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EXHIBIT 10.7
FORM OF
WARRANT TO PURCHASE
COMMON STOCK
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED FOR RESALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO SUCH SECURITIES AND SUCH DISPOSITION FILED UNDER THE ACT, OR AN EXEMPTION
FROM REGISTRATION, AND COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE
ISSUER MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF THAT
SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH LAWS ARE COMPLIED WITH.
Void After 5:00 p.m., Eastern Time, on April 26, 2007 No. ____
Warrant to Purchase
__________ shares of
Common Stock, par value $.01 per share
of
DESIGNS, INC.
This is to Certify That, FOR VALUE RECEIVED, the receipt and
sufficiency of which is hereby acknowledged, ______________________________ (the
"HOLDER") is entitled to purchase, subject to the provisions of this Warrant,
from Designs, Inc. ("COMPANY"), a Delaware corporation, at any time prior to
5:00 p.m., Eastern Time, on April 26, 2007, a total of __________ shares of
Common Stock, par value $.01 per share, of the Company ("SECURITIES") at an
initial purchase price of $8.50 (EIGHT DOLLARS AND FIFTY CENTS) per share. The
number of Securities to be received upon the exercise of this Warrant and the
price to be paid for the Securities may be adjusted from time to time as
hereinafter set forth. The number of Securities to be received upon the exercise
of this Warrant in effect at any time and as adjusted from time to time is
hereinafter sometimes referred to as the "EXERCISE RATE" and the purchase price
per Security in effect at any time and as adjusted from time to time, and
subject to the minimum purchase price set forth in Section 7(l), is hereinafter
sometimes referred to as the "EXERCISE PRICE" per Security. This Warrant is or
may be one of a series of Warrants identical in form issued by the Company to
purchase an aggregate of 2,891,471 shares of Common Stock. The Securities, as
adjusted from time to time, together with any other Securities issuable upon
exercise of this Warrant are hereinafter sometimes referred to as "WARRANT
SECURITIES". Certain capitalized terms used in this Warrant are defined in
Section 14 hereof.
1. EXERCISE OF WARRANT. This Warrant may be exercised at the
option of the Holder in whole or in part at any time or from time to time
beginning at such time as the Company has obtained the requisite stockholder
approval required by Nasdaq for the issuance of such shares of Common Stock (the
"Stockholder Approval"), but prior to 5:00 p.m., Eastern Time on April 26, 2007,
or if April 26, 2007, is a Saturday, Sunday or a day on which banking
institutions in New York, New York are authorized by law to close, then on the
next succeeding day (a "BUSINESS DAY") which shall not be such a day, by
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, with the Purchase Form annexed hereto duly executed, and
accompanied by payment of the Exercise Price, for the number of Securities
specified in such Form, together with all federal and state taxes applicable
upon such exercise. If, upon exercise of this Warrant,
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the Warrant Securities issuable upon exercise of this Warrant are not then
registered under the Act pursuant to an effective registration statement
thereunder, the Holder shall be deemed to have represented and warranted to the
Company that such Holder (x) is a "qualified institutional buyer" as defined in
Rule 144A under the Act or and "accredited investor" as defined in Rule 501
under the Act, in either case with such knowledge and experience in financial
and business matters as is necessary to evaluate the merits and risks of an
investment in the Warrant Securities, and (y) such Holder is not acquiring the
Warrant Securities with a view to any distribution thereof or with any intention
of offering or selling any Warrant Securities in a transaction that would
violate the Act or the securities laws of any state of the United States. If
this Warrant should be exercised in part only, the Company shall, upon surrender
of this Warrant for cancellation, execute and deliver a new Warrant evidencing
the right of the Holder to purchase the balance of the Securities purchasable
hereunder. Upon receipt by the Company of this Warrant at the office of the
Company or at the office of the Company's stock transfer agent, in proper form
for exercise and accompanied by the Exercise Price, if and as applicable, the
Holder shall be deemed to be the holder of record of the Securities issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Securities shall not
then be actually delivered to the Holder. It is understood and agreed that this
Warrant shall not be exercisable until Stockholder Approval is obtained.
2. RESERVATION OF SECURITIES. The Company hereby agrees that at
all times there shall be reserved for issuance and/or delivery upon exercise of
this Warrant such number of shares of Securities as shall be required for
issuance or delivery upon exercise of this Warrant. The Company covenants and
agrees that, upon exercise of this Warrant and payment of the Exercise Price
therefor, if and as applicable, all Securities and other securities issuable
upon such exercise shall be duly and validly issued, fully paid, non-assessable
and not subject to the preemptive rights of any stockholder. As long as this
Warrant shall be outstanding, the Company shall use its best efforts to cause
all Securities issuable upon the exercise of this Warrant to be listed (subject
to official notice of issuance) on all securities exchanges or quotation systems
on which its Common Stock issued may then be listed and/or quoted.
3. FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the Prior Day Market Value of such fractional share.
4. LOSS OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not the Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant and the registration rights agreement referred to in Section 16 hereof.
6. CERTAIN NOTICES TO WARRANT HOLDERS. The Company shall give
prompt written notice to the Holder of any determination to make a distribution
to the holders of its Common Stock of any cash dividends, assets, debt
securities, preferred stock, or any rights or warrants to purchase debt
securities, preferred stock, assets or other securities (other than Common
Stock, or rights, options, or warrants to purchase Common Stock) of the Company,
which notice shall state the nature and amount of such planned dividend or
distribution and the record date therefor, and shall be received by the Holder
or sent to the Holder by reputable overnight
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courier, in either case to its address as provided in Section 8, at least 10
days prior to such record date therefor. The Company shall provide notice to the
Holder that any tender offer is being made for securities of the same class as
any Warrant Securities no later than the first Business Day after the day the
Company becomes aware of any such tender offer. Notwithstanding any notice
provided to the Holder pursuant to this Section 6, the Holder shall be entitled
to any and all applicable adjustments to the Exercise Rate and the Exercise
Price per Security as provided in Section 7 arising out of any event requiring
notice to the Holder in this Section 6.
7. ADJUSTMENT OF EXERCISE RATE AND EXERCISE PRICE.
The Exercise Rate and the Exercise Price are subject to
adjustment from time to time upon the occurrence of the events enumerated in
this Section 7. The Exercise Rate shall initially be the number of Securities
for which this Warrant is initially exercisable as set forth in the introductory
paragraph to this Warrant. In the event that this Warrant is transferred or
exercised in part, the initial Exercise Rate of the portion not exercised or
transferred shall be adjusted proportionately as shall the initial Exercise Rate
of any partial transfer of this Warrant. For the purposes of Sections 7(a) and
7(b), (i) shares of Common Stock issuable upon the exercise of this Warrant and
all other warrants of the same series as this Warrant shall be deemed to be
outstanding and (ii) all shares of Common Stock that would be deemed to be
outstanding as of the date of determination in respect of Convertible
Securities, as determined in accordance with GAAP, shall be deemed to be
outstanding.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the Issue
Date, the Company:
(i) pays a dividend or makes a distribution on shares of its
Common Stock payable in shares of its Common Stock (except to the
extent any such dividend results in the grant, issuance, sale or
making of Distribution Rights or Distributions (each as defined in
Section 7(c)) to the Holder pursuant to Section 7(c));
(ii) subdivides or splits its outstanding shares of Common Stock
into a greater number of shares; or
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares;
then (1) the Exercise Rate in effect immediately prior to such action for this
Warrant shall be adjusted by multiplying the Exercise Rate in effect immediately
prior to such action by a fraction (A) the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such action and
(B) the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action or the record date applicable to
such action, if any and (2) the Exercise Price per Security in effect
immediately prior to such action shall be adjusted by multiplying the Exercise
Price per Security in effect immediately prior to such action by a fraction (A)
the numerator of which is one and (B) the denominator of which shall be the
fraction calculated in clause (1) of the above formula. The adjustments shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision or combination. In the event that such dividend or distribution is
not so paid or made or such subdivision, combination or reclassification is not
effected, the Exercise Rate and the Exercise price per Security shall again be
adjusted to be the Exercise Rate and the Exercise Price per Security which would
then be in effect if such record date or effective date had not been so fixed.
(b) ADJUSTMENT FOR CERTAIN SALES OF COMMON STOCK BELOW CURRENT MARKET
VALUE. If, after the Issue Date, the Company (i) grants or sells to any
Affiliate of the Company (other than a wholly owned subsidiary of the Company)
or (ii) grants, sells or offers to grant or sell to all holders of Common Stock,
any shares of Common Stock or Convertible Securities (other than, in the case of
each of clauses (i) and (ii),
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(1) pursuant to any Convertible Security or other right outstanding as of the
Issue Date or issuable in connection with the Transactions and financing
therefor and the fees and expenses thereof, or (2) upon the conversion, exchange
or exercise of any Convertible Security or other right as to which upon the
issuance thereof an adjustment pursuant to this Section 7 has been made), at a
price below the then Current Market Value, the Exercise Rate and the Exercise
price per Security for this Warrant shall be adjusted in accordance with the
formulae:
E(1) = E X (O+N) $(1) = $ X (O + N X P/M)
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(O + (N X P/M)) (O + N)
where:
E(1) = the adjusted Exercise Rate for this Warrant;
E = the then current Exercise Rate for this Warrant;
$(1) = the adjusted Exercise Price per Security for this
Warrant;
$ = the then current Exercise Price per Security for this
Warrant;
O = the number of shares of Common Stock outstanding
immediately prior to the sale of such Common Stock or
issuance of Convertible Securities;
N = the number of shares of Common Stock so sold or the
maximum stated number of shares of Common Stock
issuable upon the conversion, exchange or exercise of
any such Convertible Securities;
P = the proceeds per share of Common Stock received by
the Company, which (i) in the case of shares of
Common Stock is the amount received by the Company in
consideration for the sale and issuance of such
shares; and (ii) in the case of Convertible
Securities is the amount received by the Company in
consideration for the sale and issuance of such
Convertible Securities, plus the minimum aggregate
amount of additional consideration, other than the
surrender of such Convertible Securities, payable to
the Company upon exercise, conversion or exchange
thereof; and
M = the Current Market Value as of the Time of
Determination or at the time of sale, as the case may
be, of a share of Common Stock.
The adjustments shall become effective immediately after the record
date for the determination of shareholders entitled to receive the rights,
warrants or options to which this paragraph (b) applies or upon consummation of
the sale of Common Stock, as the case may be. To the extent that shares of
Common Stock are not delivered after the expiration of such rights, warrants or
options or exercise, conversion or exchange rights in respect to such
Convertible Securities, the Exercise Rate and the Exercise Price per Security
for this Warrant shall be readjusted to the Exercise Rate and the Exercise Price
per Security which would otherwise be in effect had the adjustment made upon the
issuance of such rights, warrants or options or Convertible Securities been made
on the basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Exercise Rate and the Exercise Price per Security for this Warrant shall again
be adjusted to be the Exercise Rate and the Exercise Price per Security which
would then be in
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effect if such date fixed for determination of shareholders entitled to receive
such rights, warrants or options had not been so fixed.
No adjustments shall be made under this paragraph (b) if the
application of the formula stated above in this paragraph (b) would result in a
value of E(1) that is lower than the value of E.
No adjustments shall be made under this paragraph (b) for any
adjustments which are the subject of paragraphs (a), (c) or (e) of this Section
7.
Anything in this Warrant to the contrary notwithstanding, an event
which would otherwise give rise to adjustments pursuant to this Section 7(b)
shall not give rise to such adjustments if the Company grants, sells or offers
to sell shares of Common Stock or Convertible Securities, in each case on the
same terms as the underlying event, to the Holder on a PRO RATA basis, assuming
for the purpose of this Section 7(b) that all warrants of the same series as
this Warrant had been exercised.
Notwithstanding the foregoing, no adjustment in the Exercise Rate or
the Exercise Price per Security will be required in respect of: (a) the grant of
any stock option or other stock incentive award pursuant to any present stock
option or stock incentive plan or arrangement or pursuant to any other customary
compensatory stock option or stock incentive plan for employees, officer and/or
directors, (b) the grant of any stock option or stock incentive award at an
exercise price at least equal to the then Prior Day Market Value or (c) the
exercise of any stock option or stock incentive award or similar award or right.
(c) ADJUSTMENT UPON CERTAIN DISTRIBUTIONS.
(i) If at any time after the Issue Date the Company grants,
issues or sells options, any Convertible Security, or rights to
purchase capital stock or other securities (other than Common Stock)
PRO RATA to the record holders or series of Common Stock
("DISTRIBUTION RIGHTS") or, without duplication, makes any
distribution (other than a distribution pursuant to a plan of
liquidation) other than a Permitted Cash Dividend (a "DISTRIBUTION")
on shares of Common Stock (whether in cash, property, evidences of
indebtedness, or otherwise), then the Exercise Rate and the Exercise
Price per Security shall be adjusted in accordance with the formulae:
E(1) = E X (M/(M-F)) $(1) = $ X ((M-F)/M)
where:
E(1) = the adjusted Exercise Rate;
E = the current Exercise Rate for this Warrant;
$(1) = the adjusted Exercise Price per Security for this
Warrant;
$ = the current Exercise Price per Security for this
Warrant;
M = the Current Market Value per share of Common Stock at
the Time of Determination;
F = the fair market value at the Time of Determination
of such portion of the options, Convertible
Securities, capital stock or other securities, cash,
property or assets distri-
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butable pursuant to such Distribution Rights or
Distribution per share of outstanding Common Stock.
The adjustments shall become effective immediately after the Time of
Determination with respect to the shareholders entitled to receive the options,
Convertible Securities, warrants, cash, property, evidences of indebtedness or
other securities or assets to which this paragraph (c)(i) applies. No
adjustments shall be made under this paragraph (c) if the application of the
formula stated above in this paragraph (c)(i) would result in a value of E(1)
that is lower than the value of E. This paragraph (c)(i) does not apply to any
securities which result in adjustments pursuant to paragraphs (a) or (b) of this
Section 7.
(ii) Anything in this Warrant to the contrary notwithstanding,
an event which would otherwise give rise to adjustments pursuant to
Section 7(c)(i) shall not give rise to such adjustments (or to
adjustments pursuant to any other provision of this Section 7) if the
Company grants, issues or sells Distribution Rights to the Holder or
includes the Holder in such Distribution, in each case on a PRO RATA
basis, assuming for the purpose of this Section 7(c)(ii) that all
warrants of the same series as this Warrant had been exercised.
(iii) Notwithstanding anything to the contrary set forth in this
Section 7(c), if, at any time, the Company makes any distribution
pursuant to any plan of liquidation (a "LIQUIDATING DISTRIBUTION") on
shares of Common Stock (whether in cash, property, evidences of
indebtedness or otherwise), then, subject to applicable law, the
Company shall make to the Holder the aggregate Liquidating
Distribution which the Holder would have acquired if the Holder had
held the maximum number of shares of Common Stock acquirable upon the
complete exercise of this Warrant immediately before the Time of
Determination of shareholders entitled to receive Liquidating
Distributions.
(d) NOTICE OF ADJUSTMENTS. Whenever the Exercise Rate and Exercise
Price per Security are adjusted, the Company shall promptly mail to the Holder a
notice of the adjustments. The Company shall also provide the Holder with a
certificate from the Company's independent public accountants briefly stating
the facts requiring the adjustments and the manner of computing it. The
certificate shall be conclusive evidence that the adjustments are correct,
absent manifest error.
(e) REORGANIZATION OF COMPANY; FUNDAMENTAL TRANSACTION.
(i) If (x) the Company shall reclassify its Common Stock (other
than a change in par value, or from par value to no par value, or a
subdivision or combination thereof), or (y) the Company, in a single
transaction or through a series of related transactions, consolidates
with or merges with or into any other person or sells, assigns,
transfers, leases, conveys or otherwise disposes of all or
substantially all of its properties and assets to another person or
group of affiliated persons or is a party to a merger or binding share
exchange which, in the case of any of the transactions referred to in
this clause (y), reclassifies or changes its outstanding Common Stock
(each of (x) and (y) above being referred to as a "FUNDAMENTAL
TRANSACTION"), as a condition to consummating any such Fundamental
Transaction, the Company, in the case of any such reclassification
referred to in clause (x), or the person formed by or surviving any
such consolidation or merger if other than the Company or the person
to whom such transfer has been made in the case of clause (y) above
(the "SURVIVING Person"), shall enter into a supplemental warrant
agreement. The supplemental warrant agreement shall provide (a) that
the Holder may exercise this Warrant for the kind and amount of
securities, cash or other assets which the Holder would have received
immediately after the Fundamental Transaction if the Holder had
exercised this Warrant immediately before the effective date of the
transaction, assuming (to the extent applicable) that the Holder (i)
was not a constituent person or an affiliate of a constituent person
to any transaction de-
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scribed in clause (y) above, (ii) made no election with respect to any
transaction described in clause (y) above, and (b) in the case of any
transaction described in clause (y) above, that the Surviving Person
shall succeed to and be substituted to every right and obligation of
the Company in respect of this Warrant. The supplemental warrant
agreement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in
this Section 7. The Surviving Person or the Company, as applicable,
shall mail to the Holder a notice briefly describing the supplemental
warrant agreement. If the issuer of securities deliverable upon
exercise of this Warrant is an affiliate of a Surviving Person, that
issuer shall join in the supplemental warrant agreement.
(ii) Notwithstanding the foregoing, if a Fundamental Transaction
shall occur and, upon consummation of such Fundamental Transaction,
consideration is payable to holders of shares of Common Stock which
consideration consists solely of cash, assuming (to the extent
applicable) that the Holder (i) was not a constituent person or an
affiliate of a constituent person to a transaction described in
Section 7(e)(i)(y) above and (ii) made no election with respect
thereto, then the Holder shall be entitled to receive distributions
upon consummation of such Fundamental Transaction on an equal basis
with holders of Common Stock as if this Warrant had been exercised
immediately prior to such event, less the aggregate Exercise Price
therefor; PROVIDED that the Company or the Surviving Person, as the
case may be, may require the surrender of this Warrant to such person
prior to making any such distribution to the Holder. Upon receipt of
such payment, if any, the rights of the Holder shall terminate and
cease and this Warrant shall expire.
(iii) If this paragraph (f) applies, it shall supersede the
application of paragraph (a), (b) or (c) of this Section 7.
(f) OTHER EVENTS If any event occurs as to which the provisions of
this Section 7 are not strictly applicable or, if strictly applicable, would
not, in the good faith judgment of the board of directors of the Company, fairly
and adequately protect the rights of the Holder in accordance with the essential
intent and principles of such provisions, then such board of directors shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of such board of directors, to protect such rights as
aforesaid, but in no event shall any such adjustment have the effect of
decreasing the Exercise Rate or decreasing the number of Securities issuable
upon exercise of this Warrant or increasing the Exercise Price per Security.
(g) COMPANY DETERMINATION FINAL. Any determination that the Company or
the board of directors of the Company must make pursuant to this Section 7 shall
be conclusive, absent manifest error.
(h) SPECIFICITY OF ADJUSTMENTS. Regardless of any adjustments in the
number or kind of shares purchasable upon the exercise of this Warrant or the
Exercise Price per Security, this Warrant may continue to express the same
number and kind of Securities initially issuable pursuant to this Warrant and
the initial Exercise Price per Security as set forth in the first paragraph
hereof.
(i) VOLUNTARY ADJUSTMENT. The Company from time to time may increase
the Exercise Rate and correspondingly decrease the Exercise Price per Security
by any number and for any period of time; PROVIDED, HOWEVER, that such period is
not less than 20 Business Days. Whenever the Exercise Rate is so increased and
the Exercise Price per Security is so decreased, the Company shall mail to the
Holder a notice thereof. The Company shall give the notice at least 10 days
before the date the increased Exercise Rate and decreased Exercise Price per
Security takes effect. The notice shall state the increased Exercise Rate and
decreased Exercise Price per Security and the period it will be in effect. A
voluntary increase in the Exercise Rate and
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decrease in the Exercise Price per Security shall not change or adjust the
Exercise Rate or Exercise Price per Security otherwise in effect as determined
by this Section 7.
(j) MULTIPLE ADJUSTMENTS. After an adjustment to the Exercise Rate
and Exercise Price per Security for this Warrant under this Section 7, any
subsequent event requiring an adjustment under this Section 7 shall cause an
adjustment to the Exercise Rate and Exercise Price per Security for this Warrant
as so adjusted.
(k) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED. No adjustment in the
Exercise Rate or Exercise Price per Security shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Exercise
Rate; PROVIDED, HOWEVER, that any adjustments which by reason of the foregoing
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations of the Exercise Rate shall be
rounded to the nearest whole number. All calculations of the Exercise Price per
Security shall be rounded to the nearest ten thousandth of one cent. No
adjustments need be made for a change in the par value of the Common Stock and
no adjustments shall be deferred beyond the date on which this Warrant is
exercised.
(l) Notwithstanding any adjustment to the Exercise Price called for
by this Section 7, in no event will the Exercise Price per share of Common Stock
be adjusted to an amount that is less than the par value per share of the Common
Stock at the time of such adjustment, and if, but for the provisions of this
Section 7(l), an adjustment to the Exercise Price would be required under this
Section 7 that would result in an Exercise Price per share of Common Stock that
is less than the par value per share of the Common Stock, then the Exercise
Price shall be adjusted such that the Exercise Price per share of Common Stock
equals the par value of the Common Stock.
(m) AMENDMENTS OF THE CERTIFICATE OF INCORPORATION. The Company shall
not amend its Certificate of Incorporation to increase the par value of any
Warrant Security such that such par value would exceed the Exercise Price per
share of such Warrant Security.
8. NOTICES. Any notices or certificates by the Company to the
Holder and by the Holder to the Company shall be deemed delivered if in writing
and delivered personally or sent by certified mail or reputable overnight
courier, to the Holder, addressed as set forth in the Instructions for
Registration of Warrant delivered to the Company, which may be superseded from
time to time upon notice to the Company, and, if to the Company, addressed to
Designs, Inc., 66 B Street, Needham Massachusetts, 02494, Attention: Chief
Financial Officer. The Company may change its address by written notice to the
Holder.
9. LIMITATIONS ON TRANSFERABILITY. This Warrant may be divided
or combined, upon request to the Company by the Holder, into a certificate or
certificates evidencing the same aggregate number of Warrants. This Warrant may
not be offered, sold, transferred, pledged or hypothecated (i) in the absence of
an effective registration statement as to this Warrant and such transaction
filed under the Act, or an exception from the requirement of such registration,
and compliance with the applicable federal and state securities laws, (ii) in an
amount representing the right to purchase fewer than 140,000 shares of Common
Stock, and (iii) with the consent of the Company, which consent shall not
unreasonably be withheld. The Company may require an opinion of counsel
satisfactory to the Company that such registration is not required and that such
laws are complied with. The Company may treat the registered holder of this
Warrant as he or it appears on the Company's books at any time as the Holder for
all purposes. The Company shall permit the Holder or his duly authorized
attorney, upon written request during ordinary business hours, to inspect and
copy or make extracts from its books showing the registered holders of Warrants.
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10. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. The
Company may cause the following legend, or one similar thereto, to be set forth
on this Warrant and on each certificate representing Warrant Securities, or any
other security issued or issuable upon exercise of this Warrant, unless (a) the
Company has received an opinion of counsel satisfactory to the Company as to any
such certificate that such legend, or one similar thereto, is unnecessary or (b)
a registration statement with respect to this Warrant and the Warrant Securities
has become effective under the Act.
"THIS SECURITY HAS NOT BEEN REGISTERED FOR RESALE UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITY AND
SUCH DISPOSITION FILED UNDER THE ACT, OR AN EXEMPTION FROM
REGISTRATION, AND COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
THE ISSUER MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER HEREOF THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH
LAWS ARE COMPLIED WITH."
11. APPLICABLE LAW. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to conflict of law principles.
12. AMENDMENTS. This Warrant may not be amended except in a
writing signed by the Holder and the Company.
13. SEVERABILITY. If any provisions of this Warrant shall be
held to be invalid or unenforceable, such invalidity or enforceability shall not
affect any other provision of this Warrant.
14. CERTAIN DEFINITIONS. In addition to the capitalized terms
defined elsewhere in this Warrant, the following capitalized terms shall have
the meanings set forth below.
"ACT" shall mean the Securities Act of 1933, as amended, together with
the rules and regulations promulgated thereunder.
"AFFILIATE" of a person shall mean a person who directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, such person. The term "control" means the power to direct
or cause the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract or otherwise.
"CONVERTIBLE SECURITY" shall mean any security convertible into or
exchangeable or exercisable for Common Stock, including but not limited to,
rights, options or warrants entitling the holder thereof to acquire Common Stock
or any security convertible into or exchangeable for Common Stock.
"CURRENT MARKET VALUE" per share of Common Stock of the Company at any
date shall mean:
(1) if Common Stock is not then registered under the Exchange
Act and traded on a national securities exchange or on the Nasdaq
National Market System,
(a) the value of such Common Stock, determined in good faith
by the board of directors of the Company and certified in a board
resolution, taking into account the most recently completed
arms-length transaction between the Company and a person other
than an Af-
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filiate of the Company and the closing of which occurs on such
date or shall have occurred within the six-month period preceding
such date, or
(b) if no such transaction shall have occurred on such date
or within such six-month period, the fair market value of the
security as determined by a nationally recognized investment
bank; PROVIDED, HOWEVER, that, in the case of the calculation of
Current Market Value for determining the cash value of fractional
shares, no such determination by an investment bank shall be
required and the good faith judgment of the board of directors as
to such value shall be conclusive, or
(2) (a) if Common Stock is then registered under the Exchange
Act and traded on a national securities exchange or on the Nasdaq
National Market System, the average of the daily closing sales prices
of such Common Stock for the 20 consecutive trading days immediately
preceding such date, or
(b) if Common Stock has been registered under the Exchange
Act and traded on a national securities exchange or on the Nasdaq
National Market System for less than 20 consecutive trading days
before such date, then the average of the daily closing sales
prices for all of the trading days before such date for which
closing sales prices are available,
in the case of each of (2)(a) and (2)(b), as certified by the Chief
Executive Officer, the President, any Executive Vice President or the
Chief Financial Officer or Treasurer of the Company. The closing sales
price of each such trading day shall be the closing sales price,
regular way, on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in the
United States as in effect on April 26, 2002.
"ISSUE DATE" shall mean __________, 2002.
"PERMITTED CASH DIVIDEND" shall mean any cash dividend in respect of
Common Stock that, together with all such dividends (other than dividends with
respect to which an adjustment has been made pursuant to Section 7(c)(i) or a
dividend which was also paid on a pro rata basis to the Holder as contemplated
by Section 7(c)(ii)) declared in respect of Common Stock during the previous
twelve months, on a per share basis, does not exceed 10% of the average closing
sales prices per share of the Common Stock for each trading day during such
twelve month period.
"PRIOR DAY MARKET VALUE" per share of Common Stock of the Company at
any date shall mean:
(1) if Common Stock is not then registered under the Exchange
Act and traded on a national securities exchange or on the Nasdaq
National Market System, the Current Market Value per share of Common
Stock, or
(2) if Common Stock is then registered under the Exchange Act
and traded on a national securities exchange or on the Nasdaq National
Market System, the closing sales price of Common Stock
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for the trading day ending immediately prior to the event causing the
Prior Day Market Value to be determined.
"TIME OF DETERMINATION" shall mean (i) in the case of any distribution
of securities or other property to existing shareholders to which Section 7(b)
or (c) applies, the time and date of the determination of shareholders entitled
to receive such securities or property or (ii) in the case of any other issuance
and sale to which Section 7(b) or 7(c) applies, the time and date of such
issuance or sale.
15. REGISTRATION RIGHTS. In the event that the Holder gives
notice to the Company in accordance with Section 8 hereof of its irrevocable
election to exercise this Warrant and other warrants of the same series as this
Warrant held by such Holder to the extent of at least 280,000 shares of Common
Stock and requests that such shares issuable upon such exercise be registered
under the Act, the Company undertakes to prepare and cause to be filed with the
Securities and Exchange Commission within 30 days thereafter (provided the
Company is then eligible to effect such registration on Form S-3 or any
successor form) a registration statement under the Act relating to resales of
such Common Stock by the Holder, and shall use commercially reasonable efforts
to cause such registration statement to be declared effective within 45 days
after such filing and to keep such registration statement effective for 90 days
or until such earlier time as such Common Stock issued upon exercise has been
sold by the Holder pursuant thereto; PROVIDED, HOWEVER, that the Holder shall be
bound (and if requested by the Company shall confirm in writing that it is so
bound) by reasonable and customary terms for the provision of information by the
Holder, the suspension of sales in the event of material developments regarding
the Company, delays in registration in the event of any offering of securities
for the account of the Company, and other matters, all on substantially the same
terms as may be applicable in one or more cases to holders of other securities
of the Company having similar rights to request registration under the Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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16. EFFECTIVENESS, ETC. Notwithstanding any other provision
hereof, (i) this Warrant shall not become exercisable unless and until the
Company consummates the Casual Male Acquisition as defined in the Note Agreement
between the Company and certain purchasers of the Company's 12% Senior
Subordinated Notes due 2007 (the "Note Agreement"), and (ii) this Warrant shall
automatically be rescinded, cancelled and of no further force and effect upon
the occurrence of a Mandatory Redemption Event (as defined in the Note
Agreement). Capitalized terms used, but not defined, in this Warrant shall have
the respective meanings ascribed to them in the Note Agreement unless the
context otherwise requires.
DESIGNS, INC.
By:
------------------------------------------
Name: David A. Levin
Title: President
Date: __________, 2002
Attest:
By:
-----------------------------------------
Name: Dennis R. Hernreich
Title: Chief Financial Officer
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PURCHASE FORM
Dated ____________, 20__
The undersigned hereby irrevocably elects to exercise this Warrant to
the extent of___________shares of Common Stock.
The undersigned has concurrently herewith made payment of $
in payment of the aggregate Exercise Price.
If the issuance of the Warrant Securities is not registered under the
Securities Act of 1933, as amended, the undersigned makes the representation and
warranty set forth in Section 1 of this Warrant.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name
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(please typewrite or print in block letters)
Address
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Signature
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ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________________________________
hereby sells, assigns and transfers unto
Name
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(please typewrite or print in block letters)
Address
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the right to purchase shares of Common Stock as represented by this Warrant to
the extent of shares of Common Stock as to which such right is exercisable and
does hereby irrevocably constitute and appoint, __________________ attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Signature
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Dated: _______________ 20____
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INSTRUCTIONS FOR REGISTRATION OF WARRANT
Name
---------------------------------------------------------------------------
(please typewrite or print in block letters)
Address
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Signature
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