The Wet Seal, Inc.
Foothill Ranch, CA 92610
October 4, 2012
Clinton Group, Inc.
9 West 57th Street, 26th Floor
New York, NY 10019
|Attn:||Mr. Joseph A. De Perio|
|Mr. George E. Hall|
|Mr. Gregory P. Taxin|
This letter constitutes the agreement (the Agreement) between Clinton Group, Inc., a Delaware corporation, on behalf of itself and its affiliated funds, persons and entities, both current and future (collectively, Clinton), and The Wet Seal, Inc., a Delaware corporation (the Company).
WHEREAS, Clinton is the beneficial owner of 6,225,313 shares of Class A common stock, par value $0.10 per share, of the Company (Class A Common Stock), which represents approximately 6.92% of the issued and outstanding shares of Class A Common Stock;
WHEREAS, Clinton is currently engaged in a solicitation of consents from the Companys stockholders (the Consent Solicitation) with respect to, among other things, the removal of certain current members on the Companys board of directors (the Board) and the election of Dorrit M. Bern, Lynda J. Davey, Mindy C. Meads and John S. Mills to serve as directors of the Board;
WHEREAS, Clinton agrees that it believes it has but not delivered valid written consents to remove the Resigning Directors (as defined below); and
WHEREAS, the Company and Clinton desire to resolve the Consent Solicitation and all matters related thereto and, in furtherance thereof, undertake the actions and agreements contained herein.
NOW, THEREFORE, in consideration of the promises and the representations, warranties and agreements contained herein, and other good and valuable consideration, the parties hereto mutually agree as follows:
1. The Company hereby confirms that simultaneously with the execution of this Agreement, the Board will take the following actions in the following order:
October 4, 2012
(a) authorize the reimbursement to Clinton of the reasonable and documented out-of-pocket expenses incurred by Clinton in connection with the Consent Solicitation, not to exceed $250,000 in the aggregate;
(b) accept the resignation of Harold D. Kahn, Jonathan Duskin, Sidney M. Horn and Henry D. Winterstern (collectively, the Resigning Directors) as directors of the Company, effective upon the execution of this Agreement; and
(c) appoint Dorrit M. Bern, Lynda J. Davey, Mindy C. Meads and John S. Mills to fill the four vacancies resulting from the foregoing resignations and the one pre-existing vacancy, such that the Board will be composed of Ms. Bern, Ms. Davey, Ms. Meads, Mr. Mills, Mr. Kenneth M. Reiss, Ms. Kathy Bronstein, Mr. John Goodman and one vacant seat (the New Board).
2. From the date hereof through October 23, 2012, (a) the Resigning Directors shall make themselves reasonably available to the New Board by telephone as reasonably requested by the New Board to facilitate an orderly transition to the New Board; and (b) Mr. Kahn shall continue to provide consulting services to the Board and the Company pursuant to the revised compensation arrangements previously agreed to between the Company and Mr. Kahn; provided that such consulting services shall only be provided by telephone. Each of the Resigning Directors shall be entitled to the vesting of a pro rata portion of his existing restricted stock grant, for the period of his service as a director from the date of the Companys 2012 annual meeting through the date hereof.
3. Clinton hereby agrees that it (a) shall immediately cease, and shall cause its affiliates to cease, any and all solicitation efforts in connection with the Consent Solicitation and (b) shall not vote, deliver or otherwise use any consents that may have been received to date pursuant to the Consent Solicitation.
4. The Company shall issue a press release in a form reasonably approved by Clinton (the Press Release) prior to the opening of trading on October 5, 2012, the Company shall file with the Securities and Exchange Commission (the SEC) a corresponding Form 8-K that includes both the Press Release and this Agreement, and Clinton shall file with the SEC a Schedule 13D/A that includes this Agreement and confirms its abandonment of the Consent Solicitation.
5. (a) Clinton, for the benefit of the Company and each of the Companys controlling persons, officers, directors, stockholders, agents, affiliates, employees, attorneys, advisors and assigns, past and present, in their capacity as such (the Company and each such person being a Company Released Person), hereby forever fully waives, discharges and releases, and covenants not to sue, any of the Company Released Persons for any and all claims, causes of action, actions, judgments, liens, debts, contracts, indebtedness, damages, losses, liabilities, rights, interests and demands of whatsoever kind or character (other than fraud) (collectively, Claims) based on any event, fact, act, omission, or failure to act by the Company Released Persons, whether known or unknown, occurring or existing prior to the execution of this Agreement; provided, however, this waiver and release and covenant not to sue shall not include any Claims arising out of or related to any obligations under, or breach of, this Agreement;
October 4, 2012
provided, further, nothing in the foregoing shall be deemed or constructed, now or hereafter, as limiting in any manner any right of indemnification inuring to the benefit of any director or former director of the Company arising under the organizational documents of the Company or otherwise.
(b) The Company, for the benefit of Clinton and its controlling persons, officers, directors, stockholders, agents, affiliates, employees, attorneys, advisors and assigns, past and present, in their capacity as such (each such person being a Clinton Released Person), hereby forever fully waives, discharges and releases and covenants not to sue, for any Claim based on any event, fact, act, omission or failure to act by such Clinton Released Person, whether known or unknown, occurring or existing prior to the execution of this Agreement; provided, however, this waiver and release and covenant not to sue shall not include any Claims arising out of or related to any obligations under, or breach of, this Agreement.
(c) It is the intention of the parties that the foregoing release set forth above in subsections (a) and (b) of this paragraph shall be effective as a bar to all matters released herein. In furtherance and not in limitation of such intention, the release described herein shall be, and shall remain in effect as, a full and complete release, notwithstanding the discovery or existence of any additional or different facts or claims. It is expressly understood and agreed that this Agreement is intended to cover and does cover not only all known facts and/or claims but also any further facts and/or claims not now known or anticipated, but which may later develop or should be discovered, including all the effects and consequences thereof. To further effectuate this intention, each party hereto acknowledges its awareness of California Civil Code Section 1542, which reads as follows: