TRANCHE B WARRANT AGREEMENT
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WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE B WARRANTS
WEI ACQUISITION CO.
(which will change its name to Wherehouse Entertainment, Inc.)
and
UNITED STATES TRUST COMPANY OF NEW YORK
Dated as of January 31, 1997
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TABLE OF CONTENTS
Sections Page(s)
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SECTION 1. Appointment of Warrant Agent. . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Form of Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Form of Warrant Certificates. . . . . . . . . . . . . . . . . 1
2.2. Countersignature of Warrant Certificates. . . . . . . . . . . 2
2.3. Registration. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. Transfer or Exchange of Warrants. . . . . . . . . . . . . . . . . . 3
3.1. Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2. Exchange of Warrant Certificates. . . . . . . . . . . . . . . 3
SECTION 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 5. Mutilated or Missing Warrants . . . . . . . . . . . . . . . . . . . 3
SECTION 6. Term of Warrants; Exercise of Warrants. . . . . . . . . . . . . . . 4
6.1. Term of Warrants. . . . . . . . . . . . . . . . . . . . . . . 4
6.2. Exercise of Warrants. . . . . . . . . . . . . . . . . . . . . 4
SECTION 7. Disposition of Proceeds on Exercise of Warrants . . . . . . . . . . 5
SECTION 8. Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 9. Reservation of Warrant Shares; Purchase and Cancellation of
Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
9.1. Reservation of Warrant Shares . . . . . . . . . . . . . . . . 5
9.2. Governmental Approvals and Listings . . . . . . . . . . . . . 6
9.3. Purchase of Warrants by the Company . . . . . . . . . . . . . 6
9.4. Cancellation of Warrants. . . . . . . . . . . . . . . . . . . 6
SECTION 10. Exercise Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares . . . . . 6
11.1. Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Stock Dividends, Splits, etc. . . . . . . . . . . . . 7
(b) Distributions of Assets . . . . . . . . . . . . . . . 7
(c) Computation of Market Price . . . . . . . . . . . . . 8
(d) Minimum Adjustment. . . . . . . . . . . . . . . . . . 8
(e) Warrant Share Adjustment. . . . . . . . . . . . . . . 9
(f) Notice of Adjustment. . . . . . . . . . . . . . . . . 9
(g) Definition of Common Stock. . . . . . . . . . . . . . 9
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(h) Company May Reduce Exercise Price or Increase Number
of Warrant Shares Purchasable . . . . . . . . . . . . 10
(i) Subsequently Issued Warrants. . . . . . . . . . . . . 10
(j) Number of Warrant Shares on Warrant Certificates. . . 10
11.2. No Adjustment for Dividends . . . . . . . . . . . . . . . . 10
11.3. Preservation of Purchase Rights and Adjustment of Exercise
Price upon Merger, Consolidation, etc. . . . . . . . . . . 10
SECTION 12. No Rights as Stockholders; Notices to Warrant Holders . . . . . . . 12
SECTION 13. Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 14. FRACTIONAL SHARES OF COMMON STOCK . . . . . . . . . . . . . . . . . 13
SECTION 15. Right of Action . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 16. Inspection of Warrant Agreement . . . . . . . . . . . . . . . . . . 14
SECTION 17. Merger or Consolidation or Change of Name of Warrant Agent. . . . . 14
SECTION 18. Concerning the Warrant Agent. . . . . . . . . . . . . . . . . . . . 14
18.1. Disclaimer of Representations . . . . . . . . . . . . . . 15
18.2. No Responsibility for Failure of Company's Covenants. . . 15
18.3. Delegation. . . . . . . . . . . . . . . . . . . . . . . . 15
18.4. Opinion of Counsel. . . . . . . . . . . . . . . . . . . . 15
18.5. Officer's Certificate . . . . . . . . . . . . . . . . . . 15
18.6. Compensation and Reimbursement. . . . . . . . . . . . . . 15
18.7. No Action Without Assurance of Reimbursement. . . . . . . 16
18.8. Conflicts of Interest . . . . . . . . . . . . . . . . . . 16
18.9. Solely as Agent . . . . . . . . . . . . . . . . . . . . . 16
18.10. Reliance on Documents . . . . . . . . . . . . . . . . . . 16
18.11. No Representation Regarding Validity, Etc.. . . . . . . . 17
18.12. Instructions from Company . . . . . . . . . . . . . . . . 17
SECTION 19. Change of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 20. Identity of Transfer Agent. . . . . . . . . . . . . . . . . . . . . 18
SECTION 21. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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SECTION 22. Supplements and Amendments. . . . . . . . . . . . . . . . . . . . . 18
SECTION 23. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 24. Merger or Consolidation of the Company. . . . . . . . . . . . . . . 19
SECTION 25. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 26. Benefits of this Agreement. . . . . . . . . . . . . . . . . . . . . 19
SECTION 27. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 28. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 29. Plan of Reorganization. . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .▇-▇
▇▇▇▇▇▇▇▇ FORM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
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WARRANT AGREEMENT relating to the issuance of the Tranche B Warrants,
dated as of January 31, 1997, between WEI ACQUISITION CO. (which will change
its name to Wherehouse Entertainment, Inc.), a Delaware corporation (the
"Company"), and UNITED STATES TRUST COMPANY OF NEW YORK, as Warrant Agent
(the "Warrant Agent").
WITNESSETH:
WHEREAS, pursuant to the Debtors' First Amended Chapter 11 Plan, as
Revised for Technical Corrections dated October 4, 1996 and Supplemental
Amendments on December 2, 1996 and December 13, 1996 (the "POR") and an Asset
Purchase Agreement dated as of January 31, 1997 (the "ASSET PURCHASE
AGREEMENT"), the Company will acquire substantially all of the assets of
Wherehouse Entertainment, Inc., and its parent, WEI Holdings, Inc., which
companies are debtors and debtors-in-possession (collectively, the
"DEBTORS"), in Case No. 95-911 (HSB) (Jointly Administered) (the "BANKRUPTCY
CASE") in the Bankruptcy Court for the District of Delaware (the "BANKRUPTCY
COURT");
WHEREAS, as part of the purchase price for the assets of the Debtors
to be acquired by the Company, the Company proposes to issue up to 100,000
Common Stock Purchase Warrants hereinafter described (the "Warrants") to
purchase its Common Stock, par value $0.01 per share (the "Common Stock"), each
Warrant entitling the registered owner thereof to purchase one share of Common
Stock (each share of Common Stock purchasable upon the exercise of a Warrant
being referred to herein as a "WARRANT SHARE"); and
WHEREAS, the Company wishes the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to act, in connection with the
issuance, transfer, exchange and exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and for the purpose
of defining the terms and provisions of the Warrants and the respective rights
and obligations thereunder of the Company and the registered owners of the
Warrants (the "Holders"), the Company and the Warrant Agent hereby agree as
follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as agent for the
Company in accordance with the terms and conditions hereinafter set forth, and
the Warrant Agent hereby accepts such appointment.
SECTION 2. FORM OF WARRANTS.
2.1. FORM OF WARRANT CERTIFICATES. The text of the Warrant
certificate and of the form of election to purchase Warrant Shares shall be
substantially as set forth in Exhibit A attached hereto. The Warrant
certificates shall be appropriately
printed, lithographed or engraved and may have such letters, numbers or other
marks of identification 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 rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage. The price per Warrant Share
and the number of Warrant Shares issuable upon exercise of each Warrant are
subject to adjustment upon the occurrence of certain events, all as
hereinafter provided. The Warrant certificates shall be executed on behalf
of the Company by its Chairman of the Board, its President or one of its Vice
Presidents under its corporate seal reproduced thereon and attested by its
Secretary or an Assistant Secretary. The signature of any of such officers
on the Warrant certificates may be manual or facsimile.
Warrant certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any one of them
shall have ceased to hold such offices prior to the delivery of such Warrant
certificates or did not hold such office on the date of this Agreement.
Warrant certificates shall be dated as of the date of countersignature
thereof by the Warrant Agent either upon initial issuance or upon exchange,
substitution or transfer.
2.2. COUNTERSIGNATURE OF WARRANT CERTIFICATES. The Warrant
certificates shall be manually countersigned by the Warrant Agent (or any
successor to the Warrant Agent then acting as warrant agent under this
Agreement) and shall not be valid for any purpose unless so countersigned.
Warrant certificates may be countersigned by the Warrant Agent (or by its
successor as warrant agent hereunder) and may be delivered by the Warrant Agent
notwithstanding that the persons whose manual or facsimile signatures appear
thereon as proper officers of the Company shall have ceased to be such officers
at the time of such countersignature, issuance or delivery. The Warrant Agent
shall, upon written instructions of the Chairman of the Board, the President,
any Vice President or the Secretary of the Company, countersign, issue and
deliver Warrant certificates entitling the Holders thereof to purchase in the
aggregate Warrant Shares (subject to adjustment pursuant to Section 11 hereof)
and shall countersign and deliver Warrant certificates as otherwise provided in
this Agreement.
2.3. REGISTRATION. The Warrant certificates shall be numbered and
shall be registered in a register (the "Warrant Register") as they are issued.
The Company and the Warrant Agent shall be entitled to treat the registered
holder of any Warrant as the owner in fact thereof for all purposes and shall
not be bound to recognize any equitable or other claim to or interest in such
Warrant on the part of any other person, notwithstanding any notice to the
Company or the Warrant Agent to the contrary.
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SECTION 3. TRANSFER OR EXCHANGE OF WARRANTS.
3.1. TRANSFER. The Warrants shall be transferable only in the books
of the Company maintained at the office or agency of the Warrant Agent in the
City of New York upon delivery thereof duly endorsed by the Holder or by his or
her duly authorized attorney or legal representative, or accompanied by proper
evidence of succession, assignment or authority to transfer, which endorsement
shall be guaranteed by a bank or trust company located in the United States or a
broker or dealer that is a member of a national securities exchange. In all
cases of transfer by an attorney, the original power of attorney, duly approved,
or an official copy thereof, duly certified, shall be deposited and remain with
the Warrant Agent. In case of transfer by executors, administrators, guardians
or other legal representatives, duly authenticated evidence of their authority
shall be produced, and may be required to be deposited and remain with the
Warrant Agent in its discretion. Upon any registration of transfer, the Warrant
Agent shall countersign and deliver a new Warrant certificate to the person
entitled thereto.
3.2. EXCHANGE OF WARRANT CERTIFICATES. Warrant certificates may be
exchanged for another certificate or certificates entitling the Holder thereof
to purchase a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Holder to purchase. Any Holder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Warrant Agent, and shall surrender, properly endorsed in the
manner described in subsection 3.1 hereof, the Warrant certificate or
certificates to be so exchanged. Thereupon, the Warrant Agent shall countersign
and deliver to the person entitled thereto a new Warrant certificate or
certificates, as the case may be, as so requested.
SECTION 4. [SECTION 4 INTENTIONALLY LEFT BLANK].
SECTION 5. MUTILATED OR MISSING WARRANTS.
In case any of the certificates evidencing the Warrants shall be
mutilated, lost, stolen or destroyed, the Company may, in its discretion, issue
and the Warrant Agent shall countersign and deliver in exchange and substitution
for and upon cancellation of the mutilated Warrant certificate, or in lieu of
and substitution for the Warrant certificate lost, stolen or destroyed, a new
Warrant certificate of like tenor and representing an equivalent right or
interest, but only, in case of any such loss, theft or destruction, upon receipt
of evidence satisfactory to the Company and the Warrant Agent thereof and an
indemnity also satisfactory to them. An applicant for such substitute Warrant
certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company or the Warrant Agent may prescribe.
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SECTION 6. TERM OF WARRANTS; EXERCISE OF WARRANTS.
6.1. TERM OF WARRANTS. Subject to the terms of this Agreement, each
Holder shall have the right until 5:00 P.M., New York time, on January 31, 2004
(the seventh anniversary of the Effective Date (as defined in the POR)) (the
"Expiration Date"), to purchase from the Company the number of fully paid and
nonassessable Warrant Shares which the Holder may at the time be entitled to
purchase on exercise of such Warrants.
6.2. EXERCISE OF WARRANTS. Warrant Shares may be purchased upon
surrender to the Company at the office or agency of the Warrant Agent in the
City of New York, of the certificate or certificates evidencing the Warrants to
be exercised, together with the form of election to purchase on the reverse
thereof duly filled in and signed, which signature shall, if the Warrant Shares
are to be issued in the name of a person other than the Holder of the Warrant,
be guaranteed by a bank or trust company located in the United States or a
broker or dealer that is a member of a national securities exchange, and upon
payment to the Warrant Agent for the account of the Company of the Exercise
Price (as defined in and determined in accordance with the provisions of
Sections 10 and 11 hereof) for the number of Warrant Shares in respect of which
such Warrants are then being exercised. Payment of the aggregate Exercise Price
shall be made by certified or cashier's check, or by any combination thereof.
Subject to Section 8 hereof, upon such surrender of Warrants and
payment of the Exercise Price as aforesaid, the Company shall issue and cause to
be delivered, with all reasonable dispatch, to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrants and payment of the Exercise Price, as
aforesaid; PROVIDED, HOWEVER, that if such Warrants are surrendered, and the
Exercise Price is paid, on a Saturday, Sunday or other day on which banking
institutions in the City of New York are authorized or obligated by law or
executive order to close, or on a day when the Common Stock transfer books of
the Company are closed, the certificates for the Warrant Shares in respect of
which such Warrants are then exercised shall be issuable as of the next
succeeding Monday, Tuesday, Wednesday, Thursday or Friday on which such banking
institutions are not so authorized or obligated to close (whether before or
after the Expiration Date) and which is a day on which the Common Stock transfer
books of the Company are open. The rights of purchase represented by the
Warrants shall be exercisable, at the election of the Holders thereof, either in
full or from time to time in part and, in the event that a certificate
evidencing Warrants is exercised in respect of less than all of the Warrant
Shares specified therein at any time prior to the expiration of such Warrants, a
new certificate evidencing the remaining Warrant or Warrants will be issued, and
the Warrant Agent is hereby irrevocably authorized to countersign and to deliver
the required new Warrant certificates pursuant to the provisions of this
subsection and of subsection 2.2
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hereof and the Company, whenever required by the Warrant Agent, will supply
the Warrant Agent with Warrant certificates duly executed on behalf of the
Company for such purpose.
SECTION 7. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS.
The Warrant Agent shall account promptly to the Company with respect
to the Warrants exercised and concurrently pay to the Company all moneys
received by the Warrant Agent for the purchase of the Warrant Shares through the
exercise of such Warrants.
SECTION 8. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if any, attributable
to the issuance of any Warrant certificates or certificates for Warrant Shares
issuable upon the exercise of Warrants; PROVIDED, HOWEVER, that the Company
shall not be required to pay, and the Holder shall pay, any tax or taxes that
may be payable in respect of any transfer involved in the issue or delivery of
any Warrant certificates or certificates for Warrant Shares in a name other than
that of the registered Holder of the Warrants that were surrendered and the
Company shall not be required to issue or deliver such Warrant certificates or
certificates for Warrant Shares unless or until the persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
SECTION 9. RESERVATION OF WARRANT SHARES; PURCHASE AND
CANCELLATION OF WARRANTS.
9.1. RESERVATION OF WARRANT SHARES. There have been reserved, and the
Company shall at all times keep reserved out of its authorized Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise of the
right of purchase represented by the outstanding Warrants. The Company
covenants that all Warrant Shares will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable. Before taking any action that
would cause an adjustment reducing the Exercise Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of the Warrants,
the Company shall take any corporate action which may, in the opinion of it
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of such Common Stock, at such adjusted
Exercise Price. The Transfer Agent for the Common Stock and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
as shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with the Transfer Agent for the Common Stock and with every
subsequent transfer agent for any shares of the Company's capital stock issuable
upon the exercise of the rights of
5
purchase represented by the Warrants. The Warrant Agent is hereby
irrevocably authorized to requisition from time to time from such Transfer
Agent stock certificates required to honor outstanding Warrants upon exercise
thereof in accordance with the terms of this Agreement. The Company will
supply such Transfer Agent with duly executed stock certificates for such
purpose. Promptly after the Expiration Date, the Warrant Agent shall certify
to the Company the aggregate number of Warrants then outstanding and
thereafter no shares shall be subject to reservation in respect of such
Warrants.
9.2. GOVERNMENTAL APPROVALS AND LISTINGS. The Company will as
promptly as practicable take all action which may be necessary to obtain and
keep effective (a) any and all permits, consents and approvals of governmental
agencies and authorities, and will make any and all filings under federal and
state securities laws, necessary in connection with the issuance, distribution
and transfer of Warrant certificates, the exercise of the Warrants, and the
issuance, sale, transfer and delivery of Warrant Shares and (b) if any of the
Warrant Shares have been listed on any securities exchange, the listing of the
Warrant Shares on any securities exchange on which the Common Stock may be
listed (it being understood that the Company has no obligation to list any
Warrant Shares with any securities exchange).
9.3. PURCHASE OF WARRANTS BY THE COMPANY. The Company shall have the
right, except as limited by law, other agreement or herein, to purchase or
otherwise acquire Warrants at such times, in such manner and for such
consideration as it may deem appropriate.
9.4. CANCELLATION OF WARRANTS. In the event the Company shall
purchase or otherwise acquire Warrants, the related Warrant certificates shall
thereupon be delivered to the Warrant Agent and be cancelled by it and retired.
The Warrant Agent shall cancel any Warrant certificate surrendered for exchange,
substitution, transfer or exercise in whole or in part. Warrant certificates
cancelled by the Warrant Agent pursuant to any provision of this Agreement shall
be delivered to the Company or, upon the request of the Warrant Agent and with
the consent of the Company, destroyed by the Warrant Agent. The Warrant Agent
shall furnish to the Company written confirmation of the destruction of the
Warrant certificates so cancelled.
SECTION 10. EXERCISE PRICE.
The price per share at which Warrant Shares shall be purchasable upon
exercise of each Warrant (the "Exercise Price") shall be $9.00, subject to
adjustment pursuant to Section 11 hereof.
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SECTION 11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES.
11.1. ADJUSTMENTS. The number and kind of securities purchasable
upon the exercise of each Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) STOCK DIVIDENDS, SPLITS, ETC. In case the Company shall at any
time after the date of this Agreement (w) pay a dividend or make a
distribution on its Common Stock which is paid or made (A) in Common Stock
or other shares of the Company's capital stock or (B) in rights to purchase
Common Stock or other capital stock of the Company if such rights are not
exercisable or separable from the Common Stock except upon the occurrence
of a contingency, (x) subdivide its outstanding Common Stock into a greater
number of shares of Common Stock, (y) combine its outstanding shares into a
smaller number of shares of Common Stock or (z) issue by reclassification
of its Common Stock other securities of the Company, then, in any such
event the number of Warrant Shares purchasable upon exercise of each
Warrant immediately prior thereto shall be adjusted so that the Holder of
each Warrant shall be entitled to receive upon exercise of such Warrant the
kind and number of shares of the Company and rights to purchase Common
Stock or other securities of the Company (or, in the event of the
redemption of any such rights, any cash paid in respect of such redemption)
that he, she or it would have owned or have been entitled to receive after
the happening of any of the events described above had such Warrant been
exercised immediately prior to the happening of such event or any record
date with respect thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the opening of business on the
next business day following the record date in the case of dividends or
other distributions and shall become effective immediately after the
opening of business on the next business day following the effective date
in the case of a subdivision or combination.
(b) DISTRIBUTIONS OF ASSETS. In case the Company shall at any time
after the date of this Agreement distribute to all holders of its Common
Stock evidences of indebtedness of the Company or assets of the Company
(including cash dividends or distributions out of retained earnings other
than cash dividends or distributions made on a quarterly or other periodic
basis) or warrants to subscribe for securities of the Company (excluding
those referred to in paragraph (a) above), then in each case the Exercise
Price shall be adjusted to a price determined by multiplying the Exercise
Price in effect immediately prior to such distribution by a fraction, of
which the numerator shall be the then current market price per share of
Common Stock (as defined in
7
paragraph (c) below) on the record date for determination of
shareholders entitled to receive such distribution, less the then fair
value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed or of such
subscription rights or warrants which are applicable to one share of
Common Stock, and of which the denominator shall be such market price
per share of Common Stock; PROVIDED, HOWEVER, that if the then current
market price per share of Common Stock on the record date for
determination of shareholders entitled to receive such distribution is
less than the then fair value of the portion of the assets or evidences
of indebtedness so distributed or of such subscription rights or
warrants which are applicable to one share of Common Stock, the
foregoing adjustment of the Exercise Price shall not be made and in lieu
thereof the Holder of each Warrant shall be entitled to receive upon
exercise of such Warrant in addition to the Common Stock the kind and
number of assets, evidences of indebtedness, subscription rights and
warrants (or, in the event of the redemption of any such evidences of
indebtedness, subscription rights and warrants, any cash paid in respect
of such redemption) that he or she would have owned or have been
entitled to receive after the happening of such distribution had such
Warrant been exercised immediately prior to the record date for such
distribution. Such adjustment shall be made successively whenever such
a record date is fixed, and in the event that such distribution is not
so made, the Exercise Price shall again be adjusted to be the Exercise
Price which would then be in effect if such record date had not been
fixed.
(c) COMPUTATION OF MARKET PRICE. For the purpose of any computation
under this Agreement, the current market price per share of Common Stock at
any date shall be deemed to be the average of the daily Market Price (as
defined below) per share for the 30 consecutive Trading Days (as defined
below) commencing 45 Trading Days before the date in question. "Market
Price" is defined as the closing sale price (or, if no closing sale price
is reported, the closing bid price) for the Common Stock in the over-the-
counter market, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or, if the Common Stock is
not quoted on NASDAQ, as reported by the National Quotation Bureau
Incorporated, or, if the Common Stock is not so reported, as furnished by
any two members of the National Association of Securities Dealers, Inc.,
selected from time to time by the Company for that purpose. In the event
that the Common Stock is hereafter listed for trading on one or more United
States national or regional securities exchanges, Market Price shall be the
closing price on the exchange or system designated by the Board of
Directors of the Company as the principal
8
United States market in which the Common Stock is traded. If Market
Price cannot be established as described above, Market Price shall be
the fair market value of the Common Stock as determined in good faith by
the Board of Directors. "Trading Day" shall mean a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the City
of Los Angeles and the State of California or New York, New York, are
not authorized or obligated by law or executive order to close or, if
the Common Stock is listed or admitted to trading on a national
securities exchange, a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is
open for the transaction of business.
(d) MINIMUM ADJUSTMENT. No adjustment in the number of Warrant
Shares purchasable hereunder or the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least one per
cent (1%) in the number of Warrant Shares purchasable upon the exercise of
each Warrant, or the Exercise Price, as the case may be; PROVIDED, HOWEVER,
that any adjustments which by reason of this paragraph (d) 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 the nearest ten-thousandth of a share, as the
case may be
(e) WARRANT SHARE ADJUSTMENT. Upon each adjustment of the Exercise
Price as a result of the calculations made in paragraph (a) or (b) above,
each Warrant outstanding immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the adjusted Exercise
Price, that number of shares (calculated to the nearest ten-thousandth)
obtained by (A) multiplying (x) the number of shares covered by a Warrant
immediately prior to such adjustment of the Exercise Price by (y) the
Exercise Price in effect immediately prior to such adjustment of the
Exercise Price and (ii) dividing the product so obtained by the Exercise
Price in effect immediately after such adjustment of the Exercise Price.
(f) NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares
purchasable upon the exercise of Warrants or the Exercise Price of such
Warrant Shares is adjusted, as herein provided, the Company shall cause the
Warrant Agent promptly to mail by first class mail, postage prepaid, to
each Holder of a Warrant or Warrants notice of such adjustment or
adjustments and shall deliver to the Warrant Agent a certificate of a firm
of independent public accountants selected by the Board of Directors of the
Company (who may be the regular accountants employed by the Company)
setting forth (A) the number of Warrant Shares purchasable upon the
exercise
9
of each Warrant and the Exercise Price of such Warrant Shares after such
adjustment, (B) a brief statement of the facts requiring such adjustment
and (C) the computation by which such adjustment was made. Such
certificate shall be conclusive evidence of the correctness of such
adjustment. The Warrant Agent shall be entitled to rely on such
certificate and shall be under no duty or responsibility with respect to
any such certificate, except to exhibit the same, from time to time, to
any Holder desiring an inspection thereof during reasonable business
hours. The Warrant Agent shall not at any time be under any duty or
responsibility to any Holders to determine whether any facts exist that
may require any adjustment of the Exercise Price or the number of
Warrant Shares or other stock or property purchasable upon exercise
thereof or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed in making such
adjustment.
(g) DEFINITION OF COMMON STOCK. For the purpose of this subsection
11.1, the term "Common Stock" shall mean (A) the class of stock designated
as the Common Stock of the Company at the date of this Agreement or (B) any
other class of stock resulting from successive changes or reclassifications
of such shares consisting solely of changes in par value, or from par value
to no par value or from no par value to par value. In the event that at
any time, as a result of an adjustment made pursuant to paragraph (a)
above, the Holders of a Warrant or Warrants shall become entitled to
purchase any securities of the Company other than Common Stock, thereafter
the number of such other securities so purchasable upon exercise of each
Warrant and the Exercise Price of such securities 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 Warrant Shares
contained in this subsection 11.1 and the provisions of Section 6 and
subsections 11.2 and 11.3, inclusive, with respect to the Warrant Shares,
shall apply on like terms to any such other securities.
(h) COMPANY MAY REDUCE EXERCISE PRICE OR INCREASE NUMBER OF WARRANT
SHARES PURCHASABLE. The Company may, at its option, at any time during the
term of the Warrants, reduce the then current Exercise Price, or increase
the number of Common Shares purchasable upon exercise of each Warrant, to
any amount deemed appropriate by the Board of Directors of the Company.
(i) SUBSEQUENTLY ISSUED WARRANTS. All Warrants originally issued by
the Company subsequent to any adjustment made to the Exercise Price
hereunder shall evidence the right to purchase, at the adjusted Exercise
Price, the number of shares of Common Stock
10
purchasable from time to time hereunder upon exercise of the Warrants,
all subject to further adjustment as provided herein.
(j) NUMBER OF WARRANT SHARES ON WARRANT CERTIFICATES. Irrespective
of any adjustment or change in the Exercise Price or the number of shares
of Common Stock issuable upon the exercise of the Warrants, the Warrant
certificates theretofore and thereafter issued may continue to express the
Exercise Price per share and the number of shares which were expressed upon
the initial Warrant certificates issued hereunder.
11.2. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection
11.1, no adjustment in respect of any dividends made on a quarterly or other
periodic basis out of retained earnings shall be made during the term of a
Warrant or upon the exercise of a Warrant.
11.3. PRESERVATION OF PURCHASE RIGHTS AND ADJUSTMENT OF EXERCISE PRICE
UPON MERGER, CONSOLIDATION, ETC. In case the Company shall consolidate or merge
with or into any other corporation (other than a consolidation or merger in
which the Company is the surviving corporation and each share of Common Stock
outstanding immediately prior to such consolidation or merger is to remain
outstanding immediately after such consolidation or merger and no cash,
securities or other property is distributed with respect to such shares) or
shall sell or transfer all or substantially all of its assets to any
corporation, the Company or such successor or purchasing corporation, as the
case may be (collectively, the "acquiring corporation"), shall execute with the
Warrant Agent an agreement that each Holder of a Warrant shall have the right
thereafter upon payment of the Exercise Price in effect immediately prior to
such action to purchase upon exercise of each Warrant the kind and amount of
shares and other securities, cash and other property that he or she would have
owned or have been entitled to receive after the happening of such
consolidation, merger or sale had such Warrant been exercised immediately prior
to such action (assuming that such Holder, as a holder of Common Stock prior to
such action, would not have exercised any rights of election as a holder of
Common Stock as to the kind or amount of securities, cash or other property
receivable upon such consolidation, merger or sale; provided, that if the kind
or amount of securities, cash or other property receivable upon such
consolidation, merger or sale is not the same for each non-electing share of
Common Stock, then the kind and amount of securities, cash or other property
receivable shall be deemed to be the kind and amount so receivable by a
plurality of the non-electing shares). The Company shall mail by first-class
mail, postage prepaid, to each Holder, notice of the execution of any agreement
with an acquiring corporation as provided in the first sentence of this
subsection 11.3. In addition to any adjustments required by this subsection
11.3, such agreement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
11. The Company shall not effect any such consolidation, merger or sale unless
prior to or simultaneously with the consummation thereof the acquiring
corporation (if other than the Company) resulting from such consolidation or
merger or the acquiring corporation
11
purchasing such assets or other appropriate corporation or entity shall
assume, by written instrument executed and delivered to the Warrant Agent,
the obligation to deliver to each Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such Holder may be
entitled to receive and the other obligations of the Company under this
Agreement. The provisions of this subsection 11.3 shall similarly apply to
successive consolidations, mergers, sales or conveyances. The Warrant Agent
shall be under no duty or responsibility to determine the correctness of any
provisions contained in any such agreement relating either to the kind or
amount of shares of stock or other securities, cash or property receivable
upon exercise of Warrants or with respect to the method employed and provided
therein for any adjustments.
11.4 NO ADJUSTMENT FOR EMPLOYEE COMPENSATION AND ISSUANCES TO ▇▇▇▇▇▇▇
& MARSAL, INC. Notwithstanding anything to the contrary contained herein, no
adjustment to the Exercise Price or the number of shares of Common Stock
purchasable upon exercise of any Warrant shall be made in connection with the
issuance by the Company of any shares of Common Stock or options to purchase
Common Stock or other securities which may be convertible or exercisable into
shares of Common Stock to (i) any employee of the Company as compensation for
services rendered to the Company or (ii) ▇▇▇▇▇▇▇ & Marsal, Inc. ("A&M") or any
of its affiliates, in connection with the management services to be provided by
A&M to the Company under that certain Management Services Agreement dated as of
January 31, 1997 between the Company, A&M, A&M Investment Associates #3, LLC,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇, Cerberus Partners, L.P. and certain of A&M's employees.
SECTION 12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO WARRANT HOLDERS.
(a) Nothing contained in this Agreement or in any of the Warrants
shall be construed as conferring upon the Holders or their transferees the
right to vote or to receive dividends or to consent or to receive notice as
shareholders in respect of any meeting of shareholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company. If prior to the expiration of the Warrants:
(A) the Company shall declare a dividend or other distribution
on its Common Shares, other than (i) in cash as described in Section 11.2,
(ii) in other shares of Common Stock, or (iii) in rights to purchase shares
of Common Stock or other securities of the Company of the character
described in paragraph (a) of subsection 11.1; or
(B) the Company shall authorize the issuance to all holders of
its Common Stock of rights or warrants entitling them to subscribe for or
purchase any Common Stock or any other subscription
12
rights or warrants (other than rights of the character described in
paragraph (a) of subsection 11.1); or
(C) there shall occur a reclassification of the capital stock of
the Company (other than a subdivision or combination of its outstanding
Common Stock); or
(D) the Company shall propose to effect any consolidation or
merger into or with, or to effect any sale or other transfer requiring an
adjustment pursuant to Section 11.3; or
(E) the Company shall take an action ("Adjustment Action") which
would cause an adjustment pursuant to Section 11 hereof of the number or
kind of Common Stock (or other securities) purchasable upon the exercise of
each Warrant or of the Exercise Price that would have the effect of
reducing the price payable for a share of the Company's capital stock by a
Holder upon exercise of a Warrant to an amount which is less than the
current value of such share; or
(F) a voluntary or involuntary dissolution, liquidation or
winding up of the Company shall be proposed;
then, in any such event, the Company shall cause to be mailed to the Warrant
Agent and the Holders in the manner provided in Section 21 hereof, at least 20
days prior to the applicable record or effective date hereinafter specified, a
notice stating (i) the date as of which the holders of record of Common Stock to
be entitled to such dividend, distribution, rights or warrants are to be
determined, or (ii) the date on which such reclassification, Adjustment Action,
consolidation, merger, sale, transfer, dissolution, liquidation, or winding up
is expected to become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares of
securities or other property, if any, deliverable upon such reclassification,
Adjustment Action, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. Such notice shall also state whether such
transaction will result in any adjustment of the number or kind of Common Stock
(or other securities) purchasable upon the exercise of a Warrant or of the
Exercise Price and, if so, shall set forth the nature thereof and the date upon
which it will become effective. In the event the Company gives notice to the
holders of its Common Stock of the declaration or distribution of rights to
purchase Common Stock or other securities of the Company of the character
described in paragraph (a) of subsection 11.1, the Company will give
concurrently a similar notice to the Holders in the manner provided in Section
21 hereof. The failure to give the notices required by this Section 12, or any
defect therein, shall not affect the legality or validity of any such dividend,
distribution, right, warrant, reclassification, Adjustment Action, dissolution,
liquidation or winding up or other action, or the vote on any action authorizing
the same.
13
SECTION 13. PURCHASE RIGHTS.
If at any time or from time to time on or after the date of the
Agreement, the Corporation shall give notice (a "Purchase Rights Notice")
pursuant to paragraph (B) of Section 12(a) of an issuance of rights or warrants,
(the "Purchase Rights") to all record holders of Common Stock, such issuance
shall not result in an adjustment of the Exercise Price or the number of
Warrants under Section 11 hereof, but each Holder shall be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if it had held the number of shares of
Common Stock acquirable upon exercise of the Warrants immediately before the
record date for the grant, issuance, or sale of such Purchase Rights. The
Purchase Rights Notice shall describe the Purchase Rights and their availability
to the Holders.
SECTION 14. FRACTIONAL SHARES OF COMMON STOCK.
The Company will not issue fractions of Warrants or distribute Warrant
certificates which evidence fractional Warrants. In lieu of such fractional
Warrants, there shall be paid to the Holders to whom Warrant certificates
representing such fractional Warrants would otherwise be issuable an amount in
cash equal to the product of such fraction of a Warrant multiplied by the
current market price per share of Common Stock issuable with respect to such
fraction of a Warrant.
SECTION 15. RIGHT OF ACTION.
All rights of action in respect of this Agreement are vested in the
respective Holders of the Warrant certificates, and any Holder of any Warrant
certificate, without the consent of the Warrant Agent or of the Holder of any
other Warrant certificate, may, on such Holder's own behalf and for such
Holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
such Holder's right to exercise the Warrants evidenced by such Warrant
certificate in the manner provided in such Warrant certificate and in this
Agreement.
SECTION 16. INSPECTION OF WARRANT AGREEMENT.
The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the Holders during
normal business hours at its office in the City of New York for that purpose.
The Company shall supply the Warrant Agent from time to time with such numbers
of copies of this Agreement as the Warrant Agent may request.
14
SECTION 17. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT
AGENT.
Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust business of the Warrant
Agent, shall be the successor to the Warrant Agent hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as successor Warrant Agent under the provisions of Section 19 hereof. In case
at the time such successor to the Warrant Agent shall succeed to the agency
created by this Agreement any of the Warrants shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrants so
countersigned; and in case at that time any of the Warrants shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrants
either in the name of the predecessor Warrant Agent or in the name of the
successor Warrant Agent, and in all such cases such Warrants shall have the full
force provided in the Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Agreement.
SECTION 18. CONCERNING THE WARRANT AGENT.
The Warrant 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 Warrants, by their acceptance thereof, shall be
bound:
18.1. DISCLAIMER OF REPRESENTATIONS. The statements contained
herein and in the Warrants shall be taken as statements of the Company, and
the Warrant Agent assumes no responsibility for the correctness of any of
the same except such as describe the Warrant Agent or action taken by it.
The Warrant Agent assumes no responsibility with respect to the
distribution of the Warrants except as herein otherwise provided.
18.2. NO RESPONSIBILITY FOR FAILURE OF COMPANY'S COVENANTS. The
Warrant Agent shall not be responsible for any failure of the Company to
comply with any of the covenants contained in this Agreement or in the
Warrants.
15
18.3. DELEGATION. The Warrant 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 (which shall not
include its employees), and the Warrant Agent shall not be answerable or
accountable for any act, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from such neglect or
misconduct provided reasonable care shall have been exercised in the
selection and continued employment thereof.
18.4. OPINION OF COUNSEL. The Warrant Agent may consult at any
time with legal counsel satisfactory to it, and the Warrant Agent shall
incur no liability or responsibility to the Company or to any Holder in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with the opinion or the advice of such counsel.
18.5. OFFICER'S CERTIFICATE. Whenever in the performance of its
duties under this Agreement the Warrant 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 Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
18.6. COMPENSATION AND REIMBURSEMENT. The Company agrees to pay
the Warrant Agent reasonable compensation for all services rendered by the
Warrant Agent in the performance of its duties under this Agreement, to
reimburse the Warrant Agent for all expenses, taxes and governmental
charges and other charges of any kind and nature reasonably incurred by the
Warrant Agent in the performance of its duties under this Agreement, and
agrees to indemnify the Warrant Agent and save it harmless against any and
all liabilities, including judgments, costs and reasonable counsel fees,
for anything done or omitted by the Warrant Agent in the performance of its
duties under this Agreement except as a result of the Warrant Agent's gross
negligence or willful misconduct.
18.7. NO ACTION WITHOUT ASSURANCE OF REIMBURSEMENT. The Warrant
Agent shall be under no obligation to institute any action, suit or legal
proceeding or to take any other action likely to involve expense unless the
Company or one or more Holders shall furnish the
16
Warrant Agent with reasonable security and indemnity for any costs and
expenses which may be incurred; but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may
consider proper, whether with or without any such security or indemnity.
All rights or action under this Agreement or under any of the Warrants
may be enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding instituted by
the Warrant Agent shall be brought in its name as Warrant Agent, and any
recovery of judgment shall be for the ratable benefit of the Holders, as
their respective rights or interests may appear.
18.8. CONFLICTS OF INTEREST. The Warrant Agent and any
stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants 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 Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
18.9. SOLELY AS AGENT. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything that
it may do or refrain from doing in connection with this Agreement except
for its own gross negligence or bad faith.
18.10. RELIANCE ON DOCUMENTS. The Warrant Agent will not incur any
liability or responsibility to the Company or to any Holder of any Warrant
for any action taken in reliance on any notice, resolution, waiver,
consent, order, certificate, or other paper, document or instrument
reasonably believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
18.11. NO REPRESENTATION REGARDING VALIDITY, ETC. The Warrant
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 and delivery hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof);
nor shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Warrant Shares (or other stock) to be issued pursuant to this Agreement or
any Warrant, or as to whether any Warrant Shares (or other stock) will when
issued be
17
validly issued, fully paid and nonassessable, or as to the Exercise
Price or the number or amount of Warrant Shares or other securities or
other property issuable upon exercise of any Warrant.
18.12. INSTRUCTIONS FROM COMPANY. The Warrant Agent is hereby
authorized and directed to accept instructions with respect to the
performance of its duties hereunder from the Chairman of the Board, the
President, any Vice President, the Treasurer or the Secretary of the
Company, and to apply to such officers for advice or instructions in
connection with its duties, and shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of
any such Officers.
SECTION 19. CHANGE OF WARRANT AGENT.
The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company 60 days' notice in writing. The Warrant
Agent may be removed by like notice to the Warrant Agent from the Company. If
the Warrant Agent shall resign or be removed or shall otherwise become incapable
of acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of 50 days after
such notice of removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Warrant Agent or by
any Holder (who shall with such notice submit his Warrant for inspection by the
Company), then the resigning, discharged or removed Warrant Agent or any Holder
may apply to any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Any successor warrant agent, whether appointed
by the Company or such court, shall be (a) a bank or trust company, in good
standing, incorporated under the laws of the United States of America or any
state thereof and having at the time of its appointment as warrant agent a
combined capital and surplus of at least $100,000,000, as set forth in its most
recent published annual report of condition or (b) an affiliate of a corporation
described in clause (a) above. After appointment, the successor warrant agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Warrant Agent hereunder without further act or
deed; but the former Warrant Agent shall deliver and transfer to the successor
warrant agent any property at the time held by it hereunder, and shall execute
and deliver any further assurance, conveyance, act or deed necessary for the
purpose. Failure to file any notice provided for in this Section 19, however,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
warrant agent, as the case may be. In the event of such resignation or removal,
the successor warrant agent shall mail, by first-class mail, postage prepaid, to
each Holder, written notice of such removal or resignation and the name and
address of such successor warrant agent.
18
SECTION 20. IDENTITY OF TRANSFER AGENT.
Forthwith upon the appointment of any subsequent Transfer Agent for
the Company's shares of Common Stock, or any other shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants, the Company will file with the Warrant Agent a statement
setting forth the name and address of such Transfer Agent.
SECTION 21. NOTICES.
Any notice pursuant to this Agreement by the Company or by the
Holder of any Warrant to the Warrant Agent, or by the Warrant Agent or by the
Holder of any Warrant to the Company, shall be in writing and shall be deemed
to have been duly given if delivered or mailed by certified mail, return
receipt requested, (a) if to the Company, to WEI Acquisition Co., ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ Del
▇▇▇▇▇▇▇▇ and, if to the Warrant Agent, to United States Trust Company of New
York, Corporate Trust Division, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇;, Attention: ▇▇▇▇▇ ▇▇▇▇▇. Each party hereto may from time to
time change the address to which notices to it are to be delivered or mailed
hereunder by notice in writing to the other party.
Any notice mailed pursuant to this Agreement by the Company or the
Warrant Agent to the Holders of Warrants shall be in writing and shall be deemed
to have been duly given if mailed by first-class mail, postage prepaid, to such
Holders at their respective addresses on the Warrant Register of the Warrant
Agent.
SECTION 22. SUPPLEMENTS AND AMENDMENTS.
(a) The Company and the Warrant Agent may from time to time
supplement or amend this Agreement, without the approval of any Holder in order
to cure any ambiguity or to correct or supplement any provision contained herein
that may be defective or inconsistent with any other provisions herein, or to
make any other provisions with regard to matters or questions arising hereunder
that the Company and the Warrant Agent may deem necessary or desirable and that
shall not adversely affect the interests of the Holders of Warrants.
(b) In addition to the foregoing, with the consent of Holders of
Warrants entitled, upon exercise thereof, to receive not less than two-thirds of
the shares of Common Stock issuable thereunder, the Company and the Warrant
Agent may modify this Agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
modifying in any manner the rights of the Holders of the Warrants; provided,
however, that no modification of the terms (including, but not limited to the
adjustments described in Section 11) upon which the Warrants are exercisable or
reducing the percentage required for consent to modification of this Agreement,
no acceleration of the Expiration Date
19
and no increase in the Exercise Price may, in each case, be made without the
consent of the Holder of each outstanding Warrant affected thereby.
SECTION 23. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
SECTION 24. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company will not merge or consolidate with or into any other
corporation unless the corporation resulting from such merger or consolidation
(if not the Company) shall expressly assume, by supplemental agreement
satisfactory in form to the Warrant Agent in the exercise of its reasonable
judgment and executed and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and condition of this
Agreement to be performed and observed by the Company.
SECTION 25. APPLICABLE LAW.
This Agreement and each Warrant issued hereunder shall be deemed to be
a contract made under the internal laws of the State of New York (without
preference to conflicts of law principles) and for all purposes shall be
construed in accordance with the laws of said State.
SECTION 26. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the Holders of the
Warrants any legal or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Agent, and their respective successors and assigns hereunder, and the
holders from time to time of the Warrants.
SECTION 27. COUNTERPARTS.
This Agreement may be executed in any number of counterparts 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 28. CAPTIONS.
The captions of the Sections and subsections of this Agreement have
been inserted for convenience only and shall have no substantive effect.
20
SECTION 29. PLAN OF REORGANIZATION.
The Company will comply for the benefit of the Holders with
Section 8.04 of the POR.
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
WEI ACQUISITION CO.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
and Secretary
UNITED STATES TRUST COMPANY OF NEW YORK,
as Warrant Agent
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
S-1
TRANCHE B WARRANT TO PURCHASE COMMON STOCK VOID AFTER
5:00 P.M., NEW YORK TIME, ON JANUARY 31, 2004
WHEREHOUSE ENTERTAINMENT, INC.
This certifies that, for value received, __________
___________________ or registered assigns (the "Holder"), is entitled to
purchase from Wherehouse Entertainment, Inc., a Delaware corporation (the
"Company"), until 5:00 P.M., New York time, on January 31, 2004, or such
other date as may be provided for pursuant to the Warrant Agreement referred
to below (the "Expiration Date"), at the purchase price of $9.00 per share
(the "Exercise Price"), a number of shares of Common Stock, par value $0.01
per share, of the Company (the "Common Stock") that is equal to the number of
Warrants represented hereby. The number of shares purchasable upon exercise
of this Warrant and the Exercise Price per share are subject to adjustment
from time to time as set forth in the Warrant Agreement referred to below.
The Warrants evidenced hereby may be exercised in whole or in part
by presentation of this Warrant Certificate with the Purchase Form on the
reverse side hereof duly executed (with a signature guarantee if required by
the Warrant Agreement) and simultaneous payment of the Exercise Price
(subject to adjustment) at the office or agency of the Company maintained for
that purpose in the City of New York. Initially, United States Trust Company
of New York will act as Warrant Agent (the "Warrant Agent"). Payment of such
price shall be made at the option of the holder hereof by certified or
cashier's check. No fractional shares will be issued upon the exercise of
rights to purchase hereunder, but the Company shall pay the cash value of any
such fraction upon the exercise of one or more Warrants, all as provided in
the Warrant Agreement.
Upon any partial exercise of this Warrant Certificate, there shall
be countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the shares as to which this Warrant shall not have been exercised.
This Warrant Certificate may be exchanged at the office of the Warrant Agent
maintained for that purpose in the City of New York by surrender of this
Warrant Certificate properly endorsed (with a signature guarantee if required
by the Warrant Agreement), either separately or in combination with one or
more other Warrant Certificates, for one or more new Warrant Certificates for
the same aggregate number of shares as were evidenced by the Warrant
Certificate or Warrant Certificates exchanged.
This Warrant Certificate is transferable at the office of the
Warrant Agent maintained for that purpose in the City of New York in the
manner and subject to the limitations set forth in the Warrant Agreement.
The Warrants evidenced hereby are part of a duly authorized issue
of Common Stock Purchase Warrants with rights to purchase an aggregate of up
to
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100,000 shares of Common Stock (subject to adjustment) and are issued under
and in accordance with a Warrant Agreement dated as of January 31, 1997,
between the Company and the Warrant Agent and are subject to the terms and
provisions contained in the Warrant Agreement, to all of which the Holder of
this Warrant Certificate by acceptance hereof consents. Copies of the
Warrant Agreement are on file at the above mentioned office of the Warrant
Agent and may be obtained for inspection by the Holder hereof upon written
request to the Warrant Agent.
The Holder hereof may be treated by the Company, the Warrant Agent,
and all other persons dealing with this Warrant Certificate as the absolute
owner hereof for any purpose and as the person entitled to exercise the
rights represented hereby, or to the transfer hereof on the books of the
Company, any notice to the contrary notwithstanding, and until such transfer
on such books, the Company, the Warrant Agent and all such other persons may
treat the registered holder hereof as the owner for all purposes.
The Warrants evidenced hereby do not entitle any Holder hereof to
any of the rights of a stockholder of the Company.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed by its duly authorized officers and the corporate seal hereunto
affixed.
Dated: WHEREHOUSE ENTERTAINMENT, INC.
By:
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Title:
ATTEST:
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Name:
Title:
COUNTERSIGNED:
UNITED STATES TRUST COMPANY OF NEW YORK
WARRANT AGENT
By: ------------------------
Name:
Title:
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WHEREHOUSE ENTERTAINMENT, INC.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, ______ shares of Common Stock, provided for therein, and requests
that certificates for such shares of Common Stock be issued in the name of:
Name:
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Address:
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Social Security or Taxpayer's
Identification Number:
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and, if said number of shares of Common Stock shall not be all the Common Stock
purchasable thereunder, that a new Warrant Certificate for the balance remaining
of the Common Stock purchasable under the within Warrant Certificate be
registered in the name of the undersigned Warrantholder or his or her Assignee
as below indicated and delivered to the address stated below.
Name of Warrantholder
or Assignee:
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Address:
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Social Security or Taxpayer's
Identification Number:
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Signature:
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Dated:
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Signature Guaranteed:
NOTICE: The above signature must correspond with
the name as written upon the face of
this Warrant Certificate in every
particular, without alteration or
enlargement or any change whatever,
unless this Warrant has been assigned.
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ASSIGNMENT
(To be signed only upon
assignment of Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ______________________________
(Name of Assignee)
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(Social Security or other Taxpayer Identification Number of Assignee)
the within Warrants, hereby irrevocably constituting and appointing
_____________________________________________________ Attorney to transfer
said Warrants on the books of the Company, with full power of substitution in
the premises.
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DATED:
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Signature of Registered Holder
Signature Guaranteed:
NOTICE: The signature of this assignment must
correspond with the name as it appears
upon the face of the within Warrant
Certificate in every particular, without
alteration or enlargement or any change
whatever.
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