FORM OF
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of _________, 1998 between LAMONTS APPAREL,
INC., a corporation duly organized and validly existing under the laws of
Delaware (as reorganized pursuant to Chapter 11, title 11 of the United
States Code) (the "Company") and Specialty Investment I LLC ("Holder").
The Company, as debtor in possession [has entered into an Amended and
Restated Debtor in Possession and Exit Financing Loan Agreement dated as of
September 26, 1997 with BankBoston, N.A. and certain other financial
institutions identified thereunder and with BankBoston, N.A., as agent (the
"Amended Loan Agreement"). The Holder has provided certain payment guarantees
with respect to the Term Loan (as defined in the Amended Loan Agreement)
pursuant to that certain Purchase and Guaranty Agreement also dated as of
September 26, 1997 (the "Guaranty"). Pursuant to the Amended Loan Agreement,
and to induce Holder to provide the Guaranty and in partial exchange for
Holder's administrative claim against the Company's Chapter 11 estate, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company]* has agreed that upon the effective date of
its plan of reorganization it will issue Warrants (as hereinafter defined) to
Holder [as nominee of the Term Loan Lender (as defined in the Amended Loan
Agreement)]* providing for the purchase of shares of Stock (as hereinafter
defined) of the Company, in the manner hereinafter provided. Accordingly,
the parties hereto agree as follows:
SECTION 1. DEFINITIONS ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as expressly provided herein, terms defined in the Amended
Loan Agreement are used herein as defined therein.
(b) As used herein:
"AFFILIATE" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member
of the immediate family (including parents, spouse and children) of such
individual and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any Person who is
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* Bracketed language does not go in Warrant Agreement executed by management.
* Bracketed language does not go in Warrant Agreement executed by management.
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controlled by any such member or trust. As used in this definition, "CONTROL"
(including, with its correlative meanings, "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") shall mean possession, directly or indirectly, of the power to
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise), PROVIDED that, in any event, any Person which owns
directly or indirectly 20% or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation
or 20% or more of the partnership or other ownership interests of any other
Person will be deemed to control such corporation or other Person.
Notwithstanding the foregoing, (a) no individual shall be deemed to be an
Affiliate of a corporation, solely by reason of his or her being an officer
or director of such corporation, and (b) neither Holder nor any of its
Affiliates shall be deemed to be an Affiliate of the Company.
"BANKRUPTCY COURT" shall mean the United States Bankruptcy Court for the
Western District of Washington at Seattle.
"BOARD" shall mean the Board of Directors of the Company.
"BUSINESS DAY" shall mean any day on which commercial banks are not
authorized or required to close in New York City.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other similar or successor agency of the Federal government administering the
Securities Act and/or the Securities Exchange Act of 1934, as amended from
time to time.
"COMPANY" shall have the meaning set forth at the head of this Agreement.
"CONTROL" shall mean, with respect to any Person, the power to exercise,
directly or indirectly, a controlling influence over the management or
policies of such Person.
"DATE OF ISSUANCE" shall have the meaning assigned to such term in the
form of Warrant Certificate attached as Annex 1 hereto.
"EXPIRATION DATE" shall have the meaning assigned to such term in the
form of Warrant Certificate attached as Annex 1 hereto.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any
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corporation or other entity owned or controlled (whether through ownership of
securities or other ownership interests, by contract or otherwise) by any of
the foregoing.
"HOLDER" shall have the meaning set forth at the head of this Agreement
and each other Person who acquires the original Warrant Certificate or any
Warrant Certificate issued upon transfer division, combination, partial
exercise of Warrants or in replacement or substitution therefor or who
acquires Warrant Shares pursuant to the provisions of this Agreement.
"INCLUDE" and "INCLUDING" shall be construed as if followed by the
phrase "without being limited to".
"LIEN" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"PERSON" shall mean a corporation, an association, a partnership, a
joint venture, an organization, a business, an individual or a Governmental
Authority.
"PLAN" shall mean the Company's Chapter 11 Plan of Reorganization.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Grant of Registration
Rights of even date herewith between the Company and the other parties
signatory thereto relating to the registration of the Registrable Securities
(as defined therein) under and pursuant to the Securities Act, substantially
in the form attached as Annex 2 hereto, as said Registration Rights Agreement
shall be modified and supplemented and in effect from time to time.
"RESTRICTED SECURITIES" shall mean the Warrants and any Warrant Shares
or other securities which have been issued or are issuable upon the exercise
of such Warrants until such time as any such Restricted Securities (i) have
been sold pursuant to an effective registration statement under the
Securities Act or (ii) are distributed pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act and if it has so requested,
the Company has received an opinion of counsel (either its own counsel or, if
the Company so requests, counsel to the holders of such Restricted
Securities) reasonably acceptable to the Company that such Restricted
Securities may be so transferred without registration or pursuant to an
exemption under the Securities Act, and in each such
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instance the Company has delivered new Warrant Certificates not bearing the
legend prescribed by SECTION 2.03 hereof.
"RULE 144" shall mean Rule 144 promulgated by the Commission under the
Securities Act (or any successor or similar rule then in force).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"STOCK" shall mean the Company's Class A Common Stock, $.01 par value,
and/or any security of any class or preference of the Company which has
either (a) the right to vote with the holders of the common stock of the
Company generally in the election of the board of directors of the Company or
(b) the right to any amounts payable (i) with respect to profits of the
Company or (ii) in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company in each of clauses (i) or (ii) other
than the repayment of the consideration originally paid for such security
together with a fixed or formula-based return on such consideration
consistent with the security's priority of payment.
"STOCK UNIT" shall have the meaning assigned to such term in the Warrant
Certificate.
"STOCKHOLDER" shall mean any Person (excluding any Holder) who owns any
shares of common or preferred Stock of the Company (or any successor thereto).
"SUBSIDIARY" of any Person shall mean any corporation of which at least
a majority of the outstanding shares of stock having by the terms thereof
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more of the
Subsidiaries of such Person or by such Person and one or more of the
Subsidiaries of such Person.
"TRANSFER" shall mean, unless the context otherwise requires, any
disposition of any Restricted Securities, or of any interest in any thereof,
which would constitute an offer or sale thereof within the meaning of the
Securities Act.
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"WARRANT CERTIFICATE(S)" shall have the meaning assigned to such term in
SECTION 2.01.
"WARRANT(S)" shall have the meaning assigned to such term in SECTION
2.01.
"WARRANT SHARES" shall mean (i) the shares of Stock purchased or
purchasable by the Holders of the Warrants upon the exercise thereof,
including any Stock into which such Stock may thereafter be changed or
converted, and (ii) if required hereunder, any additional shares of Stock
issued or distributed by way of a dividend, stock split or other distribution
in respect of the Stock referred to in clause (i) above, or acquired by way
of any rights offering or similar offering made in respect of the Stock
referred to in clause (i) above.
(c) References herein and in the Warrants to the Stock outstanding "on
a fully diluted basis" at any time shall mean the number of shares of Stock
then issued and outstanding, assuming full conversion, exercise and exchange
of all outstanding warrants, options and rights to purchase Stock, and all
securities of any type that shall be (or may become) exchangeable for, or
exercisable or convertible into Stock, including the Warrants.
(d) Except as otherwise may be expressly provided herein, all
accounting terms used herein shall be interpreted in accordance with
generally accepted accounting principles consistently applied. All
calculations made for the purposes of determining compliance with the terms
of this Agreement and the Warrants shall (except as otherwise may be
expressly provided herein) be made by application of generally accepted
accounting principles consistently applied.
SECTION 2. ISSUANCE AND EXECUTION OF WARRANTS.
2.01 AUTHORIZATION AND ISSUANCE OF SHARES AND WARRANTS. The Company has
authorized in accordance with the Plan: (a) the issuance of a warrant
certificate substantially in the form of ANNEX 1 to this Agreement ("Warrant
Certificate" or "Warrant Certificates") evidencing warrants to purchase Stock
Units representing shares of Stock (such Warrant Certificate(s), Warrant
Certificates issued upon transfer, partial exercise, division or combination
of, or in substitution or replacement for any Warrant Certificate or the
rights to purchase Stock evidenced by each of the foregoing, is, as the
context requires, sometimes referred to herein as a "Warrant" or "Warrants");
and (b) the issuance of such number of shares of Stock as shall permit the
compliance by the Company with its obligations to issue Stock pursuant to the
Warrants. In addition, the Warrant Certificates may have such letters,
numbers or other marks of identification or
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designation and such legends, summaries, or endorsements stamped, printed,
lithographed or engraved thereon as the Company may deem appropriate and as
are not inconsistent with the provisions of this Agreement, or as, in any
particular case, may be required to comply with any law or with any rule or
regulation of any regulatory authority or agency, or to conform to customary
usage, provided, however, that no such change shall be made which affects the
duties or obligations of the Company without the consent of the Company.
2.02 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. The Warrant
Certificates shall be executed on behalf of the Company by its Chairman or
President or any Vice President and attested to by its Secretary or Assistant
Secretary, either manually or by facsimile signature printed thereon. In
case any authorized officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer of the Company either
before or after delivery thereof by the Company to the Holder, the signature
of such person on such Warrant Certificates shall be valid nevertheless and
such Warrant Certificate may be issued and delivered to the person entitled
to receive the Warrants represented thereby with the same force and effect as
though the person who signed such Warrant Certificates had not ceased to be
such officer of the Company. The Warrant Certificate originally issued to
Holder shall be delivered on the effective date of the Plan. The Company
shall maintain books (the "Warrant Register") for the registration of
Warrants and the registration of transfers of Warrants.
2.03 TRANSFER AND EXCHANGE OF WARRANTS.
(a) Warrant Certificates evidencing Restricted Securities and
only such Warrant Certificates will bear a legend in substantially the
following form:
NEITHER THE EXERCISE OF THE WARRANTS EVIDENCED BY THIS CERTIFICATE
NOR THE ISSUANCE OF SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE,
AND SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH
TRANSFER IS PURSUANT TO (i) A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT AND THE
RULES AND REGULATIONS THEREUNDER OR (ii) AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS AND IF IT HAS SO REQUESTED, THE
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COMPANY HAS RECEIVED AN OPINION OF COUNSEL (EITHER ITS OWN COUNSEL
OR, IF THE COMPANY SO REQUESTS, COUNSEL TO THE HOLDERS OF SUCH
SECURITIES) REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
SECURITIES MAY BE SO TRANSFERRED.
(b) Following the transfer or exchange of a Restricted Security or
Securities (other than pursuant to an effective registration statement under
the Securities Act) the transferor of such Restricted Security or Securities
shall, upon request of the Company, deliver to the Company an opinion of
counsel, in substance reasonably satisfactory to the Company, to the effect
that such Restricted Security to be issued upon such transfer or exchange may
be so issued without the foregoing legend.
(c) Subject to paragraph (a) above, the Company shall register the
transfer of all or any whole number of Warrants covered by any outstanding
Warrant Certificate in the Warrant Register upon surrender at the Company of
Warrant Certificates accompanied by a written instrument or instruments of
transfer, in form reasonably satisfactory to the Company, duly executed by
the registered Holder or his attorney duly authorized in writing. Upon any
such registration of transfer a new Warrant Certificate shall be issued to
the transferee and the surrendered Warrant Certificate shall promptly be
canceled by the Company. Warrant Certificates may be exchanged at the option
of the Holder thereof, upon surrender, properly endorsed by the registered
Holders, at the Company, with written instructions, for other Warrant
Certificates evidencing in the aggregate a like number of Warrants. The
Company may require the payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any such exchange
or transfer.
2.04 TRANSFER AND EXCHANGE OF WARRANTS. All the restrictions imposed by
this SECTION 2 upon the transferability of the Restricted Securities shall
cease and terminate as to any particular Restricted Security when such
Restricted Security shall have been effectively registered under the
Securities Act and applicable state securities laws and sold by the Holder
thereof in accordance with such registration or sold under and pursuant to
Rule 144. Whenever the restrictions imposed by this SECTION 2 shall
terminate as to any Restricted Security as herein above provided, the Holder
thereof shall be entitled to receive from the Company, without expense (other
than any tax or governmental charge that may be imposed), a new certificate
evidencing such Restricted Security not bearing the restrictive legend
otherwise required to be borne by a certificate evidencing such Restricted
Security.
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SECTION 3. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Holders as follows:
3.01 EXISTENCE, QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
3.02 NO BREACH. Subject to confirmation by the Bankruptcy Court of the
Plan contemplating and approving the issuance of the Warrants which are the
subject of this Agreement, the execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company,
the issuance of the Warrants and the consummation of the transactions
contemplated hereby and thereby will not (a) violate the certificate of
incorporation or by-laws of the Company, (b) violate any loan or credit
agreement to which the Company is a party or is bound, or constitute a breach
of or default under any other instrument or agreement to which the Company is
a party or is bound which is material to the business or properties of the
Company taken as a whole, (c) violate any judgment, order, injunction, decree
or award against or binding upon the Company, (d) result in the creation of
any Lien upon any of the properties or assets of the Company, or (e) violate
any law, rule or regulation relating to the Company except, in each such case
as would not have a material adverse effect on the Company.
3.03 CORPORATE ACTION. Subject to confirmation by the Bankruptcy Court
of the Plan contemplating and approving the issuance of the Warrants which
are the subject of this Agreement, the Company has all necessary corporate
power and authority to execute, deliver and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement; the
execution, delivery and performance by the Company of this Agreement, the
Warrants and the Registration Rights Agreement have been duly authorized by
all necessary corporate action (including all necessary stockholder action)
on the part of the Company; this Agreement has been duly executed and
delivered by the Company and constitutes, and the Registration Rights
Agreement when executed and delivered by the Company will constitute, the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, or (b) general
principles of equity (regardless of whether such enforcement is considered in
a proceeding in equity or at law); the Warrants, when executed, issued and
delivered pursuant to this Agreement will constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except to the extent that enforcement thereof
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights
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generally, or (b) general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law); the Warrant
Shares initially covered by the Warrants will be duly and validly authorized
and reserved for issuance and shall, when paid for, issued and delivered in
accordance with the Warrants, be duly and validly issued, fully paid and
nonassessable and free and clear of any Liens; and none of the Warrant Shares
issued pursuant to the terms hereof or the Warrants shall be in violation of
any preemptive rights of any Stockholder.
3.04 APPROVALS. Subject to confirmation by the Bankruptcy Court of the
Company's Plan contemplating and approving the issuance of the Warrants which
are the subject of this Agreement, except as contemplated by the Registration
Rights Agreement, no authorizations, approvals or consents of, and no filings
or registrations with, any Governmental Authority or any other Person which
shall not have been obtained on or prior to the Date of Issuance are
necessary for the execution, delivery or performance by the Company of this
Agreement, the Warrants or the Registration Rights Agreement or for the
validity or enforceability thereof.
3.05 PUBLIC UTILITY HOLDING COMPANY ACT. The Company is not a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
3.06 CAPITALIZATION. As of the date of issuance of the original
Warrants to Holder, the capitalization of the Company consists solely of
common Stock and options and warrants to acquire common Stock.
SECTION 4. CERTAIN DISPOSITIONS OF SECURITIES. Notwithstanding
anything in this Agreement (including SECTION 2) or the Warrants to the
contrary, but subject to compliance with the Securities Act and the
requirement as to legending of the certificates for Restricted Securities
specified in SECTION 2.03, any Holder shall have the right to transfer any or
all of its Restricted Securities:
(a) to any Person who at the time owns (directly or indirectly) at
least a majority of the shares of such Holder;
(b) to any Person at least a majority of whose shares shall at the
time be owned (directly or indirectly) by such Holder or by any Person
who owns (directly or indirectly) at least a majority of the shares of
such Holder; or
(c) to another Holder.
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The party to which Restricted Securities are transferred pursuant to the
immediately preceding sentence shall be deemed to be a Holder of such
Restricted Securities and subject to the provisions of this Agreement, and
each such transferee shall execute a Joinder Agreement confirming that such
transferee agrees to be bound by all the provisions of this Agreement
applicable to Holders so long as he, she or it continues to own any of the
Restricted Securities so transferred to such transferee.
SECTION 5. HOLDERS, RIGHTS.
5.01 DELIVERY EXPENSES. If any Holder surrenders any Warrant
Certificate or Warrant Shares to the Company or a transfer agent of the
Company for exchange for instruments of other denominations or registered in
another name or names, the Company shall cause such new instruments to be
issued and shall deliver, in each case at the cost of the Holder, from the
office of such Holder from or to the Company or its transfer agent, the
surrendered instrument and any new instruments issued in substitution or
replacement for the surrendered instrument.
5.02 TAXES. The Company shall pay all taxes (other than federal, state
or local income taxes) which may be payable in connection with the execution
and delivery of this Agreement or the Registration Rights Agreement or the
issuance of the Warrants and Warrant Shares hereunder or in connection with
any modification of this Agreement, the Registration Rights Agreement or the
Warrants and shall hold each Holder harmless without limitation as to time
against any and all liabilities with respect to all such taxes. The Company
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of Stock
in a name other than that in which a Warrant is registered, and no such issue
or delivery shall be made unless and until the Person requesting such issue
has paid to the Company the amount of any such tax, or has established, to
the satisfaction of the Company, that such tax has been paid. The
obligations of the Company under this SECTION 5.02 shall survive any
termination of this Agreement or the Registration Rights Agreement, and any
cancellation or termination of the Warrants.
5.03 REPLACEMENT OF INSTRUMENTS. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any certificate or instrument evidencing
any Warrants or Warrant Shares, and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, or
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(b) in the case of mutilation, upon surrender or cancellation,
thereof, the Company, at the Holder's expense, shall execute, register and
deliver, in lieu thereof, a new certificate or instrument for (or evidencing
the right to purchase) an equal number of Warrants or Warrant Shares.
5.04 CERTAIN RESTRICTIONS. The Company shall not at any time enter into
an agreement or other instrument, and has not entered into an agreement
currently in effect, making performance hereunder or the issuance of shares
of Stock upon the exercise of any Warrant a default under any such agreement
or instrument.
5.05 INDEMNIFICATION. Each party hereto hereby irrevocably indemnifies
the other and saves it harmless against any and all reasonable out of pocket
losses, expenses or liabilities, including judgments, costs and reasonable
counsel fees and expenses arising out of or in connection with a breach of
this Agreement, except as a direct result of the gross negligence, bad faith
or willful misconduct of such other party.
SECTION 6. MISCELLANEOUS.
6.01 WAIVER. No failure on the part of any Holder to exercise and no
delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement, the Warrants or the Registration
Rights Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement, the
Warrants or the Registration Rights Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
6.02 NOTICES.
(a) All notices, requests and other communications provided for herein
and in the Warrants (including any waivers or consents under, this Agreement
and the Warrants) shall be given or made in writing,
(i) if to the Company:
Lamonts Apparel, Inc.
00000 Xxxxxxx Xxxx X.X.
Xxxxxxxx, XX 00000
Attention: Xx. Xxxxxx Xxxxxxxxxx
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with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
(ii) if to Holder:
Specialty Investment I LLC
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxx, Esq.
with a copy to:
Goulston & Storrs, P.C.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxx, Esq.
(iii) if to any other person who is the registered Holder of any
Warrants or Warrant Shares, to the address for such Holder as it appears
in the stock or warrant ledger of the Company;
or, in the case of any Holder, at such other address as shall be designated
by such party in a notice to the Company; or, in the case of the Company, at
such other address as the Company may designate in a notice to the Holders.
(b) All such notices, requests and other communications shall be: (i)
personally delivered, sent by courier guaranteeing overnight delivery or sent
by registered or certified mail, return receipt requested, postage prepaid,
in each case given or addressed as aforesaid; and (ii) effective upon receipt.
6.03 EXPENSES, ETC. The Company agrees to pay or reimburse the Holders
for all reasonable out-of-pocket costs and expenses of the Holders (including
the reasonable fees and expenses of Goulston & Storrs, special Boston counsel
to Holder, and other reasonable legal fees and expenses), in connection with
this Agreement but only to the extent provided in the Amended Loan Agreement.
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6.04 AMENDMENTS, ETC. Any provision of this Agreement may be amended or
modified only by an instrument in writing signed by (a) the Company and (b)
the Holders of at least a majority of the Warrant Shares issued or issuable
upon exercise of the Warrants; PROVIDED, HOWEVER, that no such amendment or
waiver shall, without the written consent of all Holders of such shares and
Warrants at the time outstanding, amend this SECTION 6.04.
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
6.06 SURVIVAL.
(a) All representations and warranties made by the Company herein or in
any certificate or other instrument delivered by it or on its behalf under
this Agreement or the Registration Rights Agreement shall be considered to
have been relied upon by each Holder and shall survive the issuance of the
Warrants or the Warrant Shares regardless of any investigation made by or on
behalf of any Holder. All statements in any such certificate or other
instrument so delivered shall constitute representations and warranties by
the Company hereunder.
(b) All representations and warranties made by the Holders herein shall
be considered to have been relied upon by the Company and shall survive the
issuance to the Holders of the Warrants or the Warrant Shares regardless of
any investigation made by the Company or on its behalf.
6.07 CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.08 COUNTERPARTS. This Agreement may be executed on counterpart
signature pages or in any number of counterparts, all of which taken together
shall constitute one and the same instrument and any of the parties hereto
may execute this Agreement by signing any such counterpart signature page or
counterpart.
6.09 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York applicable to contracts
executed in and to be fully performed in such State.
6.10 SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the
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validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
6.11 DEFECTS IN NOTICE. Failure to file any certificate or notice or to
mail any notice, or any defect in any certificate or notice pursuant to this
Agreement shall not affect in any way the rights of any registered Holder of
a Warrant Certificate or the legality or validity of any adjustment made
pursuant to the provisions of the Warrant, or any transaction giving rise to
any such adjustment, or the legality or validity of any action taken or to be
taken by the Company.
SECTION 7. OPTION FOR BINDING ARBITRATION.
At the sole and exclusive option of the Holders (from time to time) of a
majority of the Warrant Shares issued or issuable upon exercise of the
Warrants, exercised by written notice to the Company, any dispute arising out
of or relating to this Agreement shall be finally settled by arbitration
pursuant to the JAMS/ENDISPUTE Comprehensive Arbitrators Rules and Procedures
then in effect (the "Rules"), as modified by this SECTION 7. Within fifteen
(15) Business Days following such written request by such majority Holders to
submit a dispute to arbitration, the parties shall select a retired judge or
other neutral third party mutually acceptable to the parties to serve as the
sole arbitrator of the dispute. In the event the parties are unable to
select a mutually acceptable arbitrator within such fifteen day period, the
JAMS/ENDISPUTE administrator (the "Administrator") shall select the
arbitrator. Each arbitrator selected hereunder will disclose to each party
any conflict of interest or potential conflict of interest and, if any such
conflict or potential conflict exists, the Administrator shall, unless
otherwise agreed to by the parties, select a different arbitrator. The
parties (including without limitation all Holders who are parties to such
arbitration) will be bound by the arbitrator's determination(s), which will
constitute a final, binding and non-appealable adjudication on the merits.
The arbitration shall be conducted in the Commonwealth of Massachusetts at a
location to be determined by the arbitrator. The prevailing party(ies) in any
arbitration hereunder will be entitled to recover all costs, including
reasonable attorneys' fees, charges and disbursements from the opposing
party(ies). Judgment on any arbitration award may be entered in any court
having jurisdiction. It is the intent of the parties that the arbitration be
conducted and the dispute resolved in as expeditious a manner as reasonably
possible consistent with the Rules.
14
IN WITNESS WHEREOF, the parties hereto have duly executed this Warrant
Agreement as of the date first above written.
LAMONTS APPAREL, INC.
By____________________________________
Name:
Title:
SPECIALTY INVESTMENT I LLC
By____________________________________
Name:
Title:
15
Annex 1
to
Warrant Agreement
[Form of Warrant Certificate]
WARRANT CERTIFICATE
NEITHER THE EXERCISE OF THE WARRANTS EVIDENCED BY THIS CERTIFICATE NOR
THE ISSUANCE OF SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES
MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH TRANSFER IS PURSUANT TO (i) A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE
SECURITIES ACT AND THE RULES AND REGULATIONS THEREUNDER OR (ii) AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS AND IF IT HAS SO REQUESTED, THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL (EITHER ITS OWN COUNSEL OR, IF THE COMPANY SO REQUESTS,
COUNSEL TO THE HOLDERS OF SUCH SECURITIES) REASONABLY ACCEPTABLE TO THE
COMPANY THAT SUCH SECURITIES MAY BE SO TRANSFERRED.
No. of Warrants: 228,639 Warrant Certificate No. 1
WARRANT CERTIFICATE
to Purchase Stock of
LAMONTS APPAREL, INC.
Expiring as set forth in the first paragraph hereof
THIS IS TO CERTIFY THAT Specialty Investment I LLC or its assigns, is
the holder of the above number of Warrants. Each such Warrant entitles the
holder thereof to purchase from time to time from LAMONTS APPAREL, INC., a
Delaware corporation (the "Company") on the terms of this Warrant
Certificate, (i) at any time on or after the Date of Issuance, but not later
than 5:00 p.m., New York time, on ____________, 2002
16
(the "Stock Unit Expiration Date"), 14 Stock Units (as hereinafter defined
and subject to adjustment as provided herein) at a purchase price of $1.25
per Stock Unit (the "Stock Unit Exercise Price") and (ii) at any time on or
after the first date on which the Aggregate Equity Trading Value equals or
exceeds $25 million, but not later than 5:00 p.m., New York time, on
____________, 2008 (the "Adjustment Unit Expiration Date"), 1 Stock Unit at a
purchase price of $.01 per Stock Unit (the "Adjustment Unit Exercise Price");
provided that the portion of each Warrant described in this clause (ii) shall
not be exercisable unless and until the portion of such Warrant described in
clause (i) above shall have been exercised in full, in each case subject to
the terms and conditions hereinbelow provided.
SECTION 1. CERTAIN DEFINITIONS. (a) Each capitalized term used herein
without definition shall have the meaning assigned thereto (or incorporated
by reference) in the Warrant Agreement (as hereinafter defined).
(b) As used in this Warrant Certificate, unless the context otherwise
required:
"ADDITIONAL STOCK" shall mean all shares of Stock issued by the Company
on or after the Date of Issuance and all shares of Stock issuable by the
Company after the Date of Issuance on conversion or exercise of other rights
under Convertible Securities, other than, in each case, Excluded Securities.
For purposes hereof Excluded Securities means:
(i) the original Warrant Shares and any additional Warrant Shares
or Convertible Securities (including shares issuable upon exercise thereof)
issuable or issued upon exercise of the Warrants;
(ii) the Class A Warrants and the Class B Warrants and any shares
of Stock issuable or issued upon the exercise thereof (including, following
any adjustments required under the terms of such warrants, any additional
Class A Warrants or Class B Warrants or shares of Stock issuable or issued
upon the exercise thereof);
(iii) the Gordian Warrants and any shares of Stock issuable or
issued upon the exercise thereof (including, following any adjustments
required under the terms of such warrants, any additional Gordian Warrants or
shares of Stock issuable or issued upon the exercise thereof);
(iv) up to 1,708,729 shares of Stock issuable pursuant to the
Company's 1997 Stock Option Plan (as such number may be adjusted by reason of
transactions of the type described in SECTION 4.01);
17
(v) up to 9,000,000 shares of Stock issued and outstanding on
the Date of Issuance;
(vi) Stock or Convertible Securities (including shares issuable
upon exercise or conversion of Convertible Securities) issued in any
transaction for which an adjustment is otherwise made (or not required to be
made) pursuant to the terms hereof; and/or
(vii) shares of Stock issued in a bona fide registered public
offering.
"AGGREGATE EQUITY TRADING VALUE" means, as of any date, the product of
(a) the Fair Market Value per share of Stock, and (b) the total number of
issued and outstanding shares of Stock as of such date (assuming for purposes
of determining such number of shares the exercise in full of all in the money
options outstanding on such date to purchase shares of Stock and the exercise
of all Class B Warrants which are exercisable as of such date).
"CLASS A WARRANTS" means the Class A Warrants issued by the Company
pursuant to the Company's Plan of Reorganization.
"CLASS B WARRANTS" means the Class B Warrants issued by the Company
pursuant to the Company's Plan of Reorganization.
"CLOSING PRICE" means, for any date, the last sale price reported in the
WALL STREET JOURNAL or other trade publication regular way or, in case no
such reported sale takes place on such date, the average of the last reported
bid and asked prices regular way, in either case on the principal national
securities exchange on which the Stock is listed if that is the principal
market for the Stock or, if not listed on any national securities exchange or
if such national securities exchange is not the principal market for the
Stock, the average of the closing high bid and low asked prices as reported
by the National Association of Securities Dealers, Inc. Automated Quotation
System or its successor, if any, or if the Stock is not so reported, as
furnished by the National Quotation Bureau, Inc., or if such firm is not then
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business and selected by the Company or, if there
is no such firm, as furnished by any NASD member selected by the Company.
"COMPANY" shall have the meaning set forth at the head of this Warrant
Certificate.
18
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness, shares of
Stock or other securities which are convertible or exercisable into or
exchangeable for shares of Additional Stock, either immediately or upon the
arrival of a specified date or the happening of a specified event.
"DATE OF ISSUANCE" shall mean _________, 1998.
"EXERCISE PRICE" shall mean the Stock Unit Exercise Price or the
Adjustment Unit Exercise Price, as the case may be.
"EXPIRATION DATE" shall mean the Stock Unit Expiration Date or the
Adjustment Unit Expiration Date, as the case may be.
"FAIR MARKET VALUE" of shares of Stock shall mean (a) if the Stock is
listed on a national securities exchange or quoted on a national quotation
system, the average of the daily Closing Prices of the Stock for the five (5)
trading days immediately preceding the date of exercise or the sale date
under SECTION 4, as applicable, or (b) if the Stock is not so listed or
quoted, the fair market value thereof as determined in good faith by the
Company's Board of Directors.
"GORDIAN WARRANTS" means those certain warrants exercisable for Stock
having a value not to exceed $200,000 (based on the Normalized Share Price as
set forth in such warrants), issued by the Company to Gordian Group, L.P.
pursuant to the Company's Plan of Reorganization.
"INCLUDE" and "INCLUDING" shall be construed as if followed by the
phrase "without being limited to,".
"STOCK UNIT" shall mean one share of Stock, as such Stock was
constituted on the Date of Issuance, and thereafter shall mean such number of
shares (excluding fractional shares) of Stock and other securities, cash or
other property as shall result from the adjustments specified in SECTION 4
and SECTION 5.
"WARRANT AGREEMENT" shall mean the Warrant Agreement dated as of
_____________, 1998, between the Company and Specialty Investment I LLC, as
such Warrant Agreement shall be modified and supplemented and in effect from
time to time.
"WARRANTS" shall mean: (i) the Warrants evidenced by this Warrant
Certificate originally issued by the Company pursuant to the Warrant
Agreement on the Date of Issuance, evidencing rights to purchase up to an
aggregate of 3,429,588 Stock Units, (ii)
19
the additional Warrants to purchase up to 381,065 shares of Stock issued by
the Company to certain officers, directors and employees of the Company in
accordance with the Plan, and (iii) all Warrants issued upon transfer,
division or combination of, or in substitution or replacement for, any
Warrants described in clause (i) or (ii).
(c) References in this Warrant Certificate to the Stock outstanding "on
a fully diluted basis" at any time shall mean the number of shares of Stock
then issued and outstanding, assuming full conversion, exercise and exchange
of all warrants, options and rights to purchase such Stock and all securities
of any type that shall be (or may become) exchangeable for, or exercisable or
convertible into, such Stock, including the Warrants.
SECTION 2. EXERCISE AND ISSUANCE.
2.01 EXERCISE OF WARRANTS. To exercise some or all or the Warrants
evidenced by this Warrant Certificate, in whole or in part, the Holder hereof
shall deliver to the Company, at its office maintained for such purpose
pursuant to SECTION 11.01, (a) a written notice of such Holder's election to
exercise Warrants (or any portion thereof), which notice shall specify the
number of Warrants being exercised and the number of Stock Units to be
purchased pursuant to such exercise, (b) a certified or bank check or checks
payable to the Company in an aggregate amount equal to the aggregate
applicable Exercise Price for the number of Stock Units specified in clause
(a) above or a written request from the Holder that the exercise be made
pursuant to the provisions of SECTION 2.02, and (c) this Warrant Certificate.
Such notice may be in substantially the form of exercise set out at the end
of this Warrant Certificate. Upon receipt thereof, the Company shall, as
promptly as practicable and in any event within 10 Business Days thereafter,
cause to be executed and delivered to such Holder a stock certificate or
certificates representing the aggregate number of duly and validly issued,
fully paid and nonassessable Warrant Shares issuable upon such exercise, free
and clear of any Liens. Notwithstanding anything herein to the contrary, any
partial exercise of a Warrant shall conform to the provisions of the proviso
at the end of the first paragraph of this Warrant Certificate.
2.02 OPTIONAL EXERCISE. In addition to and without limiting the rights of
the Holder hereof under the terms of this Warrant Certificate and the Warrant
Agreement, the Holder may exercise some or all of the Warrants evidenced by this
Warrant Certificate in whole or in part at any time or from time to time prior
to its expiration for some or all of a number of shares of Stock of the Company
having an aggregate Fair Market Value on the date of such exercise equal to the
amount by which (a) the Fair Market Value of the number of shares of such Stock
designated for exercise by the Holder hereof on the date of the exercise exceeds
(b) the aggregate applicable Exercise Price for such shares in
20
effect at such time. The following equations illustrate how many shares of
Stock would then be issued upon exercise pursuant to this SECTION 2.02 with
respect to Stock as to which the Holder has elected the option under this
SECTION 2.02:
Let FMV = Fair Market Value per share of Stock at date of exercise.
PSP = Per share applicable Exercise Price at date of exercise.
N = Number of shares of Stock desired to be exercised.
X = Number of shares of Stock issued upon exercise.
X = (FMV)(N)-(PSP)(N)
-----------------
FMV
No payment of any cash or other consideration to the Company shall be
required from the Holder in connection with any optional exercise of the
Warrants evidenced by this Warrant Certificate pursuant to this SECTION 2.02.
Such exercise shall be effective upon the date of receipt by the Company of
the original of this Warrant Certificate surrendered for cancellation and a
written request from the Holder hereof that the exercise pursuant to this
section be made, or at such later date as may be specified in such request.
2.03 ISSUANCE. The stock certificate or certificates for Warrant Shares
so delivered shall be in such denominations as may be specified in such
notice and shall be registered in the name of such Holder or such other name
or names as shall be designated in such notice. Such stock certificate or
certificates shall be deemed to have been issued and such Holder or any other
Person so designated to be named therein shall be deemed to have become a
holder of record of such shares, including to the extent permitted by law the
right to vote such shares or to consent or to receive notice as a
stockholder, as of the time such notice and payment is received by the
Company as aforesaid. If less than all of the Warrants evidenced by this
Warrant Certificate shall have been exercised or any Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of said
stock certificate or certificates, execute and deliver to such Holder a new
Warrant Certificate, dated the Date of Issuance, evidencing the balance of
the Warrants (and/or portion of Warrants) held by such Holder following such
partial exercise and the rights of such Holder to purchase the remaining
Stock Units called for by this Warrant Certificate, which new Warrant
Certificate shall in all other respects be identical with this Warrant
Certificate, or, at the request of such Holder, appropriate notation may be
made on this Warrant Certificate and the same returned to such Holder.
All shares of Stock issuable upon the exercise of the Warrants evidenced
hereby shall, upon payment therefor in accordance herewith, be duly and
validly issued, fully paid and nonassessable and free and clear of any Liens.
21
The Company shall not issue fractional shares of Stock upon any exercise
of the Warrants evidenced by this Warrant Certificate.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to issue any shares of Stock to the extent such issuance is
otherwise prohibited by law, including federal or state securities law, but
the Company shall use all best efforts to effect such issuance.
SECTION 3. TRANSFER, DIVISION AND COMBINATION. Subject to SECTION
11.04, this Warrant Certificate, the Warrants evidenced hereby and all rights
hereunder are transferable, in whole or in part, on the books of the Company
to be maintained for such purpose, upon surrender of this Warrant Certificate
at the office of the Company maintained for such purpose pursuant to SECTION
11.01, together with a written assignment of this Warrant Certificate (in
substantially the form annexed hereto) duly executed by the Holder hereof or
its agent or attorney and payment of funds sufficient to pay any stock
transfer taxes payable hereunder by the Holder hereof upon the making of such
transfer. Upon such surrender and payment the Company shall, subject to
SECTION 11.04 and the immediately following sentence, execute and deliver one
or more new Warrant Certificates in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and this
Warrant Certificate shall promptly be canceled. If and when this Warrant
Certificate is assigned in blank (in case the restrictions on transferability
referred to in SECTION 11.04 shall have been terminated), the Company may
(but shall not be obliged to) treat the bearer hereof as the absolute owner
of this Warrant Certificate for all purposes and the Company shall not be
affected by any notice to the contrary. This Warrant Certificate, if
properly assigned in compliance with this SECTION 3 and SECTION 11.04, may be
exercised by an assignee for the purchase of shares of Stock without having a
new Warrant Certificate or Warrants issued. Each assignee, by accepting a
new Warrant Certificate issued to such assignee or this Warrant Certificate
assigned in blank, agrees to be bound by the restrictions on the
transferability of the Warrants evidenced hereby set forth in this Warrant
Certificate and the Warrant Agreement, and each such assignee shall execute a
Joinder Agreement in the form attached hereto confirming that such assignee
agrees to be bound by all the provisions of this Warrant Certificate and the
Warrant Agreement applicable to Holders so long as he, she or it continues to
own any of the Warrants or Warrant Shares, as the case may be, so transferred
to such assignee.
The Warrants evidenced hereby may, subject to SECTION 11.04, be divided or
combined with other Warrants upon presentation of this Warrant Certificate at
the aforesaid office of the Company, together with a written notice specifying
the names and denominations in which new Warrants are to be issued, signed by
the Holder hereof or its
22
authorized agent or attorney. Subject to compliance with the next preceding
paragraph and with SECTION 11.04, as to any transfer which may be involved in
such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
The Company shall maintain at its aforesaid office books for the
registration and transfer of the Warrants.
SECTION 4. ADJUSTMENTS.
4.01 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. In case at any
time or from time to time the Company shall
(1) take a record of the holders of its Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution
of, Stock, or
(2) subdivide its outstanding shares of Stock into a larger number
of shares of Stock, or
(3) combine its outstanding shares of Stock into a smaller number
of shares of Stock,
then the number of shares of Stock comprising a Stock Unit or otherwise
issuable upon the exercise of the Warrants evidenced by this Warrant
Certificate, immediately after the happening of any such event shall be
adjusted so as to consist of the number of shares of Stock which a record
holder of the number of shares of Stock for which all Warrants evidenced by
this Warrant Certificate are exercisable immediately prior to the happening
of such event would own or be entitled to receive after the happening of such
event.
4.02 ISSUANCE OF ADDITIONAL COMMON STOCK. In case at any time or from
time to time the Company shall (except as hereinafter provided) issue to any
Person any Additional Stock which is common Stock (or Convertible Securities
convertible into common Stock) for a consideration per share of such common
Stock (or which would produce consideration per share of such common Stock on
conversion of, or exercise of rights under, such Convertible Securities)
which is less than (a) with respect to any issuance incident to the
consolidation or merger of the Company with, or the sale, lease or transfer
of all or substantially all the Company's assets to the party identified in
that certain letter dated as of September 26, 1997 between the Company and
Specialty Investment I LLC (or in connection with a financing related to any
such transaction), the
23
Fair Market Value of a share of common Stock, and (b) with respect to any
other such issuance, (i) on or prior to the first date on which the Aggregate
Equity Trading Value equals or exceeds $20 million, the greater of the
Exercise Price or the Fair Market Value of a share of common Stock or (ii)
after the first date on which the Aggregate Equity Trading Value equals or
exceeds $20 million, the Fair Market Value of a share of common Stock, then
the number of shares of common Stock comprising a Stock Unit shall be
increased to that number determined by multiplying the number of shares of
common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (a) the numerator of which shall be the total number of shares of
common Stock outstanding (on a fully-diluted basis) immediately prior to the
issuance of such Additional Stock plus the number of such shares of such
common Additional Stock (assuming conversion or exercise of such Additional
Stock if such Additional Stock is Convertible Securities), and (b) the
denominator of which shall be the number of shares of such common Stock
outstanding (on a fully-diluted basis) immediately prior to the issuance of
such Additional Stock PLUS the number of shares of common Stock which could
be purchased with the aggregate consideration paid for such common Additional
Stock at an assumed price per share equal to (i) on or prior to the first
date on which the Aggregate Equity Trading Value equals or exceeds $20
million, the greater of the Exercise Price or the Fair Market Value of a
share of common Stock or (ii) after the first date on which the Aggregate
Equity Trading Value equals or exceeds $20 million, the Fair Market Value of
a share of common Stock. For purposes of this SECTION 4.02, such calculation
shall be made on the date of actual issuance of such Additional Stock. No
adjustment of the number of shares of common Stock comprising a Stock Unit
shall be made under this SECTION 4.02 upon the issuance of any Additional
Stock which is issued pursuant to the exercise of any options, warrants or
other subscription or purchase rights or pursuant to the exercise of any
conversion or exchange rights in any Convertible Securities, if any such
adjustment shall previously have been made upon the issuance of such options,
warrants or other rights or upon the issuance of such Convertible Securities
(or upon the issuance of any option, warrant or other rights therefor).
4.03. ISSUANCE OF ADDITIONAL STOCK OTHER THAN COMMON STOCK. In case
at any time or from time to time the Company shall (except as hereinafter
provided) issue to any Person any Additional Stock which is not subject to
adjustment under SECTION 4.02 (and other than in connection with an
adjustment under Section 4.01) for a consideration per share which is less
than the Fair Market Value of such Stock, then the number of shares of common
Stock comprising a Stock Unit shall be increased to that number determined by
multiplying the number of shares of common Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (a) the numerator of which
shall be the total number of shares of common Stock outstanding (on a
fully-diluted basis) immediately prior to the issuance of such Additional
Stock MULTIPLIED BY the Fair Market
24
Value per share of common Stock immediately prior to the issuance of such
Additional Stock and (b) the denominator of which shall be (i) the total
number of shares of such common Stock outstanding (on a fully-diluted basis)
immediately prior to the issuance of such common Additional Stock MULTIPLIED
BY such Fair Market Value per share LESS (ii) the aggregate Fair Market Value
of the Additional Stock so issued LESS the aggregate consideration received
by the Company for such Additional Stock. For purposes of this SECTION 4.03,
such calculation shall be made on the date of actual issuance of such
Additional Stock. No adjustment of the number of shares of common Stock
comprising a Stock Unit shall be made under this SECTION 4.03 upon the
issuance of any Additional Stock which is issued pursuant to the exercise of
any options, warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been made upon the
issuance of such options, warrants or other rights or upon the issuance of
such Convertible Securities (or upon the issuance of any option, warrant or
other rights therefor).
4.04 SUPERSEDING ADJUSTMENT OF STOCK UNIT. If, at any time after any
adjustment of the number of shares of Stock comprising a Stock Unit shall
have been made hereunder on the basis of the issuance of options, warrants or
other rights or the issuance of other Convertible Securities, or after any
new adjustment of the number of shares comprising a Stock Unit shall have
been made pursuant to this SECTION 4.04;
(1) such options, warrants or rights or the right of conversion or
exchange in such other Convertible Securities shall expire, and a
portion of such options, warrants or rights, or the right of conversion,
exercise or exchange in respect of a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, or
(2) the consideration per share, for which shares of Additional
Stock are issuable pursuant to such options, warrants or rights or the
terms of such other Convertible Securities, shall be increased,
such previous adjustment shall be rescinded and annulled and the shares of
Additional Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made on the basis of
(3) treating the number of shares of Additional Stock, if any,
theretofore actually issued or issuable pursuant to the previous
exercise of such
25
options, warrants or rights or such right of conversion or exchange, as
having been issued on the date or dates of such issuance as determined
for purposes of such previous adjustment and for the consideration
actually received and receivable therefor, and
(4) treating any such options, warrants or rights or any such
other Convertible Securities which then remain outstanding as having
been granted or issued immediately after the time of such increase of
the consideration per share for such shares of Stock as are issuable
under such options, warrants or rights or other Convertible Securities,
and, if and to the extent called for by the foregoing provisions of this
SECTION 4 on the basis aforesaid, a new adjustment of the number of shares
comprising a Stock Unit shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.
4.05 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION 4.
The following provisions shall be applicable to the making of adjustments of
the number of shares of Stock comprising a Stock Unit hereinbefore provided
for in this SECTION 4:
(1) TREASURY STOCK. The sale or other disposition of any issued shares
of Stock owned or held by or for the account of the Company shall be deemed
an issuance thereof for purposes of this SECTION 4.
(2) COMPUTATION OF CONSIDERATION. To the extent that any shares of
Additional Stock or any options, warrants or other rights to subscribe for or
purchase any shares of Additional Stock or any Convertible Securities shall
be issued for a cash consideration, the consideration received by the Company
therefor shall be deemed to be the amount of cash received by the Company
therefor, or, if such shares of Additional Stock or Convertible Securities
are offered by the Company for subscription, the subscription price, or, if
such shares of Additional Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription offering,
the initial public offering price, in any such case excluding any amounts
paid or receivable for accrued interest or accrued dividends and without
deduction of any compensation, discounts or expenses paid or incurred by the
Company for and in the underwriting of, or otherwise in connection with, the
issue thereof. To the extent that such issuance shall be for a consideration
other than cash, then, except as herein otherwise expressly provided, the
amount of such consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith by the
Board of Directors of the Company. The consideration for any shares of
Additional Stock issuable
26
pursuant to any options, warrants or other rights to subscribe for or
purchase the same shall be the consideration received or receivable by the
Company for issuing such options, warrants or other rights, plus the
additional consideration payable to the Company upon the exercise of such
options, warrants or other rights. The consideration for any shares of
Additional Stock issuable pursuant to the terms of any Convertible Securities
shall be the consideration received or receivable by the Company for issuing
any options, warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the Company
in respect of the subscription for or purchase of such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion, exercise or exchange in such
Convertible Securities. In case of the issuance at any time of any shares of
Additional Stock or Convertible Securities in payment or satisfaction of any
dividend upon any class of stock other than common stock, the Company shall
be deemed to have received for such shares of Additional Stock or Convertible
Securities a consideration equal to the amount of such dividend so paid or
satisfied.
(3) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by the
foregoing provisions of this SECTION 4 shall be made whenever and as often as
any specified event requiring an adjustment shall occur. For the purpose of
any adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(4) FRACTIONAL INTERESTS. In computing adjustments under this SECTION
4, the Company shall not be required upon the exercise of Warrants evidenced
by this Warrant Certificate to issue fractional Warrant Shares (it being
agreed that the number of Warrant Shares issuable upon any such exercise
shall be rounded to the nearest whole number).
(5) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a record
of the holders of its Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution thereof to stockholders, legally
abandon its plan to pay or deliver such dividend, distribution, subscription
or purchase rights, then thereafter no adjustment shall be required by reason
of the taking of such record and any such adjustment previously made in
respect thereof shall be rescinded and annulled.
27
SECTION 5. CONSOLIDATION, MERGER, ETC.
5.01 CONSOLIDATION, MERGER, ETC. In case a consolidation or merger of
the Company shall be effected with another Person on or after the Date of
Issuance, or the sale, lease or transfer of all or substantially all its
assets to another Person shall be effected on or after the Date of Issuance,
then, as condition of such consolidation, merger, sale, lease or transfer,
lawful and adequate provision shall be made whereby the registered Holder of
this Warrant Certificate shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions specified herein
(including the payment of any applicable Exercise Price) and in lieu of each
Stock Unit immediately theretofore purchasable and receivable upon the
exercise of each of the Warrants evidenced hereby, such shares of stock,
securities, cash or other property which would have been receivable upon such
consolidation, merger, sale, lease or transfer by the holder of the number of
shares of Stock comprising the aggregate of all Stock Units immediately prior
to such event if all Warrants evidenced by this Warrant Certificate were
fully exercisable and had been exercised in full immediately prior to such
consolidation, merger, sale, lease or transfer. In any such case,
appropriate and equitable provision also shall be made with respect to the
rights and interests of the registered Holder of this Warrant Certificate to
the end that the provisions hereof (including SECTION 4) and of the Warrant
Agreement and the Registration Rights Agreement shall thereafter be
applicable, as nearly as may be, in relation of any shares of stock,
securities, cash or other property thereafter deliverable upon the exercise
of any Warrants evidenced by this Warrant Certificate. The Company shall not
effect any such consolidation, merger, sale, lease or transfer unless prior
to or simultaneously with the consummation thereof the successor Person (if
other than the Company) resulting from such consolidation or merger or the
Person purchasing, leasing or otherwise acquiring such assets shall assume
the obligation to deliver to such Holder such shares of stock, securities,
cash or other property as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase. The above provisions of this SECTION
5.01 shall similarly apply to successive consolidations, mergers, sales,
leases or transfers. Notwithstanding the foregoing, in the event the Company
consummates a consolidation or merger with, or the sale, lease or transfer of
all or substantially all its assets to, the party identified in that certain
letter dated as of September 26, 1997, between the Company and Specialty
Investment I LLC within one year from the Date of Issuance, the Stock Unit
Exercise Price for a Stock Unit in effect immediately prior thereto shall be
increased by 25% and the Stock Unit Expiration Date shall be extended by one
year. No other adjustment shall be made to the Stock Unit Exercise Price or
the Stock Unit Expiration Date as a result of such consolidation, merger,
sale, lease or transfer.
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SECTION 6. NOTICE TO WARRANT CERTIFICATE HOLDERS.
6.01 NOTICE OF ADJUSTMENT OF STOCK UNIT OR EXERCISE PRICE. Whenever the
number of shares of Stock comprising a Stock Unit shall be adjusted pursuant
to SECTION 4, the Company shall forthwith obtain a certificate signed by
independent accountants of recognized national standing, selected by the
Company and reasonably acceptable to the holders of Warrants entitled to
purchase a majority of the Stock Units covered by all of the Warrants,
setting forth, in reasonable detail, the event requiring the adjustment and
the method by which such adjustment was calculated (including a statement of
the fair value of any evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights
referred to in SECTION 4.05(2) or SECTION 5) and specifying the number of
shares of Stock comprising a Stock Unit and (if such adjustment was made
pursuant to SECTION 4.01 or SECTION 5) describing the number and kind of any
other securities comprising a Stock Unit, and any change in the purchase
price or prices thereof, after giving effect to such adjustment or change.
The Company shall promptly, and in any case within 45 days after the making
of such adjustment, cause a signed copy of such certificate to be delivered
to the Holder of this Warrant Certificate in accordance with SECTION 11.02.
The Company shall keep at its office or agency, maintained for the purpose
pursuant to SECTION 11.01, copies of all such certificates and cause the same
to be available for inspection at said office during normal business hours by
any Holder of this Warrant Certificate or any prospective permitted purchaser
of Warrants designated by any such Holder.
6.02 NOTICE OF CERTAIN CORPORATE ACTION. In case the Company shall propose
(a) to pay any dividend to the holders of its Stock or to make any other
distribution to the holders of its Stock, or (b) to offer to the holders of its
Stock rights to subscribe for or to purchase any Additional Stock or shares of
stock of any class or any other securities, rights or options, or (c) to effect
any reclassification of its Stock (other than a reclassification involving only
the subdivision, or combination, of outstanding shares of Stock), or (d) to
effect any capital reorganization, or (e) to effect any consolidation, merger or
sale, lease, transfer or other disposition of all or substantially all of its
property, assets or business, or (f) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
the Holder of this Warrant Certificate, in accordance with SECTION 11.02, a
notice of such proposed action, which shall specify the date on which a record
is to be taken for the purposes of such stock dividend, distribution or rights,
or the date on which such reclassification, reorganization, consolidation,
merger, sale, lease, transfer, disposition, liquidation, dissolution or winding
up is to take place, if any such date is to be fixed, and shall also set forth
such facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Stock and the number and kind of any other shares
of stock which a Holder
29
is entitled in accordance herewith, and the purchase price or prices thereof,
after giving effect to any adjustment which will be required as a result of
such action. Such notice shall be so given in the case of any action covered
by CLAUSE (a) or (b) above at least 10 Business Days prior to the record date
for determining holders of the Stock for purposes of such action, and in the
case of any other such action, at least 10 Business Days prior to the date of
the taking of such proposed action or the date of participation therein by
the holders of Stock, whichever shall be the earlier.
SECTION 7. RESERVATION AND AUTHORIZATION OF STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY. The Company shall at all times
reserve and keep available for issue upon the exercise or conversion of
Warrants such number of its authorized but unissued shares of Stock as shall
be sufficient to permit the exercise or conversion in full of all outstanding
Warrants. All shares of Stock which shall be so issuable, when issued upon
exercise of any Warrant and payment of the Exercise Price therefor, or upon
such conversion, as the case may be, shall be duly and validly issued, fully
paid and nonassessable and free and clear of any Liens.
Before taking any action which would result in an adjustment in the
number of shares of Stock issuable upon exercise of any Warrant evidenced by
this Warrant Certificate or which would cause an adjustment reducing the
price per share of common Stock below the then par value, if any, of the
shares of common Stock issuable upon exercise of any Warrant evidenced by
this Warrant Certificate, the Company shall take any corporate action which
is necessary in order that the Company may validly and legally issue fully
paid and nonassessable shares of Stock free and clear of any Liens upon the
exercise of any Warrant evidenced by this Warrant Certificate immediately
after the taking of such action.
Before taking any action which would result in an adjustment in the
number of shares of Stock issuable upon exercise of any Warrant evidenced by
this Warrant Certificate or in the Exercise Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.
If any shares of Stock required to be reserved for issue upon exercise
or conversion of any Warrant evidenced by this Certificate require
registration with any Governmental Authority under any federal or state law
(otherwise than in connection with a registration under the Securities Act or
applicable state securities laws) before such shares may be so issued, the
Company shall in good faith and as expeditiously as possible and at its
expense endeavor to cause such shares to be duly registered.
30
SECTION 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. (a) In
the case of all dividends or other distributions by the Company to the
holders of Stock, the Company shall in each such case take such a record of
such holders as of the close of business on a Business Day.
(b) The Company shall not at any time, except upon complete
dissolution, liquidation or winding up, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the
exercise, conversion or transfer of any Warrant, unless otherwise required by
any applicable federal, state or local law.
SECTION 9. EXPENSES, TRANSFER TAXES AND OTHER CHARGES. The Company
shall pay any and all expenses, transfer taxes (other than income taxes) and
other charges, including all costs associated with the preparation, issue and
delivery of stock or warrant certificates, that are incurred in respect of
the issuance or delivery of shares of Stock upon exercise or conversion of
Warrants pursuant to SECTION 2. The Company shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in
the issue and delivery of shares of Stock in a name other than that in which
this Warrant Certificate is registered, and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the
Company the amount of any such tax, or has established, to the satisfaction
of the Company, that such tax has been paid.
SECTION 10. NO VOTING RIGHTS. Except as expressly provided herein or
in the Warrant Agreement, the Warrants evidenced by this Warrant Certificate
shall not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company.
SECTION 11. MISCELLANEOUS.
11.01 OFFICE OF THE COMPANY. So long as any of the Warrants evidenced
by this Warrant Certificate remain outstanding, the Company shall maintain an
office in the continental United States of America where this Warrant
Certificate may be presented for exercise, transfer, division or combination
of the Warrants evidenced hereby as herein provided. Such office shall be at
the Company's principal executive office, unless and until the Company shall
designate and maintain some other office for such purposes and give notice
thereof to the Holder of this Warrant Certificate.
11.02 NOTICES GENERALLY. Any notices and other communications pursuant
to the provisions hereof shall be sent in accordance with SECTION 6.02 of the
Warrant Agreement.
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11.03 AMENDMENTS. The terms of the Warrants evidenced by this Warrant
Certificate may be amended, and the observance of any term therein may be
waived, but only with the written consent of the holders of Warrants
evidencing a majority of the total number of Stock Units at the time
purchasable upon the exercise of all then outstanding Warrants. For the
purposes of determining whether the holders of outstanding Warrants entitled
to purchase a requisite number of Stock Units at any time have taken any
action authorized by this Warrant Certificate, any Warrants owned by the
Company or any Affiliate of the Company shall be deemed not to be outstanding.
11.04 RESTRICTIONS ON TRANSFERABILITY. The Warrants evidenced by this
Warrant Certificate and the Warrant Shares shall be transferable only upon
compliance with the conditions specified in SECTION 2 of the Warrant
Agreement and the Registration Rights Agreement therein referred to, which
conditions are intended to ensure compliance with the provisions of the
Securities Act in respect of the transfer of such Warrants or any Warrant
Shares, and any Holder of this Warrant Certificate shall be bound by the
provisions of (and entitled to the benefits of) said SECTION 2 and said
Registration Rights Agreement.
11.05 GOVERNING LAW. This Warrant Certificate and the Warrants
evidenced hereby shall be governed by, and construed in accordance with, the
law of the State of New York applicable to contracts executed in and to be
fully performed in such State.
11.06 LIMITATION OF LIABILITY. No provision hereof, in the absence of
affirmative action by the Holder hereof to purchase shares of Stock, and no
mere enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder for the Exercise Price or as
a stockholder of the Company, whether such liability is asserted by the
Company, any creditor of the Company or any other Person.
SECTION 12. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder
represents and warrants to the Company as follows:
12.01 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Warrants evidenced by
this Warrant Certificate are being acquired and, if such Warrants are
exercised, the Stock issuable upon such exercise will be acquired, for
investment for such Holder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
the federal or state securities laws.
12.02 INVESTMENT EXPERIENCE. The Holder represents that it can bear
the economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in
32
the Warrants evidenced by this Warrant Certificate and the Stock issuable
upon exercise thereof. The Holder also represents it has not been organized
solely for the purpose of acquiring Warrants evidenced by this Warrant
Certificate or the Stock issuable upon exercise thereof.
12.03 RESTRICTED SECURITIES. The Holder understands that the Warrants
evidenced by this Warrant Certificate and the Stock issuable upon exercise of
such Warrants are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and have not been registered
under the Securities Act nor qualified under applicable state securities laws
and that under such laws and applicable regulations such securities may not
be resold without registration under the Securities Act, except in certain
limited circumstances. In this connection, the Holder represents that it is
familiar with Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
12.04 ACCREDITED INVESTOR. The Holder is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act.
IN WITNESS WHEREOF, The Company has duly executed this Warrant
Certificate.
Dated:________________________ LAMONTS APPAREL, INC.
By:_________________________________
Name:
Title:
33
FORM OF ASSIGNMENT
(To be executed by the registered Holder hereof)
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
all the rights of the undersigned under the within certificate with respect
to the number of Warrants evidenced thereby set forth hereinbelow unto:
Name of Assignee Address Number of Warrants
---------------- ------- ------------------
Dated:_________________ __________________________________
34
FORM OF EXERCISE
(To be executed by the registered Holder hereof)
The undersigned hereby exercises _________Warrants evidenced by the
within certificate to subscribe for and purchase:
_____ Stock Units of Lamonts Apparel, Inc. at the Stock Unit Exercise
Price
_____ Stock Units of Lamonts Apparel, Inc. at the Adjustment Unit Exercise
Price
and herewith makes payment therefor in full. Kindly issue certificates
and/or other instruments covering Stock Units in accordance with the
instructions given below. A new Warrant Certificate for the unexercised
balance of the Warrants (including any unexercised portion of any Warrant)
covered by the within certificate, if any, will be registered in the name of
the undersigned.
In exercising its rights to purchase such Stock, the undersigned hereby
confirms that it will not sell or transfer such Stock unless such transfer is
pursuant to (i) a registration statement in effect with respect to such
securities under the Securities Act of 1933, as amended (the "Securities
Act") and the rules and regulations thereunder or (ii) an exemption from the
registration requirements of the Securities Act and any applicable state
securities laws.
Dated:________________ __________________________________
Instructions for registration of Stock Units
___________________________
Name (please print)
Social Security or Other Identifying Number: ___________________
Address:
___________________________
___________________________
___________________________
35
JOINDER AGREEMENT
JOINDER AGREEMENT, dated the date set forth below, between LAMONTS
APPAREL, INC., a Delaware corporation ("the Company") and the undersigned
stockholder or warrant holder of the Company.
A. Reference is made to that certain Warrant Agreement dated as of
___________, 1998 (as modified and supplemented and in effect from time to
time, the "WARRANT AGREEMENT"), between the Company and Holder and to the
Registration Rights Agreement. Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Warrant Agreement.
B. The Warrant Agreement requires that certain transferees of shares
of Stock or Warrants execute and deliver to the Company and each Holder this
Joinder Agreement.
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the undersigned hereby acknowledges receipt of copies of the Warrant
Agreement and the Registration Rights Agreement and agrees: (a) to be bound
by the terms and provisions of the Warrant Agreement and the Registration
Rights Agreement as though [he/she/it] were an original party thereto; and
(b) to be treated as a [Stockholder/Holder] [Existing Stockholder] for all
purposes thereof.
IN WITNESS WHEREOF, the undersigned has signed this Joinder Agreement on
the date set forth below.
Date:________________ ___________________________________________
Description of transferred securities, name
of transferor, and date of transfer:
___________________________________________
___________________________________________
Acknowledged and Agreed to as
of the date written above:
LAMONTS APPAREL, INC.
By_________________________
Name:
Title:
36
