EXHIBIT 10.2
EXECUTION VERSION
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
WHITEHALL JEWELLERS, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.:1
Number of Shares of Common Stock: 2,094,346
Date of Issuance: October 3, 2005 ("ISSUANCE DATE")
WHITEHALL JEWELLERS, INC., a Delaware corporation (the "COMPANY"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, PWJ LENDING LLC, a Delaware
limited liability company, the registered holder hereof or its permitted assigns
(the "HOLDER"), is entitled, subject to the terms set forth below, to purchase
from the Company, at the Exercise Price (as defined below) then in effect, upon
surrender of this Warrant to Purchase Common Stock (including any Warrants to
Purchase Common Stock issued in exchange, transfer or replacement hereof, the
"WARRANT"), at any time or times on or after the date hereof, but not after
11:59 p.m., New York Time, on the Expiration Date (as defined below), up to two
million, ninety-four thousand, three hundred and forty-six (2,094,346) fully
paid nonassessable shares of Common Stock (as defined below) (the "WARRANT
SHARES"). Except as otherwise defined herein, capitalized terms in this Warrant
shall have the meanings set forth in Section 15. This Warrant is one of the
Warrants to purchase Common Stock (the "SPA WARRANTS") issued pursuant to
Section 1 of that certain Securities Purchase Agreement, dated as of October 3,
2005 (the "SUBSCRIPTION DATE"), by and among the Company and the investors (the
"BUYERS") referred to therein (the "SECURITIES PURCHASE AGREEMENT").
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions
hereof (including, without limitation, the limitations set forth in Section
1(f)), this Warrant may be exercised by the Holder on any day on or after the
date hereof, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto as Exhibit A (the
"EXERCISE NOTICE"), of the Holder's election to exercise this Warrant and (ii)
(A) payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being
exercised (the "AGGREGATE EXERCISE PRICE") in cash or wire transfer of
immediately available funds or (B) by notifying the Company that this Warrant is
being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)).
The Holder shall not be required to deliver the original Warrant in order to
effect an exercise hereunder. Execution and delivery of the Exercise Notice with
respect to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or before the
first Business Day following the date on which the Company has received each of
the Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
Exercise) (the "EXERCISE DELIVERY DOCUMENTS"), the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery
Documents to the Holder and the Company's transfer agent (the "TRANSFER AGENT").
On or before the third Business Day following the date on which the Company has
received all of the Exercise Delivery Documents (the "SHARE DELIVERY DATE"), the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company ("DTC") Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of shares of Common
Stock to which the Holder is entitled pursuant to such exercise to the Holder's
or its designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (Y) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and dispatch by overnight
courier to the address as specified in the Exercise Notice, a certificate,
registered in the Company's share register in the name of the Holder or its
designee, for the number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise. Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to in clause (ii)(A) above or notification to
the Company of a Cashless Exercise referred to in Section 1(d), the Holder shall
be deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of the certificates evidencing such Warrant
Shares. If this Warrant is submitted in connection with any exercise pursuant to
this Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 7(d)) representing the
right to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with respect
to which this Warrant is exercised. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but rather the number of shares of
Common Stock to be issued shall be rounded up to the nearest whole number. The
Company shall pay any and all taxes which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant.
(b) Exercise Price. For purposes of this Warrant, "EXERCISE
PRICE" means $.75, subject to adjustment as provided herein.
- 2 -
(c) Company's Failure to Timely Deliver Securities. In addition
to the foregoing, if within three (3) Business Days after the Company's receipt
of the facsimile copy of a Exercise Notice the Company shall fail to issue and
deliver a certificate to the Holder and register such shares of Common Stock on
the Company's share register or credit the Holder's balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon such
holder's exercise hereunder, and if on or after such Business Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving from the
Company (a "BUY-IN"), then the Company shall, within three (3) Business Days
after the Holder's request and in the Holder's discretion, either (i) pay cash
to the Holder in an amount equal to the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased (the
"BUY-IN PRICE"), at which point the Company's obligation to deliver such
certificate (and to issue such shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock and pay cash to the Holder
in an amount equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock, times (B) the Closing Bid Price on
the date of exercise.
(d) Cashless Exercise. Notwithstanding anything contained herein
to the contrary, if a Registration Statement (as defined in the Registration
Rights Agreement) covering the Warrant Shares that are the subject of the
Exercise Notice (the "UNAVAILABLE WARRANT SHARES") is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula (a "CASHLESS EXERCISE"):
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A= the total number of shares with respect to which this Warrant is
then being exercised.
B= the Closing Sale Price of the shares of Common Stock (as reported
by Bloomberg) on the date immediately preceding the date of the
Exercise Notice.
C= the Exercise Price then in effect for the applicable Warrant Shares
at the time of such exercise.
(e) Disputes. In the case of a dispute as to the determination of
the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly
- 3 -
issue to the Holder the number of Warrant Shares that are not disputed and
resolve such dispute in accordance with Section 12.
(f) Limitations on Exercises.
(i) Beneficial Ownership. From and after such time that the
Holder informs the Company that the Holder is electing that this
Warrant will be governed by this Section 1(f)(i), the Company
shall not effect the exercise of this Warrant, and the Holder
shall not have the right to exercise this Warrant, to the extent
that after giving effect to such exercise, such Person (together
with such Person's affiliates) would beneficially own in excess
of 9.99% of the shares of Common Stock outstanding immediately
after giving effect to such exercise. For purposes of the
foregoing sentence, the aggregate number of shares of Common
Stock beneficially owned by such Person and its affiliates shall
include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination
of such sentence is being made, but shall exclude shares of
Common Stock which would be issuable upon (i) exercise of the
remaining, unexercised portion of this Warrant beneficially owned
by such Person and its affiliates and (ii) exercise or conversion
of the unexercised or unconverted portion of any other securities
of the Company beneficially owned by such Person and its
affiliates (including, without limitation, any convertible notes
or convertible preferred stock or warrants) subject to a
limitation on conversion or exercise analogous to the limitation
contained herein. Except as set forth in the preceding sentence,
for purposes of this paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this Warrant,
in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (1) the Company's most recent Form 10-K,
Form 10-Q, Current Report on Form 8-K or other public filing with
the Securities and Exchange Commission, as the case may be, (2) a
more recent public announcement by the Company or (3) any other
notice by the Company or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. For any reason at
any time, upon the written or oral request of the Holder, the
Company shall within one Business Day confirm orally and in
writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including
the SPA Securities and the SPA Warrants, by the Holder and its
affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.
(ii) Principal Market Regulation. The Company shall not be
obligated to issue any shares of Common Stock upon exercise of
this
- 4 -
Warrant if the issuance of such shares of Common Stock would
exceed that number of shares of Common Stock which the Company
may issue upon exercise of this Warrant (including, as
applicable, any shares of Common Stock issued upon conversion or
exercise of the SPA Securities) without breaching the Company's
obligations under the rules or regulations of the Principal
Market (the "EXCHANGE CAP"), except that such limitation shall
not apply in the event that the Company (A) obtains the approval
of its shareholders as required by the applicable rules of the
Principal Market for issuances of shares of Common Stock in
excess of such amount or (B) obtains a written opinion from
outside counsel to the Company that such approval is not
required, which opinion shall be reasonably satisfactory to the
Required Holders. Until such approval or written opinion is
obtained, no Buyer shall be issued, upon exercise of any SPA
Warrants, shares of Common Stock in an amount greater than the
product of the Exchange Cap multiplied by a fraction, the
numerator of which is the total number of shares of Common Stock
issued to such Buyer pursuant to the Securities Purchase
Agreement on the Issuance Date and the denominator of which is
the aggregate number of shares of Common Stock issued to the
Buyers pursuant to the Securities Purchase Agreement on the
Issuance Date (with respect to each Buyer, the "EXCHANGE CAP
ALLOCATION"). In the event that any Buyer shall sell or otherwise
transfer any of such Buyer's SPA Warrants, the transferee shall
be allocated a pro rata portion of such Buyer's Exchange Cap
Allocation, and the restrictions of the prior sentence shall
apply to such transferee with respect to the portion of the
Exchange Cap Allocation allocated to such transferee. In the
event that any holder of SPA Warrants shall exercise all of such
holder's SPA Warrants into a number of shares of Common Stock
which, in the aggregate, is less than such holder's Exchange Cap
Allocation, then the difference between such holder's Exchange
Cap Allocation and the number of shares of Common Stock actually
issued to such holder shall be allocated to the respective
Exchange Cap Allocations of the remaining holders of SPA Warrants
on a pro rata basis in proportion to the shares of Common Stock
underlying the SPA Warrants then held by each such holder. In the
event that the Company is prohibited from issuing any Warrant
Shares for which an Exercise Notice has been received as a result
of the operation of this Section 1(f)(ii), the Company shall pay
cash in exchange for cancellation of such Warrant Shares, at a
price per Warrant Share equal to the difference between the
Closing Sale Price and the Exercise Price as of the date of the
attempted exercise.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:
(a) Adjustment upon Issuance of shares of Common Stock. If and
whenever on or after the Subscription Date the Company issues or sells, or in
accordance with
- 5 -
this Section 2 is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding shares of Common Stock deemed to
have been issued by the Company in connection with any Excluded Securities (as
defined in the SPA Securities) for a consideration per share (the "NEW
SECURITIES ISSUANCE PRICE") less than a price (the "APPLICABLE PRICE") equal to
the Exercise Price in effect immediately prior to such issue or sale or deemed
issuance or sale (the foregoing a "DILUTIVE ISSUANCE"), then immediately after
such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an
amount equal to the New Securities Issuance Price. Subject to Section 1(f)(ii),
upon each such adjustment of the Exercise Price hereunder, the number of Warrant
Shares shall be adjusted to the number of shares of Common Stock determined by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares acquirable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment. For purposes of determining the
adjusted Exercise Price under this Section 2(a), the following shall be
applicable:
(i) Issuance of Options. If the Company in any manner grants
any Options and the lowest price per share for which one
share of Common Stock is issuable upon the exercise of any
such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such
Option is less than the Applicable Price, then such share of
Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share.
For purposes of this Section 2(a)(i), the "lowest price per
share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion, exercise or
exchange of such Convertible Securities" shall be equal to
the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any
one share of Common Stock upon the granting or sale of the
Option, upon exercise of the Option and upon conversion,
exercise or exchange of any Convertible Security issuable
upon exercise of such Option. No further adjustment of the
Exercise Price or number of Warrant Shares shall be made
upon the actual issuance of such shares of Common Stock or
of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such shares of Common
Stock upon conversion, exercise or exchange of such
Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in
any manner issues or sells any Convertible Securities and
the lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange
thereof is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such
price per share. For the purposes of
- 6 -
this Section 2(a)(ii), the "lowest price per share for which
one share of Common Stock is issuable upon the conversion,
exercise or exchange" shall be equal to the sum of the
lowest amounts of consideration (if any) received or
receivable by the Company with respect to one share of
Common Stock upon the issuance or sale of the Convertible
Security and upon conversion, exercise or exchange of such
Convertible Security. No further adjustment of the Exercise
Price or number of Warrant Shares shall be made upon the
actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options
for which adjustment of this Warrant has been or is to be
made pursuant to other provisions of this Section 2(a), no
further adjustment of the Exercise Price or number of
Warrant Shares shall be made by reason of such issue or
sale.
(iii) Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion,
exercise or exchange of any Convertible Securities, or the
rate at which any Convertible Securities are convertible
into or exercisable or exchangeable for shares of Common
Stock increases or decreases at any time, the Exercise Price
and the number of Warrant Shares in effect at the time of
such increase or decrease shall be adjusted to the Exercise
Price and the number of Warrant Shares which would have been
in effect at such time had such Options or Convertible
Securities provided for such increased or decreased purchase
price, additional consideration or increased or decreased
conversion rate, as the case may be, at the time initially
granted, issued or sold. For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the date of issuance of
this Warrant are increased or decreased in the manner
described in the immediately preceding sentence, then such
Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date
of such increase or decrease. No adjustment pursuant to this
Section 2(a) shall be made if such adjustment would result
in an increase of the Exercise Price then in effect or a
decrease in the number of Warrant Shares.
(iv) Calculation of Consideration Received. In case any
Option is issued in connection with the issue or sale of
other securities of the Company, together comprising one
integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the
Options will be deemed to have been issued for a
consideration mutually determined in good faith by the
Company (as approved by a majority of the Company
Disinterested Directors) and the Required Holders or in the
absence of agreement on the foregoing, in accordance
- 7 -
with Section 12 hereof. If any shares of Common Stock,
Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net
amount received by the Company therefor. If any shares of
Common Stock, Options or Convertible Securities are issued
or sold for a consideration other than cash, the amount of
such consideration received by the Company will be the fair
value of such consideration, except where such consideration
consists of securities, in which case the amount of
consideration received by the Company will be the Closing
Sale Price of such security on the date of receipt. If any
shares of Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net
assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or
Convertible Securities, as the case may be. The fair value
of any consideration other than cash or securities will be
determined jointly by the Company and the Required Holders.
If such parties are unable to reach agreement within ten
(10) days after the occurrence of an event requiring
valuation (the "VALUATION EVENT"), the fair value of such
consideration will be determined within five (5) Business
Days after the tenth day following the Valuation Event by an
independent, reputable appraiser jointly selected by the
Company and the Required Holders. The determination of such
appraiser shall be final and binding upon all parties absent
manifest error and the fees and expenses of such appraiser
shall be borne by the Company. For purposes of this Section
2(a)(iv), the term "COMPANY DISINTERESTED DIRECTORS" shall
mean the directors of the Company (or its successor), as of
the date of any relevant determination hereunder, that are
not employees, directors or officers of the Holder or any of
its Affiliates, where "AFFILIATE" shall mean, with respect
to any Person, any Person directly or indirectly
controlling, controlled by or under common control with,
such Person, where "control" means the possession, directly
or indirectly, of the power to direct or cause the direction
of the management and policies of such Person through the
ownership of such Person's voting securities, by contract or
otherwise..
(v) Record Date. If the Company takes a record of the
holders of shares of Common Stock for the purpose of
entitling them (A) to receive a dividend or other
distribution payable in shares of Common Stock, Options or
in Convertible Securities or (B) to subscribe for or
purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the
date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or
the date of the granting of such right of subscription or
purchase, as the case may be.
- 8 -
(b) Adjustment upon Subdivision or Combination of Shares of
Common Stock. If the Company at any time on or after the Subscription Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Warrant Shares
will be proportionately increased. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
will be proportionately decreased. Any adjustment under this Section 2(b) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(c) Other Events. If any event occurs of the type contemplated by
the provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of Warrant Shares so as to protect the rights of the
Holder; provided that no such adjustment pursuant to this Section 2(c) will
increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "DISTRIBUTION"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close
of business on the record date fixed for the determination of holders of shares
of Common Stock entitled to receive the Distribution shall be reduced, effective
as of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall
be the Closing Bid Price of the shares of Common Stock on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of Common Stock, and (ii) the denominator shall be the Closing Bid Price
of the shares of Common Stock on the trading day immediately preceding such
record date; and
(b) the number of Warrant Shares shall be increased to a number
of shares equal to the number of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed for the determination of
holders of shares of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the
- 9 -
immediately preceding paragraph (a); provided that in the event that the
Distribution is of shares of Common Stock (or common stock) ("OTHER SHARES OF
COMMON STOCK") of a company whose common shares are traded on a national
securities exchange or a national automated quotation system, then the Holder
may elect to receive a warrant to purchase Other Shares of Common Stock in lieu
of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Stock that would
have been payable to the Holder pursuant to the Distribution had the Holder
exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase Rights. In addition to any adjustments pursuant to
Section 2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) immediately before
the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
(b) Fundamental Transactions. The Company shall not enter into or
be party to a Fundamental Transaction unless (i) the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section (4)(b)
pursuant to written agreements in form and substance satisfactory to the
Required Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Warrants in
exchange for such Warrants a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value for
the shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market; provided that the Company may enter into such a
Fundamental Transaction without complying with the foregoing obligations if the
Fundamental Transaction involves a Change of Control (as defined in the Notes)
where the consideration being paid by the acquiring entity for the Common Stock
in such transaction is cash if, prior to consummation of such Fundamental
Transaction, the Company shall have provided pursuant to
- 10 -
agreements in form and substance satisfactory to the Required Holders for the
Holders to receive contemporaneous with completion of the Fundamental
Transaction in exchange for surrender of the Warrants, a cash payment equal to
the fair market value of the Warrants held by such Holder (based on then
prevailing customary valuation methodologies for derivative securities like the
Warrants and the terms thereof), as determined by mutual agreement of the
Company (as approved by the Company Disinterested Directors) and the Required
Holders (a "COMPANY WARRANT PURCHASE"); provided, further that if agreement
cannot be reached on such fair market value, fair market value shall be
determined in accordance with Section 12 hereof. Unless a Company Warrant
Purchase has occurred, upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Warrant
referring to the "Company" shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein. Unless a Company Warrant
Purchase has occurred, upon consummation of the Fundamental Transaction, the
Successor Entity shall deliver to the Holder confirmation that there shall be
issued upon exercise of this Warrant at any time after the consummation of the
Fundamental Transaction, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) purchasable upon the exercise of the
Warrant prior to such Fundamental Transaction, such shares of the publicly
traded common stock (or its equivalent) of the Successor Entity (including its
Parent Entity), as adjusted in accordance with the provisions of this Warrant.
In addition to and not in substitution for any other rights hereunder, prior to
the consummation of any Fundamental Transaction pursuant to which holders of
shares of Common Stock are entitled to receive securities or other assets with
respect to or in exchange for shares of Common Stock (a "CORPORATE EVENT"), the
Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any
time after the consummation of the Fundamental Transaction but prior to the
Expiration Date, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property) purchasable upon the exercise of the Warrant
prior to such Fundamental Transaction, such shares of stock, securities, cash,
assets or any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had the Warrant been exercised
immediately prior to such Fundamental Transaction. Provision made pursuant to
the preceding sentence shall be in a form and substance reasonably satisfactory
to the Required Holders. The provisions of this Section shall apply similarly
and equally to successive Fundamental Transactions and Corporate Events and
shall be applied without regard to any limitations on the exercise of this
Warrant.
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate in
- 11 -
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, 100% of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to the
shareholders.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred,
the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new
- 12 -
Warrant or Warrants (in accordance with Section 7(d)) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional shares of
Common Stock shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to
issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i)
shall be of like tenor with this Warrant, (ii) shall represent, as indicated on
the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of Warrant Shares then underlying this Warrant), (iii) shall have an issuance
date, as indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
8. NOTICES. Whenever notice is required to be given under this
Warrant, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Exercise Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least fifteen
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to holders of shares of Common Stock or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the Holder. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.
10. GOVERNING LAW. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
- 13 -
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
12. DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or arithmetic
calculations via facsimile within two Business Days of receipt of the Exercise
Notice giving rise to such dispute, as the case may be, to the Holder. If (i)
the Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within three Business
Days of such disputed determination or arithmetic calculation being submitted to
the Holder, (ii) the Holder and the Company are unable to agree to the
determination of the allocation of consideration under Section 2(a)(iv) hererof
or (iii) the Required Holders and the Company are unable to agree on the fair
market value of the Warrants as provided in Section 4(b), then the Company
shall, within two Business Days submit via facsimile (a) the disputed
determination of the Exercise Price, the allocation of consideration under the
first sentence of Section 2(a)(iv) or the fair market value of the Warrants, to
an independent, reputable investment bank selected by the Company and approved
by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares
to the Company's independent, outside accountant. The Company shall cause at its
expense the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.
13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
14. TRANSFER. This Warrant may be offered for sale, sold, transferred
or assigned without the consent of the Company, except as may otherwise be
required by Section 2(f) of the Securities Purchase Agreement.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:
(a) "BLOOMBERG" means Bloomberg Financial Markets.
- 14 -
(b) "BUSINESS DAY" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
(c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 12. All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.
(d) "COMMON STOCK" means (i) the Company's shares of Common
Stock, $0.001 par value per share, and (ii) any share capital into which such
Common Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.
(e) "CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock.
(f) "ELIGIBLE MARKET" means the Principal Market, the American
Stock Exchange, the Nasdaq National Market or The Nasdaq SmallCap Market.
(g) "EXPIRATION DATE" means the date eighty-four months after the
Issuance Date or, if such date falls on a day other than a Business Day or on
which trading does not take place on the Principal Market (a "HOLIDAY"), the
next date that is not a Holiday.
(h) "FUNDAMENTAL TRANSACTION" means that the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the Company
- 15 -
to another Person, or (iii) allow another Person to make a purchase, tender or
exchange offer that is accepted by the holders of more than the 50% of either
the outstanding shares of Common Stock (not including any shares of Common Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
or (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock purchase agreement or other business combination), (v) changed the members
constituting its Board of Directors such that the individuals who constituted
the Board of Directors on the Subscription Date or other governing body of the
Company (together with any new directors whose election to such Board of
Directors or whose nomination for election by the stockholders of the company
was approved by a vote of 66-2/3% of the directors then still in office who were
either directors on the Subscription Date or whose election or nomination for
election was previously so approved), cease for any reason to constitute a
majority of such Board of Directors then in office, or (vi) reorganize,
recapitalize or reclassify its Common Stock; provided that the issuance of the
Notes, the Other Notes or the Warrants or the issuance of shares of Common Stock
upon the exercise or conversion thereof shall not constitute a Fundamental
Transaction.
(i) "OPTIONS" means any rights, warrants or options to subscribe
for or purchase shares of Common Stock or Convertible Securities.
(j) "PARENT ENTITY" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(k) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(l) "PRINCIPAL MARKET" means The New York Stock Exchange, Inc.
(m) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement by and among the Company and the Buyers.
(n) "REQUIRED HOLDERS" means the holders of the SPA Warrants
representing at least a majority of shares of Common Stock underlying the SPA
Warrants then outstanding.
(o) "SPA SECURITIES" means the Notes issued pursuant to the
Securities Purchase Agreement.
- 16 -
(p) "SUCCESSOR ENTITY" means the Person, which may be the
Company, formed by, resulting from or surviving any Fundamental Transaction or
the Person with which such Fundamental Transaction shall have been made,
provided that if such Person is not a publicly traded entity whose common stock
or equivalent equity security is quoted or listed for trading on an Eligible
Market, Successor Entity shall mean such Person's Parent Entity.
[SIGNATURE PAGE FOLLOWS]
- 17 -
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase
Common Stock to be duly executed as of the Issuance Date set out above.
WHITEHALL JEWELLERS, INC.
By: /s/ John R. Desjardins
Name: John R. Desjardins
Title: Executive Vice President & CFO
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
WHITEHALL JEWELLERS, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("WARRANT SHARES") of WHITEHALL
JEWELLERS, INC., a Delaware corporation (the "COMPANY"), evidenced by the
attached Warrant to Purchase Common Stock (the "WARRANT"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as:
____________ a "Cash Exercise" with respect to _________________
Warrant Shares; and/or
____________ a "Cashless Exercise" with respect to ______________
Warrant Shares.
2. Payment of Exercise Price. In the event that the holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
- -------------------------------------
Name of Registered Holder
By:
---------------------------------
Name:
Title:
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby
directs LaSalle Bank to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated October __, 2005
from the Company and acknowledged and agreed to by LaSalle Bank.
WHITEHALL JEWELLERS, INC.
By:
------------------------------------
Name:
Title: