EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of June 16, 2006, among Tarrant Apparel Group, a California
corporation (the "COMPANY"), and the purchasers signatory hereto (each such
purchaser is a "PURCHASER" and all such purchasers are, collectively, the
"PURCHASERS"). This Agreement is made pursuant to the Warrants Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"PURCHASE AGREEMENT") and the Credit Agreement, dated as of the date hereof, by
and among the Company, the Borrowers, the Guarantors, the Lenders thereto from
time to time and the Administrative Agent and Collateral Agent for the Lenders,
each as set forth in the Credit Agreement (the "CREDIT AGREEMENT"). The Company
and the Purchasers hereby agree as follows:
1. DEFINITIONS
CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN THAT ARE
DEFINED IN THE PURCHASE AGREEMENT SHALL HAVE THE MEANINGS GIVEN SUCH TERMS IN
THE PURCHASE AGREEMENT. As used in this Agreement, the following terms shall
have the following meanings:
"ADVICE" shall have the meaning set forth in Section 6(d).
"EFFECTIVENESS DATE" means, with respect to the initial
Registration Statement required to be filed hereunder, the 150th calendar day
following the date hereof and, with respect to any additional Registration
Statements which may be required pursuant to Section 3(c), the 150th calendar
day following the date on which the Company first knows, or reasonably should
have known, that such additional Registration Statement is required hereunder;
provided, however, in the event the Company is notified by the Commission that
one of the above Registration Statements will not be reviewed or is no longer
subject to further review and comments, the Effectiveness Date as to such
Registration Statement shall be the fifth Trading Day following the date on
which the Company is so notified if such date precedes the dates required above.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section
2(a).
"FILING DATE" means, with respect to the initial Registration
Statement required hereunder, the 60th calendar day following the date hereof
and, with respect to any additional Registration Statements which may be
required pursuant to Section 3(c), the 60th day following the date on which the
Company first knows, or reasonably should have known that such additional
Registration Statement is required hereunder.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PLAN OF DISTRIBUTION" shall have the meaning set forth in Section
2(a).
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"REGISTRABLE SECURITIES" means (i) all Underlying Shares issuable
upon exercise in full of the Warrants including all additional Underlying Shares
issuable in connection with any anti-dilution provisions in the Warrants, and
(ii) any securities issued or issuable upon any stock split, dividend or other
distribution recapitalization or similar event with respect to the foregoing.
"REGISTRATION STATEMENT" means the registration statements
required to be filed hereunder and any additional registration statements
contemplated by Section 3(c), including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
"RULE 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"RULE 424" means Rule 424 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"SELLING SHAREHOLDER QUESTIONNAIRE" shall have the meaning set
forth in Section 3(a).
2. SHELF REGISTRATION
(a) On or prior to each Filing Date, the Company shall prepare and
file with the Commission a Registration Statement covering the resale of 125% of
the portion of Registrable Securities included in clause (i) of the definition
thereof, calculated as of such Filing
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Date for an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith), which if the Company is then eligible shall be an automatic
registration statement. The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
applicable Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities Act until all
Registrable Securities covered by such Registration Statement have been sold or
may be sold by each Holder without volume restrictions pursuant to Rule 144(k)
as determined by the counsel to the Company and shall provide a written opinion
letter to such effect, addressed and acceptable to the Company's transfer agent
and each of the affected Holders, including, for purposes of clarification, a
conclusion that each affected Holder is not an affiliate of the Company (the
"EFFECTIVENESS PERIOD"). The Company shall immediately notify the Holders via
facsimile or email of the effectiveness of the Registration Statement on the
same day that the Company receives notification of the effectiveness from the
Commission.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Not less than two Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto, the Company shall, (i) furnish to each Holder copies of all such
documents proposed to be filed, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that, the Company is
notified of such objection in writing no later than 2 Trading Days after the
Holders have been so furnished copies of such documents. Each Holder agrees to
furnish to the Company a completed Questionnaire in the form attached to this
Agreement as Annex A (a "SELLING SHAREHOLDER QUESTIONNAIRE") concurrently with
the execution and delivery of this Agreement, or, if not completed by the Holder
prior to the date hereof, upon written request of the Company.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement
(subject to the terms of this Agreement), and as so supplemented or amended to
be filed pursuant to Rule 424; (iii) respond as promptly as
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reasonably possible to any comments received from the Commission with respect to
a Registration Statement or any amendment thereto and as promptly as reasonably
possible, upon request, provide the Holders true and complete copies of all
correspondence from and to the Commission relating to a Registration Statement;
and (iv) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by a Registration Statement during the applicable period in
accordance (subject to the terms of this Agreement) with the intended methods of
disposition by the Holders thereof set forth in such Registration Statement as
so amended or in such Prospectus as so supplemented.
(c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 90% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file as soon as
reasonably practicable but in any case prior to the applicable Filing Date, an
additional Registration Statement covering the resale by the Holders of not less
than 125% of the number of such Registrable Securities.
(d) Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (ii) through (vi) hereof, be accompanied by an
instruction to suspend the use of the Prospectus until the requisite changes
have been made) as promptly as reasonably possible following the day (i)(A) when
a Prospectus or any Prospectus supplement or post-effective amendment to a
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement (the
Company shall upon request provide true and complete copies thereof and all
written responses thereto to each of the Holders); and (C) with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to a Registration Statement
or Prospectus or for additional information; (iii) of the issuance by the
Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of a Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; (v) of the occurrence of any
event or passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or the occurrence at any
event or any state of facts that makes any statement made in a Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus, as
the case may be, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and (vi) the occurrence or existence of any pending
corporate development with respect to the Company that the Board of Directors of
the Company has determined in good faith and after consultation with legal
counsel to be material nonpublic information and that, in the determination of
the Board, makes it not in the best interest of the Company to allow continued
availability of the Registration Statement or Prospectus; provided that any and
all of such information shall remain
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confidential to each Holder until such information otherwise becomes public,
unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder's agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information. If the Company notifies the Holders in accordance with
clauses (ii) through (v) of this Section 3(d) above to suspend the use of any
Prospectus until the requisite changes to such Prospectus have been made, then
the Holders shall suspend use of such Prospectus. The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as promptly as
is practicable, and in no event may the Company suspend the use of the
Prospectus for a period not to exceed 30 days in any 90-day period or an
aggregate of 90 days in any 12-month period.
(e) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(f) Furnish to each Holder, without charge, to the extent
requested by such Holder, at least one conformed copy of each such Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference to the extent requested by such Person, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference). ). The Company shall not, without the prior consent of the
Holders, make any offer relating to the Registrable Securities that would
constitute a "free writing prospectus," as defined in Commission Rule 405.
(g) Promptly deliver to each Holder, without charge, as many
copies of the Prospectus or Prospectuses (including each form of prospectus) and
each amendment or supplement thereto as such Persons may reasonably request in
connection with resales by the Holder of Registrable Securities. Subject to the
terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto, except after
the giving on any notice pursuant to Section 3(d).
(h) Prior to any resale of Registrable Securities by a Holder, to
register or qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from the Registration or
qualification) of such Registrable Securities for the resale by the Holder under
the securities or Blue Sky laws of such jurisdictions within the United States
as any Holder reasonably requests in writing, to keep each registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things reasonably necessary to enable the
disposition in such jurisdictions of the Registrable Securities covered by each
Registration Statement; provided, that the Company shall not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified, subject the Company to any material tax in any such jurisdiction
where it is not then so subject or file a general consent to service of process
in any such jurisdiction.
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(i) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such Holders may request.
(j) Upon the occurrence of any event contemplated by Section 3(d)
or as otherwise required, as promptly as reasonably possible under the
circumstances taking into account the Company's good faith assessment of any
adverse consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment, including a
post-effective amendment, to a Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither a Registration Statement nor such Prospectus will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(k) During the period during which the Company is required to
maintain an effective Shelf Registration Statement pursuant to this Agreement,
prior to the three-year expiration of that Shelf Registration Statement file,
and use its best efforts to cause to be declared effective (unless it becomes
effective automatically upon filing) within a period that avoids any
interruption in the ability of Holders of Securities covered by the expiring
Shelf Registration Statement to make registered dispositions, a new registration
statement relating to the Securities, which shall be deemed the "Shelf
Registration Statement" for purposes of this Agreement.
(l) Comply with all applicable rules and regulations of the
Commission.
(m) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and the person thereof that has voting and
dispositive control over the Registrable Securities. During any periods that the
Company is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because any Holder fails to
furnish such information within five Trading Days of the Company's request, any
liquidated damages that are accruing at such time as to such Holder only shall
be tolled and any event that may otherwise occur solely because of such delay
shall be suspended as to such Holder only, until such information is delivered
to the Company.
(n) In the event of an underwritten offering conducted pursuant to
Section 6(f) hereof, the Company shall, if requested, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the Shelf
Registration Statement such information as the managing underwriters reasonably
agree should be included therein and to which the Company does not reasonably
object and shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment.
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(o) Enter into such customary agreements (including an
underwriting agreement in customary form in the event of an underwritten
offering conducted pursuant to Section 6(f) hereof) and take all other
appropriate action in order to expedite and facilitate the registration and
disposition of the Registrable Securities, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures substantially identical to those set
forth in Section 5 hereof with respect to all parties to be indemnified pursuant
to Section 5 hereof.
(p)
(i) (A) make reasonably available for inspection by the
Holders, any underwriter participating in any
disposition pursuant to the Shelf Registration
Statement, and any attorney, accountant or other agent
retained by such Holders or any such underwriter all
relevant financial and other records, pertinent
corporate documents and properties of the Company and
its subsidiaries, and (B) cause the Company's officers,
directors and employees to supply all information
reasonably requested by such Holders or any such
underwriter, attorney, accountant or agent in connection
with the Shelf Registration Statement, in each case, as
is customary for similar due diligence examinations;
provided, however, that all records, information and
documents that are designated in writing by the Company,
in good faith, as confidential shall be kept
confidential by such Holders and any such underwriter,
attorney, accountant or agent, unless such disclosure is
made in connection with a court proceeding or required
by law, or such records, information or documents become
available to the public generally or through a third
party without an accompanying obligation of
confidentiality; and provided further that, if the
foregoing inspection and information gathering would
otherwise disrupt the Company's conduct of its business,
such inspection and information gathering shall, to the
greatest extent possible, be coordinated on behalf of
the Holders and the other parties entitled thereto by
one counsel designated by and on behalf of the Holders
and other parties;
(ii) in connection with any underwritten offering conducted
pursuant to Section 6(f) hereof, make such
representations and warranties to the Holders
participating in such underwritten offering and to the
managing underwriters, in form, substance and scope as
are customarily made by the Company to underwriters in
primary underwritten offerings of equity and convertible
debt securities and covering matters including, but not
limited to, those set forth in the Purchase Agreement;
(iii) in connection with any underwritten offering conducted
pursuant to Section 6(f) hereof, obtain opinions of
counsel to the Company
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(which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the
Holders and the managing underwriters) addressed to each
Holder participating in such underwritten offering and
the underwriters, covering such matters as are
customarily covered in opinions requested in primary
underwritten offerings of equity and such other matters
as may be reasonably requested by such Holders and
underwriters (it being agreed that the matters to be
covered by such opinions shall include, without
limitation, as of the date of the opinion and as of the
effective date of the Shelf Registration Statement or
most recent post effective amendment thereto or most
recent prospectus supplement thereto that is deemed to
establish a new effective date, as the case may be, the
absence from the Shelf Registration Statement and the
prospectus and any prospectus supplement included
therein, as then amended or supplemented and including
any documents incorporated by reference therein, of an
untrue statement of a material fact or the omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading and as of an applicable time identified by
such Holders or managing underwriters, the absence from
the prospectus included in the Registration Statement,
as amended or supplemented at such applicable time and
including any documents incorporated by reference
therein, taken together with any other documents
identified by such Holders or managing underwriters, of
an untrue statement of a material fact or the omission
to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, in the light of the circumstances under
which they were made, not misleading);
(iv) in connection with any underwritten offering conducted
pursuant to Section 6(f) hereof, obtain "cold comfort"
letters and updates thereof from the independent public
accountants of the Company (and, if necessary, from the
independent public accountants of any subsidiary of the
Company or of any business acquired by the Company for
which financial statements and financial data are, or
are required to be, included in the Shelf Registration
Statement), addressed to each Holder participating in
such underwritten offering (if such Holder has provided
such letter, representations or documentation, if any,
required for such cold comfort letter to be so
addressed) and the underwriters, in customary form and
covering matters of the type customarily covered in
"cold comfort" letters in connection with primary
underwritten offerings;
(v) in connection with any underwritten offering conducted
pursuant to Section 6(f) hereof, deliver such documents
and certificates as
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may be reasonably requested by any Holders participating
in such underwritten offering and the managing
underwriters, if any, including, without limitation,
certificates to evidence compliance with Section 3(d)
hereof and with any conditions contained in the
underwriting agreement or other agreements entered into
by the Company.
(q) Use its best efforts to cause the Common Stock issuable upon
conversion of the Securities to be listed for quotation on the Nasdaq National
Market System or other stock exchange or trading system on which the Common
Stock primarily trades on or prior to the Effective Time of the Shelf
Registration Statement hereunder.
(r) The Company shall use its best efforts to take all other steps
necessary to effect the registration, offering and sale of the Registrable
Securities covered by the Shelf Registration Statement contemplated hereby.
4. REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, (B) in compliance with applicable state securities or Blue
Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders) and (C) with
respect to any filing that may be required to be made by any broker through
which a Holder intends to make sales of Registrable Securities with NASD
Regulation, Inc. pursuant to the NASD Rule 2710, (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in a Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. Further, the Company shall bear or reimburse the Holders for the
reasonable fees and disbursements of a single counsel selected by a plurality of
Holders to be included on a Registration Statement who own an aggregate of not
less than 25% of the Registrable Securities covered by the Shelf Registration
Statement to act as counsel therefore in connection therewith. In addition, the
Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder. In no event shall the Company be responsible for any broker or
similar commissions and the Holders shall pay all underwriting discounts and
commission, if any, relating to the sale
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or disposition of such Holder's Registrable Securities pursuant to the Shelf
Registration Statement.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents and employees of each of them, each
underwriter (as defined in the Securities Act) or selling agent, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys' fees)
and expenses (collectively, "LOSSES"), as incurred, arising out of or relating
to any untrue or alleged untrue statement of a material fact contained in a
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or "issuer
free writing prospectus," as defined in Commission Rule 433 ("ISSUER FWP"), or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein. The Company shall notify
the Holders promptly of the institution, threat or assertion of any Proceeding
arising from or in connection with the transactions contemplated by this
Agreement of which the Company is aware.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based solely upon: any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus or Issuer FWP, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue statement
or omission is contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in such Registration Statement
or such Prospectus. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel
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reasonably satisfactory to the Indemnified Party (who shall not, without the
consent of the Indemnified Party, be counsel to the Indemnifying Party) and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement. An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding (in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of one separate counsel shall be at
the expense of the Indemnifying Party). No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement or
compromise or consent to the entry of any judgment of any pending Proceeding in
respect of which any Indemnified Party is a party, unless such settlement
compromise or judgment includes an unconditional release of such Indemnified
Party from all liability on claims that are the subject matter of such
Proceeding and does not include a statement as to, or an admission of, fault,
culpability or failure to act, by or on behalf of any Indemnified Party. Subject
to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Trading Days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is finally
judicially determined not to be entitled to indemnification contribution or
reimbursement hereunder, determined based upon the relative faults of the
parties.
(d) CONTRIBUTION. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in this Agreement, any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms. The parties
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hereto agree that it would not be just and equitable if contribution pursuant to
this Section 5(d) were determined by pro rata allocation or by any other method
of allocation that does not take into account the equitable considerations
referred to above. Notwithstanding the provisions of this Section 5(d), no
Holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the proceeds actually received by such Holder from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission, except
in the case of fraud by such Holder. The indemnity and contribution agreements
contained in this Section are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties.
6. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of
its security holders (other than the Holders in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other than
the Registrable Securities. The Company shall not file any other registration
statements until the initial Registration Statement required hereunder is
declared effective by the Commission, provided that this Section 6(b) shall not
prohibit the Company from filing amendments to registration statements already
filed.
(c) COMPLIANCE. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
(d) DISCONTINUED DISPOSITION. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Section
3(d), such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement, or
until it is advised in writing (the "ADVICE") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed as promptly as it practicable.
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(e) PIGGY-BACK REGISTRATIONS. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued in connection with any acquisition of any entity or business or equity
securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice of
such determination and, if within fifteen days after the date of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered; provided, that, the Company shall not be
required to register any Registrable Securities pursuant to this Section 6(e)
that are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective Registration
Statement.
(f) UNDERWRITTEN OFFERING. If (i) on or prior to the Effectiveness
Date, a Shelf Registration Statement has not been filed with and declared
effective by the Commission or (ii) at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities including by reason of (x) the Shelf Registration Statement ceasing
to be effective or (y) the Holders being otherwise prevented or restricted by
the Company from effecting sales pursuant to the Shelf Registration Statement
for more than 10 days, whether or not consecutive, in any 90-day period, or for
more than 20 days, whether or not consecutive, during any 12-month period (for
purposes of clause (y), not counting days during which the Company is entitled
to and has properly suspended use of the Prospectus pursuant to Section 3(d)
hereof), then Holders of at least 33-1/3% in aggregate principal amount of the
Registrable Securities then covered by the Shelf Registration Statement shall
have the right to request an underwritten offering, and any Holder of
Registrable Securities who desires to do so may sell Registrable Securities (in
whole or in part) in such underwritten offering; provided that at least such
aggregate principal amount of such Registrable Securities shall be included in
such offering. Upon receipt of such a request, the Company shall provide all
Holders of Registrable Securities written notice of the request, which notice
shall inform such Holders that they have the opportunity to participate in the
offering. In any such underwritten offering, the investment banker or bankers
and manager or managers that will administer the offering will be selected by,
and the underwriting arrangements with respect thereto (including the size of
the offering) will be approved by, the holders of a majority of the Registrable
Securities to be included in such offering; provided, however, that such
investment bankers and managers and underwriting arrangements must be reasonably
satisfactory to the Company. No Holder may participate in any underwritten
offering contemplated hereby unless (a) such Holder agrees to sell such Holder's
Registrable Securities to be included in the underwritten offering in accordance
with any approved underwriting arrangements, (b) such Holder completes and
executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such approved underwriting arrangements, and (c) such Holder returns a
completed and signed Selling Shareholders Questionnaire to the Company within a
reasonable amount of time before such underwritten offering. The Holders
participating in any underwritten offering shall be responsible for any
underwriting discounts and commissions and fees and, subject to Section 5
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hereof, expenses of their own counsel. The Company shall pay all expenses
customarily borne by issuers in an underwritten offering, including but not
limited to filing fees, the fees and disbursements of its counsel and
independent public accountants and any printing expenses incurred in connection
with such underwritten offering. Notwithstanding the foregoing or the provisions
of Section 3 hereof, upon receipt of a request from the managing underwriter or
a representative of holders of a majority of the Registrable Securities to be
included in an underwritten offering, the Company may delay the filing of any
such amendment or supplement for up to 90 days if the Board of Directors of the
Company shall have determined in good faith that the Company has a bona fide
business reason for such delay.
(g) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and Holders of at least 66 2/3% of the outstanding Registrable Securities as of
the date of such amendment. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of all of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(h) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be delivered as
set forth in the Purchase Agreement.
(i) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
all of the Holders of the then-outstanding Registrable Securities. Each Holder
may assign upon notice to the Company their respective rights hereunder to
transferees or assignees of Warrants and/or Registrable Securities in the manner
and to the Persons as permitted under the Purchase Agreement.
(j) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof.
(k) EXECUTION AND COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
-14-
(l) GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
with the provisions of the Purchase Agreement.
(m) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(n) SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(o) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(p) INDEPENDENT NATURE OF HOLDERS' OBLIGATIONS AND RIGHTS. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be
joined as an additional party in any proceeding for such purpose.
-15-
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
TARRANT APPAREL GROUP
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Chairman and Interim CEO
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
ORPHEUS HOLDINGS LLC
By: GUGGENHEIM INVESTMENT MANAGEMENT, LLC
as Manager
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
NORTH AMERICAN COMPANY FOR LIFE AND
HEALTH INSURANCE
By: MIDLAND ADVISORS COMPANY as its Agent
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
MIDLAND NATIONAL LIFE INSURANCE COMPANY
By: MIDLAND ADVISORS COMPANY as its Agent
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
DURHAM CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
ANNEX A
TARRANT APPAREL GROUP
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial owner of common stock, no par value per
share (the "COMMON STOCK"), of Tarrant Apparel Group, a California corporation
(the "COMPANY"), (the "REGISTRABLE SECURITIES") understands that the Company has
filed or intends to file with the Securities and Exchange Commission (the
"COMMISSION") a registration statement on Form S-3 (the "REGISTRATION
STATEMENT") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "SECURITIES ACT"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of
December 14, 2004 (the "REGISTRATION RIGHTS AGREEMENT"), among the Company and
the Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set placeforth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the "SELLING SECURITYHOLDER") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.
The undersigned hereby provides the following information to the
Company and represents and warrants that such information is accurate:
QUESTIONNAIRE
1. NAME
(a) Full Legal Name of Selling Securityholder
(b) Full Legal Name of Registered Holder (if not the same as (a)
above) through which Registrable Securities Listed in Item 3 below are held:
(c) Full Legal Name of Natural Control Person (which means a
natural person who directly you indirectly alone or with others has power to
vote or dispose of the securities covered by the questionnaire):
2. ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:
Telephone:
Fax:
Contact Person:
3. BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:
(a) Type and Principal Amount of Registrable Securities
beneficially owned:
4. BROKER-DEALER STATUS:
(a) Are you a broker-dealer?
Yes [_] No [_]
Note: If yes, the Commission's staff has indicated that you should
be identified as an underwriter in the Registration Statement.
(b) Are you an affiliate of a broker-dealer?
Yes [_] No [_]
(c) If you are an affiliate of a broker-dealer, do you certify
that you bought the Registrable Securities in the ordinary course of business,
and at the time of the purchase of the Registrable Securities to be resold, you
had no agreements or understandings, directly or indirectly, with any person to
distribute the Registrable Securities?
Yes [_] No [_]
Note: If no, the Commission's staff has indicated that you should
be identified as an underwriter in the Registration Statement.
5. BENEFICIAL OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED
BY THE SELLING SECURITYHOLDER. EXCEPT AS SET placeFORTH BELOW IN THIS ITEM 5,
THE UNDERSIGNED IS NOT THE BENEFICIAL OR REGISTERED OWNER OF ANY SECURITIES OF
THE COMPANY OTHER THAN THE REGISTRABLE SECURITIES LISTED ABOVE IN ITEM 3.
(a) Type and Amount of Other Securities beneficially owned by the
Selling Securityholder:
6. RELATIONSHIPS WITH THE COMPANY: EXCEPT AS SET FORTH BELOW,
NEITHER THE UNDERSIGNED NOR ANY OF ITS AFFILIATES, OFFICERS, DIRECTORS OR
PRINCIPAL EQUITY HOLDERS (OWNERS OF 5% OF MORE OF THE EQUITY SECURITIES OF THE
UNDERSIGNED) HAS HELD ANY POSITION OR OFFICE OR HAS HAD ANY OTHER MATERIAL
RELATIONSHIP WITH THE COMPANY (OR ITS PREDECESSORS OR AFFILIATES) DURING THE
PAST THREE YEARS.
State any exceptions here:
The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Registration Statement
remains effective.
By signing below, the undersigned consents to the disclosure of
the information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus. The undersigned understands that such information will be relied
upon by the Company in connection with the preparation or amendment of the
Registration Statement and the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
Dated:
Beneficial Owner:
By:__________________________________
Name:________________________________
Title:_______________________________
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO: