Document:

Exhibit 4.1

 

Alteva, Inc.,

a New York corporation

 

and

 

American Stock Transfer & Trust Company, LLC, as Rights Agent

 

RIGHTS AGREEMENT

 

Dated as of September 2, 2014

 

 

TABLE OF CONTENTS

 

	
 
    	
Page
    
	
 
    	
 
    
	
Section 1.
    	
Certain Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
Section 2.
    	
Appointment of Rights Agent
    	
7
    
	
 
    	
 
    	
 
    
	
Section 3.
    	
Issue of Right Certificates
    	
7
    
	
 
    	
 
    	
 
    
	
Section 4.
    	
Form of Right Certificates
    	
9
    
	
 
    	
 
    	
 
    
	
Section 5.
    	
Countersignature and Registration
    	
9
    
	
 
    	
 
    	
 
    
	
Section 6. 
    	
Transfer, Split Up, Combination and Exchange of Right   Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates
    	
10
    
	
 
    	
 
    	
 
    
	
Section 7.
    	
Exercise of Rights, Purchase Price; Expiration Date of   Rights
    	
11
    
	
 
    	
 
    	
 
    
	
Section 8.
    	
Cancellation and Destruction of Right Certificates
    	
12
    
	
 
    	
 
    	
 
    
	
Section 9.
    	
Availability of Preferred Shares
    	
12
    
	
 
    	
 
    	
 
    
	
Section 10.
    	
Preferred Shares Record Date
    	
13
    
	
 
    	
 
    	
 
    
	
Section 11.
    	
Adjustment of Purchase Price, Number and Kind of Shares and   Number of Rights
    	
14
    
	
 
    	
 
    	
 
    
	
Section 12.
    	
Certificate of Adjusted Purchase Price or Number of Shares
    	
21
    
	
 
    	
 
    	
 
    
	
Section 13.
    	
Consolidation, Merger or Sale or Transfer of Assets or   Earning Power
    	
22
    
	
 
    	
 
    	
 
    
	
Section 14.
    	
Fractional Rights and Fractional Shares
    	
25
    
	
 
    	
 
    	
 
    
	
Section 15.
    	
Rights of Action
    	
26
    
	
 
    	
 
    	
 
    
	
Section 16.
    	
Agreement of Right Holders
    	
27
    
	
 
    	
 
    	
 
    
	
Section 17.
    	
Right Certificate Holder Not Deemed a Shareholder
    	
27
    
	
 
    	
 
    	
 
    
	
Section 18.
    	
Concerning the Rights Agent
    	
27
    
	
 
    	
 
    	
 
    
	
Section 19.
    	
Merger or Consolidation or Change of Name of Rights Agent
    	
28
    
	
 
    	
 
    	
 
    
	
Section 20.
    	
Duties of Rights Agent
    	
29
    
	
 
    	
 
    	
 
    
	
Section 21.
    	
Change of Rights Agent
    	
30
    
	
 
    	
 
    	
 
    
	
Section 22.
    	
Issuance of New Right Certificates
    	
31
    

 

 

	
Section 23.
    	
Redemption
    	
32
    
	
 
    	
 
    	
 
    
	
Section 24.
    	
Exchange
    	
32
    
	
 
    	
 
    	
 
    
	
Section 25.
    	
Notice of Certain Events
    	
33
    
	
 
    	
 
    	
 
    
	
Section 26.
    	
Notices
    	
34
    
	
 
    	
 
    	
 
    
	
Section 27.
    	
Supplements and Amendments
    	
35
    
	
 
    	
 
    	
 
    
	
Section 28.
    	
Successors
    	
35
    
	
 
    	
 
    	
 
    
	
Section 29.
    	
Benefits of this Agreement
    	
35
    
	
 
    	
 
    	
 
    
	
Section 30.
    	
Determinations and Actions by the Board of Directors
    	
35
    
	
 
    	
 
    	
 
    
	
Section 31.
    	
Severability
    	
36
    
	
 
    	
 
    	
 
    
	
Section 32.
    	
Governing Law
    	
36
    
	
 
    	
 
    	
 
    
	
Section 33.
    	
Counterparts
    	
36
    
	
 
    	
 
    	
 
    
	
Section 34.
    	
Descriptive Headings
    	
36
    

 

 

RIGHTS AGREEMENT

 

Rights Agreement, dated as of September 2, 2014 (“Agreement”), between Alteva, Inc., a New York corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agent”).

 

The Board of Directors of the Company has adopted resolutions creating a series of preferred shares designated as “Series A Junior Participating Preferred Shares” and authorized and declared a dividend of one preferred share purchase right (a “Right”) for each Common Share (as hereinafter defined) outstanding as of the Close of Business (as defined below) on September 15, 2014 (the “Record Date”), each Right initially representing the right to purchase one one-thousandth (subject to adjustment) of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right (subject to adjustment as provided herein) with respect to each Common Share that shall become outstanding between the Record Date and the earlier of the Distribution Date and the Expiration Date (as such terms are hereinafter defined); provided, however, that Rights may be issued with respect to Common Shares that shall become outstanding after the Distribution Date and prior to the Expiration Date in accordance with Section 22.

 

Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

 

Section 1.  Certain Definitions.  For purposes of this Agreement, the following terms have the meaning indicated:

 

(a)                                 “Acquiring Person” shall mean any Person (as such term is hereinafter defined) who or which shall be the Beneficial Owner (as such term is hereinafter defined) of 20% or more of the Common Shares then outstanding, but shall not include an Exempt Person (as such term is hereinafter defined); provided, however, that

 

(i)                                     if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an “Acquiring Person” became the Beneficial Owner of a number of Common Shares such that the Person would otherwise qualify as an “Acquiring Person” inadvertently (including, without limitation, because (A) such Person was unaware that it beneficially owned that number of Common Shares that would otherwise cause such Person to be an “Acquiring Person” or (B) such Person was aware of the extent of its Beneficial Ownership of Common Shares but had no actual knowledge of the consequences of such Beneficial Ownership under this Agreement) and without any intention of changing or influencing control of the Company, then such Person shall not be deemed to be or to have become an “Acquiring Person” for any purposes of this Agreement unless and until such Person shall have failed to divest itself, as soon as practicable (as determined, in good faith, by the Board of Directors of the Company), of Beneficial Ownership of a sufficient number of Common Shares so that such Person would no longer otherwise qualify as an “Acquiring Person”;

 

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(ii)                                  if, as of the date hereof or prior to the first public announcement of the adoption of this Agreement, any Person is or becomes the Beneficial Owner of 20% or more of the Common Shares outstanding, such Person shall not be deemed to be or to become an “Acquiring Person” unless and until such time as such Person shall, after the first public announcement of the adoption of this Agreement, become the Beneficial Owner of additional Common Shares representing 1% or more of the Common Shares then outstanding (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Shares or pursuant to a split or subdivision of the outstanding Common Shares), unless, upon becoming the Beneficial Owner of such additional Common Shares, such Person is not then the Beneficial Owner of 20% or more of the Common Shares then outstanding;

 

(iii)                               no Person shall become an “Acquiring Person” solely as a result of any unilateral grant of any security by the Company or through the exercise of any options, warrants, rights or similar interests (including restricted shares) granted by the Company to its directors, officers and employees;

 

(iv)                              no Person shall become an “Acquiring Person” as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportion of the Common Shares beneficially owned by such Person to 20% or more of the Common Shares then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 20% or more of the Common Shares then outstanding by reason of such share acquisitions by the Company and shall thereafter become the Beneficial Owner of any additional Common Shares (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Shares or pursuant to a split or subdivision of the outstanding Common Shares), then such Person shall be deemed to be an “Acquiring Person” unless upon becoming the Beneficial Owner of such additional Common Shares such Person does not beneficially own 20% or more of the Common Shares then outstanding; and

 

(v)                                 no Person shall become an “Acquiring Person” as the result of the acquisition of Beneficial Ownership of Common Shares from an individual who, on the later of the date hereof or the first public announcement of this Agreement, is the Beneficial Owner of 20% or more of the Common Shares then outstanding if such Common Shares are received by such Person upon such individual’s death pursuant to such individual’s will or pursuant to a charitable trust created by such individual for estate planning purposes.

 

For all purposes of this Agreement, any calculation of the number of Common Shares outstanding at any particular time, including for purposes of determining the particular percentage of the outstanding Common Shares of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in effect on the date hereof.

 

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(b)                                 “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof.

 

(c)                                  A Person shall be deemed the “Beneficial Owner” of, shall be deemed to have “Beneficial Ownership” of and shall be deemed to “beneficially own” any securities:

 

(i)                                     which such Person or any of such Person’s Affiliates or Associates is deemed to beneficially own, directly or indirectly, within the meaning of Rule l3d-3 of the General Rules and Regulations under the Exchange Act as in effect on the date hereof;

 

(ii)                                  which such Person or any of such Person’s Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (w) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase, (x) securities which such Person has a right to acquire upon the exercise of Rights at any time prior to the time that any Person becomes an Acquiring Person, (y) securities issuable upon the exercise of Rights from and after the time that any Person becomes an Acquiring Person if such Rights were acquired by such Person or any of such Person’s Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (“Original Rights”) or pursuant to Section 11(i) or Section 11(n) with respect to an adjustment to Original Rights, or (z) securities which such Person or any of such Person’s Affiliates or Associates may acquire, does or do acquire or may be deemed to have the right to acquire, pursuant to any merger or other acquisition agreement between the Company and such Person (or one or more of such Person’s Affiliates or Associates) if such agreement has been approved by the Board of Directors prior to such Person’s becoming an Acquiring Person; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, further, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security by reason of such agreement, arrangement or understanding if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report);

 

(iii)                               which are beneficially owned, directly or indirectly, by any other Person and with respect to which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding (other than customary

 

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agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) (A) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of such securities of the Company or (B) to cooperate in obtaining, changing or influencing the control of the Company (except to the extent contemplated by the proviso to Section 1(c)(ii)(B)); or

 

(iv)                              which are the subject of a derivative transaction entered into by such Person or any of such Person’s Affiliates or Associates, including, for these purposes, any derivative security acquired by such Person or any of such Person’s Affiliates or Associates that gives such Person or any of such Person’s Affiliates or Associates the economic equivalent of ownership of an amount of securities due to the fact that the value of the derivative security is explicitly determined by reference to the price or value of such securities, or that provides such Person or any of such Person’s Affiliates or Associates an opportunity, directly or indirectly, to profit or to share in any profit derived from any change in the value of such securities, in any case without regard to whether (A) such derivative security conveys any voting rights in such securities to such Person or any of such Person’s Affiliates or Associates; (B) the derivative security is required to be, or capable of being, settled through delivery of such securities; or (C) such Person or any of such Person’s Affiliates or Associates may have entered into other transactions that hedge the economic effect of such derivative security. In determining the number of Common Shares that are beneficially owned by virtue of the operation of this Section 1(c)(iv), the subject Person will be deemed to beneficially own (without duplication) the notional or other number of Common Shares that, pursuant to the documentation evidencing the derivative security, may be acquired upon the exercise or settlement of the applicable security or as the basis upon which the value or settlement amount of such security, or the opportunity of the holder of such derivative security to profit or share in any profit, is to be calculated, in whole or in part, and in any case (or if no such number of Common Shares is specified in such documentation or otherwise) as determined by the Company’s Board of Directors in good faith to be the number of Common Shares to which the derivative security relates;

 

provided, however, that no Person who is an officer, director or employee of an Exempt Person shall be deemed, solely by reason of such Person’s status or authority as such, to be the “Beneficial Owner” of, to have “Beneficial Ownership” of or to “beneficially own” any securities that are “beneficially owned” (as defined in this Section l(c)), including, without limitation, in a fiduciary capacity, by an Exempt Person or by any other such officer, director or employee of an Exempt Person.

 

(d)                                 “Book Entry” shall mean an uncertificated book entry for the Common Shares.

 

(e)                                  “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York or the city in which the principal office of the Rights Agent is located are authorized or obligated by law or executive order to close.

 

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(f)                                   “Certificate of Amendment” shall mean the Certificate of Amendment of Certificate of Incorporation of the Company related to the Preferred Shares, the form of which is attached to this Agreement as Exhibit A, as amended and/or restated from time to time in accordance with its terms.

 

(g)                                  “Certificate of Incorporation” shall mean the Amended and Restated Certificate of Incorporation of the Company, dated September 10, 2003, as filed by the Department of State of the State of New York, as amended by a certificate of amendment dated as of May 16, 2013, and as the same may be further amended and/or restated from time to time.

 

(h)                                 “Close of Business” on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.

 

(i)                                     “Common Share Equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(j)                                    “Common Shares” when used with reference to the Company shall mean the Common Shares, presently par value $0.01 per share of the Company.  “Common Shares” when used with reference to any Person other than the Company shall mean the common shares (or, in the case of any entity other than a corporation, the equivalent equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.

 

(k)                                 “Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(l)                                     “Distribution Date” shall have the meaning set forth in Section 3 hereof.

 

(m)                             “Equivalent Preferred Shares” shall have the meaning set forth in Section 11(b) hereof.

 

(n)                                 “Exempt Person” shall mean the Company or any Subsidiary (as such term is hereinafter defined) of the Company, in each case including, without limitation, in its fiduciary capacity, or any employee benefit plan of the Company or of any Subsidiary of the Company, or any entity or trustee holding (or acting in a fiduciary capacity in respect of) Common Shares for or pursuant to the terms of any such plan or for the purpose of funding any such plan or funding other employee benefits for employees of the Company or of any Subsidiary of the Company.

 

(o)                                 “Exchange Ratio” shall have the meaning set forth in Section 24 hereof.

 

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(p)                                 “Expiration Date” shall have the meaning set forth in Section 7 hereof.

 

(q)                                 “Final Expiration Date” shall have the meaning set forth in Section 7 hereof.

 

(r)                                    “Flip-In Event” shall have the meaning set forth in Section 11(a)(ii) hereof.

 

(s)                                   “NASDAQ” shall mean The Nasdaq Stock Market.

 

(t)                                    “New York Stock Exchange” shall mean the New York Stock Exchange, Inc. and/or NYSE MKT LLC.

 

(u)                                 “Person” shall mean any individual, firm, corporation, partnership, limited liability company, trust or other entity, and shall include any successor (by merger or otherwise) to such entity.

 

(v)                                 “Preferred Shares” shall mean the Series A Junior Participating Preferred Shares, par value $0.01 per share, of the Company having the rights and preferences set forth in the Certificate of Amendment.

 

(w)                               “Principal Party” shall have the meaning set forth in Section 13(b) hereof.

 

(x)                                 “Purchase Price” shall have the meaning set forth in Section 7(b) hereof.

 

(y)                                 “Record Date” shall have the meaning set forth in the recitals hereto.

 

(z)                                  “Redemption Date” shall have the meaning set forth in Section 7 hereof.

 

(aa)                          “Redemption Price” shall have the meaning set forth in Section 23 hereof.

 

(bb)                          “Right” shall have the meaning set forth in the recitals hereto.

 

(cc)                            “Right Certificate” shall have the meaning set forth in Section 3 hereof.

 

(dd)                          “Securities Act” shall mean the Securities Act of 1933, as amended.

 

(ee)                            “Section 11(a)(ii) Trigger Date” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

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(ff)                              “Share Acquisition Date” shall mean the earliest of (i) the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such, (ii) the date a majority of the Board of Directors of the Company shall become aware of the existence of an Acquiring Person, or (iii) the public disclosure of facts by the Company or Acquiring Person indicating that any Acquiring Person has become such.

 

(gg)                            “Spread” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(hh)                          “Subsidiary” of any Person shall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or other persons performing similar functions are beneficially owned, directly or indirectly, by such Person, and any corporation or other entity that is otherwise controlled by such Person.

 

(ii)                                  “Substitution Period” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(jj)                                “Summary of Rights” shall have the meaning set forth in Section 3 hereof.

 

(kk)                          “Trading Day” shall have the meaning set forth in Section 11(d)(i) hereof.

 

Section 2.  Appointment of Rights Agent.  The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date be the holders of Common Shares) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable.

 

Section 3.  Issue of Right Certificates.

 

(a)                                 Until the Close of Business on the earlier of (i) the tenth Business Day after the Share Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action of the Board of Directors of the Company prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than an Exempt Person) of, or of the first public announcement of the intention of such Person (other than an Exempt Person) to commence, a tender or exchange offer the consummation of which would result in any Person (other than an Exempt Person) having beneficial ownership or becoming the Beneficial Owner of 20% or more of the Common Shares then outstanding (the earlier of such dates being herein referred to as the “Distribution Date,” provided, however, that if either of such dates occurs after the date of this Agreement and on or prior to the Record Date, then the Distribution Date shall be the Record Date), (x) the Rights will be evidenced (subject to the provisions of Section

 

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3(b) hereof) by the certificates representing the Common Shares registered in the names of the holders thereof (or by Book Entry shares in respect of such Common Shares) and not by separate Right Certificates, and (y) the Rights will be transferable only in connection with the transfer of Common Shares.  As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares as of the close of business on the Distribution Date (other than any Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing one Right (subject to adjustment as provided herein) for each Common Share so held.  As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates.

 

(b)                                 On the Record Date, or as soon as practicable thereafter, the Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of Exhibit C hereto (the “Summary of Rights”), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date (other than any Acquiring Person or any Associate or Affiliate of any Acquiring Person), at the address of such holder shown on the records of the Company.  With respect to certificates representing Common Shares (or Book Entry Common Shares) outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof (or such Book Entry shares) together with the Summary of Rights.  Until the Distribution Date (or, if earlier, the Expiration Date), the surrender for transfer of any certificate representing Common Shares (or any Book Entry Common Shares) outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby.

 

(c)                                  Rights shall be issued in respect of all Common Shares issued or disposed of after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date (or in certain circumstances provided in Section 22 hereof, after the Distribution Date).  Certificates issued for Common Shares after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date (or in certain circumstances provided in Section 22 hereof, after the Distribution Date) shall have impressed on, printed on, written on or otherwise affixed to them the following legend:

 

This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between ALTEVA, INC. (the “Company”) and American Stock Transfer & Trust Company, LLC, as Rights Agent, dated as of September 2, 2014, as amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company.  Under certain circumstances, as set forth in the Rights Agreement,

 

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such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate.  The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor.  Under certain circumstances, as set forth in the Rights Agreement, Rights owned by or transferred to any Person who is or becomes an Acquiring Person (as defined in the Rights Agreement) and certain transferees thereof will become null and void and will no longer be transferable.

 

With respect to any Book Entry Common Shares, such legend shall be included in a notice to the record holder of such shares in accordance with applicable law.  With respect to such certificates containing the foregoing legend, or any notice of the foregoing legend delivered to holders of Book Entry shares, until the Distribution Date the Rights associated with the Common Shares represented by such certificates or Book Entry shares shall be evidenced by such certificates or Book Entry shares alone, and the surrender for transfer of any such certificate or Book Entry share, except as otherwise provided herein, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby.  In the event that the Company purchases or otherwise acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding.

 

Notwithstanding this paragraph (c), neither the omission of a legend nor the failure to deliver the notice of such legend required hereby shall affect the enforceability of any part of this Agreement or the rights of any holder of the Rights.

 

Section 4.  Form of Right Certificates.  The Right Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) shall be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or interdealer quotation system on which the Rights may from time to time be listed or quoted, or to conform to usage.  Subject to the provisions of this Agreement, the Right Certificates shall entitle the holders thereof to purchase such number of one one-thousandths of a Preferred Share as shall be set forth therein at the Purchase Price, but the number of such one one-thousandths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein.

 

Section 5.  Countersignature and Registration.

 

(a)                                 The Right Certificates shall be executed on behalf of the Company by the President of the Company, either manually or by facsimile signature, shall have

 

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affixed thereto the Company’s seal or a facsimile thereof and shall be attested by the Secretary of the Company, either manually or by facsimile signature.  The Right Certificates shall be countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned, either manually or by facsimile.  In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the Person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such Person was not such an officer.

 

(b)                                 Following the Distribution Date, the Rights Agent will keep or cause to be kept, at an office or agency designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder.  Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.

 

Section 6.  Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.

 

(a)                                 Subject to the provisions of this Agreement, at any time after the Distribution Date and prior to the Expiration Date, any Right Certificate or Right Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase.  Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office or agency of the Rights Agent designated for such purpose.  Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested.  The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates.

 

(b)                                 Subject to the provisions of this Agreement, at any time after the Distribution Date and prior to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the

 

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Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.

 

Section 7.  Exercise of Rights, Purchase Price; Expiration Date of Rights.

 

(a)                                 Except as otherwise provided herein, the Rights shall become exercisable on the Distribution Date, and thereafter the registered holder of any Right Certificate may, subject to Section 11(a)(ii) hereof and except as otherwise provided herein, exercise the Rights evidenced thereby in whole or in part upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office or agency of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-thousandths of a Preferred Share (or other securities, cash or other assets, as the case may be) as to which the Rights are exercised, at any time which is both after the Distribution Date and prior to the time (the “Expiration Date”) that is the earliest of (i) the Close of Business on September 1, 2015 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”), (iii) the closing of any merger or other acquisition transaction involving the Company pursuant to an agreement of the type described in Sections 1(c)(ii)(A)(z) and 13(f) at which time the Rights are terminated, or (iv) the time at which such Rights are exchanged as provided in Section 24 hereof.

 

(b)                                 The Purchase Price shall be initially $22.20 for each one one-thousandth of a Preferred Share purchasable upon the exercise of a Right.  The Purchase Price and the number of one one-thousandths of a Preferred Share or other securities or property to be acquired upon exercise of a Right shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) of this Section 7.

 

(c)                                  Except as otherwise provided herein, upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the aggregate Purchase Price for the Preferred Shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof, in cash or by certified check, cashier’s check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares, or make available if the Rights Agent is the transfer agent for the Preferred Shares, certificates for the number of Preferred Shares to be purchased, and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) requisition from a depositary agent appointed by the Company depositary receipts representing interests in such number of one one-thousandths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent), and the Company hereby directs any such depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of

 

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issuance of fractional shares in accordance with Section 14 hereof, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate.

 

(d)                                 Except as otherwise provided herein, in case the registered holder of any Right Certificate shall exercise less than all of the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the exercisable Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof.

 

(e)                                  Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights upon the occurrence of any purported transfer or exercise of Rights pursuant to Section 6 hereof or this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of assignment or form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such transfer or exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) thereof as the Company shall reasonably request.

 

Section 8.  Cancellation and Destruction of Right Certificates.  All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement.  The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof.  The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

 

Section 9.  Availability of Preferred Shares.

 

(a)                                 The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights.

 

(b)                                 So long as the Preferred Shares issuable upon the exercise of Rights may be listed or admitted to trading on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become 

 

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exercisable, all shares reserved for such issuance to be listed or admitted to trading on such exchange upon official notice of issuance upon such exercise.

 

(c)                                  From and after such time as the Rights become exercisable, the Company shall use its best efforts, if then necessary to permit the issuance of Preferred Shares upon the exercise of Rights, to register and qualify such Preferred Shares under the Securities Act and any applicable state securities or “Blue Sky” laws (to the extent exemptions therefrom are not available), cause such registration statement and qualifications to become effective as soon as possible after such filing and keep such registration and qualifications effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of the date as of which the Rights are no longer exercisable for such securities and the Expiration Date.  The Company may temporarily suspend, for a period of time not to exceed 90 days, the exercisability of the Rights in order to prepare and file a registration statement under the Securities Act and permit it to become effective.  Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.  Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained and until a registration statement under the Securities Act shall have been declared effective, unless an exemption therefrom is available.

 

(d)                                 The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates therefor (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares.

 

(e)                                  The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights.  The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by that holder of such Right Certificate at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no such tax is due.

 

Section 10.  Preferred Shares Record Date.  Each Person in whose name any certificate for Preferred Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender

 

13

 

and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares transfer books of the Company are open.  Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

 

Section 11.  Adjustment of Purchase Price, Number and Kind of Shares and Number of Rights.  The Purchase Price, the number of Preferred Shares or other securities or property purchasable upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

 

(a)                                 (i)  In the event the Company shall at any time after the date of this Agreement (A) declare and pay a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the number and kind of shares of capital stock issuable upon exercise of a Right as of the record date for such dividend or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, the holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of a Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of a Right.

 

(ii)                                  Subject to Section 24 of this Agreement, in the event any Person becomes an Acquiring Person (the first occurrence of such event being referred to hereinafter as the “Flip-In Event”), then (A) the Purchase Price shall be adjusted to be the Purchase Price in effect immediately prior to the Flip-In Event multiplied by the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such Flip-In Event, whether or not such Right was then exercisable, and (B) each holder of a Right, except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii) hereof, shall thereafter have the right to receive, upon exercise thereof at a price equal to the Purchase Price (as so adjusted), in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares as shall equal the result obtained by dividing the Purchase Price (as so adjusted) by 50% of the current per share market price of the Common Shares (determined pursuant to Section 11(d) hereof) on the date of such Flip-In Event; provided, however, that the Purchase Price (as so

 

14

 

adjusted) and the number of Common Shares so receivable upon exercise of a Right shall, following the Flip-In Event, be subject to further adjustment as appropriate in accordance with Section 11(f) hereof.  Notwithstanding anything in this Agreement to the contrary, however, from and after the Flip-In Event, any Rights that are beneficially owned by (x) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the Flip-In Event or (z) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee prior to or concurrently with the Flip-In Event pursuant to either (I) a transfer from the Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding regarding the transferred Rights or (II) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding the provisions of this paragraph, and subsequent transferees of such Persons, shall be void without any further action and any holder of such Rights shall thereafter have no rights whatsoever with respect to such Rights under any provision of this Agreement.  The Company shall use all reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder.  From and after the Flip-In Event, no Right Certificate shall be issued pursuant to Section 3 or Section 6 hereof that represents Rights that are or have become void pursuant to the provisions of this paragraph, and any Right Certificate delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of this paragraph shall be canceled.  From and after the occurrence of an event specified in Section 13(a) hereof, any Rights that theretofore have not been exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable only in accordance with Section 13 and not pursuant to this Section 11(a)(ii).

 

(iii)                               The Company may at its option substitute for a Common Share issuable upon the exercise of Rights in accordance with the foregoing subparagraph (ii) a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Common Share.  In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Board of Directors of the Company shall, with respect to such deficiency, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, (A) determine the excess (such excess, the “Spread”) of (1) the value of the Common Shares issuable upon the exercise of a Right in accordance with the foregoing subparagraph (ii) (the “Current Value”) over (2) the Purchase Price (as adjusted in accordance with the foregoing subparagraph (ii)), and (B) with respect to each Right (other than Rights which have become void pursuant to the foregoing subparagraph (ii)), make adequate provision to substitute for the Common Shares issuable in accordance with the foregoing subparagraph (ii) upon exercise of the Right and payment of the Purchase Price (as adjusted in accordance therewith), (1) cash, (2) a reduction in such Purchase Price, (3) Preferred Shares or other equity securities of the Company (including, without limitation,

 

15

 

shares or fractions of preferred shares which, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the Common Shares are deemed in good faith by the Board of Directors of the Company to have substantially the same value as the Common Shares (such Preferred Shares and shares or fractions of preferred shares are hereinafter referred to as “Common Share Equivalents”)), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having a value which, when added to the value of the Common Shares issued upon exercise of such Right, shall have an aggregate value equal to the Current Value (less the amount of any reduction in such Purchase Price), where such aggregate value has been determined by the Board of Directors of the Company upon the advice of a nationally recognized investment banking firm selected in good faith by the Board of Directors of the Company; provided, however, that if the Company shall not make adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the Flip-In Event (the date of the Flip-In Event being the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, upon the surrender for exercise of a Right and without requiring payment of such Purchase Price, Common Shares (to the extent available), and then, if necessary, such number or fractions of Preferred Shares (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread.  If, upon the occurrence of the Flip-In Event, the Board of Directors of the Company shall determine in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights, then, if the Board of Directors of the Company so elects, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such thirty (30) day period, as it may be extended, is herein called the “Substitution Period”).  To the extent that the Company determines that some action need be taken pursuant to the second and/or third sentence of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) hereof and the last sentence of this Section 11(a)(iii) hereof, that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such second sentence and to determine the value thereof.  In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii), the per share value of the Common Shares shall be the current per share market price (as determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per share or fractional value of any Common Share Equivalent shall be deemed to equal the current per share market price of the Common Shares.  The Board of Directors of the Company may, but shall not be required to, establish procedures to allocate the right to receive Common Shares upon the exercise of the Rights among the holders of Rights pursuant to this Section 11(a)(iii).

 

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(b)                                 In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares (“Equivalent Preferred Shares”)) or securities convertible into Preferred Shares or Equivalent Preferred Shares at a price per Preferred Share or Equivalent Preferred Share (or having a conversion price per share, if a security convertible into Preferred Shares or Equivalent Preferred Shares) less than the then current per share market price of the Preferred Shares (determined pursuant to Section 11(d) hereof) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares and Equivalent Preferred Shares outstanding on such record date plus the number of Preferred Shares and Equivalent Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or Equivalent Preferred Shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of Preferred Shares and Equivalent Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right.  In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent.  Preferred Shares and Equivalent Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.  Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

 

(c)                                  In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price of the Preferred Shares (determined pursuant to Section 11(d) hereof) on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to

 

17

 

one Preferred Share, and the denominator of which shall be such current per share market price (determined pursuant to Section 11(d) hereof) of the Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right.  Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

 

(d)                                 (i)                                     Except as otherwise provided herein, for the purpose of any computation hereunder, the “current per share market price” of any security (a “Security” for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security.  The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported by the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or NASDAQ or, if the Security is not listed or admitted to trading on the New York Stock Exchange or NASDAQ, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed on a national securities exchange, the last quoted price or, if not so quoted, the average of the high and low asked prices in the over-the-counter market as reported by any system then in use, or, if not so quoted, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company.  The term “Trading Day” shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.

 

(ii)                                  For the purpose of any computation hereunder, if the Preferred Shares are publicly traded, the “current per share market price” of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i).  If the Preferred Shares are not publicly traded but the Common Shares are publicly traded, the “current per share market price” of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares as determined pursuant to Section 11(d)(i) multiplied by the then applicable Adjustment Number (as defined in and

 

18

 

determined in accordance with the Certificate of Amendment).  If neither the Common Shares nor the Preferred Shares is publicly traded, “current per share market price” shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent.

 

(e)                                  No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 11 shall be made to the nearest cent or to the nearest one hundred-thousandth of a Preferred Share or one-hundredth of a Common Share or other share or security as the case may be.  Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the Expiration Date.

 

(f)                                   If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than the Preferred Shares, thereafter the Purchase Price and the number of such other shares so receivable upon exercise of a Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a), 11(b), 11(c), 11(e), 11(h), 11(i) and 11(m) hereof, as applicable, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares.

 

(g)                                  All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

(h)                                 Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and 11(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a Preferred Share (calculated to the nearest one hundred-thousandth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-thousandths of a share purchasable upon the exercise of a Right immediately prior to such adjustment by (y) the Purchase Price in effect immediately prior to such adjustment and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment.

 

(i)                                     The Company may elect on or after the date of any adjustment of the Purchase Price pursuant to Sections 11(b) or 11(c) hereof to adjust the number of Rights, in substitution for any adjustment in the number of one one-thousandths of a Preferred

 

19

 

Share purchasable upon the exercise of a Right.  Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment.  Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one-hundredth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price.  The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made.  Such record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement.  If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company may, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment.  Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.

 

(j)                                    Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a Preferred Share issuable upon the exercise of a Right, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-thousandths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.

 

(k)                                 Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the fraction of Preferred Shares or other shares of capital stock issuable upon exercise of a Right, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares or other such shares at such adjusted Purchase Price.

 

(l)                                     In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event issuing to the holder of any Right exercised after such record date the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other

 

20

 

appropriate instrument evidencing such holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.

 

(m)                             Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such adjustments in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such shareholders.

 

(n)                                 Anything in this Agreement to the contrary notwithstanding, in the event that at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare and pay any dividend on the Common Shares payable in Common Shares, or (ii) effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of a dividend payable in Common Shares) into a greater or lesser number of Common Shares, then, in each such case, the number of Rights associated with each Common Share then outstanding, or issued or delivered thereafter, shall be proportionately adjusted so that the number of Rights thereafter associated with each Common Share following any such event shall equal the result obtained by multiplying the number of Rights associated with each Common Share immediately prior to such event by a fraction the numerator of which shall be the total number of Common Shares outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of Common Shares outstanding immediately following the occurrence of such event.

 

(o)                                 The Company agrees that, after the earlier of the Distribution Date or the Share Acquisition Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or eliminate the benefits intended to be afforded by the Rights.

 

Section 12.  Certificate of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares and the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof (if so required under Section 25 hereof).  The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such certificate.

 

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Section 13.  Consolidation, Merger or Sale or Transfer of Assets or Earning Power.

 

(a)                                 In the event, directly or indirectly, at any time after the Flip-In Event (i) the Company shall consolidate with or shall merge into any other Person, (ii) any Person shall merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or of the Company) or cash or any other property, or (iii) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person (other than the Company or one or more wholly-owned Subsidiaries of the Company), then upon the first occurrence of such event, proper provision shall be made so that: (A) each holder of a Right (other than Rights which have become void pursuant to Section 11(a)(ii) hereof) shall thereafter have the right to receive, upon the exercise thereof at the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof), in accordance with the terms of this Agreement and in lieu of Preferred Shares or Common Shares of the Company, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable Common Shares of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall equal the result obtained by dividing the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof) by 50% of the current per share market price of the Common Shares of such Principal Party (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; provided, however, that the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof) and the number of Common Shares of such Principal Party so receivable upon exercise of a Right shall be subject to further adjustment as appropriate in accordance with Section 11(f) hereof to reflect any events occurring in respect of the Common Shares of such Principal Party after the occurrence of such consolidation, merger, sale or transfer; (B) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (C) the term “Company” shall thereafter be deemed to refer to such Principal Party; and (D) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares in accordance with Section 9 hereof) in connection with such consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the shares of its Common Shares thereafter deliverable upon the exercise of the Rights; provided that, upon the subsequent occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right and payment of the Purchase Price as provided in this Section 13(a), such cash, shares, rights, warrants and other property which such holder would have been entitled to receive had such holder, at the time of such transaction, owned the Common Shares of the Principal Party receivable upon the exercise of a Right pursuant to this Section 13(a), and such

 

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Principal Party shall take such steps (including, but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property.

 

(b)                                 “Principal Party” shall mean:

 

(i)                                     in the case of any transaction described in (i) or (ii) of the first sentence of Section 13(a) hereof: (A) the Person that is the issuer of the securities into which the Common Shares are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer the Common Shares of which have the greatest aggregate market value of shares outstanding, or (B) if no securities are so issued, (x) the Person that is the other party to the merger, if such Person survives said merger, or, if there is more than one such Person, the Person the Common Shares of which have the greatest aggregate market value of shares outstanding or (y) if the Person that is the other party to the merger does not survive the merger, the Person that does survive the merger (including the Company if it survives) or (z) the Person resulting from the consolidation; and

 

(ii)                                  in the case of any transaction described in (iii) of the first sentence of Section 13(a) hereof, the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power so transferred or if the Person receiving the greatest portion of the assets or earning power cannot be determined, whichever of such Persons is the issuer of Common Shares having the greatest aggregate market value of shares outstanding;

 

provided, however, that in any such case described in the foregoing clause (b)(i) or (b)(ii), if the Common Shares of such Person are not at such time or have not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect Subsidiary of another Person the Common Shares of which is and has been so registered, the term “Principal Party” shall refer to such other Person, or (2) if such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Shares of all of which is and has been so registered, the term “Principal Party” shall refer to whichever of such Persons is the issuer of Common Shares having the greatest aggregate market value of shares outstanding, or (3) if such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in clauses (1) and (2) above shall apply to each of the owners having an interest in the venture as if the Person owned by the joint venture was a Subsidiary of both or all of such joint venturers, and the Principal Party in each such case shall bear the obligations set forth in this Section 13 in the same ratio as its interest in such Person bears to the total of such interests.

 

(c)                                  The Company shall not consummate any consolidation, merger, sale or transfer referred to in Section 13(a) hereof unless prior thereto the Company and the Principal Party involved therein shall have executed and delivered to the Rights Agent an agreement confirming that the requirements of Sections 13(a) and (b) hereof shall promptly be performed in accordance with their terms and that such consolidation, merger, sale or transfer of assets shall not result in a default by the Principal Party under this Agreement as

 

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the same shall have been assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof and providing that, as soon as practicable after executing such agreement pursuant to this Section 13, the Principal Party will:

 

(i)                                     prepare and file a registration statement under the Securities Act, if necessary, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date and similarly comply with applicable state securities laws;

 

(ii)                                  use its best efforts, if the Common Shares of the Principal Party shall be listed or admitted to trading on the New York Stock Exchange, NASDAQ or on another national securities exchange, to list or admit to trading (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on the New York Stock Exchange, NASDAQ, or such other national securities exchange, or, if the Common Shares of the Principal Party shall not be listed or admitted to trading on the New York Stock Exchange, NASDAQ or a national securities exchange, to cause the Rights and the securities receivable upon exercise of the Rights to be authorized for quotation on any other system then in use;

 

(iii)                               deliver to holders of the Rights historical financial statements for the Principal Party which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act; and

 

(iv)                              obtain waivers of any rights of first refusal or preemptive rights in respect of the Common Shares of the Principal Party subject to purchase upon exercise of outstanding Rights.

 

(d)                                 In case the Principal Party has a provision in any of its authorized securities or in its certificate of incorporation or by-laws or other instrument governing its affairs, which provision would have the effect of (i) causing such Principal Party to issue (other than to holders of Rights pursuant to this Section 13), in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, Common Shares or Common Share Equivalents of such Principal Party at less than the then current market price per share thereof (determined pursuant to Section 11(d) hereof) or securities exercisable for, or convertible into, Common Shares or Common Share Equivalents of such Principal Party at less than such then current market price, or (ii) providing for any special payment, tax or similar provision in connection with the issuance of the Common Shares of such Principal Party pursuant to the provisions of Section 13, then, in such event, the Company hereby agrees with each holder of Rights that it shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will

 

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have no effect in connection with, or as a consequence of, the consummation of the proposed transaction.

 

(e)                                  The Company covenants and agrees that it shall not, at any time after the Flip-In Event, enter into any transaction of the type described in clauses (i) through (iii) of Section 13(a) hereof if (i) at the time of or immediately after such consolidation, merger, sale, transfer or other transaction there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights, (ii) prior to, simultaneously with or immediately after such consolidation, merger, sale, transfer or other transaction, the shareholders of the Person who constitutes, or would constitute, the Principal Party for purposes of Section 13(b) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates or (iii) the form or nature of organization of the Principal Party would preclude or limit the exercisability of the Rights.

 

(f)                                   Notwithstanding anything contained herein to the contrary, in the event of any merger or other acquisition transaction involving the Company pursuant to a merger or other acquisition agreement between the Company and any Person (or one or more of such Person’s Affiliates or Associates) which agreement has been approved by the Board of Directors prior to any Person becoming an Acquiring Person, this Agreement and the rights of holders of Rights hereunder shall be terminated in accordance with Section 7(a).

 

Section 14.  Fractional Rights and Fractional Shares.

 

(a)                                 The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights.  In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right.  For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable.  The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or NASDAQ or, if the Rights are not listed or admitted to trading on the New York Stock Exchange or NASDAQ, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by any system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights

 

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selected by the Board of Directors of the Company.  If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used.

 

(b)                                 The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred Share) or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred Share) upon the exercise or exchange of Rights.  Interests in fractions of Preferred Shares in integral multiples of one one-thousandth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts.  In lieu of fractional Preferred Shares that are not integral multiples of one one-thousandth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the current market value of a whole Preferred Share (as determined in accordance with Section 14(a) hereof) for the Trading Day immediately prior to the date of such exercise or exchange.

 

(c)                                  The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares upon the exercise or exchange of Rights.  In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Common Share.  For purposes of this Section 14(c), the current market value of one Common Share for which a Right is exercisable shall be deemed to be the closing price of one Common Share (as determined in accordance with Section 11(d)(i) hereof), for the Trading Day immediately prior to the date of such exercise.

 

(d)                                 The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise or exchange of a Right (except as provided above).

 

Section 15.  Rights of Action.  All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), on his own behalf and for his own benefit, may enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate (or, prior to the Distribution Date, such Common

 

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Shares) in the manner provided therein and in this Agreement.  Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Agreement.

 

Section 16.  Agreement of Right Holders.  Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

 

(a)                                 prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares;

 

(b)                                 after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office or agency of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer; and

 

(c)                                  the Company and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the Common Share certificate (or Book Entry shares in respect of Common Shares)) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the Common Share certificate (or notices provided to holders of Book Entry Common Shares) made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to Section 7(e) hereof, shall be affected by any notice to the contrary.

 

Section 17.  Right Certificate Holder Not Deemed a Shareholder.  No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise or exchange of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in this Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by such Right Certificate shall have been exercised or exchanged in accordance with the provisions hereof.

 

Section 18.  Concerning the Rights Agent.

 

(a)                                 The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements

 

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incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder.  The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly.

 

(b)                                 The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate representing the Preferred Shares, the Common Shares or any other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.

 

Section 19.  Merger or Consolidation or Change of Name of Rights Agent.

 

(a)                                 Any entity into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any entity resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any entity succeeding to the stock transfer or corporate trust powers of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such entity would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof.  In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

 

(b)                                 In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

 

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Section 20.  Duties of Rights Agent.  The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:

 

(a)                                 The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.

 

(b)                                 Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the President and the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

 

(c)                                  The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct.

 

(d)                                 The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.

 

(e)                                  The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights provided for in Sections 3, 11, 13, 23 and 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of a certificate furnished pursuant to Section 12, describing such change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or other securities to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable.

 

(f)                                   The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights

 

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Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

 

(g)                                  The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any person reasonably believed by the Rights Agent to be one of the President or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions.  Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective.  The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Company actually receives such application unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.

 

(h)                                 The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement.  Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.

 

(i)                                     The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.

 

(j)                                    If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof) or a transferee thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

 

Section 21.  Change of Rights Agent.  The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company and to each transfer agent of the Common

 

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Shares or Preferred Shares by registered or certified mail, and, following the Distribution Date, to the holders of the Right Certificates by first-class mail.  The Company may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and, following the Distribution Date, to the holders of the Right Certificates by first-class mail.  If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or the laws of any state of the United States or the District of Columbia, in good standing, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million.  After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares or Preferred Shares, and, following the Distribution Date, mail a notice thereof in writing to the registered holders of the Right Certificates.  Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

 

Section 22.  Issuance of New Right Certificates.  Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such forms as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the Expiration Date, the Company may with respect to Common Shares so issued or sold (i) pursuant to the exercise of stock options, (ii) under any employee plan or arrangement, (iii) upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company or (iv) pursuant to a contractual obligation of the Company, in each case existing prior to the Distribution Date, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale.

 

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Section 23.  Redemption.

 

(a)                                 The Board of Directors of the Company may, at any time prior to the Flip-In Event, redeem all but not less than all the then outstanding Rights at a redemption price of $0.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring in respect of the Common Shares after the date hereof (the redemption price being hereinafter referred to as the “Redemption Price”).  The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company in its sole discretion may establish.  The Redemption Price shall be payable, at the option of the Company, in cash, Common Shares or such other form of consideration as the Board of Directors of the Company shall determine.

 

(b)                                 Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at such later time as the Board of Directors of the Company may establish for the effectiveness of such redemption), and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price.  The Company shall promptly give public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption.  Within 10 days after such action of the Board of Directors of the Company ordering the redemption of the Rights (or such later time as the Board of Directors of the Company may establish for the effectiveness of such redemption), the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.  Each such notice of redemption shall state the method by which the payment of the Redemption Price will be made.

 

Section 24.  Exchange.

 

(a)                                 The Board of Directors of the Company may, at its option, at any time after the Flip-In Event, exchange all or part of the then outstanding Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring in respect of the Common Shares, after the date hereof (such amount per Right being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to effect such exchange at any time after an Acquiring Person shall have become the Beneficial Owner of 50% or more of the shares of the Common Shares then outstanding.  From and after the occurrence of an event specified in Section 13(a) hereof, any Rights that theretofore have not been exchanged pursuant to this Section 24(a) shall thereafter be exercisable only in accordance with Section 13 and may not be exchanged pursuant to this Section 24(a).  The exchange

 

32

 

of the Rights by the Board of Directors of the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company in its sole discretion may establish. Prior to effecting an exchange pursuant to this Section 24, the Board of Directors may direct the Company to enter into a Trust Agreement in such form and with such terms as the Board of Directors shall then approve (the “Trust Agreement”).  If the Board of Directors so directs, the Company shall enter into the Trust Agreement and shall issue to the trust created by such agreement (the “Trust”) all of the Common Shares issuable pursuant to the exchange, and all Persons entitled to receive shares pursuant to the exchange shall be entitled to receive such shares (and any dividends or distributions made thereon after the date on which such shares are deposited in the Trust) only from the Trust and solely upon compliance with the relevant terms and provisions of the Trust Agreement.

 

(b)                                 Immediately upon the effectiveness of the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange.  The Company shall promptly mail a notice of any such exchange to all of the holders of the Rights so exchanged at their last addresses as they appear upon the registry books of the Rights Agent.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.  Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

 

(c)                                  The Company may at its option substitute, and, in the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit an exchange of Rights for Common Shares as contemplated in accordance with this Section 24, the Company shall substitute to the extent of such insufficiency, for each Common Share that would otherwise be issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof (or Equivalent Preferred Shares, as such term is defined in Section 11(b)) such that the current per share market price (determined pursuant to Section 11(d) hereof) of one Preferred Share (or Equivalent Preferred Share) multiplied by such number or fraction is equal to the current per share market price of one Common Share (determined pursuant to Section 11(d) hereof) as of the date of such exchange.

 

Section 25.  Notice of Certain Events.

 

(a)                                 In case the Company shall at any time after the earlier of the Distribution Date or the Share Acquisition Date propose (i) to pay any dividend payable in

 

33

 

shares of any class to the holders of its Preferred Shares or to make any other distribution to the holders of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision or combination of outstanding Preferred Shares), (iv) to effect the liquidation, dissolution or winding up of the Company, or (v) to pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such dividend or distribution or offering of rights or warrants, or the date on which such liquidation, dissolution, winding up, reclassification, subdivision, combination or consolidation is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier.

 

(b)                                 In case any event described in Section 11(a)(ii) or Section 13 shall occur then the Company shall as soon as practicable thereafter give to each holder of a Right Certificate (or if occurring prior to the Distribution Date, the holders of the Common Shares) in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) and Section 13 hereof.

 

Section 26.  Notices.  Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:

 

Alteva, Inc.

401 Market Street, First Floor

Philadelphia, PA 19106
 Attention: Chief Executive Officer

 

Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

 

34

 

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

ATTN: Relationship Management

 

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

 

Section 27.  Supplements and Amendments.  Except as provided in the penultimate sentence of this Section 27, for so long as the Rights are then redeemable, the Company may in its sole and absolute discretion, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Agreement in any respect without the approval of any holders of the Rights.  At any time when the Rights are no longer redeemable, except as provided in the penultimate sentence of this Section 27, the Company may, and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights, provided that no such supplement or amendment may (a) adversely affect the interests of the holders of Rights as such (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person), (b) cause this Agreement again to become amendable other than in accordance with this sentence or (c) cause the Rights again to become redeemable.  Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price.  Upon the delivery of a certificate from an appropriate officer of the Company which states that the supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment, provided that any supplement or amendment that does not amend Sections 18, 19, 20 or 21 hereof or this Section 27 in a manner adverse to the Rights Agent shall become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent.

 

Section 28.  Successors.  All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

 

Section 29.  Benefits of this Agreement.  Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares).

 

Section 30.  Determinations and Actions by the Board of Directors.  The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise the rights and powers specifically granted to the

 

35

 

Board of Directors of the Company or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including, without limitation, a determination to redeem or not redeem the Rights or to amend or not amend this Agreement).  All such actions, calculations, interpretations and determinations that are done or made by the Board of Directors of the Company in good faith shall be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights, as such, and all other parties.

 

Section 31.  Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

 

Section 32.  Governing Law.  This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.

 

Section 33.  Counterparts.  This Agreement may be executed in any number of counterparts (which may be effectively delivered by facsimile or other electronic means) and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

Section 34.  Descriptive Headings.  Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

 

signature page follows

 

36

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written.

 

	
 
    	
ALTEVA, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Brian Callahan
    
	
 
    	
 
    	
Name:   Brian Callahan
    
	
 
    	
 
    	
Title:   
    	
Executive   Vice President, Chief Financial Officer
    
	
 
    	
 
    	
and   Treasurer
    
	
 
    	
 
    
	
 
    	
AMERICAN   STOCK TRANSFER & TRUST COMPANY, LLC,
    
	
 
    	
as   Rights Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Paula Caroppoli
    
	
 
    	
 
    	
Name:   Paula Caroppoli
    
	
 
    	
 
    	
Title:   Senior Vice President
    

 

37

 

Exhibit A

 

CERTIFICATE OF AMENDMENT

 

of

 

CERTIFICATE OF INCORPORATION OF

 

ALTEVA, INC.

 

(Under Section 805 of the Business Corporation Law)

 

The undersigned, being the Chief Executive Officer of Alteva, Inc. (the “Corporation”), hereby certifies as follows:

 

1.  The name of the Corporation is Alteva, Inc. The name under which it was formed is Warwick Valley Telephone Company.

 

2.  The Corporation’s Certificate of Incorporation was filed by the Department of State on January 16, 1902 (such certificate of incorporation, as amended and restated and in effect thereafter, the “Certificate of Incorporation”).

 

3.  The text of the Certificate of Incorporation is hereby amended to set forth the terms of the Corporation’s Series A Junior Participating Preferred Shares.

 

4.  FIFTH: This amendment to the Certificate of Incorporation was authorized, pursuant to Section 502 of the New York Business Corporation Law and the Certificate of Incorporation, by a vote of the Board of Directors. Pursuant to Section 502 of the New York Business Corporation Law and the Certificate of Incorporation, no vote of the shareholders was necessary for adoption of this amendment. The Certificate of Incorporation provides that the Board of Directors may, by delivering an appropriate Certificate of Amendment to the Department of State of the State of New York, fix the designation and number of shares of one or more series of Preferred Stock, and may establish the relative rights, preferences and limitations pertaining to such series, without the approval of the shareholders of the Corporation. The Board of Directors adopted resolutions on September 2, 2014, authorizing the amendment of the Certificate of Incorporation as set forth in paragraph 5 below.

 

5.  In order to effect the change set forth in paragraph 3 above, a new Article THIRTEENTH is hereby added to the Certificate of Incorporation of the Corporation, which article shall read in its entirety as follows:

 

“THIRTEENTH: Pursuant to the authority vested in the Board of Directors of the Corporation (the “Board of Directors”) in accordance with the provisions of the

 

A-1

 

Amended and Restated Certificate of Incorporation of the Corporation (as amended from time to time, the “Certificate of Incorporation”), a series of Preferred Shares, par value $0.01 per share, of the Corporation be and hereby is created, and the designation and number of shares thereof and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions thereof are as follows:

 

Series A Junior Participating Preferred Shares

 

1.                                                              Designation and Amount.  There shall be a series of Preferred Shares that shall be designated as “Series A Junior Participating Preferred Shares,” and the number of shares constituting such series shall be 10,000.  Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of Series A Junior Participating Preferred Shares to less than the number of shares then issued and outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation.

 

2.                                                              Dividends and Distributions.

 

(A)                                                       Subject to the prior and superior rights of the holders of any class or series of shares of the Corporation ranking prior and superior to the Series A Junior Participating Preferred Shares with respect to dividends, the holders of Series A Junior Participating Preferred Shares, in preference to the holders of any class or series of shares of the Corporation ranking junior to the Series A Junior Participating Preferred Shares in respect thereof, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the 15th day of March, June, September and December, in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a Series A Junior Participating Preferred Share (or fraction thereof), in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) the Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends, and the Adjustment Number times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in Common Shares, par value $0.01 per share, of the Corporation (the “Common Shares”), or a subdivision of the outstanding Common Shares (by reclassification or otherwise), declared on the Common Shares since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of a Series A Junior Participating Preferred Share (or fraction thereof).  The “Adjustment Number” shall initially be 1,000.  In the event the Corporation shall at any time after September 2, 2014, (i) declare and pay any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of Common Shares

 

A-2

 

outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.

 

(B)                                                       The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Shares as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Shares (other than a dividend payable in Common Shares).

 

(C)                                                       Dividends shall begin to accrue and be cumulative on outstanding Series A Junior Participating Preferred Shares from the Quarterly Dividend Payment Date next preceding the date of issue of such Series A Junior Participating Preferred Shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date; in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Series A Junior Participating Preferred Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the Series A Junior Participating Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date for the determination of holders of Series A Junior Participating Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof.

 

3.                                                              Voting Rights.  The holders of Series A Junior Participating Preferred Shares shall have the following voting rights:

 

(A)                                                       Each Series A Junior Participating Preferred Share shall entitle the holder thereof to a number of votes equal to the Adjustment Number on all matters submitted to a vote of the shareholders of the Corporation.

 

(B)                                                       Except as required by law, by Section 3(C) and by Section 10 hereof, holders of Series A Junior Participating Preferred Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Shares as set forth herein) for taking any corporate action.

 

(C)                                                       If, at the time of any annual meeting of shareholders for the election of directors, the equivalent of six quarterly dividends (whether or not consecutive) payable on any Series A Junior Participating Preferred Shares are in default, the number of directors constituting the Board of Directors of the Corporation shall be increased by two.  In addition to voting together with the holders of Common Shares for the election of other directors of the Corporation, the holders of record of the Series A Junior Participating Preferred Shares, voting separately as a class to the exclusion of the

 

A-3

 

holders of Common Shares, shall be entitled at said meeting of shareholders (and at each subsequent annual meeting of shareholders), unless all dividends in arrears on the Series A Junior Participating Preferred Shares have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Corporation, the holders of any Series A Junior Participating Preferred Shares being entitled to cast a number of votes per Series A Junior Participating Preferred Share as is specified in paragraph (A) of this Section 3.  Each such additional director shall serve until the next annual meeting of shareholders for the election of directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(C).  Until the default in payments of all dividends which permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the provisions of this Section 3(C) may be removed at any time, without cause, only by the affirmative vote of the holders of the Series A Junior Participating Preferred Shares at the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders.  If and when such default shall cease to exist, the holders of the Series A Junior Participating Preferred Shares shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments of dividends.  Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced by two.  The voting rights granted by this Section 3(C) shall be in addition to any other voting rights granted to the holders of the Series A Junior Participating Preferred Shares in this Section 3.

 

4.                                                              Certain Restrictions.

 

(A)                                                       Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Shares as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on Series A Junior Participating Preferred Shares outstanding shall have been paid in full, the Corporation shall not:

 

(i)                                                             declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Shares;

 

(ii)                                                          declare or pay dividends on or make any other distributions on any shares ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Shares, except dividends paid ratably on the Series A Junior Participating Preferred Shares and all such parity shares on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or

 

A-4

 

(iii)                                                       purchase or otherwise acquire for consideration any Series A Junior Participating Preferred Shares, or any shares ranking on a parity with the Series A Junior Participating Preferred Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series A Junior Participating Preferred Shares, or to such holders and holders of any such shares ranking on a parity therewith, upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

 

(B)                                                       The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

 

5.                                                              Reacquired Shares.  Any Series A Junior Participating Preferred Shares purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired promptly after the acquisition thereof.  All such shares shall upon their retirement become authorized but unissued Preferred Shares and may be reissued as part of a new series of Preferred Shares to be created by resolution or resolutions of the Board of Directors, subject to any conditions and restrictions on issuance set forth herein.

 

6.                                                              Liquidation, Dissolution or Winding Up.  (A) Upon any liquidation, dissolution or winding up of the Corporation, voluntary or otherwise, no distribution shall be made to the holders of shares ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Shares unless, prior thereto, the holders of Series A Junior Participating Preferred Shares shall have received an amount per share (the “Series A Liquidation Preference”) equal to the greater of (i) $1,000 plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (ii) the Adjustment Number times the per share amount of all cash and other property to be distributed in respect of the Common Shares upon such liquidation, dissolution or winding up of the Corporation.

 

(B)                                                       In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other classes and series of shares of the Corporation, if any, that rank on a parity with the Series A Junior Participating Preferred Shares in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series A Junior Participating Preferred Shares and the holders of such parity shares in proportion to their respective liquidation preferences.

 

(C)                                                       Neither the merger or consolidation of the Corporation into or with another entity nor the merger or consolidation of any other entity into or with the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.

 

A-5

 

7.                                                              Consolidation, Merger, Etc.  In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the outstanding Common Shares are exchanged for or changed into other shares or securities, cash and/or any other property, then in any such case each Series A Junior Participating Preferred Share shall at the same time be similarly exchanged or changed in an amount per share equal to the Adjustment Number times the aggregate amount of shares, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each Common Share is changed or exchanged.

 

8.                                                              No Redemption.  Series A Junior Participating Preferred Shares shall not be subject to redemption by the Corporation.

 

9.                                                              Ranking.  The Series A Junior Participating Preferred Shares shall rank junior to all other series of Preferred Shares as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, unless the terms of any such series shall provide otherwise, and shall rank senior to the Common Shares as to such matters.

 

10.                                                       Amendment.  At any time that any Series A Junior Participating Preferred Shares are outstanding, the Certificate of Incorporation of the Corporation shall not be amended, by merger, consolidation or otherwise, in a manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Shares so as to affect them adversely without the affirmative vote of the holders of two-thirds of the outstanding Series A Junior Participating Preferred Shares, voting separately as a class.

 

11.                                                       Fractional Shares.  Series A Junior Participating Preferred Shares may be issued in fractions of a share that shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Shares.”

 

A-6

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate this 2nd day of September, 2014.

 

 

	
 
    	
ALTEVA, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Brian J. Kelley
    
	
 
    	
 
    	
Name: Brian J. Kelley
    
	
 
    	
 
    	
Title: Chief Executive Officer
    

 

A-7

Exhibit B

 

Form of Right Certificate

 

Certificate No. R-

 

NOT EXERCISABLE AFTER September 1, 2015, OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

 

RIGHT CERTIFICATE

 

ALTEVA, INC.

 

This certifies that                                                          or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of September 2, 2014, as the same may be amended from time to time (the “Rights Agreement”), between ALTEVA, INC., a New York corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time, on September 1, 2015, at the office or agency of the Rights Agent designated for such purpose, or of its successor as Rights Agent, one one-thousandth of a fully paid non-assessable Series A Junior Participating Preferred Share, par value $0.01 per share (the “Preferred Shares”), of the Company at a purchase price of $22.20 per one one-thousandth of a Preferred Share (the “Purchase Price”), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed.  The number of Rights evidenced by this Rights Certificate (and the number of one one-thousandths of a Preferred Share which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of September 2, 2014, based on the Preferred Shares as constituted at such date.  As provided in the Rights Agreement, the Purchase Price, the number of one one-thousandths of a Preferred Share (or other securities or property) which may be purchased upon the exercise of the Rights and the number of Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.

 

This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder

 

B-1

 

of the Rights Agent, the Company and the holders of the Right Certificates.  Copies of the Rights Agreement are on file at the principal executive offices of the Company and the above-mentioned office or agency of the Rights Agent.  The Company will mail to the holder of this Right Certificate a copy of the Rights Agreement without charge after receipt of a written request therefor.

 

This Right Certificate, with or without other Right Certificates, upon surrender at the office or agency of the Rights Agent designated for such purpose, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase.  If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.

 

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the Company at a redemption price of $0.01 per Right or (ii) may be exchanged in whole or in part for Common Shares, par value $0.01 per share, of the Company or Preferred Shares.

 

No fractional Preferred Shares or Common Shares will be issued upon the exercise or exchange of any Right or Rights evidenced hereby (other than fractions of Preferred Shares which are integral multiples of one one-thousandth of a Preferred Share, which may, at the election of the Company, be evidenced by depository receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.

 

No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise or exchange hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement) or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised or exchanged as provided in the Rights Agreement.

 

B-2

 

This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

 

WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.  Dated as of                             , 20      .

 

	
 
    	
ALTEVA, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
[Title]
    

 

	
ATTEST:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
[Title]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Countersigned:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
American   Stock Transfer & Trust Company, LLC, as Rights Agent
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By
    	
 
    	
 
    
	
 
    	
[Title]
    	
 
    

 

B-3

 

Form of Reverse Side of Right Certificate

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder if such

holder desires to transfer the Right Certificate)

 

FOR VALUE RECEIVED                                                      hereby sells, assigns and transfers unto

 

 

(Please print name and address of transferee)

 

                   Rights represented by this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint                                                              Attorney, to transfer said Rights on the books of the within-named Company, with full power of substitution.

 

	
Dated:
    	
 
    	
 
    

 

 

	
 
    	
 
    
	
 
    	
Signature
    

 

 

Signature Guaranteed:

 

Signatures must be guaranteed by a bank, trust company, broker, dealer or other eligible institution participating in a recognized signature guarantee medallion program.

 

 

	
 
    	
 
    
	
(To be completed)
    	
 
    

 

The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by, were not acquired by the undersigned from, and are not being assigned to an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).

 

	
 
    	
 
    
	
 
    	
Signature
    

 

B-4

 

Form of Reverse Side of Right Certificate - continued

 

FORM OF ELECTION TO PURCHASE

 

(To be executed if holder desires to exercise

Rights represented by the Rights Certificate)

 

To ALTEVA, INC.:

 

The undersigned hereby irrevocably elects to exercise                  Rights represented by this Right Certificate to purchase the Preferred Shares (or other securities or property) issuable upon the exercise of such Rights and requests that certificates for such Preferred Shares (or such other securities) be issued in the name of:

 

	
 
    	
 
    
	
(Please   print name and address)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    

 

If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:

 

Please insert social security

or other identifying number

 

	
 
    	
 
    
	
(Please   print name and address)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    

 

	
Dated:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature
    

 

(Signature must conform to holder specified on Right Certificate)

 

Signature Guaranteed:

 

Signature must be guaranteed by a bank, trust company, broker, dealer or other eligible institution participating in a recognized signature guarantee medallion program.

 

B-5

 

Form of Reverse Side of Right Certificate - continued

 

	
 
    	
 
    
	
(To   be completed)
    	
 
    

 

The undersigned certifies that the Rights evidenced by this Right Certificate are not beneficially owned by, and were not acquired by the undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).

 

	
 
    	
 
    
	
 
    	
Signature
    
	
 
    	
 
    
	
 
    	
 
    

 

NOTICE

 

The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, such Assignment or Election to Purchase will not be honored.

 

B-6

 

Exhibit C

 

UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

 

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED SHARES OF

ALTEVA, INC.

 

On September 2, 2014, the Board of Directors of Alteva, Inc. (the “Company”) declared a dividend of one preferred share purchase right (a “Right”) for each outstanding common share, par value $0.01 per share, of the Company (the “Common Shares”).  The dividend is payable on September 15, 2014 (the “Record Date”) to the shareholders of record on that date.  Each Right entitles the registered holder to purchase from the Company one one-thousandth of a Series A Junior Participating Preferred Share, par value $0.01 per share, of the Company (the “Preferred Shares”) at a price of $22.20 per one one-thousandth of a Preferred Share (the “Purchase Price”), subject to adjustment.  The description and terms of the Rights are set forth in a Rights Agreement dated as of September 2, 2014, as the same may be amended from time to time (the “Rights Agreement”), between the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agent”).

 

Until the earlier to occur of (i) 10 business days following a public announcement that a person or group of affiliated or associated persons (with certain exceptions, an “Acquiring Person”) has acquired beneficial ownership of 20% or more of the outstanding Common Shares or (ii) 10 business days (or such later date as may be determined by action of the Board of Directors of the Company prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 20% or more of the outstanding Common Shares (the earlier of such dates being called the “Distribution Date”), the Rights will be evidenced, with respect to any of the Common Share certificates outstanding as of the Record Date, by such Common Share certificates together with this Summary of Rights. Any existing beneficial owner of 20% or more of the outstanding Common Shares as of the date of the Rights Agreement will not be deemed an “Acquiring Person” unless and until such beneficial owner, after the date of the Rights Agreement, becomes the beneficial owner of additional shares representing 1% of the then outstanding Common Shares.

 

C-1

 

The Rights Agreement provides that, until the Distribution Date (or earlier expiration of the Rights), the Rights will be transferred with and only with the Common Shares.  Until the Distribution Date (or earlier expiration of the Rights), new Common Share certificates issued after the Record Date upon transfer or new issuances of Common Shares will contain a notation incorporating the Rights Agreement by reference.  Until the Distribution Date (or earlier expiration of the Rights), the surrender for transfer of any certificates for Common Shares outstanding as of the Record Date, even without such notation or a copy of this Summary of Rights, will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate.  As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights.

 

The Rights are not exercisable until the Distribution Date.  The Rights will expire on September 1, 2015 (the “Final Expiration Date”), unless the Final Expiration Date is advanced or extended or unless the Rights are earlier redeemed or exchanged by the Company, in each case as described below.

 

The Purchase Price payable, and the number of Preferred Shares or other securities or property issuable, upon exercise of the Rights is subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights or warrants to subscribe for or purchase Preferred Shares at a price, or securities convertible into Preferred Shares with a conversion price, less than the then-current market price of the Preferred Shares or (iii) upon the distribution to holders of the Preferred Shares of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in Preferred Shares) or of subscription rights or warrants (other than those referred to above).

 

The number of outstanding Rights is subject to adjustment in the event of a stock dividend on the Common Shares payable in Common Shares or subdivisions, consolidations or combinations of the Common Shares occurring, in any such case, prior to the Distribution Date.

 

Preferred Shares purchasable upon exercise of the Rights will not be redeemable.  Each Preferred Share will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment of the greater of (a) $10 per share, and (b) an amount equal to 1,000 times the dividend declared per Common Share.  In the event of liquidation, dissolution or winding up of the Company, the holders of the Preferred Shares will be entitled to a minimum preferential payment of the greater of (a) $1,000 per share (plus any accrued but unpaid dividends), and (b) an amount equal to 1,000 times the payment made per Common Share.  Each Preferred Share will have 1,000 votes, voting together with the Common Shares.  Finally, in the event of any merger, consolidation or other transaction in which outstanding Common Shares are converted or exchanged, each

 

C-2

 

Preferred Share will be entitled to receive 1,000 times the amount received per Common Share.  These rights are protected by customary antidilution provisions.

 

Because of the nature of the Preferred Shares’ dividend, liquidation and voting rights, the value of the one one-thousandth interest in a Preferred Share purchasable upon exercise of each Right should approximate the value of one Common Share.

 

In the event that any person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right that number of Common Shares having a market value of two times the exercise price of the Right.

 

In the event that, after a person or group has become an Acquiring Person, the Company is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provisions will be made so that each holder of a Right (other than Rights beneficially owned by an Acquiring Person, which will have become void) will thereafter have the right to receive upon the exercise of a Right that number of common shares of the person with whom the Company has engaged in the foregoing transaction (or its parent) that at the time of such transaction have a market value of two times the exercise price of the Right.

 

At any time after any person or group becomes an Acquiring Person and prior to the earlier of one of the events described in the previous paragraph or the acquisition by such Acquiring Person of 50% or more of the outstanding Common Shares, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such Acquiring Person, which will have become void), in whole or in part, for Common Shares or Preferred Shares (or a series of the Company’s preferred shares having equivalent rights, preferences and privileges), at an exchange ratio of one Common Share, or a fractional Preferred Share (or other preferred share) equivalent in value thereto, per Right.

 

With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price.  No fractional Preferred Shares or Common Shares will be issued (other than fractions of Preferred Shares which are integral multiples of one one-thousandth of a Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts), and in lieu thereof an adjustment in cash will be made based on the current market price of the Preferred Shares or the Common Shares.

 

At any time prior to the time an Acquiring Person becomes such, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”) payable, at the option of the Company, in cash, Common Shares or such other form of consideration as the Board of Directors of the Company shall determine.  The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company in

 

C-3

 

its sole discretion may establish.  Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

 

For so long as the Rights are then redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Agreement in any manner.  After the Rights are no longer redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Agreement in any manner that does not adversely affect the interests of holders of the Rights.

 

Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends.

 

A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated September 3, 2014.  A copy of the Rights Agreement is available free of charge from the Company.  This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, as the same may be amended from time to time, which is hereby incorporated herein by reference.

 

C-4EX-10.1

 Exhibit 10.1 

SECURITIES PURCHASE AGREEMENT 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of September 3, 2014, by and among B.
Riley & Co., LLC (“B. Riley”), the Purchasers listed on Exhibit A hereto (the “Other Purchasers” and, together with B. Riley, the “Purchasers”), and The Wet Seal, Inc., a Delaware
corporation (the “Company”). 
 WHEREAS, the Purchasers collectively wish to purchase, and the Company wishes to sell
shares of the Company’s Class A common stock, par value $0.10 per share, (the “Common Stock”), for the per share price and upon the other terms and subject to the conditions set forth in this Agreement (the
“Private Placement Stock”); 
 WHEREAS, to induce the Purchasers to purchase the Private Placement Stock, the Company shall
either issue each purchaser a warrant to purchase Common Stock on the terms and subject to the conditions set forth in this Agreement or at the election of such purchaser, provide such purchaser a discount equal to of the lesser of (a) four
percent (4%) of the Per Share Price (as defined below) and (b) $0.04 per share of Private Placement Stock; 
 WHEREAS, the Company
is considering undertaking a rights offering (the “Rights Offering”) to raise equity capital, pursuant to which the Company expects to distribute, at no charge, to holders of its Common Stock (and to certain persons who have rights
to acquire Common Stock) rights (the “Rights”) to purchase shares of Common stock (the “Rights Offering Stock”), which Rights, if any, will be distributed to shareholders and any other participants on a record date
to be set by the Board of Directors of the Company (the “Board”); 
 WHEREAS, the Company intends to register under the
Securities Act of 1933, as amended (the “Securities Act”) (i) the Rights Offering Stock, if any, (ii) the Private Placement Stock and the Warrant Shares for resale (as defined below). 

WHEREAS, the Company anticipates filing with the Securities and Exchange Commission (the “Commission”) (i) one
registration statement with respect to the Rights and the Rights Offering Stock, to the extent it proceeds with the Rights Offering, and (ii) one registration statement with respect to the resale of the Private Placement Stock and the resale of
the Warrant Shares (the “Resale Registration Statement”) pursuant to a registration rights agreement of even date herewith (the “Registration Rights Agreement”) 

NOW THEREFORE, in consideration of the foregoing and the mutual covenants herein contained and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 
 Section 1. Purchase; Closing. 

(a) Purchase and Sale of the Private Placement Stock in Connection with Rights Offering; the Per Share Price. At the Closing (as
defined below), and on the terms and subject to the conditions set forth herein, each Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to sell to such Purchaser, a dollar value of Private Placement Stock equal to
each such Purchaser’s “Commitment Amount” set forth opposite such Purchaser’s name on Exhibit A hereto ( “Commitment Amount”) at a per share purchase price equal to lesser of (i) $1.01, and
(ii) 87.5% of the volume weighted-average price for the Common Stock on the NASDAQ Global Select Market (the “NASDAQ”) over the twenty (20) consecutive trading day period (for the avoidance of doubt, the foregoing refers
to the volume weighted-average price for the entire 20 trading day period) ending on the trading day 

  
 1 

 Exhibit 10.1 
  

 
immediately preceding the date the subscription price for the Rights Offering is set by the Company, provided, however, if the Company sets the subscription price for the Rights Offering at a
price per share which is less than the price provided for in the previous sub-clause (i) or (ii) of this sentence, the per share purchase price shall be equal to the price per share offered to subscribers in the Rights Offering (such price
is referred to as “Per Share Price”). The Per Share Price shall be determined prior to the filing of the Resale Registration Statement with the Commission. 

(b) Purchase and Sale of the Private Placement Stock if Rights Offering Not Consummated Within 180 Days. If the Rights Offering has not
been consummated within 180 days of the date of this Agreement, and this agreement has not previously been terminated in accordance with Section 10, any Purchaser that has subscribed for at least 15% of the aggregate Commitment Amounts set
forth in the second column of Exhibit A (an “Electing Purchaser”), may elect by providing written notice (the “Election Notice”) to the Company that such Electing Purchaser wishes to proceed with the purchase
and sale of the Private Placement Stock on the terms and subject to the conditions set forth herein (the “Elective Purchase”), in which case the Electing Purchaser shall, at the Closing, purchase from the Company, and the Company
shall sell to the Electing Purchaser, a dollar value of Private Placement Stock equal to the Electing Purchaser’s Commitment Amount set forth opposite the Electing Purchaser’s name on Exhibit A hereto at a per share purchase price
equal to the lesser of (i) $1.01 and (ii) the exercise price for the Rights as set forth in the effective Rights Offering Registration Statement (as defined below), if any (the “Elective Purchase Price”). The Company shall
provide each Purchaser that is not an Electing Purchaser (a “Non-Electing Purchaser”) a copy of the Election Notice and provide such Non-Electing Purchaser three (3) business days in which to provide the Company with notice of
such Non-Electing Purchaser’s election to participate in the Elective Purchase. Any Non-Electing Purchaser that provides such notice (a “Tag Along Purchaser” and, together with any Electing Purchasers, “Participating
Purchasers”) shall purchase a dollar value of Private Placement Stock equal to each such Purchaser’s Commitment Amount set forth opposite such Purchaser’s name on Exhibit A hereto at a per share purchase price equal to
the Elective Purchase Price. Any purchaser that does not provide such notice to the Company in a timely manner of its election to participate in the Elective Purchase shall no longer be entitled to purchase Private Placement Stock pursuant to this
Agreement. Notwithstanding anything else stated herein to the contrary, in the event of an Elective Purchase, this agreement shall not be terminable pursuant to Sections 10(a)(v) or 10(b)(iv) and the condition to Closing set forth in
Section 6(c)(v) shall be suspended, in each case until 120 days after the date of the Election Notice (the “Final Date”). 

(c) Closing. Subject to the satisfaction or waiver of the conditions set forth in Section 6 of this Agreement, the closing of the
purchase and sale of the Private Placement Stock (the “Closing”) shall take place at the offices of Paul Hastings LLP, 695 Town Center Drive, Costa Mesa, California 92626, at 10:00 a.m. local time on (i) the date of
the closing of the Rights Offering or, (ii) with respect to Participating Purchasers, prior to the closing of the Rights Offering on (a) the date the Resale Registration Statement is declared effective by the Commission or, (b) on the
Final Date if the Resale Registration Statement is not declared effective on or prior to the Final Date as to each Participating Purchasers that has delivered to the Company at least five business days before the Final Date a written notice that it
has elected to purchase the Private Placement Stock despite the fact the Resale Registration Statement is not yet effective (with the Company providing a copy of such notice to any other Participating Purchaser), or such other place, time or date as
may be determined by the parties hereto in writing (the “Closing Date”); provided, however, in no event shall the Rights Offering close prior to the Closing Date. 

(d) Payments to the Company. Payment shall be made to the Company by each Purchaser, on the Closing Date, against delivery of the
Common Stock and the Warrants purchased by such Purchaser, in United States dollars by means of wire transfer of immediately available funds. 

  
 2 

 Exhibit 10.1 
  

 (e) Obligations of the Purchasers Several. The failure of any Purchaser to close the
transactions contemplated hereby shall not relieve any other Purchaser from such other Purchaser’s obligation to close with respect to its Commitment Amount. 

(f) Termination of Rights Offering Has No Effect on Obligations under this Agreement. At any time, the Company may in its sole
discretion withdraw or terminate the Rights Offering upon providing written notice to B. Riley on behalf of the Purchasers. 
 (g) Stock
Dividends, Splits, Combinations, Reclassifications, Etc. Notwithstanding the foregoing, if, at any time prior to the Closing, the number of shares of Common Stock outstanding is increased or decreased due to a stock dividend, stock split, stock
combination, reclassification or other similar transaction, immediately after the effective date for such combination, appropriate adjustments shall be made to all references to a per share price and the number of shares of Private Placement Stock
and Warrants to be sold pursuant to this Agreement shall be appropriately adjusted. 
 Section 2. Purchaser Inducement. As an inducement
for each Purchaser to enter into this Agreement and to complete the transactions contemplated hereby, in accordance with the election of each Purchaser set forth on Exhibit A, the Company hereby agrees to either (i) issue to such
Purchaser, within three (3) business days of the execution of this Agreement, Warrants, in substantially the form attached hereto as Exhibit B (the “Warrants”), representing the right to acquire the number of shares
of Common Stock set forth opposite such Purchaser’s name in the third column of Exhibit A at an exercise of $1.20 per share (the “Warrant Shares”) or (ii) sell to such Purchaser at the Closing the Private
Placement Stock at a discount of the lesser of (a) four percent (4%) of the Per Share Price and (b) $0.04 per share of Private Placement Stock (“Discounted Private Placement Stock”). Pursuant to the terms of the
Warrants, the Warrants will first become exercisable on the day that is six months and one day after the date of issuance and have an expiration date that is five years after the date they first become exercisable. 

Section 3. Company Termination Right. Notwithstanding any other provision contained in this Agreement, if at any time prior to Closing the
volume weighted-average price for the Common Stock on NASDAQ over any fifteen (15) consecutive trading day period is below $0.80 (for the avoidance of doubt, the foregoing refers to the volume weighted-average price for the entire 15 trading
day period) as determined by the Company (a “Below $0.80 15 Trading Day Period”), the Company may, in is sole discretion, elect to terminate this Agreement by providing written notice to the Purchasers within three business days
after a Below $0.80 15 Trading Day Period (a “Company Termination”), after which neither the Company nor any Purchaser shall have any liability to any other party hereto or shall have any further obligations hereunder, except that
(i) the Company shall be required to pay the fees required to be paid to B. Riley in such event pursuant to the terms of a placement agency agreement in the form attached hereto as Exhibit C (the “Placement Agency
Agreement”), (ii) each Purchaser that elected in Exhibit A to receive Warrants shall retain such the Warrants, (iii) each Purchaser that elected in Exhibit A to receive Discounted Private Placement Stock at the
Closing shall be entitled to receive, within five (5) business days of a Company Termination, a cash payment from the Company equal to four percent (4%) of such Purchaser’s Commitment Amount (as set forth on Exhibit A) and
(iv) Sections 4, 5, 9(a) through (c), 9(i) 11, and 12 through 17 shall survive. This Company Termination right is in addition to the rights of the parties to terminate this Agreement pursuant to Section 10 below. 

Section 4. Representations and Warranties of the Purchasers. Each Purchaser, individually and severally, represents, warrants and covenants
to the Company as follows: 
 (a) Accredited Investor; Information; Knowledge of Business; Financial Capacity. Such Purchaser is an
“Accredited Investor” within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act. Each Purchaser, whether through its members and affiliates or otherwise, is 

  
 3 

 Exhibit 10.1 
  

 
familiar with the business in which the Company is engaged. Each Purchaser (through its members and affiliates, if applicable) has knowledge and experience in financial and business matters, is
familiar with investments such as the Private Placement Stock and the Warrants, is fully aware of the risks involved in making an investment of this type, and is capable of evaluating the merits and risks of this investment. Each Purchaser
acknowledges that, before executing this Agreement, it or its representatives have had the opportunity to ask questions of and receive answers or obtain additional information from a representative of the Company concerning the financial and other
affairs of the Company. Without limiting the foregoing, each Purchaser is aware of the terms to be contained in the Senior Convertible Note and Warrants between the Company and Hudson Bay Master Fund Ltd. which the Company is exchanging pursuant to
the Exchange Agreement (as defined below) with Hudson Bay Master Fund to be entered into on or about the date hereof. Each Purchaser has adequate capital and means of providing for current needs to sustain a complete loss of such Purchaser’s
investment in the Company. 
 (b) Existence and Good Standing; Authority; Residency. Such Purchaser is validly existing and in good
standing under the laws of the State of its formation and has all requisite power and authority to carry on its business as now conducted. Such Purchaser is a resident of the jurisdiction listed in his address in the first column (Name and Address)
of Schedule A. 
 (c) Authorization of Agreement; Enforceability. This Agreement has been duly and validly authorized,
executed and delivered by such Purchaser. This Agreement is valid, binding and enforceable against such Purchaser in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors’ rights and to general principles of equity. 
 (d) Restricted Securities.
Except as provided in Section 8, such Purchaser understands that: 
 (i) the offer and sale (the “Placement”) of
Private Placement Stock and Warrants (collectively, the “Securities”) have not been, and will not be, registered under the Securities Act; 

(ii) the Securities and the Warrant Shares will be “restricted securities” as defined in Rule 144(a)(3) promulgated under the
Securities Act and the certificate(s) representing the Securities and the Warrant Shares will bear appropriate legends to that effect; and 

(iii) the Purchaser must hold such shares indefinitely unless their disposition is registered with the Commission and qualified by
applicable state authorities or exemptions from such registration and qualification are available. 
 (e) Availability of Funds. Such
Purchaser has and will have available sufficient funds to pay such Purchaser’s respective Commitment Amount as and when required hereunder. 

(f) Investment Intent. Such Purchaser is acquiring the Securities for its own account, with the intention of holding such Securities
for investment and with no present intention of participating, directly or indirectly, in a distribution of the shares; provided, however, by making the representations herein, such Purchaser does not agree to hold any of the Securities for
any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. Such Purchaser does not presently have any
agreement or understanding, directly or indirectly, with any Person (as defined below) to distribute any of the Securities. For purposes of this Agreement, “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. 

  
 4 

 Exhibit 10.1 
  

 (g) No Manipulation or Stabilization of Price; Regulation M Compliance. Subject
to Section 5(oo), such Purchaser has not taken since the date first contacted regarding this investment in the Company and will not take, directly or indirectly, at any time prior to the Closing any action designed to or that would constitute
or that might reasonably be expected to cause or result in, under the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise, stabilization or manipulation of the price of any security of the Company in order to
facilitate the sale or resale of any securities of the Company, and such Purchaser is not aware of any such action taken or to be taken by any Person. Without limiting the generality of the foregoing, such Purchaser has not and will not bid for,
purchase, or, pay any compensation for soliciting purchases of, any securities of the Company, or pay or agree to pay to any Person any compensation for soliciting another to purchase any securities of the Company, in each case in violation of
Regulation M under the Exchange Act. 
 (h) Brokers, Finders, etc. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on in such manner as to not give rise to any valid claim against the Company for any brokerage or finder’s commission, fee or similar compensation based upon arrangements made by or on behalf
of any Purchaser, other than arrangements made between the Company and B. Riley. 
 (i) No Conflicts. The execution, delivery and
performance by such Purchaser of this Agreement and the consummation by such Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Purchaser, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to
which such Purchaser is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Purchaser, except in the case of clauses (ii) and
(iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Purchaser to perform its obligations hereunder.

 Section 5. Representations and Warranties of the Company. The Company represents and warrants to each Purchaser as follows: 

(a) Existence and Good Standing; Authority. Each of the Company and each Subsidiary (defined below), has been duly organized and is
validly existing as a corporation in good standing under the laws of its jurisdiction of organization and has all power and authority necessary to own, hold or lease its properties and to conduct the business in which it is engaged and as described
in the Company Reports. The term “Company Reports” means (i) the reports, schedules, forms, statements and other documents filed by the Company under the Securities Act and the Exchange Act after February 3, 2013 and prior
to the date hereof. Each of the Company and each Subsidiary is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its business requires
such qualification and has all power and authority necessary to own, hold or lease its properties and to conduct the business in which it is engaged and as described in the Company Reports, except where the failure to so qualify or have such power
or authority (i) would not have, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), results of operations, assets or business of the Company or any Subsidiary, taken as a whole, or
(ii) impair in any material respect the ability of the Company to perform its obligations under this Agreement or to consummate any transactions contemplated by this Agreement (any such effect as described in clauses (i) or (ii), a
“Material Adverse Effect”). The Company owns or controls, directly or indirectly, only the following corporations, partnerships, limited liability partnerships, limited liability companies, associations or other entities: The Wet Seal
Catalog Inc. (Delaware), The Wet Seal GC, LLC (Virginia) and The Wet Seal Retail Inc. (Delaware) (each a “Subsidiary” and collectively, the “Subsidiaries”), and has no other interest, nominal or beneficial, direct or indirect, in
any other corporation, joint venture or other business entity. 

  
 5 

 Exhibit 10.1 
  

 (b) Authorization of Agreement; Enforceability. This Agreement and the Warrants have
been duly and validly authorized, executed and delivered by the Company. This Agreement and the Warrants are valid, binding and enforceable against the Company in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity. 

(c) Capitalization. The Company has 300,000,000 shares of Common Stock and 10,000,000 shares of Class B convertible common stock, $0.10
par value per share (“Class B Common Stock”) authorized, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable, have been issued in
compliance with federal and state securities laws. As of August 2, 2014, there were: (i) 84,860,314 shares of Common Stock, issued and outstanding; (ii) 0 shares of Class B Common Stock outstanding; (iii) 25,524,108 shares of
Common Stock issuable upon the exercise of all then outstanding options, warrants and other convertible securities then outstanding; and (iv) additional shares of Common Stock issuable upon the vesting of restricted stock units. Since such date
through the date of this Agreement, the Company has not issued any securities, other than (i) Common Stock of the Company issued pursuant to the exercise of stock options and equity awards issued pursuant to equity compensation plans disclosed
in the Company Reports and (ii) the exchange of securities contemplated by the Amendment, Consent and Exchange Agreement with Hudson Bay Master Fund Ltd. (the “Exchange Agreement”), pursuant to which the related Senior Convertible
Note and the related Warrant are being exchanged for the Senior Convertible Note and related Warrant previously issued to Hudson Bay Master Fund Ltd. All of the Company’s options, warrants and other rights to purchase or exchange any securities
for shares of the Company’s capital stock have been duly authorized and validly issued and were issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock was issued in violation of any
preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. 
 (d)
Consents and Approvals. Except for (i) such consents and governmental approvals that have been previously received, (ii) any vote required by NASDAQ Stock Market Listing Rule 5635, (iii) the approval by the Nasdaq Stock Market
of an application for the listing of the Private Placement Stock and the Warrant Shares and (iv) declaration of effectiveness of the Resale Registration Statement by the staff of the Commission, no consent or governmental approval is required
on the part of the Company in connection with the execution and delivery by the Company of this Agreement or the consummation of the purchase and sale of the Private Placement Stock and the issuance of the Warrants. 

(e) Due Authorization and Securities; Reservation of Warrant Shares. All corporate actions required to be taken for the authorization,
issuance and sale of the Warrants have been duly and validly taken. All of the Securities to be issued pursuant to this Agreement have been duly authorized for issuance, and, when issued in accordance with the provisions of this Agreement will be
validly issued, fully paid and non-assessable, and none of such Securities will have been issued in violation of the preemptive rights of any security holders of the Company arising as a matter of law or under or pursuant to the Company’s
Restated Certificate of Incorporation, as amended, the Company’s Amended and Restated By-laws or any material agreement or instrument to which the Company is a party or by which it is bound. As of the time of issuance of the Warrants, the
Warrant Shares shall have been reserved for issuance upon exercise of the Warrants. 
 (f) Subsidiaries. All the outstanding shares
of capital stock of each Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable and, except to the extent set forth in 

  
 6 

 Exhibit 10.1 
  

 
the Company Reports, are owned by the Company directly or indirectly through one or more wholly-owned subsidiaries, free and clear of any claim, lien, encumbrance, security interest, restriction
upon voting or transfer or any other claim of any third party. No current director, officer or key employee of the Company named in a Company Report holds any direct equity, debt or other pecuniary interest in any Subsidiary or, to the best of the
Company’s knowledge, any Person with whom the Company or any Subsidiary does business or is in privity of contract with, other than, in each case, indirectly through the ownership by such individuals of shares of Common Stock. 

(g) Auditors. Deloitte & Touche LLP, which has provided an audit opinion concerning the Company’s financial statements
and schedules, if any, in the Company’s Form 10-K for the fiscal year ended February 1, 2014, has audited the Company’s financial statements and is an independent registered public accounting firm as required by the Securities Act and
the Rules and Regulations and the Public Company Accounting Oversight Board (United States) (the “PCAOB”). Deloitte and Touche LLP has not been engaged by the Company to perform any “prohibited activities” (as defined in
Section 10A of the Exchange Act). 
 (h) Financial Statements. The financial statements, together with the related notes and
schedules, included in the Company Reports fairly present the financial position and the results of operations and changes in financial position of the Company and its Subsidiaries at the respective dates or for the respective periods therein
specified. Such statements and related notes and schedules have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout the periods involved except as
may be set forth in the related notes included in the Company Reports. The financial statements, together with the related notes and schedules, included in the Company Reports comply in all material respects with the Exchange Act and the rules and
regulations promulgated thereunder. 
 (i) Certain Events Subsequent to Audited Financial Statements. Since the date of the latest
audited financial statements included in the Company Reports, the Company has not incurred any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Company Reports; and, since such date, there has not been any change in the capital stock or long-term debt of the Company or any
Subsidiary, or any material adverse changes in or affecting the business, assets, general affairs, management, financial position, stockholders’ equity or results of operations of the Company or any Subsidiary otherwise than as set forth or
contemplated in the Company Reports. 
 (j) Licenses, Certificates, Authorizations, Permits, Etc.. Each of the Company and each
Subsidiary possesses all licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate local, state, federal or foreign regulatory agencies or bodies which are necessary or desirable
for the ownership of its properties or the conduct of its businesses as described in the Company Reports (collectively, the “Governmental Permits”) except where any failures to possess or make the same, individually or in the aggregate,
would not have a Material Adverse Effect. All such Governmental Permits are valid and in full force and effect, except where the validity or failure to be in full force and effect would not, individually or in the aggregate, have a Material Adverse
Effect. Neither the Company nor any Subsidiary has received notification of any revocation or modification (or investigation, inquiry or proceedings related thereto) of any such Governmental Permit and the Company has no knowledge that any such
Governmental Permit will be revoked, suspended or modified in a manner adverse to the Company or a Subsidiary or will not be renewed, except where such revocation, suspension or modification would not have a Material Adverse Effect. 

  
 7 

 Exhibit 10.1 
  

 (k) Investment Company Act. The Company is not, and will not be, after giving effect
to the offering of the Securities pursuant to this Agreement and the application of the proceeds thereof be required to register as an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules
and regulations of the Commission thereunder. 
 (l) Intellectual Property. Except as described in the Company Reports, the Company
owns or possesses the right to use all patents, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, software, databases, know-how, Internet domain names, trade secrets and
other unpatented and/or unpatentable proprietary or confidential information, systems or procedures, and other intellectual property (collectively, “Intellectual Property”) necessary to carry out its respective businesses as currently
conducted and as described in the Company Reports, and the Company is not aware of any claim to the contrary or any challenge by any other person to the rights of the Company or any Subsidiary with respect to the foregoing except for those that
would not reasonably be expected to have a Material Adverse Effect. Each of the Company and each Subsidiary have complied in all material respects with, and is not in breach nor has received any asserted or threatened claim of breach of, any
Intellectual Property license, where such breach would result in a Material Adverse Effect and the Company has no knowledge of any breach or anticipated breach by any other person to any Intellectual Property license. To the Company’s
knowledge, the Company’s and each Subsidiary’s respective businesses as now conducted and as proposed to be conducted (as described in the Company Reports) does not and will not infringe or conflict with any patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses or other Intellectual Property or franchise right of any person. Except as described in the Company Reports, no claim has been made against the Company or any Subsidiary alleging the
infringement by the Company or any Subsidiary of any patent, trademark, service mark, trade name, copyright, trade secret, license in or other intellectual property right or franchise right of any person, except for those that would not,
individually or in the aggregate, have a Material Adverse Effect. Each of the Company and each Subsidiary has taken all reasonable steps to protect, maintain and safeguard its rights in all Intellectual Property. The consummation of the transactions
contemplated by this Agreement will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other person in respect of, the Company or any Subsidiary’s right to own, use, or
hold for use any of the Intellectual Property as owned, used or held for use in the conduct of the businesses as currently conducted. No claims have been asserted or, to the best of the Company’s knowledge, threatened against the Company or any
Subsidiary alleging a violation of any person’s privacy or personal information or data rights and the consummation of the transactions contemplated hereby will not breach or otherwise cause any violation of any law related to privacy, data
protection, or the collection and use of personal information collected, used, or held for use by the Company or any Subsidiary in the conduct of the Company’s or any Subsidiary’s business. Each of the Company and each Subsidiary takes
reasonable measures to ensure that such information is protected against unauthorized access, use, modification, or other misuse, except for those that would not have a Material Adverse Effect. 

(m) Real and Personal Property. Each of the Company and each Subsidiary has good and marketable title in fee simple to, or have valid
rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and any Subsidiary, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do
not, individually or in the aggregate, materially affect the business of the Company and do not interfere with the use made of such property by the Company or any Subsidiary; and all of the leases and subleases material to the business of the
Company and any Subsidiary, and under which the Company holds properties described in the Company Reports, are, to the Company’s knowledge in full force and effect, and neither the Company nor any Subsidiary has received any notice of any
material claim of any sort that have been asserted by anyone adverse to the rights of the Company or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary to the
continued possession of the leased or subleased premises under any such lease or sublease, which would result in a Material Adverse Effect. 

  
 8 

 Exhibit 10.1 
  

 (n) Labor Relations. No labor dispute by the employees of the Company or any
Subsidiary exists or, to the best of the Company’s knowledge, is imminent. The Company is not aware that any key employee or significant group of employees of the Company or any Subsidiary plans to terminate employment with the Company or any
Subsidiary. 
 (o) Environmental Laws. Each of the Company and each Subsidiary is in compliance with all foreign, federal, state and
local rules, laws and regulations, as applicable, relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety or the environment which are applicable to its businesses
(“Environmental Laws”), except where the failure to comply would not, individually or in the aggregate, have a Material Adverse Effect. There has been no storage, generation, transportation, handling, treatment, disposal, discharge,
emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company or any Subsidiary (or, to the Company’s knowledge, any other entity for whose acts or omissions the Company or
any Subsidiary is or may otherwise be liable) upon any of the property now or previously owned or leased by the Company or any Subsidiary, or upon any other property, in violation of any United States law, statute, ordinance, rule, regulation,
order, judgment, decree or permit or which would, under any law, statute, ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability which would
not have, individually or in the aggregate with all such violations and liabilities, a Material Adverse Effect. 
 (p) Taxes. Each of
the Company and each Subsidiary (i) has filed all necessary federal, state, local and foreign tax returns, and all such returns were materially true, complete and correct, (ii) has paid all federal, state, local and foreign taxes,
assessments, governmental or other charges due and payable for which it is liable, including, without limitation, all sales and use taxes and all taxes which the Company or any Subsidiary is obligated to withhold from amounts owing to employees,
creditors and third parties, and (iii) does not have any tax deficiency or claims outstanding or assessed or, to the best of its knowledge, proposed against any of them, except those, in each of the cases described in clauses (i), (ii) and
(iii) of this paragraph (p), that would not, singularly or in the aggregate, have a Material Adverse Effect. Each of the Company and each Subsidiary has not engaged in any transaction which is a corporate tax shelter or which could be
characterized as such by the Internal Revenue Service or any other taxing authority, in each case, that would violate applicable law. The accruals and reserves on the books and records of the Company and each Subsidiary in respect of tax liabilities
for any taxable period not yet finally determined are adequate to meet any reasonably likely assessments and related liabilities for any such period, and since inception each of the Company and each Subsidiary has not incurred any material liability
for taxes other than in the ordinary course. 
 (q) Insurance. Each of the Company and the Subsidiaries carry or are covered by
insurance against such losses and risks and in such amounts as are reasonably considered prudent and customary in the respective businesses and industries in which the Company and its Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage. The Company has no knowledge that it or any Subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from
similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Effect. 

(r) Internal Controls. Each of the Company and each Subsidiary maintains a system of internal accounting and other controls sufficient
to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are 

  
 9 

 Exhibit 10.1 
  

 
recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as
described in the Company Reports, since the end of the Company’s most recent audited fiscal year through the date hereof, there has been (A) no material weakness in the Company’s internal control over financial reporting (whether or
not remediated) and (B) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. 

(s) Minutes. The minute books of the Company and each Subsidiary have been made available to the Placement Agent and counsel for the
Placement Agent, and such books (i) contain a summary of all meetings and actions of the board of directors (including each board committee) and stockholders of the Company and each Subsidiary since the time of its respective incorporation or
organization through the date of the latest meeting and action, and (ii) reflect in all material respects all transactions referred to in such minutes. 

(t) Franchises, Leases, Contracts, Agreements, Etc. There is no franchise, lease, contract, agreement or document required by the
Exchange Act or by the rules and regulations promulgated thereunder to be described in a Company Reports or to be filed as an exhibit to a Company Report which is not described or filed therein as required; and all descriptions of any such
franchises, leases, contracts, agreements or documents contained in the Company documents are accurate and complete descriptions of such documents in all material respects. Other than as described in the Company Reports, no such franchise, lease,
contract or agreement has been suspended or terminated for convenience or default by the Company or any Subsidiary or any of the other parties thereto, and neither the Company nor any Subsidiary has received notice nor does the Company have any
other knowledge of any such pending or threatened suspension or termination, except for such pending or threatened suspensions or terminations that would not reasonably be expected to, individually or in the aggregate, have a Material Adverse
Effect. 
 (u) Related Party Transactions. No relationship, direct or indirect, exists between or among the Company and any
Subsidiary on the one hand, and the directors, officers, 5% or greater stockholders, customers or suppliers of the Company or any Subsidiary or any of the Company’s or such Subsidiary’s affiliates on the other hand, which is required to be
described in the Company Reports and which is not so described. 
 (v) Registration Rights. Except as disclosed in the Company
Reports, no person or entity has the right to require registration of shares of Common Stock or other securities of the Company or any Subsidiary because of the filing or effectiveness of the Resale Registration Statement or otherwise, except for
persons and entities who have expressly waived such right in writing or who have been given timely and proper written notice and have failed to exercise such right within the time or times required under the terms and conditions of such right.
Except as described in the Company Reports, there are no persons with registration rights or similar rights to have any securities registered by the Company or any Subsidiary under the Securities Act. 

(w) Brokers, Finders, Etc. Neither the Company nor any Subsidiary is a party to any contract, agreement or understanding with any
person (other than the B. Riley) that would give rise to a valid claim against the Company or B. Riley for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Securities, or any transaction
contemplated by this Agreement. The Company (and not the Purchasers) shall be responsible for paying any brokerage commission, finder’s fee or like payment due to B. Riley. 

  
 10 

 Exhibit 10.1 
  

 (x) Forward-Looking Statements. No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in Company Documents has been made or reaffirmed, to the best of the Company’s knowledge, without a reasonable basis or has been disclosed other than in
good faith. 
 (y) OFAC. Neither the Company nor, to the knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the
offering of the Securities contemplated hereby, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person or entity for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC. 
 (z) Registration under the Exchange Act; NASDAQ; The Company is subject to and
in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and, prior to the Closing Date,
the Private Placement Stock and the Warrant Shares will be approved for listing on the NASDAQ, and the Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the Stock under the Exchange
Act or delisting the Stock from the NASDAQ, nor has the Company received any notification that the Commission is contemplating terminating such registration nor, except as described in the Company Reports, That The Nasdaq Stock Market is
contemplating terminating such listing. No consent, approval, authorization or order of, or filing, notification or registration with, The Nasdaq Stock Market is required for the listing and trading of the Private Placement Stock or the Warrant
Shares on the NASDAQ, except for an Additional Listing Application and a Notification Form; Change in Number of Shares Outstanding. 
 (aa)
Sarbanes-Oxley Act of 2002. Except as disclosed in the Company Reports, the Company is in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 and all applicable rules and regulations
promulgated thereunder or implementing the provisions thereof (the “Sarbanes-Oxley Act”) that are presently in effect. 

(bb) Nasdaq Corporate Governance Rules. The Company is in compliance in all material respects with all applicable corporate governance
requirements set forth in the rules of the Nasdaq Stock Market that are then in effect, except as described in the Company Reports. 
 (cc)
Off-Balance Sheet Arrangements. There are no transactions, arrangements or other relationships between and/or among the Company or any Subsidiary, any of their affiliates (as such term is defined in Rule 405 of the Securities Act) and any
unconsolidated entity, including, but not limited to, any structure finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company or any Subsidiary’s liquidity or the availability of or
requirements for its capital resources required to be described in the Company Reports which have not been described as required. 
 (dd)
Transactions with Company Officer. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company or any Subsidiary to or for the benefit
of any of the executive officers or directors of the Company, any Subsidiary or any of their respective family members, except as disclosed in the Company Reports and except for such as do not violate Section 402 of the Sarbanes-Oxley Act. All
transactions by the Company with office holders or control persons of the Company have been duly approved by the board of directors of the Company, or duly appointed committees or officers thereof. 

  
 11 

 Exhibit 10.1 
  

 (ee) Statistical, Market and Related Data. The statistical and market related data
included in the Company Reports are based on or derived from sources that the Company believes to be reliable and accurate in all material respects, and such data agree with the sources from which they are derived. 

(ff) Foreign Corrupt Practices Act. Neither the Company nor, to the knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder; and the
Company has instituted and maintain policies and procedures reasonably designed to ensure continued compliance therewith. 
 (gg) Money
Laundering. The operations of the Company are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act
of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental
agency (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator or non-governmental authority involving the Company with respect to
the Money Laundering Laws is pending or, to the Company’s knowledge, threatened. 
 (hh) Periodic Reports. The Company has filed
in a timely manner all reports required to be filed pursuant to Sections 13(a), 14 and 15(d) of the Exchange Act during the preceding 12 months, except where the failure to timely file would not reasonably be expected individually or in the
aggregate to have a Material Adverse Effect. 
 (ii) Agreements Involving Key Persons. To the Company’s knowledge, no director,
officer, key employee or consultant of the Company is subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with any employer or prior employer which could materially affect his ability to be and act
in his respective capacity of the Company or have a Material Adverse Effect on the Company. 
 (jj) No Conflicts. The Company is not
in violation of its Restated Certificate of Incorporation, as amended, or its Amended and Restated By-laws or in default under any agreement, indenture or instrument to which the Company is a party, the effect of which violation or default could
reasonably be expected to have a Material Adverse Effect, and the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby will not conflict with, or constitute a breach of, or
default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company pursuant to the terms of any agreement, indenture or instrument to which the Company is a party, which lien, charge or
encumbrance could reasonably be expected to have a Material Adverse Effect, or result in a violation of the Company’s Restated Certificate of Incorporation, as amended, or the Company’s Amended and Restated By-laws or any order, rule or
regulation of any court or governmental agency having jurisdiction over the Company or any of its property, and, except as may be required by the Securities Act, the Exchange Act and applicable state securities laws, no consent, authorization or
order of, or filing or registration with, any court or governmental agency is required for the execution, delivery and performance of this Agreement. 

(kk) Litigation. Except as disclosed in the Company Reports, there are no actions, suits, investigations or proceedings at law or in
equity or by or on behalf of any governmental entity or in arbitration pending as of the date hereof against, or to the knowledge of the Company threatened against, the Company or any of its subsidiaries or any business, property, officers,
directors or rights of any such person relating to the Placement and the other transactions contemplated by this Agreement or that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 

  
 12 

 Exhibit 10.1 
  

 (ll) Private Placement. Neither the Company nor any Person acting on its behalf has
offered to sell, or sold, the Private Placement Stock or Warrants by any form of general solicitation or general advertising (as those terms are used within the meaning of Regulation D (“Regulation D”) under the Securities Act). Neither
the Company nor any Person acting on its behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offering of the Private Placement Stock or
Warrants to be integrated with any prior offering by the Company in a manner that could require the registration of the Private Placement Stock and Warrants under the Securities Act. 

(mm) Company Reports. The Company has timely filed all Company Reports. As of their respective dates, the Company Reports complied in
all material respects with the requirements of the Exchange Act, or the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder. None of the Company Reports, including any financial statements or schedules
included or incorporated by reference therein (the “Financial Statements”), at the time filed or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing made at least two
(2) Business Days prior to the date hereof, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Financial Statements and the related notes have been prepared in accordance with accounting principles generally accepted in the United States, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in the Financial Statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes, may be condensed or summary statements or may conform to
the Commission’s rules and instructions for Quarterly Reports on Form 10-Q) 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 its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). 

(nn) Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information concerning the Company or any of its Subsidiaries, other than the existence of the transactions contemplated
by this Agreement and other than certain financial information relating to the Company’s second fiscal quarter ended August 2, 2014 (collectively, the “Information”). The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions in securities of the Company. Each press release issued by the Company or any of its Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they
are made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, prospects, operations (including results thereof) or
financial conditions, which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly announced or disclosed. 

(oo) Acknowledgement Regarding Purchasers’ Trading Activity. The Company acknowledges and agrees that following the public
disclosure of the Information: (i) none of the Purchaser has been asked to agree, nor has any Purchaser agreed, to desist from purchasing or selling, 

  
 13 

 Exhibit 10.1 
  

 
long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Private Placement Stock, Warrants, Warrant Shares or
Rights Offering Stock for any specified term; (ii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the
Common Stock, and (iii) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that
following the public disclosure of the Information (a) one or more Purchasers may engage in hedging and/or trading activities at various times during the period that the Private Placement Stock, Warrants, Warrant Shares or Rights Offering Stock
are outstanding, including, without limitation, during the periods that the value of the Private Placement Stock is being determined and (b) such hedging and/or trading activities, if any, can reduce the value of the existing stockholders’
equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement,
the Warrants or any of the documents executed in connection herewith. 
 (pp) Shell Company Status. The Company is not, and has never
been, an issuer identified in Rule 144(i)(1) of the 1933 Act. 
 Section 6. Conditions to Closing. 

(a) Conditions to the Parties’ Obligations. The obligations of the Company and the Purchasers to consummate the transactions
contemplated hereunder in connection with the Placement are subject to the fulfillment or waiver, on or before the Closing Date, of the following conditions: 

(i) no judgment, injunction, decree, regulatory proceeding or other legal restraint shall prohibit, or have the effect of rendering
unachievable, the consummation of the Placement or the transactions contemplated by this Agreement; 
 (ii) the Company has not exercised a
Company Termination; and 
 (iii) to the extent required, the Company shall have received approval from its shareholders pursuant to NASDAQ
Listing Rule 5635 with respect to the issuance of all the Private Placement Stock and the Warrant Shares. 
 (b) Conditions to
Company’s Obligations. The obligations of the Company to consummate the transactions contemplated hereunder in connection with the Placement are subject to the fulfillment or waiver, on or before the Closing Date, of the following
conditions: 
 (i) the representations and warranties of the Purchasers in Section 5 shall be true and correct in all material respects
as of the date hereof and as of the Closing Date as if made as of such date; and 
 (ii) the Purchasers shall have performed all of their
obligations hereunder. 
 (c) Conditions to the Purchasers’ Obligations. The obligations of each Purchaser to consummate the
transactions contemplated hereunder in connection with the Placement are subject to the fulfillment or waiver, before or on the Closing Date, of the following conditions: 

(i) the representations and warranties of the Company in Section 4 shall be true and correct in all material respects as of the date
hereof and as of the Closing Date as if made as of such date (unless such representations and warranties are specifically made as of another date, in which case they shall be deemed made as of such specific date); 

  
 14 

 Exhibit 10.1 
  

 (ii) the Resale Registration Statement shall have been declared effective by the Commission,
and no stop order suspending the effectiveness of the Registration Statement shall have been issued under the Securities Act and no proceedings initiated under Section 8(d) or 8(e) of the Securities Act for that purpose shall be pending or
threatened by the Commission; 
 (iii) the Securities Act registration statement relating to the Rights Offering (the “Rights
Offering Registration Statement”) shall have been declared effective by the Commission, the Company shall not have cancelled or withdrawn the Rights Offering and the Rights Offering shall have closed pursuant to the to the terms set forth
in the Rights Offering Registration Statement; 
 (iv) the Company shall have substantially performed its obligations hereunder; and 

(v) subject to Section 1(b), seven (7) months shall not have elapsed since the date of this Agreement. 

Section 7. Survival. The representations and warranties of the parties contained in this Agreement or in any certificate delivered
hereunder shall survive the Closing. 
 Section 8. Registration Rights. Subject to the terms and conditions of this Agreement and the
Registration Rights Agreement, the Company shall prepare and file with the Commission after the execution of this Agreement the Resale Registration Statement covering the resale of the Private Placement Stock and the Warrant Shares. 

Section 9. Covenants. 

(a) Removal of Restrictive Legends. Subject to the Company’s receipt of reasonable factual confirmations or certifications, no
legal opinion shall be required to be delivered to remove a restrictive legend from the Private Placement Stock or the Warrant Shares if the Purchaser resells such Private Placement Stock pursuant to the Resale Registration Statement when effective
or, to the extent such Purchaser is not an affiliate of the Company, requests the removal of restrictive legends from the Private Placement Stock after the one-year anniversary of the Closing of the transactions contemplated by the Purchase
Agreement. To the extent permitted by the rules policies of The Depository Trust Company and the Company’s transfer agent, the shares of Private Placement Stock and the Warrant Shares shall be delivered to each Purchaser in electronic form.

 (b) Public Announcements. No Purchaser shall issue any public announcement, statement or other disclosure with respect to this
Agreement or the transactions contemplated hereby without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed, except if such public announcement, statement or other disclosure is required by
applicable law or applicable stock market regulations, in which case such Purchaser shall consult in advance with respect to such disclosure with the Company to the extent reasonably practicable. 

(c) Expenses. Each party to this Agreement shall be responsible for its own fees and expenses, except that the Company shall reimburse
(i) B. Riley for its reasonable out-of-pocket fees and expenses in negotiating this Agreement and the other documents contemplated hereby in an aggregate amount not to exceed $50,000 pursuant to the Placement Agency Agreement, and (ii) The
Clinton Group, Inc. (“Clinton”) for its reasonable out-of-pocket fees and expenses in negotiating this Agreement and the other documents contemplated hereby in an aggregate amount not to exceed $10,000. 

  
 15 

 Exhibit 10.1 
  

 (d) Clinton Nominee. Concurrently with the execution of this Agreement by the parties
hereto, Clinton and the Company shall execute and deliver to each other the letter attached hereto as Exhibit D with respect to appointment by the Company of a director to the Board, which such director shall be a designee of Clinton
reasonably acceptable to the Board as provided for in such letter. 
 (e) Limitation on Obligations Purchasers. Notwithstanding
anything to the contrary contained herein, the Company shall not effect the sale of any securities, and no Purchaser shall be obligated to complete the purchase of shares of the Private Placement Stock to the extent that such purchase would result
such Purchaser would beneficially owning in excess of 9.99% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such purchase. For purposes of this Section 9(e),
beneficial ownership shall be calculated in accordance with Section13(d)of the Exchange Act and Rule 13d-3 thereunder, and, for purposes of determining the Maximum Percentage in this Section 9(e), only shares of Private Placement Stock to be
purchased by B. Riley pursuant to this Agreement shall be considered to be beneficially owned by B. Riley. 
 (f) Placement Agency
Agreement. Concurrently with the execution of this Agreement, the Company and B. Riley shall enter into the Placement Agency Agreement (the “Placement Agency Agreement”) pursuant to which, among other things, B. Riley will act
as placement agent (the “Agent”) with respect to the Placement. 
 (g) Dealer-Manager Agreement. The Company and B.
Riley shall enter into a dealer-manager agreement with respect to the Rights Offering substantially in the form set forth in Exhibit E. 

(h) Obtaining Stockholder Approval. The parties hereto acknowledge that approval by the Company’s stockholders is required
pursuant to NASDAQ Listing Rule 5635 prior to the issuance of all the Private Placement Stock and the Warrant Shares as contemplated by this Agreement and upon an exercise of the Warrants, respectively (“Stockholder Approval”). The
Company shall, as soon as reasonably practicable after the date hereof, prepare and file a preliminary proxy statement with the Commission in order to seek such Stockholder Approval. The Company agrees to use commercially reasonable efforts to
respond to any comments received from the staff of the Commission concerning such preliminary proxy statement and then prepare and file a definitive proxy statement and call a meeting of stockholders and seek Stockholder Approval as soon as
reasonably practicable thereafter. Each of the Purchasers individually hereby irrevocably agrees with the Company (and not with any other Purchaser) that, to the extent such Purchaser is a stockholder of the Company and is entitled to vote on the
Stockholder Approval proposal, then such Purchaser shall vote all of such Purchaser’s Common Stock in favor of the Stockholder Approval proposal. 

(i) Disclosure of Transactions and Other Material Information. On or before 8:30 a.m., New York City time, on the first business day
after the date this Agreement has been executed, the Company shall issue a press release (or press releases) reasonably acceptable to the Purchasers and file one or more Current Reports on Form 8-K including with respect to the Information and
describing the material terms of the transactions contemplated by this Agreement in the form required by the Exchange Act and attaching the material transaction documents (including, without limitation, this Agreement, the form of Warrant, the
Placement Agency Agreement and the Registration Rights Agreement as exhibits to such filing (collectively, the “8-K Filing”). From and after the filing of the 8-K Filing with the SEC, no Purchaser shall be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. In addition, effective upon the filing of the 8-K Filing, the
Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates,

  
 16 

 Exhibit 10.1 
  

 
employees or agents, on the one hand, and any of the Purchasers or any of their affiliates, on the other hand, shall terminate. The Company shall not, and shall cause each of its Subsidiaries and
its and each of their respective officers, directors, employees and agents, not to, provide any Purchaser with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the filing of the 8-K Filing with the SEC without the express prior written consent of such Purchaser. To the extent that the Company delivers any material, non-public information to a Purchaser without such Purchaser’s consent
Purchaser (or, if such consent is conditioned upon the release of such material, nonpublic information at a specific date, after such specific date), the Company hereby covenants and agrees that such Purchaser shall not have any duty of
confidentiality with respect to, or a duty not to trade on the basis of, such material, non-public information. Subject to the foregoing, neither the Company, its Subsidiaries nor any Purchaser shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Purchaser, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) each Purchaser shall be consulted by the
Company in connection with any such press release or other public disclosure prior to its release). Except for the 8-K Filing, the Registration Statement required to be filed pursuant to the Registration Rights Agreement or as otherwise required by
law, without the prior written consent of any applicable Purchaser, neither the Company nor any of its Subsidiaries or affiliates shall disclose the name of such Purchaser in any filing, announcement, release or otherwise. 

(j) Enforcement of B. Riley Commitment Letter. The Company has entered into that certain letter agreement, dated September 3,
2014, between B. Riley and the Company, pursuant to which, among other things, B. Riley committed to purchase as principal or cause the purchase of, a total of $12.5 million of Private Placement Stock pursuant to this Agreement. B. Riley has agreed
that, to the extent that by 5:00 pm (California time) on Thursday, September 4, 2014 the total of accounts and B. Riley have not accounted for $12.5 million of Private Placement Stock, B. Riley has committed to purchase Private Placement Stock
equal to such shortfall (the “B. Riley Commitment”). The Company hereby agrees, to enforce, to the fullest extent permitted by law, the B. Riley Commitment and shall not waive or terminate the B. Riley Commitment without the express
written consent of each of the Purchasers. 
 Section 10. Termination. 

(a) By the Purchasers. Any Purchaser may terminate this Agreement, but only with respect to its own commitment, if: 

(i) the Company materially breaches its obligations under this Agreement and such breach is not cured within five business days following
written notice to the Company; 
 (ii) consummation of the Placement is prohibited by applicable law, rules or regulations; 

(iii) the Resale Registration Statement may not be used to register the resale of the Private Placement Stock and/or Warrant Shares pursuant
to the rules of the Commission or the interpretations of the staff of the Commission; 
 (iv) a meeting of the Company’s stockholders
is held to obtain Stockholder Approval and Stockholder Approval is not received from the Company’s stockholders at such meeting or any adjournment or postponement thereof; or 

(v) subject to Section 1(b), the Closing has not occurred within seven (7) months of the date of this Agreement. 

  
 17 

 Exhibit 10.1 
  

 (b) By Company. The Company may terminate this Agreement if: 

(i) any Purchaser materially breaches its obligations under this Agreement and such breach is not cured within five business days following
written notice to such Purchaser, provided, however, the Company’s termination right pursuant hereto shall only be with respect to such breaching Purchaser; 

(ii) consummation of the Placement is prohibited by applicable law, rules or regulations; 

(iii) a meeting of the Company’s stockholders is held to obtain Stockholder Approval and Stockholder Approval is not received from the
Company’s stockholders at such meeting or any adjournment or postponement thereof; or 
 (iv) subject to Section 1(b), the Closing
has not occurred within seven (7) months of the date of this Agreement; or 
 (v) there is a Company Termination pursuant to
Section 3. 
 (c) Effect of Termination. The Company and the Purchasers hereby agree that any termination of this Agreement
pursuant to this Section 10 (other than termination by one party in the event of a breach of this Agreement by the other party or a misrepresentation of any of the statements made hereby by the other party or a Company Termination pursuant to
Section 3), shall be without liability to the Company or the Purchasers. In the event this Agreement is terminated, all Warrants issued pursuant to this Agreement shall survive, other than any Warrants issued to a Purchaser that has materially
breached its obligations under this Agreement, which Warrants shall immediately terminate upon written notice to such Purchaser that this Agreement has been terminated pursuant to Section 10(b)(1) because such Purchaser materially breached its
obligations under this Agreement. Notwithstanding the foregoing, Sections 4, 5, 9(a) through (c), 9(i) 11, and 12 through 17 shall survive any termination of this Agreement. 

Section 11. Notices. All notices, communications and deliveries required or permitted by this Agreement shall be made in writing signed by
the party making the same, shall specify the Section of this Agreement pursuant to which it is given or being made and shall be deemed given or made (a)on the date delivered if delivered in person, (b) on the third business day after it is
mailed if mailed by registered or certified mail (return receipt requested) (with postage and other fees prepaid) or (c)on the day after it is delivered, prepaid, to an overnight express delivery service that confirms to the sender delivery on such
day, as follows: 
 If to the Company: 
 The Wet Seal, Inc.

 26972 Burbank 
 Foothill Ranch, CA 92610 

Facsimile: (949) 699-4825 
 Attn: Chief Financial Officer

  
 18 

 Exhibit 10.1 
  

 With a copy (which shall not constitute notice to the Company) to: 

Paul Hastings LLP 
 695 Town Center Drive 

Costa Mesa, CA92626 
 Attn: Stephen D. Cooke 

Facsimile: (714) 979-1921 
 If to any Purchaser, to his, her
or its respective address in the Company’s records, or to such other representative or at such other address of a party as such party hereto may furnish to the other parties in writing in accordance with this Section 10, with a copy to:

 Manatt, Phelps & Phillips LLP 
 695 Town Center
Drive, 14th Floor 
 Costa Mesa, CA 92646 

Attention: Thomas J. Poletti, Esq. 
 Facsimile:
(714) 371-2551 
 Section 12. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the
Purchasers and the Company, and supersedes all prior agreements and understandings relating to the subject matter hereof. 
 Section 13.
Indemnification by Company. To the fullest extent permitted by law, the Company hereby agrees to indemnify and hold harmless the Purchasers and each of their respective affiliates, and their respective directors, officers and authorized
agents from and against any and all losses, claims, damages, expenses and liabilities relating to or arising out of any breach of any representation, warranty, covenant or undertaking made by or on behalf of the Company in this Agreement. 

Section 14. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.

 Section 15. Amendments. This Agreement may be modified or amended only with the written consent of the each of the parties hereto. If
the Company pays consideration to any Purchaser in connection with obtaining an amendment, modification, supplement, waiver or consent under this Agreement, the Company shall offer to pay such consideration to all other Purchasers. 

Section 16. Severability. If any provision of this Agreement shall be held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected. 
 Section 17. Miscellaneous. 

(a) Notwithstanding any term to the contrary herein, no Person other than the Company or the Purchasers shall be entitled to rely on and/or
have the benefit of, as a third party beneficiary or under any other theory, any of the representations, warranties, agreements, covenants or other provisions of this Agreement. 

(b) The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning of this Agreement.

 (c) This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which, when
taken together, shall constitute one and the same instrument. 
 (d) No Purchaser shall assign this Agreement or any of its rights hereunder
without the Company’s prior written consent. 

  
 19 

 Exhibit 10.1 
  

 [Signature Page Follows] 

  
 20 

 Exhibit 10.1 
  

 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the date
first set forth above. 
  

			
	THE WET SEAL, INC.
		
	By	 	 /s/ Steven H. Benrubi

	Name:	 	Steven H. Benrubi
	Title:	 	Executive Vice President, Chief Financial Officer

  
 21 

 Exhibit 10.1 
  

 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the date
first set forth above. 
  

					
	PURCHASER:
	
	CLINTON GROUP, INC.,
	in its capacity as investment manager on behalf of various funds and managed accounts purchasing securities hereunder
		
	By:	 	 /s/ John L. Hall

		 	Name:	 	John L. Hall
		 	Title:	 	Authorized Signatory

  
 22 

 Exhibit 10.1 
  

 
			
	B. RILEY & CO., LLC 
		
	By	 	 /s/ Bryant Riley

	Name:	 	Bryant Riley
	Title:	 	Chairman

  
 23 

 Exhibit 10.1 
  

 
			
	B. RILEY & CO., LLC 401(k) PROFIT SHARING PLAN
		
	By	 	 /s/ Bryant Riley

	Name:	 	Bryant Riley
	Title:	 	Trustee

  
 24 

 Exhibit 10.1 
  

 
			
	ROBERT ANTIN CHILDREN IRREVOCABLE TRUST DATED JANUARY 1, 2001
		
	By	 	 /s/ Bryant Riley

	Name:	 	Bryant Riley
	Title:	 	Trustee

  
 25 

 Exhibit 10.1 
  

 
			
	RILEY INVESTMENT PARTNERS, L.P.
		
	By	 	 /s/ Bryant Riley

	Name:	 	Bryant Riley
	Title:	 	Managing Member of Riley Investment Management, LLC, its General Partner

  
 26 

 Exhibit 10.1 
  

 
	
	 /s/ Bryant and Carleen Riley

	BRYANT AND CARLEEN RILEY JTWROS

  
 27 

 Exhibit 10.1 
  

 
			
	RILEY FAMILY TRUST
		
	By	 	 /s/ Richard Riley

	Name:	 	Richard Riley
	Title:	 	Trustee

  

			
	Address:	 	133 Shorecliff Drive
		 	Corona Del Mar, CA 92625

  
 28 

 Exhibit 10.1 
  

 
	
	B. RILEY & CO., LLC 401(k) PROFIT SHARING PLAN FBO BRYANT RILEY
	
	 /s/ Bryant Riley

	Bryant Riley

  
 29 

 Exhibit 10.1 
  

 
			
	POTOMAC CAPITAL MANAGEMENT, LLC
		
	By	 	 /s/ Paul J. Solit

	Name:	 	Paul J. Solit
	Title:	 	Managing Member of its General Partner

  
 30 

 Exhibit 10.1 
  

 
	
	 /s/ Lloyd Miller

	LLOYD MILLER

  
 31 

 Exhibit 10.1 
  

 
	
	 /s/ Susan Miller

	SUSAN MILLER

  
 32 

 Exhibit 10.1 
  

 
			
	DIVISAR CAPITAL MANAGEMENT, LLC
		
	By	 	 /s/ Steven Baughman

	Name:	 	Steven Baughman
	Title:	 	Managing Member

  
 33 

 Exhibit 10.1 
  

 
			
	EQUITEC PROPRIETARY MARKETS LLC
		
	By	 	 /s/ Dan Asher

	Name:	 	Dan Asher
	Title:	 	Managing Partner

  
 34 

 Exhibit 10.1 
  

 
			
	IL HEDGE INVESTMENTS, LLC
		
	By	 	 /s/ Steve Baughman

	Name:	 	 Steve Baughman

	Title:	 	 Managing Member of Divisar Capital Management, LLC

  
 35 

 Exhibit 10.1 
  

 EXHIBIT A 

The Agent 
  

									
	 Name and Address
	  	Commitment
Amount	 	  	Election of Warrant Shares
or Discounted Private
Placement Stock
	 B. Riley & Co., LLC and affiliates
	  	$	5,000,000	  	  	 ̈	  	[—] Warrant Shares
		  				  	  
 Or
	  	
		  				  	  
  ̈
	  	  
 Discounted Private
Placement Stock

 The Purchasers 
  

									
	 Name and Address
	  	Commitment
Amount	 	  	Election of Warrant Shares
or Discounted Private
Placement Stock
	 Parties identified by B Riley
	  	$	7,500,000	  	  	 ̈	  	[—] Warrant Shares
		  				  	  
 Or
	  	
		  				  	  
  ̈
	  	  
 Discounted Private
Placement Stock

				
	 Clinton Group, Inc.
	  	$	3,000,000	  	  	 ̈	  	[—] Warrant Shares
		  				  	  
 Or
	  	
		  				  	  
  ̈
	  	  
 Discounted Private
Placement Stock

				
	 Hudson Bay Master Fund Ltd.
	  	$	3,000,000	  	  	 ̈	  	[—] Warrant Shares
		  				  	  
 Or
	  	
		  				  	  
  ̈
	  	  
 Discounted Private
Placement Stock

  
 36 

 Exhibit 10.1 
  

 EXHIBIT B – FORM OF WARRANT 

  
 37 

 Exhibit 10.1 
  

 EXHIBIT C – PLACEMENT AGENCY AGREEMENT 

  
 38 

 Exhibit 10.1 
  

 EXHIBIT D – LETTER AGREEMENT RE CLINTON NOMINEE 

 Exhibit 10.1 
  

 EXHIBIT E – FORM OF DEALER MANAGER AGREEMENT

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