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As filed with the Securities and Exchange Commission on February 2, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES PURSUANT TO
SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
LAMONTS APPAREL, INC.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-2076160
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(State of Incorporation or (I.R.S. Employer
Organization) Identification No.)
LAMONTS APPAREL, INC.
12413 WILLOWS ROAD N.E.
KIRKLAND, WASHINGTON 98034
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(Address of principal executive offices)
If this form relates to the registration of a class of securities pursuant to
Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), please check the following box./ /
If this form relates to the registration of a class of securities pursuant to
Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), please check the following box./X/
Securities Act registration statement file number to which this form relates:
Not Applicable
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(If applicable)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
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(Title of Class)
Class A Warrants to purchase Class A Common Stock, par value $.01 per share
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(Title of Class)
Class B Warrants to purchase Class A Common Stock, par value $.01 per share
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(Title of Class)
Class C Warrants to purchase Class A Common Stock, par value $.01 per share
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(Title of Class)
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ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
This Registration Statement relates to the registration with the
Securities and Exchange Commission (the "Commission") of Class A Common Stock,
par value $.01 per share (the "Common Stock"), of the Registrant and Class A
Warrants, Class B Warrants, and Class C Warrants to purchase shares of Common
Stock (collectively, the "Warrants") of the Registrant. The description of the
Common Stock and the Warrants to be registered hereunder is set forth under the
caption "Description of Capital Stock" in the Registrant's Registration
Statement on Form S-1 (No. 333-44311) filed with the Commission on January 15,
1998, which is incorporated herein by reference.
ITEM 2. EXHIBITS.
The required exhibits are listed on the exhibit index attached hereto.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
LAMONTS APPAREL, INC.
Date: February 2, 1998 By: /s/ ALAN R. SCHLESINGER
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Name: Alan R. Schlesinger
Title: Chairman of the Board, President
and Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Description
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1. Second Restated Certificate of Incorporation of the Registrant.(1)
2. Amended and Restated Bylaws of the Registrant.(1)
3. Specimen Class A Common Stock Certificate.(1)
4. Warrant Agreement dated January 31, 1998 entered into between the
Registrant and Norwest Bank Minnesota, N.A., as Warrant Agent.
5. Warrant Agreement dated January 31, 1998 entered into between the
Registrant and Specialty Investment I LLC.
6. Form of Warrant Agreement dated January 31, 1998 entered into
between the Registrant and each of Alan R. Schlesinger, Loren R.
Rothschild, Debbie A. Brownfield, E.H. Bulen and Gary Grossblatt.
______________
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (Registration No. 333-44311) filed with the Commission on January
15, 1998.
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WARRANT AGREEMENT
BETWEEN
LAMONTS APPAREL, INC.
AND
NORWEST BANK MINNESOTA, N.A.,
as Warrant Agent
Dated as of January 31, 1998
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<PAGE>
TABLE OF CONTENTS
ARTICLE I -- DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II -- ISSUANCE, EXECUTION AND TRANSFER OF WARRANT
CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Form of Warrant Certificates . . . . . . . . . . . . . 4
Section 2.2 Execution of Warrant Certificates. . . . . . . . . . . 5
Section 2.3 Issuance of Warrant Certificates . . . . . . . . . . . 5
Section 2.4 Transfer and Exchange of Warrant Certificates. . . . . 5
Section 2.5 Lost, Stolen, Mutilated or Destroyed Warrant
Certificates. . . . . . . . . . . . . . . . . . . 6
ARTICLE III -- EXERCISE PRICE AND EXERCISE OF WARRANTS . . . . . . . . . . 7
Section 3.1 Exercise Price . . . . . . . . . . . . . . . . . . . . 7
Section 3.2 Registration of Warrant Shares . . . . . . . . . . . . 7
Section 3.3 Exercise of Warrants . . . . . . . . . . . . . . . . . 8
Section 3.4 Issuance of Warrant Shares . . . . . . . . . . . . . . 9
Section 3.5 Certificates for Unexercised Warrants. . . . . . . . . 10
Section 3.6 Reservation of Warrant Shares. . . . . . . . . . . . . 10
Section 3.7 No Impairment. . . . . . . . . . . . . . . . . . . . . 10
Section 3.8 Disposition of Proceeds. . . . . . . . . . . . . . . . 10
Section 3.9 Payment of Taxes and Charges . . . . . . . . . . . . . 10
ARTICLE IV-- ADJUSTMENTS, NOTICE PROVISIONS AND ISSUANCE OF ADDITIONAL
SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.1 Adjustment of Exercise Price . . . . . . . . . . . . . 10
Section 4.2 Sales of Certain Securities. . . . . . . . . . . . . . 12
Section 4.3 No Adjustments to Exercise Price . . . . . . . . . . . 14
Section 4.4 Adjustment of Number of Shares . . . . . . . . . . . . 14
Section 4.5 Reorganizations. . . . . . . . . . . . . . . . . . . . 14
Section 4.6 Intentionally Omitted. . . . . . . . . . . . . . . . . 15
Section 4.7 Intentionally Omitted. . . . . . . . . . . . . . . . . 15
Section 4.8 Notice of Certain Actions. . . . . . . . . . . . . . . 15
Section 4.9 Certificate of Adjustments . . . . . . . . . . . . . . 16
Section 4.10 Warrant Certificate Amendments . . . . . . . . . . . . 16
Section 4.11 Fractional Shares. . . . . . . . . . . . . . . . . . . 16
(i)
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ARTICLE V -- SPLIT UP, COMBINATION, EXCHANGE, TRANSFER AND CANCELLATION
OF WARRANT CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.1 Split Up, Combination, Exchange and Transfer
of Warrant Certificates . . . . . . . . . . . . . 17
Section 5.2 Cancellation of Warrant Certificates . . . . . . . . . 17
ARTICLE VI -- PROVISIONS CONCERNING THE WARRANT AGENT. . . . . . . . . . . 18
Section 6.1 Resignation or Removal of Warrant Agent. . . . . . . . 18
Section 6.2 Notice of Appointment. . . . . . . . . . . . . . . . . 18
Section 6.3 Merger of Warrant Agent. . . . . . . . . . . . . . . . 18
Section 6.4 Company Responsibilities . . . . . . . . . . . . . . . 18
Section 6.5 Certification for the Benefit of Warrant Agent . . . . 19
Section 6.6 Liability of Warrant Agent . . . . . . . . . . . . . . 19
Section 6.7 Use of Attorneys, Agents and Employees . . . . . . . . 20
Section 6.8 Indemnification. . . . . . . . . . . . . . . . . . . . 20
Section 6.9 Acceptance of Agency . . . . . . . . . . . . . . . . . 20
Section 6.10 Conflict of Interest . . . . . . . . . . . . . . . . . 20
ARTICLE VII -- MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.1 Changes to Agreement . . . . . . . . . . . . . . . . . 20
Section 7.2 Assignment . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.3 Successor to Company . . . . . . . . . . . . . . . . . 21
Section 7.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.5 Defects in Notice. . . . . . . . . . . . . . . . . . . 22
Section 7.6 Governing Law. . . . . . . . . . . . . . . . . . . . . 22
Section 7.7 Standing . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.8 Headings . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.9 Counterparts . . . . . . . . . . . . . . . . . . . . . 23
Section 7.10 Availability of the Agreement. . . . . . . . . . . . . 23
Section 7.11 Entire Agreement . . . . . . . . . . . . . . . . . . . 23
Section 7.12 Rights of Warrant Holders. . . . . . . . . . . . . . . 23
(ii)
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WARRANT AGREEMENT
THIS WARRANT AGREEMENT (the "Agreement") is made as of January 31, 1998
between LAMONTS APPAREL, INC., a Delaware corporation (as reorganized pursuant
to Chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"))
(the "Company"), and the Warrant Agent (as defined herein).
WITNESSETH THAT:
WHEREAS, pursuant to the Company's Modified and Restated Plan of
Reorganization under Chapter 11 of the Bankruptcy Code (the "Plan"), and a
confirmation order confirming the Plan issued by the United States Bankruptcy
Court for the Western District of Washington at Seattle, the Company proposes to
issue and deliver Warrant Certificates evidencing Warrants (each, as defined
herein) to acquire up to an aggregate of 3,003,557 shares, subject to
adjustment, of Common Stock (as defined herein);
WHEREAS, the Company desires the Warrant Agent to act, and the Warrant
Agent is willing to act, on behalf of the Company in connection with the
issuance, exchange, transfer, substitution and exercise of Warrants; and
WHEREAS, the Company desires to enter into this Agreement to set forth the
terms and conditions of the Warrants and the rights of the holders thereof.
NOW THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings (all terms defined herein in the
singular are to have the correlative meanings when used in the plural and vice
versa):
"AFFILIATE" means, with respect to any corporation, any Person that,
directly or indirectly, owns or controls 10% or more of the outstanding voting
securities of such corporation or is a Person in which such corporation has a
10% or greater direct or indirect equity interest. In addition, the term
"Affiliate," when used with reference to any Person, shall also mean any other
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Person that, directly or indirectly, controls or is controlled by or is under
common control with such Person. As used in the preceding sentence, (A) the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the entity
referred to, whether through ownership of voting securities, by contract or
otherwise and (B) the terms "controlling" and "controls" shall have meanings
correlative to the foregoing.
"AGGREGATE EQUITY TRADING VALUE" means, as of any date, the product of (a)
either (i) if the Common Stock is listed on any national securities exchange or
quoted on a national quotation system, the average of the daily Closing Prices
of the Common Stock for the five (5) Trading Days immediately preceding such
date, or (ii) if the Common Stock is not so listed or quoted, the fair market
value per share of the Common Stock determined in good faith by the Company's
Board of Directors as of a date within 30 days of such date, multiplied by
(b) the total number of issued and outstanding shares of Common 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
Common Stock and, for purposes of determining whether the Class B Initial
Exercise Date has occurred, the exercise of all Class B Warrants which are
exercisable as of such date).
"CLASS A INITIAL EXERCISE DATE" means the first date on which the Aggregate
Equity Trading Value equals or exceeds Twenty Million Dollars ($20,000,000.00).
"CLASS B INITIAL EXERCISE DATE" means the first date on which the Aggregate
Equity Trading Value equals or exceeds Twenty-Five Million Dollars
($25,000,000.00).
"CLASS A WARRANTS" means the Class A Warrants exercisable for shares of
Common Stock issued pursuant to this Agreement and the Plan.
"CLASS B WARRANTS" means the Class B Warrants exercisable for shares of
Common Stock issued pursuant to this Agreement and the Plan.
"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 Common Stock is listed if that is the principal market for
the Common Stock or, if not listed on any national securities exchange or if
such national securities exchange is not the principal market for the Common
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 Common Stock is not so reported, as
furnished by the National Quotation Bureau, Inc., or if such firm is not then
engaged in the
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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.
"COMMON STOCK" means the Class A Common Stock of the Company, par value
$.01 per share.
"COMPANY ORDER" means a written order from the Company executed by an
officer of the Company regarding the issuance and delivery of Warrant
Certificates.
"DATE OF EXERCISE" means, with respect to any Warrant, the date on which
such Warrant is exercised.
"EXPIRATION DATE" means January 31, 2008
"OFFICERS' CERTIFICATE" means a certificate signed by any two of the
Chairman of the Board, the President, any Vice President, the Chief Financial
Officer, the Treasurer, the Secretary, an Assistant Secretary or the Controller
of the Company.
"PERSON" means any natural person, corporation, partnership, trust, joint
venture, limited liability company, or any other entity or organization.
"RESTRICTED SECURITIES" means the Warrants issued to any Affiliate of the
Company on the date hereof and any Warrant Shares 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 instance the Warrant Agent
has delivered new Warrant Certificates not bearing the legend prescribed by
Section 2.4 hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time, or any successor statute, and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder.
"TRADING DAYS" means, with respect to the Common Stock (i) if the Common
Stock is quoted on the National Market System of the National Association of
Securities Dealers, Inc. or
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any similar system of automated dissemination of quotations of securities
prices, days on which trades may be made on such system or (ii) if the Common
Stock is listed or admitted for trading on any national securities exchange,
days on which such national securities exchange is open for business.
"WARRANT AGENT" means Norwest Bank Minnesota, N.A. or any successor Warrant
Agent appointed pursuant to Section 6.2 hereof.
"WARRANT AGENT'S OFFICE" means, for so long as Norwest Bank Minnesota, N.A.
shall be the Warrant Agent, the principal business address of the Warrant Agent
as specified in Section 7.4 and, thereafter, the office or agency maintained by
the successor Warrant Agent in the Borough of Manhattan, New York, New York or
the principal office of the successor Warrant Agent.
"WARRANT CERTIFICATES" means the certificates representing the Warrants.
"WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of any Warrant.
"WARRANTS" means, collectively, the Class A Warrants and the Class B
Warrants.
ARTICLE II
ISSUANCE, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES
Section 2.1 FORM OF WARRANT CERTIFICATES. The Warrant Certificates shall
be issued in registered form only and shall be substantially in the form of
EXHIBIT A attached hereto. In addition, the Warrant Certificates may have such
letters, numbers or other marks of identification or 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 Warrant
Agent without the consent of the Warrant Agent or the Company without the
consent of the Company. Each Warrant shall evidence the right, subject to the
provisions of this Agreement and of the Warrant Certificate, to purchase one
share of Common Stock at the Exercise Price (as defined in Section 3.1), subject
to adjustment pursuant to the provisions of Article IV hereof.
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Section 2.2 EXECUTION 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. The
Warrant Certificates shall be manually countersigned and dated the date of
countersignature by the Warrant Agent and shall not be valid for any purpose
unless so countersigned and dated. 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 Warrant Agent, the signature of such person on such Warrant
Certificates shall be valid nevertheless and such Warrant Certificate may be
countersigned by the Warrant Agent, and issued and delivered to the person
entitled to receive the Warrant 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.
Section 2.3 ISSUANCE OF WARRANT CERTIFICATES. Upon receipt of a
written Company Order, the Warrant Agent shall within five (5) business days
complete and countersign Warrant Certificates representing the total number
of Warrants to be issued and shall thereafter deliver such Warrant
Certificates in accordance with such Company Order. The Warrant Agent shall
maintain books (the "Warrant Register") for the registration of Warrant
Certificates and the registration of transfers of Warrant Certificates.
Section 2.4 TRANSFER AND EXCHANGE OF WARRANT CERTIFICATES.
(a) Warrant Certificates evidencing Restricted Securities and only
such Warrant Certificates will bear a legend in substantially the following
form:
NEITHER THE ISSUANCE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE ISSUANCE OF ANY SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS
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 EXCEPT 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.
(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
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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 Warrant Agent 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
Warrant Agent's Office of Warrant Certificates accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Company
and the Warrant Agent, duly executed by the registered Warrant holder or his
attorney duly authorized in writing. Upon any such registration of transfer
a new Warrant Certificate shall be countersigned by the Warrant Agent and
issued to the transferee and the surrendered Warrant Certificate shall
promptly be canceled by the Warrant Agent. Warrant Certificates may be
exchanged at the option of the holder thereof, upon surrender, properly
endorsed by the registered holders, at the Warrant Agent's Office, with
written instructions, for other Warrant Certificates countersigned by the
Warrant Agent representing in the aggregate a like number of Warrants. The
Company or the Warrant Agent 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.
Section 2.5 LOST, STOLEN, MUTILATED OR DESTROYED WARRANT CERTIFICATES.
If any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company in its discretion may direct the Warrant Agent to execute and
deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant Certificate, or in lieu of or in substitution for a lost,
stolen or destroyed Warrant Certificate, a substitute Warrant Certificate,
but only upon receipt of evidence of such loss, theft or destruction of such
Warrant Certificate, and of the ownership thereof, and indemnity, if
requested by either the Company or the Warrant Agent, all satisfactory to the
Company and the Warrant Agent. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges incidental thereto as the Company or Warrant
Agent may prescribe. Any such new Warrant Certificate shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant Certificate shall be at any time
enforceable by anyone.
ARTICLE III
EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 3.1 EXERCISE PRICE. Each Warrant Certificate shall, when
signed by the Chairman or President or any Vice President and attested to by
the Secretary or Assistant Secretary of the
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Company and countersigned by the Warrant Agent, entitle the registered holder
thereof subject to the provisions thereof and of this Agreement, to purchase
from the Company at any time after (a) in the case of the Class A Warrants,
the opening of business on the Class A Initial Exercise Date and (b) in the
case of the Class B Warrants, the opening of business on the Class B Initial
Exercise Date, and in each case before 5:00 p.m., New York time, on the
Expiration Date, one share of Common Stock for each of the Warrants specified
therein, at a purchase price of $.01 per share (the "Exercise Price") or such
adjusted number of shares at such adjusted exercise price as may be
established from time to time pursuant to the provisions of Article IV
hereof, payable in full in accordance with Section 3.3 hereof, at the time of
exercise of the Warrant. Except as the context otherwise requires, the term
"Exercise Price" as used in this Agreement shall mean the purchase price of
one Warrant Share pursuant to the Warrant Certificates reflecting all
appropriate adjustments made in accordance with the provisions of Article IV
hereof.
Section 3.2 REGISTRATION OF WARRANT SHARES. The Company shall secure
the effective registration of the Warrants and the Warrant Shares under the
Securities Act and applicable state laws and maintain such registration or
qualification in effect, all in accordance with and to the extent required by
the Registration Rights Grant adopted pursuant to the Plan. Promptly after a
registration statement under the Securities Act covering the Warrants has
become effective, the Company shall cause notice thereof together with a copy
of the prospectus covering the Warrants to be mailed to the Warrant Agent.
Section 3.3 EXERCISE OF WARRANTS.
(a) Commencing (i) in the case of the Class A Warrants, at the
opening of business on the Class A Initial Exercise Date and (ii) in the case
of the Class B Warrants, at the opening of business on the Class B Initial
Exercise Date, Warrants may be exercised by surrendering the Warrant
Certificate evidencing such Warrants at the Warrant Agent's Office with the
Election to Purchase form set forth on the reverse of the Warrant Certificate
duly completed and executed by the registered holder thereof or his attorney
duly authorized in writing, accompanied by payment in full, as set forth
below, to the Warrant Agent for the account of the Company the Exercise Price
for each share of Common Stock as to which Warrants are exercised and any
taxes that the registered holder is required to pay as set forth in Section
3.9. Such Exercise Price shall be paid in full by (i) cash or a certified
check or a wire transfer in same day funds in an amount equal to the then
applicable Exercise Price multiplied by the number of Warrant Shares then
being purchased, (ii) delivery to the Company of that number of shares of
Common Stock, duly endorsed, having an aggregate Fair Market Value (as
defined in Section 4.1(d)) equal to the then applicable Exercise Price
multiplied by the number of Warrant Shares then being purchased or (iii) by
any combination of (i) and (ii). In the alternative, the holder of a Warrant
Certificate may exercise its right to purchase some or all of the Warrant
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Shares subject to such Warrant Certificate, on a net basis, such that,
without the exchange of any funds, such holder receives that number of
Warrant Shares subscribed to pursuant to such Warrant Certificate less that
number of shares of Common Stock having an aggregate Fair Market Value at the
Date of Exercise equal to the aggregate Exercise Price that would otherwise
have been paid by such holder for the number of Warrant Shares subscribed to
pursuant to such Warrant Certificate. A registered Warrant holder may
exercise all or any number of whole Warrants represented by a Warrant
Certificate.
(b) Upon receiving notice that any Warrants are to be exercised,
the Warrant Agent will promptly provide a notice of exercise to the Company
(the "Exercise Notice"). The Exercise Notice shall set forth the name of the
registered holder, the number of Warrants to be exercised, the number of
shares to be issued, the Date of Exercise, the method of payment and the
Warrant Certificate number. Promptly following the receipt by the Company of
an Exercise Notice, the Company shall provide to the Warrant Agent, in the
event that shares of Common Stock are surrendered in payment of the Exercise
Price, with the aggregate Fair Market Value with respect to such shares of
Common Stock. If, upon exercise of any Warrants, shares of Common Stock are
surrendered to the Warrant Agent, the Warrant Agent shall promptly deliver
such shares of Common Stock to the Company. If, upon exercise of any
Warrants, shares of Common Stock are surrendered in an amount in excess of
the amount to be applied to the Exercise Price of Warrants exercised, then
the Warrant Agent shall so notify the Company and the Company shall deliver
the amount of such excess in the form of shares of Common Stock to the
holder.
(c) A Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of the due surrender for exercise
of the Warrant Certificate and payment to the Warrant Agent for the account
of the Company of the Exercise Price and any applicable taxes that the
registered holder is required to pay as set forth in Section 3.9. Each
Person in whose name any such certificate for shares of Common Stock is
issued shall for all purposes be deemed to have become the holder of record
of such shares at the close of business on the date on which the Warrant
Certificate was duly surrendered to the Warrant Agent and payment of the
Exercise Price and any such applicable taxes was made to the Warrant Agent
for the account of the Company, irrespective of the date of delivery of such
share certificate, except that, if the date of such surrender and payment is
a date when the stock transfer books of the Company are closed, such person
shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are
open (whether before or after the Expiration Date).
(d) The Warrant Agent may deem and treat the person named as the
registered holder on the face of any Warrant as the true and lawful owner
thereof for all purposes. If the
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Warrant Agent is instructed to deliver shares upon the exercise of Warrants
or to deliver a Warrant Certificate representing unexercised Warrants, in
either case registered in a name or names other than the name or names in
which a Warrant Certificate tendered in connection with such exercise is
registered, the Warrant Agent may require such documents, and such evidence
of payment of applicable transfer taxes, as it may deem necessary to enable
it to carry out the instructions of the bearer.
Section 3.4 ISSUANCE OF WARRANT SHARES. As soon as practicable and no
later than ten (10) business days after the Date of Exercise of any Warrants,
the Company shall issue, or cause its transfer agent to issue a certificate
or certificates for the number of full Warrant Shares to which the holder is
entitled, registered in accordance with the instructions set forth in the
Election to Purchase, together with cash, as provided in Section 4.11 hereof,
in respect of any fractional share. All Warrant Shares issued upon the
exercise of any Warrants shall be validly authorized and issued, fully paid
and non-assessable, free of preemptive rights and free from all taxes, liens,
security interests and charges created by the Company in respect of the
issuance thereof.
Section 3.5 CERTIFICATES FOR UNEXERCISED WARRANTS. In the event that
fewer than all of the Warrants represented by a Warrant Certificate are
exercised, the Warrant Agent shall execute and mail, by first-class mail,
within ten (10) Business days of the Date of Exercise, to the registered
holder of such Warrant Certificate, or such other Person as shall be
designated in the Election to Purchase, a new Warrant Certificate
representing the number of Warrants not exercised.
Section 3.6 RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available for issuance upon the exercise of Warrants a
number of its authorized but unissued shares or treasury shares, or both, of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants.
Section 3.7 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, stock split, stock dividend or any
other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of the Warrants, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
actions as may be reasonably necessary or appropriate to protect the rights
of the Warrant holders against impairment in accordance herewith. Without
limiting the generality of the foregoing, the Company will (a) not increase
the par value of any Warrant Shares receivable upon the exercise of the
Warrants above the amount payable therefor upon such exercise immediately
prior to such increase in par value, (b) from time to time take all such
action as may be reasonably necessary to assure that the par value of the
Common Stock is at all times equal to or less than the Exercise Price
(including without limitation approving and submitting to
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the stockholders of the Company for approval an amendment to the
Company's Second Restated Certificate of Incorporation to reduce such par
value), (c) take all such action as may be necessary in order that the Company
may validly and legally issue fully paid and non-assessable Warrant Shares upon
the exercise of any Warrant, and (d) use its reasonable best efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under the Warrants.
Section 3.8 DISPOSITION OF PROCEEDS. The Warrant Agent shall account
promptly to the Company with respect to Warrants exercised and shall
concurrently deliver to the Company all funds (after payment of the Warrant
Agent's fees and expenses as provided herein) and deliver to the Company for
cancellation all shares of Common Stock applied to the purchase of Warrant
Shares upon exercise of Warrants.
Section 3.9 PAYMENT OF TAXES AND CHARGES. The Company will from time to
time promptly pay to the Warrant Agent, or make provisions satisfactory to the
Warrant Agent for the payment of, all taxes and charges that may be imposed by
the United States or any state upon the Company or the Warrant Agent in
connection with the issuance or delivery of Warrant Shares upon the exercise of
any Warrants, provided, however, any additional transfer taxes in connection
with the issuance of Warrant Certificates or Certificates for Warrant Shares in
any name other than that of the registered holder of the Warrant Certificate
surrendered shall be paid by such registered holder; and, in such case, the
Company shall not issue or deliver any Warrant Certificate or certificates for
Warrant Shares and the Warrant Agent shall not be required to deliver any
Warrant Certificates or Warrant Shares until such taxes shall have been paid or
it has been established to the Company's and the Warrant Agent's satisfaction
that no tax is due. The Warrant Agent shall have no duty to determine if any
tax is due.
ARTICLE IV
ADJUSTMENTS, NOTICE PROVISIONS AND ISSUANCE
OF ADDITIONAL SECURITIES
Section 4.1 ADJUSTMENT OF EXERCISE PRICE. Subject to the provisions of
this Article IV, the Exercise Price in effect from time to time shall be subject
to adjustment, as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on the outstanding shares of Common Stock in shares of Common Stock
or any class thereof, (ii) subdivide or reclassify the outstanding shares of
Common Stock or any class thereof into a greater number of shares, or
(iii) combine or reclassify the outstanding shares of its Common Stock into a
smaller number of shares, the Exercise Price in effect immediately after the
record date for such dividend
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or distribution or the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the number of shares
of Common Stock outstanding immediately before such dividend, distribution,
subdivision, combination or reclassification, and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after
such dividend, distribution, subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event specified above
shall occur.
(b) In case the Company shall fix a record date for the issuance
of rights, options, warrants or convertible or exchangeable securities to all
holders of its Common Stock entitling them (for a period expiring within
forty-five (45) days after such record date) to subscribe for or purchase
shares of its Common Stock at a price per share less than the Fair Market
Value on such record date, the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding on
such record date plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the Fair Market Value per share, and of which the
denominator shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be made successively
whenever such a record date is fixed. To the extent that any such rights,
options, warrants or convertible or exchangeable securities are not so issued
or expire unexercised, the Exercise Price then in effect shall be readjusted
to the Exercise Price which would then be in effect if such unissued or
unexercised rights, options, warrants or convertible or exchangeable
securities had not been issuable.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of shares of Common Stock (i) of shares of any class
other than Common Stock or (ii) of evidences of its indebtedness or (iii) of
assets (excluding cash dividends or distributions (other than extraordinary cash
dividends or distributions), and dividends or distributions referred to in
Subsection 4.1(a) hereof) or (iv) of rights, options, warrants or convertible or
exchangeable securities (excluding those rights, options, warrants or
convertible or exchangeable securities referred to in Subsection 4.1(b) hereof),
then in each such case the Exercise Price in effect immediately thereafter shall
be determined by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the total number of
shares of Common Stock outstanding on such record date multiplied by the Fair
Market Value per share on such record date, less the aggregate fair market value
as determined in good faith by the Board of Directors of the Company of said
shares or evidences of indebtedness or assets or rights, options, warrants or
convertible or exchangeable securities so distributed, and of which the
denominator shall be the total number of
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shares of Common Stock outstanding on such record date multiplied by such
Fair Market Value per share. Such adjustment shall be made successively
whenever such a record date is fixed. In the event that such distribution is
not so made, the Exercise Price then in effect shall be readjusted to the
Exercise Price which would then be in effect if such record date had not been
fixed.
(d) For the purpose of any computation under Section 4.1(b) or
4.1(c) hereof, the "Fair Market Value" per share at any date (the
"Computation Date") shall be as follows: (i) if the Common Stock is listed on
a national securities exchange or quoted on a national quotation system, the
Current Market Price, which shall be deemed to be the average of the Closing
Prices of the Common Stock for the five (5) Trading Days immediately
preceding the Computation Date; PROVIDED, HOWEVER, that if there shall have
occurred prior to the Computation Date any event described in Section 4.1(a),
4.1(b) or 4.1(c) which shall have become effective with respect to market
transactions at any time (the "Market-Effect Date") on or after the beginning
of such 5-day period, the Closing Price for each Trading Day preceding the
Market-Effect Date shall be adjusted, for purposes of calculating such
average, by multiplying such Closing Price by a fraction the numerator of
which is the Exercise Price as in effect immediately prior to the Computation
Date and the denominator of which is the Exercise Price as in effect
immediately prior to the Market-Effect Date, it being understood that the
purpose of this proviso is to ensure that the effect of such event on the
market price of the Common Stock shall, as nearly as possible, be eliminated
in order that the distortion in the calculation of the Fair Market Value may
be minimized or (ii) if there is no public market for Common Stock, the fair
market value per share of Common Stock as determined in good faith by the
Company's Board of Directors.
Section 4.2 SALES OF CERTAIN SECURITIES.
(a) In case the Company shall on or after the date hereof issue
Common Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock (excluding Excluded Securities, as defined in Subsection 4.2(b) below) to
any Affiliate, officer, director or employee of the Company at a price per share
less than the Closing Price of a share of Common Stock on the date of such
issuance, then the Exercise Price shall be adjusted immediately thereafter so
that it shall equal the price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, of which the numerator shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of additional shares of Common Stock the Aggregate
Consideration Receivable (as defined in Subsection 4.2(d) below) would purchase
at the Closing Price per share on such date, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of additional shares of Common Stock sold or offered
for subscription or purchase. Such adjustment shall be made successively
whenever such issuance shall occur. To the extent that any such rights,
options, warrants or
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convertible or exchangeable securities are not so issued or expire
unexercised, the Exercise Price then in effect shall be readjusted to the
Exercise Price which would then be in effect if such unissued or unexercised
rights, options, warrants or convertible or exchangeable securities had not
been issuable.
(b) "Excluded Securities" means (i) rights, options, warrants, or
convertible or exchangeable securities issued in any of the transactions
described in Section 4.1(b), 4.1(c) and 4.5 hereof, (ii) shares of Common Stock
issuable upon exercise of the Warrants; (iii) shares of Common Stock issuable
upon exercise of rights, options or warrants or conversion or exchange of
convertible or exchangeable securities issued or sold under circumstances
causing an adjustment pursuant to this Section 4.2, (iv) options to purchase up
to 1,333,729 shares of Common Stock that are issued to employees and directors
of the Company and its subsidiaries pursuant to the Lamonts Apparel, Inc. 1998
Stock Option Plan and any shares of Common Stock issuable or issued upon the
exercise thereof (including, following any adjustments required under the terms
of such stock option plan, any additional options or shares of Common Stock
issuable or issued upon the exercise thereof), (v) the New Class C Warrants (as
defined in the Plan) and any shares of Common Stock issuable or issued upon the
exercise thereof (including, following any adjustments required under the terms
of such warrants, any additional New Class C Warrants or shares of Common Stock
issuable or issued upon the exercise thereof) and (vi) the Gordian Warrants (as
defined in the Plan) and any shares of Common 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 Common Stock
issuable or issued upon the exercise thereof).
(c) The price per share of Common Stock referred to in Subsection
4.2(a) above shall be determined by dividing (i) the Aggregate Consideration
Receivable in respect of the Common Stock, rights, options, warrants or
convertible or exchangeable securities issued, by (ii) the total number of
shares of Common Stock issued or covered by such rights, options, warrants or
convertible or exchangeable securities.
(d) "Aggregate Consideration Receivable" means the aggregate amount
paid to the Company for the Common Stock, rights, options, warrants or
convertible or exchangeable securities, plus the aggregate consideration or
premiums stated in such rights, options, warrants or convertible or exchangeable
securities to be payable for the shares of Common Stock covered thereby.
(e) In case the Company shall sell and issue Common Stock or rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase shares of Common Stock, for a consideration
consisting, in whole or in part, of property (other than cash) or services or
its equivalent, then in determining the "price per share of Common Stock"
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referred to in Sections 4.2(a) and 4.2(c) above and the "Aggregate Consideration
Receivable" referred to in Sections 4.2(a), 4.2(b), 4.2(c) and 4.2(d) above, the
Board of Directors of the Company shall determine, in good faith and on a
reasonable basis, the fair value of said property.
Section 4.3 NO ADJUSTMENTS TO EXERCISE PRICE. No adjustment in the
Exercise Price in accordance with the provisions of Section 4.1(a), 4.1(b) or
4.1(c) or Section 4.2(a) hereof need be made unless such adjustment would amount
to a change of at least .5% in such Exercise Price of the Warrant Certificates;
PROVIDED, HOWEVER, that the amount by which any adjustment is not made by reason
of the provisions of this Section 4.3 shall be carried forward and taken into
account at the time of any subsequent adjustment in the Exercise Price.
Section 4.4 ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to Subsection 4.1(a), (b) or (c) or Subsection 4.2(a)
hereof, each Warrant shall thereupon evidence the right to purchase that number
of Warrant Shares (calculated to the nearest hundredth of a share) obtained by
multiplying the number of Warrant Shares purchasable immediately prior to such
adjustment upon exercise of the Warrant by the Exercise Price in effect
immediately prior to such adjustment and dividing the product so obtained by the
Exercise Price in effect immediately after such adjustment.
Section 4.5 REORGANIZATIONS. In case of any capital reorganization, other
than in the cases referred to in Section 4.1 hereof, or the consolidation or
merger of the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock or
the conversion of such outstanding shares of Common Stock into shares of other
stock or other securities or property), or the sale or conveyance of the
property of the Company as an entirety or substantially as an entirety
(collectively such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of Warrant Shares theretofore deliverable) the number of shares of
stock or other securities or property to which a holder of the number of Warrant
Shares which would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon such Reorganization if such Warrant was
fully exercisable and had been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, shall be made
in the application of the provisions herein set forth with respect to the rights
and interests of Warrant holders so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of Warrants. Any such
adjustment shall be made by and set forth in a supplemental agreement prepared
by the Company or any successor thereto, between the Company, or any successor
thereto, and the Warrant Agent and shall for all purposes hereof conclusively be
deemed to be an appropriate adjustment. The Company shall not effect any such
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Reorganization, unless upon or prior to the consummation thereof the successor
corporation, or if the Company shall be the surviving corporation in any such
Reorganization and is not the issuer of the shares of stock or other securities
or property to be delivered to holders of shares of the Common Stock outstanding
at the effective time thereof, then such issuer, shall assume by written
instrument the obligation to deliver to the registered holder of any Warrant
Certificate such shares of stock, securities, cash or other property as such
holder shall be entitled to purchase in accordance with the foregoing
provisions.
Section 4.6 INTENTIONALLY OMITTED.
Section 4.7 INTENTIONALLY OMITTED.
Section 4.8 NOTICE OF CERTAIN ACTIONS. In the event the Company shall:
(a) declare any dividend payable in stock to the holders of the
Common Stock or make any other distribution in property other than cash to the
holders of the Common Stock;
(b) offer to the holders of the Common Stock rights to subscribe for
or purchase any shares of any class of stock or any other rights or options; or
(c) effect any reclassification of the Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization or any consolidation or
merger (other than a merger in which no distribution of securities or other
property is made to holders of Common Stock), or any sale, transfer or other
disposition of its property, assets and business substantially as an entirety,
or the liquidation, dissolution or winding up of the Company; then, in each such
case, the Company shall mail notice of such proposed action to the Warrant Agent
at least thirty (30) days prior to such action and shall cause the Warrant Agent
to mail such notice to each registered holder of a Warrant Certificate. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed. Such notice to the Warrant Agent shall be mailed in the case of any
action covered by paragraph (a) or (b) of this Section 4.8, at least fifteen
(15) days prior to the record date for determining holders of the Common Stock
for purposes of receiving such payment or offer, and in the case of any action
covered by paragraph (c) of this Section 4.8, at least fifteen (15) days prior
to the earlier of the date upon which such action is to take
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place or any record date to determine holders of Common Stock entitled to
receive such securities or other property.
Section 4.9 CERTIFICATE OF ADJUSTMENTS. Whenever any adjustment is to be
made pursuant to this Article IV, the Company shall prepare an Officers'
Certificate setting forth such adjustment to be mailed to the Warrant Agent, to
each other transfer agent for the Common Stock and to each registered holder of
a Warrant Certificate at least fifteen (15) days prior thereto, such notice to
include in reasonable detail (i) the events precipitating the adjustment,
(ii) the computation of any adjustments, and (iii) the Exercise Price and the
number of Warrant Shares or the securities or other property purchasable upon
exercise of each Warrant after giving effect to such adjustment. With respect
to adjustments made pursuant to Section 4.2(a) hereof, such notice shall be made
as soon as practicable thereafter. The Warrant Agent shall be fully protected
in relying on any such Officers' Certificate and on any adjustment therein
contained, and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such an Officers' Certificate.
Section 4.10 WARRANT CERTIFICATE AMENDMENTS. Irrespective of any
adjustments pursuant to this Article IV, Warrant Certificates theretofore or
thereafter issued need not be amended or replaced, but certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments;
provided the Company may, at its option, issue new Warrant Certificates
evidencing Warrants in such form as may be approved by its Board of Directors to
reflect any adjustment in the Exercise Price and number of Warrant Shares
purchasable under the Warrant Certificates and deliver the same to the Warrant
Agent in substitution for existing Warrant Certificates.
Section 4.11 FRACTIONAL SHARES. The Company shall not be required upon
the exercise of any Warrant to issue fractional Warrant Shares which may result
from adjustments in accordance with this Article IV to the Exercise Price or
number of Warrant Shares purchasable under each Warrant or otherwise. If more
than one Warrant is exercised at one time by the same registered holder, the
number of full Warrant Shares which shall be deliverable shall be computed based
on the number of shares deliverable in exchange for the aggregate number of
Warrants exercised. With respect to any final fraction of a Warrant Share
called for upon the exercise of any Warrant or Warrants, the Company shall pay a
cash adjustment to the registered holders of the Warrants in respect of such
final fraction in an amount equal to the same fraction of the Closing Price of a
Warrant Share, as determined by the Company on the basis of the Closing Price
per share of Common Stock on the business day next preceding the date of such
exercise. The registered holder of each Warrant Certificate, by his acceptance
of the Warrant Certificate, shall expressly waive any right to receive any
fractional Warrant Share upon exercise of the Warrants. All calculations under
this Section 4.11 shall be made to the nearest hundredth of a share.
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ARTICLE V
SPLIT UP, COMBINATION, EXCHANGE, TRANSFER AND
CANCELLATION OF WARRANT CERTIFICATES
Section 5.1 SPLIT UP, COMBINATION, EXCHANGE AND TRANSFER OF WARRANT
CERTIFICATES. Warrant Certificates, subject to the provisions of Section
5.2, may be split up, combined or exchanged for other Warrant Certificates of
the same type representing a like aggregate number of Warrants or may be
transferred in whole or in part. Any holder desiring to split up, combine or
exchange a Warrant Certificate or Warrant Certificates shall make such
request in writing delivered to the Warrant Agent at the Warrant Agent's
Office and shall surrender the Warrant Certificate or Warrant Certificates so
to be split up, combined or exchanged at said office. Subject to any
applicable laws, rules or regulations restricting transferability, any
restriction on transferability that may appear on a Warrant Certificate in
accordance with the terms hereof, or any "stop-transfer" instructions the
Company may give to the Warrant Agent to implement any such restrictions
(which instructions the Company is expressly authorized to give), transfers
of outstanding Warrant Certificates may be effected by the Warrant Agent from
time to time upon the books of the Company to be maintained by the Warrant
Agent for that purpose, upon a surrender of the Warrant Certificate to the
Warrant Agent at the Warrant Agent's Office with the form of Assignment
thereon duly executed. Upon any such surrender for split up, combination,
exchange or transfer, the Warrant Agent shall execute and deliver to the
person entitled thereto a Warrant Certificate or Certificates, as the case
may be, as so requested. The Warrant Agent may require the holder to pay a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any split up, combination, exchange or transfer of Warrant
Certificates prior to the issuance of any new Warrant Certificate.
Section 5.2 CANCELLATION OF WARRANT CERTIFICATES. Any Warrant Certificate
surrendered upon the exercise of Warrants or for split up, combination, exchange
or transfer, or purchased or otherwise acquired by the Company, shall be
canceled and shall not be reissued by the Company; and, except as provided in
Section 3.5 hereof in case of the exercise of less than all of the Warrants
evidenced by a Warrant Certificate or in Section 5.1 in case of a split up,
combination, exchange or transfer, no Warrant Certificate shall be issued
hereunder in lieu of such cancelled Warrant Certificate. Any Warrant
Certificate so cancelled shall be destroyed by the Warrant Agent unless
otherwise directed by the Company.
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ARTICLE VI
PROVISIONS CONCERNING THE WARRANT AGENT
Section 6.1 RESIGNATION OR REMOVAL OF WARRANT AGENT. The Warrant Agent
may resign its duties and be discharged from all further duties and liabilities
hereunder after giving at least thirty (30) days prior notice in writing to the
Company, except that such shorter notice may be given as the Company shall, in
writing, accept as sufficient. Upon comparable notice to the Warrant Agent, the
Company may remove the Warrant Agent. If the office of Warrant Agent becomes
vacant by resignation or incapacity to act or otherwise, the Company shall
appoint in writing a new Warrant Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent or by the registered holder of any Warrant Certificate, then the
registered holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new Warrant Agent. Any new Warrant Agent
appointed hereunder shall execute, acknowledge and deliver to the Company, an
instrument accepting such appointment under substantially the same terms and
conditions as are contained herein. If for any reason it becomes necessary or
expedient to have the former Warrant Agent execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed and delivered by the former
Warrant Agent.
Section 6.2 NOTICE OF APPOINTMENT. Not later than five (5) business days
prior to the effective date of the appointment of a new Warrant Agent, the
Company shall cause notice thereof to be mailed to the former Warrant Agent and
the transfer agent for the Common Stock, and shall forthwith cause a copy of
such notice to be mailed to each registered holder of a Warrant Certificate.
Failure to mail such notice, or any defect contained therein, shall not affect
the legality or validity of the appointment of the successor Warrant Agent.
Section 6.3 MERGER OF WARRANT AGENT. Any company into which the Warrant
Agent may be merged or with which it may be consolidated or any company
resulting from any merger or consolidation to which the Warrant Agent shall be a
party, shall be the successor Warrant Agent under this Agreement without further
act. Any such successor Warrant Agent may adopt the prior countersignature of
any predecessor Warrant Agent and distribute Warrant Certificates countersigned
but not distributed by such predecessor Warrant Agent, or may countersign the
Warrant Certificate in its own name.
Section 6.4 COMPANY RESPONSIBILITIES. The Company agrees that it shall
(i) pay the Warrant Agent reasonable remuneration for its services as Warrant
Agent hereunder and will reimburse the Warrant Agent upon demand for all
reasonable expenses, advances, and expenditures that the
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Warrant Agent may reasonably incur in the execution of its duties hereunder
(including reasonable fees and expenses of its counsel); (ii) provide the
Warrant Agent, upon request, with sufficient funds to pay any cash or taxes
due pursuant to this Agreement; and (iii) perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the
Warrant Agent of the provisions of this Agreement. In no case shall the
Warrant Agent be required to advance its own funds for any purpose under this
Agreement.
Section 6.5 CERTIFICATION FOR THE BENEFIT OF WARRANT AGENT. Whenever in
the performance of its duties under this Agreement the Warrant Agent shall deem
it necessary or desirable that any matter be proved or established or that any
instructions with respect to the performance of its duties hereunder be given by
the Company prior to taking or suffering any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established, or such instructions may be
given, by a certificate or instrument signed by the Chairman, the President, a
Vice President, the Secretary, Assistant Secretary or the Treasurer of the
Company and delivered to the Warrant Agent. Such certificate or instrument may
be conclusively relied upon by the Warrant Agent for any action or refusal to
act taken or suffered in good faith by it under the provisions of this
Agreement, without further investigation; but in its discretion the Warrant
Agent may in lieu thereof accept other evidence of such matter or may require
such further or additional evidence as it may deem reasonable including, without
limitation, an opinion of counsel to the Company. In addition, the Warrant
Agent may consult with counsel of its choice, and any opinion of such counsel
shall be full and complete authorization to the Warrant Agent in respect of any
action taken or omitted to be taken in good faith, in reliance on such opinion.
Section 6.6 LIABILITY OF WARRANT AGENT. The Warrant Agent shall be liable
hereunder solely for direct damages resulting from its own gross negligence, bad
faith or wilful misconduct provided, further, that the Warrant Agent shall not
be liable for any special or consequential damages in connection with any
liability hereunder. The Warrant Agent shall act hereunder solely as an agent
for the Company and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Warrant
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only. The Warrant Agent will not incur any liability or
responsibility to the Company or to any holder of any Warrant Certificate for
any action taken, or any failure to take action, in reliance on any notice,
resolution, waiver, consent, order, certificate, or other paper, document or
instrument reasonably believed by the Warrant Agent to be genuine and to have
been signed, sent or presented by the proper party or parties. The Warrant
Agent shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery thereof by the Company or in respect of
the validity or execution of any Warrant Certificate (except its
countersignature
19
<PAGE>
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Warrant
Certificate; nor shall it be responsible for the making of any adjustment
required under the provisions of Article IV hereof or responsible for the
manner, method or amount of any such adjustment or the facts that would
require any such adjustment; nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any Warrant Shares or other securities to be issued pursuant to this
Agreement or any Warrant Certificate or as to whether any Warrant Shares or
other securities will when issued be validly authorized and issued and fully
paid and non-assessable.
Section 6.7 USE OF ATTORNEYS, AGENTS AND EMPLOYEES. The Warrant Agent may
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys, agents or
employees.
Section 6.8 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 this
Agreement, except as a direct result of the gross negligence, bad faith or
willful misconduct of such party.
Section 6.9 ACCEPTANCE OF AGENCY. The Warrant Agent hereby accepts the
agency established by this Agreement and agrees to perform the same upon the
terms and conditions herein set forth.
Section 6.10 CONFLICT OF INTEREST. The Warrant Agent and any stockholder,
director, officer or employee of the Warrant Agent may buy, sell or deal in any
of the Warrant Certificates or other securities of the Company or have a
pecuniary interest in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though the Warrant Agent were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company.
ARTICLE VII
MISCELLANEOUS
Section 7.1 CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, and the Warrant Agent, together, with the written consent of
the registered holder or holders of at least 50% of the outstanding Warrants may
amend or supplement this Agreement. The Warrant Agent may, without the consent
or concurrence of any registered holder of a Warrant Certificate, by
supplemental agreement or otherwise, join with the Company in making any changes
20
<PAGE>
or corrections in this Agreement that the Company shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company or the
Warrant Agent in this Agreement such further covenants and agreements thereafter
to be observed, or (iii) result in the surrender of any right or power reserved
to or conferred upon the Company or the Warrant Agent in this Agreement, but
which changes or corrections do not or will not adversely affect, alter or
change the rights, privileges or immunities of the registered holders of Warrant
Certificates. The Warrant Agent may conclusively rely on a certificate of the
Company regarding any such changes.
Section 7.2 ASSIGNMENT. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns.
Section 7.3 SUCCESSOR TO COMPANY. The Company will not merge or
consolidate with or into any other corporation or sell or otherwise transfer its
property, assets and business substantially as an entirety to a successor
corporation, unless the corporation resulting from such merger, consolidation,
sale or transfer (if not the Company) shall expressly assume, by supplemental
agreement satisfactory in form and substance to the Warrant Agent and delivered
to the Warrant Agent, the due and punctual performance and observance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company.
Section 7.4 NOTICES. Any notice or demand required by this Agreement to
be given or made by the Warrant Agent or by the registered holder of any Warrant
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class or registered mail, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) as follows:
Lamonts Apparel, Inc.
12413 Willows Road N.E.
Kirkland, WA 98034
Attention: Ms. Debbie Brownfeld
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Attention: Michael A. Woronoff, Esq.
21
<PAGE>
Any notice or demand required by this Agreement to be given or made by the
registered holder of any Warrant Certificate or by the Company to or on the
Warrant Agent shall be sufficiently given or made if sent by first-class or
registered mail, postage prepaid, addressed (until another address is filed
in writing with the Company by the Warrant Agent), as follows:
Norwest Bank Minnesota, N.A.
161 North Concord Exchange Street
South St. Paul, Minnesota 55075
Attention: Mr. A. Wali Naibi
Any notice or demand required by this Agreement to be given or made by the
Company or the Warrant Agent to or on the registered holder of any Warrant
Certificate shall be sufficiently given or made, whether or not such holder
receives the notice, three (3) days after mailing if sent by first-class or
registered mail, postage prepaid, addressed to such registered holder at his
last address as shown on the books of the Company maintained by the Warrant
Agent. Otherwise, such notice or demand shall be deemed given when received by
the party entitled thereto.
Section 7.5 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 Section 4.1 or Section 4.2 hereof, 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 7.6 GOVERNING LAW. This Agreement and each Warrant Certificate
issued hereunder shall be governed by the laws of the State of New York without
regard to principles of conflicts of laws thereof.
Section 7.7 STANDING. Nothing in this Agreement expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company, the Warrant Agent, and the registered holders of the Warrant
Certificates any right, remedy or claim under or by reason of this Agreement or
of any covenant, condition, stipulation, promise or agreement contained herein;
and all covenants, conditions, stipulations, promises and agreements contained
in this Agreement shall be for the sole and exclusive benefit of the Company and
the Warrant Agent and their successors, and the registered holders of the
Warrant Certificates.
Section 7.8 HEADINGS. The descriptive headings of the articles and
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
22
<PAGE>
Section 7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts shall together constitute but one and the same instrument.
Section 7.10 AVAILABILITY OF THE AGREEMENT. The Company shall keep copies
of this Agreement available for inspection by holders of Warrants during normal
business hours. Copies of this Agreement may be obtained upon written request
addressed to the Company at the address set forth in Section 7.4 hereof.
Section 7.11 ENTIRE AGREEMENT. This Agreement, including the Exhibits
referred to herein and the other writings specifically identified herein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings.
Section 7.12 RIGHTS OF WARRANT HOLDERS. No Warrant Certificate shall
entitle the registered holder thereof to any of the rights of a stockholder of
the Company, including, without limitation, the right to vote, to receive
dividends and other distributions, to receive any notice of, or to attend,
meetings of stockholders or any other proceedings of the Company.
23
<PAGE>
WARRANT AGREEMENT COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto under their respective corporate seals as of the day and year first above
written.
LAMONTS APPAREL, INC.
By: /s/ ALAN R. SCHLESINGER
----------------------------------------
Name: Alan R. Schlesinger
Title: Chairman of the Board,
President and Chief Executive Officer
NORWEST BANK MINNESOTA, N.A.,
as Warrant Agent
By: /s/ LISA DORNBURG
----------------------------------------
Name: Lisa Dornburg
Title: Officer
<PAGE>
EXHIBIT A
FORM OF
CLASS [A] [B] WARRANT CERTIFICATE
NEITHER THE ISSUANCE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE ISSUANCE OF ANY SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS 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 EXCEPT 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.
NO. W [A][B]- _____
CERTIFICATE FOR ________________ CLASS [A][B] WARRANTS
NOT EXERCISABLE AFTER 5:00 P.M.,
NEW YORK CITY TIME, ON JANUARY 31, 2008
LAMONTS APPAREL, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that ____________________________________ or its registered
assigns is the registered holder (the "Registered Holder") of ________________
Class [A][B] Warrants, each of which represents the right to purchase one
fully paid and non-assessable share of Common Stock, par value $.01 per share
(the "Common Stock"), of Lamonts Apparel, Inc., a Delaware corporation (the
"Company"), at an initial exercise price (the "Exercise Price") equal to $.01
per share, at the times provided in the Warrant Agreement (as hereinafter
defined), by surrendering this Warrant Certificate, with the ELECTION TO
PURCHASE on the reverse hereof duly executed, at the principal office of Norwest
Bank Minnesota, N.A. or its successor as warrant agent (any such warrant agent
being herein called the "Warrant Agent"), at 161 North Concord Exchange Street,
South St. Paul, Minnesota 55075, and by paying in full the Exercise Price, plus
transfer taxes, if any. Payment of the Exercise Price may be made at the option
of the holder hereof by (i) cash, certified check or a wire transfer in same day
funds in an amount equal to the then applicable Exercise Price multiplied by the
number of Warrant Shares then being purchased, (ii) delivery to the Company of
that number of shares of Common Stock having an aggregate Fair Market Value
equal to the then applicable Exercise Price multiplied
A-1
<PAGE>
by the number of Warrant Shares then being purchased or (iii) by any
combination of (i) and (ii). In the alternative, the Registered Holder may
exercise its right to purchase some or all of the Warrant Shares subject to
Warrant Certificate, on a net basis, such that, without the exchange of any
funds, the Registered Holder receives that number of Warrant Shares
subscribed to pursuant to this Warrant Certificate less that number of shares
of Common Stock having an aggregate Fair Market Value at the time of exercise
equal to the aggregate Exercise Price that would otherwise have been paid by
such holder for the number of Warrant Shares subscribed to pursuant to this
Warrant Certificate.
No Warrant may be exercised after 5:00 P.M., New York City time, on
January 31, 2008 (the "Expiration Date"). All Warrants evidenced hereby shall
thereafter become void, subject to the terms of the Warrant Agreement.
Prior to the Expiration Date, subject to any applicable laws, rules or
regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate and in accordance
with the terms of the Warrant Agreement, the Registered Holder shall be entitled
to transfer this Warrant Certificate, in whole or in part, upon surrender of
this Warrant Certificate at the Warrant Agent's Office with the ASSIGNMENT on
the reverse hereof. Upon any such transfer, a new Warrant Certificate or
Warrant Certificates representing the same aggregate number of Warrants will be
issued in accordance with instructions in the form of assignment.
Upon the exercise of less than all of the Warrants evidenced by this
Warrant Certificate, there shall be issued to the Registered Holder a new
Warrant Certificate in respect of the Warrants not exercised.
Prior to the Expiration Date, the Registered Holder shall be entitled to
exchange this Warrant Certificate, with or without other Warrant Certificates,
for another Warrant Certificate or Warrant Certificates for the same aggregate
number of Warrants, upon surrender of this Warrant Certificate at the Warrant
Agent's Office as set forth in the Warrant Agreement. Upon certain events
provided for in the Warrant Agreement, the Exercise Price and the number of
shares of Common Stock issuable upon the exercise of each Warrant are required
to be adjusted. No fractional shares will be issued upon the exercise of
Warrants. As to any final fraction of a share which the Registered Holder of
one or more Warrant Certificates, the rights under which are exercised in the
same transaction, would otherwise be entitled to purchase upon such exercise,
the Company shall pay the cash value thereof determined as provided in the
Warrant Agreement.
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement dated as of January 31, 1998 between the Company and the Warrant Agent
(the "Warrant Agreement") and is subject to the terms and provisions contained
in said Warrant Agreement, to all of which terms
A-2
<PAGE>
and provisions the Registered Holder consents by acceptance hereof. All
capitalized terms not defined herein shall have the meaning set forth in the
Warrant Agreement.
This Warrant Certificate shall not entitle the Registered Holder to any of
the rights of a stockholder of the Company, including, without limitation, the
right to vote, to receive dividends and other distributions, or to attend or
receive any notice of meetings of stockholders or any other proceedings of the
Company.
This Warrant Certificate shall not be valid for any purpose until it shall
have been countersigned by the Warrant Agent.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its facsimile Corporate Seal.
LAMONTS APPAREL, INC.
By:
-------------------------------------
Name:
Title:
Seal Attest:
----------------------------------------
Assistant Secretary
Countersigned: NORWEST BANK MINNESOTA, N.A.,
as Warrant Agent
Dated: By:
-------------------------------------
Authorized Signature
A-4
<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise _______ of the
Warrants represented by this Warrant Certificate and to purchase the shares
of Common Stock issuable upon the exercise of said Warrants, and requests
that Certificates for such shares be issued and delivered as follows:
ISSUE TO:
---------------------------------------------------------------------
(NAME)
- -------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- -------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
- -------------------------------------------------------------------------------
(NAME)
at
-----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of Warrants hereby exercised is less than all the Warrants
represented by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of full Warrants not exercised be
issued and delivered as set forth above.
In full payment of the exercise price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment
of $_______ by (i) $______ in cash, certified check or wire transfer in same
day funds, (ii) surrender to the Warrant Agent of certificate no(s) __________
representing ______ shares of Common Stock duly endorsed to the Warrant Agent,
(iii) a combination of (i) an (ii) or (iv) exercising the Warrants exercised on
a net basis such that the number of shares of Common Stock otherwise receivable
by the Registered Holder pursuant to the Warrants exercised shall be reduced by
the number of shares of Common Stock having an aggregate Fair Market Value equal
to the exercise price with respect to the Warrants exercised.
Date: , 19
-------------- --- ---------------------------------------
Signature
(Signature must conform in all
respects to name of holder
as specified on the face of
the Warrant Certificate.)
A-5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby irrevocably sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF WARRANTS
- ---------------- ------- ---------------
and does hereby irrevocably constitute and appoint____________________,
Attorney, to make such transfer on the books of Lamonts Apparel, Inc.
maintained for that purpose, with full power of substitution in the premises.
Date: , 19
-------------- --- -------------------------------------------
Signature
(Signature must conform in all
respects to name of holder
as specified on the face of
the Warrant Certificate.)
A-6
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of January 31, 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 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
<PAGE>
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 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
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<PAGE>
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 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).
3
<PAGE>
"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.
"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
4
<PAGE>
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 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
5
<PAGE>
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 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.
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(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.
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
7
<PAGE>
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 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.
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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.
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.
9
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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
(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.
10
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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.
12413 Willows Road N.E.
Kirkland, WA 98034
Attention: Ms. Debbie Brownfield
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Attention: Michael A. Woronoff, Esq.
(ii) if to Holder:
Specialty Investment I LLC
40 Broad Street
Boston, MA 02109
Attn: Mitchell H. Cohen, Esq.
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with a copy to:
Goulston & Storrs, P.C.
400 Atlantic Avenue
Boston, MA 02110-3333
Attention: Kitt Sawitsky, 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.
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
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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 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
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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.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Warrant
Agreement as of the date first above written.
LAMONTS APPAREL, INC.
By /s/ ALAN R. SCHLESINGER
------------------------------------
Name: Alan R. Schlesinger
Title: Chairman of the Board,
President and Chief Executive Officer
SPECIALTY INVESTMENT I LLC
By /s/ ALAN R. GOLDSTEN
------------------------------------
Name: Alan R. Goldstein
Title: Chief Financial Officer and
Executive Vice President
15
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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. [ ]
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 January 31, 2002 (the "Stock Unit Expiration Date"), 14 Stock Units (as
hereinafter defined and subject to adjustment as
i
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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 January 31, 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 1998 Stock Option Plan (as such number may be adjusted by reason of
transactions of the type described in SECTION 4.01);
(v) up to 9,000,000 shares of Stock issued and outstanding on the
Date of Issuance;
ii
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(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.
"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 January 31, 1998.
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"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 January
31, 1998, between the Company and the initial holder of the Warrants evidenced
by this Warrant Certificate, 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, (ii) the additional New Class C Warrants (as defined in
and issued 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
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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 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:
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<PAGE>
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.
The Company shall not issue fractional shares of Stock upon any exercise
of the Warrants evidenced by this Warrant Certificate.
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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 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.
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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 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
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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 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
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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 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
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such shares of Stock as are issuable under such options, warrants orrights
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 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
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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.
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,
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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.
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,
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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 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,
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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.
SECTION 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. 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.
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
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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.
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.
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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 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.
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IN WITNESS WHEREOF, the Company has duly executed this Warrant Certificate.
Dated: January 31, 1998 LAMONTS APPAREL, INC.
By
------------------------------------
Name: Alan R. Schlesinger
Title: Chairman of the Board, President
and Chief Executive Officer
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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:
--------------------------- ------------------------------------
xix
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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:
- ----------------------------
- ----------------------------
- ----------------------------
xx
<PAGE>
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
January 31, 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 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.
IN WITNESS WHEREOF, the undersigned has signed this Joinder Agreement on
the date set forth below.
Dated:
---------------------- ----------------------------------------
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:
xxi
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of January 31, 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 ________________ ("Holder").
The Company has agreed that upon the effective date of the Plan (as
hereinafter defined) and as specified thereunder it will issue Warrants (as
hereinafter defined) to the holders (including Holder) of options under the
Lamonts Apparel, Inc. 1998 Stock Option Plan (the "Stock Option Plan"),
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. 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 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.
<PAGE>
"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 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.
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<PAGE>
"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 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.
3
<PAGE>
"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.
"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.
4
<PAGE>
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 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. Subject to the restrictions on
transferability set forth in the Stock Option Plan:
(a) Warrant Certificates evidencing Restricted Securities and only
such Warrant Certificates will bear a legend in substantially the following
form:
5
<PAGE>
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF THE LAMONTS APPAREL, INC. 1998 STOCK OPTION PLAN
WHICH PROVIDES, AMONG OTHER THINGS, THAT SUCH WARRANTS ARE
NON-TRANSFERABLE.
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.
(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
6
<PAGE>
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.
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
7
<PAGE>
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 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.
8
<PAGE>
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.
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
9
<PAGE>
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
(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.
10
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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.
12413 Willows Road N.E.
Kirkland, WA 98034
Attention: Ms. Debbie Brownfield
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Attention: Michael A. Woronoff, Esq.
(ii) if to Holder:
________________
________________
________________
________________
(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
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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.
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.
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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 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.
6.12 INCORPORATION OF STOCK OPTION PLAN. The Stock Option Plan and the
Employee Non-Qualified Stock Option Agreement of even date herewith (the
"Stock Option Agreement") between the Company and the Holder are hereby
incorporated by reference and made a part hereof, and the Warrants and this
Warrant Agreement are subject to all terms and conditions of the Stock Option
Plan and the Stock Option Agreement, including, without limitation, terms
relating to vesting set forth on Exhibit A to the Stock Option Plan. To the
extent any term or condition set forth in this Agreement is inconsistent with
any term or condition in the Stock Option Plan or the Stock Option Agreement,
the terms and conditions of the Stock Option Plan or the Stock Option
Agreement, as the case may be, shall govern.
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
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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.
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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:
______________________________________
[Holder]
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Annex 1
to
Warrant Agreement
[Form of Warrant Certificate]
WARRANT CERTIFICATE
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF THE LAMONTS APPAREL, INC. 1998 STOCK OPTION PLAN WHICH
PROVIDES, AMONG OTHER THINGS, THAT SUCH WARRANTS ARE NON-TRANSFERABLE.
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: _____ Warrant Certificate No. __
WARRANT CERTIFICATE
to Purchase Stock of
LAMONTS APPAREL, INC.
Expiring as set forth in the first paragraph hereof
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THIS IS TO CERTIFY THAT ________________ or his 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 January 31, 2002 (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 January 31, 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);
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(iv) up to 1,708,729 shares of Stock issuable pursuant to the
Company's 1998 Stock Option Plan (as such number may be adjusted by reason of
transactions of the type described in SECTION 4.01);
(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.
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"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 January 31, 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 January
31, 1998, between the Company and the initial holder of the Warrants
evidenced by this Warrant Certificate, as such Warrant Agreement shall be
modified and supplemented and in effect from time to time.
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"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, (ii) the additional New Class C Warrants (as defined in
and issued 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 effect at such
time. The
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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.
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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 authorized agent or attorney. Subject to compliance
with the next preceding paragraph and
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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 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
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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 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
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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 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
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(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 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
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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.
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
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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.
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
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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 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
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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.
SECTION 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. 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.
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,
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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.
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
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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 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.
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<PAGE>
IN WITNESS WHEREOF, the Company has duly executed this Warrant
Certificate.
Dated: January 31, 1998 LAMONTS APPAREL, INC.
By____________________________________
Name: Alan R. Schlesinger
Title: Chairman of the Board,
President and Chief Executive
Officer
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<PAGE>
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:_________________ __________________________________
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<PAGE>
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:
- ------------------------------
- ------------------------------
- ------------------------------
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<PAGE>
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
January 31, 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 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.
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:
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