Document:

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                                                                   EXHIBIT 10.20

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT (the "Agreement") is made as of this 31st day
of January, 2004, by and between Intersections Inc., a Delaware corporation,
with offices at 14901 Bogle Street, Chantilly, Virginia 20151 (the
"Corporation") and Neal B. Dittersdorf, an individual, residing at 6820 Delaware
Street, Chevy Chase, MD 20815 (the "Executive").

                                  WITNESSETH:

         WHEREAS, the Executive has been employed pursuant to an Employment
Agreement dated as of January 2003 (the "Predecessor Agreement");

         WHEREAS, the Corporation desires to continue to employ the Executive
and the Executive desires to accept such continued employment upon the terms and
conditions contained in this Agreement;

         WHEREAS, the Corporation and the Executive desire that, upon this
Agreement becoming effective, it shall replace and supercede the Predecessor
Agreement and that the Predecessor Agreement shall be of no force and effect;

         NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

         1.       Employment. The Corporation hereby employs the Executive, and
the Executive hereby accepts employment, as the Senior Vice President and
General Counsel of the Corporation under the terms and conditions set forth
herein.

         2.       Term. This Agreement and the Executive's employment are for an
indefinite term. Therefore, the Executive is employed on an at-will basis and
either the Executive or the Corporation may terminate his employment at any time
and for any reason, with or without "cause" including, without limitation, as
defined in paragraph 6.c.; provided, however, other than in the case of
termination by the Corporation for "cause" as defined in paragraph 6.c. or due
to the Executive's death as set forth in paragraph 6.a., both the Corporation
and the Executive shall give the other 60 days' prior written notice of
termination. Notwithstanding the foregoing, the Corporation may, at its option,
provide up to 60 days' full pay and benefits in lieu of such 60 days' notice or
any portion thereof.

         3.       Duties.

                  a.       While the Executive is employed pursuant to this
Agreement, he shall perform such duties and discharge such responsibilities as
the Board of Directors of the Corporation shall from time to time direct, which
duties and responsibilities shall be
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commensurate with the Executive's position. The Executive shall comply fully
with all applicable laws, rules and regulations as well as with the
Corporation's policies and procedures. The Executive shall devote his entire
working time to the business of the Corporation and shall use his best efforts,
skills and abilities in his diligent and faithful performance of his duties and
responsibilities hereunder. While the Executive is employed pursuant to this
Agreement, he shall not engage in any other business activities or hold any
office or position, regardless of whether any such activity, office or position
is pursued for profit or other pecuniary advantage, without the prior written
consent of the Corporation; provided, however, the Executive may engage in (i)
personal investment activities for himself and his family and (ii) charitable
and civic activities, so long as such outside interests set forth in subsections
(i) and (ii) hereof do not interfere with the performance of his duties and
responsibilities hereunder.

                  b.       The Board of Directors of the Corporation reserves
the right from time to time to assign to the Executive additional duties and
responsibilities and to delegate to other employees of the Corporation duties
and responsibilities normally discharged by the Executive. All such assignments
and delegations of duties and responsibilities shall be made in good faith and
shall not materially affect the general character of the work to be performed by
the Executive. The Executive shall hold such officerships and directorships in
the Corporation and any subsidiary to which, from time to time, the Executive
may be appointed or elected.

         4.       Compensation and Related Matters. As full compensation for the
Executive's performance of his duties and responsibilities during his employment
pursuant to this Agreement, the Corporation shall pay the Executive the
compensation and provide the benefits set forth below:

                  a.       Base Salary. The Corporation shall pay the Executive
an annual salary (the "Base Salary") of $200,000, less applicable withholding
and other deductions, payable in accordance with the Corporation's then current
payroll practices. The Base Salary will be reviewed at least annually by the
Corporation's Board of Directors and may be increased, but not decreased, in its
sole discretion, in which event any increased Base Salary shall be deemed the
Base Salary under this Agreement.

                  b.       Bonus. The Executive shall be entitled to participate
in any bonus (each a "Bonus") plan adopted by the Corporation, or any
subsidiary, which may be in effect at any time during the Executive's employment
by the Corporation, including, without limitation, any bonus plan adopted for
officers, or for senior or executive officers, of the Corporation. The
Executive's participation in any Bonus plan shall be subject to the plan
conditions adopted by the Board of Directors or its Compensation Committee.

                  c.       Benefits.

                           (i)      The Executive shall be entitled to
participate in, and receive benefits from, any insurance, medical, dental,
disability, incentive compensation, stock option or other employee benefit plan,
if any are adopted, of the Corporation or any subsidiary which may be in effect
at any time during the Executive's employment by the Corporation.

                                      -2-

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                           (ii)     In addition to the benefits provided under
paragraph 4.c(i) above, the Corporation shall pay for any medical or dental
costs incurred by the Executive, or his dependents covered by the Corporation's
group medical and dental insurance, to the extent not paid by the Corporation's
group medical or dental insurance, including, without limitation, deductibles,
provided such payment in any calendar year does not exceed an amount equal to 5%
of the Executive's Base Salary in that calendar year. In addition, the
Corporation shall pay for one comprehensive physical examination of the
Executive in each calendar year, together with such diagnostic or other tests
that are part of such examination. The Corporation may provide the benefits
under this paragraph 4.c(ii) either by purchasing additional insurance or by
making direct payments to the Executive or his medical provider, as determined
by the Corporation in its sole discretion. As a condition of payment, the
Executive must submit bills or other documents satisfactory to the Corporation
or its insurance provider.

                  d.       Leave. The Executive shall be eligible to receive and
take paid leave that the Corporation generally makes available to its senior
officers in accordance with the Corporation's leave policies (as may be revised
from time to time).

                  e.       Car Allowance. The Corporation shall provide the
Executive with an annual car allowance (the "Car Allowance"), which shall be
applied to the purchase or lease of a vehicle. The Car Allowance shall equal 4%
of the Executive's Base Salary, less applicable withholding and other
deductions, and shall be divided into equal payments and paid on the same basis
as the Corporation's payroll. The Executive shall be responsible for the
maintenance and operation of the vehicle and the costs associated with the same,
including, without limitation, insurance.

         5.       Expenses. The Corporation or its subsidiaries shall reimburse
the Executive for expenses which the Executive may from time to time reasonably
incur on behalf of and at the request of the Corporation in the performance of
his responsibilities and duties under this Agreement, provided that the
Executive shall be required to account to the Corporation for such expenses in
the manner prescribed by the Corporation.

         6.       Termination. This Agreement and the Executive's employment
shall terminate:

                  a.       immediately upon the Executive's death; or

                  b.       upon the Executive being unable to perform his duties
and responsibilities hereunder due to his disability (as defined below). For
purposes of this Agreement, the term "disability" shall mean that the Executive
has been unable to perform the duties and responsibilities required of him
hereunder due to a physical and/or mental condition for a period of 90
consecutive days or 180 non-consecutive days during any 12-month period. During
such period of disability, the Executive shall continue to receive the Base
Salary (less any Corporation-paid benefits that he receives, such as short term
disability or workers compensation, during such period); or

                  c.       upon the existence of cause. For purposes of this
Agreement, "cause" shall mean that the Executive: (i) has been convicted of, or
entered a plea of nolo contendre to, a misdemeanor involving moral turpitude or
any felony under the laws of the United States or any

                                      -3-

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state or political subdivision thereof; (ii) has committed an act constituting a
breach of fiduciary duty, fraud, gross negligence or willful misconduct; (iii)
has engaged in conduct that violated the Corporation's then existing internal
policies or procedures and which is materially detrimental to the business,
reputation, character or standing of the Corporation or any of its subsidiaries;
or (iv) after written notice to the Executive and a reasonable opportunity of at
least 30 days to cure, the Executive shall continue (x) to be in material breach
of the terms of this Agreement; (y) to fail or refuse to attend to the material
duties and responsibilities assigned to him by the Corporation's Board of
Directors hereunder; or (z) to be absent excessively for reasons unrelated to
disability; or

                  d.       upon the existence of "good reason". For purposes of
this Agreement, the following shall constitute "good reason": Upon written
notice setting forth the alleged good reason by Executive to the Corporation,
and the expiration of a 30-day cure period, there continues to be: (i) a
reduction in the Executive's Base Salary and/or in the aggregate benefits
provided for hereunder; (ii) the relocation of the Executive's office to a
location outside of a 30-mile radius from the Corporation's present Chantilly,
Virginia location; (iii) a material breach by the Corporation of the terms of
this Agreement; or (iv) the failure by the Corporation to obtain an agreement
from any successor to the Corporation to assure that such successor guarantees
the Corporation's performance of this Agreement or assumes and undertakes to
perform the Corporation's obligations hereunder; provided, however, in the event
of a "change in control" as defined in paragraph 6.e. hereof, then the
Corporation shall cease to have a 30-day period within which to cure the alleged
good reason.

                  e.       for the purposes of this Agreement, the term "change
in control" shall mean that:

                           (i)      any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than the Corporation, any existing director
or officer of the Corporation, any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock of the Corporation, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 30% or more of the
Common Stock of the Corporation; or

                           (ii)     the stockholders of the Corporation approve
a merger or consolidation of the Corporation with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; or

                           (iii)    the stockholders of the Corporation approve
an agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets.

                                      -4-

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                  f.       If the Executive's employment is terminated by: (a)
the Corporation pursuant to paragraph 6.a., b. or c., or (b) the Executive other
than pursuant to paragraph 6.d., then, unless the parties otherwise mutually
agree, in full satisfaction of the Corporation's obligations under this
Agreement the Executive, his beneficiaries or estate, as appropriate, shall be
entitled to receive (i) the Base Salary provided for herein up to and including
the effective date of termination, prorated on a daily basis; provided, however,
in the event of termination due to the Executive's death or disability as
provided in paragraph 6.a. and b., respectively, then his Base Salary shall
continue to be paid up to the end of the month in which the death or termination
due to disability occurs; (ii) any Bonus due at the time of termination under a
then current Bonus plan; (iii) medical benefit continuation at the Executive's
and/or his dependent's expense as provided by law; provided, however, in the
event of termination due to the Executive's death or disability as provided in
paragraph 6.a. and b., respectively, then the Corporation will pay the cost of
the Executive's medical benefit continuation for Executive and any covered
dependents for up to 18 months or until the Executive and/or his covered
dependents are covered by another company's group health insurance, whichever is
sooner; and (v) benefits, if any, payable upon the Executive's death or
disability, respectively.

                  g.       If the Executive's employment is terminated by: (a)
the Corporation other than pursuant to paragraph 6.a., b. or c. or (b) the
Executive pursuant to paragraph 6.d., then, unless the parties otherwise
mutually agree, in full satisfaction of the Corporation's obligations under this
Agreement the Executive, his beneficiaries or estate, as appropriate, shall be
entitled to receive: (i) the Base Salary provided for herein up to and including
the effective date of termination, prorated on a daily basis; (ii) any Bonus due
at the time of termination under a then current Bonus plan; (iii) severance in
an amount equal to the total cash compensation (Base Salary and Bonus) that the
Executive has received (whether or not pursuant to this Agreement) during the
prior 18-month period, or the prior 30-month period if the Executive's
employment is terminated twelve months or less after a change in control in
exchange for a general release in form and content satisfactory to the
Corporation to be paid in one payment upon such release becoming effective; and
(iv) medical benefit continuation at the Executive's and/or his dependent's
expense as provided by law; provided, however, as additional consideration for
the general release set forth in paragraph 6.g. (iii), the Corporation will pay
the cost of the Executive's medical benefit continuation pursuant to paragraphs
4.c(i) and 4.c(ii) for the Executive and any covered dependents for up to 18
months or until the Executive and/or his covered dependents are covered by
another company's group health insurance, whichever is sooner. In the event the
Executive has been employed by the Corporation for less than 18 months at the
time of termination under this paragraph, or 30 months if the Executive's
employment was terminated twelve months or less after a change in control, the
amount of the severance under this paragraph 6.g shall be computed as follows,
with "X" representing the amount of severance:

           Actual Total Cash Compensation (Base Salary and Bonus) = X
           ----------------------------------------------------     -
                            Number of Days Employed                 Y

The denominator "Y" in the equation above equals 540, or 900 if the Executive's
employment was terminated twelve months or less after a change in control. This
means, for example, if the Executive's Total Cash Compensation were $150,000 and
he worked for the Corporation for 270 days, then "X" would equal, and he would
receive severance in the amount of, $300,000, or

                                      -5-

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$500,000 if the Executive's employment was terminated twelve months or less
after a change in control.

                  h.       The Executive hereby acknowledges that he is employed
by the Corporation for an indefinite term and nothing in this Agreement,
including, without limitation, this paragraph 6, changes the at-will nature of
his employment.

         7.       Confidential and Proprietary Information; Work Product;

                  Warranty; Non-Competition; Non-Solicitation.

                  a.       Confidentiality. The Executive acknowledges and
agrees that there are certain trade secrets and confidential and proprietary
information (collectively, "Confidential Information") which have been developed
by the Corporation and which are used by the Corporation in its business.
Confidential Information shall include, without limitation: (i) customer lists
and supplier lists; (ii) the details of the Corporation's relationships with its
customers, including, without limitation, the financial relationship with a
customer, knowledge of the internal "politics"/workings of a customer
organization, a customer's technical needs and job specifications, knowledge of
a customer's strategic plans and the identities of contact persons within a
customer's organization; (iii) the Corporation's marketing and development
plans, business plans; and (iv) other information proprietary to the
Corporation's business. The Executive shall not, at any time during or after his
employment hereunder, use or disclose such Confidential Information, except to
authorized representatives of the Corporation or the customer or as required in
the performance of his duties and responsibilities hereunder. The Executive
shall return all customer and/or Corporation property, such as computers,
software and cell phones, and documents (and any copies including, without
limitation, in machine or human-readable form), to the Corporation when his
employment terminates. The Executive shall not be required to keep confidential
any information, which (x) is or becomes publicly available through no fault of
the Executive or (y) is already in his possession (unless obtained from the
Corporation or one of its customers). Further, the Executive shall be free to
use and employ his general skills, know-how and expertise, and to use, disclose
and employ any generalized ideas, concepts, know-how, methods, techniques or
skills, including, without limitation, those gained or learned during the course
of the performance of his duties and responsibilities hereunder, so long as he
applies such information without disclosure or use of any Confidential
Information.

                  b.       Work Product. The Executive agrees that all
copyrights, patents, trade secrets or other intellectual property rights
associated with any ideas, concepts, techniques, inventions, processes, or works
of authorship developed or created by him during his employment by the
Corporation and for a period of 6 months thereafter, that (i) relate, whether
directly or indirectly, to the Corporation's actual or anticipated business,
research or development or (ii) are suggested by or as a result of any work
performed by the Executive on the Corporation's behalf, shall, to the extent
possible, be considered works made for hire within the meaning of the Copyright
Act (17 U.S.C. Section 101 et. seq.) (the "Work Product"). All Work Product
shall be and remain the property of the Corporation. To the extent that any such
Work Product may not, under applicable law, be considered works made for hire,
the Executive hereby grants, transfers, assigns, conveys and relinquishes, and
agrees to grant, transfer, assign, convey and relinquish from time to time, on
an exclusive basis, all of his right, title and interest in and to the Work
Product to the Corporation in perpetuity or for the longest period otherwise
permitted

                                      -6-

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by law. Consistent with his recognition of the Corporation's absolute ownership
of all Work Product, the Executive agrees that he shall (i) not use any Work
Product for the benefit of any party other than the Corporation and (ii) perform
such acts and execute such documents and instruments as the Corporation may now
or hereafter deem reasonably necessary or desirable to evidence the transfer of
absolute ownership of all Work Product to the Corporation; provided, however, if
following 10 days' written notice from the Corporation, the Executive refuses,
or is unable, due to disability, incapacity, or death, to execute such documents
relating to the Work Product, he hereby appoints any of the Corporation's
officers as his attorney-in-fact to execute such documents on his behalf. This
agency is coupled with an interest and is irrevocable without the Corporation's
prior written consent.

                  c.       Warranty. The Executive represents and warrants to
the Corporation that (i) there are no claims that would adversely affect his
ability to assign all right, title and interest in and to the Work Product to
the Corporation; (ii) the Work Product does not violate any patent, copyright or
other proprietary right of any third party; (iii) the Executive has the legal
right to grant the Corporation the assignment of his interest in the Work
Product as set forth in this Agreement; and (iv) he has not brought and will not
bring to his employment hereunder, or use in connection with such employment,
any trade secret, confidential or proprietary information, or computer software,
except for software that he has a right to use for the purpose for which it
shall be used, in his employment hereunder.

                  d.       Non-Competition; Non Solicitation. The Executive
agrees that during his employment by the Corporation and for 18 months
thereafter, regardless of the circumstances which result in his termination, he
shall not within the continental United States (i) engage or attempt to engage,
directly or indirectly, whether as an employee, officer, director, consultant or
otherwise, in any business activity which is the same as, substantially similar
to or directly competitive with the Corporation; (ii) solicit or attempt to
solicit, directly or indirectly, whether as an employee, officer, director,
consultant or otherwise, any person or entity which is then a customer of the
Corporation or has been a customer or solicited by the Corporation in the
preceding 18-month period, to purchase products or services directly competitive
with those sold or provided by the Corporation from any entity other than the
Corporation; (iii) solicit for employment, engage and/or hire, whether directly
or indirectly, any individual who is then employed by the Corporation or engaged
by the Corporation as an independent subcontractor or consultant; and/or (iv)
encourage or induce, whether directly or indirectly, any individual who is then
employed by the Corporation or engaged by the Corporation as an independent
contractor or consultant to end his/her business relationship with the
Corporation; provided, however, nothing in this paragraph 7.d. shall prevent the
Executive from owning, solely as an investment, up to 5% of the securities of
any publicly-traded company.

                  e.       Cooperation. The Executive agrees, upon reasonable
notice, to cooperate fully with the Corporation and its legal counsel on any
matters relating to the conduct of any litigation, claim, suit, investigation or
proceeding involving the Corporation in connection with any facts or
circumstances occurring during the Executive's employment with the Corporation
in which the Corporation reasonably determines that the Executive's cooperation
is necessary or appropriate.

                                      -7-

<PAGE>

                  f.       Injunctive Relief; Remedy. The Executive acknowledges
that a breach or threatened breach of any of the terms set forth in this
paragraph 7 shall result in an irreparable and continuing harm to the
Corporation for which there shall be no adequate remedy at law. The Corporation
shall, without posting a bond, be entitled to seek injunctive and other
equitable relief, in addition to any other remedies available to the
Corporation. All expenses, including, without limitation, attorney's fees and
expenses incurred in connection with any legal proceeding arising as a result of
a breach or threatened breach of paragraph 7 of this Agreement shall be borne by
the losing party to the fullest extent permitted by law and the losing party
hereby agrees to indemnify and hold the other party harmless from and against
all such expenses.

                  g.       Essential and Independent Agreements. It is
understood by the parties hereto that the Executive's obligations and the
restrictions and remedies set forth in this paragraph 7 are essential elements
of this Agreement and that but for his agreement to comply with and/or agree to
such obligations, restrictions and remedies, the Corporation would not have
entered into this Agreement or employed (or continued to employ) him. The
Executive's obligations and the restrictions and remedies set forth in this
paragraph 7 are independent agreements and the existence of any claim or claims
by him against the Corporation under this Agreement or otherwise will not excuse
his breach of any of his obligations or affect the restrictions and remedies set
forth under this paragraph 7.

                  h.       Survival of Terms; Representations. The Executive's
obligations under this paragraph 7 hereof shall remain in full force and effect
notwithstanding the termination of his employment. He acknowledges that he is
sophisticated in business, and that the restrictions and remedies set forth in
this paragraph 7 do not create an undue hardship on him and will not prevent him
from earning a livelihood. He further acknowledges that he has had a sufficient
period of time within which to review this Agreement, including, without
limitation, this paragraph 7, with an attorney of his choice and he has done so
to the extent he desired. The Executive and the Corporation agree that the
restrictions and remedies contained in this paragraph 7 are reasonable and
necessary to protect the Corporation's legitimate business interests regardless
of the reason for or circumstances giving rise to such termination and that he
and the Corporation intend that such restrictions and remedies shall be
enforceable to the fullest extent permissible by law. The Executive agrees that
given the scope of the Corporation's business and the sophistication of the
information highway, any further geographic limitation on such remedies and
restrictions would deny the Corporation the protection to which it is entitled
hereunder. If it shall be found by a court of competent jurisdiction that any
such restriction or remedy is unenforceable but would be enforceable if some
part thereof were deleted or modified, then such restriction or remedy shall
apply with such modification as shall be necessary to make it enforceable to the
fullest extent permissible under law.

         8.       Successors. This Agreement shall inure to the benefit of and
be binding upon the parties, their legal representatives and successors and
assigns. However, the Executive's performance hereunder is personal to the
Executive and shall not be assignable by the Executive. The Corporation may
assign this Agreement to any affiliate or to any successor to all or
substantially all of the business and/or assets of the Corporation, whether
directly or indirectly, by purchase, merger, consolidation, acquisition of
stock, or otherwise.

                                      -8-

<PAGE>

         9.       Miscellaneous.

                  a.       Waiver; Amendment. The failure of a party to enforce
any term, provision, or condition of this Agreement at any time or times shall
not be deemed a waiver of that term, provision, or condition for the future, nor
shall any specific waiver of a term, provision, or condition at one time be
deemed a waiver of such term, provision, or condition for any future time or
times. This Agreement may be amended or modified only by a writing signed by
both parties hereto.

                  b.       Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to principles of conflicts of law.

                  c.       Tax Withholding. The payments and benefits under this
Agreement may be compensation and as such may be included in either the
Executive's W-2 earnings statements or 1099 statements. The Corporation may
withhold from any amounts payable under this Agreement such federal, state or
local taxes as shall be required to be withheld pursuant to any applicable law
or regulation.

                  d.       Paragraph Captions. Paragraph and other captions
contained in this Agreement are for reference purposes only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof.

                  e.       Severability. Each provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity of the remainder of this Agreement.

                  f.       Integrated Agreement. This Agreement constitutes the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof, and supersedes all prior agreements, including,
without limitation, the Predecessor Agreement which shall be of no force and
effect upon this Agreement becoming effective, understandings, memoranda, term
sheets, conversations and negotiations. There are no agreements, understandings,
restrictions, representations or warranties between the parties other than those
set forth herein or herein provided for.

                  g.       Interpretation; Counterparts. No provision of this
Agreement is to be interpreted for or against any party because that party
drafted such provision. For purposes of this Agreement: "herein," "hereby,"
"hereinafter," "herewith," "hereafter" and "hereinafter" refer to this Agreement
in its entirety, and not to any particular subsection or paragraph. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, and all of which shall constitute one and the same
instrument.

                  h.       Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand delivery, or by facsimile (with confirmation of transmission),
or by overnight courier, or by registered or certified mail, return receipt
requested, postage prepaid, in each case addressed as follows:

                                      -9-

<PAGE>

                  If to the Executive: Neal B. Dittersdorf
                  at the address first set forth above

                  If to the Corporation:

                  Intersections Inc.
                  14901 Bogle Street
                  Chantilly, Virginia 20151
                  Attention: Chief Financial Officer
                  Facsimile: 704-488-6180

                  with copies to:

                  Stroock & Stroock & Lavan LLP
                  180 Maiden Lane
                  New York, New York  10038-4982
                  Attention: Martin H. Neidell
                  Facsimile: 212-806-6006

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by addressee.

                  i.       No Limitations. The Executive represents his
employment by the Corporation hereunder does not conflict with, or breach any
confidentiality, non-competition or other agreement to which he is a party or to
which he may be subject.

         IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.

INTERSECTIONS INC.

By: /s/ Michael R. Stanfield
    ----------------------------                -------------------------------
    Name: Michael R. Stanfield                  Neal B. Dittersdorf
    Position: Chief Executive Officer

                                      -10-exv4w1

 

EXHIBIT 4.1

COMMON STOCK AND WARRANT PURCHASE AGREEMENT

     This Common Stock and Warrant Purchase Agreement (this “Agreement”) dated
as of April 25, 2004, is made and entered by and among Wilsons The Leather
Experts Inc., a Minnesota corporation (the “Company”), and the several
purchasers identified on the signature pages hereto (each, including its
respective successors and assigns, a “Purchaser” and collectively the
“Purchasers”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and/or sell to the Purchasers, and the Purchasers, severally and not
jointly, desire (i) to purchase from the Company, at the Closing (as
hereinafter defined), an aggregate of 17,948,718 shares of Common Stock (as
hereinafter defined) (the “Shares”) and warrants, exercisable for a period of
five (5) years from the issuance thereof, to purchase an aggregate of up to
2,000,000 shares of Common Stock, and (ii) to acquire from the Company, upon
the execution and delivery of this Agreement, warrants, exercisable for a
period of five (5) years from the issuance thereof, to purchase an aggregate of
up to an additional 2,000,000 shares of Common Stock, which warrants issued
upon execution and delivery of this Agreement and at Closing shall be in the
form of Exhibit A hereto (the warrants to be delivered pursuant to this
Agreement upon execution and delivery of this Agreement or at Closing and all
warrants issued in exchange or substitution therefor are referred to herein as
the “Warrants”).

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:

ARTICLE I.

DEFINITIONS

     1.1 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth in this Section 1.1:

            “Affiliate” means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144.

            “Annual Report” means the draft of the Annual Report on Form 10-K for the
fiscal year ended January 31, 2004 in substantially the form provided to the
Purchasers prior to the date hereof.

            “Business Day” means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York or State of Minnesota are authorized or required by law or
other governmental action to close.

            “Closing” means the closing of the purchase and sale of the Shares and
issuance of the Warrants pursuant to Section 2.1.

 

 

            “Closing Date” means the date of the Closing.

            “Commission” means the Securities and Exchange Commission.

            “Common Stock” means the common stock of the Company, $0.01 par value per
share, and any securities that shall replace such common stock, whether by
merger, recapitalization, or otherwise, or into which such common stock may
hereafter be reclassified.

            “Company Counsel” means Faegre & Benson LLP, 2200 Wells Fargo Center, 90
South Seventh Street, Minneapolis, Minnesota 55402.

            “Effective Date” means the date that the Registration Statement is first
declared effective by the Commission.

            “Eligible Market” means any of the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., the Nasdaq National Market or the Nasdaq
SmallCap Market.

            “Exchange Act” means the Securities Exchange Act of 1934, as amended.

            “Nasdaq” means The Nasdaq Stock Market, Inc..

            “Per Share Purchase Price” equals $1.95.

            “Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.

            “Proceeding” means an action, claim, suit, investigation or arbitration or
other court case or alternative dispute resolution proceeding (including,
without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened in writing.

            “Purchaser Counsel” means Seward & Kissel LLP, One Battery Park Plaza, New
York, New York 10004.

            “Registration Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale of the Shares, Warrant Shares and other Registrable Securities (as such
term is defined in the Registration Rights Agreement) by the Purchasers.

            “Registration Rights Agreement” means the Registration Rights Agreement,
dated as of the date of this Agreement, by and among the Company and the
Purchasers, in the form of Exhibit B.

            “Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

-2-

 

            “Securities Act” means the Securities Act of 1933, as amended.

            “Subsidiary” means any subsidiary of the Company that is required to be
listed in Schedule 3.1(a).

            “Trading Day” means (i) a day on which the Common Stock is traded, listed
or quoted on a Trading Market, or (ii) if the Common Stock is not traded,
listed or quoted on a Trading Market, a day on which the Common Stock is traded
or quoted in the over-the-counter market, as reported by the OTC Bulletin
Board, or (iii) if the Common Stock is not traded or quoted on the OTC Bulletin
Board, a day on which the Common Stock is traded or quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, that in the event that the Common Stock is not
traded, listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.

            “Trading Market” means the Nasdaq National Market or any other national
securities exchange, market or trading or quotation facility on which the
Common Stock is then traded, listed or quoted.

            “Transaction Documents” means this Agreement, the Warrants, the
Registration Rights Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereby.

            “Voting
Agreement — Individual Shareholders” means the Voting Agreement
among Joel Waller, David Rogers and related Persons, and the Company in the
form of Exhibit C.

            “Voting
Agreement — Peninsula” means the Voting Agreement among Peninsula
Investment Partners, L.P. (“Peninsula”) and the Company in the form of Exhibit
D.

            “Warrant Shares” means the shares of Common Stock issuable upon exercise
of the Warrants and all shares of Common Stock issued in exchange or
substitution therefor.

            “Warrant Share Purchase Price” means such price at which the Warrants are
exercisable for Common Stock pursuant to the Warrants.

ARTICLE II.

PURCHASE AND SALE

     2.1 Closing. The Closing of the sale and purchase of the Shares shall take
place at the offices of the Company Counsel at 9:30 a.m. (Central Daylight
time) on July 1, 2004 if all conditions to Closing set forth in Sections 2.2
and 2.3 hereof have been satisfied or waived, or, if later, on the second
Business Day after satisfaction or waiver of the conditions to Closing (or such
other date as is mutually agreed to by the Company and each Purchaser).

-3-

 

     2.2 Deliveries.

            (a) On the date that this Agreement is executed, (A) the Company shall
deliver to the Purchasers (i) this Agreement, a Registration Rights Agreement,
and the Voting Agreement – Individual Shareholders, (ii) Warrants in respect of
the number of Warrant Shares indicated below such Purchaser’s name on the
signature page of this Agreement as being subject to issuance at the time of
execution and delivery of this Agreement, registered in the name of such
Purchaser or its nominee, and (iii) letters addressed to each of Peninsula
Capital Advisors, L.L.C. and Quaker Capital Management waiving the requirements
of Section 2(b) of their respective Confidentiality Agreements with the
Company, dated April 16, 2004 and April 19, 2004, respectively, in respect of
the transactions contemplated by this Agreement and the exercise by any
Purchaser or assignee thereof that is an affiliate of Peninsula Capital
Advisors L.L.C. or Quaker Capital Management, at any time and from time to
time, of all of its rights as a security holder of the Company or otherwise,
each of (i) to (iii) duly executed by the Company, and (iv) a legal opinion of
Company Counsel substantially in the form of Exhibit E hereto, (B) each
Purchaser shall deliver to the Company this Agreement and a Registration Rights
Agreement, each duly executed by such Purchaser, and (C) Peninsula shall
deliver to the Company the Voting Agreement — Peninsula.

            (b) At the Closing, the Company shall deliver or cause to be delivered to
each Purchaser the following:

                  (i) a certificate evidencing the number of Shares equal to the number of
Shares indicated below such Purchaser’s name on the signature page of this
Agreement, registered in the name of such Purchaser or its nominee;

                  (ii) Warrants in respect of the number of Warrant Shares indicated below
such Purchaser’s name on the signature page of this Agreement as being subject
to issuance at Closing; and

                  (iii) a legal opinion of Company Counsel, substantially in the form of
Exhibit F hereto.

            (c) At the Closing, each Purchaser shall deliver or cause to be delivered
to the Company, in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose,
the Per Share Purchase Price for the Shares being purchased by such Purchaser,
as indicated on such Purchaser’s signature page to this Agreement, multiplied
by the number of Shares being purchased by such Purchaser.

     2.3 Conditions to Closing. The obligation of the Purchasers to purchase
the Shares at the Closing is subject to satisfaction or waiver by each
Purchaser of each of the following conditions: (1) the Common Stock is listed
for trading on a Trading Market; (2) the representations and warranties of the
Company are true and correct (without giving effect to any materiality
qualifiers contained therein) on the date hereof and on the Closing Date
(except for representations and warranties that speak as of a specific date,
which shall be true and correct as of that date) except to the extent that any
inaccuracies in such representations and warranties do not have a Material
Adverse Effect (as hereinafter defined); (3) Mr. R. Ted Weschler shall have

-4-

 

been duly appointed or elected to serve as a Class II director of the
Company for a remaining term of not less than two years; (4) the Company shall
have delivered an officer’s certificate to the Purchasers confirming clauses
(1), (2) and (3) of this Section 2.3; (5) the Stockholder Approval (as defined
herein) shall have been obtained or the Company shall have obtained a waiver
from Nasdaq of its requirement that Stockholder Approval be obtained; (6) the
documents listed in Section 2.2(a) shall have been duly executed and delivered
as required thereby and (7) any consents under the revolving credit agreement
of the Company necessary to consummate the transactions contemplated by this
Agreement shall have been obtained. The Company shall not be obligated to sell
any Shares at Closing unless each Purchaser purchases the number of Shares
indicated below such Purchaser’s name on the signature page of this Agreement.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:

            (a) Subsidiaries. The Company has no direct or indirect subsidiaries
other than those listed in Schedule 3.1(a). Except as disclosed in Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital stock of
each Subsidiary free and clear of any lien, charge, security interest,
encumbrance, right of first refusal or other restriction (collectively,
“Liens”), and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.

            (b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of
the Company and the Subsidiaries is duly qualified to conduct business and is
in good standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it makes
such qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, would not, individually or in the aggregate,
(i) adversely affect the legality, validity or enforceability of any
Transaction Document, (ii) have or result in a material adverse effect on the
results of operations, assets, prospects, business or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii)
adversely impair the Company’s ability to perform fully on a timely basis its
obligations under any Transaction Document (other than any such effect of the
nature referred to in clause (ii) resulting from (1) any change, event,
occurrence, or condition generally affecting the industry in which the Company
and its Subsidiaries operate, (2) general economic or securities market
conditions in the United States, (3) the public announcement or existence of
this Agreement and the transactions contemplated hereby, (4) acts of terrorism
or war (whether or not declared), or (5) any change, event, occurrence or
condition resulting from or relating to compliance with the terms of, or the
taking of any action required by, this Agreement) (any of (i), (ii) or (iii), a
“Material Adverse Effect”).

-5-

 

            (c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out
its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action (other than Stockholder
Approval) will be required by the Company. Each Transaction Document has been
(or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally and general principles of equity. Neither the
Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, by-laws or other
organizational or charter documents.

            (d) No Conflicts. Except as set forth in Schedule 3.1(d), the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated thereby do not and
will not (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any material agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding
to which the Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or (iii) result in
a violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.

            (e) Filings, Consents and Approvals. Except as set forth in Schedule
3.1(e), the Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than (1) Stockholder Approval, (2) the filing with the Commission of the
Registration Statement, and (3) the application with the Trading Market for the
listing of the Shares for trading thereon in the time and manner required
thereby (collectively, the “Required Approvals”).

            (f) Issuance of the Shares, Warrants and Warrant Shares. The Shares and
the Warrants, when issued and paid for pursuant to the terms of this Agreement,
will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all Liens and the Warrant Shares issuable
upon exercise of the Warrants have been reserved for issuance based upon the
initial Warrant Purchase Price and when issued upon exercise in

-6-

 

accordance with the terms of the Warrants will be duly authorized, validly
issued and outstanding, fully paid, nonassessable and free and clear of all
Liens.

            (g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is set forth in Schedule
3.1(g). No securities of the Company are entitled to preemptive or similar
rights, and no Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Shares and issuance of the Warrants and except as disclosed in
Schedule 3.1(g), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares
of Common Stock. The issuance and sale of the Shares and the issuance and sale
of the Warrants will not obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities.

            (h) SEC Reports; Financial Statements. Since February 1, 2002, the
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
(the foregoing materials being collectively referred to herein as the “SEC
Reports” and, together with the Schedules to this Agreement and the Annual
Report, the “Disclosure Materials”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to
the expiration of any such extension. The Company has delivered to the
Purchasers a copy of all SEC Reports filed within the 10 days preceding the
date hereof and a copy of the Annual Report. As of their respective dates, the
SEC Reports complied, and the Annual Report will comply, in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports and the Annual Report comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects
the financial position of the Company and its consolidated subsidiaries as of
and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments or other adjustments reflected in the
Annual Report.

            (i) Material Changes. Since the date of the latest financial statements
included within the Annual Report, except as specifically disclosed in the
Annual Report,

-7-

 

(i) there has been no event, occurrence or development on or prior to the
date of this Agreement that has had or that would reasonably be expected to
result in a Material Adverse Effect (for purposes of this Section 3.1(i), the
Company’s information contained in the Annual Report or the effect of such
information on the price of the Common Stock shall not constitute a Material
Adverse Effect), (ii) the Company has not incurred any liabilities (contingent
or otherwise) other than (A) trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.

            (j) Litigation. Except as set forth in Schedule 3.1(j), there is no
action, suit, inquiry, notice of violation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
“Action”) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or (ii) would, if there were
an unfavorable decision, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. Except as set forth in
Schedule 3(j), neither the Company nor any Subsidiary, nor any officer thereof,
is or has been, nor any director thereof is or has been for the last three
years, the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and, to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the Company or
any current or former director that was a director of the Company at any time
during the last three years or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.

            (k) Labor Relations. Except as set forth in Schedule 3.1(k), no material
labor dispute exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company.

            (l) Compliance. Neither the Company nor any Subsidiary (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other material
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or governmental
body, or (iii) is or has been in violation of any statute, rule or regulation
of any governmental authority, including without limitation all foreign,
federal, state and local laws

-8-

 

relating to taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor matters, except in
each case as would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice
of proceedings relating to the revocation or modification of any Material
Permit.

            (n) Title to Assets. Except as set forth in Schedule 3.1(n), the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for (i) Liens for taxes not yet
delinquent, (ii) immaterial mechanics’ and materialmen’s liens (and other
similar Liens), and immaterial Liens under operating and similar agreements, to
the extent that the same relate to expenses incurred in the ordinary course of
business that are not yet due, (iii) those that are routine governmental
approvals and (iv) Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by
them under valid, subsisting and enforceable leases of which the Company and
the Subsidiaries are in compliance.

            (o) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other
similar rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have would have, or reasonably be expected to result in, a Material Adverse
Effect (collectively, the “Intellectual Property Rights”). Except as set forth
in Schedule 3.1(o), neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person which if
determined adversely to the Company would, individually or in the aggregate
have a Material Adverse Effect. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing material
infringement by another Person of any of the Intellectual Property Rights.

            (p) Insurance. The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business.

-9-

 

            (q) Transactions With Affiliates and Employees. Except as set forth in
SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any
such employee has a substantial interest or, except for the transactions
contemplated by this Agreement, is an officer, director, trustee or partner.

            (r) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s
general or specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

            (s) Certain Fees. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other
than for persons engaged by any Purchaser or its investment advisor) relating
to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold each Purchaser harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and out-of-pocket expenses)
arising in connection with any such claims. The Company acknowledges that it
has engaged Financo as a financial advisor (the “Agent”) in connection with the
sale of the Shares and the issuance of the Warrants. Other than the Agent, the
Company has not engaged any placement agent or other agent in connection with
the sale of the Shares and the issuance of the Warrants.

            (t) Private Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2(b)-(e), no registration
under the Securities Act is required for the offer and sale of the Shares, the
issuance of the Warrants and the offer of the Warrant Shares by the Company to
the Purchasers as contemplated hereby.

            (u) Form S-3 Eligibility. The Company is eligible to register the resale
of its Common Stock for resale by the Purchasers under Form S-3 promulgated
under the Securities Act.

            (v) Listing and Maintenance Requirements. The Company has not, in the two
years preceding the date hereof and through the date of this Agreement,
received notice (written or oral) from any Eligible Market on which the Common
Stock is or has been listed or quoted, or any Trading Market, to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Eligible Market or Trading Market. The Company is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with all such listing and maintenance requirements. The
issuance and sale of the Shares and Warrants and the offer of the Warrant
Shares and Warrants and the offer of the Warrant Shares hereunder

-10-

 

does not contravene the rules and regulations of any Eligible Market or
Trading Market if the Stockholder Approval required for the Company to issue
and deliver to the Purchasers the Shares and Warrant Shares contemplated by
this Agreement is obtained.

            (w) Registration Rights. Except as described in Schedule 3.1(w), the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have
not been satisfied.

            (x) Application of Takeover Protections. Presuming that the
representations and warranties in Section 3.2(g) are true and correct, prior to
the execution and delivery of this Agreement, the Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, or other
similar anti-takeover provision under the Company’s Articles of Incorporation
(or similar charter documents) or the laws of its state of incorporation that
is or could become applicable to the Purchasers as a result of the Purchasers
and the Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including without limitation the Company’s issuance
of the Shares and Warrants and the Purchasers’ ownership of the Shares and
Warrants, and upon exercise of the Warrants and payment of the Purchase Price,
the Company’s issuance and the Purchaser’s ownership of the Warrant Shares;
provided that no representation is made as to the applicability of Section
302A.673 of the Minnesota Statutes (known as the Minnesota Business Combination
Act) to any assignees of the Purchasers who, after giving effect to the
assignment, beneficially own ten percent or more of the voting power of the
outstanding shares of the Company entitled to vote or as to the applicability
of Section 302A.553, Subd. 3, of the Minnesota Statutes (known as the Minnesota
Anti-Greenmail Act) to Purchasers who beneficially own more than five percent
of the voting power of the outstanding shares of the Company if the shares have
been beneficially owned thereby for less than two years.

            (y) Disclosure and Warrants. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that, after the filing of the Annual
Report with the Commission, the Company believes constitutes material,
non-public information. The Company understands and confirms that the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement and Annual Report, furnished by or on
behalf of the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.

     3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:

            (a) Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the

-11-

 

transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and performance
by such Purchaser of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate or partnership action on the part of
such Purchaser. Each of this Agreement and the Registration Rights Agreement
has been duly executed by such Purchaser, and, when delivered by such Purchaser
in accordance with terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and general principles of equity.

            (b) Investment Intent. The Shares and the Warrants being acquired by such
Purchaser hereunder are being purchased and acquired, and the Warrant Shares
acquired by such Purchaser upon exercise of such Warrants will be acquired, for
such Purchaser’s own account and not with the view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act without prejudice, however, to such Purchaser’s right at
all times to sell or otherwise dispose of all or any part of such Shares,
Warrants, or upon exercise, Warrant Shares in compliance with applicable
federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Purchaser to hold the Shares, Warrants or
Warrant Shares for any period of time. Such Purchaser does not have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the Shares, Warrants or Warrant Shares.

            (c) Purchaser Status. Such Purchaser is an “accredited investor” as
defined in Rule 501(a) under the Securities Act. Such Purchaser is not a
registered broker-dealer under Section 15 of the Exchange Act.

            (d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares and Warrant
Shares, and has so evaluated the merits and risks of such investment. Such
Purchaser is able to bear the economic risk of an investment in the Shares and
Warrant Shares and, at the present time, is able to afford a complete loss of
such investment.

            (e) General Solicitation. To the knowledge of such Purchaser, such
Purchaser is not purchasing the Shares or acquiring the Warrants as a result of
any advertisement, article, notice or other communication regarding the Shares
or Warrant Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

            (f) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and Warrants and the merits and risks of investing in
the Shares and Warrant Shares; (ii) access to information about the Company and
the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investments; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire

-12-

 

without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser’s right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company’s representations and warranties contained
in the Transaction Documents.

            (g) Facts Related to Inapplicability of Takeover Protection. Peninsula
Investment Partners, L.P., for itself and no other Purchaser, represents and
warrants that David Rogers is, and at Closing will be, a duly elected,
appointed or otherwise designated officer of Peninsula Investment Partners,
L.P. Quaker Capital Partners I, LP (QCPI) and Quaker Capital Partners II, LP
(QCPII), each for itself and no other Purchaser, represents and warrants that
such Purchaser (whether QCPI or QCPII), immediately prior to the execution and
delivery of this Agreement, is not the beneficial owner of 10% or more of the
voting power of the outstanding shares entitled to vote of the Company and is
not, immediately prior to the execution of this Agreement, an affiliate or
associate of the Company, for which purposes the terms “beneficial owner,”
“affiliate,” and “associate” shall have the meanings set forth in the
respective definitions thereof in the Minnesota Business Corporation Act.

     The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
3.2.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

            (a) Shares, Warrants and Warrant Shares may only be disposed of in
compliance with state and federal securities laws. In connection with any
transfer of Shares, Warrants or Warrant Shares other than pursuant to an
effective registration statement, to the Company, to an Affiliate of a
Purchaser who is an “accredited investor” as defined in Rule 501(a) under the
Securities Act, in connection with a pledge as contemplated in Section 4.1(b)
or after the legend contained in Section 4.1(b) is removed from the Shares or
Warrant Shares as provided in Section 4.1(c), the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Shares or Warrant Shares under the Securities
Act. As a condition of transfer, other than a transfer pursuant to an
effective registration statement or pursuant to any open market sale under Rule
144 or any private sale under Rule 144(k), any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement and the Registration Rights Agreement.

            (b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on any of the Shares, Warrants or
Warrant Shares:

-13-

 

THE SHARES [WARRANTS] REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SHARES [WARRANTS] MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SHARES [WARRANTS].

            The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement or grant a security interest in
some or all of the Shares, Warrants or Warrant Shares and, if required under
the terms of such arrangement, such Purchaser may transfer pledged or secured
Shares, Warrants or Warrant Shares to the pledgees or secured parties. Such a
pledge or transfer would not be subject to approval of the Company and no legal
opinion of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such pledge. At
the appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Shares, Warrants or
Warrant Shares may reasonably request in connection with a pledge or transfer
of the Shares, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.

            (c) Certificates evidencing Shares and Warrant Shares shall not contain
any legend (including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, or (ii)
following any sale of such Shares or Warrant Shares pursuant to Rule 144, or
(iii) if such Shares or Warrant Shares are eligible for sale under Rule 144(k),
or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). The Company shall cause its counsel to issue the
legal opinion included in the transfer agent instructions to the Company’s
transfer agent on the Effective Date. The Company agrees that following the
Effective Date or at such time as such legend is no longer required under this
Section 4.1(c), it will, no later than ten Trading Days following the delivery
by a Purchaser to the Company or the Company’s transfer agent of a certificate
representing Shares or Warrant Shares issued with a

-14-

 

restrictive legend, deliver or cause to be delivered to such Purchaser a
certificate representing such Shares or Warrant Shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.

     4.2 Furnishing of Information. As long as any Purchaser owns Shares,
Warrants or Warrant Shares, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with the preceding sentence. As long as any
Purchaser owns Shares, Warrants or Warrant Shares, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Shares or Warrant
Shares under Rule 144.

     4.3 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or
sale of the Shares in a manner that would require the registration under the
Securities Act of the sale of the Shares to the Purchasers, or that would be
integrated with the offer or sale of the Shares for purposes of the rules and
regulations of any Trading Market, if such integration would result in a
violation of any such rule or regulation.

     4.4 Securities Laws Disclosure; Publicity. The Company shall, within five
Business Days after the Closing Date, issue a press release or file a Current
Report on Form 8-K reasonably acceptable to the Purchasers disclosing all
material terms of the transactions contemplated hereby. The Company and the
Purchasers shall consult with each other in issuing any press releases with
respect to the transactions contemplated hereby. Notwithstanding the
foregoing, other than in any registration statement filed pursuant to the
Registration Rights Agreement and filings related thereto, the Company shall
not publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure.

     4.5 Proxy Statement; No Solicitation.

            (a) If Stockholder Approval is required by Nasdaq, the Company shall
provide each stockholder entitled to vote at a stockholders meeting of the
Company, which the Company shall use its best efforts to cause to be held as
early as practicable (it being understood that either the Company or Purchasers
may terminate this Agreement pursuant to Section 5.1 if such stockholder
meeting is not held by July 15, 2004 and Stockholder Approval is required by
Nasdaq (the “Stockholder Meeting Deadline”)), a proxy statement, which has been
previously reviewed by the Purchasers and a counsel of their choice, soliciting
each such stockholder’s affirmative vote at such stockholder meeting for
approval of the Company’s issuance of all of the securities as described in the
Transaction Documents in accordance with applicable law and the

-15-

 

rules and regulations of the Principal Market, together with the approval
of a majority of the votes cast by holders of the Common Stock of the Company
other than the Purchaser for or against such issuance of the securities (such
affirmative approval being referred to herein as the “Stockholder Approval”),
and the Company shall use its best efforts to solicit its stockholders’
approval of such issuance of the securities and to cause the Board of Directors
of the Company to recommend to the stockholders that they approve such
proposal. The Company shall be obligated to use its best efforts to obtain the
Stockholder Approval by the Stockholder Meeting Deadline. Nothing stated
herein shall limit the right of the Board of Directors of the Company to
withdraw its recommendation if the Board of Directors determines in its good
faith judgment consistent with its fiduciary duties to stockholders under
Minnesota law, after consulting with outside legal counsel, that it is required
to do so in order to comply with its fiduciary duties.

            (b) From and after the execution of this Agreement until the termination
of this Agreement, neither the Company nor any of its directors, officers,
employees, agents (including, without limitation, any investment banker,
attorney or accountant retained by any of the foregoing) and other
representatives (collectively, “Representatives”) shall, directly or
indirectly, initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Transaction Proposal (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Transaction Proposal or agree to or endorse any
Transaction Proposal, or authorize or permit any of its Representatives to take
any such action. For purposes hereof, “Transaction Proposal” shall mean any of
the following that are directly or indirectly initiated, solicited or knowingly
encouraged by the Company or any of its Representatives after the execution of
this Agreement (other than transactions between the parties hereto): (i) any
merger, consolidation, statutory share exchange, recapitalization, business
combination, or other similar transaction involving the Company; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more
of the assets of the Company and the Subsidiaries, taken as a whole, in a
single transaction or series of transactions (other than sales of inventory in
the ordinary course of business); (iii) any tender offer or exchange offer for
10% or more, or equity placement by the Company for 5% or more, of the
outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act in connection therewith; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. This covenant
relates only to prohibitions on the initial initiation, solicitation and
knowing encouragement to make an inquiry or proposal and not to responses to
unsolicited inquiries and proposals, although the Company shall summarize to
the Purchasers orally (within one Business Day) and in writing (as promptly as
practicable) any such unsolicited inquiries and proposals it receives
subsequent to the execution of this Agreement (but shall not be required to
disclose the identity of the person making the inquiry or proposal).

     4.6 Indemnification of Purchasers. The Company will indemnify and hold
the Purchasers and their directors, officers, shareholders, partners, employees
and agents (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation (collectively, “Losses”)
that any such Purchaser Party may suffer or incur as a result of or relating to
(a) any

-16-

 

misrepresentation, breach or inaccuracy, or any allegation by a third
party that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in
this Agreement or in the other Transaction Documents; or (b) any cause of
action, suit or claim brought or made against such Purchaser Party and solely
arising out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents. The
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation, preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. The Company and the Purchaser Party may not, without the prior
written consent of the other, agree to any settlement of any claim or action
with respect to which the Company is required to indemnify the Purchaser Party
pursuant to this Section 4.6.

     4.7 Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an “Acquiring Person” under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Shares, Warrants or Warrant Shares under the Transaction Documents or under any
other agreement between the Company and the Purchasers.

     4.8 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information (except information provided to any director or
officer of the Company in his capacity as such), unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.

     4.9 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Shares hereunder for working capital purposes and the repayment of the
Company’s debt, and not to redeem any Company equity or equity-equivalent
securities or to settle any outstanding litigation.

     4.10 No Voluntary Suspension. The Company shall use its reasonable best
efforts to ensure that the Common Stock will at all times remain listed or
quoted on the Trading Market or on an Eligible Market. The Company shall not
at any time take any act or action, or omit to take any act or action, that is
reasonably calculated to result in (i) the removal or suspension of any such
listing or quotation or (ii) the suspension of the Company’s duty to file
reports under the Securities Exchange Act of 1934.

ARTICLE V.

TERMINATION

     5.1 This Agreement may be terminated at any time prior to Closing as
follows:

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            (a) at the election of any Purchaser or the Company, if the Closing shall
not have occurred on or prior to the fifth Business Day following the
Stockholder Meeting Deadline (the “Termination Date”) or the Stockholder
Approval shall not have been obtained on or before the Stockholder Meeting
Deadline if Stockholder Approval is required by Nasdaq;

            (b) at the election of any Purchaser, if any of the conditions set forth
in Sections 2.2 or 2.3 shall become incapable of being fulfilled at any time on
or before the Termination Date and shall not have been waived by all of the
Purchasers, and any Purchaser shall have provided notice of its intent to
terminate this Agreement pursuant hereto within five (5) Business Days prior to
the effective date of such termination; provided, however, that the inability
to fulfill the condition is not due to the failure of any Purchaser to comply
in all material respects with its obligations under this Agreement;

            (c) at the election of the Company, if any of the conditions set forth in
Sections 2.2 or 2.3 shall become incapable of being fulfilled at any time on or
before the Termination Date and shall not have been waived by the Company, and
the Company shall have provided notice of its intent to terminate this
Agreement pursuant hereto within five (5) Business Days prior to the effective
date of such termination; provided, however, that the inability to fulfill the
condition is not due to the failure of the Company to comply in all material
respects with its obligations under this Agreement; or

            (d) by any Purchaser or the Company if Stockholder Approval has been
requested at a meeting of stockholders of the Company and the Stockholders
shall have voted at that meeting or any adjournment or postponement thereof not
to grant such Stockholder Approval.

ARTICLE VI.

MISCELLANEOUS

     6.1 Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay
all stamp and other taxes and duties levied in connection with the sale of the
Shares and Warrants.

     6.2 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.

     6.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a

-18-

 

day that is not a Trading Day or later than 6:30 p.m. (New York City time)
on any Trading Day, (c) the Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:

	 	 	 	 	 
	

	 	If to the Company:
	 	Wilsons The Leather Experts Inc.
	

	 	 	 	7401 Boone Avenue North
	

	 	 	 	Brooklyn Park, MN 55428
	

	 	 	 	Attn: Chief Financial Officer
	

	 	 	 	Fax No.: (763) 391-4000
	 
	 	 	 	 
	

	 	With a copy to:
	 	Faegre & Benson LLP
	

	 	 	 	2200 Wells Fargo Center
	

	 	 	 	90 South Street
	

	 	 	 	Minneapolis, MN 55402-3901
	

	 	 	 	Attn: Kris Sharpe, Esq.
	

	 	 	 	Fax No.: (612) 766-1600
	 
	 	 	 	 
	

	 	If to a Purchaser:
	 	To the address set forth under such Purchaser’s name on the signature pages hereof;
	 
	 	 	 	 
	

	 	With a copy to:
	 	Seward & Kissel LLP
	

	 	 	 	One Battery Park Plaza
	

	 	 	 	New York, New York 10004
	

	 	 	 	Attention: Patricia A. Poglinco, Esq.
	

	 	 	 	Telephone: (212) 574-1200
	

	 	 	 	Telecopy: (212) 480-8421

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

     6.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.

     6.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

     6.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign

-19-

 

this Agreement or any rights or obligations hereunder without the prior
written consent of the Purchasers. Any Purchaser may assign any or all of its
rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Shares, Warrants or Warrant Shares, provided such transferee
agrees in writing to be bound, with respect to the transferred Shares, Warrants
or Warrant Shares, by the provisions hereof that apply to the “Purchasers.”

     6.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.6.

     6.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Minnesota, without regard to the principles of conflicts of law thereof. Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the State of
Minnesota. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the State of Minnesota
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any such court, that such
Proceeding is improper. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such Proceeding
by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to trial
by jury in any legal proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby. If either party shall commence a
Proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such Proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.

     6.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing.

     6.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

-20-

 

     6.11 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

     6.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights.

     6.13 Replacement of Shares and Option Shares. If any certificate or
instrument evidencing any Shares, Warrants and Warrant Shares is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested. The
applicants for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the issuance of such
replacement Shares, Warrants or Warrant Shares.

     6.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

     6.15 Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.

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SIGNATURE PAGE FOR PURCHASER FOLLOWS]

-21-

 

     IN WITNESS WHEREOF, the parties hereto have caused this Common Stock and
Warrant Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

	 	 	 	 	 
	

	 	WILSONS THE LEATHER EXPERTS INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Joel N. Waller
	

	 	 	 	
 
	

	 	 	 	Name: Joel N. Waller
	

	 	 	 	Title: Chief Executive Officer

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

-22-

 

	 	 	 	 	 
	

	 	PENINSULA INVESTMENT PARTNERS, L.P.
	

	 	 	 	 
	

	 	By:
	 	Peninsula Capital Appreciation, LLC, its General Partner
	

	 	 	 	 
	

	 	By:
	 	/s/ R. Ted Weschler
	

	 	 	 	
 
	

	 	 	 	Name: R. Ted Weschler
	

	 	 	 	Title: Managing Member

	 	 	 	 	 
	

	 	Number of Warrant Shares underlying the
Warrant to be delivered on the date of
execution and delivery hereof: 1,428,571

	 
	 	 	 	 
	

	 	Number of Warrant Shares underlying the
Warrant to be delivered at Closing: 1,428,571

	 
	 	 	 	 
	

	 	Number of Shares to be acquired at Closing: 12,820,513

	 
	 	 	 	 
	

	 	Address for Notices:

	 
	 	 	 	 
	

	 	404B East Main Street, 2nd Floor

	

	 	Charlottesville, Virginia 22902

	

	 	Attention: Mr. R. Ted Weschler

	

	 	Telephone: (434) 297-0811

	

	 	Telecopy: (434) 220-9321

	 
	 	 	 	 
	

	 	With a copy to:

	 
	 	 	 	 
	

	 	Seward & Kissel LLP

	

	 	One Battery Park Plaza

	

	 	New York, New York 10004

	

	 	Attention: Patricia A. Poglinco, Esq.

	

	 	Telephone: (212) 574-1200

	

	 	Telecopy: (212) 480-8421

[PURCHASE AGREEMENT SIGNATURE PAGE]

-23-

 

	 	 	 	 	 
	

	 	QUAKER CAPITAL PARTNERS I, LP
	

	 	By Quaker Premier, L.P.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Mark G. Schoeppner
	

	 	 	 	
 
	

	 	 	 	Name: Mark G. Schoeppner
	

	 	 	 	Title: President

	 	 	 	 	 
	

	 	Number of Warrant Shares underlying the
Warrant to be delivered on the date of
execution and delivery hereof: 366,857

	 
	 	 	 	 
	

	 	Number of Warrant Shares underlying the
Warrant to be delivered at Closing: 366,857

	 
	 	 	 	 
	

	 	Number of Shares to be acquired at Closing: 3,292,308

	 
	 	 	 	 
	

	 	Address for Notices:

	 
	 	 	 	 
	

	 	c/o Quaker Capital Management

	

	 	401 Wood Street, Suite 1300

	

	 	Pittsburgh, Pennsylvania 15222

	

	 	Attention:

	

	 	Telephone: (412) 281-1948

	

	 	Telecopy: (412) 281-0323

	 
	 	 	 	 
	

	 	With a copy to:

	 
	 	 	 	 
	

	 	Seward & Kissel LLP

	

	 	One Battery Park Plaza

	

	 	New York, New York 10004

	

	 	Attention: Patricia A. Poglinco, Esq.

	

	 	Telephone: (212) 574-1200

	

	 	Telecopy: (212) 480-8421

[PURCHASE AGREEMENT SIGNATURE PAGE]

-24-

 

	 	 	 	 	 
	

	 	QUAKER CAPITAL PARTNERS II, L.P.

By Quaker Premier II, L.P.
	

	 	 	 	 
	

	 	By:
	 	/s/ Mark G. Schoeppner
	

	 	 	 	
 
	

	 	 	 	Name: Mark G. Schoeppner

Title: President

	 	 	 	 	 
	

	 	Number of Warrant Shares underlying the
Warrant to be delivered on the date of
execution and delivery hereof: 204,572

	 
	 	 	 	 
	

	 	Number of Warrant Shares underlying the
Warrant to be delivered at Closing: 204,572

	 
	 	 	 	 
	

	 	Number of Shares to be acquired at Closing: 1,835,897

	 
	 	 	 	 
	

	 	Address for Notices:

	 
	 	 	 	 
	

	 	c/o Quaker Capital Management

	

	 	401 Wood Street, Suite 1300

	

	 	Pittsburgh, Pennsylvania 15222

	

	 	Attention:

	

	 	Telephone: (412) 281-1948

	

	 	Telecopy: (412) 281-0323

	 
	 	 	 	 
	

	 	With a copy to:

	 
	 	 	 	 
	

	 	Seward & Kissel LLP

	

	 	One Battery Park Plaza

	

	 	New York, New York 10004

	

	 	Attention: Patricia A. Poglinco, Esq.

	

	 	Telephone: (212) 574-1200

	

	 	Telecopy: (212) 480-8421

[PURCHASE AGREEMENT SIGNATURE PAGE]

-25-

 

EXHIBIT A

FORM OF WARRANT

To Subscribe for and Purchase Common Stock of

Wilsons The Leather Experts Inc.

     THIS WARRANT CERTIFIES THAT, for value received,                   , a                    (herein called “Purchaser”) or registered assigns is entitled
to subscribe for and purchase from Wilsons The Leather Experts Inc. (herein
called the “Company”), a corporation organized and existing under the laws of
the State of Minnesota, at the price specified below (subject to adjustment as
noted below) at any time from and after                   , 2004 to and including
                 , 2009, **[         Million (           )] fully paid and nonassessable
shares of the Company’s Common Stock, $.01 par value per share (“Common Stock”)
(subject to adjustment as noted below).

     The Exercise Price shall be $3.00 per share (subject to adjustment as
noted below).

     This Warrant is subject to the following provisions, terms and conditions:

     1. The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part, by written notice of exercise, in the form
attached hereto, delivered to the Company by the surrender of this Warrant
(properly endorsed if required) at the principal office of the Company and upon
payment to it by check of the Exercise Price in lawful money of the United
States. The Company agrees that the shares so purchased shall be and are
deemed to be issued to the holder hereof 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 as aforesaid. Subject to the
provisions of the next succeeding paragraph, certificates for the shares of
stock so purchased shall be delivered to the holder hereof within a reasonable
time, not exceeding l0 days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder hereof
within such time.

     2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraphs 7 and 8 hereof.

     3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon
issuance, be duly authorized and issued, fully paid and nonassessable and free
of preemptive rights. The Company further covenants and agrees that during the
period within which the rights 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 its Common Stock to provide for the
exercise of the rights represented by this Warrant.

A-1

 

     4. The above provisions are, however, subject to the following:

            (a) The Exercise Price shall, from and after the date of issuance of this
Warrant, be subject to adjustment from time to time as hereinafter provided.
Upon each adjustment of the Exercise Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of shares obtained by multiplying the Exercise 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 Exercise Price resulting from such adjustment.

            (b) In case the Company shall (i) declare a dividend upon the Common Stock
payable in Common Stock (other than a dividend declared to effect a subdivision
of the outstanding shares of Common Stock, as described in paragraph (c) below)
or any obligations or any shares of stock of the Company that are convertible
into or exchangeable for Common Stock (any of such obligations or shares of
stock being hereinafter called “Convertible Securities”), or in any rights or
options to purchase Common Stock or Convertible Securities, or (ii) declare any
other dividend or make any other distribution upon the Common Stock payable
otherwise than out of earnings or earned surplus, then thereafter the holder of
this Warrant upon the exercise hereof will be entitled to receive the number of
shares of Common Stock to which such holder shall be entitled upon such
exercise, and, in addition and without further payment therefor, each dividend
described in clause (i) above and each dividend or distribution described in
clause (ii) above which such holder would have received by way of dividends or
distributions if continuously since such holder became the record holder of
this Warrant such holder (x) had been the record holder of the number of shares
of Common Stock then received, and (y) had retained all dividends or
distributions in stock or securities (including Common Stock or Convertible
Securities, and any rights or options to purchase any Common Stock or
Convertible Securities) payable in respect of such Common Stock or in respect
of any stock or securities paid as dividends or distributions and originating
directly or indirectly from such Common Stock. For the purposes of the
foregoing, a dividend or distribution other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such earnings
or earned surplus are charged an amount equal to the fair value of such
dividend or distribution as determined by the Board of Directors of the Company
in good faith.

            (c) In case the Company shall at any time subdivide its outstanding shares
of Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
conversely, in case the outstanding shares of Common Stock of the Company shall
be combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased.

     (d) (1) In case of any consolidation with or merger of the Company
with or into another corporation, or in case of any sale, lease, or
conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety,
such successor, leasing, or purchasing corporation, as the case may be,
shall (i) execute with the holder hereof an agreement providing that the
holder hereof shall have the right thereafter to receive upon exercise of
this Warrant solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof receivable upon
such consolidation, merger, sale, lease, or conveyance by a holder of the
number of shares of Common Stock for which this

A-2

 

Warrant might have been exercised immediately prior to such
consolidation, merger, sale, lease, or conveyance, except that in a
merger or consolidation in which all holders of Common Stock receive cash
for their shares of Common Stock, the Company may instead at the time of
the merger or consolidation pay the holder of this Warrant in cash an
amount equal to the amount by which the cash that would have been
received by the holder of this Warrant had it exercised this Warrant
immediately prior to the merger exceeds the aggregate Exercise Price that
would have been paid to exercise this Warrant and (ii) make effective
provision in its articles of incorporation or otherwise, if necessary, to
effect such agreement. Such agreement shall provide for adjustments
which shall be as nearly equivalent as practicable to the adjustments in
this Warrant.

                  (2) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Warrant (other than a change
in par value or from no par value to a specified par value, or as a
result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), or in case of any
consolidation or merger of another corporation into the Company in which
the Company is the continuing corporation and in which there is a
reclassification or change (including a change to the right to receive
cash or other property) of the shares of Common Stock (other than a
change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the holder hereof
shall have the right thereafter to receive upon exercise of this Warrant
solely the kind and amount of shares of stock and other securities,
property, cash, or any combination thereof receivable upon such
reclassification, change, consolidation, or merger by a holder of the
number of shares of Common Stock for which this Warrant might have been
exercised immediately prior to such reclassification, change,
consolidation, or merger. Thereafter, appropriate provision shall be
made for adjustments which shall be as nearly equivalent as practicable
to the adjustments in this Warrant.

            (e) (1) If, at any time or from time to time after the Company
issues or sells, or is deemed by the express provisions of this paragraph
4(e) to have issued or sold, Additional Shares of Common Stock (as
defined below), other than as a dividend or other distribution on any
class of stock, and other than a subdivision or combination of shares of
Common Stock, for an Effective Price (as defined below) less than the
then effective Exercise Price, then and in each such case, the then
existing Exercise Price will be reduced, as of the opening of business on
the date of such issue or sale, to a price determined by multiplying the
Exercise Price in effect immediately prior to such issuance or sale by a
fraction:

                        (A) the numerator of which will be (1) the number of shares of
Common Stock deemed outstanding (as defined below) immediately
prior to such issue or sale, plus (2) the number of shares of
Common Stock which the Aggregate Consideration (as defined below)
received by the Company for the total number of Additional Shares
of Common Stock so issued would purchase at the Exercise Price, and

A-3

 

                        (B) the denominator of which will be the number of shares of
Common Stock deemed outstanding immediately prior to such issue or
sale plus the total number of Additional Shares of Common Stock so
issued.

                  For the purposes of this paragraph 4(e), the number of shares of
Common Stock deemed outstanding as of a given date will be the sum of (1)
the number of shares of Common Stock then outstanding, and (2) the number
of shares of Common Stock into which any other outstanding securities of
the Company are then issuable upon conversion, exercise or exchange of
such securities.

                  (2) No adjustment will be made to the Exercise Price in an amount
less than one cent per share. Any adjustment otherwise required by this
paragraph 4(e) that is not required to be made due to the preceding
sentence will be included in any subsequent adjustment to the Exercise
Price.

                  (3) For the purpose of making any adjustment required under this
paragraph 4(e), the aggregate consideration received by the Company for
any issue or sale of securities (the “Aggregate Consideration”) will be
defined as: (A) to the extent it consists of cash, the net amount of cash
received by the Company after deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company
in connection with such issue or sale but without deduction of any
expenses payable by the Company, (B) to the extent it consists of
property other than cash, the fair value of that property as determined
in good faith by the Board of Directors, and (C) if Additional Shares of
Common Stock, Additional Convertible Securities (as defined below) or
rights or options to purchase either Additional Shares of Common Stock or
Additional Convertible Securities are issued or sold together with other
stock or securities or other assets of the Company for a consideration
which covers both, be computed as the portion of the consideration so
received that may be reasonably determined in good faith by the Board of
Directors to be allocable to such Additional Shares of Common Stock,
Additional Convertible Securities or rights or options.

                  (4) For the purpose of the adjustment required under this paragraph
4(e), if the Company issues or sells (x) stock or other securities
convertible into, Additional Shares of Common Stock (such convertible
stock or securities being herein referred to as “Additional Convertible
Securities”) or (y) rights or options for the purchase of Additional
Shares of Common Stock or Additional Convertible Securities, and if the
Effective Price (as defined below) of such Additional Shares of Common
Stock is less than the Exercise Price, in each case the Company will be
deemed to have issued at the time of the issuance of such rights or
options or Additional Convertible Securities the maximum number of
Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such
shares an amount equal to the total amount of the consideration, if any,
received by the Company for the issuance of such rights or options or
Additional Convertible Securities plus:

A-4

 

                        (A) in the case of such rights or options, the minimum amounts
of consideration, if any, payable to the Company upon the exercise
of such rights or options; and

                        (B) in the case of Additional Convertible Securities, the
minimum amounts of consideration, if any, payable to the Company
upon the conversion thereof (other than by cancellation of
liabilities or obligations evidenced by such Additional Convertible
Securities); provided that if the minimum amounts of such
consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Company will be
deemed to have received the minimum amounts of consideration
without reference to such clauses.

                  If the minimum amount of consideration payable to the Company upon
the exercise or conversion of rights, options or Additional Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the
Effective Price will be recalculated using the figure to which such
minimum amount of consideration is reduced; provided, that if the minimum
amount of consideration payable to the Company upon the exercise or
conversion of such rights, options or Additional Convertible Securities
is subsequently increased, the Effective Price will be again recalculated
using the increased minimum amount of consideration payable to the
Company upon the exercise or conversion of such rights, options or
Additional Convertible Securities.

                  No further adjustment of the Exercise Price, as adjusted upon the
issuance of such rights, options or Additional Convertible Securities,
will be made as a result of the actual issuance of Additional Shares of
Common Stock or the exercise of any such rights or options or the
conversion of any such Additional Convertible Securities. If any such
rights or options or the conversion privilege represented by any such
Additional Convertible Securities will expire without having been
exercised, the Exercise Price as adjusted upon the issuance of such
rights, options or Additional Convertible Securities will be readjusted
to the Exercise Price which would have been in effect had an adjustment
been made on the basis that the only Additional Shares of Common Stock so
issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of
conversion of such Additional Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting
of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Additional Convertible
Securities actually converted, plus the consideration, if any, actually
received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Additional Convertible Securities) on the
conversion of such Additional Convertible Securities.

                  (5) For the purpose of making any adjustment to the Exercise Price
required under this paragraph 4(e), “Additional Shares of Common Stock”
will mean all shares of Common Stock issued by the Company or deemed to
be issued pursuant to this

A-5

 

paragraph 4(e) (including shares of Common Stock subsequently reacquired
or retired by the Company), other than (A) shares of Common Stock and
options, warrants or other Common Stock purchase rights and the Common
Stock issued pursuant to such options, warrants or other purchase rights
(as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like after the filing date hereof) to
employees, officers or directors of, or consultants or advisors to, the
Company or any subsidiary pursuant to stock purchase or stock incentive
plans or other arrangements that are approved by the Board of Directors;
and (B) shares of Common Stock and options, warrants or other Common
Stock purchase rights, and the Common Stock issued pursuant to such
options, warrants or other rights issued for consideration other than
cash pursuant to a merger, consolidation, acquisition, or similar
business combination approved by the Board of Directors.

            The “Effective Price” of Additional Shares of Common Stock will mean
the quotient determined by dividing the total number of Additional Shares
of Common Stock issued or sold, or deemed to have been issued or sold by
the Company under this Section 4(e), into the Aggregate Consideration
received, or deemed to have been received by the Company for such issue
under this paragraph 4(e), for such Additional Shares of Common Stock.

            (f) Upon any adjustment of the Exercise Price, then and in each such case
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, which notice shall state the
Exercise 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.

            (g) In case any time:

                  (1) the Company shall pay any dividend or make any distribution on
shares of Common Stock in shares of common Stock or make any other
distribution (other than regularly scheduled cash dividends which are not
in a greater amount per share than the most recent such cash dividend) to
all holders of Common Stock;

                  (2) the Company shall pay any dividend payable in stock upon Common
Stock or make any distribution (other than regular cash dividends) to the
holders of Common Stock;

                  (3) the Company shall offer for subscription pro rata to the holders
of Common Stock any additional shares of stock of any class or other
rights, or shall issue any rights, warrants or other securities to all
holders of Common Stock entitling them to purchase any additional shares
of Common Stock or any other rights, warrants or other securities;

A-6

 

                  (4) there shall be any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to,
another corporation; or

                  (5) there shall be 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 written notice,
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, of the date on which (aa) the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights,
or (bb) such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be. Such written notice shall be given at least 10 days prior to the
action in question and not less than 3 days prior to the record date or the
date on which the Company’s transfer books are closed in respect thereto.

            (h) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid; provided, however, that the members of the Board
of Directors of the Company shall not be liable to the holders hereof for any
such determination made in good faith.

            (i) No fractional shares of Common Stock shall be issued upon the exercise
of this Warrant, but, instead the Company shall pay round such fraction of a
share of Common Stock to the nearest whole share, except that if the fraction
is one-half or greater, the Company shall round the fraction up to the nearest
whole share.

     5. As used herein, the term “Common Stock” shall mean and include the
Company’s presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided that the shares purchasable pursuant to this Warrant shall include
shares designated as Common Stock of the Company on the date of original issue
of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities, cash or assets provided for in paragraph
4(d) above.

     6. This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Company.

A-7

 

     7. (a) The holder of this Warrant acknowledges that neither this Warrant
nor, as of the date of the original issuance of this Warrant, any of the shares
of Common Stock issuable upon exercise hereof have been registered under the
Securities Act of 1933, as amended (the “Act”), or any state securities laws
and that this Warrant or such shares of Common Stock may only be transferred in
accordance with this paragraph 7. The holder of this Warrant, by acceptance
hereof, represents that it has acquired this Warrant for investment and not
with a view to distribution of this Warrant or the shares of Common Stock
issuable upon exercise hereof within the meaning of the Act and the rules and
regulations thereunder.

            (b) The holder realizes that the purchase of this Warrant is a speculative
investment, and that the economic benefits which may be derived therefrom are
uncertain. In determining whether or not to purchase the Warrant, the holder
has relied solely upon the publicly-available materials filed by the Company
with the Securities and Exchange Commission, copies of which have been reviewed
by the Purchaser, and upon independent investigations made by the holder and
its representatives.

            (c) The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before exercising or transferring this Warrant,
in whole or in part, or transferring any shares of Common Stock issuable or
issued upon the exercise hereof, if at the time of such transfer the shares of
Common Stock are not covered by an effective registration statement under the
Act, of such holder’s intention to do so. Such holder shall also provide the
Company with an opinion of counsel reasonably satisfactory to the Company to
the effect that the proposed exercise or transfer of this Warrant or transfer
of shares, if at the time of such transfer the shares are not covered by an
effective registration statement under the Act, may be effected without
registration or qualification under the Act and any applicable state securities
laws. Upon receipt of such written notice and opinion by the Company, such
holder shall be entitled to exercise this Warrant in accordance with its terms,
or to transfer this Warrant, or to transfer shares of Common Stock issuable or
issued upon the exercise of this Warrant, all in accordance with the terms of
the notice delivered by such holder to the Company, provided that an
appropriate legend respecting the aforesaid restrictions on transfer may be
endorsed on this Warrant, if at the time of such transfer the shares are not
covered by an effective registration statement under the Act, or the
certificates for such shares. In the event of a proposed transfer of this
Warrant, prior to the transfer the proposed transferee shall execute and
deliver to the Company a warrant transfer letter in the form attached hereto.

     8. Subject to the provisions of paragraph 7 hereof, this Warrant and all
rights hereunder are transferable, without the prior approval of the Company,
in whole or in part, at the principal office of the Company by the holder
hereof in person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed. Each taker and holder of this Warrant, by taking or holding
the same, consents and agrees that the bearer of this Warrant, when endorsed,
may be treated by the Company and all other persons dealing with this Warrant
as the absolute owner hereof for any purpose and as the person entitled to
exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Company, any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered holder hereof
as the owner for all purposes.

A-8

 

     9. This Warrant is exchangeable, upon the surrender hereof by the holder
hereof at the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.

     10. The Company covenants and agrees that the holder shall have the rights
of a Purchaser under the Registration Rights Agreement dated April 25, 2004
among the Company and the Purchasers set forth in such agreement.

     11. (a) In addition to and without limiting the rights of the holder of
this Warrant under the terms of this Warrant, the holder of this Warrant shall
have the right (the “Conversion Right”) to convert this Warrant or any portion
thereof into shares of Common Stock as provided in this paragraph 11 at any
time or from time to time prior to its expiration. Upon exercise of the
Conversion Right with respect to a particular number of shares subject to this
Warrant (the “Converted Warrant Shares”), the Company shall deliver to the
holder of this Warrant, without payment by the holder of any exercise price or
any cash or other consideration, that number of shares of Common Stock equal to
the quotient obtained by dividing the Net Value (as hereinafter defined) of the
Converted Warrant Shares by the market price (calculated pursuant to paragraph
11(c)) of a single share of Common Stock, determined in each case as of the
Conversion Date (as hereinafter defined). The “Net Value” of the Converted
Warrant Shares shall be determined by subtracting the aggregate Exercise Price
of the Converted Warrant Shares from the aggregate market price of the
Converted Warrant Shares. Notwithstanding anything in this paragraph 11 to the
contrary, the Conversion Right cannot be exercised with respect to a number of
Converted Warrant Shares having a Net Value below $100. No fractional shares
shall be issuable upon exercise of the Conversion Right, and if the number of
shares to be issued in accordance with the foregoing formula is other than a
whole number, the Company shall round such fraction of a share of Common Stock
to the nearest whole share, except that if the fraction is one-half, the
Company shall round the fraction up to the nearest whole share.

            (b) The Conversion Right may be exercised by the holder of this Warrant by
the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this
Warrant which are being surrendered (referred to in paragraph (a) above as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with
the aforesaid written statement, or on such later date as is specified therein
(the “Conversion Date”), but not later than the expiration date of this
Warrant. Certificates for the shares of Common Stock issuable upon exercise of
the Conversion Right, together with a check in payment of any fractional share
and, in the case of a partial exercise, a new warrant evidencing the shares
remaining subject to this Warrant, shall be issued as of the Conversion Date
and shall be delivered to the holder of this Warrant within 15 days following
the Conversion Date.

            (c) “Market price” for purposes of this paragraph 11 shall mean, if the
Common Stock is traded on a securities exchange or on The Nasdaq National
Market or The Nasdaq SmallCap Market, the closing price of the Common Stock on
such exchange or The

A-9

 

Nasdaq National Market or the Nasdaq SmallCap Market, or, if the Common Stock
is otherwise traded in the over-the-counter market, the closing bid price, in
each case averaged over a period of 20 consecutive business days prior to the
Conversion Date. If at any time the Common Stock is not traded on an exchange
or The Nasdaq National Market or the Nasdaq SmallCap Market, or otherwise
traded in the over-the-counter market, the “market price” shall be deemed to be
the higher of (i) the book value thereof as determined by any firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company as of the last day of any month ending within 60 days
preceding the Conversion Date, or (ii) the fair value thereof determined in
good faith by the Board of Directors of the Company as of a date which is
within l5 days of the Conversion Date.

     12. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
the holder hereof for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of any certificate
in a name other than that of the holder hereof and the Company shall not be
required to issue or deliver any such certificate unless and until the person
or persons requesting the issue thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.

     13. All questions concerning this Warrant will be governed and interpreted
and enforced in accordance with the internal law, not the law of conflicts, of
the State of Minnesota.

A-10

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of                   , 2004.

	 	 	 	 	 	 
	 	WILSONS THE LEATHER EXPERTS INC.
	 	 
	 	 	 	 
	 	By
	 	 	 	 
	 	

	 	
 
	 	 
	 	 	 	 
	 	

	 	Its	 	 
	 	

	 	 	 	
 

RESTRICTION ON TRANSFER

     The securities evidenced hereby may not be transferred without (i) the
opinion of counsel satisfactory to the Company that such transfer may be
lawfully made without registration under the Securities Act of 1933, as
amended, and all applicable state securities laws or (ii) such registration.

A-11

 

ASSIGNMENT

(To Be Signed Only Upon Assignment)

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto                                                                                  this
Warrant, and appoints                                                                                    to
transfer this Warrant on the books of Wilsons The Leather Experts Inc. with the
full power of substitution in the premises.

	 	 	 	 
	Dated:
	 	 
	

	
 
	 
	 	 
	In the presence of:
	 
	

	 	
 

	 	 	 
	

	 	
 
	 
	 	 
	

	 	(Signature must conform in all
respects to the name of the holder
as specified on the face of this
Warrant without any alteration or
change whatsoever, and the signature
must be guaranteed in the usual
manner)

A-12

 

FORM OF WARRANT TRANSFER LETTER

To: Wilsons The Leather Experts Inc.

Ladies and Gentlemen:

     The undersigned is a proposed transferee of the warrant (the “Warrant”) to
purchase                            shares of Common Stock, par value $.01 (“Common
Stock”), of Wilsons The Leather Experts Inc., a Minnesota corporation (the
“Company”), currently registered in the name of                           . In order
to induce the Company to consent to the transfer of the Warrant, the
undersigned hereby represents, warrants and agrees as follows:

     1. The undersigned acknowledges that neither the Warrant nor **[any of the
shares of Common Stock issuable upon exercise thereof] have been registered
under the Securities Act of 1933, as amended (the “Act”), or any state
securities laws and that, accordingly, the Warrant **[and such shares of Common
Stock] may only be transferred in accordance with the terms of paragraphs 7 and
8 of the Warrant.

     2. The undersigned is an “accredited investor” as defined in Rule 501(a)
of Regulation D promulgated under the Act.

	 	 	 	 
	 	Signature
	 	 
	 	

	 	
 
	 	 
	 	 
	 	Address
	 	 
	 	

	 	
 
	 	 
	 	 
	 	Date
	 	 
	 	

	 	
 

A-13

 

FORM OF EXERCISE NOTICE

To be Executed by the Holder of this Warrant if such Holder

Desires to Exercise this Warrant in Whole or in Part:

To: Wilsons The Leather Experts Inc. (the “Company”)

The undersigned                                                         

Please insert Social Security or other

identifying number of Purchaser:

hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder,                                                          shares of the
Common Stock provided for therein and tenders payment herewith to the order of
the Company in the amount of $                                                        , such payment being made
as provided on the face of this Warrant.

     In order to induce the Company to consent to the exercise of this Warrant,
the undersigned hereby represents, warrants and agrees that neither this
Warrant **[nor any of the shares of Common Stock issuable upon exercise hereof]
have been registered under the Securities Act of 1933, as amended (the “Act”),
or any state securities laws and that, accordingly, this Warrant may be
exercised [and the shares of Common Stock issued pursuant to this exercise] may
only be transferred in accordance with the terms of paragraphs 7 and 8 of this
Warrant.

A-14

 

     The undersigned requests that certificates for such shares of Common Stock
be issued as follows:

	 	 	 
	Name:
	 	 
	

	 	
 
	 
	 	 
	Address:
	 	 
	

	 	
 
	 
	 	 
	Deliver to:
	 	 
	

	 	
 
	 
	 	 
	Address:
	 	 
	

	 	
 

and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance
remaining of the shares of Common Stock purchasable under this Warrant be
registered in the name of, and delivered to, the undersigned at the address
stated below.

	 	 	 
	Address:
	 	 
	

	 	
 

	 	 	 	 	 
	

	 	Signature	 	 
	

	 	 	 	
 
	 
	 	 	 	 
	

	 	 	 	(Signature must conform in all
respects to the name of the holder
as written specified on the face of
this Warrant without any alteration
or change whatsoever)

	 	 	 	 
	Dated:
	 	 	 
	

	 	
 	 

A-15

 

EXHIBIT B

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered
into as of April 25, 2004, by and among Wilsons The Leather Experts Inc., a
Minnesota corporation (the “Company”), and the investors signatory hereto
(each, including their respective successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).

     This Agreement is made pursuant to the Common Stock and Warrant Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers
(the “Purchase Agreement”).

     The Company and the Purchasers hereby agree as follows:

     1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following
terms shall have the meanings set forth in this Section 1:

     “Effectiveness Date” means the earlier of (i) the 120th day following the
Closing Date and (ii) the fifth Trading Day following the date on which the
Company is notified by the Commission that such Registration Statement will not
be reviewed or is no longer subject to further review and comments.

     “Effectiveness Period” shall have the meaning set forth in Section 2(a).

     “Filing Date” means the 30th day following the Closing Date.

     “Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.

     “Indemnified Party” shall have the meaning set forth in Section 5(c).

     “Indemnifying Party” shall have the meaning set forth in Section 5(c).

     “Losses” shall have the meaning set forth in Section 5(a).

     “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened in writing.

     “Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

B-1

 

     “Registrable Securities” means the Shares and the Warrant Shares issued or
issuable under the Purchase Agreement.

     “Registration Statement” means the registration statement required to be
filed under this Agreement, including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.

     “Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

     “Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

     “Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

     “Shares” means all shares of Common Stock issued or issuable to the
Purchasers pursuant to the Purchase Agreement.

     “Special Counsel” means Seward & Kissel LLP.

     “Warrants” shall have the meaning set forth in the Purchase Agreement.

     “Warrant Shares” shall have the meaning set forth in the Purchase
Agreement.

     2. Registration.

          (a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission a Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except
if the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance herewith) and shall contain (except if otherwise
agreed by the Holders) the “Plan of Distribution” attached hereto as Annex A.
The Company shall use its reasonable best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and shall use its reasonable best efforts to keep such Registration
Statement continuously effective under the Securities Act until the date which
is five years after the date that the Registration Statement is declared
effective by the Commission or such earlier date when all Registrable
Securities covered by the Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company’s transfer agent and the affected
Purchasers (the “Effectiveness Period”).

B-2

 

          (b) If: (i) the Registration Statement is not filed on or prior to the
Filing Date (if the Company files the Registration Statement without affording
the Holder the opportunity to review and comment on the same as required by
Section 3(a), the Company shall not be deemed to have satisfied clause (i)), or
(ii) the Company fails to file with the Commission a request for acceleration
in accordance with Rule 461 promulgated under the Securities Act within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that the Registration Statement will
not be “reviewed,” or not subject to further review, or (iii) the Company fails
to respond to any comments made by the Commission within twenty Trading Days
after the receipt of such comments, or (iv) the Registration Statement filed
hereunder is not declared effective by the Commission by the Effectiveness
Date, or (v) after the Registration Statement is filed with and declared
effective by the Commission, the Registration Statement ceases to be effective
as to all Registrable Securities to which it is required to relate at any time
prior to the expiration of the Effectiveness Period without being succeeded
within twenty Trading Days by an amendment to the Registration Statement or by
a subsequent Registration Statement filed with the Commission, (vi) an
amendment to the Registration Statement is not filed by the Company with the
Commission within fifteen Trading Days of the Commission’s notifying the
Company that such amendment is required in order for the Registration Statement
to be declared effective, or (vii) the Company suspends the use of the
Registration Statement by the Holders for more than sixty consecutive days or
during any 365-day period suspends the use of the Registration Statement for
more than 120 days (any such failure or breach being referred to as an “Event,”
and for purposes of clause (i) or (iv) the date on which such Event occurs, or
for purposes of clause (ii) the date on which such five Trading Day-period is
exceeded, or for purposes of clauses (iii) or (vi) the date which such fifteen
Trading Day-period is exceeded, or for purposes of clauses (v) and (vii) the
date which such twenty Trading Day period is exceeded being referred to as an
“Event Date”) , then: (x) on each such Event Date the Company shall pay to each
Holder an amount in cash, as liquidated damages and not as a penalty, equal to
1.0% of the aggregate purchase price paid by such Holder pursuant to the
Purchase Agreement; and (y) on each monthly anniversary of each such Event Date
thereof (if the applicable Event shall not have been cured by such date) until
the applicable Event is cured, the Company shall pay to each Holder an amount
in cash, as liquidated damages and not as a penalty, equal to 1.0% of the
aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement. If the Company fails to pay any liquidated damages pursuant to this
Section in full within seven days after the date payable, the Company will pay
interest thereon at a rate of 8% per annum (or such lesser maximum amount that
is permitted to be paid by applicable law) to the Holder, accruing daily from
the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. Notwithstanding the foregoing, the maximum
liability of the Company after the date hereof pursuant to this Section 2(b)
shall not exceed $3,500,000 (and the Company shall have no obligation to make
any payments after the date hereof pursuant to this Section 2(b) to the extent
that the aggregate of all such payments would exceed $3,500,000).

     3. Registration Procedures

          In connection with the Company’s registration obligations hereunder, the
Company shall:

B-3

 

          (a) Not less than five Trading Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, the Company shall, (i) furnish to the Holders and their Special
Counsel copies of all such documents proposed to be filed (including documents
incorporated or deemed incorporated by reference) which documents will be
subject to the review of such Holders and their Special Counsel, and (ii) cause
its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable Securities and
their Special Counsel shall reasonably object in good faith.

          (b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as to the applicable Registrable Securities
for the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within twenty
days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and, as promptly as reasonably
possible, provide the Holders true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof set
forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.

          (c) Notify the Holders of Registrable Securities to be sold and their
Special Counsel as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than three Trading Days prior to such filing) and (if requested
by any such Person) confirm such notice in writing no later than one Trading
Day following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a “review”
of the Registration Statement and whenever the Commission comments in writing
on the Registration Statement (the Company shall provide true and complete
copies thereof and all written responses thereto to each of the Holders); and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority for amendments or supplements
to the Registration Statement or Prospectus or for additional information;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence of
any event or passage of time that makes the financial

B-4

 

statements included in the Registration Statement ineligible for inclusion
therein or any statement made in the Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

          (d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

          (e) Furnish to each Holder and their Special Counsel to the extent
requested by such Person, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.

          (f) Promptly deliver to each Holder and their Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form
of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.

          (g) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or subject the Company to any material tax in any such jurisdiction where it is
not then so subject.

          (h) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to the Registration Statement, which certificates shall
be free, to the extent permitted by law, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered
in such names as any such Holders may request.

B-5

 

          (i) Upon the occurrence of any event contemplated by Section 3(c)(v), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

          (j) Comply with all applicable rules and regulations of the Commission.

          (k) The Company may require each selling Holder to furnish to the Company
a certified statement as to the number of shares of Common Stock beneficially
owned by such Holder and, if requested by the Commission, the controlling
person thereof.

     4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company, other than
underwriting discounts and commissions, shall be borne by the Company whether
or not any Registrable Securities are sold pursuant to a Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to
be made with the Trading Market on which the Common Stock is then listed for
trading, and (B) in compliance with applicable state securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) Securities Act liability
insurance, if the Company so desires such insurance, and (v) fees and expenses
of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.

     5. Indemnification

          (a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement,
any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any

B-6

 

preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto (it being understood
that the Holder has approved Annex A hereto for this purpose) or (2) in the
case of an occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). The Company shall notify the Holders promptly of
the institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.

          (b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon: (x) such Holder’s failure
to comply with the prospectus delivery requirements of the Securities Act in
reselling Registrable Securities or (y) any untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus or to the extent that (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement (it
being understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or such form of Prospectus or in any amendment or supplement
thereto or (2) in the case of an occurrence of an event of the type specified
in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(d). In no event shall the liability of
any selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
“Indemnified Party”),

B-7

 

such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.

          An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). In the event that the Indemnifying Party is liable to
the Indemnified Party for legal expenses, the liability of the Indemnifying
Party for such legal expenses shall be limited to the expenses of a single
counsel. The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not
be unreasonably withheld. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.

          All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten
Trading Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled
to indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).

          (d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any

B-8

 

other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.

          The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Holder from the sale of
the Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.

          The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

     6. Miscellaneous

          (a) Remedies. In the event of a breach by the Company or by a Holder of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted
by law and under this Agreement, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by them of any of
the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, they shall
waive the defense that a remedy at law would be adequate.

          (b) No Piggyback on Registrations. Except as and to the extent specified
in Schedule 6(b) hereto, neither the Company nor any of its security holders
(other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
Except as and to the extent specified in Schedule 6(b) hereto, the Company has
not previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person which have not been fully
satisfied.

B-9

 

          (c) Compliance. Each Holder covenants and agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the Registration
Statement.

          (d) Discontinued Disposition. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Section 3(c), such Holder
will forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.

          (e) Piggy-Back Registrations. If at any time the Company shall determine
to prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock
option or other employee benefit plans, then the Company shall send to each
Holder written notice of such determination if at such time such Holder is
unable to sell its Registrable Securities without volume restrictions pursuant
to Rule 144(k) promulgated under the Securities Act and, if within fifteen days
after receipt of such notice, any such Holder shall so request in writing, the
Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered, subject to
customary underwriter cutbacks applicable to all holders of registration
rights.

          (f) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holders of the then outstanding Registrable Securities.

          (g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York
City time) on any date and earlier than 11:59 p.m. (New York City time) on such
date, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:

B-10

 

	 	 	 	 	 
	

	 	If to the Company:
	 	Wilsons The Leather Experts Inc.
	

	 	 	 	7401 Boone Avenue North
	

	 	 	 	Brooklyn Park, Minnesota 55428
	

	 	 	 	Attn: Chief Financial Officer
	

	 	 	 	Fax No.: (763) 391-4000
	 
	 	 	 	 
	

	 	With a copy to:
	 	Faegre & Benson LLP
	

	 	 	 	2200 Wells Fargo Center
	

	 	 	 	90 South Street
	

	 	 	 	Minneapolis, Minnesota 55420-1650
	

	 	 	 	Attn: Wendy B. Mahling, Esq.
	

	 	 	 	Fax No.: (612) 766-1600
	 
	 	 	 	 
	

	 	If to a Purchaser:
	 	To the address set forth under such
Purchaser’s name on the signature pages hereto.
	 
	 	 	 	 
	

	 	With a copy to:
	 	Seward & Kissel LLP
	

	 	 	 	One Battery Park Plaza
	 
	 	 	 	 
	

	 	 	 	New York, New York 10004
	 
	 	 	 	 
	

	 	 	 	Attention: Patricia A. Poglinco, Esq.
	

	 	 	 	Telephone: (212) 574-1200
	

	 	 	 	Telecopy: (212) 480-8421
	 
	 	 	 	 
	

	 	If to any other Person
who is then the
registered Holder:
	 
	 	 	 	 
	

	 	 	 	To the address of such Holder as it appears in the
stock transfer books of the Company

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

          (h) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder. Each Holder may assign their respective rights hereunder in the manner
and to the Persons as permitted under the Purchase Agreement.

          (i) Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

          (j) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and

B-11

 

enforced in accordance with the internal laws of the State of
Minnesota, without regard to the principles of conflicts of law thereof. Each
party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated
by this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the State of
Minnesota. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the State of Minnesota
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of the any of this Agreement), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such Proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such Proceeding by mailing
a copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding
to enforce any provisions of this Agreement, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.

          (k) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

          (l) Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not
be necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES TO FOLLOW]

B-12

 

     IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

	 	 	 	 	 
	 	WILSONS THE LEATHER EXPERTS INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Joel N. Waller 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF PURCHASER TO FOLLOW]

B-13

 

	 	 	 	 	 
	

	 	PENINSULA INVESTMENT PARTNERS, L.P.
	 
	 	 	 	 
	

	 	By:
	 	Peninsula Capital Appreciation, LLC,

its General Partner
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	 	 	Name: R. Ted Weschler
	

	 	 	 	Title: Managing Member

	 	 	 
	

	 	Address for Notices:
	 
	 	 
	

	 	404B East Main Street, 2nd Floor
	

	 	Charlottesville, Virginia 22902
	

	 	Attention: Mr. R. Ted Weschler
	

	 	Telephone: (434) 297-0811
	

	 	Telecopy: (434) 220-9321
	 
	 	 
	

	 	With a copy to:
	 
	 	 
	

	 	Seward & Kissel LLP
	

	 	One Battery Park Plaza
	

	 	New York, New York 10004
	

	 	Attention: Patricia A. Poglinco, Esq.
	

	 	Telephone: (212) 574-1200
	

	 	Telecopy: (212) 480-8421

B-14

 

	 	 	 	 	 
	

	 	QUAKER CAPITAL PARTNERS I, LP
	

	 	by Quaker Premier, L.P.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	 	 	Name:
	

	 	 	 	Title:

	 	 	 
	

	 	Address for Notices:
	 
	 	 
	

	 	c/o Quaker Capital Management
	

	 	401 Wood Street, Suite 1300
	

	 	Pittsburgh, Pennsylvania 15222
	

	 	Attention: Mark Schoeppner
	

	 	Telephone: (412) 281-1948
	

	 	Telecopy: (412) 281-0323
	 
	 	 
	

	 	With a copy to:
	 
	 	 
	

	 	Seward & Kissel LLP
	

	 	One Battery Park Plaza
	

	 	New York, New York 10004
	

	 	Attention: Patricia A. Poglinco, Esq.
	

	 	Telephone: (212) 574-1200
	

	 	Telecopy: (212) 480-8421

B-15

 

	 	 	 	 	 
	

	 	QUAKER CAPITAL PARTNERS II LP

By Quaker Premier II, L.P.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	 	 	Name:
	

	 	 	 	Title:

	 	 	 
	

	 	Address for Notices:
	 
	 	 
	

	 	c/o Quaker Capital Management
	

	 	401 Wood Street, Suite 1300
	

	 	Pittsburgh, Pennsylvania 15222
	

	 	Attention: Mark Schoeppner
	

	 	Telephone: (412) 281-1948
	

	 	Telecopy: (412) 281-0323
	 
	 	 
	

	 	With a copy to:
	 
	 	 
	

	 	Seward & Kissel LLP
	

	 	One Battery Park Plaza
	

	 	New York, New York 10004
	

	 	Attention: Patricia A. Poglinco, Esq.
	

	 	Telephone: (212) 574-1200
	

	 	Telecopy: (212) 480-8421

B-16

 

Annex A

Plan of Distribution

     The Selling Shareholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions through one or more underwriters,
broker-dealers or agents. If the shares of Common Stock are sold through
underwriters or broker-dealers, the selling shareholders will be responsible
for underwriting discounts on commissions or agent’s commissions. These sales
may be at fixed or negotiated prices. The Selling Shareholders may use any one
or more of the following methods when selling shares:

	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
	 
	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
	 
	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
	 
	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	•	 	privately negotiated transactions;
	 
	•	 	short sales;
	 
	•	 	broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per
share;
	 
	•	 	a combination of any such methods of sale; and
	 
	•	 	any other method permitted pursuant to applicable law.

     The Selling Shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

     Broker-dealers engaged by the Selling Shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Shareholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated. The Selling Shareholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.

     The Selling Shareholder may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if
they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell the shares of common stock from time to time
under this prospectus, or under an amendment to this

B-17

 

prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act of 1933 amending the list of Selling Shareholders to include the
pledgee, transferee or other successors in interest as Selling Stockholders
under this prospectus.

     The Selling Shareholders also may transfer and donate the shares of common
stock in other circumstances, in which case the transferees, donees, pledgees
or other successors in interest will be the selling beneficial owners for
purposes of this prospectus.

     The Selling Shareholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event,
any commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Shareholders
have informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute any of the shares subject
to this Registration Statement.

     The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Shareholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

B-18

 

EXHIBIT C

VOTING AGREEMENT

          VOTING AGREEMENT, dated as of April 25, 2004 (this “Agreement”), by and
among Wilsons The Leather Experts Inc., a Minnesota corporation (the
"Company”), and the stockholders of the Company listed on the signature pages
hereto under the heading “Stockholders” (each, a “Stockholder”, and
collectively, the “Stockholders”).

          WHEREAS, the Company and certain investors (each, an “Investor”, and
collectively, the “Investors”) have entered into a Common Stock and Warrant
Purchase Agreement, dated as of the date hereof (the “Securities Purchase
Agreement”), pursuant to which, among other things, the Company has agreed to
issue and sell to the Investors and the Investors have, severally and not
jointly, agreed to purchase (i) shares of the Company’s common stock, par value
$.01 per share (the “Common Stock") and (ii) warrants (the “Warrants") which
will be exercisable to purchase shares of Common Stock (as exercised
collectively, the “Warrant Shares");

          WHEREAS, as of the date hereof, the Stockholders own in the aggregate
2,490,666.80 shares of Common Stock, which represent in the aggregate (i)
approximately 12% of the total issued and outstanding Common Stock of the
Company, and (ii) approximately 12% of the total voting power of the Company;

          WHEREAS, as a condition to the willingness of the Investors to enter into
the Securities Purchase Agreement and to consummate the transactions
contemplated thereby (collectively, the “Transaction”), the Investors have
required that the Stockholders agree, and in order to induce the Investors to
enter into the Securities Purchase Agreement, the Stockholders have agreed, to
enter into this Agreement with respect to all the Common Stock now owned and
which may hereafter be acquired by the Stockholders at any time that this
Agreement is in effect (the “Shares”)and any other securities, if any, which
Stockholders are currently entitled to vote, or after the date hereof become
entitled to vote, at any meeting of the stockholders of the Company held at any
time that this Agreement is in effect (the “Other Securities”).

          NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:

ARTICLE I

VOTING AGREEMENT OF THE STOCKHOLDERS

          SECTION 1.01. Voting Agreement. The Stockholders hereby agree that at
any meeting of the stockholders of the Company, however called, and in any
action by written consent of the Company’s stockholders, the Stockholders shall
vote the Shares and the Other Securities: (a) in favor of the transactions
contemplated by the Securities Purchase Agreement and the documents that,
pursuant to the terms of the Securities Purchase Agreement, will be executed as
of the date hereof or the Closing Date pursuant to the Securities Purchase
Agreement (the “Transaction Documents”), copies of which have been provided to
each Stockholder, including the Company’s issuance of all of the Common Stock
and Warrants pursuant to the

C-1

 

Securities Purchase Agreement and other Transaction Documents, all in
accordance with the Company’s Articles of Incorporation and Bylaws and
applicable law and the rules and regulations of the Nasdaq National Market (the
"Principal Market”), and (iii) any amendment to the Company’s Articles of
Incorporation that may be necessary to issue the Securities; and (b) against
any proposal or any other corporate action or agreement that would result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Securities Purchase Agreement or which could
result in any of the conditions to the Company’s obligations under the
Securities Purchase Agreement not being fulfilled. The Stockholders
acknowledge receipt and review of a copy of the Securities Purchase Agreement
and the other Transaction Documents. Each Stockholder hereby revokes all
proxies and powers of attorney with respect to the Shares and the Other
Securities that such Stockholder may have heretofore appointed or granted, and
no subsequent proxy or power of attorney shall be given or written consent
executed (and if given or executed, shall not be effective) by such
Stockholder, with respect to the matters specified in Section 1.01 hereof. All
authority herein conferred or agreed to be conferred shall survive the death or
incapacity of each Stockholder and any obligation of each Stockholder under
this Agreement shall be binding upon the heirs, personal representatives,
successors and assigns of such Stockholder. The obligations of the
Stockholders under this Section 1.01 shall terminate immediately following the
earlier of the occurrence of the Stockholder Approval, as defined in the
Securities Purchase Agreement, or the termination of the Securities Purchase
Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

          Each Stockholder hereby represents and warrants, severally and not
jointly, to each of the Investors as follows:

          SECTION 2.01. Authority Relative to This Agreement. Such Stockholder has
all necessary power and authority to execute and deliver this Agreement, to
perform his, her or its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by such Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms, except (a) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws now or hereafter in effect relating to, or affecting
generally, the enforcement of creditors’ and other obligees’ rights, (b) where
the remedy of specific performance or other forms of equitable relief may be
subject to certain equitable defenses and principles and to the discretion of
the court before which the proceeding may be brought, and (c) where rights to
indemnity and contribution thereunder may be limited by applicable law and
public policy.

          SECTION 2.02. No Conflict. (a) The execution and delivery of this
Agreement by such Stockholder does not, and the performance of this Agreement
by such Stockholder shall not, (i) conflict with or violate any federal, state
or local law, statute, ordinance, rule, regulation, order, judgment or decree
applicable to such Stockholder or by which the Shares or the Other Securities
owned by such Stockholder are bound or affected or (ii) result in any breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default)

C-2

 

under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the Shares or the Other Securities owned by such
Stockholder pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which such Stockholder is a party or by which such Stockholder or the Shares
or Other Securities owned by such Stockholder is bound.

          (b) The execution and delivery of this Agreement by such Stockholder does
not, and the performance of this Agreement by such Stockholder shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental entity by such Stockholder, except for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the “1934 Act”).

          SECTION 2.03. Title to the Stock. As of the date hereof, except as
provided in Appendix A hereto, such Stockholder is the beneficial owner of the
number of shares of Common Stock set forth opposite his, her or its name on
Appendix A attached hereto, entitled to vote, without restriction, on all
matters brought before holders of capital stock of the Company, which Common
Stock represents on the date hereof the percentage of the outstanding stock and
voting power of the Company set forth on such Appendix. Such Common Stock are
all the securities of the Company owned, either of record or beneficially, by
such Stockholder. Such Common Stock is owned free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on such Stockholder’s voting rights, charges and other
encumbrances of any nature whatsoever. Such Stockholder has not appointed or
granted any proxy, which appointment or grant is still effective, with respect
to the Shares or Other Securities owned by such Stockholder regarding the
matters specified in Section 1.01 hereof. Except as provided in Annex A, such
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Article 1 hereof, sole power of disposition
and sole power to agree to all matters set forth in this Agreement.

ARTICLE III

COVENANTS

          SECTION 3.01. No Disposition or Encumbrance of Stock. (a) Each
Stockholder hereby covenants and agrees, solely with respect to himself,
herself or itself, that such Stockholder shall not offer or agree to sell,
transfer, tender, assign, hypothecate or otherwise dispose of, grant a proxy
(except a customary revocable proxy in connection with an annual meeting of
shareholders, which proxy does not involve the matters set forth in Section
1.01 hereof unless such proxy directs the proxy to vote in accordance with the
agreements of the Stockholders set forth in this Agreement) or power of
attorney with respect to, or create or permit to exist any security interest,
lien, claim, pledge, option, right of first refusal, agreement, limitation on
Stockholders’ voting rights, charge or other encumbrance of any nature
whatsoever (“Encumbrance”) with respect to the Shares or Other Securities,
directly or indirectly, or initiate, solicit or encourage any person to take
actions which could reasonably be expected to lead to the occurrence of any of
the foregoing.

C-3

 

          SECTION 3.02. Company Cooperation. The Company hereby covenants and
agrees that it will not, and each Stockholder irrevocably and unconditionally
acknowledges and agrees that the Company will not (and waives any rights
against the Company in relation thereto), to the extent permitted by law,
recognize any Encumbrance or agreement on any of the Shares or Other Securities
subject to this Agreement.

ARTICLE IV

MISCELLANEOUS

          SECTION 4.01. Termination. This Agreement (except for Article IV of this
Agreement) shall terminate upon the earlier of the date that each Stockholder
votes the Shares and the Other Securities in favor of the items set forth in
Section 1.01(a) hereof or the termination of the Securities Purchase Agreement.

          SECTION 4.02. Further Assurances. The Stockholders will execute and
deliver such further documents and instruments and take all further action as
may be reasonably necessary in order to consummate the transactions
contemplated hereby.

          SECTION 4.03. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that any Investor
(without being joined by any other Investor) shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or in
equity. Any Investor shall be entitled to its reasonable attorneys’ fees in
any action brought to enforce this Agreement in which it is the prevailing
party.

          SECTION 4.04. No Effect on Fiduciary Duties. Nothing herein stated shall
limit or otherwise affect the fiduciary duties of any stockholder as an officer
or director of the Company. This Agreement only applies to the voting of
shares and other securities of the Company by the Stockholders in their
capacities as Stockholders.

          SECTION 4.05. Limited Proxy. Notwithstanding anything stated in this
Agreement, each Stockholder will retain at all times the right to vote, or
authorize a proxy to vote, in such Stockholder’s or such proxy’s sole
discretion, on all matters other than those set forth in Section 1.01, which
are at any time and from time to time presented to the Company’s shareholders
generally.

          SECTION 4.06. Entire Agreement. This Agreement constitutes the entire
agreement among the Company and the Stockholders (other than the Securities
Purchase Agreement and the other Transaction Documents) with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, among the Company and the Stockholders with respect to
the subject matter hereof.

          SECTION 4.07. Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto; provided, however, that any
change that is adverse to the Investors shall require their consent.

C-4

 

          SECTION 4.08. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the terms of this Agreement remain as originally contemplated to the
fullest extent possible.

          SECTION 4.09. Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of Minnesota, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Minnesota or any other jurisdictions). The parties hereby agree that all
actions or proceedings arising directly or indirectly from or in connection
with this Agreement shall be subject to the non-exclusive jurisdiction of the
courts of the State of Minnesota or the United States District Court for the
District of Minnesota. The parties consent to the jurisdiction and venue of
the foregoing courts and consent that any process or notice of motion or other
application to any of said courts or a judge thereof may be served inside or
outside the State of Minnesota by registered mail, return receipt requested,
directed to the party being served at its address set forth in Section 4.11 or
on the signature pages to this Agreement (and service so made shall be deemed
complete three (3) days after the same has been posted as aforesaid) or by
personal service or in such other manner as may be permissible under the rules
of said courts. Each of the Company and each Stockholder irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action, or
proceeding brought in such a court and any claim that suit, action, or
proceeding has been brought in an inconvenient forum. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

          SECTION 4.10. Third-Party Beneficiaries. The Investors shall be intended
third party beneficiaries of this Agreement to the same extent as if they were
parties hereto, and shall be entitled to enforce the provisions hereof.

          SECTION 4.11 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, via
facsimile (which is confirmed) or sent by a nationally recognized overnight
courier service to the parties at the following addresses (or such other
address for a party as shall be specified by like notice):

C-5

 

	 	 	 
	

	 	If to the Company:
	 
	 	 
	

	 	Wilsons The Leather Experts Inc.
	

	 	7401 Boone Avenue North
	

	 	Brooklyn Park, MN 55428
	

	 	Telephone: (763) 391-4000
	

	 	Facsimile: (763) 391-4906
	

	 	Attention: Chief Financial Officer
	 
	 	 
	

	 	With a copy to:
	 
	 	 
	

	 	Faegre & Benson LLP
	

	 	2200 Wells Fargo Center
	

	 	90 South Seventh Street
	

	 	Minneapolis, MN 55402-3901
	

	 	Telephone: (612) 766-7000
	

	 	Facsimile: (612) 766-1600
	

	 	Attention: Philip S. Garon

          If to a Stockholder, to its address and facsimile number set forth on the
signature page hereto, with copies to such Stockholder’s representatives as set
forth thereon or to such other address and/or facsimile number and/or to the
attention of such other person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. The Company shall send copies of all notices hereunder to each of
the Investors.

          IN WITNESS WHEREOF, each Stockholder and the Company has duly executed
this Agreement.

	 	 	 	 	 
	 	THE COMPANY:

WILSONS THE LEATHER EXPERTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Joel N. Waller 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

C-6

 

[SIGNATURE PAGE TO VOTING AGREEMENT]

	 
	STOCKHOLDERS:

	 

	 

	
JOEL WALLER

	Address: 1201 Yale Place

	Minneapolis, MN 55403

	 

	
SHARON WALLER

	Address: 1201 Yale Place

	Minneapolis, MN 55403

	 	 	 	 	 
	

	 	THE WALLER FAMILY LIMITED PARTNERSHIP
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	Name:
	 	Joel Waller
	

	 	Title:
	 	General Partner
	

	 	Address: 1201 Yale Place
	

	 	Minneapolis, MN 55403
	 
	 	 	 	 
	

	 	
 
	

	 	DAVID ROGERS
	

	 	Address: 2208 E. Huntington Point Road
	

	 	Minnetonka Beach, MN 55391
	 
	 	 	 	 
	

	 	
 
	

	 	DIANE ROGERS
	

	 	Address: 2208 E. Huntington Point Road
	

	 	Minnetonka Beach, MN 55391

Voting Agreement-Individual Shareholders

C-7

 

APPENDIX A

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Voting
	 	 	 	 	 	 	Percentage of	 	Percentage
	 	 	Common Stock	 	Stock	 	of Stock
	Stockholder
	 	Owned
	 	Outstanding
	 	Outstanding

	Joel Waller
	 	 	977,504.30	 	 	 	4.7	 	 	 	4.7	 
	Sharon Waller
	 	 	1,500.00	 	 	 	*	 	 	 	*	 
	The Waller Family
Limited Partnership
	 	 	150,000.00	 	 	 	.7	 	 	 	.7	 
	David Rogers
	 	 	41,500.00	 	 	 	.2	 	 	 	.2	 
	David Rogers and
Diane Rogers,
Jointly
	 	 	1,320,162.50	 	 	 	6.3	 	 	 	6.3	 

C-8

 

EXHIBIT D

VOTING AGREEMENT

          VOTING AGREEMENT, dated as of April 25, 2004 (this “Agreement”), by and
among Wilsons The Leather Experts Inc., a Minnesota corporation (the
"Company”), and Peninsula Investment Partners, L.P. (the “Stockholder”).

          WHEREAS, the Company and certain, investors including the Stockholder
(each, an “Investor”, and collectively, the “Investors”) have entered into a
Common Stock and Warrant Purchase Agreement, dated as of the date hereof (the
"Securities Purchase Agreement”), pursuant to which, among other things, the
Company has agreed to issue and sell to the Investors and the Investors have,
severally and not jointly, agreed to purchase (i) shares of the Company’s
common stock, par value $.01 per share (the “Common Stock") and (ii) warrants
(the “Warrants") which will be exercisable to purchase shares of Common Stock
(as exercised collectively, the “Warrant Shares");

          WHEREAS, as of the date hereof, the Stockholder owns the aggregate number
of shares of Common Stock set forth in Annex A, which represent (i)
approximately 13% of the total issued and outstanding Common Stock of the
Company, and (ii) approximately 13% of the total voting power of the Company;

          WHEREAS, as a condition to the willingness of the Company to enter into
the Securities Purchase Agreement and to consummate the transactions
contemplated thereby (collectively, the “Transaction”), the Company has
required that the Stockholder agree, and in order to induce the Company to
enter into the Securities Purchase Agreement, the Stockholder has agreed, to
enter into this Agreement with respect to all the Common Stock now owned and
which may hereafter be acquired by the Stockholder at any time that this
Agreement is in effect (the “Shares”)and any other securities, if any, which
the Stockholder is currently entitled to vote, or after the date hereof becomes
entitled to vote, at any meeting of the stockholders of the Company held at any
time that this Agreement is in effect (the “Other Securities”).

          NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:

ARTICLE I

VOTING AGREEMENT OF THE STOCKHOLDER

     SECTION 1.01. Voting Agreement. The Stockholder hereby agrees that at
any meeting of the stockholders of the Company, however called, and in any
action by written consent of the Company’s stockholders, the Stockholder shall
vote the Shares and the Other Securities: (a) in favor of the transactions
contemplated by the Securities Purchase Agreement and the documents that,
pursuant to the terms of the Securities Purchase Agreement, will be executed as
of the date hereof or the Closing Date pursuant to the Securities Purchase
Agreement (the “Transaction Documents”), copies of which have been provided to
the Stockholder, including the Company’s issuance of all of the Common Stock
and Warrants pursuant to the Securities Purchase Agreement and other
Transaction Documents, and (iii) any amendment to

D-1

 

the Company’s Articles of Incorporation that may be necessary to issue the
Securities; and (b) against any proposal or any other corporate action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the
Securities Purchase Agreement or which could result in any of the conditions to
the Company’s obligations under the Securities Purchase Agreement not being
fulfilled. The Stockholder acknowledges receipt and review of a copy of the
Securities Purchase Agreement and the other Transaction Documents. The
Stockholder hereby revokes all proxies and powers of attorney with respect to
the Shares and the Other Securities that the Stockholder may have heretofore
appointed or granted, and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by the Stockholder, with respect to the matters specified in Section
1.01 hereof. Any obligation of the Stockholder under this Agreement shall be
binding upon the successors and assigns of the Stockholder. The obligations of
the Stockholder under this Section 1.01 shall terminate immediately following
the earlier of the occurrence of the Stockholder Approval, as defined in the
Securities Purchase Agreement, or the termination of the Securities Purchase
Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER

          The Stockholder hereby represents and warrants to each of the Investors as
follows:

          SECTION 2.01. Authority Relative to This Agreement. The Stockholder has
all necessary power and authority, including partnership power and authority,
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Stockholder and constitutes a legal, valid
and binding obligation of the Stockholder, enforceable against the Stockholder
in accordance with its terms, except (a) as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws now or hereafter in effect relating to, or affecting
generally, the enforcement of creditors’ and other obligees’ rights, (b) where
the remedy of specific performance or other forms of equitable relief may be
subject to certain equitable defenses and principles and to the discretion of
the court before which the proceeding may be brought, and (c) where rights to
indemnity and contribution thereunder may be limited by applicable law and
public policy.

          SECTION 2.02. No Conflict. (a) The execution and delivery of this
Agreement by the Stockholder does not, and the performance of this Agreement by
the Stockholder shall not, (i) conflict with or violate the partnership
agreement of the Stockholder or any federal, state or local law, statute,
ordinance, rule, regulation, order, judgment or decree applicable to the
Stockholder or by which the Shares or the Other Securities owned by the
Stockholder are bound or affected or (ii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the Shares or the Other Securities owned by the
Stockholder pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or

D-2

 

obligation to which the Stockholder is a party or by which the Stockholder
or the Shares or Other Securities owned by the Stockholder is bound.

          (b) The execution and delivery of this Agreement by the Stockholder does
not, and the performance of this Agreement by the Stockholder shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental entity by the Stockholder, except for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the “1934 Act”).

          SECTION 2.03. Title to the Stock. As of the date hereof, except as
provided in Appendix A hereto, the Stockholder is the beneficial owner of the
number of shares of Common Stock set forth opposite its name on Appendix A
attached hereto, entitled to vote, without restriction, on all matters brought
before holders of capital stock of the Company, which Common Stock represents
on the date hereof the percentage of the outstanding stock and voting power of
the Company set forth on such Appendix. Such Common Stock are all the
securities of the Company owned, either of record or beneficially, by the
Stockholder. Such Common Stock is owned free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Stockholder’s voting rights, charges and other
encumbrances of any nature whatsoever. The Stockholder has not appointed or
granted any proxy, which appointment or grant is still effective, with respect
to the Shares or Other Securities owned by the Stockholder regarding the
matters specified in Section 1.01 hereof. Except as provided in Annex A, the
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Article 1 hereof, sole power of disposition
and sole power to agree to all matters set forth in this Agreement.

ARTICLE III

COVENANTS

          SECTION 3.01. No Disposition or Encumbrance of Stock. (a) The
Stockholder hereby covenants and agrees that the Stockholder shall not offer or
agree to sell, transfer, tender, assign, hypothecate or otherwise dispose of,
grant a proxy (except a customary revocable proxy in connection with an annual
meeting of shareholders, which proxy does not involve the matters set forth in
Section 1.01 hereof unless such proxy directs the proxy to vote in accordance
with the agreements of the Stockholder set forth in this Agreement) or power of
attorney with respect to, or create or permit to exist any security interest,
lien, claim, pledge, option, right of first refusal, agreement, limitation on
the Stockholder’s voting rights, charge or other encumbrance of any nature
whatsoever with respect to the Shares or Other Securities, directly or
indirectly, or initiate, solicit or encourage any person to take actions which
could reasonably be expected to lead to the occurrence of any of the foregoing.

ARTICLE IV

MISCELLANEOUS

          SECTION 4.01. Termination. This Agreement (except for Article IV of this
Agreement) shall terminate upon the earlier of the date that the Stockholder
votes the Shares and

D-3

 

the Other Securities in favor of the items set forth in Section 1.01(a)
hereof or the termination of the Securities Purchase Agreement.

          SECTION 4.02. Further Assurances. The Stockholder will execute and
deliver such further documents and instruments and take all further action as
may be reasonably necessary in order to consummate the transactions
contemplated hereby.

          SECTION 4.03. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the Company shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity. The Company shall be entitled to its reasonable
attorneys’ fees in any action brought to enforce this Agreement in which it is
the prevailing party.

          SECTION 4.04. Limited Proxy. Notwithstanding anything stated in this
Agreement, the Stockholder will retain at all times the right to vote, or
authorize a proxy to vote, in the Stockholder’s or such proxy’s sole
discretion, on all matters other than those set forth in Section 1.01, which
are at any time and from time to time presented to the Company’s shareholders
generally.

          SECTION 4.05. Entire Agreement. This Agreement constitutes the entire
agreement among the Company and the Stockholder (other than the Securities
Purchase Agreement and the other Transaction Documents) with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, among the Company and the Stockholder with respect to
the subject matter hereof.

          SECTION 4.06. Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.

          SECTION 4.07. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the terms of this Agreement remain as
originally contemplated to the fullest extent possible.

          SECTION 4.08. Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of Minnesota, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Minnesota or any other jurisdictions). The parties hereby agree that all
actions or proceedings arising directly or indirectly from or in connection
with this Agreement shall be subject to the non-exclusive jurisdiction of the
courts of the State of Minnesota or the United States District Court for the
District of Minnesota. The parties consent to the jurisdiction and venue of
the foregoing courts and consent that any process or notice of

D-4

 

motion or other application to any of said courts or a judge thereof may
be served inside or outside the State of Minnesota by registered mail, return
receipt requested, directed to the party being served at its address set forth
in Section 4.09 or on the signature pages to this Agreement (and service so
made shall be deemed complete three (3) days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts. Each of the Company and the Stockholder
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit,
action, or proceeding brought in such a court and any claim that suit, action,
or proceeding has been brought in an inconvenient forum. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

          SECTION 4.09. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, via
facsimile (which is confirmed) or sent by a nationally recognized overnight
courier service to the parties at the following addresses (or such other
address for a party as shall be specified by like notice):

	 	 	 	 	 
	 	 	If to the Company:
	 
	 	 	 	 
	

	 	 	 	Wilsons The Leather Experts Inc.

7401 Boone Avenue North

Brooklyn Park, MN 55428

Telephone: (763) 391-4000

Facsimile: (763) 391-4906

Attention: Chief Financial Officer
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	

	 	 	 	Faegre & Benson LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, MN 55402-3901

Telephone: (612) 766-7000

Facsimile: (612) 766-1600

Attention: Philip S. Garon

          If to the Stockholder, to its address and facsimile number set forth on
the signature page hereto, with copies to the Stockholder’s representatives as
set forth thereon or to such other address and/or facsimile number and/or to
the attention of such other person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change.

D-5

 

     IN WITNESS WHEREOF, the Stockholder and the Company has duly executed this
Agreement.

	 	 	 	 	 
	 	THE COMPANY:

WILSONS THE LEATHER EXPERTS, INC.

 

 	 
	 	By:  	 	 
	 	 	Name:  	Joel N. Waller 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	 	 
	  	 	 
	 	 	 
	 	 	 
	 

Voting Agreement — Peninsula

D-6

 

[SIGNATURE PAGE TO VOTING AGREEMENT]

	 	 	 	 	 
	 	STOCKHOLDER:

PENINSULA INVESTMENT PARTNERS, L.P.

 	 
	 	By:  	Peninsula Capital Appreciation, LLC, its General Partner	 
	 
	 	By:  	 	 
	 	 	Name:  	R. Ted Weschler 	 
	 	 	Title:  	Managing Member 	 
	 
	 

404B East Main Street, 2nd Floor

Charlottesville, Virginia 22902

Attention: Mr. R. Ted Weschler

Telephone: (434) 297-0811

Telecopy: (434) 220-9321

With a copy to:

Seward & Kissel LLP

One Battery Park Plaza

New York, New York 10004A

Attention: Patricia A. Poglinco, Esq.

Telephone: (212) 574-1200

Telecopy: (212) 480-8421

D-7

 

APPENDIX A

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Voting Percentage
	 	 	Common Stock	 	Percentage of Stock	 	of Stock
	Stockholder
	 	Owned
	 	Outstanding
	 	Outstanding

	Peninsula Investment Partners, L.P.
	 	 	2,667,000	 	 	 	12.8	%	 	 	12.8	%

D-8

 

EXHIBIT E

     1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Minnesota and has the requisite
corporate power to own and use its properties and assets and to carry on its
business as described in the SEC reports.

     2. The Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder.

     3. The execution and delivery of each of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
thereby prior to the Closing have been duly authorized by all necessary
corporate action on the part of the Company.

     4. Each of the Transaction Documents have been duly executed and delivered
by the Company and constitute valid and binding obligations of the Company
enforceable against the Company in accordance with its terms.

     5. The Initial Warrants are duly authorized, validly issued and
outstanding, fully paid and nonassessable. The Warrant Shares issuable upon
exercise of the Initial Warrants have been reserved for issuance based upon the
initial Exercise Price of the Initial Warrants and, when issued upon exercise
of the Initial Warrants in accordance with their terms, will be duly
authorized, validly issued and outstanding, fully paid and nonassessable.

E-1

 

EXHIBIT F

     1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Minnesota and has the requisite
corporate power and authority to own and use its properties and assets and to
carry on its business as described in the SEC Reports.

     2. The Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder.

     3. The execution and delivery of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part of the
Company. Either the Stockholder Approval has been obtained or no such approval
is required under the rules of the National Association of Securities Dealers,
Inc. in order for the Company to consummate the transactions contemplated by
the Transaction Documents.

     4. Each of the Transaction Documents has been duly executed and delivered
by the Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.

     5. Except for any mandatory prepayment of the Senior Notes due August 15,
2004 that would result from any change in control of the Company resulting
from the consummation of the transactions contemplated by the Transaction
Documents, the execution, delivery and performance by the Company of the
Transaction Documents and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) violate any provision of the
Company’s articles of incorporation or bylaws, or (ii) constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any of the
Material Contracts, or (iii) result in a violation of any law, rule or
regulation of the United States or the State of Minnesota applicable to the
Company or of any order, judgment, injunction, decree or other restriction of
any court or governmental authority known to us that names the Company and is
specifically directed to it or its property; except, in the case of each of
clauses (ii) and (iii), such as would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.

     6. Except for consents, waivers, authorizations, orders, notices, filings
and registrations contemplated by the Registration Rights Agreement, the
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any federal
or Minnesota State governmental authority in connection with the execution,
delivery and performance by the Company of the Transaction Documents.

     7. The Shares and the Warrants that are required to be issued at the
Closing, when issued and paid for in accordance with the terms of the Purchase
Agreement, will be duly authorized, validly issued and outstanding, fully paid
and nonassessable. The Warrant Shares issuable upon exercise of the Warrants
have been reserved for issuance based upon the initial Warrant Purchase Price
and, when issued upon exercise of the Warrants in accordance with their terms,
will be duly authorized, validly issued and outstanding, fully paid and
nonassessable.

F-1

 

     8. The authorized capital stock of the Company consists of (i) 150,000,000
shares of Common Stock, and (ii) 10,000,000 shares of preferred stock, par
value $0.01 per share. No
securities of the Company will be entitled to preemptive or similar rights
under the Company’s articles of incorporation or bylaws or under the Minnesota
Business Corporation Act or under any of the Material Contracts as a result of
the issuance and sale of the Shares, the Warrants or the Warrant Shares.

     9. No registration under the Securities Act is required for the offer and
sale of the Shares, the issuance of the Warrants or the offer of the Warrant
Shares by the Company to the Purchasers as contemplated by the Transaction
Documents, subject to the timely filing by the Company of a Form D pursuant to
Regulation D promulgated by the Commission under the Securities Act.

     10. To our knowledge there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or overtly threatened in writing
against the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which
challenges the legality, validity or enforceability of any of the Transaction
Documents.

F-2

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