Document:

Exhibit 4.2

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE COMMON STOCK INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION EVIDENCED BY (IF REQUESTED BY THE COMPANY) AN OPINION OF COUNSEL TO THE HOLDER, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.

 

THE PRINCIPAL AMOUNT OF THIS NOTE, AND INTEREST IN RESPECT THEREOF, ARE SUBORDINATED IN RIGHT OF PAYMENT TO SENIOR DEBT.

 

THIS NOTE IS SUBJECT TO CERTAIN SET OFF PROVISIONS SET FORTH IN A STOCK PURCHASE AGREEMENT DATED AS OF JULY 15, 2013 AMONG THE COMPANY, THE PERSON TO WHOM THIS NOTE WAS ORIGINALLY ISSUED, AND CERTAIN OTHER PERSONS.  THE COMPANY WILL FURNISH A COPY OF THESE SET OFF PROVISIONS TO THE HOLDER HEREOF, WITHOUT CHARGE, UPON WRITTEN REQUEST.

 

FORM OF SUBORDINATED CONVERTIBLE NOTE

 

	
$[        ]
    	
[            ],   2015
    

 

WHEREAS, pursuant to that certain Stock Purchase Agreement, dated July 15, 2013, by and among the Parties (as defined below) and certain other persons (the “Stock Purchase Agreement”), the Company (as defined below) executed that certain Subordinated Convertible Note, dated September 30, 2013, in favor of the Holder (as defined below) in the original principal amount of [             ] Dollars ($[         ]) (the “Original Note”);

 

WHEREAS, pursuant to that certain Rollover Agreement, dated September [    ], 2015, by and among the Parties and certain other persons (the “Rollover Agreement”), a portion of the Original Note has been repaid in cash, a portion has been repaid in Common Stock (as defined below) and the balance is to be repaid through issuance of this Subordinated Convertible Note (this “Note”); and

 

WHEREAS, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Original Note is hereby amended and restated in all respects by this Note.

 

FOR VALUE RECEIVED, the undersigned, Joe’s Jeans, Inc., a Delaware corporation (the “Company” and, together with Holder, the “Parties”), hereby unconditionally promises to pay to [                     ] (“Holder”), in lawful money of the United States of America, the principal sum of [             ] Dollars ($[        ])(1), together with interest on the unpaid principal balance thereon from the date set out above (the “Issuance Date”) until the earlier to occur of the Conversion Date or the date such principal amount is paid in full as provided herein.

 

 

This Note is one of an issue of Subordinated Convertible Notes issued on the date hereof and has been executed and delivered pursuant to the terms of the Rollover Agreement (including any PIK Notes issued thereon, collectively, the “Notes”, and such other Subordinated Convertible Notes, the “Other Notes”).  Undefined capitalized terms herein are defined in the Stock Purchase Agreement.  The Company and the Holder acknowledge and agree that the payment of all or any portion of the outstanding principal balance of this Note and all accrued interest hereon, including but not limited to in connection with any Event of Default but excluding any payment in connection with any elective conversion of this Note pursuant to Section 2, shall be pari passu in right of payment and in all other respects to the Other Notes.  In furtherance of the foregoing, the Company agrees that it shall not make any payment of interest under this Note (whether at maturity or otherwise, but excluding any payment pursuant to Section 2) unless it shall concurrently make a payment of interest, as applicable, under each of the Other Notes in the same proportionate amount as the accrued but unpaid interest is paid under this Note.

 

1.                                      Payments

 

1.1                               Principal and Interest.

 

(a)                                 Interest shall accrue on the unpaid principal balance of this Note at a rate of 6.50%(2) per annum (the “Interest Rate”), which shall be payable 50% in cash and 50% in PIK Notes (“PIK Interest”); provided, however, that the Company may, in its sole discretion, elect to pay 100% of such interest in cash.

 

(b)                                 When the Company issues additional Notes (“PIK Notes”) to the Holder as payment of PIK Interest, such PIK Notes shall be equal to the amount of PIK Interest that has accrued in respect of the Notes since the last interest payment date up to the relevant interest payment date.  The Notes issued on the Issuance Date and any such PIK Notes shall be treated as a single class for all purposes under this Note, including with respect to the accrual of interest.  In the event that PIK Interest due to the Holder is less than $1.00, any PIK Interest less than $1.00 shall be rounded up to the nearest $1.00.

 

(c)                                  Interest shall accrue at the Interest Rate computed on the basis of a 365/366 day year on the unpaid principal amount of this Note outstanding from time to time from the Issuance Date until the earlier to occur of the Conversion Date or the date such principal amount is paid in full as provided in Section 1.1(a).  The Company shall

 

(1)  Note to Draft: To be the amount equal to the percentage of principal and unpaid interest set forth on Schedule A to the Rollover Agreement.

(2)  Note to Draft: Interest rate for all Noteholders other than Fireman to be 6.5%.  Interest rate for FCP Note to initially be 6.5% with a step up to 7% as of October 1, 2016.

 

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pay to the Holder all accrued and unpaid interest in arrears for each calendar quarter on the first day of each April, July, October and January, beginning [            ], 2016 and ending [October 1], 20[20](3).  Thereafter, the Company shall pay to the Holder all accrued and unpaid interest on the Maturity Date (as defined below).  Notwithstanding the foregoing, if the parties’ professional tax advisors agree that quarterly payments may be made subsequent to [          ], 20[   ], without causing this Note to be an applicable high yield debt obligation, as defined in section 163(i) of the Internal Revenue Code of 1986, as amended, then such interest payments shall be on a quarterly basis.  Any accrued interest which for any reason has not theretofore been paid shall be paid in full on the date on which the final principal payment on this Note is made.  Notwithstanding the first paragraph of this Note or the first sentence of this Section 1.1(c), during any period in which an Event of Default has occurred and is continuing, the Company shall pay interest on the unpaid principal amount of this Note at a rate per annum equal to [·]%(4) (the “Default Rate”).

 

1.2                               Payment of Principal on Note.

 

(a)                                 The Company shall pay the principal amount then outstanding of this Note to the Holder on [          ], 20[   ](5) (the “Maturity Date”), together with all accrued and unpaid interest in the manner set forth below, unless such amounts are paid or payable sooner pursuant to the provisions of this Note.  On the Maturity Date, the Company shall pay to the Holder cash in an amount equal to the entire then outstanding principal balance of this Note plus all accrued but unpaid interest on the Note.

 

For the avoidance of doubt, notwithstanding anything to the contrary herein, this Note shall remain outstanding so long as either (1) any principal amount of this Note (together with any accrued and unpaid interest thereon) remains outstanding or (2) the Holder has the right to convert any Conversion Amount pursuant to this Note.

 

(b)                                 The Company shall provide notice of the Maturity Date to the Holder no later than 30 days prior to the Maturity Date, which notice shall be deemed to have been received (i) on the date of delivery if delivered personally, or if by facsimile, upon written confirmation of receipt by facsimile, e mail or otherwise, (ii) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (iii) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. Prior to delivering such notice, the Company shall be required to confirm the notice information of the Holder.

 

(c)                                  Except as provided in (i) the final paragraph of Section 3.3 and (ii) Section 5, the Company shall have the right to prepay this Note at any time.

 

(3)  Note to Draft: Bracketed date to be updated based on the date the Note is issued.

(4)  Note to Draft: To be 2% above the applicable interest rate.

(5)  Note to Draft: To be the date that is five and a half years following the date of the Note.

 

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1.3                               Manner of Payment.  Principal, interest, and all other amounts due under this Note will be payable in cash, except as provided in Section 1.1, in U.S. dollars, to Holder by wire transfer in immediately available funds to an account designated by Holder in writing.  If any applicable law (as determined by the Company) requires the deduction of withholding of any tax from any payment or in connection with a conversion of the Note, then the Company shall be entitled to make such deduction and timely pay the full amount deducted to the relevant governmental authority and any amount so deducted and paid to the relevant governmental authority shall be treated as a payment to the Holder.  If any payment of principal or interest on this Note is due on a day that is not a Business Day, such payment will be due on the next succeeding Business Day, and such extension of time will be taken into account in calculating the amount of interest payable under this Note.  “Business Day” means any day other than a Saturday, Sunday or legal holiday in the State of California.  The Company may, to the extent permissible under Section 1.2(h)(i) and Section 9.7 of the Stock Purchase Agreement, set off against the principal amount outstanding under this Note any amounts that Holder is determined to be liable to the Company in connection with the Transactions under the Stock Purchase Agreement which have been determined: (i) by the written agreement between the Holder and the Company; or (ii) by any other means to which the Holder and the Company shall agree which shall include the final judgment or decree of a court when the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined; provided, that such set off shall be treated as a payment of principal under this Note and shall be subject to Article 4.  In the event of such setoff, the outstanding principal amount of this Note shall be set-off until the aggregate amount of the set-off equals the amounts for which setoff is available from the Holder pursuant to the Stock Purchase Agreement; provided that in all cases the foregoing shall be subject as to indemnification claims under Section 9.7 to the limitations in Article 9 of the Stock Purchase Agreement, including those set forth in Section 9.1 of the Stock Purchase Agreement.  Any accrued but unpaid interest on the principal amount so offset will be cancelled, and, in the event any such interest on such principal amount so offset has been previously paid to Holder, such interest shall be deducted by the Company from the next interest payments otherwise due Holder.  This Right of Setoff is without prejudice and in addition to any other right to which Holder is at any time otherwise entitled under this Note (whether by operation of Law, Contract, or otherwise).  Within 10 days after the final determination of any amounts hereunder available for set off, the Holder shall surrender this Note to the Company for cancellation in exchange for a replacement Note reflecting the correct principal amount after taking into account the set off.

 

1.4                               Payment of Certain Taxes.  The Company shall promptly reimburse the Holder for any interest payable by the Holder pursuant to Section 453A of the Internal Revenue Code of 1986, as amended (the “Code”) (and any corresponding state and local taxes) on the deferred tax liability (as defined in Section 453A(c)(3) of the Code) attributable to the transactions contemplated by the Stock Purchase Agreement (the “Section 453A Interest Charges”).  The amounts owed by the Company to the Holder pursuant to the preceding sentence shall be treated as additional sales proceeds and shall be payable at such time as the Section 453A Interest Charges are actually payable by the Holder to the Internal Revenue Service or other taxing authority (the “Section 453A Payment Date”) and shall be increased by the taxes payable by the Holder with respect to the receipt of the Section 453A Interest Charges from the Company (such

 

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aggregate amount shall be referred to as the “Section 453A Payment Amount”).  Such calculations shall be based on the assumptions that the Holder (x) has received no other installment notes in the taxable year including the Closing Date, and (y) is subject to income tax at the highest marginal federal, state and local capital gains tax rates applicable to the Holder (including, to the extent applicable to the Holder, the tax imposed under Section 1411 of the Code on net investment income), absent the Holder providing the Company with documentation that the Holder is subject to the federal alternative minimum tax.  An example of such calculations, solely for illustrative purposes, is attached hereto as Exhibit II.  The Holder shall provide the Company with Holder’s tax basis and gain percentage recognized on the transaction in order to calculate the Section 453A Payment Amount.  Within ten (10) days after the Company receives written notice from the Holder of the Section 453A Payment Date and the Section 453A Payment Amount, the Company shall pay such Section 453A Payment Amount to the Holder in cash.

 

2.                                      Conversion of Notes. This Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined below) or cash or a combination thereof at the option of the Company, on the terms and conditions set forth in this Section 2.

 

2.1                               Conversion Right. At any time on or after the date hereof, the Holder shall be entitled to convert all but not less than all of the Conversion Amount into the Settlement Amount determined in accordance with Section 2.3.  Subject to Section 4, all accrued but unpaid interest on the Note shall be paid in cash at the time of conversion.  In the event that the Company is prohibited from paying such interest in cash pursuant to the provisions of its Senior Debt, it shall pay such interest in Common Stock based upon the then Market Price.  The Company shall pay any and all transfer, stamp, issuance and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of the Conversion Amount.

 

2.2                               Mechanics of Conversion.  To convert any Conversion Amount into the Settlement Amount as provided in this Note, the Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., Los Angeles time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company (such date, the “Conversion Date”).  Interest on the Note shall cease to accrue on the Conversion Date.  Within three (3) Trading Days following a conversion of this Note as aforesaid, the Holder shall surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated by Section 6.3).  In the event of a Physical Settlement or Combination Settlement, on or before the second Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a Settlement Notice as described in Section 2.3(b), of receipt of such Conversion Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”), if applicable.  On or before the third Trading Day following the date of receipt of a Conversion Notice, the Company shall, to the extent any such Settlement Amount is to be paid in shares of Common Stock, either (a) credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit/Withdrawal at Custodian system or (b) if required, issue and deliver (via reputable overnight courier) to the address as specified in the Company instructions, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled.

 

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2.3                               Settlement Upon Conversion.  If a Holder converts this Note, the Company shall pay or deliver to such Holder, as the case may be, in respect of the Conversion Amount of Notes being converted, solely cash, solely shares of Common Stock (other than the payment of accrued interest, which shall be paid in cash except as contemplated by Section 2.1) or a combination of cash and Common Stock (the “Settlement Amount”), at the Company’s election, as set forth in this Section 2.3.

 

(a)                                 The Company shall pay or deliver, as the case may be, the Settlement Amount on the third Trading Day immediately following the date of the Conversion Notice; provided, that;

 

(i)                                     if the Company elects to fulfill its conversion obligation, in whole or in part, in shares of Common Stock, the Company shall deliver such Common Stock on the third Trading Day immediately following the Conversion Date in accordance with Section 2.2;

 

(ii)                                  if the Company elects to fulfill its conversion obligation, in whole or in part, in cash, the Company shall pay such cash as soon as possible but no later than the twentieth Trading Day immediately following the Conversion Date; and

 

(iii)                               the Company shall use its commercially reasonable effort to pay in cash all accrued but unpaid interest as soon as possible but no later than the twentieth Trading Day immediately following the Conversion Date.

 

For the avoidance of doubt, notwithstanding anything to the contrary herein, in the event that for any reason (including due to the provisions of Section 4 hereof that restrict making of cash payments in certain circumstances) the Company is not able to pay all or any portion of the Notes in cash, then the Company shall be required to fulfill its conversion obligations in shares of Common Stock for any portion that the Company cannot pay in cash.

 

(b)                                 The Company shall deliver a notice (each, a “Settlement Notice”) of the relevant Settlement Amount not later than the Close of Business on the second Trading Day following the related Conversion Date.  Each such Settlement Notice shall specify whether the Company shall satisfy its conversion obligation by (i) delivering shares of Common Stock (“Physical Settlement”), (ii) paying solely cash (“Cash Settlement”) or (iii) paying and delivering, as the case may be, a combination of cash and shares of Common Stock (“Combination Settlement”). In the case of an election that provides for Combination Settlement, the relevant Settlement Notice shall indicate the Specified Dollar Amount.

 

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(c)                                  The Settlement Amount in respect of any conversion shall be computed as follows:

 

(i)                                     if the Company elects to satisfy its conversion obligation in respect of such conversion through Physical Settlement, the Company will deliver to the converting Holder a number of shares of Common Stock equal to (A) the entire Conversion Amount, divided by (B) the Market Price;

 

(ii)                                  if the Company elects to satisfy its conversion obligation in respect of such conversion through Cash Settlement, the Company shall pay to the converting Holder cash in an amount equal to the entire Conversion Amount; and

 

(iii)                               subject to Section 2.1, if the Company elects to satisfy its conversion obligation in respect of such conversion through Combination Settlement, the Company shall pay and deliver to the converting Holder, as the case may be, a Settlement Amount equal to: (A) a number of shares of Common Stock as calculated pursuant to Section 2.3(c)(i) above assuming that a portion of the Conversion Amount designated by the Company is the Conversion Amount being settled by Physical Settlement and (B) cash equal to the amount of cash to be paid pursuant to Section 2.3(c)(ii) above assuming that the remaining portion of the Conversion Amount is the Conversion Amount being settled by Cash Settlement.

 

(d)                                 Notwithstanding the foregoing, the Company will not issue fractional shares of Common Stock as part of the Settlement Amount due with respect to any converted Note in respect of which shares of Common Stock are deliverable. Instead, if any such Settlement Amount includes a fraction of a share of Common Stock, the Company will, in lieu of delivering such fraction of a share of Common Stock, pay an amount of cash equal to the product of (i) such fraction of a share and (ii) the Market Price of the Common Stock, subject in each case to the following paragraph.

 

(e)                                  If a Holder surrenders more than one Note for conversion on a single Conversion Date, the Company will calculate the amount of cash and the number of shares of Common Stock due with respect to such Notes as if such Holder had surrendered for conversion one Note having an aggregate principal amount equal to the sum of the principal amounts of each of the Notes surrendered for conversion by such Holder on such Conversion Date.

 

2.4                               Rights Upon Issuance Of Purchase Rights And Other Corporate Events.

 

(a)                                 Purchase Rights. In addition to any adjustments pursuant to Section 2.5 below, if at any time the Company grants, issues or sells any Options, Convertible Notes or rights to purchase stock, warrants, securities or other property pro rata to all of the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held

 

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the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

(b)                                 Other Corporate Events. In addition to and not in substitution for any other rights hereunder, (i) prior to the consummation of any Corporate Event pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets in exchange for shares of Common Stock, the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion price for such consideration commensurate with the Conversion Price or (ii) prior to the consummation of any Corporate Event pursuant to which holders of shares of Common Stock are entitled to receive a distribution with respect to securities or other assets and, immediately following such distribution, such shares of Common Stock remain outstanding, the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note).  The provisions of this Section 2.4(b) shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion of this Note.  Upon any Corporate Event, this Note shall continue in full force and effect and the terms hereof shall be applicable to the securities and assets receivable on the exercise of this Note after the consummation of such Corporate Event and shall be binding upon the Company, or upon a successor entity resulting from such Corporate Event regardless of whether or not such successor entity shall have expressly assumed the terms of this Note.

 

2.5                               Rights Upon Issuance of Other Securities.

 

(a)                                 Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section 2.4, if the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced.  Without limiting any provision of Section 2.5, if the Company at any time on or after the Issuance Date (other than pursuant

 

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to the Reverse Stock Split) combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased.  Any adjustment pursuant to this Section 2.5 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 2.5 occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.

 

(b)                                 Other Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of Sections 2.4 or 2.5 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder.

 

2.6                               Notices.

 

(a)                                 Immediately upon any adjustment of the Conversion Price, the Company shall send written notice thereof to the Holder, setting forth in reasonable detail and certifying the calculation of such adjustment.

 

(b)                                 The Company shall send written notice to the Holder at least 10 Business Days prior to the date on which the Company closes its books or takes a record (i) with respect to any dividend or distribution upon the Common Stock, (ii) with respect to any pro rata subscription offer to holders of Common Stock or (iii) for determining rights to vote with respect to any Corporate Event, dissolution or liquidation.

 

(c)                                  The Company shall also give at least ten (10) Business Days prior written notice of the date on which any Corporate Event, dissolution or liquidation shall take place.

 

3.                                      Defaults

 

3.1                               Events of Default.  The occurrence of any one or more of the following events with respect to the Company will constitute an event of default hereunder (“Event of Default”):

 

(a)                                 If the Company fails to pay when due any payment of principal or interest on this Note or any Other Note and such failure continues for ten (10) days after the original due date for such payment;

 

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(b)                                 If the Company, under the laws of any jurisdiction: (i) is dissolved, liquidated or wound up, or otherwise ceases doing business; (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official; (iv) makes a general assignment for the benefit of its creditors; (v) institutes a proceeding, or has an involuntary proceeding instituted or filed against it (or has any writ, judgment, warrant of attachment, execution or similar process issued or levied against a substantial part of the Company’s properties) that is not dismissed, released or fully bonded within 45 days thereafter, relating to insolvency, bankruptcy, reorganization, liquidation, receivership, dissolution, winding-up, relief of debtors or any other similar relief under any bankruptcy, insolvency, or other similar Law affecting creditors’ rights; or (vi) takes any action to effectuate or authorize any of the foregoing;

 

(c)                                  the failure to make any payment when due (giving effect to any applicable grace periods and any extensions thereof) on the principal amount of any Indebtedness of the Company and its subsidiaries, or any interest thereon, if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness, whether such Indebtedness now exists, or is created after the date of this Note, in default for failure to pay principal at final maturity or which has been accelerated, aggregates $10.0 million or more at any time; or

 

(d)                                 the Company breaches any covenant or other term or condition in this Note or any Other Note, and such breach is not cured within 30 days after the Holder notifies the Company in writing of such breach.

 

3.2                               Notice by the Company.  The Company will notify Holder in writing within five days after the occurrence of any Event of Default of which the Company acquires knowledge.

 

3.3                               Remedies.  Upon the occurrence of an Event of Default (a) pursuant to Section 3.1(a) hereunder (unless cured by the Company or waived in writing by Holder), Holder may, at its option, (i) by written notice to the Company, declare the entire unpaid principal balance of this Note, together with all accrued and unpaid interest on the Note, immediately due and payable and/or (ii) exercise any and all rights and remedies available to it under this Note and applicable Law, including the right to collect from the Company all sums due under this Note or (b) pursuant to Sections 3.1(b), 3.1(c) or 3.1(d) hereunder (unless cured by the Company or waived in writing by the holders of a majority of the outstanding principal amount of the Notes), the holders of a majority of the outstanding principal amount of the Notes may, at their option, (i) by written notice to the Company, declare the entire unpaid principal balance of the Notes, together with all accrued and unpaid interest on the Notes, immediately due and payable and/or (ii) exercise any and all rights and remedies available to the holders of the Notes and applicable Law, including the right to collect from the Company all sums due under this Note.  The rights and remedies of the Holder under this Note are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to the Holder.  No failure, delay or omission on the part of the Holder in exercising any right, power or privilege under this Note shall operate as a waiver of such right, power or privilege or any other right, power or privilege hereunder or otherwise preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The Company will pay all costs and expenses incurred by or on behalf of Holder in connection with Holder’s exercise of any or all of its rights and remedies under this Note, including reasonable attorneys’ fees.

 

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Without limitation any other provision herein set forth, upon any Event of Default prior to the Maturity Date in which the entire unpaid principal balance of this Note is paid or required to be paid pursuant to a demand made pursuant to the preceding paragraph (without regard to the provisions of Section 4), the Company shall, subject to Section 4, prepay such amount pursuant to Section 5.

 

4.                                      Subordination.  Notwithstanding anything to the contrary set forth in this Note, this Note, including, without limitation, the Subordinated Debt, the rights of contribution under Section 8.9 and the Guaranteed Obligations (collectively, the “Subordinated Obligations”), are subordinated to the Senior Debt to the extent and in the manner set forth in this Section 4.  In the event of any conflict between this Section 4 and any other provision of this Note, this Section 4 shall control and govern.  For the avoidance of doubt, this Note is not subordinated to, or pari passu with, any Indebtedness other than the Senior Debt, as to which Senior Debt this Note shall be subordinated as provided herein.  The Loan Parties shall not be permitted to issue any unsecured Indebtedness that is senior to this Note and the Other Notes.  For purposes of this Section, any reference to a holder or the holders of the Senior Debt shall be deemed to include any agent for such holder or holders.

 

4.1                               No payment or distribution of any kind, whether direct or indirect (by set-off, recoupment or otherwise) and whether in cash or other property (other than in shares of Common Stock), shall be made on account of any Subordinated Obligation, or in respect of any redemption, retirement, purchase or other acquisition of any Subordinated Obligation, by or for the account of any of the Loan Parties, at any time during which the Senior Debt shall be outstanding or any commitment to extend the Senior Debt exists, other than (a) to the extent no Senior Default has occurred and is continuing, regularly scheduled payments of interest (at the non-default rate of interest and on a non-accelerated basis), payments of interest and fractional shares upon conversion of this Note, or payments of taxes pursuant to Sections 1.4 and 2.1, (b) payment of principal (other than payments of principal due upon the conversion of this Note) on this Note at its stated maturity date, so long as no Senior Default has occurred and is continuing and (c) issuance of shares of Common Stock upon conversion of this Note, or as otherwise contemplated hereunder and the accrual and capitalization of any PIK Interest.

 

4.2                               Except as permitted by Section 4.11, in the event of any payment or distribution of assets of any of the Loan Parties of any kind or character, whether in cash or other property, upon the dissolution, winding up, or total or partial liquidation or reorganization, readjustment, arrangement, or similar proceeding relating to such Loan Party or its property, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership, arrangement or similar proceedings or upon an assignment for the benefit of creditors, or upon any other marshaling or composition of the assets and liabilities of such Loan Party (each, a “Proceeding”), or event described in Section 4.4 or Section 4.5 of this Note or otherwise:  (a) all amounts owing on account of the Senior Debt shall first be Paid in Full before any payment of the Subordinated Obligations is made and (b) any cash payment to which the Holder would be entitled (but for the provisions hereof) shall be paid or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of creditors,

 

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or other liquidating agent making such payment or distribution to the Senior Debt holders directly, for application to the payment of the Senior Debt until all the Senior Debt shall have been Paid in Full; provided that in no event shall the foregoing limit the issuance of shares of Common Stock upon conversion of this Note.

 

4.3                               In the event that notwithstanding the foregoing any payment or distribution of assets of any Loan Party of any kind or character, whether direct or indirect (by set-off, recoupment or otherwise) and whether in cash or other property, shall be received by the Holder on account of any Subordinated Obligation in violation of the provisions of this Note and before all the Senior Debt is Paid in Full, subject to, if no Proceeding is pending, Section 4.13, such payment or distribution shall be received and held in trust by the Holder for the benefit of the holders of the Senior Debt, or their designated representative, ratably according to the respective amounts of the Senior Debt held or represented by each, to the extent necessary to cause the Senior Debt to be Paid in Full and upon demand by any such holder, shall be delivered to such holders; provided that in no event shall the foregoing be deemed to include any shares of Common Stock issued upon conversion of this Note.

 

4.4                               Until the 91st day following the date all Senior Debt is Paid in Full, the Holder shall not be entitled to (x) accelerate the maturity of any Subordinated Obligation (provided that if the Company fails to pay any payment that is due and payable under this Note at a time when the Company is otherwise permitted under this Section 4 to make such payment, then, on or after the 180th day following an Event of Default that is continuing under this Note due to such failure and as to which written notice thereof has been delivered to the Company and the holders of the Senior Debt, the Holder may by written notice to the Company and such holders elect to accelerate the maturity of any Subordinated Obligation, but may not take any other action with respect to the Subordinated Obligations) or commence any other action or proceeding to recover any amounts due or to become due with respect to any Subordinated Obligation or (y) join in, solicit any other Person to, or act to cause the commencement of, any Proceeding.  If at any time the Holder obtains any judgment or Lien against any Loan Party or any of its subsidiaries or their respective properties in respect of any Subordinated Obligation, such judgment or Lien, or both, shall automatically (and without any further action) be subordinate and junior to any Lien, whether now existing or hereafter acquired, securing, or purporting to secure, any of the Senior Debt and shall further be subject to the subordination provisions of this Note and the rights of the holders of the Senior Debt to the same extent as such rights apply to Subordinated Obligations under this Note.  Upon any release of any such Lien securing any Senior Debt, any Lien securing any of the Subordinated Obligations shall automatically be released to the same extent as such Lien securing such Senior Debt.

 

4.5                               The provisions of this Section 4 shall continue to be effective or be reinstated, as the case may be, if at any time any payment in respect of the Senior Debt is rescinded or must otherwise be returned by any holders of the Senior Debt (including, without limitation, in the event of a Proceeding), all as though such payment had not been made.  Without limitation to the foregoing, in the event that the Senior Debt is avoided, disallowed or subordinated pursuant to Section 548 of the Bankruptcy Code or any applicable state fraudulent conveyance laws, whether asserted directly or under Section 544 of the Bankruptcy Code, the provisions of this Section 4 shall continue to be effective or be reinstated, as the case may be.

 

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4.6                               All rights and interests of the holders of the Senior Debt hereunder, and all agreements and obligations of the Holder, or any Loan Party hereunder, shall remain in full force and effect irrespective of:

 

(a)                                 any lack of validity or enforceability of the Senior Debt;

 

(b)                                 any change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Debt, or any other amendment or waiver of or any consent to any departure from the Senior Debt, including, without limitation, any increase in the Senior Debt resulting from the extension of additional credit to Company or otherwise;

 

(c)                                  any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any part of the Senior Debt;

 

(d)                                 any manner of application of collateral, or proceeds thereof, to all or any of the Senior Debt, or any manner of sale or other disposition of any collateral for all or any of the Senior Debt or any other assets of any Loan Party;

 

(e)                                  the grant of any adjustment, indulgence or forbearance, or compromise with, any Loan Party with respect to the Senior Debt;

 

(f)                                   any change, restructuring or termination of the structure or existence of any Loan Party; or

 

(g)                                 any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Loan Party or any Holder.

 

4.7                               Each of the Loan Parties and Holder hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Senior Debt and this Section 4 and any requirement that the Senior Debt holder protect, secure, perfect or insure any security interest or lien on the any property subject thereto or exhaust any right to take or first take any action against any Loan Party or any other Person or any collateral.

 

4.8                               This Note and all other instruments (and all replacements thereof) evidencing the Subordinated Obligations or any part thereof shall be inscribed with a legend conspicuously indicating that the payment thereof is subordinated to the payment of the Senior Debt pursuant to the provisions of this Section 4.

 

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4.9                               This Section 4 shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt; and such holders are made third party beneficiaries of this Section 4 hereunder and any one or more of them, or their designated representative, may enforce such provisions, and all such holders shall be deemed to have relied thereon.  The subordination effected by this Section 4 is a continuing subordination, and the Holder unconditionally waives notice of the incurring of any Senior Debt or any part thereof and reliance by any holders of Senior Debt upon the subordination contained herein.  The Holder acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement to and a consideration of the holders of Senior Debt, whether such Senior Debt was created or acquired before or after the incurrence or creation of any Subordinated Obligation and whether such holders of Senior Debt are now known or hereafter become known, and each holder of Senior Debt shall be deemed conclusively to have relied upon such subordination provisions in acquiring and holding, or in continuing to hold, such Senior Debt and shall be entitled to enforce the provisions of this Section 4 directly as if it were a party to this Note.  No right of any present or future holders of Senior Debt to enforce subordination provisions contained in this Section 4 shall at any time be prejudiced or impaired by any act or failure to act on the part of the Loan Parties or by any noncompliance by the Loan Parties with the terms of this Note.

 

4.10                        The provisions of this Section 4 are for the purpose of defining the relative rights of the holders of the Senior Debt on the one hand and the holders of Subordinated Obligations on the other hand, and nothing herein shall impair (as between the Loan Parties and the holders of the Subordinated Obligations) the Loan Parties’ obligation to the holders of the Subordinated Obligations to pay to such holders the full amount of the Subordinated Obligations in accordance with the terms of the Notes. Except as provided in Section 4.4 above, no provision of this Section 4 shall be construed to prevent the holders of the Subordinated Obligations from exercising all rights and remedies available under this Note or under applicable law upon the occurrence of an Event of Default or otherwise, subject to the rights of the holders of the Senior Debt as set forth above to receive payments otherwise payable to the holders of the Subordinated Obligations, and no provision of this Section 4 shall be deemed to subordinate, to any extent, any claim or right of any holder of the Subordinated Obligations to any claim against any Loan Party by any creditor or any other Person except to the extent expressly provided herein.  The subordination provisions of this Section 4 are solely for the benefit of the holders of the Senior Debt and may not be rescinded, canceled, amended or modified in any way that adversely affects the rights under this Section 4 of any holder of Senior Debt then outstanding without the prior written consent of the Working Capital Agent, the Term Loan Agent and the holders of a majority of the other Senior Debt then outstanding.

 

4.11                        Notwithstanding anything herein to the contrary, nothing in this Section 4 shall affect or limit the right of the Holder to at any time convert all or any portion of this Note, or interest thereon as contemplated hereunder, into Common Stock in accordance herewith (or the obligation of the Company to effect such conversion), it being expressly acknowledged and agreed that such conversion may be consummated regardless of the occurrence and continuance of a Senior Default, the commencement and pendency of a Proceeding with respect to the Company, or any other circumstance.

 

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4.12                        Upon the Senior Debt having been Paid in Full (but not before), Holder shall be subrogated to the rights of the holders of such Senior Debt to receive payments or distributions of assets of any Loan Party applicable to the Senior Debt until the obligations under this Note shall have been satisfied.  For purposes of such subrogation, no payments or distributions to the holders of Senior Debt of assets, whether in cash, property or securities, distributable to the holders of Senior Debt under the provisions hereof to which Holder would be entitled except for the provisions of this Section 4, and no payment pursuant to the provisions of this Section 4 to the holders of Senior Debt by Holder, shall, as among the Loan Parties, its creditors other than the holders of Senior Debt, and Holder, be deemed to be a payment by the Loan Parties to or on account of Senior Debt, it being understood that the provisions of this Section 4 are, and are intended, solely for the purpose of defining the relative rights of Holder, on the one hand, and the holders of Senior Debt, on the other hand.

 

4.13                        The Company shall give prompt written notice to Holder of any fact known to the Company which would prohibit the making of any payment to Holder in respect of this Note pursuant to this Section 4.  Notwithstanding the provisions of this Section 4, Holder shall not at any time be charged with knowledge of the existence of any facts which would prohibit the making of any payment or distribution to Holder of the type that could be made under Section 4.1, unless and until Holder shall have received written notice thereof from the Company or from the holder or holders of any Senior Debt or shall have received notice of any Proceeding; and, prior to the receipt of any such written notice, Holder shall be entitled to assume conclusively that such facts do not exist and to receive and retain such payments or distributions on this Note; provided, the Holder shall not be entitled to retain any such payments or distributions received by Holder within the 30 day period prior to the date Holder receives such written notice.  Holder shall be entitled to rely on the delivery to it of a written notice by a person representing himself or herself to be a holder of Senior Debt to establish that such notice has been given by a holder of Senior Debt.  In the event that Holder determines in good faith that further evidence is required with respect to the right pursuant to this Section 4 of any person as a holder of Senior Debt to participate in any payment or distribution of amounts otherwise payable to Holder, Holder may request such person to furnish evidence to the reasonable satisfaction of Holder as to the amount of Senior Debt held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of each person under this Section 4, and, if such evidence is not furnished, Holder may defer any payment to such person pending judicial determination as to the right of such person to receive such payment.

 

5.                                      Company Optional Prepayment.

 

5.1                               Subject to Section 4, the Company shall have the right to prepay all or any portion of the then outstanding principal balance under this Note so long at it makes pro rata prepayment and all or any portion of the then outstanding principal balance (as defined in the Other Notes) then outstanding under the Other Notes on the Company Optional Prepayment Date (as defined below) (a “Company Optional Prepayment”).  On the Company Optional Prepayment Date, an amount equal to 103%(6) of the principal amount of the portion of this Note subject to prepayment pursuant to this Section 5.1 shall be prepaid by the Company in cash (the “Company Optional Prepayment Amount”).

 

(6)  Note to Draft:  In the FCP Notes, this shall be 100% of the principal amount.

 

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5.2                               The Company may exercise its prepayment right under this Section 5 by delivering an irrevocable written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Notes and Other Notes, excluding for purposes hereof the [FCP Notes](7) (the “Company Optional Prepayment Notice” and the date all of the holders of Notes and Other Notes received such notice is referred to as the “Company Optional Prepayment Notice Date”).  The Company Optional Prepayment Notice shall (x) state the date on which the Company Optional Prepayment shall occur (the “Company Optional Prepayment Date”) which date shall not be less than sixty (60) calendar days nor more than ninety (90) calendar days following the Company Optional Prepayment Notice Date, and (y) state the aggregate Company Optional Prepayment Amount of the Notes and Other Notes which is being prepaid in such Company Optional Prepayment from the Holder and all of the other holders of the Notes and Other Notes pursuant to this Section 5 (and analogous provisions under the Other Notes) on the Company Optional Prepayment Date. All principal balances under this Note converted by the Holder after the Company Optional Prepayment Notice Date shall reduce the Company Optional Prepayment Amount of this Note required to be prepaid on the Company Optional Prepayment Date.  Prepayments made pursuant to this Section 5 shall be made in accordance with Section 5.3.

 

5.3                               The Company shall deliver the applicable Company Optional Prepayment Amount to the Holder on the applicable Company Optional Prepayment Date.  In the event that the Company does not pay the applicable Company Optional Prepayment Amount to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Company Optional Prepayment Amount in full, the Holder shall have the option, in lieu of prepayment, to require the Company to promptly return to the Holder all or any portion of this Note representing the principal balance of this Note that was submitted for prepayment and for which the applicable Company Optional Prepayment Amount has not been paid, which remedy shall be in addition to the other remedies available to the Holder (including under Section 3).

 

5.4                               Notwithstanding anything to the contrary in this Note, the Conversion Amount (a) shall remain outstanding (for purposes of conversion, but not as a principal obligation or indebtedness of any kind) after the consummation of any Company Optional Prepayment until the Maturity Date and (b) during such period may be converted by the Holder in accordance with Section 2.

 

6.                                      Certain Definitions. For purposes of this Note, the following terms shall have the following meanings:

 

6.1                               “Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101, et seq.) as now and hereafter in effect, or any applicable successor statute.

 

(7)  Note to Draft: The term Management Notes to replace the term FCP Notes in the FCP Notes.

 

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6.2                               “Capitalized Lease Obligations” means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

 

6.3                               “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

6.4                               “Common Stock” means the Common Stock, par value $0.10 per share, of the Company.

 

6.5                               “Conversion Amount” means, as of any date of determination, the amount equal to (a) the product of (i) the Market Price, multiplied by (ii)  the quotient of (A) the Principal Amount, divided by (B) the Conversion Price, minus (b) the aggregate Company Optional Prepayment Amounts paid to the Holder as of such date of determination pursuant to Section 5.

 

6.6                               “Conversion Price” means, as of the Conversion Date or other date of determination, $[          ](8), subject to adjustment as provided herein.

 

6.7                               “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

(8)  Note to Draft: To be the amount equal to the deal price ($0.37) with a 25% premium (adjusted for the Reverse Stock Split).

 

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6.8                               “Corporate Event” means any consolidation with or merger of the Company with or into another Person, or any sale, lease, exchange, exclusive license or other disposition to another Person of the assets of the Company as an entirety or substantially as an entirety (where there is an exchange of or distribution with respect to the Common Stock), or any reclassification of the capital of the Company.

 

6.9                               “FCP Notes” means the Other Notes issued on date hereof to Fireman Capital CPF Hudson Co-Invest LP.(9)

 

6.10                        “Indebtedness” means with respect to any Person without duplication:  (a) all Obligations of such Person for borrowed money; (b) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all Capitalized Lease Obligations of such Person; (d) all Obligations of such Person issued or assumed as the deferred and unpaid purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business); (e) all Obligations for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction (including reimbursement obligations with respect thereto except to the extent such reimbursement obligation relates to a trade payable and such obligation is satisfied within 30 days of incurrence); (f) guarantees and other contingent obligations in respect of Indebtedness of other Persons referred to in clauses (a) through (e) above; (g) all Obligations of any other Person of the type referred to in clauses (a) through (f) which are secured by any Lien on any property or asset of such Person whether or not such Indebtedness is assumed by such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset at such date of determination and the amount of the Obligation so secured; (h) all Obligations of such Person in respect of any interest rate swaps or hedge agreements; or (i) all Obligations of such Person under any sale and leaseback transaction, synthetic lease or other off-balance sheet loan or financing.

 

6.11                        “Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest).

 

6.12                        “Loan Parties” means, collectively, the Company and the Subsidiary Guarantors.

 

6.13                        “Market Disruption Event” means (a) a failure by the primary exchange or quotation system on which the Common Stock trades or is quoted to open for trading during its regular trading session or (b) the occurrence or existence, prior to 1:00 p.m., New York City time, on any Trading Day for the Common Stock, of an aggregate one half-hour period of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Common Stock or in any options, contracts or future contracts relating to the Common Stock.

 

(9)  Note to Draft: This term will be removed in the FCP Notes and will be replaced with the term Management Notes (Other Notes, issued on date hereof, other than notes issued to Fireman Capital CPF Hudson Co-Invest LP).

 

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6.14                        “Market Price” means (a) the sum of the Closing Sales Price of the Common Stock on each of the twenty (20) consecutive Trading Days ending and including the Trading Day immediately preceding the Conversion Date, the Company Optional Prepayment Date or the Maturity Date, as the case may be, divided by (b) twenty (20).  All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction during such the applicable measurement periods and prior to the actual conversion hereunder.

 

6.15                        “Obligations” means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

 

6.16                        “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

6.17                        “Paid in Full” means, with respect to any issuance of the Senior Debt, the full payment in cash, in immediately available funds, of such Senior Debt (other than unasserted contingent indemnification obligations) and the termination of all commitments of the holders of such Senior Debt to make loans and other extensions of credit to or for the benefit of the Company pursuant to the terms of the documents evidencing such Senior Debt.  The expressions “prior payment in full,” “payment in full”, “paid or satisfied in full” and “paid in full” (whether or not such expressions are capitalized) and other similar phrases shall have correlative meanings.

 

6.18                        “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

6.19                        “Principal Market” means the principal securities exchange or securities market on which the Common Stock is then traded.

 

6.20                        “Principal Amount” means the original principal amount of this Note to be converted less any amounts set off against the Note pursuant to Section 9.7 of the Stock Purchase Agreement less any amount of principal previously converted and fulfilled by the Company pursuant to Section 2.

 

6.21                        “Reverse Stock Split” means the 1 for 30 reverse stock split contemplated by the Merger Agreement.

 

6.22                        “Senior Debt” means the principal of (and premium, if any), unpaid interest and any other amount, in each case whether or not such premium, interest or other amount is allowed in connection with any Proceeding, constituting (X) (a) Indebtedness of the Company (including Indebtedness of others guaranteed by the Company) other than the Notes and Other Notes, whether outstanding on the date of this Note or thereafter created, incurred, assumed or guaranteed and (b) amendments, renewals, extensions, modifications and refundings of any such Indebtedness, unless in any case in the instrument creating or evidencing any such Indebtedness

 

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or pursuant to which the same is outstanding it is provided that such Indebtedness is not superior or is subordinated in right of payment to or is on parity in right of payment with the Notes and Other Notes, provided, however, that, notwithstanding anything to the contrary in the preceding, Senior Debt shall not include (i) any liability for federal, state, local or other taxes owed or owing by the Loan Parties, (ii) any Indebtedness of the Loan Parties to any of their respective Affiliates, (iii) any trade payables of the Company or any Subsidiary Guarantor or (iv) any unsecured Obligations for borrowed money incurred by the Company or any Subsidiary Guarantor after the date of this Note; (Y) Working Capital Indebtedness and all other Indebtedness under factoring facilities and revolving credit facilities, the proceeds of which other Indebtedness are used for working capital of the Company and its subsidiaries and (Z) Term Loan Indebtedness.

 

6.23                        “Senior Default” means any event of default under any of the Senior Debt.

 

6.24                        “Specified Dollar Amount” means the dollar amount to be received upon conversion as specified by the Company in the Settlement Notice.

 

6.25                        “Subordinated Debt” means all Obligations arising with respect to this Note.

 

6.26                        “Subsidiary Guarantor” means [Joe’s Jeans Subsidiary, Inc., Joe’s Jeans Retail Subsidiary, Inc., Innovo West Sales, Inc., Hudson Clothing Holdings, Inc., HC Acquisition Holdings, Inc., and Hudson Clothing LLC](10).

 

6.27                        [“Term Loan Agent” means Garrison Loan Agency Services LLC, in its capacity as administrative agent and collateral agent for the Term Loan Lenders, its successors and assigns (including any agent appointed to replace such initial agent).](11)

 

6.28                        “Term Loan Credit Agreement” has the meaning set forth in the definition of “Term Loan Documents”.

 

6.29                        [“Term Loan Indebtedness” means all Obligations of any kind owed by the Company and its subsidiaries (or any of them) to the Term Loan Agent and the other Term Loan Lenders (or any of them) from time to time under or pursuant to any of the Term Loan Documents and all Ledger Debt (as defined in the Term Loan Credit Agreement) owing to The CIT Group/Commercial Services, Inc., as factor, including, without limitation, all principal, interest accruing thereon, charges, expenses, fees and other sums (including all interest, charges, expenses, fees and other sums accruing after commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company or any of its subsidiaries) chargeable to the Company or any of its subsidiaries by the Term Loan Agent or the Term Loan Lenders, and reimbursement, indemnity or other obligations due and payable to such Term Loan Agent and Term Loan Lenders.  Term Loan Indebtedness shall continue to constitute

 

(10)  Note to Draft: To be confirmed and to include any subsidiaries providing a guarantee with respect to the Senior Debt.

(11)  Note to Draft: To be updated to conform to new financing arrangement.

 

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Senior Debt, notwithstanding the fact that such Term Loan Indebtedness or any claim for such Term Loan Indebtedness is subordinated, avoided or disallowed under the federal Bankruptcy Code or other applicable law.  Term Loan Indebtedness shall also include any indebtedness of the Company and its subsidiaries incurred in connection with a refinancing of the Term Loan Indebtedness under the Term Loan Documents.](12)

 

6.30                        “Term Loan Lenders” has the meaning set forth in the definition of “Term Loan Documents”.

 

6.31                        [“Term Loan Documents” means (x) that certain Term Loan Credit Agreement dated as of September 30, 2013 (as amended, restated, modified, supplemented, extended, replaced or refinanced from time to time, the “Term Loan Credit Agreement”), by and among the Company, certain of its subsidiaries as co-borrowers and guarantors, the financial institutions from time to time party thereto (the “Term Loan Lenders”), and Term Loan Agent and (y) all other agreements, documents and instruments at any time executed and/or delivered by the Company or any other obligor with respect to the Term Loan Indebtedness with, to or in favor of Term Loan Agent or the Term Loan Lenders in connection with the Term Loan Credit Agreement or related thereto (including, without limitation, all “Loan Documents” as defined in the Term Loan Credit Agreement), as all of the foregoing now exist or may hereafter be amended, restated, modified, supplemented, extended, replaced or refinanced.](13)

 

6.32                        “Trading Day” means a day during which (i) trading in the Common Stock generally occurs on the primary exchange or quotation system on which the Common Stock then trades or is quoted and (ii) there is no Market Disruption Event.

 

6.33                        [“Working Capital Agent” means The CIT Group/Commercial Services, Inc., in its capacity as administrative agent and collateral agent for the Working Capital Lenders, its successors and assigns (including any agent appointed to replace such initial agent).](14)

 

6.34                        “Working Capital Credit Agreement” has the meaning set forth in the definition of “Working Capital Loan Documents”.

 

6.35                        [“Working Capital Indebtedness” means all Obligations of any kind owed by the Company and its subsidiaries (or any of them) to the Working Capital Agent and the other Working Capital Lenders (or any of them) from time to time under or pursuant to any of the Working Capital Loan Documents and all Ledger Debt (as defined in the Working Capital Credit Agreement) owing to The CIT Group/Commercial Services, Inc., as factor, including, without limitation, all principal, interest accruing thereon, charges, expenses, fees and other sums (including all interest, charges, expenses, fees and other sums accruing after commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company or any of its subsidiaries) chargeable to the Company or any of its subsidiaries by

 

(12)  Note to Draft: To be updated to conform to new financing arrangement.

(13)  Note to Draft: To be updated to conform to new financing arrangement.

(14)  Note to Draft: To be updated to conform to new financing arrangement.

 

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the Working Capital Agent or the Working Capital Lenders, and reimbursement, indemnity or other obligations due and payable to such Working Capital Agent and Working Capital Lenders.  Working Capital Indebtedness shall continue to constitute Senior Debt, notwithstanding the fact that such Working Capital Indebtedness or any claim for such Working Capital Indebtedness is subordinated, avoided or disallowed under the federal Bankruptcy Code or other applicable law.  Working Capital Indebtedness shall also include any indebtedness of the Company and its subsidiaries incurred in connection with a refinancing of the Working Capital Indebtedness under the Working Capital Loan Documents.](15)

 

6.36                        “Working Capital Lenders” has the meaning set forth in the definition of “Working Capital Loan Documents”.

 

6.37                        [“Working Capital Loan Documents” means (x) that certain Revolving Credit Agreement dated as of September 30, 2013 (as amended, restated, modified, supplemented, extended, replaced or refinanced from time to time, the “Working Capital Credit Agreement”), by and among the Company, certain of its subsidiaries as co-borrowers and guarantors, the financial institutions from time to time party thereto (the “Working Capital Lenders”), and Working Capital Agent and (y) all other agreements, documents and instruments at any time executed and/or delivered by the Company or any other obligor with respect to the Working Capital Indebtedness with, to or in favor of Working Capital Agent or the Working Capital Lenders in connection with the Working Capital Credit Agreement or related thereto (including, without limitation, all “Loan Documents” as defined in the Working Capital Credit Agreement), as all of the foregoing now exist or may hereafter be amended, restated, modified, supplemented, extended, replaced or refinanced.](16)

 

7.                                      Miscellaneous

 

7.1                               Waiver.  The Company hereby waives presentment, demand, protest, and notice of dishonor and protest, waives any rights which it may have to require the Holder to proceed against any other Person or property, and agrees that without notice to any Person and without affecting any Person’s liability under this Note, the Holder, at any time or times, may grant extensions of the time for payment or other indulgences to any Person or permit the renewal, amendment or modification of this Note.  No act or inaction of the Holder under this Note shall be deemed to constitute or establish a “course of performance or dealing” that would require the Holder to so act or refrain from acting in any particular manner at a later time under similar or dissimilar circumstances.

 

7.2                               Non-Negotiability.  This Note is fully transferable.  If this Note is assigned or transferred to any Person, then with respect to the portion of the Note so assigned or transferred (a) the assignor or transferor (as the case may be) will no longer be deemed to be a “Holder” for purposes of this Note and (b) the assignee or transferee (as the case may be) will be deemed to be a “Holder” for purposes of this Note, subject to the provision of notice to the Company in

 

(15)  Note to Draft: To be updated to conform to new financing arrangement.

(16)  Note to Draft: To be updated to conform to new financing arrangement.

 

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Section 7.7.  Notwithstanding the foregoing, unless permitted under Section 4, this Note may not be transferred (whether directly, by way of a participation or otherwise) to the Company or any subsidiary of the Company, without the prior written consent of the Working Capital Agent and the Term Loan Agent, and any such transfer made in violation of this provision shall be null and void.

 

7.3                               Replacement.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction of this Note, upon receipt of an indemnity reasonably satisfactory to the Company (provided that, if the holder of this Note is a financial institution, its own unsecured agreement shall be satisfactory) or, in the case of any such mutilation, upon the surrender and cancellation of this Note, the Company, at its expense, shall execute and deliver, in lieu thereof, a new Note of like tenor and dated the date of such lost, stolen, destroyed or mutilated Note.  Any Note in lieu of which any such new Note has been so executed and delivered by the Company shall not be deemed to be an outstanding Note.

 

7.4                               Reservation of Authorized Shares.  The Company covenants that, so long as any Notes remain outstanding, the Company will at all times reserve and keep available, from its authorized and unissued Common Stock solely for issuance and delivery upon the conversion of the outstanding Notes and free of preemptive rights, such number of shares of Common Stock as from time to time shall be issuable upon the conversion in full of all outstanding Notes.  The Company covenants that all shares of Common Stock issuable upon conversion of the Notes will, upon issuance, be freely tradable, listed, duly and validly issued, fully paid and nonassessable and will be free from all taxes, Liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein).

 

7.5                               Stock Certificates.  Each stock certificate delivered by the Company to Holder will be imprinted with legends substantially in the following form:

 

“THE SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.  THESE SHARES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION EVIDENCED BY (IF REQUESTED BY THE COMPANY) AN OPINION OF COUNSEL TO THE HOLDER, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT.”

 

7.6                               No Stockholder Rights. Nothing contained in this Note shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company and,

 

23

 

except as otherwise expressly provided herein, no dividends or other distributions shall be payable or accrued in respect of this Note or the interest represented hereby or the shares of Common Stock to be obtained upon conversion hereunder until, and only to the extent that, this Note shall have been converted.

 

7.7                               Registration; Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Other Notes held by such holders (the “Registered Notes”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error.  The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of Principal and Interest hereunder, notwithstanding notice to the contrary.

 

7.8                               Successors.  All of the terms, agreements, covenants, representations, warranties, and conditions of this Note are binding upon, and inure to the benefit of and are enforceable by, the Parties and their respective successors.  If Holder is an entity and if the principal business, operations or a majority or substantial portion of the assets of Holder are assigned, conveyed, allocated, or otherwise transferred, including by sale, merger, consolidation, amalgamation, conversion, or similar transactions, such receiving Person or Persons will automatically become bound by and subject to the provisions of this Note, and Holder will cause the receiving Person or Persons to expressly assume its obligations hereunder.

 

7.9                               Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.

 

7.10                        Assignment by the Company.  Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Company, without the prior written consent of the Holder; provided, that, without limiting the Company’s obligations under Section 2.4, the Company shall be entitled to assign its rights, interests and obligations hereunder in connection with a Corporate Event, provided, further, that the resulting, surviving or transferee Person in such Corporate Event expressly assumes all of the Company’s obligations under this Note and, solely in connection with a Corporate Event not involving an unaffiliated third party, so long as the Company or any of its affiliated entities remains an entity whose common equity interests are listed on a national securities exchange, such listed entity shall be the primary obligor under this Note.

 

7.11                        Notices.  All notices, requests, demands, claims, and other communications hereunder will be in writing.  Any notice, request, demand, claim, or other communication hereunder will be deemed duly given if (and then three business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

 

24

 

If to the Company:

 

Joe’s Jeans, Inc.
 2340 South Eastern Avenue

Commerce, CA 90040

Attn:                    [                          ]
 Fax:                       [                          ]

 

Copy to (which will not constitute notice):

 

Joe’s Jeans, Inc.

2340 South Eastern Avenue

Commerce, CA 90040

Attn:  Lori Nembirkow

Fax: 323-837-3791

 

If to the Holder:

 

Attn:  [                        ]
 [                                  ]

[                                  ]

 

Either Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient.  Either Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other notice in the manner herein set forth, provided that no change in a Holder’s notice address shall be effective unless such change is received and acknowledged by the Working Capital Agent and the Term Loan Agent.

 

25

 

7.12                        Submission to Jurisdiction; No Jury Trial.

 

(a)                                 Submission to Jurisdiction.  Each Party submits to the jurisdiction of any state or federal court sitting in Wilmington, Delaware in any Action arising out of or relating to this Note and agrees that all claims in respect of the Action may be heard and determined in any such court.  Each Party also agrees not to bring any Action arising out of or relating to this Note in any other court.  Each Party agrees that a final judgment in any Action so brought will be conclusive and may be enforced by an Action on the judgment or in any other manner provided at Law or in equity.  Each Party waives any defense of inconvenient forum to the maintenance of any Action so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto.

 

(b)                                 Waiver of Jury Trial.  THE PARTIES EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS NOTE OR ANY OTHER AGREEMENTS RELATING THERETO OR ANY DEALINGS BETWEEN THEM RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY.  The scope of this waiver is intended to be all encompassing of any and all Actions that may be filed in any court and that relate to the subject matter of the transactions contemplated hereby, including Contract claims, tort claims, breach of duty claims and all other common Law and statutory claims.  Each Party acknowledges that this waiver is a material inducement to enter into a business relationship and that they will continue to rely on the waiver in their related future dealings.  Each Party further represents and warrants that it has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel.  NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY OR IN WRITING, AND THE WAIVER WILL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS NOTE OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO.  IN THE EVENT OF AN ACTION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY A COURT.

 

7.13                        Time.  Time is of the essence in the performance of this Note.

 

7.14                        Headings.  The article and section headings contained in this Note are inserted for convenience only and will not affect in any way the meaning or interpretation of this Note.

 

7.15                        Governing Law.  This Note and the performance of the obligations of the Parties hereunder will be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of Law principles.

 

26

 

7.16                        Amendments and Waivers.  No amendment, modification, replacement, termination, cancellation, waiver of or consent to any provision of this Note will be valid, unless (i) the same will be in writing and signed by holders of a majority in principal amount of Notes excluding any [FCP Notes](17) and (ii) Working Capital Agent and Term Loan Agent if such amendment, modification, replacement, termination, or cancellation of any provision of this Note affects Section 4, affects any other right of Working Capital Agent, Term Loan Agent or a holder of the Senior Debt or changes the obligations under this Note regarding the date of payment or amount of principal or interest payable under this Note (other than rate reductions and payment extensions).  No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation, or Breach of warranty or covenant hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence.

 

7.17                        Severability.  The provisions of this Note will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Note, as applied to any Party or to any circumstance, is adjudged by a Governmental Authority, arbitrator, or mediator not to be enforceable in accordance with its terms, the Parties agree that the Governmental Authority, arbitrator, or mediator making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced.

 

7.18                        Expenses.  Except as otherwise expressly provided in this Note or in Section 2.7 of the Rollover Agreement, each Party will bear its own costs and expenses incurred in connection with the preparation, execution and performance of this Note, including all fees and expenses of agents, representatives, financial advisors, legal counsel, and accountants; provided, however, that the Company shall pay all reasonable and documented costs and expenses of collection and enforcement of this Note when incurred, including the Holder’s reasonable and documented attorneys’ fees and legal and court costs in connection therewith, including any incurred on appeal or in connection with bankruptcy or insolvency, whether or not any lawsuit or proceeding is ever filed with respect hereto.

 

7.19                        Construction.  The Parties have participated jointly in the negotiation and drafting of this Note.  If an ambiguity or question of intent or interpretation arises, this Note will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party because of the authorship of any provision of this Note.  Any reference to any federal, state, local, or foreign Law will be deemed also to refer to Law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise.  The words “include,” “includes,” and “including” will be deemed to be followed by “without limitation.”  Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires.  The words “this Note,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this Note as a whole and not to any particular subdivision unless expressly so limited.  The Parties intend that each representation, warranty, and covenant contained herein will have independent significance.  If any Party has

 

(17)  Note to Draft: To be replace with the term Management Notes in the FCP Notes.

 

27

 

breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached will not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant.

 

7.20                        Remedies.  Except as expressly provided herein, the rights, obligations and remedies created by this Note are cumulative and in addition to any other rights, obligations or remedies otherwise available at Law or in equity.  Except as expressly provided herein, nothing herein will be considered an election of remedies.

 

7.21                        No Inconsistent Agreements.  The Company has not entered into, and in no event shall the Company enter into, any agreements, which are inconsistent with this Note.

 

8.                                      Guaranty.

 

8.1                               The Subsidiary Guarantee.  The Subsidiary Guarantors hereby jointly and severally guarantee (the “Subsidiary Guarantee”), as a primary obligor and not as a surety to each Holder and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest on the Notes, and all other Obligations from time to time owing to the Holder by the Company or any Subsidiary Guarantor (the “Note Parties”) under the Notes, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the “Guaranteed Obligations”).  The Subsidiary Guarantors hereby jointly and severally agree that if the Company or other Subsidiary Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

 

8.2                               Obligations Unconditional.  The obligations of the Subsidiary Guarantors under Section 8.1 shall constitute a guaranty of payment and to the fullest extent permitted by law, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of the Company under the Notes or any other agreement or instrument referred to herein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Subsidiary Guarantor (except for payment in full).  Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Subsidiary Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above:

 

28

 

(a)                                 at any time or from time to time, without notice to any Subsidiary Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;

 

(b)                                 any of the acts mentioned in any of the provisions of the Notes or any other agreement or instrument referred to herein shall be done or omitted;

 

(c)                                  the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Notes or any other agreement or instrument referred to herein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or

 

(d)                                 the release of any other Subsidiary Guarantor pursuant to Section 8.8.

 

The Subsidiary Guarantors hereby, to the fullest extent permitted by applicable Legal Requirement, expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Holder exhaust any right, power or remedy or proceed against the Company under the Notes or any other agreement or instrument referred to herein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations.  The Subsidiary Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Holder upon this Subsidiary Guarantee or acceptance of this Subsidiary Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Subsidiary Guarantee, and all dealings between the Company and the Holder shall likewise be conclusively presumed to have been had or consummated in reliance upon this Subsidiary Guarantee.  This Subsidiary Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by the Holder, and the obligations and liabilities of the Subsidiary Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Holder or any other person at any time of any right or remedy against the Company or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto.  This Subsidiary Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Subsidiary Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Holders, and their respective successors and assigns.

 

8.3                               Reinstatement.  The obligations of the Subsidiary Guarantors under this Section 8 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Company or other Note Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.

 

29

 

8.4                               Subrogation.  Each Subsidiary Guarantor hereby agrees that until the indefeasible payment and satisfaction in full in cash of all Guaranteed Obligations it shall waive any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in Section 8.1, whether by subrogation or otherwise, against the Company or any other Subsidiary Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations.

 

8.5                               Remedies.  The Subsidiary Guarantors jointly and severally agree that, as between the Subsidiary Guarantors and the Holders, the obligations of the Company under the Notes may be declared to be forthwith due and payable as provided in Section 3.3 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 3.3) for purposes of Section 8.1, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Company and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Company) shall forthwith become due and payable by the Subsidiary Guarantors for purposes of Section 8.1.

 

8.6                               Continuing Guarantee.  The guarantee in this Section 8 is a continuing guarantee of payment, and shall apply to all Guaranteed Obligations whenever arising.

 

8.7                               General Limitation on Guarantee Obligations.  In any action or proceeding involving any state corporate or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Subsidiary Guarantor under Section 8.1 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 8.1, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Subsidiary Guarantor, any Note Party or any other person, be automatically limited and reduced to the highest amount (after giving effect to the right of contribution established in Section 8.9) that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

 

8.8                               Release of Subsidiary Guarantors.  If all or substantially all of the equity interests of any Subsidiary that is a Subsidiary Guarantor are sold or otherwise transferred (a “Transferred Subsidiary Guarantor”) to a person or persons, none of which is the Company or a Subsidiary Guarantor, such Transferred Subsidiary Guarantor shall, upon the consummation of such sale or transfer, be automatically released from its obligations under this Agreement.

 

8.9                               Right of Contribution.  Each Subsidiary Guarantor hereby agrees that to the extent that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against any other Subsidiary Guarantor hereunder which has not paid its proportionate share of such payment.  Each Subsidiary Guarantor’s right of contribution shall be subject to the terms and conditions of Section 8.4.  The provisions of this Section 8.9 shall in no respect limit the obligations and liabilities of any Subsidiary Guarantor to the Holders, and each Subsidiary Guarantor shall remain liable to the Holders for the full amount guaranteed by such Subsidiary Guarantor hereunder.

 

[SIGNATURE ON FOLLOWING PAGE]

 

30

 

IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the date first above written.

 

 

	
 
    	
JOE’S JEANS INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   [                        ]
    
	
 
    	
Title:   [                          ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JOE’S JEANS SUBSIDIARY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   [                        ]
    
	
 
    	
Title:   [                          ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JOE’S JEANS RETAIL SUBSIDIARY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   [                        ]
    
	
 
    	
Title:   [                          ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
INNOVO WEST SALES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   [                        ]
    
	
 
    	
Title:   [                          ]
    

 

[Signature Page to Buyer Note]

 

 

	
 
    	
HUDSON CLOTHING LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   [                        ]
    
	
 
    	
Title: [                          ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HUDSON CLOTHING HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   [                        ]
    
	
 
    	
Title:   [                          ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HC ACQUISITION HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   [                        ]
    
	
 
    	
Title: [                          ]
    

 

[Signature Page to Buyer Note]

 

 

EXHIBIT I

 

JOE’S JEANS, INC.
 CONVERSION NOTICE

 

To:  Joe’s Jeans, Inc.

 

The undersigned Holder of this Note hereby irrevocably exercises the option to convert this Note, into an amount of cash, shares of Common Stock or combination of cash and shares of Common Stock, as the case may be, in accordance with the terms of the Note, and directs that any cash payable and any shares of Common Stock issuable and deliverable upon conversion, be paid and/or issued and/or delivered, as the case may be, to the registered Holder hereof unless a different name is indicated below.

 

If any shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect to such issuance and transfer as set forth in the Note.

 

Principal amount to be converted:

 

	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signature(s)
    
	
 
    	
 
    
	
 
    	
Signature(s) must   be guaranteed by an institution which is a member of one of the following   recognized signature Guarantee Programs: (i) The Securities Transfer   Agent Medallion Program (STAMP); (ii) The New York Stock Exchange   Medallion Program (MNSP); (iii) The Stock Exchange Medallion Program   (SEMP); or (iv) another guarantee program acceptable to the Trustee.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signature(s)
    

 

 

Fill in for registration of any shares of Common Stock and Securities if to be issued otherwise than to the registered Holder.

 

	
 
    	
 
    
	
(Name)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
(Address)
    	
 
    
	
 
    	
 
    
	
Please   print Name and Address
    	
 
    
	
(including   zip code number)
    	
 
    
	
Social   Security or other Taxpayer
    	
 
    
	
Identifying   Number
    	
 
    

 

 

EXHIBIT II

 

The example provided below is an illustrative example only and the principal amount, amount of gain, tax rate imposed on gain, and other figures are hypothetical figures only and the actual figures may differ.

 

Assumptions

 

·                  Holder’s Principal Amount of Note at Issuance:  $7,100,000

·                  Deferred Gain: Equal to the outstanding principal amount of the Holder’s Note at year end

·                  Section 6621(a)(2) Underpayment Rate:  3%

·                  Maximum Rate of Tax in effect under Section 1(h) for net capital gain: 20%

·                  Assumed tax rate imposed on gain from installment sale: 37.1% (based on a maximum federal capital gains tax rate of 20%, a 3.8% Medicare tax rate on net investment income and a 13.3% California tax rate)

·                  2015 Payments:  None

·                  2016 Payments:  Aggregate payments in an amount sufficient to reduce the principal amount of the Holder’s Note to $5,000,000 at year end

 

2015

 

At the close of 2015, the outstanding principal amount of the Holder’s Note remains $7,100,000. Pursuant to Section 453A, the taxpayer must pay an interest charge on an “applicable percentage” of the “deferred tax liability”.  The “applicable percentage” would be 29.58%, which is determined by dividing (i) $2,100,000 (the excess of the amount of the Note outstanding at the end of the year over $5,000,000), by (ii) $7,100,000 (the amount of the Note outstanding at the end of the year).  The “deferred tax liability” would be $1,420,000, which is equal to the product of (i) $7,100,000 (the amount of gain from the installment sale that is unrecognized at the end of the year), and (ii) 20% (the maximum tax rate on net capital gain under Section 1(h)).  The portion of the deferred tax liability that would be subject to the interest charge would be $420,000, which is determined by multiplying $1,420,000 by 29.58%.  The interest charge imposed by Section 453A will therefore equal $12,600, which is determined by multiplying $420,000 by 3% (the underpayment rate under Section 6621(a)(2)).

 

The amount paid to holder would equal $20,031.80, which reflects a gross up for the tax imposed on the Section 453A interest charge determined by dividing (i) $12,600 by (ii) 62.9% (1 minus an assumed tax rate of 37.1%).

 

2016

 

At the close of 2016, the outstanding principal amount of the Holder’s Note would be $5,000,000.  As a result the applicable percentage would be 0%.  Accordingly, no payment would be due under Section 1.4 of this Agreement.Exhibit 10.1

 

STOCK PURCHASE AGREEMENT
  
 DATED AS OF SEPTEMBER 8, 2015

by and between
  
 TCP DENIM, LLC

 

and

 

JOE’S JEANS INC.

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I   PURCHASE AND SALE OF THE SHARES
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.1.
    	
Agreement to Purchase   and Sell
    	
1
    
	
Section 1.2.
    	
Closing
    	
2
    
	
Section 1.3.
    	
Delivery and Payment
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE II   REPRESENTATIONS AND WARRANTIES OF THE COMPANY
    	
3
    
	
 
    	
 
    	
 
    
	
Section 2.1.
    	
Organization, Standing   and Corporate Power
    	
3
    
	
Section 2.2.
    	
Capitalization
    	
4
    
	
Section 2.3.
    	
Authority;   Noncontravention; Voting Requirements
    	
5
    
	
Section 2.4.
    	
Governmental Approvals
    	
6
    
	
Section 2.5.
    	
Company SEC Documents;   Undisclosed Liabilities
    	
6
    
	
Section 2.6.
    	
Absence of Certain   Changes or Events
    	
7
    
	
Section 2.7.
    	
Legal Proceedings
    	
8
    
	
Section 2.8.
    	
Compliance with Laws;   Permits
    	
8
    
	
Section 2.9.
    	
Issuance and Delivery   of Purchased Shares
    	
8
    
	
Section 2.10.
    	
No General Solicitation
    	
8
    
	
Section 2.11.
    	
Preemptive Rights;   Rights to First Offer
    	
8
    
	
Section 2.12.
    	
Private Placement
    	
8
    
	
Section 2.13.
    	
Registration Rights
    	
9
    
	
Section 2.14.
    	
No Restriction on the   Ability to Pay Cash Dividends
    	
9
    
	
Section 2.15.
    	
Rights Agreement;   Anti-Takeover Provisions
    	
9
    
	
Section 2.16.
    	
Additional   Representations and Warranties
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE III   REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
    	
9
    
	
 
    	
 
    	
 
    
	
Section 3.1.
    	
Authority
    	
9
    
	
Section 3.2.
    	
Consents and Approvals
    	
10
    
	
Section 3.3.
    	
No Conflict
    	
10
    
	
Section 3.4.
    	
No Proceedings
    	
10
    
	
Section 3.5.
    	
Investment   Representations
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   ADDITIONAL COVENANTS AND AGREEMENTS
    	
11
    
	
 
    	
 
    	
 
    
	
Section 4.1.
    	
Certain Covenants from   the Merger Agreement
    	
11
    
	
Section 4.2.
    	
Certain Tax Matters
    	
11
    
	
Section 4.3.
    	
Reservation and Listing   of Securities
    	
11
    
	
Section 4.4.
    	
Use of Proceeds
    	
12
    
	
Section 4.5.
    	
Notification of Certain   Matters
    	
12
    
	
Section 4.6.
    	
Fees and Expenses
    	
12
    
	
Section 4.7.
    	
Company Board of   Directors
    	
12
    
	
Section 4.8.
    	
No Waivers under the   Merger Agreement
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE V   CONDITIONS TO CLOSING
    	
13
    
	
 
    	
 
    	
 
    
	
Section 5.1.
    	
Conditions to Each   Party’s Obligations
    	
13
    
	
Section 5.2.
    	
Conditions to   Obligations of the Purchaser
    	
13
    

 

i

 

	
Section 5.3.
    	
Conditions to the   Company’s Obligations
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   TERMINATION
    	
15
    
	
 
    	
 
    	
 
    
	
Section 6.1.
    	
Termination by the   Purchaser or the Company
    	
15
    
	
Section 6.2.
    	
Effect of Termination
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   MISCELLANEOUS
    	
15
    
	
 
    	
 
    	
 
    
	
Section 7.1.
    	
Survival of   Representations and Warranties
    	
15
    
	
Section 7.2.
    	
Notices
    	
15
    
	
Section 7.3.
    	
Amendments and Waivers
    	
16
    
	
Section 7.4.
    	
Descriptive Headings,   Etc.
    	
16
    
	
Section 7.5.
    	
Further Assurances
    	
17
    
	
Section 7.6.
    	
No Third-Party   Beneficiaries
    	
17
    
	
Section 7.7.
    	
Successors and Assigns
    	
17
    
	
Section 7.8.
    	
Entire Agreement
    	
17
    
	
Section 7.9.
    	
Severability
    	
17
    
	
Section 7.10.
    	
Governing Law;   Jurisdiction; Waiver of Jury Trial
    	
17
    
	
Section 7.11.
    	
Specific Enforcement;   Limit on Liability
    	
18
    
	
Section 7.12.
    	
Definitions
    	
19
    
	
Section 7.13.
    	
Counterparts; Scanned   Signatures
    	
25
    

 

ii

 

STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT (this “Agreement”) dated as of September 8, 2015 by and between JOE’S JEANS INC., a Delaware corporation (the “Company”), and TCP Denim, LLC, a Delaware limited liability company (the “Purchaser”).

 

WHEREAS, concurrently with the execution of this Agreement, the Company is entering into an Agreement and Plan of Merger, dated as of September 8, 2015 (the “Merger Agreement”), with JJ Merger Sub LLC, a Delaware limited liability company (“Merger Sub”), and RG Parent, LLC, a Delaware limited liability company (“RG”), pursuant to which, among other things, Merger Sub will merge with and into RG with RG surviving the merger as a wholly owned subsidiary of the Company (the “Merger”);

 

WHEREAS, as part of the financing for the Merger, the Company proposes to issue and sell to the Purchaser certain shares of the Company’s preferred stock, par value $.10 per share, designated as “Series A Convertible Preferred Stock” (the “Company Preferred Stock”), having the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions as specified in the certificate of designation establishing the Company Preferred Stock, in substantially the form attached hereto as Exhibit A (the “Certificate of Designation”), to be adopted pursuant to a restated certificate of incorporation of the Company (the “Restated Charter”) on or before the Closing Date, on the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, the Company Preferred Stock is being offered and sold to the Purchaser, on the terms and subject to the conditions set forth in this Agreement, without registration under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), in reliance on an exemption from the registration requirements under the Securities Act; and

 

WHEREAS, prior to, or concurrently with, the execution of this Agreement, and as a condition and inducement to the Company’s and RG’s willingness to enter into the Merger Agreement, Tengram Capital Partners Fund II, L.P., a Delaware limited partnership (“Guarantor”) is entering into a guaranty in favor of the Company (the “Guaranty”) with respect to the obligations of the Purchaser under this Agreement to pay the Purchase Price.

 

NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

ARTICLE I
 PURCHASE AND SALE OF THE SHARES

 

Section 1.1.                                 Agreement to Purchase and Sell.  On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Company agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Company, an aggregate of fifty thousand (50,000) shares of Company Preferred Stock (the “Purchased Shares”), for an aggregate purchase price in cash equal to $50,000,000 (the “Purchase Price” and, the issuance of the Purchased Shares by the Company and the payment of the Purchase Price by the Purchaser as described in this Section 1.1, the “Sale”).

 

 

Section 1.2.                                 Closing.  Subject to the satisfaction or waiver of the applicable conditions set forth in Article V hereof, including that the Merger shall have been consummated in accordance with the terms of the Merger Agreement, the closing of the Sale (the “Closing”) shall occur immediately following the consummation of the Merger (the “Closing Date”), at the offices of Akin Gump Strauss Hauer & Feld LLP, 1333 New Hampshire Avenue NW, Washington DC 20036, unless another time, date or place is agreed to in writing by the parties hereto.  By agreement of the parties, the Closing may take place by delivery of the documents to be delivered at the Closing by facsimile or other electronic transmission.  All deliveries by one party to any other party at the Closing shall be deemed to have occurred simultaneously and none shall be effective until and unless all have occurred, unless the parties agree otherwise in writing.

 

Section 1.3.                                 Delivery and Payment.

 

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

 

(i)                                     the Purchased Shares, validly issued and free and clear of Encumbrances, evidenced by certificates registered in the Purchaser’s name and duly authorized, executed and delivered on behalf of the Company, bearing the legend set forth in Section 3.5(a) hereof;

 

(ii)                                  evidence that the Restated Charter and Certificate of Designation have been filed with and accepted by the Secretary of State of the State of Delaware;

 

(iii)                               a certificate, dated as of the Closing Date, signed by an authorized officer of the Company, in the form attached hereto as Exhibit B, among other things, certifying that the conditions set forth in Section 5.2 have been satisfied;

 

(iv)                              a certificate, dated as of the Closing Date, signed by the secretary of the Company, in the form attached hereto as Exhibit C, certifying as to certain matters; and

 

(v)                                 the Registration Rights Agreement, duly executed by the Company.

 

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

 

(i)                                     the Purchase Price, by wire transfer of immediately available funds to such accounts as the Company shall specify in writing not later than three (3) Business Days prior to the Closing Date; and

 

(ii)                                  the Registration Rights Agreement, duly executed by the Purchaser.

 

2

 

ARTICLE II
 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except (i) as disclosed in the Company SEC Documents or (ii) as set forth in the disclosure schedule delivered by the Company to the Purchaser simultaneously with the execution of this Agreement (the “Company Disclosure Schedule”), the Company represents and warrants to the Purchaser as follows (such representations and warranties are given with the assumption that the Asset Sale Transactions have been consummated):

 

Section 2.1.                                 Organization, Standing and Corporate Power.

 

(a)                                 The Company is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated. Each of the Company’s Subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated or formed. Each of the Company and its Subsidiaries has all requisite corporate or other power, as the case may be, and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company and its Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.

 

(b)                                 The copies of the Company Charter Documents that are incorporated by reference into the SEC Documents are complete and correct copies thereof as in effect on the date hereof. The Company is not in violation of or default under any of the provisions of the Company Charter Documents. No Subsidiary of the Company is in violation of or default under any of the provisions of its articles of incorporation, bylaws or similar organizational documents.

 

(c)                                  Section 2.1(c) of the Company Disclosure Schedule lists, as of the date hereof, all Subsidiaries of the Company together with the jurisdiction of organization of each such Subsidiary.  (i) The Company is the direct or indirect owner of all outstanding shares of capital stock of, or other equity interests in, each Subsidiary of the Company, (ii) all such shares or other equity interests have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights and are owned directly or indirectly by the Company and (iii) all such shares or other equity interests are free and clear of all liens, pledges, proxies, charges, mortgages, deeds of trust, hypothecations, encumbrances, adverse rights, title defects, restrictions or claims and security interests of any kind or nature whatsoever (including any restriction on the right to vote or transfer the same, except for such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various States of the United States) (collectively, “Liens”). Other than money market accounts, the Company does not own, directly or indirectly, any capital stock of, or voting securities or equity interests in, any Person, other than its Subsidiaries.

 

3

 

Section 2.2.                                 Capitalization.

 

(a)                                 The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.10 per share (“Company Common Stock”), and 5,000,000 shares of Company Preferred Stock. At the close of business on the date of this Agreement, (i) 70,075,429 shares of Company Common Stock were issued and outstanding, (ii) 727,137 shares of Company Common Stock were held by the Company in its treasury and (iii) no shares of Company Preferred Stock were issued and outstanding. All of the shares of Company Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. None of the Subsidiaries of the Company beneficially owns any shares of Company Common Stock or any other equity securities of the Company.

 

(b)                                 Since January 1, 2014, the Company has not issued any shares of its capital stock, voting securities or equity interests, or any securities convertible into or exchangeable or exercisable for any shares of its capital stock, voting securities or equity interests, other than pursuant to the outstanding awards under the Company Incentive Plan as disclosed in the Company SEC Documents or as otherwise expressly permitted by this Agreement.

 

(c)                                  Except (i) as set forth in Section 2.2(a), (ii) for the Convertible Notes, (iii) for outstanding awards under the Company Incentive Plan as disclosed in the Company SEC Documents or (iv) as otherwise expressly permitted by Section 4.1 of the Merger Agreement as incorporated by reference under Section 4.1 of this Agreement, as of the date of this Agreement there are not, and as of the Closing there will not be, any shares of capital stock, voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) the Company issued and outstanding or any subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance of, or obligating the Company or any of its Subsidiaries to transfer or sell, any shares of capital stock, voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) the Company, including any representing the right to purchase or otherwise receive any Company Common Stock. Except as provided for by the Company Incentive Plan and the Convertible Notes, none of the Company or any of its Subsidiaries has issued or is bound by any outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance or disposition of any shares of capital stock, voting securities or equity interests of any Subsidiary of the Company.  Except as set forth in the Company Incentive Plan, there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock, voting securities or equity interests (or any options, warrants or other rights to acquire any shares of capital stock, voting securities or equity interests) of the Company or any of its Subsidiaries. Except as set forth in Section 2.2(c) of the Company Disclosure Schedule, none of the Company or any Subsidiary of the Company is a party to any stockholders’ agreement, voting trust agreement, registration rights agreement or other similar agreement or understanding relating to capital stock, voting securities or equity interests of the Company or any of its Subsidiaries or any other agreement relating to the disposition, voting or dividends with respect to any such stock, securities or interests.

 

4

 

Section 2.3.                                 Authority; Noncontravention; Voting Requirements.

 

(a)                                 The Company has all necessary corporate or other power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to obtaining the Company Stockholder Approval, to consummate the Sale. The execution, delivery and performance by the Company of this Agreement and the consummation of the Sale have been duly authorized and approved by the Company Board and, except for obtaining the Company Stockholder Approval with respect to consummation of the Sale and related matters, no other corporate or other action on the part of the Company is necessary to authorize the execution, delivery and performance by the Company of this Agreement and the consummation of the Sale. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the Purchaser, constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Laws of general application affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity, whether considered in a proceeding at law or in equity (the “Bankruptcy and Equity Exception”).

 

(b)                                 The Company Board, at a meeting duly called and held, has (i) determined that it is fair to, and in the best interest of, the Company and the Company Stockholders to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby and (iii) resolved to recommend the authorization or approval, as applicable, by the Company Stockholders of such actions that require the authorization or approval of the Company Stockholders in order to consummate the Merger, the Sale and certain related matters (the “Company Recommendation”), which resolutions, as of the date hereof, have not been subsequently withdrawn or modified in a manner adverse to the Purchaser.

 

(c)                                  Except as set forth in Section 2.3(c) of the Company Disclosure Schedule, none of the execution and delivery of this Agreement by the Company, the consummation by the Company of the Sale or compliance by the Company with any of the terms or provisions hereof will (i) assuming that the Company Stockholder Approval is obtained, conflict with or violate any provision of the Company Charter Documents or (ii) assuming that the authorizations, consents and approvals referred to in Section 2.4 and the Company Stockholder Approval are obtained and the filings referred to in Section 2.4 are made, (A) violate any material Law, judgment, writ or injunction of any Governmental Authority applicable to the Company, any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of, the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any loan or

 

5

 

credit agreement, debenture, note, bond, mortgage, indenture, deed of trust, license, lease, contract or other agreement, instrument or obligation (each, a “Contract”) or Permit, to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except, in the case of clause (ii)(B), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.

 

(d)                                 (i) The affirmative vote (in person or by proxy) of the holders of a majority of the shares of Company Common Stock for the adoption of an amendment to the Company’s certificate of incorporation to effect a 1 for 30 reverse stock split of the Company Common Stock (the “Reverse Stock Split”) and (ii) the affirmative vote (in person or by proxy) of the holders of a majority of the shares present at the stockholders meeting for the approval of the issuance of Company Common Stock in connection with the Merger and the issuance of the Underlying Purchased Shares in connection with the consummation of the transactions contemplated by this Agreement, is the only vote or approval of the holders of any class or series of capital stock of the Company or any of its Subsidiaries which is necessary to approve the Merger, the Sale and certain related matters (the “Company Stockholder Approval”).

 

Section 2.4.                                 Governmental Approvals.  Except for (a) the filing with the SEC of a Proxy Statement in definitive form relating to the Stockholders’ Meeting (as defined below), the Form S-4 Registration Statement and any other filings required under, and compliance with other applicable requirements of, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Securities Act, state securities laws or “blue sky” laws of the various States of the United States and the rules of NASDAQ, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DLLCA and the terms of the Merger Agreement, (c) filings required under, and compliance with other applicable requirements of, the HSR Act and any other applicable Antitrust Laws pursuant to the terms of the Merger Agreement and (d) the filing with the Secretary of State of Delaware of the Amended and Restated Charter and the Certificate of Designation, no consents or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the Sale, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

Section 2.5.                                 Company SEC Documents; Undisclosed Liabilities.

 

(a)                                 The Company has filed with and furnished to the SEC all Company SEC Documents required to be filed or furnished by it since January 1, 2014 (collectively, the “Company Reports”), and the Company will file with and furnish to the SEC all Company SEC Documents required to be filed or furnished after the date of this Agreement. As of their respective effective dates (in the case of Company Reports that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective SEC filing dates (in the case of all other Company Reports), and, if amended, as of the date of the last such amendment, the Company Reports complied as to

 

6

 

form in all material respects with the requirements of the Exchange Act, the Securities Act and the Sarbanes-Oxley Act, as the case may be, applicable to such Company Reports, and none of the Company Reports as of such respective dates and, if amended, as of the date of the last such amendment, 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. None of the Company’s Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act. As of the date of this Agreement, there are no outstanding or unresolved comments received from the SEC or its staff with respect to the Company Reports.

 

(b)                                 The consolidated financial statements of the Company included or incorporated by reference in the Company Reports comply as to form, as of their respective dates and, if amended, as of the date of the last such amendment, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except as indicated in the notes thereto) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments, the absence of notes and other adjustments described therein).

 

(c)                                  Except as set forth in Section 2.5(c) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has any Liabilities of the type required to be disclosed in the liabilities column of a balance sheet prepared in accordance with GAAP, except Liabilities (i) reflected or reserved against on the unaudited balance sheet of the Company and its Subsidiaries as of May 31, 2015 (the “Balance Sheet Date”) (including the notes thereto), (ii) incurred after the Balance Sheet Date in the ordinary course of business consistent with past practice, which, individually or in the aggregate, would not be material to the Company and its Subsidiaries, taken as a whole, or to the Hudson’s Business, (iii) permitted by Section 4.1 of the Merger Agreement as incorporated by reference under Section 4.1 of this Agreement or (iv) which have been discharged or paid in full in the ordinary course of business consistent with past practice, as of the date of this Agreement.

 

Section 2.6.                                 Absence of Certain Changes or Events.  Except as set forth in Section 2.6 of the Company Disclosure Schedule, since November 30, 2014, (a) there have not been any changes, events, effects, developments, occurrences or state of facts that, individually or in the aggregate, have had or would reasonably be expected to have a Company Material Adverse Effect and (b) the Company and its Subsidiaries have carried on and operated their respective businesses in all material respects in the ordinary course of business consistent with past practice.

 

7

 

Section 2.7.                                 Legal Proceedings.  As of the date of this Agreement, except as set forth in Section 2.7 of the Company Disclosure Schedule, there is no pending or, to the Knowledge of the Company, threatened, legal, administrative, arbitral or other proceeding, claim, suit or action against, or, to the Knowledge of the Company, governmental or regulatory audit or investigation of, the Company, any of its Subsidiaries, any of its or their respective properties or assets, or any officer, director or employee of the Company or any of its Subsidiaries in such capacity, that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.  There is no Order imposed (or, to the Knowledge of the Company, threatened to be imposed) upon the Company, any of its Subsidiaries or any of its or their respective properties or assets, by or before any Governmental Authority that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.

 

Section 2.8.                                 Compliance with Laws; Permits.  Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries are (and since January 1, 2014 have been) in compliance with all laws (including common law), statutes, ordinances, codes, rules, regulations, decrees and Orders of Governmental Authorities (collectively, “Laws”) applicable to the Company or any of its Subsidiaries, any of their properties or other assets or any of their businesses or operations or their employees. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and each of its Subsidiaries hold (and since January 1, 2014 have held) all licenses, franchises, permits, certificates, registrations, approvals and authorizations from Governmental Authorities, or required by Governmental Authorities to be obtained, in each case necessary for the lawful conduct of their respective businesses (collectively, “Permits”).  Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries are (and since January 1, 2014 have been) in compliance with the terms of all such Permits.

 

Section 2.9.                                 Issuance and Delivery of Purchased Shares.  The Purchased Shares have been duly authorized and, when issued by the Company in the Sale and the Purchase Price is paid by the Purchaser in the Sale, in each case in compliance with the provisions of this Agreement, (a) shall be free and clear of any and all Liens, except for such Liens as are expressly set forth in this Agreement or in the Certificate of Designation or otherwise imposed by applicable federal or state securities laws or by the Purchaser, (b) shall have been duly authorized and validly issued and (c) shall be fully paid and nonassessable.

 

Section 2.10.                          No General Solicitation.  Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Section 4(a)(2) under the Securities Act) in connection with the offer or issuance of the Securities.

 

Section 2.11.                          Preemptive Rights; Rights to First Offer.  None of the sale and issuance of the Purchased Shares pursuant to this Agreement and the issuance of Underlying Purchased Shares upon conversion of the Purchased Shares in accordance with their terms are or will be subject to any preemptive rights, rights of first offer or similar rights of any Person.

 

Section 2.12.                          Private Placement.  Assuming the accuracy of the representations and warranties of the Purchaser set forth in Article III of this Agreement, the offer, sale, and issuance of the Purchased Shares and the issuance of the Underlying Purchased Shares upon conversion of the Purchased Shares, in each case in conformity with the terms of this Agreement, are exempt from the registration requirements of Section 5 of the Securities Act.

 

8

 

Section 2.13.                          Registration Rights.  Other than the Registration Rights Agreement and except as set forth in Section 2.13 of the Company Disclosure Schedule, the Company has not granted or agreed to grant, and is not under any obligation to provide, any rights (including “piggy-back” registration rights) to register under the Securities Act any of its presently outstanding securities or any of its securities that may be issued subsequently.

 

Section 2.14.                          No Restriction on the Ability to Pay Cash Dividends.  Except as set forth in the Amended and Restated Charter, the Certificate of Designation and in Section 2.14 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is, or will be, immediately following the Closing, a party to any Contract, and is not, and will not be, immediately following the Closing, subject to any provisions in its Charter or Bylaws or other governing documents or resolutions of the Company Board or other governing body, that restricts, limits, prohibits or prevents the payment of cash dividends with respect to any of its equity securities.

 

Section 2.15.                          Rights Agreement; Anti-Takeover Provisions.

 

(a)                                 The Company is not party to a stockholder rights agreement, “poison pill” or similar agreement or plan.

 

(b)                                 The Company Board has taken all necessary action so that any takeover, anti-takeover, moratorium, “fair price,” “control share” or other similar Law enacted under any Law applicable to the Company, including Section 203 of the DGCL, does not, and will not, apply to this Agreement, the Sale or the other transactions contemplated by the Merger Agreement.

 

Section 2.16.                          Additional Representations and Warranties.  The representations and warranties contained in Sections 2.9 (Tax Matters), 2.10 (Employee Benefits), 2.11 (Contracts), 2.12 (Intellectual Property), 2.13 (Brokers and Other Advisors), 2.14 (Related Party Transactions), 2.15 (Insurance), 2.16 (Property), 2.17 (Environmental Matters), 2.19 (Labor Matters; Employees) and 2.20 (Asset Purchase Agreements) of the Merger Agreement are hereby incorporated by reference into this Agreement mutatis mutandis.

 

ARTICLE III
  REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

Except as set forth in the disclosure schedule delivered by the Purchaser to the Company simultaneously with the execution of this Agreement (the “Purchaser Disclosure Schedule”), the Purchaser represents and warrants to the Company as follows:

 

Section 3.1.                                 Authority.  The Purchaser has all requisite power and authority to execute and deliver this Agreement and to consummate the Sale.  The Purchaser has taken all requisite action to, and no other action or proceeding on the part of the Purchaser is necessary for, the execution and delivery by the Purchaser of this Agreement or the consummation by the Purchaser of the Sale.  This Agreement has been duly executed and delivered by the Purchaser

 

9

 

and, assuming due authorization, execution and delivery of this Agreement by the Company, is a valid and binding obligation of the Purchaser and is enforceable by the Company against the Purchaser in accordance with its terms, subject, as to enforcement, to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereinafter in effect affecting creditors’ rights generally and (ii) general principles of equity.

 

Section 3.2.                                 Consents and Approvals.  No filing with, or authorization, approval, consent, license, Order, registration, qualification or decree of, any Governmental Authority or third party is necessary or required by or with respect to the Purchaser for the execution by the Purchaser of this Agreement or the consummation by the Purchaser of the Sale.

 

Section 3.3.                                 No Conflict.  None of the execution, delivery or performance by the Purchaser of this Agreement nor the consummation by the Purchaser of the Sale will conflict with, violate, constitute a breach of or a default under (i) the Purchaser’s organizational documents, (ii) any contracts to which the Purchaser is a party or by which it is bound or (iii) any Law binding upon the Purchaser.

 

Section 3.4.                                 No Proceedings.  There is no action, claim, suit, demand, hearing, notice of violation or deficiency, or proceeding pending or, to the Purchaser’s knowledge, threatened against the Purchaser by Governmental Authorities or any third party that would reasonably be expected, individually or in the aggregate, to enjoin, prevent or materially delay the consummation by the Purchaser of the Sale.

 

Section 3.5.                                 Investment Representations.

 

(a)                                 The Purchaser (i) is acquiring the Purchased Shares solely for investment with no present intention to distribute them in violation of the Securities Act and the rules and regulations thereunder or any applicable U.S. state securities laws, (ii) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of making an informed investment decision to purchase the Purchased Shares, (iii) is an “accredited investor” (as that term is defined by Rule 501 promulgated under the Securities Act) and (iv) acknowledges and understands that the Purchased Shares have not been registered under the Securities Act, or any state securities laws, and agrees that it will not offer, sell, assign, transfer, pledge, encumber or otherwise dispose of such Purchased Shares absent registration under the Securities Act or unless such transaction is exempt from, or not subject to, registration under the Securities Act, and in each case, in accordance with all applicable state securities laws.  The Purchaser understands that the Purchased Shares will be characterized as “restricted securities” under the United States federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances.  The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Purchased Shares or the fairness or suitability of the Purchased Shares.  The Purchaser understands that until such time as the resale thereof has been registered under the Securities Act, certificates evidencing the Purchased Shares shall bear a legend substantially to the following effect (in addition to any legends required under applicable securities laws):

 

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES OR UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL THAT AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.

 

ARTICLE IV
 ADDITIONAL COVENANTS AND AGREEMENTS

 

Section 4.1.                                 Certain Covenants from the Merger Agreement.  The covenants contained in Sections 4.1(a), 4.5, 4.6 and 4.7 of the Merger Agreement are hereby incorporated by reference into this Agreement mutatis mutandis and all references to RG thereto will be references to the Purchaser hereunder.  For avoidance of doubt, any of the provisions incorporated by reference under this Section 4.1 requiring the consent of RG shall require the consent of the Purchaser.

 

Section 4.2.                                 Certain Tax Matters.  The Company and the Purchaser acknowledge and agree that the Purchased Shares are being issued solely in consideration of the Purchase Price and neither the Company nor the Purchaser shall take any position for financial accounting, Tax or other purposes inconsistent with such agreement.  Without limiting the foregoing, the Company shall not record an expense or apply any withholding (other than any withholding that may be required by law pursuant to Section 1441, 1442, 1445 or other applicable provision of the Code and comparable state or local laws) in connection with the issuance or any exercise or redemption of, any adjustment to, or any payments made in respect of any of the Purchased Shares.

 

Section 4.3.                                 Reservation and Listing of Securities.  The Company shall (a) maintain a reserve from its duly authorized Company Common Stock for issuance of the Underlying Purchased Shares to fulfill its obligations in full under the Sale Documents, (b) prepare and timely file with NASDAQ a subsequent listing application covering all of the Underlying Purchased Shares, (c) use reasonable best efforts to cause the Underlying Purchased Shares to be approved for listing on NASDAQ as soon as reasonable practicable following the date hereof and in any event prior to the Closing Date and (d) use reasonable best efforts to maintain the listing of the Underlying Purchased Shares on NASDAQ.

 

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Section 4.4.                                 Use of Proceeds.  The Company shall use the net proceeds from the Sale for the purpose of consummating the Merger and the transactions contemplated by the Merger Agreement.

 

Section 4.5.                                 Notification of Certain Matters.  The Company shall give prompt notice to the Purchaser, and the Purchaser shall give prompt notice to the Company, of (i) any notice or other communication received by such party from any Governmental Authority in connection with the Sale, any of the transactions contemplated by the Sale Documents or from any Person alleging that the consent of such Person is or may be required in connection with the Sale or any of the transactions contemplated by the Sale Documents, (ii) any actions, suits, claims, investigations or proceedings commenced or, to such party’s knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its Subsidiaries which relate to the Sale or any of the transactions contemplated by the Sale Documents, (iii) the discovery of any fact or circumstance that, or the occurrence or nonoccurrence of any event the occurrence or non-occurrence of which, is reasonably likely to (A) in the case of the Company, cause the conditions set forth in Section 5.2(a) or Section 5.2(b) not to be satisfied and (B) in the case of the Purchaser, cause the conditions set forth in Section 5.3(a) or Section 5.3(b) not to be satisfied; provided, however, that the delivery of any notice pursuant to this Section 4.5 shall not (x) cure any breach of, or non-compliance with, any provision of this Agreement or (y) limit the remedies available to the party receiving such notice.

 

Section 4.6.                                 Fees and Expenses; Taxes.

 

(a)                                 Except as otherwise provided herein, all fees and expenses incurred in connection with the Sale shall be paid or reimbursed by the Company upon consummation of the Sale. If the Sale is not consummated, all fees and expenses incurred in connection with the Sale shall be paid by the party incurring such fees or expenses.

 

(b)                                 The Company shall pay all Taxes incident to preparing for, entering into and carrying out this Agreement and the consummation of the Sale.

 

Section 4.7.                                 Company Board of Directors.  At the Closing, the applicable number of directors on the Company Board shall resign such that only two directors on the Company Board immediately prior to the Closing shall remain on the Company Board immediately following the Closing and, as of the Closing, the Company Board shall appoint the three (3) persons designated by Purchaser in writing at least five (5) Business Days prior to the anticipated Closing Date to fill three of such vacancies as a director of the Company. A remaining vacancy will be filled by the Company’s Chief Executive Officer following the Effective Time.

 

Section 4.8.                                 No Waivers under the Merger Agreement.  The Company and its Subsidiaries will not amend or waive any material term or condition of the Merger Agreement without the prior written consent of the Purchaser, which, for the avoidance of doubt shall include, without limitation, any extension of the Outside Date (as such term is defined in the Merger Agreement).

 

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ARTICLE V
 CONDITIONS TO CLOSING

 

Section 5.1.                                 Conditions to Each Party’s Obligations.  The respective obligations of each party hereto to effect the Sale shall be subject to the satisfaction (or waiver, if permissible under applicable Law, by the Purchaser and the Company) on or prior to the Closing Date of the following conditions:

 

(a)                                 Stockholder Approval; Filing of Restated Charter and Certificate of Designation.  The Company Stockholder Approval shall have been obtained on or before the Closing Date, and the Restated Charter and Certificate of Designation shall have been properly filed with and accepted by the office of the Secretary of State of the State of Delaware.

 

(b)                                 No Injunctions or Restraints.  No Law or Order enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining, preventing or prohibiting consummation of the Sale or making the consummation of the Sale illegal.

 

(c)                                  Consummation of the Merger Agreement.  The Merger shall have been consummated in accordance with the terms of the Merger Agreement.

 

Section 5.2.                                 Conditions to Obligations of the Purchaser The obligations of the Purchaser to consummate the Sale shall be subject to the satisfaction, or waiver by the Purchaser, of each of the following conditions:

 

(a)                                 Representations and Warranties.  (i) The representations and warranties of the Company set forth in Sections 2.1(a), 2.2, 2.3(a), 2.3(d) 2.9, 2.10, 2.11, 2.12, 2.13 and 2.15, shall be true and correct (other than in de minimis respects with regard to Section 2.2) as of the date of this Agreement and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date) and (ii) all other representations and warranties of the Company set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to not be so true and correct (without giving effect to any limitation as to “materiality” or “Company Material Adverse Effect” set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.  The Purchaser shall have received a certificate signed on behalf of the Company by the Interim Chief Executive Officer and Chief Financial Officer thereof to such effect.

 

(b)                                 Performance of Obligations of the Company.  The Company shall have performed or complied in all material respects with its obligations, agreements and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing Date and the Purchaser shall have received a certificate signed on behalf of the Company by the Interim Chief Executive Officer and Chief Financial Officer thereof to such effect.

 

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(c)                                  Listing.  The Underlying Purchased Shares shall have been authorized for listing on the NASDAQ, subject to official notice of issuance.

 

(d)                                 No Material Adverse Effect.  Since the date of this Agreement, there shall not have occurred a Company Material Adverse Effect and there shall not have been any changes, events, effects, developments, occurrences or state of facts that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.

 

(e)                                  Closing Deliveries.  The Company shall have made, or caused to be made, delivery to the Purchaser of the items required to be delivered to the Purchaser pursuant to Section 1.3(a).

 

Section 5.3.                                 Conditions to the Company’s Obligations.  The obligations of the Company to consummate the Sale shall be subject to the satisfaction, or waiver by the Company, of each of the following conditions:

 

(a)                                 Representations and Warranties.  (i) The representations and warranties of the Purchaser set forth in Sections 3.1 and 3.5 shall be true and correct other than in de minimis respects as of the date of this Agreement and as of the Closing Date, as if made at and as of such time and (ii) all other representations and warranties of the Purchaser set forth in this Agreement shall be true and correct (disregarding all qualifications or limitations as to “materiality” and words of similar import set forth therein) as of the date of this Agreement and as of the Closing Date as though made on the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a material effect on Purchaser’s ability to, in a timely manner, perform its obligations under this Agreement or consummate the Sale.  The Company shall have received a certificate signed on behalf of the Purchaser by an executive officer thereof to such effect.

 

(b)                                 Performance of Obligations of the Purchaser.  The Purchaser shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date and the Company shall have received a certificate signed on behalf of the Purchaser by an executive officer of the Purchaser to such effect.

 

(c)                                  Closing Deliveries.  The Purchaser shall have made, or caused to be made, delivery to the Company of the items required to be delivered to the Company pursuant to Section 1.3(b).

 

(d)                                 Validity of the Guaranty.  The Guaranty shall be in full force and effect and the valid, binding obligation of the Guarantor.

 

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ARTICLE VI
 TERMINATION

 

Section 6.1.                                 Termination by the Purchaser or the Company.  This Agreement shall terminate automatically and without any action from either the Company or the Purchaser if the Merger Agreement is terminated in accordance with its terms.

 

Section 6.2.                                 Effect of Termination.  In the event of the termination of this Agreement as provided in Section 6.1, this Agreement shall forthwith become null and void (other than Section 4.6, Section 6.2, Article VII and the expense reimbursement provisions contained in Section 4.6(a), all of which shall survive termination of this Agreement), and there shall be no liability on the part of the Purchaser or the Company or their Affiliates or Representatives, except (a) no such termination shall relieve the Purchaser or the Company for any liabilities or damages incurred or suffered by the Company or the Purchaser, as the case may be, to the extent such liabilities or damages were the result of the breach by the Purchaser or the Company, as the case may be, of any of its representations, warranties, covenants or other agreements set forth in this Agreement and (b) nothing shall relieve any party to this Agreement from liability for any damages for a knowing and intentional breach of a representation or warranty or a knowing and intentional breach of any obligation hereunder made or allowed to occur or actual (not constructive) fraud.

 

ARTICLE VII
 MISCELLANEOUS

 

Section 7.1.                                 Survival of Representations and Warranties.  The representations and warranties of the Company set forth in Sections 2.1, 2.2, 2.3(a), 2.3(a) 2.9, 2.10, 2.11, 2.12 and 2.15 will terminate upon ninety (90) days after the expiration of the statutes of limitations applicable to each such representation and warranty. All other representations and warranties will not survive the Closing.

 

Section 7.2.                                 Notices.  All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, facsimiled (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:

 

if to Company:

 

Joe’s Jeans Inc. 
 2340 S. Eastern Avenue 
 Commerce, CA 90040 
 Attention:                                         Interim Chief Executive Officer 
 Facsimile:                                         (323) 837-3791

 

with a copy (which shall not constitute notice) to:

 

Akin Gump Strauss Hauer & Feld LLP 
 1333 New Hampshire Avenue NW 
 Washington DC 20036

Attention:                                         Russell W. Parks, Jr. 

Erica D. McGrady 

Facsimile:                                         (202) 887-4288

 

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if to the Purchaser:

 

TCP Denim, LLC

c/o Tengram Capital Partners
 15 Riverside Avenue, First Floor
 Westport, CT 06880
 Attention:  Andrew R. Tarshis
 Facsimile:  (203) 454-6998

 

with a copy (which shall not constitute notice) to:

 

Skadden, Arps, Slate, Meagher & Flom LLP
 300 South Grand Avenue, Suite 3400
 Los Angeles, CA 90071
 Attention:                                         Jeffrey H. Cohen

Andrew D. Garelick

Facsimile:                                         (213) 687-5600

 

or such other address or facsimile number as such party may hereafter specify by like notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

 

Section 7.3.                                 Amendments and Waivers.  The provisions of this Agreement may not be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions hereof may not be given, without the written consent of the Company and the Purchaser.

 

Section 7.4.                                 Descriptive Headings, Etc.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein.  Unless the context of this Agreement otherwise requires:  (1) words of any gender shall be deemed to include each other gender; (2) words using the singular or plural number shall also include the plural or singular number, respectively; (3) the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and paragraph references are to the Sections and paragraphs of this Agreement unless otherwise specified; (4) the word “including” and words of similar import when used in this Agreement mean “including, without limitation,” unless otherwise specified; (5) “or” is not exclusive; and (6) provisions apply to successive events and transactions.

 

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Section 7.5.                                 Further Assurances.  Each party to this Agreement shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such agreements, certificates, instruments and documents as the other party hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

Section 7.6.                                 No Third-Party Beneficiaries.  No person or entity not a party to this Agreement shall be deemed to be a third-party beneficiary hereunder or entitled to any rights hereunder.

 

Section 7.7.                                 Successors and Assigns.  The provisions of this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto. This Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the written consent of the Purchaser. The Purchaser may assign its rights hereunder in whole or in part to any Person to whom the Purchaser assigns or transfers any Securities in compliance with the Sale Documents and applicable law, provided such transferee shall agree in writing to be bound, with respect to the transferred Securities, by the terms and conditions of this Agreement that apply to the “Purchaser.”

 

Section 7.8.                                 Entire Agreement.  This Agreement (together with the other Sale Documents) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior documents, agreements and understandings, both written and verbal, among the parties with respect to the subject matter hereof and the transactions contemplated hereby.

 

Section 7.9.                                 Severability.  In the event that any one or more of the provisions, paragraphs, words, clauses, phrases or sentences contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision, paragraph, word, clause, phrase or sentence in every other respect and of the other remaining provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.

 

Section 7.10.                          Governing Law; Jurisdiction; Waiver of Jury Trial.

 

(a)                                 This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware, without regard to its rules of conflict of laws.  To the fullest extent permitted by Law, any action against any party to this Agreement arising out of or in any way relating to this Agreement shall be brought in the Court of Chancery of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), and each of the parties submits to the exclusive jurisdiction of such courts for the purpose of any such action.  To the fullest extent permitted by Law, each party irrevocably and unconditionally agrees not to assert (i) any objection which it may ever have to the laying of venue of any such action in the Court of Chancery of the State of

 

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Delaware and any state appellate court therefrom within the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), (ii) any claim that any such action brought in any such court has been brought in an inconvenient forum, and (iii) any claim that such court does not have jurisdiction with respect to such action.

 

(b)                                 EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE, TO THE FULLEST EXTENT PERMITTED BY LAW, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE DEBT COMMITMENT LETTERS OR THE DOCUMENTS RELATED THERETO.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 7.10.

 

Section 7.11.                          Specific Enforcement; Limit on Liability.  The parties agree that irreparable damage would occur and the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, except as provided in the following sentence.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement from the Chancery Court of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Chancery Court of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), without proof of actual damages, without bond or other security being required, this being in addition to any other remedy to which they are entitled at law or in equity.  The parties hereto further agree that (i) by seeking the remedies provided for in this Section 7.11, a party shall not in any respect waive its right to seek any other form of relief that may be available to a party under this Agreement (including monetary damages) in the event that the remedies provided for in this Section 7.11 are not available or otherwise are not granted, and (ii) nothing set forth in this Section 7.11 shall require any party hereto to institute any proceeding for (or limit any party’s right to institute any proceeding for) specific performance under this Section 7.11 prior or as a condition to exercising any termination right under Article VI (and pursuing damages after such termination), nor shall the commencement of any legal proceeding pursuant to this Section 7.11 or anything set forth in this Section 7.11 restrict or limit any party’s right to terminate this Agreement in accordance with the terms of Article VI or pursue any other remedies under this Agreement that may be available then or thereafter.

 

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Section 7.12.                          Definitions.

 

(a)                                 As used in this Agreement, the following terms have the meanings ascribed thereto below:

 

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person.  For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.

 

“Agreement” has the meaning set forth in the preamble hereto.

 

“Amended and Restated Charter” has the meaning set forth in the recitals hereto.

 

“Antitrust Laws” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other applicable Laws issued by a Governmental Authority that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.

 

“Balance Sheet Date” has the meaning set forth in Section 2.5(c).

 

“Bankruptcy and Equity Exception” has the meaning set forth in Section 2.3(a).

 

“Business Day” means a day except a Saturday, a Sunday or other day on which the SEC or banks in New York, New York are authorized or required by Law to be closed.

 

“Certificate of Designation” has the meaning set forth in the recitals hereto.

 

“Certificate of Merger” means the certificate of merger with respect to the Merger, containing the provisions required by, and executed in accordance with, the DLLCA.

 

“Closing” has the meaning set forth in Section 1.2.

 

“Closing Date” has the meaning set forth in Section 1.2.

 

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“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company” has the meaning set forth in the preamble hereto.

 

“Company 10-K” means the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2014, as amended.

 

“Company Board” has the meaning set forth in the recitals.

 

“Company Charter Documents” means the Certificate of Incorporation and Bylaws of the Company, each as amended.

 

“Company Common Stock” has the meaning set forth in Section 2.2(a).

 

“Company Incentive Plan” means the Amended and Restated 2004 Stock Incentive Plan, as amended, of the Company.

 

“Company Material Adverse Effect” means any change, event, circumstance, effect, development, occurrence or state of facts that, individually or in the aggregate:  (i) has or would be reasonably likely to have a material adverse effect on the business, condition, properties, assets, liabilities (contingent or otherwise), results of operations or financial condition of (x) the Company and its Subsidiaries, taken as a whole, or on the Hudson’s Business; provided, however, that none of the following shall be deemed in itself to constitute, and that none of the following shall be taken into account in determining whether there has been or would reasonably be expected to be, a Company Material Adverse Effect:  (a) any change generally affecting the economy, financial markets or political, economic or regulatory conditions in the United States or any other geographic region in which the Company and its Subsidiaries conduct business (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudson’s Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (b) general financial, credit or capital market conditions, including interest rates or exchange rates, or any changes therein (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudson’s Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (c) conditions (or changes therein) in any industries in which the Company and its Subsidiaries operate (excluding seasonal fluctuations) (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudson’s Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (d) the taking of any action required by this Agreement or the announcement of the transactions contemplated hereby, (e) changes in applicable Law or GAAP (or, in each case, any interpretations thereof) (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudson’s Business are disproportionately adversely affected relative to

 

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other participants in the industries in which the Company and its Subsidiaries participate), (f) a decline in the price of the Company Common Stock on NASDAQ or any other market in which such securities are quoted for purchase and sale (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been, or will be, a Company Material Adverse Effect), (g) any acts of terrorism or war or any escalation thereof or any weather related event, fire or natural disaster (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudson’s Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), or (h) any failure by the Company and its Subsidiaries to meet internal or published projections, forecasts, performance measures, operating statistics or revenue or earnings predictions for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been, or will be, a Company Material Adverse Effect); or (ii) has a material adverse effect on the Company’s ability to, in a timely manner, perform its obligations under this Agreement, consummate the transactions contemplated by this Agreement or consummate the Sale.

 

“Company Preferred Stock” has the meaning set forth in the recitals.

 

“Company Recommendation” has the meaning set forth in Section 2.3(b).

 

“Company Reports” has the meaning set forth in Section 2.5(a).

 

“Company SEC Documents” means all reports, schedules, forms, certifications, prospectuses, and registration, proxy and other statements required to be filed with or furnished to the SEC, together with all documents filed on a voluntary basis on Form 8-K, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein.

 

“Company Stockholder Approval” has the meaning set forth in Section 2.3(d).

 

“Company Stockholders” has the meaning set forth in the recitals.

 

“Contract” has the meaning set forth in Section 2.3(c).

 

“Convertible Notes” means those certain subordinated convertible notes issued on September 30, 2013, and all payment in kind notes issued as interest thereon, to the former stockholders and optionholders of Hudson Clothing Holdings, Inc.

 

“Copyrights” has the meaning set forth in the definition of Intellectual Property Rights.

 

“DGCL” means the Delaware General Corporation Law.

 

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“DLLCA” means the Delaware Limited Liability Company Act.

 

“Encumbrance” means any lien, encumbrance, security interest, pledge, mortgage, hypothecation, charge, restriction on transfer of title, adverse claim, title retention agreement of any nature or kind, or similar claim or right. The term “Encumbrance” shall not include any restrictions on transfer applicable to the Purchased Shares under applicable securities laws.

 

“Exchange Act” has the meaning set forth in Section 2.4.

 

“Form S-4 Registration Statement” means the registration statement on Form S-4 to be filed with the SEC by the Company in connection with issuance of Company Common Stock in the Merger, as such registration statement may be amended prior to the time it is declared effective by the SEC.

 

“Governmental Authority” means any supranational, foreign, domestic, state, municipal or local government, political subdivision or any department, court, arbitrator, commission, board, bureau, regulatory or administrative agency, instrumentality or other authority thereof, or any other governmental or quasi-governmental authority (including any government-sponsored enterprise such as Fannie Mae or Freddie Mac).

 

“Guarantor” has the meaning set forth in the recitals.

 

“Guaranty” has the meaning set forth in the recitals.

 

“Hudson’s Business” means the business of the Company operated as of the date hereof under the brand names “Hudson’s” and “Hudson Jeans.”

 

“Intellectual Property Rights” means all of the rights arising from or in respect of the following, whether protected, created or arising under the Laws of the United States or any foreign jurisdiction:  (i) patents, patent applications, any reissues, reexaminations, divisionals, continuations, continuations-in-part and extensions thereof (collectively, “Patents”); (ii) trademarks, service marks, trade names (whether registered or unregistered), fictitious names, industrial designs, brand names, domain names, social media handles and accounts, trade dress rights, identifying symbols, logos, emblems, signs or insignia, and including all goodwill associated with the foregoing; (iii) copyrights, whether registered or unregistered (including copyrights in computer software programs), mask work rights and registrations and applications therefore (collectively, “Copyrights”); (iv) confidential, proprietary or other nonpublic information, or non-public processes, designs, specifications, technology, know-how, techniques, formulas, inventions (whether or not patentable and whether or not reduced to practice), concepts, trade secrets, discoveries, ideas and technical data and information, in each case which derive economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other Persons who can obtain economic value from its disclosure or use, and which is the subject of commercially reasonable efforts to maintain its secrecy, excluding

 

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any rights in respect of any of the foregoing that comprise or are protected by Copyrights or Patents; (v) rights of publicity and moral rights; (vi) any other intellectual property rights and (vi) all applications and registrations related to any of the foregoing clauses (i) through (iv).

 

“Joe’s Business” means the business of the Company operated as of the date hereof under the brand names “Joe’s Jeans,” “Joe’s,” “Joe’s JD” and “else.”

 

“Knowledge of the Company” means the actual knowledge, after reasonable inquiry under the circumstances (but only to the extent of each such individual’s area of responsibility), of the Samuel Furrow, Hamish Sandhu, Lori Nembirkow, Peter Kim and Robert Otto.

 

“Laws” has the meaning set forth in Section 2.8.

 

“Liens” has the meaning set forth in Section 2.1(c).

 

“Merger” has the meaning set forth in the recitals hereto.

 

“Merger Agreement” has the meaning set forth in the recitals hereto.

 

“Merger Sub” has the meaning set forth in the recitals hereto.

 

“NASDAQ” means the Nasdaq Capital Market.

 

“Order” means any writ, judgment, injunction, consent, order, decree, stipulation, award or executive order of or by any Governmental Authority.

 

“Patents” has the meaning set forth in the definition of Intellectual Property Rights.

 

“Permits” has the meaning set forth in Section 2.8.

 

“Person” means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity, including a Governmental Authority.

 

“Proxy Statement” means a proxy statement/prospectus to be sent to the Company’s stockholders in connection with the Stockholders’ Meeting.

 

“Purchase Price” has the meaning set forth in Section 1.1.

 

“Purchased Shares” has the meaning set forth in Section 1.1.

 

“Purchaser” has the meaning set forth in the preamble hereto.

 

“Representatives” means a company’s Subsidiaries and Affiliates and each of the company’s and the company’s Subsidiaries’ and Affiliates’ respective directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, agents and other representatives.

 

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“Registration Rights Agreement” means the Registration Rights Agreement, in substantially the form attached to this Agreement as Exhibit D, dated as of the Closing Date, by and among the Company, the Purchaser and the other parties specified therein.

 

“Reverse Stock Split” has the meaning set forth in Section 2.3(d).

 

“RG” has the meaning set forth in the recitals hereto.

 

“Rollover Letter” has the meaning set forth in the recitals.

 

“Sale” has the meaning set forth in Section 1.1.

 

“Sale Documents” means this Agreement, the Registration Rights Agreement, the Certificate of Designation and any other document, instrument or agreement entered into in connection with the Sale.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities” means the Purchased Shares and Underlying Purchased Shares.

 

“Securities Act” has the meaning set forth in the recitals hereto.

 

“Stockholders’ Meeting” has the meaning set forth in Section 4.5(e) of the Merger Agreement as incorporated by referenced under Section 4.1 hereto.

 

“Subsidiary” when used with respect to any party, means any corporation, limited liability company, partnership, association, trust or other entity the accounts of which would be consolidated with those of such party in such party’s consolidated financial statements if such financial statements were prepared in accordance with GAAP, as well as any other corporation, limited liability company, partnership, association, trust or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power (or, in the case of a partnership, more than 50% of the general partnership interests) are, as of such date, owned or controlled by such party or one or more Subsidiaries of such party or by such party and one or more Subsidiaries of such party.

 

“Tax” or “Taxes” means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes (in the case of all such taxes, whether the tax base is modified or

 

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not), customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Authority in connection with any item described in clause (i), and (iii) any liability in respect of any items described in clauses (i) or (ii) payable by reason of contract, assumption, transferee or successor liability, operation of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof or any analogous or similar provision under Law) or otherwise.

 

“Underlying Purchased Shares” means the shares of the Company’s Common Stock issuable upon conversion of the Purchased Shares in accordance with the terms and provisions thereof.

 

(b)                                 Any capitalized term used herein but not defined shall have the meaning ascribed to such term in the Merger Agreement.

 

Section 7.13.                          Counterparts; Scanned Signatures.  This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.  Facsimile or other electronically scanned and transmitted signatures shall be deemed originals for all purposes of this Agreement.

 

[Signature Page Follows]

 

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

 

	
 
    	
 
    
	
 
    	
JOE’S   JEANS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Hamish Sandhu
    
	
 
    	
 
    	
Name:   Hamish Sandhu
    
	
 
    	
 
    	
Title:   CFO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TCP   DENIM, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Andrew Tarshis
    
	
 
    	
 
    	
Name:   Andrew Tarshis 
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to Stock Purchase Agreement]

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