF PRICE. The Company has not, and to its knowledge
no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company.
(ee) DISCLOSURE. All disclosure provided to the Buyers regarding the
Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, taken as a whole, furnished by or on behalf of the
Company is true and correct in all material respects and does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each press release issued by the
Company during the twelve (12) months preceding the date of this Agreement did
not at the time of release contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
- 17 -
(ff) INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, who have
certified the consolidated financial statements of the Company as of January 31,
2004, are independent public accountants within the meaning of the 1933 Act, the
1934 Act and the standards and rules of the Public Company Accounting Oversight
Board.
(gg) INVESTMENT COMPANY. Neither the Company nor its Subsidiaries is
or, after giving effect to the offering and sale of the Securities and the
application of the proceeds thereof, will become an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
(hh) ACKNOWLEDGEMENT REGARDING BUYERS' TRADING ACTIVITY. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding, but subject
to compliance by the Buyers with applicable law, it is understood and
acknowledged by the Company (i) that none of the Buyers have been asked to
agree, nor has any Buyer agreed, to desist from purchasing or selling, long
and/or short, securities of the Company, or "derivative" securities based on
securities issued by the Company or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by any Buyer,
including, without limitation, short sales or "derivative" transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company's publicly-traded securities;
(iii) that any Buyer and counter parties in "derivative" transactions to which
any such Buyer is a party, directly or indirectly, presently may have a "short"
position in the Class A Common Stock, and (iv) that each Buyer shall not be
deemed to have any affiliation with or control over any arm's length
counter-party in any "derivative" transaction. The Company further understands
and acknowledges that (a) one or more Buyers may engage in hedging activities at
various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Conversion Shares
and Warrant Shares deliverable with respect to the Securities are being
determined and (b) such hedging activities (if any) could reduce the value of
the existing stockholders' equity interests in the Company at and after the time
that the hedging activities are being conducted.
(ii) FINANCIAL POSITION. After giving effect to the receipt of the net
proceeds to the Company pursuant hereto at the Closing, the Company will not be
subject to receipt of, and as of Closing shall not have received, from the
Company's independent auditors, inclusion of a "going concern" or other
qualification in the auditor's opinion with respect to the Company's
consolidated financial statements for the year ended January 29, 2005. The
Company has no reason to believe that (i) any such "going concern" or other
qualification will be included in such auditor's opinion as to such financial
statements (ii) it will be unable to file its Annual Report on Form 10-K for the
fiscal year ended January 29, 2005 on or prior to April 14, 2005, or such later
date as is legally applicable, but no later than April 29, 2005.
4. COVENANTS.
(a) BEST EFFORTS; CONVERSION COOPERATION. Each party shall use its
best efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
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(b) FORM D AND BLUE SKY. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as is necessary in order to obtain an
exemption for or to qualify the Securities for sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of any such exemption or
qualification so taken to the Buyers on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Closing Date.
(c) REPORTING STATUS. From the Closing Date until the date on which
the Investors (as defined in the Registration Rights Agreement) shall have sold
all of the Securities and none of the Securities is outstanding (the "REPORTING
PERIOD"), and other than in accordance with the Certificate of Designations and
Warrants, the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall continue to timely file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would otherwise no longer require such filings.
(d) USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Securities for general working capital purposes, including payment of
trade creditors, and for the repayment of the Bridge Facility. The Company will
not use the proceeds from the sale of the Securities for the redemption or
repurchase of any of its equity securities.
(e) FINANCIAL INFORMATION. The Company agrees to send the following
to each Investor during the Reporting Period provided that the following does
not constitute material, nonpublic information, unless the following are filed
with the SEC through XXXXX and are available to the public through the XXXXX
system, within one (1) Business Day after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-K or 10-KSB, any interim reports or any
consolidated balance sheets, income statements, stockholders' equity statements
and/or cash flow statements for any fiscal quarter, any Current Reports on Form
8-K and any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act.
(f) LISTING. The Company shall promptly secure the listing of all of
the Conversion Shares and Warrant Shares upon each national securities exchange
and automated quotation system, if any, upon which the Class A Common Stock is
then listed (subject to official notice of issuance) and shall maintain such
listing of all Conversion Shares and Warrant Shares from time to time issuable
under the terms of the Transaction Documents. The Company shall maintain the
Class A Common Stocks' authorization for quotation on the Principal Market.
Neither the Company nor any of its Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Class A Common Stock on the Principal Market.
(g) FEES. (i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company shall pay
or cause to be paid all costs and expenses incident to the performance of its
obligations hereunder, including without limitation, all fees, costs and
expenses (A) incident to the preparation, issuance, execution, authentication
and delivery of the Securities, including any expenses of any trustee or warrant
- 19 -
agent, (B) incurred in connection with the registration or qualification and
determination of eligibility for investment of the Securities, (C) in connection
with the admission for trading of the Conversion Shares and Warrant Shares on
any securities exchange or inter-dealer quotation system, (D) related to any
filing with the National Association of Securities Dealers, Inc. ("NASD"), (E)
the satisfaction of the conditions set forth in Sections 6 and 7, in each case
whether or not the Closing Date occurs or this Agreement is terminated, and (F)
otherwise in connection with satisfying its obligations hereunder. The Company
shall be responsible for the payment of any placement agent's fees, financial
advisory fees, or broker's commissions (other than for Persons engaged by any
Buyer) relating to or arising out of the transactions contemplated hereby,
including, without limitation, any fees or commissions payable to any agents.
The Company shall pay, and hold each Buyer harmless against, any liability, loss
or expense (including, without limitation, reasonable attorney's fees and out of
pocket expenses) arising in connection with any claim relating to any such
payment.
(ii) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company shall pay
or cause to be paid all out-of-pocket costs, fees and expenses (including,
without limitation, all fees and other client charges and expenses of Xxxxxxx
Xxxx & Xxxxx LLP, counsel for SAC) ("EXPENSES") incurred by, or on behalf of,
SAC in connection with the transactions contemplated by this Agreement,
including, but not limited to, in connection with the revision, negotiation,
execution and delivery of all Transaction Documents and any related documents,
up to a maximum reimbursement of $250,000 (the "FEE Cap"). Subject to the Fee
Cap, SAC shall be entitled to withhold any Expenses not previously reimbursed
from its Purchase Price at the Closing.
(h) PLEDGE OF SECURITIES. The Company acknowledges and agrees that
the Securities may be pledged by an Investor (as defined in the Registration
Rights Agreement) in connection with a bona fide margin agreement or other loan
or financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
(i) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION. On or
before 8:30 a.m., New York time, on the second Business Day following the date
of this Agreement, the Company shall file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement, the
Certificate of Designations, the form of each of the Warrants and the
Registration Rights Agreement) as exhibits to such filing, which Form 8-K shall
be in form and substance reasonably acceptable to the Majority Buyers (including
all attachments, the "INITIAL 8-K FILING"). On or before 8:30 a.m., New York
time, on the second Business Day following the date of any material amendment to
the terms set forth in this Agreement, the Company shall file a Current Report
on
- 20 -
Form 8-K describing the terms of such amendment or modification in the form
required by the 1934 Act and attaching any material transaction documents, as
entered into, prepared, modified or amended, as exhibits to such filing
(including all attachments, an "AMENDING 8-K FILING"). On or before 8:30 a.m.,
New York time, on the second Business Day following the Closing Date, the
Company shall file a Current Report on Form 8-K describing the Closing and
disclosing any previously undisclosed material, nonpublic information in the
form required by the 1934 Act and attaching any material transaction documents
not previously filed as exhibits to such filing (including all attachments, the
"FINAL 8-K FILING", and collectively with the Initial 8-K Filing and all
Amending 8-K Filings, the "8-K FILINGS"). From and after the filing of the Final
8-K Filing with the SEC, no Buyer shall be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any
of its respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filings. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Buyer with any material, nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of
the Initial 8-K Filing with the SEC without the express written consent of such
Buyer. Subject to the foregoing, neither the Company nor any Buyer shall issue
any press releases or any other public statements with respect to the
transactions contemplated hereby; PROVIDED, HOWEVER, that the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filings and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) the Majority Buyers shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and provided
that in any case the Company shall not disclose the identity of any Buyer
without such Buyer's express written consent unless required by applicable law
and regulations).
(j) ADDITIONAL PREFERRED SHARES; VARIABLE SECURITIES; DILUTIVE
ISSUANCES. So long as any Buyer beneficially owns any Securities, the Company
will not issue any Preferred Shares other than to the Buyers as contemplated
hereby and the Company shall not issue any other securities that would cause a
breach or default under the Certificate of Designations. For so long as any
Preferred Shares or Warrants remain outstanding, the Company shall not, in any
manner, issue or sell any rights, warrants or options to subscribe for or
purchase Class A Common Stock or directly or indirectly convertible into or
exchangeable or exercisable for Class A Common Stock at a price which varies or
may vary with the market price of the Class A Common Stock, including by way of
one or more reset(s) to any fixed price, unless the conversion, exchange or
exercise price of any such security cannot be less than the then applicable
Conversion Price (as defined in the Certificate of Designations) with respect to
the Class A Common Stock into which any Preferred Share is convertible and the
then applicable Exercise Price (as defined in the Warrants) with respect to the
Class A Common Stock into which any Warrant is exercisable. For so long as any
Preferred Shares or Warrants remain outstanding, the Company shall not, in any
manner, enter into or affect any Dilutive Issuance (as defined in the
Certificate of Designations) if the effect of such Dilutive Issuance is to cause
the Company to be required to issue upon conversion of any Preferred Shares or
exercise of any Warrant any shares of Class A Common Stock in excess of that
number of shares of Class A Common Stock which the Company may issue upon
conversion of the Preferred Shares and exercise of the Warrants without
breaching the Company's obligations under the rules or regulations of the
Principal Market.
- 21 -
(k) CORPORATE EXISTENCE. So long as any Buyer beneficially owns any
Securities, the Company shall not be party to any Fundamental Transaction (as
defined in the Certificate of Designations) unless the Company is in compliance
with the applicable provisions governing Fundamental Transactions set forth in
the Certificate of Designations and the Warrants.
(l) RESERVATION OF SHARES. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, after the Closing Date, 130% of the aggregate number of shares of
Class A Common Stock issuable upon conversion of all of the Preferred Shares and
issuable upon exercise of the Warrants.
(m) CONDUCT OF BUSINESS.
(i) Unless set forth in Schedule 4(m) or the Company shall
otherwise agree in writing with the Majority Buyers (such agreement not to be
unreasonably withheld) and except as expressly contemplated by the Transaction
Documents, during the period from the date of this Agreement to the Closing
Date, the Company shall conduct, and it shall cause its Subsidiaries to conduct,
its or their businesses in the ordinary course and consistent with past
practice, and the Company shall, and it shall cause its Subsidiaries to, use its
or their reasonable best efforts to preserve intact its business organization,
to keep available the services of its officers and employees and to maintain
satisfactory relationships with all Persons with whom it does business and
(ii) without limiting the generality of the foregoing, neither
the Company nor any of its Subsidiaries will:
(1) amend or propose to amend its Certificate of
Incorporation or Bylaws (or comparable governing instruments) in any
material respect;
(2) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of any
shares of, or any options, warrants, commitments, subscriptions or rights
of any kind to acquire or sell any shares of, the capital stock or other
securities of the Company or any of its Subsidiaries including, but not
limited to, any securities convertible into or exchangeable for shares of
stock of any class of capital stock of the Company or any of its
Subsidiaries, except for the issuance of shares pursuant to the exercise of
either incentive or non-qualified stock options, including management stock
options, outstanding on the date of this Agreement in accordance with their
present terms;
(3) hire any executive officer of the Company;
(4) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, other than dividends or distributions to the Company
or a Subsidiary, or directly or indirectly redeem, purchase or otherwise
acquire or offer to acquire any shares of its capital stock or other
securities;
- 22 -
(5) (a) create, incur or assume any debt, except
refinancings of existing obligations on terms that are no less favorable to
the Company or its Subsidiaries than the existing terms; (b) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, indirectly, contingently or otherwise) for the obligations of any
Person; (c) make any capital expenditures or make any loans, advances or
capital contributions to, or investments in, any other Person (other than
to a Subsidiary); (d) acquire the stock or assets of, or merge or
consolidate with, any other Person; (e) voluntarily incur any material
liability or obligation (absolute, accrued, contingent or otherwise), other
than in the ordinary course of business consistent with past practice; or
(f) other than in the ordinary course of business consistent with past
practice, sell, transfer, mortgage, pledge or otherwise dispose of, or
encumber, or agree to sell, transfer, mortgage, pledge or otherwise dispose
of or encumber, any assets or properties, real, personal or mixed material
to the Company and its Subsidiaries taken as a whole other than to secure
debt permitted under (a) of this clause (v);
(6) increase in any manner the compensation of any of its
officers or employees or enter into, establish, amend or terminate any
employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit sharing, health
or other welfare, stock option or other equity, pension, retirement,
vacation, severance, deferred compensation or other compensation or benefit
plan, policy, agreement, trust, fund or arrangement with, for or in respect
of, any stockholder, officer, director, other employee, agent, consultant
or affiliate other than as required pursuant to the terms of agreements in
effect on the date of this Agreement and such as are in the ordinary course
of business consistent with past practice;
(7) enter into or commit to enter into any material
transaction, material monetary commitment or capital expenditure or enter
into, amend, modify or terminate any material agreement (including real
estate leases that are material in the aggregate);
(8) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a portion of the
securities of, or by any other manner, any Person, or otherwise acquire or
agree to acquire all or substantially all of the assets of any other Person
(other than the purchase of assets from suppliers or vendors in the
ordinary course of the business of the Company);
(9) settle or compromise any litigation, proceeding, action
or claim that could reasonably be expected to result in payments (to the
extent not covered by insurance) that exceed $250,000 in the aggregate;
(10) fail to use its commercially reasonable efforts to
comply in all material respects with any law, rule, regulation, order,
judgment or decree (including federal and state securities laws) applicable
to it or any of its properties, assets or business and maintain in full
force and effect all the Company permits necessary for, or otherwise
material to, such business; or
(11) agree or commit to do any of the foregoing.
- 23 -
(iii) Notwithstanding the forgoing, to the extent that any of the
foregoing shall constitute material, nonpublic information, before seeking the
Buyers' consent hereunder, the Company shall first confirm with such Buyer that
it desires to receive such information (without disclosing the nature of any
information that may constitute material, nonpublic information) and if the
Buyer agrees to receive such information, then such information shall constitute
Disclosed Information for all purposes hereof.
(n) ADDITIONAL ISSUANCES OF SECURITIES.
(i) For purposes of this Section 4(n), the following definitions
shall apply.
(1) "CONVERTIBLE SECURITIES" means any stock or securities
(other than Options) convertible into or exercisable or exchangeable for
shares of Class A Common Stock.
(2) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase shares of Class A Common Stock or Convertible
Securities.
(3) "CLASS A COMMON STOCK EQUIVALENTS" means, collectively,
Options and Convertible Securities.
(ii) From the date hereof until the date that is 30 Trading Days
(as defined in the Certificate of Designations) following the Effective Date (as
defined in the Registration Rights Agreement) (the "TRIGGER DATE"), the Company
will not, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or its Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
shares of Class A Common Stock or Class A Common Stock Equivalents (any such
offer, sale, grant, disposition or announcement being referred to as a
"SUBSEQUENT PLACEMENT").
(iii) In lieu of the rights set forth in (x) Section 3(bb) of
that Securities Purchase Agreement, dated as of June 29, 2004 (the "JUNE SPA"),
by and among the Company and the purchasers signatory thereto (the "JUNE 2004
PARTICIPATION RIGHT") and (y) Section 4(n) of the Existing SPA (the "EXISTING
PARTICIPATION RIGHT"), which June 2004 Participation Right and Existing
Participation Right are hereby superseded and terminated as to all of the
Buyers, from the Trigger Date until the thirty-six (36) month anniversary of the
later of the date of this Agreement and the Closing Date, the Company will not,
directly or indirectly, effect any Subsequent Placement unless the Company shall
have first complied with this Section 4(n)(iii).
(1) The Company shall deliver to each Buyer a written
notice (the "OFFER NOTICE") of any proposed or intended issuance or sale or
exchange (the "OFFER") of the securities being offered (the "OFFERED
SECURITIES") in a Subsequent Placement, which Offer Notice shall (w)
identify and describe the Offered Securities, (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the
number or amount of the Offered Securities to be issued, sold or
- 24 -
exchanged, (y) identify the Persons (if known) to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (z)
offer to issue and sell to or exchange with such Buyers the Offered
Securities allocated among such Buyers (a) based on such Buyer's pro rata
portion of the aggregate principal amount of Preferred Shares purchased
hereunder (the "BASIC AMOUNT"), and (b) with respect to each Buyer that
elects to purchase its Basic Amount, any additional portion of the Offered
Securities attributable to the Basic Amounts of other Buyers as such Buyer
shall indicate it will purchase or acquire should the other Buyers
subscribe for less than their Basic Amounts (the "UNDERSUBSCRIPTION
AMOUNT").
(2) To accept an Offer, in whole or in part, such Buyer
must deliver a written notice to the Company prior to the end of the tenth
(10th) Business Day after such Buyer's receipt of the Offer Notice (the
"OFFER PERIOD"), setting forth the portion of such Buyer's Basic Amount
that such Buyer elects to purchase and, if such Buyer shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any,
that such Buyer elects to purchase (in either case, the "NOTICE OF
Acceptance"). If the Basic Amounts subscribed for by all Buyers are less
than the total of all of the Basic Amounts, then each Buyer who has set
forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; PROVIDED, HOWEVER, that if
-------- ------- the Undersubscription Amounts subscribed for exceed the
difference between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the "AVAILABLE UNDERSUBSCRIPTION AMOUNT"), each Buyer who
has subscribed for any Undersubscription Amount shall be entitled to
purchase only that portion of the Available Undersubscription Amount as the
Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers
that have subscribed for Undersubscription Amounts, subject to rounding by
the Company to the extent its deems reasonably necessary.
(3) The Company shall have five (5) Business Days from the
expiration of the Offer Period above to offer, issue, sell or exchange all
or any part of such Offered Securities as to which a Notice of Acceptance
has not been given by the Buyers (the "REFUSED SECURITIES"), but only to
the offerees described in the Offer Notice (if so described therein) and
only upon terms and conditions (including, without limitation, unit prices
and interest rates) that are not more favorable to the acquiring Person or
Persons or less favorable to the Company than those set forth in the Offer
Notice.
(4) In the event the Company shall propose to sell less
than all the Refused Securities (any such sale to be in the manner and on
the terms specified in Section 4(n)(iii)(3) above), then each Buyer may, at
its sole option and in its sole discretion, reduce the number or amount of
the Offered Securities specified in its Notice of Acceptance to an amount
that shall be not less than the number or amount of the Offered Securities
that such Buyer elected to purchase pursuant to Section 4(n)(iii)(2) above
multiplied by a fraction, (i) the numerator of which shall be the number or
amount of Offered Securities the Company actually proposes to issue, sell
or exchange (including Offered Securities to be issued or sold to Buyers
pursuant to Section 4(n)(iii)(3) above prior to such reduction) and (ii)
the denominator of which shall be the original amount of
- 25 -
the Offered Securities. In the event that any Buyer so elects to reduce the
number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Buyers in accordance with Section
4(n)(iii)(1) above.
(5) Upon the closing of the issuance, sale or exchange of
all or less than all of the Refused Securities, the Buyers shall acquire
from the Company, and the Company shall issue to the Buyers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4(n)(iii)(3) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer. The purchase
by the Buyers of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Buyers of a
purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Buyers and their respective
counsel.
(6) Any Offered Securities not acquired by the Buyers or
other Persons in accordance with Section 4(n)(iii)(3) above may not be
issued, sold or exchanged until they are again offered to the Buyers under
the procedures specified in this Agreement.
(iv) The restrictions contained in subsections (ii) and (iii) of
this Section 4(n) shall not apply in connection with the issuance of any
Excluded Securities (as defined in the Certificate of Designations).
(o) GENERAL SOLICITATION. None of the Company, any of its affiliates
(as defined in Rule 501(b) promulgated under the 0000 Xxx) or any person acting
on behalf of the Company or such affiliate will solicit any offer to buy or
offer or sell the Securities by means of any form of general solicitation or
general advertising within the meaning of Regulation D, including: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over television or radio; and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(p) INTEGRATION. None of the Company or any of its Subsidiaries will
offer, sell or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the 0000 Xxx) in a manner that would cause the offer and
sale of the Securities to fail to be entitled to the exemption from registration
afforded by Rule 506 of Regulation D and Section 4(2) of the 1933 Act.
(q) NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to each Buyer if any of the following occur after the date of this
Agreement: (i) receipt of any notice or other communication in writing from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement, provided
that such consent would have been required to have been disclosed in this
Agreement; (ii) receipt of any material notice or other communication from any
Person (including, but not limited to, the SEC, NASD or any securities exchange)
in connection with the
- 26 -
transactions contemplated by this Agreement; (iii) the occurrence of an event
which would be reasonably likely to have a Material Adverse Effect; or (iv) the
commencement or threat of any litigation involving or affecting the Company or
any of its Subsidiaries, or any of their respective properties or assets, or, to
its knowledge, any employee, agent, director or officer, in his or her capacity
as such, of the Company or any of its Subsidiaries which, if pending on the date
hereof, would have been required to have been disclosed in this Agreement or
which relates to the consummation of the transactions contemplated by the
Transaction Documents; PROVIDED, HOWEVER, that to the extent that any of the
foregoing shall constitute material, nonpublic information, the Company shall
first confirm with such Buyer that it desires to receive such information
(without disclosing the nature of any information that may constitute material,
nonpublic information) and if the Buyer agrees to receive such information, then
such information shall constitute Disclosed Information for all purposes hereof.
(r) ACCESS AND INFORMATION. Between the date of this Agreement and
the Closing Date, the Company will give, and shall direct its accountants and
legal counsel to give, each Buyer and their respective authorized
representatives (including, without limitation, its financial advisors,
accountants, consultants and legal counsel), at all reasonable times, access as
reasonably requested to all offices and other facilities and to all contracts,
agreements, commitments, books and records of or pertaining to the Company and
its Subsidiaries, will permit the foregoing to make such reasonable inspections
as they may require and will cause its officers and other employees promptly to
furnish such Buyer with (a) such financial and operating data and other
information with respect to the business and properties of the Company and its
Subsidiaries as such Buyer may from time to time reasonably request, and (b) a
copy of each material report, schedule and other document filed or received by
the Company or any of its Subsidiaries pursuant to the requirements of
applicable securities laws or the NASD; PROVIDED, HOWEVER, that to the extent
that any of the foregoing shall constitute material, nonpublic information, the
Company shall first confirm with such Buyer that it desires to receive such
access or information (without disclosing the nature of any information that may
constitute material, nonpublic information) and if the Buyer agrees to receive
such information, then such information shall constitute Disclosed Information
for all purposes hereof.
(s) SALES BY OFFICERS AND DIRECTORS. Until the later of (a) the
Trigger Date and (b) 180 Trading Days after the Closing Date, the Company shall
not, directly or indirectly, permit any officer or director of the Company or
any of its Subsidiaries to sell any Class A Common Stock pursuant to a contract,
instruction or plan in accordance with Rule 10b5-1 of the 1934 Act.
(t) REGULATION M. The Company will not take any action prohibited by
Regulation M under the 1934 Act, in connection with the distribution of the
Securities contemplated hereby.
(u) EXISTING RIGHTS OF PARTICIPATION. The Company represents that it
has given the required notice to the holders of the June 2004 Participation
Right and the Existing Participation Right (collectively, the "PARTICIPATION
RIGHTS HOLDERS"). In the event that all Participation Rights Holders are not
party to this Agreement on the date hereof (each a "NON-PARTICIPATING BUYER"),
unless such notice has been waived by the Participating Holders as a result of
their respective execution of this Agreement as of the date hereof, the Company
shall
- 27 -
inform SAC by no later than ten (10) Business Days after the date hereof (the
"PARTICIPATION DEADLINE") as to whether or not and to what extent such
Non-Participating Buyer has exercised any such right (any such Non-Participating
Buyer exercising such rights, a "PARTICIPATING BUYER"). The Preferred Shares and
Warrants not being purchased by any Non-Participating Buyer on the date hereof
shall be allocated to SAC. Upon a Non-Participating Buyer's execution and
delivery to the Company of a signature page to this Agreement prior to the
Participation Deadline, the Preferred Shares and Warrants of such
Non-Participating Buyer allocated to SAC hereunder shall automatically be
allocated to such Non-Participating Buyer.
(v) WAIVER OF EXISTING ANTIDILUTION AND EXISTING RIGHTS OF
PARTICIPATION. Each Buyer hereby agrees to waive, solely with respect to the
issuance of the Securities hereunder, the application of the adjustment
provisions set forth in any of the securities issued pursuant to the Existing
SPA and pursuant to Section 4(j) of the Existing SPA and held by such Buyer (or
its affiliates) as of the date hereof. Further, each Buyer hereby agrees to
waive, solely with respect to the issuance of the Securities hereunder and the
issuance Common Stock or warrants to purchase up to 2,800,000 shares of Common
Stock, in the aggregate, that may be issued to one or more parties who have
provided consulting services to the Company, including Xxxxxxx Xxxx or one of
his affiliates, the application of the adjustment provisions set forth in any of
the securities issued pursuant to the Existing SPA and pursuant to Section 4(j)
of the Existing SPA and held by such Buyer (or its affiliates) as of the date
hereof and any pre-emptive right, participation right or prohibition on such
issuance set forth in the Existing SPA or related notes and warrants and held by
such Buyer (or its affiliates) as of the date hereof.
(w) COMPANY RESTRICTED TRANSFERS. Each Buyer agrees that it shall not
transfer any of the Securities to any of the Company's officers, directors,
employees or consultants in a manner that would require the approval of the
stockholders of the Company in accordance with the rules of the Principal
Market.
(x) BRIDGE FACILITY REDUCTION. In accordance with Section 6.06(b) of
the Senior Credit Agreement (as defined below), on the Closing Date the Company
shall pay-off in full each applicable Buyer's principal, accrued, but unpaid
interest, and any other amounts outstanding under the Bridge Facility. The
outstanding principal amount of each such Buyer under the Bridge Facility as of
the date hereof is set forth opposite such Buyer's name in column (5) on the
Schedule of Buyers and such amount, together with any accrued, but unpaid
interest thereon, and any other amounts outstanding under the Bridge Facility,
shall be withheld by such Buyer on the Closing Date as partial payment of such
Buyer's Purchase Price hereunder. This provision constitutes notice of repayment
as required by the applicable financing documents.
(y) AMENDMENTS TO EXISTING RRA. Each Buyer hereby agrees that the
Filing Deadline set forth in the Existing RRA is hereby amended to mean ten (10)
Business Days after the earlier of (x) May 3, 2005 and (y) the Closing; provided
that in the event that the Registration Statement required by the Existing RRA
is not filed on or before such amended Filing Deadline in accordance with the
Existing RRA, the Company shall make any payments required to be paid pursuant
to Section 2(g) of the Existing RRA retroactively from April 21, 2005. In
addition, each Buyer hereby agrees that the Effectiveness Deadline set forth in
the Existing RRA is hereby amended to mean as soon as practicable, but not later
than 60 calendar days (or in the event the SEC reviews the Registration
Statement and requires the Company to make modifications
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thereto, 90 calendar days) after the date the Registration Statement required
under the Existing RRA is initially filed with the SEC; provided that in the
event that the Registration Statement required by the Existing RRA is not
declared effective on or before such amended Effectiveness Deadline in
accordance with the Existing RRA, the Company, shall make any payments required
to be paid pursuant to Section 2(g) of the Existing RRA retroactively from April
21, 2005. To the extent that the registration statement required pursuant to the
terms of the Existing RRA (the "EXISTING RRA REGISTRATION STATEMENT") is filed,
but not declared effective, prior to the Registration Statement required by the
Registration Rights Agreement, each Buyer hereby consents to an amendment to the
Existing RRA Registration Statement to include the Registrable Securities (as
defined in the Registration Rights Agreement).
(z) TRUSTEE CONSENT. Each Buyer hereby affirms that such Buyer
provides its consent to any modifications, amendments and supplements necessary
under the Indenture (as defined in the Existing SPA) to authorize the Trustee to
take any and all actions on behalf of such Buyers in connection with the Amended
and Restated Subordination Agreement and the Security Documents and authorizes
the Trustee to take any and all further actions necessary in furtherance
thereof.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) REGISTER. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Securities), a register for the Preferred Shares and
the Warrants, in which the Company shall record the name and address of the
Person in whose name the Preferred Shares and the Warrants have been issued
(including the name and address of each transferee), the number of Preferred
Shares held by such Person, the number of Conversion Shares issuable upon
conversion of the Preferred Shares and Warrant Shares issuable upon exercise of
the Warrants held by such Person. The Company shall keep the register open and
available at all times during business hours for inspection of any Buyer or its
legal representatives.
(b) TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of each Buyer or its
respective nominee(s) or transferee, for the Securities issued at the Closing or
upon conversion of the Preferred Shares or exercise of the Warrants or transfer
of the Preferred Shares or Warrants, in such amounts as specified from time to
time by each Buyer to the Company upon conversion or transfer of the Preferred
Shares or exercise or transfer of the Warrants in the form of EXHIBIT E attached
hereto (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5(b), and stop transfer instructions to give effect
to Section 2(g) hereof, will be given by the Company to its transfer agent, and
that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Documents. If a Buyer effects a sale, assignment or transfer
of the Securities in accordance with Section 2(f), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the
- 29 -
event that such sale, assignment or transfer involves Securities sold, assigned
or transferred pursuant to an effective registration statement or pursuant to
Rule 144, the transfer agent shall issue such Securities to the Buyer, assignee
or transferee, as the case may be, without any restrictive legend. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that a Buyer shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
(a) PREFERRED SHARES AND THE WARRANTS. The obligation of the Company
hereunder to issue and sell the Preferred Shares and the Warrants to each Buyer
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(ii) Such Buyer and each other Buyer shall have delivered to the
Company the Purchase Price (less, in the case of SAC, the amounts withheld
pursuant to Section 4(g)) for the Preferred Shares and the related Warrants
being purchased by such Buyer at the Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
(iv) Each Buyer shall have delivered to the Company such other
documents relating to the transactions contemplated by this Agreement as the
Company or its counsel may reasonably request.
(b) CLOSING EXERCISE SHARES. The obligation of the Company hereunder
to issue the Closing Exercise Shares to each Buyer at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Delivery by such Buyer of appropriate exercise notices with
respect to its election to exercise the Existing Warrants.
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(ii) Delivery by such Buyer to the Company of its Existing
Warrants relating to the Closing Exercise Shares.
(iii) Payment by such Buyer to the Company of the Closing
Exercise Price by wire transfer of immediately available funds pursuant to wire
instructions provided by the Company to such Buyer prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
(a) CLOSING DATE. The obligation of each Buyer hereunder to purchase
the Preferred Shares, the Warrants and the Closing Exercise Shares at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company with prior written notice thereof:
(i) The Company and, to the extent it is a party thereto, each
of its Subsidiaries, shall have executed and delivered to such Buyer (1) each of
the Transaction Documents, (2) one or more certificates representing the
Preferred Shares (in such number and denominations as such Buyer shall request)
being purchased by such Buyer at the Closing pursuant to this Agreement, (3) the
Warrants (in such amounts as such Buyer shall request) being purchased by such
Buyer at the Closing pursuant to this Agreement, (4) one or more certificates
representing the Closing Exercise Shares (in such number and denominations as
such Buyer shall request) being purchased by such Buyer at the Closing pursuant
to this Agreement and (5) new Existing Warrants (in such amounts as such Buyer
shall request) representing unexercised portions of Existing Warrants delivered
to the Company with respect to exercising Existing Warrants for the Closing
Exercise Shares.
(ii) The Company shall have delivered to such Buyer a copy of the
Irrevocable Transfer Agent Instructions, in the form of EXHIBIT D attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(iii) Each Buyer shall have received the opinion of Akin Gump
Xxxxxxx Xxxxx & Xxxx LLP, the Company's outside counsel, dated as of the Closing
Date, substantially covering the matters set forth in EXHIBIT E attached hereto.
(iv) The Company shall have delivered to such Buyer a certificate
evidencing the formation and good standing of the Company and each of its
Subsidiaries in such entity's jurisdiction of formation issued by the Secretary
of State (or comparable office) of such jurisdiction, as of a date within 10
days of the Closing Date.
(v) The Company shall have delivered to such Buyer a certificate
evidencing the Company's and each Subsidiary's qualification as a foreign
corporation and good standing issued by the Secretary of State (or comparable
office) of each jurisdiction in which the Company and each Subsidiary conducts
business, as of a date within 10 days of the Closing Date.
- 31 -
(vi) The Certificate of Designations in the form attached as
Exhibit A shall have been filed with the Secretary of State of the State of
Delaware and shall be in full force and effect, enforceable against the Company
in accordance with its terms and shall not have been amended.
(vii) The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware within ten (10) days of the Closing Date, which shall
reflect the Certificate of Designations as part thereof or attachment thereto.
(viii) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (x) the resolutions consistent with Section 3(b) as adopted
by the Company's Board of Directors in a form reasonably acceptable to such
Buyer, (y) the Certificate of Incorporation, as amended and (z) the Bylaws, each
as in effect at the Closing, in the form attached hereto as EXHIBIT F.
(ix) The representations and warranties of the Company shall be
true and correct in all material respects (other than representations and
warranties that are already qualified by materiality or Material Adverse Effect
which shall be true and correct in all respects) as of the date when made and as
of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by a duly authorized executive
officer of the Company, dated as of the Closing Date, to the foregoing effect,
certifying as to the fulfillment of the conditions specified in Section 7 of
this Agreement and as to such other matters as may be reasonably requested by
such Buyer in the form attached hereto as EXHIBIT G.
(x) No event, circumstances or fact shall have occurred which
has resulted in, would result in or could reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect; PROVIDED, HOWEVER,
that for purposes of this condition, Material Adverse Effect does not include
any event, circumstance or fact that does not or would not, with the passage of
time, reasonably be expected to result in an Event of Default (as defined in
either (A) the Amended and Restated Credit Agreement, dated as of September 22,
2004 (as amended from time to time, the "SENIOR CREDIT AGREEMENT"), by and
among, the Senior Agent, the Senior Lenders, the Company and certain of its
Subsidiaries, as amended as of the date hereof and without regard to any future
waiver or amendment thereof, the "SENIOR CREDIT FACILITY" or (B) the Bridge
Facility).
(xi) The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Class A Common
Stock outstanding as of a date within five (5) days of the Closing Date.
(xii) The Class A Common Stock (i) shall be designated for
quotation or listed on the Principal Market, and (ii) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from
trading on the Principal Market nor shall suspension by
- 32 -
the SEC or the Principal Market have been threatened, as of the Closing Date,
either (A) in writing by the SEC or the Principal Market or (B) by falling below
the minimum listing maintenance requirements of the Principal Market.
(xiii) The Senior Lenders shall have executed and delivered the
Security Documents and the Company shall have obtained the consent or waiver of
the respective lenders under the Senior Credit Agreement and the Bridge Facility
to the transactions contemplated by the Transaction Documents, including the
issuance and sale of the Securities and the Company's performance of its other
obligations thereunder, which consents and/or waivers shall be in form and
substance satisfactory to Xxxxxxx Xxxx & Xxxxx LLP.
(xiv) The Company shall have obtained all other governmental,
regulatory or third party consents and approvals, if any, necessary to be
obtained for the sale of the Securities.
(xv) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.
(b) Other than the Security Documents, which shall be effective on
the Escrow Date in accordance with their respective terms, the parties hereby
agree that each of the documents required to be delivered pursuant to Section
7(a) hereof shall be executed and delivered by the appropriate parties on April
29, 2005 (the "ESCROW DATE") and, except for the documents listed on Schedule 1,
are dated as of the Escrow Date, to be held in escrow by Akin Gump Xxxxxxx Xxxxx
& Xxxx LLP and Xxxxxxx Xxxx & Xxxxx LLP, and all actions required to be
undertaken pursuant to Section 7(a) shall be completed, as the case may be, on
or prior to the Escrow Date (the "ESCROW CONDITIONS"). The Company shall certify
that the Escrow Conditions are met, and each Buyer shall waive each of the
conditions to Closing set forth in Sections 7(a) (including, but not limited to,
Section 7(a)(x) hereof), except for Sections 7(a)(i) and (xi), which shall
constitute the only remaining conditions to each Buyer's obligation to purchase
the Preferred Shares, the Warrants and the Closing Exercise Shares on the
Closing Date, by executing a waiver in substantially the form attached hereto as
Exhibit H, which shall be acceptable to the Majority Buyers in their sole
discretion.
8. FAILURE TO SATISFY. In the event (a) that on or before 5:00 p.m. (EST)
on the Escrow Date (i) the Company shall have failed to satisfy the conditions
set forth in Section 7 above (other than the satisfaction of the conditions set
forth in Sections 7(a)(i) and (xi) above) or (ii) such Buyer shall have failed
to satisfy the conditions set forth in Section 6 above (other than the
satisfaction of the condition set forth in Sections 6(a)(ii) above) and the
nonbreaching party has failed to waive such unsatisfied condition(s), or (b) the
Closing shall not have occurred with respect to any Buyer on or before May 3,
2005 due to the Company's failure to satisfy the conditions set forth in
Sections 7(a)(i) and (xi) above and the nonbreaching party has failed to waive
such unsatisfied condition(s), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date; provided, however, this if this Agreement is terminated
pursuant to this Section 8, the Company (other than a termination due to a
breach of this Agreement by SAC) shall remain obligated to reimburse SAC for the
expenses described in Section 4(g)(ii) above.
- 33 -
9. EFFECT OF FAILURE TO SATISFY. If this Agreement is terminated by any
party pursuant to Section 8 and the transactions contemplated hereby are not
consummated, this Agreement shall become null and void and of no further force
and effect and there shall be no liability on the part of any party hereto (or
any shareholder, director, officer, partner, employee, agent, consultant or
representative of such party), except as set forth in this Section 9; PROVIDED,
HOWEVER, if this Agreement is terminated pursuant to Section 8, the Company
shall remain obligated to reimburse SAC for the expenses described in Section
4(g) above; and PROVIDED, further, that any termination of this Agreement shall
not relieve any party hereto from any liability for any breach of any provisions
of this Agreement. This Section 9 shall survive termination of this Agreement in
accordance with its terms.
10. MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity
- 34 -
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf with respect to the matters
discussed herein and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Majority Buyers, and any amendment to this Agreement made in
conformity with the provisions of this Section 10(e) shall be binding on all
Buyers and holders of Securities, as applicable. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the applicable Securities then
outstanding. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents, holders of Preferred Shares or holders of the
Warrants, as the case may be. The Company has not, directly or indirectly, made
any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
(f) NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
The Wet Seal, Inc.
00000 Xxxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
- 35 -
With a copy (for informational purposes only) to:
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx, Esq.
Xxxxxxx X. Xxxxxxx III, Esq.
If to the Transfer Agent:
American Stock Transfer and Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxx Xxxxx
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,
With a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any subsequent purchasers of the Preferred Shares or the Warrants or,
upon the conversion or exercise thereof, respectively, Conversion Shares or
Warrant Shares, other than pursuant to an effective registration statement with
respect thereto. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Majority Buyers,
including by way of a Fundamental Transaction (unless the Company is in
compliance with the
- 36 -
applicable provisions governing Fundamental Transactions set forth in the
Certificate of Designations and the Warrants). A Buyer may assign some or all of
its rights hereunder without the consent of the Company in connection with a
transfer by such Buyer of any of the Securities, in which event such assignee
shall be deemed to be a Buyer hereunder with respect to such assigned rights.
Each Buyer and the Company acknowledges that SAC may assign some or all of its
rights (i) hereunder and under the other Transaction Documents, (ii) under the
Existing SPA and the Transaction Documents (as defined in the Existing SPA) and
(iii) under the June SPA and the Transaction Documents (as defined in the June
SPA), to an entity affiliated with Prentice Capital LLC without the consent of
any such Buyer or the Company, subject to applicable securities laws and
provided that such party agrees to be bound by the terms and covenants hereof.
In addition to the foregoing, the Company acknowledges that any of the Buyers
may assign and transfer some of the rights and obligations in connection with
the purchase of the Securities prior to Closing to other Buyers, which Buyers
shall become party hereto by execution of a signature to this Agreement and by
updating of the Schedule of Buyers hereto in which case such assignee shall be
deemed a Buyer for all purposes hereunder as if such assignee executed this
Agreement on the date hereof. In the event that any Buyer fails to provide its
Purchase Price at the Closing, SAC shall have the right to purchase such Buyer's
Securities hereunder.
(h) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) SURVIVAL. Unless this Agreement is terminated under Section 8,
the representations and warranties of the Company and the Buyers contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
10 shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
any Indemnitee as a result of, or arising out of, or
- 37 -
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of the Transaction Documents,
(ii) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii) the
status of such Buyer or holder of the Securities as an investor in the Company
pursuant to the transactions contemplated by the Transaction Documents. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 10(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
(l) NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
(m) REMEDIES; RESCISSION AND WITHDRAWAL. Each Buyer and each holder
of the Securities shall have all rights and remedies set forth in the
Transaction Documents and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security. Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Buyer exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Buyer may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part, in accordance with the terms of the Transaction Documents,
without prejudice to its future actions and rights.
(n) PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the
- 38 -
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
(o) INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer,
other than SAC, acknowledges that (i) Xxxxxxx Xxxx & Xxxxx LLP solely
represented SAC in connection with the transaction contemplated hereby and (ii)
SAC did not provide any advice in connection herewith and such Buyer's
determination to participate herein was based solely on its own evaluation of
the risks and merits of the investment contemplated hereby. Each Buyer shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.
[SIGNATURE PAGE FOLLOWS]
- 39 -
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
COMPANY:
THE WET SEAL, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Executive Vice President &
Chief Financial Officer
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
BUYERS:
S.A.C. CAPITAL ASSOCIATES, LLC
By: S.A.C. Capital Advisors, LLC
By: /s/ Xxxxx Xxxxxxxx
------------------------------
Name: Xxxxx Xxxxxxxx
Title: General Counsel
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
GMM CAPITAL, LLC
By: /s/ Xxxxx Xxxxx
--------------------------------
Name: Xxxxx Xxxxx
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
XXXXXXXX CAPITAL PARTNERS LLC
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Member
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
/s/ Xxxxxxx Xxxxxxxx
------------------------------------
MR. XXXXXXX XXXXXXXX
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
/s/ Xxx Xxxxxxx
------------------------------------
XX. XXX XXXXXXX
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
WLSS CAPITAL PARTNERS, LLC
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
Title: Member
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
SMITHFIELD FIDUCIARY, LLC
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Authorized Signatory
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, L.P.
By: X.X. XXXXX PARTNERS LLC,
its general partner
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, LTD.
By: X.X. XXXXX & CO., L.P.,
its trading Manager
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
RIVERVIEW GROUP, LLC
By: Millennium Holding Group, L.P.,
By: Millennium Management, L.L.C.
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Operating Officer
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
PRENTICE CAPITAL PARTNERS QP, LP
By: Prentice Capital GP, LLC,
its general partner
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
PRENTICE CAPITAL PARTNERS, LP
By: Prentice Capital GP, LLC,
its general partner
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
PRENTICE CAPITAL OFFSHORE, LTD
By: Prentice Capital Management, LP,
the Investment Manager
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
UBS FINANCIAL SERVICES AS
CUSTODIAN FBO XXXXXXX X.
XXXXXXXX ROLLOVER XXX
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5) (6) (7)
Aggregate Number Principal
Address and Number of Amount Legal
Facsimile Number of Series E of Representative's
Preferred Warrant Bridge Purchase Address and
Buyer Shares Shares Facility Price Facsimile Number Tax ID #
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
S.A.C. Capital c/o S.A.C. Capital Xxxxxxx Xxxx &
Associates, LLC Advisors, LLC Zabel LLP
00 Xxxxxxxx Xxxxx Xxxx 000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx Xxx Xxxx, Xxx
00000 York 10022
Attention: General Attention:
Counsel Xxxxxxx Xxxxx,
Facsimile: (203) Esq.
890-2393 Facsimile:
Residence: Anguila 6,040 2,209,822 $4,910,714 $6,040,000 (000) 000-0000 00-0000000
Telephone:
(000) 000-0000
Prentice Capital c/o Prentice Capital
Partners QP, LP Management, LP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx
Xxxxxxxxx
Xxxxxxx Xxxxxxxx
Facsimile: 6,040** 1,473,214** N/A $6,040,000** N/A 00-0000000
000-000-0000
Prentice Capital c/o Prentice Capital
Partners, LP Management, LP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx
Xxxxxxxxx
Xxxxxxx Xxxxxxxx
Facsimile: ** ** N/A ** N/A 00-0000000
000-000-0000
Prentice Capital c/o Prentice Capital
Offshore, Ltd Management, LP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx
Xxxxxxxxx
Xxxxxxx Xxxxxxxx
Facsimile: ** ** N/A ** N/A N/A
000-000-0000
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5) (6) (7)
Aggregate Number Principal
Address and Number of Amount Legal
Facsimile Number of Series E of Representative's
Preferred Warrant Bridge Purchase Address and
Buyer Shares Shares Facility Price Facsimile Number Tax ID #
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
GMM Capital, LLC 000 Xxxx 00xx Xxxxxx
20th Floor Skadden, Arps,
Xxx Xxxx, XX 00000 Slate, Xxxxxxx &
Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX
00000
Attention:
Xxxxxx X.
Xxxxxxxxx, Esq.
Facsimile: (917)
777-7886
Telephone: (212)
3,075 937,000 $1,250,000 $3,075,000 735-7886 00-0000000
Xxxxxxxx Capital 00 Xxxxxxx Xxxxx Xxxxxxxxx and
Partners LLC Xxxxxxxxxx, XX 00000 Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, X.X.
00000
Attention. Xxxx
Xxxx, Esq.
Facsimile: (212)
318 3400
Telephone: (212)
1,977 602,679 $982,143 $1,977,000 318 3022 00-0000000
Mr. Xxxxxxx Xxxxxxxx 000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000 556** 169,430** $357,143 $556,000** N/A N/A
UBS Financial Services c/o Mr. Xxxxxxx Xxxxxxxx
as Custodian FBO 000 Xxxx Xxxxxx
Xxxxxxx X. Xxxxxxxx Xxx Xxxx, XX 00000 323 98,427 N/A $323,000 N/A N/A
Rollover XXX
Xx. Xxx Xxxxxxx 0 Xxxx Xxxx
Xxxxxxxxx, XX 00000 395 120,536 N/A $395,000 N/A N/A
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5) (6) (7)
Aggregate Number Principal
Address and Number of Amount Legal
Facsimile Number of Series E of Representative's
Preferred Warrant Bridge Purchase Address and
Buyer Shares Shares Facility Price Facsimile Number Tax ID #
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
WLSS Capital Partners, c/o Xxxxx Xxxxxx Fulbright and
LLC 0000 Xxxx Xxxxxx Xxxxxxxx
Apt. 26B 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000 New York, N.Y.
10103
Attention. Xxxx
Xxxx, Esq.
Facsimile: (212)
318 3400
Telephone: (212)
44 13,393 N/A $44,000 318 3022 00-0000000
Smithfield Fiduciary c/o Highbridge Capital
LLC Management, LLC
0 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X.
Xxxxxx
Xxxx
X. Chill
Fax: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman
Islands 2,601 793,008 $1,057,343 $2,601,000 N/A N/A
X.X. Xxxxx Special x/x X.X. Xxxxx & Xx.,
Xxxxxxxxxxxxx Xxxx, L.P L.P.
000 Xxxxx Xxxxxx, 00xx
Xxxxx Xxx Xxxx, Xxx Xxxx
00000
Telephone: (646)
720-9100
Fax: (000) 000-0000
Attention: Xxxxxx X.
Xxxxx Xxxxx X.
Xxxxx
Residence: Cayman
Islands 750 228,496 $ 304,662 $750,000 N/A 00-0000000
X.X. Xxxxx Special x/x X.X. Xxxxx & Xx.,
Xxxxxxxxxxxxx Xxxx, X.X.
Ltd. 000 Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (646)
720-9100
Fax: (000) 000-0000
Attention: Xxxxxx X.
Xxxxx Xxxxx X.
Xxxxx
Residence: Cayman
Islands 749 228,495 $ 304,662 $749,000 N/A N/A
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5) (6) (7)
Aggregate Number Principal
Address and Number of Amount Legal
Facsimile Number of Series E of Representative's
Preferred Warrant Bridge Purchase Address and
Buyer Shares Shares Facility Price Facsimile Number Tax ID #
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Riverview Group, LLC 000 Xxxxx Xxxxxx, 0xx
xxxxx
Xxx Xxxx, Xxx Xxxx
00000 Attention: Xxxxxx
Xxxxxxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
Residence: Delaware 2,050 625,000 $833,333 $2,050,000 N/A 00-0000000
------------------------------------------------
Total: 24,600 7,500,000 $10,000,000 $24,600,000
================================================
** Allocations of the securities listed under Prentice Capital Partners QP, LP
among Prentice Capital Partners QP, LP, Prentice Capital Partners, LP,
Prentice Capital Offshore, Ltd and Mr. Xxxxxxx Xxxxxxxx to be delivered to
the Company prior to the Closing Date.
SCHEDULE OF CLOSING EXERCISE SHARES
(1) (2) (3) (4) (5) (6) (7)
Exercise
Price Exercise Aggregate
Buyer Number of of Series Number of Price of Number of Aggregate
Series A A Series B Series B Closing Closing
Warrant Warrant Warrant Warrant Exercise Exercise
Shares Shares Shares Shares Shares Price
----------------------------------------------------------------------------------------------------------------------------------
S.A.C. Capital Associates, LLC 1,129,464 $1,976,562.00 520,536 $1,171,206.00 1,650,000 $3,147,768.00
Prentice Capital Partners QP,
LP X/X X/X X/X X/X X/X X/X
Prentice Capital Partners, LP N/A N/A N/A N/A N/A N/A
Prentice Capital Offshore, Ltd N/A N/A N/A N/A N/A N/A
GMM Capital, LLC 287,500 $503,125.00 132,500 $298,125.00 420,000 $801,250.00
Xxxxxxxx Capital Partners LLC 184,822 $323,438.50 85,178 $191,650.50 270,000 $515,089.00
Mr. Xxxxxxx Xxxxxxxx 82,143 $143,750.25 37,857 $85,178.25 120,000 $228,928.50
UBS Financial Services as
Custodian FBO Xxxxxxx X.
Xxxxxxxx Rollover XXX X/X X/X X/X X/X X/X X/X
Xx. Xxx Xxxxxxx 36,964 $64,687.00 17,035 $38,328.75 53,999 $103,015.75
WLSS Capital Partners, LLC 4,107 $7,187.25 1,892 $4,257.00 5,999 $11,444.25
Smithfield Fiduciary LLC 243,189 $425,580.75 112,078 $252,175.50 355,267 $677,756.25
X.X. Xxxxx Special
Opportunities Fund, L.P 70,072 $122,626.00 32,294 $72,661.50 102,366 $195,287.50
X.X. Xxxxx Special
Opportunities Fund, Ltd. 70,072 $122,626.00 32,294 $72,661.50 102,366 $195,287.50
Riverview Group, LLC 191,667 $335,417.25 88,333 $198,749.25 280,000 $534,166.50
Total: 2,300,000 $4,025,000 1,059,997 $2,384,993.25 3,359,997 $6,409,993.25
========================================================================================
SCHEDULE 1
DOCUMENTS TO BE DATED AS OF THE CLOSING DATE:
1. Certificates representing the Preferred Shares
2. Warrants
3. (Common Stock) certificates representing the Closing Exercise Shares
(issuable upon exercise of the Series A and Series B Warrants)
4. New Existing (Series B) Warrants representing the unexercised portions of the
Existing (Series B) Warrants
5. Akin Gump Xxxxxxx Xxxxx & Xxxx LLP opinion
EXHIBITS
Exhibit A Form of Certificate of Designations
Exhibit B Form of Series E Warrants
Exhibit C Registration Rights Agreement
Exhibit D Form of Irrevocable Transfer Agent Instructions
Exhibit E Form of Outside Company Counsel Opinion
Exhibit F Form of Secretary's Certificate
Exhibit G Form of Officer's Certificate
Exhibit H Form of Waiver
EXHIBIT 11
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES C CONVERTIBLE PREFERRED STOCK
OF
THE WET SEAL, INC.
The Wet Seal, Inc. (the "COMPANY"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"DGCL"), does hereby certify that, pursuant to authority conferred upon the
Board of Directors of the Company by the Certificate of Incorporation, as
amended, of the Company, and pursuant to Sections 151 and 141 of the DGCL, the
Board of Directors of the Company adopted resolutions (i) designating a series
of the Company's previously authorized preferred stock, par value $0.01 per
share, and (ii) providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of Twenty-Four Thousand Six Hundred (24,600) shares of
Series C Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 24,600 shares of
Series C Convertible Preferred Stock (the "PREFERRED SHARES"), par value $0.01
per share, which shall be perpetual unless and until converted as contemplated
by this Certificate of Designations, Preferences and Rights (this "CERTIFICATE
OF DESIGNATIONS") and shall have the following powers, designations, preferences
and other special rights:
(1) DIVIDENDS. The holders of the Preferred Shares (each, a "HOLDER"
and collectively, the "HOLDERS") shall not be entitled to receive any regularly
scheduled dividends in respect of such Preferred Shares.
(2) CONVERSION OF PREFERRED SHARES. Preferred Shares shall be
convertible into shares of the Company's Class A Common Stock, par value $0.10
per share (the "COMMON STOCK"), on the terms and conditions set forth in this
Section 2.
(a) CERTAIN DEFINED TERMS. For purposes of this Certificate of
Designations, the following terms shall have the following meanings:
(i) "AMEX" means the American Stock Exchange.
(ii) "APPROVED STOCK PLAN" means any employee benefit
plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be
issued to any employee, officer, consultant or director for
services provided to the Company.
(iii) "BLOOMBERG" means Bloomberg Financial Markets.
(iv) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of
New York are authorized or required by law to remain closed.
(v) "CAPITAL STOCK" means any and all shares, interests,
participations, rights or other equivalents (however
designated) of
corporate stock, including, without limitation, with respect
to partnerships, partnership interests (whether general or
limited) and any other interest or participation that
confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, such
partnership.
(vi) "CHANGE OF CONTROL" means any Fundamental
Transaction other than (A) a Fundamental Transaction in which
holders of the Company's voting power immediately prior to
the Fundamental Transaction continue after the Fundamental
Transaction to hold publicly traded securities and, directly
or indirectly, the voting power of the surviving entity or
entities necessary to elect a majority of the members of the
board of directors (or their equivalent if other than a
corporation) of such entity or entities, or (B) pursuant to a
migratory merger effected solely for the purpose of changing
the jurisdiction of incorporation of the Company.
(vii) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,
for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security
on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis
and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or
last trade price, respectively, of such security prior to
4:00:00 p.m., New York Time, as reported by Bloomberg, or, if
the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid
price or last trade price, respectively, of such security on
the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price
or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the
ask prices, respectively, of any market makers for such
security as reported in the "pink sheets" by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the
Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the
foregoing bases, the Closing Bid Price or the Closing Sale
Price, as the case may be, of such security on such date
shall be the fair market value as mutually determined by the
Company and the Required Holders. If the Company and the
Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to
Section 2(d)(iii). All such determinations to be
appropriately adjusted for any stock dividend, stock split,
stock combination or other similar transaction during the
applicable calculation period.
2
(viii) "COMMON STOCK DEEMED OUTSTANDING" means, at any
given time, the number of shares of Common Stock actually
outstanding at such time, plus the number of shares of Common
Stock deemed to be outstanding pursuant to Sections
2(f)(i)(A) and 2(f)(i)(B) hereof regardless of whether the
Options or Convertible Securities are actually exercisable at
such time, but excluding any shares of Common Stock owned or
held by or for the account of the Company or issuable upon
conversion of the Preferred Shares.
(ix) "CONVERSION AMOUNT" means the Stated Value.
(x) "CONVERSION PRICE" means, with respect to the
Preferred Shares, as of any Conversion Date or other date of
determination, $3.00, subject to adjustment as provided
herein.
(xi) "CONVERTIBLE SECURITIES" means any stock or
securities (other than Options) directly or indirectly
convertible into or exchangeable or exercisable for Common
Stock.
(xii) "ELIGIBLE MARKET" means the Principal Market,
NYSE, AMEX or The Nasdaq SmallCap Market.
(xiii) "EXCLUDED SECURITIES" means shares of Common Stock
issued or deemed to be issued in accordance with Section 2(f)
hereof by the Company: (v) in connection with an Approved
Stock Plan; (w) upon issuance of the Preferred Shares or upon
conversion of the Preferred Shares or upon exercise of the
Warrants; (x) pursuant to a bona fide firm commitment
underwritten public offering with a nationally recognized
underwriter which generates gross proceeds to the Company in
excess of $35,000,000 (other than an "at-the-market offering"
as defined in Rule 415(a)(4) promulgated under the Securities
Act and "equity lines"), (y) upon exercise of any Options or
Convertible Securities which are outstanding on the date
immediately preceding the Subscription Date, provided that
such issuance of shares of Common Stock upon exercise of such
Options or Convertible Securities is made pursuant to the
terms of such Options or Convertible Securities as in effect
on the date immediately preceding the Subscription Date
(including such Convertible Securities issued by the Company
pursuant to the Existing SPA and the Indenture) and such
Options or Convertible Securities are not amended after the
date immediately preceding the Subscription Date, and (z) to
one or more parties who have provided consulting services to
the Company, including Xxxxxxx Xxxx or one of his affiliates,
in an amount not to
3
exceed, in the aggregate, 2,800,000 shares of Common
Stock or warrants to acquire such number of shares of Common
Stock.
(xiv) "EXISTING SPA" means that certain Securities
Purchase Agreement, dated as of November 9, 2004, by and
among the Company and certain parties listed on the Schedule
of Buyers attached thereto, as amended and restated or
modified.
(xv) "FUNDAMENTAL TRANSACTION" means that the Company
shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether
or not the Company is the surviving corporation) another
Person, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow
another Person to make a purchase offer, tender offer or
exchange offer that is accepted by the holders of more than
50% of the Company's outstanding voting securities (but
excluding any voting securities held by the Person or Persons
making or party to, or any Person(s) associated or affiliated
with such Person or Persons making or party to, such purchase
offer, tender offer or exchange offer), or (iv) enter into a
stock purchase agreement or other agreement to effect any
other business combination (including, without limitation, a
reorganization, recapitalization or spin-off) with another
Person or Persons, whereby more than 50% of the Company's
outstanding voting securities are acquired by such Person or
Persons (excluding any voting securities of the Company held
by such Person or Persons making or party to, or any
Person(s) associated or affiliated with such Person or
Persons making or party to, such stock purchase agreement or
other agreement to effect such other business combination),
or (v) change the members constituting its Board of Directors
such that the individuals who constituted the Board of
Directors on the Subscription Date or other governing body of
the Company (together with any new directors whose election
to such Board of Directors or whose nomination for election
by the stockholders of the Company was approved by a vote of
662/3% of the directors then still in office who were either
directors on the Subscription Date or whose election or
nomination for election was previously so approved), cease
for any reason to constitute a majority of such Board of
Directors then in office, or (vi) reorganize, recapitalize or
reclassify its Common Stock.
(xvi) "INDENTURE" means that certain Indenture, dated as
of January 14, 2005, by and between the Company and The Bank
of New York, as Trustee, as amended and restated or modified.
(xvii) "INITIAL ISSUANCE DATE" means the Closing Date,
as defined in the Securities Purchase Agreement.
4
(xviii)"LIQUIDATION EVENT" means (x) the voluntary or
involuntary liquidation, dissolution or winding up of the
Company or such Subsidiaries the assets of which constitute
all of the business of the Company and its Subsidiaries taken
as a whole, in a single transaction or series of transactions
or (y) a Change of Control.
(xix) "NYSE" means The New York Stock Exchange, Inc.
(xx) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible
Securities.
(xxi) "PARENT ENTITY" of a Person means an entity that,
directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or
listed on an Eligible Market, or, if there is more than one
such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date
of consummation of the Fundamental Transaction.
(xxii) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity or a
government or any department or agency thereof.
(xxiii) "PRINCIPAL MARKET" means the Nasdaq National
Market.
(xxiv)"REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement, by and among the Company and
the initial Holders of the Preferred Shares relating to the
filing of a registration statement covering the resale of the
shares of Common Stock issuable upon conversion of the
Preferred Shares and exercise of the Warrants, as such
agreement may be amended or modified from time to time as
provided in such agreement.
(xxv) "REQUIRED HOLDERS" means the Holders of Preferred
Shares representing at least a majority of the aggregate
Preferred Shares then outstanding.
(xxvi) "SEC" means the Securities and Exchange
Commission.
(xxvii) "SECURITIES PURCHASE AGREEMENT" means that
certain securities purchase agreement, dated as of the
Subscription Date, by and among the Company and the initial
Holders, as such agreement may be amended or modified from
time to time as provided in such agreement.
(xxviii) "STATED VALUE" means $1,000.
(xxix) "SUBSCRIPTION DATE" means April 29, 2005.
5
(xxx) "SUCCESSOR ENTITY" means the Person, which may be
the Company, formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such
Fundamental Transaction shall have been made, provided that
if such Person is not a publicly traded entity whose common
stock or equivalent equity security is quoted or listed for
trading on an Eligible Market, Successor Entity shall mean
such Person's Parent Entity.
(xxxi) "TRADING DAY" means any day on which the Common
Stock are traded on the Principal Market, or, if the
Principal Market is not the principal trading market for the
Common Stock, then on the principal securities exchange or
securities market on which the Common Stock are then traded;
provided that "Trading Day" shall not include any day on
which the Common Stock are scheduled to trade on such
exchange or market for less than 4.5 hours or any day that
the Common Stock are suspended from trading during the final
hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York Time).
(xxxii) "WARRANTS" means the warrants to purchase shares
of Common Stock issued by the Company pursuant to the
Securities Purchase Agreement.
(b) HOLDER'S CONVERSION RIGHT. Subject to the provisions of
Section 5 and Section 12, at any time or times on or after the Initial Issuance
Date, any Holder shall be entitled to convert any whole number of Preferred
Shares into fully paid and nonassessable shares of Common Stock in accordance
with Section 2(d) at the Conversion Rate (as defined below).
(c) CONVERSION. Subject to Sections 5 and 12, the number of
fully paid, non-assessable shares of Common Stock issuable upon conversion of
each Preferred Share pursuant to Section 2(b) shall be determined according to
the following formula (the "CONVERSION RATE"):
CONVERSION AMOUNT
Conversion Price
(d) MECHANICS OF CONVERSION. The conversion of Preferred Shares
shall be conducted in the following manner:
(i) HOLDER'S DELIVERY REQUIREMENTS. To convert Preferred
Shares into shares of Common Stock on any date (the
"CONVERSION DATE"), the Holder shall (A) transmit by
facsimile (or otherwise deliver), for receipt on or prior to
5:00 p.m., New York City Time, on such date, a copy of a
properly completed notice of conversion executed by the
registered Holder of the Preferred Shares subject to such
conversion in the
6
registered Holder of the Preferred Shares subject to such
conversion in the form attached hereto as EXHIBIT I (the
"CONVERSION NOTICE") to the Company and the Company's
designated transfer agent (the "TRANSFER AGENT") and (B) if
required by Section 2(d)(vii), surrender to a common carrier
for delivery to the Company as soon as practicable following
such date the original certificates representing the
Preferred Shares being converted (or compliance with the
procedures set forth in Section 14) (the "PREFERRED STOCK
CERTIFICATES").
(ii) COMPANY'S RESPONSE. Upon receipt by the Company of
copy of a Conversion Notice, the Company shall (I) as soon as
practicable, but in any event within one (1) Business Day,
send, via facsimile, a confirmation of receipt of such
Conversion Notice to such Holder and the Transfer Agent,
which confirmation shall constitute an instruction to the
Transfer Agent to process such Conversion Notice in
accordance with the terms herein and (II) on or before the
third (3rd) Trading Day following the date of receipt by the
Company of such Conversion Notice, (the "SHARE DELIVERY
DATE"), (A) provided the Transfer Agent is participating in
the DTC Fast Automated Securities Transfer Program, credit
such aggregate number of shares of Common Stock to which the
Holder shall be entitled to the Holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (B) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer
Program, issue and deliver to the address as specified in the
Conversion Notice, a certificate, registered in the name of
the Holder or its designee, for the number of shares of
Common Stock to which the Holder shall be entitled. If the
number of Preferred Shares represented by the Preferred Stock
Certificate(s) submitted for conversion, as may be required
pursuant to Section 2(d)(viii), is greater than the number of
Preferred Shares being converted, then the Company shall, as
soon as practicable and in no event later than three (3)
Business Days after receipt of the Preferred Stock
Certificate(s) (the "PREFERRED STOCK DELIVERY DATE") and at
its own expense, issue and deliver to the Holder a new
Preferred Stock Certificate representing the number of
Preferred Shares not converted.
(iii) DISPUTE RESOLUTION. In the case of a dispute as to
the determination of the Closing Sale Price or the arithmetic
calculation of the Conversion Rate, the Company shall submit
the disputed determinations or arithmetic calculations via
facsimile within two (2) Business Days of receipt of the
Conversion Notice giving rise to such dispute, as the case
may be, to the Holder. If the Holder and the Company are
unable to agree upon the determination of the Closing Sale
Price or arithmetic calculation of the Conversion Rate within
three (3) Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then
the Company shall, within two (2) Business Days thereafter
submit via facsimile (a) the disputed determination of the
Closing Sale Price to an independent, reputable investment
bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the
7
Conversion Rate to the Company's independent, outside
accountant. The Company shall cause, at its expense, the
investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the
Company and the Holder of the results no later than ten (10)
Business Days from the time it receives the disputed
determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable
error.
(iv) RECORD HOLDER. The Person or Persons entitled to
receive the shares of Common Stock issuable upon a conversion
of Preferred Shares shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on
the Conversion Date.
(v) COMPANY'S FAILURE TO TIMELY CONVERT.
(A) CASH DAMAGES. If (I) within three (3) Business
Days after the Company's receipt of the facsimile copy of a Conversion Notice
the Company shall fail to credit a Holder's balance account with DTC or issue
and deliver a certificate to such Holder for the number of shares of Common
Stock to which such Holder is entitled upon such Holder's conversion of
Preferred Shares or (II) within three (3) Business Days of the Company's receipt
of a Preferred Stock Certificate the Company shall fail to issue and deliver a
new Preferred Stock Certificate representing the number of Preferred Shares to
which such Holder is entitled pursuant to Section 2(d)(ii), then in addition to
all other available remedies which such Holder may pursue hereunder and under
the Securities Purchase Agreement, the Company shall pay in cash to the Holder
on each day after such third Business Day that the issuance of such shares of
Common Stock is not timely effected an amount equal to 1.5% of the product of
(A) the sum of the number of shares of Common Stock not issued to the Holder on
a timely basis and to which the Holder is entitled and (B) the Closing Sale
Price of the shares of Common Stock on the Trading Day immediately preceding the
last possible date which the Company could have issued such shares of Common
Stock to the Holder without violating Section 2(d)(ii). In addition to the
foregoing, if within three (3) Trading Days after the Company's receipt of the
facsimile copy of a Conversion Notice the Company shall fail to issue and
deliver a certificate to the Holder and register such shares of Common Stock on
the Company's share register or credit the Holder's balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon such
Holder's conversion of Preferred Shares hereunder, and if on or after the third
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
shares of Common Stock issuable upon such conversion that the Holder anticipated
receiving from the Company (a "BUY-IN"), then the Company shall, within three
(3) Business Days after the Holder's request and in the Holder's discretion,
either (i) pay cash to the Holder in an amount equal to the Holder's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "BUY-IN PRICE"), at which point the Company's
obligation to deliver such certificate (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such shares of Common Stock
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
multiplied by (B) the
8
Closing Bid Price on the Conversion Date, provided that, so long as the Senior
Credit Facility (as defined in the Securities Purchase Agreement) remains
outstanding, each of the Holders hereby acknowledges, covenants and agrees that
such Holder will not demand or accept, and the Company will not be obligated to
make, any payment (each a "DELAY FEE") (whether in whole or in part) required to
be made pursuant to this SECTION 2(D)(V), SECTION 1(C) of the Warrants
(regarding the Company's obligation to make payments in the event of its failure
to timely deliver securities upon exercise of the Warrants) and SECTION 2(F) of
the Registration Rights Agreement (regarding the Company's obligation to make
Registration Delay Payments, as defined in the Registration Rights Agreement),
which would, in the aggregate of all of the aforementioned payments made to all
Holders, exceed $250,000 in the aggregate in any calendar year (the "DELAY FEE
CAP"). Each Holder agrees that, so long as the Senior Credit Facility (as
defined in the Securities Purchase Agreement) is outstanding, (i) such Holder
does not have any rights to, and shall not accept or demand any, Delay Fees in
excess of its pro rata share of the Delay Fee Cap and (ii) to the extent any
amounts are received with respect to the Delay Fees by such Holder from the
Company in excess of such Holder's pro rata share of the Delay Fee Cap, such
Holder shall promptly forward an amount equal to such excess in immediately
available funds to the Administrative Agent (as defined in the Senior Credit
Facility) at such account as the Administrative Agent shall designate from time
to time.
(B) VOID CONVERSION NOTICE; ADJUSTMENT OF CONVERSION
PRICE. If for any reason a Holder has not received all of the shares of Common
Stock to which such Holder is entitled prior to the fifth (5th) Business Day
after the Share Delivery Date with respect to a conversion of Preferred Shares,
then the Holder, upon written notice to the Company, with a copy to the Transfer
Agent, may void its Conversion Notice with respect to, and retain or have
returned, as the case may be, any Preferred Shares that have not been converted
pursuant to such Holder's Conversion Notice; provided that the voiding of a
Holder's Conversion Notice shall not effect the Company's obligations to make
any payments which have accrued prior to the date of such notice pursuant to
Section 2(d)(v)(A) or otherwise.
(vi) PRO RATA CONVERSION. Subject to Section 12, in the
event the Company receives a Conversion Notice from more than
one Holder for the same Conversion Date and the Company can
convert some, but not all, of such Preferred Shares, the
Company shall convert from each Holder electing to have
Preferred Shares converted at such time a pro rata amount of
such Holder's Preferred Shares submitted for conversion based
on the number of Preferred Shares submitted for conversion on
such date by such Holder relative to the number of Preferred
Shares submitted for conversion on such date.
(vii) BOOK-ENTRY. Notwithstanding anything to the
contrary set forth herein, upon conversion of Preferred
Shares in accordance with the terms hereof, the Holder
thereof shall not be required to physically surrender the
certificate representing the Preferred Shares to the Company
unless (A) the full or remaining number of Preferred Shares
represented by the certificate are being converted or (B) a
Holder has provided the Company with prior written notice
(which notice may be included in a Conversion Notice)
requesting reissuance of Preferred Shares upon
9
physical surrender of any Preferred Shares. The Holder and
the Company shall maintain records showing the number of
Preferred Shares so converted and the dates of such
conversions or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to
require physical surrender of the certificate representing
the Preferred Shares upon each such conversion. In the event
of any dispute or discrepancy, such records of the Company
establishing the number of Preferred Shares to which the
record holder is entitled shall be controlling and
determinative in the absence of manifest error.
Notwithstanding the foregoing, if Preferred Shares
represented by a certificate are converted as aforesaid, the
Holder may not transfer the certificate representing the
Preferred Shares unless the Holder first physically
surrenders the certificate representing the Preferred Shares
to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new certificate
of like tenor, registered as the Holder may request,
representing in the aggregate the remaining number of
Preferred Shares represented by such certificate. The Holder
and any assignee, by acceptance of a certificate,
acknowledge and agree that, by reason of the provisions of
this paragraph, following conversion of any Preferred
Shares, the number of Preferred Shares represented by such
certificate may be less than the number of Preferred Shares
stated on the face thereof. Each certificate for Preferred
Shares shall bear the following legend:
ANY TRANSFEREE OF THIS CERTIFICATE SHOULD
CAREFULLY REVIEW THE TERMS OF THE COMPANY'S
CERTIFICATE OF DESIGNATIONS RELATING TO THE
PREFERRED SHARES REPRESENTED BY THIS
CERTIFICATE, INCLUDING SECTION 2(d)(vii)
THEREOF. THE NUMBER OF PREFERRED SHARES
REPRESENTED BY THIS CERTIFICATE MAY BE LESS
THAN THE NUMBER OF PREFERRED SHARES STATED
ON THE FACE HEREOF PURSUANT TO SECTION
2(d)(vii) OF THE CERTIFICATE OF DESIGNATIONS
RELATING TO THE PREFERRED SHARES REPRESENTED
BY THIS CERTIFICATE.
(e) TAXES. The Company shall pay any and all documentary,
stamp, transfer (but only in respect of the registered holder thereof) and other
similar taxes that may be payable with respect to the issuance and delivery of
Common Stock upon the conversion of Preferred Shares.
(f) ADJUSTMENTS TO CONVERSION PRICE. Subject to Sections 5 and
12, the Conversion Price will be subject to adjustment from time to time as
provided in this Section 2(f).
10
(i) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
COMMON STOCK. If and whenever on or after the Subscription
Date, the Company issues or sells, or in accordance with
this Section 2(f) is deemed to have issued or sold, any
shares of Common Stock (including the issuance or sale of
shares of Common Stock owned or held by or for the account
of the Company but excluding Excluded Securities) for a
consideration per share (the "NEW SECURITIES ISSUANCE
PRICE") less than a price (the "APPLICABLE PRICE") equal to
the Conversion Price in effect immediately prior to such
time (a "DILUTIVE ISSUANCE"), then immediately after such
issue or sale, the Conversion Price then in effect shall be
reduced to an amount equal to the product of (x) the
Conversion Price in effect immediately prior to such
Dilutive Issuance and (y) (1) the sum of (I) the product of
the Applicable Price and the number of shares of Common
Stock Deemed Outstanding immediately prior to such Dilutive
Issuance and (II) the consideration, if any, received by the
Company upon such Dilutive Issuance, divided by (2) the
product of (I) the Applicable Price multiplied by (II) the
number of shares of Common Stock Deemed Outstanding
immediately after such Dilutive Issuance. For purposes of
determining the adjusted Conversion Price under this Section
2(f)(i), the following shall be applicable:
(A) ISSUANCE OF OPTIONS. If the Company in any
manner grants or sells any Options and the lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Option or upon
conversion, exchange or exercise of any Convertible Securities issuable upon
exercise of such Option is less than the Applicable Price, then such share of
Common Stock shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the granting or sale of such Option for such price
per share. For purposes of this Section 2(f)(i)(A), the "lowest price per share
for which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exchange or exercise of any Convertible Securities
issuable upon exercise of such Option" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon granting or sale of the Option,
upon exercise of the Option and upon conversion, exchange or exercise of any
Convertible Security issuable upon exercise of such Option. No further
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion,
exchange or exercise of such Convertible Securities.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable upon such
conversion, exchange or exercise thereof is less than the Applicable Price, then
such share of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance of sale of such
Convertible Securities for such price per share. For the purposes of this
Section 2(f)(i)(B), the "lowest price per share for which one share of Common
Stock is issuable upon such conversion, exchange or exercise" shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of
11
Common Stock upon the issuance or sale of the Convertible Security and upon the
conversion, exchange or exercise of such Convertible Security. No further
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock upon conversion, exchange or exercise of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustment of the Conversion Price had
been or are to be made pursuant to other provisions of this Section 2(f)(i), no
further adjustment of the Conversion Price shall be made by reason of such issue
or sale.
(C) CHANGE IN OPTION PRICE OR RATE OF CONVERSION.
If the purchase or exercise price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exchange or exercise
of any Convertible Securities, or the rate at which any Convertible Securities
are convertible into or exchangeable or exercisable for Common Stock changes at
any time, the Conversion Price in effect at the time of such change shall be
adjusted to the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold. For purposes of this Section
2(f)(i)(C), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of the Preferred Shares are changed in
the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change. No adjustment shall be made if such adjustment would result
in an increase of the Conversion Price then in effect.
(D) CALCULATION OF CONSIDERATION RECEIVED. In case
any Option is issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $0.01. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the gross amount received by the Company therefor. If any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of marketable securities, in which case the amount of
consideration received by the Company will be the arithmetic average of the
Closing Sale Prices of such securities during the ten (10) consecutive Trading
Days ending on the date of receipt of such securities. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"VALUATION EVENT"), the fair value of such consideration will be determined
within five (5) Business Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser selected by the Company and the
Required Holders. The determination of such appraiser shall be deemed binding
upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.
(E) RECORD DATE. If the Company takes a record of
the holders of Common Stock for the purpose of entitling them (I) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (II) to subscribe for
12
or purchase Common Stock, Options or Convertible Securities, then such record
date will be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(ii) ADJUSTMENT OF CONVERSION PRICE UPON SUBDIVISIONS OR
COMBINATIONS OF COMMON STOCK. If the Company at any time on
or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or
more classes of its outstanding shares of Common Stock into
a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be
proportionately reduced. If the Company at any time on or
after the Subscription Date combines (by combination,
reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased. Any
adjustment under this Section 2(f) shall become effective at
the close of business on the date the subdivision or
combination becomes effective.
(iii) NOTICES.
(A) Whenever the Conversion Price is adjusted, the
Company shall promptly mail to Holders a notice of the adjustment accompanied by
an Officers' Certificate briefly stating the facts requiring the adjustment and
the manner of computing it, which computation shall have been made by the
Company. In the case of a dispute as to the determination of such adjustment,
then such dispute shall be resolved in accordance with the procedures set forth
in Section 2(d)(iii).
(B) The Company will give written notice stating
the proposed effective date or record date, as the case may be, to each Holder
at least ten (10) Business Days prior to the date on which any Fundamental
Transaction or Liquidation Event will take place or on which the Company closes
its books or takes a record (I) with respect to any dividend or distribution
upon the Common Stock, (II) with respect to any pro rata subscription offer to
holders of Common Stock or (III) for determining rights to vote with respect to
any Fundamental Transaction or Liquidation Event, provided that such information
shall be made known to the public prior to or in conjunction with such notice
being provided to such Holder.
Failure to provide the requisite notice or any
defect therein shall not affect the validity of any transaction referred to in
clause (A), (B) or (C) of this Section 2(f)(xii).
(3) [INTENTIONALLY OMITTED]
(4) OTHER RIGHTS OF HOLDERS.
(a) ASSUMPTION. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes in writing all
of the obligations of the Company under this Certificate of Designations and the
other Transaction
13
Documents in accordance with the provisions of this Section 4(a) pursuant to
written agreements in form and substance satisfactory to the Required Holders
and approved by the Required Holders prior to such Fundamental Transaction,
including agreements to deliver to each holder of Preferred Shares in exchange
for such Preferred Shares a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to the
Certificate of Designations, including, without limitation, having a stated
value equal to the stated value of the Preferred Shares held by such holder and
having similar ranking to the Preferred Shares, and satisfactory to the Required
Holders and (ii) the Successor Entity (including its Parent Entity) is a
publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Certificate of Designations referring to the "Company" shall refer instead
to the Successor Entity), and may exercise every right and power of the Company
and shall assume all of the obligations of the Company under this Certificate of
Designations with the same effect as if such Successor Entity had been named as
the Company herein. Upon consummation of the Fundamental Transaction, the
Successor Entity shall deliver to the Holder confirmation that there shall be
issued upon conversion of the Preferred Shares at any time after the
consummation of the Fundamental Transaction, in lieu of the shares of the
Company's Common Stock (or other securities, cash, assets or other property)
purchasable upon the conversion of the Preferred Shares prior to such
Fundamental Transaction, such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had the Preferred Shares been converted
immediately prior to such Fundamental Transaction, as adjusted in accordance
with the provisions of this Certificate of Designations. The provisions of this
Section shall apply similarly and equally to successive Fundamental Transactions
and shall be applied without regard to any limitations on the conversion of the
Preferred Shares.
(b) PURCHASE RIGHTS. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "PURCHASE RIGHTS"), then the Holders will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Holder could have acquired if such Holder had held
the number of shares of Common Stock acquirable upon complete conversion of the
Preferred Shares (without taking into account any limitations or restrictions on
the convertibility of the Preferred Shares) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(5) LIMITATION ON BENEFICIAL OWNERSHIP. The Company shall not effect
any conversion of the Preferred Shares, and any Holder shall not have the right
to convert any Preferred Shares pursuant hereto, to the extent that after giving
effect to such conversion, such Holder (together with its affiliates) would
beneficially own in excess of 9.99% (the "CONVERSION LIMITATION") of the number
of shares of Common Stock outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentences, the aggregate number of
shares of Common Stock beneficially owned by the Holder and its affiliates shall
include the
14
number of shares of Common Stock issuable upon conversion of the Preferred
Shares with respect to which the determination of such sentence is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (A) conversion of the remaining, nonconverted portion of the Preferred
Shares beneficially owned by the Holder or any of its affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any of the warrants or
convertible notes) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the Holder or any of
its affiliates. Except as set forth in the preceding sentence, for purposes of
this Section 5, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act. For purposes of this Section 5, in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as reflected in (1) the
Company's most recent Form 10-K or 10-Q or any Current Report on Form 8-K filed
subsequent thereto or other public filing with the Securities and Exchange
Commission, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. For any reason at any time, upon the written
or oral request of the Holder, the Company shall within three (3) Business Days
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the Preferred Shares, by the Holder or its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. By written notice to the Company, any Holder may
increase or decrease the Conversion Limitation to any other percentage specified
in such notice but such percentage shall not be in excess of 9.99%; provided
that (i) any such increase will not be effective until the 61st day after such
notice is delivered to the Company, and (ii) any such increase or decrease will
apply only to the Holder sending such notice and not to any other Holder of the
Preferred Shares.
(6) RESERVATION OF SHARES.
(a) RESERVATION. So long as any Preferred Shares are outstanding,
the Company shall take all action necessary to reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Preferred Shares, 130% of the number of shares of Common
Stock as shall from time to time be necessary to effect the conversion of all of
the Preferred Shares outstanding at such time; provided that at no time shall
the number of shares of Common Stock so reserved be less than the number of
shares required to be reserved of the previous sentence (without regard to any
limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number
of shares of Common Stock reserved for conversions of the Preferred Shares and
each increase in the number of shares so reserved shall be allocated pro rata
among the Holders based on the number of Preferred Shares held by each Holder on
the Initial Issuance Date or increase in the number of reserved shares, as the
case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event that a Holder
shall sell or otherwise transfer any of such Holder's interests in the Preferred
Shares, each transferee shall be allocated a pro rata portion of such Holder's
Authorized Share Allocation. Any shares of Common Stock reserved and allocated
to any Person which ceases to hold any Preferred Shares shall be allocated to
the remaining Holders of
15
such Preferred Shares, pro rata based on the number of Preferred Shares then
held by such Holders.
(b) INSUFFICIENT AUTHORIZED SHARES. If at any time while any of
the Preferred Shares remain outstanding the Company does not have a sufficient
number of authorized and unreserved shares of Common Stock to satisfy its
obligation to reserve for issuance upon conversion of the Preferred Shares at
least a number of shares of Common Stock equal to the Required Reserve Amount
(an "AUTHORIZED SHARE FAILURE"), then the Company shall immediately take all
action necessary to increase the Company's authorized shares of Common Stock to
an amount sufficient to allow the Company to reserve the Required Reserve Amount
for the Preferred Shares then outstanding. Without limiting the generality of
the foregoing sentence, as soon as practicable after the date of the occurrence
of an Authorized Share Failure, but in no event later than 60 days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its shareholders for the approval of an increase in the number of authorized
shares of Common Stock. In connection with such meeting, the Company shall
provide each shareholder with a proxy statement and shall use its best efforts
to solicit its shareholders' approval of such increase in authorized shares of
Common Stock and to cause its board of directors to recommend to the
shareholders that they approve such proposal.
(7) VOTING RIGHTS. Except as otherwise required by law and except as
provided in Section 13 with respect to the matters referred to therein, the
Holders shall not be entitled to any voting rights or powers accorded to the
Common Stock. Notwithstanding the foregoing, each Holder shall be entitled to
receive the same prior notice of any stockholders' meeting as is provided to the
holders of Common Stock in accordance with the bylaws of the Company as well as
prior notice of all stockholder actions to be taken by legally available means
in lieu of a meeting.
(8) LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of a
Liquidation Event, the Holders shall be entitled to receive in cash out of the
assets of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "LIQUIDATION FUNDS"), before any amount
shall be paid to the holders of any of the capital stock of the Company of any
class junior in rank to the Preferred Shares in respect of the preferences as to
distributions and payments on the liquidation, dissolution and winding up of the
Company, an amount per Preferred Share equal to the Stated Value; provided that,
if the Liquidation Funds are insufficient to pay the full amount due to the
Holders and holders of shares of other classes or series of preferred stock of
the Company that are of equal rank with the Preferred Shares as to payments of
Liquidation Funds (the "PARI PASSU SHARES"), if any, then each Holder and Pari
Passu Shares shall receive a percentage of the Liquidation Funds equal to the
full amount of Liquidation Funds payable to such Holder as a liquidation
preference, in accordance with their respective Certificates of Designations, as
a percentage of the full amount of Liquidation Funds payable to all holders of
Preferred Shares and Pari Passu Shares. To the extent necessary, the Company
shall cause such actions to be taken by any of its Subsidiaries so as to enable,
to the maximum extent permitted by law, the proceeds of a Liquidation Event to
be distributed to the Holders in accordance with this Section. All the
preferential amounts to be paid to the Holders under this Section shall be paid
or set apart for payment before the payment or setting apart for payment of
16
any amount for, or the distribution of any Liquidation Funds of the Company to
the holders of shares of other classes or series of preferred stock of the
Company junior in rank to the Preferred Shares in connection with a Liquidation
Event as to which this Section applies. The purchase or redemption by the
Company of stock of any class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a Liquidation Event.
(9) PREFERRED RANK. All shares of Common Stock shall be of junior rank
to all Preferred Shares with respect to the preferences as to dividends,
distributions and payments upon any Liquidation Event. The rights of the shares
of Common Stock shall be subject to the preferences and relative rights of the
Preferred Shares. Without the prior express written consent of the Required
Holders, the Company shall not hereafter authorize or issue additional or other
capital stock that is of senior or pari passu rank to the Preferred Shares in
respect of the preferences as to distributions and payments upon any Liquidation
Event. The Company shall be permitted to issue preferred stock that is junior in
rank to the Preferred Shares in respect of the preferences as to distributions
and payments upon any Liquidation Event, provided that such junior preferred
stock is perpetual. In the event of the merger or consolidation of the Company
with or into another corporation, the Preferred Shares shall maintain their
relative powers, designations and preferences provided for herein (except that
the Preferred Shares may be pari passu with, but not junior to, any capital
stock of the successor entity) and no merger shall result inconsistent
therewith.
(10) PARTICIPATION. Each Holder shall be entitled to such dividends
paid and distributions made to the holders of Common Stock, whether in cash or
in kind, to the same extent as if such Holder had converted Preferred Shares
into Common Stock (without regard to any limitations on conversion herein, in
this Certificate of Designations or elsewhere) and had held such shares of
Common Stock on the record date for such dividends and distributions. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
(11) ADDITIONAL COVENANTS.
(a) EXISTENCE. Subject to Section 8, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such right or
franchise if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.
(b) FURTHER INSTRUMENTS AND ACTS. Upon the request of any Holder,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Certificate of Designations.
(12) LIMITATION ON NUMBER OF CONVERSION SHARES. Notwithstanding
anything to the contrary contained herein, the Company shall not be obligated to
issue any shares of Common Stock upon conversion of the Preferred Shares or
exercise of the Warrants if the issuance of such shares of Common Stock would
exceed that number of shares of Common
17
Stock which the Company may issue upon conversion of the Preferred Shares or
exercise of the Warrants without breaching the Company's obligations under the
rules or regulations of the Principal Market, or the market or exchange where
the Common Stock is then traded (the "EXCHANGE CAP"), which number of shares of
Common Stock was equal to 8,250,115 in the aggregate as of April 28, 2005,
except that such limitation shall not apply in the event that the Company (a)
obtains the approval of its stockholders as required by the applicable rules of
the Principal Market (or any successor rule or regulation) for issuances of
Common Stock in excess of such amount, or (b) obtains a written opinion from
outside counsel to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the Required Holders. Until such approval or
written opinion is obtained, no purchaser of Preferred Shares pursuant to the
Securities Purchase Agreement (the "PURCHASERS") shall be issued, in the
aggregate, upon conversion of Preferred Shares or exercise of the Warrants,
shares of Common Stock in an amount greater than the product of (i) the Exchange
Cap amount multiplied by (ii) a fraction, the numerator of which is the number
of Preferred Shares issued to such Purchaser pursuant to the Securities Purchase
Agreement on the Initial Issuance Date and the denominator of which is the
aggregate amount of all the Preferred Shares issued to the Purchasers pursuant
to the Securities Purchase Agreement on the Initial Issuance Date (the "EXCHANGE
CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise
transfer any of such Purchaser's Preferred Shares, the transferee shall be
allocated a pro rata portion of such Purchaser's Exchange Cap Allocation. In the
event that any Holder shall convert all of such Holder's Preferred Shares into a
number of shares of Common Stock which, in the aggregate, is less than such
Holder's Exchange Cap Allocation, then the difference between such Holder's
Exchange Cap Allocation and the number of shares of Common Stock actually issued
to such Holder shall be allocated to the respective Exchange Cap Allocations of
the remaining Holders on a pro rata basis in proportion to the number of
Preferred Shares then held by each such Holder.
(13) VOTE TO CHANGE THE TERMS OF CERTIFICATE OF DESIGNATIONS OR ISSUE
PREFERRED SHARES. In addition to any other rights provided by law, except where
the vote or written consent of the holders of a greater number of shares is
required by law or by another provision of the Certificate of Incorporation as
in effect on the Subscription Date, without first obtaining the affirmative vote
at a meeting duly called for such purpose or the written consent without a
meeting of the Required Holders, voting together as a single separate class, the
Company shall not: (u) amend or repeal any provision of, or add any provision
to, the Certificate of Incorporation or bylaws, or file any certificate of
designations, preferences, limitations and relative rights of any series of
preferred stock, if such action would adversely alter or change the preferences,
rights, privileges or powers of, or restrictions provided for the benefit of the
Preferred Shares, regardless of whether any such action shall be by means of
amendment to the Certificate of Incorporation or by merger, consolidation or
otherwise; (v) increase or decrease (other than by conversion) the authorized
number of shares of the Preferred Shares; (w) create or authorize (by
reclassification or otherwise) any new class or series of shares that has a
preference over or is on a parity with the Preferred Shares with respect to the
distribution of assets on any Liquidation Event; (x) purchase, repurchase or
redeem any shares of Common Stock (other than pursuant to equity incentive
agreements with employees giving the Company the right to repurchase shares upon
the termination of services); (y) pay dividends or make any other distribution
on the Common Stock; or (z) whether or not prohibited by the terms of the
Preferred Shares, circumvent a right of the Preferred Shares.
18
(14) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of an indemnification
undertaking by the Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; PROVIDED, HOWEVER, the Company shall not
be obligated to re-issue preferred stock certificates if the Holder
contemporaneously requests the Company to convert such Preferred Shares into
Common Stock.
(15) REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Certificate of Designations shall be cumulative and in
addition to all other remedies available under this Certificate of Designations
and the other Transaction Documents, at law or in equity (including a decree of
specific performance and/or other injunctive relief), and nothing herein shall
limit the right of a Holder's right to pursue actual damages for any failure by
the Company to comply with the terms of this Certificate of Designations. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holders and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holders shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
(16) CONSTRUCTION; HEADINGS. This Certificate of Designations shall be
deemed to be jointly drafted by the Company and all of the Holders and shall not
be construed against any person as the drafter hereof. The headings of this
Certificate of Designations are for convenience of reference and shall not form
part of, or affect the interpretation of, this Certificate of Designations.
(17) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of a Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
(18) NOTICE. Whenever notice is required to be given under this
Certificate of Designations, unless otherwise provided herein, such notice shall
be given in accordance with Section 9(f) of the Securities Purchase Agreement
(provided that if the Preferred Shares are not held by a Buyer (as defined in
the Securities Purchase Agreement) then substituting the words "holder of
Securities" for the word "Buyer"), subject to the provisions of Delaware law.
(19) TRANSFER OF PREFERRED SHARES. A Holder may assign some or all of
the Preferred Shares and the accompanying rights hereunder held by such Holder
without the consent of the Company; PROVIDED that such assignment is in
compliance with applicable securities laws, subject to the transfer and resale
restrictions set forth in the Securities Purchase Agreement.
19
(20) PREFERRED SHARE REGISTER. The Company shall maintain at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Holders), a register for the Preferred Shares, in
which the Company shall record the name and address of the persons in whose name
the Preferred Shares have been issued, as well as the name and address of each
transferee. The Company may treat the person in whose name any Preferred Share
is registered on the register as the owner and holder thereof for all purposes,
notwithstanding any notice to the contrary, but in all events recognizing any
properly made transfers.
(21) PREFERRED STOCKHOLDER MATTERS. Any preferred stockholder action,
approval or consent required, desired or otherwise sought by the Company
pursuant to the rules and regulations of the Principal Market, the DGCL, this
Certificate of Designations or otherwise with respect to the issuance of the
Preferred Shares or the Common Stock issuable upon conversion thereof may be
effected by written consent of the Company's preferred stockholders or any
series thereof or at a duly called meeting of the Company's preferred
stockholders or any series thereof, as applicable, all in accordance with the
applicable rules and regulations of the Principal Market and the DGCL. This
provision is intended to comply with the applicable sections of the DGCL
permitting stockholder action, approval and consent affected by written consent
in lieu of a meeting.
* * * * *
20
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by [NAME], its [OFFICE], as of the ____ day of _____,
2005
THE WET SEAL, INC.
By:
--------------------------------
Name:
Title:
21
EXHIBIT I
THE WET SEAL, INC. CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and
Rights of Series C Convertible Preferred Stock of The Wet Seal, Inc. (the
"CERTIFICATE OF DESIGNATIONS"). In accordance with and pursuant to the
Certificate of Designations, the undersigned hereby elects to convert the number
of shares of Series C Convertible Preferred Stock, par value $0.01 per share
(the "PREFERRED SHARES"), of The Wet Seal, Inc., a Delaware corporation (the
"COMPANY"), indicated below into shares of Class A Common Stock, par value $0.10
per share (the "COMMON STOCK"), of the Company, as of the date specified below.
Date of Conversion:
----------------------------------------------------
Number of Preferred Shares to be converted:
Stock certificate no(s). of Preferred Shares to be converted:
----------
Tax ID Number (If applicable):
----------------------------------------
Please confirm the following information:
Conversion Price:
------------------------------------------------------
Number of shares of Common Stock to be issued:
Please issue the Common Stock into which the Preferred Shares are
being converted in the following name and to the following address:
Issue to:
-------------------------------------
Address:
--------------------------------------
Telephone Number:
-----------------------------
Facsimile Number:
-----------------------------
Name of Registered Holder:
By:
-------------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Dated:
----------------------------------------
Account Number (if electronic book entry transfer):
--------------------
Transaction Code Number (if electronic book entry transfer):
-----------
[NOTE TO HOLDER -- THIS FORM MUST BE SENT CONCURRENTLY TO TRANSFER AGENT]
22
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby
directs American Stock Transfer and Trust Company to issue the above indicated
number of shares of Common Stock in accordance with the Irrevocable Transfer
Agent Instructions dated May __, 2005 from the Company and acknowledged and
agreed to by American Stock Transfer and Trust Company.
THE WET SEAL, INC.
By:
-----------------------------------
Name:
Title:
23
EXHIBIT 12
EXHIBIT B
FORM OF WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
THE WET SEAL, INC.
WARRANT TO PURCHASE CLASS A COMMON STOCK
Warrant No.:
--------------
Number of Shares of Class A Common Stock: 1
-------------
Date of Issuance: May __, 2005 ("ISSUANCE DATE")
The Wet Seal, Inc., a Delaware corporation (the "COMPANY"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, [S.A.C. CAPITAL ASSOCIATES, LLC] [OTHER
BUYERS], the registered holder hereof or its permitted assigns (the "HOLDER"),
is entitled, subject to the terms set forth below, to purchase from the Company,
at the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Class A Common Stock (including any Warrants to Purchase
Class A Common Stock issued in exchange, transfer or replacement hereof, the
"WARRANT"), at any time or times on or after November __, 2005 (the "VESTING
DATE"), but not after 11:59 p.m., New York Time, on the Expiration Date (as
defined below), (___________) fully paid nonassessable shares of Class A Common
Stock (as defined below) (the "WARRANT SHARES"). Except as otherwise defined
herein, capitalized terms in this Warrant shall have the meanings set forth in
SECTION 15. This Warrant is one of the Warrants to Purchase Class A Common Stock
(the "SPA Warrants") issued pursuant to Section 1 of that certain Securities
Purchase Agreement, dated as of April 29, 2005 (the "SUBSCRIPTION DATE"), by and
among the Company and the investors (the "BUYERS") referred to therein (the
"SECURITIES PURCHASE AGREEMENT").
--------
1 INSERT HOLDER'S PORTION OF SERIES E WARRANTS SET FORTH IN COLUMN (4) ON THE
SCHEDULE OF BUYERS TO THE SECURITIES PURCHASE AGREEMENT, EXERCISABLE FOR AN
AGGREGATE OF 7,500,000 SHARES OF COMMON STOCK
1. EXERCISE OF WARRANT.
(a) MECHANICS OF EXERCISE. Subject to the terms and conditions
hereof (including, without limitation, the limitations set forth in SECTION
1(F)), this Warrant may be exercised by the Holder on any day on or after the
Vesting Date in whole or in part, by (i) delivery of a written notice, in the
form attached hereto as EXHIBIT A (the "EXERCISE NOTICE"), of the Holder's
election to exercise this Warrant and (ii) (A) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "AGGREGATE
EXERCISE PRICE") in cash or wire transfer of immediately available funds to an
account designated by the Company or (B) by notifying the Company that this
Warrant is being exercised pursuant to a Cashless Exercise (as defined in
SECTION 1(D)). The Holder shall not be required to deliver the original Warrant
in order to effect an exercise hereunder. Execution and delivery of the Exercise
Notice with respect to less than all of the Warrant Shares shall have the same
effect as cancellation of the original Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares. On or
before the first Business Day following the date on which the Company has
received each of the Exercise Notice and the Aggregate Exercise Price (or notice
of a Cashless Exercise) (the "EXERCISE DELIVERY DOCUMENTS"), the Company shall
transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Delivery Documents to the Holder and the Company's transfer agent (the
"TRANSFER AGENT"). On or before the third Business Day following the date on
which the Company has received all of the Exercise Delivery Documents (the
"SHARE DELIVERY DATE"), the Company shall (X) provided that the Transfer Agent
is participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Class A Common Stock to which the Holder is
entitled pursuant to such exercise to the Holder's or its designee's balance
account with DTC through its Deposit Withdrawal Agent Commission system, or (Y)
if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the Company's
share register in the name of the Holder or its designee, for the number of
shares of Class A Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in CLAUSE (II)(A) above or notification to the Company of a Cashless
Exercise referred to in SECTION 1(D), the Holder shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the date
of delivery of the certificates evidencing such Warrant Shares. If this Warrant
is submitted in connection with any exercise pursuant to this SECTION 1(A) and
the number of Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an exercise,
then the Company shall as soon as practicable and in no event later than three
Business Days after any exercise and at its own expense, issue a new Warrant (in
accordance with SECTION 7(D)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional shares of Class A Common Stock are to be issued upon
the exercise of this Warrant, but rather the number of shares of Class A Common
Stock to be issued shall be rounded up to the nearest whole number. The Company
shall pay any and all taxes which may
2
be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
(b) EXERCISE PRICE. For purposes of this Warrant, "EXERCISE
PRICE" means US $[___], subject to adjustment as provided herein.
(c) COMPANY'S FAILURE TO TIMELY DELIVER SECURITIES. Subject to
SECTION 1(F), if the Company shall fail for any reason or for no reason to issue
to the Holder within three (3) Business Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Class A Common Stock to
which the Holder is entitled and register such shares of Class A Common Stock on
the Company's share register or to credit the Holder's balance account with DTC
for such number of shares of Class A Common Stock to which the Holder is
entitled upon the Holder's exercise of this Warrant, then, in addition to all
other remedies available to the Holder, the Company shall pay in cash to the
Holder on each day after such third Business Day that the issuance of such
shares of Class A Common Stock is not timely effected an amount equal to 1.5% of
the product of (A) the sum of the number of shares of Class A Common Stock not
issued to the Holder on a timely basis and to which the Holder is entitled and
(B) the Closing Sale Price of the shares of Class A Common Stock on the Trading
Day immediately preceding the last possible date which the Company could have
issued such shares of Class A Common Stock to the Holder without violating
SECTION 1(A). In addition to the foregoing, if within three (3) Trading Days
after the Company's receipt of the facsimile copy of a Exercise Notice the
Company shall fail to issue and deliver a certificate to the Holder and register
such shares of Class A Common Stock on the Company's share register or credit
the Holder's balance account with DTC for the number of shares of Class A Common
Stock to which the Holder is entitled upon such holder's exercise hereunder, and
if on or after the third Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Class A Common Stock to deliver in
satisfaction of a sale by the Holder of shares of Class A Common Stock issuable
upon such exercise that the Holder anticipated receiving from the Company (a
"BUY-IN"), then the Company shall, within three (3) Business Days after the
Holder's request and in the Holder's discretion, either (i) pay cash to the
Holder in an amount equal to the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Class A Common Stock so
purchased (the "BUY-IN PRICE"), at which point the Company's obligation to
deliver such certificate (and to issue such shares of Class A Common Stock)
shall terminate, or (ii) promptly honor its obligation to deliver to the Holder
a certificate or certificates representing such shares of Class A Common Stock
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Class A Common
Stock, multiplied by (B) the Closing Bid Price on the date of exercise, provided
that, so long as the Senior Credit Facility (as defined in the Securities
Purchase Agreement) remains outstanding, each of the Holders hereby
acknowledges, covenants and agrees that such Holder will not demand or accept,
and the Company will not be obligated to make, any payment (each a "DELAY FEE")
(whether in whole or in part) required to be made pursuant to this SECTION 1(C),
SECTION 2(D)(V) of the Company's Certificate of Designations, Preferences and
Rights of Series C Convertible Preferred Stock (the "PREFERRED SHARES")
(regarding the Company's obligation to make payments in the event of its failure
to timely convert the Preferred Shares) and SECTION 2(F) of the Registration
Rights Agreement (regarding the Company's obligation to make Registration Delay
Payments, as defined in the Registration Rights Agreement), which would, in the
3
aggregate of all of the aforementioned payments made to all Holders, exceed
$250,000 in the aggregate in any calendar year (the "DELAY FEE CAP"). Each
Holder agrees that, so long as the Senior Credit Facility (as defined in the
Securities Purchase Agreement) is outstanding, (i) such Holder does not have any
rights to, and shall not accept or demand any, Delay Fees in excess of its pro
rata share of the Delay Fee Cap and (ii) to the extent any amounts are received
with respect to the Delay Fees by such Holder from the Company in excess of such
Holder's pro rata share of the Delay Fee Cap, such Holder shall promptly forward
an amount equal to such excess in immediately available funds to the
Administrative Agent (as defined in the Senior Credit Facility) at such account
as the Administrative Agent shall designate from time to time.
(d) CASHLESS EXERCISE. Notwithstanding anything contained herein
to the contrary, if a Registration Statement (as defined in the Registration
Rights Agreement) covering the Warrant Shares that are the subject of the
Exercise Notice (the "UNAVAILABLE WARRANT SHARES") is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Class A Common Stock determined according
to the following formula (a "CASHLESS EXERCISE"):
Net Number = (A X B) - (A X C)
-----------------
B
For purposes of the foregoing formula:
A= the total number of shares with respect to which this
Warrant is then being exercised.
B= the Closing Sale Price of the shares of Class A
Common Stock (as reported by Bloomberg) on the date
immediately preceding the date of the Exercise Notice.
C= the Exercise Price then in effect for the applicable
Warrant Shares at the time of such exercise.
(e) DISPUTES. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with SECTION 12.
(f) LIMITATIONS ON EXERCISES.
(i) BENEFICIAL OWNERSHIP. The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such exercise, such
Person (together with such Person's affiliates) would beneficially own in excess
of 9.99% (the "CONVERSION LIMITATION") of the shares of Class A Common Stock
outstanding immediately after giving effect to such exercise.
4
For purposes of the foregoing sentence, the aggregate number of shares of Class
A Common Stock beneficially owned by such Person and its affiliates shall
include the number of shares of Class A Common Stock issuable upon exercise of
this Warrant with respect to which the determination of such sentence is being
made, but shall exclude shares of Class A Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Warrant, in determining the number of outstanding
shares of Class A Common Stock, the Holder may rely on the number of outstanding
shares of Class A Common Stock as reflected in (1) the Company's most recent
Form 10-K or 10-Q or any Current Report on Form 8-K filed subsequent thereto or
other public filing with the Securities and Exchange Commission, (2) a more
recent public announcement by the Company or (3) any other notice by the Company
or the Transfer Agent setting forth the number of shares of Class A Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Holder, the Company shall within three (3) Business Days confirm orally and in
writing to the Holder the number of shares of Class A Common Stock then
outstanding. In any case, the number of outstanding shares of Class A Common
Stock shall be determined after giving effect to the issuance of the SPA
Securities and the conversion or exercise of securities of the Company,
including the SPA Warrants, by the Holder and its affiliates since the date as
of which such number of outstanding shares of Class A Common Stock was reported.
By written notice to the Company, any Holder may increase or decrease the
Conversion Limitation to any other percentage not in excess of 9.99% specified
in such notice; provided that (i) any such increase will not be effective until
the 61st day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder sending such notice and not
to any other holder of SPA Warrants.
(ii) PRINCIPAL MARKET REGULATION. The Company shall not be
obligated to issue any shares of Class A Common Stock upon exercise of this
Warrant if the issuance of such shares of Class A Common Stock would exceed that
number of shares of Class A Common Stock which the Company may issue upon
exercise of this Warrant (including, as applicable, any shares of Class A Common
Stock issued upon conversion or exercise of the SPA Securities) without
breaching the Company's obligations under the rules or regulations of the
Principal Market (the "EXCHANGE CAP"), which number of shares of Class A Common
Stock is 8,250,115 as of April 29, 2005, except that such limitation shall not
apply in the event that the Company (A) obtains the approval of its shareholders
as required by the applicable rules of the Principal Market for issuances of
shares of Class A Common Stock in excess of such amount or (B) obtains a written
opinion from outside counsel to the Company that such approval is not required,
which opinion shall be reasonably satisfactory to the Required Holders. Until
such approval or written opinion is obtained, no Buyer shall be issued, upon
exercise or conversion, as applicable, of any SPA Warrants or SPA Securities,
shares of Class A Common Stock in an amount greater than the product of the
Exchange Cap multiplied by a fraction, the numerator of which is the total
number of shares of Class A Common Stock issued to such Buyer pursuant to
5
the Securities Purchase Agreement on the Issuance Date and the denominator of
which is the aggregate number of shares of Class A Common Stock issued to the
Buyers pursuant to the Securities Purchase Agreement on the Issuance Date (with
respect to each Buyer, the "EXCHANGE CAP ALLOCATION"). In the event that any
Buyer shall sell or otherwise transfer any of such Buyer's SPA Warrants, the
transferee shall be allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of SPA Warrants shall exercise
all of such holder's SPA Warrants into a number of shares of Class A Common
Stock which, in the aggregate, is less than such holder's Exchange Cap
Allocation, then the difference between such holder's Exchange Cap Allocation
and the number of shares of Class A Common Stock actually issued to such holder
shall be allocated to the respective Exchange Cap Allocations of the remaining
holders of SPA Warrants on a pro rata basis in proportion to the shares of Class
A Common Stock underlying the SPA Warrants then held by each such holder. In the
event that the Company is prohibited from issuing any Warrant Shares for which
an Exercise Notice has been received as a result of the operation of this
SECTION 1(F)(II), the Company shall pay cash in exchange for cancellation of
such Warrant Shares, at a price per Warrant Share equal to the difference
between the Closing Sale Price and the Exercise Price as of the date of the
attempted exercise.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time upon subdivisions or combinations of shares of Class A Common Stock. If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Class A Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares will be proportionately
increased. If the Company at any time on or after the Subscription Date combines
(by combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Class A Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of Warrant Shares will be
proportionately decreased. Any adjustment under this SECTION 2(B) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare
or make any dividend or other distribution of its assets (or rights to acquire
its assets) to holders of shares of Class A Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash,
stock or other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "DISTRIBUTION"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close
of business on the record date fixed for the determination of holders of shares
of Class A Common Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Exercise Price by a fraction of which (i)
6
the numerator shall be the Closing Bid Price of the shares of Class A Common
Stock on the Trading Day immediately preceding such record date minus the value
of the Distribution (as determined in good faith by the Company's Board of
Directors) applicable to one share of shares of Class A Common Stock, and (ii)
the denominator shall be the Closing Bid Price of the shares of Class A Common
Stock on the Trading Day immediately preceding such record date; and
(b) the number of Warrant Shares shall be increased to a number
of shares equal to the number of shares of Class A Common Stock obtainable
immediately prior to the close of business on the record date fixed for the
determination of holders of shares of Class A Common Stock entitled to receive
the Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding paragraph (a); provided that in the event that the
Distribution is of shares of Class A Common Stock (or common stock) ("OTHER
SHARES OF CLASS A COMMON STOCK") of a company whose common shares are traded on
a national securities exchange or a national automated quotation system, then
the Holder may elect to receive a warrant to purchase Other Shares of Class A
Common Stock in lieu of an increase in the number of Warrant Shares, the terms
of which shall be identical to those of this Warrant, except that such warrant
shall be exercisable into the number of shares of Other Shares of Class A Common
Stock that would have been payable to the Holder pursuant to the Distribution
had the Holder exercised this Warrant immediately prior to such record date and
with an aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) PURCHASE RIGHTS. In addition to any adjustments pursuant to
SECTION 2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Class A
Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Class A Common Stock acquirable upon complete exercise of
this Warrant (without regard to any limitations on the exercise of this Warrant)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Class A Common Stock are to be determined
for the grant, issue or sale of such Purchase Rights.
(b) FUNDAMENTAL TRANSACTIONS. The Company shall not enter into
or be party to a Fundamental Transaction unless (i) the Successor Entity assumes
in writing all of the obligations of the Company under this Warrant and the
other Transaction Documents in accordance with the provisions of this SECTION
(4)(B) pursuant to written agreements in form and substance satisfactory to the
Required Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Warrants in
exchange for such Warrants a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value for
the shares of Class A Common Stock reflected by
7
the terms of such Fundamental Transaction, and exercisable for a corresponding
number of shares of capital stock equivalent to the shares of Class A Common
Stock acquirable and receivable upon exercise of this Warrant (without regard to
any limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and satisfactory to the Required Holders and (ii) the Successor
Entity (including its Parent Entity) is a publicly traded corporation whose
common stock is quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity shall deliver to the Holder confirmation that there shall be issued upon
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Class A Common Stock (or other
securities, cash, assets or other property) purchasable upon the exercise of the
Warrant prior to such Fundamental Transaction, such shares of stock, securities,
cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been
converted immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant. In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Class A Common
Stock are entitled to receive securities or other assets with respect to or in
exchange for shares of Class A Common Stock (a "CORPORATE EVENT"), the Company
shall make appropriate provision to insure that the Holder will thereafter have
the right to receive upon an exercise of this Warrant at any time after the
consummation of the Fundamental Transaction but prior to the Expiration Date, in
lieu of the shares of the Class A Common Stock (or other securities, cash,
assets or other property) purchasable upon the exercise of the Warrant prior to
such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had the Warrant been exercised
immediately prior to such Fundamental Transaction. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the
Required Holders. The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall be
applied without regard to any limitations on the exercise of this Warrant.
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that
the Company will not, by amendment of its Certificate of Incorporation, By-laws
or through any reorganization, transfer of assets, consolidation, merger, scheme
of arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Class A Common
Stock receivable upon the exercise of this Warrant above the Exercise Price then
in effect, and (ii) shall take all such actions as may be necessary or
8
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Class A Common Stock upon the exercise of this
Warrant. The Company shall, so long as any of the SPA Warrants are outstanding,
take all action necessary to reserve and keep available out of its authorized
and unissued shares of Class A Common Stock, solely for the purpose of effecting
the exercise of the SPA Warrants, 100% of the number of shares of Class A Common
Stock as shall from time to time be necessary to effect the exercise of the SPA
Warrants then outstanding (without regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this SECTION 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to the
shareholders.
7. REISSUANCE OF WARRANTS.
(a) TRANSFER OF WARRANT. If this Warrant is to be transferred,
the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with SECTION 7(D)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with SECTION 7(D)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.
(b) LOST, STOLEN OR MUTILATED WARRANT. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with SECTION 7(D)) representing the right to purchase the
Warrant Shares then underlying this Warrant.
(c) EXCHANGEABLE FOR MULTIPLE WARRANTS. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new
9
Warrant or Warrants (in accordance with SECTION 7(D)) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional shares of
Class A Common Stock shall be given.
(d) ISSUANCE OF NEW WARRANTS. Whenever the Company is required
to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant
(i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated
on the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to SECTION 7(A) or SECTION 7(C), the Warrant Shares designated by the Holder
which, when added to the number of shares of Class A Common Stock underlying the
other new Warrants issued in connection with such issuance, does not exceed the
number of Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant which is the same as
the Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
8. NOTICES. Whenever notice is required to be given under this
Warrant, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefor. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Exercise Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least fifteen
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Class A
Common Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to holders of shares of Class A Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the Holder. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.
10. GOVERNING LAW. This Warrant shall be governed by and construed
and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule
10
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York.
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be
jointly drafted by the Company and all the Buyers and shall not be construed
against any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.
12. DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or arithmetic
calculations via facsimile within two Business Days of receipt of the Exercise
Notice giving rise to such dispute, as the case may be, to the Holder. If the
Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within three Business
Days of such disputed determination or arithmetic calculation being submitted to
the Holder, then the Company shall, within two Business Days thereafter submit
via facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by
the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to
the Company's independent, outside accountant. The Company shall cause at its
expense the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.
13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
14. TRANSFER. This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company, except as may
otherwise be required by Section 2(f) of the Securities Purchase Agreement.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the
following terms shall have the following meanings:
(a) "BLOOMBERG" means Bloomberg Financial Markets.
11
(b) "BUSINESS DAY" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
(c) "CLASS A COMMON STOCK" means (i) the Company's shares of
Class A Common Stock, par value $0.10 per share, and (ii) any share capital into
which such Class A Common Stock shall have been changed or any share capital
resulting from a reclassification of such Class A Common Stock.
(d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to SECTION 12. All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.
(e) "CONVERTIBLE SECURITIES" means any stock or securities
(other than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Class A Common Stock.
(f) "ELIGIBLE MARKET" means the Principal Market, The New York
Stock Exchange, Inc., the American Stock Exchange or The Nasdaq SmallCap Market.
(g) "EXPIRATION DATE" means November __, 2010 or, if such date
falls on a day other than a Business Day or on which trading does not take place
on the Principal Market (a "HOLIDAY"), the next date that is not a Holiday.
(h) "FUNDAMENTAL TRANSACTION" means that the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person, or (ii) sell, assign, transfer,
12
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person to make a
purchase offer, tender offer or exchange offer that is accepted by the holders
of more than 50% of the Company's outstanding voting securities (but excluding
any voting securities held by the Person or Persons making or party to, or any
Person(s) associated or affiliated with such Person or Persons making or party
to, such purchase offer, tender offer or exchange offer), or (iv) enter into a
stock purchase agreement or other agreement to effect any other business
combination (including, without limitation, a reorganization, recapitalization
or spin-off) with another Person or Persons, whereby more than 50% of the
Company's outstanding voting securities are acquired by such Person or Persons
(excluding any voting securities of the Company held by such Person or Persons
making or party to, or any Person(s) associated or affiliated with such Person
or Persons making or party to, such stock purchase agreement or other agreement
to effect such other business combination), or (v) change the members
constituting its Board of Directors such that the individuals who constituted
the Board of Directors on the Subscription Date or other governing body of the
Company (together with any new directors whose election to such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of 662/3% of the directors then still in office who were
either directors on the Subscription Date or whose election or nomination for
election was previously so approved), cease for any reason to constitute a
majority of such Board of Directors then in office, or (vi) reorganize,
recapitalize or reclassify its Common Stock.
(i) "OPTIONS" means any rights, warrants or options to subscribe
for or purchase shares of Class A Common Stock or Convertible Securities.
(j) "PARENT ENTITY" of a Person means an entity that, directly
or indirectly, controls the applicable Person and whose common stock or
equivalent equity security is quoted or listed on an Eligible Market, or, if
there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date of consummation of
the Fundamental Transaction.
(k) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity or a government or any department or agency
thereof.
(l) "PRINCIPAL MARKET" means the Nasdaq National Market.
(m) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement by and among the Company and the Buyers, as may be
amended or modified from time to time.
(n) "REQUIRED HOLDERS" means the holders of the SPA Warrants
representing at least a majority of shares of Class A Common Stock underlying
the SPA Warrants then outstanding.
(o) "SPA SECURITIES" means the Preferred Shares, as defined in
and issued pursuant to the Securities Purchase Agreement.
13
(p) "SUCCESSOR ENTITY" means the Person (or, if so elected by
the Required Holders, the Parent Entity) formed by, resulting from or surviving
any Fundamental Transaction or the Person (or, if so elected by the Required
Holders, the Parent Entity) with which such Fundamental Transaction shall have
been entered into.
(q) "TRADING DAY" means any day on which the Class A Common
Stock are traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock are then traded;
provided that "Trading Day" shall not include any day on which the Common Stock
are scheduled to trade on such exchange or market for less than 4.5 hours or any
day that the Common Stock are suspended from trading during the final hour of
trading on such exchange or market (or if such exchange or market does not
designate in advance the closing time of trading on such exchange or market,
then during the hour ending at 4:00:00 p.m., New York Time).
[SIGNATURE PAGE FOLLOWS]
14
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase
Class A Common Stock to be duly executed as of the Issuance Date set out above.
THE WET SEAL, INC.
By:
-----------------------------------
Name:
Title:
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE CLASS A COMMON STOCK
THE WET SEAL, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Class A Common Stock ("WARRANT SHARES") of
The Wet Seal, Inc., a Delaware corporation (the "COMPANY"), evidenced by the
attached Warrant to Purchase Class A Common Stock (the "WARRANT"). Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as:
____________ a "CASH EXERCISE" with respect to __________
Warrant Shares; and/or
____________ a "CASHLESS EXERCISE" with respect to ______
Warrant Shares.
2. Payment of Exercise Price. In the event that the holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
-----------------------------------
Name of Registered Holder
By:
-----------------------------------
Name:
Title:
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby
directs American Stock Transfer and Trust Company to issue the above indicated
number of shares of Class A Common Stock in accordance with the Transfer Agent
Instructions dated May __, 2005 from the Company and acknowledged and agreed to
by American Stock Transfer and Trust Company.
THE WET SEAL, INC.
By:
-----------------------------------
Name:
Title:
EXHIBIT 15
EXECUTION VERSION
SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT
This Second Amendment and Waiver to Credit Agreement (this "SECOND
AMENDMENT") is made as of the 29th day of April, 2005 by and among:
THE WET SEAL, INC., a Delaware corporation, having its principal place of
business at 00000 Xxxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000, as Lead
Borrower for the Borrowers, being:
said WET SEAL, INC.,
WET SEAL CATALOG, INC., a Delaware corporation, having its principal
place of business at 00000 Xxxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000;
and
THE WET SEAL RETAIL, INC., a Delaware corporation, having its principal
place of business at 00000 Xxxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000;
and
WET SEAL GC, INC., a Virginia corporation, having its principal place of
business at 00000 Xxxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000, as Facility
Guarantor; and
the LENDERS party hereto; and
S.A.C. CAPITAL ASSOCIATES, LLC, a limited liability company organized under
the laws of Anguilla, in its role as administrative agent (the
"ADMINISTRATIVE AGENT") and in its role as collateral agent (the
"COLLATERAL AGENT", together with the Administrative Agent, the"AGENTS")
for the Lenders;
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
WITNESSETH
WHEREAS, the Lead Borrower, the other Borrowers, the Lenders and the Agents
entered into a Credit Agreement dated as of November 9, 2004 (as amended by the
First Amendment to Credit Agreement, dated as of January 14, 2005 and as the
same may be further amended, restated or otherwise modified and in effect from
time to time, the "CREDIT AGREEMENT"); and
WHEREAS, the Lead Borrower desires to issue a new series of convertible
preferred stock and a new series of warrants, pursuant to the terms of the
Securities Purchase Documents (as hereinafter defined), and has requested that
the Lenders and the Agents consent to such issuance and to waive any Default or
Event of Default under the Credit Agreement related thereto; and
WHEREAS, the Lenders and the Agents have agreed to consent to the issuance
of the convertible preferred stock and the warrants pursuant to the terms of the
Securities Purchase Documents and to waive any Default or Event of Default under
the Credit Agreement that might be deemed to occur as a result of such issuance;
and
WHEREAS, the parties desire to amend certain of the terms and conditions of
the Credit Agreement pursuant to the terms and conditions set forth herein.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS. All capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Credit Agreement.
2. AMENDMENTS TO ARTICLE I. Section 1.01 of the Credit Agreement is hereby
amended by:
a. deleting the parenthetical in the definition of "Excess Availability"
and substituting in lieu thereof "(as in effect on the Third Amendment
to Working Capital Credit Agreement Effective Date)".
b. deleting the definition of "Minimum Required Excess Availability" in
its entirety and substituting in lieu thereof the following:
"MINIMUM REQUIRED EXCESS AVAILABILITY" means Excess Availability
at all times of not less than the lesser of (i) fifteen percent (15%)
of the greater of the Borrowing Base or the Term Loan Borrowing Base,
at any time of calculation, or (ii) $5,000,000.
c. deleting the definition of "Restricted Payment" in its entirety and
substituting in lieu thereof the following:
"RESTRICTED PAYMENT" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any
shares of any class of capital stock of any Loan Party or any
Subsidiary of any Loan Party, or any payment (whether in cash,
securities or other property), including any sinking fund or similar
fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any such
shares of capital stock of any Loan Party or any such Subsidiary or
any option, warrant or other right to acquire any such shares of
capital stock of any Loan Party or any such Subsidiary. Without
limiting the foregoing, "Restricted Payments" with respect to any
Person shall also include all payments made by such Person with
respect to any stock appreciation rights, plans, equity incentive or
achievement plans or any similar plans and all proceeds of a
dissolution or liquidation of such Person payable to the shareholders
of such person; PROVIDED, HOWEVER, that "Restricted Payments" with
respect to any Person shall not include any Equity Fees.
d. deleting the definition of "Working Capital Credit Agreement" in its
entirety and substituting in lieu thereof the following:
"WORKING CAPITAL CREDIT AGREEMENT" means the Amended and Restated
Credit Agreement, dated as of September 22, 2004, as the same may be
amended, replaced, renewed or refinanced from time to time in
accordance with the terms thereof and Section 6.09 hereof.
2
e. inserting the following new definitions in their appropriate
alphabetical positions:
"EQUITY FEES" means, collectively, (a) any "Registration Delay
Payments" (as such term is defined in the 2005 Registration Rights
Agreement) required to be paid pursuant to Section 2(f) of the 2005
Registration Rights Agreement, plus (b) any amounts required to be
paid as a result of any failure by the Lead Borrower to timely issue
and deliver or register the shares of Common Stock on the Lead
Borrower's share register or to credit a holder's balance account with
The Depository Trust Company, to which any holder is entitled upon
such holder's exercise of any 2005 Warrant pursuant to Section 1(c) of
each 2005 Warrant, plus (c) any amounts required to be paid as a
result of any failure by the Lead Borrower to credit a holder's
balance account with The Depository Trust Company or to issue and
deliver a certificate to a holder for the number of Common Shares to
which such holder is entitled upon the conversion of Preferred Shares,
or to issue and deliver a new Preferred Stock Certificate representing
the number of Preferred Shares to which a holder is entitled, pursuant
to Section 2(d)(v) of the 2005 Certificate of Designations, all such
fees set forth in clauses (a), (b) and (c) herein in an amount not to
exceed $250,000 in the aggregate in any calendar year.
"THIRD AMENDMENT TO WORKING CAPITAL CREDIT AGREEMENT EFFECTIVE
DATE" means the date on which all conditions precedent to the Third
Amendment to Working Capital Credit Agreement, dated as of April 29,
2005, among the Loan Parties, the Working Capital Administrative Agent
and the Working Capital Lenders, have been satisfied."
"2005 CERTIFICATE OF DESIGNATIONS" means that certain Certificate
of Designations, Preferences and Rights of Series C Convertible
Preferred Stock dated as of April __, 2005.
"2005 REGISTRATION RIGHTS AGREEMENT" means that certain
Registration Rights Agreement dated as of April __, 2005 by and
between the Lead Borrower and the Buyers (as defined in the 2005
Securities Purchase Agreement) listed therein.
"2005 SECURITIES PURCHASE AGREEMENT" means that certain
Securities Purchase Agreement dated as of April __, 2005 entered into
by and among the Lead Borrower and the Buyers (as defined in the 2005
Securities Purchase Agreement).
"2005 TRANSACTION DOCUMENTS" means the 2005 Securities Purchase
Agreement, the 2005 Registration Rights Agreement, the 2005
Certificate of Designations and the 2005 Warrants.
"2005 WARRANTS" means the Form of Series E Warrants substantially
in the form attached as Exhibit B to the 2005 Securities Purchase
Agreement.
3
3. AMENDMENTS TO ARTICLE V. Article V of the Credit Agreement is hereby
amended by:
a. deleting subsection 5.01(f) in its entirety and substituting in lieu
thereof the following:
"(f) weekly, on Wednesday of each week, (i) a Borrowing Base
Certificate (as defined in the Working Capital Credit Agreement)
showing the Borrowing Base and Term Loan Borrowing Base as of the
close of business on the immediately preceding Saturday, which
Borrowing Base Certificate shall reflect, among other things, the roll
forward of the Inventory from the prior week as of the close of
business on the immediately preceding Saturday and the prior week's
Eligible Cash and Cash Equivalents (as defined in the Working Capital
Credit Agreement) as of the close of business on the immediately
preceding Saturday; PROVIDED that, if at any time the Working Capital
Administrative Agent or the Term Lender (as defined in the Working
Capital Credit Agreement) request a daily Borrowing Base Certificate
from the Lead Borrower, the Lead Borrower shall simultaneously furnish
a copy of such Borrowing Base Certificate to the Agents; and (ii) if
the Borrowing Base (as defined in the Working Capital Credit Agreement
as in effect on the Third Amendment to Working Capital Credit
Agreement Effective Date), the Term Loan Borrowing Base (as defined in
the Working Capital Credit Agreement as in effect on the Third
Amendment to Working Capital Credit Agreement Effective Date) or any
component definition thereof (as in effect on the Third Amendment to
Working Capital Credit Agreement Effective Date) shall be modified
after the Third Amendment to Working Capital Credit Agreement
Effective Date, an additional Borrowing Base Certificate (as in effect
on the Third Amendment to Working Capital Credit Agreement Effective
Date) showing the Borrowing Base (as defined, together with any
component definition used therein, in the Working Capital Credit
Agreement as in effect on the Third Amendment to Working Capital
Credit Agreement Effective Date) and Term Loan Borrowing Base (as
defined, together with any component definition used therein, in the
Working Capital Credit Agreement as in effect on the Third Amendment
to Working Capital Credit Agreement Effective Date) as of the close of
business on the immediately preceding Saturday, in each case of
clauses (i) and (ii) above, each such Borrowing Base Certificate to be
certified as complete and correct on behalf of the Borrowers by a
Financial Officer of the Lead Borrower;"
b. deleting "and" at the end of subsection 5.02(i) and inserting the
following new subsections (j) and (k) at the end of Section 5.02:
"(j) the occurrence of (i) any delay in complying with any Filing
Deadline (as defined in the Registration Rights Agreement (as defined
in the Securities Purchase Agreement) and as defined in the 2005
Registration Rights Agreement, or Effectiveness Deadline (as defined
in the Registration Rights Agreement (as defined in the Securities
Purchase Agreement) and as defined in the 2005 Registration Rights
Agreement or (ii) any Conversion Failure (as defined in the Notes (as
defined in the Securities Purchase Agreement)), or (iii)
4
any failure to deliver Class A Common Stock upon conversion or
exercise, as applicable, within the time periods provided for in the
respective Securities (as defined in the 2005 Securities Purchase
Agreement)."
"(k) The filing of the Registration Statement with the Securities
Exchange Commission pursuant to Section 2(a), 2(d) and 2(e) of the
2005 Registration Rights Agreement."
4. AMENDMENT TO ARTICLE VII. Article VII of the Credit Agreement is hereby
amended by:
a. deleting subsection 7.01(d) in its entirety and substituting in lieu
thereof the following:
"(d) the Loan Parties shall fail to observe or perform any
covenant, condition or agreement contained in Sections 2.22, 5.01(f),
5.02(j), 5.07 (with respect to insurance covering the Collateral),
5.09, or 5.12, or in Article VI;"
b. inserting the following new subsection at the end of Section 7.01:
"(s) the breach by the Lead Borrower of any covenant or other
term or condition of any of the 2005 Transaction Documents, subject to
any applicable grace periods set forth therein."
5. WAIVER. The Lead Borrower has entered into (a) a Securities Purchase
Agreement, dated as of April __, 2005 (together with all other documents
executed and delivered in connection therewith, the "SECURITIES PURCHASE
AGREEMENT"), attached hereto as Exhibit A, by and among the Lead Borrower
and the investors listed on the Schedule of Buyers attached thereto
(individually, a "BUYER" and collectively, the "BUYERS") and (b) a
Registration Rights Agreement, dated as of April __, 2005 (together with
all other documents executed and delivered in connection therewith, the
"REGISTRATION RIGHTS AGREEMENT"; and together with the Securities Purchase
Agreement, the "SECURITIES PURCHASE DOCUMENTS"), attached hereto as Exhibit
B, by and among the Lead Borrower and the Buyers.
Pursuant to the terms of the Securities Purchase Documents, the Lead
Borrower intends to issue (a) a new series of convertible preferred stock
of the Lead Borrower designated as Series C Convertible Preferred Stock
(the "PREFERRED Shares"), which Preferred Shares shall be convertible into
shares of the Class A Common Stock and (b) a new series of Series E
Warrants (the "WARRANTS") to acquire up to such number of shares of Class A
Common Stock as set forth in the Schedule of Buyers to the Securities
Purchase Agreement. As a condition to this issuance (a) each Buyer shall
exercise that amount of its outstanding Series A Warrants and Series B
Warrants exercisable into such number of shares of Class A Common Stock as
set forth on the Schedule of Closing Exercise Shares to the Securities
Purchase Agreement and (b) the Loan Parties shall enter into an appropriate
amendment to each of the Credit Agreement, the Working Capital Credit
Agreement and the Working Capital Intercreditor Agreement.
5
In accordance with Section 9.02 of the Credit Agreement, each Lender
and each Agent hereby waives any Default or Event of Default under Section
6.06(a) of the Credit Agreement that might be deemed to occur as a result
of the issuance of the Preferred Shares and Warrants pursuant to the terms
of the Securities Purchase Documents.
The waivers set forth in this Section 5 shall be effective only in the
specific instances and for the specific purposes set forth herein and do
not allow for any other or further departure from the terms and conditions
of the Credit Agreement or any other Loan Document, which terms and
conditions shall remain in full force and effect.
6. AMENDMENT TO SCHEDULES. All of the Schedules to the Credit Agreement are
hereby amended and restated in their entirety in the forms of the
respective Schedules attached hereto.
7. CLOSING OF PURCHASE UNDER SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL
[ ], 2005. The closing of the purchases contemplated by Section 1(a) of
the 2005 Securities Purchase Agreement (the "CLOSING") is subject to
satisfaction of the following:
(a) The Lead Borrower and the Buyers (as defined in the 2005
Securities Purchase Agreement) shall establish an arrangement with respect
to the deposit and payment of the purchase price contemplated by Section
1(a) of the 2005 Securities Purchase Agreement satisfactory in all respects
to the Administrative Agent and Lenders in their reasonable discretion.
(b) The Lead Borrower shall have delivered to the Administrative Agent
and the Lenders a funds flow memorandum, in form satisfactory to the
Administrative Agent and the Lenders in their reasonable discretion, no
less than two (2) Business Days prior to the Closing.
8. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall not be effective
until each of the following conditions precedent have been fulfilled to the
satisfaction of the Administrative Agent:
a. The Administrative Agent shall have received a fully executed copy of
the following documents, together with each other document required
thereby:
1. This Second Amendment, duly executed and delivered by the
Borrowers, the Facility Guarantor, the Agents and the Lenders;
2. The Third Amendment to the Working Capital Credit Agreement, in
form and substance reasonably satisfactory to the Administrative
Agent, duly executed and delivered by the Borrowers, the Facility
Guarantor, the Working Capital Administrative Agent and the
Working Capital Lenders;
3. The Second Amendment to the Working Capital Intercreditor
Agreement, in form and substance reasonably satisfactory to the
Administrative Agent, duly executed by the Working Capital
Administrative Agent and the Administrative Agent;
6
4. A Subordination Agreement, in form and substance reasonably
satisfactory to the Administrative Agent and the Working Capital
Administrative Agent, duly executed and delivered by the Buyers
under the 2005 Securities Purchase Agreement; and
5. The Securities Purchase Documents, in substantially the forms
attached hereto as Exhibits A and B, duly executed by the parties
thereto.
b. The Third Amendment to the Working Capital Credit Agreement shall have
become effective in accordance with its terms.
c. The Second Amendment to the Working Capital Intercreditor Agreement
shall have become effective, in accordance with its terms.
d. The issuance of the Preferred Shares and Warrants, pursuant to the
terms of the Securities Purchase Documents, shall occur on or prior to
May 3, 2005.
e. No Default or Event of Default shall have occurred and be continuing
both before and immediately after giving effect to the execution of
this Second Amendment (other than as may be waived herein) and all
representations and warranties made in the Credit Agreement are true
and correct as of the date hereof, except to the extent that they
refer specifically to an earlier date, in which case they are true and
correct as of such earlier date.
f. The Borrowers and the Facility Guarantor shall have provided such
additional instruments and documents to the Administrative Agent as
the Administrative Agent and its counsel may reasonably request.
9. MISCELLANEOUS.
a. Except as provided herein, all terms and conditions of the Credit
Agreement and the other Loan Documents remain in full force and
effect. The Loan Parties hereby ratify, confirm, and reaffirm all of
the representations, warranties and covenants therein contained.
b. Each Loan Party confirms and agrees that this Amendment shall
constitute a Loan Document under the Credit Agreement. Accordingly, it
shall be an Event of Default under the Credit Agreement if any
representation or warranty made or deemed made by any Loan Party under
or in connection with this Amendment shall have been incorrect in any
material respect when made or deemed made or if any Loan Party fails
to perform or comply with any covenant or agreement contained herein.
c. Each Loan Party hereby acknowledges and agrees that it has no offsets,
defenses, claims, or counterclaims against the Agents or any Lender,
or any of their respective officers, directors, employees, attorneys,
representatives, predecessors, successors, or assigns with respect to
the Loan Documents, the Obligations, or otherwise, and that if such
Loan Party now has, or ever did have, any offsets,
7
defenses, claims, or counterclaims against the Agents or any Lender,
or any of their respective officers, directors, employees, attorneys,
representatives, predecessors, successors, or assigns, whether known
or unknown, at law or in equity, all of them are hereby expressly
WAIVED, and each Loan Party hereby RELEASES the Agents and each
Lender, and each of their respective officers, directors, employees,
attorneys, representatives, predecessors, successors, and assigns from
any liability therefor.
d. This Second Amendment may be executed in several counterparts and by
each party on a separate counterpart, each of which when so executed
and delivered, shall be an original, and all of which together shall
constitute one instrument. Delivery of an executed counterpart of this
Second Amendment by facsimile or electronic mail shall be equally
effective as delivery of an original executed counterpart.
e. This Second Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
f. This Second Amendment shall be binding upon, and inure to the benefit
of the successors and assigns of the parties hereto.
g. This Second Amendment expresses the entire understanding of the
parties with respect to the matters set forth herein and supersedes
all prior discussions or negotiations hereon. This Second Amendment
may not be amended, modified or otherwise changed without the mutual
agreement in writing of the parties hereto.
h. Each of the Loan Parties hereto (on behalf of all Loan Parties) hereby
(a) acknowledges and consents to this Second Amendment, (b) confirms
and agrees that each Loan Document to which it is a party is, and
shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects except that on and after the date of
this Second Amendment all references in any such Loan Document to "the
Credit Agreement", the "Agreement", "thereto", "thereof", "thereunder"
or words of like import referring to the Credit Agreement shall mean
the Credit Agreement as amended by this Amendment, and (c) confirms
and agrees that to the extent that any such Loan Document purports to
assign or pledge to any Agent for the ratable benefit of the Lenders,
or to grant to any Agent for the ratable benefit of the Lenders a
security interest in or Lien on, any collateral as security for the
obligations of any Loan Party from time to time existing in respect of
the Credit Agreement (as amended hereby) and the Loan Documents, such
pledge, assignment and/or grant of the security interest or Lien is
hereby ratified and confirmed in all respects. Nothing herein shall be
deemed to entitle any Loan Party to a consent to, or a waiver,
amendment, modification or other change of, any of the terms,
conditions, obligations, covenants or agreements contained in the
Credit Agreement or any other Loan Document in similar or different
circumstances.
8
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be executed and their seals to be hereto affixed as the date first above
written.
THE WET SEAL, INC.
By:/s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: EVP-CFO
THE WET SEAL RETAIL, INC.
By:/s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Secretary & Treasurer
THE WET CATALOG, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Secretary & Treasurer
THE WET SEAL GC, INC.
By:/s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Secretary & Treasurer
S.A.C. CAPITAL ASSOCIATES, LLC,
as Administrative Agent, Collateral
Agent, and a Lender
By: S.A.C. Capital Advisors, LLC
By:/s/ Xxxxxxx X. Felderma
---------------------------------
Name: Xxxxx Xxxxxxxx
Title: General Counsel
GMM CAPITAL, LLC,
as a Lender
By: /s/ Xxxxx Xxxxx
---------------------------------
Name: Xxxxx Xxxxx
Title: Director
XXXXXXXX CAPITAL PARTNERS LLC,
as a Lender
By: /s/ Xxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Member
/s/ Xxxxxxx Xxxxxxxx
----------------------------------
Mr. Xxxxxxx Xxxxxxxx, as a Lender
SMITHFIELD FIDUCIARY LLC, as a
Lender
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Authorized Signatory
X.X. XXXXX SPECIAL OPPORTUNITIES
FUND, L.P.,
as a Lender
By: X.X. Xxxxx Partners LLC,
its general partner
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
X.X. XXXXX SPECIAL OPPORTUNITIES
FUND, LTD, as a Lender
By: X.X. Xxxxx & Co., L.P.,
its trading manager
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
RIVERVIEW GROUP, LLC, as a Lender
By: MILLENNIUM HOLDING GROUP, L.P.
By: Millennium Management,
L.L.C.
By: /s/ Xxxx Xxxxx
---------------------------------
Name: Xxxx Xxxxx
Title: Executive Vice President
CONSENTED AND AGREED:
Fleet Retail Group, Inc.,
as Working Capital Administrative Agent
By:/s/ Xxxxxx Xxxxx
-------------------------------------
Name: Xxxxxx Xxxxx
Title: Director
EXHIBIT A
EXHIBIT B
EXHIBIT 18
SECOND AMENDMENT TO
INTERCREDITOR AND LIEN SUBORDINATION AGREEMENT
THIS SECOND AMENDMENT TO INTERCREDITOR AND LIEN SUBORDINATION AGREEMENT
(this "AMENDMENT") is entered into as of April 29, 2005, by and among S.A.C.
CAPITAL ASSOCIATES, LLC, a limited liability company organized under the laws of
Anguila, as "Administrative Agent" and "Collateral Agent" for all Second Lien
Lenders party to the Second Lien Credit Agreement as described more fully in the
Intercreditor Agreement referred to below (the "SECOND LIEN AGENT"), THE WET
SEAL, INC., a Delaware corporation (the "LEAD Borrower"), THE WET SEAL RETAIL,
INC., a Delaware corporation ("WET SEAL RETAIL"), WET SEAL CATALOG, INC., a
Delaware corporation (collectively, with Wet Seal Retail and the Lead Borrower,
the "COMPANIES"), WET SEAL GC, INC., a Virginia corporation (the "FACILITY
GUARANTOR"), and FLEET RETAIL GROUP, INC., as "Administrative Agent" and
"Collateral Agent" for all of the First Lien Lenders party to the First Lien
Credit Agreement as described more fully in the Intercreditor Agreement referred
to below (the "FIRST LIEN AGENT"). All capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Intercreditor
Agreement referred to below.
R E C I T A L S
A. Concurrently with the Companies', the Facility Guarantor's and the
Second Lien Agent's execution and delivery of that certain Second Lien Credit
Agreement with the Second Lien Lenders, the Companies, the Facility Guarantor,
the Second Lien Agent and the First Lien Agent executed an Intercreditor and
Lien Subordination Agreement, dated as of November 9, 2004 (as amended and in
effect from time to time, the "INTERCREDITOR AGREEMENT");
B. The Companies and the Facility Guarantor have requested that the First
Lien Credit Agreement be amended to provide, among other things, that the
Borrowing Base and the Minimum Required Excess Availability be amended and that
the Second Lien Credit Agreement be amended to provide, among other things, that
the Minimum Required Excess Availability be amended; and
C. The First Lien Agent and the Second Lien Agent have agreed, subject to
the terms and conditions provided herein, to amend the Intercreditor Agreement
as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto hereby agree as
follows:
2
1. AMENDMENTS TO INTERCREDITOR AGREEMENT.
(a) Section 1 of the Intercreditor Agreement is hereby amended by
adding the following new definition of "Third Amendment to First Lien Credit
Agreement Effective Date" in the appropriate alphabetical order:
""THIRD AMENDMENT TO FIRST LIEN CREDIT AGREEMENT EFFECTIVE DATE"
means the date on which all conditions precedent to the Third Amendment to
Amended and Restated Credit Agreement, dated as of April ___, 2005, among
the Credit Parties, the First Lien Agent and the First Lien Lenders, have
been satisfied."
(b) Section 1 of the Intercreditor Agreement is hereby further modified
by deleting the definition of "Borrowing Base Certificate" in its entirety and
substituting in lieu thereof the following new definition:
""BORROWING BASE CERTIFICATE" means the Borrowing Base Certificate
as defined in the First Lien Credit Agreement (as in effect on the Third
Amendment to First Lien Credit Agreement Effective Date)."
(c) Section 1 of the Intercreditor Agreement is hereby further modified
by deleting the definition of "Maximum First Lien Debt" in its entirety and
substituting in lieu thereof the following new definition:
""MAXIMUM FIRST LIEN DEBT" shall mean on any date of determination
thereof, First Lien Debt in an amount equal to (a) the lesser of (i)
$50,000,000 and (ii) the result of (A) the greater of the (I) Borrowing
Base and (II) Term Loan Borrowing Base (as such terms (including the
component definitions thereof) are defined in the First Lien Credit
Agreement as of the Third Amendment to First Lien Credit Agreement
Effective Date), MINUS (B) the Minimum Required Excess Availability (as
such term (including the component definitions thereof) is defined in the
First Lien Credit Agreement as of the Third Amendment to First Lien Credit
Agreement Effective Date); PLUS (b) $8,000,000; PLUS, (c) the Permitted
Overadvance Amount, MINUS (d) all Asset Sale Revolver Reserves, all
Insurance Reserves and all Term Loan Permanent Reductions."
(d) Section 1 of the Intercreditor Agreement is hereby further modified
by deleting the definition of "Second Lien Actionable Default" in its entirety
and substituting in lieu thereof the following new definition:
""SECOND LIEN ACTIONABLE DEFAULT" shall mean, collectively to the
extent that such events have not been cured or waived, (a) an "Event of
Default" that arises pursuant to (i) the incurrence of indebtedness that is
pari passu or senior in right of payment to the Second Lien Debt in
contravention of Section 6.01 of the Second Lien Credit Agreement and (ii)
Section 7.01(a) of the Second Lien Credit Agreement (as in effect on
November 9, 2004), (b) the First Lien Principal Obligations exceeds the
Maximum First Lien Debt, (c) after the occurrence of a First Lien Default
(which shall not have been cured or waived) if
3
at such time the First Lien Agent shall be in breach of any material term
or provision of this Agreement and such breach shall not have been cured
within five (5) Business Days of the date of receipt of written notice of
such breach from the Second Lien Agent and (d) the Borrowers shall have
failed to deliver the Borrowing Base Certificate required pursuant to
Section 5.01(f) of the First Lien Credit Agreement (as in effect on the
Third Amendment to First Lien Credit Agreement Effective Date)."
2. Section 9(b) of the Intercreditor Agreement is hereby amended by
deleting the phrase "as in effect on the Second Amendment to First Lien Credit
Agreement Effective Date" in each instance therein and substituting in lieu
thereof the phrase "as in effect on the Third Amendment to First Lien Credit
Agreement Effective Date".
3. CONDITIONS TO EFFECTIVENESS. This Amendment shall be effective as of the
date hereof upon receipt by the First Lien Agent and the Second Lien Agent of
the following conditions:
(a) a counterpart signature page to this Amendment duly executed and
delivered by the Companies, the Facility Guarantor, the First Lien Agent and the
Second Lien Agent; and
(b) evidence reasonably satisfactory to the First Lien Agent and the
Second Lien Agent that all corporate action necessary for the valid execution,
delivery and performance by the Companies and the Facility Guarantor of this
Amendment and the transactions contemplated hereby shall have been duly and
effectively taken.
4. CONSENTS.
The First Lien Agent, for and on behalf of the First Lien Lenders,
hereby consents to the Second Amendment to Second Lien Credit Agreement, dated
as of the date hereof, and attached hereto as EXHIBIT A. This is a one time
consent and shall not obligate the First Lien Agent or any First Lien Lender to
consent to any other transactions or to establish a course of conduct.
5. NO OTHER AMENDMENTS, ETC. Except as expressly provided in this
Amendment, (a) all of the terms and conditions of the Intercreditor Agreement
remain unchanged, and (b) all of the terms and conditions of the Intercreditor
Agreement, as amended hereby, are hereby ratified and confirmed and remain in
full force and effect. Nothing herein shall be construed to be an amendment,
consent or a waiver of any requirements of the First Lien Agent or of any other
Person under the Intercreditor Agreement except as expressly set forth herein.
Nothing in this Amendment shall be construed to imply any willingness on the
part of the First Lien Agent or the First Lien Lenders to grant any similar or
future amendment, consent or waiver of any of the terms and conditions of the
Intercreditor Agreement.
6. HEADINGS. The paragraph headings used in this Amendment are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
4
7. COUNTERPARTS. This Amendment may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Delivery of photocopies of the signature
pages to this Amendment by facsimile shall be effective as delivery of a
manually executed counterpart hereof.
8. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AMENDMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES. EACH PARTY HERETO HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED THEREIN AND IRREVOCABLY AGREES THAT, SUBJECT TO FIRST
LIEN AGENT'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AMENDMENT SHALL BE LITIGATED IN SUCH COURTS. EACH PARTY HERETO EXPRESSLY
SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS. EACH PARTY HERETO HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY
BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO SUCH PARTY, AS THE CASE MAY BE, AT SUCH PERSON'S ADDRESS SET FORTH
IN THE INTERCREDITOR AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10)
DAYS AFTER THE SAME HAS BEEN POSTED.
9. WAIVER OF JURY TRIAL. EACH SECOND LIEN LENDER PARTY, EACH CREDIT PARTY
AND FIRST LIEN AGENT (FOR ITSELF AND FOR AND ON BEHALF OF EACH FIRST LIEN
LENDER) HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY. EACH SECOND LIEN LENDER PARTY, EACH CREDIT PARTY AND FIRST LIEN
AGENT (FOR ITSELF AND FOR AND ON BEHALF OF THE FIRST LIEN LENDERS) ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP,
THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AMENDMENT, THE SECOND
LIEN DEBT DOCUMENTS AND THE FIRST LIEN DEBT DOCUMENTS, AS THE CASE MAY BE, AND
THAT SUCH PERSONS WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RESPECTIVE
RELATED FUTURE DEALINGS. EACH OF EACH SECOND LIEN LENDER PARTY, EACH CREDIT
PARTY AND FIRST LIEN AGENT (FOR ITSELF AND FOR AND ON BEHALF OF EACH FIRST LIEN
LENDER) WARRANTS AND REPRESENTS THAT SUCH PERSON HAS HAD THE OPPORTUNITY OF
REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT SUCH PERSON KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
5
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Second Lien Agent, the Credit Parties and the First
Lien Agent have caused this Amendment to be executed as of the date first above
written.
THE SECOND LIEN AGENT:
---------------------
S.A.C. CAPITAL ASSOCIATES, LLC, as
Administrative Agent and Collateral Agent
BY: S.A.C. CAPITAL ADVISORS, LLC
By:/s/ Xxxxx Xxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxx
Title:
THE COMPANIES:
-------------
THE WET SEAL, INC.
By:/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: EVP-CFO
THE WET SEAL RETAIL, INC.
By:/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Secretary & Treasurer
WET SEAL CATALOG, INC.
By::/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Secretary & Treasurer
THE FACILITY GUARANTOR:
----------------------
WET SEAL GC, INC.
By::/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Secretary & Treasurer
***SIGNATURE PAGE TO SECOND AMENDMENT TO INTERCREDITOR
AND LIEN SUBORDINATION AGREEMENT***
THE FIRST LIEN AGENT:
--------------------
FLEET RETAIL GROUP, INC.
By:/a/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Director
***SIGNATURE PAGE TO SECOND AMENDMENT TO INTERCREDITOR
AND LIEN SUBORDINATION AGREEMENT***
EXHIBIT 22
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), is entered into
as of April 29, 2005, by and among The Wet Seal, Inc., a Delaware corporation
(the "COMPANY") and the buyers listed on the Schedule of Buyers attached hereto
as EXHIBIT A (each, a "BUYER" and, collectively, the "BUYERS").
THE PARTIES TO THIS AGREEMENT enter into this agreement on the basis
of the following facts, intentions and understanding:
A. The Company and the Buyers entered into that certain Securities
Purchase Agreement, dated as of April 29, 2005 (the "SECURITIES PURCHASE
AGREEMENT"), and, upon the terms and subject to the conditions of the Securities
Purchase Agreement, the Company has agreed to issue and sell to the Buyers an
aggregate of (i) Twenty-Four Thousand Six Hundred (24,600) shares of the
Company's Series C Convertible Preferred Stock, $0.01 par value (the "PREFERRED
SHARES"), issued pursuant to the Company's Certificate of Designations,
Preferences and Rights of Series C Convertible Preferred Stock (the "CERTIFICATE
OF Designations") related thereto, which shall be convertible into shares of
Class A Common Stock of the Company (as converted, collectively, the "CONVERSION
SHARES"), $0.10 par value per share (the "COMMON STOCK"), and (ii) Warrants (as
the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof, the "WARRANTS") to purchase in the aggregate
up to seven million five hundred thousand (7,500,000) shares of Common Stock (as
exercised, collectively, the "WARRANT SHARES").
B. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights to the Buyers under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute
(collectively, the "1933 Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
Section 1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
"BUSINESS DAY" means any day other than Saturday, Sunday or any other
day on which commercial banks in The City of New York are required by law to
remain closed.
"COMMISSION" means the Securities and Exchange Commission.
"INVESTOR" means each Buyer and any transferee or assignee thereof to
whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 of this
Agreement, and any subsequent transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9 of
this Agreement.
"PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization or association and governmental or any department or agency
thereof.
"REGISTER," "REGISTERED," and "REGISTRATION" means a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the 1933 Act and pursuant to Rule 415 under the 1933
Act or any successor rule providing for offering securities on a continuous or
delayed basis ("RULE 415"), and the declaration or ordering of effectiveness of
such Registration Statements by the Commission.
"REGISTRABLE SECURITIES" means (i) the Conversion Shares issued or
issuable upon conversion of the Preferred Shares, (ii) the Warrant Shares issued
or issuable upon exercise of the Warrants, (iii) any shares of capital stock
issued or issuable with respect to securities referenced in the preceding
clause, as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
conversions of the Preferred Shares or exercise of the Warrants, (iv) any shares
of capital stock of any entity issued in respect of the capital stock referenced
in the immediately preceding clauses as a result of a merger, consolidation,
sale of assets, sale or exchange of capital stock or other similar transaction;
provided, that any Registrable Securities that have been sold pursuant to a
Registration Statement or Rule 144 promulgated under the 1933 Act shall no
longer be Registrable Securities.
"REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act and covering all
of the Registrable Securities.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
Section 2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall use its best efforts
to prepare and, as soon as practicable but in no event later than 30 calendar
days after the Closing Date (as defined in the Securities Purchase Agreement)
"(the "FILING DEADLINE"), file with the Commission a Registration Statement on
Form S-3 covering the resale of all of the Registrable Securities. In the event
that Form S-3 is unavailable for such a registration, the Company shall use
such other form as is available for such a registration, subject to the
provisions of Section 2(d) of this Agreement. The Registration Statement
prepared pursuant hereto shall register the Registrable Securities for resale,
including at least 130% of the number of shares of Common Stock issuable upon
conversion of the Preferred Shares and exercise of the Warrants by the Investors
from time to time in accordance with the methods of distribution elected by such
Investors or such other amount as required by Section 4(e) of the Securities
Purchase Agreement. The Registration Statement shall contain (except if
otherwise directed by the holders of at least a majority of the Registrable
Securities) the "Selling Securityholders" and "Plan of Distribution" sections
in substantially the form attached hereto as EXHIBIT B. The Company shall use
reasonable efforts to have the Registration Statement declared effective by
the Commission as soon as practicable, but not later than 90 calendar days
(or in the event the Commission reviews
2
the Registration Statement and requires the Company to make modifications
thereto, 120 calendar days after the Closing Date (the "EFFECTIVENESS
DEADLINE").
(b) ALLOCATION OF CONVERSION SHARES AND WARRANT SHARES. The initial
number of Conversion Shares and Warrant Shares included in any Registration
Statement and each increase in the number thereof included therein shall be
allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement covering
such initial number of Registrable Securities or increase thereof is declared
effective by the Commission. In the event that an Investor sells or otherwise
transfers any of such Investor's Registrable Securities, each transferee shall
be allocated the portion of the then remaining number of the applicable
Registrable Securities included in such Registration Statement allocable to the
transferor. Other than the securities covered by the Existing RRA (as defined in
the Securities Purchase Agreement), which the Holders hereby consent to be
included in this Registration Statement, in no event shall the Company include
any securities other than Registrable Securities on any Registration Statement
without the prior written consent of the Investors holding at least a majority
in interest of the applicable Registrable Securities, determined as if all of
the Preferred Shares held by Investors then outstanding had been converted into
Conversion Shares and all Warrants then outstanding had been exercised for
Warrant Shares without regard to any limitations on conversion of the Preferred
Shares or exercise of the Warrants (the "REQUIRED HOLDERS"). To the extent that
the registration statement required pursuant to the terms of the Existing RRA
(the "EXISTING RRA REGISTRATION STATEMENT") is filed, but not declared
effective, prior to the Registration Statement required hereunder, the Holders
hereby consent to the inclusion of the Registrable Securities hereunder in the
Existing RRA Registration Statement.
(c) LEGAL COUNSEL. Subject to Section 5 of this Agreement, the
Required Holders in interest of the Registrable Securities shall have the right
to select one legal counsel to review and comment upon any registration pursuant
to this Agreement (the "LEGAL COUNSEL"), which the Investors agree shall be
Xxxxxxx Xxxx & Xxxxx LLP or such other counsel as thereafter designated in
writing by the Required Holders. Xxxxxxx Xxxx & Xxxxx LLP, or any other counsel
designated in writing by the Required Holders, shall not represent any Investor
that sends such counsel written notice that such Investor does not wish such
counsel to represent it in connection with the matters discussed in this Section
2(c). The Investors, other than any Investor that delivers the notice discussed
in the preceding sentence, hereby waive any conflict of interest or potential
conflict of interest that may arise as a result of the representation of such
Investors by Xxxxxxx Xxxx & Xxxxx LLP in connection with the subject matter of
this Agreement. This provision will not prohibit any other counsel to an
Investor from reviewing and commenting on any registration filed pursuant to
this Agreement at no cost to the Company.
(d) INELIGIBILITY FOR FORM S-3. If Form S-3 is not available for the
registration of the resale of the Registrable Securities hereunder or the
Company is not permitted by the 1933 Act or the Commission to use Form S-3, then
the Company shall (i) register the resale of the Registrable Securities on
another appropriate form reasonably acceptable to the Required Holders and (ii)
undertake to register the Registrable Securities on Form S-3 as soon as such
form is available; provided, however, that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3
3
covering all of the Registrable Securities has been declared effective by the
Commission or, if earlier, until the end of the Registration Period (as defined
in Section 3(a).
(e) SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the number
of shares registered under a Registration Statement filed pursuant to
Section 2(a) of this Agreement is insufficient to cover all of the Conversion
Shares and Warrant Shares or all of an Investor's allocated portion of the
Conversion Shares and Warrant Shares pursuant to Section 2(b) of this
Agreement, the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover at least one hundred thirty percent (130%) of the number
of such Conversion Shares and Warrant Shares as of the trading day immediately
preceding the date of the filing of such amendment and/or new Registration
Statement, in each case, as soon as practicable, but in no event later than
fifteen (15) days after the necessity therefor arises. The Company shall use
its reasonable efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. The calculation of the number of shares sufficient to cover all of the
Conversion Shares and Warrant Shares shall be made without regard to any
limitations on the conversion of the Preferred Shares or the exercise of the
Warrants, and such calculation shall assume that all of the Preferred Shares
and all of the Warrants are then exercisable for, shares of Common Stock at the
then prevailing Conversion Rate (as defined in the Certificate of Designations)
or Warrant Exercise Price (as defined in the Warrants), as applicable.
(f) EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN EFFECTIVENESS
OF REGISTRATION STATEMENT. Subject to any elections made pursuant to
Section 4(b), if (i) a Registration Statement covering all the Registrable
Securities is not filed with the Commission on or before the Filing Deadline or
is not declared effective by the Commission on or before the Effectiveness
Deadline, (ii) a Registration Statement covering all of the Registrable
Securities required to be covered thereby, as described in Section 2(e) of this
Agreement, is not filed with the Commission on or before the deadline described
in Section 2(e) of this Agreement or is not declared effective by the Commission
on or before the deadline described in Section 2(e) of this Agreement, (iii)
on any day after such Registration Statement has been declared effective by the
Commission, sales of all of the Registrable Securities required to be included
on such Registration Statement cannot be made as a matter of law (other than
during an Allowable Grace Period (as defined in Section 3(n) of this Agreement)
pursuant to such Registration Statement (including, without limitation, because
of a failure to keep such Registration Statement effective, to disclose
such information as is necessary for sales to be made pursuant to such
Registration Statement or to register a sufficient number of shares of Common
Stock but excluding failures caused solely by a breach of the applicable
Investor's obligations hereunder), or (iv) a Grace Period (as defined in
Section 3(n) of this Agreement) exceeds the length of an Allowable Grace
Period (each of the items described in clauses (i), (ii), (iii) and (iv) above
shall be referred to as a "REGISTRATION DELAY"), then, as partial relief for
the damages to any holder by reason of any such delay in or reduction of its
ability to sell the underlying shares of Common Stock (which remedy shall not
be exclusive of any other remedies available at law or in equity) the Company
shall pay on the occurrence of each Registration Delay and every thirtieth day
(pro rated for periods totaling less than thirty days) thereafter until such
Registration Delay is cured, (1) to each holder of the Preferred Shares an
amount in cash equal to the product of (i) the initial principal amount paid for
the Preferred Shares held by such holder or the related Conversion Shares
multiplied by (ii) two percent (2%) and (2) to each holder of the Warrants or
Warrant Shares an amount in
4
cash equal to the product of (i) the Exercise Price for such Warrant or the
related Warrant Shares multiplied by (ii) two percent (2%). The payments to
which a holder shall be entitled pursuant to this Section 2(f) are referred to
herein as "REGISTRATION DELAY PAYMENTS." The Registration Delay Payments shall
be paid in cash on the earlier of (A) the last day of the calendar month during
which such Registration Delay Payments are incurred and (B) the third Business
Day after the event or failure giving rise to the Registration Delay Payments is
cured. In the event the Company fails to make Registration Delay Payments in a
timely manner, such Registration Delay Payments shall bear interest at the rate
of one and two-tenths percent (1.2%) per month (prorated for partial months)
until paid in full; provided that, so long as the Senior Credit Facility (as
defined in the Securities Purchase Agreement) remains outstanding, each of the
Buyers hereby acknowledges, covenants and agrees that such Buyer will not demand
or accept, and the Company will not be obligated to make, any payment (each a
"DELAY FEE") (whether in whole or in part) required to be made pursuant to this
SECTION 2(F), SECTION 2(D)(V) of the Company's Certificate of Designations
(regarding the Company's obligation to make payments in the event of its failure
to timely convert the Preferred Shares) and SECTION 1(C) of the Warrants
(regarding the Company's obligation to make payments in the event of its failure
to timely deliver securities upon exercise of the Warrants), which would, in the
aggregate of all of the aforementioned payments made to all Buyers, exceed
$250,000 in the aggregate in any calendar year (the "DELAY FEE CAP"). Each Buyer
agrees that, so long as the Senior Credit Facility (as defined in the Securities
Purchase Agreement) is outstanding, (i) such Buyer does not have any rights to,
and shall not accept or demand any, Delay Fees in excess of its pro rata share
of the Delay Fee Cap and (ii) to the extent any amounts are received with
respect to the Delay Fees by such Buyer from the Company in excess of such
Buyer's pro rata share of the Delay Fee Cap, such Buyer shall promptly forward
an amount equal to such excess in immediately available funds to the
Administrative Agent (as defined in the Senior Credit Facility) at such account
as the Administrative Agent shall designate from time to time.
Section 3. RELATED OBLIGATIONS. At such time as the Company is
obligated to file a Registration Statement with the Commission pursuant to
Section 2(a), 2(d) or 2(e) of this Agreement, the Company will use reasonable
efforts to effect the registration of all of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:
(a) The Company shall promptly prepare and file with the Commission
a Registration Statement with respect to all of the Registrable Securities(but
in no event later than the applicable Filing Deadline) and use reasonable
efforts to cause such Registration Statement relating to all of the Registrable
Securities required to be covered thereby to become effective as soon as
practicable after such filing (but in no event later than the applicable
Effectiveness Deadline). The Company shall submit to the SEC, within two (2)
Business Days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on a particular Registration Statement, as the case may
be, a request for acceleration of effectiveness of such Registration Statement
to a time and date not later than 48 hours after the submission of such request.
The Company shall, subject to the terms of this Agreement, keep each
Registration Statement effective pursuant to Rule 415 at all times during the
period from the date it is initially declared effective until the earliest of
(i) the second anniversary of the date such Registration Statement is filed,
(ii) the date as of which all of the Investors (other than any Investors who are
"affiliates" of the Company as
5
such term is used in Rule 144(k) promulgated under the 0000 Xxx) may sell all of
the Registrable Securities without restriction pursuant to Rule 144(k) (or the
successor rule thereto) promulgated under the 1933 Act or (iii) the date on
which all of the Investors shall have sold all of the Registrable Securities
(the "REGISTRATION PERIOD"), which Registration Statement, as of its filing and
effective dates and each day thereafter (including all amendments or supplements
thereto, as of their respective filing and effective dates and each day
thereafter), shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to make the
statements therein, not misleading, and the prospectus contained in such
Registration Statement, as of its filing date and each day thereafter (including
all amendments and supplements thereto, as of their respective filing dates and
each day thereafter), shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated thereon, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
(b) Subject to Section 3(n) of this Agreement, the Company shall
prepare and file with the Commission such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with such Registration Statement, which prospectus is to be
filed pursuant to Rule 424 (or any successor rule thereto) promulgated under the
1933 Act, as may be necessary to keep such Registration Statement effective at
all times during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act. In the case of amendments and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company filing a
report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, or any similar successor statute (the "1934 ACT"), the Company shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the Commission on
the same day on which the 1934 Act report is filed which created the requirement
for the Company to amend or supplement such Registration Statement and
prospectus.
(c) The Company shall permit Legal Counsel, or if no Legal Counsel
shall have been chosen by the Investors, the Investors, to review and provide
written comment upon each Registration Statement, prospectus and all amendments
and supplements thereto at least three (3) Business Days prior to their filing
with the Commission. The Company shall furnish to the Investors and Legal
Counsel, without charge, (i) promptly after receipt of such correspondence,
copies of all correspondence from the Commission or the staff of the Commission
to the Company or its representatives relating to each Registration Statement,
prospectus and all amendments and supplements thereto, (ii) promptly after the
same is prepared and filed with the Commission, one (1) copy of each
Registration Statement, prospectus and all amendments and supplements thereto,
including all exhibits and financial statements related thereto, and (iii)
promptly upon the effectiveness of each Registration Statement and each
amendment and supplement thereto, one (1) copy of the prospectus included in
each such Registration Statement and all amendments and supplements thereto. The
Company agrees that it will, and it will cause its counsel to, consider in good
faith any comments or objections from Legal Counsel, or if no Legal Counsel
shall have been selected, the Investors, as to the form or content of each
Registration Statement, prospectus and all amendments or supplements thereto or
6
any request for acceleration of the effectiveness of each Registration
Statement, prospectus and all amendments or supplements thereto.
(d) [Intentionally omitted].
(e) Subject to Section 3(n) of this Agreement, and excluding any
Registrable Shares held by Investors electing to exclude their Registrable
Shares from the Registration Statement under Section 4(b), the Company shall use
reasonable efforts to (i) promptly register and qualify, unless an exemption
from registration and qualification applies, the resale of the Registrable
Securities under such other securities or "blue sky" laws of all applicable
jurisdictions in the United States as any holder of Registrable Shares
reasonably requests in writing, (ii) promptly prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii)
promptly take such other actions as may be reasonably necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) promptly take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to file a general consent to service of
process in any such jurisdiction, except in such jurisdictions where the Company
is subject to service of process. The Company shall promptly notify each
Investor who holds Registrable Securities and Legal Counsel of the receipt by
the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of notice of the initiation or threatening of any proceeding for
such purpose.
(f) Notwithstanding anything to the contrary set forth herein, as
promptly as practicable after becoming aware of such event, the Company shall
notify each Investor and Legal Counsel in writing of the happening of any event
as a result of which (i) the Registration Statement or any amendment or
supplement thereto, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or (ii) the
prospectus related to such Registration Statement or any amendment or supplement
thereto includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and, subject to Section 3(n) of this Agreement, promptly prepare a
supplement or amendment to such Registration Statement and prospectus to correct
such untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor and Legal Counsel as such Investor or
Legal Counsel may reasonably request. The Company shall also promptly notify
each Investor and Legal Counsel in writing (i) when a prospectus and each
prospectus supplement or amendment thereto has been filed, and when a
Registration Statement and each amendment (including post-effective amendments)
and supplement thereto has been declared effective by the Commission
(notification of such effectiveness shall be delivered to each Investor and
Legal Counsel by facsimile on the same day of such effectiveness and by
overnight mail), (ii) of any request by the Commission for amendments or
supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company's reasonable determination that an
amendment (including any post-effective amendment) or
7
supplement to a Registration Statement or prospectus would be appropriate
(subject to Section 3(n) hereof).
(g) Subject to Section 3(n) of this Agreement, the Company shall use
reasonable efforts to (i) prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Securities for sale in any
jurisdiction, (ii) if such an order or suspension is issued, obtain the
withdrawal of such order or suspension at the earliest practicable moment and
notify each holder of Registrable Securities and Legal Counsel of the issuance
of such order and the resolution thereof or its receipt of notice of the
initiation or threat of any proceeding for such purpose.
(h) The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with United States federal
or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement,
prospectus or any amendment or supplement thereto, (iii) the release of such
information is ordered pursuant to a subpoena or other final, non-appealable
order from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Agreement or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, unless ordered or requested by
the Commission or other governmental authority not to do so, give prompt written
notice to such Investor and allow such Investor, at the Investor's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(i) The Company shall use reasonable efforts to cause all the
Conversion Shares and Warrant Shares to be listed on each securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Conversion Shares and Warrant Shares is
then permitted under the rules of such exchange. The Company shall pay all fees
and expenses in connection with satisfying its obligation under this Section
3(i).
(j) In connection with any sale or transfer of Registrable Securities
pursuant to a Registration Statement, the Company shall cooperate with the
Investors who hold Registrable Securities being offered and, to the extent
applicable, facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend) representing the Registrable Securities to be
offered pursuant to a Registration Statement and enable such certificates to be
in such denominations or amounts, as the case may be, as the Investors may
reasonably request and, registered in such names as the Investors may request.
(k) If requested by an Investor, the Company shall (i) as soon as
practicable, incorporate in each prospectus supplement or post-effective
amendment to the Registration Statement such information as an Investor provides
in writing and reasonably requests to be included therein relating to the sale
and distribution of the Registrable Securities, and (ii) as soon as practicable,
make all required filings of such prospectus supplement or post-effective
8
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment.
(l) The Company shall comply with all applicable rules and
regulations of the Commission in connection with any registration hereunder.
(m) Within two (2) Business Days after a Registration Statement is
ordered effective by the Commission the Company will so notify the transfer
agent for the Registrable Securities and the Investors whose Registrable
Securities are included in the Registration Statement.
(n) Notwithstanding anything to the contrary herein, at any time
after a Registration Statement has been declared effective by the Commission,
the Company may delay the disclosure of material non-public information
concerning the Company if the disclosure of such information at the time is not,
in the good faith judgment of the Board of Directors of the Company relying upon
the opinion of counsel, in the best interests of the Company (a "GRACE
PERIOD"); provided, however, that the Company shall promptly (i) notify the
Investors in writing of the existence of material non-public information giving
rise to a Grace Period (provided that the Company shall not disclose the
content of such material non-public information to the Investors) and the date
on which the Grace Period will begin, and (ii) notify the Investors in writing
of the date on which the Grace Period ends; provided further, that no single
Grace Period shall exceed fifteen (15) consecutive days, and during any three
hundred sixty-five (365) day period, the aggregate of all of the Grace Periods
shall not exceed an aggregate of thirty (30) days and the first day of any Grace
Period must be at least five (5) trading days after the last day of any prior
Grace Period (each Grace Period complying with this provision being an
"ALLOWABLE GRACE PERIOD"). For purposes of determining the length of a Grace
Period, the Grace Period shall be deemed to begin on and include the date the
Investors receive the notice referred to in clause (i) above and shall end on
and include the later of the date the Investors receive the notice referred to
in clause (ii) above and the date referred to in such notice; provided, however,
that no Grace Period shall be longer than an Allowable Grace Period. The
provisions of Section 3(g) of this Agreement shall not be applicable during the
period of any Allowable Grace Period. Upon expiration of the Grace Period, the
Company shall again be bound by the first sentence of Section 3(f) of this
Agreement.
(o) If reasonably requested in writing in connection with any
disposition of Registrable Securities pursuant to a Registration Statement, make
reasonably available for inspection during normal business hours by a
representative for the Investors of such Registrable Securities and any
broker-dealers, attorneys and accountants retained by such Investors, all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the appropriate
executive officers, directors and designated employees of the Company and its
subsidiaries to make reasonably available for inspection during normal business
hours all relevant information reasonably requested by such representative for
the Investors or any such broker-dealers, attorneys or accountants in connection
with such disposition, in each case as is customary for similar "due diligence"
examinations; provided, however, that any information that is designated by the
Company, in good faith, as confidential at the time of delivery of such
information shall be kept confidential by such Persons, unless disclosure
thereof is made in connection with a court, administrative or
9
regulatory proceeding or required by law, or such information has become
available to the public generally through the Company or through a third party
without an accompanying obligation of confidentiality.
(p) The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with, and in the manner provided by, the provisions of Rule 158 under the 0000
Xxx) covering a twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the effective date of a Registration
Statement.
Section 4. OBLIGATIONS OF THE INVESTORS.
(a) At least three (3) Business Days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each Investor
in writing of the information the Company requires from each such Investor if
such Investor elects to have any of such Investor's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the effectiveness of the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. Each Investor shall promptly notify the
Company of any material change with respect to such information previously
provided to the Company by such Investor.
(b) Each Investor agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement, in which case, such
Investor does not need to cooperate with the Company until it notifies the
Company of its desire to include one or more shares of the Registrable
Securities in such Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
3(n) of this Agreement or the first sentence of Section 3(f) of this Agreement,
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statements covering such Registrable Securities
until such Investor's receipt of the copies of the amended or supplemented
prospectus contemplated by Section 3(g) of this Agreement or the first sentence
of Section 3(f) of this Agreement or receipt of notice that no amendment or
supplement is required and, if so directed by the Company, such Investor shall
deliver to the Company (at the expense of the Company) or destroy (and deliver
to the Company a certificate of destruction) all copies of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice (other than a single file copy, which such Investor may keep) in such
Investor's possession.
Section 5. EXPENSES OF REGISTRATION. All expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications
10
pursuant to Sections 2 and 3 of this Agreement, including, without limitation,
all registration, listing and qualifications fees, printers and accounting fees,
transfer agent fees and fees and disbursements of counsel for the Company, shall
be paid by the Company. The Company shall pay all of the Investors' reasonable
costs (including reasonable fees and disbursements of Legal Counsel) incurred in
connection with the registration, filing or qualification pursuant to this
Agreement, up to an aggregate amount of $15,000.
Section 6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor, the directors,
officers, members, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "CLAIMS") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the Commission, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any amendment
(including post-effective amendments) or supplement thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which the Registrable Securities
are offered ("BLUE SKY FILING"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus if authorized for use by
the Company prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if any) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement, or (iv) any material violation
of this Agreement by the Company (the matters in the foregoing clauses (i)
through (iv) being, collectively, "VIOLATIONS"). Subject to Section 6(c) of this
Agreement, the Company shall reimburse the Indemnified Persons, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person or its Legal
Counsel expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not be
available to the extent such Claim is based on a failure of the Investor to
deliver
11
or to cause to be delivered the prospectus made available by the Company,
including a corrected prospectus, if such prospectus or corrected prospectus was
timely made available by the Company pursuant to Section 3(d) of this Agreement;
and (iii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld, conditioned or delayed. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9 of this
Agreement.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a) of this Agreement, the Company, each
of its directors, each of its officers who signs the Registration Statement, its
agents and each Person, if any, who controls the Company within the meaning of
the 1933 Act or the 1934 Act (each, an "INDEMNIFIED PARTY"), against any
Claims or Indemnified Damages to which any of them may become subject, under the
1933 Act, the 1934 Act or otherwise, insofar as such Claims or Indemnified
Damages arise out of or are based upon any Violation (including for purposes
of this paragraph, a material violation of this Agreement by the Investor), in
each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor or its Legal Counsel expressly for use in connection
with such Registration Statement and, subject to Section 6(c) of this
Agreement, such Investor will reimburse any legal or other expenses reasonably
incurred by an Indemnified Party in connection with investigating or defending
any such Claim; provided, however, that the indemnification agreement contained
in this Section 6(b) and the agreement with respect to contribution contained
in Section 7 of this Agreement shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
such Investor, which consent shall not be unreasonably withheld or delayed;
provided, further, that the Investor shall be liable under this Section 6(b) for
only that amount of the Claims and Indemnified Damages as does not exceed
the net proceeds to such Investors as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnification
agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer
of the Registrable Securities by the Investors pursuant to Section 9 of this
Agreement. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis
in the prospectus, as then amended or supplemented.
(c) Promptly after an Indemnified Person or Indemnified Party under
this Section 6 has knowledge of any Claim as to which such Indemnified Person or
Indemnified Party reasonably believes indemnity may be sought or promptly after
such Indemnified Person or Indemnified Party receives notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of such Claim, and
the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of
12
the defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding; provided, further, that the indemnifying party shall
not be responsible for the reasonable fees and expense of more than one (1)
separate legal counsel for such Indemnified Person or Indemnified Party. In the
case of an Indemnified Person, the legal counsel referred to in the immediately
preceding sentence shall be selected by the Required Holders. The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent; provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a full release from all liability in
respect to such Claim and action and proceeding. After indemnification as
provided for under this Agreement, the rights of the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. The failure to deliver written notice to
the indemnifying party as provided in this Agreement shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
(d) No Person involved in the sale of Registrable Securities who
is guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the 0000 Xxx) in connection with such sale shall be entitled to
indemnification from any Person involved in such sale of Registrable Securities
who is not guilty of fraudulent misrepresentation.
(e) The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
(f) The indemnification agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
13
Section 7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 of this Agreement to the fullest
extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker
would not have been liable for indemnification under the fault standards set
forth in Section 6 of this Agreement, (ii) no Person involved in the sale of
Registrable Securities who is guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) in connection with such sale shall be
entitled to contribution from any Person involved in such sale of Registrable
Securities who is not guilty of fraudulent misrepresentation, and (iii)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities pursuant to such Registration Statement. The provisions
of this Section 7 shall remain in full force and effect, regardless of the
investigation made by or on behalf of the beneficiaries of this Section 7 and
shall survive the transfer of Registrable Securities by the Investors pursuant
to Section 9 of this Agreement.
Section 8. REPORTING.
(a) Reports Under The 1934 Act. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the 1933 Act or any
other similar rule or regulation of the Commission that may at any time permit
the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company shall use reasonable efforts to:
(1) make and keep public information available, as those
terms are understood and defined in Rule 144;
(2) file with the Commission in a timely manner all reports
and other documents required of the Company under the 1933 Act and
the 1934 Act; and
(3) furnish to each Investor, so long as such Investor owns
Registrable Securities, promptly upon request, (A) a written
statement by the Company, if true, that it has complied with the
applicable reporting requirements of Rule 144, the 1933 Act and the
1934 Act, (B) a copy of the most recent annual or quarterly report of
the Company and copies of such other reports and documents so filed
by the Company, and (C) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to
Rule 144 without registration.
(b) Rule 144A Information. The Company shall, upon request of any
Investor, make available to such Investor the information required by Rule
144A(d)(4) (or any successor rule) under the 1933 Act.
Section 9. ASSIGNMENT OF REGISTRATION RIGHTS. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties, including, without the need for an express assignment or any
consent by the Company thereto, subsequent Investors, subject to the condition
that such transfer shall have been conducted in accordance with all applicable
federal and state securities laws. The rights under this Agreement shall be
14
automatically assignable by the Investors to any transferee of all or any
portion of such Investor's Registrable Securities if: (i) the Investor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence, the transferee or assignee agrees in writing
with the Company to be bound by all of the obligations of an Investor under this
Agreement; (v) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement, the Certificate of
Designations and the Warrants; and (vi) such transfer shall have been conducted
in accordance with all applicable federal and state securities laws. The Company
hereby shall extend the benefits of this Agreement to any Investor and any such
Investor may specifically enforce the provisions of this Agreement as if an
original party hereto.
Section 10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance of any provision of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Required Holders. Any amendment or waiver affected in accordance with
this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is offered
to all of the parties to this Agreement.
Section 11. MISCELLANEOUS.
(a) A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from such record owner of such Registrable Securities.
(b) Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (evidenced by mechanically
or electronically generated receipt by the sender's facsimile machine); or (iii)
one (1) Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
The Wet Seal, Inc.
15
00000 Xxxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx, Esq.
Xxxxxxx X. Xxxxxxx III, Esq.
If to Legal Counsel:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto as Exhibit A, with copies to such Buyer's representatives
as set forth on the Schedule of Buyers, or to such other address and/or
facsimile number and/or to the attention of such other Person as the recipient
party has specified by written notice given to each other party.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of
the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting the City of
New York, borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party
16
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(e) This Agreement, the Securities Purchase Agreement, the
Certificate of Designations, the Warrants and the other documents referenced
herein and therein constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement, the Securities Purchase
Agreement, the Certificate of Designations and the Warrants supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
(f) This Agreement shall become effective as of the Closing Date.
(g) Subject to the requirements of Section 9 of this Agreement, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other parties hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
(j) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k) All consents and other determinations required to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by the Required Holders.
17
(l) This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
(m) The obligations of each Buyer under any Transaction Document
are several and not joint with the obligations of any other Buyer, and no Buyer
shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Buyer pursuant hereto or
thereto, shall be deemed to constitute the Buyers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.
18
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY
THE WET SEAL, INC.
By:/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chief Financial Officer
[Signatures of Buyers on Following Page]
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
BUYER
S.A.C. CAPITAL
ASSOCIATES, LLC By:
S.A.C. Capital
Advisors, LLC
By:/s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Peer Xxxxxxxx
Title: General Counsel
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
BUYER
GMM CAPITAL, LLC
By:/s/ Xxxxx Xxxxx
-----------------------------------
Name: Xxxxx Xxxxx
Title:
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
XXXXXXXX CAPITAL PARTNERS LLC
By:/s/ Xxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Member
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
/s/ Xxxxxxx Xxxxxxxx
-----------------------------------
MR. XXXXXXX XXXXXXXX
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
/s/ Xxx Xxxxxxx
-----------------------------------
XX. XXX XXXXXXX
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
WLSS CAPITAL PARTNERS, LLC
By:/s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
Title: Member
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
SMITHFIELD FIDUCIARY, LLC
By:/s/ Xxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Authorized Signatory
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, L.P.
By: X.X. XXXXX PARTNERS LLC,
its general partner
By:/s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, LTD.
By: X.X. XXXXX & CO., L.P.,
its trading Manager
By:/s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
RIVERVIEW GROUP, LLC
By: Millennium Holding Group, L.P.,
By: Millennium Management, L.L.C.
By:/s/ Xxxx Xxxxx
-----------------------------------
Name: Xxxx Xxxxx
Title: Executive Vice President
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
PRENTICE CAPITAL PARTNERS QP, LP
By: Prentice Capital GP, LLC, its
general partner
By:/s/ Xxxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
PRENTICE CAPITAL PARTNERS, LP
By: Prentice Capital GP, LLC, its
general partner
By:/s/ Xxxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
PRENTICE CAPITAL OFFSHORE, LTD
By: Prentice Capital Management, LP,
the Investment Manager
By:/s/ Xxxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
UBS FINANCIAL SERVICES AS CUSTODIAN
FBO XXXXXXX X. XXXXXXXX ROLLOVER XXX
By:/s/ Xxxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
EXHIBIT A
EXHIBIT A TO REGISTRATION RIGHTS AGREEMENT
SCHEDULE OF BUYERS
NAME OF BUYERS NUMBER OF PREFERRED SHARES NUMBER OF WARRANTS
--------------------------------------------- ----------------------------- --------------------
S.A.C. Capital Associates, LLC
c/o S.A.C. Capital Advisors, LLC
00 Xxxxxxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel Facsimile:
(000) 000-0000 Residence: Anguila
Prentice Capital Partners QP, LP
c/o Prentice Capital Management, LP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxx
Facsimile: 000-000-0000
Prentice Capital Partners, LP
c/o Prentice Capital Management, LP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxx
Facsimile: 000-000-0000
Prentice Capital Offshore, Ltd
c/o Prentice Capital Management, LP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxx
Facsimile: 000-000-0000
GMM Capital, LLC
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Xxxxxxxx Capital Partners LLC
1
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Mr. Xxxxxxx Xxxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
UBS Financial Services as Custodian FBO
Xxxxxxx X. Xxxxxxxx Rollover XXX
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Xx. Xxx Xxxxxxx
0 Xxxx Xxxx
Xxxxxxxxx, XX 00000
WLSS Capital Partners, LLC
c/o Xxxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxx. 00X Xxx Xxxx, XX 00000
Smithfield Fiduciary LLC
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxx
Xxxx X. Chill
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
2
NAME OF BUYERS NUMBER OF PREFERRED SHARES NUMBER OF WARRANTS
--------------------------------------------- ----------------------------- --------------------
X.X. Xxxxx Special Opportunities Fund, L.P
c/o X.X. Xxxxx & Co., L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
Xxxxx X. Xxxxx
Residence: Cayman Islands
X.X. Xxxxx Special Opportunities Fund, Ltd.
c/o X.X. Xxxxx & Co., L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
Xxxxx X. Xxxxx
Residence: Cayman Islands
Riverview Group, LLC
000 Xxxxx Xxxxxx, 0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Delaware
3
EXHIBIT B
SELLING SECURITYHOLDERS
The preferred shares and warrants were originally issued by us in
transactions exempt from the registration requirements of the 1933 Act to
persons reasonably believed to be "accredited investors" as defined in
Regulation D under the 1933 Act. The shares of common stock being offered by the
selling securityholders are issuable upon conversion of the preferred shares and
upon exercise of the warrants. For additional information regarding the
preferred shares and warrants see "Private Placement of Preferred Shares and
Warrants" above. We are registering the shares of common stock underlying the
preferred shares and warrants in order to permit the selling securityholders to
offer the shares of common stock for resale from time to time. Except for the
ownership of the preferred shares, the warrants and the purchases of other
securities from the Company on January 14, 2005, the selling stockholders have
not had any material relationship with us within the past three years.
The table below lists the selling securityholders and other
information regarding the beneficial ownership of the shares of common stock by
each of the selling securityholders. The second column lists the number of
shares of common stock beneficially owned by each selling stockholder as of
________, 2005, assuming conversion of all of the preferred shares and exercise
of all of the warrants held by the selling securityholders on that date, without
regard to any limitations on conversion or exercise. The third column lists the
shares of common stock being offered pursuant to this prospectus by each of the
selling securityholders. The fourth column lists the number of shares that will
be beneficially owned by the selling securityholders assuming all of the shares
offered pursuant to this prospectus are sold and that shares beneficially owned
by them, as of __________, 2005, but not offered hereby are not sold.
In accordance with the terms of registration rights agreements with
the holders of the preferred shares and the warrants, this prospectus generally
covers the resale of (i) 130% of the maximum number of shares of common stock
issuable upon conversion of the preferred shares (without taking into account
any limitations on the conversion of the preferred shares set forth in the
certificate of designations relating to the preferred shares) and (ii) 130% of
the maximum number of shares of common stock issuable upon exercise of the
warrants (without taking into account any limitations on the exercise of the
warrants set forth in the warrants), in each case as of the trading day
immediately preceding the date this registration statement was initially filed
with the SEC. Because the conversion price of the preferred shares and exercise
price of the warrants may be adjusted, the number of shares that will actually
be issued may be more or less than the number of shares being offered by this
prospectus.
Under the terms of the certificate of designations relating to the
preferred shares and the warrants, a selling securityholder may not convert the
preferred shares or exercise the warrants, to the extent such conversion or
exercise would cause such selling securityholder, together with its affiliates,
to beneficially own a number of shares of common stock which would exceed 9.99%
of our then outstanding shares of common stock following such conversion or
exercise, excluding for purposes of such determination shares of common stock
issuable upon conversion of the preferred shares which have not been converted
and upon exercise of the warrants which have not been exercised. The numbers in
the second column do not reflect this limitation. The
1
selling securityholders may sell all, some or none of their shares in this
offering. See "Plan of Distribution."
The inclusion of any securities in the following table does not
constitute an admission of beneficial ownership by the persons named below.
2
SHARES
OF
COMMON
STOCK
OWNED SHARES OF SHARES OF
BEFORE COMMON STOCK COMMON STOCK
THE OFFERED OWNED AFTER THE
NAME OF SELLING SECURITYHOLDER OFFERING HEREBY OFFERING (1)
----------------------------- -------- ----------- ------------------
S.A.C. Capital Associates, LLC (2)
Prentice Capital Partners QP, XX
Xxxxxxxx Capital Partners, XX
Xxxxxxxx Capital Offshore, Ltd
GMM Capital, LLC
Xxxxxxxx Capital Partners LLC
Mr. Xxxxxxx Xxxxxxxx
UBS Financial Services as Custodian
FBO Xxxxxxx X. Xxxxxxxx Rollover
XXX
Xx. Xxx Xxxxxxx
WLSS Capital Partners, LLC
Smithfield Fiduciary LLC (3)
X.X. Xxxxx Special Opportunities Fund, L.P (4)
X.X. Xxxxx Special Opportunities Fund, Ltd. (4)
Riverview Group, LLC (5)
(1) Assumes that all of the shares offered hereby are sold and that
shares owned before the offering but not offered hereby are not sold.
(2) Pursuant to investment agreements, each of S.A.C. Capital
Advisors, LLC, a Delaware limited liability company which we refer to in this
prospectus as SAC Capital Advisors, and S.A.C. Capital Management, LLC, a
Delaware limited liability company which we refer to in this prospectus as SAC
Capital Management, share all investment and voting power with respect to the
securities held by S.A.C. Capital Associates, LLC. Xx. Xxxxxx X. Xxxxx controls
both SAC Capital Advisors and SAC Capital Management. Each of SAC Capital
Advisors, SAC Capital Management and Xx. Xxxxx disclaim beneficial ownership of
these securities.
1
(3) Highbridge Capital Management, LLC ("Highbridge"), is the
trading manager of Smithfield Fiduciary LLC ("Smithfield") and consequently has
voting control and investment discretion over the shares of Common Stock held
by Smithfield. Xxxxx Xxxxx and Xxxxx Xxxxxx control Highbridge. Each of
Highbridge and Messrs. Xxxxx and Xxxxxx disclaims beneficial ownership of the
shares held by Smithfield.
(4) X. X. Xxxxx & Co., L.P. is the trading manager of each of Xxxxx
Special Opportunities Fund, Ltd. and Xxxxx Special Opportunities Fund, L.P. and
consequently has voting control and investment discretion over securities held
by each of these entities. Xxxxxx X. Xxxxx controls Xxxxx Holdings, LLC, which
in turn is the managing member of, and thereby controls, DBZ GP, LLC, which in
turn is the general partner of, and thereby controls, X. X. Xxxxx & Co., L.P.
Each of Xxxxxx X. Xxxxx, Xxxxx Holdings, LLC, DBZ GP, LLC and X. X. Xxxxx & Co.,
L.P. disclaims beneficial ownership of securities held by each of Xxxxx Special
Opportunities Fund, Ltd. and Xxxxx Special Opportunities Fund, L.P.
(5) The managing member of Riverview is Millennium Holding Group,
L.P., a Delaware limited partnership ("Millennium Holdings"). Millennium
Management, L.L.C., a Delaware limited liability company ("Millennium
Management"), is the general partner of Millennium Holdings and consequently may
be deemed to have voting control and investment discretion over securities owned
by Millennium Holdings and by Riverview. Xxxxxx X. Xxxxxxxxx ("Xx. Xxxxxxxxx")
is the managing member of Millennium Management. As a result, Xx. Xxxxxxxxx may
be deemed to be the beneficial owner of any shares deemed to be beneficially
owned by Millennium Management. The foregoing should not be construed in and of
itself as an admission by any of Millennium Holdings, Millennium Management or
Xx. Xxxxxxxxx as to beneficial ownership of the shares owned by Riverview.
Millennium Partners, L.P., a Cayman Islands limited partnership ("Millennium
Partners"), is a limited partner of Millennium Holdings. As a limited partner,
Millennium Partners has no investment or voting control over Millennium Holdings
or its securities positions.
2
PLAN OF DISTRIBUTION
We are registering the shares of common stock issuable upon conversion
of the preferred shares and upon exercise of warrants and to permit the resale
of the underlying shares of common stock by the holders from time to time after
the date of this prospectus. We will not receive any of the proceeds from the
sale by the selling securityholders of the securities. We will bear all fees and
expenses incident to our obligation to register the preferred shares, warrants
and shares of common stock.
The selling securityholders may sell all or a portion of the
securities beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
securities are sold through underwriters or broker-dealers, the selling
securityholders will be responsible for underwriting discounts or commissions or
agent's commissions. The securities may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may
be effected in transactions, which may involve crosses or block transactions,
o on any national securities exchange or quotation service on which
the securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or
in the over-the-counter market;
o through the writing of options, whether such options are listed
on an options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o pursuant to Rule 144 under the Securities Act;
o broker-dealers may agree with the selling securityholders to sell
a specified number of such securities at a stipulated price per
security;
1
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling securityholders effect such transactions by selling the
preferred shares, warrants, or shares of common stock to or through
underwriters, broker-dealers or agents, such underwriters, broker-dealers or
agents may receive commissions in the form of discounts, concessions or
commissions from the selling securityholders or commissions from purchasers of
the preferred shares, warrants or shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of any securities or otherwise, the selling securityholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the securities in the course of hedging in positions they assume. The
selling securityholders may also sell securities short and deliver securities
covered by this prospectus to close out short positions. The selling
securityholders may also loan or pledge securities to broker-dealers that in
turn may sell such securities.
The selling securityholders may pledge or grant a security interest in
some or all of the preferred shares, warrants or shares of common stock owned by
them and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell shares of common stock from time
to time pursuant to this prospectus or any amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling securityholders to include
the pledgee, transferee or other successors in interest as selling
securityholders under this prospectus. The selling securityholders also may
transfer and donate the preferred shares, warrants or shares of common stock in
other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling securityholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the 1933 Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the 1933 Act. At the time a particular offering
of the securities is made, a prospectus supplement, if required, will be
distributed which will set forth the aggregate amount of securities being
offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling securityholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states, the securities may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the preferred shares, warrants and shares of common
stock may not be sold unless such preferred shares, warrants or shares of common
stock have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
2
The selling securityholders may choose not to sell any or may choose
to sell less than all of the shares of common stock registered pursuant to the
shelf registration statement, of which this prospectus forms a part.
The selling securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the 1934 Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling
securityholders and any other participating person. Regulation M may also
restrict the ability of any person engaged in the distribution of the shares of
common stock to engage in market-making activities with respect to the shares of
common stock. All of the foregoing may affect the marketability of the shares of
common stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
We will pay all expenses of the registration of the preferred shares,
warrants and shares of common stock pursuant to the registration rights
agreement, estimated to be $[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that a selling
securityholder will pay all underwriting discounts and selling commissions, if
any. We will indemnify the selling securityholders against liabilities,
including some liabilities under the 1933 Act, in accordance with the
registration rights agreements, or the selling securityholders will be entitled
to contribution. We may be indemnified by the selling securityholders against
civil liabilities, including liabilities under the 1933 Act, that may arise from
any written information furnished to us by the selling securityholder
specifically for use in this prospectus, in accordance with the related
registration rights agreements, or we may be entitled to contribution.
Once sold under the shelf registration statement, of which this
prospectus forms a part, the shares of common stock will be freely tradable in
the hands of persons other than our affiliates.
3
EXHIBIT 25
[EXECUTION COPY]
AMENDMENT NO. 1 TO
AMENDED AND RESTATED SUBORDINATION AGREEMENT
AMENDMENT NO. 1 TO AMENDED AND RESTATED SUBORDINATION AGREEMENT (this
"AMENDMENT"), dated as of April __, 2005, among FLEET RETAIL GROUP, INC., a
Delaware corporation having its office at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000, in its capacity as agent (the "AGENT") for the Lenders (as hereinafter
defined), S.A.C. CAPITAL ASSOCIATES, LLC ("SAC"), GMM CAPITAL, LLC ("GMM"),
XXXXXXXX CAPITAL PARTNERS LLC ("XXXXXXXX"), Xxxxxxx Xxxxxxxx, individually
("XXXXXXXX"), Xxx Xxxxxxx, individually ("XXXXXXX") WLSS CAPITAL PARTNERS, LLC
("WLSS"), SMITHFIELD FIDUCIARY, LLC ("SMITHFIELD"), X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, L.P. ("XXXXX XX"), X.X. XXXXX SPECIAL OPPORTUNITIES FUND,
LTD ("XXXXX LTD"), RIVERVIEW GROUP, LLC ("RIVERVIEW" and, collectively with SAC,
GMM, Xxxxxxxx, Phillips, Wachtel, WLSS, Smithfield, Xxxxx XX and Xxxxx Ltd, the
"BUYERS"), THE BANK OF NEW YORK, in its capacity as trustee (the "TRUSTEE") and
as collateral agent (the "COLLATERAL AGENT") under the Indenture (as defined in
the Amended and Restated Subordination Agreement referred to below), for each of
the Holders (collectively with the Buyers, the Trustee and the Holders, the
"SUBORDINATING CREDITORS") and THE WET SEAL, INC., a Delaware corporation having
its office at 00000 Xxxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the "BORROWER").
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms as in the Amended and Restated Subordination Agreement referred to
below.
WHEREAS, pursuant to an Amended and Restated Credit Agreement dated as of
September 22, 2004 (as amended and in effect from time to time, including any
replacement agreement therefor, the "CREDIT Agreement"), among the financial
institutions party thereto (the "LENDERS"), the Agent, the Borrower, The Wet
Seal Retail, Inc. ("WET SEAL RETAIL"), Wet Seal Catalog, Inc. ("WET SEAL
CATALOG"), and Wet Seal GC, Inc. (the "FACILITY GUARANTOR" and, collectively
with the Borrower, Wet Seal Retail and Wet Seal Catalog, the "COMPANIES" and,
each individually, a "COMPANY"), the Lenders have agreed, upon the terms and
subject to the conditions contained therein, to make loans and otherwise to
extend credit to the Companies; and
WHEREAS, the Borrower and the Buyers entered into that certain Amended and
Restated Securities Purchase Agreement, dated as of December 13, 2004 (as
amended and in effect from time to time, the "AMENDED SECURITIES PURCHASE
AGREEMENT"), to purchase such securities and certain warrants of the Borrower;
and
WHEREAS, the Borrower and the Subordinating Creditors entered into that
certain Amended and Restated Subordination Agreement, dated as of January 14,
2005 (as amended and in effect from time to time, the "AMENDED AND RESTATED
SUBORDINATION AGREEMENT"); and
WHEREAS, concurrently with the execution of this Amendment, the Borrower
and certain of the Subordinating Creditors are entering into a Securities
Purchase Agreement (the "2005 SECURITIES PURCHASE AGREEMENT"), pursuant to
which, among other things, the Borrower has authorized (i) a new series of
convertible preferred stock of the Borrower, which preferred stock shall be
convertible into shares of Class A Common Stock in accordance with the terms of
the Certificate of Designations, Preferences and Rights attached thereto as an
exhibit, and (ii) a new
- 2 -
series of warrants to acquire Class A Common Stock of the Borrower in accordance
with the terms therein; and
WHEREAS, in connection with the foregoing, the Borrower, the Trustee (for
itself and on behalf of the Holders), the Collateral Agent (for itself and on
behalf of the Holders), each Subordinating Creditor and the Agent, subject to
the terms and conditions provided herein, have agreed to amend the Amended and
Restated Subordination Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements
herein contained and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. AMENDMENT TO SECTION 1 OF THE AMENDED AND RESTATED SUBORDINATION
AGREEMENT.
(a) Section 1 of the Amended and Restated Subordination Agreement is hereby
amended by deleting the parenthetical "(other than the Warrants, Warrant
Agreements and Registration Rights Agreement)" in the third line of the
definition "Subordinated Documents".
(b) Section 1 of the Amended and Restated Subordination Agreement is hereby
further amended by (i) deleting the phrase "Subordinated Agreement" in the
definition of "Subordinated Debt" and substituting in lieu thereof the phrase
"Subordinated Documents" and (ii) inserting the parenthetical "(other than the
Conversion Shares and the Warrant Shares, each as defined in the Amended
Securities Purchase Agreement)" after the word "instruments" in the fourth line
thereof.
(c) Section 1 of the Amended and Restated Subordination Agreement is hereby
further amended by deleting the reference "Section 2(f)" in the definition of
Subordinated Debt Fees" and substituting in lieu thereof the reference "Section
2(g)".
2. AMENDMENT TO SECTION 9 OF THE AMENDED AND RESTATED SUBORDINATION
AGREEMENT. Section 9 of the Amended and Restated Subordiantion Agreement is
hereby amended by deleting such Section in its entirety and substitituting in
lieu thereof the following:
"9. MODIFICATION OR SALE OF THE SUBORDINATED DEBT. Neither the
Collateral Agent nor any Subordinating Creditor will, at any time
while this Agreement is in effect, modify any of the terms of any of
the Subordinated Debt or any of the Subordinated Documents with
respect to the Subordinated Debt; nor will any Subordinating Creditor
sell, transfer, pledge, assign, hypothecate or otherwise dispose of
any or all of the Subordinated Debt (other than the Subordinated Debt
evidenced by the "Notes" issued under the Indenture) to any person
other than a person who agrees in a writing, reasonably satisfactory
in form and substance to the Agent, to become a party hereto and to
succeed to the rights and to be bound by all of the obligations of
such Subordinating Creditor hereunder; PROVIDED, HOWEVER any sale,
transfer, pledge, assignment, hypothecation or other disposal of the
"Notes" issued under the Indenture shall remain at all times subject
to Section 3.02 of the Indenture ("Ranking; Subordination")."
3. AMENDMENT TO SECTION 18 OF THE AMENDED AND RESTATED SUBORDINATION
AGREEMENT.
- 3 -
(a) Section 18 of the Amended and Restated Subordination Agreement is
hereby amended by deleting the phrase "requisite Lenders" in the sixth line
thereof and substituting in lieu thereof the phrase "Required Lenders (as
defined in the Credit Agreement) and the Term Lender (as defined in the Credit
Agreement)".
(b) Section 18 of the Amended and Restated Subordination Agreement is
hereby further amended by adding the following two new sentences immediately
after the third sentence thereof:
"The provisions of this Agreement may from time to time be amended if
such amendment is in writing and consented to by the Trustee, the
Collateral Agent, the Borrower, the holders of a majority in interest of
the Subordinated Debt as of the date of such amendment and the Agent;
provided, HOWEVER, any amendment consented to by the holders of a majority
in interest of the Subordinated Debt shall be binding upon all
Subordinating Creditors, whether or not such Subordinating Creditor
consented thereto in such writing. No failure or delay on the part of any
Person in exercising any power or right under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
power or right preclude any other or further exercise thereof or the
exercise of any other power or right."
4. CONDITIONS PRECEDENT. This Amendment shall become effective upon the
receipt by the Agent and the Trustee of a duly executed and delivered
counterpart signature page to this Amendment by the Agent, the Trustee, the
Collateral Agent, each Subordinating Creditor and the Borrower.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL BE A
SEALED INSTRUMENT UNDER SUCH LAWS.
6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AMENDMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF
THE PARTIES HERETO HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER
IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY LENDER HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE
AGENT HAS BEEN INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
7. MISCELLANEOUS. This Amendment may be executed in several counterparts
and by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall constitute one
instrument. In proving this Amendment, it
- 4 -
shall not be necessary to produce or account for more than one such counterpart
signed by the party against which enforcement is sought. This Amendment shall be
binding upon each Subordinating Creditor, the Trustee, the Collateral Agent, the
Agent, the Borrower and their respective successors and assigns and shall inure
to the benefit of the Agent and the Lenders, the Agent's and the Lenders'
respective successors and assigns, any lender or lenders refunding or
refinancing any of the Senior Debt and their respective successors and assigns,
but shall not otherwise create any rights or benefits for any third party.
Except as expressly provided in this Amendment, all of the terms and conditions
of the Amended and Restated Subordination Agreement remain in full force and
effect. The parties hereto agree that the Amended and Restated Subordination
Agreement are, except as expressly modified in this Amendment upon the terms set
forth herein, ratified and confirmed in all respects.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
THE WET SEAL, INC., as Borrower
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: EVP-CFO
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On this 15th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxxx X. Xxxxxxxxx, personally known to me, to be the
person whose name is signed on the preceding or attached document, and
acknowledged to me that (he) signed it voluntarily for its stated purpose.
/s/ Xxxxxxxx X. Xxxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires: May 27, 2007
Xxxxxxxx X. Xxxxxx
Commission # 1420715
Notar Public - California
Orange County
My Comm. Expires May 27, 2007
Amendment No. 1 to Amended and Restated Subordination Agreement
THE BANK OF NEW YORK, as Trustee
for each of the Holders
By: /s/ Xxxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxxx Xxxxxx
Title: Vice President
THE BANK OF NEW YORK, as
Collateral Agent for each of the Holders
By: /s/ Xxxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxxx Xxxxxx
Title: Vice President
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxxxx Xxxxxx, proved to me through satisfactory evidence
of identification, which were a driver's license, to be the person whose name is
signed on the preceding or attached document, and acknowledged to me that
(he)(she) signed it voluntarily for its stated purpose (as Vice President for
The Bank of New York, a New York Corporation).
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Xxxxxxx X. Xxxxxxx
Notary Public, State of New York
No. 01CA5027729
Qualified in Bronx County
Commission Expires May 18, 2006
Amendment No. 1 to Amended and Restated Subordination Agreement
THE BUYERS:
S.A.C. CAPITAL ASSOCIATES, LLC
By: S.A.C. Capital Advisors, LLC
By: /s/ Xxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: General Counsel
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CONNECTICUT )
) ss.:
COUNTY OF FAIRFIELD )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxx Xxxxxxxx, proved to me through satisfactory evidence
of identification, which were my personal knowledge, to be the person whose name
is signed on the preceding or attached document, and acknowledged to me
that (he)(she) signed it voluntarily for its stated purpose (as ____________ for
________________, a ___________________).
/s/ Xxxx X. Xxxxxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires: 5-31-07
Xxxx X. Xxxxxxxx
Notary Public
My Commission Expires May 31, 2007
Amendment No. 1 to Amended and Restated Subordination Agreement
GMM CAPITAL, LLC
By: /s/ Xxxxx Xxxxx
------------------------------------------
Name: Xxxxx Xxxxx
Title: Director
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
XXXXXXXX CAPITAL PARTNERS LLC
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Member
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 27th day of April, 2005, before me, the undersigned notary
public, personally appeared Xxxxxx Xxxxxxxx, proved to me through
satisfactory evidence of identification, which were New York driver's license,
to be the person whose name is signed on the preceding or attached document, and
acknowledged to me that (he) (she) signed it voluntarily for its stated purpose
(as member for Xxxxxxxx Capital Partners LLC, a Delaware 11c).
/s/ Xxxxxxxx Xxxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires: 1/7/06
Xxxxxxxx Xxxxxx
Notary Public, State of New York
No. 01SC6068634
Qualified in New York County
Commission Expires January 7, 2006
Amendment No. 1 to Amended and Restated Subordination Agreement
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------------
Mr. Xxxxxxx Xxxxxxxx
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxxx Xxxxxxxx, proved to me through satisfactory evidence
of identification, which were New York drivers license, to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that he signed it voluntarily for its stated purpose (as ____________ for
____________________, a ________________________).
/s/ Xxxx X. Xxxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Xxxx X. Xxxxxx
Notary Public, State of New York
No. 02MA6054605
Qualified in Kings County
Certificate Filed in New York County
Commission Expires Feb. 12, 2007
Amendment No. 1 to Amended and Restated Subordination Agreement
By: /s/ Xxx Xxxxxxx
------------------------------------------
Xx. Xxx Xxxxxxx
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 26th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxx Xxxxxxx, proved to me through satisfactory evidence of
identification, which were U.S. passport, to be the person whose name is signed
on the preceding or attached document, and acknowledged to me that he signed it
voluntarily for its stated purpose (as ____________ for ____________________, a
________________________).
/s/ Xxxxxx X. Xxxxxxxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Xxxxxx X. Xxxxxxxxxx
Notary Public State of New York
No. 00-0000000
Qualified in New York County
Commission Expires Nov. 30, 2006
Amendment No. 1 to Amended and Restated Subordination Agreement
WLSS CAPITAL PARTNERS, LLC
By: /s/ Xxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Member
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 27th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxx X. Xxxxxx, proved to me through satisfactory evidence
of identification, which were New York driver's license, to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that (he) (she) signed it voluntarily for its stated purpose (as member for WLSS
Capital Partners, LLC, a Delaware LLC).
/s/ Xxxxxxxx Xxxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires: 1/7/06
Xxxxxxxx Xxxxxx
Notary Public, State of New York
No. 01SC6068634
Qualified in New York County
Commission Expires January 07, 2006
Amendment No. 1 to Amended and Restated Subordination Agreement
RIVERVIEW GROUP, LLC
By: Millennium Holding Group, L.P.,
By: Millennium Management, L.L.C.
By: /s/ Xxxx Xxxxx
------------------------------------------
Name: Xxxx Xxxxx
Title: Executive Vice President
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 28th day of April, 2005, before me, the undersigned notary
public, personally appeared Xxxx Xxxxx, personally known to me, to be the person
whose name is signed on the preceding or attached document, and acknowledged to
me that he signed it voluntarily for its stated purpose (as Executive Vice
President of Millennium Management, L.L.C., the general partner of Millennium
Holding Group, L.P., the managing member of Riverview Group, LLC, a Delaware
limited liability company).
/s/ Xxxxxxxx Xxxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Xxxxxxxx Xxxxxx
Notary Public, State of New York
No. 01SC6119482
Qualified in Kings County
Commission Expires Nov. 29, 2008
Amendment No. 1 to Amended and Restated Subordination Agreement
X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, L.P.
BY: X.X. XXXXX PARTNERS LLC,
its general partner
By: /s/ Xxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, LTD.
BY: X.X. XXXXX & CO., L.P.,
its trading Manager
By: /s/ Xxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxx X. Xxxxx, proved to me through satisfactory evidence
of identification, which were ________________, to be the person whose name is
signed on the preceding or attached document, and acknowledged to me that
(he) (she) signed it voluntarily for its stated purpose (as managing member for
DBZ & Co., a ________________________).
/s/ Xxxxxx X. Xxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Notary Signature: /s/ Xxxxxxx X. Xxxxxxx 4/29/05
---------------------------------------------
Xxxxxxx X. Xxxxxxx
Notary Public, State of New York
No. 01PI6112028
Qualified in Queens County
My Commission Expires June 28, 2008
Amendment No. 1 to Amended and Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxx X. Xxxxx, proved to me through satisfactory evidence
of identification, which were (known to me personally), to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that (he) (she) signed it voluntarily for its stated purpose (as managing member
for DBZ & Co., a ________________________).
/s/ Xxxxxx X. Xxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Notary Signature: /s/ Xxxxxxx X. Xxxxxxx 4/29/05
---------------------------------------------
Xxxxxxx X. Xxxxxxx
Notary Public, State of New York
No. 01PI6112028
Qualified in Queens County
My Commission Expires June 28, 2008
Amendment No. 1 to Amended and Restated Subordination Agreement
SMITHFIELD FIDUCIARY, LLC
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Authorized Signatory
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF QUEENS )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxx X. Xxxxxxx, proved to me through satisfactory evidence
of identification, which were known to me, to be the person whose name is signed
on the preceding or attached document, and acknowledged to me that (he) (she)
signed it voluntarily for its stated purpose (as ____________ for
____________________, a ________________________).
/s/ Xxxxxx Xxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Xxxxxx Xxxx
Notary Public - State of New York
No. 01RA6054878
Qualified in Queens County
My Commission Expires July 15, 2007
Amendment No. 1 to Amended and Restated Subordination Agreement
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FLEET RETAIL GROUP, INC., as Agent
By: /s/ Xxxxxx Xxxxx
------------------------------------------
Name: Xxxxxx Xxxxx
Title: Director
Signature Page to Amendment No. 1 to Amended and
Restated Subordination Agreement
EXHIBIT 27
[EXECUTION COPY]
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT (this "AGREEMENT"), dated as of April __,
2005, among FLEET RETAIL GROUP, INC., a Delaware corporation having its office
at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, in its capacity as agent (the
"AGENT") for the Lenders (as hereinafter defined), S.A.C. CAPITAL ASSOCIATES,
LLC ("SAC"), GMM CAPITAL, LLC ("GMM"), XXXXXXXX CAPITAL PARTNERS LLC
("Xxxxxxxx"), Xxxxxxx Xxxxxxxx, individually ("XXXXXXXX"), UBS FINANCIAL
SERVICES as Custodian FBO Xxxxxxx X. Xxxxxxxx Rolover XXX ("XXXXXXXX XXX"), Xxx
Xxxxxxx, individually ("XXXXXXX") WLSS CAPITAL PARTNERS, LLC ("WLSS"),
SMITHFIELD FIDUCIARY, LLC ("SMITHFIELD"), X.X. XXXXX SPECIAL OPPORTUNITIES FUND,
L.P. ("XXXXX XX"), X.X. XXXXX SPECIAL OPPORTUNITIES FUND, LTD ("XXXXX LTD"),
RIVERVIEW GROUP, LLC ("RIVERVIEW"), GPC XLVIII, LLC ("GPC"), PRENTICE CAPITAL
PARTNERS QP, LP ("Prentice Partners QP"), PRENTICE CAPITAL PARTNERS, LP
("Prentice Partners LP"), PRENTICE CAPITAL OFFSHORE, LP ("Prentice Offshore"
and, collectively with SAC, GMM, Goldfarb, Phillips, Xxxxxxxx XXX, Xxxxxxx,
WLSS, Smithfield, Xxxxx XX, Xxxxx Ltd, GPC, Prentice Partners QP and Prentice
Partners LP, the "BUYERS" and the "SUBORDINATING CREDITORS") and THE WET SEAL,
INC., a Delaware corporation having its office at 00000 Xxxxxxx, Xxxxxxxx Xxxxx,
Xxxxxxxxxx 00000 (the "BORROWER").
WHEREAS, pursuant to an Amended and Restated Credit Agreement dated as
of September 22, 2004 (as amended and in effect from time to time, including any
replacement agreement therefor, the "CREDIT AGREEMENT"), among the financial
institutions party thereto (the "LENDERS"), the Agent, the Borrower, The Wet
Seal Retail, Inc. ("WET SEAL RETAIL"), Wet Seal Catalog, Inc. ("WET SEAL
CATALOG"), and Wet Seal GC, Inc. ("FACILITY GUARANTOR" and, collectively with
Borrower, Wet Seal Retail and Wet Seal Catalog, the "COMPANIES" and, each
individually, a "COMPANY"), the Lenders have agreed, upon the terms and subject
to the conditions contained therein, to make loans and otherwise to extend
credit to the Companies; and
WHEREAS, the Borrower has authorized a new series of Preferred Shares
(as defined in the Certificate of Designations, Preferences and Rights (as
defined below) of the Borrower, which Preferred Shares shall be convertible into
the Borrower's Class A Common Stock, $0.10 par value per share, in accordance
with the terms of such Certificate of Designations, Preferences and Rights; and
WHEREAS, the Borrower and the Buyers entered into that certain
Securities Purchase Agreement, dated as of April __, 2005 (as amended and in
effect from time to time, the "2005 SECURITIES PURCHASE AGREEMENT"), to purchase
such Preferred Shares and certain warrants of the Borrower; and
WHEREAS, it is a condition to the Lenders' willingness to continue
making loans and otherwise extending credit to the Companies pursuant to the
Credit Agreement and to consent to the transactions contemplated by the 2005
Securities Purchase Agreement as required pursuant to the terms of the 2005
Securities Purchase Agreement that the Borrower and each Subordinating Creditor
enter into this Agreement with the Agent on or prior to the Closing Date (as
defined below); and
WHEREAS, in order to induce the Lenders to continue making loans and
otherwise extending credit to the Companies pursuant to the Credit Agreement and
to consent to the
-2-
transactions contemplated by the 2005 Securities Purchase Agreement as required
therein, the Borrower and each Subordinating Creditor have agreed to enter into
this Agreement with the Agent.
NOW, THEREFORE, in consideration of the foregoing, the mutual
agreements herein contained and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. Terms not otherwise defined herein have the same
respective meanings given to them in the Credit Agreement. In addition, the
following terms shall have the following meanings:
AMENDED AND RESTATED SUBORDINATION AGREEMENT. Shall mean that certain
Amended and Restated Subordination Agreement, dated as of January 14, 2005 (as
amended, restated or otherwise modified with the written consent of the Agent as
provided herein and in effect from time to time), among the Agent, the Borrower,
the Subordinating Creditors identified therein and The Bank of New York, as
Trustee and as Collateral Agent.
BANKRUPTCY CODE. The provisions of Title 11 of the United States Code,
as amended from time to time and any successor statute and all rules and
regulations promulgated thereunder or any state insolvency, debtor relief or
assignment for the benefit of creditor law.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS. Shall mean the
Certificate of Designations, Preferences and Rights of the Series C Preferred
Stock dated as of April __, 2005 (as amended, restated or otherwise modified
with the written consent of the Agent as provided herein and in effect from time
to time).
CLOSING DATE. Shall have the meaning provided for such term in the
2005 Securities Purchase Agreement. ------------
EFFECTIVE DATE. April __, 2005.
LIEN. With respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a security interest, in
respect of such asset.
PERMITTED SUBORDINATED DEBT FEES. Collectively (i) reasonable and
documented fees and expenses of Xxxxxxx Xxxx & Xxxxx LLP, counsel to SAC, in
connection with its representation of SAC in connection with the Subordinated
Documents, except for fees and expenses of any consultants hired by Xxxxxxx Xxxx
& Xxxxx LLP, and (ii) (A) any Registration Delay Payments (as such term is
defined in the Registration Rights Agreement) required to be paid pursuant to
Section 2(f) of the Registration Rights Agreement, plus (B) any amounts required
to be paid as a result of any failure by the Borrower to timely issue and
deliver or register the shares of Common Stock on the Borrower's share register
or to credit a holder's balance account with The Depository Trust Company, to
which any holder is entitled upon such holder's exercise of any Warrant pursuant
to Section 1(c) of each Warrant, plus (C) any amounts required to be paid as a
result of any failure by the Borrower to credit a holder's balance account with
The Depository Trust Company or to issue and deliver a certificate to a holder
for the number of Common Shares to which such holder is entitled upon the
conversion of Preferred Shares, or to issue and deliver a new Preferred Stock
Certificate representing the number of Preferred Shares to which a holder is
-3-
entitled, pursuant to Section 2(d)(v) of the Certificate of Designations,
Preferences and Rights, all such fees set forth in clauses (A), (B) and (C)
herein in an amount not to exceed $250,000 in the aggregate in any calendar
year.
PERSON. Any natural person, corporation, general or limited
partnership, limited liability company, firm, trust, association, government,
governmental agency or other entity, whether acting in an individual, fiduciary
or other capacity.
PROCEEDING. Any voluntary or involuntary insolvency, bankruptcy,
receivership, custodianship, liquidation, dissolution, reorganization,
assignment for the benefit of creditors, appointment of a custodian, receiver,
trustee or other officer with similar powers or any other proceeding for the
liquidation, dissolution or other winding up of a Person.
REGISTRATION RIGHTS AGREEMENT. Shall mean the Registration Rights
Agreement dated as of April __, 2005 (as amended, restated or otherwise modified
with the written consent of the Agent as provided herein and in effect from time
to time), between the Borrower and the Buyers.
SECURITIES. Shall mean, collectively, (i) such "Preferred Shares"
purchased under the 2005 Securities Purchase Agreement and described in the
Certificate of Designations, Preferences and Rights; (ii) such "Conversion
Shares" issued or issuable upon the conversion of the Preferred Shares; (iii)
such Warrants; (iv) such "Warrant Shares" issued or issuable pursuant to such
Warrants; and (v) such "Registrable Securities" referred to under the
Registration Rights Agreement.
SENIOR DEBT. All principal, interest, fees, charges, costs, damages,
enforcement expenses (including legal fees and disbursements), collateral
protection expenses, redemption conversion payments and other reimbursement or
indemnity obligations created or evidenced by the Credit Agreement or any of the
other Loan Documents or any prior, concurrent, or subsequent notes, instruments
or agreements of indebtedness, liabilities or obligations of any type or form
whatsoever relating thereto in favor of the Agent or any of the Lenders. Senior
Debt shall expressly include any and all interest accruing or out of pocket
costs or expenses incurred after the date of any filing by or against the
Borrower or any other Company of any petition under the federal Bankruptcy Code
or any other bankruptcy, insolvency or reorganization act regardless of whether
the Agent's or any Lender's claim therefor is allowed or allowable in the case
or proceeding relating thereto.
SUBORDINATED AGREEMENTS. Collectively, (i) the 2005 Securities
Purchase Agreement, (ii) each of the Securities, (iii) the Certificate of
Designations, Preferences and Rights, (iv) the Registration Rights Agreement,
(v) any Transaction Documents (other than the Security Documents) (each as
defined in the 2005 Securities Purchase Agreement as in effect on the Effective
Date), and (vi) each such agreement, document or instrument executed and/or
delivered in connection with the foregoing, evidencing directly or indirectly
any of the Subordinated Debt, whether now existing or hereafter created, as the
same may be amended, restated or otherwise modified with the written consent of
the Agent as provided herein and in effect from time to time.
SUBORDINATED DEBT ACTIONABLE DEFAULT. Collectively, means:
(i) the failure of the applicable Registration Statement (as
defined in the Registration Rights Agreement) required to be filed
pursuant to the Registration Rights Agreement to be declared effective
by the SEC on or prior to the date that is 120 days
-4-
after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or, while the applicable Registration
Statement is required to be maintained effective pursuant to the terms
of the Registration Rights Agreement, the effectiveness of the
applicable Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to
any holder of the Securities for sale of all of such holder's
Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of
10 consecutive days or for more than an aggregate of 30 days in any
365-day period (other than days during an Allowable Grace Period (as
defined in the Registration Rights Agreement));
(ii) the suspension from trading or failure of the Common
Stock (as defined in each of the Securities) to be listed on an
Eligible Market (as defined in each of the Securities) for a period of
five (5) consecutive Trading Days (as defined in each of the
Securities) or for more than an aggregate of ten (10) Trading Days (as
defined in each of the Securities) in any 365-day period;
(iii) the Borrower's (A) failure to deliver Common Stock (as
defined in the Securities) upon conversion within the time periods
specified in the respective Securities within ten (10) Business Days
(as defined in the Securities) after the date on which such delivery
was to occur, or (B) notice, written or oral, to any holder of the
Securities, including by way of public announcement or through any of
its agents, at any time, of its intention not to comply with a request
for conversion of any Securities into shares of Common Stock (as
defined in the Securities) that is tendered in accordance with the
provisions of the Securities; and
(iv) at any time following the tenth consecutive Business
Day (as defined in the Securities) that the Holder's Authorized Share
Allocation (as defined in the Securities) is less than the number of
shares of Common Stock (as defined in the Securities) that the Holder
would be entitled to receive upon a conversion of the full Conversion
Amount (as defined in the Securities) of the Securities (without
regard to any limitations on conversion set forth in each of the
Securities).
SUBORDINATED DEBT. All principal, interest, fees, costs, enforcement
expenses (including legal fees and disbursements), other payment obligations
(including, without limitation, all payment obligations arising under or in
connection with (i) the Registration Rights Agreement, (ii) the Warrants or
(iii) and other payment obligation, reimbursement and indemnity obligations
created or evidenced by any of the Subordinated Agreements (other than
Conversion Shares or Warrant Shares, each as defined in the 2005 Securities
Purchase Agreement) or any prior, concurrent or subsequent notes, instruments
(other than Conversion Shares or Warrant Shares, each as defined in the 2005
Securities Purchase Agreement) or agreements of indebtedness, liabilities or
obligations of any type or form whatsoever relating thereto in favor of any
Subordinating Creditor.
WARRANT. Shall mean such "Warrants" purchased under the 2005
Securities Purchase Agreement and substantially in the form attached as Exhibit
B thereto.
2. GENERAL.
-5-
(a) Pursuant to the terms of the Subordination Agreement, the
Subordinated Debt and, to the extent providing for the payment of Subordinated
Debt, any and all Subordinated Agreements have been and continue to be and,
pursuant to the terms of this Agreement, hereby are subordinated and the payment
thereof is deferred until the full and final payment in cash of the Senior Debt,
whether now or hereafter incurred or owed by the Companies. The Borrower shall
not be permitted to pay, and each Subordinating Creditor shall not be permitted
to receive, any cash payment in respect of the Subordinated Debt until the
Senior Debt has been finally paid in full in cash (other than the Permitted
Subordinated Debt Fees).
(b) Each Subordinating Creditor and the Borrower hereby represents and
warrants that the Existing RRA (as defined in the 2005 Securities Purchase
Agreement as of the Effective Date) (i) has not been amended except as otherwise
provided in the 2005 Securities Purchase Agreement as of the Effective Date and
(ii) does not include the Securities.
3. ENFORCEMENT.
(a) The Subordinating Creditors will not take or omit to take any
action or assert any claim in respect of the Subordinated Debt or otherwise
which is inconsistent with the provisions of this Agreement. Without limiting
the foregoing and except to the extent (but only to such extent) that the
commencement of a legal action may be required to toll the running of any
applicable statute of limitation, until the Senior Debt has been paid in full in
cash, the Subordinating Creditors will not assert, collect or enforce the
Subordinated Debt or any part thereof or take any action to foreclose or realize
upon the Subordinated Debt or any part thereof or enforce any of the
Subordinated Agreements in respect of any Subordinated Debt until the earlier to
occur of the following:
(i) the commencement of an enforcement action with respect
to a material portion of the Collateral securing the Senior Debt; or
(ii) the passage of 180 days from the delivery of written
notice from any Subordinating Creditor to the Agent pursuant to which
such Subordinating Creditor notifies the Agent, in reasonable detail,
of the occurrence of a Subordinated Debt Actionable Default to the
extent that the default or occurrence described therein shall not have
been cured or waived within such 180 day period, provided that such
Subordinating Creditor shall have given at least 10 days written
notice to the Agent of such Subordinating Creditor's intention to take
such enforcement action (which notice may be given during such 180 day
period).
(b) In addition, until the Senior Debt has been finally paid in full
in cash, the Subordinating Creditors shall not have any right of subrogation,
reimbursement, restitution, contribution or indemnity whatsoever in respect of
the Subordinated Debt from any assets of the Borrower or any other Company or
any guarantor of or provider of collateral security for the Senior Debt. The
Subordinating Creditor further waives any and all rights with respect to
marshalling.
(c) Notwithstanding SECTION 3(A) above, the right of any Subordinating
Creditor to receive any Permitted Subordinated Debt Fees due and owing to a
Subordinating Creditor on or after the respective due dates for payment from any
Company, or to institute suit against any Company for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected by SECTION 3(A); PROVIDED, that such Subordinating Creditor shall not
have
-6-
the right to institute any such suit against any Company for the enforcement of
payment if and to the extent that the surrender or prosecution thereof or the
entry of judgment therein would, under applicable law, result in the surrender,
impairment, waiver or loss of the Lien of the Agent and the Lenders upon any
property subject to such Lien or enforce any judgment in respect thereof against
any Collateral for the Senior Debt.
4. PAYMENTS HELD IN TRUST.
Except as set forth in SECTION 3(C), each Subordinating Creditor will
hold in trust and immediately pay over to the Agent for the account of the
Lenders and the Agent, in the same form of payment received, with appropriate
endorsements, for application (a) to the Senior Debt, any cash amount that any
Company pays to such Subordinating Creditor on account of the Subordinated Debt,
or (b) as collateral for the Senior Debt, any other assets of the Borrower or
any other Company that such Subordinating Creditor may receive on account of the
Subordinated Debt.
5. DEFENSE TO ENFORCEMENT. If any Subordinating Creditor, in
contravention of the terms of this Agreement, shall commence, prosecute or
participate in any suit, action or proceeding against the Borrower, then the
Borrower may interpose as a defense or plea the making of this Agreement, and
the Agent or any Lender may intervene and interpose such defense or plea in its
name or in the name of the Borrower. If any Subordinating Creditor, in
contravention of the terms of this Agreement, shall attempt to collect any of
the Subordinated Debt or enforce any of the Subordinated Agreements in respect
of the Subordinated Debt, then the Agent, any Lender or the Borrower may, by
virtue of this Agreement, restrain the enforcement thereof in the name of the
Agent or such Lender or in the name of the Borrower. If any Subordinating
Creditor, in contravention of the terms of this Agreement, obtains on account of
the Subordinated Debt any cash or other assets of the Borrower or any Company as
a result of any administrative, legal or equitable actions, or otherwise, such
Subordinating Creditor agrees forthwith to pay, deliver and assign to the Agent,
for the account of the Lenders and the Agent, with appropriate endorsements, any
such cash for application to the Senior Debt and any such other assets as
collateral for the Senior Debt.
6. BANKRUPTCY, ETC.
6.1. PAYMENTS RELATING TO SUBORDINATED DEBT. At any meeting
of creditors of the Borrower or in the event of any case or
Proceeding, voluntary or involuntary, for the distribution, division
or application of all or part of the assets of the Borrower or the
proceeds thereof, whether such case or Proceeding be for the
liquidation, dissolution or winding up of the Borrower or its
business, a receivership, insolvency or bankruptcy case or Proceeding,
an assignment for the benefit of creditors or a Proceeding by or
against the Borrower for relief under the federal Bankruptcy Code or
any other bankruptcy, reorganization or insolvency law or any other
law relating to the relief of debtors, readjustment of indebtedness,
reorganization, arrangement, composition or extension or marshalling
of assets or otherwise, the Agent is hereby irrevocably authorized at
any such meeting or in any such Proceeding to receive or collect for
the benefit of the Lenders and the Agent any cash or other assets of
the Borrower distributed, divided or applied by way of dividend or
payment on account of any Subordinated Debt, or any securities issued
on account of any Subordinated Debt, and apply such cash to or to hold
such other assets or securities as collateral for the Senior Debt, and
to apply to the Senior Debt any cash proceeds of any realization upon
such other assets or securities that the Agent in its
-7-
discretion elects to effect, until all of the Senior Debt shall have
been paid in full in cash, rendering to the Subordinating Creditors
any surplus to which Subordinating Creditors are then entitled.
6.2. SECURITIES BY PLAN OF REORGANIZATION OR READJUSTMENT.
Notwithstanding the foregoing provisions of SECTION 6.1, the
Subordinating Creditors shall be entitled to receive and retain any
securities of the Borrower or any other corporation or other entity
provided for by a plan of reorganization or readjustment (i) the
payment of which securities is subordinate, at least to the extent
provided in this Agreement with respect to Subordinated Debt, to the
payment of all Senior Debt under any such plan of reorganization or
readjustment and (ii) all other terms of which are reasonably
acceptable to the Lenders and the Agent.
6.3. SUBORDINATED DEBT VOTING RIGHTS. At any such meeting of
creditors or in the event of any such case or Proceeding, the
Subordinating Creditors shall retain the right to vote and otherwise
act with respect to the Subordinated Debt (including, without
limitation, the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, arrangement, composition or
extension), PROVIDED that none of the Subordinating Creditors shall
vote with respect to any such plan or take any other action in any way
so as to contest (i) the validity of any Senior Debt or any collateral
therefor or guaranties thereof, (ii) the relative rights and duties of
any holders of any Senior Debt established in any instruments or
agreements creating or evidencing any of the Senior Debt with respect
to any of such collateral or guaranties or (iii) the Subordinating
Creditors' obligations and agreements set forth in this Agreement.
7. UNSECURED CREDITORS. Each Subordinating Creditor hereby
acknowledges and agrees that the Subordinated Debt and all obligations arising
under or in connection with the Subordinated Agreements are and shall remain
unsecured at all times while this Agreement is in effect. Notwithstanding
anything to the contrary contained herein, each Subordinating Creditor shall
have no fewer rights than those available to an unsecured creditor of the
Borrower, arising under the Bankruptcy Code or other applicable non-bankruptcy
law.
7.1. FURTHER ASSURANCES. Each Subordinating Creditor hereby
agrees, upon request of the Agent at any time and from time to time,
to execute such other documents or instruments as may be reasonably
requested by the Agent further to evidence of public record or
otherwise the senior priority of the Senior Debt and the unsecured
status of the Subordinated Debt as contemplated hereby.
7.2. BOOKS AND RECORDS. Each Subordinating Creditor further
agrees to maintain on its books and records such notations as the
Agent may reasonably request to reflect the subordination contemplated
hereby and to perfect or preserve the rights of the Agent hereunder.
7.3. LEGEND. Until the termination of this Agreement in
accordance with Section 11 hereof, the Borrower and each Subordinating
Creditor will cause to be clearly, conspicuously and prominently
inserted on the face of each Subordinated Agreement, and any other
negotiable Subordinated Agreement (if any) or such other notice
reasonably acceptable to the Agent, as well as any renews or
replacements thereof, the following legend in substantially the form
hereof:
-8-
"This instrument and the rights and obligations
evidenced hereby, and other obligations incurred or arising
under or evidenced by this instrument and the rights and
obligations evidenced hereby with respect to such
obligations are subordinate and unsecured in the manner and
to the extent set forth in that certain Subordination
Agreement (as the same may be amended or otherwise modified
from time to time pursuant to the terms thereof, the
"Subordination Agreement"), dated as of April __, 2005 among
S.A.C. CAPITAL ASSOCIATES, LLC, a limited liability company
organized under the laws of Anguila ("SAC"), and certain
other holders of indebtedness identified on the signature
pages thereto, THE WET SEAL, INC., a Delaware corporation,
(the "Lead Borrower"), and FLEET RETAIL GROUP, INC., acting
as agent, to the indebtedness owed by the Companies (as
defined below) pursuant to that certain Credit Agreement
dated as of September 22, 2004 (the "First Lien Credit
Agreement") among the Lead Borrower, THE WET SEAL RETAIL,
INC., a Delaware corporation ("Wet Seal Retail"), WET SEAL
CATALOG, INC., a Delaware corporation (collectively, with
Wet Seal Retail and the Lead Borrower, the "Companies"), WET
SEAL GC, INC., a Virginia corporation, and FLEET RETAIL
GROUP, INC. (as "Agent"), Back Bay Capital Funding, LLC, as
Term Lender, the lenders from time to time party thereto and
Fleet National Bank, as Issuing Lender, and certain
guarantees of the indebtedness evidenced thereby, as such
First Lien Credit Agreement and such guarantees have been
and hereafter may be amended, restated, supplemented or
otherwise modified from time to time as permitted under the
Subordination Agreement; and each holder of this instrument,
by its acceptance hereof, irrevocably agrees to be bound by
the provisions of the Subordination Agreement applicable to
the "Subordinating Creditors" (as such term is defined in
the Subordination Agreement), as if such holder were a
Subordinating Creditor for all purposes of the Subordination
Agreement."
8. LENDERS' FREEDOM OF DEALING.
Each Subordinating Creditor agrees, with respect to the Senior Debt
and any and all collateral therefor or guaranties thereof, that the Companies
and the Lenders may agree to increase the amount of the Senior Debt or otherwise
modify the terms of any of the Senior Debt, and the Lenders may grant extensions
of the time of payment or performance to and make compromises, including
releases of collateral or guaranties, and settlements with the Companies and all
other persons, in each case without the consent of any Subordinating Creditor or
the Companies and without affecting the agreements of the Subordinating
Creditors or the Borrower contained in this Agreement; PROVIDED, HOWEVER, that
nothing contained in this SECTION 8 shall constitute a waiver of the right of
the Borrower itself to agree or consent to a settlement or compromise of a claim
which the Agent or any Lender may have against the Borrower.
9. MODIFICATION OR SALE OF THE SUBORDINATED DEBT. No Subordinating
Creditor will, at any time while this Agreement is in effect, modify any of the
terms of any of the Subordinated Debt or any of the Subordinated Agreements with
respect to the Subordinated Debt; nor will any Subordinating Creditor sell,
transfer, pledge, assign, hypothecate or otherwise dispose of any or all of the
Subordinated Debt to any Person other than a Person who agrees in a writing,
reasonably satisfactory in form and substance to the Agent, to become a party
hereto and to succeed to the rights and to bound by all of the obligations of
such Subordinating Creditor hereunder.
-9-
10. BORROWER'S OBLIGATIONS ABSOLUTE. Nothing contained in this
Agreement shall impair, as among the Borrower and the Subordinating Creditors,
the obligation of the Borrower to pay to the Buyers or any permitted assignee
all amounts payable in respect of the Subordinated Debt as and when the same
shall become due and payable in accordance with the terms thereof, or prevent
the Subordinating Creditors (except as expressly otherwise provided in SECTION
3, SECTION 4, SECTION 5, SECTION 6 or SECTION 7) from exercising all rights,
powers and remedies otherwise permitted by Subordinated Agreements and by
applicable law upon a default in the payment of the Subordinated Debt or under
any Subordinated Agreement, all, however, subject to the rights of the Agent and
the Lenders as set forth in this Agreement.
11. TERMINATION OF SUBORDINATION. This Agreement shall continue in
full force and effect, and the obligations and agreements of the Subordinating
Creditors and the Borrower hereunder shall continue to be fully operative, until
all of the Senior Debt shall have been paid in full in cash. To the extent that
any Company or any guarantor of or provider of collateral for the Senior Debt
makes any payment on the Senior Debt that is subsequently invalidated, declared
to be fraudulent or preferential or set aside or is required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or
reorganization act, state or federal law, common law or equitable cause (such
payment being hereinafter referred to as a "VOIDED PAYMENT"), then to the extent
of such Voided Payment, that portion of the Senior Debt that had been previously
satisfied by such Voided Payment shall be revived and continue in full force and
effect as if such Voided Payment had never been made. In the event that a Voided
Payment is recovered from the Agent or any Lender, an Event of Default shall be
deemed to have existed and to be continuing under the Credit Agreement from the
date of the Agent's or such Lender's initial receipt of such Voided Payment
until the full amount of such Voided Payment is restored to the Agent or such
Lender. During any continuance of any such Event of Default, this Agreement
shall be in full force and effect with respect to the Subordinated Debt. To the
extent that (i) any Subordinating Creditor has received any payments with
respect to the Subordinated Debt subsequent to the date of the Agent's or any
Lender's initial receipt of such Voided Payment and such payments have not been
invalidated, declared to be fraudulent or preferential or set aside or are
required to be repaid to a trustee, receiver, or any other party under any
bankruptcy act, state or federal law, common law or equitable cause, and (ii)
such payments would have been required to have been turned over to the Agent
pursuant to this Agreement, such Subordinating Creditor shall be obligated and
hereby agrees that any such payment so made or received shall be deemed to have
been received in trust for the benefit of the Agent or such Lender, and each
Subordinating Creditor hereby agrees to pay to the Agent for the benefit of the
Agent or (as the case may be) such Lender, upon demand, the full amount of such
payment so received by such Subordinating Creditor during such period of time to
the extent necessary fully to restore to the Agent or such Lender the amount of
such Voided Payment. Upon the payment in full in cash of all of the Senior Debt,
this Agreement will automatically terminate without any additional action by any
party hereto.
12. NOTICES. All notices and other communications which are required
and may be given pursuant to the terms of this Agreement shall be in writing and
shall be sufficient and effective in all respects if given in writing or
telecopied, delivered or mailed by registered or certified mail, postage
prepaid, as follows:
If to the Agent: Fleet Retail Group, Inc.
c/o Bank of America Retail Finance Group
00 Xxxxx Xx., 00xx Xxxxx
Xxxxxx, XX 00000
-10-
Attention: Xxxxxx X. Xxxxx, Director
Facsimile: (000) 000-0000
With a copy to: Xxxxxx & Xxxxxxxxxx, LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
And with a copy to: Back Bay Capital Funding LLC
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, Managing Director
Facsimile: (000) 000-0000
And with a copy to: Xxxxxxx XxXxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. X. Xxxxx, Esq.
Facsimile: (000) 000-0000
If to any Buyer or Subordinating Creditor::
c/o The Wet Seal, Inc.
00000 Xxxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to: Akin Gump Xxxxxxx Xxxxx & Xxxx, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, III, Esq. and
Xxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Borrower: The Wet Seal, Inc.
00000 Xxxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to: Akin Gump Xxxxxxx Xxxxx & Xxxx, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, III, Esq. and
Xxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
-11-
or such other address or addresses as any party hereto shall have
designated by written notice to the other parties hereto. Notices shall be
deemed given and effective upon the earlier to occur of (i) the third day
following deposit thereof in the U.S. mail or (ii) receipt by the party to whom
such notice is directed. For purposes of delivery of notices to the Buyers, such
notices shall be delivered to the Borrower.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL BE A
SEALED INSTRUMENT UNDER SUCH LAWS.
14. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER
OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW,
EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY LENDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY LENDER WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGES THAT THE AGENT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
15. MISCELLANEOUS. This Agreement may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement, it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against which enforcement is sought. The Agent, acting upon the instructions of
the Required Lenders (as defined in the Credit Agreement) and the Term Lender
(as defined in the Credit Agreement), may, in their sole and absolute
discretion, waive any provisions of this Agreement benefiting the Agent and the
Lenders; PROVIDED, HOWEVER, that such waiver shall be effective only if in
writing and signed by the Agent and shall be limited to the specific provision
or provisions expressly so waived. The provisions of this Agreement may from
time to time be amended if such amendment is in writing and consented to by the
holders of a majority in interest of the Subordinated Debt determined as of the
date of such amendment, the Borrower and the Agent; PROVIDED, HOWEVER, any
amendment consented to by the holders of a majority in interest of the
Subordinated Debt shall be binding upon all Subordinating Creditors, whether or
not such Subordinating Creditor consented thereto in such writing. No failure or
delay on the part of any Person in exercising any power or right under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. This Agreement shall be
binding upon the successors and assigns of each Subordinating Creditor and the
Borrower and shall inure to the benefit of the Agent and the Lenders, the
Agent's and the Lenders' respective successors and assigns, any lender or
lenders refunding or refinancing any of the Senior Debt and their
-12-
respective successors and assigns, but shall not otherwise create any rights or
benefits for any third party. In the event that any lender or lenders refund or
refinance any of the Senior Debt, the terms "Credit Agreement", "Loan
Documents", "Event of Default" and the like shall refer MUTATIS MUTANDIS to the
agreements and instruments in favor of such lender or lenders and to the related
definitions contained therein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
THE WET SEAL, INC., as Borrower
By:/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: EVP-CFO
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On this 15th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxxx X. Xxxxxxxxx personally known to me to be the person
whose name is signed on the preceding or attached document, and acknowledged to
me that he signed it voluntarily for its stated purpose.
/S/ Xxxxxxxx X. Xxxxxx
---------------------------------------------
(official signature and seal of notary)
My commission expires: May 27, 2007
Xxxxxxxx X. Xxxxxx
Commission #1420715
Notary Public - California
Orange County
My Comm. Expires May 27, 2007
Subordination Agreement
THE BUYERS
S.A.C. CAPITAL
ASSOCIATES, LLC
By: S.A.C. Capital
Advisors, LLC
By: /S/ XXXXX XXXXXXXX
------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: General Counsel
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CONNECTICUT )
) ss.:
COUNTY OF FAIRFIELD )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxx Xxxxxxxx, proved to me through satisfactory evidence
of identification, which were per my personal knowledge, to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that (he) (she) signed it voluntarily for its stated purpose (as _____________
for ________________, a ___________________).
/S/ XXXX X. XXXXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires: 5-31-07
XXXX X. XXXXXXXX
NOTARY PUBLIC
My Commission Expires May 31, 2007
Subordination Agreement
PRENTICE CAPITAL PARTNERS QP, LP
By: Prentice Capital GP, LLC, its
general partner
By: /S/ XXXXXXX XXXXXXXX
-----------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
Signature Page Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxxx Xxxxxxxx, proved to me through satisfactory evidence
of identification, which were New York drivers license, to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that (he) (she) signed it voluntarily for its stated purpose (as ____________
for ____________________, a ________________________).
/S/ XXXXX XXXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
XXXXX XXXXXXX
Notary Public, State of New York
No. 02SP6121041
Qualified in Kings County
Commission Expires Jan. 3, 2009
Subordination Agreement
PRENTICE CAPITAL PARTNERS, LP
By: Prentice Capital GP, LLC,
its general partner
By: /S/ XXXXXXX XXXXXXXX
------------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
Signature Page Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxxx Xxxxxxxx, proved to me through satisfactory evidence
of identification, which were New York drivers license, to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that (he) (she) signed it voluntarily for its stated purpose (as ____________
for ____________________, a ________________________).
/S/ XXXXX XXXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
XXXXX XXXXXXX
Notary Public, State of New York
No. 02SP6121041
Qualified in Kings County
Commission Expires Jan. 3, 2009
Subordination Agreement
PRENTICE CAPITAL OFFSHORE, LTD
By: Prentice Capital Management, LP, the
Investment Manager
By: /S/ XXXXXXX XXXXXXXX
------------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
Signature Page Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxxx Xxxxxxxx, proved to me through satisfactory evidence
of identification, which were New York drivers license, to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that (he) (she) signed it voluntarily for its stated purpose (as ____________
for ____________________, a ________________________).
/S/ XXXXX XXXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
XXXXX XXXXXXX
Notary Public, State of New York
No. 02SP6121041
Qualified in Kings County
Commission Expires Jan. 3, 2009
Subordination Agreement
GMM CAPITAL, LLC
By: /S/ XXXXX XXXXX
------------------------------------------
Name: Xxxxx Xxxxx
Title: Director
Signature Page to Subordination Agreement
XXXXXXXX CAPITAL PARTNERS LLC
By: /S/ XXXXXX XXXXXXXX
------------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Member
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 27th day of April, 2005, before me, the undersigned notary
public, personally appeared Xxxxxx Xxxxxxxx, proved to me through satisfactory
evidence of identification, which were New York drivers license, to be the
person whose name is signed on the preceding or attached document, and
acknowledged to me that (he) (she) signed it voluntarily for its stated purpose
(as member for Xxxxxxxx Capital Partners LLC, a Delaware 11c).
/S/ XXXXXXXX XXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires: 1/7/06
Xxxxxxxx Xxxxxx
Notary Public, State of New York
No. 01SC6068634
Qualified in New York County
Commission Expires January 07, 2006
Subordination Agreement
By: /S/ XXXXXXX XXXXXXXX
------------------------------------------
Mr. Xxxxxxx Xxxxxxxx
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxxx Xxxxxxxx, proved to me through satisfactory evidence
of identification, which were New York drivers license, to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that (he) (she) signed it voluntarily for its stated purpose (as ____________
for ____________________, a ________________________).
/S/ XXXX X. XXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
XXXX X. XXXXXX
Notary Public, State of New York
No. 02MA6054605
Qualified in Kings County
Commission Expires Feb. 12, 2007
Subordination Agreement
UBS FINANCIAL SERVICES AS CUSTODIAN FBO
XXXXXXX X. XXXXXXXX ROLLOVER XXX
By: /S/ XXXXXXX XXXXXXXX
--------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxxx Xxxxxxxx, proved to me through satisfactory evidence
of identification, which were New York drivers license, to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that (he) (she) signed it voluntarily for its stated purpose (as ____________
for ____________________, a ________________________).
/S/ XXXXX XXXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
XXXXX XXXXXXX
Notary Public, State of New York
No. 02SP6121041
Qualified in Kings County
Commission Expires Jan. 3, 2009
Subordination Agreement
By: /S/ XXX XXXXXXX
------------------------------------------
Xxx Xxxxxxx
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 26th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxx Xxxxxxx, proved to me through satisfactory evidence of
identification, which were U.S. passport, to be the person whose name is signed
on the preceding or attached document, and acknowledged to me that (he) (she)
signed it voluntarily for its stated purpose ____________ ____________________,
________________________).
/S/ XXXXXX X. XXXXXXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
XXXXXX X. XXXXXXXXXX
Notary Public State of New York
No. 00-0000000
Qualified in New York County
Commission Expires Nov. 30, 2006
Subordination Agreement
WLSS CAPITAL PARTNERS, LLC
By: /S/ XXXXX X. XXXXXX
------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Member
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 27th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxx X. Xxxxxx, proved to me through satisfactory evidence
of identification, which were New York driver's license, to be the person whose
name is signed on the preceding or attached document, and acknowledged to me
that (he) (she) signed it voluntarily for its stated purpose (as member for WLSS
Capital Partners, LLC, a Delaware LLC).
/S/ XXXXXXXX XXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires: 1/7/06
Xxxxxxxx Xxxxxx
Notary Public, State of New York
No. 01SC6068634
Qualified in New York County
Commission Expires January 07, 2006
Subordination Agreement
SMITHFIELD FIDUCIARY, LLC
By: /S/ XXXXX X. XXXXXXX
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Authorized Signatory
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF QUEENS )
On this 28th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxx X. Xxxxxxx, proved to me through satisfactory evidence
of identification, which were known to me, to be the person whose name is signed
on the preceding or attached document, and acknowledged to me that (he) (she)
signed it voluntarily for its stated purpose (as ____________ for
____________________, a ________________________).
/S/ XXXXXX XXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
XXXXXX XXXX
Notary Public - State of New York
No. OIRA6054878
Qualified in Queens County
My Commission Expires July 15, 2007
Subordination Agreement
X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, L.P.
BY: X.X. XXXXX PARTNERS LLC,
its general partner
By: /S/ XXXXXX X. XXXXX
------------------------------------------
Name: Xxxxxx X. Xxxxx
Title:
X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, LTD.
BY: X.X. XXXXX & CO., L.P.,
its trading Manager
By: /S/ XXXXXX X. XXXXX
------------------------------------------
Name: Xxxxxx X. Xxxxx
Title:
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxx X. Xxxxx, proved to me through satisfactory evidence
of identification, which were ________________, to be the person whose name is
signed on the preceding or attached document, and acknowledged to me that (he)
(she) signed it voluntarily for its stated purpose (as Managing Member for DBZ &
Co., a ________________________).
/S/ XXXXXX X. XXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Notary Signature: /S/ XXXXXXX X. XXXXXXX 4/29/05
---------------------------------------------
XXXXXXX X. XXXXXXX
Notary Public, State of New York
No. 01PI16112028
Qualified in Queens County
My Commission Expires June 28, 2008
Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29th day of April, 2005, before me, the undersigned notary public,
personally appeared Xxxxxx X. Xxxxx, proved to me through satisfactory evidence
of identification, which were ________________, to be the person whose name is
signed on the preceding or attached document, and acknowledged to me that (he)
(she) signed it voluntarily for its stated purpose (as Managing Member for DBZ &
Co., a ________________________).
/S/ XXXXXX X. XXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Notary Signature: /S/ XXXXXXX X. XXXXXXX 4/29/05
---------------------------------------------
XXXXXXX X. XXXXXXX
Notary Public, State of New York
No. 01PI16112028
Qualified in Queens County
My Commission Expires June 28, 2008
Subordination Agreement
RIVERVIEW GROUP, LLC
By: Millennium Holding Group, L.P.,
By: Millennium Management, L.L.C.
By: /S/ XXXX XXXXX
------------------------------------------
Name: Xxxx Xxxxx
Title: Executive Vice President
Signature Page to Subordination Agreement
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 28th day of April, 2005, before me, the undersigned notary
public, personally appeared Xxxx Xxxxx, personally known to me, to be the person
whose name is signed on the preceding or attached document, and acknowledged to
me that he signed it voluntarily for its stated purpose (as Executive Vice
President of Millennium Management, L.L.C., the general partner of Millennium
Holding Group, L.P., the managing member of Riverview Group, LLC, a Delaware
limited liability company).
/S/ XXXXXXXX XXXXXX
---------------------------------------------
(official signature and seal of notary)
My commission expires:
Xxxxxxxx Xxxxxx
Notary Public, State of New York
No. 01SC6119482
Qualified in Kings County
Commission Expires Nov. 29, 2008
Subordination Agreement
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written
FLEET RETAIL GROUP, INC., as Agent
By:/S/ XXXXXX XXXXX
------------------------------------------
Name: Xxxxxx Xxxxx
Title: Director
Signature Page to Subordination Agreement
EXHIBIT 28
WAIVER AND CONSENT
This waiver and consent (the "WAIVER") is entered into as of April 29,
2005, by and among The Wet Seal, Inc., a Delaware corporation (the "COMPANY")
and the buyers listed on the Schedule of Buyers attached hereto as EXHIBIT A
(each, a "BUYER" and, collectively, the "BUYERS"). Unless otherwise defined
herein or the context otherwise requires, capitalized terms used herein and
defined in the Securities Purchase Agreement shall be used herein as therein
defined.
THE PARTIES TO THIS AGREEMENT enter into this waiver on the basis of
the following facts, intentions and understanding:
A. The Company and the Buyers entered into that certain Securities
Purchase Agreement, dated as of April 29, 2005 (the "SECURITIES PURCHASE
AGREEMENT"), and, upon the terms and subject to the conditions of the Securities
Purchase Agreement, the Company has agreed to issue and sell to the Buyers an
aggregate of (i) Twenty-Four Thousand Six Hundred (24,600) shares of the
Company's Series C Convertible Preferred Stock, $0.01 par value per share,
issued pursuant to the Company's Certificate of Designations, Preferences and
Rights of Series C Convertible Preferred Stock related thereto, which shall be
convertible into shares of Class A Common Stock of the Company, $0.10 par value
per share (the "COMMON STOCK"), and (ii) Warrants to purchase in the aggregate
up to Seven Million Five Hundred Thousand (7,500,000) shares of Common Stock.
In addition, the Buyers have agreed to exercise their Series A Warrants (as
defined in the Securities Purchase Agreement) and a portion of their Series B
Warrants (as defined in the Securities Purchase Agreement) for up to Three
Million Three Hundred Fifty-Nine Thousand Nine Hundred and Ninety-Seven
(3,359,997) shares of Common Stock.
B. In accordance with Section 7(b) of the Securities Purchase
Agreement, the parties hereto have agreed that, other than the Security
Documents which shall be effective on the Escrow Date in accordance with their
respective terms, each of the documents required to be delivered pursuant to
Section 7(a) of the Securities Purchase shall be executed and delivered by the
appropriate parties on April 29, 2005 (the "ESCROW DATE") and, except for the
documents listed on Schedule 1 to the Securities Purchase Agreement, are dated
as of the Escrow Date, to be held in escrow by Akin Gump Xxxxxxx Xxxxx & Xxxx
LLP and Xxxxxxx Xxxx & Xxxxx LLP, and all actions required to be undertaken
pursuant to Section 7(a) shall be completed, as the case may be, on or prior to
the Escrow Date (the "ESCROW CONDITIONS").
C. The Company desires that each Buyer waive each of the conditions
to Closing set forth in Sections 7(a) (including, but not limited to, Section
7(a)(x) thereof), except for Sections 7(a)(i) and (xi), which shall constitute
the only remaining conditions to each Buyer's obligation to purchase the
Preferred Shares, the Warrants and the Closing Exercise Shares on the Closing
Date.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
1. The Company hereby certifies to each Buyer that as of the date
hereof the Escrow Conditions have been met.
2. Each Buyer hereby waives each of the conditions to Closing set forth
in Section 7(a) (including, but not limited to, Section 7(a)(x)),
except for Sections 7(a)(i) and (xi), which shall constitute the
only remaining conditions to each Buyer's obligation to purchase the
Preferred Shares, the Warrants and the Closing Exercise Shares on
the Closing Date.
3. The parties hereto hereby acknowledge and agree that Deloitte &
Touche LLP, the Company's independent auditors, may rely on this
Waiver.
4. Each party represents and warrants that this Waiver has been duly
and validly authorized, executed and delivered on behalf of the
undersigned and shall constitute the legal, valid and binding
obligations of the undersigned enforceable against such party in
accordance with its terms, except as such enforceability may be
limited by general principles of equity or to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
5. This Waiver shall be effective as of April 29, 2005 and shall remain
effective provided that the documents held in escrow pursuant to
Section 7(b) of the Securities Purchase Agreement are released to
the Buyers on the Closing Date.
6. All questions concerning the construction, validity, enforcement and
interpretation of this Waiver shall be governed by the internal
laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State
of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in
an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Waiver
and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in
any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS WAIVER OR ANY TRANSACTION CONTEMPLATED HEREBY.
7. Except for the waiver set forth in Section 2 above, nothing herein
shall be deemed to amend or waive any Transaction Documents or any
of the Securities.
8. This Waiver may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile
signature shall be considered due execution and shall be binding
upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.
9. The obligations of each Buyer under this Waiver and any Transaction
Document are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under this Waiver
or any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Buyer pursuant
hereto or thereto, shall be deemed to constitute the Buyers as a
partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by this Waiver or the Transaction
Documents. Each Buyer confirms that it has independently
participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors. Each Buyer,
other than SAC, acknowledges that (i) Xxxxxxx Xxxx & Xxxxx LLP
solely represented SAC in connection with the transaction
contemplated hereby and (ii) SAC did not provide any advice in
connection herewith and such Buyer's determination to participate
herein was based solely on its own evaluation of the risks and
merits of the investment contemplated hereby. Each Buyer shall be
entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Waiver or out of
any other Transaction Documents, and it shall not be necessary for
any other Buyer to be joined as an additional party in any
proceeding for such purpose.
[The remainder of this page is intentionally left blank]
IN WITNESS WHEREOF, the undersigned has executed this Waiver and Consent
effective as of the date set forth above.
The Wet Seal, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chief Financial Officer
[WAIVER AND CONSENT]
IN WITNESS WHEREOF, the undersigned has executed this Waiver and Consent
effective as of the date set forth above.
GMM Capital, LLC
By: /s/ Xxxxx Xxxxx
--------------------------------
Name: Xxxxx Xxxxx
Title: Director
[WAIVER AND CONSENT]
IN WITNESS WHEREOF, the undersigned has executed this Waiver and Consent
effective as of the date set forth above.
Xxxxxxxx Capital Partners, LLC
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Member
[WAIVER AND CONSENT]
IN WITNESS WHEREOF, the undersigned has executed this Waiver and Consent
effective as of the date set forth above.
/s/ Xxx Xxxxxxx
-----------------------------------
By: /s/ Xxx Xxxxxxx
--------------------------------
Name:
Title:
[WAIVER AND CONSENT]
IN WITNESS WHEREOF, the undersigned has executed this Waiver and Consent
effective as of the date set forth above.
WLSS Capital Partners, LLC
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Member
[WAIVER AND CONSENT]
IN WITNESS WHEREOF, the undersigned has executed this Waiver and Consent
effective as of the date set forth above.
X.X. Xxxxx Special Opportunities
Fund, L.P.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title:
[WAIVER AND CONSENT]
IN WITNESS WHEREOF, the undersigned has executed this Waiver and Consent
effective as of the date set forth above.
X.X. Xxxxx Special Opportunities
Fund, Ltd.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title:
[WAIVER AND CONSENT]
IN WITNESS WHEREOF, the undersigned has executed this Waiver and Consent
effective as of the date set forth above.
RIVERVIEW GROUP, LLC
By: Millennium Holding Group, L.P.,
By: Millennium Management, L.L.C.
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
Title: Executive Vice President
[WAIVER AND CONSENT]
IN WITNESS WHEREOF, the undersigned has executed this Waiver and Consent
effective as of the date set forth above.
Smithfield Fiduciary LLC
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X.Xxxxxxx
Title: Authorized Signatory
[WAIVER AND CONSENT]
AGSH&F DRAFT 4/24/05
EXHIBIT A TO WAIVER
SCHEDULE OF BUYERS
NAME OF BUYERS
-------------------------
S.A.C. Capital Associates, LLC
c/o S.A.C. Capital Advisors, LLC
00 Xxxxxxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel Facsimile:
(000) 000-0000 Residence: Anguila
Prentice Capital Partners QP, LP
c/o Prentice Capital Management, LP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxx
Facsimile: 000-000-0000
Prentice Capital Partners, LP
c/o Prentice Capital Management, LP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxx
Facsimile: 000-000-0000
Prentice Capital Offshore, Ltd
c/o Prentice Capital Management, LP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxx
Facsimile: 000-000-0000
GMM Capital, LLC
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Xxxxxxxx Capital Partners LLC
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Mr. Xxxxxxx Xxxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
UBS Financial Services as
Custodian FBO Xxxxxxx X.
Xxxxxxxx Rollover XXX
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Xx. Xxx Xxxxxxx
0 Xxxx Xxxx
Xxxxxxxxx, XX 00000
WLSS Capital Partners, LLC
c/o Xxxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxx. 00X
Xxx Xxxx, XX 00000
Smithfield Fiduciary LLC
c/o Highbridge Capital
Management, LLC
0 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxx
Xxxx X. Chill
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
[X.X. Xxxxx Special Opportunities Fund, L.P]
c/o X.X. Xxxxx & Co., L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx Xxx
Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
Xxxxx X. Xxxxx
Residence: Cayman Islands
[X.X. Xxxxx Special Opportunities Fund, Ltd.]
c/o X.X. Xxxxx & Co., L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
Xxxxx X. Xxxxx
Residence: Cayman Islands
Riverview Group, LLC
000 Xxxxx Xxxxxx, 0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Delaware
