Exhibit 4.8
REGISTRATION RIGHTS AGREEMENT
dated as of
May 25, 1996
by and among
Melville Corporation,
Wilsons The Leather Experts Inc.,
The Managers Listed on The Signature Pages Hereto,
Leather Investors Limited Partnership I
and
The Partners Listed on the Signature Pages Hereto
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of May 25, 1996 by and among Wilsons The Leather
Experts Inc., a Minnesota corporation ("Newco"), Melville Corporation, a New
York corporation ("Melville"), the managers listed on the signature pages hereto
(the "Managers"), Leather Investors Limited Partnership I, a Minnesota Limited
Partnership (the "Limited Partnership I"), and the partners of the Limited
Partnership I listed on the signature pages hereto (the "Partners", and
collectively and individually, and with the Limited Partnership I, the
"Investors").
W I T N E S S E T H:
WHEREAS, pursuant to the Sale Agreement dated as of May 24, 1996 among
Newco, Wilsons Center, Inc. (the "Company"), and Melville (the "Sale Agreement")
Melville has agreed to transfer 100 shares of common stock of the Company,
constituting one hundred percent of the issued and outstanding capital stock of
the Company, to Newco in exchange for the Common Shares (as defined below) of
Newco, the Preferred Shares (as defined below) of Newco, the Note (as defined
below) of Newco, the Warrant (as defined below) and the Management Warrant (as
defined below);
WHEREAS, pursuant to the Stock Purchase Agreement ("Manager Stock
Purchase Agreement") dated as of May 25, 1996 among Newco and the Managers,
Newco has agreed to sell to the Managers 2,050,000 shares of the Class B Common
Stock and 450,000 shares of the Class C Common Stock (the "Management Shares")
and 1,200,000 shares of restricted Class B Common Stock (the "Restricted Common
Stock") of Newco for an aggregate purchase price of $2,000,000.
WHEREAS, pursuant to the Stock Purchase Agreement ("Investor Stock
Purchase Agreement") dated as of May 25, 1996 among Melville, the Limited
Partnership I and Leather Investors Limited Partnership II, a Minnesota limited
partnership (the "Limited Partnership II"), Melville has agreed to sell to the
Limited Partnership I 4,800,000 shares of the Class A Common Stock (the "Common
Shares") and to the Limited Partnership II 7,405 shares of preferred stock (the
"Preferred Shares") of Newco for an aggregate purchase price of $10,000,000.
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the obligations of the parties to the Sale Agreement to consummate
the transactions contemplated thereby;
NOW, THEREFORE, in consideration of good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, together with the
mutual covenants and agreements herein contained, the parties hereto agree as
follows:
DEFINITIONS
1.1 Definitions. (a) The following terms, as used herein, have the
following meanings:
"Class A Common Stock" means the Class A Common Stock, par value $.01
per share of Newco, having the rights, voting power, preferences and
restrictions designated in the articles of incorporation of Newco.
"Class B Common Stock" means the Class B Common Stock, par value $.01
per share of Newco, having the rights, voting power, preferences and
restrictions designated in the articles of incorporation of Newco.
"Class C Common Stock" means the Class C Common Stock, par value $.01
per share of Newco, having the rights, preferences and restrictions designated
in the articles of incorporation of Newco.
"Closing Date" means the date of the Closing.
"Common Shares" means 4,800,000 shares of Class A Common Stock of
Newco issued by Newco to Melville pursuant to the Sale Agreement.
"Common Stock" means the Class A Common Stock, Class B Common Stock,
Class C Common Stock and any common stock undesignated as to class, par value
$.01 per share, of Newco.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any property or
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 property or asset.
"Management Warrant" means the warrant issued by Newco to Melville
pursuant to the Sale Agreement to purchase 1,200,000 shares of Class A Common
Stock during the two year period after April 30, 2001, as such number of shares
may be reduced by the terms of the Management Warrant.
"Manager Stock Purchase Agreement" means the stock purchase agreement
dated May 25, 1996 among Newco and the Managers.
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"Note" means the senior secured subordinated note due December 31,
2000 of Newco in the principal amount of $55,811,000 issued to Melville pursuant
to the Sale Agreement.
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"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Preferred Shares" means 7,405 shares of the series A preferred stock
of Newco, issued by Newco to Melville pursuant to the Sale Agreement.
"Warrant" means the warrant issued by Newco to Melville to purchase
1,500,000 shares of Class A Common Stock issued to Melville pursuant to the Sale
Agreement.
"Warrant Shares" means the shares of Class A Common Stock of Newco to
be issued upon the exercise of the Warrant and the Management Warrant.
(a) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Demanding Holders........... 2.1
Demanding Shareholders...... 2.1
Management Warrant Holders.. 2.1
Note Holders................ 2.1
Registering Holders......... 2.2
Section 3.1 Offer........... 3.1
Section 3.1 Offer Notice.... 3.1
Section 3.1 Offer Period.... 3.1
Section 3.1 Sale Price...... 3.1
SEC......................... 2.1
Subject Obligations......... 2.1
Subject Securities.......... 2.1
Third Party Claim........... 2.5
Warrant Holders............. 2.1
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REGISTRATION RIGHTS
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2.1 Registration Upon Request. Subject to the provisions herein, (i) at
any time commencing on the Closing Date and continuing thereafter, holders of a
majority in aggregate principal amount of the Notes (such holders being referred
to as the "Note Holders"), holders of a majority of the Warrants determined by
reference to the number of shares of Common Stock for which such Warrants are
exercisable (such holders being referred to as the "Warrant Holders") and, after
April 30, 2001 holders of a majority of the Management Warrants determined by
reference to the number of shares of Common Stock for which such Management
Warrants are exercisable (such holders being referred to as the "Management
Warrant Holders") shall have the right to make written demand upon Newco, on not
more than three separate occasions (and may not effect more than one
registration each 120 days) for each of the Note, the Warrant and the Management
Warrant (subject to the provisions of this Section 2.1) (the Note, Warrant and
Management Warrant being referred to as the "Subject Obligations"), to register
under the 1933 Act, the portion of the Note, the Warrant or the Management
Warrant (but in the case of the Management Warrant, to register the portion of
the number of shares of Common Stock for which such Management Warrant is
exercisable in lieu of the Management Warrant) held by such Note Holders,
Warrant Holders or Management Warrant Holders, as the case may be (the
"Demanding Holders"), and (ii) at any time after the earlier of (A) six months
following the closing of an initial public offering of Common Stock or (B) the
second anniversary of the Closing Date, but no later than May 25, 2007, holders
of a majority of the outstanding Class A Common Stock that was outstanding as of
the date of this Agreement whether held by the original holders or by the
transferees of such Class A Common Stock from such holders (so long as any such
transferee provides evidence reasonably satisfactory to Newco that such transfer
is permitted under all applicable federal and state securities laws and under
the Shareholders Agreement referred to in the Sale Agreement) or, if all Class A
Common Stock shall have been converted into Common Stock without designation as
to class, a majority of the number of outstanding shares of Common Stock into
which such Class A Common Stock outstanding as of the date of this Agreement
shall have been converted whether held by the original holders or by transferees
of such Class A Common Stock from such holders (so long as any such transferee
provides evidence reasonably satisfactory to Newco that such transfer is
permitted under all applicable federal and state securities laws and under the
Shareholders Agreement referred to in the Sale Agreement) ("Demanding
Shareholders") shall have the right to make written demand upon Newco, on not
more than two separate occasions (subject to the provisions of this Section 2.1)
but may make unlimited demands for registration on Form S-3, if permitted, to
register under the 1933 Act the shares of Common Stock held by such shareholders
in such amount that such shareholders request to be registered (such Subject
Obligations and Common Stock being referred to as the "Subject Securities"),
provided that they may not effect more than one registration each 120 days, and
Newco shall use its best efforts to cause such securities to be registered under
the 1933 Act and take all other action reasonably necessary under state law or
regulation as soon as reasonably practicable so as to permit the sale thereof
promptly, provided further that, notwithstanding anything in this Agreement to
the contrary, the Subject Obligations or Subject Securities, as the case may be,
shall cease to be subject to this Section 2.1 and Section 2.2 when (i) a
registration statement registering such Subject Obligations or Subject
Securities, as the case may be, under the 1933 Act has been declared effective
and such Subject Obligations or Subject Securities, as the case may be, have
been sold or otherwise transferred by the holder thereof pursuant to such
effective registration statement or (ii) such Subject Obligations or Subject
Securities, as the case may be, are sold pursuant to Rule 144 (or any successor
provision) promulgated under the 1933 Act under circumstances in which any
legend borne by such Subject Obligations or Subject Securities relating to
restrictions on transferability thereof, under the
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1933 Act or otherwise, is removed by Newco. Promptly after receiving any of the
above demands for registration, Newco shall give notice in the case of clause
(i) of the first sentence of this paragraph, to all Note Holders, Warrant
Holders or Management Warrant Holders, as the case may be, and in the case of
clause (ii) of the first sentence of this paragraph, to all holders of
outstanding Class A Common Stock that was outstanding as of the date of this
Agreement, whether held by the original holders or by transferees of such Common
Stock from such holders (so long as any such transferee provides evidence
reasonably satisfactory to Newco that such transfer is permitted under all
applicable federal and state securities laws and under the Shareholders
Agreement referred to in the Sale Agreement) (or Common Stock undesignated as to
class into which such Class A Common Stock outstanding as of the date of this
Agreement shall have been converted whether held by the original holders or by
transferees (so long as any such transferee provides evidence reasonably
satisfactory to Newco that such transfer is permitted under all applicable
federal and state securities laws and under the Shareholders Agreement referred
to in the Sale Agreement)) of the receipt of such demand and provide an
opportunity to such holders to participate in such demanded registration by
giving notice to Newco, with fifteen days after receipt of such notice from
Newco, of the number of Subject Securities that such holders desire to register,
in which event they shall also be deemed to be Demanding Holders or Demanding
Shareholders, as the case may be. In connection therewith, Newco shall prepare,
and within 45 days of the receipt of the request, file, on Form S-3 if permitted
or within 120 days of the receipt of the request file on the appropriate form if
Form S-3 is not available, a registration statement under the 1933 Act to effect
such registration. Notwithstanding the foregoing, the Company shall not be
obligated to register securities that are available for resale pursuant to Rule
144(k) promulgated under the 1933 Act. The Demanding Holders or Demanding
Shareholders, as the case may be, agree to provide all such information and
materials and to take all such action as may be reasonably required in order to
permit Newco to comply with all applicable requirements of the 1933 Act, the
rules and regulations thereunder and the Securities and Exchange Commission (the
"SEC") and to obtain any desired acceleration of the effective date of such
registration statement. If the offering to be registered is to be underwritten,
the managing underwriter shall be selected by Newco and such underwriter shall
be reasonably satisfactory to a majority, measured by Subject Securities
holdings, of the Demanding Holders or the Demanding Shareholders, as the case
may be, and Newco, the Demanding Holders or the Demanding Shareholders, as the
case may be, shall enter into an underwriting agreement containing customary
terms and conditions. Notwithstanding the foregoing, Newco shall be entitled to
postpone for up to 90 days, the filing of any registration statement otherwise
required to be prepared and filed by Newco if Newco is, at such time, conducting
or about to conduct an underwritten public offering of securities and is advised
by its managing underwriter or underwriters in writing (with a copy to the
Demanding Holders or Demanding Shareholders, as the case may be), that such
offering would, in its or their opinion, be materially adversely affected by the
registration so requested. In the event of such postponement, the Demanding
Holders or Demanding Shareholders, as the case may be, by action of a majority
in interest thereof, shall have the right to withdraw the request for
registration by giving written notice to Newco within 20 days after receipt of
the notice of postponement (and, in the event of such withdrawal, such request
shall not be counted for purposes of determining the number of registrations to
which the Demanding Holders or Demanding Shareholders, as the case may be, are
entitled pursuant to this Section 2.1). Newco shall not grant to any other
holder of its securities (other than holders of Common Stock), whether currently
outstanding or issued in the future, any incidental or piggyback registration
rights with respect to any registration statement filed pursuant to a demand
registration under this Section 2.1.
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2.2 Incidental Registration Rights. If Newco (on its own initiative or
as the result of a demand) proposes to register any of its Common Stock or the
Warrant under the 1933 Act (other than (i) pursuant to Section 2.1 hereof, (ii)
securities to be issued pursuant to a stock option or other employee benefit or
similar plan, or (iii) securities proposed to be issued in exchange for other
securities or assets (other than cash) or in connection with a merger or
consolidation with another corporation), Newco shall, as promptly as
practicable, give written notice to all holders of Warrants and Melville, all
Managers and all Investors then holding Common Stock (but shall not be required
to give such written notice to any other holder of Common Stock other than a
Permitted Transferee (as that term is defined in the Shareholders Agreement
referred to in the Sale Agreement) of Common Stock from Melville, any such
Manager or any such Investor only to the extent of the Common Stock so
transferred) of Newco's intention to effect such registration. If, within 15
days after receipt of such notice, holders of Warrants or Common Stock entitled
to such notice submit a written request to Newco specifying the part or all of
the Warrants or shares of Common Stock that are then beneficially owned by
holders of the Warrants and Common Stock and that such holders ("Registering
Holders") propose to sell or otherwise dispose of in accordance with this
Section 2.2, Newco shall use its best efforts to include the securities
specified in the Registering Holders request in such registration. If the
offering pursuant to such registration statement is to be made by or through
underwriters, the Registering Holders and such underwriter shall execute an
underwriting agreement in customary form. If the managing underwriter reasonably
determines in good faith and advises the Registering Holders that the inclusion
in the registration statement of all of the Warrants or Common Stock proposed to
be included by all holders of the Warrants or Common Stock entitled to
participate (other than on a demand basis) would interfere with the successful
marketing of the securities proposed to be registered, then Newco will include
in such registration that number of the Warrants or shares of Common Stock which
does not exceed the number which such managing underwriter reasonably determines
in good faith can be sold without interfering with the successful marketing of
the securities proposed to be registered based upon the following order of
priority: (A) first, the securities Newco proposes to sell, or in the event of a
demand registration, the securities any participant exercising demand
registration rights proposes to sell, (B) second, in the event of a demand
registration, the securities Newco proposes to sell, and (C) third, the
securities of each other Person who is entitled to participate (other than on a
demand basis) in such registration on a pro rata basis as to each type of
security based on the number of shares of Common Stock (or, in the case of
Warrants, on the number of shares subject to the Warrants) owned by each such
Person; provided that if the managing underwriter reasonably determines in good
faith that inclusion in the registration statement of Warrants will prevent the
successful marketing of shares of Common Stock proposed to be registered, then
Newco need not include the incidental registration of the Warrants in such
registration and Newco shall provide the Warrant Holders the opportunity to
include in such registration statement the Warrant Shares underlying the
Warrants pursuant to this Section 2.2 in the same manner as other Common Stock
and, provided further that if the number of securities that the Registering
Holder had initially requested be included in a registration under this Section
2.2 is reduced pursuant to clause (C), the Registering Holder may withdraw all
securities from such registration. No registration effected under this Section
2.2 shall relieve Newco of its obligation to effect any registration upon
request under Section 2.1. Whether or not a Registering Holder has been
permitted to participate in a proposed offering pursuant to this Section 2.2,
Newco thereafter may determine either not to file a registration
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statement relating thereto, or to withdraw such registration statement, or
otherwise not to consummate such offering, without any liability hereunder.
2.3 Registration Mechanics. In connection with any offering of shares of
Subject Securities registered pursuant to Section 2.1 and 2.2 herein, Newco
shall (i) furnish to the Demanding Holders, Demanding Shareholders or
Registering Holders, as the case may be, such number of copies of any prospectus
(including preliminary and summary prospectuses) and conformed copies of the
registration statement (including amendments or supplements thereto and, in each
case, all exhibits) and such other documents as it may reasonably request, but
only while Newco shall be required under the provisions hereof to cause the
registration statement to remain current; (ii)(A) use its commercially
reasonable efforts to register or qualify the Subject Securities covered by such
registration statement under such blue sky or other state securities laws for
offer and sale as the holders of such Subject Securities shall reasonably
request and (B) keep such registration or qualification in effect for so long as
the registration statement remains in effect; provided, however, that Newco
shall not be obligated to qualify to do business as a foreign corporation under
the laws of any jurisdiction in which it shall not then be qualified or to file
any general consent to service of process in any jurisdiction in which such a
consent has not been previously filed or subject itself to taxation in any
jurisdiction wherein it would not otherwise be subject to tax but for the
requirements of this Section 2.3; (iii) use its commercially reasonable efforts
to cause all Subject Securities covered by such registration statement to be
registered with or approved by such other federal or state government agencies
or authorities as may be necessary in the opinion of counsel to Newco to enable
the Demanding Holders, Demanding Shareholders or Registering Holders, as the
case may be, to consummate the disposition of such shares of Subject Securities;
(iv) at any time when a prospectus relating thereto is required to be delivered
under the 1933 Act, notify the Demanding Holders, Demanding Shareholders or
Registering Holders, as the case may be, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made, and (subject to the good faith
determination of Newco's Board of Directors as to whether to permit sales under
such registration statement), at the request of the Demanding Holders, Demanding
Shareholders or Registering Holders, as the case may be, promptly prepare and
furnish to them a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
the light of the circumstances under which they were made; (v) otherwise use its
commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC; (vi) use its commercially reasonable efforts to list (if
required by the rules of the applicable securities exchange or, if securities of
the same class are then so listed) the Subject Securities covered by such
registration statement on the New York Stock Exchange or on any other securities
exchange or the Nasdaq Stock Market on which Subject Securities are then listed
or traded; and (vii) before filing any registration statement or any amendment
or supplement thereto, and as far in advance as is reasonably practicable,
furnish to the Demanding Holders, Demanding Shareholders or Registering Holders,
as the case may be, and their counsel copies of such documents. In connection
with the closing of any offering of Subject Securities registered pursuant to
Section 2.1 or 2.2, Newco shall (x) furnish to the underwriter, if any,
unlegended certificates representing ownership of the
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Subject Securities being sold in such denominations as requested and (y)
instruct any transfer agent and registrar of the Subject Securities to release
any stop transfer orders with respect to such Subject Securities. Upon any
registration becoming effective pursuant to Section 2.1 or 2.2, Newco shall use
its best efforts to keep such registration statement effective for a period of
270 days or such shorter period as shall be necessary to effect the distribution
of the Subject Securities.
The Demanding Holders, Demanding Shareholders and Registering Holders
agree that upon receipt of any notice from Newco of the happening of any event
of the kind described in subdivision (iv) of this Section 2.3, it will forthwith
discontinue its disposition of Subject Securities pursuant to the registration
statement relating to such Subject Securities until its receipt of the copies of
the supplemented or amended prospectus contemplated by subdivision (iv) of this
Section 2.3 and, if so directed by Newco, will deliver to Newco all copies then
in its possession of the prospectus relating to such Subject Securities current
at the time of receipt of such notice. If the Demanding Holders', Demanding
Shareholders' and Registering Holders', as the case may be, disposition of
Subject Securities is discontinued pursuant to the foregoing sentence, unless
Newco thereafter extends the effectiveness of the registration statement to
permit dispositions of Subject Securities for an aggregate of 180 days (or 210
days, if Newco is eligible to use a Form S-3, or successor form) or such shorter
period during which all such Subject Securities are disposed of, whether or not
consecutive, the registration statement shall not be counted for purposes of
determining the number of registrations to which the Demanding Holders,
Demanding Shareholders and Registering Holders, as the case may be, are entitled
pursuant to Section 2.1.
2.4 Expenses. The Demanding Holders, Demanding Shareholders and
Registering Holders shall pay all agent fees and commissions and underwriting
discounts and commissions related to shares of Subject Securities being sold by
such holders and the fees and disbursements of their counsel and accountants and
Newco shall pay all fees and disbursements of its counsel and accountants in
connection with any registration demanded pursuant to this Article 2, provided
that the Note Holders, Warrant Holders or Management Warrant Holders, as the
case may be, shall pay all fees and disbursements of Newco's counsel and
accountants in connection with any registration pursuant to clause (i) of the
first sentence of Section 2.1. All other fees and expenses in connection with
any registration statement (including, without limitation, all registration and
filing fees, all printing costs and all fees and expenses of complying with
securities or blue sky laws) shall (i) in the case of a registration other than
of Common Stock, or in the case of the registration of Warrant Shares for which
the Management Warrant is exercisable, be borne by the Note Holders, Warrant
Holders or Management Warrant Holders, as the case may be, or (ii) in the case
of a registration of Common Stock other than the Warrant Shares for which the
Management Warrant is exercisable, be borne by Newco.
2.5 Indemnification and Contribution. In the case of any offering
registered pursuant to this Article 2, Newco agrees to indemnify and hold each
seller of the Subject Securities and each underwriter (as defined in the 0000
Xxx) under such registration and each person who controls any of the foregoing
within the meaning of Section 15 of the 1933 Act, and any officer, employee or
partner of the foregoing, harmless against any and all losses, claims, damages
or liabilities (including reasonable legal fees and other reasonable expenses
incurred in the investigation and defense thereof) to which they or any of them
may become subject under the 1933 Act or otherwise (collectively "Losses"),
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insofar as any such Losses shall arise out of or shall be based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement distributed to potential purchasers relating to the sale
of such Subject Securities (as amended if Newco shall have filed with the SEC
any amendment thereof), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the prospectus relating to the sale of such
Subject Securities (as amended or supplemented if Newco shall have filed with
the SEC any amendment thereof or supplement thereto), or the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided, however, that the indemnification contained in this
Section 2.5 shall not apply to such Losses which shall arise out of or shall be
based upon any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, which shall have been made in reliance upon and in
conformity with information furnished in writing to Newco by the Demanding
Holders, Demanding Shareholders and Registering Holders, as the case may be, or
any such underwriter or such controlling person, specifically for use in
connection with the preparation of the registration statement or prospectus
contained in the registration statement or any such amendment thereof or
supplement therein.
In the case of each offering registered pursuant to this Article 2,
the Demanding Holders, Demanding Shareholders and Registering Holders, as the
case may be, severally agree and each underwriter or such controlling person, if
any, participating therein shall severally agree, substantially in the same
manner and to the same extent as set forth in the preceding paragraph, to
indemnify and hold harmless Newco and each person, if any, who controls Newco
within the meaning of Section 15 of the 1933 Act, and the directors and officers
of Newco, and any underwriter with respect to any statement in or omission from
such registration statement or prospectus contained in such registration
statement (as amended or as supplemented, if amended or supplemented as
aforesaid) if such statement or omission shall have been made in reliance upon
and in conformity with information furnished in writing to Newco by the
Demanding Holders, Demanding Shareholders and Registering Holders, as the case
may be, or such underwriter or such controlling person, as the case may be,
specifically for use in connection with the preparation of such registration
statement or prospectus contained in such registration statement or any such
amendment thereof or supplement thereto.
If any third party shall notify the indemnified party with respect to
any claim of such third party (a "Third Party Claim") which may give rise to a
claim for indemnification by the indemnified party against the indemnifying
party, then the indemnified party shall notify the indemnifying party thereof in
writing within ten business days after receiving such notification from the
third party, provided that failure to give timely notice under this paragraph of
Section 2.5 shall not limit the indemnification obligations of the indemnifying
party hereunder except to the extent that the delay in giving, or failure to
give, such notice prejudices the ability of the indemnifying party to defend
against the Third Party Claim. The indemnifying party shall have the right to
elect to, by written notice delivered to the indemnified party within ten days
of receipt by the indemnifying party of the notice from the indemnified party in
respect of the Third Party Claim, and shall if so requested by the indemnified
party, at the sole expense of the indemnifying party, assume control of the
defense of the Third Party Claim with counsel selected by the indemnifying party
and reasonably satisfactory to the indemnified party.
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If the indemnifying party elects to assume such control within such
ten-day period or is requested by the indemnified party to assume control, the
indemnifying party will pursue such defense in a diligent and bona fide manner,
and the indemnified party shall cooperate with the indemnifying party and its
counsel and shall have the right to participate in the negotiation, settlement
or defense of such Third Party Claim, at its own expense (except for settlement
payments and except that the indemnifying party will be responsible for the fees
and expenses of the indemnified party's counsel if in the reasonable opinion of
counsel to the indemnifying party such counsel has a conflict of interest). If
the indemnifying party elects to assume such control, the indemnified party
agrees to (i) give the indemnifying party, its counsel and other authorized
representatives reasonable access during normal business hours to the employees,
offices, properties, books and records of the indemnified party reasonably
related to the investigation or defense of any such matters and (ii) instruct
the employees of the indemnified party to reasonably cooperate with and assist
the indemnifying party, its counsel and other authorized representatives in the
investigation and defense, in depositions or appearing as witnesses. The
indemnifying party shall reimburse the indemnified party and its employees for
the reasonable out-of-pocket expenses incurred by such Person in connection
therewith. If the indemnifying party does not elect to assume control of the
defense within such ten-day period and is not requested by the indemnified party
to assume control of the defense or, having elected or having been so requested
to assume such control, thereafter fails to proceed with the settlement or
defense of any such Third Party Claim in a diligent and bona fide manner, the
indemnified party shall be entitled to assume such control at the expense of the
indemnifying party. In such case, the indemnifying party shall cooperate where
necessary with the indemnified party and its counsel in connection with such
Third Party Claim and the indemnifying party shall be bound by the results
obtained by the indemnified party with respect to such Third Party Claim.
The indemnified party shall not settle any Third Party Claim without
the prior written consent of the indemnifying party, which shall not be
unreasonably withheld. The indemnifying party shall not settle any Third Party
Claim unless the indemnified party is relieved of all obligations thereunder
pursuant to the terms of the written settlement and, if the indemnified party is
Newco, Melville or the Limited Partnership I, is not impaired in any material
respect pursuant to the settlement from operating its business in the manner in
which it was operated in accordance with past practice.
The indemnified party agrees to give prompt notice to the indemnifying
party of the assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought under this Agreement that
does not constitute a Third Party Claim, provided that a failure to give a
timely notice under this paragraph of Section 2.5 shall not limit the
indemnification obligation of the indemnifying party except to the extent that
the delay in giving, or the failure to give, such notice prejudices the ability
of the indemnifying party to defend against such claim, suit, action or
proceeding.
Notwithstanding the provisions of this Section 2.5, no underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and the Demanding
Holders, Demanding
11
Shareholders and Registering Holders, as the case may be, registering shares
pursuant to Section 2.1 or Section 2.2 shall not be required to contribute any
amount in excess of the amount by which the total price at which the securities
of the Demanding Holders, Demanding Shareholders and Registering Holders, as the
case may be, were offered to the public (less underwriters' discounts and
commissions) exceeds the amount of any damages which the Demanding Holders,
Demanding Shareholders and Registering Holders, as the case may be, have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.5 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
2.6 Holdback Agreements. If and to the extent requested by the managing
underwriter or underwriters, in the case of any underwritten public offering,
the Demanding Holders, Demanding Shareholders and Registering Holders, as the
case may be, agree not to effect, except as part of such registration, any sale
of the Note, Warrant, or Management Warrant or shares of Common Stock during the
14 days prior to, and during the 90-day period (or if the underwriter reasonably
concludes that a longer period is necessary, such longer period as is mutually
agreed) beginning on the effective date of such registration statement.
2.7 Participation in Underwritten Registrations. Without limiting the
generality of the foregoing, no Demanding Holders, Demanding Shareholders or
Registering Holders may participate in any underwritten registration hereunder
unless (i) such Demanding Holder, Demanding Shareholder or Registering Holder
agrees to sell such holder's registrable shares on the basis provided in any
underwriting arrangements approved by Newco, and (ii) such Demanding Holder,
Demanding Shareholder or Registering Holder completes and executes all
questionnaires.
RIGHT OF FIRST OFFER
3.1 Right of First Offer. (a) If Melville desires to transfer all or
part of the Note or the Warrant to a third party in a bona fide arm's-length
transaction or proposes to register all or part of the Note or the Warrant
pursuant to Section 2, Melville shall give written notice (a "Section 3.1 Offer
Notice") to Xxxx Xxxxxx and Xxxxx Xxxxxx individually and on behalf of the other
Managers, to the Investors and, in the case of a proposed sale or registration
of the Warrant, to Newco (i) stating that Melville desires to effect such a
transfer or registration and (ii) setting forth the amount of the Note and/or
Warrant proposed to be transferred or registered and, in the case of a sale or
other transfer to a third party, the cash price or other consideration that such
third party proposes to pay for such Notes or Warrants, the identity of the
proposed transferee and the other material terms and conditions of such proposed
transfer or in the case of a proposed registration of the Note, the principal
and interest then
12
due under the Note or in the case of a proposed registration of the Warrants, an
appraisal from an investment banking firm of national reputation reasonably
acceptable to Newco setting forth the fair market value of the Warrants proposed
to be registered (the "Section 3.1 Sale Price").
(b) The receipt of a Section 3.1 Offer Notice by Xxxx Xxxxxx and
Xxxxx Xxxxxx, the Investors and, in the case of a proposed sale or registration
of the Warrant, by Newco from Melville shall constitute an offer (the "Section
3.1 Offer") by Melville to sell, to Xxxx Xxxxxx and Xxxxx Xxxxxx, the other
Managers, the Investors and, in the case of a proposed sale or registration of
the Warrant, Newco, in the aggregate all but not less than all of the offered
amount of such Notes or Warrants for cash at the Section 3.1 Sale Price (and, if
the proposed transfer shall include non-cash consideration, such consideration
shall be valued at its fair market value for purposes of establishing the
Section 3.1 Sale Price) or, if the buyers so elect if the Section 3.1 Sale Price
includes non-cash consideration, at the price and on the terms proposed by the
third party. Such offer shall be irrevocable for 30 days after receipt of such
Section 3.1 Offer Notice by Xxxx Xxxxxx and Xxxxx Xxxxxx, the other Managers,
the Investors and, in the case of a proposed sale or registration of the
Warrant, by Newco (the "Section 3.1 Offer Period"). During the Section 3.1 Offer
Period, Xxxx Xxxxxx and Xxxxx Xxxxxx, the other Managers, the Investors and, in
the case of a proposed sale or registration of the Warrant, Newco shall have the
exclusive right to accept such offer by giving written notice of acceptance to
Melville prior to the expiration of the Section 3.1 Offer Period. If Newco shall
accept such offer with respect to the Warrant during the Section 3.1 Offer
period, the portion of the Warrant so offered shall be sold to Newco and not to
the other offerees. If either or both of Xxxx Xxxxxx and Xxxxx Xxxxxx shall
accept such offer during the Section 3.1 Offer Period (and, if the offer is with
respect to the Warrant, Newco shall not have accepted such offer), the portion
of the Note or the Warrant, as the case may be, so offered shall be sold to
whichever of Xxxx Xxxxxx or Xxxxx Xxxxxx accepted the offer (or pro-rata based
upon the respective ownership of outstanding Common Stock by them and their
Permitted Transferees under the Shareholders Agreement on the date of
commencement of the Section 3.1 Offer Period if both shall have accepted the
offer) and not to the other offerees. In all other events, the portion of the
Note or the Warrant so offered shall be sold pro-rata (based upon the respective
ownership by the shareholders of outstanding Common Stock on the date of
commencement of the Section 3.1 Offer Period) to the other Managers and the
Investors (and their Permitted Transferees under the Shareholders Agreement) who
accepted the offer.
(c) Xxxx Xxxxxx and Xxxxx Xxxxxx, the other Managers, the Investors
or, in the case of a proposed sale or registration of the Warrant, Newco, in the
order of priority set forth in Section 3.1(b) shall purchase and pay cash for
all Notes or Warrants accepted within a 20-day period of their acceptance of the
offer, provided that if the Section 3.1 Sale Price includes non-cash
consideration, they may instead elect to purchase at the price and on the terms
proposed by the third party. A Section 3.1 Offer Notice shall be deemed to
constitute a representation and warranty by Melville that (i) Melville has good
title to such Notes or Warrants free of any Liens and (ii) has full power and
authority to make such offer and consummate such sale.
(d) Upon the failure to accept the Section 3.1 Offer within such
Section 3.1 Offer Period (including failure to accept all of the Notes or
Warrants offered in the Section 3.1 Offer Notice), there shall commence a 90-day
period during which Melville shall have the right to effect a transfer to a
third party of or to register all of the Notes or Warrants subject to the
Section 3.1 Offer on substantially
13
the same terms and conditions as were set forth in the Section 3.1 Offer Notice
at a price in cash not less than 100% (or if the Section 3.1 Offer Notice stated
that Melville proposed to register all or part of the Note or Warrant, 90%) of
the Section 3.1 Sale Price; provided that Newco shall have received an opinion
of qualified legal counsel to Melville to the effect that the transfer to such
third party is not in violation of the 1933 Act. Notwithstanding the foregoing,
if the purchase and sale of such Notes or Warrants is subject to any prior
regulatory approval, the time period during which such purchase and sale may be
consummated shall be extended until the expiration of five Business Days after
all such approvals shall have been received but in no event shall such time
period exceed 120 days without the consent of Newco. If Melville does not
consummate the sale of the Notes or Warrants subject to the Section 3.1 Offer in
accordance with the foregoing time limitations, Melville may not sell any Notes
or Warrants without repeating the foregoing procedures.
MISCELLANEOUS
4.1 Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including facsimile transmission) and shall be
given at the party's address (or telecopier number) set forth below, or such
other address (or telecopier number) as shall have been furnished to the party
giving or making such notice, request or other communication:
If to Newco, to:
Wilsons The Leather Experts Inc.
c/o Wilsons Center Inc.
000 Xxxxxxx 000
Xx. Xxxxx Xxxx, Xxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxx Xxxxxx, Xxxxx Xxxxxx
with copies to:
Faegre & Xxxxxx
2200 Norwest Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopier: 000-000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
and
14
Xxxxxx Xxxxxxx Xxxxxx & Brand
3300 Norwest Center 00
Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxx X. Sell, Esq.
If to Melville, to:
Melville Corporation
Xxx Xxxxxx Xxxx
Xxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Chief Executive Officer, Chief
Financial Officer and General Counsel
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
If to the Investors or Managers, at the most recent addresses shown on the
stock record books of Newco.
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
4.2 Amendments and Waivers. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement (except
that in the case of the Managers, it need be signed only by Managers holding 80%
of the outstanding Common Stock then held by the Managers and their respective
Permitted Transferees under the Shareholders Agreement), or in the case of a
waiver, by the party against whom the waiver is to be effective (except that in
the case of the Managers, it need be signed only by Managers holding 80% of the
outstanding Common Stock then held by the Managers and their respective
Permitted Transferees under the Shareholders Agreement).
15
(a) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
4.3 Expenses. Except as otherwise expressly provided herein, all costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense.
4.4 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto except as otherwise expressly provided
herein. Notwithstanding the foregoing, Newco may assign its rights hereunder to
one or more wholly owned Subsidiaries of Newco, but such assignment shall not
relieve Newco of its obligations hereunder.
4.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York, without regard to the
conflicts of law rules of such state.
4.6 Jurisdiction. With respect to any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby, THE
PARTIES HERETO WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL.
4.7 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
4.8 Third Party Beneficiaries. No provision of this Agreement is intended
to confer upon any Person other than the parties hereto any rights or remedies
hereunder except as otherwise expressly provided herein.
4.9 Entire Agreement. This Agreement, the Note, the Warrant, the
Management Warrant and the Sale Agreement constitute the entire agreement
between the parties with respect to the subject matter thereof and supersedes
all prior agreements and understandings, both oral and written, between the
parties with respect to the subject matter thereof. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
has been made or relied upon by either party hereto. Neither this Agreement nor
any provision hereof is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
4.10 Validity of Provisions. Should any provision of this Agreement be
declared by any court of competent jurisdiction to be invalid or unenforceable,
the remaining provisions
16
shall not be affected thereby. If any provision of this Agreement shall be held
to be partially invalid and unenforceable, then that portion which is not held
to be invalid or unenforceable shall be deemed enforceable to the maximum extent
permitted by law.
4.11 Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
4.12 Further Assurances. At any time and from time to time, each party
hereto, without further consideration, shall cooperate, take such further action
and execute and deliver such further instruments and documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
Melville Corporation
By: /s/ XXXXXX XXXXXXXXX
----------------------------
Name: Xxxxxx Xxxxxxxxx
Title: President
WILSONS THE LEATHER EXPERTS INC.
By: /s/ XXXXX XXXXXX
----------------------------
Name: Xxxxx Xxxxxx
Title: President
LEATHER INVESTORS LIMITED PARTNERSHIP I
By: /s/ XXXX XXXXXX
----------------------------
Title:
/s/ XXXX XXXXXX
-------------------------------
Xxxx Xxxxxx
/s/ XXXXXX XXXXXXXX
--------------------------------
Xxxxxx Xxxxxxxx
/s/ XXXX X. SELL
--------------------------------
Xxxx X. Sell
/s/ ERCU UCAN
--------------------------------
Ercu Ucan
/s/ XXXXXX XXXXX
---------------------------------
Xxxxxx Xxxxx
18
XXX XXXXXX
/s/ XXX XXXXXX
----------------------------
XXXXX XXXXXXXX
/s/ XXXXX XXXXXXXX
----------------------------
XXXXX XXXXXXXX
/s/ XXXXX XXXXXXXX
----------------------------
WM XXXXXXX XXXX
/s/ WM XXXXXXX XXXX
----------------------------
XXXXXX XXXXX
/s/ XXXXXX XXXXX
----------------------------
XXXXXXX XXXXXXXX
/s/ XXXXXXX XXXXXXXX
----------------------------
XXXXX XXXXXXXXX
/s/ XXXXX XXXXXXXXX
----------------------------
XXXXXXX XXXXX
/s/ XXXXXXX XXXXX
----------------------------
XXXXXX XXXXXX
/s/ XXXXXX XXXXXX
----------------------------
XXXXXX XXXXXX
/s/ XXXXXX XXXXXX
----------------------------
XXXXXXX XXXXXXX-XXXXXXX
/s/ XXXXXXX XXXXXXX XXXXXXX
----------------------------
XXXXXXXX XXXXXXX
/s/ XXXXXXXX XXXXXXX
----------------------------
19
XXXX XXXXXX
/s/ XXXX XXXXXX
----------------------------
XXXXXXX XXXXX
/s/ XXXXXXX XXXXX
----------------------------
XXXXX XXXX
/s/ XXXXX XXXX
----------------------------
XXXXX XXXXXX
/s/ XXXXX XXXXXX
----------------------------
XXXXX XXX
/s/ XXXXX XXX
----------------------------
XXXXXX XXXXX
/s/ XXXXXX XXXXX
----------------------------
XXX XXXXX
/s/ XXX XXXXX
----------------------------
XXXX XXXXXX
/s/ XXXX XXXXXX
----------------------------
XXXXX XXXXXX
/s/ XXXXX XXXXXX
----------------------------
XXXXXXX XXXXXXXX
/s/ XXXXXXX XXXXXXXX
----------------------------
XXXXXXX XXXXXXXX
/s/ XXXXXXX XXXXXXXX
----------------------------
XXXXX XXXX
/s/ XXXXX XXXX
----------------------------
20
XXXXX XXXXXXXXX
/s/ XXXXX XXXXXXXXX
---------------------------
XXXX XXXXX
/s/ XXXX XXXXX
--------------------------
XXXXXX XXXXXXX
/s/ XXXXXX XXXXXXX
---------------------------
XXXXXXX XXXXXXX
/s/ XXXXXXX XXXXXXX
---------------------------
XXXXXXX XXXXXXX
/s/ XXXXXXX XXXXXXX
---------------------------
XXXXXXX XXXXX
/s/ XXXXXXX XXXXX
---------------------------
XXXXX XXXX
/s/ XXXXX XXXX
---------------------------
XXXX XXXXXXXX
/s/ XXXX XXXXXXXX
---------------------------
XXXXXX XXXXXXX
/s/ XXXXXX XXXXXXX
---------------------------
XXXXX XXXXX
/s/ XXXXX XXXXX
---------------------------
XXXXX XXXXXX
/s/ XXXXX XXXXXX
---------------------------
XXXX XXXXXXXX
/s/ XXXX XXXXXXXX
---------------------------
21
XXXX XXXXXXXX
/s/ XXXX XXXXXXXX
---------------------
XXXX XXXXXXX
/s/ XXXX XXXXXXX
--------------------
XXXXX XXXXX
/s/ XXXXX XXXXX
-------------------
XXXXX XXXXXXX
/s/ XXXXX XXXXXXX
---------------------
XXXXXXX XXXXX
/s/ XXXXXXX XXXXX
---------------------
XXXXXX XXXXXXX
/s/ XXXXXX XXXXXXX
----------------------
XXXXX XXXXXXXX
/s/ XXXXX XXXXXXXX
----------------------
XXXXXXX XXXXX
/s/ XXXXXXX XXXXX
---------------------
XXXX XXXXXX
/s/ XXXX XXXXXX
-------------------
XXXXX XXXXXXXXX
/s/ XXXXX XXXXXXXXX
-----------------------
XXXXXXXX XXXXXXXX
/s/ XXXXXXXX XXXXXXXX
-------------------------
XXXXXX XXXXXXXXXX
/s/ XXXXXX XXXXXXXXXX
-------------------------
22
XXXXXXXXX XXXXXX
/s/ XXXXXXXXX XXXXXX
------------------------
23
