FORM OF WARRANT To Subscribe for and Purchase Common Stock of Wilsons The Leather Experts Inc.
Exhibit 1
FORM OF WARRANT
To Subscribe for and Purchase Common Stock of
Xxxxxxx The Leather Experts Inc.
This Warrant (this “Warrant”) certifies, for value received, , a
(herein called “Purchaser”), or its registered assigns is entitled to subscribe for
and purchase from Wilsons The Leather Experts Inc. (herein called the “Company”), a corporation
organized and existing under the laws of the State of Minnesota, at the price specified below
(subject to adjustment as noted below) at any time from and after June 15, 2007 to and including
June 15, 2012, the number of fully paid and nonassessable shares of the Company’s common stock,
$0.01 par value per share (“Common Stock”), as set forth in Section 1 below. This Warrant is
issued pursuant to the terms of that certain Securities Purchase Agreement, dated as of June 1,
2007, by and among the Company, the Purchaser, and the other purchasers set forth therein (the
"Securities Purchase Agreement”).
The Exercise Price shall be $2.00 per share of Common Stock (subject to adjustment as noted below).
This Warrant is subject to the following provisions, terms and conditions:
1. Right to Purchase.
(a) The Purchaser is entitled to purchase shares of Common Stock, subject to
adjustment as provided in this paragraph 1(a). When any adjustment is required to be made to the
Exercise Price pursuant to Section 5 below, the number of shares of Common Stock purchasable upon
the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares of Common Stock issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior
to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.
(b) Notwithstanding paragraph 1(a) above, the Company shall not be obligated to issue any
shares of Common Stock upon exercise of this Warrant if the issuance of such shares of Common Stock
would exceed the number of shares of Common Stock that the Company may issue to the Purchaser
without breaching the Company’s obligations under the rules and regulations of the Nasdaq Global
Select Market (as defined in the Securities Purchase Agreement) (the “Exchange Cap”), except the
limitation shall not apply in the event that the Company (a) obtains the approval of its
shareholders as required by the applicable rules of the Nasdaq Global Select Market for issuances
in excess of the Exchange Cap or (b) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be reasonably satisfactory to the
Purchaser.
2. The rights represented by this Warrant may be exercised by the holder hereof, in whole or in
part, by written notice of exercise, in the form attached hereto, delivered to the Company by the
surrender of this Warrant (properly endorsed if required) at the principal office of the Company
and upon payment to it by check of the Exercise Price in lawful money of the United States. The
Company agrees that the shares of Common Stock so purchased shall be and are deemed to be issued to
the holder hereof as the record owner of such shares of Common Stock as of the close of business on
the date on which this Warrant shall have been surrendered and payment made for such shares of
Common Stock as aforesaid. Subject to the provisions of the next succeeding paragraph,
certificates for the shares of Common Stock so purchased shall be delivered to the holder hereof
within a reasonable time, not exceeding l0 days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number
of shares of Common Stock, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the holder hereof within such time.
3. Notwithstanding the foregoing, however, the Company shall not be required to deliver any
certificate for shares of Common Stock upon exercise of this Warrant except in accordance with the
provisions, and subject to the limitations, of paragraphs 8 and 9 hereof.
4. The Company covenants and agrees that all shares of Common Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance as set forth above, be duly
authorized and issued, fully paid and nonassessable and free of preemptive rights. The Company
further covenants and agrees that during the period within which the rights
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represented by this Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of issue or transfer upon exercise of the subscription rights evidenced by
this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
5. The above provisions are, however, subject to this paragraph 5. Notwithstanding anything in
this paragraph 5 to the contrary, no change in the Exercise Price shall be made until the
cumulative effect of the adjustments called for by this paragraph 5 since the date of the last
change in the Exercise Price would change the Exercise Price by more than 1%. However, once the
cumulative effect would result in such a change, then the Exercise Price shall be changed to
reflect all adjustments called for by this paragraph 5 and not previously made. Subject to the
foregoing, the Exercise Price shall be adjusted from time to time as set forth in this paragraph 5.
If the occurrence of an event would cause the Exercise Price to be adjusted by more than one
subsection of this Section 5, then the Exercise Price shall be adjusted once pursuant to the
subsection that would provide the greatest dollar amount decrease in the Exercise Price.
(a) Adjustments to Exercise Price for Consolidation, Merger, etc. In case of any
consolidation or merger of the Company with any other entity (other than a wholly owned subsidiary
of the Company), or in case of any sale or transfer of all or substantially all of the assets of
the Company, or in case of any share exchange pursuant to which all of the outstanding shares of
Common Stock are converted into other securities or property, the Company shall, prior to or at the
time of such transaction, make appropriate provision or cause appropriate provision to be made so
that the Purchaser shall have the right thereafter to exercise this Warrant into the kind and
amount of shares of stock and other securities and property receivable upon such consolidation,
merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock into
which such this Warrant could have been exercised immediately prior to the effective date of such
consolidation, merger, sale, transfer or share exchange. If in connection with any such
consolidation, merger, sale, transfer or share exchange, each holder of shares of Common Stock is
entitled to elect to receive either securities, cash or other assets upon completion of such
transaction, the Company shall provide or cause to be provided to the Purchaser the right to elect
the securities, cash or other assets for which this Warrant shall be exercisable after completion
of any such transaction on the same terms and subject to the same conditions applicable to holders
of the Common Stock (including, without limitation, notice of the right to elect, limitations on
the period in which such election shall be made and the effect of failing to exercise the
election).
(b) Adjustments to Exercise Price for Stock Splits, Reclassifications, and Certain
Distributions. In case the Company shall:
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(i) pay a dividend or make a distribution on its Common Stock in shares of its capital stock;
(ii) subdivide its outstanding Common Stock into a greater number of shares;
(iii) combine the shares of its outstanding Common Stock into a smaller number of shares; or
(iv) issue by reclassification of its Common Stock any shares of its capital stock,
then in each such case the Exercise Price in effect immediately prior thereto shall be
proportionately adjusted so that the Purchaser, upon any exercise of this Warrant, shall be
entitled to receive, to the extent permitted by applicable law, the number and kind of shares of
capital stock of the Company which the Purchaser would have owned or have been entitled to receive
after the happening of such event had this Warrant, or any portion hereof, been exercised
immediately prior to the record date for such event (or if no record date is established in
connection with such event, the effective date for such action).
An adjustment pursuant to this subparagraph (b) shall become effective immediately after the
record date in the case of a stock dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or reclassification.
(c) Adjustments to Exercise Price for Diluting Issues.
(i) Certain Definitions. For purposes of this paragraph 5, the following terms shall
have the following meanings:
(A) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued by the
Company or deemed to be issued pursuant to paragraph 5(c)(ii) below (including shares of Common
Stock subsequently reacquired or retired by the Company) after the date hereof.
(B) “Business Day” shall mean any day except Saturday, Sunday or federal legal holiday, and
any other day on which the Trading Market (as defined below) is closed.
(C) “Convertible Security” shall mean any evidence of indebtedness, share or other security
directly or indirectly convertible or exchangeable into or for Common Stock, excluding Options.
(D) “Option” shall mean any option, warrant, right or security to purchase or otherwise
acquire Common Stock or Convertible Securities.
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(E) “Trading Market” means whichever of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or
the OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in
question.
(ii) Additional Shares of Common Stock Deemed to be Issued.
(A) If after the date hereof, the Company shall issue or sell any Options or Convertible
Securities, or shall fix a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the maximum number of shares
of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any
conditions to exercisability, convertibility or exchangeability but without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as
of the time of such issue or, in case such a record date shall have been fixed, as of the close of
business on such record date.
(B) If the terms of any Option or Convertible Security, the issuance of which resulted in an
adjustment to the Exercise Price pursuant to the terms of this subparagraph 5(c), are revised as a
result of an amendment to such terms or any other adjustment pursuant to the provisions of such
Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to
anti-dilution or similar provisions of such Option or Convertible Security) to provide for either
(1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise,
conversion and/or exchange of any such Option or Convertible Security or (2) any increase or
decrease in the consideration payable to the Company upon such exercise, conversion and/or
exchange, then, effective upon such increase or decrease becoming effective, the Exercise Price
computed upon the original issue of such Option or Convertible Security (or upon the occurrence of
a record date with respect thereto) shall be readjusted to such Exercise Price as would have
obtained had such revised terms been in effect upon the original date of issuance of such Option or
Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this subparagraph
(B) shall have the effect of increasing the Exercise Price to an amount which exceeds the lower of
(X) the Exercise Price in effect immediately prior to the original adjustment made as a result of
the issuance of such Option or Convertible Security, or (Y) the Exercise Price that would have
resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of
Additional Shares of Common Stock as a result of the issuance of such Option or Convertible
Security) between the original adjustment date and such readjustment date.
(C) If the terms of any Option or Convertible Security, the issuance of which did not result
in an adjustment to the Exercise Price pursuant to the terms of this subparagraph 5(c) (either
because the consideration per share (determined pursuant to subparagraph 5(c)(iii)) of the
Additional Shares of Common Stock subject thereto was equal to or greater than the Exercise Price
then in effect and the then Current Market Price, or because such Option or Convertible Security
was issued before the date hereof), are revised after the date hereof as a result of an amendment to such terms or any other adjustment pursuant to the
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provisions of such Option or Convertible Security (but excluding automatic adjustments to such
terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to
provide for either (1) any increase or decrease in the number of shares of Common Stock issuable
upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any
increase or decrease in the consideration payable to the Company upon such exercise, conversion or
exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional
Shares of Common Stock subject thereto (determined in the manner provided in subparagraph 5(c)(ii))
shall be deemed to have been issued effective upon such increase or decrease becoming effective.
(D) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged
Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon
a revision of its terms) in an adjustment to the Exercise Price pursuant to the terms of
subparagraphs 5(c)(iv) or (v), the Exercise Price shall be readjusted to such Exercise Price as
would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(E) If the number of shares of Common Stock issuable upon the exercise, conversion and/or
exchange of any Option or Convertible Security, or the consideration payable to the Company upon
such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible
Security is issued or amended but is subject to adjustment based upon subsequent events, any
adjustment to the Exercise Price provided for in this subparagraph 5(c)(ii) shall be effected at
the time of such issuance or amendment based on such number of shares or amount of consideration
without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall
be treated as provided in clauses (B) and (C) of this subparagraph 5(c)(ii)). If the number of
shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or
Convertible Security, or the consideration payable to the Company upon such exercise, conversion
and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is
issued or amended, any adjustment to the Exercise Price that would result under the terms of this
subparagraph 5(c)(ii) at the time of such issuance or amendment shall instead be effected at the
time such number of shares and/or amount of consideration is first calculable (even if subject to
subsequent adjustments), assuming for purposes of calculating such adjustment to the Exercise Price
that such issuance or amendment took place at the time such calculation can first be made.
(iii) Determination of Consideration. For purposes of this paragraph 5, the
consideration received by the Company for the issue of any Additional Shares of Common Stock shall
be computed as follows:
(A) Cash and Property: Such consideration shall:
(1) insofar as it consists of cash, be computed at the aggregate amount of cash received by
the Company, excluding amounts paid or payable for accrued interest;
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(2) insofar as it consists of property other than cash, be computed at the fair market value
thereof at the time of such issue, as determined in good faith by the Board of Directors of the
Company; and
(3) in the event Additional Shares of Common Stock are issued together with other shares or
securities or other assets of the Company for consideration which covers both, be the proportion of
such consideration so received for the Additional Shares of Common Stock, computed as provided in
clauses (1) and (2) above, as determined in good faith by the Board of Directors of the Company.
(B) Options and Convertible Securities. The consideration per share received by the
Company for Additional Shares of Common Stock deemed to have been issued pursuant to subparagraph
5(c)(ii), relating to Options and Convertible Securities, shall be determined by dividing:
(1) the minimum aggregate amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion or exchange of such
Convertible Securities, by
(2) the maximum number of shares of Common Stock (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange of such Convertible Securities.
(iv) Issues Below Current Market Price.
(A) In case the Company shall issue or sell or, or is deemed to have issued or sold pursuant
to subparagraph 5(c)(ii) above, Additional Shares of Common Stock for consideration per share less
than the average of the daily last sales price of the Common Stock on the Trading Market as
reported by Bloomberg Financial Markets, or a comparable reporting service (the “Closing Price”)
for the 10 consecutive Business Days ending on the Business Day immediately preceding the date of
such issuance (the “Current Market Price”), then in each such case the Exercise Price in effect on
such record date shall be adjusted in accordance with the formula:
| E1 = E x | O + | N x P | ||||
| M | ||||||
| O + N | ||||||
where
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| E1 | = | the adjusted Exercise Price. | ||||
| E | = | the current Exercise Price. | ||||
| O | = | the number of shares of Common Stock outstanding on the Business Day immediately preceding the date of such issuance (for which purpose the shares of Common Stock outstanding shall be the sum of (1) the number of shares of Common Stock then outstanding, and (2) the number of shares of Common Stock into which any other outstanding securities of the Company are then issuable upon conversion, exercise or exchange of such securities other than the “Warrants” (as defined in the Securities Purchase Agreement)). | ||||
| N | = | the number of Additional Shares of Common Stock issued, or deemed to have been issued. | ||||
| P | = | the consideration per share of the Additional Shares of Common Stock issued or deemed to have been issued. | ||||
| M | = | the Current Market Price per share of Common Stock on the date of such issuance. |
(B) Such adjustment shall become effective immediately after the date of issuance, or deemed
issuance, of such Common Stock.
(v) Issues Below Exercise Price.
(A) In case the Company shall issue or sell or, or is deemed to have issued or sold pursuant
to subparagraph 5(c)(ii) above, Additional Shares of Common Stock for consideration per share less
than the Exercise Price in effect immediately prior to the date of such issue, then in each such
case the Exercise Price in effect on such issuance date shall be adjusted in accordance with the
formula:
| E1 = E x | O + | N x P | ||||
| E | ||||||
| O + N | ||||||
where
| E1 | = | the adjusted Exercise Price. | ||||
| E | = | the current Exercise Price. | ||||
| O | = | the number of shares of Common Stock outstanding on the Business Day immediately preceding the date of such issuance (for which purpose the shares of Common Stock outstanding shall be the sum of (1) the number of shares of Common Stock then outstanding, and (2) the number of shares of Common Stock into which any other outstanding securities of the Company are then issuable upon conversion, exercise or exchange of such securities other than the “Warrants” (as defined in the Securities Purchase Agreement)). | ||||
| N | = | the number of Additional Shares of Common issued, or deemed to have |
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| been issued. | ||||||
| P | = | the consideration per share of the Additional Shares of Common Stock issued, or deemed to have been issued. |
(B) Such adjustment shall become effective immediately after the date of issuance, or deemed
issuance, of such Common Stock.
(d) Adjustments to Exercise Price for Certain Distributions.
(i) In case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock evidences of its Indebtedness (as defined in the Securities Purchase
Agreement) or assets (including securities, but excluding (A) any Options or Convertible
Securities, and (B) any dividend or distribution paid in cash out of the retained earnings
of the Company and any dividend or distribution referred to in subparagraph 5(b) above),
then in each such case the Exercise Price then in effect shall be adjusted as of the
ex-dividend date for such dividend or distribution in accordance with the formula:
| E1 | = | E | x | M - F
|
where
| E1 | = | the adjusted Exercise Price. | ||||
| E | = | the current Exercise Price. | ||||
| M | = | the Current Market Price per share of Common Stock on the ex-dividend date for such distribution. | ||||
| F | = | the amount of such cash dividend and/or the fair market value on such ex-dividend date of the assets, securities, rights or warrants to be distributed divided by the number of shares of Common Stock outstanding on such ex-dividend date. The Board of Directors of the Company shall determine in good faith such fair market value. |
Notwithstanding the foregoing, in no event shall |
M - F | be deemed to be less than zero. | ||
| M |
(ii) Such adjustment shall become effective immediately after the ex-dividend date with
respect to such dividend or distribution.
(e) All calculations of adjustments hereunder shall be made to the nearest cent or to the
nearest 1/100 of a share, as the case may be.
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(f) In the event that at any time, as a result of an adjustment made pursuant to subparagraph
(a) or (b) above, the Purchaser shall, upon any exercise of this Warrant, become entitled to
receive securities, cash or assets other than Common Stock, the number or amount of such securities
or property so receivable upon such exercise shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in subparagraphs (a) through (d) above.
(g) Whenever the Exercise Price is adjusted as herein provided, the Company shall send to each
transfer agent for the Common Stock, and to the Trading Market, a statement signed by the Chairman
of the Board, the Chief Executive Officer, the Chief Financial Officer or any Vice President of the
Company and if required by the Trading Market by its Treasurer, its Secretary or its Assistant
Secretary stating the adjusted Exercise Price determined as provided in this paragraph 5; and any
adjustment so evidenced, given in good faith, shall be binding upon all shareholders and upon the
Company. Whenever the Exercise Price is adjusted, the Company shall give prompt notice to the
holder hereof by mail, setting forth the adjustment and the new Exercise Price. Notwithstanding
the foregoing notice provisions, failure by the Company to give such notice or a defect in such
notice shall not affect the binding nature of such corporate action of the Company.
(h) Whenever the Company shall propose to take any of the actions specified in subparagraphs
(a) through (d) of this paragraph 5 which would result in any adjustment in the Exercise Price, the
Company shall cause a notice to be mailed at least 10 days prior to the date on which the books of
the Company will close or on which a record will be taken for such action to the holder of record
of this Warrant on the date of such notice. Such notice shall specify the action proposed to be
taken by the Company and the date as of which holders of record of the Common Stock shall
participate in any such actions or be entitled to exchange their Common Stock for securities or
other property, as the case may be. Failure by the Company to give such notice or any defect in
such notice shall not affect the validity of the transaction.
(i) Notwithstanding any other provision of this paragraph 5, no adjustment in the Exercise
Price need be made (A) for issuances of (1) Conversion Shares or Warrant Shares (as such terms are
defined in the Securities Purchase Agreement) or (2) Common Stock or Convertible Securities
actually issued upon the exercise of Options or shares of Common Stock actually issued upon the
conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant
to the terms of such Option or Convertible Security; (B) for issuances of shares of Common Stock,
Options or Convertible Securities issued as a dividend or distribution on Series A Preferred Stock
(as defined in the Securities Purchase Agreement); (C) for sales of Common Stock pursuant to a plan
for reinvestment of dividends on Common Stock, provided that the purchase price in any such sale is
at least equal to 95% of the market price of the Common Stock at the time of such sales; or (D) for
sales of Common Stock pursuant to any plan adopted by the Company for the benefit of its employees
or consultants, provided that such plan has been approved by the Company’s independent directors,
or pursuant to any plan for the benefit of the Company’s directors, provided that such plan has
been approved by the Company’s shareholders.
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(j) If any event occurs as to which in the opinion of the Board of Directors of the Company
the other provisions of this paragraph 5 are not strictly applicable or if strictly applicable
would not fairly protect the purchase rights of the holder of this Warrant or of Common Stock in
accordance with the essential intent and principles of such provisions, then the Board of Directors
of the Company shall make an adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect such purchase rights as aforesaid; provided,
however, that the members of the Board of Directors of the Company shall not be liable to the
holders hereof for any such determination made in good faith.
(k) No fractional shares of Common Stock shall be issued upon the exercise of this Warrant,
but, instead the Company shall round such fraction of a share of Common Stock to the nearest whole
share, except that if the fraction is one-half or greater, the Company shall round the fraction up
to the nearest whole share.
6. As used herein, the term “Common Stock” shall mean and include the Company’s presently
authorized Common Stock and shall also include any capital stock of any class of the Company
hereafter authorized which shall not be limited to a fixed sum or percentage in respect of the
rights of the holders thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company; provided that the
shares purchasable pursuant to this Warrant shall include shares designated as Common Stock of the
Company on the date of original issue of this Warrant or, in the case of any reclassification of
the outstanding shares thereof, the stock, securities, cash or assets provided for in paragraph
5(a) above.
7. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company.
8.
(a) The holder of this Warrant acknowledges that neither this Warrant nor, as of the date of
the original issuance of this Warrant, any of the shares of Common Stock issuable upon exercise
hereof have been registered under the Securities Act of 1933, as amended (the “Act”), or any state
securities laws and that this Warrant or such shares of Common Stock may only be transferred in
accordance with this paragraph 8. The holder of this Warrant, by acceptance hereof, represents
that it has acquired this Warrant for investment and not with a view to distribution of this
Warrant or the shares of Common Stock issuable upon exercise hereof within the meaning of the Act
and the rules and regulations thereunder.
(b) The holder realizes that the purchase of this Warrant is a speculative investment, and
that the economic benefits which may be derived therefrom are uncertain. In determining whether or
not to purchase the Warrant, the holder has relied solely upon the publicly-available materials
filed by the Company with the Securities and Exchange Commission, copies of which have been
reviewed by the Purchaser, and upon independent investigations made by the holder and its
representatives.
(c) The holder of this Warrant, by acceptance hereof, agrees to give written notice to the
Company before exercising or transferring this Warrant, in whole or in part, or transferring any
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shares of Common Stock issuable or issued upon the exercise hereof, if at the time of such transfer
the shares of Common Stock are not covered by an effective registration statement under the Act, of
such holder’s intention to do so. Such holder shall also provide the Company with an opinion of
counsel reasonably satisfactory to the Company to the effect that the proposed exercise or transfer
of this Warrant or transfer of shares, if at the time of such transfer the shares are not covered
by an effective registration statement under the Act, may be effected without registration or
qualification under the Act and any applicable state securities laws. Upon receipt of such written
notice and opinion by the Company, such holder shall be entitled to exercise this Warrant in
accordance with its terms, or to transfer this Warrant, or to transfer shares of Common Stock
issuable or issued upon the exercise of this Warrant, all in accordance with the terms of the
notice delivered by such holder to the Company, provided that an appropriate legend respecting the
aforesaid restrictions on transfer may be endorsed on this Warrant, if at the time of such transfer
the shares are not covered by an effective registration statement under the Act, or the
certificates for such shares. In the event of a proposed transfer of this Warrant, prior to the
transfer the proposed transferee shall execute and deliver to the Company a warrant transfer letter
in the form attached hereto.
9. Subject to the provisions of paragraph 8 hereof, this Warrant and all rights hereunder are
transferable, without the prior approval of the Company, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized attorney, upon surrender
of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that the bearer of this Warrant, when endorsed, may be treated by the
Company and all other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this Warrant, or to the
transfer hereof on the books of the Company, any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered holder hereof as the owner for
all purposes.
10. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the principal
office of the Company, for new Warrants of like tenor representing in the aggregate the right to
subscribe for and purchase the number of shares which may be subscribed for and purchased
hereunder, each of such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of such surrender.
11. The Company covenants and agrees that the holder of this Warrant shall have the rights of a
“Purchaser” under the Registration Rights Agreement, of even date herewith, by and among the
Company, the Purchaser, and the other purchasers set forth therein, set forth in such agreement.
12.
(a) In addition to and without limiting the rights of the holder of this Warrant under the
terms of this Warrant, the holder of this Warrant shall have the right (the “Conversion Right”) to
convert this Warrant or any portion thereof into shares of Common Stock as provided in this paragraph 12 at any time or from time to time prior to its expiration. Upon exercise
of the Conversion Right with respect to a particular number of shares subject to this Warrant (the
“Converted Warrant Shares”), the Company shall deliver to the holder of this Warrant, without
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payment by the holder of any exercise price or any cash or other consideration, that number of
shares of Common Stock equal to the quotient obtained by dividing the Net Value (as defined below)
of the Converted Warrant Shares by the Market Price (as defined below) of a single share of Common
Stock, determined in each case as of the Conversion Date (as hereinafter defined). The “Net Value”
of the Converted Warrant Shares shall be determined by subtracting the aggregate Exercise Price of
the Converted Warrant Shares from the aggregate Market Price of the Converted Warrant Shares.
Notwithstanding anything in this paragraph 12 to the contrary, the Conversion Right cannot be
exercised with respect to a number of Converted Warrant Shares having a Net Value below $100. No
fractional shares shall be issuable upon exercise of the Conversion Right, and if the number of
shares to be issued in accordance with the foregoing formula is other than a whole number, the
Company shall round such fraction of a share of Common Stock to the nearest whole share, except
that if the fraction is one-half or greater, the Company shall round the fraction up to the nearest
whole share.
(b) The Conversion Right may be exercised by the holder of this Warrant by the surrender of
this Warrant at the principal office of the Company together with a written statement specifying
that the holder thereby intends to exercise the Conversion Right and indicating the number of
shares subject to this Warrant which are being surrendered (referred to in subparagraph (a) above
as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be
effective upon receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the “Conversion Date”), but not later
than the expiration date of this Warrant. Certificates for the shares of Common Stock issuable
upon exercise of the Conversion Right and, in the case of a partial exercise, a new warrant
evidencing the shares remaining subject to this Warrant, shall be issued as of the Conversion Date
and shall be delivered to the holder of this Warrant within 15 days following the Conversion Date.
(c) “Market Price” for purposes of this paragraph 12 shall mean, if the Common Stock is traded
on a securities exchange, the closing price of the Common Stock on such exchange, or, if the Common
Stock is otherwise traded in the over-the-counter market, the closing bid price, in each case
averaged over a period of 20 consecutive Business Days prior to the Conversion Date. If at any
time the Common Stock is not traded on an exchange, or otherwise traded in the over-the-counter
market, the “market price” shall be deemed to be the higher of (i) the book value thereof as
determined by any firm of independent public accountants of recognized standing selected by the
Board of Directors of the Company as of the last day of any month ending within 60 days preceding
the Conversion Date, or (ii) the fair value thereof determined in good faith by the Board of
Directors of the Company as of a date which is within l5 days of the Conversion Date.
13. The issuance of any shares or other securities upon the exercise of this Warrant, and the
delivery of certificates or other instruments representing such shares or other securities, shall
be made without charge to the holder hereof for any tax or other charge in respect of such
issuance. 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 any certificate in a name other than that of the
holder hereof and the Company shall not be required to issue or deliver any such certificate unless
and until the person or persons requesting the issue thereof shall have paid to the
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Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has
been paid.
14. All questions concerning this Warrant will be governed and interpreted and enforced in
accordance with the internal law, not the law of conflicts, of the State of Minnesota.
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized
officer and this Warrant to be dated as of June 15, 2007.
| XXXXXXX THE LEATHER EXPERTS INC. |
||||
| By | ||||
| Its | ||||
RESTRICTION ON TRANSFER
The securities evidenced hereby may not be transferred without (i) the opinion of counsel
satisfactory to the Company that such transfer may be lawfully made without registration under the
Securities Act of 1933, as amended, and all applicable state securities laws or (ii) such
registration.
-15-
ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________________ this Warrant, and appoints ______________________________________ to transfer this
Warrant on the books of Xxxxxxx The Leather Experts Inc. with the full power of substitution in the
premises.
Dated: _________________________
In the presence of: _________________________
_______________________________________
(Signature must conform in all respects to the name of the holder as
specified on the face of this Warrant without any alteration or
change whatsoever, and the signature must be guaranteed in the usual
manner)
FORM OF WARRANT TRANSFER LETTER
To: Xxxxxxx The Leather Experts Inc.
Ladies and Gentlemen:
The undersigned is a proposed transferee of the warrant (the “Warrant”) to purchase
_______________________ shares of Common Stock, par value $0.01 (“Common Stock”), of Wilsons The
Leather Experts Inc., a Minnesota corporation (the “Company”), currently registered in the name of
______________________. In order to induce the Company to consent to the transfer of the Warrant, the
undersigned hereby represents, warrants and agrees as follows:
| 1. | The undersigned acknowledges that neither the Warrant nor **[any of the shares of Common Stock issuable upon exercise thereof] have been registered under the Securities Act of 1933, as amended (the “Act”), or any state securities laws and that, accordingly, the Warrant **[and such shares of Common Stock] may only be transferred in accordance with the terms of paragraphs 8 and 9 of the Warrant. |
| 1. | The undersigned is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Act. |
| Signature ______________________________ Address _______________________________ Date __________________________________ |
||||
FORM OF EXERCISE NOTICE
To be Executed by the Holder of this Warrant if such Holder
Desires to Exercise this Warrant in Whole or in Part:
To: Xxxxxxx The Leather Experts Inc. (the “Company”)
The undersigned _______________________________________________
Please insert Social Security or other
identifying number of Purchaser:
____________________________________________________
identifying number of Purchaser:
____________________________________________________
hereby irrevocably elects to exercise the right of purchase represented by this Warrant for, and to
purchase thereunder, ___________________ shares of the Common Stock provided for therein and
tenders payment herewith to the order of the Company in the amount of $___________________, such
payment being made as provided on the face of this Warrant.
In order to induce the Company to consent to the exercise of this Warrant, the undersigned hereby
represents, warrants and agrees that neither this Warrant **[nor any of the shares of Common Stock
issuable upon exercise hereof] have been registered under the Securities Act of 1933, as amended
(the “Act”), or any state securities laws and that, accordingly, this Warrant may be exercised [and
the shares of Common Stock issued pursuant to this exercise] may only be transferred in accordance
with the terms of paragraphs 8 and 9 of this Warrant.
The undersigned requests that certificates for such shares of Common Stock be issued
as follows:
Name: _________________________________________________________________________________________
Address: ______________________________________________________________________________________
Deliver to: _____________________________________________________________________________________
Address: ______________________________________________________________________________________
and, if such number of shares of Common Stock shall not be all the shares of Common Stock
purchasable hereunder, that a new Warrant for the balance remaining of the shares of Common Stock
purchasable under this Warrant be registered in the name of, and delivered to, the undersigned at
the address stated below.
Address: _____________________________________________________________
Signature _______________________________________
(Signature must conform in all respects to the name of the
holder as written specified on the face of this Warrant
without any alteration or change whatsoever)
holder as written specified on the face of this Warrant
without any alteration or change whatsoever)
Dated: ____________________
