THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ("ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR SUCH LAWS AND RULES AND
REGULATIONS THEREUNDER.
MANAGEMENT ANTI-DILUTION WARRANT
TO PURCHASE SHARES OF COMMON
STOCK OF LONDON FOG INDUSTRIES, INC.
This certifies that ___________ (the "Holder"), for value
received, is entitled to purchase from London Fog Industries, Inc., a Delaware
corporation (the "Company"), _______________________ (____) fully paid and
nonassessable shares of the Company's Common Stock, par value $.01 per share
(the "Stock"), at a price of $15.72 per share (the "Stock Purchase Price") at
any time or from time to time during the exercise period set forth in Section 1,
upon surrender to the Company at its principal office at 8 West 40th Street, New
York, New York 10018 (or at such other location as the Company may advise Holder
in writing) of this Warrant with the Form of Subscription attached hereto duly
filled in and signed and upon payment by cash, certified or bank check or wire
transfer of the aggregate Stock Purchase Price for the number of shares for
which this Warrant is being exercised determined in accordance with the
provisions hereof. The Stock Purchase Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
This Warrant is exercisable at the option of Holder at any time or from time to
time on or after the first date on which any Warrants (the "Merger Warrants")
issued pursuant to the Merger Agreement dated as of February 27, 1998 between
the Company and LFI Merger Corp. are exercised and not later than 5:00 p.m. (New
York time) on the Expiration Date (as defined below) for all or a portion of the
shares of Stock which may be purchased hereunder. "Expiration Date" means the
earlier of (i) the later of February 28, 2005 and seven days after receipt by
the Holder of the Exercise Notice referred to below, or (ii) the occurrence of
an event which causes termination of this Warrant under clause (d) of Section
3.4. The Company shall give the Holder prompt notice (the "Exercise Notice") of
the exercise of any of the Merger Warrants. Notwithstanding the foregoing, this
Warrant shall only be exercisable with respect to the same percentage of the
aggregate shares subject to this Warrant as the percentage of the aggregate
shares subject to the Stock Option Agreement between the Company and the Holder
dated the date hereof which are
then exercisable or have previously been exercised under the terms of the Stock
Option Agreement.
The Company agrees that the shares of Stock purchased under
this Warrant shall be and are deemed to be issued to Holder as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such shares. Subject to the
provisions of Section 2, certificates for the shares of Stock so purchased,
together with any other securities or property to which Holder is entitled upon
such exercise, shall be delivered to Holder by the Company's transfer agent at
the Company's expense within a reasonable time (but in no event more than three
business days) after the rights represented by this Warrant have been exercised.
Each stock certificate so delivered shall be in such denominations of Stock as
may be requested by Holder and shall be registered in the name of Holder or such
other name as shall be designated by Holder, subject to the limitations
contained in Section 2. If, upon exercise of this Warrant, fewer than all of the
shares of Stock evidenced by this Warrant are purchased prior to the Expiration
Date, one or more new warrants substantially in the form of, and on the terms
in, this Warrant will be issued for the remaining number of shares of Stock not
purchased upon exercise of this Warrant.
2. Shares to be Fully Paid: Reservation of Shares. The Company
covenants and agrees that all shares of Stock which may be issued upon the
exercise of the rights represented by this Warrant (the "Warrant Shares") will,
upon issuance, be duly authorized, validly issued, fully paid and nonassessable
and free from all preemptive rights of any stockholder and free of all taxes,
liens and charges with respect to the issue thereof. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized
and reserved, for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
authorized but unissued Stock for such exercise. The Company will take all such
action as may be necessary to assure that such shares of Stock may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange, automated quotation system or
quotation service upon which the Stock may be listed.
3. Adjustment of Stock Purchase Price; Number of Shares. The
Stock Purchase Price and the number of shares purchasable upon the exercise of
this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3; provided, however,
that if a certain event shall cause the Stock Purchase Price to be adjusted to a
price less than the par value of the Stock, the Company prior to such event
shall decrease the par value of the Stock so that the Stock Purchase Price shall
not be less than the par value of the Stock following the occurrence of such
event. Upon each adjustment of the Stock Purchase Price, the holder of this
Warrant shall thereafter be entitled to purchase, at the Stock Purchase Price
resulting from such adjustment, the number of shares obtained by multiplying the
Stock Purchase Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the
Company shall at any time subdivide its outstanding shares of Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and the number of shares
issuable upon exercise of this Warrant shall be proportionately increased.
Conversely, in case the outstanding shares of Stock of the Company shall be
combined into a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately increased and the
number of shares issuable upon exercise of this Warrant shall be proportionately
reduced.
3.2 Stock Dividend. In case the Company shall at any
time declare or pay a dividend upon its Stock payable in shares of Stock, the
Stock Purchase Price in effect immediately prior to such dividend shall be
proportionately reduced and the number of shares issuable upon exercise of this
Warrant shall be proportionately increased.
3.3 Notice of Adjustment. Upon any adjustment of the
Stock Purchase Price or any increase or decrease in the number of shares
purchasable upon the exercise of this Warrant, the Company shall give written
notice thereof, by first class mail, postage prepaid, addressed to the
registered holder of this Warrant at the address of such holder as shown on the
books of the Company. The notice shall be signed by the Company's Secretary or
another designated officer and shall state the effective date of the adjustment
and the Stock Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
3.4 Other Notices. If at any time:
(a) the Company shall propose to declare any cash
dividend upon its Stock;
(b) the Company shall propose to declare or make any
dividend or other distribution to the holders of its Stock, whether in cash,
property or other securities;
(c) the Company shall propose to effect any
reorganization or reclassification of the capital stock of the Company or any
consolidation or merger of the Company with or into another corporation or any
sale, lease or conveyance of all or substantially all of the assets of the
Company; or
(d) the Company shall propose to effect a voluntary
or involuntary dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by certified or
registered mail, postage prepaid, addressed to the holder of this Warrant at the
address of such holder as shown on the books of the Company, (i) at least 30
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend or distribution or for
determining rights to vote in respect of any such reorganization,
reclassification,
consolidation, merger, sale, lease, conveyance, dissolution, liquidation or
winding-up, and (ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, lease, conveyance, dissolution, liquidation or
winding-up, at least 30 days' written notice of the date when the same shall
take place. Upon the occurrence of an event described in clause (c), the holder
of this Warrant shall be entitled thereafter to receive upon exercise of this
Warrant the kind and amount of shares of stock or other securities or assets
which the holder would have been entitled to receive after the occurrence of
such event had this Warrant been exercised immediately prior to such event; and
in any such case, appropriate provision shall be made with respect to the rights
and interests of the holder to the end that the provisions of this Warrant
(including, without limitation, provisions with respect to changes in and
adjustments of the Stock Purchase Price and the number of shares purchasable
upon the exercise of this Warrant) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, or other securities or assets,
thereafter deliverable upon the exercise of this Warrant. The Company will not
effect any of the transactions described in clause (c) above unless, prior to
the consummation thereof, each person (other than the Company) that may be
required to deliver any cash, stock, securities or other assets upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this Warrant, (x)
the obligations of the Company under this Warrant (and if the Company shall
survive the consummation of any such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Warrant) and (y) the obligation to deliver to such
holder such cash, stock, securities or other assets as such holder may be
entitled to receive in accordance with the provisions of this Section 3. Upon
the occurrence of an event described in clause (d), this Warrant shall
terminate. The provisions of this Section 3.6 shall similarly apply to
successive transactions.
4. Issue Tax. The issuance of certificates for shares of Stock
upon the exercise of this Warrant shall be made without charge to the holder of
this Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then holder of the Warrant being exercised.
5. No Voting Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder in
respect of meetings of stockholders for the election of directors of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.
No provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Stock, and no mere enumeration herein of the rights or
privileges of the Holder hereof, shall give rise to any liability of such Holder
for the Stock Purchase Price or as a stockholder of the Company whether such
liability is asserted by the Company or by its creditors.
6. Restrictions on Transferability of Securities; Compliance
With Securities Act.
6.1 Restrictions on Transferability. The Warrant and
the Warrant Shares (collectively, the "Securities"), shall not be transferable
in the absence of registration under the Act or an exemption therefrom under
such Act.
6.2 Restrictive Legend. Each certificate representing
the Securities or any other securities issued in respect of the Securities upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR ANY
STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR SUCH
LAWS AND RULES AND REGULATIONS THEREUNDER.
If, at the time of exercise, the Shares are registered
pursuant to the Registrant Rights Agreement referred to in Section 7, the legend
shall be modified accordingly.
6.3 Effect of Transfer. Subject to the provisions of
Section 6.1 hereof, the Holder may transfer all or any portion of this Warrant
by surrendering this Warrant to the Company together with a completed assignment
in the form attached hereto as Exhibit B. Upon such surrender, the Company shall
deliver a new Warrant or Warrants to the person or persons entitled thereto and,
if applicable, shall deliver to the Holder a new Warrant evidencing the right of
the Holder to purchase the balance of the Warrant Shares subject to purchase
hereunder. The term "Holder" as used herein shall include any transferee to whom
this Warrant has been transferred in accordance with this Section 6.3.
7. Registration Procedures. The Warrant Shares constitute
"Registrable Securities" as defined in Section 1 of the Registration Rights
Agreement, dated as of February 27, 1998, and shall be entitled to registration
rights in accordance with such Agreement.
8. Income Tax Withholding. If the Company or a subsidiary
shall be required to withhold any amounts by reason of any federal, state or
local tax rules or regulations in respect of the exercise of this Warrant, the
holder shall make available to the Company or the subsidiary sufficient funds to
meet the withholding requirements and the Company or the subsidiary shall be
entitled to take and authorize any steps it deems advisable in order to have
such funds made available to the Company or the subsidiary out of any funds or
property due or to become due to the Holder. If the Holder elects and if the
Company consents in its sole
discretion to such election, any such taxes may be paid by delivering Warrant
Shares acquired upon exercise of this Warrant (valued at fair market value as
defined in the Stock Option Agreement referred to in section 1).
9. Modification and Waiver. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
10. Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
personally delivered or shall be sent by certified or registered mail, postage
prepaid, to each such Holder at its address as shown on the books of the Company
or to the Company at the address indicated therefor in the first paragraph of
this Warrant. Any notice given by personal delivery shall be deemed given upon
receipt, and any notice given by certified or registered mail shall be deemed
given five days after registration or certification thereof, as the case may be.
11. Descriptive Headings and Governing Law. The descriptive
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of New York, without giving
effect to rules governing conflicts of law.
12. Lost Warrants or Stock Certificates. The Company
represents and warrants to, and agrees with, the Holder that upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction,
or mutilation of any Warrant or stock certificate and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity, or in the case of any
such mutilation, upon surrender and cancellation of such Warrant or stock
certificate, the Company at its expense will make and deliver a new Warrant or
stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.
13. Fractional Shares. No fractional shares shall be issued
upon exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the Holder entitled to such fraction a sum in cash equal
to such fraction multiplied by the market price of the Stock,
which shall be, on any date, the closing price for the Stock or the closing bid
if no sales were reported on the domestic securities exchange or automated
quotation system or quotation service which is the principal market for the
stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer, thereunto duly authorized this 27th day of February,
1998.
LONDON FOG INDUSTRIES, INC.
By:
------------------------------
Name:
Title:
FORM OF SUBSCRIPTION
--------------------
(To be signed only upon exercise of Warrant)
To: ___________________________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, _____________________ (_______) shares of
Common Stock, par value $.__ per share (the "Stock"), of London Fog Industries,
Inc. (the "Company") and herewith makes payment of _____________________________
Dollars ($__________) therefor and requests that the certificates for such
shares be issued in the name of, and delivered to,
___________________________________
_____________________________________________________________, whose address is
____________________________________________.
The undersigned represents, unless the exercise of this
Warrant has been registered under the Securities Act of 1933, as amended (the
"Securities Act"), that the undersigned is acquiring such Stock for its own
account for investment and not with a view to or for sale in connection with any
distribution thereof (except for any resale pursuant to a Registration Statement
under the Securities Act).
DATED:
-----------------
------------------------------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant)
------------------------------------------------
------------------------------------------------
(Address)
EXHIBIT B
FORM OF ASSIGNMENT
(To be executed by the registered Holder if such Holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ____________________________ hereby sells,
assigns, and transfers unto ___________________________ a Warrant to Purchase
____________ shares of Common Stock, par value $.__ per share, of London Fog
Industries, Inc. (the "Company"), together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint ___________ attorney
to transfer such Warrant on the books of the Company, with full power of
substitution.
Dated:
------------------------
Signature
------------------
NOTICE
This signature on the foregoing Assignment must correspond to
the name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.